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Template-Type: ReDIF-Paper 1.0
Title: Nonparametric Risk Management and Implied Risk Aversion
Classification-JEL: G12; G13
Author-Name: Yacine Ait-Sahalia
Author-Person: pai23
Author-Name: Andrew W. Lo
Author-Person: plo171
Note: AP
Number: 6130
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w6130
File-URL: http://www.nber.org/papers/w6130.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Econometrics, Vol. 94 (2000): 9-51.
Abstract: Typical value-at-risk (VAR) calculations involve the probabilities of extreme dollar losses, based on the statistical distributions of market prices. Such quantities do not account for the fact that the same dollar loss can have two very different economic valuations, depending on business conditions. We propose a nonparametric VAR measure that incorporates economic valuation according to the state-price density associated with the underlying price processes. The state-price density yields VAR values that are adjusted for risk aversion, time preferences, and other variations in economic valuation. In the context of a representative agent equilibrium model, we construct an estimator of the risk-aversion coefficient that is implied by the joint observations on the cross-section of option prices and time-series of underlying asset values. "
Handle: RePEc:nbr:nberwo:6130
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Offer-of-Settlement Rules on the Terms of Settlement
Classification-JEL: K40; K41
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Howard F. Chang
Note: LE
Number: 6509
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w6509
File-URL: http://www.nber.org/papers/w6509.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Legal Studies, vol. 28, no. 2, pp. 489-513, 1999.
Abstract: Under an offer of settlement' rule, a party to a lawsuit may make a special offer to settle with the other party, such that if the other party rejects this offer, then this offer (unlike an ordinary offer) becomes part of the record in the case and may affect the allocation of litigation costs. Specifically, if the parties litigate to judgment, then the allocation of litigation costs may depend on how the judgment compares with the special offer. This paper develops a model of bargaining under offer-of-settlement rules that can be used to analyze the effect that such rules have on the terms of settlement. The analysis first sets forth a general principle that identifies the settlement amount under any such rule. We then apply this principle to derive the settlement terms under the most important of these rules, and we identify a large set of seemingly different rules that produce identical settlements. Our results have both positive and normative implications.
Handle: RePEc:nbr:nberwo:6509
Template-Type: ReDIF-Paper 1.0
Title: Rethinking the Role of NAIRU in Monetary Policy: Implications of Model Formulation and Uncertainty
Classification-JEL: E5
Author-Name: Arturo Estrella
Author-Person: pes29
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: ME
Number: 6518
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w6518
File-URL: http://www.nber.org/papers/w6518.pdf
File-Format: application/pdf
Publication-Status: published as Monetary Policy Rules, edited by John B. Taylor, pp. 405-430, 1999. The University of Chicago Press.
Publication-Status: published as Rethinking the Role of NAIRU in Monetary Policy: Implications of Model Formulation and Uncertainty , Arturo Estrella, Frederic S. Mishkin. in Monetary Policy Rules, Taylor. 1999
Abstract: In this paper we rethink the NAIRU concept and examine whether it might have a useful role in monetary policy. We argue that it can, but success depends critically on defining NAIRU as a short-run concept and distinguishing it from a long-run concept like the natural rate of unemployment. We examine what effect uncertainty has on the use of NAIRU in policy. Uncertainty about the level of NAIRU does not imply that monetary policy should react less to the NAIRU gap. However, uncertainty about the effect of the NAIRU gap on inflation does require adjustments to the policy reaction function. Also, as in Brainard (1967), uncertainty about the effect of the monetary policy instrument on the NAIRU gap reduces the magnitude of the policy response. We estimate a simple NAIRU gap model for the United States to obtain quantitative measures of uncertainty and to assess how these measures affect our view of the policy reaction function.
Handle: RePEc:nbr:nberwo:6518
Template-Type: ReDIF-Paper 1.0
Title: An Economic Analysis of Transnational Bankruptcies
Classification-JEL: G33; G15
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Andrew T. Guzman
Note: CF
Number: 6521
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w6521
File-URL: http://www.nber.org/papers/w6521.pdf
File-Format: application/pdf
Publication-Status: published as The Journal of Law and Economics, vol. XLII, no. 2, pp. 775-808, 1999.
Abstract: This paper analyzes the effects of the legal rules governing transnational bankruptcies. We compare a regime of territoriality' -- in which assets are adjudicated by the jurisdiction in which they are located at the time of the bankruptcy -- with a regime of universality are adjudicated in a single jurisdiction. Territoriality is shown to generate a distortion in investment patterns that might lead to an inefficient allocation of capital across countries. We also analyze who gains and who loses from territoriality, explain why countries engage in it even though it reduces global welfare, and identify what can be done to achieve universality.
Handle: RePEc:nbr:nberwo:6521
Template-Type: ReDIF-Paper 1.0
Title: Open-Economy Inflation Targeting
Classification-JEL: E52; E58
Author-Name: Lars E. O. Svensson
Author-Person: psv2
Note: IFM ME
Number: 6545
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w6545
File-URL: http://www.nber.org/papers/w6545.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, Vol. 50 (2000): 155-183.
Abstract: The paper extends previous analysis of closed-economy inflation targeting to a small open economy with forward-looking aggregate supply and demand with some microfoundations, and with stylized realistic lags in the different transmission channels for monetary policy. The paper compares targeting of CPI and domestic inflation, strict and flexible inflation targeting, and inflation-targeting reaction functions and the Taylor rule. The optimal monetary policy response to several different shocks is examined. Flexible CPI-inflation targeting stands out as successful in limiting not only the variability of CPI inflation but also the variability of the output gap and the real exchange rate. Somewhat counter to conventional wisdom, negative productivity supply shocks and positive demand shocks have similar effects on inflation and the output gap, and induce similar monetary policy responses. The model gives limited support for a so-called monetary conditions index, MCI, of the monetary policy impact on aggregate demand, but the impact on inflation is too complex to be captured by any single index. The index differs from currently used indices in combing (1) a long rather than a short real interest rate with the real exchange rate and (2) expected future values rather than current values. Because of (2), the index is not directly observable and verifiable to external observers.
Handle: RePEc:nbr:nberwo:6545
Template-Type: ReDIF-Paper 1.0
Title: Income Taxes and Entrepreneurs' Use of Labor
Classification-JEL: H32
Author-Name: Robert Carroll
Author-Name: Douglas Holtz-Eakin
Author-Name: Mark Rider
Author-Name: Harvey S. Rosen
Author-Person: pro55
Note: PE
Number: 6578
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w6578
File-URL: http://www.nber.org/papers/w6578.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Labor Economics, vol. 18, no. 2, pp. 324-351, 1999.
Abstract: This paper investigates the effect of entrepreneurs' personal income tax situations on their use of labor. We analyze the income tax returns of a large number of sole proprietors before and after the Tax Reform Act of 1986 and determine how the substantial reductions in marginal tax rates associated with that law affected their decisions to hire labor and the size of their wage bills. We find that individual income taxes exert a statistically and quantitatively significant influence on the probability that an entrepreneur hires workers. Raising the entrepreneur's tax price' (one minus the marginal tax rate) by 10 percent raises the mean probability of hiring workers by about 12 percent. Further, conditional on hiring employees, taxes also influence the total wage payments to those workers. The elasticity of the median wage bill with respect to the tax price is about 0.37.
Handle: RePEc:nbr:nberwo:6578
Template-Type: ReDIF-Paper 1.0
Title: Nominal Income Targeting in an Open-Economy Optimizing Model
Classification-JEL: E52; E37
Author-Name: Bennett T. McCallum
Author-Name: Edward Nelson
Author-Person: pne58
Note: EFG ME
Number: 6675
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w6675
File-URL: http://www.nber.org/papers/w6675.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, vol43, no. 3, 1999, pp 553-578.
Abstract: This paper presents stochastic simulation results pertaining to the performance of nominal income targeting, here represented as a monetary policy rule that sets quarterly values of an interest rate instrument in response to deviations on existing studies of nominal income growth from a specified target rate. It attempts to improve on existing studies by conducting analysis in a macroeconomic model that is designed to respect both neoclassical theory and empirical regularities. Accordingly, the basic theoretical framework is one in which individual economic agents are depicted as solving dynamic optimization problems with rational expectations, but in an environment such that prices respond only gradually to changes in conditions. The adjustment specification used is the P-bar model, which satisfies the strict natural rate hypothesis. Two improvements over previous work by the authors are that consumption choices reflect habit formation, which lends some inertia to the system, while the modeled economy is open to international flows of goods and securities. Both of these features have major effects on the system's properties. Quantitatively, the model is calibrated to post-Bretton Woods U.S. quarterly data. The results suggest that nominal income targeting deserves serious consideration as a monetary policy strategy.
Handle: RePEc:nbr:nberwo:6675
Template-Type: ReDIF-Paper 1.0
Title: Would a Privatized Social Security System Really Pay a Higher Rate of Return
Author-Name: John Geanakoplos
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: Stephen P. Zeldes
Note: AG
Number: 6713
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w6713
File-URL: http://www.nber.org/papers/w6713.pdf
File-Format: application/pdf
Publication-Status: published as Framing the Social Security Debate: Values, Politics, and Economics, Arnold, R. Douglas,Michael J. Graetz,and Alicia H. Munnell, eds., Brookings Institution Press, 1998, pp. 137-156.
Abstract: Many advocates of social security privatization argue that rates of return under a defined contribution individual account system would be much higher for all than they are under the current social security system. This claim is false. The mistake comes from ignoring accrued benefits already promised based on past payroll taxes, and from underestimating the riskiness of stock investments. Confusion arises because three distinct reforms are muddled. By privatization we mean creating individual accounts (which could, for example, be invested exclusively in bonds). By diversification we mean investing in stocks, and perhaps other assets, as well as bonds; diversification might be undertaken either by individuals in their private social security accounts, or by the social security trust fund. By prefunding we mean closing the gap between social security benefits promised to date and the assets on hand to pay for them. Any one of these reforms could be implemented without the other two. If the system were completely privatized, with no prefunding or diversification, the social security system would need to raise taxes and/or issue new debt in order to pay benefits already accrued. If the burden were spread evenly across all future generations via a constant proportional tax, the added taxes would completely eliminate any rate of return advantage on the individual accounts. We estimate that the required new taxes would amount to about 3 percent of payroll, or about a quarter of all social security contributions, in perpetuity. Unlike privatization, prefunding would raise rates of return for later generations, but at the cost of lower returns for today's workers. For households able to invest in the stock market on their own, diversification would not raise rates of return, correctly adjusted to recognize risk. Households that are constrained from holding stock, due to lack of wealth outside of social security or to fixed costs from holding stocks, would gain higher risk-adjusted returns and would benefit from diversification. If this group is large, diversification would raise stock values, thus helping current stockholders, but it would lower future stock returns, thus hurting young unconstrained households. Overall, since the number of truly constrained households is probably not that large, privatization and diversification would have a much smaller effect on returns than reformers typically claim.
Handle: RePEc:nbr:nberwo:6713
Template-Type: ReDIF-Paper 1.0
Title: Social Security Money's Worth
Author-Name: John Geanakoplos
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: Stephen P. Zeldes
Note: AG
Number: 6722
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w6722
File-URL: http://www.nber.org/papers/w6722.pdf
File-Format: application/pdf
Publication-Status: published as Prospects for Social Security Reform, edited by Olivia S. Mitchell, Robert J. Myers, and Howard Young, pp. 79-151, 1999. The Pesion Research Councilof the Wharton School of the University of Pennsylvania.
Abstract: This paper describes how three money's worth measures the benefit-to-tax ratio, the internal rate of return, and the net present value are calculated and used in analyses of social security reforms, including systems with privately managed individual accounts invested in equities. Declining returns from the U.S. social security system prove to be the inevitable result of having instituted an unfunded (pay-as-you-go) retirement system that delivered $7.9 trillion of net transfers (in 1997 present value dollars) to people born before 1917, and will deliver another $1.8 trillion to people born between 1918 and 1937. But young and future workers cannot necessarily do better by investing their payroll taxes in capital markets. If the old system were closed down, massive unfunded liabilities of $9-10 trillion would still have to be paid unless already accrued benefits were cut. Alternative methods of calculating these accrued benefits yield somewhat different numbers: the straight line calculation is $800 billion less than the constant benefit calculation we propose as the benchmark. Using this benchmark in a world with no uncertainty, we show that privatization without prefunding would not increase returns at all, net of the new taxes needed to pay for unfunded liabilities. These new taxes would amount to 3.6 percent of payroll, or about 29 percent of social security contributions. Prefunding, implemented by reducing accrued benefits or by raising taxes, would eventually increase money's worth for later generations, but at the cost of lower money's worth for today's workers and/or retirees. Computing money's worth when there is uncertainty is much more difficult unless four conditions hold prices into stocks and out of bonds has no effect whatsoever on money's worth when it i adjusted for risk: a dollar of stock is worth no more than a dollar of bonds. diversification can raise welfare for constrained households, but the exact money's worth must depend on specific assumptions about household attitudes toward risk. Calculations lik the Social Security Advisory Council that attribute over $2.85 of net present va $1 shifted from bonds to stocks completely overlook the disutility of risk. By estimate that a 2 percent of payroll equity fund carved out of social security w present value by about 59 cents per dollar of bonds switched into equities When the likely reductions in income and longevity insurance are factored in privatization and diversification is substantially less than popularly perceived
Handle: RePEc:nbr:nberwo:6722
Template-Type: ReDIF-Paper 1.0
Title: Economic Recovery from the Argentine Great Depression: Institutions, Expectations, and the Change of Macroeconomic Regime
Classification-JEL: N16; E63
Author-Name: Gerardo della Paolera
Author-Person: pde864
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: EFG
Number: 6767
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w6767
File-URL: http://www.nber.org/papers/w6767.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic History, vol. 59, no. 3 (September 1999): 567-599.
Abstract: This work explores how Argentina overcame the Great Depression and asks whether active macroeconomic interventions made any contribution to the recovery. In particular, we study Argentine macroeconomic policy as it deviated from gold-standard orthodoxy after the final suspension of convertibility in 1929. As elsewhere, fiscal policy in Argentina was conservative, and had little power to smooth output. Monetary policy became heterodox after 1929. The first and most important stage of institutional change took place with the switch from a metallic monetary regime to a fiduciary regime in 1931; the Caja de Conversi¢n (Conversion Office, a currency board) began rediscounting as a means to sterilize gold outflows and avoid deflationary pressures, thus breaking from orthodox game. and were not enough to fully offset the incipient monetary contractions: the recovery derived from changes in beliefs and expectations surrounding the shift in the monetary and exchange-rate regime, and the delinking of gold flows and the money base. Agents perceived a new regime, as shown by the path of consumption, investment, and estimated ex ante real interest rates: the predated a later, and supposedly more significant, stage of institutional reform, namely the creation of the central bank in 1935. Still, the extent of intervention was weak, and insufficient to fully offset external shocks to prices and money. Argentine macropolicy was heterodox in terms of the change of regime, but still conservative in terms of the tentative scope of the measures taken.
Handle: RePEc:nbr:nberwo:6767
Template-Type: ReDIF-Paper 1.0
Title: Nonprofit Business Activity and the Unrelated Business Income Tax
Classification-JEL: H25; L31
Author-Name: James R. Hines, Jr.
Author-Person: phi111
Note: PE
Number: 6820
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w6820
File-URL: http://www.nber.org/papers/w6820.pdf
File-Format: application/pdf
Publication-Status: published as Non-Profit Business Activity and the Unrelated Business Income Tax, James R. Hines Jr.. in Tax Policy and the Economy, Volume 13, Poterba. 1999
Abstract: American nonprofit organizations are generally exempt from federal income tax, with the exception that profits earned from activities that are subject to the Unrelated Business Income Tax (UBIT). The UBIT is intended to prevent nonprofits and taxable for-profit firms, and also to prevent erosion of the federal tax base through tax-motivated transactions between taxable and tax-exempt entities. The evidence indicates that American nonprofit organizations engage in very little unrelated business activity, paying aggregate UBIT of less than $200 million annually. Large nonprofit organizations, and those with pressing financial needs due to high program-related expenses and low receipts of contributions and government grants, are the most likely to have unrelated business income. The same organizational characteristics are not associated with earning income from inventory sales that are nonprofits incur important organizational costs in undertaking unrelated business activity, since unrelated business income is concentrated among organizations facing the strongest financial pressures. This, in turn, carries implications for the efficiency of the UBIT as a source of tax revenue and for the need to tax the business income of nonprofit organizations in order to prevent
Handle: RePEc:nbr:nberwo:6820
Template-Type: ReDIF-Paper 1.0
Title: Managerial Value Diversion and Shareholder Wealth
Classification-JEL: K22; G34
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Christine Jolls
Note: CF LE
Number: 6919
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w6919
File-URL: http://www.nber.org/papers/w6919.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Law, Economics & Organization, vol. 15, no. 2, (July 1999): 487-502
Abstract: The agents to whom shareholders delegate the management of corporate affairs may transfer value from shareholders to themselves through a variety of mechanisms, such as self-dealing, insider trading, and taking of corporate opportunities. A common view in the law and economics literature is that such value diversion does not ultimately produce a reduction in shareholder wealth, since value diversion simply substitutes for alternative forms of compensation that would otherwise be paid to managers. We question this view within its own analytical framework by studying, in a principal-agent model, the effects of allowing value diversion on managerial compensation and effort. We suggest that the standard law and economics view of value diversion overlooks a significant cost of such behavior. Many common modes of compensation can provide managers with incentives to enhance shareholder value; replacing such compensation would reduce these incentives. As a result, even if the consequences of a rule permitting value diversion can be fully taken into account in settling managerial compensation, such a rule might still produce a reduction in shareholder wealth -- and would not do so only if value diversion would have some countervailing positive effects (a possibility which our model considers) that are sufficiently significant in size.
Handle: RePEc:nbr:nberwo:6919
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 IFM
Number: 7044
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7044
Publication-Status: published as Journal of Monetary Economics, Vol. 43, No. 3, 576-606, June 1999. Elsevier Science.
Abstract: This paper was an accidental re-issue of w6965
Handle: RePEc:nbr:nberwo:7044
Template-Type: ReDIF-Paper 1.0
Title: Role of the Minimal State Variable Criterion
Classification-JEL: C32; E00
Author-Name: Bennett T. McCallum
Note: ME EFG
Number: 7087
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7087
File-URL: http://www.nber.org/papers/w7087.pdf
File-Format: application/pdf
Publication-Status: published as International Tax and Public Finance, vol 6, no. 4, pp. 621-639, 1999.
Abstract: This paper concerns the minimal-state-variable (MSV) criterion for selection among solutions in rational expectations (RE) models that feature a multiplicity of paths that satisfy all of the model's conditions. It compares the MSV criterion with others that have been proposed, including the widely used saddle-path (or dynamic stability) criterion. It is emphasized that the MSV criterion can be viewed as a classification scheme that delineates the unique solution that is free of bubble or sunspot components. This scheme is of scientific value as it (a) yields a single solution upon which a researcher can focus attention if desired and (b) provides the basis for a substantive hypothesis that actual market outcomes are generally of a bubble-free nature. In the process of demonstrating uniqueness of the MSV solution for a broad class of linear models, the paper exposits a convenient and practical computational procedure. Also, several applications to current issues regarding monetary policy are outlined.
Handle: RePEc:nbr:nberwo:7087
Template-Type: ReDIF-Paper 1.0
Title: The Role of Foreign Direct Investment in International Capital Flows
Author-Name: Robert E. Lipsey
Author-Person: pli259
Note: ITI
Number: 7094
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7094
File-URL: http://www.nber.org/papers/w7094.pdf
File-Format: application/pdf
Publication-Status: published as International Capital Flows, Martin Feldstein, ed., Chicago: University of Chicago Press, 1999, pp. 307-331.
Publication-Status: published as The Role of Foreign Direct Investment in International Capital Flows, Robert E. Lipsey, Robert C. Feenstra, Carl H. Hahn, George N. Hatsopoulos. in International Capital Flows, Feldstein. 1999
Abstract: Direct investment has accounted for about a quarter of total international capital outflows in the 1990s and appears to have grown, relative to other forms of international investment, since the 1970s. The United States was by far the major source of direct investment outflows in the early 1970s, but Europe caught up to the United States in the 1980s and Japan almost did, before fading in the 1990s. The United States shifted from being the largest net supplier of direct investment to absorbing much of the world's supply, especially in the late 1980s, and then reverted to its earlier net supplier role. Direct Investment flows have been the least volatile source of international investment for most countries, the chief exception being the United States, which has flipped back and forth from dominant net supplier to dominant net recipient, and back to dominant net supplier. Particularly for developing countries, direct investment has been the most dependable source of foreign investment.
Handle: RePEc:nbr:nberwo:7094
Template-Type: ReDIF-Paper 1.0
Title: Lessons from the Asian Crisis
Classification-JEL: F3; E5
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: IFM ME
Number: 7102
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7102
File-URL: http://www.nber.org/papers/w7102.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Money and Finance, Vol. 18, no. 4 (August 1999): 709-723. Published as "Lessons from the Tequila Crisis", Journal of Banking and Finance, Vol. 23, no. 10 (October 1999): 1521-1533.
Abstract: This paper provides an asymmetric information analysis of the recent East Asian crisis. It then outlines several lessons from this crisis. First, there is a strong rationale for an international lender of last resort. Second, without appropriate conditionality for this lending, the moral hazard created by operation of an international lender of last resort can promote financial instability. Third, although capital flows did contribute to the crisis, they are a symptom rather than an underlying cause of the crisis, suggesting exchange controls are unlikely to be a useful strategy to avoid future crises. Fourth, pegged exchange-rate regimes are a dangerous strategy for emerging market countries and make financial crises more likely.
Handle: RePEc:nbr:nberwo:7102
Template-Type: ReDIF-Paper 1.0
Title: Does the P* Model Provide Any Rationale for Monetary Targeting?
Classification-JEL: E42; E52
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: ME
Number: 7178
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7178
File-URL: http://www.nber.org/papers/w7178.pdf
File-Format: application/pdf
Publication-Status: published as German Economic Review, Vol. 1, no. 1 (February 2000): 69-81.
Abstract: The so-called P* model is frequently used or referred to in discussions of monetary targeting. This gives the impression that the P* model might provide some rationale for monetary targeting or for the monetary reference value used by the Eurosystem. The P* model implies that inflation is determined by the level of and changes in the 'money gap' (the deviation of current real balances from their long-run equilibrium level), and hence that the real money gap is an important indicator for future inflation. Nevertheless, the P* model does not seem to provide any rationale for either a Bundesbank-style money-growth target or a Eurosystem-style money-growth indicator.
Handle: RePEc:nbr:nberwo:7178
Template-Type: ReDIF-Paper 1.0
Title: Understanding the Determinants of Managerial Ownership and the Link Between Ownership and Performance
Classification-JEL: G3
Author-Name: Charles P. Himmelberg
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Author-Name: Darius Palia
Note: CF
Number: 7209
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7209
File-URL: http://www.nber.org/papers/w7209.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Financial Economics, vol. 53, pp. 353-384, 1999.
Abstract: Both managerial ownership and performance are endogenously determined by exogenous (and only partly observed) changes in the firm's contracting environment. We extend the cross-sectional results of Demsetz and Lehn (1985) and use panel data to show that managerial ownership is explained by key variables in the contracting environment in ways consistent with the predictions of principal-agent models. A large fraction of the cross-sectional variation in managerial ownership is explained by unobserved firm heterogeneity. Moreover, after controlling both for observed firm characteristics and firm fixed effects, we cannot conclude (econometrically) that changes in managerial ownership affect firm performance.
Handle: RePEc:nbr:nberwo:7209
Template-Type: ReDIF-Paper 1.0
Title: Federalism and Takeover Law: The Race to Protect Managers from Takeovers
Classification-JEL: G30; G34
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Allen Ferrell
Note: LE
Number: 7232
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7232
File-URL: http://www.nber.org/papers/w7232.pdf
File-Format: application/pdf
Publication-Status: published as "Federalism and Corportate Law: The Race to Protect Managers from Takovers." Columbia Law Review, vol. 99, no.5, pp. 1168-1199 (1999)
Abstract: This paper analyzes certain important shortcomings of state competition in corporate law. In particular, we show, with respect to takeovers, states have incentives to produce rules that excessively protect incumbent managers. The development of state takeover law, we argue, is consistent with our theory. States have adopted antitakeover statutes that have little policy basis, and, more importantly, they have provided managers with a wider and more open-ended latitude to engage in defensive tactics than endorsed even by the commentators most favorable to such tactics. Furthermore, states have elected, even though they could have done otherwise, to impose antitakeover protections on shareholders, who did not appear to favor them, in a way that left shareholders with little choice or say. Finally, we conclude by pointing out that proponents of state competition cannot reconcile their views with the evolution of state takeover law---and should therefore reconsider their unqualified support of state competition.
Handle: RePEc:nbr:nberwo:7232
Template-Type: ReDIF-Paper 1.0
Title: Affiliates of U.S. and Japanese Multinationals in East Asian Production and Trade
Classification-JEL: F19; F23
Author-Name: Robert E. Lipsey
Author-Person: pli259
Note: ITI
Number: 7292
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7292
File-URL: http://www.nber.org/papers/w7292.pdf
File-Format: application/pdf
Publication-Status: published as The Role of Foreign Direct Investment in East Asian Economic Development, EASE Vol. 9, Ito, Takatoshi and Anne O. Krueger, eds., Chicago: University of Chicago Press, pp. 147-185, 2000.
Publication-Status: published as Affiliates of US and Japanese Multinationals in East Asian Production and Trade, Robert E. Lipsey. in The Role of Foreign Direct Investment in East Asian Economic Development, Ito and Krueger. 2000
Abstract: Since 1977, and in some cases starting before that, most East Asian countries' export patterns in manufacturing have been transformed from industry distributions typical of developing countries to distributions more like those of advanced countries. The process of change in most cases started with inward FDI to produce for export in the new industries, particularly by U.S. firms in electronics and computer-related machinery. The U.S. firms were followed, in electronics, by Japanese multinationals. Over time, in most cases, the U.S.-owned affiliates turned more to sales in host-country markets and their share in host country exports declined, although the host countries' specializations in the new industries continued. U.S. and Japanese firms played somewhat different roles. U.S. firms' investments were always distributed more along the lines of U.S. export comparative advantage, far from the previous patterns of the host countries. The industry distribution of Japanese investments initially followed more the lines of the host countries' comparative advantage and Japanese affiliates were less export-oriented than U.S. affiliates. However, Japanese affiliates have become more like U.S. affiliates in both export orientation and industry composition. Their early concentration in textiles and apparel faded and they are more heavily concentrated than U.S. affiliates and more export-oriented in both electrical machinery and transport equipment.
Handle: RePEc:nbr:nberwo:7292
Template-Type: ReDIF-Paper 1.0
Title: Togetherness: Spouses' Synchronous Leisure, and the Impact of Children
Classification-JEL: J22; J13
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Note: LS
Number: 7455
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7455
File-URL: http://www.nber.org/papers/w7455.pdf
File-Format: application/pdf
Publication-Status: published as "Timing, Togetherness and Time Windfalls" Hamermesh, Daniel S.; Journal of Population Economics, November 2002, v. 15, iss. 4, pp. 601-23
Abstract: This study goes beyond the immense literature on the quantity of labor that households supply to examine the timing of their labor/leisure choices. Using two-year panels from the United States in the 1970s it demonstrates that couples prefer to consume leisure simultaneously: Synchronization is greater than random male-female pairing would predict. In the 1970s the demand for joint leisure among working couples was more responsive to increases in wives' earnings than to husbands', but by the 1990s the responses were identical. Couples react to changes in constraints on them by altering their schedules to preserve joint leisure, and those with higher full incomes consume more of their leisure jointly. Children reduce the jointness of spouses' leisure, with the greatest change in schedules occurring among new mothers.
Handle: RePEc:nbr:nberwo:7455
Template-Type: ReDIF-Paper 1.0
Title: From Bismarck to Maastricht: The March to European Union and the Labor Compact
Classification-JEL: J29
Author-Name: Alan B. Krueger
Author-Person: pkr63
Note: LS
Number: 7456
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7456
File-URL: http://www.nber.org/papers/w7456.pdf
File-Format: application/pdf
Publication-Status: published as Labour Economics, Vol. 7, no. 2 (March 2000): 117-134
Abstract: This paper considers the likely impact that European Union (EU) will have on the labor compact. It is argued that, despite increased economic integration in Europe, countries will still be able to maintain distinct labor practices if they are willing to bear the cost of those practices. The incidence of many social protections probably already falls on workers. In addition, it is argued that imperfect mobility of capital, labor, goods and services will limit the pressure that integration will place on the labor compact. Evidence is presented suggesting that labor mobility among EU countries has not increased after the elimination of remaining restrictions on intra-EU labor mobility in 1993. Moreover, immigration from non-EU countries, which is much larger than intra-EU migration, has declined since 1993. Evidence is also reviewed suggesting that the demand for social protection rises when countries are more open, and therefore subject to more severe external shocks. This finding suggests that increased economic integration and European Monetary Union could lead to greater demand for social protection. The U.S. experience with state workers' compensation insurance programs is offered as an example of enduring differences in labor market protections in highly integrated regional economies with a common currency.
Handle: RePEc:nbr:nberwo:7456
Template-Type: ReDIF-Paper 1.0
Title: A Review of Estimates of the Schooling/Earnings Relationship, with Tests for Publication Bias
Classification-JEL: I2
Author-Name: Orley Ashenfelter
Author-Person: pas9
Author-Name: Colm Harmon
Author-Person: pha269
Author-Name: Hessel Oosterbeek
Author-Person: poo5
Note: LS
Number: 7457
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7457
File-URL: http://www.nber.org/papers/w7457.pdf
File-Format: application/pdf
Publication-Status: published as Labour Economics, Vol. 6, no. 4 (November 1999): 453-470.
Abstract: In this paper we provide an analytical review of previous estimates of the rate of return on schooling investments and measure how these estimates vary by country, over time, and by estimation method. We find evidence reporting (or file drawer') bias in the estimates and, after due account is taken of this bias, we find that differences due to estimation method are much smaller than is sometimes reported, although some are statistically significant. We also find that estimated returns are higher in the U.S. and they have increased in the last two decades.
Handle: RePEc:nbr:nberwo:7457
Template-Type: ReDIF-Paper 1.0
Title: Would Collective Action Clauses Raise Borrowing Costs?
Classification-JEL: F0; F3
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Ashoka Mody
Note: IFM
Number: 7458
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7458
File-URL: http://www.nber.org/papers/w7458.pdf
File-Format: application/pdf
Publication-Status: published as Eichengreen, Barry and Ashoka Mody. "Do Collective Action Clauses Raise Borrowing Costs?," Economic Journal, 2004, v114(495,Apr), 247-264.
Abstract: We examine the implications for borrowing costs of including collective-action clauses in loan contracts. For a sample of some 2,000 international bonds, we compare the spreads on bonds subject to UK governing law, which typically include collective-action clauses, with spreads on bonds subject to US law, which do not. Contrary to the assertions of some market participants, we find that collective-action clauses in fact reduce the cost of borrowing for more credit-worthy issuers, who appear to benefit from the ability to avail themselves of an orderly restructuring process. In contrast, less credit-worthy issuers pay, if anything, higher spreads. We conjecture that for less credit-worthy borrowers the advantages of orderly restructuring are offset by the moral hazard and default risk associated with the presence of renegotiation-friendly loan provisions.
Handle: RePEc:nbr:nberwo:7458
Template-Type: ReDIF-Paper 1.0
Title: Assessing the Effects of Fiscal Shocks
Classification-JEL: E3; E6
Author-Name: Craig Burnside
Author-Person: pbu20
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Jonas D.M. Fisher
Author-Person: pfi4
Note: EFG ME
Number: 7459
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7459
File-URL: http://www.nber.org/papers/w7459.pdf
File-Format: application/pdf
Publication-Status: published as Burnside, Craig, Martin Eichenbaum and Jonas Fisher. “Fiscal Shocks and Their Consequences." Journal of Economic Theory 115, 1 (2004): 89–117.
Abstract: This paper investigates the response of real wages and hours worked to an exogenous shock in fiscal policy. We identify this shock with the dynamic response of government purchases and tax rates to an exogenous increase in military purchases. The fiscal shocks that we isolate are characterized by highly correlated increases in government purchases, tax rates and hours worked as well as persistent declines in real wages. We assess the ability of standard Real Business Cycle models to account for these facts. They can-but only under the assumption that marginal income tax rates are constant, a standard assumption in the literature. Once we abandon this counterfactual assumption, RBC models cannot account for the facts. We argue that our empirical findings pose a challenge to a wide class of business cycle models.
Handle: RePEc:nbr:nberwo:7459
Template-Type: ReDIF-Paper 1.0
Title: Searching for Non-Linear Effects of Fiscal Policy: Evidence from Industrial and Developing Countries
Classification-JEL: E21; E62
Author-Name: Francesco Giavazzi
Author-Person: pgi18
Author-Name: Tullio Jappelli
Author-Person: pja11
Author-Name: Marco Pagano
Author-Person: ppa56
Note: IFM
Number: 7460
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7460
File-URL: http://www.nber.org/papers/w7460.pdf
File-Format: application/pdf
Publication-Status: published as Giavazzi, Francesco, Tullio Jappelli and Marco Pagano. "Searching For Non-Linear Effects Of Fiscal Policy: Evidence From Industrial And Developing Countries," European Economic Review, 2000, v44(7,Jun), 1291-1326.
Abstract: Several recent studies suggest that the response of national saving to fiscal policy may be non-linear. In this paper we use two data sets to search for the circumstances in which such non-linear responses may arise: a sample of OECD countries used in previous studies, and sample of developing countries, using more recent World Bank data. We find that in both samples non-linear effects tend to be associated with large and persistent fiscal impulses. In the OECD sample the non-linearity of the response is stronger for fiscal contractions than for expansions. An increase in net taxes has no effect on national saving during large fiscal contractions, while it has a positive effect in less pronounced contractions. High or rapidly growing public debt does not appear to be a good predictor of non-linear effects. In the World Bank sample of developing countries, non-linearities in the response national saving to fiscal policy are not limited to large fiscal contractions, and also tend to occur in periods in which debt is accumulating rapidly, regardless of its initial level.
Handle: RePEc:nbr:nberwo:7460
Template-Type: ReDIF-Paper 1.0
Title: Keynesian Macroeconomics without the LM Curve
Classification-JEL: E12; E32
Author-Name: David Romer
Author-Person: pro406
Note: ME
Number: 7461
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7461
File-URL: http://www.nber.org/papers/w7461.pdf
File-Format: application/pdf
Publication-Status: published as David Romer, 2000. "Keynesian Macroeconomics without the LM Curve," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 149-169, Spring.
Abstract: Changes in both the macroeconomy and in macroeconomics suggest that the IS-LM-AS model is no longer the best baseline model of short-run fluctuations for teaching and policy analysis. This paper presents an alternative model that replaces the assumption that the central bank targets the money supply with an assumption that it follows a simple interest rate rule. The resulting model is simpler, more realistic, and more coherent than IS-LM-AS, not just in its treatment of monetary policy but in many other ways. The paper also discusses other alternatives to IS-LM-AS.
Handle: RePEc:nbr:nberwo:7461
Template-Type: ReDIF-Paper 1.0
Title: What Causes Fluctuations in the Terms of Trade?
Classification-JEL: E32; F41
Author-Name: Marianne Baxter
Author-Person: pba102
Author-Name: Michael A. Kouparitsas
Author-Person: pko63
Note: ITI
Number: 7462
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7462
File-URL: http://www.nber.org/papers/w7462.pdf
File-Format: application/pdf
Publication-Status: published as Baxter, Marianne and Michael A. Kouparitsas. "What Can Account For Fluctuations In The Terms Of Trade?," International Finance, 2006, v9(1,Apr), 63-86.
Abstract: This paper investigates the sources of terms of trade volatility, specifically addressing the relative importance of goods-price effects vs. country-price effects. For fuel exporters, most of the terms of trade variation stems from goods-price effects, as one would have expected, a priori. For commodity exporters, there is great dispersion in the importance of goods price effects vs. country price effects, and no overall generalization is possible. Exporters of manufactured goods face terms of trade variation that appears to be about equally due to goods-price effects and country-price effects.
Handle: RePEc:nbr:nberwo:7462
Template-Type: ReDIF-Paper 1.0
Title: Are Americans More Altruistic than the Japanese? A U.S.-Japan Comparison of Saving and Bequest Motives
Classification-JEL: D12; D91
Author-Name: Charles Yuji Horioka
Author-Person: pho41
Author-Name: Hideki Fujisaki
Author-Name: Wako Watanabe
Author-Person: pwa215
Author-Name: Takatsugu Kouno
Note: PE
Number: 7463
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7463
File-URL: http://www.nber.org/papers/w7463.pdf
File-Format: application/pdf
Publication-Status: published as International Economic Journal, Vol. 14, no. 1 (Spring 2000): 1-31.
Abstract: In this paper, we analyze a variety of data on saving motives, bequest motives, and bequest division from the Comparative Survey of Savings in Japan and the United States,' a binational survey conducted in 1996 by the Institute for Posts and Telecommunications Policy of the Ministry of Posts and Telecommunications of the Government of Japan, in order to shed light on which model of household behavior applies in the two countries. We find (1) that the selfish life cycle model is the dominant model of household behavior in both countries but that it is far more applicable in Japan than it is in the U.S., (2) that the altruism model is far more applicable in the U.S. than it is in Japan but that it is not the dominant model of household behavior in either country, and (3) that the dynasty model is more applicable in Japan than it is in the U.S. bu that it is of only limited applicability even in Japan.
Handle: RePEc:nbr:nberwo:7463
Template-Type: ReDIF-Paper 1.0
Title: Do Equity Financing Cycles Matter? Evidence from Biotechnology Alliances
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: Alexander Tsai
Note: CF PR
Number: 7464
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7464
File-URL: http://www.nber.org/papers/w7464.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Financial Economics, 67 (March 2003) 411-446.
Abstract: While the variability of public equity financing has been long recognized, its impact on firms has attracted little empirical scrutiny. This paper examines one setting where theory suggests that variations in financing conditions should matter, alliances between small R&D firms and major corporations: Aghion and Tirole [1994] suggest that when financial markets are weak, assigning the control rights to the small firm may be sometimes desirable but not feasible. The performance of 200 agreements entered into by biotechnology firms between 1980 and 1995 suggests that financing availability does matter. Consistent with theory, agreements signed during periods with little external equity financing that assign the bulk of the control to the corporate partner are significantly less successful than other alliances. These agreements are also disproportionately likely to be renegotiated if financial market conditions improve.
Handle: RePEc:nbr:nberwo:7464
Template-Type: ReDIF-Paper 1.0
Title: Wage and Productivity Dispersion in U.S. Manufacturing: The Role of Computer Investment
Classification-JEL: J3; O3
Author-Name: Timothy Dunne
Author-Person: pdu86
Author-Name: John Haltiwanger
Author-Person: pha231
Author-Name: Lucia Foster
Author-Person: pfo74
Note: EFG PR
Number: 7465
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7465
File-URL: http://www.nber.org/papers/w7465.pdf
File-Format: application/pdf
Publication-Status: published as Timothy Dunne & Lucia Foster & John Haltiwanger & Kenneth R. Troske, 2004. "Wage and Productivity Dispersion in United States Manufacturing: The Role of Computer Investment," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 397-430, April.
Abstract: By exploiting establishment-level data, this paper sheds new light on the source of the changes in the structure of production, wages, and employment that have occurred over the last several decades. Based on theoretical work by Caselli (1999) and Kremer and Maskin (1996), we focus on investigating the following two related hypotheses. The first hypothesis is that the channel through which skill biased technical change works through the economy is via changes in the dispersion in wages and productivity across establishments. The second is that the increased dispersion in wages and productivity across establishments is linked to differential rates of technological adoption across establishments. Our findings are supportive of these hypotheses. Specifically, we find that (1) the between plant component of wage dispersion is a growing part of total wage dispersion, (2) much of the between plant increase in dispersion is within industries, (3) the between plant measures of wage and productivity dispersion have increased substantially over the last few decades, and (4) a substantial fraction of the rising dispersion in wages and productivity is accounted for by increasing wage and productivity differentials across high and low computer investment per worker plants and high and low capital intensity plants.
Handle: RePEc:nbr:nberwo:7465
Template-Type: ReDIF-Paper 1.0
Title: Job Creation, Job Destruction, and the Real Exchange Rate
Classification-JEL: F4
Author-Name: Michael W. Klein
Author-Person: pkl9
Author-Name: Scott Schuh
Author-Person: psc769
Author-Name: Robert K. Triest
Author-Person: ptr80
Note: IFM
Number: 7466
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7466
File-URL: http://www.nber.org/papers/w7466.pdf
File-Format: application/pdf
Publication-Status: Published as "The Real Exchange Rate and Foreign Direct Investment in the United States: Relative Wealth Vs. Relative Wage Effects", Journal of International Economics (1994).
Abstract: This paper contributes to an understanding of internationally generated adjustment costs by demonstrating a statistically significant and economically relevant effect of the real exchange rate on job creation and job destruction in U.S. manufacturing industries over the period 1973 to 1993. The responsiveness of these gross job flows to the real exchange rate reflects pervasive heterogeneity with respect to international conditions across firms, even within narrowly defined industries. We document this heterogeneity and show that the responsiveness of job flows to movements in the real exchange rate varies with the industry's openness to international trade. We also show an asymmetry in the responsiveness of job flows to the real exchange rate; appreciations play a significant role in job destruction, but job flows do not respond significantly to dollar depreciations.
Handle: RePEc:nbr:nberwo:7466
Template-Type: ReDIF-Paper 1.0
Title: Human Resource Management and Performance in the Service Sector: The Case of Bank Branches
Classification-JEL: J24; L8
Author-Name: Ann P. Bartel
Note: LS PR
Number: 7467
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7467
File-URL: http://www.nber.org/papers/w7467.pdf
File-Format: application/pdf
Publication-Status: published as Bartel, Ann P. "Human Resource Management And Organizational Performance: Evidence From Retail Banking," Industrial and Labor Relations Review, 2004, v57(2,Jan), 181-203.
Abstract: This paper utilizes a unique dataset collected through site visits to extend the analysis of the relationship between the human resource management environment and establishment performance to the service sector, specifically the branch operations of a large bank. Case studies of several branches were used to understand how and why the human resource management environment is likely to affect branch level performance. The branch interviews were instrumental in properly specifying a branch-level performance equation. The econometric analysis showed that, controlling for the characteristics of the market in which the branch is located and the characteristics of the branch employees, as well as unobserved branch-specific and unobserved manager-specific characteristics, the human resource management environment at the branch, as measured by the performance evaluation and feedback system and the quality of communications between the manager and the staff, had a significant effect on the branch's performance. An important finding is that, even though all managers in this bank are given a formal set of human resource policies, they appear to have considerable discretion in their application.
Handle: RePEc:nbr:nberwo:7467
Template-Type: ReDIF-Paper 1.0
Title: Growth Theory
Classification-JEL: O10
Author-Name: Boyan Jovanovic
Note: PR
Number: 7468
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7468
File-URL: http://www.nber.org/papers/w7468.pdf
File-Format: application/pdf
Publication-Status: published as Jovanovic, Boyan. “Economic Growth: Theory” International Encyclopedia of the Social Sciences.
Abstract: Growth theory offers two plausible explanations of growth. One stresses the supply of productive ideas and holds that the industrial revolution had to wait until we had thought up enough inventions to lift us into the era of modern growth. It says, roughly, that the growth of living standards depends on the growth of science. The other explanation stresses incentives: Growth could begin only when hard work and business enterprise were free of heavy taxation, of social stigma and of other interference by the government and the church. The first branch of theory is well developed; it is the second that now challenges the growth economist to explain not just growth, but the evolution of political and religious institutions and social attitudes as well.
Handle: RePEc:nbr:nberwo:7468
Template-Type: ReDIF-Paper 1.0
Title: Peer Effects with Random Assignment: Results for Dartmouth Roommates
Classification-JEL: I2; J0
Author-Name: Bruce Sacerdote
Note: LE LS
Number: 7469
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7469
File-URL: http://www.nber.org/papers/w7469.pdf
File-Format: application/pdf
Publication-Status: published as Sacerdote, Bruce. "Peer Effects With Random Assignment: Results For Dartmouth Roommates," Quarterly Journal of Economics, 2001, v116(2,May), 681-704.
Abstract: This paper uses a unique data set to measure peer effects among college age roommates. Freshman year roommates and dormmates are randomly assigned at Dartmouth College. I find that in this group, peer effects are very important in determining levels of academic effort and in decisions to join social groups such as fraternities. Residential peer effects are markedly absent in other major life decisions such as choice of college major. Several forms of peer effects are considered. The data support a model in which peer effects are driven by roommate behavior after the freshmen arrive. Social learning based on a roommate's observable pre-Dartmouth information or skills appears to be less important. Peer effects in GPA occur at the individual room level whereas peer effects in fraternity membership occur both at the room level and the entire dorm level. I also find that a freshman with high social ability is likely to remain with his or her roommates in sophomore year, but high academic ability actually decreases roommate retention.
Handle: RePEc:nbr:nberwo:7469
Template-Type: ReDIF-Paper 1.0
Title: The Role of Commitment in Dynamic Contracts: Evidence from Life Insurance
Classification-JEL: L0; D4
Author-Name: Igal Hendel
Author-Name: Alessandro Lizzeri
Author-Person: pli177
Note: PR
Number: 7470
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7470
File-URL: http://www.nber.org/papers/w7470.pdf
File-Format: application/pdf
Publication-Status: published as Hendel, Igal and Alessandro Lizzeri. "The Role Of Commitment In Dynamic Contracts: Evidence From Life Insurance," Quarterly Journal of Economics, 2003, v118(1,Feb), 299-327.
Abstract: We look at the life insurance industry to study the properties of long term contracts in a world where consumers cannot commit to a contract. The main issue is how contracts are designed to deal with classification risk. We present a model that captures the main features of this industry. The data is especially suited for a test of the theory since it includes information on the entire profile of future premiums. The lack of commitment by consumers shapes contracts in the way predicted by the theory. All types of contracts involve front-loading. This generates a partial lock-in of consumers. Contracts that are more front-loaded have a lower present value of premiums over the period of coverage. This is consistent with the idea that more front-loaded contracts retain better risk pools. The estimates suggest that classification risk is almost completely insured by long term level-premium contracts.
Handle: RePEc:nbr:nberwo:7470
Template-Type: ReDIF-Paper 1.0
Title: Total Factor Productivity: A Short Biography
Classification-JEL: O47; B22
Author-Name: Charles R. Hulten
Note: PR
Number: 7471
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7471
File-URL: http://www.nber.org/papers/w7471.pdf
File-Format: application/pdf
Publication-Status: published as Total Factor Productivity: A Short Biography, Charles R. Hulten. in New Developments in Productivity Analysis, Hulten, Dean, and Harper. 2001
Abstract: Economists have long recognized that total factor productivity is an important factor in the process of economic growth. However, just how important it is has been a matter of ongoing controversy. Part of this controversy is about methods and assumptions. Total factor productivity growth is estimated as a residual, using index number techniques. It is thus a measure of our ignorance,' with ample scope for measurement error. Another source of controversy arises from sins of omission, rather than commission. A New Economy critique of productivity points to unmeasured gains in product quality, while an environmental critique points to the unmeasured costs of growth. This essay is offered as an attempt to address these issues. Its first objective is to explain the origins of the growth accounting and productivity methods now under scrutiny. It is a biography of an idea, is intended to show what results can be expected from the productivity framework and what cannot. The ultimate objective is to demonstrate the considerable utility of the idea, as a counter-weight to the criticism, often erroneous, to which it has been subjected. Despite its flaws, the residual has provided a simple and internally consistent intellectual framework for organizing data on economic growth, and has provided the theory to guide a considerable body of economic measurement.
Handle: RePEc:nbr:nberwo:7471
Template-Type: ReDIF-Paper 1.0
Title: Changes in Job Stability and Job Security: A Collective Effort to Untangle, Reconcile, and Interpret the Evidence
Classification-JEL: J63; J64
Author-Name: David Neumark
Author-Person: pne16
Note: PR
Number: 7472
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7472
File-URL: http://www.nber.org/papers/w7472.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, 2000.
Abstract: I synthesize and summarize a set of recent papers on changes in the employment relationship. The authors of these papers present the most up-to-date and accurate assessment of their evidence on changes in job stability and job security, and attempt to reconcile their evidence with the findings of other research, including the other papers discussed herein. Some of papers also begin to explore explanations of changes in the employment relationship. The evidence suggests that the 1990's witnessed some changes in the employment relationship consistent with weakened bonds between workers and firms. But the magnitudes of these changes indicate that while these bonds may have weakened, they have not been broken. Furthermore, the changes that occurred in the 1990's have not persisted very long. It is therefore premature to infer long-term trends towards declines in long-term employment relationships, and even more so to infer anything like the disappearance of long-term, secure jobs. The papers examining sources of changes in job stability and job security in the 1990's point to some potential explanations, including relative wage movements, growth in alternative employment relationships, and downsizing. However, with the possible exception of the first of these, this list does not encompass fundamental' or exogenous changes impacting the employment relationship, but rather to some extent suggests how various changes in the employment relationship may reinforce each other. Understanding the structural changes underlying empirical observations on changes in job stability and job security is likely to be a fruitful frontier for future research on the employment relationship.
Handle: RePEc:nbr:nberwo:7472
Template-Type: ReDIF-Paper 1.0
Title: Tax Avoidance, Evasion, and Administration
Classification-JEL: H20; H26
Author-Name: Joel Slemrod
Author-Person: psl10
Author-Name: Shlomo Yitzhaki
Author-Person: pyi12
Note: PE
Number: 7473
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7473
File-URL: http://www.nber.org/papers/w7473.pdf
File-Format: application/pdf
Publication-Status: published as Slemrod, Joel & Yitzhaki, Shlomo, 2002. "Tax avoidance, evasion, and administration," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470 Elsevier.
Abstract: When tax structure changes, people may alter their consumption basket, but they also may call and give new instructions to their accountant, change their reports to the IRS, change the timing of transactions, and undertake a range of other actions that do not directly involve a change in their consumption basket. This survey argues that acknowledging the variety of behavioral responses to taxation changes the answers to traditional subjects of inquiry such an incidence, optimal progressivity, and optimal tax structure, and also raises a whole new set of policy questions, such as the appropriate level of resources to devote to administration and enforcement, and how these resources should be deployed. For some purposes, such as estimating the marginal cost of funds, and subject to some qualifications, the nature of the behavioral response does not matter, and only the total magnitude of response does. However, with respect to real behavioral responses such as labor supply, it is natural to presume that the response is an immutable function of preferences. With respect to avoidance and evasion, though, this is not appropriate because there are a variety of policy instruments that can affect the magnitude of responses, implying that the elasticity of response is itself a policy instrument.
Handle: RePEc:nbr:nberwo:7473
Template-Type: ReDIF-Paper 1.0
Title: The Role of Wage and Skill Differences in US-German Employment Differences
Classification-JEL: E24; J23
Author-Name: Richard B. Freeman
Author-Person: pfr23
Author-Name: Ronald Schettkat
Note: LS
Number: 7474
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7474
File-URL: http://www.nber.org/papers/w7474.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), vol. 219/1-2 (July 1999): 49-66
Abstract: Greater job creation in the US than in Germany has often been related to greater wage dispersion coupled with less regulated labour and product markets in the US. Based on the Comparative German American Structural Database and the International Adult Literacy Survey we find that employment of skilled to unskilled labour is unrelated to differences in skill premium but that changes in relative employment are related to changes in relative wages raising the possibility of some substitution behavior. Still, the differing dispersion of wages is not a major contributor to differences in employment rates. The jobs problem in Germany is one of a general lack in demand for labor.
Handle: RePEc:nbr:nberwo:7474
Template-Type: ReDIF-Paper 1.0
Title: Does Political Ambiguity Pay? Corporate Campaign Contributions and the Rewards to Legislator Reputation
Classification-JEL: D72; D78
Author-Name: Randall S. Kroszner
Author-Name: Thomas Stratmann
Author-Person: pst44
Note: LE
Number: 7475
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7475
File-URL: http://www.nber.org/papers/w7475.pdf
File-Format: application/pdf
Abstract: Do politicians tend to follow a strategy of ambiguity in their policy positions or a strategy of reputational development to reduce uncertainty about where they stand? Ambiguity could allow a legislator to avoid alienating constituents and to play rival interests off against each other to maximize campaign contributions. Alternatively, reputational clarity could help to reduce uncertainty about a candidate and lead to high campaign contributions from favored interests. We outline a theory that considers conditions under which a politician would and would not prefer reputational development and policy-stance clarity in the context of repeat dealing with special interests. Our proxy for reputational development is the percent of repeat givers to a legislator. Using data on corporate political action committee contributions (PACs) to members of the U.S. House during the seven electoral cycles from 1983/84 to 1995/96, we find that legislators do not appear to follow a strategy of ambiguity and that high reputational development is rewarded with high PAC contributions.
Handle: RePEc:nbr:nberwo:7475
Template-Type: ReDIF-Paper 1.0
Title: Preserving the Ocean Circulation: Implications for Climate Policy
Classification-JEL: Q20; Q30
Author-Name: Klaus Keller
Author-Name: Kelvin Tan
Author-Name: Francois M.M. Morel
Author-Name: David F. Bradford
Note: PE
Number: 7476
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7476
File-URL: http://www.nber.org/papers/w7476.pdf
File-Format: application/pdf
Publication-Status: published as Keller, Klaus, Kelvin Tan, François M. M. Morel, and David F. Bradford. "Preserving the Ocean Circulation: Implications for Climate Policy." Climatic Change 47, 1-2 (October 2000): 17-43.
Abstract: Climate modelers have recognized the possibility of abrupt climate changes caused by a reorganization of the North Atlantic's current pattern (technically known as a thermohaline circulation collapse). This circulation system now warms north-western Europe and transports carbon dioxide to the deep oceans. The posited collapse of this system could produce severe cooling in north-western Europe, even when general global warming is in progress. In this paper we use a simple integrated assessment model to investigate the optimal policy response to this risk. Adding the constraint of avoiding a thermohaline circulation collapse would significantly reduce the allowable greenhouse gas emissions in the long run along an optimal path. Our analysis implies that relatively small damages associated with a collapse (less than 1 % of gross world product) would justify a considerable reduction of future carbon dioxide emissions.
Handle: RePEc:nbr:nberwo:7476
Template-Type: ReDIF-Paper 1.0
Title: 150 Years of Patent Office Practice
Classification-JEL: O34
Author-Name: Josh Lerner
Author-Person: ple60
Note: PR
Number: 7477
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7477
File-URL: http://www.nber.org/papers/w7477.pdf
File-Format: application/pdf
Publication-Status: published as Josh Lerner, 2005. "150 Years of Patent Office Practice," American Law and Economics Review, Oxford University Press, vol. 7(1), pages 112-143.
Abstract: An extensive theoretical literature has examined the impact of information problems on interactions between government bodies and private firms. One little-explored empirical testing ground is the patent system. This paper examines the administrative practices of patent offices in sixty countries over a 150-year period. I show that the usage of patent renewal fees and other mechanisms to grant discretion to patentees is consistent with theoretical suggestions. Nations where information asymmetries between government officials and patentees are likely to be more prevalent-larger countries, wealthier economies, and those where international trade is more important-incorporate discretionary features into their patent systems more frequently. I also find evidence that policymakers are more likely to restrict patent office officials' flexibility and to divide the responsibility for determining patentability between the patent office and the courts when information problems are likely to be severe.
Handle: RePEc:nbr:nberwo:7477
Template-Type: ReDIF-Paper 1.0
Title: 150 Years of Patent Protection
Classification-JEL: O34
Author-Name: Josh Lerner
Author-Person: ple60
Note: PR
Number: 7478
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7478
File-URL: http://www.nber.org/papers/w7478.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 92, no. 2 (May 2002): 221-225
Abstract: This paper examines three sets of explanations for variations in the strength of patent protection across sixty countries and a 150-year period. Wealthier nations are more likely to have patent systems, to allow patentees a longer time to put their patents into practice, and to ratify treaties assuring equal treatment of other nations. But they are also likely to charge higher fees and limit patent protection in some important ways. Countries with democratic political institutions are consistently more likely to have patent protection appear to be determined by historical factors. The origin of a country's commercial law appears particularly important in explaining the presence of restrictions on patentees' privileges and discriminatory provisions against foreign patentees.
Handle: RePEc:nbr:nberwo:7478
Template-Type: ReDIF-Paper 1.0
Title: What's Driving the New Economy: The Benefits of Workplace Innovation
Classification-JEL: D24; J24
Author-Name: Sandra E. Black
Author-Person: pbl92
Author-Name: Lisa M. Lynch
Author-Person: ply3
Note: LS
Number: 7479
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7479
File-URL: http://www.nber.org/papers/w7479.pdf
File-Format: application/pdf
Publication-Status: published as Black, Sandra E. and Lisa M. Lynch. "What's Driving The New Economy?? The Benefits Of Workplace Innovation," Economic Journal, 2004, v114(493,Feb), 97-116.
Abstract: Using a unique nationally representative sample of U.S. establishments surveyed in 1993 and 1996, we examine the relationship between workplace innovations and establishment productivity and wages. We match plant level practices with plant level productivity and wage outcomes and estimate production functions and wage equation using both cross sectional and longitudinal data. We find a positive and significant relationship between the proportion of non-managers using computers and productivity of establishments. We find that firms that re-engineer their workplaces to incorporate more high performance practices experience higher productivity. Profit sharing and/or stock options are also associated with increased productivity. In addition, we find that employee voice has a larger positive effect on productivity when it is done in the context of unionized establishments. When we examine the determinants of wages within these establishments, we find that re-engineering a workplace to incorporate more high performance practices leads to higher wages. However, increasing the usage of profit sharing or stock options results in lower regular pay for workers especially technical workers and clerical/sales workers. Finally, increasing the percentage of workers meeting regularly in groups has a larger positive effect on wages in unionized establishments.
Handle: RePEc:nbr:nberwo:7479
Template-Type: ReDIF-Paper 1.0
Title: Does Product Market Competition Reduce Agency Costs?
Classification-JEL: L0; K0
Author-Name: Ravi Jagannathan
Author-Person: pja91
Author-Name: Shaker B. Srinivasan
Note: AP PR
Number: 7480
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7480
File-URL: http://www.nber.org/papers/w7480.pdf
File-Format: application/pdf
Publication-Status: published as North American Journal of Economics and Finance (special Finance Issue), Volume: 10 Issue: 2 Pages: 387-399 (1999)
Abstract: The folk wisdom is that competition reduces agency costs. We provide indirect empirical support for this view. We argue that the temptation to retain cash and engage in less productive activities is more severe for firms in less competitive industries. Hence an unanticipated increase in cash-flow due to higher past returns is more likely to lead to a reduction in leverage as well as a lowering of future returns for firms in less competitive environments. Current leverage will therefore be negatively related to past returns and positively related to future returns for such firms. In contrast, for firms in more competitive industries, the negative relation between past returns and current leverage will be attenuated. Theory suggests that the relation between current leverage and future returns for such firms will be zero or negative. Using a proxy to distinguish firms in less competitive industries and data for 165 single business firms in the U.S.A., we provide empirical supports for our arguments.
Handle: RePEc:nbr:nberwo:7480
Template-Type: ReDIF-Paper 1.0
Title: Criminal Violence and Alcohol Beverage Control: Evidence from an International Study
Classification-JEL: I10
Author-Name: Sara Markowitz
Author-Person: pma138
Note: EH
Number: 7481
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7481
File-URL: http://www.nber.org/papers/w7481.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: The purpose of this paper is to examine the relationship between the price of alcoholic beverages and the incidence of criminal violence in different countries around the world. The positive association between alcoholic beverage consumption and violence is well documented, as is the negative relationship between the quantity of alcohol consumed and its price. These two relationships together form the principal hypothesis of whether increases in alcoholic beverage prices will directly decrease the incidence of criminal violence. The data come from the 1989 and 1992 International Victimization Surveys. The sample used in this paper is comprised of almost 50,000 respondents in 16 different countries. The respondents were asked if they had been victims of three types of violent crimes in the past year: robbery, assault, and sexual assault (female respondents only). A reduced form model is estimated where the probability of being a victim of violent crime is determined by the price of alcohol, variables describing the area the person lives in, and other socio-economic characteristics of the respondent. Country fixed effects are also employed in some models. Results indicate that higher alcoholic beverage prices lead to lower incidences of all three types of violent crime in models where country fixed effects are not included. Results from models which include country fixed effects are not reliable.
Handle: RePEc:nbr:nberwo:7481
Template-Type: ReDIF-Paper 1.0
Title: Understanding Inflation: Implications for Monetary Policy
Classification-JEL: E31; E58
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Author-Name: Erica L. Groshen
Author-Person: pgr213
Note: ME
Number: 7482
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7482
File-URL: http://www.nber.org/papers/w7482.pdf
File-Format: application/pdf
Publication-Status: published as Dreze, Jacques H. (ed.) Advances in Macroeconomics, Proceedings of the Twelfth World Congress of the International Economic Association. London: Macmillan, Ltd., 2001.
Abstract: This paper discusses how optimal monetary policy is affected by differences in the combination of shocks an economy experiences and the rigidities it exhibits. Without both nominal rigidities and economic shocks, monetary policy would be irrelevant. Recognizing this, policymakers increasingly incorporate the understanding gained from new research on rigidities and shocks into both their policy actions and the design of monetary institutions. Specifically, shocks can be predominantly real, affecting relative prices, or primarily nominal, moving the general price level. They may also be big or small, frequent or rare. Similarly, some nominal rigidities are symmetrical, affecting both upward and downward movements equally, while others are asymmetrical, restricting decreases more than increases. After reviewing major trends in the conduct of monetary policy, we describe how the growing theoretical and empirical literature on shocks and rigidities informs three crucial dimensions of monetary policymaking. First, we discuss why trimmed means provide the best measure of core inflation. Second, we outline how rigidities impede policymakers' ability to control inflation. And third, we describe how alternative shock/rigidity combinations create inflation's grease (whereby it improves economic efficiency by speeding adjustment) and sand effects (whereby it distorts price signals) with their contrasting implications for the optimal level of inflation. We conclude by considering some key implications for monetary policy.
Handle: RePEc:nbr:nberwo:7482
Template-Type: ReDIF-Paper 1.0
Title: Causes of the Korean Financial Crisis: Lessons for Policy
Classification-JEL: F3; E5
Author-Name: Joon-Ho Hahm
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: IFM
Number: 7483
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7483
File-URL: http://www.nber.org/papers/w7483.pdf
File-Format: application/pdf
Publication-Status: published as Shin, Inseok (ed.) The Korean Crisis, Before and After. Seoul: Korean Development Institute, 2000.
Abstract: This paper uses an asymmetric information framework to understand the causes of the recent financial crisis in Korea. It shows that the Korean data is consistent with this explanation of the crisis. It then draws on this analysis to discuss several lessons that can help guide Korean policymakers in the future.
Handle: RePEc:nbr:nberwo:7483
Template-Type: ReDIF-Paper 1.0
Title: Endogenous R&D Spillovers and Industrial Research Productivity
Classification-JEL: O31; O33
Author-Name: James D. Adams
Author-Person: pad11
Note: PR
Number: 7484
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7484
File-URL: http://www.nber.org/papers/w7484.pdf
File-Format: application/pdf
Abstract: This paper explores the implications of a simple model of learning and innovation by firms. In this model R&D spillovers are partly determined by firms, rather than by the given economic environment. According to this approach the full effect of spillovers on research productivity of firms exceeds the structural effect because it includes an active learning' response of firms to new information. Furthermore, effective spillovers grow faster or slower than potential spillovers, depending on the returns to scale of production processes for learning and invention. The empirical work is based on a sample of R&D laboratories in the chemicals, machinery, electrical equipment, and transportation equipment industries. I estimate negative binomial regressions for the number of patents as a function of academic and industrial spillover pools, learning expenditures and internal research expenditures. The findings are consistent with the view that learning expenditures transmit the effect of spillovers. I also perform tobit, ordered probit and grouped probit estimation of learning effort. I find that learning effort increases in response to industrial and academic R&D spillovers. Lastly, academic spillovers appear to have a more pervasive effect on R&D than do industrial spillovers. Overall these results suggest a sequence of events underlying learning and innovation, with learning responding to opportunities, innovation responding to learning and own R&D, and a stream of innovations leading to the accumulation of new product introductions that ultimately are reflected in the value of enterprise.
Handle: RePEc:nbr:nberwo:7484
Template-Type: ReDIF-Paper 1.0
Title: Trade, Income Inequality, and Government Policies: Redistribution of Income or Education Subsidies?
Classification-JEL: F16; H2
Author-Name: Eckhard Janeba
Author-Person: pja312
Note: ITI
Number: 7485
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7485
File-URL: http://www.nber.org/papers/w7485.pdf
File-Format: application/pdf
Abstract: This paper explores the role of government policies in a situation where the wage gap between high-skilled and low-skilled workers is widening due to increasing foreign competition in the manufacturing of low-skilled intensive goods. A two-period, two-sector general equilibrium model of a small open economy is developed in which individuals choose whether to invest in skills or not. The government influences individual decision-making by redistribution of income or by subsidizing investment in skills. Both types of policies have complicated effects on income inequality and social welfare. The first policy discourages investment in skills while the latter, although successful in inducing more investment in skills, tends to be regressive by favoring those who acquire skills. Yet for a given income tax rate the Lorenz curves of the two different policies intersect. When the government maximizes social welfare education subsidies are useful only if there is a high degree of inequality aversion and financing the subsidy is not too distortive.
Handle: RePEc:nbr:nberwo:7485
Template-Type: ReDIF-Paper 1.0
Title: Self-Employment in OECD Countries
Classification-JEL: J2
Author-Name: David G. Blanchflower
Author-Person: pbl22
Note: LS
Number: 7486
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7486
File-URL: http://www.nber.org/papers/w7486.pdf
File-Format: application/pdf
Publication-Status: published as Labour Economics, Vol. 7, no. 5 (September 2000): 471-505
Abstract: This paper describes measurement of a self-employment rate and the important role the agricultural sector plays in any analysis of the determinants of self-employment. The determinants of the self-employment rate are modeled using a panel of 23 countries for the period 1966-1996. A similar analysis is then performed at the level of the individual using a time-series of cross-sections for the period 1975-1996 for 19 countries. For most countries there is a negative relationship between the self-employment rate and the unemployment rate. It is also shown that the self-employed are more satisfied with their jobs than are individuals who are not their own boss. I developed a flexibility index based on information provided by individuals in 1995. According to this index, the U.S. economy was the most flexible, followed by Canada, Germany and the Netherlands. Latvia, Russia and Hungary were found to be the least flexible countries. Of the OECD countries examined, Austria and Ireland were ranked lowest.
Handle: RePEc:nbr:nberwo:7486
Template-Type: ReDIF-Paper 1.0
Title: Well-Being Over Time in Britain and the USA
Classification-JEL: J2
Author-Name: David G. Blanchflower
Author-Person: pbl22
Author-Name: Andrew J. Oswald
Note: LS
Number: 7487
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7487
File-URL: http://www.nber.org/papers/w7487.pdf
File-Format: application/pdf
Publication-Status: published as Blanchflower, David G. and Andrew J. Oswald. "Well-Being Over Time In Britain And The USA," Journal of Public Economics, 2004, v88(7-8,Jul), 1359-1386.
Abstract: The standard of living in the industrialized nations has been steadily increasing over the last few decades. Yet some observers wonder whether we are really getting any happier. This paper addresses that question by examining well-being data on 100,000 randomly sampled Americans and Britons from the early 1970s to the late 1990s. Reported levels of happiness have declined over the period in the United States. Life satisfaction has been approximately flat through time in Great Britain. Counter to the general US trend, the happiness of blacks in that nation has risen since the early 1970s. The black-white happiness differential has diminished. The happiness of American men has grown. Despite legislation aimed to reduce gender discrimination, the well-being of women has fallen noticeably. Well-being equations have a stable structure: the British equations look almost identical to the US ones. Money does buy happiness. The paper also calculates the dollar values of life events like unemployment and divorce. They are large. A lasting marriage, for example, is calculated to be worth $100,000 a year.
Handle: RePEc:nbr:nberwo:7487
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Returns Standardized by Realized Volatility are (Nearly) Gaussian
Classification-JEL: G0; C0
Author-Name: Torben G. Andersen
Author-Name: Tim Bollerslev
Author-Person: pbo66
Author-Name: Francis X. Diebold
Author-Person: pdi1
Author-Name: Paul Labys
Note: AP
Number: 7488
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7488
File-URL: http://www.nber.org/papers/w7488.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.
Publication-Status: published as Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 2000. "Exchange Rate Returns Standardized by Realized Volatility are (Nearly) Gaussian," Multinational Finance Journal, Multinational Finance Journal, vol. 4(3-4), pages 159-179, September.
Abstract: It is well known that high-frequency asset returns are fat-tailed relative to the Gaussian distribution tails are typically reduced but not eliminated when returns are standardized by volatilities estimated from popular models such as GARCH. We consider two major dollar exchange rates, and we show that returns standardized instead by the realized volatilities of Andersen, Bollerslev, Diebold and Labys (1999) are very nearly Gaussian. We perform both univariate and multivariate analyses, we trace the different effects of the different standardizations to differences in information sets, and we draw implications for the presence of jumps in exchange rate diffusions.
Handle: RePEc:nbr:nberwo:7488
Template-Type: ReDIF-Paper 1.0
Title: Market Efficiency in an Irrational World
Classification-JEL: G1
Author-Name: Kent Daniel
Author-Name: Sheridan Titman
Author-Person: pti51
Note: AP
Number: 7489
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7489
File-URL: http://www.nber.org/papers/w7489.pdf
File-Format: application/pdf
Publication-Status: published as Kent Daniel & Sheridan Titman, 1999. "Market Efficiency in an Irrational World," Financial Analysts Journal, vol 55(6), pages 28-40.
Abstract: This paper explains why investors are likely to be overconfident and how this behavioral bias affects investment decisions. Our analysis suggests that investor overconfidence can potentially generate stock return momentum and that this momentum effect is likely to be the strongest in those stocks whose valuation requires the interpretation of ambiguous information. Consistent with this, we find that momentum effects are stronger for growth stocks than value stocks. A portfolio strategy based on this hypothesis generates strong abnormal returns that do not appear to be attributable to risk. Although these results violate the traditional efficient markets hypothesis, they do not necessarily imply that rational but uniformed investors, without the benefit of hindsight, could have actually achieved the returns. We argue that to examine whether unexploited profit opportunities exist, one must test for what we call adaptive-efficiency, which is a somewhat weaker form of market efficiency that allows for the appearance of profit opportunities in historical data, but requires these profit opportunities to dissipate when they become apparent. Our tests reject this notion of adaptive-efficiency.
Handle: RePEc:nbr:nberwo:7489
Template-Type: ReDIF-Paper 1.0
Title: Robust Monetary Policy Under Model Uncertainty in a Small Model of the U.S. Economy
Classification-JEL: E58; C53
Author-Name: Alexei Onatski
Author-Person: pon27
Author-Name: James H. Stock
Author-Person: pst148
Note: EFG ME
Number: 7490
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7490
File-URL: http://www.nber.org/papers/w7490.pdf
File-Format: application/pdf
Publication-Status: published as Alexei Onatski & James H. Stock, 1999. "Robust monetary policy under model uncertainty in a small model of the U.S. economy," Proceedings, Federal Reserve Bank of San Francisco.
Publication-Status: published as Onatski, Alexei & Stock, James H., 2002. "Robust Monetary Policy Under Model Uncertainty In A Small Model Of The U.S. Economy," Macroeconomic Dynamics, Cambridge University Press, vol. 6(01), pages 85-110, February.
Abstract: This paper examines monetary policy in Rudebusch and Svensson's (1999) two equation macroeconomic model when the policymaker recognizes that the model is an approximation and is uncertain about the quality of that approximation. It is argued that the minimax approach of robust control provides a general and tractable alternative to the conventional Bayesian decision theoretic approach. Robust control techniques are used to construct robust monetary policies. In most (but not all) cases, these robust policies are more aggressive than the optimal policies absent model uncertainty. The specific robust policies depend strongly on the formation of model uncertainty used, and we make some suggestions about which formulation is most relevant for monetary policy applications.
Handle: RePEc:nbr:nberwo:7490
Template-Type: ReDIF-Paper 1.0
Title: Making Single Mothers Work: Recent Tax and Welfare Policy and its Effects
Classification-JEL: H24; I38
Author-Name: Bruce D. Meyer
Author-Person: pme273
Author-Name: Dan T. Rosenbaum
Author-Person: pro561
Note: CH LS PE
Number: 7491
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7491
File-URL: http://www.nber.org/papers/w7491.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.
Publication-Status: published as Bruce D. Meyer & Dan T. Rosenbaum, 2000. "Making Single Mothers Work: Recent Tax and Welfare Policy and its Effects," National Tax Journal, vol 53(4, Part 2), pages 1027-1062.
Abstract: We describe the enormous changes in social and tax policy in recent years that have encouraged work by single mothers. We document the changes in federal and state income taxes, AFDC and Food Stamp benefits, Medicaid, training and child care programs. We describe the quantitative importance of these changes and their timing. We also describe how these changes differed across states and show how they affected families with different numbers and ages of children and with different family incomes. We then examine whether the changes in employment rates over time for different demographic groups and states are consistent with a causal effect of these policies on employment. We use multiple comparison groups and two datasets over a long time period. The results support the more structural findings in Meyer and Rosenbaum (1999a) of substantial EITC effects on employment as well as the findings in Eissa and Liebman (1996) and Ellwood (1999).
Handle: RePEc:nbr:nberwo:7491
Template-Type: ReDIF-Paper 1.0
Title: The Distributional Effects of an Investment-Based Social Security System
Classification-JEL: H55; I3
Author-Name: Martin Feldstein
Author-Person: pfe112
Author-Name: Jeffrey Liebman
Author-Person: pli184
Note: AG PE
Number: 7492
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7492
File-URL: http://www.nber.org/papers/w7492.pdf
File-Format: application/pdf
Publication-Status: published as The Distributional Effects of an Investment-Based Social Security System, Martin S. Feldstein, Jeffrey B. Liebman. in The Distributional Aspects of Social Security and Social Security Reform, Feldstein and Liebman. 2002
Abstract: In this paper we study the distributional impact of a change from the existing pay-as-you-go Social Security system to one that combines both pay-as-you-go and investment-based elements. Critics of investment-based plans have been concerned that such plans might reduce the retirement income of low-paid workers or of surviving spouses relative to what they would get from Social Security, and might therefore increase the extent of poverty among the aged. Our analysis in this paper shows that this is generally not the case, even in plans that make no special effort to maintain or increase redistribution. Our principal finding is that virtually all of the demographic groups that we examine would receive higher average benefits under a mixed system with an investment-based component than the benefits that they would receive under current Social Security rules. There would also be a smaller share of individuals with benefits below the poverty line even though the total cost of funding the mixed system -- a three percent saving contribution rather than a six percent rise in the tax rate -- is substantially lower than that of funding the pay-as-you-go system. Our individual-level data permit us to go beyond comparing group means to analyze the full distribution of the benefits that individuals would receive under the two different systems. These comparisons show that the overwhelming majority of individuals would have higher benefits with the investment-based system than with the pure pay-as-you-go system. The relatively small number of individuals who would receive less from the investment-based system is further reduced when the effects of the Supplementary Security Income program is taken into account. These basic conclusions remain true even if the future rate of return in the investment-based component of the mixed system is substantially less than past experience implies.
Handle: RePEc:nbr:nberwo:7492
Template-Type: ReDIF-Paper 1.0
Title: Identification through Heteroskedasticity: Measuring "Contagion: betweenArgentinean and Mexican Sovereign Bonds
Classification-JEL: C30; F32
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: IFM
Number: 7493
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7493
File-URL: http://www.nber.org/papers/w7493.pdf
File-Format: application/pdf
Publication-Status: published as Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, 09.
Abstract: In this paper, I develop a new identification method to solve the problem of simultaneous equations, based on heteroskedasticity of the structural shocks. I show that if the heteroskedasticity can be described as a two-regime process, then the system is just identified under relatively weak conditions. Identification is also discussed under more than two regimes, when the residuals exhibit ARCH behavior, and when there are aggregate shocks. This methodology is applied to measure contagion across sovereign bonds between Argentina and Mexico. The estimates of the simultaneous parameters are relatively to different definitions of the regimes.
Handle: RePEc:nbr:nberwo:7493
Template-Type: ReDIF-Paper 1.0
Title: If at First You Don't Succeed...: Profits, Prices and Market Structure in a Model of Quality with Unknowable Consumer Heterogeneity
Classification-JEL: D4; D6
Author-Name: Kala Krishna
Author-Person: pkr26
Author-Name: Tor Winston
Note: IO
Number: 7494
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7494
File-URL: http://www.nber.org/papers/w7494.pdf
File-Format: application/pdf
Publication-Status: published as Krishna, Kala and Tor Winston. "If At First You Don't Succeed...: Profits, Prices, And Market Structure In A Model Of Quality With Unknowable Consumer Heterogeneity," International Economic Review, 2003, v44(2,May), 573-597.
Abstract: Why are higher quality niches seen as intrinsically more profitable in business circles? Why do high quality products sometimes have a low real price, while it is unusual to see low quality products with high real prices? Can markets have quality differentiation as well as quality bunching? In this paper we develop a new model of quality which explains such phenomena. Our model builds on the idea that even if a customer chooses to purchase a product, it may fail to deliver'. If a product fails to deliver, the customer may wish to choose some other product. A higher quality product has a higher probability of delivering. We model this as a three stage game where firms first choose whether to enter or not, then in the second stage choose their quality and in the last stage, their price. Our model has a number of interesting predictions. First, it suggests that in equilibrium, a wider range of price per unit of quality is to be found for high quality goods than for low quality ones. Second, it provides a theoretical reason for why high quality niches may be more profitable, supporting the common business school idea that the money is at the high end.' Third, it suggests that the nature of the fixed costs of establishing quality plays a critical role in determining when free entry could be consistent with the existence of profits and result in natural oligopolies' and when it would tend to eliminate all profits.
Handle: RePEc:nbr:nberwo:7494
Template-Type: ReDIF-Paper 1.0
Title: Do Patents Matter?: Empirical Evidence after GATT
Classification-JEL: D21; I18
Author-Name: Jean O. Lanjouw
Author-Name: Iain Cockburn
Author-Person: pco166
Note: PR
Number: 7495
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7495
File-URL: http://www.nber.org/papers/w7495.pdf
File-Format: application/pdf
Abstract: Since the late 1980s the global intellectual property rights (IPR) system has been strengthening dramatically as much of the developing world introduces patent protection for new drug products. This may lead to more research on drugs to address developing country needs. As there are identifiable differences in the drug demands of these countries as compared to those already offering such protection the situation offers a unique opportunity to examine the incentive role of patent protection. We use new survey data from India, the results of interviews with industry, government and multinational institutions, and measures of R&D activity constructed from a variety of statistical sources to determine trends in the allocation of research to products specific to developing country markets. There is some, although limited, evidence of an increase in the mid- to late 1980s which appears to have leveled off in the 1990s. In interpreting the trends we examine factors that might enhance, or dampen, a firm's responsiveness to the availability of product patents. The picture presented here provides a baseline' against which future research activity can be compared once the new global patent regime is fully established and uncertainty about its implementation is resolved.
Handle: RePEc:nbr:nberwo:7495
Template-Type: ReDIF-Paper 1.0
Title: The Political Economy of the Budget Surplus in the U.S.
Author-Name: Alberto Alesina
Author-Person: pal207
Note: PE
Number: 7496
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7496
File-URL: http://www.nber.org/papers/w7496.pdf
File-Format: application/pdf
Publication-Status: Published as "The Political Economy of Fiscal Adjustments", Brookings Paper, Vol. 28, no. 1 (1998): 197-248.
Abstract: Current surpluses in the U.S. have been achieved by a combination of a strong economy, low interest rates, and sharp cuts in defence spending. These surpluses follow a period (the eighties) of rather exceptional budget deficits. This paper investigates the origin, size, and expected future patterns of the U.S. budget balance. It discusses how different political forces may generate alternative fiscal scenarios for the U.S. in the next decade.
Handle: RePEc:nbr:nberwo:7496
Template-Type: ReDIF-Paper 1.0
Title: Estimating Exchange Rate Exposures: Some "Weighty" Issues
Classification-JEL: F3
Author-Name: Gordon M. Bodnar
Author-Person: pbo613
Author-Name: M.H. Franco Wong
Note: IFM
Number: 7497
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7497
File-URL: http://www.nber.org/papers/w7497.pdf
File-Format: application/pdf
Publication-Status: published as Gordon M. Bodnar & M.H. Franco Wong, 2003. "Estimating Exchange Rate Exposures: Issues in Model Structure," Financial Management, Financial Management Association, vol. 32(1), Spring.
Abstract: From a sample of 910 U.S. firms over the period 1977 1996, we find that structure of the empirical model has significant impacts on resulting estimates of exchange rate exposures from equity returns. While lengthening the return horizon has minimal impact on exposure estimates, the inclusion of a market portfolio in the specification results in significant changes to the exposure estimates. We further demonstrate that different definitions of the market portfolio result in important differences in the overall distribution of exposure estimates and the interpretations of the sign, size, and significance of many firms' exposures. The source of the exposure differences across market portfolios is due to a strong size-exposure relation for U.S. firms. Surprisingly, this size-exposure relation does not appear to be driven by an underlying correlation between size and foreign cash flow position of the firms. An alternative model specification using matched CRSP capital-based size portfolios as controls for market movements in the exposure model produces firm-level exposures with a stronger relation to foreign cash flows and less of a correlation with firm size.
Handle: RePEc:nbr:nberwo:7497
Template-Type: ReDIF-Paper 1.0
Title: Money as Stock: Price Level Determination with no Money Demand
Classification-JEL: F3
Author-Name: John H. Cochrane
Author-Person: pco57
Note: AP ME
Number: 7498
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7498
File-URL: http://www.nber.org/papers/w7498.pdf
File-Format: application/pdf
Publication-Status: published as John H. Cochrane, 2005. "Money as stock," Journal of Monetary Economics, vol 52(3), pages 501-528.
Abstract: I show that a determinate, finite price level can be achieved in an economy with no monetary frictions, and no commodity standard or other explicit redemption commitment. I make one small modification to a standard cash in advance model: I reopen the security market at the end of the day. With this modification, overnight money demand is precisely zero. I show that the price level is still determined, however, by the government debt valuation equation. Nominal government debt is, despite appearances, a residual claim to government surpluses. Thus, the price level is determined just like the price of stock, and just as if we used (say) Microsoft stock as numeraire, unit of account, and medium of exchange. I resolve Buiter's (1999) criticism that fiscal price level determination mis-treats the government budget constraint. The government is not forced by a budget constraint to raise surpluses in response to an off-equilibrium deflation, just as Microsoft is not forced to raise earnings if there is a bubble in its stock price. I also address McCallum's (1998) criticism that fiscal models do not properly treat indeterminacies, and a number of other confusions and misconceptions surrounding fiscal price level determination. I provide a taxonomy of fiscal and monetary regimes.
Handle: RePEc:nbr:nberwo:7498
Template-Type: ReDIF-Paper 1.0
Title: Tax Base Variability and Procyclical Fiscal Policy
Classification-JEL: F41; H30
Author-Name: Ernesto Talvi
Author-Name: Carlos A. Vegh
Author-Person: pve34
Note: IFM
Number: 7499
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7499
File-URL: http://www.nber.org/papers/w7499.pdf
File-Format: application/pdf
Publication-Status: published as Talvi, Ernesto and Carlos A. Vegh. "Tax Base Variability And Procyclical Fiscal Policy In Developing Countries," Journal of Development Economics, 2005, v78(1,Oct), 156-190.
Abstract: Based on a sample of 56 countries, we find that while fiscal policy in the G-7 countries appears to be broadly consistent with Barro's tax smoothing proposition, in developing countries government spending and taxes are highly procyclical (i.e., government spending rises and taxes fall during expansions, while the reverse is true in recessions). To explain this puzzle, we develop an optimal fiscal policy model in which running budget surpluses is costly because they create pressures to increase public spending. Given this distortion, a government that faces large (and perfectly anticipated) fluctuations in the tax base will find it optimal to run a procyclical fiscal policy. We argue that the differences in fiscal policy between the G-7 countries and developing countries can be traced back to the fact that the tax base is much more volatile in developing countries than in the G-7 countries.
Handle: RePEc:nbr:nberwo:7499
Template-Type: ReDIF-Paper 1.0
Title: The Role of Alcohol and Drug Consumption in Determining Physical Fights and Weapon Carrying by Teenagers
Classification-JEL: I0; J13
Author-Name: Sara Markowitz
Author-Person: pma138
Note: EH
Number: 7500
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7500
File-URL: http://www.nber.org/papers/w7500.pdf
File-Format: application/pdf
Publication-Status: published as Eastern Economic Journal, 27, No.4 (Fall 2001), 409-432.
Abstract: The purpose of this study is to examine the question of whether alcohol or drug use causes teenagers to engage in violent behaviors as measured by physical fighting, carrying a gun, or carrying other types of weapons. Simple OLS estimation of the effects of drug and alcohol consumption on violence may be biased because of the possibility that both behaviors are determined by unmeasured individual traits. Two-stage least squares estimates are employed to establish causality. This method first predicts consumption using the prices of beer, marijuana and cocaine and then enters predicted consumption in the violence equation. This technique allows the consumption measures to be purged of their correlation with unobserved characteristics. Data come from the National School-Based Youth Risk Behavior Surveys, which are nationally representative samples of high school students. Results indicate that beer and marijuana consumption do cause teens to engage in more physical fights, while cocaine use appears to have no relationship. None of the substances lead to increased probabilities of carrying a gun or other weapon.
Handle: RePEc:nbr:nberwo:7500
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Unions on Employment: Evidence from an Unnatural Experiment in Uruguay
Classification-JEL: J5
Author-Name: Adriana Cassoni
Author-Name: Steven G. Allen
Author-Person: pal6
Author-Name: Gaston J. Labadie
Note: LS
Number: 7501
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7501
File-URL: http://www.nber.org/papers/w7501.pdf
File-Format: application/pdf
Publication-Status: published as Job Creation in Latin America and the Caribbean: Recent Trends and the Policy Challenges. Carmen Pages, Gaelle Pierre, Stefano Scarpetta (eds) 2009
Abstract: This study examines the impact of unions on wages and employment using data from Uruguay in a period where unions were banned (1973-1984), then legalized with tripartite bargaining (1984-1991) followed by industry-wide or firm-specific bargaining (1992-1997). The relationship between wages and employment shifted significantly across these periods as evidenced by - Recursive residuals show structural shifts in five of six industries with the shifts coming at the same time as the regime changes. - Wages are exogenous to employment before 1985, but not afterwards. - The wage elasticity and the employment-output elasticity fell sharply after 1984. - Unions significantly raised wages in 1985-1992, but afterwards the change in bargaining structure and increased openness led to concessions. - Starting in 1985, workers in unionized industries were less likely to be laid off than workers in nonunion industries.
Handle: RePEc:nbr:nberwo:7501
Template-Type: ReDIF-Paper 1.0
Title: Wage-Setting Institutions as Industrial Policy
Classification-JEL: J23; J51
Author-Name: Steven J. Davis
Author-Person: pda15
Author-Name: Magnus Henrekson
Author-Person: phe60
Note: LS
Number: 7502
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7502
File-URL: http://www.nber.org/papers/w7502.pdf
File-Format: application/pdf
Publication-Status: published as Davis, Steven J. and Magnus Henrekson. "Wage-Setting Institutions As Industrial Policy," Labour Economics, 2005, v12(3,Jun), 345-377.
Abstract: Centralized wage-setting institutions compress relative wages. Motivated by this fact, we investigate the effects of centralized wage setting on the industry distribution of employment. We examine Sweden's industry distribution from 1960 to 1994 and compare it to the U.S. distribution over the same period. We also relate U.S.-Swedish differences in the industry distribution and their evolution over time to the structure of relative wages between and within industries. The empirical results identify the rise and fall of centralized wage-setting arrangements as a major factor in the evolution of Sweden's industry distribution. The compression associated with centralized wage-setting shifted the industry distribution of Swedish employment in three respects: away from industries with high wage dispersion among workers, away from industries with a high mean wage, and, most powerfully, away from industries with a low mean wage. By the middle 1980s, these wage structure effects accounted for about 40 percent of U.S.-Swedish differences in the industry distribution. The dissolution of Sweden's centralized wage-setting arrangements beginning in 1983 led to widening wage differentials and a reversal in the evolution of U.S.-Swedish differences in industry structure.
Handle: RePEc:nbr:nberwo:7502
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Urban Concentration on Economic Growth
Classification-JEL: O1; O47
Author-Name: J. Vernon Henderson
Author-Person: phe30
Note: EFG PE
Number: 7503
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7503
File-URL: http://www.nber.org/papers/w7503.pdf
File-Format: application/pdf
Publication-Status: Published as "Community Development: The Effects of Growth and Uncertainty", American Economic Review, Vol. 70, no. 5 (1980): 894-910.
Abstract: The paper examines whether there is a significant relationship between economic growth and the degree of urban concentration, as measured by primacy, or the share of the largest metro area in national urban population. Is there reason to believe many countries have excessive primacy and how costly is excessive (or insufficient) primacy? Using GMM methods, the paper estimates growth effects, using a panel of 80-100 countries from 1960 to 1995. It also looks at the determinants of primacy and policy instruments that might be effective in reducing excessive primacy. The paper finds that there is a best degree of national urban primacy, which increases sharply up to a per capita income of about $5000 (PPP 1987 income), before declining modestly. The best degree of primacy declines with country scale. Error bands about estimated best degrees of primacy are generally tight. Growth losses from significantly non-optimal concentration are large and rise with income. Results are very robust. In a group of 72 countries in 1990, it appears that at least 24 have satisfactory primacy; at least 24 have significantly excessive primacy; and at least 5 countries have too little. What determines urban concentration? Econometric models show that urban concentration initially rises with income and then peaks around an income of $2400, before declining. Openness, or trade effects are modest. Similarly, the effects of a greater degree of political decentralization while significantly reducing urban concentration are quite modest. The key policy type variable affecting concentration is investment in inter-regional transport infrastructure. In particular, increases in the density of road networks significantly reduce primacy, with the effect rising with income. As a policy consideration, this takes heightened importance because growth losses from excessive primacy tend to rise with income. The effect on growth rates of investment in roads, through its effect on primacy, is highest in middle income countries.
Handle: RePEc:nbr:nberwo:7503
Template-Type: ReDIF-Paper 1.0
Title: Medicare Reform: The Larger Picture
Classification-JEL: I18
Author-Name: Victor R. Fuchs
Author-Person: pfu157
Note: AG EH
Number: 7504
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7504
File-URL: http://www.nber.org/papers/w7504.pdf
File-Format: application/pdf
Publication-Status: published as Fuchs, Victor R. "Medicare Reform: The Larger Picture," Journal of Economic Perspectives, 2000, v14(2,Spring), 57-70.
Abstract: The Medicare problem' is examined as part of the larger problem of providing for the overall financial needs of the elderly. Several myths about Medicare are discussed, and sources and uses of the elderly's full income' are estimated. The paper explores policy options to deal with technology-induced increases in health care expenditures and excessive dependence of the elderly on transfers from the young. The paper concludes that if Americans wish to continue to enjoy the benefits of medical advances, they will have to work more before and after age 65 and will have to increase substantially their rate of saving.
Handle: RePEc:nbr:nberwo:7504
Template-Type: ReDIF-Paper 1.0
Title: Two Generalizations of a Deposit-Refund System
Classification-JEL: H21; Q20
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Ann Wolverton
Note: PE EEE
Number: 7505
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7505
File-URL: http://www.nber.org/papers/w7505.pdf
File-Format: application/pdf
Publication-Status: published as Fullerton, Don and Ann Wolverton. "Two Generalizations Of A Deposit-Refund System," American Economic Review, 2000, v90(2,May), 238-242.
Abstract: This paper suggests two generalizations of the deposit-refund idea. In the first, we apply the idea not just to solid waste materials, but to any waste from production or consumption including wastes that may be solid, gaseous, or liquid. Using a simple general equilibrium model, we derive the optimal combination of a tax on a purchased commodity and subsidy to a clean' activity (such as emission abatement, recycling, or disposal in a sanitary landfill). This two-part instrument' is equivalent to a Pigovian tax on the dirty' activity (such as emissions, dumping, or litter). In the second generalization, we consider the case where government must use distorting taxes on labor and capital incomes. To help meet the revenue requirement, would the optimal deposit be raised and the refund reduced? We derive the second-best revenue-raising DRS or two-part instrument to answer that question.
Handle: RePEc:nbr:nberwo:7505
Template-Type: ReDIF-Paper 1.0
Title: Youth Smoking in the U.S.: Prices and Policies
Classification-JEL: H23; I18
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: CH EH
Number: 7506
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7506
File-URL: http://www.nber.org/papers/w7506.pdf
File-Format: application/pdf
Publication-Status: published as Jonathan Gruber, 2001. "Youth Smoking in the 1990's: Why Did It Rise and What Are the Long-Run Implications?," American Economic Review, American Economic Association, vol. 91(2), pages 85-90, May.
Publication-Status: published as Jonathan Gruber & Jonathan Zinman, 2001. "Youth Smoking in the United States: Evidence and Implications," NBER Chapters, in: Risky Behavior among Youths: An Economic Analysis, pages 69-120 National Bureau of Economic Research, Inc.
Abstract: After steadily declining over the previous 15 years, youth smoking began to rise precipitously in 1992, and by 1997 had risen by roughly one-third from its 1991 trough. We know very little about what caused this time trend and what public policy can do to reverse it. This paper therefore provides a comprehensive analysis of the impact of prices and other public policies on youth smoking in the 1990s, drawing on three separate data sets. I find that the most important policy determinant of youth smoking, particularly among older teens, is prices. Prices are a significant and sizeable determinant of smoking by older teens in all tree data sets, although the estimated price elasticity varies significantly. On the other hand, price does not appear to be an important determinant of smoking by younger teens. There is little consistent evidence of robust effect of other public policies targeted to reducing youth smoking, although there is some suggestion that restrictions on youth purchase of cigarettes reduce the quantity of cigarettes reduce the quantity of cigarettes smoked. And I find that black youth and those with less educated parents are much more responsive to cigarette price than are white teens and those with more educated parents, suggesting a strong correlation between price sensitivity and socioeconomic status.
Handle: RePEc:nbr:nberwo:7506
Template-Type: ReDIF-Paper 1.0
Title: Is Addiction "Rational"? Theory and Evidence
Classification-JEL: I18; H21
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Botond Koszegi
Note: AG CH LS PE
Number: 7507
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7507
File-URL: http://www.nber.org/papers/w7507.pdf
File-Format: application/pdf
Publication-Status: published as J. Gruber & B. Koszegi, 2001. "Is Addiction "Rational"? Theory and Evidence," The Quarterly Journal of Economics, vol 116(4), pages 1261-1303.
Abstract: A standard model of addictive process is Becker and Murphy's rational addiction' model, which has the key empirical prediction that the current consumption of addictive goods should respond to future prices, and the key normative prediction that the optimal government regulation of addictive goods should depend only on their interpersonal externalities. While a variety of previous studies have supported this empirical contention, we demonstrate that these results are very fragile. We propose a new empirical test for the case of cigarettes, using state excise tax increases that have been legislatively enacted but are not yet effective, and monthly data on consumption. We find strong evidence that consumption drops when there are announced future tax increases, providing more robust support for the key empirical prediction of the Becker and Murphy model. But we also propose a new formulation of this model that makes only one change, albeit a major one: the incorporation of the inconsistent preferences which are likely to provide a much better platform for understanding the smoking decision. We find that with these preferences the model continues to yield the predictions for forward-looking behavior that have been tested by others and by ourselves. But it has strikingly different normative implications, as with these preferences optimal government policy should depend as well on the internalities' imposed by smokers on themselves. We estimate that the optimal tax per pack of cigarettes should be at least one dollar higher under our formulation than in the rational addiction case.
Handle: RePEc:nbr:nberwo:7507
Template-Type: ReDIF-Paper 1.0
Title: Sorting and Long-Run Inequality
Classification-JEL: D3; I2
Author-Name: Raquel Fernandez
Author-Person: pfe17
Author-Name: Richard Rogerson
Author-Person: pro53
Note: EFG LS
Number: 7508
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7508
File-URL: http://www.nber.org/papers/w7508.pdf
File-Format: application/pdf
Publication-Status: published as Fernandez, Raquel and Richard Rogerson. "Sorting And Long-Run Inequality," Quarterly Journal of Economics, 2001, v116(4,Nov), 1305-1341.
Abstract: Many social commentators have raised concerns over the possibility that increased sorting in a society can lead to greater inequality. To investigate this we construct a dynamic model of intergenerational education acquisition, fertility, and marital sorting and parameterize the steady state to match several basic empirical findings. Contrary to Kremer's (1997) finding of a basically insignificant effect of marital sorting on inequality, we find that increased marital sorting will significantly increase income inequality. Three factors are central to our findings: a negative correlation between fertility and education, a decreasing marginal effect of parental education on children's years of education, and wages that are sensitive to the relative supply of skilled workers.
Handle: RePEc:nbr:nberwo:7508
Template-Type: ReDIF-Paper 1.0
Title: Geographic Localization of International Technology Diffusion
Classification-JEL: F1; F2
Author-Name: Wolfgang Keller
Author-Person: pke8
Note: ITI PR
Number: 7509
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7509
File-URL: http://www.nber.org/papers/w7509.pdf
File-Format: application/pdf
Publication-Status: published as Keller, Wolfgang. "Geographic Localization Of International Technology Diffusion," American Economic Review, 2002, v92(1,Mar), 120-142.
Abstract: Convergence in per capita income across countries turns on whether technological knowledge spillover are global or local. This paper estimates the amount of spillover from R&D expenditures in major industrialized countries on a geographic basis. A new data set is used which encompasses most of the world's innovative activity at the industry-level between the years 1970 and 1995. First, I find that technological knowledge is to a substantial degree local, not global, as the benefits from foreign spillover are declining with distance: on average, a 10% higher distance to a major technology-producing country such as the U.S. is associated with a 0.15% lower level of productivity. Second, technological knowledge has become more global over the sample period. As a determinant of productivity, foreign R&D has significantly gained in importance relative to domestic R&D, and the extent to which knowledge spillover decline with distance has fallen by 20%. The finding of a falling but still high degree of localization has important implications for macroeconomics and growth, trade, and regional economics.
Handle: RePEc:nbr:nberwo:7509
Template-Type: ReDIF-Paper 1.0
Title: Understanding Young Women's Marriage Decisions: The Role of Labor and Marriage Market Conditions
Classification-JEL: J1
Author-Name: Francine D. Blau
Author-Person: pbl16
Author-Name: Lawrence M. Kahn
Author-Person: pka63
Author-Name: Jane Waldfogel
Note: LS
Number: 7510
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7510
File-URL: http://www.nber.org/papers/w7510.pdf
File-Format: application/pdf
Publication-Status: published as Francine D. Blau & Lawrence M. Kahn & Jane Waldfogel. "Understanding young women's marriage decisions: The role of labor and marriage market conditions," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 53(4), pages 624-647, July 2000.
Abstract: Using the 1970, 1980 and 1990 Censuses, we investigate the impact of labor and marriage market conditions on the incidence of marriage of young women (age 16-24). We employ a two-stage methodology. First, across individuals, marriage is regressed on personal characteristics and MSA indicators, separately by race and education group. Second, the first-stage MSA effects are regressed on MSA-level labor and marriage market conditions and welfare benefits using cross-section and fixed effects models, including both first and second difference equations. Better female labor markets, worse female marriage markets and worse male labor markets are found to lower marriage rates for whites in all education groups. Results for these variables for blacks are sensitive to estimation technique, although stronger results are obtained for an older age group (25-34). While welfare benefits have a negative effect in cross-sectional analyses, the association becomes considerably weaker in fixed effects specifications.
Handle: RePEc:nbr:nberwo:7510
Template-Type: ReDIF-Paper 1.0
Title: Sticky-Price Models of the Business Cycle: Specification and Stability
Classification-JEL: E31; E32
Author-Name: Peter N. Ireland
Author-Person: pir1
Note: ME
Number: 7511
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7511
File-URL: http://www.nber.org/papers/w7511.pdf
File-Format: application/pdf
Publication-Status: published as Ireland, Peter N. "Sticky-Price Models Of The Business Cycle: Specification And Stability," Journal of Monetary Economics, 2001, v47(1,Feb), 3-18.
Abstract: This paper focuses on the specification and stability of a dynamic, stochastic, general equilibrium model of the American business cycle with sticky prices. Maximum likelihood estimates reveal that the data prefer a version of the model in which adjustment costs apply to the price level but not to the inflation rate. Formal hypothesis test detect instability in the estimated parameters, particularly in estimates of the representative household's discount factor. Evidently, more detailed descriptions of the economy are needed to explain movements in interest rates before and after 1979.
Handle: RePEc:nbr:nberwo:7511
Template-Type: ReDIF-Paper 1.0
Title: The Elasticity of Taxable Income: Evidence and Implications
Classification-JEL: H21; H31
Author-Name: Jon Gruber
Author-Person: pgr20
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE
Number: 7512
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7512
File-URL: http://www.nber.org/papers/w7512.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jon and Emmanuel Saez. "The Elasticity Of Taxable Income: Evidence And Implications," Journal of Public Economics, 2002, v84(1,Apr), 1-32.
Abstract: A central tax policy parameter that has recently received much attention, but about which there is substantial uncertainty, is the overall elasticity of taxable income. We provide new estimates of this elasticity which address identification problems with previous work, by exploiting a long panel of tax returns to study a series of tax reforms throughout the 1980s. This identification strategy also allows us to provide new evidence on both the income effects of tax changes on taxable income, and on variation in the elasticity of taxable income by income group. We find that the overall elasticity of taxable income is approximately 0.4; the elasticity of real income, not including tax preferences, is much lower. We also estimate small income effects on tax changes on reported income, implying that the compensated and uncompensated elasticities of taxable income are very similar. We estimate that this overall elasticity is primarily due to a very elastic response of taxable income for taxpayers who have incomes above $100,000 per year, who have an elasticity of 0.57, while for those with incomes below $100,000 per year the elasticity is less than one-third as large. Moreover, high income taxpayers who itemize are particularly responsive to taxation. We then derive optimal income tax structures using these elasticities. Our estimates suggest that the optimal system for most redistributional preferences consists of a large demogrant that is rapidly taxed away for low income taxpayers, with lower marginal rates at higher income levels.
Handle: RePEc:nbr:nberwo:7512
Template-Type: ReDIF-Paper 1.0
Title: Market Provision of Public Goods: The Case of Broadcasting
Classification-JEL: D43; L13
Author-Name: Simon P. Anderson
Author-Person: pan42
Author-Name: Stephen Coate
Author-Person: pco66
Note: PE
Number: 7513
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7513
File-URL: http://www.nber.org/papers/w7513.pdf
File-Format: application/pdf
Publication-Status: published as Anderson, Simon P. and Stephen Coate. "Market Provision Of Broadcasting: A Welfare Analysis," Review of Economic Studies, 2005, v72(253,Oct), 947-972.
Abstract: This paper studies the market provision of a specific type of public good: radio and television broadcasts. Its main focus is to explore the ability of the market to provide broadcasting efficiently in a world in which broadcasters earn revenues by selling time to advertisers and advertisements provide information to consumers about new products. The paper shows that market provided broadcasts may feature too few or too many commercials, depending on the relative sizes of their social benefit and their nuisance cost to viewers. In addition, the market may provide too few or too many types of programs, depending on the relative size of viewing benefits and the benefits to advertisers from contacting viewers. The possibility of both under and over-provision of advertisements and programming, means that there are ranges of the parameters for which the market provides broadcasting close to efficiently. The paper also considers whether the market performs better under monopoly or competition and studies how the ability to charge viewers subscription prices impacts market performance.
Handle: RePEc:nbr:nberwo:7513
Template-Type: ReDIF-Paper 1.0
Title: Capital Movements, Banking Insolvency, and Silent Runs in the Asian Financial Crisis
Classification-JEL: G2; F3
Author-Name: Edward J. Kane
Author-Person: pka853
Note: CF
Number: 7514
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7514
File-URL: http://www.nber.org/papers/w7514.pdf
File-Format: application/pdf
Publication-Status: published as Kane, Edward J., 2000. "Capital movements, banking insolvency, and silent runs in the Asian financial crisis," Pacific-Basin Finance Journal, Elsevier, vol. 8(2), pages 153-175, May.
Abstract: This paper supplies an agency-cost and contestable-markets perspective on the financial policies that triggered the Asian financial crisis. The agency-cost analysis hypothesizes that individual-country regulators knew that politically directed loans had made their banks insolvent, but purposefully gambled that deregulation could allow the insolvent banks to grow their way out of trouble. The contestable-markets paradigm sets this gamble in the context of offshore innovations in financial technology and regulatory systems that made it progressively easier for worried Asian citizens to move funds to foreign institutions. These perspectives portray the simultaneous breakdown of repressive financial systems as a technology-led victory of market forces over longstanding government efforts to wall out foreign financial competition.
Handle: RePEc:nbr:nberwo:7514
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Shocks in an Efficiency Wage Model
Classification-JEL: E1; E6
Author-Name: Craig Burnside
Author-Person: pbu20
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Jonas D.M. Fisher
Author-Person: pfi4
Note: EFG ME
Number: 7515
Creation-Date: 2000-01
Order-URL: http://www.nber.org/papers/w7515
File-URL: http://www.nber.org/papers/w7515.pdf
File-Format: application/pdf
Abstract: This paper analyzes the ability of a general equilibrium efficiency wage model to account for the estimated response of hours worked and of real wages to a fiscal policy shock. Our key finding is that the model cannot do so unless we make the counterfactual assumption that marginal tax rates are constant. The model shares the strengths and weaknesses of high labor supply elasticity Real Business Cycle models. In particular it can account for the conditional volatility of real wages and hours worked. But it cannot account for the temporal pattern of how these variables respond to a fiscal policy shock and generates a counterfactual negative conditional correlation between government purchases and hours worked.
Handle: RePEc:nbr:nberwo:7515
Template-Type: ReDIF-Paper 1.0
Title: How Should Monetary Policy be Conducted in an Era of Price Stability?
Classification-JEL: E42; E52
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: PE
Number: 7516
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7516
File-URL: http://www.nber.org/papers/w7516.pdf
File-Format: application/pdf
Publication-Status: published as Lars E.O. Svensson, 1999. "How should monetary policy be conducted in an era of price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 195-259.
Abstract: The paper discusses several issues related to how monetary policy should be conducted in an era of price stability. Low inflation (with base drift in the price level) and price-level stability (without such base drift) are compared, and a suitable loss function (corresponding to flexible inflation targeting) is discussed, including the index and level for the inflation target. Three ways of maintaining price stability are examined, namely (1) a commitment to a simple instrument rule, (2) "forecast targeting," and (3) monetary targeting. Both (1) and (3) are found to be inferior to forecast targeting in maintaining price stability. The benefits of credibility (private inflation expectations coinciding with the inflation target) are discussed. Credibility improves the tradeoff between inflation variability, output-gap variability and instrument variability and makes it easier for the central bank to meet its inflation target. The threat of deflation and a liquidity trap is examined. Transparent inflation targeting and a contingency plan with emergency measures, including a coordinated fiscal and monetary expansion, are likely to avoid a liquidity trap, but also contribute to escaping from one if already trapped.
Handle: RePEc:nbr:nberwo:7516
Template-Type: ReDIF-Paper 1.0
Title: The European Central Bank and the Euro: The First Year
Classification-JEL: F33
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: IFM
Number: 7517
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7517
File-URL: http://www.nber.org/papers/w7517.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin, 2000. "The European Central Bank and the Euro: The First Year," Journal of Policy Modeling, Elsevier, vol. 22(3), pages 345-354, May.
Abstract: The creation of the euro and the European Central Bank is a remarkable and unprecedented event in economic and political history: creating a supranational central bank and leaving eleven countries without national currencies of their own. The experience of the first year confirms that one size fits all' monetary policy is not suitable for Europe because cyclical and inflation conditions vary substantially among countries. Labor market policies during this first year will increase this problem in the future and may lead to more trade protectionism. The paper explores reasons why cyclical unemployment, structural unemployment, and inflation may all be higher in the future as a result of the single currency. Although some advocate the euro despite its economic problems because of its assumed favorable effects on European political cohesiveness, the paper argues that it is more likely to lead to political conflict within Europe and with the Unites States.
Handle: RePEc:nbr:nberwo:7517
Template-Type: ReDIF-Paper 1.0
Title: Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange
Classification-JEL: H0; H3
Author-Name: Antonio Rangel
Author-Person: pra69
Note: AG PE
Number: 7518
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7518
File-URL: http://www.nber.org/papers/w7518.pdf
File-Format: application/pdf
Publication-Status: published as Rangel, Antonio. "Forward And Backward Intergenerational Goods: Why Is Social Security Good For The Environment?," American Economic Review, 2003, v93(3,Jun), 813-824.
Abstract: This paper develops a theory of intergenerational exchange for generations that are either selfish or have non-dynastic altruism. The main building blocks of the theory are forward and backward intergenerational goods (FIGs and BIGs) and the relationship between them. A FIG is a transfer from present to future generations, like parental investments in education and the preservation of the environment. A BIG is a transfer from future to present generations, like pay-as -you-go social security or taking care of elderly parents. We show that there is a fundamental difference between BIGs and FIGs. BIGs generating a positive surplus are self-sustainable, but FIGs never are. However, even with selfish generations, optimal investment in future generations can take place if the equilibrium social norm links BIGs and FIGs. The tools developed here can be used to understand a wide class of intergenerational problems, from the political economy of environmental treaties to the economics of seniority institutions. Two applications are developed in the paper: (1) the political economy of intergenerational public expenditures, and (2) investment in children within the family.
Handle: RePEc:nbr:nberwo:7518
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Minimum Wages Throughout the Wage Distribution
Classification-JEL: J18; I3
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Mark Schweitzer
Author-Person: psc593
Author-Name: William Wascher
Note: LS
Number: 7519
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7519
File-URL: http://www.nber.org/papers/w7519.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Human Resources, 2004, Vol. 39, pp. 424-50.
Abstract: This paper provides evidence on a wide set of margins along which labor markets can adjust in response to increases in the minimum wage, including wages, hours, employment, and ultimately labor income, representing the central margins of adjustment that impact the economic well-being of workers potentially affected by minimum wage increases. The evidence indicates that workers initially earning near the minimum wage are adversely affected by minimum wage increases, while, not surprisingly, higher-wage workers are little affected. Although wages of low-wage workers increase , their hours and employment decline, and the combined effect of these changes is a decline in earned income. We also delve into the political economy of minimum wages, attempting to understand the vigorous support of labor unions for minimum wage increases. Using the same empirical framework, we find that relatively low-wage union members gain at the expense of the lowest-wage nonunion workers when minimum wages increase.
Handle: RePEc:nbr:nberwo:7519
Template-Type: ReDIF-Paper 1.0
Title: The Progressivity of Social Security
Classification-JEL: H22; H55
Author-Name: Julia Lynn Coronado
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Thomas Glass
Note: AG PE
Number: 7520
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7520
File-URL: http://www.nber.org/papers/w7520.pdf
File-Format: application/pdf
Publication-Status: published as Julia Lynn Coronado & Don Fullerton & Thomas Glass, 2011. "The Progressivity of Social Security," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 11(1), pages 70.
Abstract: How much does the current social security system really redistribute from rich to poor? We use the PSID to estimate lifetime wage profiles and actual earnings each year for a sample of 1778 individuals, and we use mortality probabilities to calculate expected payroll taxes and social security benefits. For a given set of facts' about the net flows received by each individual, measured progressivity depends on many assumptions. This paper attempts to capture and to quantify all of the individual characteristics that are relevant to determine the progressivity of a life-cycle program like social security. We proceed in seven steps. First, we classify individuals by annual income and use Gini coefficients to find that social security is highly progressive. Second, we reclassify individuals on the basis of lifetime income and find that social security is less progressive. Third, we remove the cap on measured earnings and find that social security is even less progressive. Fourth, we switch from actual to potential lifetime earnings (the present value of the wage rate times 4000 hours each year). This measure captures the value of leisure and home production, so those out of the labor force are less poor, and net payments to them are less progressive. Fifth, we assign to each married individual half of the couple's income. The low-wage spouse is then not so poor less progressive. Sixth, we incorporate mortality probabilities that differ by potential lifetime income. Since the rich live longer and collect benefits longer, social security is no longer progressive. Finally, we increase the discount rate from 2% to 4%, which puts relatively more weight on the earlier-but-regressive payroll tax and less weight on the later-but-progressive benefit schedule. The whole social security system is then regressive.
Handle: RePEc:nbr:nberwo:7520
Template-Type: ReDIF-Paper 1.0
Title: Choice, Chance, and Wealth Dispersion at Retirement
Author-Name: Steven F. Venti
Author-Name: David A. Wise
Author-Person: pwi45
Note: LS AG
Number: 7521
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7521
File-URL: http://www.nber.org/papers/w7521.pdf
File-Format: application/pdf
Publication-Status: published as Choice, Chance, and Wealth Dispersion at Retirement, Steven F. Venti, David A. Wise. in Aging Issues in the United States and Japan, Ogura, Tachibanaki, and Wise. 2001
Abstract: People earn just enough to get by' is a phrase often used to explain the low personal saving rate in the United States. The implicit presumption is that households simply do not earn enough to pay for current needs' and to save. We show in this paper that at all levels of lifetime earnings there is an enormous dispersion in the accumulated wealth of families approaching retirement. It is not only households with low incomes that save little; a significant proportion of high income households also saves little. And, a substantial proportion of low income households save a great deal. We then consider the extent to which differences in household lifetime financial resources explain the wide dispersion in wealth, given lifetime earnings. We find that very little of this dispersion can be explained by chance differences in individual circumstances largely outside the control of individuals' that might limit the resources from which saving might plausibly be made. We also consider how much of the dispersion in wealth might be accounted for by different investment choices of savers some more risky, some less risky given lifetime earnings. We find that investment choice is not a major determinant of the dispersion in asset accumulation. It matters about as much as chance events that limit the available resources of households with the same lifetime earnings. We conclude that the bulk of the dispersion must be attributed to differences to in the amount that households choose to save. The differences in saving choices among households with similar lifetime earnings lead to vastly different levels of asset accumulation by the time retirement age approaches.
Handle: RePEc:nbr:nberwo:7521
Template-Type: ReDIF-Paper 1.0
Title: Children's Welfare Exposure and Subsequent Development
Classification-JEL: I38; J13
Author-Name: Phillip B. Levine
Author-Person: ple553
Author-Name: David J. Zimmerman
Author-Person: pzi72
Note: CH LS PE
Number: 7522
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7522
File-URL: http://www.nber.org/papers/w7522.pdf
File-Format: application/pdf
Publication-Status: published as Levine, Phillip B. and David J. Zimmerman. "Children's Welfare Exposure And Subsequent Development," Journal of Public Economics, 2005, v89(1,Jan), 31-56.
Abstract: We examine the extent to which children are exposed to the welfare system through their mother's receipt of benefits and its impact on several developmental outcomes. Using data from the matched mother-child file from the National Longitudinal Survey of Youth (NLSY), we find that children's welfare exposure is substantial. By age 10 over one-third of all children will have lived in a welfare household; black, non-Hispanic children face a much higher rate of exposure. Simple correlations suggest a strong negative relationship between maternal welfare receipt and children's outcomes. In this paper we implement three alternative strategies (instrumental variables, sibling difference, and child fixed effects models) designed to identify whether this correlation can be attributed to the mother's welfare receipt directly or to other characteristics of mothers who receive welfare, regardless of whether or not those characteristics are observable to the researcher. Based on the results of all three estimation strategies, we find little evidence of any causal link between maternal welfare receipt and children's developmental outcomes.
Handle: RePEc:nbr:nberwo:7522
Template-Type: ReDIF-Paper 1.0
Title: Tunnelling
Classification-JEL: G3; G38
Author-Name: Simon Johnson
Author-Person: pjo44
Author-Name: Rafael La Porta
Author-Person: pla273
Author-Name: Florencio Lopez-de-Silanes
Author-Person: plo137
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: CF
Number: 7523
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7523
File-URL: http://www.nber.org/papers/w7523.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 90, no. 2 (May 2000): 22-27
Abstract: Tunnelling is defined as the transfer of assets and profits out of firms for the benefit of their controlling shareholders. We describe the various forms that tunnelling can take, and examine under what circumstances it is legal. We discuss two important legal principles -- the duty of care and the duty of loyalty -- which courts use to analyze cases involving tunnelling. Several important legal cases from France, Belgium, and Italy illustrate how and why the law accommodates tunnelling in civil law countries, and why certain kinds of tunnelling are less likely to pass legal scrutiny in common law countries.
Handle: RePEc:nbr:nberwo:7523
Template-Type: ReDIF-Paper 1.0
Title: How Do UK-Based Foreign Exchange Dealers Think Their Market Operates?
Classification-JEL: F31; G15
Author-Name: Yin-Wong Cheung
Author-Person: pch261
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: Ian W. Marsh
Author-Person: pma170
Note: IFM
Number: 7524
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7524
File-URL: http://www.nber.org/papers/w7524.pdf
File-Format: application/pdf
Publication-Status: published as Cheung, Yin-Wong, Menzie D. Chinn and Ian W. Marsh. "How Do UK-Based Foreign Exchange Dealers Think Their Market Operates?," International Journal of Finance and Economics, 2004, v9(4,Oct), 289-306.
Abstract: This paper summarises the results of a survey of UK based foreign exchange dealers conducted in 1998. It addresses topics in three main areas: The microeconomic operation of the foreign exchange market; the beliefs of dealers regarding the importance, or otherwise, of macroeconomic fundamental factors in affecting exchange rates; microstructure factors in FX. We find that heterogeneity of traders' beliefs is evident from the results but that it is not possible to explain such disagreements in terms of institutional detail, rank or trading technique (e.g. technical analysts versus fundamentalists). As expected, non-fundamental factors are thought to dominate short horizon changes in exchange rates, but fundamentals are deemed important over much shorter horizons that the mainstream empirical literature would suggest. Finally, market norms' and behavioural phenomena are very strong in the FX market and appear to be key determinants of the bid-ask spread.
Handle: RePEc:nbr:nberwo:7524
Template-Type: ReDIF-Paper 1.0
Title: The Income and Tax Share of Very High Income Households, 1960-1995
Classification-JEL: H2; D31
Author-Name: Daniel R. Feenberg
Author-Person: pfe56
Author-Name: James M. Poterba
Author-Person: ppo19
Note: PE
Number: 7525
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7525
File-URL: http://www.nber.org/papers/w7525.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 90 (May 2000): 264-270.
Abstract: This paper presents new information on the fraction of adjusted gross income, and of wages and salaries, that is reported by taxpayers in the top one half of one percent of the income distribution. This corresponds to roughly five hundred thousand households in the late 1990s. This paper relies on data from the Treasury's Individual Income Tax Model for the period 1960-1995. The definition of adjusted gross income is standardized, so that changes in the tax law do not affect the measured concentration of AGI. The results suggest that the share of AGI reported by the highest income households increased significantly between the early 1980s and the mid-1990s, with most of the increase taking place in the years immediately following the Tax Reform Act of 1986. While we find some evidence of transitory changes in the concentration of income around major tax changes, which may be the result of income retiming by high income taxpayers, re-timing does not seem to explain most of the changes since 1986.
Handle: RePEc:nbr:nberwo:7525
Template-Type: ReDIF-Paper 1.0
Title: How Large is the Bias is Self-Reported Disability?
Classification-JEL: H5
Author-Name: Hugo Benitez-Silva
Author-Name: Moshe Buchinsky
Author-Person: pbu314
Author-Name: Hiu Man Chan
Author-Name: Sofia Cheidvasser
Author-Name: John Rust
Author-Person: pru5
Note: AG LS
Number: 7526
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7526
File-URL: http://www.nber.org/papers/w7526.pdf
File-Format: application/pdf
Publication-Status: published as Benitez-Silva, Hugo, Moshe Buchinsky, Hiu Man Chan, Sofia Cheidvasser, and John P. Rust. "How Large is the Bias is Self-Reported Disability?" Journal of Applied Econometrics 19 (2004): 649-670.
Abstract: A pervasive concern with the use of self-reported health and disability measures in behavioral models is that they are biased and endogenous. A commonly suggested explanation is that survey respondents exaggerate the severity of health problems and incidence of disabilities in order to rationalize labor force non-participation, application for disability benefits and/or receipt of those benefits. This paper re-examines this issue using a self-reported indicator of disability status from the Health and Retirement Survey. Using a bivariate probit model we test and are unable to reject the hypothesis that the self-reported disability measure is an exogenous explanatory variable in a model of individual's decision to apply for DI benefits or Social Security Administration's decision to award benefits. We further study a subsample of individuals who applied for Disability Insurance and Supplemental Security Income benefits from the Social Security Administration (SSA) for whom we can also observe SSA's award/deny decision. For this subsample we test and are unable to reject the hypothesis that self-reported disability is health and socio-economic characteristics similar to the information used by the SSA in making its award decisions. The unbiasedness restriction implies that these two variables have the same conditional probability distributions. Thus, our results indicate that disability applicant do not exaggerate their disability status at least in anonymous surveys such as the HRS. Indeed, our results are consistent with the hypothesis that disability applicants are aware of the criteria and decision rules that SSA uses in making awards and act as if they were applying these same criteria and rules when reporting their own disability status.
Handle: RePEc:nbr:nberwo:7526
Template-Type: ReDIF-Paper 1.0
Title: The Power of the Pill: Oral Contraceptives and Women's Career and Marriage Decisions
Classification-JEL: J0; N3
Author-Name: Claudia Goldin
Author-Person: pgo601
Author-Name: Lawrence F. Katz
Author-Person: pka266
Note: LS DAE
Number: 7527
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7527
File-URL: http://www.nber.org/papers/w7527.pdf
File-Format: application/pdf
Publication-Status: published as Goldin, Claudia and Lawrence F. Katz. "The Power Of The Pill: Contraceptives And Women's Career And Marriage Decisions," Journal of Political Economy, 2002, v110(4,Aug), 730-770.
Abstract: The fraction of U.S. college graduate women entering professional programs increased substantially around 1970 and the age at first marriage among all U.S. college graduate women soared just after 1972. We explore the relationship between these two changes and how each was shaped by the diffusion of the birth control pill among young, single college educated women. Although the pill' was approved in 1960 by the FDA and diffused rapidly among married women, it did not diffuse among young single women until the late 1960s when a series of state law changes reduced the age of majority and extended mature minor decisions. We model the impact of the pill on women's careers as consisting of two effects. The pill had a direct positive effect on women's career investment by almost eliminating the chance of becoming pregnant and thus the cost of having sex. The pill also created a social multiplier effect by encouraging the delay of marriage generally and thus increasing a career woman's likelihood of finding an appropriate mate after professional school. We present a collage of evidence pointing to the power of the pill in lowering the costs of long-duration professional education for women. The evidence consists of the striking coincidences in the timing of changes in career investment, marriage age, state laws, and pill use among young single women. The connection between changes in the age at first marriage and the pill is further explored using state variation in laws affecting young single women's pill access. We also evaluate alternative explanations for the changes in career and marriage.
Handle: RePEc:nbr:nberwo:7527
Template-Type: ReDIF-Paper 1.0
Title: Jacksonian Monetary Policy, Specie Flows, and the Panic of 1837
Classification-JEL: N11; N21
Author-Name: Peter L. Rousseau
Author-Person: pro64
Note: DAE ME
Number: 7528
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7528
File-URL: http://www.nber.org/papers/w7528.pdf
File-Format: application/pdf
Publication-Status: published as Rousseau, Peter L. "Jacksonian Monetary Policy, Specie Flows, And The Panic Of 1837," Journal of Economic History, 2002, v62(2,Jun), 457-488.
Abstract: The Panic of 1837 stands among the most severe banking crises in U.S. history, marking the start of a business downturn from which the nation would not recover for six years. Given the serious consequences of the panic for the rapidly evolving commercial and industrial sectors, it is thus not surprising that a number of hypotheses have emerged to disentangle the true' causes from a host of aggravating domestic and international shocks. To this day, however, the event remains not fully understood. In this paper, I organize previously unexploited information from the U.S. government documents and contemporary newspapers to take a fresh look at the panic. These sources point to a new explanation which places neither the official distribution of the federal surplus to the states in the Spring of 1837 nor an international shock at the heart of the crisis, although the latter may have served as a catalyst in the final weeks. Rather, a series of hitherto unremarked interbank transfers of government balances ordered in the year leading up to the crisis combined with a policy-induced increase in the demand for coin in the Western states to drain the largest New York City banks of their specie reserves and render the panic inevitable.
Handle: RePEc:nbr:nberwo:7528
Template-Type: ReDIF-Paper 1.0
Title: U.S. Banks, Crises, and Bailouts: From Mexico to LTCM
Classification-JEL: F3; F33
Author-Name: Rene M. Stulz
Note: AP CF IFM
Number: 7529
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7529
File-URL: http://www.nber.org/papers/w7529.pdf
File-Format: application/pdf
Publication-Status: published as Bong-Chan Kho & Dong Lee & Rene M. Stulz, 2000. "U.S. Banks, Crises, and Bailouts: From Mexico to LTCM," American Economic Review, American Economic Association, vol. 90(2), pages 28-31, May.
Abstract: This paper investigates the impact on bank stock prices of emerging market currency crises and bailouts. The stock market distinguishes between banks with exposure to a crisis country and other banks. In general, banks with exposures to a crisis country are affected adversely by currency events and positively by bailouts. Other banks are mostly unaffected by events in countries experiencing a crisis. The paper uses the impact of the LTCM crisis on bank stock prices to put the emerging market events in perspective. The LTCM crisis had no significant contagion effects in the banking sector either, but banks that participated in the LTCM rescue experienced negative stock returns when the rescue was announced.
Handle: RePEc:nbr:nberwo:7529
Template-Type: ReDIF-Paper 1.0
Title: Income-distribution Dynamics with Endogenous Fertility
Classification-JEL: J13; O15
Author-Name: Michael Kremer
Author-Person: pkr20
Author-Name: Daniel Chen
Note: CH EFG
Number: 7530
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7530
File-URL: http://www.nber.org/papers/w7530.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 89, no. 2 (May 1999): 155-160.
Publication-Status: published as Kremer, Michael & Chen, Daniel L, 2002. " Income Distribution Dynamics with Endogenous Fertility," Journal of Economic Growth, Springer, vol. 7(3), pages 227-58, September.
Abstract: Developing countries with highly unequal income distributions, such as Brazil or South Africa, face an uphill battle in reducing inequality. Educated workers in these countries have a much lower birthrate than uneducated workers. Assuming children of educated workers are more likely to become educated, this tends to increase the proportion of unskilled workers, reducing their wages, and thus their opportunity cost of having children, creating a vicious cycle. A model incorporating this effect generates multiple steady-state levels of inequality, suggesting that in some circumstances, temporarily increasing access to educational opportunities could permanently reduce inequality. Empirical evidence suggests that the fertility differential between the educated and uneducated is greater in less equal countries, consistent with the model.
Handle: RePEc:nbr:nberwo:7530
Template-Type: ReDIF-Paper 1.0
Title: Can Output Losses Following International Financial Crises be Avoided?
Classification-JEL: F15; F2
Author-Name: Michael P. Dooley
Author-Person: pdo13
Note: IFM
Number: 7531
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7531
File-URL: http://www.nber.org/papers/w7531.pdf
File-Format: application/pdf
Publication-Status: published as Dooley, Michael P. "International Financial Architecture And Strategic Default: Can Financial Crises Be Less Painful?," Carnegic-Rochester Conference Series on Public PolicyP, 2000, v53(1), 361-377.
Abstract: Recent financial crises in emerging markets have been followed by temporary but substantial losses in output. This paper explores the possibility that threats of such losses are the dominant incentive for repayment of international debt. In this environment private debtors and creditors have strong incentives to design international contracts so that renegotiation is costly. Such contracts generate dead weight losses and proposals for reform of the international monetary system that modify explicit and implicit contractual arrangements and can be welfare improving under special circumstances. However, such proposals might also weaken the incentives that make private international debt possible.
Handle: RePEc:nbr:nberwo:7531
Template-Type: ReDIF-Paper 1.0
Title: Capital Gains Realizations of the Rich and Sophisticated
Classification-JEL: H31; G11
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Jonathan M. Siegel
Note: PE
Number: 7532
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7532
File-URL: http://www.nber.org/papers/w7532.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. and Jonathan M. Siegel. "Capital Gains Realizations Of The Rich And Sophisticated," American Economic Review, 2000, v90(2,May), 276-282.
Abstract: This paper attempts to bring theoretical and empirical research on capital gains realization behavior closer together by considering whether investors who appear to engage more in strategic tax avoidance activity also respond differently to tax rates. We find that such investors exhibit significantly smaller responses to permanent tax rate changes than other investors. Put another way, a larger part of their response to capital gains tax rates reflects timing, consistent with their closer adherence to tax avoidance strategies emphasizing arbitrage based on tax rate differentials. This finding holds for two alternative specifications of realization behavior, one of which suggests larger permanent responses to capital gains tax rates than those of previous panel studies.
Handle: RePEc:nbr:nberwo:7532
Template-Type: ReDIF-Paper 1.0
Title: How Liability Law Affects Medical Productivity
Author-Name: Daniel P. Kessler
Author-Name: Mark B. McClellan
Note: AG EH LE
Number: 7533
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7533
File-URL: http://www.nber.org/papers/w7533.pdf
File-Format: application/pdf
Publication-Status: published as Kessler, Daniel P. & McClellan, Mark B., 2002. "How liability law affects medical productivity," Journal of Health Economics, Elsevier, vol. 21(6), pages 931-955, November.
Abstract: Previous research suggests that "direct" reforms to the liability system -- reforms designed to reduce the level of compensation to potential claimants -- reduce medical expenditures without important consequences for patient health outcomes. We extend this research by identifying the mechanisms through which reforms affect the behavior of health care providers. Although we find that direct reforms improve medical productivity primarily by reducing malpractice claims rates and compensation conditional on a claim, our results suggest that other policies that reduce the time spent and the amount of conflict involved in defending against a claim can also reduce defensive practices substantially. In addition, we find that "malpractice pressure" has a larger impact on diagnostic rather than therapeutic treatment decisions. Our results provide an empirical foundation for simulating the effects of untried malpractice reforms on health care costs and outcomes, based on their predicted effects on the malpractice pressure facing medical providers.
Handle: RePEc:nbr:nberwo:7533
Template-Type: ReDIF-Paper 1.0
Title: Resuscitating Real Business Cycles
Classification-JEL: E10; E32
Author-Name: Robert G. King
Author-Person: pki21
Author-Name: Sergio T. Rebelo
Note: EFG
Number: 7534
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7534
File-URL: http://www.nber.org/papers/w7534.pdf
File-Format: application/pdf
Publication-Status: Published as "Real Business Cycles and the Test of the Adelmans", Journal of Monetary Economics, Vol. 33, no. 2 (1994): 405-438.
Publication-Status: published as King, Robert G. & Rebelo, Sergio T., 1999. "Resuscitating real business cycles," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007 Elsevier.
Abstract: The Real Business Cycle (RBC) research program has grown spectacularly over the last decade, as its concepts and methods have diffused into mainstream macroeconomics. Yet, there is increasing skepticism that technology shocks are a major source of business fluctuations. This chapter exposits the basic RBC model and shows that it requires large technology shocks to produce realistic business cycles. While Solow residuals are sufficiently volatile, these imply frequent technological regress. Productivity studies permitting unobserved factor variation find much smaller technology shocks, suggesting the imminent demise of real business cycles. However, we show that greater factor variation also dramatically amplifies shocks: a RBC model with varying capital utilization yields realistic business cycles from small, nonnegative changes in technology.
Handle: RePEc:nbr:nberwo:7534
Template-Type: ReDIF-Paper 1.0
Title: Cigarettes and Alcohol: Substitutes or Complements?
Classification-JEL: H20
Author-Name: Sandra L. Decker
Author-Name: Amy Ellen Schwartz
Author-Person: psc654
Note: EH
Number: 7535
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7535
File-URL: http://www.nber.org/papers/w7535.pdf
File-Format: application/pdf
Abstract: Taxation of cigarettes and alcohol can raise revenue and reduce consumption of goods with negative external effects. Despite medical and psychological evidence linking their consumption, little previous work has investigated the significance of cross-price effects in cigarette and alcohol consumption. We use individual-level data from the Behavioral Risk Factor Surveillance System to investigate cigarette and alcohol consumption in the US, estimating both own and cross-price elasticities. Results suggest significant cross-price effects. Specifically, we find that higher alcohol prices decrease both alcohol consumption and smoking participation (suggesting a complementarity in consumption), while higher cigarette prices tend to decrease smoking participation but increase drinking. The significance of these findings suggests that further work is warranted to better understand the social and economic relationship between cigarette and alcohol consumption.
Handle: RePEc:nbr:nberwo:7535
Template-Type: ReDIF-Paper 1.0
Title: Strategic Trade Policy with Endogenous Choice of Quality and Asymmetric Costs
Classification-JEL: F12; F13
Author-Name: Dongsheng Zhou
Author-Name: Barbara J. Spencer
Author-Person: psp2
Author-Name: Ilan Vertinsky
Note: ITI
Number: 7536
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7536
File-URL: http://www.nber.org/papers/w7536.pdf
File-Format: application/pdf
Publication-Status: published as Zhou, Dongsheng, Barbara J. Spencer and Ilan Vertinsky. "Strategic Trade Policy With Endogenous Choice Of Quality And Asymmetric Costs," Journal of International Economics, 2002, v56(1,Jan), 205-232.
Abstract: This paper examines the strategic trade policy incentives for investment policies towards quality improvements in a vertically differentiated exporting industry. Firms first compete in qualities and then export to a third country market based on Bertrand or Cournot competition. Optimal policies are asymmetric across the two producing countries. Under Bertrand competition, the low-quality country subsidizes investment to raise export quality, while the high-quality country imposes a tax so as to reduce the quality of its already high quality exports. Under Cournot competition, the results are reversed with a tax in the low-quality country and a subsidy in the high-quality country.
Handle: RePEc:nbr:nberwo:7536
Template-Type: ReDIF-Paper 1.0
Title: Medical Liability, Managed Care, and Defensive Medicine
Author-Name: Daniel P. Kessler
Author-Name: Mark B. McClellan
Note: AG EH LE
Number: 7537
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7537
File-URL: http://www.nber.org/papers/w7537.pdf
File-Format: application/pdf
Publication-Status: published as Kessler, Daniel and Mark McClellan. "Malpractice Law And Health Care Reform: Optimal Liability Policy In An Era Of Managed Care," Journal of Public Economics, 2002, v84(2,May), 175-197.
Abstract: Because the optimal level of medical malpractice liability depends on the incentives provided by the health insurance system, the rise of managed care in the 1990s may affect the relationship between liability reform and defensive medicine. In this paper, we assess empirically the extent to which managed care and liability reform interact to affect the cost of care and health outcomes of elderly Medicare beneficiaries with cardiac illness. Malpractice reforms that directly reduce liability pressure -- such as caps on damages -- reduce defensive practices both in areas with low and with high levels of managed care enrollment. In addition, managed care and direct reforms do not have long-run interaction effects that are harmful to patient health. However, at least for patients with less severe cardiac illness, managed care and direct reforms are substitutes, so the reduction in defensive practices that can be achieved with direct reforms is smaller in areas with high managed care enrollment. We consider some implications of these results for the current debate over the appropriateness of extending malpractice liability to managed care organizations.
Handle: RePEc:nbr:nberwo:7537
Template-Type: ReDIF-Paper 1.0
Title: Heart of Darkness: Modeling Public-Private Funding Interactions Inside the R&D Black Box
Classification-JEL: H41; H42
Author-Name: Paul A. David
Author-Person: pda76
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Note: PR
Number: 7538
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7538
File-URL: http://www.nber.org/papers/w7538.pdf
File-Format: application/pdf
Publication-Status: published as Research Policy, Vol. 29 (June 2000).
Abstract: This paper is a first step toward closing the analytical gap in the extensive literature on the results of interactions between public and private R&D expenditures, and their joint effects on the economy. Econometric studies in this area report a plethora of sometimes confusing and frequently contradictory estimates of the response of company financed R&D to changes in the level and nature of public R&D expenditure, but the necessary theoretical framework within which the empirical results can be interpreted is seldom provided. A major cause of inconsistencies' in the empirical literature is the failure to recognize key differences among the various policy experiments' being considered depending upon the economy in which they are embedded, and the type of public sector R&D spending that is contemplated. Using a simple, stylized structural model, we identify the main channels of impact of public R&D. We thus can characterize the various effects, distinguishing between short-run and long-run impacts that would show up in simple regression analyses of nominal public and private R&D expenditure variables. Within the context of our simple model it is possible to offer interpretations that shed light on recent cross-section and panel data findings at both high (i.e. national) and low (specific technology area) levels of aggregation.
Handle: RePEc:nbr:nberwo:7538
Template-Type: ReDIF-Paper 1.0
Title: Have Falling Tariffs and Transportation Costs Raised U.S. Wage Inequality?
Classification-JEL: F16; J31
Author-Name: Jonathan E. Haskel
Author-Person: pha161
Author-Name: Matthew J. Slaughter
Note: ITI
Number: 7539
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7539
File-URL: http://www.nber.org/papers/w7539.pdf
File-Format: application/pdf
Publication-Status: published as Jonathan E. Haskel & Matthew J. Slaughter, 2003. "Have Falling Tariffs and Transportation Costs Raised US Wage Inequality?," Review of International Economics, Blackwell Publishing, vol. 11(4), pages 630-650, 09.
Abstract: A number of studies have tried to gauge the effect of international trade on the rising U.S. skill premium by examining whether product prices in unskill-intensive sectors have fallen relative to prices in skill-intensive sectors. However, these studies do not estimate what share of domestic product-price changes is due to trade barriers. This paper attempts to address this issue by analyzing not the sector bias of price changes but rather the sector bias of price changes induced by changes in U.S. tariffs and transportation costs. We find that in both the 1970s and 1980s, level cuts in tariffs and transportation costs levels were concentrated in the unskill-intensive sectors. If pass-through of trade barriers to product prices is uniform across all sectors, then this suggests falls in tariffs and transportation costs were mandating a rise in the U.S. skill premium. But despite this suggestive evidence, we estimate that the price changes induced by tariffs or transportation costs mandated a rise in the skill premium that was mostly statistically insignificant. Thus, we do not find strong evidence that falling tariffs and transport costs, working through price changes, mandated rises in inequality.
Handle: RePEc:nbr:nberwo:7539
Template-Type: ReDIF-Paper 1.0
Title: Institutions for High-Quality Growth: What They are and How to Acquire Them
Classification-JEL: O10
Author-Name: Dani Rodrik
Author-Person: pro60
Note: EFG
Number: 7540
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7540
File-URL: http://www.nber.org/papers/w7540.pdf
File-Format: application/pdf
Publication-Status: published as Roy, Kartik C. and Jorn Sideras (eds.) Institutions, Globalisation and Empowerment. Cheltenham, U.K. and Northampton, MA: Elgar, 2006.
Publication-Status: published as Dani Rodrik, 2000. "Institutions for high-quality growth: What they are and how to acquire them," Studies in Comparative International Development, vol 35(3), pages 3-31.
Abstract: This paper opens with a discussion of the types of institutions that allow markets to perform adequately. While we can identify in broad terms what these are, there is no unique mapping between markets and the non-market institutions that underpin them. The paper emphasizes the importance of local knowledge' and argues that a strategy of institution building must not over-emphasize best-practice blueprint' at the expense of experimentation. Participatory political systems are the most effective ones for processing and aggregating local knowledge. Democracy is a meta-institution for building good institutions. A range of evidence indicates that participatory democracies enable higher-quality growth.
Handle: RePEc:nbr:nberwo:7540
Template-Type: ReDIF-Paper 1.0
Title: The Growth Costs of Malaria
Classification-JEL: F43; I10
Author-Name: Desmond McCarthy
Author-Name: Holger Wolf
Author-Name: Yi Wu
Note: EFG
Number: 7541
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7541
File-URL: http://www.nber.org/papers/w7541.pdf
File-Format: application/pdf
Abstract: Malaria ranks among the foremost health issues facing tropical countries. In this paper, we explore the determinants of cross-country differences in malaria morbidity, and examine the linkage between malaria and economic growth. Using a classification rule analysis, we confirm the dominant role of climate in accounting for cross-country differences in malaria morbidity. The data, however, do not suggest that tropical location is destiny: controlling for climate, we find that access to rural healthcare and income equality influence malaria morbidity. In a cross-section growth framework, we find a significant negative association between higher malaria morbidity and the growth rate of GDP per capita which is robust to a number of modifications, including controlling for reverse causation. The estimated absolute growth impact of malaria differs sharply across countries; it exceeds a quarter percent per annum in a quarter of the sample countries. Most of these are located in Sub-Saharan Africa (with an estimated average annual growth reduction of 0.55 percent).
Handle: RePEc:nbr:nberwo:7541
Template-Type: ReDIF-Paper 1.0
Title: Why Do Dancers Smoke? Time Preference, Occupational Choice, and Wage Growth
Classification-JEL: J2; J3
Author-Name: Lalith Munasinghe
Author-Name: Nachum Sicherman
Note: LS
Number: 7542
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7542
File-URL: http://www.nber.org/papers/w7542.pdf
File-Format: application/pdf
Publication-Status: published as Lalith Munasinghe & Nachum Sicherman, 2006. "Why Do Dancers Smoke? Smoking, Time Preference, and Wage Dynamics," Eastern Economic Journal, Eastern Economic Association, vol. 32(4), pages 595-616, Fall.
Abstract: Time preference is a key determinant of occupational choice and investments in human capital. Since careers are characterized by different wage growth prospects, individual discount rates play an important role in the relative valuation of jobs or occupations. We predict that individuals with lower discount rates are more likely to select into jobs or occupations with steeper wage profiles. To test this hypothesis we use smoking as an instrument for time preference. Panel data from the NLSY (1979-94) are ideal for our purposes since it contains information on smoking behavior in addition to detailed work histories and other socio-economic variables. We find that smokers have substantially flatter wage profiles, and a higher marginal rate of substitution of current wages for future wages. Incidentally, a survey of several hundred undergraduates at Barnard and Columbia College show that dance majors have the highest smoking rate.
Handle: RePEc:nbr:nberwo:7542
Template-Type: ReDIF-Paper 1.0
Title: The Importance of Group Coverage: How Tax Policy Shaped U.S. Health Insurance
Classification-JEL: H20; I10
Author-Name: Melissa A. Thomasson
Author-Person: pth24
Note: DAE EH PE
Number: 7543
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7543
File-URL: http://www.nber.org/papers/w7543.pdf
File-Format: application/pdf
Publication-Status: published as "From Sickness To Health: The Twentieth-Century Development Of U.S. Health Insurance," Explorations in Economic History, Vol. 39, no. 3 (July 2002): 233-253
Publication-Status: published as American Economic Review, Vol. 93, no. 4 (September 2003): 1373-1384
Abstract: In 1954, the Internal Revenue Service stipulated that employer contributions to the health insurance plans of their employees were to be excluded from employee taxable income. Today, the tax subsidy is major feature of the U.S. health care market. This paper examines the initial effects of the tax subsidy on the demand for health insurance using previously unexamined data from 1953 and 1958. Results suggest that the tax subsidy increased the growth of group insurance, particularly among union members and employed persons. This is a critical effect because group insurance is not only less expensive than individual insurance, but it is also easier to obtain, and households with access to group health insurance are far more likely to purchase health insurance coverage than those without similar access. By increasing access to group insurance, the tax subsidy fostered an increase in the purchase of group health insurance by people who may not have purchased individual coverage, and generated institutional change as it cemented an employment-based system of group health insurance in the United States.
Handle: RePEc:nbr:nberwo:7543
Template-Type: ReDIF-Paper 1.0
Title: Labor- and Capital- Augmenting Technical Change
Classification-JEL: O33; O14
Author-Name: Daron Acemoglu
Author-Person: pac16
Note: EFG
Number: 7544
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7544
File-URL: http://www.nber.org/papers/w7544.pdf
File-Format: application/pdf
Publication-Status: published as Daron Acemoglu, 2003. "Labor- And Capital-Augmenting Technical Change," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 1-37, 03.
Abstract: I analyze an economy in which profit-maximizing firms can undertake both labor- or capital-augmenting technological improvements. In the long run, the economy looks like the standard growth model with purely labor-augmenting technical change, and the share of labor in GDP is constant. Along the transition path, however, there is capital-augmenting technical change and factor shares change. A range of policies may have counterintuitive implications due to their effect on the direction of technical change. For example, taxes on capital income reduce the labor share in the short run, but increase it in the medium/long run.
Handle: RePEc:nbr:nberwo:7544
Template-Type: ReDIF-Paper 1.0
Title: Fertility, Migration, and Altruism
Classification-JEL: D1; D64
Author-Name: Eli Berman
Author-Person: pbe188
Author-Name: Zaur Rzakhanov
Note: AG CH ITI LS
Number: 7545
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7545
File-URL: http://www.nber.org/papers/w7545.pdf
File-Format: application/pdf
Publication-Status: published as Eli Berman & Zaur Rzakhanov, 2020. "Fertility, migration, and altruism," Journal of Demographic Economics, vol 86(3), pages 367-402.
Abstract: Consider migration to a higher income region as a human capital investment in which parents bear migration costs and children share returns. Migrants from a population with heterogeneous intergenerational discount rates will be self-selected on intergenerational altruism. Thus, immigrants may be self-selected on fertility. Soviet Jews who migrate to Israel despite high migration costs have significantly more children than members of the same birth cohort who migrate later when costs are low. We distinguish selection from treatment effects using a comparison group of women who migrate after childbearing age. We also find that immigrants favor bequests more and spend more time with their grandchildren in the U.S. Health and Retirement Survey. Selection on altruism can explain why historically immigrant-absorbing countries like the U.S. have higher fertility than other countries at comparable income levels. It provides an alternative explanation for Chiswick's classic earnings-overtaking result. Selection on altruism also implies that immigrant-absorbing regions will grow faster, or have higher per capita income, or both.
Handle: RePEc:nbr:nberwo:7545
Template-Type: ReDIF-Paper 1.0
Title: The Firm as a Dedicated Hierarchy: A Theory of the Origin and Growth of Firms
Classification-JEL: D23; I22
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Author-Name: Luigi Zingales
Note: CF
Number: 7546
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7546
File-URL: http://www.nber.org/papers/w7546.pdf
File-Format: application/pdf
Publication-Status: published as Rajan, Raghuram G. and Luigi Zingales. "The Firm As A Dedicated Hierarchy: A Theory Of The Origins And Growth Of Firms," Quarterly Journal of Economics, 2001, v116(3,Aug), 805-851.
Abstract: A fundamental problem entrepreneurs face in the formative stages of their businesses is how to provide incentives for employees to protect, rather than steal, the source of organizational rents. We study how the entrepreneur's response to this problem will determine the organization's internal structure, growth, and its eventual size. In particular, our model suggests large, steep hierarchies will predominate in physical capital intensive industries, and these will typically have seniority-based promotion policies. By contrast, flat hierarchies will be seen in human capital intensive industries. These will have up-or-out promotion systems, where experienced managers either become owners or are fired. Furthermore, flat hierarchies will have more distinctive technologies or cultures than steep hierarchies. The model points to some essential differences between organized hierarchies and markets.
Handle: RePEc:nbr:nberwo:7546
Template-Type: ReDIF-Paper 1.0
Title: A Monetary Explanation of the Great Stagflation of the 1970s
Classification-JEL: E31; E32
Author-Name: Robert Barsky
Author-Person: pba670
Author-Name: Lutz Kilian
Author-Person: pki110
Note: ME
Number: 7547
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7547
File-URL: http://www.nber.org/papers/w7547.pdf
File-Format: application/pdf
Abstract: The origins of stagflation and the possibility of its recurrence continue to be an important concern among policymakers and in the popular press. It is common to associate the origins of the Great Stagflation of the 1970s with the two major oil price increases of 1973/74 and 1979/80. This paper argues that oil price increases were not nearly as essential a part of the causal mechanism generating stagflation as is often thought. We provide a model that can explain the bulk of stagflation by monetary expansions and contractions without reference to supply shocks. Monetary fluctuations also help to explain variations in the price of oil (and other commodities) and help to account for the striking coincidence of major oil price increases and worsening stagflation. In contrast, there is no theoretical presumption that oil supply shocks are stagflationary. In particular, we show that oil supply shocks may quite plausibly lower the GDP deflator and that there is little independent evidence that oil supply shocks actually raised the deflator (as opposed to the CPI). The oil supply shock view also fails to explain the dramatic surge in the price of other industrial commodities that preceded the 1973/74 oil price increase and the fact that increases in industrial commodity prices lead oil price increases in the OPEC period.
Handle: RePEc:nbr:nberwo:7547
Template-Type: ReDIF-Paper 1.0
Title: Optimal Exercise Prices for Executive Stock Options
Classification-JEL: J0; J3
Author-Name: Brian J. Hall
Author-Name: Kevin J. Murphy
Author-Person: pmu108
Note: CF LS PE
Number: 7548
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7548
File-URL: http://www.nber.org/papers/w7548.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 90, no. 2 (May 2000): 209-214
Abstract: Although exercise prices for executive stock options can be set either below or above the grant-date market price, in practice virtually all options are granted at the money. We offer an economic rationale for this apparent puzzle, by showing that pay-to-performance incentives for risk-averse undiversified executives are typically maximized by setting exercise prices at (or near) the grant-date market price. We provide an operationally useful alternative to Black-Scholes (1973) for the purpose of both valuing executive stock options and measuring the incentives created by options. Our framework has implications not only for exercise-price policies, but also for indexed options, option repricings, exchanges of cash for stock-based compensation, and the design of bonus plans.
Handle: RePEc:nbr:nberwo:7548
Template-Type: ReDIF-Paper 1.0
Title: The Information in the High Yield Bond Spread for the Business Cycle: Evidence and Some Implications
Classification-JEL: E37; E44
Author-Name: Mark Gertler
Author-Person: pge11
Author-Name: Cara S. Lown
Note: AG EFG ME
Number: 7549
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7549
File-URL: http://www.nber.org/papers/w7549.pdf
File-Format: application/pdf
Publication-Status: published as Gertler, Mark & Lown, Cara S, 1999. "The Information in the High-Yield Bond Spread for the Business Cycle: Evidence and Some Implications," Oxford Review of Economic Policy, Oxford University Press, vol. 15(3), pages 132-50, Autumn.
Abstract: The market for high yield (below investment-grade) corporate bonds developed in the middle 1980s. We show that, since this time, the high yield spread has had significant explanatory power for the business cycle. We interpret this finding as possibly symptomatic of financial factors at work in the business cycle, along the lines suggested by the financial accelerator. We also show that over this period the high yield spread outperforms other leading financial indicators, including the term spread, the paper-bill spread and the Federal Funds rate. We conjecture that changes in the conduct of monetary policy over time may account for the reduced informativeness of these alternative indicators, all of which are tied closely to monetary policy.
Handle: RePEc:nbr:nberwo:7549
Template-Type: ReDIF-Paper 1.0
Title: What do we know about Macroeconomics that Fisher and Wicksell did not?
Classification-JEL: B1; B22
Author-Name: Olivier Blanchard
Author-Person: pbl2
Note: EFG ME
Number: 7550
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7550
File-URL: http://www.nber.org/papers/w7550.pdf
File-Format: application/pdf
Publication-Status: published as Blanchard, Olivier. "What Do We Know About Macroeconomics That Fisher And Wicksell Did Not?," Quarterly Journal of Economics, 2000, v115(4,Nov), 1375-1409.
Abstract: The answer to the question in the title is: A lot. In this essay, I argue that the history of macroeconomics during the 20th century can be divided in three epochs: Pre 1940. A period of exploration, where macroeconomics was not macroeconomics yet, but monetary theory on one side, business cycle theory on the other. A period during which all the right ingredients, and quite a few more, were developed. But also a period where confusion reigned, because of the lack of an integrated framework. From 1940 to 1980. A period of consolidation. A period during which an integrated framework was developed starting with the IS-LM, all the way to dynamic general equilibrium models and used to clarify the role of shocks and propagation mechanisms in fluctuations. But a construction with an Achille's heel, namely too casual a treatment of imperfections, leading to a crisis in the late 1970s. Since 1980. A new period of exploration, focused on the role of imperfections in macroeconomics, from the relevance of nominal price setting, to incompleteness of markets, to asymmetric information, to search and bargaining in decentralized markets. Exploration often feels like confusion. But behind it may be one of the most productive periods of research in macroeconomics.
Handle: RePEc:nbr:nberwo:7550
Template-Type: ReDIF-Paper 1.0
Title: Inflation Dynamics: A Structural Econometric Analysis
Classification-JEL: E31
Author-Name: Jordi Gali
Author-Person: pga43
Author-Name: Mark Gertler
Author-Person: pge11
Note: EFG ME
Number: 7551
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7551
File-URL: http://www.nber.org/papers/w7551.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, Vol. 44, no. 2 (1999): 195-222.
Abstract: We develop and estimate a structural model of inflation that allows for a fraction of firms that use a backward looking rule to set prices. The model nests the purely forward looking New Keynesian Phillips curve as a particular case. We use measures of arginal cost as the relevant determinant of inflation, as the theory suggests, instead of an ad-hoc output gap. Real marginal costs are a significant and quantitatively important determinant of inflation. Backward looking price setting, while statistically significant, is not quantitatively important. Thus, we conclude that the New Keynesian Phillips curve provides a good first approximation to the dynamics of inflation.
Handle: RePEc:nbr:nberwo:7551
Template-Type: ReDIF-Paper 1.0
Title: Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)
Author-Name: Wesley M. Cohen
Author-Name: Richard R. Nelson
Author-Person: pne56
Author-Name: John P. Walsh
Note: PR
Number: 7552
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7552
File-URL: http://www.nber.org/papers/w7552.pdf
File-Format: application/pdf
Abstract: Based on a survey questionnaire administered to 1478 R&D labs in the U.S. manufacturing sector in 1994, we find that firms typically protect the profits due to invention with a range of mechanisms, including patents, secrecy, lead time advantages and the use of complementary marketing and manufacturing capabilities. Of these mechanisms, however, patents tend to be the least emphasized by firms in the majority of manufacturing industries, and secrecy and lead time tend to be emphasized most heavily. A comparison of our results with the earlier survey findings of Levin et al. [1987] suggest that patents may be relied upon somewhat more heavily by larger firms now than in the early 1980s. For the protection of product innovations, secrecy now appears to be much more heavily employed across most industries than previously. Our results on the motives to patent indicate that firms patent for reasons that often extend beyond directly profiting from a patented innovation through either its commercialization or licensing. In addition to the prevention of copying, the most prominent motives for patenting include the prevention of rivals from patenting related inventions (i.e., patent blocking'), the use of patents in negotiations and the prevention of suits. We find that firms commonly patent for different reasons in discrete' product industries, such as chemicals, versus complex' product industries, such as telecommunications equipment or semiconductors. In the former, firms appear to use their patents commonly to block the development of substitutes by rivals, and in the latter, firms are much more likely to use patents to force rivals into negotiations.
Handle: RePEc:nbr:nberwo:7552
Template-Type: ReDIF-Paper 1.0
Title: Tax Subsidies for Health Insurance: Evaluating the Costs and Benefits
Classification-JEL: I18; H23
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: EH PE
Number: 7553
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7553
File-URL: http://www.nber.org/papers/w7553.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan and Larry Levitt. "Tax Subsidies For Health Insurance: Costs And Benefits," Health Affairs, 2000, v19(1,Feb), 72-85.
Abstract: The continued rise in the number of non-elderly Americans without health insurance has led to considerable interest in tax-based policies to raise the level of insurance coverage. This paper describes a detailed microsimulation model that has been developed to evaluate such tax-based polices, and its findings for the impact of polices on government costs and insurance coverage. I find that while tax subsidies could significantly increase insurance coverage, even very generous tax policies could not cover more than a sizable minority of the uninsured population. But there are several design features which can clearly make tax policy more effective: using tax credits rather than deductions; making credits refundable; and addressing the timing mismatch between when insurance purchases are made and tax refunds are received. I also document a clear tradeoff between the scope of tax subsidies and their efficiency.
Handle: RePEc:nbr:nberwo:7553
Template-Type: ReDIF-Paper 1.0
Title: On the Fundamentals of Self-Fulfilling Speculative Attacks
Classification-JEL: F31; F41
Author-Name: Craig Burnside
Author-Person: pbu20
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Sergio T. Rebelo
Note: IFM
Number: 7554
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7554
File-URL: http://www.nber.org/papers/w7554.pdf
File-Format: application/pdf
Publication-Status: published as Burnside, Craig, Martin Eichenbaum and Sergio Rebelo. "Government Guarantees And Self-Fulfilling Speculative Attacks," Journal of Economic Theory, 2004, v119(1,Nov), 31-63.
Abstract: This paper proposes a theory of twin banking-currency crises in which both fundamentals and self-fulfilling beliefs play crucial roles. Fundamentals determine whether crises will occur. Self-fulfilling beliefs determine when they occur. The fundamental that causes twin crises' is government guarantees to domestic banks' foreign creditors. When these guarantees are in place twin crises inevitably occur, but their timing is a multiple equilibrium phenomenon that depends on agents' beliefs. So while self-fulfilling beliefs have an important role to play, twin crises do not happen just anywhere. They happen in countries where there are fundamental problems - problems such as guarantees to the financial sector.
Handle: RePEc:nbr:nberwo:7554
Template-Type: ReDIF-Paper 1.0
Title: Does Public Insurance Improve the Efficiency of Medical Care? Medicaid Expansions and Child Hospitalizations
Classification-JEL: I18; H51
Author-Name: Leemore Dafny
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: CH EH PE
Number: 7555
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7555
File-URL: http://www.nber.org/papers/w7555.pdf
File-Format: application/pdf
Publication-Status: published as "Public Insurance and Child Hospitalizations: Access and Efficiency Effects," Journal of Public Economics, 2005, 89(1): 109-129
Abstract: One of the benefits commonly claimed for expanded public health insurance is improved efficiency of medical care delivery, but this claim has little rigorous empirical support. We provide such support by assessing the impact of the Medicaid expansions over the 1983-1996 period on the incidence of avoidable hospitalizations. We find that expanded public insurance eligibility leads to a significant decline in avoidable hospitalization: over this period Medicaid eligibility expansions were associated with a 22% decline in avoidable hospitalization. But we also find that there is a countervailing and larger impact in terms of increased access to hospital care for newly eligible children, so that there is an overall 10% rise in child hospitalizations due to the expansions. The expansions have mixed implications for treatment intensity, but appear to be associated with a significant shift in the types of hospitals at which children are treated, with fewer children treated in public hospitals and more in for-profit facilities.
Handle: RePEc:nbr:nberwo:7555
Template-Type: ReDIF-Paper 1.0
Title: Single Peaked Vs. Diversified Capitalism: The Relation Between Economic Institutions and Outcomes
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 7556
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7556
File-URL: http://www.nber.org/papers/w7556.pdf
File-Format: application/pdf
Publication-Status: published as Dreze, Jacques (ed.) Advances in Macroeconomic Theory. London, UK: Palgrave, in association with the IEA, Conf. Vol #133, 2002.
Abstract: Capitalist countries have historically had quite different labour market institutions and social policies. Do these differences produce sufficiently different economic outcomes to identify a single peak set of institutions? This paper shows that: 1. Labour market institutions have large effects on distribution, but modest hard-to-uncover effects on efficiency. 2. Institutional diversity is increasing among advanced countries, as measured by the percentage of workers covered by collective bargaining. 3. The case for the US having the institutions for peak economy status rests on its 1990s full employment experience, which arguably counterbalances its high level of economic inequality The historical pattern whereby some capitalist countries do better than others in some periods (ie Japan in the 1970s-1980s), then run into problems is more consonant with the view that capitalism permits national differences in institutions to persist than with the view that all economies must converge to a single institutional structure.
Handle: RePEc:nbr:nberwo:7556
Template-Type: ReDIF-Paper 1.0
Title: Outsourcing at Will: Unjust Dismissal Doctrine and the Growth of Temporary Help Employment
Classification-JEL: J21; K31
Author-Name: David H. Autor
Author-Person: pau9
Note: LS
Number: 7557
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7557
File-URL: http://www.nber.org/papers/w7557.pdf
File-Format: application/pdf
Publication-Status: published as Autor, David H. "Outsourcing At Will: The Contribution Of Unjust Dismissed Doctrine To The Growth Of Employment Outsourcing," Journal of Labor Economics, 2003, v21(1,Jan), 1-42.
Abstract: The U.S. temporary help services (THS) industry grew at 11 percent annually between 1979 to 1995, five times more rapidly than non-farm employment. Contemporaneously, courts in 46 states adopted exceptions to the common law doctrine of employment at will that limit employers' discretion to terminate workers and opened them to litigation. This paper assesses whether the decline of employment at will and the growth of THS are causally related. To aid the analysis, the paper considers a simple model of employment outsourcing, the primary implication of which is that firms will respond to externally imposed firing costs by outsourcing positions requiring the least firm-specific skills rather than those with the highest expected termination costs. The empirical analysis indicates that one class of exception, the implied contractual right to ongoing employment, led to 14 to 22 percent excess temporary help growth in adopting states. Unjust dismissal doctrines did not significantly contribute to employment growth in other business service industries. Temporary help employment is closely correlated with union penetration, with states experiencing the least rapid decline in unionization undergoing substantially faster THS growth. The decline of employment at will explains as much as 20 percent of the growth of THS between 1973 to 1995 and accounts for 336,000 to 494,000 additional workers employed in THS on a daily basis as of 1999.
Handle: RePEc:nbr:nberwo:7557
Template-Type: ReDIF-Paper 1.0
Title: The Importance of Measurement Error in the Cost of Capital
Classification-JEL: E62; C23
Author-Name: Austan Goolsbee
Author-Person: pgo49
Note: PE
Number: 7558
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7558
File-URL: http://www.nber.org/papers/w7558.pdf
File-Format: application/pdf
Publication-Status: published as Goolsbee, Austan. "The Importance Of Measurement Error In The Cost Of Capital," National Tax Journal, 2000, v53(2,Jun), 215-228.
Abstract: Conventional estimates of the impact of taxes on investment may be seriously biased by measurement error in the cost of capital. The existence and size of such error, however, has not been documented. Using panel data on different types of capital equipment, this paper provides direct evidence of measurement error in the tax component of the cost of capital, accounting for about 20 percent of the tax term's variance. Correcting for the error with IV estimation shows that taxes significantly affect both prices and investment and that conventional results may be off by as much as a factor of four.
Handle: RePEc:nbr:nberwo:7558
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy and Asset Price Volatility
Classification-JEL: E5; E44
Author-Name: Ben Bernanke
Author-Person: pbe55
Author-Name: Mark Gertler
Author-Person: pge11
Note: AP EFG ME
Number: 7559
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7559
File-URL: http://www.nber.org/papers/w7559.pdf
File-Format: application/pdf
Publication-Status: published as Economic Review - Federal Reserve Bank of Kansas City, Fourth Quarter 1999, pp. 17-51
Publication-Status: published as Ben Bernanke & Mark Gertler, 1999. "Monetary policy and asset price volatility," Proceedings, Federal Reserve Bank of Kansas City, pages 77-128.
Abstract: We explore the implications of asset price volatility for the management of monetary policy. We show that it is desirable for central banks to focus on underlying inflationary pressures. Asset prices become relevant only to the extent they may signal potential inflationary or deflationary forces. Rules that directly target asset prices appear to have undesirable side effects. We base our conclusions on (i) simulation of different policy rules in a small scale macro model and (ii) a comparative analysis of recent U.S. and Japanese monetary policy.
Handle: RePEc:nbr:nberwo:7559
Template-Type: ReDIF-Paper 1.0
Title: Differential Mortality and the Value of Individual Account Retirement Annuities
Classification-JEL: H55; J14
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Note: AG PE
Number: 7560
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7560
File-URL: http://www.nber.org/papers/w7560.pdf
File-Format: application/pdf
Publication-Status: published as Differential Mortality and the Value of Individual Account Retirement Annuities, Jeffrey Brown. in The Distributional Aspects of Social Security and Social Security Reform, Feldstein and Liebman. 2002
Abstract: This paper examines the extent of redistribution that would occur under various annuity and bequest options as part of an individual accounts retirement program. I first estimate mortality differentials by gender, race, ethnicity and level of education using the National Longitudinal Mortality Study and document substantial differences. I then use these estimates to examine the expected transfers' that would take place between socioeconomic groups under different assumptions about the structure of an annuity program. Using an expected present discounted value or money's worth' calculation as the basis for comparison, I find that the size of transfers in an individual accounts program is highly sensitive to the benefit structure. For example, mandating a single-life, real annuity can result in expected transfers of as high as 20% of the account balance, often from economically disadvantaged groups toward groups that are better off. These transfers can be substantially reduced through the use of joint life annuities, survivor provisions and bequest options. For example, the largest expected negative transfer under a joint and full survivor annuity with a fully valued 20-year guarantee option is only 2% of the account balance. However, efforts to reduce the extent of redistribution generally do so at the cost of significantly lower annuity benefits paid to the individuals who contribute to the system.
Handle: RePEc:nbr:nberwo:7560
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Immigration on Native Self-Employment
Classification-JEL: J23; J61
Author-Name: Robert W. Fairlie
Author-Person: pfa338
Author-Name: Bruce D. Meyer
Author-Person: pme273
Note: LS
Number: 7561
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7561
File-URL: http://www.nber.org/papers/w7561.pdf
File-Format: application/pdf
Publication-Status: published as Fairlie, Robert W. and Rebecca A. London, "The Effect of Incremental Benefit Levels on Births to AFDC Recipients," Journal of Policy Analysis and Management, Vol. 16, no. 4 (Autumn 1997): 575-597
Publication-Status: published as Journal of Labor Economics, Vol. 21, no. 3 (July 2003): 619-650
Abstract: A rapidly growing literature examines the impact of immigrants on the labor market outcomes of native-born Americans. However, the impact of immigration on natives in self-employment has not been examined, despite the over-representation of immigrants in that sector. We first present a new general equilibrium model of self-employment and wage/salary work. For a range of plausible parameter values, the model predicts small negative effects of immigration on native self-employment rates and earnings. Using 1980 and 1990 Census microdata, we then examine the relationship between changes in immigration and native self-employment rates and earnings across 132 of the largest metropolitan areas in the United States. We find evidence supporting the hypothesis that self-employed immigrants displace self-employed natives. The effects are much larger than those predicted by simulations of the theoretical model. Immigrants, however, do not have a negative effect on native self-employment earnings. Our findings are similar if we weight immigration rates by the propensity of immigrant groups to be self-employed or if we try alternative estimation techniques and specifications.
Handle: RePEc:nbr:nberwo:7561
Template-Type: ReDIF-Paper 1.0
Title: Compensation in the Nonprofit Sector
Classification-JEL: J3; J4
Author-Name: Christopher Ruhm
Author-Person: pru7
Author-Name: Carey Borkoski
Note: EH LS PE
Number: 7562
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7562
File-URL: http://www.nber.org/papers/w7562.pdf
File-Format: application/pdf
Publication-Status: published as Ruhm, Christopherj. and Cary Borkoski. "Compensation In The Nonprofit Sector," Journal of Human Resources, 2003, v38(4,Fall), 992-1021.
Abstract: This analysis provides an in-depth investigation of the determinants of pay in the nonprofit sector. The main findings are as follows. First, holding constant individual characteristics, average weekly wages are 11 percent lower in nonprofit than for-profit jobs. However, this difference is entirely explained by the concentration of nonprofit employment in relatively low paid industries. Second, an accompanying longitudinal analysis, focusing on movements of workers between nonprofit and profit-seeking employers, suggests a nonprofit penalty of between 2 and 4 percent. Third, nonprofit workers in three specific industries (hospitals, nursing/personal care facilities, social services) earn as much or more than their for-profit counterparts. However, the effects of changing the type of employment varies substantially across the three industries. These results raise questions about several predominant models of nonprofit wage-setting.
Handle: RePEc:nbr:nberwo:7562
Template-Type: ReDIF-Paper 1.0
Title: The Role of Social Capital in Financial Development
Classification-JEL: G2; O1
Author-Name: Luigi Guiso
Author-Person: pgu58
Author-Name: Paola Sapienza
Author-Person: psa155
Author-Name: Luigi Zingales
Note: CF
Number: 7563
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7563
File-URL: http://www.nber.org/papers/w7563.pdf
File-Format: application/pdf
Publication-Status: published as Guiso, Luigi, Paola Sapienza and Luigi Zingales. "The Role Of Social Capital In Financial Development," American Economic Review, 2004, v94(3,Jun), 526-556.
Abstract: To identify the effect of social capital on financial development, we exploit the well-known differences in social capital and trust (Banfield (1958), Putnam (1993)) across different parts of Italy, using microeconomic data on households and firms. In areas of the country with high levels of social trust, households invest less in cash and more in stock, use more checks, have higher access to institutional credit, and make less use of informal credit. In these areas, firms also have more access to credit and are more likely to have multiple shareholders. The effect of trust is stronger where legal enforcement is weaker and among less-educated people. The behavior of movers is mainly affected by the level of trust of the environment where they live, but a significant fraction of the effect is also due to the level of trust prevailing in the province where they grew up.
Handle: RePEc:nbr:nberwo:7563
Template-Type: ReDIF-Paper 1.0
Title: Why Do People Still Live in East Germany?
Classification-JEL: J61; P23
Author-Name: Jennifer Hunt
Author-Person: phu9
Note: LS
Number: 7564
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7564
File-URL: http://www.nber.org/papers/w7564.pdf
File-Format: application/pdf
Abstract: In 1997 GDP per capita in East Germany was 57% of that of West Germany, wage rates were 75% of western levels, and the unemployment rate was at least double the western rate of 7.8%. One would expect that if capital flows and trade in goods failed to bring convergence, labor flows would respond, enhancing overall efficiency. Yet net emigration from East Germany has fallen from high levels in 1989-1990 to close to zero. Using state-level data for all of Germany, available from 1991-1996, I am able to explain the downward trend in east to west migration using wage and unemployment information. Convergence in hourly wages is the most important factor. Analysis of the eastern sample of the German Socio-Economic Panel for 1990-1997 suggests that commuting is unlikely to substitute substantially for emigration. The individual-level data further indicate that emigrants are disproportionately young and skilled, and that individuals suffering a layoff or non-employment spell are also much more likely to emigrate.
Handle: RePEc:nbr:nberwo:7564
Template-Type: ReDIF-Paper 1.0
Title: A Century of Global Stock Markets
Author-Name: Philippe Jorion
Author-Name: William N. Goetzmann
Author-Person: pgo59
Note: AP
Number: 7565
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7565
Publication-Status: Published as "Global Stock Markets in the Twentieth Century", Journal of Finance, Vol. 54, no. 3 (June 1999): 953-980.
Abstract: This paper was an accidental re-issue of w5901
Handle: RePEc:nbr:nberwo:7565
Template-Type: ReDIF-Paper 1.0
Title: Global Real Estate Markets - Cycles and Fundamentals
Author-Name: Bradford Case
Author-Name: William N. Goetzmann
Author-Person: pgo59
Author-Name: K. Geert Rouwenhorst
Author-Person: pro146
Note: AP
Number: 7566
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7566
File-URL: http://www.nber.org/papers/w7566.pdf
File-Format: application/pdf
Abstract: The correlations among international real estate markets are surprisingly high, given the degree to which they are segmented. While industrial, office and retail properties exist all around the world, they are not economic substitutes because of locational specificity. In addition, the broad securitization of real estate property companies has, until recently, lagged that of other types of companies. Never-the-less, international property returns move together in dramatic fashion. In this paper, we use eleven years of global property returns to explore the factors influencing this co-movement. We attribute a substantial amount of the correlation across world property markets to the effects of changes in GNP, suggesting that real estate is a bet on fundamental economic variables which are correlated across countries. A decomposition shows that a local production factor is more important in some countries than in others.
Handle: RePEc:nbr:nberwo:7566
Template-Type: ReDIF-Paper 1.0
Title: Daily Momentum and Contrarian Behavior of Index Fund Investors
Author-Name: William N. Goetzmann
Author-Person: pgo59
Author-Name: Massimo Massa
Note: AP
Number: 7567
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7567
File-URL: http://www.nber.org/papers/w7567.pdf
File-Format: application/pdf
Publication-Status: published as Goetzmann, William N. and Massimo Massa. "Daily Momentum And Contrarian Behavior Of Index Fund Investors," Journal of Financial and Quantitative Analysis, 2002, v37(3,Sep), 375-389.
Abstract: We use a two-year panel of individual accounts in an S&P 500 index mutual fund to examine the trading and investment behavior of more than 91 thousand investors who have chosen a low-cost, passively managed vehicle for savings. This allows us to characterize investors' heterogeneity in terms of their investment patterns. In particular, we identify positive feedback traders as well as contrarians whose activities are conditional upon preceding day stock market moves. We test the consistency and profitability of these conditional strategies over time. We find that more frequent traders are typically contrarians, while infrequent traders are more typically momentum investors. The dynamics of these investor classes help us to partially examine the question of the marginal investor over the period of our study. We find that the behavior of momentum investors is typically more correlated to changes in the S&P 500 and we trace its dynamics over time. We build up behavioral factors' based on contrarian and momentum flows and show that they perform well against a benchmark of loadings on latent factors extracted from returns. We also use the behavior of momentum and contrarian investors to build a measure of market polarization.' This captures the dispersion of beliefs among the investors and helps to account for asset pricing better than standard measures of dispersion of beliefs.
Handle: RePEc:nbr:nberwo:7567
Template-Type: ReDIF-Paper 1.0
Title: Long Run Effects of Social Security Reform Proposals on Lifetime Progressivity
Classification-JEL: H22; H55
Author-Name: Julia Lynn Coronado
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Thomas Glass
Note: AG PE
Number: 7568
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7568
File-URL: http://www.nber.org/papers/w7568.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, M. and J. Liebman (eds.) The Distributional Effects of Social Security Reform. Chicago: The University of Chicago Press, 2002.
Publication-Status: published as Long-Run Effects of Social Security Reform Proposals on Lifetime Progressivity, Julia Lynn Coronado, Don Fullerton, Thomas Glass. in The Distributional Aspects of Social Security and Social Security Reform, Feldstein and Liebman. 2002
Abstract: This paper uses a lifetime framework to address questions about the progressivity of social security and proposed reforms. We use a large sample of diverse individuals from the PSID to calculate lifetime income, to classify individuals into income quintiles, and then to calculate the present value of taxes minus benefits for each person in each group. In our basic calculations, the current system is slightly progressive, overall, on a lifetime basis. Social Security would become slightly more progressive in one of the reform plans, and it would become slightly regressive in each of the other plans. The pattern of progressivity is affected by alternative assumptions, but it is affected in similar ways for the current system and proposed reforms. None of these reforms greatly alters the current degree of progressivity on a lifetime basis.
Handle: RePEc:nbr:nberwo:7568
Template-Type: ReDIF-Paper 1.0
Title: The Shape of Twentieth Century Economic History
Author-Name: J. Bradford DeLong
Note: ME DAE
Number: 7569
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7569
File-URL: http://www.nber.org/papers/w7569.pdf
File-Format: application/pdf
Abstract: The history of the twentieth century can be summarized excessively briefly in five propositions: First, that the history of the twentieth century was overwhelmingly economic history. Second, that the twentieth century saw the material wealth of humankind explode beyond all previous imagining. Third, that because of advances technology, productivity, and organization and the feelings of social dislocation and disquiet that these advances generated the twentieth century's tyrannies were the most brutal and barbaric in history. Fourth, that the twentieth century saw the relative economic gulf between different economies grow at a rapid pace. Fifth and last, the economic policy the management of their economies by governments in the twentieth century was at best inept. Little was known or learned about how to manage a market or mixed economy.
Handle: RePEc:nbr:nberwo:7569
Template-Type: ReDIF-Paper 1.0
Title: Social Security and Inequality over the Life Cycle
Classification-JEL: H2; H5
Author-Name: Angus Deaton
Author-Person: pde30
Author-Name: Pierre-Olivier Gourinchas
Author-Person: pgo28
Author-Name: Christina Paxson
Author-Person: ppa335
Note: AG PE
Number: 7570
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7570
File-URL: http://www.nber.org/papers/w7570.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin and Jeff Liebman (eds.) The Distributional Effects of Social Security Reform. Chicago: University of Chicago Press, 2002.
Publication-Status: published as Social Security and Inequality over the Life Cycle, Angus S. Deaton, Pierre-Olivier Gourinchas, Christina Paxson. in The Distributional Aspects of Social Security and Social Security Reform, Feldstein and Liebman. 2002
Abstract: This paper examines the consequences of social security reform for the inequality of consumption across individuals. The idea is that inequality is at least in part the result of individual risk in earnings or asset returns, the effects of which accumulate over time to increase inequality within groups of people as they age. Institutions such as social security, that share risk across individuals, will moderate the transmission of individual risk into inequality. We examine how different social security systems, with different degrees of risk sharing, affect consumption inequality. We do so within the framework of the permanent income hypothesis, and also using richer models of consumption that incorporate precautionary saving motives and borrowing restrictions. Our results indicate that systems in which there is less sharing of earnings risk such as systems of individual accounts produce higher consumption inequality both before and after retirement. However, differences across individuals in the rate of return on assets (including social security assets held in individual accounts) produce only modest additional effects on inequality.
Handle: RePEc:nbr:nberwo:7570
Template-Type: ReDIF-Paper 1.0
Title: The Savers-Spenders Theory of Fiscal Policy
Classification-JEL: E0; H00
Author-Name: N. Gregory Mankiw
Note: EFG ME
Number: 7571
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7571
File-URL: http://www.nber.org/papers/w7571.pdf
File-Format: application/pdf
Publication-Status: published as Mankiw, N. Gregory. "The Savers-Spenders Theory Of Fiscal Policy," American Economic Review, 2000, v90(2,May), 120-125.
Abstract: The macroeconomic analysis of fiscal policy is usually based on one of two canonical models--the Barro-Ramsey model of infinitely-lived families or the Diamond-Samuelson model of overlapping generations. This paper argues that neither model is satisfactory and suggests an alternative. In the proposed model, some consumers plan ahead for themselves and their descendants, while others live paycheck to paycheck. This model is easier to reconcile with the essential facts about consumer behavior and wealth accumulation, and it yields some new and surprising conclusions about fiscal policy.
Handle: RePEc:nbr:nberwo:7571
Template-Type: ReDIF-Paper 1.0
Title: Keiretsu and Relationship-Specific Investment: A Barrier to Trade?
Classification-JEL: F12
Author-Name: Barbara J. Spencer
Author-Person: psp2
Author-Name: Larry D. Qiu
Author-Person: pqi8
Note: ITI
Number: 7572
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7572
File-URL: http://www.nber.org/papers/w7572.pdf
File-Format: application/pdf
Publication-Status: published as Spencer, Barbara J. and Larry D. Qiu. "Keiretsu And Relationship-Specific Investment: A Barrier To Trade?," International Economic Review, 2001, v42(4,Nov), 871-901.
Abstract: This paper develops a model of informal procurement within Japanese keiretsu so as to consider effects on intermediate-good imports, such as auto parts. Parts-suppliers make relationship-specific investments that benefit the auto-maker and prices are determined by bargaining after investment has been sunk. Although this investment raises efficiency, it limits the range of imports to less important parts such as tail pipes and it is possible that no parts are imported, despite lower foreign production costs. Lack of information concerning investment rents combined with counterintuitive effects on imports and Japanese production costs could create unwarranted perceptions of a trade barrier.
Handle: RePEc:nbr:nberwo:7572
Template-Type: ReDIF-Paper 1.0
Title: Labor Markets in Professional Sports
Classification-JEL: J4
Author-Name: Sherwin Rosen
Author-Name: Allen Sanderson
Note: LS
Number: 7573
Creation-Date: 2000-02
Order-URL: http://www.nber.org/papers/w7573
File-URL: http://www.nber.org/papers/w7573.pdf
File-Format: application/pdf
Publication-Status: published as Rosen, Sherwin and Allen Sanderson. "Labour Markets In Professional Sports," Economic Journal, 2001, v111(469,Feb), 47-68.
Abstract: Many interesting elements of supply and demand are starkly observable in professional athletics. Understanding institutional arrangements, competitive balance and labor-management relations requires a basic understanding of sports labor markets and the struggle for control of those markets between interest groups. In this paper we treat historical and contemporary labor issues in North America and Europe, from reserve rules and free agency, high levels of player pay and work stoppages, to the distribution of playing talents across teams. We discuss the relationship between personal productivity and pay; relative versus absolute demand; competitive and cooperative interactions across firms (teams); factor substitutions; player mobility and the Coase theorem. We briefly consider how property rights affect supply, athletic talent, arms races and restrictions on competition. The problem of (excess) incentives to compete leading to externalities and inefficiencies are noted throughout the paper. Restrictive agreements such as reverse-order drafts, payroll caps and revenue sharing may constrain these forces, but they also redistribute rents from players to owners. All of these schemes, in one way or another, punish success. The European approach -- promotion of better-performing teams and relegation of those with the poorest records -- punishes failure. It remains an interesting economic question as to which system is better.
Handle: RePEc:nbr:nberwo:7573
Template-Type: ReDIF-Paper 1.0
Title: Guaranteed Income: SSI and the Well-Being of the Elderly Poor
Classification-JEL: I3
Author-Name: Kathleen McGarry
Author-Person: pmc264
Note: AG PE
Number: 7574
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7574
File-URL: http://www.nber.org/papers/w7574.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin and Jeff Liebman (eds.) The Distributional Effects of Social Security Reform. Chicago: University of Chicago Press, 2002.
Abstract: Discussions of changes in the Social Security program must necessarily consider the impact of such changes on the well-being of the poor elderly. Under the current system, the financial needs of this population are met by the Supplement Security Income program (SSI). SSI has done much to improve situation of the poorest elderly but has the potential to do more. This paper examines that potential. One of the most surprising aspect of the program is that many of those eligible for benefits are not enrolled. Here I examine the correlates of participation for a sample of eligible individuals and use the results to simulate the effect of changes in eligibility criteria on participation and on costs. The largest expansion considered in the paper, providing an income guarantee for all elderly individuals that is equal to the poverty line, increases payments directed towards the elderly by 90 percent, to just over 8 billion in 1993 dollars. Although large, this $8 billion is less than half of the expenditures for the SSI disabled population in that year. Modifications to SSI that increase income disregards, eliminate the asset test, or base income eligibility solely on Social Security income, would be less costly, but would also provide less relief to the poor. Importantly, all programs, including the current system, could have substantially greater effects on poverty if participation rates were increased.
Handle: RePEc:nbr:nberwo:7574
Template-Type: ReDIF-Paper 1.0
Title: Globalization and International Public Finance
Classification-JEL: F0; F3
Author-Name: Michael Kremer
Author-Person: pkr20
Author-Name: Paras Mehta
Note: EFG IFM
Number: 7575
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7575
File-URL: http://www.nber.org/papers/w7575.pdf
File-Format: application/pdf
Abstract: This paper examines the effect of reduced transaction costs in the international trading of assets on the ability of governments to issue debt. We examine a model in which governments care about the welfare of their citizens, and thus are more inclined to default if a large proportion of their debt is held by foreigners. Reductions in transaction costs make it easier for domestic citizens to share risk by selling debt to foreigners. This may increase tendencies for governments to default, and thus raise their cost of credit and reduce welfare. We find that even in the absence of transaction costs, home bias in placement of government debt may persist, because in the presence of default risk the return on government debt is correlated with the tax burden required to pay the debt. Asset inequality may reduce this home bias, and by increasing foreign ownership, increase incentives for default. Finally, if foreign creditors are less risk averse than domestic creditors, there may be one equilibrium in which domestic creditors hold the asset and default risk is low, and another in which foreign creditors hold the asset and default risk is high.
Handle: RePEc:nbr:nberwo:7575
Template-Type: ReDIF-Paper 1.0
Title: Does Growing Inequality Reduce Tax Progressivity? Should It?
Classification-JEL: H2
Author-Name: Joel Slemrod
Author-Person: psl10
Author-Name: Jon Bakija
Author-Person: pba72
Note: PE
Number: 7576
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7576
File-URL: http://www.nber.org/papers/w7576.pdf
File-Format: application/pdf
Publication-Status: published as Hassett, K. and R. G. Hubbard (eds.) Inequality and Tax Policy. Washington, DC: The AEI Press for the American Enterprise Institute, 2001.
Abstract: This paper explores the links between two phenomena of the past two decades: striking increase in the inequality of pre-tax incomes, and the failure of tax-and-transfer progressivity to increase. We emphasize the causal links going from inequality to progressivity, noting that optimal taxation theory predicts that growing inequality should increase progressivity. We discuss public choice alternatives to the optimal progressivity framework. The paper also addresses the opposite causal direction: that it is changes in taxation that have caused an apparent increase in inequality. Finally, we discuss the non-event-study' offered by the large changes in the distribution of income--with no major tax changes-- since 1995, and discuss its implications for the link between progressivity and inequality.
Handle: RePEc:nbr:nberwo:7576
Template-Type: ReDIF-Paper 1.0
Title: Potential Pitfalls for the Purchasing-Power-Parity Puzzle? Sampling and Specification Biases in Mean-Reversion Tests of the Law of One Price
Classification-JEL: C22; C51
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE IFM ITI
Number: 7577
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7577
File-URL: http://www.nber.org/papers/w7577.pdf
File-Format: application/pdf
Publication-Status: published as Taylor, Alan M. "Potential Pitfalls For The Purchasing-Power-Parity Puzzle? Sampling And Specification Biases In Mean-Reversion Tests Of The Law Of None Price," Econometrica, 2001, v69(2,Mar), 473-498.
Abstract: The PPP puzzle is based on empirical evidence that international price differences for individual goods (LOOP) or baskets of goods (PPP) appear highly persistent or even non-stationary. The present consensus is these price differences have a half-life that is of the order of five years at best, and infinity at worst. This seems unreasonable in a world where transportation and transaction costs appear so low as to encourage arbitrage and the convergence of price gaps over much shorter horizons, typically days or weeks. However, current empirics rely on a particular choice of methodology, involving (i) relatively low-frequency monthly, quarterly, or annual data, and (ii) a linear model specification. In fact, these methodological choices are not innocent, and they can be shown to bias analysis to-wards findings of slow convergence and a random walk. Intuitively, if we suspect that the actual adjustment horizon is of the order of days then monthly and annual data cannot be expected to reveal it. If we suspect arbitrage costs are high enough to produce a substantial band of inaction' then a linear model will fail to support convergence if the process spends considerable time random-walking in that band. Thus, when testing for PPP or LOOP, model specification and data sampling should not proceed without consideration of the actual institutional context and logistical framework of markets.
Handle: RePEc:nbr:nberwo:7577
Template-Type: ReDIF-Paper 1.0
Title: Do Immigrant Inflows Lead to Native Outflows?
Classification-JEL: J61
Author-Name: David Card
Author-Person: pca271
Author-Name: John E. DiNardo
Author-Person: pdi178
Note: LS
Number: 7578
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7578
File-URL: http://www.nber.org/papers/w7578.pdf
File-Format: application/pdf
Publication-Status: published as Card, David and John DiNardo. "Do Immigrant Inflows Lead To Native Outflows?," American Economic Review, 2000, v90(2,May), 360-367.
Abstract: We use 1980 and 1990 Census data for 119 larger Metropolitan Statistical Areas to examine the effect of skill-group specific immigrant inflows on the location decisions of natives in the same skill group, and on the overall distribution of human capital. To control for unobserved skill-group specific demand factors, our models include lagged mobility flows of natives over the 1970-80 period. We also estimate instrumental variables models that use the fraction of Mexican immigrants in 1970 to predict skill-group specific relative immigrant inflows over the 1980s. Despite wide variation across cities in the size and relative skill composition of immigrant population changes we find no evidence of selective out-migration by natives. We conclude that immigrant inflows exert a direct effect on the relative skill composition of cities: cities that have received relatively unskilled immigrant flows have experienced proportional rises in the size of their unskilled populations.
Handle: RePEc:nbr:nberwo:7578
Template-Type: ReDIF-Paper 1.0
Title: Elected versus Appointed Regulators: Theory and Evidence
Author-Name: Stephen Coate
Author-Person: pco66
Author-Name: Timothy Besley
Author-Person: pbe46
Note: IO PE
Number: 7579
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7579
File-URL: http://www.nber.org/papers/w7579.pdf
File-Format: application/pdf
Publication-Status: published as Timothy Besley & Stephen Coate, 2003. "Elected Versus Appointed Regulators: Theory and Evidence," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1176-1206, 09.
Abstract: This paper contrasts direct election with political appointment of regulators. When regulators are appointed, regulatory policy becomes bundled with other policy issues the appointing politicians are responsible for. Since regulatory issues are not salient for most voters, regulatory policy outcomes reflect the preferences of party elites and special interests. Direct election of regulators strengthens the power of voters by ensuring the salience of regulatory issues. Using panel data on regulatory outcomes from U.S. states, we find evidence in favor of the idea that elected states are more pro-consumer in their regulatory policies.
Handle: RePEc:nbr:nberwo:7579
Template-Type: ReDIF-Paper 1.0
Title: Economic Analysis of Social Interactions
Author-Name: Charles F. Manski
Author-Person: pma111
Note: LS
Number: 7580
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7580
File-URL: http://www.nber.org/papers/w7580.pdf
File-Format: application/pdf
Publication-Status: published as Manski, Charles F. "Economic Analysis Of Social Interactions," Journal of Economic Perspectives, 2000, v14(3,Summer), 115-136.
Abstract: Economists have long been ambivalent about whether the discipline should focus on the analysis of markets or should be concerned with social interactions more generally. Recently the discipline has sought to broaden its scope while maintaining the rigor of modern economic analysis. Major theoretical developments in game theory, the economics of the family, and endogenous growth theory have taken place. Economists have also performed new empirical research on social interactions, but the empirical literature does not show progress comparable to that achieved in economic theory. This paper examines why and discusses how economists might make sustained contributions to the empirical analysis of social interactions.
Handle: RePEc:nbr:nberwo:7580
Template-Type: ReDIF-Paper 1.0
Title: Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration
Classification-JEL: F32; F41
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: Eswar S. Prasad
Author-Person: ppr1
Note: IFM
Number: 7581
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7581
File-URL: http://www.nber.org/papers/w7581.pdf
File-Format: application/pdf
Publication-Status: published as Chinn, Menzie D. and Eswar S. Prasad. "Medium-term Determinants Of Current Accounts In Industrial And Developing Countries: An Empirical Exploration," Journal of International Economics, 2003, v59(1,Jan), 47-76.
Abstract: This paper provides an empirical investigation of the medium-term determinants of current accounts for a large sample of industrial and developing countries. The analysis is based on a structural approach that highlights the roles of the fundamental macroeconomic determinants of saving and investment. Cross-section and panel regression techniques are used to characterize the properties of current account variation across countries and over time. We find that current account balances are positively correlated with government budget balances and initial stocks of net foreign assets. Among developing countries, measures of financial deepening are positively associated with current account balances while indicators of openness to international trade are negatively correlated with current account balances.
Handle: RePEc:nbr:nberwo:7581
Template-Type: ReDIF-Paper 1.0
Title: Obstacles to Optimal Policy: The Interplay of Politics and Economics in Shaping Bank Supervision and Regulation Reforms
Classification-JEL: D72; D78
Author-Name: Randall S. Kroszner
Author-Name: Philip E. Strahan
Note: ME
Number: 7582
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7582
File-URL: http://www.nber.org/papers/w7582.pdf
File-Format: application/pdf
Publication-Status: published as Obstacles to Optimal Policy: The Interplay of Politics and Economics in Shaping Bank Supervision and Regulation Reforms, Randall S. Kroszner, Philip E. Strahan. in Prudential Supervision: What Works and What Doesn't, Mishkin. 2001
Abstract: This paper provides a positive political economy analysis of the most important revision of the U.S. supervision and regulation system during the last two decades, the 1991 Federal Deposit Insurance Corporation Improvement Act (FDICIA). We analyze the impact of private interest groups as well as political-institutional factors on the voting patterns on amendments related to FDICIA and its final passage to assess the empirical importance of different types of obstacles to welfare-enhancing reforms. Rivalry of interests within the industry (large versus small banks) and between industries (banks versus insurance) as well as measures of legislator ideology and partisanship play important roles and, hence, should be taken into account in order to implement successful change. A divide and conquer' strategy with respect to the private interests appears to be effective in bringing about legislative reform. The concluding section draws tentative lessons from the political economy approaches about how to increase the likelihood of welfare-enhancing regulatory change.
Handle: RePEc:nbr:nberwo:7582
Template-Type: ReDIF-Paper 1.0
Title: Child Care and the Welfare to Work Transition
Classification-JEL: H24; I38
Author-Name: Robert J. Lemke
Author-Name: Ann Dryden Witte
Author-Name: Magaly Queralt
Author-Name: Robert Witt
Author-Person: pwi138
Note: CH LS PE
Number: 7583
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7583
File-URL: http://www.nber.org/papers/w7583.pdf
File-Format: application/pdf
Abstract: We assess the role of child care in the welfare to work transition using an unusually large and comprehensive data base. Our data are for Massachusetts, a state that began welfare reform in 1995 under a federal waiver, for the period July 1996 through August 1997. We find that both the nature of the child care market and the availability of subsidized care and early education affect the probability that current and former welfare recipients will work. Regarding the child care market, we find that the cost, stability and quality of care matter. We also find that child care subsidies and some types of early education serve to increase employment. To be more specific, we find that increased funding for child care subsidies and the availability of full day kindergarten significantly increase the probability the current and former welfare recipients work.
Handle: RePEc:nbr:nberwo:7583
Template-Type: ReDIF-Paper 1.0
Title: A Dynamic Model of Differential Human Capital and Criminal Activity
Classification-JEL: C61; J24
Author-Name: H. Naci Mocan
Author-Person: pmo270
Author-Name: Stephen C. Billups
Author-Name: Jody Overland
Note: CH
Number: 7584
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7584
File-URL: http://www.nber.org/papers/w7584.pdf
File-Format: application/pdf
Publication-Status: published as Mocan, H. Naci, Stephen C. Billups and Jody Overland. "A Dynamic Model Of Differential Human Capital And Criminal Activity," Economica, 2005, v72(288,Nov), 655-681.
Abstract: This paper presents a new, dynamic economic model of criminal activity. Individuals are endowed with legal and criminal human capital. Potential incomes in legal and criminal sectors depend on the level of the relevant human capital, the rate of return, and random shocks. Both types of human capital can be enhanced by participating in the relevant sector. Legal human capital can also be enhanced through savings. Each type of human capital is subject to depreciation. Individuals maximize expected discounted lifetime utility, which depends on consumption. In this two-stage dynamic stochastic model, in each period the individual decides in which sector to participate (legal or illegal), and after the realization of income in that period, he decides on the optimal amount of consumption. A particular decision (e.g. participation in the criminal sector) has implications both for future decisions as well as the choices available to the individual in later periods. The model allows analyses of the effects of recessions, neighborhood effects, various imprisonment/rehabilitation scenarios, risk aversion, and time preferences on criminal behavior. It provides new insights, which are different from existing models, and it is able to explain the declining propensity of individuals to commit crimes over time.
Handle: RePEc:nbr:nberwo:7584
Template-Type: ReDIF-Paper 1.0
Title: Self-Confidence and Social Interactions
Classification-JEL: A12; C70
Author-Name: Roland Benabou
Author-Person: pbe27
Author-Name: Jean Tirole
Author-Person: pti33
Note: CH
Number: 7585
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7585
File-URL: http://www.nber.org/papers/w7585.pdf
File-Format: application/pdf
Abstract: This paper studies the interactions between an individual's self esteem and his social environment in the workplace, at school, and in personal relationships. Because a person generally has only imperfect knowledge of his own abilities, people who derive benefits from his performance (parent, spouse, friend, teacher, manager, etc.) have incentives to manipulate his self confidence. We first study situations where an informed principal chooses an incentive structure, such as offering payments or rewards, delegating a task, or giving encouragement. We show that extrinsic rewards may have hidden costs as stressed by psychologists in that they undermine intrinsic motivation. As a result, they may be only weak reinforcers in the short run, and become negative reinforcers once withdrawn. Similarly, empowerment is likely to increase motivation, while offers of help may create a dependance. More generally, we identify when the hidden costs of rewards are a myth or a reality. We next consider situations where people criticize or downplay the performance of their spouse, child, colleague, or subordinate. We formalize ego bashing as reflecting battles for dominance or authority within the relationship. Finally, we turn to the self presentation strategies of privately informed agents. We study in particular how depressed individuals may engage in self-deprecation as a way of seeking leniency (a lowering of expectancies) or a helping hand' on various obligations.
Handle: RePEc:nbr:nberwo:7585
Template-Type: ReDIF-Paper 1.0
Title: Germany's Economic Unification: An Assessment after Ten Years
Classification-JEL: H0; O52
Author-Name: Hans-Werner Sinn
Author-Person: psi146
Note: PE
Number: 7586
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7586
File-URL: http://www.nber.org/papers/w7586.pdf
File-Format: application/pdf
Publication-Status: published as Sinn, H. W. "Germany's Economic Unification: An Assessment After Ten Years," Review of International Economics, 2002, v10(1,Feb), 113-128.
Abstract: A political miracle occurred when Germany was reunited, and at first glance an economic miracle has followed. Real incomes in the east have now reached the western level, and investment per capita has been much higher than in the west. However, every third deutschmark spent in the east has been coming from the west, investment in equipment has fallen below the west German per capita level, and convergence seems to have come to a halt at an overall labor productivity of only 55% of west Germany. Excessively high wages coupled with investment incentives that made the cost of capital negative rank high among the possible explanations. This paper describes reforms of the labor market that could help to make convergence continue.
Handle: RePEc:nbr:nberwo:7586
Template-Type: ReDIF-Paper 1.0
Title: The Visible Hand, the Invisible Hand and Efficiency
Classification-JEL: D21; G30
Author-Name: Eitan Goldman
Author-Name: Gary Gorton
Author-Person: pgo458
Note: CF
Number: 7587
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7587
File-URL: http://www.nber.org/papers/w7587.pdf
File-Format: application/pdf
Abstract: When a firm forms a market closes. Resources that were previously allocated via the price system are allocated by managerial authority within the firm. We explore this choice of organizational form using a model of price formation in which agents negotiate prices on behalf of their principals when there is trade in a market. Principals motivate agents to make efforts and form prices by writing contracts contingent on the prices that the agents themselves negotiate. Admitting agency issues into price formation introduces a need for a principal to have the authority to coordinate economic activity. This can be achieved by closing a market and forming a firm, thereby contracting directly with both agents, and centrally directing trade. Closing a market, however, results in a loss of information from market prices, information that can be used to reduce the cost of contracting. This information cannot be replicated by internally generated transfer prices.' Hence, when the market is internalized within the firm, information from market prices is lost. Choice of organizational form, a market or a firm, is then determined by the relative value of central authority over agents (the visible' hand) versus information from market prices (the invisible' hand).
Handle: RePEc:nbr:nberwo:7587
Template-Type: ReDIF-Paper 1.0
Title: Retirement Outcomes in the Health and Retirement Study
Classification-JEL: H55; J14
Author-Name: Alan L. Gustman
Author-Person: pgu327
Author-Name: Thomas L. Steinmeier
Note: AG LS
Number: 7588
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7588
File-URL: http://www.nber.org/papers/w7588.pdf
File-Format: application/pdf
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 as "Retirement Measures in the Health and Retirement Study", Journal of Human Resources, Vol. 30 (1995, Supp): 57-83.
Abstract: This study examines retirement outcomes in the first four waves of the Health and Retirement Study. Measured retirement is seen to differ, sometimes substantially, with the definition of retirement used and among various groups analyzed. Moreover, these differences vary with the wave of the survey as respondents age. Retirement is comprised of a complex set of flows among states representing full time work, partial retirement and complete retirement. Seventy seven percent of transitions continue in the same or equivalent states between adjoining waves of the HRS; 17 percent involve a move from greater to lesser labor force participation, and 6 percent involve a move from states of lesser to greater labor force participation. Twenty two percent of the sample report they were partially retired at some time in the first four waves, and by age 65, over a fifth of the population is partially retired. Altogether, 14 percent of the sample experienced a reversal in the course of the survey, moving from a state of less work to a state of more work. Comparing retirement flows for men between the HRS and the 1969-1979 Retirement History Study, the large spike in the population leaving full time work at age 65 observed in the RHS is reduced to half its original size in the HRS, while the share leaving full time work at age 62 has almost doubled over time. The results presented here should help researchers to improve their understanding of the structure of the dependent variable in retirement studies.
Handle: RePEc:nbr:nberwo:7588
Template-Type: ReDIF-Paper 1.0
Title: Asset Pricing at the Millennium
Classification-JEL: G12
Author-Name: John Y. Campbell
Author-Person: pca54
Note: AP CF EFG ME
Number: 7589
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7589
File-URL: http://www.nber.org/papers/w7589.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, John Y. "Asset Pricing At The Millennium," Journal of Finance, 2000, v55(4,Aug), 1515-1567.
Abstract: This paper surveys the field of asset pricing. The emphasis is on the interplay between theory and empirical work, and on the tradeoff between risk and return. Modern research seeks to understand the behavior of the stochastic discount factor (SDF) that prices all assets in the economy. The behavior of the term structure of real interest rates restricts the conditional mean of the SDF, while patterns of risk premia restrict its conditional volatility and factor structure. Stylized facts about interest rates, aggregate stock prices, and cross-sectional patterns in stock returns have stimulated new research on optimal portfolio choice, intertemporal equilibrium models, and behavioral finance.
Handle: RePEc:nbr:nberwo:7589
Template-Type: ReDIF-Paper 1.0
Title: Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk
Classification-JEL: E32; G10
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Martin Lettau
Author-Person: ple572
Author-Name: Burton G. Malkiel
Author-Name: Yexiao Xu
Note: AP EFG
Number: 7590
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7590
File-URL: http://www.nber.org/papers/w7590.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, John Y., Martin Lettau, Burton G. Malkiel and Yexiao Xu. "Have Individual Stocks Become More Volatile? An Empirical Exploration Of Idiosyncratic Risk," Journal of Finance, 2001, v56(1,Feb), 1-43.
Abstract: This paper uses a disaggregated approach to study the volatility of common stocks at the market, industry, and firm levels. Over the period 1962-97 there has been a noticeable increase in firm-level volatility relative to market volatility. Accordingly correlations among individual stocks and the explanatory power of the market model for a typical stock have declined, while the number of stocks needed to achieve a given level of diversification has increased. All the volatility measures move together countercyclically and help to predict GDP growth. Market volatility tends to lead the other volatility series. Factors that may be responsible for these findings are suggested.
Handle: RePEc:nbr:nberwo:7590
Template-Type: ReDIF-Paper 1.0
Title: Education for Growth: Why and For Whom?
Classification-JEL: J24; E20
Author-Name: Alan B. Krueger
Author-Person: pkr63
Author-Name: Mikael Lindahl
Author-Person: pli213
Note: EFG
Number: 7591
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7591
File-URL: http://www.nber.org/papers/w7591.pdf
File-Format: application/pdf
Publication-Status: published as Alan B. Krueger & Mikael Lindahl, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
Abstract: This paper tries to reconcile evidence from the microeconometric and empirical macro growth literatures on the effect of schooling on income and GDP growth. Much microeconometric evidence suggest that education is an important causal determinant of income for individuals within countries. At a national level, however, recent studies have found that increases in educational attainment are unrelated to economic growth. This finding appears 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. Another finding of the macro growth literature - that economic growth depends positively on the initial stock of human capital - is shown to result from imposing linearity and constant-coefficient assumptions on the estimates. These restrictions are often rejected by the data, and once either assumption is relaxed the initial level of education has little effect on economic growth for the average country.
Handle: RePEc:nbr:nberwo:7591
Template-Type: ReDIF-Paper 1.0
Title: Why a Funded Pension System is Useful and Why It is Not Useful
Classification-JEL: H5
Author-Name: Hans-Werner Sinn
Author-Person: psi146
Note: AG PE
Number: 7592
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7592
File-URL: http://www.nber.org/papers/w7592.pdf
File-Format: application/pdf
Publication-Status: published as Sinn, Hans-Werner. "Why A Funded Pension System Is Needed And Why It Is Not Needed," International Tax and Public Finance, 2000, v7(4/5,Aug), 389-410.
Abstract: Based on explicit present value calculations, the paper criticizes the view that the PAYGO system wastes economic resources. In present value terms, there is nothing to be gained from a transition to funded system even though the latter offers a permanently higher rate of return. The sum of the implicit and explicit tax burdens that result from the need to respect the existing pension claims is the same under all systems and transition strategies. Nevertheless a partial transition to a funded system may be a way to overcome the current demographic crisis because it replaces missing human capital with real capital and helps smooth tax and child reading costs across the generations.
Handle: RePEc:nbr:nberwo:7592
Template-Type: ReDIF-Paper 1.0
Title: Testing Parental Altruism: Implications of a Dynamic Model
Author-Name: Kathleen McGarry
Author-Person: pmc264
Note: AG
Number: 7593
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7593
File-URL: http://www.nber.org/papers/w7593.pdf
File-Format: application/pdf
Abstract: Each year parents transfer a great deal of money to their adult children. While intuition might suggest that these transfers are altruistic and made out of concern for the well-being of the children, the fundamental prediction of the altruistic model has been decisively rejected in empirical tests. Specifically, the required derivative restriction-that an increase of one dollar in the income of the recipient, accompanied by a decrease of one dollar in the income of the donor, leads to a one dollar reduction in transfers-fails to hold. I show in this paper that in fact, this prediction will not hold if parents use observations on the current incomes of children to update their expectations about future incomes. This result implies that many past studies have relied on too restrictive a test, and furthermore, that our ability to distinguish empirically between altruistic and exchange behavior is severely limited. The paper also analyzes the variation in transfer behavior over time and finds substantial change across periods in recipiency status as well as strong correlation between inter vivos transfers and the transitory income of the recipient. This evidence suggest that dynamic models can provide insights into transfer behavior that are impossible to obtain in a static context.
Handle: RePEc:nbr:nberwo:7593
Template-Type: ReDIF-Paper 1.0
Title: Public Policy and Extended Families: Evidence from South Africa
Classification-JEL: D1; E2
Author-Name: Marianne Bertrand
Author-Person: pbe697
Author-Name: Douglas Miller
Author-Person: pmi179
Author-Name: Sendhil Mullainathan
Author-Person: pmu103
Note: AG LS
Number: 7594
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7594
File-URL: http://www.nber.org/papers/w7594.pdf
File-Format: application/pdf
Publication-Status: published as Marianne Bertrand & Sendhil Mullainathan & Douglas Miller, 2003. "Public Policy and Extended Families: Evidence from Pensions in South Africa," World Bank Economic Review, Oxford University Press, vol. 17(1), pages 27-50, June.
Abstract: Tightly knit extended families, in which people often give money to and get money from relatives, characterize many developing countries. These intra-family flows mean that public policies may affect a very different group of people than the one they target. To assess the empirical importance of these effects, we study a cash pension program in South Africa that targets the elderly. Focusing on three-generation households , we use the variation in pension receipt that comes from differences in the age of the elder(s) in the households. We find a sharp drop in the labor force participation of prime-age men in these households when elder women reach 60 years old or elder mean reach 65, the respective ages for pension eligibility. We also find that the drop in labor supply diminishes with family size, as the pension money is split over more people, and with educational attainment, as the pension money becomes less significant relative to outside earnings. Other findings suggest that power within the family might play an important role: (1) labor supply drops less when the pension is received by a man rather than by a woman; (2) middle aged men (those more likely to have control in the family) reduce labor supply more than younger men; and (3) female labor supply is unaffected. These last two findings also respectively suggest that the results are unlikely to be driven by increased human capital investment or by a need to stay home to care for the elderly. As a whole, this public policy seems to have had large effects on a group-prime age men living with the old-quite different from the one it originally targeted-elderly men and women.
Handle: RePEc:nbr:nberwo:7594
Template-Type: ReDIF-Paper 1.0
Title: Do After-Tax Returns Affect Mutual Fund Inflows?
Classification-JEL: G11; H24
Author-Name: Daniel Bergstresser
Author-Person: pbe639
Author-Name: James Poterba
Author-Person: ppo19
Note: AP PE
Number: 7595
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7595
File-URL: http://www.nber.org/papers/w7595.pdf
File-Format: application/pdf
Publication-Status: published as Bergstresser, Daniel and James Poterba. "Do After-Tax Returns Affect Mutual Fund Inflows?," Journal of Financial Economics, 2002, v63(3,Mar), 381-414.
Abstract: This paper explores the relationship between the after-tax returns that taxable investors earn on equity mutual funds and the subsequent cash inflows to these funds. Previous studies have documented that funds with high pretax returns attract greater inflows. This paper investigates the relative predictive power of pre-tax and after-tax returns for explaining annual fund inflows. The empirical results, based on a large sample of equity mutual funds over the period 1993-1998, suggest that after-tax returns have more explanatory power than pretax returns in explaining inflows. In addition, funds with large overhangs' of unrealized capital gains experience smaller inflows, all else equal, than funds without such unrealized gains. By disaggregating net fund inflows into gross inflows and gross redemptions, the paper also provides some insight on how after-tax returns and prospective capital gain realizations affect investor behavior.
Handle: RePEc:nbr:nberwo:7595
Template-Type: ReDIF-Paper 1.0
Title: The Taxation of Executive Compensation
Classification-JEL: G34; H2
Author-Name: Brian J. Hall
Author-Name: Jeffrey B. Liebman
Author-Person: pli184
Note: CF LS PE
Number: 7596
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7596
File-URL: http://www.nber.org/papers/w7596.pdf
File-Format: application/pdf
Publication-Status: published as Tax Policy and the Economy, Vol. 14, Cambridge: MIT Press, 2000,forthcoming.
Publication-Status: published as The Taxation of Executive Compensation, Brian J. Hall, Jeffrey B. Liebman. in Tax Policy and the Economy, Volume 14, Poterba. 2000
Abstract: Over the past 20 years, there has been a dramatic increase in the share of executive compensation paid through stock options. In this paper, we examine the extent to which tax policy has influenced the composition of executive compensation, and discuss the implications of rising stock-based pay for tax policy. We begin by describing the tax rules for executive pay in detail and analyzing how changes in various tax rates affect the tax advantages of stock options relative to salary and bonus. Our empirical analysis leads to three conclusions. First, there is little evidence that tax changes have played a major role int the dramatic explosion in executive stock option pay since 1980. Although the tax advantage of options has approximately dounbled since the early advantage of options has approximately doubled since the early 1980s options currently have only a slight tax advantage relative to cash - approximately $4 per $100 of pre-tax compensation to the executive. A more convincing story for the dramatic explosion in stock options involves changes in corporate governance and the market for corporate control. For example, there is a strong correlation between the fraction of shares held by large institutional investors and the fraction of ececutive pay in the form of stock options, a result that holds both longitudinally and cross-sectionally. Second, we find evidence that the million dollar rule (which limited the corporate deductibility of non-performance-related executive compensateion to $1 million) led firms to adjust the composition of their pay away from salary and toward "performance related pay," although our estimates suggest that substitution was minor. We find no evience that the regulation decreased the level of total compensation. Third, we examine whether there is evidence for significant shifting of the timing of option exercieses in response to changes in tax rates. After replicating the Goolsbee (1999) result regardin tax-shifting with our data for the 1993 tax reform, we show that no such shifting occurred in either of the two tax reforms of the 1980s. Moreover, we find evidence that much of the unusually large level of option exercises in 1992 was the result of the rising stock market rather than the change in marginal tax rates.
Handle: RePEc:nbr:nberwo:7596
Template-Type: ReDIF-Paper 1.0
Title: How Effective is Redistribution Under the Social Security Benefit Formula?
Classification-JEL: H55; J14
Author-Name: Alan L. Gustman
Author-Person: pgu327
Author-Name: Thomas L. Steinmeier
Note: AG LS PE
Number: 7597
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7597
File-URL: http://www.nber.org/papers/w7597.pdf
File-Format: application/pdf
Publication-Status: published as Gustman, Alan L. and Thomas L. Steinmeier. "How Effective Is Redistribution Under The Social Security Benefit Formula?," Journal of Public Economics, 2001, v82(1,Oct), 1-28.
Abstract: This paper uses earnings histories obtained from the Social Security Administration and linked to the survey responses for participants in the Health and Retirement Study to investigate redistribution under the current social security benefit formula. We find that as advertised, at the level of the individual respondent, the benefit formula is progressive. When individuals are arrayed by indexed lifetime earnings, own benefits are significantly redistributed from those with high lifetime earnings to those with low lifetime earnings. However, much of this apparent redistribution is from men to women, and when examined at the level of the family, from primary to secondary earners. When families are arrayed according the total lifetime earnings, and spouse and survivor benefits are taken into account, the extent of redistribution from families with high lifetime earnings to families with low lifetime earnings is roughly halved. Much of the remaining redistribution is from families where both spouses spend much of their potential work lives in the labor market, to families where a spouse, often with high earnings potential, chooses to spend a significant number of years outside of the labor force. When families are arrayed by their earnings potential, that is earnings during years when both spouses are engaged in substantial work, there is very little redistribution from families with high to low earnings capacity. Accordingly, at least for families on the verge of retirement today, introducing a simple system of privatized or other individual accounts, i.e., a system that ignored issues of redistribution, would have no major effect on the distribution of social security benefits net of taxes among families with different earnings capacities. Moreover, although privatized or other individual accounts would reduce redistribution from two earner to one earner families, the extent of that redistribution is greatly exaggerated when one compares benefits among individuals arrayed according to lifetime earnings.
Handle: RePEc:nbr:nberwo:7597
Template-Type: ReDIF-Paper 1.0
Title: The First Year of the Eurosystem: Inflation Targeting or Not?
Classification-JEL: E42; E52
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: IFM ME
Number: 7598
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7598
File-URL: http://www.nber.org/papers/w7598.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review: Papers and Proceedings, Vol. 90, No. 2, (May, 2000).
Abstract: This paper is a brief evaluation of the Eurosystem's monetary-policy regime after its first year, in particular of the extent to which it is similar to inflation targeting as practiced by an increasing number of central banks. I examine the Eurosystem's goals, framework for monetary-policy decisions and communication with outsiders. Criteria for evaluation are whether the goals are unambiguous and appropriate; whether the decision framework is efficient in collecting and processing information and reaching decisions that are appropriate relative to the goals; and whether the communication is effective in motivating decisions, simplifying external evaluation and thereby improving transparency and accountability. I also consider whether the actual instrument setting has been appropriate, given the information available at the times of decision.
Handle: RePEc:nbr:nberwo:7598
Template-Type: ReDIF-Paper 1.0
Title: Using the EITC to Help Poor Families: New Evidence and a Comparision with the Minimum Wage
Classification-JEL: J39; I32
Author-Name: David Neumark
Author-Person: pne16
Author-Name: William Wascher
Note: LS PE
Number: 7599
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7599
File-URL: http://www.nber.org/papers/w7599.pdf
File-Format: application/pdf
Publication-Status: published as Neumark, David and William Wascher. "State-Level Estimates Of Minimum Wage Effects: New Evidence And Interpretations From Disequilibrium Methods," Journal of Human Resources, 2002, v37(1,Winter), 35-62.
Publication-Status: published as Neumark, David & Wascher, William, 2001. "Using The EITC to Help Poor Families: New Evidence and a Comparison with the Minimum Wage," National Tax Journal, National Tax Association, vol. 54(n. 2), pages 281-318, June Cita.
Abstract: This paper evaluates the effects of the earned income tax credit (EITC) on poor families. Exploiting state-level variation in EITCs, we find that the EITC helps families rise above poverty-level earnings. This occurs by inducing labor market entry in families that initially do not have an adult in the workforce. Evidence based on the federal EITC is less supportive of a positive impact of the EITC on poor families. Finally, our results suggest that for the range of policy changes typical of recent history in the U.S., the EITC is more beneficial for poor families than is the minimum wage.
Handle: RePEc:nbr:nberwo:7599
Template-Type: ReDIF-Paper 1.0
Title: The Simple Economics of Open Source
Classification-JEL: L22; L31
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: Jean Triole
Note: PR
Number: 7600
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7600
File-URL: http://www.nber.org/papers/w7600.pdf
File-Format: application/pdf
Publication-Status: published as "Some Simple Economics of Open Source," Journal of Industrial Economics, 52 (June 2002) 197-234.
Abstract: There has been a recent surge of interest in open source software development, which involves developers at many different locations and organizations sharing code to develop and refine programs. To an economist, the behavior of individual programmers and commercial companies engaged in open source projects is initially startling. This paper makes a preliminary exploration of the economics of open source software. We highlight the extent to which labor economics, especially the literature on career concerns,' can explain many of these projects' features. Aspects of the future of open source development process, however, remain somewhat difficult to predict with off-the-shelf' economic models.
Handle: RePEc:nbr:nberwo:7600
Template-Type: ReDIF-Paper 1.0
Title: The Sexual Activity and Birth Control Use of American Teenagers
Classification-JEL: J1
Author-Name: Phillip B. Levine
Author-Person: ple553
Note: CH
Number: 7601
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7601
File-URL: http://www.nber.org/papers/w7601.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan (ed.) An Economic Analysis of Risky Behavior among Youths. Chicago: University of Chicago Press, 2001.
Publication-Status: published as The Sexual Activity and Birth-Control Use of American Teenagers, Phillip B. Levine. in Risky Behavior among Youths: An Economic Analysis, Gruber. 2001
Abstract: This paper evaluates the evidence regarding teens' sexual activity and birth control use with an emphasis on the contribution of economic analysis. For non-economists, teen sexual activity is often considered spontaneous and irrational, and pregnancies are viewed as mistakes.' Alternatively an economic framework, which focuses on the costs and benefits of alternative actions and utilizes more sophisticated statistical methods, can be applied to these decisions' as well. After documenting recent trends, I review prior economic and non-economic research regarding the determinants of these activities. Economic models differ in that they predict unprotected sexual activity will decline if its costs, broadly-defined, increase. After presenting evidence documenting who engages in sexual activity and uses birth control, I report an analysis of state-level data over time that examines whether changes in costs are related to changes in these behaviors. The results support the notion that costs matter. The final section reviews the evidence regarding the impact of teen child-bearing on women's subsequent well-being to examine the magnitude of its cost.
Handle: RePEc:nbr:nberwo:7601
Template-Type: ReDIF-Paper 1.0
Title: Cornucopia: The Pace of Economic Growth in the Twentieth Century
Author-Name: J. Bradford DeLong
Note: DAE ME
Number: 7602
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7602
File-URL: http://www.nber.org/papers/w7602.pdf
File-Format: application/pdf
Abstract: There is one central fact about the economic history of the twentieth century: above all, the century just past has been the century of increasing material wealth and economic productivity. No previous era and no previous economy has seen material wealth and productive potential grow at such a pace. The bulk of America's population today achieves standards of material comfort and capabilities that were beyond the reach of even the richest of previous centuries. Even lower middle-class households in relatively poor countries have today material standards of living that would make them, in many respects, the envy of the powerful and lordly of past centuries.
Handle: RePEc:nbr:nberwo:7602
Template-Type: ReDIF-Paper 1.0
Title: Local Revenue Hills: A General Equilibrium Specification with Evidence from Four U.S. Cities
Classification-JEL: H2; H71
Author-Name: Andrew Haughwout
Author-Person: pha405
Author-Name: Robert Inman
Author-Name: Steven Craig
Author-Person: pcr122
Author-Name: Thomas Luce
Note: PE
Number: 7603
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7603
File-URL: http://www.nber.org/papers/w7603.pdf
File-Format: application/pdf
Publication-Status: published as Andrew Haughwout & Robert Inman & Steven Craig & Thomas Luce, 2004. "Local Revenue Hills: Evidence from Four U.S. Cities," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 570-585, 06.
Abstract: We provide estimates of the impact and long-run elasticities of tax base with respect to tax rates for four large U.S. cities: Houston (property taxation), Minneapolis (property taxation), New York City (property, general sales, and income taxation), and Philadelphia (property, gross receipts, and wage taxation). Results suggest that all four of our cities are near the peaks of their longer-run revenue hills. Equilibrium effects are observed within three to four fiscal years after the initial increase in local tax rates. A significant negative impact (current period) effect of a balanced budget increase in city property tax rates on city property base is interpreted as a capitalization effect and suggests that marginal increases in city spending do not provide positive net benefits to property owners. Estimates of the effects of taxes on city employment levels for New York City and Philadelphia the two cities for which employment series are available show the local income and wage tax rates have significant negative effects on city employment levels.
Handle: RePEc:nbr:nberwo:7603
Template-Type: ReDIF-Paper 1.0
Title: Do CEOs Set Their Own Pay? The Ones Without Principals Do
Classification-JEL: G3; J3
Author-Name: Marianne Bertrand
Author-Person: pbe697
Author-Name: Sendhil Mullainathan
Author-Person: pmu103
Note: CF LS
Number: 7604
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7604
File-URL: http://www.nber.org/papers/w7604.pdf
File-Format: application/pdf
Publication-Status: published as Bertrand, Marianne and Sendhil Mullainathan. "Are CEOs Rewarded For Luck? The Ones Without Principles Are," Quarterly Journal of Economics, 2001, v116(3,Aug), 901-932.
Abstract: We empirically examine two competing views of CEO pay. In the contracting view, pay is used to solve an agency problem: the compensation committee optimally chooses pay contracts which give the CEO incentives to maximize shareholder wealth. In the skimming view, pay is the result of an agency problem: CEOs have managed to capture the pay process so that they set their own pay, constrained somewhat by the availability of cash or by a fear of drawing shareholders' attention. To distinguish these views, we first examine how CEO pay responds to luck, observable shocks to performance beyond the CEO's control. Using several measures of luck, such as changes in oil price for the oil industry, we find substantial pay for luck. Pay responds about as much to a lucky' dollar as to a general dollar. Most importantly, we find that better governed firms pay their CEOs less for luck. Our second test examines how much CEOs are charged for the options they are granted. Since options never appear on balance sheets, they might offer an appealing way to skim. Here again we find a crucial role for governance: CEOs in better governed firms are charged more for the options they are given. These results suggest that both views of CEO pay matter. In poorly governed firms, the skimming view fits better (pay for luck and little charge for options) while in well governed firms, the contracting view fits better (filtering out of luck and charging for options).
Handle: RePEc:nbr:nberwo:7604
Template-Type: ReDIF-Paper 1.0
Title: Long-Term Declines in Disability Among Older Men: Medical Care, Public Health, and Occupational Change
Classification-JEL: I12; N31
Author-Name: Dora L. Costa
Author-Person: pco358
Note: AG DAE EH
Number: 7605
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7605
File-URL: http://www.nber.org/papers/w7605.pdf
File-Format: application/pdf
Abstract: Functional disability (difficulty in walking , difficulty in bending, paralysis, blindness in at least one eye, and deafness in at least one ear) in the United States has fallen at an average annual rate of 0.6 percent among men age 50 to 74 from the early twentieth century to the early 1990s. Twenty-four to 41 percent of this decline is attributable to innovations in medical care, 37 percent to reduced chronic disease rates, and the remainder is unexplained. The portion due to reduced chronic disease rates can be subdivided into the 9 percent accounted for by reduced infectious disease rates (particularly rheumatic fever, malaria, typhoid, and acute respiratory infections), the 7 percent accounted for by occupational shifts away from manual labor and to white collar jobs, and the 21 percent that is unexplained.
Handle: RePEc:nbr:nberwo:7605
Template-Type: ReDIF-Paper 1.0
Title: Do Living Wage Ordinances Reduce Urban Poverty?
Classification-JEL: J23; R00
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Scott Adams
Author-Person: pad22
Note: LS
Number: 7606
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7606
File-URL: http://www.nber.org/papers/w7606.pdf
File-Format: application/pdf
Publication-Status: published as Neumark, David and Scott Adams. "Do Living Wage Ordinances Reduce Urban Poverty?," Journal of Human Resources, 2003, v38(3,Summer), 490-521.
Abstract: Many cities in the United States have recently passed living wage ordinances. These ordinances typically mandate that businesses under contract with the city or, in some cases, receiving assistance from the city, must pay their workers a wage sufficient to support a family financially. To date, there has been no empirical analysis of the actual effects of living wages on the expected beneficiaries low-wage workers and their families. In this paper, we estimate the effects of city living wage ordinances on the wages and hours of workers in cities that have adopted such legislation. We also look at the effects of the ordinances on employment and poverty rates in these cities. Our findings indicate that living wage ordinances boost wages of low-wage workers. The estimated elasticities are small, however, which seems consistent with the fact that living wages have limited coverage, and may also have limited compliance and enforcement. In addition to the wage effects, we find weak negative hours effects of living wage ordinances on low-wage workers, and strong negative employment effects. Finally, our estimates of the effects of living wages on poverty rates indicate that living wage ordinances may help to achieve modest reductions in urban poverty.
Handle: RePEc:nbr:nberwo:7606
Template-Type: ReDIF-Paper 1.0
Title: Designing Stabilization Policy in a Monetary Union
Classification-JEL: E50; F33
Author-Name: Russell W. Cooper
Author-Name: Hubert Kempf
Author-Person: pke25
Note: EFG IFM ME
Number: 7607
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7607
File-URL: http://www.nber.org/papers/w7607.pdf
File-Format: application/pdf
Abstract: While the European Monetary Union (EMU) is now a reality, debate among economists nonetheless continues about the design and desirability of monetary unions. Since an essential element of a monetary union is the delegation of monetary power to a single centralized entity, one of the key issues in this debate is whether a monetary union will limit the effectiveness of stabilization policy. If so, monetary union will not necessarily be welfare improving. In this paper, we study a two-country world economy and consider various designs of monetary union. We argue that the success of monetary union depends on : (i) the commitment ability of the single central bank, (ii) the policy flexibility of the national fiscal authorities and the central monetary authority and (iii) the cross country correlation of shocks. If, for example, the central bank moves before the fiscal authorities, then a monetary union will increase welfare as long as fiscal policy is sufficiently responsive to shocks. However, if the fiscal authorities have a restricted set of tools and/or the monetary authority lacks the ability to commit to its policy, then monetary union may not be desirable.
Handle: RePEc:nbr:nberwo:7607
Template-Type: ReDIF-Paper 1.0
Title: From Mill Town to Board Room: The Rise of Women's Paid Labor
Classification-JEL: J16; J22
Author-Name: Dora L. Costa
Author-Person: pco358
Note: DAE LS
Number: 7608
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7608
File-URL: http://www.nber.org/papers/w7608.pdf
File-Format: application/pdf
Publication-Status: published as Costa, Dora L. "From Mill Town To Board Room: The Rise Of Women's Paid Labor," Journal of Economic Perspectives, 2000, v14(4,Fall), 101-122.
Abstract: In the twenty-first century many of the professional and high ranking managerial workers in the United States and in other OECD countries will be women. This change in women's social and economic status represents a dramatic break with the past, but one that can only be understood by looking to the past. The rise of the career woman would not have been possible without the entry of previous generations of women into the labor market. This entry was determined both by contemporaneous demand factors and by the characteristics, expectations, and social norms regarding work and family of different cohorts of women. History suggests that change in women's labor force experiences may be slow because it must await the entry of new cohorts of women (and also of men)into the labor market.
Handle: RePEc:nbr:nberwo:7608
Template-Type: ReDIF-Paper 1.0
Title: Expectations Hypotheses Tests
Classification-JEL: E4; F3
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Robert J. Hodrick
Author-Person: pho115
Note: AP
Number: 7609
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7609
File-URL: http://www.nber.org/papers/w7609.pdf
File-Format: application/pdf
Publication-Status: published as Bekaert, Geert and Robert J. Hodrick. "Expectations Hypotheses Tests," Journal of Finance, 2001, v56(4,Aug), 1357-1394.
Abstract: We investigate the Expectations Hypotheses of the term structure of interest rates and of the foreign exchange market using vector autoregressive methods for the U.S. dollar, Deutsche mark, and British pound interest rates and exchange rates. In addition to standard Wald tests, we formulate Lagrange Multiplier and Distance Metric tests which require estimation under the non-linear constraints of the null hypotheses. Estimation under the null is achieved by iterating on approximate solutions that require only matrix inversions. We use a bias-corrected, constrained vector autoregression as a data generating process and construct extensive Monte Carlo simulations of the various test statistics under the null hypotheses. Wald tests suffer from severe size distortions and use of the asymptotic critical values results in gross over-rejection of the null. The Lagrange Multiplier tests slightly under-reject the null, and the Distance Metric tests over-reject. Use of the small sample distributions of the different tests leads to a common interpretation of the validity of the Expectations Hypotheses. The evidence against the Expectations Hypotheses for these interest rates and exchange rates is much less strong than under asymptotic inference.
Handle: RePEc:nbr:nberwo:7609
Template-Type: ReDIF-Paper 1.0
Title: Skill Compression, Wage Differentials and Employment: Germany vs. the US
Author-Name: Richard B. Freeman
Author-Person: pfr23
Author-Name: Ronald Schettkat
Note: LS
Number: 7610
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7610
File-URL: http://www.nber.org/papers/w7610.pdf
File-Format: application/pdf
Publication-Status: published as Oxford Economic Papers, Vol. 53, no. 3 (July 2001): 582-603
Abstract: Germany's more compressed wage structure is taken by many analysts as the main cause of the German-US difference in job creation. We find that the US has a more dispersed level of skills than Germany but even adjusted for skills, Germany has a more compressed wage distribution than the US. The fact that jobless Germans have nearly the same skills as employed Germans and look more like average Americans than like low skilled Americans runs counter to the wage compression hypothesis. It suggests that the pay and employment experience of low skilled Americans is a poor counterfactual for assessing how reductions in pay might affect jobless Germans.
Handle: RePEc:nbr:nberwo:7610
Template-Type: ReDIF-Paper 1.0
Title: Low Wage Services: Interpreting the US - German Difference
Author-Name: Richard B. Freeman
Author-Person: pfr23
Author-Name: Ronald Schettkat
Note: LS
Number: 7611
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7611
File-URL: http://www.nber.org/papers/w7611.pdf
File-Format: application/pdf
Publication-Status: published as M. Gregory, S. Bazen and W. Salverda (eds.) Labour Market Inequalities: Problems and Policies of Low-Wage Employment in International Perspective. Oxford University Press, 2000.
Abstract: Is the expansion of jobs in low-wage services in Europe restricted by high wages? With services now the main sector source of employment growth this question becomes crucial and we examine it through a detailed comparison of the role of low-wage services in the US and Germany. We find a clear low-wage service jobs deficit' in Germany but this is not due to excessively high German wages. Relative wages in low-wage sectors are extremely similar in the two countries. This is a striking finding given the much wider wage distribution in the US. The explanation for this phenomenon is the much greater intra-industry wage dispersion in the US producing similar industry mean wages as the much narrower German distribution.
Handle: RePEc:nbr:nberwo:7611
Template-Type: ReDIF-Paper 1.0
Title: The Influence of Federal Laboratory R&D on Industrial Research
Classification-JEL: O31; O33
Author-Name: James D. Adams
Author-Person: pad11
Author-Name: Eric P. Chiang
Author-Person: pch469
Author-Name: Jeffrey L. Jensen
Note: PR
Number: 7612
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7612
File-URL: http://www.nber.org/papers/w7612.pdf
File-Format: application/pdf
Publication-Status: published as Adams, James D., Eric P. Chiang and Jeffrey L. Jensen. "The Influence Of Federal Laboratory R&D On Industrial Research," Review of Economics and Statistics, 2003, v85(4,Nov), 1003-1020.
Abstract: Over the past 60 years the United States has created the world's largest system of government laboratories. The impact of the laboratories on the private economy has been little studied though their research accounts for 14% of total U.S. R&D, more than the R&D of all colleges and universities combined. In this paper we study the influence of federal laboratory R&D on industrial research using a sample of industrial laboratories. In head-to-head comparisons with alternative measures, we find that Cooperative Research and Development Agreements or CRADAs, are the primary channel by which federal laboratories increase the patenting and R&D of industrial laboratories. With a CRADA industrial laboratories patent more, spend more on company-financed R&D and spend more of their own money on federal laboratories. Without a CRADA patenting stays about the same and only federally funded R&D increases, mostly because of direct subsidies by government. These results are consistent with the literature on endogenous R&D spillovers, which emphasizes that knowledge spills over when recipients work at making it spill over. CRADAs are legal agreements between federal laboratories and firms to work together on joint research. They are backed by real budgets and accompanied by cost sharing that could bind the parties together in joint research. Moreover, the CRADA instrument is the main form of such agreements. Thus, both in theory and in fact CRADAs may be more beneficial to firms than other public- private interactions, precisely because of the mutual effort that they require of firms and government laboratories.
Handle: RePEc:nbr:nberwo:7612
Template-Type: ReDIF-Paper 1.0
Title: Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation
Author-Name: Andrew W. Lo
Author-Person: plo171
Author-Name: Harry Mamaysky
Author-Name: Jiang Wang
Note: AP
Number: 7613
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7613
File-URL: http://www.nber.org/papers/w7613.pdf
File-Format: application/pdf
Publication-Status: published as Lo, Andrew W., Harry Mamaysky and Jiang Wang. "Foundations Of Technical Analysis: Computational Algorithms, Statistical Inference, And Empirical Implementation," Journal of Finance, 2000, v55(4,Aug), 1705-1765.
Abstract: Technical analysis, also known as charting,' has been part of financial practice for many decades, but this discipline has not received the same level of academic scrutiny and acceptance as more traditional approaches such as fundamental analysis. One of the main obstacles is the highly subjective nature of technical analysis the presence of geometric shapes in historical price charts is often in the eyes of the beholder. In this paper, we propose a systematic and automatic approach to technical pattern recognition using nonparametric kernel regression, and apply this method to a large number of U.S. stocks from 1962 to 1996 to evaluate the effectiveness to technical analysis. By comparing the unconditional empirical distribution of daily stock returns to the conditional distribution conditioned on specific technical indicators such as head-and-shoulders or double-bottoms we find that over the 31-year sample period, several technical indicators do provide incremental information and may have some practical value.
Handle: RePEc:nbr:nberwo:7613
Template-Type: ReDIF-Paper 1.0
Title: Using Options to Divide Value in Corporate Bankruptcy
Classification-JEL: G3; G33
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Note: LE
Number: 7614
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7614
File-URL: http://www.nber.org/papers/w7614.pdf
File-Format: application/pdf
Publication-Status: published as "Using Options to Divide Value in Corporate Bankruptcy" European Economic Review, Vol. 44, pp. 829-843 (2000).
Abstract: This paper revisits the proposal to use options in corporate bankruptcy that was put forward in Bebchuk (1988). According to the proposed procedure, corporate bankruptcy should be implemented through the distribution to participants of appropriately designed options. The paper starts by discussing the goals that should guide the design of bankruptcy procedures. The paper then explains how the options procedure can improve both ex post efficiency and ex ante efficiency. The paper offers a refined version of the procedure, and it also responds to questions that have been raised regarding the execution and desirability of the procedure. The paper concludes by explaining the relationship between the options approach to corporate bankruptcy and the Black-Scholes characterization of all corporate securities as options.
Handle: RePEc:nbr:nberwo:7614
Template-Type: ReDIF-Paper 1.0
Title: Covariance Risk, Mispricing, and the Cross Section of Security Returns
Classification-JEL: G1
Author-Name: Kent D. Daniel
Author-Name: David Hirshleifer
Author-Person: phi20
Author-Name: Avanidhar Subrahmanyam
Author-Person: psu270
Note: AP
Number: 7615
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7615
File-URL: http://www.nber.org/papers/w7615.pdf
File-Format: application/pdf
Publication-Status: published as Overconfidence, Arbitrage, and Equilibrium Asset Pricing. Kent Daniel, David Hirshleifer and Avanidhar Subrahmanyam, Journal of Finance, 56(3), June, (2001):921-965.
Abstract: This paper offers a multisecurity model in which prices reflect both covariance risk and misperceptions of firms' prospects, and in which arbitrageurs trade to profit from mispricing. We derive a pricing relationship in which expected returns are linearly related to both risk and mispricing variables. The model thereby implies a multivariate relation between expected return, beta, and variables that proxy for mispricing of idiosyncratic components of value tends to be arbitraged away but systematic mispricing is not. The theory is consistent with several empirical findings regarding the cross-section of equity returns, including: the observed ability of fundamental/price ratios to forecast aggregate and cross-sectional returns, and of market value but not non-market size measures to forecast returns cross-sectionally; and the ability in some studies of fundamental/price ratios and market value to dominate traditional measures of security risk. The model also offers several untested empirical implications for the cross-section of expected returns and for the relation of volume to subsequent volatility.
Handle: RePEc:nbr:nberwo:7615
Template-Type: ReDIF-Paper 1.0
Title: Federalism with and without Political Centralization: China versus Russia
Classification-JEL: P2; P3
Author-Name: Olivier Blanchard
Author-Person: pbl2
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: CF
Number: 7616
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7616
File-URL: http://www.nber.org/papers/w7616.pdf
File-Format: application/pdf
Publication-Status: published as Olivier Blanchard & Andrei Shleifer, 2001. "Federalism With and Without Political Centralization: China Versus Russia," IMF Staff Papers, Palgrave Macmillan Journals, vol. 48(4), pages 8.
Abstract: In China, local governments have actively contributed to the growth of new firms. In Russia, local governments have typically stood in the way, be it through taxation, regulation, or corruption. There appears to be two main reasons behind the behavior of local governments in Russia. First, capture by old firms, leading local governments to protect them from competition by new entrants. Second, competition for rents by local officials, eliminating incentives for new firms to enter. The question then is why this has not happened in China. We argue that the answer lies in the degree of political centralization present in China, but not in Russia. Transition in China has taken place under the tight control of the communist party. As a result, the central government has been in a strong position both to reward and to punish local administrations, reducing both the risk of local capture and the scope of competition for rents. By contrast, transition in Russia has come with the emergence of a partly dysfunctional democracy. The central government has been neither strong enough to impose its views, nor strong enough to set clear rules about the sharing of the proceeds of growth. As a result, local governments have had few incentives either to resist capture or to rein in competition for rents. Based on the experience of China, a number of researchers have argued that federalism could play a central role in development. We agree, but with an important caveat. We believe the experience of Russia indicates that another ingredient is crucial, namely political centralization.
Handle: RePEc:nbr:nberwo:7616
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy Strategies for Latin America
Classification-JEL: E5; F33
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Author-Name: Miguel A. Savastano
Note: EFG IFM ME
Number: 7617
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7617
File-URL: http://www.nber.org/papers/w7617.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Development Economics, Vol. 66, no. 2 (December 2001): 415-444
Publication-Status: published as Mishkin, Frederic S. and Miguel A. Savastano. "Monetary Policy Strategies For Emerging Market Countries: Lessons From Latin America," Chinese Economic Studies, Vol. 44, no. 2/3 (Summer 2002): 45-82
Abstract: The paper examines possible monetary policy strategies for Latin America that may help lock-in the gains in the fight against inflation attained by the region during the 1990s. We start by calling for a refocus of the debate about the conduct of monetary policy away from thinking that it is about whether the nominal exchange rate should be fixed or flexible. Instead we argue that the focus should be on whether the monetary policy regime appropriately constrains discretion in monetary policymaking. This focus suggest that there are three basic frameworks that deserve serious discussion as possible, long-run strategies for monetary policy in Latin America: a hard exchange-rate peg, monetary targeting, and inflation targeting. We look at the advantages and disadvantages of each of these strategies and then examine the recent track record of monetary policy in some Latin American countries for clues as to which of the three strategies might be best suited to economies in the region.
Handle: RePEc:nbr:nberwo:7617
Template-Type: ReDIF-Paper 1.0
Title: Inflation Targeting in Emerging Market Countries
Classification-JEL: E5
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: EFG IFM ME
Number: 7618
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7618
File-URL: http://www.nber.org/papers/w7618.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, vol. 9, no. 2, pp. 105-109, May 2000.
Abstract: This paper outlines what inflation targeting involves for emerging market/transition countries and discusses the advantages and disadvantages of this monetary policy strategy. The discussion suggests that although inflation targeting is not a panacea and may not be appropriate for many emerging market countries, it can be a highly useful monetary policy strategy in a number of them.
Handle: RePEc:nbr:nberwo:7618
Template-Type: ReDIF-Paper 1.0
Title: Horatio Alger Meets the Mobility Tables
Classification-JEL: D31; J23
Author-Name: Douglas Holtz-Eakin
Author-Name: Harvey S. Rosen
Author-Person: pro55
Author-Name: Robert Weathers
Note: PE
Number: 7619
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7619
File-URL: http://www.nber.org/papers/w7619.pdf
File-Format: application/pdf
Publication-Status: published as Small Business Economics, edited by Zoltan J. Acs and David B. Audretch, vol. 14, no.4, pp.243-274, June, 2000. Kluwer Academic Publishers.
Abstract: The question of how entrepreneurship relates to income mobility is cogent given the current public debate about the sources of income inequality and mobility in United States society. We examine how experience with entrepreneurship has affected an individual's place in the earnings distribution. Our basic tack is to follow individuals' positions in the income distribution over time, and to see how their mobility (or lack thereof) was affected by involvement with entrepreneurship. Our main finding is that for low-income individuals there is some merit to the notion that the self-employed moved ahead in the earnings distribution relative to those who remained wage earners. On the other hand, for those at the upper end of the earnings distribution, those who became self-employed often advanced less in the earnings distribution than their salaried counterparts.
Handle: RePEc:nbr:nberwo:7619
Template-Type: ReDIF-Paper 1.0
Title: Government Ownership of Banks
Classification-JEL: G21; L32
Author-Name: Rafael La Porta
Author-Person: pla273
Author-Name: Florencio Lopezde-Silanes
Author-Person: plo137
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: CF PE
Number: 7620
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7620
File-URL: http://www.nber.org/papers/w7620.pdf
File-Format: application/pdf
Publication-Status: published as Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002. "Government Ownership of Banks," Journal of Finance, American Finance Association, vol. 57(1), pages 265-301, 02.
Abstract: In this paper, we investigate a neglected aspect of financial systems of many countries around the world: government ownership of banks. We assemble data which establish four findings. First, government ownership of banks is large and pervasive around the world. Second, such ownership is particularly significant in countries with low levels of per capita income, underdeveloped financial systems, interventionist and inefficient governments, and poor protection of property rights. Third, government ownership of banks is associated with slower subsequent financial development. Finally, government ownership of banks is associated with lower subsequent growth of per capita income, and in particular with lower growth of productivity rather than slower factor accumulation. This evidence is inconsistent with the optimistic development' theories of government ownership of banks common in the 1960s, but supports the more recent political' theories of the effects of government ownership of firms.
Handle: RePEc:nbr:nberwo:7620
Template-Type: ReDIF-Paper 1.0
Title: The Determinants of Trust
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Eliana La Ferrara
Author-Person: pla68
Note: PE
Number: 7621
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7621
File-URL: http://www.nber.org/papers/w7621.pdf
File-Format: application/pdf
Abstract: Both individual experiences and community characteristics influence how much people trust each other. Using data drawn from US localities we find that the strongest factors that reduce trust are: i) a recent history of traumatic experiences, even though the passage of time reduces this effect fairly rapidly; ii) belonging to a group that historically felt discriminated against, such as minorities (black in particular) and, to a lesser extent, women; iii) being economically unsuccessful in terms of income and education; iv) living in a racially mixed community and/or in one with a high degree of income disparity. Religious beliefs and ethnic origins do not significantly affect trust. The latter result may be an indication that the American melting pot at least up to a point works, in terms of homogenizing attitudes of different cultures, even though racial cleavages leading to low trust are still quite high.
Handle: RePEc:nbr:nberwo:7621
Template-Type: ReDIF-Paper 1.0
Title: Pricing Upward-Only Adjusting Leases
Classification-JEL: R0; G12
Author-Name: Brent W. Ambrose
Author-Person: pam25
Author-Name: Patric H. Hendershott
Author-Name: Malgorzata M. Klosek
Note: AP
Number: 7622
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7622
File-URL: http://www.nber.org/papers/w7622.pdf
File-Format: application/pdf
Publication-Status: published as Ambrose, Brent W., Patric H. Hendershott and Malgorzata M. Klosek. "Pricing Upward-Only Adjusting Leases," Journal of Real Estate Finance and Economics, 2002, v25(1,Jul), 33-49.
Abstract: This paper presents a stochastic pricing model of a unique, path-dependent lease instrument common in the United Kingdom and numerous commonwealth countries, the upward-only adjusting lease. In this lease, the rental rate is fixed at lease commencement but will be reset to the market rate at predetermined intervals (usually every five years) if it exceeds the contract rent. Numerical results indicate how the initial coupon rate should be set relative to that on a symmetric up-and-downward adjusting variable rate' lease under various economic conditions (level of real interest rates and expected drift and volatility of the underlying rental service flow). We also consider the calculation of effective rents when free rent periods are given during either a market collapse or a steady-state drift.
Handle: RePEc:nbr:nberwo:7622
Template-Type: ReDIF-Paper 1.0
Title: Outward FDI and Parent Exports and Employment: Japan, the United States, and Sweden
Classification-JEL: F14; F23
Author-Name: Robert E. Lipsey
Author-Person: pli259
Author-Name: Eric D. Ramstetter
Author-Name: Magnus Blomstrom
Author-Person: pbl88
Note: ITI
Number: 7623
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7623
File-URL: http://www.nber.org/papers/w7623.pdf
File-Format: application/pdf
Publication-Status: published as Lipsey, Robert E., Eric D. Ramstetter and Mangus Blomstrom. "Outward FDI And Apparent Exports And Employment: Japan, The United States, And Sweden," Global Economy Journal, 2000, v1(4,Oct), Article 1.
Abstract: Within Japanese multinational firms, parent exports from Japan to a foreign region are positively related to production in that region by affiliates of that parent, given the parent's home production in Japan and the region's size and income level. This relationship is similar to that found for Swedish and U.S. multinationals in parallel studies. A Japanese parent's worldwide exports tend to be larger, relative to its output, the larger the firm's overseas production. In this respect also, Japanese firms resembled U.S. multinationals. A Japanese parent's employment, given the level of its production, tends to be higher, the greater the production abroad by the firm's foreign affiliates. Japanese firms' behavior in this respect is similar to that of Swedish firms, but contrasts with that of U.S. firms. U.S. firms appear to reduce employment at home, relative to production, by allocating labor-intensive parts of their production to affiliates in developing countries. Swedish firms seem to allocate the more capital-intensive parts of their production to their foreign affiliates, mostly in high-wage countries. We conclude that in Japanese firms and ancillary employment at home to service foreign operations outweighs any allocation of labor-intensive production to developing countries.
Handle: RePEc:nbr:nberwo:7623
Template-Type: ReDIF-Paper 1.0
Title: Can Subsidies for MARs be Procompetitive?
Classification-JEL: F13
Author-Name: Kala Krishna
Author-Person: pkr26
Author-Name: Suddhasatwa Roy
Author-Name: Marie C. Thursby
Author-Person: pth283
Note: ITI
Number: 7624
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7624
File-URL: http://www.nber.org/papers/w7624.pdf
File-Format: application/pdf
Publication-Status: published as Canadian Journal of Economics, Volume: 34 Issue: 1 (February 2001) Pages: 212-224
Abstract: In contrast to recent literature, we show that market access requirements (MARs) can be implemented in a procompetitive manner even in the absence of threats in related markets. By focusing on subsidies that are paid only when the requirement is met, we show that a MAR can increase aggregate output relative to free trade provided that the right set of firms is targeted. In the context of a model with multiple Japanese and US firms, we show that a MAR on US imports is procompetitive as long as the US firms are the ones targeted to receive the subsidy.
Handle: RePEc:nbr:nberwo:7624
Template-Type: ReDIF-Paper 1.0
Title: Trading Volume: Definitions, Data Analysis, and Implications of Portfolio Theory
Classification-JEL: G12
Author-Name: Andrew W. Lo
Author-Person: plo171
Author-Name: Jiang W. Wang
Note: AP
Number: 7625
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7625
File-URL: http://www.nber.org/papers/w7625.pdf
File-Format: application/pdf
Publication-Status: published as Lo, A. W. and J. Wang. "Trading Volume: Definitions, Data Analysis, And Implications Of Portfolio Theory," Review of Financial Studies, 2000, v13(2,Summer), 257-300.
Abstract: We examine the implications of portfolio theory for the cross-sectional behavior of equity trading volume. Two-fund separation theorems suggest a natural definition for trading activity: share turnover. If two-fund separation holds, share turnover must be identical for all securities. If (K+1)-fund separation holds, we show that turnover satisfies an approximately linear K-factor structure. These implications are examined empirically using individual weekly turnover data for NYSE and AMEX securities from 1962 to 1996. We find strong evidence against two-fund separation, and a principal-components decomposition suggests that turnover is well approximated by a two-factor linear model.
Handle: RePEc:nbr:nberwo:7625
Template-Type: ReDIF-Paper 1.0
Title: Taxes, High-Income Executives, and the Perils of Revenue Estimation in the New Economy
Classification-JEL: H24
Author-Name: Austan Goolsbee
Author-Person: pgo49
Note: PE
Number: 7626
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7626
File-URL: http://www.nber.org/papers/w7626.pdf
File-Format: application/pdf
Publication-Status: published as Goolsbee, Austan. "Taxes, High-Income Executives, And The Perils Of Revenue Estimation In The New Economy," American Economic Review, 2000, v90(2,May), 271-275.
Abstract: This paper attempts to help explain the unforecasted, excess' personal income tax revenues of the last several years. Using panel data on executive compensation in the 1990s, it argues that because the gains on most stock options are treated as ordinary income for tax purposes, rising stock market valuations are directly tied to non-capital gains income. This blurred line between capital and wage income for has affected tax revenue in three ways, at least for these high-income people. First, stock performance has directly affected the amount of ordinary income that people report by influencing their stock option exercise decisions. Second, the presence of options gives executives more flexibility in changing the timing of their reported income and appears to make them much more sensitive to the short-run timing of tax changes, even accounting for the stock market changes of the period. Third, because of the tax rules on options, changing the capital gains tax rate, as the U.S. did in the late 1990s, can lead individuals to exercise their options early to convert the expected future gains into lower-taxed forms. The data show significant evidence of each of these effects and in all three cases, executives working in the new' economy and high-technology sectors
Handle: RePEc:nbr:nberwo:7626
Template-Type: ReDIF-Paper 1.0
Title: What has Welfare Reform Accomplished? Impacts on Welfare Participation, Employment, Income, Poverty, and Family Structure
Classification-JEL: I3
Author-Name: Robert F. Schoeni
Author-Person: psc101
Author-Name: Rebecca M. Blank
Author-Person: pbl56
Note: CH LS PE
Number: 7627
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7627
File-URL: http://www.nber.org/papers/w7627.pdf
File-Format: application/pdf
Abstract: This paper evaluates the effectiveness of recent welfare reforms, investigating the effects of both state-specific waivers in the early 1990s and the 1996 federal reform legislation. Unlike earlier work, we analyze a wide array of indicators, including welfare participation, labor market involvement, earnings, income and poverty, and family formation. While no single methodology is entirely satisfying, the results in this paper are convincing in part because they are consistent across alternative approaches. We find strong evidence that these policy changes reduced public assistance participation and increased family earnings. The result was a rise in total family income and a decline in poverty. The gains from the 1996 reforms were not as broadly distributed across the distribution of less-skilled women as were the effects of waivers. Waivers also increased labor market involvement among the less-skilled, but the 1996 reforms had little additional impact on work behavior after controlling for economic forces. These policies also appeared to have an impact on family structure.
Handle: RePEc:nbr:nberwo:7627
Template-Type: ReDIF-Paper 1.0
Title: Using Elasticities to Derive Optimal Income Tax Rates
Classification-JEL: H21
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE
Number: 7628
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7628
File-URL: http://www.nber.org/papers/w7628.pdf
File-Format: application/pdf
Publication-Status: published as Saez, Emmanuel. "Using Elasticities To Drive Optimal Income Tax Rates," Review of Economic Studies, 2001, v68(234,Jan), 205-229.
Abstract: This paper derives optimal income tax formulas using compensated and uncompensated elasticities of earnings with respect to tax rates. A simple formula for the high income optimal tax rate is obtained as a function of these elasticities and the thickness of the top tail of the income distribution. In the general non-linear income tax problem, this method using elasticities shows precisely how the different economic effects come into play and which are the key relevant parameters in the optimal income tax formulas of Mirrlees. The optimal non-linear tax rate formulas are expressed in terms of elasticities and the shape of the income distribution. These formulas are implemented numerically using empirical earnings distributions and a range of realistic elasticity parameters.
Handle: RePEc:nbr:nberwo:7628
Template-Type: ReDIF-Paper 1.0
Title: Dimensions of Credit Risk and Their Relationship to Economic Capital Requirements
Author-Name: Mark Carey
Author-Person: pca1564
Note: CF ME
Number: 7629
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7629
File-URL: http://www.nber.org/papers/w7629.pdf
File-Format: application/pdf
Publication-Status: published as Dimensions of Credit Risk and Their Relationship to Economic Capital Requirements, Mark Carey. in Prudential Supervision: What Works and What Doesn't, Mishkin. 2001
Abstract: Now in prospect is a major revision of international bank capital regulations that would embody recent advances in credit risk measurement and management. Previous regulations have been simpler in structure, with a primary goal of getting capital requirements right on average, and thus have largely ignored the difference between average and marginal. This paper presents evidence that explicit treatment in new regulations of several important dimensions of credit risk is necessary. If such dimensions are compressed or ignored, capital arbitrage activities by banks are likely to continue, leading to an increase in bank failure rates over time.
Handle: RePEc:nbr:nberwo:7629
Template-Type: ReDIF-Paper 1.0
Title: From Benign Neglect to Malignant Preoccupation: U.S. Balance-of-Payments Policy in the 1960s
Author-Name: Barry Eichengreen
Author-Person: pei2
Note: IFM
Number: 7630
Creation-Date: 2000-03
Order-URL: http://www.nber.org/papers/w7630
File-URL: http://www.nber.org/papers/w7630.pdf
File-Format: application/pdf
Publication-Status: published as Perry, George L. and James Tobin (eds.) Economic events, ideas, and policies: The 1960s and after. Washington, D.C.: Brookings Institution Press, 2000.
Abstract: U.S. balance-of-payments problems in the 1960s remain poorly understood. In this paper I argue that they had two aspects. On the one hand there was a problem of real overvaluation, evident in the erosion of the current account and reflecting the reluctance of the Fed, the Executive and Congress to subordinate domestic political and economic objectives to balance-of-payments goals. In addition there was the systemic aspect, that the main source of international liquidity for the expanding world economy was dollar balances. The role of the United States was to act as banker to the world, borrowing short and lending long. But just like a bank providing liquidity transformation services, the U.S. was vulnerable to a depositor run.' So long as foreign central banks, concerned to preserve the Bretton Woods System, stood ready to support the dollar, they provided the equivalent of deposit insurance. But unlike a classic lender of last resort, their willingness to do so was limited. When that limit was reached in 1971, the dollar -- and the Bretton Woods System -- came crashing down.
Handle: RePEc:nbr:nberwo:7630
Template-Type: ReDIF-Paper 1.0
Title: The Meaning of Patent Citations: Report on the NBER/Case-Western Reserve Survey of Patentees
Classification-JEL: O3
Author-Name: Adam B. Jaffe
Author-Person: pja49
Author-Name: Manuel Trajtenberg
Author-Person: ptr35
Author-Name: Michael S. Fogarty
Note: PR
Number: 7631
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7631
File-URL: http://www.nber.org/papers/w7631.pdf
File-Format: application/pdf
Publication-Status: published as Jaffe, Adam B., Manuel Trajtenberg and Michael S. Fogarty. "KNowledge Spillovers And Patent Citations: Evidence From A Survey Of Inventors," American Economic Review, 2000, v90(2,May), 215-218.
Abstract: A survey of recent patentees was conducted to elicit their perceptions regarding the importance of their inventions, the extent of their communication with other inventors, and the relationship of both importance and communication to observed patent citations. A cohort of 1993 patentees were asked specifically about 2 patents that they had cited, and a third placebo' patent that was similar but which they did not cite. One of the two cited inventors was also surveyed. We find that inventors report significant communication, at least some of which is in forms that suggests spillovers from the cited inventor to the citing inventor. The perception of such communication was substantively and statistically significantly greater for the cited patents than for the placebos. There is, however, a large amount of noise in citations data; it appears that something like one-half of all citations do not correspond to any perceived communication, or even necessarily to a perceptible technological relationship between the inventions. We also find a significant correlation between the number of citations a patent received and its importance (both economic and technological) as perceived by the inventor.
Handle: RePEc:nbr:nberwo:7631
Template-Type: ReDIF-Paper 1.0
Title: When Did Globalization Begin?
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: 7632
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7632
File-URL: http://www.nber.org/papers/w7632.pdf
File-Format: application/pdf
Publication-Status: published as O Rourke, Kevin H. & Williamson, Jeffrey G., 2002. "When did globalisation begin?," European Review of Economic History, Cambridge University Press, vol. 6(01), pages 23-50, April.
Abstract: Some world historians attach globalization big bang' significance to 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. Other world historians insist that globalization stretches back even earlier. There is a third view which argues that the world economy was fragmented and completely de-globalized before the 19th century. None of these three competing views has explicitly shown the difference between trade expansion driven by booming demand and supply within the trading economies (e.g., the underlying fundamental, population growth), and trade expansion driven by the integration of markets between trading economies (e.g., the central manifestation of globalization, commodity price convergence). This paper makes that distinction, and then offers two novel empirical tests which allow us to discriminate between these three competing views. Both tests show: there is no evidence supporting the view that the world economy was globally integrated prior to 1492 and/or 1498; there is also no evidence supporting the view that these two dates had the economic impact on the global economy that world historians assign to them; but there is abundant evidence supporting the view that the 19th century contained a very big globalization bang. These tests involve a close look at the connections between factor prices, commodity prices and endowments world wide.
Handle: RePEc:nbr:nberwo:7632
Template-Type: ReDIF-Paper 1.0
Title: Growth and Business Cycles
Classification-JEL: D92; E32
Author-Name: Larry Jones
Author-Person: pjo88
Author-Name: Rodolfo Manuelli
Author-Name: Henry Siu
Author-Person: psi89
Note: EFG
Number: 7633
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7633
File-URL: http://www.nber.org/papers/w7633.pdf
File-Format: application/pdf
Abstract: Our purpose in this paper is to present a class of convex endogenous growth models, and to analyze their performance in terms of both growth and business cycle criteria. The models we study have close analogs in the real business cycle literature. In fact, we interpret the exogenous growth rate of productivity as an endogenous growth rate of human capital. This perspective allows us to compare the strengths of both classes of models. In order to highlight the mechanism that gives endogenous growth models the ability to improve upon their exogenous growth relatives, we study models that are symmetric in terms of human and physical capital formation -- our two engines of growth. More precisely, we analyze models in which the technology used to produce human capital is identical to the technologies used to produce consumption and investment goods, and in which the technology shocks in the two sectors are perfectly correlated. We find that endogenous growth models can generate levels of labor volatility close to those observed in the data, as well as positively correlated growth rates of output. We also find that these models outperform a related exogenous growth version in most dimensions.
Handle: RePEc:nbr:nberwo:7633
Template-Type: ReDIF-Paper 1.0
Title: Contractibility and Asset Ownership: On-Board Computers and Governance in U.S. Trucking
Classification-JEL: L14; L22
Author-Name: George P. Baker
Author-Name: Thomas N. Hubbard
Note: CF IO
Number: 7634
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7634
File-URL: http://www.nber.org/papers/w7634.pdf
File-Format: application/pdf
Publication-Status: published as Baker, George P. and Thomas N. Hubbard. "Contractibility And Asset Ownership: On-board Computers And Governance In U.S. Trucking," Quarterly Journal of Economics, 2004, v119(4,Nov), 1443-1479.
Abstract: We investigate how the contractibility of actions affecting the value of an asset affects asset ownership. We examine this by testing how on-board computer (OBC) adoption affects truck ownership. We develop and test the proposition that adoption should lead to less ownership by drivers, particularly for hauls where drivers have the greatest incentive to drive in non-optimal ways or engage in rent-seeking behavior. We find evidence in favor: OBC adoption leads to less driver ownership, especially for long hauls and hauls that use specialized trailers. We also find that non-owner drivers with OBCs drive better than those without them. These results suggest that technology-enabled increases in contractibility may lead to less independent contracting and larger firms.
Handle: RePEc:nbr:nberwo:7634
Template-Type: ReDIF-Paper 1.0
Title: Foreign-Born Teaching Assistants and the Academic Performance of Undergraduates
Classification-JEL: I2
Author-Name: George J. Borjas
Author-Person: pbo44
Note: LS
Number: 7635
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7635
File-URL: http://www.nber.org/papers/w7635.pdf
File-Format: application/pdf
Publication-Status: published as Borjas, George J. "Foreign-Born Teaching Assistants And The Academic Performance Of Undergraduates," American Economic Review, 2000, v90(2,May), 355-359.
Abstract: The large literature that analyzes the impact of immigration on the United States typically focuses on measuring the labor market and fiscal consequences. This literature, however, has ignored the impact of immigration on other sectors of society. One sector that is of great interest is the American university, where the share of nonresident aliens in the graduate student population rose from 5.5 percent in 1976 to 10.5 percent in 1996. Despite the rapid growth in the number of foreign students, little is known about their impact on the educational process. Nevertheless, undergraduates frequently complain that the lack of English language proficiency among many foreign-born Teaching Assistants affects adversely their understanding of the material. This paper addresses the question that is at the heart of these complaints: Do foreign-born teaching assistants have an adverse impact on the scholastic achievement of American undergraduates? To provide empirical evidence on this issue, I use data drawn from a survey of undergraduates enrolled in economics principles classes at a large public university. The data suggest that foreign-born Teaching Assistants have an adverse impact on the class performance of undergraduate students.
Handle: RePEc:nbr:nberwo:7635
Template-Type: ReDIF-Paper 1.0
Title: Why Do the Poor Live in Cities?
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Matthew E. Kahn
Author-Person: pka41
Author-Name: Jordan Rappaport
Author-Person: pra38
Note: LS PE
Number: 7636
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7636
File-URL: http://www.nber.org/papers/w7636.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. & Kahn, Matthew E. & Rappaport, Jordan, 2008. "Why do the poor live in cities The role of public transportation," Journal of Urban Economics, Elsevier, vol. 63(1), pages 1-24, January.
Abstract: More than 17 percent of households in American central cities live in poverty; in American suburbs, just 7.4 percent of households live in poverty. The income elasticity of demand for land is too low for urban poverty to be the result of wealthy individuals' wanting to live where land is cheap (the traditional urban economics explanation of urban poverty). Instead, the urbanization of poverty appears to be the result of better access to public transportation in central cities, and central city governments favoring the poor (relative to suburban governments).
Handle: RePEc:nbr:nberwo:7636
Template-Type: ReDIF-Paper 1.0
Title: Why Do Temporary Help Firms Provide Free General Skills Training?
Classification-JEL: D82; J31
Author-Name: David H. Autor
Author-Person: pau9
Note: LS
Number: 7637
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7637
File-URL: http://www.nber.org/papers/w7637.pdf
File-Format: application/pdf
Publication-Status: published as Autor, David H. "Why Do Temporary Help Firms Provide Free General Skills Training?," Quarterly Journal of Economics, 2001, v116(4,Nov), 1409-1448.
Abstract: Nominally free, unrestricted training in portable computer skills is offered by the majority of U.S. temporary help supply (THS) establishments, a practice that is inconsistent with the competitive model of training. This paper asks why temporary help firms provide free general skills training. The answer proposed is that in addition to skills formation, training plays an informational role at THS firms by eliciting private information about worker ability. The model is built on the premise that training is more productive and therefore valuable to high ability workers. Firms offer a package of training and initially lower wages that induces self-selection. Workers of high perceived ability choose training in anticipation of a steeper wage profile while low ability workers are deterred by limited expected gains. Firms profit from their sunk training investment via their short-run informational advantage about ability and thereby limited monopsony power. Market competition among THS firms reduces employer rents, yielding higher wages and more training. Detailed tests of the model using representative establishment data on wages and training find strong support. The analysis demonstrates that beyond providing spot market labor, THS firms gather and sell information about worker quality to clients. The rapid growth of THS as a labor market information broker implies that the demand for worker screening is rising.
Handle: RePEc:nbr:nberwo:7637
Template-Type: ReDIF-Paper 1.0
Title: How Did the United States Become a Net Exporter of Manufactured Goods?
Classification-JEL: F10; N71
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: DAE ITI
Number: 7638
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7638
File-URL: http://www.nber.org/papers/w7638.pdf
File-Format: application/pdf
Abstract: The United States became a net exporter of manufactured goods around 1910 after a dramatic surge in iron and steel exports began in the mid-1890s. This paper argues that natural resource abundance fueled the expansion of iron and steel exports in part by enabling a sharp reduction in the price of U.S. exports relative to other competitors. The commercial exploitation of the Mesabi iron ore range, for example, reduced domestic ore prices by 60 percent in the mid-1890s and was equivalent to nearly 30 years of industry productivity growth in its effect on iron and steel export prices. The results are consistent with Wright's (1990) finding that U.S. manufactured exports were natural resource intensive at this time and have implications for recent work suggesting that resource abundance may be a curse rather than a blessing for economic development.
Handle: RePEc:nbr:nberwo:7638
Template-Type: ReDIF-Paper 1.0
Title: Tariffs and Growth in Late Nineteenth Century America
Classification-JEL: F13; N11
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: DAE ITI
Number: 7639
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7639
File-URL: http://www.nber.org/papers/w7639.pdf
File-Format: application/pdf
Publication-Status: published as Douglas A. Irwin, 2001. "Tariffs and Growth in Late Nineteenth Century America," The World Economy, Blackwell Publishing, vol. 24(1), pages 15-30, 01.
Abstract: Were high import tariffs somehow related to the strong U.S. economic growth during the late nineteenth century? This paper examines this frequently mentioned but controversial question and investigates the channels by which tariffs could have promoted growth during this period. The paper shows that: (i) late nineteenth century growth hinged more on population expansion and capital accumulation than on productivity growth; (ii) tariffs may have discouraged capital accumulation by raising the price of imported capital goods; (iii) productivity growth was most rapid in non-traded sectors (such as utilities and services) whose performance was not directly related to the tariff.
Handle: RePEc:nbr:nberwo:7639
Template-Type: ReDIF-Paper 1.0
Title: Could the U.S. Iron Industry Have Survived Free Trade After the Civil War?
Classification-JEL: F13; N71
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: DAE ITI
Number: 7640
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7640
File-URL: http://www.nber.org/papers/w7640.pdf
File-Format: application/pdf
Publication-Status: published as Irwin, Douglas A. "Could The United States Iron Industry Have Survived Free Trade After The Civil War?," Explorations in Economic History, 2000, v37(3,Jul), 278-299.
Abstract: An unresolved question concerning post-Civil War U.S. industrialization is the degree to which import tariffs protected domestic manufacturers from foreign competition. This paper considers the impact of import tariffs on the domestic pig iron industry, the basic building block of the entire iron and steel industry. After reviewing the contentious political debate surrounding the pig iron duties and estimating the elasticity of substitution between domestic and imported pig iron, a standard trade model provides estimates of how tariff reductions would affect domestic prices, production, imports, and welfare. The results suggest that, had the tariff been eliminated in 1869, domestic output would fall by about 15 percent and the import market share would rise from about 7 percent to nearly 30 percent. These relatively modest effects suggest that a substantial portion of the domestic industry could have survived a significant tariff reduction.
Handle: RePEc:nbr:nberwo:7640
Template-Type: ReDIF-Paper 1.0
Title: Ohlin Versus Stolper-Samuelson?
Classification-JEL: F13; F16
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: DAE ITI
Number: 7641
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7641
File-URL: http://www.nber.org/papers/w7641.pdf
File-Format: application/pdf
Abstract: This paper examines Bertil Ohlin's analysis of trade policy and factor rewards in the context of the late nineteenth and early twentieth century United States. A leading question of the day was whether labor could benefit from protection. Ohlin suspected that labor could benefit from protection and his writings helped spawn the Stolper-Samuelson theorem, which was different from but consistent with Ohlin's approach. This paper seeks to find evidence on whether U.S. tariffs on imported labor-intensive manufactures helped enhance the income of labor at the expense of capital and land. The answer is unclear: vastly different conclusions arise from a calibrated general equilibrium Ohlin-style model and a factor content of trade calculation indirect evidence from lobbying and voting patterns over the tariff are also ambiguous.
Handle: RePEc:nbr:nberwo:7641
Template-Type: ReDIF-Paper 1.0
Title: Trade and the Rate of Income Convergence
Classification-JEL: F1; O1
Author-Name: Dan Ben-David
Author-Person: pbe276
Author-Name: Ayal Kimhi
Author-Person: pki17
Note: ITI
Number: 7642
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7642
File-URL: http://www.nber.org/papers/w7642.pdf
File-Format: application/pdf
Publication-Status: published as Dan Ben-David & Ayal Kimhi, 2004. "Trade and the rate of income convergence," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 13(4), pages 419-441, December.
Abstract: To the extent that trade policy affects trade flows between countries, the ramifications can be far-reaching from an economic growth perspective. This paper examines one aspect of these ramifications, namely the impact of changes in the extent of trade between countries on changes in the rate of reduction in the size of the income gap that exists between them. Export and import data are used as the criteria for determining bilateral trade between major trade partners, resulting in the creation of 127 pairs of countries on the basis of export data and 134 pairs on the basis of import data. An increase in trade between major trade partners - and in particular, increased exports by poorer countries to their wealthier partners - is shown to be related to an increase in the rate of convergence between the countries.
Handle: RePEc:nbr:nberwo:7642
Template-Type: ReDIF-Paper 1.0
Title: Universities as Research Partners
Classification-JEL: O32
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Author-Name: Albert N. Link
Author-Person: pli161
Author-Name: John T. Scott
Author-Person: psc472
Note: PR
Number: 7643
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7643
File-URL: http://www.nber.org/papers/w7643.pdf
File-Format: application/pdf
Publication-Status: published as Hall, Bronwyn H., Albert N. Link and John T. Scott. "Universities As Research Partners," Review of Economics and Statistics, 2003, v85(2,May), 485-491.
Abstract: Universities are a key institution in the US innovation system and an important aspect of their involvement is the role they play in Private-Public Partnering activities. This study seeks to gain a better understanding of the performance of university-industry research partnerships using a sample survey of pre-commercial research projects funded the U.S. government's Advanced Technology Program. Although results must be interpreted cautiously due to the small size of the sample, the study finds that projects with university involvement tend to be in areas involving new' science and therefore experience more difficulty and delay but also are more likely not to be aborted prematurely. We interpret this finding to imply that universities are contributing to basic research awareness and insight among the partners in ATP-funded projects.
Handle: RePEc:nbr:nberwo:7643
Template-Type: ReDIF-Paper 1.0
Title: Capital Gains Taxes and Stock Reactions to Quarterly Earnings Announcements
Classification-JEL: H24; G12
Author-Name: Jennifer L. Blouin
Author-Name: Jana Smith Raedy
Author-Name: Douglas A. Shackelford
Author-Person: psh631
Note: PE
Number: 7644
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7644
File-URL: http://www.nber.org/papers/w7644.pdf
File-Format: application/pdf
Publication-Status: Published as "The Lock-In Effect of Capital Gains Taxes: Evidence from the RJR Nabisco Leveraged Buyout", National Tax Journal, Vol. 48, no. 2 (1995): 245-259.
Abstract: This paper examines the impact of capital gains taxes on equity pricing. Examining three-day cumulative abnormal returns for quarterly earning announcements from 1983-1997, we present evidence consistent with shareholders' capital gains taxes affecting stock price responses. To our knowledge, this is the first study to link shareholder taxes and share price responses to earnings releases. The results imply that shares trade at higher (lower) prices when individual investors face incremental taxes (tax savings) created by selling appreciated (depreciated) shares before they qualify for long-term treatment. Unlike prior studies that have focused on price reactions in settings where shareholder taxes are unusually salient (e.g., tax law changes, turn-of-the-year trading, or tax-sensitive transactions), this study finds the imprint of capital gains taxes in a more general setting.
Handle: RePEc:nbr:nberwo:7644
Template-Type: ReDIF-Paper 1.0
Title: Controls on Capital Inflows: Do they Work?
Classification-JEL: F21; F30
Author-Name: Jose De Gregorio
Author-Person: pde80
Author-Name: Sebastian Edwards
Author-Person: ped3
Author-Name: Rodrigo O. Valdes
Author-Person: pva726
Note: IFM
Number: 7645
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7645
File-URL: http://www.nber.org/papers/w7645.pdf
File-Format: application/pdf
Publication-Status: published as De Gregorio, Jose & Edwards, Sebastian & Valdes, Rodrigo O., 2000. "Controls on capital inflows: do they work?," Journal of Development Economics, Elsevier, vol. 63(1), pages 59-83, October.
Abstract: This paper analyzes the effectiveness of capital controls, in particular the Chilean experience with the use of the unremunerated reserve requirement. We examine the effects on interest rates, real exchange rate, and the volume and composition of capital inflows. The effects are elusive and it is difficult to pin down long-run effects. Although after the unremunerated reserve requirement was introduced there was an increase in the interest rate differential, the econometric evidence does not show it has a significant long-run effect on interest rate differentials. There are also no effects on the real exchange rate. However, the more persistent and significant effect is on the composition of capital inflows, tilting composition toward longer maturity.
Handle: RePEc:nbr:nberwo:7645
Template-Type: ReDIF-Paper 1.0
Title: Economic Reforms and Labor Markets: Policy Issues and Lessons from Chile
Classification-JEL: J5; J6
Author-Name: Sebastian Edwards
Author-Person: ped3
Author-Name: Alejandra Cox Edwards
Note: LS PE
Number: 7646
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7646
File-URL: http://www.nber.org/papers/w7646.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian and Alejandra Cox Edwards. "Economic Reforms And Labour Markets: Policy Issues And Lessons From Chile," Economic Policy, 2000, v15(30,Apr), 181-230.
Abstract: This paper deals with the reform to labor market regulation implemented by Chile during the last twenty years. We concentrate on the reform to job security, on the decentralization of the wage bargaining process, and on the reduction in payroll taxes. Our interest is to understand to what extent these reforms helped reduce Chile's rate of unemployment from European' to U.S' levels. We argue that the reduction of payroll taxes (within the context of the social security reform), and the decentralization of bargaining increased labor market flexibility and contributed to the reduction of unemployment. Our analysis suggests that the reform on job security had no significant effect on the aggregate rate of unemployment.
Handle: RePEc:nbr:nberwo:7646
Template-Type: ReDIF-Paper 1.0
Title: What Have We Learned from the Reagan Deficits and Their Disappearance?
Classification-JEL: H62
Author-Name: Benjamin M. Friedman
Note: EFG ME
Number: 7647
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7647
File-URL: http://www.nber.org/papers/w7647.pdf
File-Format: application/pdf
Publication-Status: published as Friedman, Benjamin. "What Have We Learned From The Disappearance Of The Deficits?," CHALLENGE, 2000, v43(4,Jul-Aug), 5-21.
Abstract: This paper looks again at the U.S. deficit debate of the 1980s, this time with the benefit of the Commerce Department's newly revised data for that period and also in light of the experience of the 1990s when sizeable budget surpluses replaced chronic large deficits. The familiar conclusion that sustained government deficits at full employment depress private capital formation has stood up well in both regards. By contrast, the more recent experience in particular has sharply contradicted any simple notion that the government balance and the current account balance move in parallel. Other relevant issues include the equilibrium (that is, noninflationary) unemployment rate, the response of private saving to government dissaving, and the role of debt and equity in financing private capital formation.
Handle: RePEc:nbr:nberwo:7647
Template-Type: ReDIF-Paper 1.0
Title: Behavioral and Distributional Effects of Environmental Policy Introduction
Classification-JEL: H21; H23
Author-Name: Carlo Carraro
Author-Person: pca270
Author-Name: Gilbert E. Metcalf
Note: PE
Number: 7648
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7648
File-URL: http://www.nber.org/papers/w7648.pdf
File-Format: application/pdf
Publication-Status: published as Carlo Carraro & Gilbert E. Metcalf, 2001. "Behavioral and Distributional Effects of Environmental Policy," NBER Books, National Bureau of Economic Research, Inc, number carr01-1, December.
Abstract: This paper summarizes research presented at the FEEM-NBER Conference on the Behavioral and Distributional Effects of Environmental Policy, held in Milan Italy in June 1999.
Handle: RePEc:nbr:nberwo:7648
Template-Type: ReDIF-Paper 1.0
Title: Horizontal Equity: New Measures, Unclear Principles
Classification-JEL: D63; H23
Author-Name: Louis Kaplow
Author-Person: pka44
Note: PE
Number: 7649
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7649
File-URL: http://www.nber.org/papers/w7649.pdf
File-Format: application/pdf
Abstract: Alan Auerbach and Kevin Hassett offer a new measure of horizontal equity (HE) that is designed to overcome deficiencies in prior indexes. There is, however, a fundamental problem that their effort shares with their predecessors' attempts: the underlying rationale for pursuing HE at the expense of individuals' well-being is never stated. Moreover, as discussed here, it appears that no plausible rationale can be given because the essence of HE involves giving weight to morally arbitrary factors. Indeed, pursuing HE may even conflict with the Pareto principle. On reflection, it seems that the appeal of HE is specious: HE does not possess intrinsic value, but rather is a rough proxy concept that may signal various ways in which unequal treatment of individuals can lead to a loss in social welfare. Unfortunately, HE indexes are not very useful even with regard to HE's proxy role.
Handle: RePEc:nbr:nberwo:7649
Template-Type: ReDIF-Paper 1.0
Title: American Living Standards, 1888-1994: Evidence From Consumer Expenditures
Classification-JEL: D12; N11
Author-Name: Dora L. Costa
Author-Person: pco358
Note: AG DAE
Number: 7650
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7650
File-URL: http://www.nber.org/papers/w7650.pdf
File-Format: application/pdf
Abstract: I use micro data on food and recreation expenditures from 1888 to 1994 to provide the first estimates of overall CPI bias prior to the 1970s and new estimates of bias since the 1970s and to reassess long-run growth rates. I find that CPI bias was -0.1 percentage points per year between 1888 and 1919 and rose to 0.7 percentage points per year between 1919 and 1935. CPI bias was low in the 1950s and 0.3 percentage points per year in the 1960s and then rose to 2.7 percentage points per year between 1973 and 1982 before falling to 0.6 percentage points per year between 1983 and 1994. Inadequately accounting for the introduction of new consumer goods probably was the biggest source of bias between 1919 and 1935. Revised growth rates suggest that despite the Great Depression real per capita personal income was not falling but was rising by 0.5 percentage points per year between 1919 and 1935 and that growth rates were not stagnant in the 1970s but were almost as high as in the 1960s (4.0 and 3.2 in the 1960s and 1970s, respectively).
Handle: RePEc:nbr:nberwo:7650
Template-Type: ReDIF-Paper 1.0
Title: Social Security Incentives for Retirement
Classification-JEL: H3; H5
Author-Name: Courtney Coile
Author-Person: pco557
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: PE
Number: 7651
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7651
File-URL: http://www.nber.org/papers/w7651.pdf
File-Format: application/pdf
Publication-Status: published as Social Security Incentives for Retirement, Courtney Coile, Jonathan Gruber. in Themes in the Economics of Aging, Wise. 2001
Abstract: We present a detailed analysis of the incentives that Social Security provides for continued work at older ages. We do so using information on older males from the Health and Retirement Study over the 1980-1997 period to calculate the changes in the present discounted value of Social Security entitlements from additional work at each age. We find that the median male worker faces a small tax on work at ages 55-61, a near zero tax at ages 62-64, and a large tax at ages 65-69. However, there is significant heterogeneity in tax rates. We also document significant non-monotonicities in the accrual of Social Security entitlements with additional work, and suggest a more appropriate measure of incentive effects that considers accruals over not just the next year but future years as well.
Handle: RePEc:nbr:nberwo:7651
Template-Type: ReDIF-Paper 1.0
Title: Aggregate Price Shocks and Financial Instability: An Historical Analysis
Classification-JEL: E31; E52
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Michael J. Dueker
Author-Name: David C. Wheelock
Note: DAE
Number: 7652
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7652
File-URL: http://www.nber.org/papers/w7652.pdf
File-Format: application/pdf
Publication-Status: published as Bordo, Michael D., Michael J. Dueker and David C. Wheelock. "Aggregate Price Shocks And Financial Instability: A Historical Analysis," Economic Inquiry, 2002, v40(4,Oct), 521-538.
Abstract: This paper presents empirical evidence on the hypothesis that aggregate price disturbances cause or worsen financial instability. We construct two annual indexes of financial conditions for the United States covering 1790-1997, and estimate the effect of aggregate price shocks on each index using a dynamic ordered probit model. We find that price level shocks contributed to financial instability during 1790-1933, and that inflation rate shocks contributed to financial instability during 1980-97. Our research indicates that the size of the aggregate price shocks needed to substantially alter financial conditions depends on the institutional environment, but that a monetary policy focused on price stability would be conducive to financial stability.
Handle: RePEc:nbr:nberwo:7652
Template-Type: ReDIF-Paper 1.0
Title: The Bail-In Problem: Systematic Goals, Ad Hoc Means
Classification-JEL: F0; F3
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Christof Ruehl
Note: IFM
Number: 7653
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7653
File-URL: http://www.nber.org/papers/w7653.pdf
File-Format: application/pdf
Publication-Status: published as Eichengreen, Barry & Ruhl, Christof, 2001. "The bail-in problem: systematic goals, ad hoc means," Economic Systems, Elsevier, vol. 25(1), pages 3-32, March.
Abstract: In this paper we analyze the recent efforts of the international financial institutions to limit the moral hazard created by their assistance to crisis countries. We question the wisdom of the case-by-case approach taken in Pakistan, Ecuador, Romania and Ukraine. We show that because default and restructuring are so painful and costly, it is simply not time consistent for the IFIs to plan to stand aside if the markets refuse to roll over maturing claims, restructure problem debts, or provide new money. Because these realities create an incentive to disburse even if investors fail to comply, the IFIs are then placed in the position of having to back down on their previous conditionality, which undermines their credibility. And since investors are aware of these facts, their behavior is unlikely to be modified by the IFIs' less-than-credible statements of intent. Hence, this approach to bailing in the private sector' will not work. Fortunately, there is an alternative: introducing collective-action clauses into loan agreements. This, and not ad hoc efforts to bail in the private sector, is a forward-looking solution to the moral hazard problem.
Handle: RePEc:nbr:nberwo:7653
Template-Type: ReDIF-Paper 1.0
Title: Neutralizing the Adverse Industry Impacts of CO2 Abatement Policies: What Does it Cost?
Classification-JEL: D58; H21
Author-Name: A. Lans Bovenberg
Author-Person: pbo45
Author-Name: Lawrence H. Goulder
Note: PE EEE
Number: 7654
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7654
File-URL: http://www.nber.org/papers/w7654.pdf
File-Format: application/pdf
Publication-Status: published as Carraro, C. and G. Metcalf (eds.) Behavioral and Distributional Effects of Environmental Policies. University of Chicago Press, 2001.
Publication-Status: published as Neutralizing the Adverse Industry Impacts of CO2 Abatement Policies: What Does It Cost?, A. Lans Bovenberg, Lawrence H. Goulder. in Behavioral and Distributional Effects of Environmental Policy, Carraro and Metcalf. 2001
Abstract: The most cost-effective policies for achieving CO2 abatement (e.g., carbon taxes) fail to get off the ground politically because of unacceptable distributional consequences. This paper explores CO2 abatement policies designed to address distributional concerns. Using an intertemporal numerical general equilibrium model of the U.S., we examine how efficiency costs change when these policies include features that neutralize adverse impacts on energy industries. We find that avoiding adverse impacts on profits and equity values in fossil fuel industries involves a relatively small efficiency cost. This stems from the fact that CO2 abatement policies have the potential to generate revenues that are very large relative to the potential loss of profit. By enabling firms to retain only a very small fraction of these potential revenues, the government can protect firms' profits and equity values. Thus, the government needs to grandfather only a small percentage of CO2 emissions permits or, similarly, must exempt only a small fraction of emissions from the base of a carbon tax. These policies involve a small sacrifice of potential government revenue. Such revenue has an efficiency value because it can finance cuts in pre-existing distortionary taxes. Because the revenue sacrifice is small, the efficiency cost is small as well. We also find that there is a very large difference between preserving firms' profits and preserving their tax payments. Offsetting producers' carbon tax payments on a dollar-for-dollar basis (through cuts in corporate tax rates, for example) substantially overcompensates firms, raising profits and equity values significantly relative to the unregulated situation. This reflects the fact that producers can shift onto consumers most of the burden from a carbon tax. The efficiency costs of such policies are far greater than the costs of policies that do not overcompensate firms.
Handle: RePEc:nbr:nberwo:7654
Template-Type: ReDIF-Paper 1.0
Title: Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis
Classification-JEL: J24; I21
Author-Name: David Card
Author-Person: pca271
Author-Name: Thomas Lemieux
Author-Person: ple92
Note: CH LS
Number: 7655
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7655
File-URL: http://www.nber.org/papers/w7655.pdf
File-Format: application/pdf
Publication-Status: published as Card, David and Thomas Lemieux. "Can Falling Supply Explain The Rising Return To College For Younger Men? A Cohort-Based Analysis," Quarterly Journal of Economics, 2001, v116(2,May), 705-746.
Abstract: Although the college-high school wage gap for younger men has doubled over the past 30 years, the gap for older men has remained nearly constant. We argue that these shifts reflect changes in the relative supply of highly-educated workers across age groups. Cohorts born in the first half of the century had steadily rising educational attainments that offset rising demand for better-educated workers. This trend ended abruptly in the early 1950s and has only recently resumed. Using a model with imperfect substitution between similarly-educated workers in different age groups, we show that a slowdown in the rate of growth of educational attainment across cohorts will lead to a rise in the return to college for young workers that eventually works its way through the age distribution. This prediction is remarkably consistent with data for the U.S. over the period from 1959 to 1995. Estimates based on a version of the model with two education groups high school equivalent and college equivalent workers suggest that the elasticity of substitution between different age groups is large but finite (around 5) while the elasticity of substitution between the two education groups is about 2.5. We also examine data for the United Kingdom and Canada: both countries experienced similar slowdowns in the rate of growth of educational attainment. Results from these countries are comparable to the U.S. findings, and underscore the importance of cohort-specific relative supplies in interpreting movements in education-related wage differentials.
Handle: RePEc:nbr:nberwo:7655
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Attending a Small Class in the Early Grades on College-Test Taking and Middle School Test Results: Evidence from Project STAR
Classification-JEL: I2
Author-Name: Alan Krueger
Author-Person: pkr63
Author-Name: Diane Whitmore
Author-Person: psc874
Note: CH LS
Number: 7656
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7656
File-URL: http://www.nber.org/papers/w7656.pdf
File-Format: application/pdf
Publication-Status: published as Krueger, Alan and Cecilia Rouse, "The Effect of Workplace Education on Earnings, Turnover, and Job Performance," Journal of Labor Economics, Vol. 16, no. 1 (January 1998): 61-94
Publication-Status: published as The Economic Journal, Vol. 111, no. 468 (January 2001): 1-28
Abstract: This paper provides a long-term follow-up of students who participated in the Tennessee STAR experiment. The Tennessee STAR experiment randomly assigned 11,600 elementary school students and their teachers to a small class, regular-size class or regular-size class with a teacher-aide. The experiment began with the wave of students who entered kindergarten in 1985, and lasted for four years. After the third grade, all students returned to regular-size classes. We analyze the effect of past attendance in a small class on standardized test scores through the eighth grade, on whether students took the ACT or SAT college entrance exam, and on how they performed on the ACT or SAT exam. The results suggest that attending a small class in the early grades is associated with somewhat higher performance on standardized test, and an increase in the likelihood that students take a college-entrance exam, especially among minority students. Most significantly, being assigned to a small class appears to have narrowed the black-white gap in college-test taking by 54 percent. A calculation is presented suggesting that the internal rate of return from reducing class size from 22 to 15 students is 5.5 percent.
Handle: RePEc:nbr:nberwo:7656
Template-Type: ReDIF-Paper 1.0
Title: Free Trade and Global Warming: A Trade Theory View of the Kyoto Protocol
Classification-JEL: F10; H4
Author-Name: Brian R. Copeland
Author-Person: pco51
Author-Name: M. Scott Taylor
Author-Person: pta60
Note: ITI PE EEE
Number: 7657
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7657
File-URL: http://www.nber.org/papers/w7657.pdf
File-Format: application/pdf
Publication-Status: published as Copeland, Brian R. and M. Scott Taylor. "Free Trade And Global Warming: A Trade Theory View Of The Kyoto Protocol," Journal of Environmental Economics and Management, 2005, v49(2,Mar), 205-234.
Abstract: This paper demonstrates how three important results in environmental economics, true under mild conditions in closed economies, are false or need serious amendment in a world with international trade in goods. Since the three results we highlight have framed much of the ongoing discussion and research on the Kyoto protocol our viewpoint from trade theory suggests a re-examination may be in order. Specifically, we demonstrate that in an open trading world, but not in a closed economy setting: (1) unilateral emission reductions by the rich North can create self-interested emission reductions by the unconstrained poor South; (2) simple rules for allocating emission reductions across countries (such as uniform reductions) may well be efficient even if international trade in emission permits is not allowed; and (3) when international emission permit trade does occur it may make both participants in the trade worse off and increase global emissions.
Handle: RePEc:nbr:nberwo:7657
Template-Type: ReDIF-Paper 1.0
Title: Dropout and Enrollment Trends in the Post-War Period: What Went Wrong in the 1970s?
Classification-JEL: I21
Author-Name: David Card
Author-Person: pca271
Author-Name: Thomas Lemieux
Author-Person: ple92
Note: CH LS
Number: 7658
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7658
File-URL: http://www.nber.org/papers/w7658.pdf
File-Format: application/pdf
Publication-Status: published as Dropout and Enrollment Trends in the Postwar Period: What Went Wrong in the 1970s?, David Card, Thomas Lemieux. in Risky Behavior among Youths: An Economic Analysis, Gruber. 2001
Abstract: Over most of the 20th century successive generations of U.S. children had higher enrollment rates and rising levels of completed education. This trend reversed with the baby boom cohorts who attended school in the 1970s, and only resumed in the mid-1980s. Even today, the college entry rate of male high school seniors is not much higher than it was in 1968. In this paper, we use a variety of data sources to address the question What went wrong in the 1970s?' We focus on both demand-side factors and on a particular supply-side variable the relative size of the cohort currently in school. We find that tuition costs and local unemployment rates affect schooling decisions, although neither variable explains recent trends in enrollment or completed education. We also find that larger cohorts have lower schooling attainment, and that aggregate enrollment rates are correlated with changes in the earnings gains associated with a college degree. For women, our results suggest that the slowdown in education in the 1970s was a temporary response to large cohort sizes and low returns to education. For men, however, the decline in enrollment rates in the 1970s and slow recovery in the 1980s point to a permanent shift in the inter-cohort trend in educational attainment that will affect U.S. economic growth and trends in inequality for many decades to come.
Handle: RePEc:nbr:nberwo:7658
Template-Type: ReDIF-Paper 1.0
Title: Investment-Cash Flow Sensitivities are not Valid Measures of Financing Constraints
Author-Name: Steven N. Kaplan
Author-Name: Luigi Zingales
Note: CF
Number: 7659
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7659
File-URL: http://www.nber.org/papers/w7659.pdf
File-Format: application/pdf
Publication-Status: Published as "Do Investment-Cash Flow Sensitivities Provide Useful Measuresof Financing Constraints?", Quarterly Journal of Economics, Vol. 107, no. 1(February 1997): 16-215.
Abstract: Kaplan and Zingales [1997] provide both theoretical arguments and empirical evidence that investment-cash flow sensitivities are not good indicators of financing constraints. Fazzari, Hubbard and Petersen [1999] criticize those findings. In this note, we explain how the Fazzari et al. [1999] criticisms are either very supportive of the claims in Kaplan and Zingales [1997] or incorrect. We conclude with a discussion of unanswered questions.
Handle: RePEc:nbr:nberwo:7659
Template-Type: ReDIF-Paper 1.0
Title: Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts
Classification-JEL: G24; G32
Author-Name: Steven N. Kaplan
Author-Name: Per Stromberg
Author-Person: pst18
Note: CF
Number: 7660
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7660
File-URL: http://www.nber.org/papers/w7660.pdf
File-Format: application/pdf
Publication-Status: published as Kaplan, Steven N and Per Stromberg. "Financial Contracting Theory Meets The Real World: An Empirical Analysis Of Venture Capital Contracts," Review of Economic Studies, 2003, v70(2,Apr), 281-315.
Abstract: In this paper, we compare the characteristics of real world financial contracts to their counterparts in financial contracting theory. We do so by conducting a detailed study of actual contracts between venture capitalists (VCs) and entrepreneurs. We consider VCs to be the real world entities who most closely approximate the investors of theory. (1) The distinguishing characteristic of VC financings is that they allow VCs to separately allocate cash flow rights, voting rights, board rights, liquidation rights, and other control rights. We explicitly measure and report the allocation of these rights. (2) While convertible securities are used most frequently, VCs also implement a similar allocation of rights using combinations of multiple classes of common stock and straight preferred stock. (3) Cash flow rights, voting rights, control rights, and future financings are frequently contingent on observable measures of financial and non-financial performance. (4) If the company performs poorly, the VCs obtain full control. As company performance improves, the entrepreneur retains / obtains more control rights. If the company performs very well, the VCs retain their cash flow rights, but relinquish most of their control and liquidation rights. The entrepreneur's cash flow rights also increase with firm performance. (5) It is common for VCs to include non-compete and vesting provisions aimed at mitigating the potential hold-up problem between the entrepreneur and the investor. We interpret our results in relation to existing financial contracting theories. The contracts we observe are most consistent with the theoretical work of Aghion and Bolton (1992) and Dewatripont and Tirole (1994). They also are consistent with screening theories.
Handle: RePEc:nbr:nberwo:7660
Template-Type: ReDIF-Paper 1.0
Title: Evaluating the Specification Errors of Asset Pricing Models
Classification-JEL: G10; E21
Author-Name: Robert J. Hodrick
Author-Person: pho115
Author-Name: Xiaoyan Zhang
Author-Person: pzh588
Note: AP
Number: 7661
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7661
File-URL: http://www.nber.org/papers/w7661.pdf
File-Format: application/pdf
Publication-Status: published as Hodrick, Robert J. and Xiaoyan Zhang. "Evaluating The Specification Errors Of Aset Pricing Models," Journal of Financial Economics, 2001, v62(2,Nov), 327-376.
Abstract: This paper examines the specification errors of several asset pricing models using the methodology of Hansen and Jagannathan (1997) and a common data set. The models are the CAPM, the Consumption CAPM, the Jagannathan and Wang (1996) conditional CAPM, the Campbell (1996) dynamic asset pricing model, the Cochrane (1996) production-based model, and the Fama-French (1993) three-factor and five-factor models. We use returns on the Fama-French twenty-five portfolios sorted by size and book-to-market ratio and the risk-free rate as our test assets. The sample is 1952 to 1997. We allow the parameters of the models' pricing kernels to fluctuate with the business cycle which we measure in two ways. One uses the Hodrick-Prescott (1997) filter applied to either industrial production for monthly models or real GNP for quarterly models. The second approach for quarterly models uses the consumption-wealth measure developed by Lettau and Ludvigson (1999). While we cannot reject correct pricing for Campbell's model, a stability test indicates that the parameters may not be stable. None of the models correctly prices returns that are scaled by the term premium.
Handle: RePEc:nbr:nberwo:7661
Template-Type: ReDIF-Paper 1.0
Title: The Significance of Federal Taxes as Automatic Stabilizers
Classification-JEL: E62
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Daniel Feenberg
Author-Person: pfe56
Note: EFG PE
Number: 7662
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7662
File-URL: http://www.nber.org/papers/w7662.pdf
File-Format: application/pdf
Publication-Status: Published as "The Significance of Federal Taxes as Automatic Satbilizers," The Journal of Economic Perspectives, Volume 14, Number 3 (Summer 2000): Pages 37-56.
Abstract: Using the TAXSIM model for the period 1962-95, we consider the federal tax system's impact as an automatic stabilizer. Despite the many changes in the tax system, there has been relatively little change in its role as an automatic stabilizer. We estimate that individual federal taxes offset perhaps as much as 8 percent of initial shocks to GDP. We also suggest that the progressive income tax may help to stabilize output via its effect on the supply of labor, an additional effect that may even be of similar magnitude to the more traditional path of stabilization through aggregate demand.
Handle: RePEc:nbr:nberwo:7662
Template-Type: ReDIF-Paper 1.0
Title: Estate Taxes and Charitable Bequests by the Wealthy
Classification-JEL: D19; H24
Author-Name: David Joulfaian
Author-Person: pjo3
Note: PE
Number: 7663
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7663
File-URL: http://www.nber.org/papers/w7663.pdf
File-Format: application/pdf
Publication-Status: published as Joulfaian, David. "Estate Taxes And Charitable Bequests By The Wealthy," National Tax Journal, 2000, v53(3,Sep), Part 2, 743-763.
Abstract: Charitable bequests are an important source of philanthropic support. Unlike bequests to children which can be taxed at a maximum statutory rate of 0.55, such transfers are exempt from estate taxation. Thus, by lowering the price of charitable giving, the estate tax may influence the disposition of terminal wealth. In this paper, I examine the effects of estate taxation on charitable bequests using data from estate tax returns of decedents in 1992. The results suggest that the estate tax deduction is budget' efficient. The overall effects of the estate tax, however, are likely to be modest as charitable bequests are wealth elastic.
Handle: RePEc:nbr:nberwo:7663
Template-Type: ReDIF-Paper 1.0
Title: The Transition Economies After Ten Years
Classification-JEL: P2; P3
Author-Name: Stanley Fischer
Author-Name: Ratna Sahay
Author-Person: psa1709
Note: EFG IFM
Number: 7664
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7664
File-URL: http://www.nber.org/papers/w7664.pdf
File-Format: application/pdf
Publication-Status: published as Orlowski, Lucjan T. (ed.) Transition and growth in post-communist countries: The ten-year experience. Cheltenham, U.K. and Northampton, Mass.: Elgar, 2001.
Publication-Status: published as Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," IMF Working Papers, vol 00(30).
Abstract: While output declined in virtually all transition economies in the initial years, the speed and extent of the recovery that followed has varied widely across these countries. The contrast between the more and less successful transitions, the latter largely in the former Soviet Union, raises many questions about the relative roles played by adverse initial conditions, external factors, and reform strategies. This paper summarizes the macroeconomic performance of the transition economies. We first review the initial conditions confronting these economies, the reform strategy that was proposed, and the associated controversies that arose a decade ago. We then account for the widely different outcomes, highlighting the role of exogenous factors and the macroeconomic and structural policies adopted by the countries. We find that both stabilization policies and structural reforms, particularly privatization, contributed to the growth recovery. We also conclude that the faster is the speed of reforms, the quicker is the recovery and the higher is growth.
Handle: RePEc:nbr:nberwo:7664
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy in the Open Economy Revisited: Price Setting and Exchange Rate Flexibility
Classification-JEL: F3; F4
Author-Name: Michael B. Devereux
Author-Person: pde32
Author-Name: Charles Engel
Author-Person: pen14
Note: IFM
Number: 7665
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7665
File-URL: http://www.nber.org/papers/w7665.pdf
File-Format: application/pdf
Publication-Status: published as Devereux, Michael B. and Charles Engel. "Monetary Policy In The Open Economy Revisited: Price Setting And Exchange-Rate Flexibility," Review of Economic Studies, 2003, v70(4,Oct), 765-783.
Abstract: This paper develops a welfare-based model of monetary policy in an open economy. We focus on the extent to which monetary policy should be employed in maintaining the exchange rate. The traditional approach maintains that exchange rate flexibility is desirable in the presence of real country-specific shocks that require adjustment in relative prices. However, in the light of empirical evidence on nominal price response to exchange-rate changes specifically, that there appears to be a large degree of local-currency pricing in industrialized countries the expenditure-switching role played by nominal exchange rates may be exaggerated in the traditional literature. In the presence of local-currency, we find that optimal monetary policy in response to real shocks pricing is fully consistent with fixed exchange rates. On the other hand, when real country-specific shocks are not important, and when a country's monetary sector is stable, the case for freely floating rates (a monetary policy in which exchange rates are not a consideration) is strengthened in the presence of local-currency pricing.
Handle: RePEc:nbr:nberwo:7665
Template-Type: ReDIF-Paper 1.0
Title: Parental Employment and Child Cognitive Development
Classification-JEL: I12; J13
Author-Name: Christopher J. Ruhm
Author-Person: pru7
Note: CH EH
Number: 7666
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7666
File-URL: http://www.nber.org/papers/w7666.pdf
File-Format: application/pdf
Publication-Status: published as Christopher J. Ruhm, 2004. "Parental Employment and Child Cognitive Development," Journal of Human Resources, University of Wisconsin Press, vol. 39(1).
Abstract: This study investigates the relationship between parental employment and child cognitive development using data from multiple years of the National Longitudinal Survey of Youth. Maternal labor supply during the first three years of the child's life is predicted to have a small negative effect on the verbal ability of 3 and 4 year olds and a substantial detrimental impact on the reading and math achievement of 5 and 6 year olds. Working during the second and third years appears to have less favorable or more deleterious consequences when the mother is also employed in the first year. The results are robust to the inclusion of controls for day care arrangements or paternal job-holding and there is some indication that early employment may be particularly costly for children in traditional' two-parent families. Finally, the data suggest that paternal and maternal employment have qualitatively similar effects, hinting at the importance of time investments by fathers. The overall conclusion is that previous research may have provided an overly optimistic assessment of the effects of parental employment on child cognitive development.
Handle: RePEc:nbr:nberwo:7666
Template-Type: ReDIF-Paper 1.0
Title: Medicaid Expansions and Welfare Contractions: Offsetting Effects on Prenatal Care and Infant Health?
Classification-JEL: I18; I38
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Jeffrey Grogger
Author-Person: pgr125
Note: CH EH
Number: 7667
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7667
File-URL: http://www.nber.org/papers/w7667.pdf
File-Format: application/pdf
Publication-Status: published as Currie, Janet and Jeffrey Grogger. "Medicaid Expansions And Welfare Contractions: Offsetting Effects On Prenatal Care And Infant Health?," Journal of Health Economics, 2002, v21(2,Mar), 313-335.
Abstract: Evaluations of changes to the Medicaid program have focused on increases in the generosity of income cutoffs for Medicaid eligibility. Previous research shows that despite dramatic increases in the number of births paid for by the Medicaid program, women often enroll in Medicaid at the point of birth rather than before. States have addressed this problem by adopting administrative measures designed to simplify the Medicaid application process and encourage the use of prenatal care. At the same time, recent declines in welfare caseloads may effectively increasing administrative barriers to obtaining care. We examine the effects of these three types of policies (changes in income eligibility, administrative reforms, and changes in welfare caseloads) on the use of prenatal care and infant health using data from birth certificates covering all U.S. births between 1990 and 1996. We find that increases in income cutoffs increased the use of prenatal care, while decreases in welfare caseloads reduced the use of prenatal care, especially among blacks. The administrative reforms we consider had little effect. The changes in the utilization of prenatal care that were induced by increases in income eligibility cutoffs and decreases in welfare rates led to small but statistically significant reductions in the incidence of very low birthweight among whites.
Handle: RePEc:nbr:nberwo:7667
Template-Type: ReDIF-Paper 1.0
Title: Understanding the Fiscal Theory of the Price Level
Classification-JEL: E5; E58
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Terry J. Fitzgerald
Note: EFG
Number: 7668
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7668
File-URL: http://www.nber.org/papers/w7668.pdf
File-Format: application/pdf
Publication-Status: published as Christiano, Lawrence J. and Terry J. Fitzgerald. "Understanding The Fiscal Theory Of The Price Level," FRB Cleveland - Economic Review, 2000, v36(2,Qtr-2), 2-37.
Abstract: We review the fiscal theory of the price level. We place special emphasis on the theory's implications for the feasibility of price stability.
Handle: RePEc:nbr:nberwo:7668
Template-Type: ReDIF-Paper 1.0
Title: Tax Externalities of Equity Mutual Funds
Classification-JEL: G23; H23
Author-Name: John B. Shoven
Author-Name: Joel Dickson
Author-Name: Clemens Sialm
Author-Person: psi59
Note: AG PE
Number: 7669
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7669
File-URL: http://www.nber.org/papers/w7669.pdf
File-Format: application/pdf
Publication-Status: published as Dickson, Joel, John Shoven, and Clemens Sialm. “Tax Externalities of Equity Mutual Funds.” National Tax Journal 53 (3/2) (2000): 607-628.
Abstract: Investors holding mutual funds in taxable accounts face a classic externality. The after-tax return of their investment depends on the behavior of others. In particular, redemptions may force the mutual fund to sell some of its equity positions in order to pay off the liquidating investors. As a result, it may be forced to distribute taxable capital gains to its shareholders. On the other hand, new investors convey a positive externality upon existing investors by diluting the unrealized capital gain position of the fund. This paper's simulations show that these externalities are important determinants of the after-tax performance of equity mutual funds.
Handle: RePEc:nbr:nberwo:7669
Template-Type: ReDIF-Paper 1.0
Title: Games Daughters and Parents Play: Teenage Childbearing, Parental Reputation, and Strategic Transfers
Classification-JEL: J13
Author-Name: Lingxin Hao
Author-Name: V. Joseph Hotz
Author-Person: pho4
Author-Name: Ginger Zhe Jin
Note: CH
Number: 7670
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7670
File-URL: http://www.nber.org/papers/w7670.pdf
File-Format: application/pdf
Abstract: In this paper, we examine the empirical implications of reputation formation using a game-theoretic model of intra-familial interactions. We consider parental reputation in repeated two-stage games in which daughters' decision to have a child as a teenager and the willingness of parents to continue to house and support their daughters given their decisions. Drawing on the work of Milgrom and Roberts (1982) and Kreps and Wilson (1982) on reputation in repeated games, we show that parents have, under certain conditions, the incentive to penalize teenage (and typically out-of-wedlock) childbearing of older daughters, in order to get the younger daughters to avoid teenage childbearing. The two key empirical implications of this model is that the likelihood of teenage childbearing and parental transfers to a daughter who had a teen birth will decrease with the number of the daughter's sisters at risk. We test these two implications, using data from the National Longitudinal Survey of Youth, 1979 Cohort (NLSY79), exploiting the availability of repeated observations on young women (daughters) and of observations on multiple daughters (sisters) available in this data. Controlling for daughter- and family-specific fixed effects, we find evidence of differential parental financial transfer responses to teenage childbearing by the number of the daughter's sisters and brothers at risk.
Handle: RePEc:nbr:nberwo:7670
Template-Type: ReDIF-Paper 1.0
Title: Information and Globalization: Wage Co-Movements, Labor Demand Elasticity, and Conventional Trade Liberalization
Classification-JEL: F15; F16
Author-Name: James E. Rauch
Author-Person: pra166
Author-Name: Vitor Trindade
Author-Person: ptr67
Note: ITI LS
Number: 7671
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7671
File-URL: http://www.nber.org/papers/w7671.pdf
File-Format: application/pdf
Publication-Status: published as "Information, International Substitutability, and Globalization", American Economic Review, Vol. 93 (June 2003), pp. 775-791.
Abstract: We model home country familiarity with business opportunities in a foreign country as a parameter in a matching process between domestic and foreign firms. We show that as familiarity increases the effect of relative national labor supplies on relative national wages declines, the elasticity of domestic labor demand increases, and the extent of pass-through' of trade tax changes to home wages increases. Since the volume of trade is increasing in familiarity, trade liberalization has a greater impact on wages when the initial volume of trade is greater, all else equal. As familiarity becomes complete, the results of the 2 x 2 Heckscher-Ohlin-Samuelson model are obtained: relative national wages are fixed by trade taxes independent of relative national labor supplies, domestic labor demand is infinitely elastic, and pass-through of tax changes to wages is complete' in the sense that it is determined entirely by production technology and no arbitrage opportunities remain.
Handle: RePEc:nbr:nberwo:7671
Template-Type: ReDIF-Paper 1.0
Title: The Timing of Purchases and Aggregate Fluctuations
Classification-JEL: E21; E32
Author-Name: John V. Leahy
Author-Person: ple189
Author-Name: Joseph Zeira
Author-Person: pze3
Note: EFG ME
Number: 7672
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7672
File-URL: http://www.nber.org/papers/w7672.pdf
File-Format: application/pdf
Publication-Status: Published as "Sectoral Shocks, Learning, and Aggregate Fluctuations", Review of Economic Studies, Vol. 60, no. 205 (1993): 777-794.
Abstract: This paper analyzes how the decision of when to buy a durable good affects both non-durable consumption and business cycle dynamics. At the individual level, we show that the timing of durable goods purchases plays an important role in smoothing consumption over time. In the benchmark case, the time at which the agent purchases the durable good is the only variable that reacts to changes in wealth, while other variables, such as the consumption of non-durables or the amount of the durable that the individual purchases, remain unchanged. At the aggregate level, we show that timing decisions can serve as a mechanism for the amplification and propagation of aggregate shocks. A decline in wealth causes individuals to delay their durable goods purchases which reduces demand dramatically for some time.
Handle: RePEc:nbr:nberwo:7672
Template-Type: ReDIF-Paper 1.0
Title: The Demand for Medical Care in Urban China
Classification-JEL: I1; O52
Author-Name: H. Naci Mocan
Author-Person: pmo270
Author-Name: Erdal Tekin
Author-Person: pte12
Author-Name: Jeffrey S. Zax
Note: EH
Number: 7673
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7673
File-URL: http://www.nber.org/papers/w7673.pdf
File-Format: application/pdf
Publication-Status: published as Mocan, H. Naci & Tekin, Erdal & Zax, Jeffrey S., 2004. "The Demand for Medical Care in Urban China," World Development, Elsevier, vol. 32(2), pages 289-304, February.
Abstract: This is the first paper to investigate the determinants of the demand for medical care in the People's Republic of China. It uses a data set that consists of detailed characteristics of 6407 urban households, a continuous measure of health care spending, and price. A two-part model and a discrete factor model are used in the estimation. Household characteristics and work conditions impact the demand for medical care. Income elasticity is around 0.3, indicating medical care is a necessity. Medical care demand is price inelastic, and price elasticity is larger in absolute value for poorer households.
Handle: RePEc:nbr:nberwo:7673
Template-Type: ReDIF-Paper 1.0
Title: Demand Side Considerations and the Trade and Wages Debate
Classification-JEL: F1; D58
Author-Name: Lisandro Abrego
Author-Name: John Whalley
Author-Person: pwh8
Note: ITI
Number: 7674
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7674
File-URL: http://www.nber.org/papers/w7674.pdf
File-Format: application/pdf
Publication-Status: published as Abrego, Lisandro and John Whalley. "Goods Market Responses To Trade Shocks And Trade And Wages Decompositions," Canadian Journal of Economics, 2003, v36(3,Aug), 747-757.
Abstract: Recent trade and wages literature focuses on whether trade or technology has been the major source of increases in wage inequality in OECD countries since the 1980s. In this literature, no attention has been paid to demand side considerations. Using a simple heterogeneous goods trade model of the Armington type, and UK data, we show how trade shocks affecting the price of unskilled-intensive goods can be absorbed on the demand side, with little or no impact on relative wage rates. No wage impact occurs if the elasticity of substitution in preferences between imports and import substitutes is one. As this elasticity increases, trade plays an ever larger role in explaining wage inequality changes, and as the elasticity goes below one the sign of the effect changes. We suggest that since many import demand elasticity estimates are in the neighbourhood of one, there is a prima facie case that demand side considerations further lower the significance of trade as an explanation of recent trends in OECD wage inequality -beyond that reported in recent literature.
Handle: RePEc:nbr:nberwo:7674
Template-Type: ReDIF-Paper 1.0
Title: The Cost Channel of Monetary Transmission
Classification-JEL: E5; E3
Author-Name: Marvin J. Barth III
Author-Name: Valerie A. Ramey
Author-Person: pra154
Note: EFG ME
Number: 7675
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7675
File-URL: http://www.nber.org/papers/w7675.pdf
File-Format: application/pdf
Publication-Status: published as The Cost Channel of Monetary Transmission, Marvin J. Barth III, Valerie A. Ramey. in NBER Macroeconomics Annual 2001, Volume 16, Bernanke and Rogoff. 2002
Abstract: This paper presents evidence that the cost channel' may be an important part of the monetary transmission mechanism. We argue that if working capital is an essential component of production and distribution, monetary contractions can affect output through a supply channel as well as the traditional demand-type channels. We specify an industry equilibrium model and use it to interpret the results of a VAR analysis. We find that following a monetary contraction, many industries exhibit periods of falling output and rising price-wage ratios, consistent with a supply shock in our model. We also show that the effects are noticeably more pronounced during the period before 1979.
Handle: RePEc:nbr:nberwo:7675
Template-Type: ReDIF-Paper 1.0
Title: The Determinants of Punishment: Deterrence, Incapacitation and Vengeance
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Bruce Sacerdote
Note: LS PE
Number: 7676
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7676
File-URL: http://www.nber.org/papers/w7676.pdf
File-Format: application/pdf
Publication-Status: published as Sacerdote, Bruce and Edward Glaeser. "Vengeance, Deterrence, and Incapacitation." The Journal of Legal Studies 32, 2 (June 2003).
Abstract: Does the economic model of optimal punishment explain the variation in the sentencing of murderers? As the model predicts, we find that murderers with a high expected probability of recidivism receive longer sentences. Sentences are longest in murder types where apprehension rates are low, and where deterrence elasticities appear to be high. However, sentences respond to victim characteristics in a way that is hard to reconcile with optimal punishment. In particular, victim characteristics are important determinants of sentencing among vehicular homicides, where victims are basically random and where the optimal punishment model predicts that victim characteristics should be ignored. Among vehicular homicides, drivers who kill women get 56 percent longer sentences. Drivers who kill blacks get 53 percent shorter sentences.
Handle: RePEc:nbr:nberwo:7676
Template-Type: ReDIF-Paper 1.0
Title: Theoretical Analysis Regarding a Zero Lower Bound on Nominal Interest Rates
Classification-JEL: E40; E50
Author-Name: Bennett T. McCallum
Note: EFG ME
Number: 7677
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7677
File-URL: http://www.nber.org/papers/w7677.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Money, Credit and Banking, Vol. 32, no. 4, part 2 (November 2000): 870-904
Publication-Status: published as Bennett T. McCallum, 2000. "Theoretical analysis regarding a zero lower bound on nominal interest rates," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 870-935.
Abstract: This paper explores several issues concerning a possible zero lower bound (ZLB) including its theoretical rationale; the magnitude of effects of low sustained inflation on real interest rates; the validity of analyzing monetary policy in models with no monetary variables; and the dynamic stabilizing properties of Taylor rules in a ZLB context. The most important argument, however, is that if the short nominal rate is immobilized at zero, there nevertheless exists a route for monetary stabilization policy to be effective--- via the foreign exchange market. Its quantitative importance is examined in a calibrated, optimizing, open-economy model.
Handle: RePEc:nbr:nberwo:7677
Template-Type: ReDIF-Paper 1.0
Title: Human Capital, Heterogeneity, and Estimated Degrees of Intergenerational Mobility
Classification-JEL: J62; J24
Author-Name: Song Han
Author-Person: pha202
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Note: LS
Number: 7678
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7678
File-URL: http://www.nber.org/papers/w7678.pdf
File-Format: application/pdf
Publication-Status: published as Han, Song and Casey B. Mulligan. "Human Capital, Heterogeneity And Estimated Degrees Of Intergenerational Mobility," Economic Journal, 2001, v111(470,Apr), 207-243.
Abstract: Some of the important implications of the parental investment model of intergenerational mobility have been derived under the assumption that parental income is the main source of heterogeneity. We explicitly model the variability and inheritability of innate' earnings ability and the variability of tastes, showing how they affect observed degrees of intergenerational consumption and earnings mobility. Heterogeneity increases the difficulty of detecting the existence of borrowing constrained families. Conversely, the presence of heterogeneity means that economic and linear statistical models of inheritance generate similar intergenerational data on consumption and earnings. In this sense, our findings offer some support for Goldberger's (1989) criticism of human capital models of inheritance. Finally, we suggest that any cross-country differences in intergenerational earnings mobility are more readily interpreted according to the heterogeneity of inherited ability, rather than optimal family responses to country-specific institutions for accumulating human capital.
Handle: RePEc:nbr:nberwo:7678
Template-Type: ReDIF-Paper 1.0
Title: Induced Retirement, Social Security, and the Pyramid Mirage
Classification-JEL: J26; D78
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Note: AG PE
Number: 7679
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7679
File-URL: http://www.nber.org/papers/w7679.pdf
File-Format: application/pdf
Abstract: Does Social Security redistribute across cohorts? Or is it a program for purchasing the jobs' of the elderly? I formalize both models, showing how they have some predictions in common the most important of which is that generational accounts have the appearance of a pyramid scheme.' I also derive important differences between the two interpretations, and compare those differences with data on the design and incidence of Social Security programs around the world. Since implicit and explicit tax rates on elderly labor income are so high, and so closely (and positively) related with the amount of Social Security spending, and because substitution effects of the program can be as large as its wealth effects, I conclude that Social Security's induced retirement motive is much more important for explaining differences among European countries than is the intergenerational redistribution motive. Furthermore, when policy at least in part designed to induce retirement, its generational incidence can be very different than the incidence of a pyramid scheme, even for those countries where the induced retirement motive is not the dominant one. The possibility of induced retirement also makes it difficult for perpetual intergenerational redistribution to be supported as a subgame perfect political equilibrium.
Handle: RePEc:nbr:nberwo:7679
Template-Type: ReDIF-Paper 1.0
Title: Can Monopoly Unionism Explain Publicly Induced Retirement?
Classification-JEL: J26; J51
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Note: AG EFG LS PE
Number: 7680
Creation-Date: 2000-04
Order-URL: http://www.nber.org/papers/w7680
File-URL: http://www.nber.org/papers/w7680.pdf
File-Format: application/pdf
Abstract: It has long been suggested that trade unions take actions and favor public policies that reduce the quantity of labor so that union members might enjoy greater labor incomes. Can this explain the prevalence of generous public pension programs inducing retirement? I suggest not, by formalizing the monopoly unionism model and showing how labor's interest in reducing the quantity of labor cannot explain why the old are induced to retire rather than discouraging work among workers of all ages. Discouraging work of a subset of union workers introduces allocative inefficiencies without promoting the objectives of the monopoly union. And, unless the old have a disproportionate influence within the union, union interests cannot explain why public pension programs are so generous.
Handle: RePEc:nbr:nberwo:7680
Template-Type: ReDIF-Paper 1.0
Title: Price Level Convergence Among United States Cities: Lessons for the European Central Bank
Classification-JEL: F31; F37
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Author-Name: Nelson C. Mark
Author-Person: pma186
Author-Name: Robert J. Sonora
Author-Person: pso114
Note: ME
Number: 7681
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7681
File-URL: http://www.nber.org/papers/w7681.pdf
File-Format: application/pdf
Publication-Status: published as Cecchetti, Stephen G., Nelson C. Mark and Robert J. Sonora. "Price Index Convergence Among United States Cities," International Economic Review, 2002, v43(4,Nov), 1081-1099.
Abstract: We study the dynamics of price indices for major U.S. cities using panel econometric methods and find that relative price levels among cities mean revert at an exceptionally slow rate. In a panel of 19 cities from 1918 to 1995, we estimate the half-life of convergence to be approximately nine years. These estimates provide an upper bound on speed of convergence that participants in European Monetary Union are likely to experience. The surprisingly slow rate of convergence can be explained by a combination of the presence of transportation costs, differential speeds of adjustment to small and large shocks, and the inclusion of non-traded good prices in the overall price index.
Handle: RePEc:nbr:nberwo:7681
Template-Type: ReDIF-Paper 1.0
Title: The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior
Classification-JEL: E2; H3
Author-Name: Brigitte C. Madrian
Author-Person: pma384
Author-Name: Dennis F. Shea
Note: AG PE
Number: 7682
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7682
File-URL: http://www.nber.org/papers/w7682.pdf
File-Format: application/pdf
Publication-Status: published as Madrian, Brigitte C. and Dennis F. Shea. "The Power Of Suggestion: Inertia In 401(k) Participation And Savings Behavior," Quarterly Journal of Economics, 2001, v116(4,Nov), 1149-1187.
Abstract: In this paper, we analyze the 401(k) savings behavior of employees in a large U.S. corporation before and after an interesting change in the company 401(k) plan. Before the plan change, employees were required to affirmatively elect participation in the 401(k) plan. After the plan change, employees were automatically and immediately enrolled in the 401(k) plan unless they made a negative election to opt out of the plan. Although none of the economic features of the plan changed, this switch to automatic enrollment dramatically changed the savings behavior of employees. We have two key findings. First, 401(k) participation is significantly higher under automatic enrollment. Second, the default contribution rate and investment allocation chosen by the company under automatic enrollment has a strong influence on the savings behavior of 401(k) participants. A substantial fraction of 401(k) participants hired under automatic enrollment exhibit what we call default' behavior--sticking to both the default contribution rate and the default fund allocation even though very few employees hired before automatic enrollment picked this particular outcome. This default' behavior appears to result both from participant inertia and from many employees taking the default as investment advice on the part of the company. Overall, these results are consistent with the notion that large changes in savings behavior can be motivated simply by the power of suggestion.' These findings have important implications for the optimal design of 401(k) savings plans as well as for any type of Social Security reform that includes personal accounts over which individuals have some amount of control. They also shed light more generally on the importance of both economic and non-economic factors in the determination of individual savings behavior.
Handle: RePEc:nbr:nberwo:7682
Template-Type: ReDIF-Paper 1.0
Title: Selling Company Shares to Reluctant Employees: France Telecom's Experience
Classification-JEL: G0; G10
Author-Name: Francois Degeorge
Author-Person: pde130
Author-Name: Dirk Jenter
Author-Person: pje55
Author-Name: Alberto Moel
Author-Name: Peter Tufano
Note: CF
Number: 7683
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7683
File-URL: http://www.nber.org/papers/w7683.pdf
File-Format: application/pdf
Publication-Status: published as Degeorge, Francois & Jenter, Dirk & Moel, Alberto & Tufano, Peter, 2004. "Selling company shares to reluctant employees: France Telecom's experience," Journal of Financial Economics, Elsevier, vol. 71(1), pages 169-202, January.
Abstract: In 1997, France T‚l‚com, the state-owned French telephone company, went through a partial privatization. The government offered current and prior France T‚l‚com employees the opportunity to buy portfolios of shares with various combinations of discounts, required holding periods, leverage, tax treatment, and levels of downside protection. We adapt a neoclassical model of investment decision-making that takes into account firm-specific human capital and holding period restrictions to predict how employees might respond to the share offers. Using a database that tracks over 200,000 eligible participants, we analyze the employees' characteristics and their decisions whether to participate; how much to invest; and what form of stock alternatives they selected.
Handle: RePEc:nbr:nberwo:7683
Template-Type: ReDIF-Paper 1.0
Title: The Information Technology Revolution and the Stock Market: Evidence
Classification-JEL: O3
Author-Name: Bart Hobijn
Author-Person: pho54
Author-Name: Boyan Jovanovic
Note: AP PR
Number: 7684
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7684
File-URL: http://www.nber.org/papers/w7684.pdf
File-Format: application/pdf
Publication-Status: published as Hobijn, Bart and Boyan Jovanovic. "The Information-Technology Revolution And The Stock Market: Evidence," American Economic Review, 2001, v91(5,Dec), 1203-1220.
Abstract: Since 1968, the ratio of stock market capitalization to GDP has varied by a factor of 5. In 1972, the ratio stood at above unity, but by 1974, it had fallen to 0.45 where it stayed for the next decade. It then began a steady climb, and today it stands above 2. We argue that the IT revolution was behind this and, moreover, that the capitalization/GDP ratio is likely to decline and then rise after any major technological shift. The three assumptions that deliver the result are: 1. The IT revolution was anticipated by early 1973, 2. IT was resisted by incumbents, which led their value to fall, and 3. Takeovers are an imperfect policing device that allowed many firms to remain inefficient until the mid-1980's. We lay out some facts that the IT hypothesis explains, but that some alternative hypotheses -- oil-price shocks, increased market volatility, and bubbles -- do not.
Handle: RePEc:nbr:nberwo:7684
Template-Type: ReDIF-Paper 1.0
Title: Does Distance Still Matter? The Information Revolution in Small Business Lending
Classification-JEL: G20; G21
Author-Name: Mitchell A. Petersen
Author-Person: ppe42
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Note: CF
Number: 7685
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7685
File-URL: http://www.nber.org/papers/w7685.pdf
File-Format: application/pdf
Publication-Status: published as Proceedings, Federal Reserve Bank of Chicago, May 2000, pp. 103-107
Publication-Status: published as Journal of Finance, Vol. 57, no. 6 (December 2002): 2533-2570
Abstract: The distance between small firms and their lenders in the United States is increasing. Not only are firms choosing more distant lenders, they are also communicating with them in more impersonal ways. After documenting these systematic changes, we demonstrate that they do not stem from small firms locating differently, from simple consolidation in the banking industry, or from biases in the sample. Instead, they seem correlated with improvements in bank productivity. We conjecture that greater, and more timely, availability of borrower credit records, as well as the greater ease of processing these may explain the increased lending at a distance. Consistent with such an explanation, distant firms no longer have to be observably the highest quality credits, suggesting that a wider cross-section of firms can now obtain funding from a particular lender. These findings, we believe, are direct evidence that there has been substantial development of the financial sector in the United States, even in areas such as small business lending that have not been directly influenced by the growth in public markets. From a policy perspective, that small firms now obtain wider access to financing suggests the consolidation of banking services may not raise as strong anti-trust concerns as in the past.
Handle: RePEc:nbr:nberwo:7685
Template-Type: ReDIF-Paper 1.0
Title: Youths at Nutritional Risk: Malnourished or Misnourished?
Classification-JEL: I12; H51
Author-Name: Jay Bhattacharya
Author-Name: Janet Currie
Author-Person: pcu13
Note: CH
Number: 7686
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7686
File-URL: http://www.nber.org/papers/w7686.pdf
File-Format: application/pdf
Publication-Status: published as Youths at Nutrition Risk: Malnourished or Misnourished?, Jay Bhattacharya, Janet Currie. in Risky Behavior among Youths: An Economic Analysis, Gruber. 2001
Abstract: We use data from the third National Health and Nutrition Examination Survey to examine the prevalence and determinants of poor nutritional outcomes among American youths. One strength of our analysis is that we focus on an array of nutritional outcomes, and we find in fact that the determinants of these outcomes vary considerably form outcome to outcome. We interpret our results using a model in which investments in health capital are affected by both resource constraints and a human capital production function that summarizes available nutrition information. We find that although many youths suffer from nutrient deficiencies, these conditions are not generally sensitive to measures of resource constraints, and hence are unlikely to be due solely to a shortage of food. Conversely, we find that our proxies for information matter. Our results suggest that broad-based policies designed to alter the composition of the diet may hold the greatest promise for addressing the nutritional problems of American youths.
Handle: RePEc:nbr:nberwo:7686
Template-Type: ReDIF-Paper 1.0
Title: Forecasting Crashes: Trading Volume, Past Returns and Conditional Skewness in Stock Prices
Classification-JEL: G12; G14
Author-Name: Joseph Chen
Author-Name: Harrison Hong
Author-Person: pho390
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: AP CF
Number: 7687
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7687
File-URL: http://www.nber.org/papers/w7687.pdf
File-Format: application/pdf
Publication-Status: published as Chen, Joseph, Harrison Hong and Jeremy C. Stein. "Forecasting Crashes: Trading Volume, Past Returns, And Conditional Shewness In Stock Prices," Journal of Financial Economics, 2001, v61(3,Sep), 345-381.
Abstract: This paper is an investigation into the determinants of asymmetries in stock returns. We develop a series of cross-sectional regression specifications which attempt to forecast skewness in the daily returns of individual stocks. Negative skewness is most pronounced in stocks that have experienced: 1) an increase in trading volume relative to trend over the prior six months; and 2) positive returns over the prior thirty-six months. The first finding is consistent with the model of Hong and Stein (1999), which predicts that negative asymmetries are more likely to occur when there are large differences of opinion among investors. The latter finding fits with a number of theories, most notably Blanchard and Watson's (1982) rendition of stock-price bubbles. Analogous results also obtain when we attempt to forecast the skewness of the aggregate stock market, though our statistical power in this case is limited.
Handle: RePEc:nbr:nberwo:7687
Template-Type: ReDIF-Paper 1.0
Title: Plants and Productivity in International Trade
Classification-JEL: F11; F17
Author-Name: Andrew B. Bernard
Author-Name: Jonathan Eaton
Author-Person: pea5
Author-Name: J. Bradford Jenson
Author-Name: Samuel Kortum
Author-Person: pko74
Note: IO ITI PR
Number: 7688
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7688
File-URL: http://www.nber.org/papers/w7688.pdf
File-Format: application/pdf
Publication-Status: published as Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
Abstract: We reconcile international trade theory with findings of enormous plant-level heterogeneity in exporting and productivity. Our model extends basic Ricardian theory to accommodate many countries, geographic barriers, and imperfect competition. Fitting the model to bilateral trade among the United States and its 46 major trade partners, we see how well it can explain basic facts about U.S. plants: (i) productivity dispersion, (ii) the productivity advantage of exporters, (iii) the small fraction who export, (iv) the small fraction of revenues from exporting among those that do, and (v) the much larger size of exporters. We pick up all these basic qualitative features, and go quite far in matching them quantitatively. We examine counterfactuals to assess the impact of various global shifts on productivity, plant entry and exit, and labor turnover in U.S. manufacturing.
Handle: RePEc:nbr:nberwo:7688
Template-Type: ReDIF-Paper 1.0
Title: Did U.S. Bank Supervisors Get Tougher During the Credit Crunch? Did They Get Easier During the Banking Boom? Did It Matter to Bank Lending?
Classification-JEL: G21; G28
Author-Name: Allen N. Berger
Author-Person: pbe359
Author-Name: Margaret K. Kyle
Author-Person: pky20
Author-Name: Joseph M. Scalise
Note: ME
Number: 7689
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7689
File-URL: http://www.nber.org/papers/w7689.pdf
File-Format: application/pdf
Publication-Status: published as Mishkin, Frederic (ed.) Prudential Supervision: What Works and What Doesn't. Chicago: University of Chicago Press, 2001.
Publication-Status: published as Did US Bank Supervisors Get Tougher during the Credit Crunch? Did They Get Easier during the Banking Boom? Did It Matter to Bank Lending?, Allen N. Berger, Margaret K. Kyle, Joseph M. Scalise. in Prudential Supervision: What Works and What Doesn't, Mishkin. 2001
Abstract: We test three hypotheses regarding changes in supervisory toughness' and their effects on bank lending. The data provide modest support for all three hypotheses that there was an increase in toughness during the credit crunch period (1989-1992), that there was a decline in toughness during the boom period (1993-1998), and that changes in toughness, if they occurred, affected bank lending. However, all of the measured effects are small, with 1% or less of loans receiving harsher or easier classification, about 3% of banks receiving better or worse CAMEL ratings, and bank lending being changed by 1% or less of assets.
Handle: RePEc:nbr:nberwo:7689
Template-Type: ReDIF-Paper 1.0
Title: Building and Delivering the Virtual World: Commercializing Services for Internet Access
Classification-JEL: L86; C80
Author-Name: Shane Greenstein
Author-Person: pgr134
Note: IO PR
Number: 7690
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7690
File-URL: http://www.nber.org/papers/w7690.pdf
File-Format: application/pdf
Publication-Status: published as Greenstein, Shane. "Building And Delivering The Virtual World: Commercializing Services For Internet Access," Journal of Industrial Economics, 2000, v48(4,Dec), 391-411.
Abstract: This study analyzes the service offerings of Internet Service Providers (ISPs), the commercial suppliers of Internet access in the United States. It presents data on the services of 2089 ISPs in the summer of 1998. By this time, the Internet access industry had undergone its first wave of entry and many ISPs had begun to offer services other than basic access. This paper develops an Internet access industry product code which classifies these services. Significant heterogeneity across ISPs is found in the propensity to offer these services, a pattern with an unconditional urban/rural difference. Most of the explained variance in behavior arises from firm-specific factors, with only weak evidence of location-specific factors for some services. These findings provide a window to the variety of approaches taken to build viable businesses organizations, a vital structural feature of this young market.
Handle: RePEc:nbr:nberwo:7690
Template-Type: ReDIF-Paper 1.0
Title: Mothers and Others: Who Invests in Children's Health?
Classification-JEL: I1; D1
Author-Name: Anne Case
Author-Person: pca108
Author-Name: Christina Paxson
Author-Person: ppa335
Note: CH EH
Number: 7691
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7691
File-URL: http://www.nber.org/papers/w7691.pdf
File-Format: application/pdf
Publication-Status: published as Case, Anne & Paxson, Christina, 2001. "Mothers and others: who invests in children's health?," Journal of Health Economics, Elsevier, vol. 20(3), pages 301-328, May.
Abstract: We estimate the impact of family structure on investments made in children's health, using data from the 1988 National Health Interview Survey Child Health Supplement. Controlling for household size, income and characteristics, we find that children living with step mothers are significantly less likely to have routine doctor and dentist visits, or to have a place for usual medical care, or for sick care. If children living with step mothers have regular contact with their birth mothers, however, their health care does not suffer relative to that reported for children who reside with their birth mothers. In addition to health investments, we find a significant effect of step mothers on health-related behaviors: children living with step mothers are significantly less likely to wear seatbelts, and are significantly more likely to be living with a cigarette smoker. We cannot reject that investments for children living with birth fathers and step mothers are the same as those made by birth fathers living alone with their children. Who invests in children's health? It appears these investments are made, largely, by a child's mother, and that step mothers are not substitutes for birth mothers in this domain.
Handle: RePEc:nbr:nberwo:7691
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Maternal Alcohol and Illicit Drug Use on Children's Behavior Problems: Evidence from the Children of the National Longitudinal Survey...
Author-Name: Pinka Chatterji
Author-Person: pch732
Author-Name: Sara Markowitz
Author-Person: pma138
Note: EH
Number: 7692
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7692
File-URL: http://www.nber.org/papers/w7692.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Health Economics, 20, No.5 (August 2001), 703-731.
Abstract: This study uses data from the Children of the National Longitudinal Survey of Youth to test for evidence of a causal relationship between maternal alcohol use, marijuana use and cocaine use, and children's behavior problems. Ordinary least squares results provide strong evidence that maternal substance use is associated with children's behavior problems. Models that account for the potential endogeneity of maternal substance use yield mixed results. Models estimated using instrumental variables (IV) methods are inconsistent with OLS findings. Child-specific and family-specific fixed effects models suggest that maternal alcohol, marijuana and cocaine use are associated with increases in behavior problems.
Handle: RePEc:nbr:nberwo:7692
Template-Type: ReDIF-Paper 1.0
Title: FDI in the Restructuring of the Japanese Economy
Classification-JEL: F23
Author-Name: Magnus Blomstrom
Author-Person: pbl88
Author-Name: Denise Konan
Author-Person: pko137
Author-Name: Robert E. Lipsey
Author-Person: pli259
Note: ITI
Number: 7693
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7693
File-URL: http://www.nber.org/papers/w7693.pdf
File-Format: application/pdf
Publication-Status: published as Blomstrom, Magnus, Byron Gangnes, and Sumner La Croix. Japan's new economy: Continuity and change in the twenty-first century. Oxford and New York: Oxford University Press, 2001.
Abstract: This paper examines how inward and outward foreign direct investment (FDI) have influenced the restructuring of the Japanese economy and can be expected to continue to do so in the future. We find that outward investment has helped Japanese firms to sustain foreign market shares and contributed to the restructuring of the Japanese economy away from older industries. By shifting from exporting to affiliate production, there has been a geographical reallocation of the activities of Japanese firms, particularly those of multinational manufacturing firms. However, Japanese outward FDI is still not very large relative to the Japanese economy, despite the rapid growth since the mid-1980s, and there is still scope for significant increase when compared with the levels of most other OECD countries. Inward FDI will presumably have an even stronger impact on the restructuring of the Japanese economy. Although the stock of inward foreign direct investment is still very small, there are important changes under way. Deregulation has opened up much of the industrial and service sectors to foreign multinationals.
Handle: RePEc:nbr:nberwo:7693
Template-Type: ReDIF-Paper 1.0
Title: Credit Constraints in the Market for Consumer Durables: Evidence from Micro Data on Car Loans
Classification-JEL: D0; E0
Author-Name: Orazio Attanasio
Author-Person: pat7
Author-Name: Pinelopi K. Goldberg
Author-Person: pgo1
Author-Name: Ekaterini Kyriazidou
Note: EFG
Number: 7694
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7694
File-URL: http://www.nber.org/papers/w7694.pdf
File-Format: application/pdf
Publication-Status: published as Orazio P. Attanasio & Pinelopi Koujianou Goldberg & Ekaterini Kyriazidou, 2008. "Credit Constraints In The Market For Consumer Durables: Evidence From Micro Data On Car Loans," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(2), pages 401-436, 05.
Abstract: We investigate the empirical significance of borrowing constraints in the market for consumer loans. We set up a theoretical model of consumer loan demand, which in the presence of credit rationing implies restrictions on the elasticities of loan demand with respect to the interest rate and the maturity of the loan. We estimate these elasticities and test the theoretical implications using micro data from the Consumer Expenditure Survey (1984-1995) on auto loan contracts. The econometric specification that we employ accounts for important features of the data: selection, censoring, and simultaneity. Our results suggest that credit constraints are binding for some groups in the population, in particular for young and low-income households.
Handle: RePEc:nbr:nberwo:7694
Template-Type: ReDIF-Paper 1.0
Title: Quantifying Quality Growth
Classification-JEL: O33; O47
Author-Name: Mark Bils
Author-Person: pbi148
Author-Name: Peter J. Klenow
Note: EFG
Number: 7695
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7695
File-URL: http://www.nber.org/papers/w7695.pdf
File-Format: application/pdf
Publication-Status: published as Bils, Mark and Peter J. Klenow. "Quantifying Quality Growth," American Economic Review, 2001, v91(4,Sep), 1006-1030.
Abstract: We introduce an instrumental variables approach to estimate the importance of unmeasured quality growth for a set of 66 durable consumer goods. Our instrument is based on predicting which of these 66 goods will display rapid quality growth. Using pooled cross- relatively sections of households in the 1980 through 1996 U.S. Consumer Expenditure Surveys, we estimate quality Engel curves' for 66 durable consumer goods based on the extent richer households pay more for a good, conditional on purchasing. We use the slopes of these curves to predict the rate of quality-upgrading. Just as if households are ascending these quality Engel curves over time, we find that the average price paid rises faster for goods with steeper quality slopes. BLS prices likewise increase more quickly for goods with steeper quality slopes, suggesting the BLS does not fully net out the impact of quality-upgrading on prices paid. We estimate that quality growth averages about 3.7% per year for our goods, with about 60% of this, or 2.2% per year, showing up as higher inflation rather than higher real growth.
Handle: RePEc:nbr:nberwo:7695
Template-Type: ReDIF-Paper 1.0
Title: State-Owned Enterprises, Shirking and Trade Liberalization
Classification-JEL: F4; H1
Author-Name: Madanmohan Ghosh
Author-Name: John Whalley
Author-Person: pwh8
Note: ITI
Number: 7696
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7696
File-URL: http://www.nber.org/papers/w7696.pdf
File-Format: application/pdf
Publication-Status: published as Ghosh, Madanmohan & Whalley, John, 2008. "State owned enterprises, shirking and trade liberalization," Economic Modelling, Elsevier, vol. 25(6), pages 1206-1215, November.
Abstract: We explore the implications of trade liberalization in economies with State Owned enterprises (SOEs) and shirking. SOEs are modelled as controlled by the members of the enterprise who determine output and effort levels, while facing output prices and wage rates set by government. Enterprise members must collectively meet a budget constraint that the value of sales equals the enterprise wage bill plus an exogenous enterprise commitment to the state budget. Labour can shirk either through low on the job effort (leisure), or through moonlighting to second jobs in the private sector. Three alternative formulations of equilibria in SOE economies are explored, and in these trade liberalization can produce effects opposite from conventional competitive models. In particular, the output of import competing SOEs increases rather than falls, and negative effects on imports can also occur. These models when calibrated to 1995 data for Vietnam also suggest quantitatively much larger impacts from trade liberalization than is the case for comparable conventional competitive models. This is because departures from Pareto optimality in SOE economies can be large and trade liberalization acts to discipline shirking associated with these inefficiencies. The implication we draw from our analysis is that to evaluate policy initiatives, such as trade liberalization, in developing and transition economies without explicitly recognizing the role that SOE's can play may be misleading. This is especially the case where SOEs account for a significant fraction of economic activity and shirking is involved.
Handle: RePEc:nbr:nberwo:7696
Template-Type: ReDIF-Paper 1.0
Title: The Changing Structure of Wages in the US and Germany: What Explains the Differences?
Classification-JEL: J3; O3
Author-Name: Paul Beaudry
Author-Person: pbe35
Author-Name: David Green
Author-Person: pgr285
Note: LS
Number: 7697
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7697
File-URL: http://www.nber.org/papers/w7697.pdf
File-Format: application/pdf
Publication-Status: published as Beaudry, Paul and David A. Green. "Wages And Employment In The United States And Germany: What Explains The Difference?," American Economic Review, 2003, v93(3,Jun), 573-602.
Abstract: Over the last twenty years the wage-education relationships in the US and Germany have evolved very differently, while the education composition of employment has evolved in a surprisingly parallel fashion. In this paper, we propose and test an explanation to these conflicting patterns. The model we present has two important elements: (1) technological change arises in the form of an alternative production process as opposed to being in the factor augmenting form, which renders technological adoption endogenous, (2) aggregate production depends on three factors (physical capital, human capital and labor). Based on this framework, we show why imbalances in the accumulation of human versus physical capital will be especially detrimental to low skill workers when the new technology is skill-biased and exhibits capital-skill complementarity. Using matched files from the PSID (US) and the GSOEP (Germany), we demonstrate how factor movements within these countries are associated with wage changes that are strongly supportive of our endogenous technological adoption model. Our conclusion is that the difference in the US and German experiences appear driven by the US having under-accumulated physical capital relative human capital over the 1979-96 period, while Germany accumulated factors in a more balanced manner.
Handle: RePEc:nbr:nberwo:7697
Template-Type: ReDIF-Paper 1.0
Title: Merit Motives and Government Intervention: Public Finance in Reverse
Classification-JEL: H11; H22
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Author-Name: Tomas J. Philipson
Author-Person: pph37
Note: AG EH PE
Number: 7698
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7698
File-URL: http://www.nber.org/papers/w7698.pdf
File-Format: application/pdf
Abstract: A common view in public finance is that there is an efficiency-redistribution tradeoff in which distortions are tolerated in order to redistribute income. However, the fact that so much public- and private redistributive activity involves in-kind transfers rather than cash may be indicative of merit motives on the part of the payers rather than a preference for the well-being of the recipients. Efficiency-enhancing public policy in a merit good economy has the primary purpose of creating distortions and may only redistribute income from rich to poor in order to create those distortions the reverse of the conventional efficiency-redistribution tradeoff. We discuss why the largest programs on the federal and local level in the US including Social Security, Medicare and Medicaid, and Public Schooling seem consistent with the reverse tradeoff rather than the classic one. Transfers are not lump sum in a merit good economy, and explicitly accounting for this when calculating tax incidence reduces the estimated progressivity of government policy. As one example, we calibrate the conventional life-cycle model to show how the amount of over-saving induced on the poor by Social Security hurts them at least as much as the progressive' benefits help them. When the distortions outweigh fiscal transfers in this manner, the classic efficiency-redistribution tradeoff cannot justify the program and the program is far less progressive than conventional analysis suggests.
Handle: RePEc:nbr:nberwo:7698
Template-Type: ReDIF-Paper 1.0
Title: Estimation Risk, Market Efficiency, and the Predictability of Returns
Classification-JEL: C11; D83
Author-Name: Jonathan Lewellen
Author-Name: Jay Shanken
Author-Person: psh114
Note: AP
Number: 7699
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7699
File-URL: http://www.nber.org/papers/w7699.pdf
File-Format: application/pdf
Abstract: In asset pricing, estimation risk refers to investor uncertainty about the parameters of the return or cashflow process. We show that with estimation risk the observable properties of prices and returns can differ significantly from the properties perceived by rational investors. In particular, parameter uncertainty will tend to induce return predictability in ways that resemble irrational mispricing, and prices can violate familiar volatility bounds when investors are rational. Cross-sectionally, expected returns deviate from the CAPM even if investors attempt to hold mean-variance efficient portfolios, and these deviations can be predictable based on past dividends and prices. In short, estimation risk can be important for characterizing and testing market efficiency.
Handle: RePEc:nbr:nberwo:7699
Template-Type: ReDIF-Paper 1.0
Title: Foreign Direct Investments in Services and the Domestic Market for Expertise
Author-Name: James R. Markusen
Author-Person: pma528
Author-Name: Thomas F. Rutherford
Author-Person: pru142
Author-Name: David Tarr
Number: 7700
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7700
File-URL: http://www.nber.org/papers/w7700.pdf
File-Format: application/pdf
Publication-Status: published as Baldwin, Richard E. and Aymo Brunetti (eds.) Economic Impact of EU Membership on Entrants. Boston: Kluwer Academic Publishers, 2001.
Abstract: Producer services such as managerial and engineering consulting can provide domestic firms with the substantial benefits of specialized knowledge that would be costly in terms of both time and money for domestic firms to develop on their own. These intermediate services are often non-traded, or costly to trade, and are best transferred through foreign direct investment. This has important implications for public policy since policies that impact on foreign direct investment are often quite different from those that impact on trade in goods. We develop a model of these services in this paper. Results show that: (1) while imported services are partial-equilibrium substitutes for domestic skilled labor, they may be general-equilibrium complements, (2) imported services lead to differential productivity effects in final goods production so that, for example, the pattern of trade in goods can reverse when FDI is permitted, and (3) the optimal tax on FDI (which we do not advocate as a practical matter) is negative.
Handle: RePEc:nbr:nberwo:7700
Template-Type: ReDIF-Paper 1.0
Title: Measuring Real Economic Effects of Bailouts: Historical Perspectives on How Countries in Financial Distress Have Fared With and Without Bailouts
Classification-JEL: F3; G2
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Anna J. Schwartz
Note: DAE IFM
Number: 7701
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7701
File-URL: http://www.nber.org/papers/w7701.pdf
File-Format: application/pdf
Publication-Status: published as Bordo, Michael D. & Schwartz, Anna J., 2000. "Measuring real economic effects of bailouts: historical perspectives on how countries in financial distress have fared with and without bailouts," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 53(1), pages 81-167, December.
Abstract: In this paper we first trace the changing nature of banking, currency and debt crises from the last century to the present. Each type of crisis has transmogrified in the presence of official intervention and the creation of a safety net. A similar pattern is observed for international rescue loans. We then present evidence suggesting that the incidence has increased and the severity of financial crises has changed little in emerging markets from the pre-1914 era to the present. Finally we assess the impact of IMF loans on the macro performance of the recipients. A simple with-without comparison of countries receiving IMF assistance during crises in the period 1973-98 with countries in the same region not receiving assistance suggests that the real performance of the former group was possibly worse than the latter. Similar results obtain adjusting for self-selection bias and counterfactual policies.
Handle: RePEc:nbr:nberwo:7701
Template-Type: ReDIF-Paper 1.0
Title: Trade Implies Law: The Power of the Weak
Classification-JEL: F1; D2
Author-Name: James E. Anderson
Author-Person: pan2
Author-Name: Leslie Young
Note: ITI
Number: 7702
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7702
File-URL: http://www.nber.org/papers/w7702.pdf
File-Format: application/pdf
Abstract: Without the rule of law, traders who incur trading costs can be held up by counter-parties who are stronger in anarchic bargaining. The favourable terms which the latter extract can overcrowd that side of the market, dissipating the benefits. We establish plausible necessary and sufficient conditions for a move from anarchy toward the rule of law to benefit all traders. The rule of law might be delayed, not only by the difficulties of setting up legal institutions, but by monopolistic traders that have meantime emerged to address the inefficiencies of anarchic trade. These monopolistic traders must also guarantee atomistic traders against holdup.
Handle: RePEc:nbr:nberwo:7702
Template-Type: ReDIF-Paper 1.0
Title: Marijuana and Youth
Classification-JEL: I10
Author-Name: R. L. Pacula
Author-Person: ppa1299
Author-Name: M. Grossman
Author-Person: pgr107
Author-Name: F. J. Chaloupka
Author-Person: pch236
Author-Name: P. M. O'Malley
Author-Name: Lloyd D. Johnston
Author-Name: Matthew C. Farrelly
Note: CH EH
Number: 7703
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7703
File-URL: http://www.nber.org/papers/w7703.pdf
File-Format: application/pdf
Publication-Status: published as Marijuana and Youth, Rosalie Liccardo Pacula, Michael Grossman, Frank J. Chaloupka, Patrick M. O'Malley, Lloyd D. Johnston, Matthew C. Farrelly. in Risky Behavior among Youths: An Economic Analysis, Gruber. 2001
Abstract: This paper contains the first estimates of the price sensitivity of the prevalence of youth marijuana use. Survey data on marijuana use by high school seniors from the Monitoring the Future Project are combined with data on marijuana prices and potency from the Drug Enforcement Administration Office of Intelligence or Intelligence Division. Our estimates of the price elasticity of annual marijuana participation range from 0.06 to 0.47, while those for thirty day participation range from 0.002 to 0.69. These estimates clearly imply that changes in the real, quality adjusted price of marijuana contributed significantly to the trends in youth marijuana use between 1982 and 1998, particularly during the contraction in use from 1982 to 1992. Similarly, changes in youth perceptions of the harms associated with regular marijuana use had a substantial impact on both the contraction in use during the 1982 though 1992 period and the subsequent expansion in use after 1992. These findings underscore the usefulness of considering price in addition to more traditional determinants in any analysis of marijuana consumption decisions made by youths.
Handle: RePEc:nbr:nberwo:7703
Template-Type: ReDIF-Paper 1.0
Title: The Pace of Progress at Superfund Sites: Policy Goals and Interest Group Influence
Classification-JEL: Q2; K32
Author-Name: Hilary Sigman
Author-Person: psi55
Note: PE
Number: 7704
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7704
File-URL: http://www.nber.org/papers/w7704.pdf
File-Format: application/pdf
Publication-Status: published as Sigman, Hilary. "The Pace Of Progress At Superfund Sites: Policy Goals And Interest Group Influence," Journal of Law and Economics, 2001, v44(1,Apr), 315-344.
Abstract: Bureaucracies may set priorities for their workload according to social goals or the desires of concentrated private interests. This paper explores bureaucratic priorities empirically by studying Superfund, the federal program for cleaning up contaminated sites. It examines the amount of time that sites on Superfund's National Priorities List require to complete three states from listing to cleanup, using an econometric method for multiple sequential durations. The empirical results provide little evidence that the EPA prioritizes sites according to their harms. By contrast, concentrated private interests, such as liable parties and local communities, play an important role in the EPA's priorities. Delays caused by liable parties may reduce net benefits of cleanup by 8%. This result suggests a benefit from funding provision of environmental quality and other public goods through diffuse sources, such as broad-based taxes, to avoid the detrimental effects of such concentrated interests.
Handle: RePEc:nbr:nberwo:7704
Template-Type: ReDIF-Paper 1.0
Title: Information Production and Capital Allocation: Decentralized vs. Hierarchical Firms
Classification-JEL: G21; G31
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: CF
Number: 7705
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7705
File-URL: http://www.nber.org/papers/w7705.pdf
File-Format: application/pdf
Publication-Status: published as Stein, Jeremy C. "Information Production And Capital Allocation: Decentralized Versus Hierarchical Firms," Journal of Finance, 2002, v57(5,Oct), 1891-1921.
Abstract: This paper assesses different organizational forms in terms of their ability to generate information about investment projects and allocate capital to these projects efficiently. A decentralized approach with small, single-manager firms is most likely to be attractive when information about individual projects is soft' and cannot be credibly transmitted. Moreover, holding fixed firm size, soft information also favors flatter organizations with fewer layers of management. In contrast, large hierarchical firms with multiple layers of management are at a comparative advantage when information can be costlessly hardened' and passed along within the hierarchy. As a concrete application of the theory, the paper discusses the consequences of consolidation in the banking industry. It has been documented that when large banks acquire small banks, there is a pronounced decline in lending to small businesses. To the extent that small-business lending relies heavily on soft information, this is exactly what the theory would lead one to expect.
Handle: RePEc:nbr:nberwo:7705
Template-Type: ReDIF-Paper 1.0
Title: In Search of New Foundations
Classification-JEL: G30
Author-Name: Luigi Zingales
Note: CF
Number: 7706
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7706
File-URL: http://www.nber.org/papers/w7706.pdf
File-Format: application/pdf
Publication-Status: published as Zingales, Luigi. "In Search Of New Foundations," Journal of Finance, 2000, v55(4,Aug), 1623-1653.
Abstract: In this paper I argue that corporate finance theory, empirical research, practical applications, and policy recommendations are deeply rooted in an underlying theory of the firm. I also argue that while the existing theories have delivered very important and useful insights, they seem to be quite ineffective in helping us cope with the new type of firms that are emerging. I outline the characteristics that a new theory of the firm should satisfy and how such a theory could change the way we do corporate finance, both theoretically and empirically.
Handle: RePEc:nbr:nberwo:7706
Template-Type: ReDIF-Paper 1.0
Title: The Distribution of Payroll and Income Tax Burdens, 1979-1999
Classification-JEL: H2
Author-Name: Andrew Mitrusi
Author-Name: James Poterba
Author-Person: ppo19
Note: PE
Number: 7707
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7707
File-URL: http://www.nber.org/papers/w7707.pdf
File-Format: application/pdf
Publication-Status: published as Mitrusi, Andrew and James Poterba. "The Distribution Of Payroll And Income Tax Burdens," National Tax Journal, 2000, v53(3,Sep), Part 2, 765-794.
Abstract: This paper presents new evidence on the level and distribution of income and payroll tax burdens for U.S. families over the 1979-1999 period. During this period, payroll taxes have become an increasingly important component of the tax burden for many low- and middle-income families. This paper uses a new and expanded version of the NBER TAXSIM program to analyze the impact of legislative changes in income and payroll taxes. Averaged over all families, the combined 1999 payroll and income tax burden was quite similar to what it would have been if the 1979 income and payroll tax laws had remained in force for the last two decades, with only inflation-based adjustments to tax brackets. The mix of income and payroll taxes has changed, however. As a result of the expansion of the Earned Income Tax Credit in the late 1980s and early 1990s, as well as other changes in the federal personal income tax, payroll tax liabilities now exceed income tax liabilities for nearly two thirds of families. In 1979, payroll taxes exceeded income taxes for 44 percent of families.
Handle: RePEc:nbr:nberwo:7707
Template-Type: ReDIF-Paper 1.0
Title: Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses
Classification-JEL: H21
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE
Number: 7708
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7708
File-URL: http://www.nber.org/papers/w7708.pdf
File-Format: application/pdf
Publication-Status: published as Saez, Emmanuel. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," Quarterly Journal of Economics, 2002, v107(3,Aug), 1039-1073.
Abstract: This paper investigates the optimal income transfer problem at the low end of the income distribution. The government maximizes a social welfare function and faces the traditional equity-efficiency trade-off. The paper models labor supply behavioral responses along the intensive margin (hours or intensity of work on the job) and along the extensive margin (participation in the labor force). Optimal tax formulas are derived as a function of the behavioral elasticities, the shape of the income distribution and the redistribution tastes of the government. When behavioral responses are concentrated along the intensive margin, the optimal transfer program is a classical Negative Income Tax program with a substantial guaranteed income support that is taxed away at high rates. However, when behavioral responses are concentrated along the extensive margin, the optimal transfer program is an Earned Income Credit program with negative marginal tax rates at low income levels and a small guaranteed income. Numerical simulations calibrated with the actual empirical earnings distribution are presented for a range of behavioral elasticities and redistributive tastes of the government. For realistic elasticities, the optimal program provides a moderate guaranteed income, imposes low tax rates on very low annual earnings levels, and then starts phasing out benefits at substantial rates.
Handle: RePEc:nbr:nberwo:7708
Template-Type: ReDIF-Paper 1.0
Title: Time Limits and Welfare Use
Classification-JEL: I3; J2
Author-Name: Jeff Grogger
Author-Person: pgr125
Note: CH LS PE
Number: 7709
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7709
File-URL: http://www.nber.org/papers/w7709.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Human Resources, Vol. 39, no. 2 (Spring 2004): 405-424
Abstract: Time limits are a central component of recent welfare reforms and represent a substantial departure from previous policy. However, several recent studies suggest that they have had no effect on welfare use. In this paper I attempt to reconcile those findings with results from Grogger and Michalopoulos, who find time limits to have substantial effects that vary by the age of the youngest child in the family. Using data from the Current Population Survey, I obtain results similar to those of previous analysts when I estimate models that constrain the effects of time limits to be independent of age. When I allow for age dependence and employ controls for time-varying state-level unobservables that may be correlated with the timing of welfare reform, however, I find that time limits have negative effects on welfare use and that those effects are stronger, the younger the youngest child in the family. The estimates suggest that time limits may account for 16 to 18 percent of the recent decline in welfare use among female-headed families.
Handle: RePEc:nbr:nberwo:7709
Template-Type: ReDIF-Paper 1.0
Title: A Dynamic Analysis of the Market for Wide-Bodied Commercial Aircraft
Classification-JEL: L13; L11
Author-Name: C. Lanier Benkard
Note: PR
Number: 7710
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7710
File-URL: http://www.nber.org/papers/w7710.pdf
File-Format: application/pdf
Publication-Status: published as Benkard, C. Lanier. "A Dynamic Analysis Of The Market For Wide-Bodied Commercial Aircraft," Review of Economic Studies, 2004, v71(248,Jul), 581-611.
Abstract: This paper develops a multi-agent dynamic model of the commercial aircraft industry and then uses that model to analyze industry pricing, industry performance, and optimal industry policy. In the model, firms are differentiated in their products and cost structure, and entry, exit, prices, and quantity sold are endogenously determined in dynamic equilibrium. Re ecting the focus of the paper, demand and supply are modeled structurally, while investment is modeled in reduced form. The model utilizes a cost model of commercial aircraft production developed and estimated in a previous paper (Benkard (2000)), and a discrete choice model of commercial aircraft demand to determine static profits. I find that many unusual aspects of the aircraft data, such as high concentration and pricing below the level of static marginal cost, are explained by this model. The model also replicates the stochastic evolution of the industry well. Many of these properties could not be explained with a static model. These results provide support for the structural dynamic modeling approach in general. I also find that the unconstrained Markov perfect equilibrium is quite efficient from a social perspective, providing only 9% less welfare on average than a social planner would obtain, but that the Markov perfect equilibrium shifts a substantial amount of welfare from consumers to producers. Finally, I provide simulation evidence that an anti-trust policy in the form of a concentration restriction would be welfare reducing with high probability.
Handle: RePEc:nbr:nberwo:7710
Template-Type: ReDIF-Paper 1.0
Title: Reexamining the Empirical Evidence for an Environmental Kuznets Curve
Classification-JEL: Q25; O13
Author-Name: William Harbaugh
Author-Name: Arik Levinson
Author-Person: ple135
Author-Name: David Wilson
Note: PE
Number: 7711
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7711
File-URL: http://www.nber.org/papers/w7711.pdf
File-Format: application/pdf
Publication-Status: published as William T. Harbaugh & Arik Levinson & David Molloy Wilson, 2002. "Reexamining The Empirical Evidence For An Environmental Kuznets Curve," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 541-551, August.
Abstract: This paper uses an updated and revised panel data set on ambient air pollution in cities world-wide to examine the robustness of the evidence for the existence of an inverted U-shaped relationship between national income and pollution. We test the sensitivity of the pollution-income relationship to functional forms, to additional covariates, and to changes in the nations, cities, and years sampled. We find that the results are highly sensitive to these changes. We conclude that there is little empirical support for an inverted-U-shaped relationship between several important air pollutants and national income in these data.
Handle: RePEc:nbr:nberwo:7711
Template-Type: ReDIF-Paper 1.0
Title: The Strategic Positioning of Store Brands in Retailer - Manufacturer Bargaining
Classification-JEL: L1; M3
Author-Name: Fiona Scott Morton
Author-Name: Florian Zettelmeyer
Note: IO
Number: 7712
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7712
File-URL: http://www.nber.org/papers/w7712.pdf
File-Format: application/pdf
Publication-Status: published as Morton, Fiona Scott and Florian Zettelmeyer. "The Strategic Positioning Of Store Brands In Retailer-Manufacturer Negotiations," Review of Industrial Organization, 2004, v24(2,Mar), 161-194.
Abstract: We argue in this paper that retailers can strategically position store brands in product space to strengthen their bargaining position when negotiating supply terms with manufacturers of national brands. Using a bargaining framework we model a retailer's decision whether to carry an additional national brand or a store brand, and if the retailer chooses to introduce the latter, where in product space to locate the store brand. Store brands differ from other brands in being both unadvertised and located at a position in product space that is determined by the retailer instead of by a manufacturer. To capture the negotiation effect of store brands empirically, our paper analyses a retailer's choice of whether or not to carry a store brand in a given category. We control for other motivations for carrying a store brand that have been used in the literature. We test our model on a cross-section of categories using supermarket data from multiple retailers. The first contribution of this paper is to show theoretically that the strategic positioning of a store brand in a category changes the bargaining over supply terms between a retailer and national brand manufacturers in that category. The empirical evidence is consistent with the theory. We find that retailers are more likely to carry a store brand in a category if the share of the leading national brand is higher, but that the leading national brand share does not affect the market share of the store brand. This indicates that there may be a bargaining motive for the introduction of the store brand. We propose that this is because the retailer can position the store brand to mimic the leading national brand and present data that shows that store brands frequently imitate national brand packaging on multiple dimensions.
Handle: RePEc:nbr:nberwo:7712
Template-Type: ReDIF-Paper 1.0
Title: Explaining the Rise in Youth Suicide
Classification-JEL: D1
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Edward Glaeser
Author-Person: pgl9
Author-Name: Karen Norberg
Author-Person: pno208
Note: CH EH
Number: 7713
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7713
File-URL: http://www.nber.org/papers/w7713.pdf
File-Format: application/pdf
Publication-Status: published as Explaining the Rise in Youth Suicide, David M. Cutler, Edward L. Glaeser, Karen E. Norberg. in Risky Behavior among Youths: An Economic Analysis, Gruber. 2001
Abstract: Suicide rates among youths aged 15-24 have tripled in the past half-century, even as rates for adults and the elderly have declined. And for every youth suicide completion, there are nearly 400 suicide attempts. This paper examines the dynamics of youth suicide attempts and completions, and reaches three conclusions. First, we suggest that many suicide attempts by youths can be viewed as a strategic action on the part of the youth to resolve conflicts within oneself or with others. Youths have little direct economic or familial power, and in such a situation, self-injury can be used to signal distress or to encourage a response by others. Second, we present evidence for contagion effects. Youths who have a friend or family member who attempts or commits suicide are more likely to attempt or commit suicide themselves. Finally, we show that to the extent we can explain the rise in youth suicide over time, the most important explanatory variable is the increased share of youths living in homes with a divorced parent. The divorce rate is more important for suicides than either the share of children living with step-parents or the share of female-headed households.
Handle: RePEc:nbr:nberwo:7713
Template-Type: ReDIF-Paper 1.0
Title: Foreign and Domestic Bank Participation in Emerging Markets: Lessons from Mexico and Argentina
Classification-JEL: F3; F34
Author-Name: Linda Goldberg
Author-Person: pgo256
Author-Name: B. Gerard Dages
Author-Name: Daniel Kinney
Note: IFM
Number: 7714
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7714
File-URL: http://www.nber.org/papers/w7714.pdf
File-Format: application/pdf
Publication-Status: published as B. Gerard Dages & Linda Goldberg & Daniel Kinney, 2000. "Foreign and domestic bank participation in emerging markets: lessons from Mexico and Argentina," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 17-36.
Abstract: The Asian Crisis has highlighted the importance of strong domestic financial systems in overall economic development and stabilization. Less agreement is evident on the role of foreign banks in achieving this goal. We explore this issue by studying bank-specific data on lending by domestically- and foreign-owned banks in Argentina and Mexico. We find that foreign banks generally have had higher loan growth rates than their domestically-owned counterparts, with lower volatility of lending, contributing to lower overall volatility of credit. Additionally, in both countries, foreign banks show notable credit growth during crisis periods. In Argentina, the loan portfolios of foreign and domestic privately-owned banks are similar, and lending rates analogously respond to aggregate demand fluctuations. In Mexico, foreign and domestic banks with lower levels of impaired assets have similar loan responsiveness and portfolios. State-owned banks (Argentina) and banks with high levels of impaired assets (Mexico) have more stagnant loan growth and weak responsiveness to market signals. Overall, these findings suggest that bank health, and not ownership per se, is the critical element in the growth, volatility, and cyclicality of bank credit. Diversity in ownership appears to contribute to greater stability of credit in times of crisis and domestic financial system weakness.
Handle: RePEc:nbr:nberwo:7714
Template-Type: ReDIF-Paper 1.0
Title: Can Emerging Market Bank Regulators Establish Credible Discipline? The Case of Argentina, 1992-1999
Author-Name: Charles W. Calomiris
Author-Person: pca421
Author-Name: Andrew Powell
Note: IFM ME
Number: 7715
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7715
File-URL: http://www.nber.org/papers/w7715.pdf
File-Format: application/pdf
Publication-Status: published as Can Emerging Market Bank Regulators Establish Credible Discipline? The Case of Argentina, 1992-99, Charles W. Calomiris, Andrew Powell. in Prudential Supervision: What Works and What Doesn't, Mishkin. 2001
Abstract: In the early 1990s, after decades of high inflation and financial repression, Argentina embarked on a course of macroeconomic and bank regulatory reform. Bank regulatory policy promoted privatization, financial liberalization, and free entry, limited safety net support, and established a novel mix of regulatory and market discipline to ensure stable growth of the banking system during the liberalization process. Argentina suffered some fallout from the Mexican tequila crisis of 1995, but its response to that crisis (allowing weak banks to close) and the redoubling of regulatory efforts to promote market discipline after the crisis made Argentina's banking system quite resilient during the Asian, Russian, and Brazilian crises. Argentina's bank regulatory system now is widely regarded as one of the two or three most successful among emerging market economies. This paper traces the evolution of the regulatory policy changes of the 1990s and shows that the reliance on market discipline has played an important role in prudential regulation by encouraging proper risk management by banks. There is substantial heterogeneity among banks in the interest rates they pay for debt and the rate of growth of their deposits, and that heterogeneity is traceable to fundamental attributes of banks that affect the riskiness of deposits (i.e. asset risk and leverage). Moreover, market perceptions of default risk are mean-reverting, indicating that market discipline encourages banks to respond to increases in default risk by limiting asset risk or lowering leverage.
Handle: RePEc:nbr:nberwo:7715
Template-Type: ReDIF-Paper 1.0
Title: Creating Markets for New Vaccines Part I: Rationale
Author-Name: Michael Kremer
Author-Person: pkr20
Note: EH PE
Number: 7716
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7716
File-URL: http://www.nber.org/papers/w7716.pdf
File-Format: application/pdf
Publication-Status: published as Creating Markets for New Vaccines - Part I: Rationale, Michael Kremer. in Innovation Policy and the Economy, Volume 1, Jaffe, Lerner, and Stern. 2001
Abstract: Malaria, tuberculosis, and the strains of HIV common in Africa kill approximately 5 million people each year. Yet research on vaccines for these diseases remains minimal largely because potential vaccine developers fear that they would not be able to sell enough vaccine at a sufficient price to recoup their research expenditures. Enhancing markets for new vaccines could create incentives for vaccine research and increase accessibility of any vaccines developed. Private firms currently conduct little research on vaccines against malaria, tuberculosis, and the strains of HIV common in Africa. This is not only because these diseases primarily affect poor countries, but also because vaccines are subject to severe market failures. Government- directed research programs may be well-suited for basic research, but for the later, more applied states of research, committing to compensate successful private vaccine developers has important advantages. Under such programs, the public pays only if a successful vaccine is actually developed. This gives pharmaceutical firms and scientists strong incentives to self-select research projects that have a reasonable chance of leading to a vaccine. Committing to purchase vaccines and make them available to poor countries may also be attractive relative to other ways of rewarding vaccine developers.
Handle: RePEc:nbr:nberwo:7716
Template-Type: ReDIF-Paper 1.0
Title: Creating Markets for New Vaccines Part II: Design Issues
Author-Name: Michael Kremer
Author-Person: pkr20
Note: EH PE
Number: 7717
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7717
File-URL: http://www.nber.org/papers/w7717.pdf
File-Format: application/pdf
Publication-Status: published as Creating Markets for New Vaccines - Part II: Design Issues, Michael Kremer. in Innovation Policy and the Economy, Volume 1, Jaffe, Lerner, and Stern. 2001
Abstract: Several programs have been proposed to improve incentives for research on vaccines for malaria, tuberculosis, and HIV, and to help increase accessibility of vaccines once they are developed. For these programs to spur research, potential vaccine developers must believe that the sponsor will not renege on the commitment once research costs have been sunk. Given appropriate legal language, the key determinant of credibility will be eligibility and pricing rules, rather than whether funds are physically placed in separate accounts. Requiring candidate vaccines to meet basic technical requirements would help ensure that funds were spent only on effective vaccines. Requiring developing countries to contribute co-payments would help ensure that they felt that the vaccines were useful given the conditions in their countries. Purchases under a vaccine purchase program could be the conditions in their countries. Purchases under a vaccine purchase program could be governed by a market exclusivity provision similar to that in the U.S. Orphan Drug Act. A program could start by offering a modest price and increasing it if it proved inadequate to spur research. If donors pledge approximately $250 million per year for each vaccine for ten years, vaccine purchases would cost approximately $10 per year of life saved. No funds would be spent or pledges called unless a vaccine were developed.
Handle: RePEc:nbr:nberwo:7717
Template-Type: ReDIF-Paper 1.0
Title: Who is Selling the Ivory Tower? Sources of Growth in University Licensing
Classification-JEL: D24; L31
Author-Name: Jerry G. Thursby
Author-Person: pth25
Author-Name: Marie C. Thursby
Author-Person: pth283
Note: PR
Number: 7718
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7718
File-URL: http://www.nber.org/papers/w7718.pdf
File-Format: application/pdf
Publication-Status: published as Thursby, Jerry G. and Marie C. Thursby. "Who Is Selling the Ivory Tower? Sources of Growth in University Licensing." Management Science 48, 1 Special Issue on University Entrepreneurship and Technology Transfer (Jan 2002): 90-104.
Abstract: Historically, commercial use of university research has been viewed in terms of spillovers. Recently, there has been a dramatic increase in technology transfer through licensing as universities attempt to appropriate the returns from faculty research. This change has prompted concerns regarding the source of this growth - specifically, whether it suggests a change in the nature of university research. We develop an intermediate input model to examine the extent to which the growth in licensing is due to the productivity observable inputs or driven by a change in the propensity of faculty and administrators to engage in commercializing university research. We model licensing as a three stage process, each involving multiple inputs. Nonparametric programming techniques are applied to survey data from 65 universities to calculate total factor productivity (TFP) growth in each state. To examine the sources of TFP growth, the productivity analysis is augmented by survey evidence from business who license-in university inventions. Results suggest that increased licensing is due primarily to an increased willingness of faculty and administrators to license and increased business reliance on external R&D rather than a shift in faculty research.
Handle: RePEc:nbr:nberwo:7718
Template-Type: ReDIF-Paper 1.0
Title: Evaluating School-To-Work Programs Using the New NLSY
Classification-JEL: I2; J15
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Mary Joyce
Note: CH LS PE
Number: 7719
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7719
File-URL: http://www.nber.org/papers/w7719.pdf
File-Format: application/pdf
Publication-Status: published as Neumark, David and Mary Joyce. "Evaluating School-To-Work Programs Using The New NLSY," Journal of Human Resources, 2001, v36(4,Fall), 666-702.
Abstract: A critical impediment to research on school-to-work programs has been the absence of large representative data sets with information on such programs. In contrast, the new NLSY (NLSY97) offers researchers opportunities to analyze direct evidence on school-to-work programs. In the NLSY97, individuals are asked a set of survey questions about programs schools offer to help students prepare for the world of work,' and an accompanying survey includes information on school-to-work programs offered by schools attended by the interviewees. These data, coupled with observations on multiple individuals in the same schools, potentially allow researchers to estimate the effects of school-to-work programs on individuals while accounting for possible bias from selection into these programs, although apparent data problems pose some limitations. Because Round One of the NLSY97 covers workers only up to age 17, this paper focuses on the consequences of school-to-work programs for youth employment and schooling decisions while in high school, and students' subjective assessments of the likelihood of future schooling and work behavior. Overall, the evidence does not point to a causal effect of school-to-work program participation on behavior likely associated with future college attendance. On the other hand, school-to-work program participation does appear to have positive effects on educational attainment in terms of respondents' subjective probabilities of obtaining a high-school diploma. More in accordance with the traditional view of school-to-work programs, the data indicate that participation in these programs increases the perceived likelihood of future labor market activity, both for the year following the survey and at age 30. However, school-to-work programs do not appear to boost the probability of current employment.
Handle: RePEc:nbr:nberwo:7719
Template-Type: ReDIF-Paper 1.0
Title: Institutions, Restructuring, and Macroeconomic Performance
Classification-JEL: E0; G34
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Mohamad L. Hammour
Note: EFG
Number: 7720
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7720
File-URL: http://www.nber.org/papers/w7720.pdf
File-Format: application/pdf
Publication-Status: published as Dreze, Jacques (ed.) Macroeconomic Theory. Palgrave, NY: 2001.
Abstract: A growing body of new research has emphasized the macroeconomic consequences of transactional impediments in factor markets, and their role in the recurrent restructuring requirements of modern economies. We first review the function institutional arrangements play in facilitating transactions and explore the macroeconomic consequences of poor institutions. As an application, we discuss the lessons that can be learnt from observed changes in the nature of unemployment in Europe. We then analyze the effect the institutional environment can have on macroeconomic restructuring. In light of this framework we revisit the question of the relationship between recessions and restructuring activity, and review the recent evidence of reduced restructuring following recessions. We also discuss corroborating evidence from merger waves' in the restructuring of corporate assets.
Handle: RePEc:nbr:nberwo:7720
Template-Type: ReDIF-Paper 1.0
Title: The Old and the New in U.S. Economic Expansion of the 1990s
Classification-JEL: E30; E32
Author-Name: Victor Zarnowitz
Note: EFG
Number: 7721
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7721
File-URL: http://www.nber.org/papers/w7721.pdf
File-Format: application/pdf
Abstract: Some analysts see the expansion of the 1990s as uniquely long and strong. Moreover, according to one popular view, the noninflationary boom can continue indefinitely. To shed some light on this debate, this paper compares the 1990s systematically with two previous long economic expansions, using 31 variables on real activity, inflation, productivity, wages, profits, interest rates, stock prices, foreign trade, and fiscal and monetary policies. Contrary to the popular conception, the cumulative gains in activity were greater in the 1960s and even in the 1980s than in the 1990s. This is because the recovery of 1991-1992 was unusually sluggish, and despite the fact that lately U.S. growth was indeed remarkably high and stable. Inflation was decreasing or stable, a fact which is new for the post-World War II period (but not for the longer historical perspective). Disinflation or deflation abroad contributed much to this outcome, as did the new technologies. The declines of interest rates reflected mostly reductions in inflation and the national debt. Profit margins increased strongly. Still, there are potential imbalances from overborrowing, overspending and undersaving, and rising current account deficits. Overvaluation in some parts of the stock market is probable and worrisome, but hard to evaluate.
Handle: RePEc:nbr:nberwo:7721
Template-Type: ReDIF-Paper 1.0
Title: Debt Restructuring
Classification-JEL: F34
Author-Name: Benjamin M. Friedman
Note: IFM
Number: 7722
Creation-Date: 2000-05
Order-URL: http://www.nber.org/papers/w7722
File-URL: http://www.nber.org/papers/w7722.pdf
File-Format: application/pdf
Abstract: What difference does it make, and for whom, whether the nonperforming debts of emerging market borrowers are restructured? This paper begins by positing a set of counterfactual conditions under which restructuring would not matter, and then shows how several ways in which the actual world of international lending departs from these conditions give both lenders and borrowers ample reason to care whether nonperforming debts are restructured. One implication of the way in which debt restructuring matters is that restructuring should not be too' easy. Further, with a greater frequency of defaults, some credit flows to emerging market countries would not be extended in the first place. An important element driving this line of argument is moral hazard, but (unlike in much of the recent literature of emerging market debt problems) what is central here is not the availability of credit from the IMF or other official lenders but the more fundamental moral hazard inherent in all uncollateralized borrower-lender relationships.
Handle: RePEc:nbr:nberwo:7722
Template-Type: ReDIF-Paper 1.0
Title: Should the Government Subsidize Supply or Demand in the Market for Scientists and Engineers?
Classification-JEL: O38
Author-Name: Paul M. Romer
Author-Person: pro45
Note: LS PR
Number: 7723
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7723
File-URL: http://www.nber.org/papers/w7723.pdf
File-Format: application/pdf
Publication-Status: published as Should the Government Subsidize Supply or Demand in the Market for Scientists and Engineers?, Paul M. Romer. in Innovation Policy and the Economy, Volume 1, Jaffe, Lerner, and Stern. 2001
Abstract: This paper suggests that innovation policy in the United States has erred by subsidizing the private sector demand for scientists and engineers without asking whether the educational system provides that supply response necessary for these subsidies to work. It suggests that the existing institutional arrangements in higher education limit this supply response. To illustrate the path not taken, the paper considers specific programs that could increase the numbers of scientists and engineers available to the private sector.
Handle: RePEc:nbr:nberwo:7723
Template-Type: ReDIF-Paper 1.0
Title: The International Monetary Fund: Its Present Role in Historical Perspective
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Harold James
Author-Person: pja546
Note: DAE IFM
Number: 7724
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7724
File-URL: http://www.nber.org/papers/w7724.pdf
File-Format: application/pdf
Abstract: In this paper we describe what the IMF is and what it does. We consider its origins as the guardian of the Bretton Woods adjustable peg exchange rate system and financier of temporary current account deficits for advanced countries, to its present primary roles as development financier and crisis manager for the emerging world. We consider the externalities or market failures that the IMF is believed by many to correct and the public goods that the IMF provides. Critics of the IMF downplay the extent of market failure and the scope of public goods provided. They attach greater importance to market solutions. We consider their views as well. We conclude with a discussion of the case for reform in the light of historical experience.
Handle: RePEc:nbr:nberwo:7724
Template-Type: ReDIF-Paper 1.0
Title: Alternative Monetary Policy Rules: A Comparison with Historical Settings for the United States, the United Kingdom, and Japan
Classification-JEL: E52; E42
Author-Name: Bennett T. McCallum
Note: EFG ME
Number: 7725
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7725
File-URL: http://www.nber.org/papers/w7725.pdf
File-Format: application/pdf
Publication-Status: published as Economic Quarterly - Federal Reserve Bank of Richmond, Vol. 86/1 (Winter 2000): pp. 49-79
Abstract: This paper conducts counterfactual historical analysis of several monetary policy rules by contrasting actual settings of instrument variables with values that would have been specified by the rules in response to prevailing conditions. Of particular interest is whether major policy mistakes, judged ex post, would have been prevented by candidate rules. The rules studied include those of Taylor and McCallum, previously considered by Alison Stuart, plus several additional combinations of instrument and target variables. The time spans examined are 1962-1998 for the U.S. and U.K., and 1972-1998 for Japan. In addition to various substantive findings, the paper develops several methodological arguments. A surprising result is that rules' messages are evidently more dependent upon the specification of their instrument than their target variable.
Handle: RePEc:nbr:nberwo:7725
Template-Type: ReDIF-Paper 1.0
Title: The Structure and Conduct of Corporate Lobbying: How Firms Lobby the Federal Communications Commission
Classification-JEL: K2; L5
Author-Name: John M. de Figueiredo
Author-Name: Emerson H. Tiller
Note: LE
Number: 7726
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7726
File-URL: http://www.nber.org/papers/w7726.pdf
File-Format: application/pdf
Publication-Status: published as de Figueiredo, John M. and Emerson H. Tiller. "The Structure and Conduct of Corporate Lobbying: How Firms Lobby the Federal Communications Commission." Journal of Economics and Management Strategy 10, 1 (Spring 2001): 91-122.
Abstract: lobbying (internal organization vs. trade association) by firms in administrative agencies. It explores the power and limitations of the collective action theories and transaction cost theories in explaining lobbying. It introduces a dataset of over 900 lobbying contacts cover 101 issues at the Federal Communications Commission (FCC) in early 1998. We find that the structure and conduct of large firm lobbying at the FCC is consistent with the predictions of theories of transaction costs and the main results of theories of collective action. However, large firms do not change their behavior drastically as structures arise to remedy the free rider problem. Small firms show no sensitivity to collective action issues or transaction cost issues in the organization or amount of their lobbying, but they do lobby less when having to reveal proprietary information. In sum, large firms behave largely consistent with theoretical predictions, while small firms do not.
Handle: RePEc:nbr:nberwo:7726
Template-Type: ReDIF-Paper 1.0
Title: Controlling Stocks and Flows to Promote Quality: The Environment, With Applications to Physical and Human Capital
Classification-JEL: C61; E22
Author-Name: Nathaniel O. Keohane
Author-Person: pke48
Author-Name: Benjamin Van Roy
Author-Name: Richard J. Zeckhauser
Author-Person: pze7
Note: PE
Number: 7727
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7727
File-URL: http://www.nber.org/papers/w7727.pdf
File-Format: application/pdf
Abstract: Our analysis melds two traditional approaches to promoting quality. The first is restoring the stock of quality. The second is curbing its flow of deterioration. Although both approaches are widely used in real world settings, analytic models have tended to focus on one strategy or the other. We consider a class of problems, which we call SFQ' problems, in which both stocks and flows can be controlled to promote quality. We develop our results in the context of environmental quality, drawing on real-world examples from atomic wastes to zebra mussels. But the lessons are general, and we show how they apply to promoting the quality of both physical and human capital. We first study optimal policies in the limiting cases when only abatement or restoration is possible. We then focus on the full SFQ world, where both approaches can be used. We show that the optimal policy employs both instruments. Moreover, when combined optimally, neither strategy takes the form it would in the absence of the other.
Handle: RePEc:nbr:nberwo:7727
Template-Type: ReDIF-Paper 1.0
Title: The Economic Approach to Social Capital
Classification-JEL: D0; J0
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: David Laibson
Author-Person: pla164
Author-Name: Bruce Sacerdote
Note: LE LS
Number: 7728
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7728
File-URL: http://www.nber.org/papers/w7728.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, E. L., D. Laibson and B. Sacerdote. "An Economic Approach To Social Capital," Economic Journal, 2002, v112(483,Nov), 437-458.
Abstract: To identify the determinants of social capital formation, it is necessary to understand the social capital investment decision of individuals. Individual social capital should then be aggregated to measure the social capital of a community. This paper assembles the evidence that supports the individual-based model of social capital formation, including seven facts: (1) the relationship between social capital and age is first increasing and then decreasing, (2) social capital declines with expected mobility, (3) social capital investment is higher in occupations with greater returns to social skills, (4) social capital is higher among homeowners, (5) social connections fall sharply with physical distance, (6) people who invest in human capital also invest in social capital, and (7) social capital appears to have interpersonal complementarities.
Handle: RePEc:nbr:nberwo:7728
Template-Type: ReDIF-Paper 1.0
Title: Last Minute Bidding and the Rules for Ending Second-Price Auctions: Theory and Evidence from a Natural Experiment on the Internet
Classification-JEL: C73; C90
Author-Name: Alvin E. Roth
Author-Person: pro40
Author-Name: Axel Ockenfels
Author-Person: poc7
Note: IO
Number: 7729
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7729
File-URL: http://www.nber.org/papers/w7729.pdf
File-Format: application/pdf
Publication-Status: published as Roth, Alvin E. and Axel Ockenfels. "Last-Minute Bidding And The Rules For Ending Second-Price Auctions: Evidence From eBay And Amazon Auctions On The Internet," American Economic Review, 2002, v92(4,Sep), 1093-1103.
Abstract: There is a great deal of late bidding on internet second price auctions. We show that this need not result from either common value properties of the objects being sold, or irrational behavior: late bidding can occur at equilibrium even in private value auctions. The reason is that very late bids have a positive probability of not being successfully submitted, and this opens a way for bidders to implicitly collude, and avoid bidding wars, in auctions such as those run by eBay, which have a fixed end time. A natural experiment is available because the auctions on Amazon, while operating under otherwise similar rules, do not have a fixed end time, but continue if necessary past the scheduled end time until ten minutes have passed without a bid. The strategic differences in the auction rules are reflected in the auction data by significantly more late bidding on eBay than on Amazon. Futhermore, more experienced bidders on eBay submit late bids more often than do less experienced bidders, while the effect of experience on Amazon goes in the opposite direction. On eBay, there is also more late bidding for antiques than for computers. We also find scale independence in the distribution over time of bidders' last bids, of a form strikingly similar to the deadline effect' noted in bargaining: last bids are distributed according to a power law. The evidence suggests that multiple causes contribute to late bidding, with strategic issues related to the rules about ending the auction playing an important role.
Handle: RePEc:nbr:nberwo:7729
Template-Type: ReDIF-Paper 1.0
Title: Changes in Managerial Pay Structures 1986-1992 and Rising Returns to Skill
Classification-JEL: J3; J2
Author-Name: K.C. O'Shaughnessy
Author-Name: David I. Levine
Author-Person: ple80
Author-Name: Peter Cappelli
Note: LS
Number: 7730
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7730
File-URL: http://www.nber.org/papers/w7730.pdf
File-Format: application/pdf
Publication-Status: published as O'Shaughnessy, K. C., David I. Levine and Peter Cappelli. "Changes In Managerial Pay Structures 1986-1992 And Rising Returns To Skill," Oxford Economic Papers, 2001, v53(3,Jul), 482-507.
Abstract: We examine the relationship between wages and skill requirements in a sample of over 50,000 managers in 39 companies between 1986 and 1992. The data include an unusually good measure of job requirements and skills that can proxy for human capital. We find that wage inequality increased both within and between firms from 1986 and 1992. Higher returns to our measure of skill accounts for most of the increasing inequality within firms. At the same time, our measure of skill does not explain much of the cross-sectional variance in average wages between employers, and changes in returns to skill do not explain any of the time series increase in between-firm variance over time. Finally, we find only weak evidence of any declines in the rigidity of internal wage structures of large employers.
Handle: RePEc:nbr:nberwo:7730
Template-Type: ReDIF-Paper 1.0
Title: Uncertainty and Labor Contract Durations
Classification-JEL: J41; J51
Author-Name: Robert Rich
Author-Person: pri146
Author-Name: Joseph Tracy
Author-Person: ptr23
Note: LS
Number: 7731
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7731
File-URL: http://www.nber.org/papers/w7731.pdf
File-Format: application/pdf
Publication-Status: published as Robert Rich & Joseph Tracy, 2004. "Uncertainty and Labor Contract Durations," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 270-287, 01.
Abstract: This paper provides an empirical investigation into the relationship between ex ante U.S. labor contract durations and uncertainty over the period 1970 to 1995. We construct measures of inflation uncertainty as well as aggregate nominal and real uncertainty. The results not only corroborate previous findings of an inverse relationship between contract duration and inflation uncertainty, but document that this relationship extends to both measures of aggregate uncertainty. We also explore the robustness of this relationship to the various measures of inflation uncertainty that have appeared in the literature.
Handle: RePEc:nbr:nberwo:7731
Template-Type: ReDIF-Paper 1.0
Title: Gender Differences in Pay
Classification-JEL: J3; J7
Author-Name: Francine D. Blau
Author-Person: pbl16
Author-Name: Lawrence M. Kahn
Author-Person: pka63
Note: LS
Number: 7732
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7732
File-URL: http://www.nber.org/papers/w7732.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Perspectives. Volume: 14 Issue: 4 (Fall 2000) Pages: 75-99
Abstract: We consider the gender pay gap in the United States. Both gender-specific factors, including gender differences in qualifications and discrimination, and overall wage structure, the rewards for skills and employment in particular sectors, importantly influence the gender pay gap. Declining gender differentials in the U.S., and the more rapid closing of the gender pay gap in the U.S. than elsewhere, appear to be primarily due to gender-specific factors. However, the relatively large gender pay gap in the U.S. compared to a number of other advanced countries seems primarily attributable to the very high level of U.S. wage inequality.
Handle: RePEc:nbr:nberwo:7732
Template-Type: ReDIF-Paper 1.0
Title: An Introduction to School-To-Work Programs in the NLSY97: How Prevalent are They, and Which Youths do They Serve?
Classification-JEL: I2; J15
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Mary Joyce
Note: CH LS
Number: 7733
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7733
File-URL: http://www.nber.org/papers/w7733.pdf
File-Format: application/pdf
Publication-Status: published as Neumark, David, and Mary Joyce. “Evaluating School-to-Work Programs Using the New NLSY." Journal of Human Resources (Fall 2001): 666-702.
Abstract: In the wake of the 1994 School-to-Work Opportunities Act (STWOA), we introduce and study two new data sources to estimate the extent to which school-to-work programs have been implemented in U.S. high schools, and the extent to which high school students are participating in these programs. The first data source, the National Longitudinal Survey of Youth, 1997 (NLSY97), provides information directly form students on whether they participated in these programs. The second source, the 1996 School Administrators's Survey, was administered to schools attended by NLSY97 interviewees, and provides information directly from schools on whether they offered any school-to-work programs. Findings from the 1996 School Administrator's Survey show that school-to-work programs are commonly offered, with over 60 percent of schools providing at least one such program. Findings from the NLSY97 show that a fair number of high school students participate in school-to-work programs, with about 38 percent of students reporting participation in at least one program. The findings concerning whether schools with disadvantaged student populations are more likely to offer school-to-work programs, or whether less-advantaged students are more likely to participate in these programs, are mixed.
Handle: RePEc:nbr:nberwo:7733
Template-Type: ReDIF-Paper 1.0
Title: Delaying the Inevitable: Optimal Interest Rate Policy and BOP Crises
Classification-JEL: F41; E52
Author-Name: Amartya Lahiri
Author-Person: pla150
Author-Name: Carlos A. Vegh
Author-Person: pve34
Note: IFM
Number: 7734
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7734
File-URL: http://www.nber.org/papers/w7734.pdf
File-Format: application/pdf
Publication-Status: published as Lahiri, Amartya and Carlos A. Vegh. "Delaying The Inevitable: Interest Rate Defense And Balance Of Payments Crises," Journal of Political Economy, 2003, v111(2,Apr), 404-424.
Abstract: The classical model of balance of payments crises implicitly assumes that the central bank sits passively as international reserves dwindle. In practice, however, central banks typically defend pegs aggressively by raising short-term interest rates. This paper analyzes the feasibility and optimality of raising interest rates to delay a potential BOP crisis. Interest rate policy works through two distinct channels. By raising demand for domestic, interest-bearing liquid assets, higher interest rates tend to delay the crisis. Higher interest rates, however, increase public debt service and imply higher future inflation, which tends to bring forward the crisis. We show that, under certain conditions, it is feasible to delay the crisis, but raising interest rates beyond a certain point may actually hasten the crisis. A similar non-monotonic relationship emerges between welfare and the increase in interest rates. It is thus optimal to engage in some active interest rate defense but only up to a certain point. In fact, there is a whole range of interest rate increases for which it is feasible to delay the crisis but not optimal to do so.
Handle: RePEc:nbr:nberwo:7734
Template-Type: ReDIF-Paper 1.0
Title: Participation and Investment Decisions in a Retirement Plan: The Influence of Colleagues' Choices
Classification-JEL: D83; I22
Author-Name: Esther Duflo
Author-Person: pdu166
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: AG PE
Number: 7735
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7735
File-URL: http://www.nber.org/papers/w7735.pdf
File-Format: application/pdf
Publication-Status: published as Duflo, Esther and Emmanuel Saez. "Participation And Investment Decisions In A Retirement Plan: The Influence Of Colleagues' Choices," Journal of Public Economics, 2002, v85(1,Jul), 121-148.
Abstract: This paper investigates whether peer effects play an important role in retirement savings decisions. We use individual data from the staff of a university to study whether individual decisions to enroll in a Tax Deferred Account plan sponsored by the university (and the choice of the mutual fund vendor for people who choose to enroll) are affected by the decisions of other employees in the same department. To overcome the identification problems, we separate the departments into sub-groups (along gender, status, age, and tenure lines) and we instrument the average participation of each peer group by the salary or tenure structure in this group. Our results suggest that peer effects are important. We find significant own-group peer effect on participation and on vendor's choice, but no cross-group peer effects.
Handle: RePEc:nbr:nberwo:7735
Template-Type: ReDIF-Paper 1.0
Title: Do Debt Flows Crowd Out Equity Flows Or the Other Way Round?
Classification-JEL: D82; F21
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Author-Name: Chi-Wa Yuen
Note: IFM PE
Number: 7736
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7736
File-URL: http://www.nber.org/papers/w7736.pdf
File-Format: application/pdf
Publication-Status: published as Assaf Razin & Efraim Sadka & Chi-Wa Yuen, 2000. "Do Debt Flows Crowd Out Equity Flows or the Other Way Round?," Annals of Economics and Finance, Society for AEF, vol. 1(1), pages 33-47, May.
Abstract: In the presence of asymmetric information, the stage at which financing decisions are made about investment projects in a small open economy is crucial for the composition of international capital inflows as well as for the efficiency of channeling savings into investment. This paper compares the implications of two extreme cases regarding the information possessed by the firms at their financing stage for whether inflows of foreign debt may crowd out foreign equity or the other way round. The scope for corrective tax policies is examined. We also provide a welfare comparison between the two mechanisms of capital flows.
Handle: RePEc:nbr:nberwo:7736
Template-Type: ReDIF-Paper 1.0
Title: Language-Skill Complementarity: Returns to Immigrant Language Acquisition
Classification-JEL: C81; F22
Author-Name: Eli Berman
Author-Person: pbe188
Author-Name: Kevin Lang
Author-Person: pla83
Author-Name: Erez Siniver
Note: LS
Number: 7737
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7737
File-URL: http://www.nber.org/papers/w7737.pdf
File-Format: application/pdf
Publication-Status: published as Berman, Eli & Lang, Kevin & Siniver, Erez, 2003. "Language-skill complementarity: returns to immigrant language acquisition," Labour Economics, Elsevier, vol. 10(3), pages 265-290, June.
Abstract: We examine the effect of language acquisition on the growth of immigrants' earnings. We gathered data on recent Soviet immigrants to Israel that include retrospective questions on earnings and language ability on entry into their current job. Language acquisition is found to interact positively with occupation level. Immigrant programmers and computer technicians have a return to tenure about three percentage points higher than that of natives; improved Hebrew language skills account for between 2/3 and 3/4 of that differential wage growth. In contrast, construction workers and gas station attendants have no convergence of wages to those of natives and language acquisition has no discernible effect on their wages. For these less skilled workers the estimated return' to Hebrew proficiency in the cross-section is entirely due to ability bias. This finding may invite a reinterpretation of other studies on the returns to language acquisition for low wage immigrants.
Handle: RePEc:nbr:nberwo:7737
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Regimes and Financial-Market Imperfections
Classification-JEL: F31; F32
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Ricardo Hausmann
Author-Person: pha552
Note: IFM ITI
Number: 7738
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7738
File-URL: http://www.nber.org/papers/w7738.pdf
File-Format: application/pdf
Abstract: This paper investigates the design of an exchange rate policy for an economy where the domestic capital market is segmented from the global financial market, producers rely on credit to finance working capital needs, and the labor market is characterized by nominal contracts. We show that the choice of an exchange rate regime is intertwined with the financial structure -- greater reliance on working capital to finance input needs, and greater segmentation of the domestic capital market increase the desirable exchange rate stability. This result follows from the observation that greater exchange rate stability is likely to reduce the real interest rate facing the producer, thereby increasing output. Hence, greater reliance on working capital increases the welfare gain attached to the lower interest rate associated with lower flexibility of the exchange rate, thereby increasing the desirability of a fixed exchange rate. Similarly, greater integration with the global capital market reduces the real interest rate benefits from exchange rate stability, increasing thereby the optimal flexibility of the exchange rate, and reducing the demand for international reserves.
Handle: RePEc:nbr:nberwo:7738
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Investing Social Security Funds in the Stock Market When Fixed Costs Prevent Some Households from Holding Stocks
Classification-JEL: H55
Author-Name: Andrew B. Abel
Author-Person: pab10
Note: AP EFG PE
Number: 7739
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7739
File-URL: http://www.nber.org/papers/w7739.pdf
File-Format: application/pdf
Publication-Status: published as Andrew B. Abel, 2001. "The Effects of Investing Social Security Funds in the Stock Market When Fixed Cobsts Prevent Some Households from Holding Stocks," American Economic Review, American Economic Association, vol. 91(1), pages 128-148, March.
Abstract: With fixed costs of participating in the stock market, consumers with high income will participate in the stock market, but consumers with lower income will not participate. If a fully-funded defined-contribution social security system tries to exploit the equity premium by selling a dollar of bonds per capita and buying a dollar of equity per capita, consumers who save but do not participate in the stock market will increase their consumption, thereby reducing saving and capital accumulation. Calibration of a general equilibrium model indicates that this policy could reduce the aggregate capital stock substantially, by about 50 cents per capita.
Handle: RePEc:nbr:nberwo:7739
Template-Type: ReDIF-Paper 1.0
Title: International Liquidity Management: Sterilization Policy in Illiquid Financial Markets
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Arvind Krishnamurthy
Author-Person: pkr393
Note: IFM EFG ME
Number: 7740
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7740
File-URL: http://www.nber.org/papers/w7740.pdf
File-Format: application/pdf
Abstract: During the booms that precede crises in emerging economies, policy makers often struggle to limit capital flows and their expansionary consequences. The main policy tool for this task is sterilization - essentially a swap of international reserves for public bonds. However, there is an extensive debate on the effectiveness of this policy, with many arguing that it may be counterproductive once the (over-) reaction of the private sector is considered. But what forces account for the private sector's reaction remain largely unexplained. In this paper we provide a model to discuss these issues. We emphasize the international liquidity management aspect of sterilization over the traditional monetary one, a re-focus that seems warranted when the main concern is external crisis prevention. We first demonstrate that policies to smooth expansion in anticipation of downturns can be Pareto improving in economies where domestic financial markets are underdeveloped. We then discuss the implementation and effectiveness of this policy via sterilization. The greatest risk of policy arises in situations where policy is most needed - that is , when financial markets are illiquid. Our mechanism is akin to the implicit bailout' problem, although the central bank acts non-selectively and only intervenes through open markets in our model. Illiquidity replaces corruption and ineptitude. In addition to an appreciation of the currency and the emergence of a quasi-fiscal deficit, the private sector's reaction to sterilization may lead to an expansion rather than the desired contraction in aggregate demand or nontradeables investment and to a bias toward short term capital inflows. The main insights extend to international liquidity management issues more generally.
Handle: RePEc:nbr:nberwo:7740
Template-Type: ReDIF-Paper 1.0
Title: Market Value and Patent Citations: A First Look
Classification-JEL: O31; O38
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Author-Name: Adam B. Jaffe
Author-Person: pja49
Author-Name: Manuel Trajtenberg
Author-Person: ptr35
Note: IO PR
Number: 7741
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7741
File-URL: http://www.nber.org/papers/w7741.pdf
File-Format: application/pdf
Publication-Status: published as Hall, Bronwyn H., Adam Jaffe and Manuel Trajtenberg. "Market Value And Patent Citations," Rand Journal of Economics, 2005, v36(1,Spring), 16-38.
Abstract: As patent data become more available in machine-readable form, an increasing number of researchers have begun to use measures based on patents and their citations as indicators of technological output and information flow. This paper explores the economic meaning of these citation-based patent measures using the financial market valuation of the firms that own the patents. Using a new and comprehensive dataset containing over 4800 U. S. Manufacturing firms and their patenting activity for the past 30 years, we explore the contributions of R&D spending, patents, and citation-weighted patents to measures of Tobin's Q for the firms. We find that citation-weighted patent stocks are more highly correlated with market value than patent stocks themselves and that this fact is due mainly to the high valuation placed on firms that hold very highly cited patents.
Handle: RePEc:nbr:nberwo:7741
Template-Type: ReDIF-Paper 1.0
Title: Examining the Incidence of Downsizing and Its Effect on Establishment Performance
Classification-JEL: J2
Author-Name: Peter Cappelli
Note: LS
Number: 7742
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7742
File-URL: http://www.nber.org/papers/w7742.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, 2000.
Publication-Status: published as Excerpted in Monthly Labor Review 123, 8 (August 2000): 40.
Abstract: The interest in examining job security and job stability has been driven in part by the phenomenon of downsizing. The distinctiveness of downsizing, as opposed to more traditional layoffs, is that the job cuts do not necessarily appear to be driven by shortfalls in demand but instead appear to be driven by the search for operating efficiencies. Despite the interest in downsizing, there has been essentially no serious investigation into its causes. I distinguish downsizing from job cuts associated with shortfalls in demand and find that employment and management practices over which employers have control, such as severance pay and profit sharing, are important predictors of subsequent downsizing and more general job losses. Surprisingly, excess operating capacity is not necessarily related to more general job losses at the establishment level. I also examine the relationship between both job losses associated with shortfalls in demand and downsizing and subsequent financial performance. The results suggest, among other things, that downsizing reduces labor costs per employee but also sales per employee. Job cuts associated with excess capacity appear to be somewhat more successful at improving sales per employee than is downsizing.
Handle: RePEc:nbr:nberwo:7742
Template-Type: ReDIF-Paper 1.0
Title: Savings and the Terms of Trade Under Borrowing Constraints
Classification-JEL: D91; F41
Author-Name: Pierre-Richard Agenor
Author-Person: pag16
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: ITI
Number: 7743
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7743
File-URL: http://www.nber.org/papers/w7743.pdf
File-Format: application/pdf
Publication-Status: published as Agenor, Pierre-Richard & Aizenman, Joshua, 2004. "Savings and the terms of trade under borrowing constraints," Journal of International Economics, Elsevier, vol. 63(2), pages 321-340, July.
Abstract: This paper examines the extent to which permanent terms-of-trade shocks have an asymmetric effect on private savings. The first part uses a simple three-period model to show that, if households expect to face binding borrowing constraints in bad states of nature, savings rates will respond asymmetrically to favorable movements in the permanent component of the terms of trade in contrast to what conventional consumption-smoothing models would predict. The second part tests for the existence of asymmetric effects of terms-of-trade disturbances using an econometric model that controls for various standard determinants of private savings. The results, based on panel data for non-oil commodity exporters of sub-Saharan Africa for the period 1980-96, indicate that increases in the permanent component of the terms of trade (measured using three alternative filtering techniques) tend indeed be associated with higher rates of private savings.
Handle: RePEc:nbr:nberwo:7743
Template-Type: ReDIF-Paper 1.0
Title: Estimating the General Equilibrium Benefits of Large Policy Changes: The Clean Air Act Revisited
Classification-JEL: H41; Q25
Author-Name: Holger Sieg
Author-Name: V. Kerry Smith
Author-Person: psm143
Author-Name: H. Spencer Banzhaf
Author-Person: pba328
Author-Name: Randy Walsh
Note: PE
Number: 7744
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7744
File-URL: http://www.nber.org/papers/w7744.pdf
File-Format: application/pdf
Publication-Status: published as Sieg, Holger, V. Kerry Smith, H. Spencer Banzhaf and Randy Walsh. "Estimating The General Equilibrium Benefits Of Large Changes In Spatially Delineated Public Goods," International Economic Review, 2004, v45(4,Nov), 1047-1077.
Abstract: This paper reports the first comprehensive approach for measuring the general equilibrium willingness to pay for large changes in air quality. It is based on a well defined locational equilibrium model. The approach allows estimation of households' indirect utility function and the underlying distribution of household types. With these estimates it is possible to compute a new locational equilibrium and the resulting housing prices in response to exogenous changes in air quality. This permits construction of welfare measures which properly take into consideration the adjustments of households in equilibrium to non-marginal changes in air quality. These types of measures are outside the scope of more traditional approaches. The empirical approach of this paper provides, for the first time, an internally consistent framework for estimation and applied general equilibrium welfare analysis. We compute the general equilibrium willingness to pay for the changes in air quality between 1990 and 1995. We implement our empirical framework using data from Southern California, an area which has experienced dramatic improvements in air quality during the past 20 years. Our findings are by and large supportive for our approach and suggest that accounting for general equilibrium effects in applied welfare can be especially important.
Handle: RePEc:nbr:nberwo:7744
Template-Type: ReDIF-Paper 1.0
Title: Does Trade Raise Income? Evidence from the Twentieth Century
Classification-JEL: F1
Author-Name: Douglas A. Irwin
Author-Person: pir25
Author-Name: Marko Tervio
Note: DAE ITI
Number: 7745
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7745
File-URL: http://www.nber.org/papers/w7745.pdf
File-Format: application/pdf
Publication-Status: published as Irwin, Douglas A. and Marko Terviö. "Does trade raise income?: Evidence from the twentieth century." Journal of International Economics 58, 1 (October 2002): 1-18.
Abstract: Efforts to estimate the effects of international trade on a country's real income have been hampered by the failure to account for the endogeneity of trade. Frankel and Romer recently use a country's geographic attributes - notably its distance from potential trading partners - as an instrument to identify the effects of trade on income in 1985. Using data from the pre- World War I, the interwar, and the post-war periods, this paper finds that the Frankel-Romer result is robust to different time periods, i.e., that instrumenting for trade with geographic characteristics raises the estimated positive effect of trade on income by a substantial margin and, in most of our cases, the precision of those estimates. These results suggest that the downward bias of OLS estimates is systematic and may be due to measurement error, a potential source of which is that trade is an imperfect proxy for a host of economically beneficial interactions between countries. However, the results are not robust to the inclusion of another geographic variable, latitude (distance from the equator).
Handle: RePEc:nbr:nberwo:7745
Template-Type: ReDIF-Paper 1.0
Title: Financial Crisis, Health Outcomes and Aging: Mexico in the 1980s and 1990s
Classification-JEL: I1; F3
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Felicia Knaul
Author-Name: Rafael Lozano
Author-Name: Oscar Mendez
Author-Name: Beatriz Zurita
Note: EH
Number: 7746
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7746
File-URL: http://www.nber.org/papers/w7746.pdf
File-Format: application/pdf
Publication-Status: published as Cutler, David, Felicia Knaul, Rafael Lozano, Oscar Mendez and Beatriz Zurita. "Financial Crisis, Health Outcomes And Ageing: Mexico In The 1980s And 1990s," Journal of Public Economics, 2002, v84(2,May), 279-303.
Abstract: We study the impact of economic crisis on health in Mexico. There have been four wide-scale economic crises in Mexico in the past two decades, the most recent in 1995-96. We find that mortality rates for the very young and the elderly increase or decline less rapidly in crisis years as compared with non-crisis years. In late 1995-96 crisis, mortality rates were about 5 to 7 percent higher in the crisis years compared to the years just prior to the crisis. This translates into a 0.4 percent increase in mortality for the elderly and a 0.06 percent increase in mortality for the very young. We find tentative evidence that economic crises affect mortality by reducing incomes and possibly by placing a greater burden on the medical sector, but not by forcing less healthy members of the population to work or by forcing primary caregivers to go to work.
Handle: RePEc:nbr:nberwo:7746
Template-Type: ReDIF-Paper 1.0
Title: How Good a Deal Was the Tobacco Settlement?: Assessing Payments to Massachusetts
Classification-JEL: I1; K0
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Arnold M. Epstein
Author-Name: Richard G. Frank
Author-Name: Raymond Hartman
Author-Name: Charles King III
Author-Name: Joseph P. Newhouse
Author-Name: Meredith B. Rosenthal
Author-Name: Elizabeth Richardson Vigdor
Note: EH
Number: 7747
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7747
File-URL: http://www.nber.org/papers/w7747.pdf
File-Format: application/pdf
Publication-Status: published as Cutler, David M, et al, 2000. " How Good a Deal Was the Tobacco Settlement? Assessing Payments to Massachusetts," Journal of Risk and Uncertainty, Springer, vol. 21(2-3), pages 235-61, November.
Abstract: We estimate the increment in Massachusetts Medicaid program costs attributable to smoking from December 20, 1991, to 1998. We describe how our methods improve upon earlier estimates of analogous costs at the national level. Current costs to the Massachusetts Medicaid program approximate the payments to Massachusetts under the tobacco settlement of November 1998. Whether these payments are viewed as appropriate compensation for Medicaid costs over time depends upon the rate of increase in future health care costs, the rate of decline in smoking, the proportion of smoking that should be attributed to the actions of the tobacco companies and the liklihood that state would have prevailed at trial. The costs to the Medicaid program are dwarfed by the internal costs to smokers themselves.
Handle: RePEc:nbr:nberwo:7747
Template-Type: ReDIF-Paper 1.0
Title: Cephalon, Inc. Taking Risk Management Theory Seriously
Classification-JEL: G10; G13
Author-Name: George Chacko
Author-Name: Peter Tufano
Author-Name: Geoffrey Verter
Note: CF
Number: 7748
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7748
File-URL: http://www.nber.org/papers/w7748.pdf
File-Format: application/pdf
Publication-Status: published as Chacko, George, Peter Tufano and Geoffrey Verter. "Cephalon, Inc. Taking Risk Management Theory Seriously," Journal of Financial Economics, 2001, v60(2-3,May), 449-485.
Abstract: We study a firm that justifies its novel use of equity derivatives as a cash-flow hedging strategy. Our purpose is to understand the challenge of translating risk management theory into managerial action. Cephalon Inc., a biotech firm, bought a large block of call options on its own stock. If the FDA approved the firm's new drug, the firm would have large cash needs, which the options were designed to meet. We analyze this stated rationale for the firm's choice, applying the cash flow hedging concepts articulated by Froot, Scharfstein and Stein (1993). In applying the theory to practice, there are lessons for both managers and theorists. Managers consider deadweight costs of financing and of risk management, whereas theory tends to ignore the latter costs. While theory is driven by costs of external financing, managers must measure these costs to arrive at decisions and this measurement problem is severe. Cephalon's risk management decisions seem motivated as much by fluctuations in the availability and cost of external financing and by accounting considerations as by fluctuations in operating cash flows or desired investment. Finally, even a field-based examination of this strategy cannot reject the conclusion that the transaction was motivated by goals other than risk management.
Handle: RePEc:nbr:nberwo:7748
Template-Type: ReDIF-Paper 1.0
Title: Race and the Value of Owner-Occupied Housing, 1940-1990
Classification-JEL: N32; R20
Author-Name: William J. Collins
Author-Person: pco315
Author-Name: Robert A. Margo
Author-Person: pma319
Note: DAE
Number: 7749
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7749
File-URL: http://www.nber.org/papers/w7749.pdf
File-Format: application/pdf
Publication-Status: published as Collins, William J. and Robert A. Margo. "Race And The Value Of Owner-Occupied Housing, 1940-1990," Regional Science and Urban Economics, 2003, v33(3,May), 255-286.
Abstract: The racial gap in the value of owner occupied housing has narrowed substantially since 1940, but this narrowing has not been even over time or across space. The 1970s stand out as an unusual decade in which the value gap did not narrow despite continued convergence in the observed characteristics of housing. A decline in the relative value of black-owned homes in central cities appears to have offset gains elsewhere during the 1970s, and this central city decline continued into the 1980s. In further exploration of the 1970s, we find evidence of a rising propensity for higher-income blacks to live in the suburbs. We also find a positive correlation between riots in the 1960s and widening of the value gap during the 1970s in a panel of cities.
Handle: RePEc:nbr:nberwo:7749
Template-Type: ReDIF-Paper 1.0
Title: Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach
Classification-JEL: O51; O52
Author-Name: Gernot Doppelhofer
Author-Person: pdo24
Author-Name: Ronald I. Miller
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Note: EFG
Number: 7750
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7750
File-URL: http://www.nber.org/papers/w7750.pdf
File-Format: application/pdf
Publication-Status: published as Xavier Sala-I-Martin & Gernot Doppelhofer & Ronald I. Miller, 2004. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, American Economic Association, vol. 94(4), pages 813-835, September.
Abstract: This paper examines the robustness of explanatory variables in cross-country economic growth regressions. It employs a novel approach, Bayesian Averaging of Classical Estimates (BACE), which constructs estimates as a weighted average of OLS estimates for every possible combination of included variables. The weights applied to individual regressions are justified on Bayesian grounds in a way similar to the well-known Schwarz criterion. Of 32 explanatory variables we find 11 to be robustly partially correlated with long-term growth and another five variables to be marginally related. Of all the variables considered, the strongest evidence is for the initial level of real GDP per capita.
Handle: RePEc:nbr:nberwo:7750
Template-Type: ReDIF-Paper 1.0
Title: The Rise and Fall of Foreign Exchange Market Intervention
Classification-JEL: E5; F3
Author-Name: Anna J. Schwartz
Note: IFM ME
Number: 7751
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7751
File-URL: http://www.nber.org/papers/w7751.pdf
File-Format: application/pdf
Publication-Status: published as Anna J. Schwartz. "The Rise and Fall of Foreign Exchange Market Intervention as a Policy Tool." Journal of Financial Services Research, Volume 18, Numbers 2-3, 319-339 (2000)
Abstract: The premise of the paper is that the fervor for foreign exchange market intervention by U.S, and European monetary authorities has ebbed in recent years. A pattern of initial belief in the effectiveness of foreign exchange market intervention has recently been eroded, as is revealed by the absence of intervention in circumstances that in earlier times would have invoked it. Only the Bank of Japan among central banks of the developed world has not thusfar abandoned its faith that intervention can change the relative value of the yen as determined by market forces to conform with its notion of what that value should be. To explain why U.S. and European monetary authorities no longer believe that intervention is a tool that works, I review the equivocal record of past episodes, the inconclusive results of empirical research, and the problems of implementation that intervention advocates ignore.
Handle: RePEc:nbr:nberwo:7751
Template-Type: ReDIF-Paper 1.0
Title: Interpreting the "One Big Wave" in U.S. Long-Term Productivity Growth
Classification-JEL: O40; O47
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG PR
Number: 7752
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7752
File-URL: http://www.nber.org/papers/w7752.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Robert J. (ed.) Productivity growth, inflation, and unemployment: The collected essays of Robert J. Gordon, With a foreword by Robert M. Solow. Cambridge; New York and Melbourne: Cambridge University Press, 2004.
Abstract: This paper assesses the standard data on output, labor input, and capital input, which imply one big wave' in multi-factor productivity (MFP) growth for the United States since 1870. The wave-like pattern starts with slow MFP growth in the late 19th century, then an acceleration peaking in 1928-50, and then a deceleration to a slow rate after 1972 that returns to the poor performance of 1870-1891. A counterpart of the standard data is a mysterious doubling in the ratio of output to capital input when the postwar era is compared with 1870-1929. Three types of measurement adjustments are applied to the standard input data. Following the lead of Denison and Jorgenson-Griliches, adjustments for the changing composition (or quality') of labor and capital, currently published by the BLS back to 1948, are estimated for 1870-1948. These composition adjustments take into account the shifting mix of the labor force along the dimensions of education and age-sex composition, and of the capital stock between equipment and structures. Further adjustments are made to capital input data to allow retirement to vary with gross investment rather than to follow a fixed pattern depending only on age, and to add types of capital owned by the government that are particularly productive in the private sector. A new MFP series taking account of all these adjustments grows more slowly throughout, and the big wave' phenomenon is both flatter and extends back further in time to 1891. However, there is no solution to the post-1972 productivity slowdown, and in the new data MFP growth during 1972-96 proceeds at a pathetic 0.1 percent per year. A byproduct of the measurement adjustments is to solve completely the previous puzzle of the jump in the output-capital ratio; in the new data this ratio is actually lower in 1996 than in 1870. The primary substantive explanation for the big wave lies in the timing of inventions. MFP growth during the big wave' period benefited from the diffusion of four great clusters of inventions that dwarf today's information technology revolution in their combined importance. A complementary hypothesis is that the partial closing of American labor markets to immigration and of American goods markets to imports during the big wave period gave an artificial and temporary boost to real wages which fed back into boosting productivity growth, followed by a reopening that contributed to the post-1972 productivity slowdown.
Handle: RePEc:nbr:nberwo:7752
Template-Type: ReDIF-Paper 1.0
Title: Robust-H-infinity Forecasting and Asset Pricing Anomalies
Classification-JEL: E44; G12
Author-Name: Aaron Tornell
Author-Person: pto157
Note: AP IFM
Number: 7753
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7753
File-URL: http://www.nber.org/papers/w7753.pdf
File-Format: application/pdf
Abstract: We present an alternative expectation formation mechanism that helps rationalize well known asset pricing anomalies, such as the predictability of excess returns, excess volatility, and the equity-premium puzzle. As with rational expectations (RE), the expectation formation mechanism we consider is based on a rigorous optimization algorithm that does not presume misperceptions - it simply departs from some of the implicit assumptions that underlie RE. Agents fear that existence of misspecifications and design strategies that will be robust against a very large class of misspecifications. The new element is that uncertainty cannot be modeled via probability distributions. We consider an asset pricing model where uncertainty is represented by unknown disturbance sequences, as in the H-infinity-control literature. Agents must filter the persistent' and transitory' components of a sequence of observations in order to make consumption and portfolio decisions. We find that H-infinity forecasts are more sensitive to news than RE forecasts and equilibrium prices exhibit the anomalies previously mentioned.
Handle: RePEc:nbr:nberwo:7753
Template-Type: ReDIF-Paper 1.0
Title: Benevolent Colluders? The Effects of Antitrust Action on College Financial Aid and Tuition
Author-Name: Caroline M. Hoxby
Author-Person: pho46
Note: CH LS PE
Number: 7754
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7754
File-URL: http://www.nber.org/papers/w7754.pdf
File-Format: application/pdf
Abstract: The Department of Justice's (DOJ's) investigation of private colleges for price-fixing caused the Overlap' group of colleges to discontinue their meetings. DOJ alleged that the meetings enabled the colleges to collude on higher tuition and increase their tuition revenue. The colleges claimed that they needed the meeting to implement their policies of basing aid on need and fully covering need. This paper investigates whether the cessation of the meeting caused a break-down of need-based aid policies or whether, as DOJ argued, the meeting was unnecessary for such policies. I also attempt to determine whether the cessation of the meeting affected tuition or tuition revenue. Finally, I examine the question of whether need-based aid is simply redistribution or a method of internalizing externalities among students. Many students would like colleges to maintain policies of need-based aid for others while making exceptions for them, awarding them grants for which they would not qualify based on need. Yet, the same students might prefer a regime of need-based aid, knowing that it would apply them, because basing aid on need affects colleges' selectivity and diversity.
Handle: RePEc:nbr:nberwo:7754
Template-Type: ReDIF-Paper 1.0
Title: What is an Oil Shock?
Classification-JEL: E3
Author-Name: James D. Hamilton
Author-Person: pha60
Note: EFG EEE
Number: 7755
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7755
File-URL: http://www.nber.org/papers/w7755.pdf
File-Format: application/pdf
Publication-Status: published as Hamilton, James D., 2003. "What is an oil shock?," Journal of Econometrics, Elsevier, vol. 113(2), pages 363-398, April.
Abstract: This paper uses a flexible approach to characterize the nonlinear relation between oil price changes and GDP growth. The paper reports clear evidence of nonlinearity, consistent with earlier claims in the literature-- oil price increases are much more important than oil price decreases, and increases have significantly less predictive content if they simply correct earlier decreases. An alternative interpretation is suggested based on estimation of a linear functional form using exogenous disruptions in petroleum supplies as instruments. The evidence suggests that oil shocks matter because they disrupt spending by consumers and firms on certain key sectors.
Handle: RePEc:nbr:nberwo:7755
Template-Type: ReDIF-Paper 1.0
Title: Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance
Classification-JEL: I22; J24
Author-Name: Susan Dynarski
Author-Person: pdy1
Note: CH PE
Number: 7756
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7756
File-URL: http://www.nber.org/papers/w7756.pdf
File-Format: application/pdf
Publication-Status: Published as "Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance," National Tax Journal 53:3 (September 2000), pp. 629- 661.
Abstract: The federal government and the states have recently enacted a slew of aid policies aimed at college students from middle- and high-income families. I estimate the impact of aid on the college attendance of middle- and upper-income youth by evaluating Georgia's HOPE Scholarship, the inspiration of the new federal Hope Scholarship. The results suggest that Georgia's program has had a surprisingly large impact on the college attendance rate of middle- and high-income youth. Using a set of nearby states as a control group, I find that Georgia's program has likely increased the college attendance rate of all 18- to 19-year-olds by 7.0 to 7.9 percentage points. The results suggest that each $1,000 in aid ($1998) increased the college attendance rate in Georgia by 3.7 to 4.2 percentage points. Due to key differences between the federal and Georgia programs, these estimates should be treated as a generous upper bound on the predicted effect of the federal Hope Scholarship. Further, the evidence suggests that Georgia's program has widened the gap in college attendance between blacks and whites and between those from low- and high-income families. The federal Hope Scholarship, should it have its intended effect on middle- and upper-income attendance, will also widen already large racial and income gaps in college attendance in the US.
Handle: RePEc:nbr:nberwo:7756
Template-Type: ReDIF-Paper 1.0
Title: The US Economic Model at Y2K: Lodestar for Advanced Capitalism?
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 7757
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7757
File-URL: http://www.nber.org/papers/w7757.pdf
File-Format: application/pdf
Publication-Status: published as Freeman, Ricahrd B. "The US Economic Model at Y2K: Lodestar for Advanced Capitalism?" Canadian Public Policy / Analyse de Politiques, Vol. 26, Supplement: Structural Aspects of Unemployment in Canada (Jul., 2000): S187-S200.
Abstract: The 1990s economic performance of the US suggests that the country may have the right mix of institutions and policies to be the peak capitalist economy in the new information economy. This paper develops criterion for judging peak status and examines whether the US fulfills these criterion. The US's employment and productivity performance make it a legitimate candidate for peak, but the record in distribution does not. As the late 1990s boom raised the wages of low skill workers, continued full employment will greatly strengthen the case for the US as peak economy. But with anything less than full employment the US economy will lose its luster. Even if this occurs, however, the US record in employing women and extending ownership to many workers deserves attention.
Handle: RePEc:nbr:nberwo:7757
Template-Type: ReDIF-Paper 1.0
Title: Alcohol Consumption and Alcohol Advertising Bans
Classification-JEL: I1
Author-Name: Henry Saffer
Author-Person: psa935
Note: EH
Number: 7758
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7758
File-URL: http://www.nber.org/papers/w7758.pdf
File-Format: application/pdf
Publication-Status: published as Henry Saffer & Dhaval Dave, 2002. "Alcohol consumption and alcohol advertising bans," Applied Economics, Taylor and Francis Journals, vol. 34(11), pages 1325-1334.
Abstract: The purpose of this paper is to empirically examine the relationship between alcohol advertising bans and alcohol consumption. Most prior studies have found no effect of advertising on total alcohol consumption. A simple economic model is provided which explains these prior results. The data set used in this study is a pooled time series of data from 20 countries over 26 years. The empirical model is a simultaneous equations system which treats both alcohol consumption and alcohol advertising bans as endogenous. The primary conclusions of this study are that alcohol advertising bans decrease alcohol consumption and that alcohol consumption has a positive effect on the legislation of advertising bans. The results indicate that an increase of one ban could reduce alcohol consumption by five to eight percent. The alcohol price elasticity is estimated at about .2. The results suggest that recent exogenous decreases in alcohol consumption will decrease the probability of enactment of new bans and undermine the continuance of existing bans. Canada, Denmark, New Zealand and Finland have recently rescinded alcohol advertising bans. Alcohol consumption in these countries may increase or decrease at a slower rate than would have occurred had advertising bans remained in place.
Handle: RePEc:nbr:nberwo:7758
Template-Type: ReDIF-Paper 1.0
Title: The Boskin Commission Report and its Aftermath
Classification-JEL: I1; I11
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: PR EFG
Number: 7759
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7759
File-URL: http://www.nber.org/papers/w7759.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Robert-J, 1999. "The Boskin Commission Report and Its Aftermath," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 17(3), pages 41-68, December.
Abstract: This paper briefly summarizes the analysis and findings of the 1996 Boskin Commission Report, Toward a More Accurate Measure of the Cost of Living. It then reviews the comments and criticisms that appeared soon after the Report was issued and provides responses to the more important criticisms. Changes in the CPI, both those that were planned before the Report and those that were in part a response to its recommendations, are summarized and assessed. The paper concludes with a summary of recent research on quality change and comments on the current status of the CPI and of price measurement research. Including those improvements that the BLS has announced for implementation in 2000-2002, the paper estimates that the current upward bias in the CPI is in the range of 0.65 percent, down from the 1.1 percent that the Report estimated applied to the period 1995-96.
Handle: RePEc:nbr:nberwo:7759
Template-Type: ReDIF-Paper 1.0
Title: The Economic Impacts of the Tobacco Settlement
Classification-JEL: I1; K0
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Raymond S. Hartman
Author-Name: M.B. Landrum
Author-Name: J. Newhouse
Author-Name: Meredith B. Rosenthal
Note: EH
Number: 7760
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7760
File-URL: http://www.nber.org/papers/w7760.pdf
File-Format: application/pdf
Publication-Status: published as Cutler, David M., Jonathan Gruber, Raymond S. Hartman, Mary Beth Landrum, Joseph P. Newhouse, and Meredith B. Rosenthal. "The Economic Impacts of the Tobacco Settlement." Journal of Policy Analysis and Management 21, 1 (Winter 2002): 1-19.
Abstract: Recent litigation against major tobacco companies culminated in a Master Settlement Agreement' (MSA) under which the participating companies agreed to compensate most states for Medicaid expenses. We outline the terms of the settlement and analyze whether it was a move toward economic efficiency using data from Massachusetts. Medicaid spending will fall, but only a modest amount ($0.1 billion). The efficiency issue turns mainly on the treatment of health benefits from reduced smoking induced by the settlement. We conclude that the settlement was a move towards economic efficiency.
Handle: RePEc:nbr:nberwo:7760
Template-Type: ReDIF-Paper 1.0
Title: Borrowing Constraints and the Returns to Schooling
Author-Name: Stephen Cameron
Author-Name: Christopher Taber
Note: CH PE
Number: 7761
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7761
File-URL: http://www.nber.org/papers/w7761.pdf
File-Format: application/pdf
Publication-Status: published as Cameron, Stephen V. and Christopher Taber. "Estimation Of Educational Borrowing Constraints Using Returns To Schooling," Journal of Political Economy, 2004, v112(1,Feb), 132-182.
Abstract: To a large degree, the expansion of student aid programs to potential college students over the past 25 years in the United States has been based on the presumption that borrowing constraints present an obstacle to obtaining a college education. Economists and sociologists studying schooling choices have found empirical support for college subsidies in the well-documented, large positive correlation between family income and schooling attainment. This correlation has been widely interpreted as evidence of credit constraints. Recently, however, Cameron, and Heckman (1998, 2000), Keane and Wolpin (1999), and Shea (1999) have questioned whether borrowing constraints plays any role on college choices. Over the last 30 years, a separate literature in economics has aimed at estimating measured returns to schooling purged of various biases. One potential source of bias arises when students have differential access to sources of credit for educational investments. The connection between credit access and returns to schooling-first articulated by Becker (1972)- has been recently explored by Lang (1993) and Card (1995a, 2000). Lang and Card term this bias discount rate bias,' and argue it can help explain anomalously high instrumental variables estimates of returns to schooling documented by a multitude of empirical researchers. This argument implicitly suggests borrowing constraints are important for schooling decisions. Our paper attempts to integrate and reconcile these two literatures. Building on the seminal work of Willis and Rosen (1979), we develop a framework that allows us to study schooling determinants and returns together. Identification of the effect of borrowing constraints arises from the fact that foregone earnings-the indirect costs of school-and the direct costs of schooling affect borrowing constrained persons differently from unconstrained individuals. We apply this idea using least-squares, instrumental variables regression, and a structural economic model to measure the extent of borrowing constraints on schooling choices. Because returns to schooling and quantity of schooling are jointly determined, the structural approach allows us to explore the importance of credit market constraints on schooling choices once the influences of ability and relative wages are parceled out. This type of experiment cannot be done in standard models of schooling-attainment. None of these methods produces evidence of borrowing constraints.
Handle: RePEc:nbr:nberwo:7761
Template-Type: ReDIF-Paper 1.0
Title: Generational Conflict, Human Capital Accumulation, and Economic Growth
Classification-JEL: E62; H30
Author-Name: Douglas Holtz-Eakin
Author-Name: Mary E. Lovely
Author-Person: plo347
Author-Name: Mehmet S. Tosun
Note: PE
Number: 7762
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7762
File-URL: http://www.nber.org/papers/w7762.pdf
File-Format: application/pdf
Publication-Status: Published as "Solow and States: Capital Accumulation, Productivity, and Economic Growth", National Tax Journal, Vol. 46, no. 4 (1993): 425-439.
Abstract: Worldwide, dependency ratios are forecast to increase dramatically in the next 50 years. A great deal of attention has been devoted to understanding the changes in fiscal policies that must' take place to accommodate these changes. In contrast, less effort has been concentrated on studying the fiscal shifts that will endogenously result from demographic pressures. An example of particular interest is the degree to which a more elderly population will support public spending for education. We use an overlapping-generations model to investigate the effect of this demographic transition on the endogenous determination of public spending for education. A demographic transition alters the identity of the median voter, leading to a preference for less education spending. If the public sector is inefficiently small, demographic transition exacerbates the underprovision of human capital. Alternatively, such a shift may trim an inefficiently large government, reduce tax rates and raise capital per worker enough to raise education spending. Thus, there is no automatic link between demographic transition and reduced support for those programs whose benefits are concentrated among the young.
Handle: RePEc:nbr:nberwo:7762
Template-Type: ReDIF-Paper 1.0
Title: Emerging Equity Markets and Economic Development
Classification-JEL: F3; G0
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Campbell R. Harvey
Author-Person: pha102
Author-Name: Christian Lundblad
Author-Person: plu185
Note: AP IFM
Number: 7763
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7763
File-URL: http://www.nber.org/papers/w7763.pdf
File-Format: application/pdf
Publication-Status: published as Bekaert, Geert, Campbell R. Harvey and Christian Lundblad. "Emerging Equity Markets And Economic Development," Journal of Development Economics, 2001, v66(2,Dec), 465-504.
Abstract: We provide an analysis of real economic growth prospects in emerging markets after financial liberalizations. In contrast with previous research, we identify the financial liberalization dates and examine the influence of liberalizations while controlling for a number of other macroeconomic and financial variables. Our work also introduces an econometric methodology that allows us to use extensive time-series as well as cross-sectional information for our tests. We find across a number of different specifications that financial liberalizations are associated with significant increases in real economic growth.
Handle: RePEc:nbr:nberwo:7763
Template-Type: ReDIF-Paper 1.0
Title: Banks, Short Term Debt and Financial Crises: Theory, Policy Implications and Applications
Classification-JEL: G20; G21
Author-Name: Douglas W. Diamond
Author-Person: pdi80
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Note: CF IFM
Number: 7764
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7764
File-URL: http://www.nber.org/papers/w7764.pdf
File-Format: application/pdf
Publication-Status: published as Diamond, Douglas W. & Rajan, Raghuram G., 2001. "Banks, short-term debt and financial crises: theory, policy implications and applications," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 54(1), pages 37-71, June.
Abstract: Short-term borrowing has often been blamed for precipitating financial crises. We argue that while the empirical association between a financial institution's, or country's, short-term borrowing and susceptibility to crises may, in fact, exist, the direction of causality is often precisely the opposite to the one traditionally suggested by commentators. Institutions like banks that want to enhance their ability to provide liquidity and credit to difficult borrowers have to borrow short-term. Similarly countries that have poor disclosure rules and inadequate investor protections, have limited long-term debt capacity, and will find their borrowing becoming increasingly short-term as they finance illiquid investment. Thus it is the increasing illiquidity of the investment being financed (or the deteriorating credit quality of borrowers) that necessitates short-term financing, and causes the susceptibility to crises. In fact, once illiquid investments have been financed, rather than making the system more stable, a ban on short-term financing may precipitate a more severe crisis. Even a priori, a ban is not without adverse consequences policy makers have to trade off the costs of decreased credit creation and investment against the benefits of greater stability. A ban on short-term debt often deals with symptoms rather than underlying causes.
Handle: RePEc:nbr:nberwo:7764
Template-Type: ReDIF-Paper 1.0
Title: Natural Openness and Good Government
Classification-JEL: F0; F1
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: IFM ITI
Number: 7765
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7765
File-URL: http://www.nber.org/papers/w7765.pdf
File-Format: application/pdf
Abstract: This paper offers a new interpretation of the connection between openness and good governance. Assuming that corruption and bad governance drive out international trade and investment more than domestic trade and investment, a naturally more open economy' as determined by its size and geography would devote more resources to building good institutions and would display lower corruption in equilibrium. In data, naturally more open economies' do exhibit less corruption even after taking into account their levels of development. Residual openness' which potentially includes trade policies is found not to be important once natural openness' is accounted for. Moreover, naturally more open economies' also tend to pay better civil servant salaries relative to their private sector alternatives indicative of the marginal benefit of good governance in a society's revealed preference. These patterns are consistent with the conceptual model.
Handle: RePEc:nbr:nberwo:7765
Template-Type: ReDIF-Paper 1.0
Title: Quality of Bureaucracy and Open-Economy Macro Policies
Classification-JEL: F38; F4
Author-Name: Chong-En Bai
Author-Person: pba338
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: IFM
Number: 7766
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7766
File-URL: http://www.nber.org/papers/w7766.pdf
File-Format: application/pdf
Abstract: Bureaucratic quality in terms of the level of corruption varies widely across countries, and is in general slow to evolve relative to the speed with which many economic polices can be implemented such as the imposition of capital controls. In this paper, we study the possibility that quality of bureaucracy may be an important structural determinant of open-economy macro-policies, in particular, the imposition/removal of capital controls, and financial repression. We first derive a model that delivers such a result. Bureaucratic corruption translates into reduced ability by the government to collect tax revenue. Even if capital control/financial repression is otherwise inefficient, as long as the government needs the revenue for public goods provision, it would have to rely more on capital control/financial repression. For all countries for which we can obtain relevant data, we find that more corrupt countries are indeed more likely to impose capital controls, a pattern consistent with the model's prediction. The result of this paper suggests that a premature removal of capital controls mandated by outside institutions could reduce rather than enhance economic efficiency.
Handle: RePEc:nbr:nberwo:7766
Template-Type: ReDIF-Paper 1.0
Title: Allocating Payroll Tax Revenue to Personal Retirement Accounts to Maintain Social Security Benefits and the Payroll Tax Rate
Classification-JEL: H55; I3
Author-Name: Martin Feldstein
Author-Person: pfe112
Author-Name: Andrew Samwick
Author-Person: psa395
Note: PE
Number: 7767
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7767
File-URL: http://www.nber.org/papers/w7767.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin and Andrew Samwick. "Allocating Payroll Tax Revenue to Personal Retirement Accounts." Tax Notes 87, 12 (June 19, 2000): 1645-1652.
Abstract: In an earlier paper we analyzed a method of combining traditional tax financed pay-as-you-go Social Security benefits with annuities financed by Personal Retirement Accounts. We showed that such a combination could maintain the level of retirement income projected in current Social Security law while avoiding a future increase in the payroll tax rate. The current paper extends the earlier analysis in four ways: (1) We now specify that the funds deposited in the Personal Retirement Accounts come from allocating 2 percent of the 12.4 percent payroll tax instead of being additional funds provided from outside the system. (2) We discuss the effects of the uncertain return on investment based annuities. (3) We provide estimates of the cost of permitting bequests if individuals die either before retirement or during the first twenty years after retirement. (4) We update the statistical basis for our estimates to be consistent with the 2000 Social Security Trustees Report. Our analysis shows that a program of Personal Retirement Accounts funded by allocating 2 percent of the 12.4 percent payroll tax collections can maintain the retirement income projected in current law while avoiding any increase in the 12.4 percent payroll tax. The combination of the higher return on the assets in the Personal Retirement Accounts and the use of the additional corporate profits taxes that result from the increased national saving in Personal Retirement Accounts is sufficient to maintain the solvency of the Social Security Trust Fund even though the tax payments to the fund are reduced from 12.4 percent of taxable payroll to 10.4 percent of taxable payroll. Although there is a period of years when the Trust Fund must borrow, it is able to repay this borrowing with interest out of future tax collections. In the long run, the Trust Fund becomes very large, implying that it would be possible to reduce the payroll tax further or to increase retirement incomes above the levels projected in current law.
Handle: RePEc:nbr:nberwo:7767
Template-Type: ReDIF-Paper 1.0
Title: On the Instability of Variance Decompositions of the Real Exchange Rate across Exchange-Rate-Regimes: Evidence from Mexico and the United States
Classification-JEL: F30; F41
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Note: IFM
Number: 7768
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7768
File-URL: http://www.nber.org/papers/w7768.pdf
File-Format: application/pdf
Abstract: Variance decompositions of the Mexico-United States real exchange rate are examined using monthly data on consumer prices and the nominal exchange rate for the period January, 1969 to February, 2000. The results show that the robust result found in industrial-country data that most of the variation of the real exchange rate is due to fluctuations in prices of tradable goods and nominal exchange rates holds only in periods in which Mexico was not under a regime of exchange-rate management. In periods in the sample in which Mexico had a managed exchange-rate regime, the variability of prices of non-tradable goods relative to tradable goods accounts for up to 70 percent of the variability of the peso-dollar real exchange rate.
Handle: RePEc:nbr:nberwo:7768
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems
Classification-JEL: I20; J31
Author-Name: David Card
Author-Person: pca271
Note: CH LS
Number: 7769
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7769
File-URL: http://www.nber.org/papers/w7769.pdf
File-Format: application/pdf
Publication-Status: published as Card, David. "Estimating The Return To Schooling: Progress On Some Persistent Econometric Problems," Econometrica, 2001, v69(5,Sep), 1127-1160.
Abstract: This paper reviews a set of recent studies that have attempted to measure the causal effect of education on labor market earnings by using institutional features of the supply side of the education system as exogenous determinants of schooling outcomes. A simple theoretical model that highlights the role of comparative advantage in the optimal schooling decision is presented and used to motivate an extended discussion of econometric issues, including the properties of ordinary least squares and instrumental variables estimators. A review of studies that have used compulsory schooling laws, differences in the accessibility of schools, and similar features as instrumental variables for completed education reveals that the resulting estimates of the return to schooling are typically as big or bigger than the corresponding ordinary least squares estimates. One interpretation of this finding is that marginal returns to education among the low-education subgroups typically affected by supply-side innovations tend to relatively high, reflecting their high marginal costs of schooling, rather than low ability that limits their return to education.
Handle: RePEc:nbr:nberwo:7769
Template-Type: ReDIF-Paper 1.0
Title: Pensions and Contemporary Socioeconomic Change
Classification-JEL: H55
Author-Name: Assar Lindbeck
Note: AG PE
Number: 7770
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7770
File-URL: http://www.nber.org/papers/w7770.pdf
File-Format: application/pdf
Publication-Status: published as Pensions and Contemporary Socioeconomic Change, Assar Lindbeck. in Social Security Pension Reform in Europe, Feldstein and Siebert. 2002
Abstract: The paper discusses the consequences for the functioning of different pension systems of various types of socioeconomic changes, mainly demographic developments, variations in productivity growth and changes in real interest rates. Two of the pension systems have exogenous and four have endogenous contribution rates. I analyze both marginal and radical pension reforms for the purpose of making pension systems more stable, avoiding arbitrary redistibutions between generations and dealing with increased heterogeneity of the population in terms of family structure and international mobility. The advantages of combining PAYGO and actuarially fair systems are pointed out.
Handle: RePEc:nbr:nberwo:7770
Template-Type: ReDIF-Paper 1.0
Title: The Colonial Origins of Comparative Development: An Empirical Investigation
Classification-JEL: O11; P16
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Simon Johnson
Author-Person: pjo44
Author-Name: James A. Robinson
Author-Person: pro179
Note: DAE EFG LS
Number: 7771
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7771
File-URL: http://www.nber.org/papers/w7771.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron, Simon Johnson and James A. Robinson. "The Colonial Origins Of Comparative Development: An Empirical Investigation," American Economic Review, 2001, v91(5,Dec), 1369-1401.
Abstract: We exploit differences in the mortality rates faced by European colonialists to estimate the effect of institutions on economic performance. Our argument is that Europeans adopted very different colonization policies in different colonies, with different associated institutions. The choice of colonization strategy was, at least in part, determined by whether Europeans could settle in the colony. In places where Europeans faced high mortality rates, they could not settle and they were more likely to set up worse (extractive) institutions. These early institutions persisted to the present. We document evidence supporting these hypotheses. Exploiting differences in mortality rates faced by soldiers, bishops and sailors in the colonies in the 17th, 18th and 19th centuries as an instrument for current institutions, we estimate large effects of institutions on income per capita. Our estimates imply that differences in institutions explain approximately three-quarters of the income per capita differences across former colonies. Once we control for the effect of institutions, we find that countries in Africa or those farther away from the equator do not have lower incomes.
Handle: RePEc:nbr:nberwo:7771
Template-Type: ReDIF-Paper 1.0
Title: Consumption Externalities 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: 7772
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7772
File-URL: http://www.nber.org/papers/w7772.pdf
File-Format: application/pdf
Publication-Status: published as Ernst R. Berndt & Robert S. Pindyck & Pierre Azoulay, 2003. "Consumption Externalities and Diffusion in Pharmaceutical Markets: Antiulcer Drugs," Journal of Industrial Economics, Blackwell Publishing, vol. 51(2), pages 243-270, 06.
Abstract: We examine the role of consumption externalities in the demand for pharmaceuticals at both the brand level and over a therapeutic class of drugs. These effects emerge when use of a drug by others affects its value, and/or conveys information abut efficacy and safety to patients and physicians. This can affect that rate of market diffusion for a new entrant, and can lead to herb behavior whereby a particular drug can dominate the market despite the availability of close substitutes. We use data for H2-antagonist antiulcer drugs to estimate a dynamic demand model and quantify these effects. The model has three components: an hedonic price equation that measures how the aggregate usage of a drug, as well as conventional attributes, affect brand valuation; equations relating equilibrium market shares to quality-adjusted prices and marketing levels; and diffusion equations describing the dynamic adjustment process. We find that consumption externalities influence both valuations and rates of diffusion, but that they operate at the brand and not the therapeutic class level.
Handle: RePEc:nbr:nberwo:7772
Template-Type: ReDIF-Paper 1.0
Title: The Cost of Job Security Regulation: Evidence from Latin American Labor Markets
Classification-JEL: C20
Author-Name: James J. Heckman
Author-Name: Carmen Pages
Author-Person: ppa299
Note: LS
Number: 7773
Creation-Date: 2000-06
Order-URL: http://www.nber.org/papers/w7773
File-URL: http://www.nber.org/papers/w7773.pdf
File-Format: application/pdf
Publication-Status: published as Heckman, James J. and Carmen Pages-Serra. “The Cost of Job Security Regulation: Evidence from the Latin American Labor Markets." Journal of the Latin American and Caribbean Economic Association 1, 1 (Fall 2000): 109-154.
Abstract: This paper documents the high level of job security protection in Latin American labor markets and analyzes its impact on employment. We show that job security policies have substantial impact on the level and the distribution of employment in Latin America. They reduce employment and promote inequality. The institutional organization of the labor market affects both employment and inequality.
Handle: RePEc:nbr:nberwo:7773
Template-Type: ReDIF-Paper 1.0
Title: Tax and Subsidy Combinations for the Control of Car Pollution
Classification-JEL: H23; H21
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Sarah West
Author-Person: pwe92
Note: PE EEE
Number: 7774
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7774
File-URL: http://www.nber.org/papers/w7774.pdf
File-Format: application/pdf
Publication-Status: published as Don Fullerton & Sarah E. West, 2010. "Tax and Subsidy Combinations for the Control of Car Pollution," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 10(1).
Abstract: Despite technological advances, an individual car's emissions still cannot be measured reliably enough to impose a Pigovian tax. This paper explores alternative market incentives that could be used instead. We solve for second-best combinations of uniform taxes on gasoline, engine size, and vehicle age. For 1,261 individuals and cars in the 1994 Consumer Expenditure Survey, we record the car's model, year, and number of cylinders. We then seek a corresponding car in data from the California Air Resources Board that shows the car's engine size, fuel efficiency, and emissions per mile. We calculate the welfare improvement from a zero-tax scenario to the ideal Pigovian tax, and we find that 71 percent of that gain can be achieved by the second-best combination of taxes on gas, size, and vintage. A gas tax alone attains 62 percent of that gain. These results are robust to variation in the elasticity of substitution among goods.
Handle: RePEc:nbr:nberwo:7774
Template-Type: ReDIF-Paper 1.0
Title: A Framework for Assessing Estate and Gift Taxation
Classification-JEL: H21; H23
Author-Name: Louis Kaplow
Author-Person: pka44
Note: PE
Number: 7775
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7775
File-URL: http://www.nber.org/papers/w7775.pdf
File-Format: application/pdf
Publication-Status: published as Gale, William G., James R. Hines Jr., and Joel Slemrod (eds.) Rethinking estate and gift taxation. Washington, D.C.: Brookings Institution Press, 2001.
Abstract: Whether and how estates and gifts should be taxed has long been a controversial subject, and the approach to estate and gift taxation varies among developed countries. Arguments for and against various forms of transfer taxation have focused on concerns about the distribution of income and wealth, intergenerational equity, raising revenue, savings incentives, and other economic and philosophical issues. This essay has two purposes. The first is to examine the conceptual basis for various arguments for and against the current estate and gift tax regime and proposed alternatives. The second is to integrate policy analysis of transfer taxation with that of the rest of the tax system, notably, the income tax. The analysis begins by considering how it would be optimal to tax transfers if they are viewed simply one of many forms of expenditure by donors, and then it explores how the distinctive features of gifts and bequests may alter the conclusions. The importance of different transfer motives is discussed, and the analysis is reconsidered in the light of the importance of human capital in intergenerational transfers; differences between inter vivos transfers and bequests, between gifts to individuals and gifts to charitable institutions, and among gifts to donees having varying relationships to the donor; and the possibility that transfers are not explained by maximizing behavior.
Handle: RePEc:nbr:nberwo:7775
Template-Type: ReDIF-Paper 1.0
Title: Tariff-Jumping Antidumping Duties
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Note: ITI
Number: 7776
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7776
File-URL: http://www.nber.org/papers/w7776.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.
Publication-Status: published as Blonigen, Bruce A., 2002. "Tariff-jumping antidumping duties," Journal of International Economics, Elsevier, vol. 57(1), pages 31-49, June.
Abstract: Using a newly constructed database, this paper examines the tariff-jumping response of all firm and product combinations subject to U.S. AD investigations from 1980-1990. The results strongly support the hypothesis that tariff-jumping is only a realistic option for multinational firms from industrialized countries. Because many firms subject to U.S. AD investigations and eventual duties do not have these characteristics, tariff-jumping of U.S. AD protection is relatively modest. It may also explain why developing countries have been more concerned about addressing AD protection in the WTO than industrialized countries. While the raw numbers show a high tariff-response rate for Japanese firms, this is due almost solely to the fact that many of these firms have substantial multinational experience, not due to any Japanese-specific response per se. I also find little evidence that certain U.S. Department of Commerce procedures that use information from the domestic petitioners (rather than the foreign firms) to calculate dumping margins has any impact on tariff-jumping responses.
Handle: RePEc:nbr:nberwo:7776
Template-Type: ReDIF-Paper 1.0
Title: The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?
Classification-JEL: F00; F3
Author-Name: Maurice Obstfeld
Author-Person: pob13
Author-Name: Kenneth Rogoff
Author-Person: pro164
Note: EFG IFM ITI ME
Number: 7777
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7777
File-URL: http://www.nber.org/papers/w7777.pdf
File-Format: application/pdf
Publication-Status: published as The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?, Maurice Obstfeld, Kenneth Rogoff. in NBER Macroeconomics Annual 2000, Volume 15, Bernanke and Rogoff. 2001
Publication-Status: published as Maurice Obstfeld & Kenneth Rogoff, 2000. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER/Macroeconomics Annual, vol 15(1), pages 339-390.
Abstract: The central claim in this paper is that by explicitly introducing costs of international trade (narrowly, transport costs but more broadly, tariffs, nontariff barriers and other trade costs), one can go far toward explaining a great number of the main empirical puzzles that international macroeconomists have struggled with over twenty-five years. Our approach elucidates J. McCallum's home bias in trade puzzle, the Feldstein-Horioka saving-investment puzzle, the French-Poterba equity home bias puzzle, and the Backus-Kehoe- Kydland consumption correlations puzzle. That one simple alteration to an otherwise canonical international macroeconomic model can help substantially to explain such a broad arrange of empirical puzzles, including some that previously seemed intractable, suggests a rich area for future research. We also address a variety of international pricing puzzles, including the purchasing power parity puzzle emphasized by Rogoff, and what we term the exchange-rate disconnect puzzle.' The latter category of riddles includes both the Meese-Rogoff exchange rate forecasting puzzle and the Baxter-Stockman neutrality of exchange rate regime puzzle. Here although many elements need to be added to our extremely simple model, we can still show that trade costs play an essential role.
Handle: RePEc:nbr:nberwo:7777
Template-Type: ReDIF-Paper 1.0
Title: The Equity Premium and Structural Breaks
Classification-JEL: G10; G11
Author-Name: Lubos Pastor
Author-Person: ppa276
Author-Name: Robert F. Stambaugh
Author-Person: pst282
Note: AP
Number: 7778
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7778
File-URL: http://www.nber.org/papers/w7778.pdf
File-Format: application/pdf
Publication-Status: published as Pastor, Lubos and Robert F. Stambaugh. "The Equity Premium And Structural Breaks," Journal of Finance, 2001, v56(4,Aug), 1207-1239.
Abstract: A long return history is useful in estimating the current equity premium even if the historical distribution has experienced structural breaks. The long series helps not only if the timing of breaks is uncertain but also if one believes that large shifts in the premium are unlikely or that the premium is associated, in part, with volatility. Our framework incorporates these features along with a belief that prices are likely to move opposite to contemporaneous shifts in the premium. The estimated premium since 1834 fluctuates between four and six percent and exhibits its sharpest drop in the last decade.
Handle: RePEc:nbr:nberwo:7778
Template-Type: ReDIF-Paper 1.0
Title: Evaluating and Investing in Equity Mutual Funds
Classification-JEL: G11; G12
Author-Name: Lubos Pastor
Author-Person: ppa276
Author-Name: Robert F. Stambaugh
Author-Person: pst282
Note: AP
Number: 7779
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7779
File-URL: http://www.nber.org/papers/w7779.pdf
File-Format: application/pdf
Publication-Status: published as Pastor, Lubog and Robert F. Stambaugh. "Investing In Equity Mutual Funds," Journal of Financial Economics, 2002, v63(3,Mar), 351-380.
Abstract: Our framework for evaluating and investing in mutual funds combines observed returns on funds and passive assets with prior beliefs that distinguish pricing-model inaccuracy from managerial skill. A fund's alpha' is defined using passive benchmarks. We show that returns on non-benchmark passive assets help estimate that alpha more precisely for most funds. The resulting estimates generally vary less than standard estimates across alternative benchmark specifications. Optimal portfolios constructed from a large universe of equity funds can include actively managed funds even when managerial skill is precluded. The fund universe offers no close substitutes for the Fama-French and momentum benchmarks.
Handle: RePEc:nbr:nberwo:7779
Template-Type: ReDIF-Paper 1.0
Title: Youth Smoking in the U.S.: Evidence and Implications
Classification-JEL: I18; H21
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Jonathan Zinman
Author-Person: pzi83
Note: CH EH PE
Number: 7780
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7780
File-URL: http://www.nber.org/papers/w7780.pdf
File-Format: application/pdf
Publication-Status: published as Jonathan Gruber & Jonathan Zinman, 2001. "Youth Smoking in the United States: Evidence and Implications," NBER Chapters, in: Risky Behavior among Youths: An Economic Analysis, pages 69-120 National Bureau of Economic Research, Inc.
Abstract: The one-third rise in the teen smoking rate in the 1990s has led to considerable interest in understanding the determinants of the youth smoking decision. We explore four aspects of this decision. First, we consider the demographic correlates of smoking participation, and find that smoking participation is not simply concentrated among the most disadvantaged youth; indeed, increasingly over time youth smoking is taking place among white, suburban youth with college educated parents and good grades. Second, we show that neither changes in demographic characteristics nor changes in attitudes towards smoking can explain the striking increase in smoking rates in the 1990s. Third, we document that price is a powerful determinant of smoking for high school seniors; using state fixed effects models on data for the 1991-1997 period we estimate an elasticity of smoking participation of -0.67, which suggest that the drop in cigarette prices in the early 1990s can explain 26% of the subsequent upwards smoking trend for seniors. But price is not important for younger teens, although we do find some evidence that restrictions on access to cigarette purchases can lower the quantity that younger teens smoke. Finally, we document that there is an important intertemporal correlation in the decision to smoke. In particular, we find that there is a significant correlation across cohorts in teen smoking and later smoking of adults, and that the taxes that teens face on cigarettes have a significant negative effect on their smoking later in life. These findings suggest that between 25 and 50% of the rise in youth smoking in the 1990s will persist into adulthood for this cohort; rough calculations suggest that the long run cost to the U.S. will be at least 1.6 million years of life lost from this youth smoking increase.
Handle: RePEc:nbr:nberwo:7780
Template-Type: ReDIF-Paper 1.0
Title: Risky Behavior Among Youths: An Economic Analysis
Classification-JEL: D80; I18
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: CH EH
Number: 7781
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7781
File-URL: http://www.nber.org/papers/w7781.pdf
File-Format: application/pdf
Publication-Status: published as Introduction to "Risky Behavior among Youths: An Economic Analysis", Jonathan Gruber. in Risky Behavior among Youths: An Economic Analysis, Gruber. 2001
Abstract: There are a host of potentially risky behaviors in which youth engage, which have important implications for both their well being as youth and their life prospects. The past decade has seen dramatic shifts in the intensity with which youths pursue these risky activities: for example, youth homicide fell by 40%; teen births decline by 20%; youth smoking rose by 33%; and marijuana use among youth virtually doubled. This paper, and the volume it introduces, explores the determinants and implications of risky behaviors by youths. I begin by reviewing perspectives on youth risk-taking from traditional rational-choice economics, developmental psychology, and behavioral economics. I then discuss both cross-sectional and time series evidence on risk-taking by youths, and how this compares to adults. I review the evidence on youth risk taking from the studies in this volume, and highlight the conclusions that (a) economic incentives and macroeconomic conditions are powerful predictors of risk taking by youths, (b) despite this, these factors are not very successful in predicting the dramatic time series swings we see in youth risk taking, and (c) risk taking by youths appears to have important implications for risky behaviors later in life. I also comment on the implications of these findings for policy, and for future economic research.
Handle: RePEc:nbr:nberwo:7781
Template-Type: ReDIF-Paper 1.0
Title: Macroeconomic Volatility in Latin America: A View and Three Case Studies
Classification-JEL: F3; F4
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Note: EFG IFM
Number: 7782
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7782
File-URL: http://www.nber.org/papers/w7782.pdf
File-Format: application/pdf
Publication-Status: published as Ricardo J.Caballero, 2001. "Macroeconomic volatility in Latin America: a view and three case studies," Estudios de Economia, University of Chile, Department of Economics, vol. 28(1 Year 20), pages 5-52, June.
Abstract: After decades of trial, error, and occasional regress the pieces of a successful Latin American economic model can be seen scattered among the leading economies of the region. The most traditional macroeconomic maladies of the emerging world - such as chronic fiscal imbalances and monetary gimmicks are gradually being left behind. Many of these economies have made significant progress in their regulatory and supervisory frameworks and, at times, have been leaders beyond Latin American boundaries in allowing private sector co-participation in a wide array of ex-public sector activities. Despite these significant efforts, several structural sources of volatility remain, and new ones have emerged as a result of the new and otherwise better economic environment. In this paper I review these sources through the recent experiences of Argentina, Chile and Mexico.
Handle: RePEc:nbr:nberwo:7782
Template-Type: ReDIF-Paper 1.0
Title: Why Stocks May Disappoint
Author-Name: Andrew Ang
Author-Person: pan374
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Jun Liu
Note: AP
Number: 7783
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7783
File-URL: http://www.nber.org/papers/w7783.pdf
File-Format: application/pdf
Publication-Status: published as Ang, Andrew & Bekaert, Geert & Liu, Jun, 2005. "Why stocks may disappoint," Journal of Financial Economics, Elsevier, vol. 76(3), pages 471-508, June.
Abstract: Recently much progress has been made in developing optimal portfolio choice models accomodating time-varying opportunity sets, but unless investors are unreasonably risk averse, optimal holdings include unreasonably large equity positions. One reason is that most studies assume investors behave as expected utility maximizers with power utility. In this article, we provide a formal treatment of both static and dynamic portfolio choice using the Disappointment Aversion preferences of Gul (1991). While different from the Kahneman-Tversky (1979) loss aversion utility, these preferences imply asymmetric aversion to gains versus losses and are consistent with the tendency of some people to like lottery-type gambles but dislike stock in-vestments. By calibrating a number of data generating processes to actual US data on stock and bond returns, we find very reasonable portfolios for moderately disappointment averse investors with utility functions exhibiting low curvature. Disappointment aversion preferences affect intertemporal hedging demands and the state dependence of asset allocation in such a way as to not be replicable by standard expected utility functions with higher curvature. Furthermore, it is easy to reconcile the large equity premium observed in the data with disappointment aversion utility of low curvature and reasonable disappointment aversion.
Handle: RePEc:nbr:nberwo:7783
Template-Type: ReDIF-Paper 1.0
Title: Land, Labor and Globalization in the Pre-Industrial Third World
Classification-JEL: F1; F2
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI
Number: 7784
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7784
File-URL: http://www.nber.org/papers/w7784.pdf
File-Format: application/pdf
Publication-Status: published as Williamson, Jeffrey G. "Land, Labor, And Globalization In The Third World, 1870-1940," Journal of Economic History, 2002, v62(1,Mar), 55-85.
Abstract: A Third World data base documenting commodity and factor prices 1870-1940 has been collected, yielding annual time series on wage/rental ratios, land/labor ratios, the terms of trade, and other explanatory variables for: Argentina, Burma, Egypt, Japan, Korea, the Punjab, Taiwan, Thailand and Uruguay. These 9 have been added to a previously-collected data base for 10 in the so-called greater Atlantic economy: Australia, Britain, Canada, Denmark, France, Germany, Ireland, Spain, Sweden and the USA. These 19 countries form the panel data base which is used to explore the determinants of wage/rental ratios the world round between 1870 and 1940. The data offer a useful way to identify the impact of globalization on the pre-industrial Third World. This paper finds commodity price convergence to have been bigger in the Third World than the Atlantic economy. It also identifies the sources of a previously-unnoticed but enormous convergence in wage/rental ratios. Commodity price convergence and factor supply responses appear to be an important source of the relative factor price convergence in the Third World, more clearly exposed by the absence of significant industrialization and capital-deepening forces there prior to 1940.
Handle: RePEc:nbr:nberwo:7784
Template-Type: ReDIF-Paper 1.0
Title: The Dynamics of Car Sales: A Discrete Choice Approach
Classification-JEL: D12; D91
Author-Name: Jerome Adda
Author-Person: pad6
Author-Name: Russell Cooper
Note: EFG
Number: 7785
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7785
File-URL: http://www.nber.org/papers/w7785.pdf
File-Format: application/pdf
Abstract: Mankiw [1982] explores the Permanent Income Hypothesis implication that durable expenditures follow an ARMA(1,1) representation. He finds that durable expenditures are represented by an AR(1) process which implies that the rate of depreciation of durables, under the PIH model, is 100%. This finding presents a puzzle. Our paper builds on earlier work which attempts to explain this puzzle by considering the aggregation of the discrete dynamic choices of heterogeneous households. We implement this approach by estimating a dynamic discrete choice model of car replacement. We find that through aggregation we can explain both the AR and MA components of Mankiw's results. Further we find that our model is able to match a VAR representation of car sales, prices and income. We find that most of the variation in car sales is due to shocks which influence the replacement probability.
Handle: RePEc:nbr:nberwo:7785
Template-Type: ReDIF-Paper 1.0
Title: Building the IPO Order Book: Underpricing and Participation Limits With Costly Information
Classification-JEL: G2
Author-Name: Ann E. Sherman
Author-Person: psh151
Author-Name: Sheridan Titman
Author-Person: pti51
Note: CF
Number: 7786
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7786
File-URL: http://www.nber.org/papers/w7786.pdf
File-Format: application/pdf
Publication-Status: published as Sherman, Ann E. and Sheridan Titman. "Building The IPO Order Book: Underpricing And Participation Limits With Costly Information," Journal of Financial Economics, 2002, v65(1,Jul), 3-29.
Abstract: This paper examines the book building mechanism for marketing initial public offerings. We present a model where the underwriter selects a group of investors along with a pricing and allocation mechanism in a way that maximizes the information generated during the process of going public at a minimum cost. Unlike previous models, we take into account the moral hazard problem that is faced by investors when evaluation is costly. Our results suggest that for firms with the most to gain from accurate pricing, the number of investors participating in the offering is larger, and underpricing will be greater. When the demand for accuracy is relatively low, the expected amount of underpricing exactly offsets the investors' costs of acquiring information. However, when the demand for accuracy is high, the expected amount of underpricing can exceed the cost of information and investors can earn rents.
Handle: RePEc:nbr:nberwo:7786
Template-Type: ReDIF-Paper 1.0
Title: Simon S. Kuznets: April 30, 1901-July 9, 1985
Author-Name: Robert W. Fogel
Note: DAE EFG
Number: 7787
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7787
File-URL: http://www.nber.org/papers/w7787.pdf
File-Format: application/pdf
Abstract: This paper, prepared for the Biographical Memoirs of the National Academy of Sciences, presents an account of the scholarly career of Simon S. Kuznets. Among the issues considered are his contribution to the development of the empirical tradition in economics, his transformation of the field of national income accounting, his use of national income accounting during World War II to set production targets for both the military and civilian sectors of the economy, and to guide the implementation of those targets; his development of a theory of economic growth, his investigation of the interrelationship between economic growth and population growth, his contribution to methods of measurement in economics, and his legacy to the economics profession.
Handle: RePEc:nbr:nberwo:7787
Template-Type: ReDIF-Paper 1.0
Title: Product Prices and the OECD Cycle
Classification-JEL: E3; F1
Author-Name: Aart Kraay
Author-Person: pkr80
Author-Name: Jaume Ventura
Author-Person: pve110
Note: EFG
Number: 7788
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7788
File-URL: http://www.nber.org/papers/w7788.pdf
File-Format: application/pdf
Publication-Status: published as Kraay Aart & Ventura Jaume, 2002. "Product Prices and the OECD Cycle," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-18, April.
Abstract: It is well known that business cycles in OECD countries exhibit a remarkable degree of synchronization. Much less known is that the peak of the OECD cycle is associated with high prices of labour-intensive products and low prices of capital-intensive ones. We document this cyclical behavior of product prices and argue that it offers an important clue as to why business cycles are so synchronized. Positive shocks in one or more countries raise the prices of labour-intensive products and, as a result, the demand for labour throughout the industrialized world. This generates increases in wages, employment and output in all industrial countries. Through this channel, shocks are positively transmitted across countries, creating a force towards the synchronization of business cycles.
Handle: RePEc:nbr:nberwo:7788
Template-Type: ReDIF-Paper 1.0
Title: Hospital Ownership and Public Medical Spending
Author-Name: Mark Duggan
Author-Person: pdu194
Note: EH
Number: 7789
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7789
File-URL: http://www.nber.org/papers/w7789.pdf
File-Format: application/pdf
Publication-Status: published as Duggan, Mark G. "Hospital Ownership And Public Medical Spending," Quarterly Journal of Economics, 2000, v115(4,Nov), 1343-1373.
Abstract: The hospital market is served by firms that are private for-profit, private not-for-profit, and government-owned and operated. I use a plausibly exogenous change in hospital financing that was intended to improve medical care for the poor to test three theories of organizational behavior. My results reveal that the critical difference between the three types of hospitals owes to the soft budget constraint of government-owned institutions. The decision-makers in private not-for-profit hospitals are just as responsive to financial incentives and are no more altruistic than their counterparts in profit-maximizing facilities. My final set of results suggests that the significant increase in public medical spending examined in this paper did not improve health outcomes for the indigent.
Handle: RePEc:nbr:nberwo:7789
Template-Type: ReDIF-Paper 1.0
Title: Consumer City
Classification-JEL: R0; R5
Author-Name: Ed Glaeser
Author-Person: pgl9
Author-Name: Jed Kolko
Author-Person: pko228
Author-Name: Albert Saiz
Author-Person: psa110
Note: EFG PE
Number: 7790
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7790
File-URL: http://www.nber.org/papers/w7790.pdf
File-Format: application/pdf
Publication-Status: published as Edward L. Glaeser, Jed Kolko, and Albert Saiz, 2001. "Consumer city," Journal of Economic Geography, Oxford University Press, vol. 1(1), pages 27-50, January.
Abstract: Urban economics has traditionally viewed cities as having advantages in production and disadvantages in consumption. We argue that the role of urban density in facilitating consumption is extremely important and understudied. As firms become more mobile, the success of cities hinges more and more on cities' role as centers of consumption. Empirically, we find that high amenity cities have grown faster than low amenity cities. Urban rents have gone up faster than urban wages, suggesting that the demand for living in cities has risen for reasons beyond rising wages. The rise of reverse commuting suggest the same consumer city phenomena.
Handle: RePEc:nbr:nberwo:7790
Template-Type: ReDIF-Paper 1.0
Title: Bequests as Signals: An Explanation for the Equal Division Puzzle
Classification-JEL: D10; H31
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Author-Name: Sergei Severinov
Note: AG PE
Number: 7791
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7791
File-URL: http://www.nber.org/papers/w7791.pdf
File-Format: application/pdf
Publication-Status: published as Bernheim, B. Douglas and Sergei Severinov. "Bequests As Signals: An Explanation For The Equal Division Puzzle," Journal of Political Economy, 2003, v111(4,Aug), 733-764.
Abstract: In the United States, more than two-thirds of decedents with multichild families divide their estates exactly equally among their children. In contrast, intra vivos gifts are usually unequal. These findings challenge the validity of existing theories regarding the determination of intergenerational transfers. In this paper, we develop a theory that accounts for this puzzle, based on the notion that the division of bequests provides a signal about a parent's altruistic preferences. The theory can also explain the norm of unigeniture, which prevails in other societies.
Handle: RePEc:nbr:nberwo:7791
Template-Type: ReDIF-Paper 1.0
Title: Dollarization of Liabilities: Underinsurance and Domestic Financial Underdevelopment
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Arvind Krishnamurthy
Author-Person: pkr393
Note: EFG IFM CF
Number: 7792
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7792
File-URL: http://www.nber.org/papers/w7792.pdf
File-Format: application/pdf
Abstract: While there is still much disagreement on the causes underlying recent emerging markets' crises, one factor that most observers have agreed upon is that contracting dollar' (foreign currency) denominated external debt as opposed to domestic currency debt created balance sheet mismatches that led to bankruptcies and dislocations that amplified downturns. Much of the analysis of the currency-balance sheet channel' hinges on the assumption that companies contract dollar denominated debt. Yet there has been little systematic inquiry into why companies must or choose to take on dollar debt. In this paper we cast the problem as one of microeconomic underinsurance with respect to country-wide aggregate shocks. Denominating external debt in domestic currency is equivalent to contracting the same amount of dollar-debt, complemented with insurance against shocks that depreciate the equilibrium exchange rate. The presence of country-level international financial constraints justify the purchase of such insurance even if all agents are risk neutral. However, if domestic financial constraints also exist, domestics will undervalue the social contribution of contracting insurance against country-wide shocks. Foreign lenders will reinforce the underinsurance problem by reducing their participation in domestic financial markets.
Handle: RePEc:nbr:nberwo:7792
Template-Type: ReDIF-Paper 1.0
Title: Inequality and Growth: What Can the Data Say?
Classification-JEL: D31; O41
Author-Name: Abhijit V. Banerjee
Author-Name: Esther Duflo
Author-Person: pdu166
Note: EFG
Number: 7793
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7793
File-URL: http://www.nber.org/papers/w7793.pdf
File-Format: application/pdf
Publication-Status: published as Banerjee, Abhijit V. and Esther Duflo. "Inequality And Growth: What Can The Data Say?," Journal of Economic Growth, 2003, v8(3,Sep), 267-299.
Abstract: This paper describes the correlations between inequality and the growth rates in cross-country data. Using non-parametric methods, we show that the growth rate is an inverted U-shaped function of net changes in inequality: Changes in inequality (in any direction) are associated with reduced growth in the next period. The estimated relationship is robust to variations in control variables and estimation methods. This inverted U-curve is consistent with a simple political economy model, although, as we point out, efforts to interpret this model causally run into difficult identification problems. We show that this non-linearity is sufficient to explain why previous estimates of the relationship between the level of inequality and growth are so different from one another.
Handle: RePEc:nbr:nberwo:7793
Template-Type: ReDIF-Paper 1.0
Title: When Unions "Mattered": Assessing the Impact of Strikes on Financial Markets: 1925-1937
Classification-JEL: J5; G3
Author-Name: John DiNardo
Author-Person: pdi178
Author-Name: Kevin F. Hallock
Author-Person: pha176
Note: LS
Number: 7794
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7794
File-URL: http://www.nber.org/papers/w7794.pdf
File-Format: application/pdf
Publication-Status: published as John DiNardo & Kevin F. Hallock, 2002. "When unions "mattered": The impact of strikes on financial markets, 1925-1937," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 55(2), pages 219-233, January.
Abstract: Combining information from labor historians and using techniques from finance we analyze the strikes that labor historians have agreed are pivotal in American history' during the period 1925-1937. Using information we collected on strike dates and historical financial market stock price data we assess the financial market's view of these conflicts. We study the effects of major strikes between the world wars on detailed industry stock prices. We find that strikes have large, negative effects on industry stock value. We also find that longer strikes, violent strikes, strikes where unions win,' industry-wide strikes, strikes that lead to union recognition, and strikes that lead to large wage increases lead to larger negative share price reactions than other strikes. Also, our analysis shows that most of the news' in a strike seems to be incorporated very early on in the strike. Our analysis strongly suggests that although the financial markets generally expected unions to lose,' they viewed union victories as quite important determinants of the share of firm profits going to stockholders.
Handle: RePEc:nbr:nberwo:7794
Template-Type: ReDIF-Paper 1.0
Title: Country Portfolios
Classification-JEL: F2; F3
Author-Name: Aart Kraay
Author-Person: pkr80
Author-Name: Norman Loayza
Author-Person: plo190
Author-Name: Luis Serven
Author-Person: pse75
Author-Name: Jaume Ventura
Author-Person: pve110
Note: IFM
Number: 7795
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7795
File-URL: http://www.nber.org/papers/w7795.pdf
File-Format: application/pdf
Publication-Status: published as Aart Kraay & Norman Loayza & Luis Servén & Jaume Ventura, 2005. "Country Portfolios," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 914-945, 06.
Abstract: How do countries hold their financial wealth? We construct a new database of countries' claims on capital located at home and abroad, and international borrowing and lending, covering 68 countries from 1966 to 1997. We find that a small amount of capital flows from rich countries to poor countries. Countries' foreign asset positions are remarkably persistent, and mostly take the form of foreign loans rather than foreign equity. To interpret these facts, we build a simple model of international capital flows that highlights the interplay between diminishing returns, production risk and sovereign risk. We show that in the presence of reasonable diminishing returns and production risk, the probability that international crises occur twice a century is enough to generate a set of country portfolios that are roughly consistent with the data.
Handle: RePEc:nbr:nberwo:7795
Template-Type: ReDIF-Paper 1.0
Title: On the Gains to International Trade in Risky Financial Assets
Classification-JEL: F30; G15
Author-Name: Steven J. Davis
Author-Person: pda15
Author-Name: Jeremy Nalewaik
Author-Name: Paul Willen
Author-Person: pwi457
Note: AP EFG IFM
Number: 7796
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7796
File-URL: http://www.nber.org/papers/w7796.pdf
File-Format: application/pdf
Abstract: This paper develops and implements a framework for quantifying the gains to international trade in risky financial assets. The framework can handle may agents, many assets, incomplete markets and limited participation in asset markets. It delivers closed-form analytic solutions for consumption, portfolio allocations, asset prices and the gains to trade. We find enormous gains to trade when asset returns are calibrated to observed risk premia and all agents participate in asset markets. The gains-to-trade puzzle is closely related to, but distinct from, the equity premium puzzle. High risk aversion merely alters the form of the gains-to-trade puzzle, but limited participation in asset markets goes a long way towards addressing both puzzles. We also identify three reasons for limited international risk sharing. First, the requirement that asset markets span the space of national output shocks fails in a serious way. Second, for many countries the cost of using financial assets to hedge national output shocks greatly exceeds the benefits. Third, limited asset market participation reduces the feasible gains from international risk sharing.
Handle: RePEc:nbr:nberwo:7796
Template-Type: ReDIF-Paper 1.0
Title: Looking for Contagion: Evidence from the ERM
Classification-JEL: E3; F3
Author-Name: Carlo A. Favero
Author-Person: pfa12
Author-Name: Francesco Giavazzi
Author-Person: pgi18
Note: IFM
Number: 7797
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7797
File-URL: http://www.nber.org/papers/w7797.pdf
File-Format: application/pdf
Abstract: This paper applies a full-information technique to test for the presence of contagion across the money markets of ERM member countries. We show that whenever it is possible to estimate a model for interdependence, a test for contagion based on a full information technique is more powerful. We test for the presence of contagion after having identified episodes of country-specific shocks, whose effects on other European markets are significantly different from those predictable from the estimated channels of interdependence. Using data on three-months interest rate spreads on German rates for seven countries over the period 1988-1992, we are unable to reject the null of contagion. Our evidence suggest that contagion within the ERM was a general phenomenon, not limited to a subset of weaker countries, the exception in the sample being France. Our results are mute as to the question of what lies behind these episodes of contagion; they show, however, that it is not always true that one only detects contagion when one applies poor statistical techniques.
Handle: RePEc:nbr:nberwo:7797
Template-Type: ReDIF-Paper 1.0
Title: Winning Isn't Everything: Corruption in Sumo Wrestling
Author-Name: Mark Duggan
Author-Person: pdu194
Author-Name: Steven D. Levitt
Author-Person: ple59
Note: LE
Number: 7798
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7798
File-URL: http://www.nber.org/papers/w7798.pdf
File-Format: application/pdf
Publication-Status: published as Duggan, Mark and Steven D. Levitt. "Winning Isn't Everything: Corruption In Sum Sumo Wrestling," American Economic Review, 2002, v92(5,Dec), 1594-1605.
Abstract: Although the theoretical literature on corruption is well developed, empirical work in this area has lagged because it has proven difficult to isolate corrupt behavior in the data. In this paper, we look for evidence of corruption in an unlikely place: the highest echelons of Japanese sumo wrestling. This paper provides strong statistical evidence documenting match rigging in sumo wrestling. A non-linearity in the incentive structure of promotion leads to gains from trade between wrestlers on the margin for achieving a winning record and their opponents. We show that wrestlers win a disproportionate share of the matches when they are on the margin. Increased effort can not explain the findings. Winning on the bubble is more frequent when the two competitors have met often in the past. Success on the bubble tends to rise over the course of a wrestler's career, but declines in his last year, consistent with the game theoretic predictions. Wrestlers who are victorious when on the bubble lose more frequently than would be expected the next time they meet that opponent, suggesting that part of the payment for throwing a match is future payment in kind. Systematic differences across wrestling stables suggest that the stables play a role in facilitating the corruption. In times of increased media scrutiny, the match rigging disappears.
Handle: RePEc:nbr:nberwo:7798
Template-Type: ReDIF-Paper 1.0
Title: Market Responses to Interindustry Wage Differentials
Classification-JEL: J3
Author-Name: George J. Borjas
Author-Person: pbo44
Author-Name: Valerie A. Ramey
Author-Person: pra154
Note: EFG LS
Number: 7799
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7799
File-URL: http://www.nber.org/papers/w7799.pdf
File-Format: application/pdf
Abstract: This paper examines the link between interindustry wage differentials and subsequent growth of industry variables such as employment, GDP and labor productivity. We find that industries that paid higher than average wages in 1959 experienced significantly lower employment growth and GDP growth in the subsequent 30 to 40 years, while at the same time experiencing higher-than-average growth in the capital-labor ratio and in labor productivity. We argue that the evidence is best explained by a non-competitive model of the interindustry wage structure, as both firms and the market respond to the wage rigidity implied by the long-run persistence of the interindustry wage structure.
Handle: RePEc:nbr:nberwo:7799
Template-Type: ReDIF-Paper 1.0
Title: Technical Change, Inequality, and the Labor Market
Classification-JEL: J30; J31
Author-Name: Daron Acemoglu
Author-Person: pac16
Note: LS EFG
Number: 7800
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7800
File-URL: http://www.nber.org/papers/w7800.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron. "Technical Change, Inequality, And The Labor Market," Journal of Economic Literature, 2002, v40(1,Mar), 7-72.
Abstract: This essay discusses the effect of technical change on wage inequality. I argue that the behavior of wages and returns to schooling indicates that technical change has been skill-biased during the past sixty years. Furthermore, the recent increase in inequality is most likely due to an acceleration in skill bias. In contrast to twentieth century developments, most technical change during the nineteenth century appears to be skill-replacing. I suggest that this is because the increased supply of unskilled workers in the English cities made the introduction of these technologies profitable. On the other hand, the twentieth-century has been characterized by skill-biased technical change because the rapid increase in the supply of skilled workers has induced the development of skill-complementary technologies. The recent acceleration in skill bias is in turn likely to have been a response to the acceleration in the supply of skills during the past several decades.
Handle: RePEc:nbr:nberwo:7800
Template-Type: ReDIF-Paper 1.0
Title: Interest Rates, Contagion and Capital Controls
Classification-JEL: F0; F3
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM
Number: 7801
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7801
File-URL: http://www.nber.org/papers/w7801.pdf
File-Format: application/pdf
Abstract: In this paper I analyze several issues related to contagion,' including its definition, recent experiences, alternative channels at work, and possible prevention mechanisms. The discussion deals with the macroeconomics implications of contagion, and concentrates on the relationship between the degree of openness of the capital account and the transmission of foreign shocks. More specifically, I ask whether restrictions to capital mobility and, in particular, controls on capital inflows of the type Chile implemented throughout most of the 1990s reduce a country's vulnerability to contagion. I also deal, albeit briefly, with the connection between the exchange rate regime and the propagation of international shocks. The evidence presented in this paper shows that the effectiveness of Chile's controls on inflows has often been overstated. Indeed, Chile was severely affected by the East Asian, Russian and Brazilian crises.
Handle: RePEc:nbr:nberwo:7801
Template-Type: ReDIF-Paper 1.0
Title: Collective Choice and Voluntary Provision of Public Goods
Classification-JEL: H41; D78
Author-Name: Dennis Epple
Author-Person: pep21
Author-Name: Richard Romano
Author-Person: pro223
Note: CH PE
Number: 7802
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7802
File-URL: http://www.nber.org/papers/w7802.pdf
File-Format: application/pdf
Publication-Status: published as Epple, Dennis and Richard Romano. "Collective Choice And Voluntary Provision Of Public Goods," International Economic Review, 2003, v44(2,May), 545-572.
Abstract: Some public goods are provided entirely with private contributions, others with a mixture of public and private funding, and still others are entirely publicly funded. To explain this variation, a model of dual provision is developed that endogenizes public and private funding. Members of the economy vote over an income tax that finances public supply of the good, and they vote on whether to permit private contributions. While permitting private contributions may lead to a reduction in total provision of the good, a majority always favors permitting private contributions. Results are developed for small and large economies, and the relevance of excludability and non-congestion are investigated. Comparative statics and computational analysis demonstrate properties of equilibrium.
Handle: RePEc:nbr:nberwo:7802
Template-Type: ReDIF-Paper 1.0
Title: Does Diversification Destroy Value? Evidence From Industry Shocks
Classification-JEL: G34
Author-Name: Owen Lamont
Author-Name: Christopher Polk
Author-Person: ppo238
Note: AP CF
Number: 7803
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7803
File-URL: http://www.nber.org/papers/w7803.pdf
File-Format: application/pdf
Publication-Status: published as Lamont, Owen A. and Christopher Polk. "Does Diversification Destroy Value? Evidence From The Industry Shocks," Journal of Financial Economics, 2002, v63(1,Jan), 51-77.
Abstract: Does corporate diversification reduce shareholder value? Since firms endogenously choose to diversify, exogenous variation in diversification is necessary in order to draw inferences about the causal effect. We examine changes in the within-firm dispersion of industry investment, or diversity.' We find that exogenous changes in diversity, due to changes in industry investment, are negatively related to firm value. Thus diversification destroys value, consistent with the inefficient internal capital markets hypothesis. This finding is not caused by measurement error. We also find that exogenous changes in industry cash flow diversity are negative related to firm value.
Handle: RePEc:nbr:nberwo:7803
Template-Type: ReDIF-Paper 1.0
Title: The Slowdown of the Economics Publishing Process
Classification-JEL: A14
Author-Name: Glenn Ellison
Author-Person: pel10
Note: IO PR
Number: 7804
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7804
File-URL: http://www.nber.org/papers/w7804.pdf
File-Format: application/pdf
Publication-Status: published as Ellison, Glenn. "The Slowdown Of The Economics Publishing Process," Journal of Political Economy, 2002, v110(5,Oct), 947-993.
Abstract: Over the last three decades there has been a dramatic increase in the length of time necessary to publish a paper in a top economics journal. This paper documents the slowdown and notes that a substantial part is due to an increasing tendency of journals to require that papers be extensively revised prior to acceptance. A variety of potential explanations for the slowdown are considered: simple cost and benefit arguments; a democratization of the publishing process; increases in the complexity of papers; the growth of the profession; and an evolution of preferences for different aspects of paper quality. Various time series are examined for evidence that the economics profession has changed along these dimensions. Paper-level data on review times is used to assess connections between underlying changes in the profession and changes in the review process. It is difficult to attribute much of the slowdown to observable changes in the economics profession. Evolving social norms may play a role.
Handle: RePEc:nbr:nberwo:7804
Template-Type: ReDIF-Paper 1.0
Title: Evolving Standards for Academic Publishing: A q-r Theory
Classification-JEL: A14; D70
Author-Name: Glenn Ellison
Author-Person: pel10
Note: IO PR
Number: 7805
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7805
File-URL: http://www.nber.org/papers/w7805.pdf
File-Format: application/pdf
Publication-Status: published as Ellison, Glenn. "Evolving Standards For Academic Publishing: A q-r Theory," Journal of Political Economy, 2002, v110(5,Oct), 994-1034.
Abstract: This paper develops a model of evolving standards for academic publishing. It is motivated by the increasing tendency of academic journals to require multiple revisions of articles and by changes in the content of articles. Papers are modeled as varying along two quality dimensions: q and r. The former represents the clarity and importance of a paper's main ideas and the latter its craftsmanship and polish. Observed trends are regarded as increases in r-quality. A static equilibrium model in which an arbitrary social norm determines how q and r are weighted is developed and used to discuss comparative statics explanations for increases in r. The paper then analyzes a learning model in which referees (who have a biased view of the importance of their own work) try to learn the social norm from observing how their own papers are treated and the decisions editors make on papers they referee. The model predicts that social norms will gradually but steadily evolve to increasingly emphasize r-quality.
Handle: RePEc:nbr:nberwo:7805
Template-Type: ReDIF-Paper 1.0
Title: Child Care Subsidy Programs
Classification-JEL: J13
Author-Name: David M. Blau
Author-Person: pbl13
Note: PE CH
Number: 7806
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7806
File-URL: http://www.nber.org/papers/w7806.pdf
File-Format: application/pdf
Publication-Status: published as Blau, David M. "Do Child Care Regulations Affect The Child Care And Labor Markets?," Journal of Policy Analysis and Management, 2003, v22(3,Summer), 443-465.
Publication-Status: published as Child Care Subsidy Programs, David Blau. in Means-Tested Transfer Programs in the United States, Moffitt. 2003
Abstract: Child care and early education subsidies are an important part of government efforts to increase economic independence and improve development of children in low-income families in the United States. This chapter describes the main subsidy programs in the U.S., discusses economic issues that arise in designing such programs and evaluating their effects, and surveys evidence on the effects of the programs. An important theme of the chapter is the tradeoff between the policy goals of increasing economic independence and improving child outcomes. All child care and early education subsidies affect both work incentives and inputs to child development. But a subsidy designed specifically to achieve one of these policy goals will usually be relatively ineffective at accomplishing the other goal. The evidence indicates that child care subsidies that reduce the effective price to parents of all purchased child care, regardless of the type and location of care, cause the employment rate of mothers of young children to increase. The most reliable evidence suggests that the effect is fairly small, but the range of estimates in the literature is quite large. The three main difficulties encountered in research on this issue are finding appropriate control groups, accounting for the wide prevalence of unpaid child care arrangements, and identification of the effect of the price of child care. Evidence on the employment effects of subsidies restricted to high-quality child care arrangements is non-existent. There is very little evidence of the effect of child care subsidies on child development outcomes.
Handle: RePEc:nbr:nberwo:7806
Template-Type: ReDIF-Paper 1.0
Title: The Asian Flu and Russian Virus: Firm-level Evidence on How Crises are Transmitted Internationally
Classification-JEL: F30; F40
Author-Name: Kristin Forbes
Author-Person: pfo1
Note: IFM
Number: 7807
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7807
File-URL: http://www.nber.org/papers/w7807.pdf
File-Format: application/pdf
Publication-Status: published as Forbes, Kristin J., 2004. "The Asian flu and Russian virus: the international transmission of crises in firm-level data," Journal of International Economics, Elsevier, vol. 63(1), pages 59-92, May.
Abstract: This paper uses firm-level information to evaluate how crises are transmitted internationally. It constructs a new data set of financial statistics, industry information, geographic data, and stock returns for over 10,000 companies in 46 countries to test what types of firms were most affected by the East Asian and Russian crises. Results suggest that a product-competitiveness and income effect were both important transmission mechanisms during the later part of the Asian crisis and the Russian crisis. For example, if a firm's main product line competed with a major East Asian export, the firm's average daily abnormal stock return was 13 percent lower during the Asian crisis. The magnitude of this product competitiveness effect during the Russian crisis was 32 percent. Results suggest that a credit crunch was not important during either crisis. Finally, country-specific effects, which are poorly explained by macroeconomic and corporate governance variables, can have a larger impact than all other transmission mechanisms combined.
Handle: RePEc:nbr:nberwo:7807
Template-Type: ReDIF-Paper 1.0
Title: Firm Value, Risk, and Growth Opportunities
Classification-JEL: G30; G39
Author-Name: Hyun-Han Shin
Author-Name: Rene M. Stulz
Note: AP CF
Number: 7808
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7808
File-URL: http://www.nber.org/papers/w7808.pdf
File-Format: application/pdf
Abstract: We show that Tobin's q, as proxied by the ratio of the firm's market value to its book value, increases with the firm's systematic equity risk and falls with the firm's unsystematic equity risk. Further, an increase in the firm's total equity risk is associated with a fall in q. The negative relation between the change in total risk and the change in q is robust through time for the whole sample, but it does not hold for the largest firms.
Handle: RePEc:nbr:nberwo:7808
Template-Type: ReDIF-Paper 1.0
Title: The Expectations Trap Hypothesis
Classification-JEL: E1
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Christopher J. Gust
Author-Person: pgu329
Note: EFG
Number: 7809
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7809
File-URL: http://www.nber.org/papers/w7809.pdf
File-Format: application/pdf
Publication-Status: published as Christiano, Lawrence J. and Christopher Gust. "The Expectations Trap Hypothesis," FRB Chicago - Economic Perspectives, 2000, v24(2,Second-Qtr), 21-39.
Abstract: We explore a hypothesis about the take-off in inflation that occurred in the early 1970s. According to the expectations trap hypothesis, the Fed was pushed into producing the high inflation out of a fear of violating the public's inflation expectations. We compare this hypothesis with the Phillips curve hypothesis, according to which the Fed produced the high inflation as an unfortunate by-product of a conscious decision to jump-start a weak economy. Which hypothesis is more plausible has important implications for what needs to be done to prevent other inflation flare-ups.
Handle: RePEc:nbr:nberwo:7809
Template-Type: ReDIF-Paper 1.0
Title: Interpreting Developed Countries' Foreign Direct Investment
Classification-JEL: F23
Author-Name: Robert E. Lipsey
Author-Person: pli259
Note: ITI
Number: 7810
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7810
File-URL: http://www.nber.org/papers/w7810.pdf
File-Format: application/pdf
Publication-Status: published as Investing Today for the World of Tomorrow. Berlin: Springer-Verlag, 2001.
Abstract: Inward and outward direct investment (FDI) stocks and flows tend to go together, across countries and over time. The countries that invest extensively abroad are usually also large recipients of FDI. There is little evidence that flows of FDI are a major influence on capital formation. That lack of effects suggests that financing capital formation is not a primary role of FDI. FDI transfers the ownership of existing productive assets from one set of owners to others willing to pay more for them, possibly from less efficient to more efficient owners. One fact that suggests this function is that outward U.S. FDI production and outward minus inward production tends to be concentrated in industries of U. S. comparative advantage. It is not in industries of U.S. comparative disadvantage, as might be expected if FDI were primarily a method of relocating production to more suitable locations. Within individual broad industry groups, U.S. FDI tends to move to countries with comparative disadvantages in trade relative to the United States in machinery industries. In resource-intensive industries, however, it moves to countries with comparative advantages in trade relative to the United States. The difference suggests that company comparative advantages dominate investment in machinery, but country comparative advantages dominate in resource-intensive industries. If FDI is transferring assets and production from less efficient to more efficient owners and managers, inward FDI can be viewed in the recipient countries as freeing capital that had been frozen in industries that the owners would prefer to leave. It permits the former owners to allocate their capital in more desirable and profitable ways. Outward FDI permits a home country's firms to optimally exploit their skills and comparative advantages, perhaps lost to the home countries, but retained by the country's firms.
Handle: RePEc:nbr:nberwo:7810
Template-Type: ReDIF-Paper 1.0
Title: The Distributional Burden of Taxing Estates and Unrealized Capital Gains at the Time of Death
Classification-JEL: H24
Author-Name: James M. Poterba
Author-Person: ppo19
Author-Name: Scott Weisbenner
Note: AG PE
Number: 7811
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7811
File-URL: http://www.nber.org/papers/w7811.pdf
File-Format: application/pdf
Publication-Status: published as Gale, William G., James R. Hines, and Joel Slemrod (eds.) Rethinking Estate and Gift Taxation. Brookings Institution, 2001.
Abstract: The 1998 Survey of Consumer Finances provides information on household wealth ownership that can be used to estimate the effect of changing the Unified Estate and Gift Tax Credit on estate tax revenues. The survey also includes data on the prices at which assets were purchased, along with information on their market values. This makes it possible to compare the revenue yield and the distributional consequences of taxing estates with those of taxing unrealized capital gains on assets held by individuals who die. This paper uses data from the Survey of Consumer Finances to estimate the revenue effects of changes in both estate tax provisions and capital gains tax rules. It finds that among those with small estates ($1 million or less), taxing capital gains at death would collect more revenue than the current estate tax from roughly half of the decedents. For those with larger estates, replacing the estate tax with a tax on unrealized gains at death would result in a substantial reduction in total tax payments. The revenue estimates and distributional analyses assume no change in the current capital gains realization behavior of taxpayers, even if the tax law changes. This is an important limitation, and the paper notes several directions for further research that might help to relax this assumption.
Handle: RePEc:nbr:nberwo:7811
Template-Type: ReDIF-Paper 1.0
Title: Mortality Risk, Inflation Risk, and Annuity Products
Classification-JEL: D91; D82
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: AG PE
Number: 7812
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7812
File-URL: http://www.nber.org/papers/w7812.pdf
File-Format: application/pdf
Publication-Status: published as Mitchell, O., Z. Bodie, B. Hammond, and S. Zeldes (eds.) Innovations in Retirement Financing. Philadelphia, PA: University of Pennsylvania Press, 2002.
Abstract: As growing numbers of retirees reach retirement age with substantial balances in self-directed retirement plans, annuities are likely to become increasingly important instruments for drawing down retirement savings. This study explores recent trends in the pricing of single-premium annuity products in the United States. Virtually all of the annuity products currently available in the United States offer fixed nominal payouts, rather than an inflation-linked payout stream. After describing the money's worth' of the various types of nominal annuity products, this study considers the extent to which existing U.S. private annuity markets provide retirees with inflation-protected retirement income flows. Although there is effectively no market yet for inflation-indexed annuities in the United States, such products are available in other countries. The paper concludes by summarizing recent data on the pricing of both nominal and inflation-linked annuities in the United Kingdom and several other nations.
Handle: RePEc:nbr:nberwo:7812
Template-Type: ReDIF-Paper 1.0
Title: Interest Rate Volatility and Contagion in Emerging Markets: Evidence from the 1990s
Classification-JEL: F0; F3
Author-Name: Sebastian Edwards
Author-Person: ped3
Author-Name: Raul Susmel
Note: IFM
Number: 7813
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7813
File-URL: http://www.nber.org/papers/w7813.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian and Raul Susmel. "Volatility Dependence And Contagion In Emerging Equity Markets," Journal of Development Economics, 2001, v66(2,Dec), 505-532.
Abstract: In this paper we use high frequency interest rate data for a group of Latin American countries to analyze the behavior of volatility through time. We are particularly interested in understanding whether periods of high volatility spillover across countries. Our analysis relies both on univariate and bivariate switching volatility models. Our results indicate that high-volatility episodes are, in general, short-lived, lasting from two to seven weeks. We find some weak evidence of volatility co-movements across countries. Overall, our results are not overly supportive of contagion' stories.
Handle: RePEc:nbr:nberwo:7813
Template-Type: ReDIF-Paper 1.0
Title: Elderly Asset Management and Health: An Empirical Analysis
Author-Name: Jonathan S. Feinstein
Author-Person: pfe36
Author-Name: Chih-Chin Ho
Note: EH
Number: 7814
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7814
File-URL: http://www.nber.org/papers/w7814.pdf
File-Format: application/pdf
Abstract: We present models of asset management by the elderly. We focus on saving, spend-down of assets, and gift-giving, and the influence of health on these precesses. We also study the evolution of elderly health and the impact of economic variables on health outcomes. We present results from estimating our models using data from waves one and two of the AHEAD dataset. Our model of asset management links elderly decisions about saving, spend-down of assets, and gift-giving in a system of equations. We divide households for which head and partner (if present) are in poor health and those for which head and partner are in good health; our specification allows for differences in health to affect both the average level of economic outcomes and the marginal effects of income and wealth on the outcomes. We also include in our model a set of sociodemographic control variables. Our model of health outcomes links health in the preceding period to health in the current period, allowing for three outcomes good health, poor health, or death. In our models of health outcomes we include variables measuring health in the previous period, wealth, age, education, and control variables. Our main results are the following. First, results for gift-giving suggest that at least some elderly do plan their estate transfer - those that have established trust funds or for which households assets exceed the estate tax filling threshold have a significantly greater propensity to give gifts. Second, the average level of gift-giving is lower for those in poor health, but the marginal effect of increasing wealth on gift-giving is much greater. This result is important in showing the ways in which health can interact with economic variables in influencing economic decision-making. Third, income is an important determinant of saving and spend-down. Fourth, other things equal, households that save are also more likely to give gifts. Fifth, sudden changes in family structure and health are associated with changing patters of economic behavior - most especially, becoming a widow or widower is associated with a significant increase in the likelihood both of spending out of assets and of making gifts. Finally, variables related to children have less effect on propensity to give gifts than expected - the only variable that has a significant effect is the number of children for which parents cannot provide income information, suggesting that the quality of the relationship between parents and children is important for gift-giving.
Handle: RePEc:nbr:nberwo:7814
Template-Type: ReDIF-Paper 1.0
Title: The Tenuous Tradeoff Between Risk and Incentives
Classification-JEL: J3
Author-Name: Canice Prendergast
Note: LS
Number: 7815
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7815
File-URL: http://www.nber.org/papers/w7815.pdf
File-Format: application/pdf
Publication-Status: published as Prendergast, Canice. "The Tenuous Trade-Off Between Risk And Incentives," Journal of Political Economy, 2002, v110(5,Oct), 1071-1102.
Abstract: Empirical work testing for a negative tradeoff between risk and incentives, a cornerstone of agency theory, has not had much success. Indeed, the data seem to suggest a positive relationship between measures of uncertainty and incentives, rather than the posited negative tradeoff. I argue that the existing literature fails to account for an important effect of uncertainty on incentives through the allocation of responsibility to employees. When workers operate in certain settings, the activities that they should engage in are well known, and firms are content to assign tasks to workers and monitor their inputs. By contrast, when the situation is more uncertain, firms know less about how workers should be spending their time. As a result, the delegate responsibility to workers but, to constraint heir discretion, base compensation on observed output. Hence, uncertainty and output-based pay are positively related. I argue that parts of the existing empirical literature are better explained through this lens than with the standard model.
Handle: RePEc:nbr:nberwo:7815
Template-Type: ReDIF-Paper 1.0
Title: The Medical Treatment of Depression, 1991-1996: Productive Inefficiency, Expected Outcome Variations, and Price Indexes
Classification-JEL: I11; O33
Author-Name: Ernst R. Berndt
Author-Name: Anupa Bir
Author-Name: Susan H. Busch
Author-Name: Richard G. Frank
Author-Name: Sharon-Lise T. Normand
Note: EH PR
Number: 7816
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7816
File-URL: http://www.nber.org/papers/w7816.pdf
File-Format: application/pdf
Publication-Status: published as Berndt, Ernst R., Anupa Bir, Susan H. Busch, Richard G. Frank and Sharon-Lise T. Normand. "The Medical Treatment Of Depression, 1991-1996: Productive Inefficiency, Expected Outcome Variations, And Price Indexes," Journal of Health Economics, 2002, v21(3,May), 373-396.
Abstract: We examine the price of treating episodes of acute phase major depression over the 1991-1996 time period. We combine data from a large retrospective medical claims data base (MarketScanTM, from the MedStat Group) with clinical literature and expert clinical opinion elicited from a two-state Delphi procedure. This enables us to construct a variety of treatment price indexes that include variations over time in the proportion of off-frontier' production, as well as the corresponding variations in expected treatment outcomes. We also incorporate the fact that the no treatment option ( waiting list') frequently results in spontaneous remission of depressive symptoms. We find that in general the incremental cost of successfully treating an episode of acute phase major depression has generally fallen over the 1991-96 time period. Based on hedonic regression equations that account for the effects of changing patient mix, we find price reductions that range from about -1.66% to -2.13% per year. An implication of this is that, since expenditures on depression are thought to be increasing since at least 1991, the source of the spending increases is volume (quantity) increases, and not price increases.
Handle: RePEc:nbr:nberwo:7816
Template-Type: ReDIF-Paper 1.0
Title: Technology, Unemployment, and Inflation
Author-Name: Jacob Mincer
Author-Name: Stephan Danninger
Author-Person: pda278
Note: LS
Number: 7817
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7817
File-URL: http://www.nber.org/papers/w7817.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: We explore the response of employment (unemployment) skill differentials to skill-biased shifts in demand touched off by the new and spreading technologies. We find that skill differentials in unemployment follow at least in part the same pattern as skill differentials in wages: They widen initially but decline after a roughly 5-year lag, allowing time for training and learning to handle the new technologies. In the micro (PSID) cross-section the differentials show up as sectoral differences defined by technology. In the aggregate time series relative unemployment is defined by educational unemployment differentials. We find that the pace and turnaround in the unemployment gap' is twice as fast as in the wage gap'. Apparently, the hiring and training response is quicker than the wage response. We also observe in time series that the pace of technology has unclear effects on aggregate unemployment in the short run, but appears to reduce it in the longer run. In addition to technology, maturing of the workforce, and growth of international trade reduce unemployment in the longer run. The same variables also significantly reduce inflation in both the short and long run. Given the actual changes in these factors in the early 90's we are able to predict a little over a half of the decline in unemployment and about 70% of the reduction in inflation in the latter half of the last decade.
Handle: RePEc:nbr:nberwo:7817
Template-Type: ReDIF-Paper 1.0
Title: Comments on Obstfeld and Rogoff's "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?"
Classification-JEL: F3; F4
Author-Name: Charles Engel
Author-Person: pen14
Note: IFM
Number: 7818
Creation-Date: 2000-07
Order-URL: http://www.nber.org/papers/w7818
File-URL: http://www.nber.org/papers/w7818.pdf
File-Format: application/pdf
Abstract: The paper offers comments on Obstfeld and Rogoff (2000). The comments primarily focus on three issues: (a) How do we reconcile the numerical examples of OR, which show quantitatively plausible resolutions to the major puzzles arising from costs of trade, with previous studies that have found trade costs do not get us very far? (b) Does the solution proposed by OR solve the puzzles at the expense of introducing new puzzles? That is, does their solution have counterfactual implications for other economic relationships? (The prime example of what I have in mind here is what OR call the Backus-Smith puzzle'.) (c) Some of the problems connected with points (a) and (b) can be rectified by moving away from the assumption of complete asset markets. But, then, how do we assess how much of the solution to the puzzle is coming from trade costs versus capital-market imperfections?
Handle: RePEc:nbr:nberwo:7818
Template-Type: ReDIF-Paper 1.0
Title: Estimating Production Functions Using Inputs to Control for Unobservables
Author-Name: James Levinsohn
Author-Person: ple386
Author-Name: Amil Petrin
Note: PR ITI
Number: 7819
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7819
File-URL: http://www.nber.org/papers/w7819.pdf
File-Format: application/pdf
Publication-Status: published as Levinsohn, James and Amil Petrin. "Estimating Production Functions Using Inputs To Control For Unobservables," Review of Economic Studies, 2003, v70(2,Apr), 317-341.
Abstract: We introduce a new method for conditioning out serially correlated unobserved shocks to the production technology by building ideas first developed in Olley and Pakes (1996). Olley and Pakes show how to use investment to control for correlation between input levels and the unobserved firm-specific productivity process. We prove that like investment, intermediate inputs (those inputs which are typically subtracted out in a value-added production function) can also solve this simultaneity problem. We highlight three potential advantages to using an intermediate inputs approach relative to investment. Our results indicate that these advantages are empirically important.
Handle: RePEc:nbr:nberwo:7819
Template-Type: ReDIF-Paper 1.0
Title: Identifying the Role of Cognitive Ability in Explaining the Level of and Change in the Return to Schooling
Classification-JEL: J31
Author-Name: James Heckman
Author-Name: Edward Vytlacil
Author-Person: pvy2
Note: CH LS PE
Number: 7820
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7820
File-URL: http://www.nber.org/papers/w7820.pdf
File-Format: application/pdf
Publication-Status: published as Heckman, James and Edward Vytlacil. "Identifying The Role Of Cognitive Ability In Explaining The Level Of And Change In The Return To Schooling," Review of Economics and Statistics, 2001, v83(1,Feb), 1-12.
Abstract: This paper considers two problems that arise in determining the role of ability in explaining the level of and change in the rate of return to schooling. (1) Ability and schooling are so strongly dependent that it is not possible, over a wide range of variation in schooling and ability, to independently vary these two variables and estimate their separate impacts. (2) The structure of panel data makes it difficult to identify main age and time effects or to isolate crucial education-ability-time interactions needed to assess the role of ability in explaining the rise in the return to education.
Handle: RePEc:nbr:nberwo:7820
Template-Type: ReDIF-Paper 1.0
Title: On the Marginal Source of Investment Funds
Classification-JEL: G35; H32
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Kevin A. Hassett
Author-Person: pha378
Note: CF PE
Number: 7821
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7821
File-URL: http://www.nber.org/papers/w7821.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. and Kevin A. Hassett. "On The Marginal Source Of Investment Funds," Journal of Public Economics, 2003, v87(1,Jan), 205-232.
Abstract: Under the new view' of dividend taxation developed in Auerbach (1979), Bradford (1981) and King (1977) the marginal source of finance for new investment projects is retained earnings. In this case, the tax advantage of retentions precisely offsets the double taxation of subsequent dividends: taxes on dividends have no impact on the investment incentives of firms using retentions as a marginal source of funds and paying dividends with residual cash flows. We find evidence that dividends do respond to investment and cash flow for the nonfinancial corporate sector as a whole in a manner consistent with the new view. We also find that this dividend pattern is weaker for firms with better access to capital markets, as measured by bond rating and the number of analysts following them. Finally, we find that, although new share issues and repurchases respond to the same firm characteristics as dividends do, the pattern of these responses is consistent with a broader interpretation of the new view that preserves the main result of dividend-tax irrelevance with respect to the cost of capital.
Handle: RePEc:nbr:nberwo:7821
Template-Type: ReDIF-Paper 1.0
Title: Strategic Trade, Competitive Industries and Agricultural Trade Disputes
Classification-JEL: F02; F11
Author-Name: Kyle Bagwell
Author-Person: pba409
Author-Name: Robert W. Staiger
Author-Person: pst85
Note: ITI
Number: 7822
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7822
File-URL: http://www.nber.org/papers/w7822.pdf
File-Format: application/pdf
Publication-Status: published as Kyle Bagwell & Robert W. Staiger, 2001. "Strategic Trade, Competitive Industries and Agricultural Trade Disputes," Economics and Politics, Blackwell Publishing, vol. 13(2), pages 113-128, 07.
Abstract: The primary predictions of strategic-trade theory are not restricted to imperfectly-competitive markets. Indeed, these predictions emerge in a natural three-country extension of the traditional theory of trade policy in competitive markets, once the theory is augmented to allow for politically-motivated governments, so that the sign of export policy may be converted from tax to subsidy. This suggest that the ongoing agricultural trade disputes may be best interpreted from the perspective of strategic-trade theory. In fact, these disputes may offer the most important example yet of strategic-trade theory.
Handle: RePEc:nbr:nberwo:7822
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Policies in Open Cities with Firms and Households
Classification-JEL: H3; H7
Author-Name: Andrew Haughwout
Author-Person: pha405
Author-Name: Robert P. Inman
Note: PE
Number: 7823
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7823
File-URL: http://www.nber.org/papers/w7823.pdf
File-Format: application/pdf
Publication-Status: published as Haughwout, Andrew and Robert P. Inman. "Fiscal Policies In Open Cities With Firms And Households," Regional Science and Urban Economics, 2001, v31(2-3,Apr), 147-180.
Abstract: With the renewed interest in cities as economic centers comes a need to understand how local public services and local taxes are likely to affect city economic performance. This paper provides an equilibrium model of an open city economy with mobile firms and resident workers. Given household preferences and firm technologies and an exogenous configuration of city tax rates and national grants and fiscal mandates, the model calculates equilibrium values for firm production and input use, household consumption and housing choices, city wages, rents, and population, and finally, local tax bases, revenues, and public goods provision. The model is calibrated to the Philadelphia economy for FY 1998; model predictions are compared to recent econometric estimates of the effects of city fiscal policy on the Philadelphia private economy. We then explore two important questions for the city's fiscal future: What are the economic and fiscal consequences of raising city tax rates? Can the city shoulder a rising burden of local welfare payments and remain a viable economic center in the long-run? We find the city to be near the top of its total revenue hill and incapable of bearing significant increases in local responsibility for welfare transfers.
Handle: RePEc:nbr:nberwo:7823
Template-Type: ReDIF-Paper 1.0
Title: On the Benefits of Dollarization when Stabilization Policy is not Credible and Financial Markets are Imperfect
Classification-JEL: F32; F33
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Note: IFM
Number: 7824
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7824
File-URL: http://www.nber.org/papers/w7824.pdf
File-Format: application/pdf
Publication-Status: published as Mendoza, Enrique G. "The Benefits Of Dollarization When Stabilization Policy Lacks Credibility And Financial Markets Are Imperfect," Journal of Money, Credit and Banking, 2001, v33(2,May), Part 2, 440-474.
Abstract: This paper examines two potential benefits that emerging economies may derive from dollarization. First, dollarization may eliminate distortions induced by the lack of credibility of monetary policy. Second, dollarization may weaken financial frictions that result in endogenous credit constraints. The analysis is based on numerical simulations of a two-sector dynamic, stochastic general equilibrium model calibrated to Mexican data. The results indicate that policy uncertainty and credit constraints are very costly distortions. The mean welfare gains of eliminating policy uncertainty range between 6.4 and 9 percent of the trend level of consumption per capita. The mean welfare gain of weakening credit frictions is about 4.6 percent.
Handle: RePEc:nbr:nberwo:7824
Template-Type: ReDIF-Paper 1.0
Title: The Antebellum Tariff on Cotton Textiles Revisited
Classification-JEL: N71; F13
Author-Name: Douglas A. Irwin
Author-Person: pir25
Author-Name: Peter Temin
Author-Person: pte231
Note: DAE ITI
Number: 7825
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7825
File-URL: http://www.nber.org/papers/w7825.pdf
File-Format: application/pdf
Publication-Status: published as Irwin, Douglas A. and Peter Temin. "The Antebellum Tariff On Cotton Textiles Revisited," Journal of Economic History, 2001, v61(3,Sep), 777-798.
Abstract: Recent research has suggested that the antebellum U.S. cotton textile industry would have been wiped out had it not received tariff protection. We reaffirm Taussig's judgment that the U.S. cotton textile industry was largely independent of the tariff by the 1830s. American and British producers specialized in quite different types of textile products that were poor substitutes for one another. The Walker tariff of 1846, for example, reduced the duties on cotton textiles from nearly 70 percent to 25 percent and imports soared as a result, but there was little change in domestic production. Using data from 1826 to 1860, we estimate the responsiveness of domestic production to fluctuations in import prices and conclude that the industry could have survived even if the tariff had been completely eliminated.
Handle: RePEc:nbr:nberwo:7825
Template-Type: ReDIF-Paper 1.0
Title: Portfolios of the Rich
Classification-JEL: D10; D31
Author-Name: Christopher D. Carroll
Author-Person: pca45
Note: ME
Number: 7826
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7826
File-URL: http://www.nber.org/papers/w7826.pdf
File-Format: application/pdf
Publication-Status: published as Guiso, Luigi, Michael Haliassos, and Tullio Jappelli (eds.) Household portfolios. Cambridge and London: MIT Press, 2002.
Abstract: Recent research has shown that rich' households save at much higher rates than others (see Carroll (2000); Dynan, Skinner, and Zeldes (1996); Gentry and Hubbard (1998); Huggett (1996); Quadrini (1999)). This paper documents another large difference between the rich and the rest of the population: portfolios of the rich are heavily skewed toward risky assets, particularly investments in their own privately held businesses. The paper explores three possible explanations of these facts. First, perhaps there is exogenous variation in risk tolerance, so that highly risk tolerant house-holds engage in high-risk, high-return activities, and the risk-lovers who are lucky constitute the rich. A second possibility is that capital market imperfections a la Gentry and Hubbard (1998)and Quadrini (1999) require entrepreneurial activities to be largely self-financed, and these same imperfections imply that entreprenurial investment will yield high average returns. The final possibility is that wealth enters households' utility functions directly as a luxury good as in Carroll (2000) (one interpretation is that this reflects the utility of anticipated bequests), implying that risk aversion declines as wealth rises. The paper concludes that the overall pattern of facts suggests both Carroll-style utility and Gentry/Hubbard-Quadrini style capital market imperfections are important.
Handle: RePEc:nbr:nberwo:7826
Template-Type: ReDIF-Paper 1.0
Title: Capital Gains Holding Periods and Equity Trading: Evidence from the 1998 Tax Act
Classification-JEL: H24; G12
Author-Name: Jennifer L. Blouin
Author-Name: Jana Smith Raedy
Author-Name: Douglas A. Shackelford
Author-Person: psh631
Note: PE
Number: 7827
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7827
File-URL: http://www.nber.org/papers/w7827.pdf
File-Format: application/pdf
Publication-Status: published as Blouin, Jennifer L., Jana Smith Raedy and Douglas A. Shackelford. "Capital Gains Taxes And Equity Trading: Empirical Evidence," Journal of Accounting Research, 2003, v41(4,Sep), 611-651.
Abstract: This paper exploits an unusually powerful setting to explore a choice many individual investors face regularly the decision to sell today or postpone selling until lower rates are available in the future. We examine trading volume and stock returns around the 1998 reduction in the holding period required for individual investors to receive the most favorable long-term capital gains tax rate. For firms whose initial public shareholders were affected by the legislation, we find trading volume increasing and share returns decreasing in past price performance on the day the legislation was publicly disclosed. The results are consistent with capital gains holding periods distorting markets sufficiently that if investors are permitted to liquidate appreciated positions at favorable rates, enough will sell immediately to move prices. To our knowledge, this is the first study linking trading volume and security prices to a change in capital gains holding periods.
Handle: RePEc:nbr:nberwo:7827
Template-Type: ReDIF-Paper 1.0
Title: The Razor's Edge: Distortions and Incremental Reform in the People's Republic of China
Classification-JEL: P2
Author-Name: Alwyn Young
Note: EFG
Number: 7828
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7828
File-URL: http://www.nber.org/papers/w7828.pdf
File-Format: application/pdf
Publication-Status: published as Young, Alwyn. "The Razor's Edge: Distortions and Incremental Reform in the People's Republic of China." The Quarterly Journal of Economics 115, 4 (Novermber 2000): 1091-1135.
Abstract: In a partially reformed economy, distortions beget distortions. Segments of the economy which are freed from centralized control respond to the rent seeking opportunities implicit in the remaining distortions of the economy. The battle to capture, and then protect, these rents leads to the creation of new distortions, even as the reform process tries to move forward. In this paper I illustrate this idea with a study of the People's Republic of China. Under the plan, prices were skewed so as to concentrate profits, and hence revenue, in industry. As control over factor allocations was loosened, local governments throughout the economy sought to capture these rents by developing high margin industries. Continued reform, and growing interregional competition between duplicative industries, threatened the profitability of these industrial structures, leading local governments to impose a variety of interregional barriers to trade. Thus, the reform process led to the fragmentation of the domestic market and the distortion of regional production away from patterns of comparative advantage.
Handle: RePEc:nbr:nberwo:7828
Template-Type: ReDIF-Paper 1.0
Title: Medicaid
Classification-JEL: I1; H51
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: CH EH PE
Number: 7829
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7829
File-URL: http://www.nber.org/papers/w7829.pdf
File-Format: application/pdf
Publication-Status: published as Medicaid, Jonathan Gruber. in Means-Tested Transfer Programs in the United States, Moffitt. 2003
Abstract: This paper examines the history, rules, and economic implications of the Medicaid program. I begin by providing a detailed overview of how the program works. I then provide information on who is covered, who is eligible, and spending patterns. I then turn to a review of the economic issues involved in studying the Medicaid program: assessing the impacts on insurance coverage (public and private), health, labor supply, family structure, and savings. I follow this with a review of the empirical literature on each of these topics. Finally, I conclude with a discussion of the policy issues and unanswered questions surrounding the Medicaid program.
Handle: RePEc:nbr:nberwo:7829
Template-Type: ReDIF-Paper 1.0
Title: Social Security and Retirement
Classification-JEL: H55; J26
Author-Name: Courtney Coile
Author-Person: pco557
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: AG LS PE
Number: 7830
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7830
File-URL: http://www.nber.org/papers/w7830.pdf
File-Format: application/pdf
Publication-Status: published as Coile, Courtney C. and Jonathan Gruber. “Future Social Security Entitlements and the Retirement Decision.” The Review of Economics and Statistics 89(2):234-246, May 2007.
Abstract: A critical question for Social Security policy is how program incentives affect retirement behavior. We use the wealth of new data available through the Health and Retirement Survey (HRS) to examine the impact of Social Security incentives on male retirement. We implement forward-looking models of retirement whereby individuals consider not just the incentives to work in the next year but in all future years as well. We find that such forward looking incentive measures for Social Security are significant determinants of retirement decisions. Our findings suggest that Social Security policies which increase the incentives to work at older ages can significantly reduce the exit rate of older workers from the labor force.
Handle: RePEc:nbr:nberwo:7830
Template-Type: ReDIF-Paper 1.0
Title: Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools
Classification-JEL: C1; I2
Author-Name: Joseph G. Altonji
Author-Person: pal266
Author-Name: Todd E. Elder
Author-Person: pel109
Author-Name: Christopher R. Taber
Note: CH PE
Number: 7831
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7831
File-URL: http://www.nber.org/papers/w7831.pdf
File-Format: application/pdf
Publication-Status: published as Joseph G. Altonji & Todd E. Elder & Christopher R. Taber, 2005. "Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 151-184, February.
Abstract: We develop estimation methods that use the amount of selection on the observables in a model as a guide to the amount of selection on the unobservables. We show that if the observed variables are a random subset of a large number of factors that influence the endogenous variable and the outcome of interest, then the relationship between the index of observables that determines the endogenous variable and the index that determines the outcome will be the same as the relationship between the indices of unobservables that determine the two variables. In some circumstances this fact may be used to identify the effect of the endogenous variable. We also propose an informal way to assess selectivity bias based on measuring the ratio of selection on unobservables to selection on observables that would be required if one is to attribute the entire effect of the endogenous variable to selection bias. We use our methods to estimate the effect of attending a Catholic high school on a variety of outcomes. Our main conclusion is that Catholic high schools substantially increase the probability of graduating from high school and, more tentatively, college attendance. We do not find much evidence for an effect on test scores.
Handle: RePEc:nbr:nberwo:7831
Template-Type: ReDIF-Paper 1.0
Title: Enrollee Mix, Treatment Intensity, and Cost in Competing Indemnity and HMO Plans
Classification-JEL: I1
Author-Name: Daniel Altman
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Richard Zeckhauser
Author-Person: pze7
Note: EH
Number: 7832
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7832
File-URL: http://www.nber.org/papers/w7832.pdf
File-Format: application/pdf
Publication-Status: published as Altman, Daniel & Cutler, David & Zeckhauser, Richard, 2003. "Enrollee mix, treatment intensity, and cost in competing indemnity and HMO plans," Journal of Health Economics, Elsevier, vol. 22(1), pages 23-45, January.
Abstract: We examine why managed care plans are less expensive than traditional indemnity insurance plans. Our database consists of the insurance experiences of over 200,000 state and local employees in Massachusetts and their families, who are insured in a single pool. Within this group, average HMO costs are 40 percent below those of the indemnity plan. We evaluate cost differences for 8 conditions representing over 10 percent of total health expenditures. They are: heart attacks, cancers (breast, cervical, colon, prostate), diabetes (type I and II), and live births. For each condition, we identify the portions of the cost differential arising from differences in treatment intensity, enrollee mix, and prices paid for the same treatment. Surprisingly, treatment intensity differs hardly at all between the HMOs and the indemnity plan. That is, relative to their fee-for-service competitor, HMOs do not curb the use of expensive treatments. Across the 8 conditions, roughly half of the HMO cost savings is due to the lower incidence of the diseases in the HMOs. Virtually all of the remaining savings come because HMOs pay lower prices for the same treatment.
Handle: RePEc:nbr:nberwo:7832
Template-Type: ReDIF-Paper 1.0
Title: Does the "New Economy" Measure up to the Great Inventions of the Past?
Classification-JEL: O30; O40
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG PR
Number: 7833
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7833
File-URL: http://www.nber.org/papers/w7833.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Robert J. "Does The 'New Economy' Measure Up To The Great Inventions Of The Past?," Journal of Economic Perspectives, 2000, v14(4,Fall), 49-74.
Abstract: During the four years 1995-99 U. S. productivity growth experienced a strong revival and achieved growth rates exceeding that of the golden age' of 1913-72. Accordingly many observers have declared the New Economy' (the Internet and the accompanying acceleration of technical change in computers and telecommunications) to be an Industrial Revolution equal in importance, or even more important, than the Second Industrial Revolution of 1860-1900 which gave us electricity, motor and air transport, motion pictures, radio, indoor plumbing, and made the golden age of productivity growth possible. This paper raises doubts about the validity of this comparison with the Great Inventions of the past. It dissects the recent productivity revival and separates the revival of 1.35 percentage points (comparing 1995-99 with 1972-95) into 0.54 of an unsustainable cyclical effect and 0.81 points of acceleration in trend growth. The entire trend acceleration is attributed to faster multi-factor productivity (MFP) growth in the durable manufacturing sector, consisting of computers, peripherals, telecommunications, and other types of durables. There is no revival of productivity growth in the 88 percent of the private economy lying outside of durables; in fact when the contribution of massive investment in computers in the nondurable economy is subtracted, MFP growth outside of durables has actually decelerated. The paper combines the Great Inventions of 1860-1900 into five clusters' and shows how their development and diffusion in the first half of the 20th century created a fundamental transformation in the American standard of living from the bad old days of the late 19th century. In comparison, computers and the Internet fall short. The rapid decline in the cost of computer power means that the marginal utility of computer characteristics like speed and memory has fallen rapidly as well, implying that the greatest contributions of computers lie in the past, not in the future. The Internet fails the hurdle test as a Great Invention on several counts. First, the invention of the Internet has not boosted the growth in the demand for computers; all of that growth can be interpreted simply as the same unit-elastic response to the decline in computer prices as was prevalent prior to 1995. Second, the Internet provides information and entertainment more cheaply and conveniently than before, but much of its use involves substitution of existing activities from one medium to another. Third, much internet investment involves defense of market share by existing companies like Borders Books faced with the rise of Amazon; social returns are less than private returns. Fourth, much Internet activity duplicates existing activity like mail order catalogues, but the latter have not faded away; the usage of paper is rising, not falling. Finally, much Internet activity, like daytime e-trading, involves an increase in the fraction of work time involving consumption on thejob
Handle: RePEc:nbr:nberwo:7833
Template-Type: ReDIF-Paper 1.0
Title: Is Mobility of Technical Personnel a Source of R&D Spillovers?
Classification-JEL: J24; J31
Author-Name: Jarle Møen
Note: LS
Number: 7834
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7834
File-URL: http://www.nber.org/papers/w7834.pdf
File-Format: application/pdf
Publication-Status: published as "Is Mobility of Technical Personnel a Source of R&D Spillovers?" Journal of Labor Economics, Vol. 23(1), 2005, 81-114.
Abstract: Labor mobility is often considered to be an important source of knowledge externalities, making it difficult for firms to appropriate returns to R&D investments. In this paper, I argue that inter-firm transfers of knowledge embodied in people should be analyzed within a human capital framework. Testing such a framework using a matched employer-employee data set, I find that the technical staff in R&D-intensive firms pays for the knowledge they accumulate on the job through lower wages in the beginning of their career. Later they earn a return on these implicit investments through higher wages. This suggests that the potential externalities associated with labor mobility, at least to some extent, are internalized in the labor market.
Handle: RePEc:nbr:nberwo:7834
Template-Type: ReDIF-Paper 1.0
Title: Rebels, Conformists, Contrarians and Momentum Traders
Classification-JEL: G1; G0
Author-Name: Evan Gatev
Author-Name: Stephen A. Ross
Note: AP
Number: 7835
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7835
File-URL: http://www.nber.org/papers/w7835.pdf
File-Format: application/pdf
Abstract: We develop a model of optimal investment with two types of agents with different beliefs about the market dynamics. Market conformists agree with the true log-normal price distribution and rebels believe in price predictability. Depending on their exact beliefs, the rebels may follow either a momentum or a contrarian strategy. It is difficult to detect rebels' beliefs that are not far-fetched from the market perspective. The long-run investment portfolios of both conformist and rebels need not be biased towards equities.
Handle: RePEc:nbr:nberwo:7835
Template-Type: ReDIF-Paper 1.0
Title: Explaining the Border Effect: The Role of Exchange Rate Variability, Shipping Costs, and Geography
Classification-JEL: F30; F40
Author-Name: David C. Parsley
Author-Person: ppa30
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: ITI
Number: 7836
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7836
File-URL: http://www.nber.org/papers/w7836.pdf
File-Format: application/pdf
Publication-Status: published as Parsley, David C. and Shang-Jin Wei. "Explaining The Border Effect: The Role Of Exchange Rae Variability, Shipping Costs, And Geography," Journal of International Economics, 2001, v55(1,Oct), 87-105.
Abstract: This paper exploits a three-dimensional panel data set of prices on 27 traded goods, over 88 quarters, across 96 cities in the U.S. and Japan. We show that a simple average of good-level real exchange rates tracks the nominal exchange rate well, suggesting strong evidence of sticky prices. Focusing on dispersion in prices between city-pairs, we find that crossing the U.S.-Japan Border' is equivalent to adding as much as 43,000 trillion miles to the cross-country volatility of relative prices. We turn next to economic explanations for this so-called border effect and to its dynamics. Distance, unit-shipping costs, and exchange rate variability, collectively, explain a substantial portion of the observed international market segmentation. Relative wage variability, on the other hand, has little independent impact on segmentation.
Handle: RePEc:nbr:nberwo:7836
Template-Type: ReDIF-Paper 1.0
Title: Perspectives on the Budget Surplus
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: William G. Gale
Author-Person: pga40
Note: PE
Number: 7837
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7837
File-URL: http://www.nber.org/papers/w7837.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. and William Gale. "Perspectives on the Budget Surplus." National Tax Journal (September 2000): 459-472.
Abstract: This paper provides alternative measures of federal budget surpluses over 10-year and long-term horizons. Official baseline budget forecasts are based on a series of statutory requirements that may be at variance with reasonable expectation. More plausible notions of current policy toward discretionary spending, taxes and retirement trust funds imply that surpluses over the next 10 years will be substantially smaller than the baseline forecasts indicate. Properly accounting for long-term imbalances in social security and the rest of the budget implies that, under plausible definitions of current policy, the federal government faces a long-term shortfall.
Handle: RePEc:nbr:nberwo:7837
Template-Type: ReDIF-Paper 1.0
Title: The Behavioral Dynamics of Youth Smoking
Classification-JEL: I1
Author-Name: Donna B. Gilleskie
Author-Name: Koleman S. Strumpf
Note: EH
Number: 7838
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7838
File-URL: http://www.nber.org/papers/w7838.pdf
File-Format: application/pdf
Publication-Status: published as Gilleskie, Donna B. and Koleman S. Strumpf. "The Behavioral Dynamics Of Youth Smoking," Journal of Human Resources, 2005, v40(4,Fall), 822-866.
Abstract: While individual smoking behavior persists over time, it is unknown whether this repeated behavior is due to addiction or individual propensities to smoke. To address this issue, we develop a dynamic empirical model of smoking decisions which explicitly accounts for the impact of previous smoking behavior and allows for unobserved individual heterogeneity. The model is estimated using longitudinal data on a representative sample of teens from all 50 United States from 1988 to 1992. We find that current smokers are both more likely to continue smoking and are less price sensitive than current non-smokers. For example, smoking in 8th grade (as opposed to not smoking) increased the probability of smoking two years later three fold, while smoking participation rates are double four years later. The estimated price sensitivities of previous non-smokers and previous smokers are -0.32 and 0.08, respectively. This suggests that a cigarette price increase will have a larger aggregate effect in the long run than in the short run as more individuals accumulate in the price-sensitive non-smoking group. In total, a dollar increase in cigarette prices reduces (age 18) smoking participation predictions by four percentage points more when unobserved individual heterogeneity and behavior modification associated with previous price changes are taken into account than when they are ignored.
Handle: RePEc:nbr:nberwo:7838
Template-Type: ReDIF-Paper 1.0
Title: 'Risky Habits' and the Marginal Propensity to Consume Out of Permanent Income, or, How Much Would a Permanent Tax Cut Boost Japanese Consumption?
Classification-JEL: D11; D81
Author-Name: Christopher D. Carroll
Author-Person: pca45
Note: ME PE
Number: 7839
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7839
File-URL: http://www.nber.org/papers/w7839.pdf
File-Format: application/pdf
Publication-Status: published as Carroll, Christopher D. "Risks Habits' And The Marginal Propensity To Consume Out Of Permanent Income, Or, How Much Would A Permanent Tax Cut Boost Japanese Consumption?," International Economic Journal, 2000, v14(4,Winter), 1-40.
Abstract: Papers in variety of disparate literatures have recently suggested that habit formation in consumption may explain several empirical puzzles, ranging from the level and cyclical variability of the equity premium (Abel (1990,1999); Constantinides (1990); Jermann (1998); Campbell and Cochrane (1999)) to the excess smoothness' of aggregate consumption (Fuhrer (2000)) to the apparent fact that increases in economic growth cause subsequent increases in aggregate saving rates (Carroll and Weil (1994); Bosworth (1993); Attanasio, Picci, and Scorcu (2000); Rodrik (1999); Loayza, Schmidt-Hebbel, and Serv‚n (2000)). This paper examines an implication of these models that has mostly been overlooked: Habits strong enough to solve these puzzles imply an immediate marginal propensity to consume out of permanent shocks of much less than one. When the model is calibrated to roughly match the rise in the Japanese saving rate over the postwar period, it implies that the immediate MPC out of permanent tax cuts may be as low as 30 percent, suggesting that calls for permanent income tax cut as a quick means of stimulating aggregate demand in Japan may be misguided.
Handle: RePEc:nbr:nberwo:7839
Template-Type: ReDIF-Paper 1.0
Title: Balance Sheets and Exchange Rate Policy
Classification-JEL: F3; F4
Author-Name: Luis Felipe Cespedes
Author-Person: pce53
Author-Name: Roberto Chang
Author-Person: pch80
Author-Name: Andres Velasco
Note: IFM
Number: 7840
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7840
File-URL: http://www.nber.org/papers/w7840.pdf
File-Format: application/pdf
Publication-Status: published as Cespedes, Luis Felipe, Roberto Chang and Andres Velasco. "Balance Sheets And Exchange Rate Policy," American Economic Review, 2004, v94(4,Sep), 1183-1193.
Abstract: We study the relation among exchange rates, balance sheets, and macroeconomic outcomes in a small open economy. Because liabilities are dollarized,' a real devaluation has detrimental effects on entreprenurial net worth, which in turn constrains investment due to financial frictions. But there is an offsetting effect, int hat devaluation expands home output and the return to domestic investment, which are also components of net worth. We show that the impact of an adverse foreign shock can be strongly magnified by the balance sheet effect of the associated real devaluation. But the fall in output employment, and investment is stronger under fixed exchange rates than under flexible rates. Hence the conventional wisdom, that flexible exchange rates are better absorbers of real foreign shocks than are fixed rates, holds in spite of potentially large balance sheet effects.
Handle: RePEc:nbr:nberwo:7840
Template-Type: ReDIF-Paper 1.0
Title: Body Weight and Women's Labor Market Outcomes
Classification-JEL: J3; I1
Author-Name: John Cawley
Author-Person: pca6
Note: EH LS
Number: 7841
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7841
File-URL: http://www.nber.org/papers/w7841.pdf
File-Format: application/pdf
Publication-Status: published as Cawley, John. "The Impact of Obesity on Wages." Journal of Human Resources, Spring 2004, 39(2): 451-474.
Abstract: Several studies have found that, all else equal, heavier women earn less. Previous research has been unable to determine whether high weight is the cause of low wages, the result of low wages, or whether unobserved factors cause both higher weight and lower wages. Applying the method of instrumental variables to data from the National Longitudinal Survey of Youth, this paper attempts to generate consistent estimates of the effect of weight on labor market outcomes for women. Three labor market outcomes are studied: hourly wages, employment, and sector of occupation. This paper finds that weight lowers wages for white women; among this group, a difference in weight of two standard deviations (roughly sixty-five pounds) is associated with a difference in wages of 7%. In absolute value, this is equivalent to the wage effect of roughly one year of education, two years of job tenure, or three years of work experience. In contrast, this paper finds only weak evidence that weight lowers wages for hispanic women, and no evidence that weight lowers the wages of black women. This paper also concludes that there is no effect of weight on the probability of employment or sector of occupation.
Handle: RePEc:nbr:nberwo:7841
Template-Type: ReDIF-Paper 1.0
Title: Regulating Executive Pay: Using the Tax Code to Influence CEO Compensation
Classification-JEL: J33; G3
Author-Name: Nancy L. Rose
Author-Person: pro786
Author-Name: Catherine Wolfram
Note: IO PE
Number: 7842
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7842
File-URL: http://www.nber.org/papers/w7842.pdf
File-Format: application/pdf
Publication-Status: published as Rose, Nancy L. and Catherine Wolfram. "Regulating Executive Pay: Using The Tax Code To Influence Chief Executive Officer Compensation," Journal of Labor Economics, 2002, v20(2,Apr), Part 2, S138-S175.
Abstract: This study explores corporate responses to 1993 legislation, implemented as section 162(m) of the Internal Revenue Code, that capped the corporate tax deductibility of top management compensation at $1 million per executive unless it qualified as substantially performance-based.' We detail the provisions of this regulation, describe its possible effects, and test its impact on U.S. CEO compensation during the 1990s. Data on nearly 1400 publicly-traded U.S. corporations are used to explore the determinants of section 162(m) compensation plan qualification and the effect of section 162(m) on CEO pay. Our analysis suggests that section 162(m) may have created a focal point' for salary compensation, leading some salary compression close to the deductibility cap. There is weak evidence that compensation plan qualification is associated with higher growth rates, as would be the case if qualification relaxed some political constraints on executive pay. There is little evidence that the deductibility cap has had significant effects on overall executive compensation levels or growth rates at firms likely to be affected by the deductibility cap, however, nor is there evidence that it has increased the performance sensitivity of CEO pay at these firms. We conclude that corporate pay decisions seem to be relatively insulated from this type of blunt policy intervention.
Handle: RePEc:nbr:nberwo:7842
Template-Type: ReDIF-Paper 1.0
Title: Industry-University Cooperative Research Centers
Classification-JEL: O31; O33
Author-Name: James D. Adams
Author-Person: pad11
Author-Name: Eric P. Chiang
Author-Person: pch469
Author-Name: Katara Starkey
Note: PR
Number: 7843
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7843
File-URL: http://www.nber.org/papers/w7843.pdf
File-Format: application/pdf
Publication-Status: published as Adams, James D & Chiang, Eric P & Starkey, Katara, 2001. " Industry-University Cooperative Research Centers," The Journal of Technology Transfer, Springer, vol. 26(1-2), pages 73-86, January.
Abstract: This paper takes a first look at the effect of Industry-University Cooperative Research Centers (IUCRCs) on industrial R&D laboratories. IUCRCs are small academic centers designed to foster technology transfer between universities and firms. Since IUCRCs depend on industry support we expect them to further the research of member companies. Our findings suggest that IUCRCs promote industry-university technology transfer. We find strong associations between laboratory membership in IUCRCs and the importance of faculty consultants, co-authorship with faculty and hiring of graduate students to the laboratories. IUCRC membership contributes small increments, not always statistically significant, of 2% in laboratory patenting and research expenditures. Both estimates are larger for National Science Foundation IUCRCs, consistent with their quality and their sorting to larger laboratories. These results survive a simultaneous equation analysis of the joint decision to patent and join IUCRCs. Nevertheless more work is needed to separate the effect of the IUCRCs from the matching mechanism that assigns IUCRCs to R&D laboratories.
Handle: RePEc:nbr:nberwo:7843
Template-Type: ReDIF-Paper 1.0
Title: Was There a Riverside Miracle? A Framework for Evaluating Multi-Site Programs
Classification-JEL: C11; I38
Author-Name: Rajeev Dehejia
Author-Person: pde179
Note: LS
Number: 7844
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7844
File-URL: http://www.nber.org/papers/w7844.pdf
File-Format: application/pdf
Publication-Status: published as "Was There a Riverside Miracle? A Framework for Evaluating Multi-Site Programs" Journal of Business and Economic Statistics, Vol. 21, No. 1, pp. 1-11(January 2003)
Abstract: This paper uses data from the Greater Avenues for Independence (GAIN) initiative to discuss the evaluation of programs that are implemented at multiple sites. Two frequently used methods are to pool the data or to use fixed effects (an extreme version of which estimates separate models for each site). The former approach, however, ignores site effects. Though the latter estimates site effects, it lacks a framework for predicting the impact in subsequent implementations of the program (e.g., will a new implementation resemble Riverside or Alameda?). I develop a model for earnings that lies between these two extremes. For the GAIN data, I show that most of the differences across sites are due to differences in the composition of participants. I show also that uncertainty regarding predicting site effects is important; when the predictive uncertainty is ignored, the treatment impact for the Riverside sites is significant, but when we consider predictive uncertainty, the impact for the Riverside sites is insignificant. Finally, I demonstrate that the model is able to extrapolate site effects with reasonable accuracy, when the site for which the prediction is being made does not differ substantially from the sites already observed. For example, the San Diego treatment effects could have been predicted based on observable site characteristics, but the Riverside effects are consistently underestimated.
Handle: RePEc:nbr:nberwo:7844
Template-Type: ReDIF-Paper 1.0
Title: Troubled Banks, Impaired Foreign Direct Investment: The Role of Relative Access to Credit
Classification-JEL: F2; G2
Author-Name: Michael Klein
Author-Person: pkl9
Author-Name: Joe Peek
Author-Person: ppe90
Author-Name: Eric Rosengren
Note: IFM
Number: 7845
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7845
File-URL: http://www.nber.org/papers/w7845.pdf
File-Format: application/pdf
Publication-Status: published as Klein, Michael W., Joe Peek and Eric P. Rosengren. "Troubled Banks, Impaired Foreign Investment: The Role Of Relative Access To Credit," American Economic Review, 2002, v92(3,Jun), 664-682.
Abstract: The relative wealth hypothesis of Froot and Stein (1991), motivated by the aggregate correlation between real exchange rates and foreign direct investment (FDI) observed in the 1980s, cannot explain one of the major shifts in FDI in the 1990s: the continued decline in Japanese FDI during a period of stable stock prices and a rapidly appreciating yen. However, when the relative wealth hypothesis is supplemented with the relative access to credit hypothesis proposed in this study, we are able to show that unequal access to credit by Japanese firms can explain the FDI puzzle in the 1990s. We utilize a unique data set that links individual Japanese firms engaged in FDI to their main banks. Using both bank-level and firm-level data sets, we find that financial difficulties at banks were economically and statistically important in reducing the number of FDI projects by Japanese firms into the United States, even after controlling for the effects associated with the relative wealth movements driven by macroeconomic fluctuations in the exchange rate and stock market prices. This provides strong empirical evidence that differences across firms in the degree of their access to credit can be an important determinant of foreign direct investment.
Handle: RePEc:nbr:nberwo:7845
Template-Type: ReDIF-Paper 1.0
Title: What Explains Skill Upgrading in Less Developed Countries?
Classification-JEL: F16; J31
Author-Name: Nina Pavcnik
Author-Person: ppa511
Note: ITI
Number: 7846
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7846
File-URL: http://www.nber.org/papers/w7846.pdf
File-Format: application/pdf
Publication-Status: published as Pavcnik, Nina. "What Explains Skill Upgrading In Less Developed Countries?," Journal of Development Economics, 2003, v71(2,Aug), 311-327.
Abstract: Although many developing countries have experienced growing income inequality and an increase in the relative demand for skilled workers during the 1980s, the sources of this trend remain a puzzle. This paper examines whether investment and adoption of skill-biased technology have contributed to within-industry skill upgrading using plant-level data from Chile. Using semiparametric and parametric approaches, I investigate whether plant-level measures of capital and investment, the use of imported materials, foreign technical assistance, and patented technology affect the relative demand for skilled workers. I find positive relationship between these measures and skill upgrading. Capital deepening and the adoption of skill biased technology therefore might contribute to the increased relative demand for skilled workers within industries.
Handle: RePEc:nbr:nberwo:7846
Template-Type: ReDIF-Paper 1.0
Title: A Model for the Federal Funds Rate Target
Classification-JEL: C22; C25
Author-Name: James D. Hamilton
Author-Person: pha60
Author-Name: Oscar Jorda
Author-Person: pjo46
Note: EFG ME
Number: 7847
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7847
File-URL: http://www.nber.org/papers/w7847.pdf
File-Format: application/pdf
Publication-Status: published as Hamilton, James D. and Oscar Jorda. "A Model Of The Federal Funds Rate Target," Journal of Political Economy, 2002, v110(5,Oct), 1135-1167.
Abstract: This paper is a statistical analysis of the manner in which the Federal Reserve determines the level of the Federal funds rate target, one of the most publicized and anticipated economic indicators in the financial world. The analysis presents two econometric challenges: (1) changes in the target are irregularly spaced in time; (2) the target is changed in discrete increments of 25 basis points. The contributions of this paper are: (1) to give a detailed account of the changing role of the target in the conduct of monetary policy; (2) to develop new econometric tools for analyzing time-series duration data; (3) to analyze empirically the determinants of the target. The paper introduces a new class of models termed autoregressive conditional hazard processes, which allow one to produce dynamic forecasts of the probability of a target change. Conditional on a target change, an ordered probit model produces predictions of the magnitude by which the Fed will raise or lower the Federal funds rate. By decomposing Federal funds rate innovations into target changes and nonchanges, we arrive at new estimates of the effects of a monetary policy shock.'
Handle: RePEc:nbr:nberwo:7847
Template-Type: ReDIF-Paper 1.0
Title: Factor Supplies and Specialization in the World Economy
Classification-JEL: F1
Author-Name: James Harrigan
Author-Person: pha151
Author-Name: Egon Zakrajsek
Author-Person: pza207
Note: ITI
Number: 7848
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7848
File-URL: http://www.nber.org/papers/w7848.pdf
File-Format: application/pdf
Abstract: A core prediction of the Heckscher-Ohlin theory is that countries specialize in goods in which they have a comparative advantage, and that the source of comparative advantage is differences in relative factor supplies. To examine this theory, we use the most extensive dataset available and document the pattern of industrial specialization and factor endowment differences in a broad sample of rich and developing countries over a lengthy period (1970-92). Next, we develop an empirical model of specialization based on factor endowments, allowing for unmeasurable technological differences and estimate it using panel data techniques. In addition to estimating the effects of factor endowments, we also consider the alternative hypothesis that the level of aggregate productivity by itself can explain specialization. Our results clearly show the importance of factor endowments on specialization: relative endowments do matter.
Handle: RePEc:nbr:nberwo:7848
Template-Type: ReDIF-Paper 1.0
Title: Creative Destruction and Development: Institutions, Crises, and Restructuring
Classification-JEL: E0; J3
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Mohamad L. Hammour
Note: EFG
Number: 7849
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7849
File-URL: http://www.nber.org/papers/w7849.pdf
File-Format: application/pdf
Publication-Status: published as Annual World Bank Conference on Development Economics 2000.
Abstract: There is increasing empirical evidence that creative destruction, driven by experimentation and the adoption of new products and processes when investment is sunk, is a core mechanism of development. Obstacles to this process are likely to be obstacles to the progress in standards of living. Generically, underdeveloped and politicized institutions are a major impediment to a well-functioning creative destruction process, and result in sluggish creation, technological sclerosis,' and spurious reallocation. Those ills reflect the macroeconomic consequences of contracting failures in the presence of sunk investments. Recurrent crises are another major obstacle to creative destruction. The common inference that increased liquidations during crises result in increased restructuring is unwarranted. Indications are, to the contrary, that crises freeze the restructuring process and that this is associated with the tight financial-market conditions that follow. This productivity cost of recessions adds to the traditional costs of resource under-utilization.
Handle: RePEc:nbr:nberwo:7849
Template-Type: ReDIF-Paper 1.0
Title: Neighborhood Schools, Choice, and the Distribution of Educational Benefits
Classification-JEL: H70; H73
Author-Name: Dennis Epple
Author-Person: pep21
Author-Name: Richard Romano
Author-Person: pro223
Note: CH PE
Number: 7850
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7850
File-URL: http://www.nber.org/papers/w7850.pdf
File-Format: application/pdf
Publication-Status: published as Neighborhood Schools, Choice, and the Distribution of Educational Benefits, Dennis N. Epple, Richard Romano. in The Economics of School Choice, Hoxby. 2003
Abstract: School districts in the U.S. typically have multiple schools, centralized finance, and student assignment determined by neighborhood of residence. In many states, centralization is extending beyond the district level as states assume an increasing role in the finance of education. At the same time, movement toward increased public school choice, particularly in large urban districts, is growing rapidly. Models that focus on community-level differences in tax and expenditure policy as the driving force in determination of residential choice, school peer groups, and political outcomes are inadequate for analysis of multi-school districts and, hence, for understanding changing education policies. This paper develops a model of neighborhood formation and tax-expenditure policies in neighborhood school systems with centralized finance. Stratification across neighborhoods and their schools is likely to arise in equilibrium. Consequences of intra-district choice with and without frictions are characterized, including effects on the allocation of students across schools, tax and expenditure levels, student achievement, and household welfare.
Handle: RePEc:nbr:nberwo:7850
Template-Type: ReDIF-Paper 1.0
Title: When Does Start-Up Innovation Spur the Gale of Creative Destruction?
Classification-JEL: L10; L14
Author-Name: Joshua S. Gans
Author-Person: pga42
Author-Name: David H. Hsu
Author-Name: Scott Stern
Note: IO PR
Number: 7851
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7851
File-URL: http://www.nber.org/papers/w7851.pdf
File-Format: application/pdf
Publication-Status: published as Joshua S. Gans & David H. Hsu & Scott Stern, 2002. "When Does Start-Up Innovation Spur the Gale of Creative Destruction?," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 571-586, Winter.
Abstract: This paper is motivated by the substantial differences in start-up commercialization strategies observed across different high-technology sectors. Specifically, we evaluate the conditions under which start-up innovators earn their returns on innovation through product market competition with more established firms (such as in many areas of the electronics industry) as opposed to cooperation with these incumbents (either through licensing, strategic alliances or outright acquisition as observed in the pharmaceutical industry). While the former strategy challenges incumbent market power, the latter strategy tends to reinforce current market structure. Though the benefits of cooperation include forestalling the costs of competition in the product market and avoiding duplicative investment in sunk assets, imperfections in the market for ideas' may lead to competitive behavior in the product market. Specifically, if the transaction costs of bargaining are high or incumbents are likely to expropriate ideas from start-up innovators, then product market competition is more likely. We test these ideas using a novel dataset of the commercialization strategies of over 100 start-up innovators. Our principal robust findings are that the probability of cooperation is increasing in the innovator's control over intellectual property rights, association with venture capitalists (which reduce their transactional bargaining costs), and in the relative cost of control of specialized complementary assets. Our conclusion is that the propensity for pro-competitive benefits from start-up innovators reflects an earlier market failure, in the market for ideas.'
Handle: RePEc:nbr:nberwo:7851
Template-Type: ReDIF-Paper 1.0
Title: Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants
Classification-JEL: C14; D24
Author-Name: Nina Pavcnik
Author-Person: ppa511
Note: ITI PR
Number: 7852
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7852
File-URL: http://www.nber.org/papers/w7852.pdf
File-Format: application/pdf
Publication-Status: published as Pavcnik, Nina. "Trade Liberalization, Exit, And Productivity Improvements: Evidence From Chilean Plants," Review of Economic Studies, 2002, v69(1,238,Jan), 245-276.
Abstract: This paper empirically investigates the effects of trade liberalization on plant productivity in the case of Chile. Chile presents an interesting setting to study this relationship since it underwent a massive trade liberalization that significantly exposed its plants to competition from abroad during the late 1970s and early 1980s. Methodologically, I approach this question in two steps. In the first step, I estimate a production function to obtain a measure of plant productivity. I estimate the production function semiparametrically to correct for the presence of selection and simultaneity biases in the estimates of the input coefficients required to construct a productivity measure. I explicitly incorporate plant exit in the estimation to correct for the selection problem induced by liquidated plants. These methodological aspects are important in obtaining a reliable plant-level productivity measure based on consistent estimates of the input coefficients. In the second step, I identify the impact of trade liberalization on plants' productivity in a regression framework allowing variation in productivity over time and across traded- and nontraded-goods sectors. Using plant-level panel data on Chilean manufacturers, I find evidence of within plant productivity improvements that can be attributed to a liberalized trade policy, especially for the plants in the import-competing sector. In many cases, aggregate productivity improvements stem from the reshuffling of resources and output from less to more efficient producers.
Handle: RePEc:nbr:nberwo:7852
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy in a World Without Money
Classification-JEL: E42; E52
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG ME
Number: 7853
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7853
File-URL: http://www.nber.org/papers/w7853.pdf
File-Format: application/pdf
Publication-Status: published as Woodford, Michael. "Monetary Policy In A World Without Money," International Finance, 2000, v3(2), 229-260.
Abstract: This paper considers whether the development of electronic money' poses any threat to the ability of central banks to control the value of their national currencies through conventional monetary policy. It argues that even if the demand for base money for use in facilitating transactions is largely or even completely eliminated, monetary policy should continue to be effective. Macroeconomic stabilization depends only upon the ability of central banks to control a short-term nominal interest rate, and this would continue to be possible, in particular through the use of a channel' system for the implementation of policy, like those currently used in Canada, Australia and New Zealand.
Handle: RePEc:nbr:nberwo:7853
Template-Type: ReDIF-Paper 1.0
Title: Ability Tracking, School Competition, and the Distribution of Educational Benefits
Classification-JEL: H70; I21
Author-Name: Dennis Epple
Author-Person: pep21
Author-Name: Elizabeth Newlon
Author-Name: Richard Romano
Author-Person: pro223
Note: CH PE
Number: 7854
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7854
File-URL: http://www.nber.org/papers/w7854.pdf
File-Format: application/pdf
Publication-Status: published as Epple, Dennis, Elizabeth Newlon and Richard Romano. "Ability Tracking, School Competition, And The Distribution Of Educational Benefits," Journal of Public Economics, 2002, v83(1,Jan), 1-48.
Abstract: To study the effects of ability grouping on school competition, we develop a theoretical and computational model of tracking in public and private schools. We examine tracking's consequences for the allocation of students of differing abilities and income within and between public and private schools. Private schools tend to attract the most able and wealthiest students, and rarely track in equilibrium. Public sector schools can maximize attendance by tracking students. Public schools retain a greater proportion of higher-ability students by tracking, but lose more wealthy, lower-ability students to the private sector. Consequently, socioeconomic status is a predictor of track assignment in public schools. For the entire population, public-sector tracking has small aggregate effects on achievement and welfare, but results in significant redistribution from lower- to higher-ability students.
Handle: RePEc:nbr:nberwo:7854
Template-Type: ReDIF-Paper 1.0
Title: Managers, Investors, and Crises: Mutual Fund Strategies in Emerging Markets
Classification-JEL: F3; G1
Author-Name: Graciela Kaminsky
Author-Person: pka84
Author-Name: Richard K. Lyons
Author-Person: ply9
Author-Name: Sergio Schmukler
Author-Person: psc64
Note: AP IFM
Number: 7855
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7855
File-URL: http://www.nber.org/papers/w7855.pdf
File-Format: application/pdf
Publication-Status: published as Kaminsky, Graciela, Richard K. Lyons and Sergio L. Schmukler. "Managers, Investors, Crises: Mutual Fund Strategies In Emerging Markets," Journal of International Economics, 2004, v64(1,Oct), 113-134.
Abstract: This paper addresses the trading strategies of mutual funds in emerging markets. The data set we develop permits analysis of these strategies at the level of individual portfolios. Methodoloically, a novel feature is our disentangling the behavior of managers from that of underlying investors. For both managers and investors, we strongly reject the null hypothesis of no momentum trading: funds' momentum trading is positive they systematically buy winners and sell losers. Contemporaneous momentum trading (buying current winners and selling current losers) is stronger during crises, and stronger for fund investors than for fund managers. Lagged momentum trading (buying past winners and selling past losers) is stronger during non-crisis, and stronger for fund managers. Investors also engage in contagion trading, i.e., they sell assets from one country when asset prices fall in another.
Handle: RePEc:nbr:nberwo:7855
Template-Type: ReDIF-Paper 1.0
Title: Gold into Base Metals: Productivity Growth in the People's Republic of China during the Reform Period
Classification-JEL: O4; P2
Author-Name: Alwyn Young
Note: EFG
Number: 7856
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7856
File-URL: http://www.nber.org/papers/w7856.pdf
File-Format: application/pdf
Publication-Status: published as Alwyn Young, 2003. "Gold into Base Metals: Productivity Growth in the People’s Republic of China during the Reform Period," Journal of Political Economy, vol 111(6), pages 1220-1261.
Abstract: With minimal sleight of hand, it is possible to transform the recent growth experience of the People's Republic of China from the extraordinary into the mundane. Systematic understatement of inflation by enterprises accounts for 2.5% growth per annum in the non-agricultural economy during the reform period (1978-1998). The usual suspects, i.e. rising participation rates, improvements in educational attainment, and the transfer of labour out of agriculture, account for most of the remainder. The productivity performance of the non-agricultural economy during the reform period is respectable, but not outstanding. To the degree that the reforms have improved efficiency, these gains may lie principally in agriculture.
Handle: RePEc:nbr:nberwo:7856
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Effect of Currency Unions on Trade and Output
Classification-JEL: O4; F4
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: IFM ITI
Number: 7857
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7857
File-URL: http://www.nber.org/papers/w7857.pdf
File-Format: application/pdf
Publication-Status: published as Frankel, Jeffrey A. and Andrew Rose. “An Estimate of the Effect of Common Currencies on Trade and Income.” Quarterly Journal of Economics CXVII, 2 (May 2002): 437-466.
Abstract: Gravity-based cross-sectional evidence indicates that currency unions stimulate trade; cross-sectional evidence indicates that trade stimulates output. This paper estimates the effect that currency union has, via trade, on output per capita. We use economic and geographic data for over 200 countries to quantify the implications of currency unions for trade and output, pursuing a two-state approach. Our estimates at the first stage suggest that belonging to a currency union more than triples trade with the other members of the zone. Moreover, there is no evidence of trade-diversion. Our estimates at the second stage suggest that every one percent increase in trade (relative to GDP) raises income per capita by roughly 1/3 of a percent over twenty years. We combine the two estimates to quantify the effect of currency union on output. Our results support the hypothesis that the beneficial effects of currency unions on economic performance come through the promotion of trade, rather than through a commitment to non-inflationary monetary policy, or other macroeconomic influences.
Handle: RePEc:nbr:nberwo:7857
Template-Type: ReDIF-Paper 1.0
Title: Globalization of the Economy
Classification-JEL: F0; F1
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Note: IFM ITI
Number: 7858
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7858
File-URL: http://www.nber.org/papers/w7858.pdf
File-Format: application/pdf
Publication-Status: published as in Nye, Joseph and John Donahue (eds.) Governance in a Globalizing World, Visions of Governance Project. Washington, DC: Brookings Institution Press, 2000 p. 45-71
Publication-Status: published as Art, Robert and Robert Jervis (eds.) International Politics: Enduring Concepts and Contemporary Issues. (7th edition) Longman, 2005.
Publication-Status: published as Frieden, Jeffry, David Lake and J. Lawrence Broz (eds.) International Political Economy. New York: Norton, 2009.
Abstract: Globalization of trade and finance has gone a long way over the last half-century. But it is less impressive than most non-economists think, judged either by the standard of 100 years ago or by the hypothetical standard of perfect international integration. The paper documents the extent of globalization, and some reasons for the barriers that remains. It then briefly considers the implications for economic growth and the implications for goals not measured by GDP equality and the environment. The conclusion is that globalization is not the primary obstacle to efforts to address such concerns.
Handle: RePEc:nbr:nberwo:7858
Template-Type: ReDIF-Paper 1.0
Title: Political Jurisdictions in Heterogeneous Communities
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Reza Baqir
Author-Name: Caroline Hoxby
Author-Person: pho46
Note: PE
Number: 7859
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7859
File-URL: http://www.nber.org/papers/w7859.pdf
File-Format: application/pdf
Publication-Status: published as Alesina, Alberto, Reza Baqir and Caroline Hoxby. "Political Jurisdications In Heterogeneous Communities," Journal of Political Economy, 2004, v112(2,Apr), 348-396.
Abstract: We investigate how the number and size of local political jurisdictions in an area is determined. Our model focuses on the tradeoff between the benefits of economies of scale and the costs of a heterogeneous population. We consider heterogeneity in income, race, ethnicity, and religion, and we test the model using American school districts, school attendance areas, municipalities, and special districts. Using both cross-sectional and panel analysis, we find evidence of a significant tradeoff between economies of scale and racial heterogeneity. We find weaker tradeoffs between economies of scale and income or ethnic heterogeneity. That is, it appears that people are willing to sacrifice the most, in terms of economies of scale, in order to avoid racial heterogeneity in their jurisdiction.
Handle: RePEc:nbr:nberwo:7859
Template-Type: ReDIF-Paper 1.0
Title: Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment
Classification-JEL: I2; J31
Author-Name: Esther Duflo
Author-Person: pdu166
Note: CH
Number: 7860
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7860
File-URL: http://www.nber.org/papers/w7860.pdf
File-Format: application/pdf
Publication-Status: published as Duflo, Esther. "Schooling And Labor Market Consequences Of School Construction In Indonesia: Evidence From An Unusual Policy Experiment," American Economic Review, 2001, v91(4,Sep), 795-813.
Abstract: Between 1973 and 1978, the Indonesian Government constructed over 61,000 primary schools throughout the country. This is one of the largest school construction programs on record. I evaluate the effect of this program on education and wages by combining differences across regions in the number of schools constructed with differences across cohorts induced by the timing of the program. The estimates suggest that the construction of primary schools led to an increase in education and earnings. Children ages 2 to 6 in 1974 received 0.12 to 0.19 more years of education for each school constructed per 1,000 children in their region of birth. Using the variations in schooling generated by this policy as instrumental variables for the impact of education on wages generates estimates of economic returns to education ranging from 6.8 percent to 10.6 percent.
Handle: RePEc:nbr:nberwo:7860
Template-Type: ReDIF-Paper 1.0
Title: Accumulated Pension Collars: A Market Approach to Reducing the Risk of Investment-Based Social Security Reform
Classification-JEL: H55; I3
Author-Name: Martin Feldstein
Author-Person: pfe112
Author-Name: Elena Ranguelova
Note: AG AP PE
Number: 7861
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7861
File-URL: http://www.nber.org/papers/w7861.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin and Ranguelova, Elena. "Individual Risk In An Investment-Based Social Security System," Tax Policy and the Economy, Volume 15. Ed. James M. Poterba. Cambridge MA, The MIT Press, 2001.
Publication-Status: published as Accumulated Pension Collars: A Market Approach to Reducing the Risk of Investment-Based Social Security Reform, Martin Feldstein, Elena Ranguelova. in Tax Policy and the Economy, Volume 15, Poterba. 2001
Abstract: This paper shows how a new type of derivative product that could be provided by private financial markets could in principle be used to guarantee that an investment-based Social Security reform provides at least the level of real retirement income that is projected in current Social Security rules. In effect, future retirees could purchase a put option' that guarantees that the future retirement benefit will not fall below the level projected in current Social Security law or some other chosen level. To pay for this guarantee, they would agree to give up the part of the annuity payments which exceeds a given level, effectively selling a call option on the stream of payments. This market-based approach could be completely voluntary, leaving each individual to decide what level of guarantee he wants. The higher the minimum guarantee that the individual chooses, the more of the potentially higher returns he must give up. The financial market can thus tailor each individual's product to his own risk preferences. Alternatively, the government might require that any product that is sold as part of the investment-based Social Security reform must include at least some such market-based guarantee. Our analysis calculates some of the tradeoffs that could be provided in today's financial markets. We show that it is feasible to protect future benefits equal to those projected in current law with a combination of the current payroll tax rate and Personal Retirement Account savings equal to 2.5 percent of covered earnings. Raising the savings rate to 3.0 percent increases substantially the amount of the return that the individual can keep, raising it to 145 percent of the currently projected level of benefits. Reducing the guarantee level to 90 percent of the projected future benefits would increase this upside potential to 150 percent of the currently projected level of benefits with a 2.5 percent saving rate and 195 percent of the currently projected benefits with a 3.0 percent saving rate.
Handle: RePEc:nbr:nberwo:7861
Template-Type: ReDIF-Paper 1.0
Title: Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based-Stabilizations
Classification-JEL: F41
Author-Name: Ariel T. Burstein
Author-Name: Joao C. Neves
Author-Name: Sergio Rebelo
Note: EFG IFM
Number: 7862
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7862
File-URL: http://www.nber.org/papers/w7862.pdf
File-Format: application/pdf
Publication-Status: published as Burstein, Ariel T., Joao C. Neves and Sergio Rebelo. "Distribution Costs And Real Exchange Rate Dynamics During Exchange-Rate-Based Stabilizations," Journal of Monetary Economics, 2003, v50(6,Sep), 1189-1214.
Abstract: This paper studies the role played by the distribution sector in shaping the behavior of the real exchange rate during exchange-rate-based-stabilizations. We use data for the U.S. and Argentina to document the importance of distribution margins in retail prices and disaggregated price data to study price dynamics in the aftermath of Argentina's 1991 Convertibility plan. Distribution services require local labor and land so they drive a natural wedge between retail prices in different countries. We study in detail the impact of introducing a distribution sector in an otherwise standard model of exchange-rate-based-stabilizations. We show that this simple extension improves dramatically the ability of the model to rationalize observed real exchange rate dynamics.
Handle: RePEc:nbr:nberwo:7862
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Religion, Jewish Survival and Jewish Attitudes Toward Competition in Torah Education
Author-Name: Dennis W. Carlton
Author-Person: pca14
Author-Name: Avi Weiss
Note: IO
Number: 7863
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7863
File-URL: http://www.nber.org/papers/w7863.pdf
File-Format: application/pdf
Publication-Status: published as Carlton, Dennis W & Weiss, Avi, 2001. "The Economics of Religion, Jewish Survival, and Jewish Attitudes toward Competition in Torah Education," Journal of Legal Studies, University of Chicago Press, vol. 30(1), pages 253-75, January.
Abstract: This paper examines the attitude of Jewish law to competition in light of the economist's understanding of the benefits of competition and of the beneficiaries from intervention in the competitive process. The punchline of this paper is simple. Although Judaism has used a whole host of restrictions on competition and has had its share of legislation to promote private interests, there has been one area that has generally been a consistent exception to impediments to competition -- the teaching of Torah. This exception is all the more remarkable because those who were in a position to influence the legislation often stood to benefit from such restrictions. From this stress on teaching, we show that the foundation was laid for the survival and perpetuation of Judaism.
Handle: RePEc:nbr:nberwo:7863
Template-Type: ReDIF-Paper 1.0
Title: Do We Really Need a New International Monetary Compact?
Classification-JEL: E42; F41
Author-Name: Maurice Obstfeld
Author-Person: pob13
Author-Name: Kenneth Rogoff
Author-Person: pro164
Note: IFM ME
Number: 7864
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7864
File-URL: http://www.nber.org/papers/w7864.pdf
File-Format: application/pdf
Publication-Status: published as Obstfeld, Maurice and Kenneth Rogoff. "Global Implications of Self-Oriented National Monetary Rules." Quarterly Journal of Economics, May 2002.
Abstract: In recent years, many countries have instituted monetary reforms aimed at improving anti-inflation credibility. Is it a problem, however, that international welfare spillover effects seldom receive much consideration in the design of monetary reforms? Surprisingly, the answer may be no. Under plausible conditions, as domestic rules improve and international financial markets become more complete, the Nash and cooperative monetary rule setting games converge. We base our analysis on a utility-theoretic sticky-wage (new open economy macroeconomics) model; the question we pose simply could not have been adequately formulated using earlier models of monetary cooperation.
Handle: RePEc:nbr:nberwo:7864
Template-Type: ReDIF-Paper 1.0
Title: Do Pharmaceutical Prices Respond to Insurance?
Classification-JEL: L11; I11
Author-Name: Nina Pavcnik
Author-Person: ppa511
Note: EH PR PE
Number: 7865
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7865
File-URL: http://www.nber.org/papers/w7865.pdf
File-Format: application/pdf
Publication-Status: published as Pavcnik, Nina. "Do Pharmaceutical Prices Respond To Potential Patient Out-Of-Pocket Expenses," Rand Journal of Economics, 2002, v33(3,Autumn), 469-487.
Abstract: Despite the importance of patient insurance in the market for prescription pharmaceuticals, little is known about the impact of insurance on the pricing behavior of pharmaceutical firms. This paper examines the link between insurance and pricing using a unique policy experiment from Germany. Starting in 1989, a maximum reimbursement for a given medicine replaced a flat prescription fee. This change in insurance reimbursement exposes the patient to the price of a prescribed product. Using a product level panel dataset covering several therapeutic categories before and after the change in insurance reimbursement, I find that producers significantly decrease prices after the change in insurance. Price declines are most pronounced for brand name products. Moreover, branded products that face more generic competitors reduce prices more.
Handle: RePEc:nbr:nberwo:7865
Template-Type: ReDIF-Paper 1.0
Title: Would School Choice Change the Teaching Profession?
Author-Name: Caroline Hoxby
Author-Person: pho46
Note: CH LS PE
Number: 7866
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7866
File-URL: http://www.nber.org/papers/w7866.pdf
File-Format: application/pdf
Publication-Status: published as Hoxby, Caroline M. "Would School Choice Change The Teaching Profession?," Journal of Human Resources, 2002, v37(4,Fall), 846-891.
Abstract: This paper investigates whether schools that face stronger choice-based incentives have greater demand for certain teacher characteristics and (if so) which teacher characteristics. Schools that face choice-based incentives should demand teachers who raise a schools' ability to attract students. Thus, in the long term, school choice would affect who became (and remained) a teacher if it affected schools' demand for certain teacher characteristics. Using data on traditional forms of choice (Tiebout choice, choice of private schools) and a new survey of charter school teachers, this paper finds evidence that suggests that school choice would change the teaching profession by demanding teachers with higher quality college education, more math and science skills, and a greater degree of effort and independence.
Handle: RePEc:nbr:nberwo:7866
Template-Type: ReDIF-Paper 1.0
Title: Peer Effects in the Classroom: Learning from Gender and Race Variation
Author-Name: Caroline Hoxby
Author-Person: pho46
Note: CH LS PE
Number: 7867
Creation-Date: 2000-08
Order-URL: http://www.nber.org/papers/w7867
File-URL: http://www.nber.org/papers/w7867.pdf
File-Format: application/pdf
Abstract: Peer effects are potentially important for understanding the optimal organization of schools, jobs, and neighborhoods, but finding evidence is difficult because people are selected into peer groups based, in part, on their unobservable characteristics. I identify the effects of peers whom a child encounters in the classroom using sources of variation that are credibly idiosyncratic, such as changes in the gender and racial composition of a grade in a school in adjacent years. I use specification tests, including one based on randomizing the order of years, to confirm that the variation I use is not generated by time trends or other non-idiosyncratic forces. I find that students are affected by the achievement level of their peers: a credibly exogenous change of 1 point in peers' reading scores raises a student's own score between 0.15 and 0.4 points, depending on the specification. Although I find little evidence that peer effects are generally non-linear, I do find that peer effects are stronger intra-race and that some effects do not operate through peers' achievement. For instance, both males and females perform better in math in classrooms that are more female despite the fact that females' math performance is about the same as that of males.
Handle: RePEc:nbr:nberwo:7867
Template-Type: ReDIF-Paper 1.0
Title: Diagnosing Market Power in California's Restructured Wholesale Electricity Market
Author-Name: Severin Borenstein
Author-Person: pbo78
Author-Name: James Bushnell
Author-Person: pbu181
Author-Name: Frank Wolak
Note: IO
Number: 7868
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7868
File-URL: http://www.nber.org/papers/w7868.pdf
File-Format: application/pdf
Publication-Status: published as Borenstein, Severin, James B. Bushnell and Frank A. Wolak. "Measuring Market Inefficiencies In California's Restructured Wholesale Electricity Market," American Economic Review, 2002, v92(5,Dec), 1376-1405.
Abstract: Effective competition in wholesale electricity markets is a necessary feature of a successful electricity supply industry restructuring. We examine the degree of competition in the California wholesale electricity market during the period June 1998 to September 1999 by comparing the market prices with estimates of the prices that would have resulted if owners of instate fossil fuel generating facilities behaved as price takers. We find that there were significant departures from competitive pricing and that these departures are most pronounced during the highest demand periods, which tend to occur during the months of July through September. Through most of the winter and spring of 1999 there was little evidence of the exercise of market power. Overall, the exercise of market power raised the cost of power purchases by about 16% above the competitive level. Following the presentation of our methodology for computing the counterfactual price-taking market price, we describe why our calculation represents a lower bound on the extent of market power and why the observed market prices cannot by attributed to competitive peak-lead pricing.
Handle: RePEc:nbr:nberwo:7868
Template-Type: ReDIF-Paper 1.0
Title: Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates?
Author-Name: V.V. Chari
Author-Person: pch40
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Author-Name: Ellen R. McGrattan
Author-Person: pmc46
Note: EFG IFM
Number: 7869
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7869
File-URL: http://www.nber.org/papers/w7869.pdf
File-Format: application/pdf
Publication-Status: published as Chari, V. V., Patrick J. Kehoe and Ellen R. McGrattan. "Can Sticky Price Models Generate Volatile And Persistent Real Exchange Rates?," Review of Economic Studies, 2002, v69(3,240,Jul), 533-563.
Abstract: The central puzzle in international business cycles is that real exchange rates are volatile and persistent. The most popular story for real exchange rate fluctuations is that they are generated by monetary shocks interacting with sticky goods prices. We quantify this story and find that it can account for some of the observed properties of real exchange rates. When prices are held fixed for at least one year, risk aversion is high and preferences are separable in leisure, the model generates real exchange rates that are as volatile as in the data. The model also generates real exchange rates that are persistent, but less so than in the data. If monetary shocks are correlated across countries, then the comovements in aggregates across countries are broadly consistent with those in the data. Making asset markets incomplete or introducing sticky wages does not measurably change the results.
Handle: RePEc:nbr:nberwo:7869
Template-Type: ReDIF-Paper 1.0
Title: International Business Cycles with Endogenous Incomplete Markets
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Author-Name: Fabrizio Perri
Author-Person: ppe52
Note: EFG IFM
Number: 7870
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7870
File-URL: http://www.nber.org/papers/w7870.pdf
File-Format: application/pdf
Publication-Status: published as Kehoe, Patrick J. and Fabrizio Perri. "International Business Cycles With Endogenous Incomplete Markets," Econometrica, 2002, v70(3,May), 907-928.
Abstract: Backus, Kehoe and Kydland (1992), Baxter and Crucini (1995) and Stockman and Tesar (1995) find two major discrepancies between standard international business cycle models with complete markets and the data: In the models, cross-country correlations are much higher for consumption than for output, while in the data the opposite is true; and cross-country correlations of employment and investment are negative, while in the data they are positive. This paper introduces a friction into a standard model that helps resolve these anomalies. The friction is that international loans are imperfectly enforceable; any country can renege on its debts and suffer the consequences for future borrowing. To solve for equilibrium in this economy with endogenous incomplete markets, the methods of Marcet and Marimon (1999) are extended. Incorporating the friction helps resolve the anomalies more than does exogenously restricting the assets that can be traded.
Handle: RePEc:nbr:nberwo:7870
Template-Type: ReDIF-Paper 1.0
Title: Money, Interest Rates, and Exchange Rates with Endogenously Segmented Asset Markets
Author-Name: Fernando Alvarez
Author-Name: Andrew Atkeson
Author-Person: pat52
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Note: EFG IFM
Number: 7871
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7871
File-URL: http://www.nber.org/papers/w7871.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 analyzes the effects of money injections on interest rates and exchange rates in a model in which agents must pay a Baumol-Tobin style fixed cost to exchange bonds and money. Asset markets are endogenously segmented because this fixed cost leads agents to trade bonds and money only infrequently. When the government injects money through an open market operation, only those agents that are currently trading absorb these injections. Through their impact on these agents' consumption, these money injections affect real interest rates and real exchange rates. We show that the model generates the observed negative relation between expected inflation and real interest rates. With moderate amounts of segmentation, the model also generates other observed features of the data: persistent liquidity effects in interest rates and volatile and persistent exchange rates. A standard model with no fixed costs can produce none of these features.
Handle: RePEc:nbr:nberwo:7871
Template-Type: ReDIF-Paper 1.0
Title: Currency Unions and International Integration
Classification-JEL: F15; F33
Author-Name: Andrew K. Rose
Author-Person: pro71
Author-Name: Charles Engel
Author-Person: pen14
Note: IFM
Number: 7872
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7872
File-URL: http://www.nber.org/papers/w7872.pdf
File-Format: application/pdf
Publication-Status: published as Rose, Andrew K & Engel, Charles, 2002. "Currency Unions and International Integration," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(4), pages 1067-89, November.
Abstract: This paper characterizes the integration patterns of international currency unions (such as the CFA Franc zone and the East Caribbean Currency Area). We empirically explore different features of currency unions, and compare them both to countries with sovereign monies, and to regions within nations. We ask: are countries within international currency unions as integrated as regions within political unions? We do this by examining the criteria for Mundell's concept of an optimum currency area. We find that members of currency unions are more integrated than countries with their own currencies, but less integrated than regions within a country. For instance, we find that currency union members have more trade and less volatile real exchange rates than countries with their own monies, but less trade and more volatile exchange rates than regions within individual countries. Similarly, business cycles are more highly synchronized across currency union countries than across countries with sovereign monies, but not as synchronized as regions of a single country. Finally, currency union membership is not associated with significantly greater risk sharing, though risk sharing is widespread within countries.
Handle: RePEc:nbr:nberwo:7872
Template-Type: ReDIF-Paper 1.0
Title: Asset Liquidity and Segment Divestitures
Classification-JEL: G30; G34
Author-Name: Frederik P. Schlingemann
Author-Person: psc684
Author-Name: Rene M. Stulz
Author-Name: Ralph A. Walkling
Note: AP CF
Number: 7873
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7873
File-URL: http://www.nber.org/papers/w7873.pdf
File-Format: application/pdf
Publication-Status: published as Schlingemann, Frederik P., Rene M. Stulz and Ralph A. Walkling. "Divestitures And The Liquidity Of The Market For Corporate Assets," Journal of Financial Economics, 2002, v64(1,Apr), 117-144.
Abstract: We investigate a sample of firms whose number of reported segments falls by one or more for the first time in their reporting history. The firms in our sample have a significantly larger diversification discount, underperform, and underinvest relative to comparable firms. Firms are more likely to divest segments from industries with a more liquid market for corporate assets, segments unrelated to the core activities of the firm, poorly performing segments, and small segments. The liquidity of the market for corporate assets plays an important role in explaining why some firms divest assets while others stop reporting them without divesting them, and why some firms divest core segments while others divest unrelated segments.
Handle: RePEc:nbr:nberwo:7873
Template-Type: ReDIF-Paper 1.0
Title: Educational Attainment in Blended Families
Classification-JEL: I2; D1
Author-Name: Anne Case
Author-Person: pca108
Author-Name: I-Fen Lin
Author-Name: Sara McLanahan
Note: CH
Number: 7874
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7874
File-URL: http://www.nber.org/papers/w7874.pdf
File-Format: application/pdf
Publication-Status: published as Case, Anne, Sara McLanahan, and I-Fen Lin. “Educational Attainment of Siblings in Stepfamilies." Evolution and Human Behavior 22, 4 (2001): 269-289.
Abstract: In this paper we compare the educational attainment of birth and non-birth children of women in the Panel Study of Income Dynamics (PSID). We find that children raised by step, adoptive or foster mothers obtain significantly less education on average than do the birth children of the same women. Controlling for the women's fixed effects, the non-birth children of a woman receive on average one year less schooling than do her birth children, with the educational break occurring at the time children finish high school and begin college.
Handle: RePEc:nbr:nberwo:7874
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Grading Standards on Student Achievement, Educational Attainment, and Entry-Level Earnings
Classification-JEL: I2
Author-Name: Julian R. Betts
Author-Name: Jeff Grogger
Author-Person: pgr125
Note: CH LS
Number: 7875
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7875
File-URL: http://www.nber.org/papers/w7875.pdf
File-Format: application/pdf
Publication-Status: published as Betts, Julian R. & Grogger, Jeff, 2003. "The impact of grading standards on student achievement, educational attainment, and entry-level earnings," Economics of Education Review, Elsevier, vol. 22(4), pages 343-352, August.
Abstract: Despite recent theoretical work and proposals from educational reformers, there is little empirical work on the effects of higher grading standards. In this paper we use data from the High School and Beyond survey to estimate the effects of grading standards on student achievement, educational attainment, and entry level earnings. We consider not only how grading standards affect average outcomes but also how they affect the distribution of educational gains by skill level and race/ethnicity. We find that higher standards raise test scores throughout the distribution of achievement, but that the increase is greatest toward the top of the test score distribution. Higher standards have no positive effect on educational attainment, however, and indeed have negative effects on high school graduation among blacks and Hispanics. We suggest a relative performance hypothesis to explain how higher standards may reduce educational attainment even as they increase educational achievement.
Handle: RePEc:nbr:nberwo:7875
Template-Type: ReDIF-Paper 1.0
Title: The Determinants of National Innovative Capacity
Classification-JEL: O3; O33
Author-Name: Scott Stern
Author-Name: Michael E. Porter
Author-Name: Jeffrey L. Furman
Note: IO PR
Number: 7876
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7876
File-URL: http://www.nber.org/papers/w7876.pdf
File-Format: application/pdf
Publication-Status: published as Stern, Scott, Michael E. Porter, and Jeffrey L. Furman. "The determinants of national innovative capacity." Research Policy 31 (2002): 899-933.
Abstract: Motivated by differences in R&D productivity across advanced economies, this paper presents an empirical examination of the determinants of country-level production of international patents. We introduce a novel framework based on the concept of national innovative capacity. National innovative capacity is the ability of a country to produce and commercialize a flow of innovative technology over the long term. National innovative capacity depends on the strength of a nation's common innovation infrastructure (cross-cutting factors which contribute broadly to innovativeness throughout the economy), the environment for innovation in its leading industrial clusters, and the strength of linkages between these two areas. We use this framework to guide our empirical exploration into the determinants of country-level R&D productivity, specifically examining the relationship between international patenting (patenting by foreign countries in the United States) and variables associated with the national innovative capacity framework. While acknowledging important measurement issues arising from the use of patent data, we provide evidence for several findings. First, the production function for international patents is surprisingly well-characterized by a small but relatively nuanced set of observable factors, including R&D manpower and spending, aggregate policy choices such as the extent of IP protection and openness to international trade, and the share of research performed by the academic sector and funded by the private sector. As well, international patenting productivity depends on each individual country's knowledge stock.' Further, the predicted level of national innovative capacity has an important impact on more downstream commercialization and diffusion activities (such as achieving a high market share of high-technology export markets). Finally, there has been convergence among OECD countries in terms of the estimated level of innovative capacity over the past quarter century.
Handle: RePEc:nbr:nberwo:7876
Template-Type: ReDIF-Paper 1.0
Title: When Does Funding Research by Smaller Firms Bear Fruit?: Evidence from the SBIR Program
Classification-JEL: G24; O31
Author-Name: Joshua S. Gans
Author-Person: pga42
Author-Name: Scott Stern
Note: IO PR
Number: 7877
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7877
File-URL: http://www.nber.org/papers/w7877.pdf
File-Format: application/pdf
Publication-Status: published as Joshua Gans & Scott Stern, 2003. "When Does Funding Research By Smaller Firms Bear Fruit?: Evidence From The Sbir Program," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 12(4), pages 361-384, August.
Abstract: This paper evaluates whether the relative concentration of funding for small, research-oriented firms in a small number of high-tech industries is related to the differences across industries in the level of appropriability or capital constraints facing small firms. To do so, we exploit a novel test based on the relationship between industry-level private venture financing and the performance of government-subsidized R&D projects in those sectors. If the government funds projects on the margin (as it should under an optimal subsidy regime) and industries only differ in terms of the level of appropriability, then private funding and subsidized project performance are positively correlated. Conversely, if industries only differ in terms of the level of capital constraints, this correlation is negative. Our principal empirical result is that project-level performance is highest for those technologies that are in industrial segments that attract high rates of venture capital investment. This result suggests that industrial sectors differ in the degree of appropriability for research-oriented small businesses and that variation in the appropriability regime helps explain the concentrated nature of venture capital activity in the economy.
Handle: RePEc:nbr:nberwo:7877
Template-Type: ReDIF-Paper 1.0
Title: Does the Internet Increase Trading? Evidence from Investor Behavior in 401(k) Plans
Classification-JEL: D0; G0
Author-Name: James J. Choi
Author-Name: David Laibson
Author-Person: pla164
Author-Name: Andrew Metrick
Author-Person: pme99
Note: AP
Number: 7878
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7878
File-URL: http://www.nber.org/papers/w7878.pdf
File-Format: application/pdf
Publication-Status: published as Choi, James J., David Laibson, and Andrew Metrick. "How Does the Internet Affect Trading? Evidence from Investor Behavior in 401(k) Plans." Journal of Financial Economics 64 (June 2002): 397-421.
Abstract: We analyze the impact of a Web-based trading channel on the trading activity in two corporate 401(k) plans. Using detailed data on about 100,000 participants, we compare trading growth in these firms to growth for a sample of firms without a Web channel. After 18 months of access, the inferred Web effect is very large: trading frequency doubles, and portfolio turnover rises by over 50 percent. We also document several patterns of Web-trading behavior. Young, male, and wealthy participants are more likely to try the Web channel. Frequent traders (before Web introduction) are less likely to try the Web. Participants who try the Web tend to stick with it. Web trades tend to be smaller than phone trades both in dollars and as a fraction of portfolio. Short-term' trades make up a higher proportion of phone trades than of Web trades.
Handle: RePEc:nbr:nberwo:7878
Template-Type: ReDIF-Paper 1.0
Title: A Debt Puzzle
Classification-JEL: D91; E21
Author-Name: David Laibson
Author-Person: pla164
Author-Name: Andrea Repetto
Author-Name: Jeremy Tobacman
Author-Person: pto126
Note: AP EFG
Number: 7879
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7879
File-URL: http://www.nber.org/papers/w7879.pdf
File-Format: application/pdf
Publication-Status: published as Aghion, Philippe, Roman Frydman, Joseph Stiglitz, and Michael Woodford (eds.) Knowledge, Information and Expectations in Modern Macroeconomics: In Honor of Edmund S. Phelps. Princeton University Press, 2003.
Abstract: Over 60% of US households with credit cards are currently borrowing -- i.e., paying interest -- on those cards. We attempt to reconcile the high rate of credit card borrowing with observed levels of life cycle wealth accumulation. We simulate a lifecycle model with five properties that create demand for credit card borrowing. First, the calibrated labor income path slopes upward early in life. Second, income has transitory shocks. Third, consumers invest actively in an illiquid asset, which is sufficiently illiquid that it can not be used to smooth transitory income shocks. Fourth, consumers may declare bankruptcy, reducing the effective cost of credit card borrowing. Fifth, households have relatively more dependents early in the life-cycle. Our calibrated model predicts that 20% of the population will borrow on their credit card at any point in time, far less than the observed rate of over 60%. We identify a resolution to this puzzle: hyperbolic time preferences. Simulated hyperbolic consumers borrow actively in the revolving credit card market and accumulate relatively large stocks of illiquid wealth, matching observed data.
Handle: RePEc:nbr:nberwo:7879
Template-Type: ReDIF-Paper 1.0
Title: Fin de Siecle Real Interest Parity
Classification-JEL: F21; F31
Author-Name: Eiji Fujii
Author-Person: pfu65
Author-Name: Menzie D. Chinn
Author-Person: pch129
Note: IFM
Number: 7880
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7880
File-URL: http://www.nber.org/papers/w7880.pdf
File-Format: application/pdf
Publication-Status: published as Fujii, Eiji and Menzie Chinn. "Fin De Siecle Real Interest Parity," Journal of International Financial Markets, Institutions and Money, 2001, v11(3-4,Sep), 289-308.
Abstract: We evaluate the recent evidence for real interest parity, focusing on long-term yields. Examining the data on financial instruments of various maturities across the G7 countries, we find substantial differences in the degree of real interest equalization measured at different horizons. In general, real interest parity holds better at long horizons than at short. This empirical result is robust to alternative ways of modeling expected inflation rates. Considering the relevance of long-term yields for the investment decisions of firms, our findings imply that the degree of capital mobility among the G-7 economies may be greater than previously thought.
Handle: RePEc:nbr:nberwo:7880
Template-Type: ReDIF-Paper 1.0
Title: The Public-Private Mix in the Modern Health Care System - Concepts, Issues, and Policy Options Revisited
Author-Name: Dov Chernichovsky
Note: EH
Number: 7881
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7881
File-URL: http://www.nber.org/papers/w7881.pdf
File-Format: application/pdf
Abstract: Private financing of care can make universal entitlement to care more comprehensive' and complete.' The possible combination -- at the point of service provision -- of privately acquired entitlement with the public entitlement, can impinge, however, upon the goals (e.g. improved health, equity, cost containment, care production efficiency, and client satisfaction from service) of the publicly supported health system. The potential to achieve these goals is at greatest risk in the combined system' (e.g., Australia) where, contrary to the segregated system' (e.g., Canada), the same providers are sanctioned to provide medical care under both private and public contracts. A combined system may be inevitable, however, for both economic and political reasons, especially where medical resources are relatively scarce. In this case, the Emerging Paradigm in health systems can offer the best possible solution to the public-private mix issue. In this paradigm, budget-holding institutions, intermediaries between financing entities and providers, organize and manage the consumption of care (OMCC) under public entitlement. The OMCC institutions can offer private insurance, to supplement to the public insurance', but supervise separate groups of providers, those working under public contracts and those working under private.
Handle: RePEc:nbr:nberwo:7881
Template-Type: ReDIF-Paper 1.0
Title: Aging and Housing Equity
Author-Name: Steven F. Venti
Author-Name: David A. Wise
Author-Person: pwi45
Note: AG
Number: 7882
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7882
File-URL: http://www.nber.org/papers/w7882.pdf
File-Format: application/pdf
Publication-Status: published as Bodie, Hammond, and Mitchell (eds.) Innovations in Retirement Financing. University of Pennsylvania Press and the Pension Research Council, 2002.
Abstract: Housing equity is the principle asset of a large fraction of older Americans. Indeed many retired persons have essentially no financial assets, other then Social Security and, for some, employer-provided pension benefits. Yet we find that housing wealth is typically not used to support non-housing consumption during retirement. Based on data from the Survey of Income and Program Participation, and the Asset and Health Dynamics Among the Oldest Old, we consider the change in home equity as families age. The results are based in large part on families aged 70 and older. We find that, barring changes in household structure, most elderly families are unlikely to move. Even among movers, those families that continue to own typically do not reduce home equity. However, precipitating shocks, like the death of a spouse or entry to a nursing home, sometimes lead to liquidation of home equity. Home equity is typically not liquidated to support general non-housing consumption needs. The implication is that when considering whether families have saved enough to maintain their pre-retirement standard of living after retirement, housing equity should not be counted on to support general non-housing consumption. These conclusions seem to correspond closely with the results of a recent American Association of Retired Persons survey, which found that 95 percent of persons 75 and older agreed with the statement: What I'd really like to do is stay in my current residence as long as possible.'
Handle: RePEc:nbr:nberwo:7882
Template-Type: ReDIF-Paper 1.0
Title: Managed Care, Technology Adoption, and Health Care: The Adoption of Neonatal Intensive Care
Classification-JEL: I1
Author-Name: Laurence C. Baker
Author-Name: Ciaran S. Phibbs
Note: EH
Number: 7883
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7883
File-URL: http://www.nber.org/papers/w7883.pdf
File-Format: application/pdf
Publication-Status: published as Baker, Laurence C. and Ciaran S. Phibbs. "Managed Care, Technology Adoption And Health Care: The Adoption Of Neonatal Intensive Care," Rand Journal of Economics, 2002, v33(3,Autumn), 524-548.
Abstract: Managed care activity may alter the incentives associated with the acquisition and use of new medical technologies, with potentially important implications for health care costs, patient care, and outcomes. This paper discusses mechanisms by which managed care could influence the adoption of new technologies and empirically examines the relationship between HMO market share and the diffusion of neonatal intensive care, a collection of technologies for the care of high risk newborns. We find that managed care slowed the adoption of NICUs, primarily by slowing the adoption of mid-level NICUs rather than the most advanced high-level units. Slowing the adoption of mid-level units would likely have generated savings. Moreover, opposite the frequent supposition that slowing technology growth is uniformly harmful to patients, in this case reduced adoption of mid-level units could have benefitted patients, since health outcomes for seriously ill newborns are better in higher-level NICUs and reductions in the availability of mid-level units appear to increase the chance of receiving care in a high-level center.
Handle: RePEc:nbr:nberwo:7883
Template-Type: ReDIF-Paper 1.0
Title: The Inexorable and Mysterious Tradeoff Between Inflation and Unemployment
Author-Name: N. Gregory Mankiw
Note: EFG ME
Number: 7884
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7884
File-URL: http://www.nber.org/papers/w7884.pdf
File-Format: application/pdf
Publication-Status: published as Mankiw, N. Gregory. "The Inexorable And Mysterious Tradeoff Between Inflation And Unemployment," Economic Journal, 2001, v111(471,May), 45-61.
Abstract: This paper discusses the short-run tradeoff between inflation and unemployment. Although this tradeoff remains a necessary building block of business cycle theory, economists have yet to provide a completely satisfactory explanation for it. According to the consensus view among central bankers and monetary economists, a contractionary monetary shock raises unemployment, at least temporarily, and leads to a delayed and gradual fall in inflation. Standard dynamic models of price adjustment, however, cannot explain this pattern of responses. Reconciling the consensus view about the effects of monetary policy with models of price adjustment remains an outstanding puzzle for business cycle theorists.
Handle: RePEc:nbr:nberwo:7884
Template-Type: ReDIF-Paper 1.0
Title: Contagion in Latin America: Definitions, Measurement, and Policy Implications
Classification-JEL: F30; F40
Author-Name: Kristin Forbes
Author-Person: pfo1
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: IFM
Number: 7885
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7885
File-URL: http://www.nber.org/papers/w7885.pdf
File-Format: application/pdf
Publication-Status: published as Roberto Rigobón & Kristin Forbes, 2001. "Contagion in Latin America: Definitions, Measurement, and Policy Implications," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, January.
Abstract: This paper analyzes bond and stock markets in Latin America and uses these patterns to investigate whether contagion occurred in the 1990's. It defines shift-contagion' as a significant increase in cross-market linkages after a shock to one country or region. Several coin-toss examples and a simple model show that the standard tests for contagion are biased due to the presence of heteroscedasticity, endogeneity, and omitted-variable bias. Recent empirical work which addresses these problems finds little evidence of shift-contagion during a range of crisis periods. Instead, this work argues that many countries are highly interdependent' in all states of the world and the strong cross-country linkages which exist after a crisis are not significantly different than those during more stable periods. These findings have a number of implications for Latin America.
Handle: RePEc:nbr:nberwo:7885
Template-Type: ReDIF-Paper 1.0
Title: Paying our Presidents: What do Trustees Value?
Classification-JEL: J44; I22
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Author-Name: John L. Cheslock
Author-Name: Julia Epifantseva
Note: LS
Number: 7886
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7886
File-URL: http://www.nber.org/papers/w7886.pdf
File-Format: application/pdf
Publication-Status: published as Ehrenberg, Ronald G., John J. Cheslock and Julia Epifantseva. "Paying Our Presidents: What Do Trustees Value?" Review of Higher Education (Fall 2001).
Abstract: We use panel data on the salaries and benefits of private university and college presidents for the 1992-93 to 1996-97 period to try to infer the factors that the trustees of these institutions value. Salary level equations suggest that the salary and compensation of the presidents are positively associated with the enrollment and endowment levels of their institutions and the test scores of their entering students. Salary and compensation change equations estimated for the presidents who remained in their positions for four years provide only weak evidence that presidents' pay increases are related to their fund raising success and no evidence that they get rewarded for their institutions' freshmen test scores increasing.
Handle: RePEc:nbr:nberwo:7886
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Information Technology on Emergency Health Care Outcomes
Classification-JEL: I12; L32
Author-Name: Susan Athey
Author-Person: pat6
Author-Name: Scott Stern
Note: EH IO PR
Number: 7887
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7887
File-URL: http://www.nber.org/papers/w7887.pdf
File-Format: application/pdf
Publication-Status: published as Athey, Susan and Scott Stern. "The Impact Of Information Technology On Emergency Health Care Outcomes," Rand Journal of Economics, 2002, v33(3,Autumn), 399-432.
Abstract: This paper analyzes the productivity of technology and job design in emergency response systems, or 911 systems.' During the 1990s, many 911 systems adopted Enhanced 911' (E911), where information technology is used to link automatic caller identification to a database of address and location information. A potential benefit to E911 is improved timeliness of the emergency response. We evaluate the returns to E911 in the context of a panel dataset of Pennsylvania counties during 1994-1996, when almost half of the 67 counties experienced a change in technology. We measure productivity using an index of health status of cardiac patients at the time of ambulance arrival, where the index should be improved by timely response. We also consider the direct effect of E911 on several patient outcomes, including mortality within the first hours following the incident and the total hospital charges incurred by the patient. Our main finding is that E911 increases the short-term survival rates for patients with cardiac diagnoses by about 1%, from a level of 96.2%. We also provide evidence that E911 reduces hospital charges. Finally, we analyze the effect of job design, in particular the use of Emergency Medical Dispatching' (EMD), where call-takers gather medical information, provide medical instructions over the telephone, and prioritize the allocation of ambulance and paramedic services. Controlling for EMD adoption does not affect our results about E911, and we find that EMD and E911 do not have significant interactions in determining outcomes (that is, they are neither substitutes nor complements).
Handle: RePEc:nbr:nberwo:7887
Template-Type: ReDIF-Paper 1.0
Title: The Impact of School Choice on Student Outcomes: An Analysis of the Chicago Public Schools
Classification-JEL: I20; H80
Author-Name: Julie Berry Cullen
Author-Person: pcu44
Author-Name: Brian Jacob
Author-Name: Steven Levitt
Author-Person: ple59
Note: CH PE
Number: 7888
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7888
File-URL: http://www.nber.org/papers/w7888.pdf
File-Format: application/pdf
Publication-Status: published as Cullen, Julie Berry & Jacob, Brian A. & Levitt, Steven D., 2005. "The impact of school choice on student outcomes: an analysis of the Chicago Public Schools," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 729-760, June.
Abstract: Current education reform proposals involve improving educational outcomes through forms of market-based competition and expanded parental choice. In this paper, we explore the impact of choice through open enrollment within the Chicago Public Schools (CPS). Roughly half of the students within CPS opt out of their assigned high school to attend other neighborhood schools or special career academies and magnet schools. Access to school choice dramatically increases student sorting by ability relative to neighborhood assignment. Students who opt out are more likely to graduate than observationally similar students who remain at their assigned schools. However, with the exception of those attending career academies, the gains appear to be largely spurious driven by the fact that more motivated students are disproportionately likely to opt out. Students with easy geographical access to a range of schools other than career academies (who presumably have a greater degree of school choice) are no more likely to graduate on average than students in more isolated areas. We find no evidence that this finding can be explained by negative spillovers to those who remain that mask gains to those who travel. Open enrollment apparently benefits those students who take advantage of having access to vocational programs without harming those who do not.
Handle: RePEc:nbr:nberwo:7888
Template-Type: ReDIF-Paper 1.0
Title: Optimal Exchange Rate Policy: The Influence of Price Setting and Asset Markets
Classification-JEL: F3; F4
Author-Name: Charles Engel
Author-Person: pen14
Note: IFM
Number: 7889
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7889
File-URL: http://www.nber.org/papers/w7889.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Money, Credit, and Banking, Vol. 33, no. 2, part 2 (May 2001): 518-541
Publication-Status: published as Charles Engel, 2001. "Optimal exchange rate policy: the influence of price setting and asset markets," Proceedings, Federal Reserve Bank of Cleveland, pages 518-547.
Abstract: This paper examines optimal exchange-rate policy in two-country sticky-price general equilibrium models in which households and firms optimize over an infinite horizon in an environment of uncertainty. The models are in the vein of the new open-economy macroeconomics' as exemplified by Obstfeld and Rogoff (1995, 1998, 2000). The conditions under which fixed or floating exchange rates yield higher welfare depend on the exact nature of price stickiness and on the degree of risk-sharing opportunities. This paper presents some preliminary empirical evidence on the behavior of consumer prices in Mexico that suggests failures of the law of one price are important. The evidence on price setting and risk-sharing opportunities is not refined enough to make definitive conclusions about the optimal exchange-rate regime for that country.
Handle: RePEc:nbr:nberwo:7889
Template-Type: ReDIF-Paper 1.0
Title: Upstairs, Downstairs: Computer-Skill Complementarity and Computer-Labor Substitution on Two Floors of a Large Bank
Classification-JEL: J3; O3
Author-Name: David H. Autor
Author-Person: pau9
Author-Name: Frank Levy
Author-Person: ple351
Author-Name: Richard Murnane
Author-Person: pmu87
Note: LS PR
Number: 7890
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7890
File-URL: http://www.nber.org/papers/w7890.pdf
File-Format: application/pdf
Publication-Status: published as Autor, David, Frank Levy and Richard J. Murnane. "Upstairs, Downstairs: Computers And Skills On Two Floors Of A Large Bank," International Labor Relations Review, 2002, v55(3,Apr), 432-447.
Abstract: We describe how a single technological innovation, the introduction of image processing of checks, led to distinctly different changes in the structure of jobs in two departments of a large bank overseen by one group of managers. In the downstairs deposit processing department, image processing led to the substitution of computers for high school educated labor in accomplishing core tasks and in greater specialization in the jobs that remained. In the upstairs exceptions processing department, image processing led to the integration of tasks, with an associated increase in the demand for particular skills. The case illustrates the interdependence of technological change and organizational change. It suggests that seeing the whole picture' and associated conceptual and problem-solving skills are made more valuable by information technologies. Finally, it underscores that the short-term consequences of technological changes may depend importantly on regulatory forces.
Handle: RePEc:nbr:nberwo:7890
Template-Type: ReDIF-Paper 1.0
Title: Measuring the "Ideas" Production Function: Evidence from International Patent Output
Classification-JEL: O3; O47
Author-Name: Michael E. Porter
Author-Name: Scott Stern
Note: IO PR
Number: 7891
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7891
File-URL: http://www.nber.org/papers/w7891.pdf
File-Format: application/pdf
Abstract: This paper estimates the parameters of the ideas' production function central to recent models of economic growth. We do so by evaluating the determinants of international' patenting rates across the OECD, where an international patent is one granted by the U.S. patent office to a foreign establishment. Taking advantage of variation in the flow of ideas produced by different countries over time, we provide evidence for three main findings. First, at the level of the production of international patents, country-level R&D productivity increases proportionally with the stock of ideas already discovered, a key parametric restriction associated with the Romer model of ideas-driven growth (Romer, 1990; Jones, 1995). Second, we find that ideas productivity in a given country is constant or declining in the worldwide stock of ideas. Ideas production by other countries raises the bar for producing new-to-the-world technology domestically, outweighing the positive effects of international knowledge spillovers. Finally, ideas productivity is concave in the size of the R&D workforce and the linkage between ideas production and overall productivity growth is small. These results suggest that while the parametric restrictions required to generate endogenous technological change may be satisfied for individual economies, the growth rate associated with such effects may be modest. There seems to be a gap between the the sustained production of ideas by advanced economies and the ability to translate ideas into measured productivity growth.
Handle: RePEc:nbr:nberwo:7891
Template-Type: ReDIF-Paper 1.0
Title: The Regulation of Entry
Author-Name: Simeon Djankov
Author-Person: pdj4
Author-Name: Rafael La Porta
Author-Person: pla273
Author-Name: Florencio LopezdeSilanes
Author-Person: plo137
Author-Name: Andrei Shleifer
Author-Person: psh93
Number: 7892
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7892
File-URL: http://www.nber.org/papers/w7892.pdf
File-Format: application/pdf
Publication-Status: published as Simeon Djankov & Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002. "The Regulation Of Entry," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 1-37, February.
Abstract: We present new data on the regulation of entry of start-up firms in 75 countries. The data set contains information on the number of procedures, official time, and official cost that a start-up must bear before it can operate legally. The official costs of entry are extremely high in most countries. Countries with heavier regulation of entry have higher corruption and larger unofficial economies, but not better quality of public or private goods. Countries with more democratic and limited governments have fewer entry regulations. The evidence is inconsistent with Pigouvian (helping hand) theories of benevolent regulation, but support the (grabbing hand) view that entry regulation benefits politicians and bureaucrats.
Handle: RePEc:nbr:nberwo:7892
Template-Type: ReDIF-Paper 1.0
Title: The Asset Price Incidence of Capital Gains Taxes: Evidence from the Taxpayer Relief Act of 1997 and Publicly-Traded Real Estate Firms
Classification-JEL: H22; H25
Author-Name: Todd Sinai
Author-Person: psi354
Author-Name: Joseph Gyourko
Author-Person: pgy3
Note: PE
Number: 7893
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7893
File-URL: http://www.nber.org/papers/w7893.pdf
File-Format: application/pdf
Publication-Status: published as Sinai, Todd and Joseph Gyourko. "The Asset Price Incidence Of Capital Gains Taxes: Evidence From The Taxpayer Relief Act Of 1997 And Publicly-Traded Real Estate Firms," Journal of Public Economics, 2004, v88(7-8,Jul), 1543-1565.
Abstract: We provide new evidence that corporate-level investment subsidies can be substantially capitalized into asset prices by examining the relative stock price performance of publicly traded companies in the real estate industry that should have been differentially affected by the capital gains tax rate reduction enacted in the Taxpayer Relief Act of 1997. By comparing real estate firms that have an organizational structure that allow property sellers to defer capital gains taxes and plan to use it to acquire property with those that do not, we isolate the effect of the tax cut from industry trends and firm-level heterogeneity. When we examine the time period surrounding the reduction in the capital gains tax rate, our results suggest the tax change was substantially capitalized into lower share prices for these firms and that the benefit of the seller's capital gains tax deferral accrued mainly to the buyer of an appreciated property. The validity of our estimation strategy is supported by further tests showing that these firms did not experience any relative movement in share prices during the previous year when capital gains tax rates did not change.
Handle: RePEc:nbr:nberwo:7893
Template-Type: ReDIF-Paper 1.0
Title: Entrepreneurship and Household Saving
Classification-JEL: E2
Author-Name: William M. Gentry
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Note: CF PE EFG
Number: 7894
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7894
File-URL: http://www.nber.org/papers/w7894.pdf
File-Format: application/pdf
Publication-Status: published as William Gentry & R. Hubbard, 2004. "Entrepreneurship and Household Saving," Advances in Economic Analysis & Policy, Berkeley Electronic Press, vol. 4(1), pages 1053-1053.
Abstract: In this paper, we argue that costly external financing for entrepreneurial investments (coupled with potentially high returns on those investments) has important implications for the saving, investment, and entry decisions of continuing and potential entrepreneurs. These effects are similar in spirit to the role played by costly external financing on investment by corporations. Using data from the 1983 and 1989 Federal Reserve Board Surveys of Consumer Finances, we quantify three findings about entrepreneurial saving decisions and their role in household wealth accumulation. First, entrepreneurial households own a substantial share of household wealth and income, and this share increases throughout the wealth distribution and the income distribution. Second, the portfolios of entrepreneurial households, even wealthy ones, are very undiversified, with the bulk of assets held within active businesses. Third, wealth-income ratios and saving rates are higher for entrepreneurial households even after controlling for age and other demographic variables. Taken together, these findings suggest that studies of household saving decisions in general and of the savings decisions of wealthy or high-income households in particular have paid insufficient attention to the role of entrepreneurial decisions and their role in wealth accumulation. Our conclusion that entrepreneurial saving and investment decisions are interdependent raises three areas for future research: (1) measuring the role of entrepreneurs in aggregate wealth accumulation; (2) studying implications for portfolio allocation and asset pricing; and (3) analyzing consequences for tax policy toward entrepreneurial saving and investment.
Handle: RePEc:nbr:nberwo:7894
Template-Type: ReDIF-Paper 1.0
Title: Live Long, Live Well: Quantifying the Health of Heterogenous Populations
Classification-JEL: I1
Author-Name: John Mullahy
Note: EH
Number: 7895
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7895
File-URL: http://www.nber.org/papers/w7895.pdf
File-Format: application/pdf
Publication-Status: published as John Mullahy, 2001. "Live long, live well: quantifying the health of heterogeneous populations," Health Economics, John Wiley & Sons, Ltd., vol. 10(5), pages 429-440.
Abstract: Various health-, quality-, and disability-adjusted life year or life expectancy (HALY, QALY, DALY; HALE, QALE, DALE) measures have become gold standards for defining outcomes in technology evaluation, population health monitoring, and other evaluative efforts. As such, it is critical that the analytical framework within which these measures are used for descriptive and evaluative purposes be theoretically consistent and statistically rigorous. For instance, widely-accepted definitions of cost-effectiveness ratios and other technology evaluation criteria that are based on expectations of the respective cost and outcome measures must as such be defined in terms of expected HALYs or QALYs. Similarly, measures like HALEs or QALEs used for population health monitoring are typically concerned with population expectations of such measures (or their corresponding totals). This paper demonstrates that estimation of such expectations necessarily requires consideration of the population variation in and covariation between quality and longevity. From the perspective of several different environments characterizing such heterogeneity, quantification or estimation of measures like QUALs are recondidered. An empirical example of the central issues is provided by means of an analysis of the Years of Healthy Life (YHL) measure drawn from the U.S. National Health Interview Survey.
Handle: RePEc:nbr:nberwo:7895
Template-Type: ReDIF-Paper 1.0
Title: Outside Funding of Community Organizations: Benefiting or Displacing the Poor?
Classification-JEL: Z13
Author-Name: Mary Kay Gugerty
Author-Name: Michael Kremer
Author-Person: pkr20
Note: PE
Number: 7896
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7896
File-URL: http://www.nber.org/papers/w7896.pdf
File-Format: application/pdf
Abstract: In response to the widespread consensus on the importance of social capital, and to concerns about the scarcity of institutions giving voice to disadvantaged groups, some donors have begun programs designed to strengthen indigenous community organizations. We use a prospective, randomized evaluation to examine a development program explicitly targeted at building social capital among rural women's groups in western Kenya. The program increased turnover among group members. It increased entry into group membership and leadership by younger, more educated women, by women employed in the formal sector, and by men. The analysis suggests that providing development assistance to indigenous community organizations of the disadvantaged may change the very characteristics of these organizations that made them attractive to outside funders.
Handle: RePEc:nbr:nberwo:7896
Template-Type: ReDIF-Paper 1.0
Title: The Creation of Effective Property Rights
Classification-JEL: D23; D74
Author-Name: Herschel I. Grossman
Note: EFG
Number: 7897
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7897
File-URL: http://www.nber.org/papers/w7897.pdf
File-Format: application/pdf
Publication-Status: published as Grossman, Herschel I. "The Creation Of Effective Property Rights," American Economic Review, 2001, v91(2,May), 347-352.
Abstract: Traditionally, general-equilibrium models have taken effective property rights to be given and have been concerned only with analysing the allocation of resources among productive uses and the distribution of the resulting product. But, this formulation of the economic problem is incomplete because it neglects that the appropriative activities by which people create the effective property rights that inform allocation and distribution are themselves an alternative use of scarce resources.This paper develops two canonical general-equilibrium models of resource allocation and income distribution that allow for the allocation of time and effort to the creation of effective property rights to valuable resources. In one model the valuable resources are initially in a common pool. In the other model agents initially have nonoverlapping claims to the valuable resources. For both models the analysis reveals how the amount of time and effort that agents allocate to the creation of effective property rights, rather than to production,depends on the environment for creating effective property rights, on the technology of production, and on the scale of the economy. The paper also analyses the security of initial claims to valuable resources and speculates about why initial claims sometimes are perfectly secure.
Handle: RePEc:nbr:nberwo:7897
Template-Type: ReDIF-Paper 1.0
Title: Inventors and Pirates: Creative Activity and Intellectual Property Rights
Classification-JEL: O31; O34
Author-Name: Herschel I. Grossman
Note: EFG
Number: 7898
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7898
File-URL: http://www.nber.org/papers/w7898.pdf
File-Format: application/pdf
Publication-Status: published as Grossman, Herschel I. "Inventors And Pirates: Creative Activity And Intellectual Property Rights," European Journal of Political Economy, v21(2,Jun), 2005, 269-285.
Abstract: This paper analyzes how both the value of ideas created as well as the security of intellectual property rights result from the choices of potentially creative people either to engage in creative activity or to be pirates, and from decisions of people who are engaged in creative activity to allocate time and effort to the guarding of ideas from pirating. An important result is that, although the existence of a small number of geniuses causes a larger fraction of potentially creative people to choose to be pirates and, consequently, makes intellectual property rights less secure, the existence of a small number of geniuses, holding fixed the average level of talent, can result in a larger value of ideas being created. The paper also recognizes the difference between the private value and the social value of the security of intellectual property rights.
Handle: RePEc:nbr:nberwo:7898
Template-Type: ReDIF-Paper 1.0
Title: Aspects of Global Economic Intergration: Outlook for the Future
Classification-JEL: F2; F3
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: IFM ITI
Number: 7899
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7899
File-URL: http://www.nber.org/papers/w7899.pdf
File-Format: application/pdf
Publication-Status: published as Aspects of Global Economic Integration, Annual Conference of The Federal Reserve Bank of Kansas City. 2000.
Abstract: This paper comments on five aspects of globalization: (1) the gains from international flows of goods and capital; (2) the role of foreign direct investment and reasons for its increase; (3) the preventions and management of currency crises; (4) the fluctuation of relative currency values; and (5) the segmentation of global capital market.
Handle: RePEc:nbr:nberwo:7899
Template-Type: ReDIF-Paper 1.0
Title: Are Financial Crises Becoming Increasingly More Contagious? What is the Historical Evidence on Contagion?
Classification-JEL: G15; N20
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Antu P. Murshid
Author-Person: pmu38
Note: DAE IFM ME
Number: 7900
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7900
File-URL: http://www.nber.org/papers/w7900.pdf
File-Format: application/pdf
Publication-Status: published as Claessens, Stijn and Kristin I. Forbes (eds.) International Financial Contagion. Boston, MA: Kluwer Academic Publishers, 2001.
Abstract: We examine the evidence of contagion during the pre World War I era and the interwar and contrast our findings with the evidence of contagion from the recent crises in Asia and Latin America. Using weekly data on bond prices and interest rates, we investigate the extent to which bilateral cross-market correlations rise following the onset of a crisis. After correcting for heteroscedasticity, ala Forbes and Rigobon (1998, 1999), we find little evidence of significant increases in cross-market correlations in either the earlier regimes or in the more recent period. We use principle components analysis to assess the extent of comovement across all markets as well as within various groups of markets, prior to, and after the onset of a crisis. Countries are grouped into regions, as well as along the lines of advanced and emerging. There is little evidence to suggest that cross-country linkages are tighter in the aftermath of a financial crisis for the recent period. There is, however, some evidence of stronger comovement during periods of instability in earlier regimes.
Handle: RePEc:nbr:nberwo:7900
Template-Type: ReDIF-Paper 1.0
Title: Verifiability and the Vanishing Intermediate Exchange Rate Regime
Classification-JEL: F31; F32
Author-Name: Jeffrey Frankel
Author-Person: pfr12
Author-Name: Sergio Schmukler
Author-Person: psc64
Author-Name: Luis Serven
Author-Person: pse75
Note: IFM
Number: 7901
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7901
File-URL: http://www.nber.org/papers/w7901.pdf
File-Format: application/pdf
Publication-Status: published as Collins, Susan and Dani Rodrik (eds.) Brookings Trade Forum 2000. Washington D.C.: Brookings Institution.
Abstract: The corners hypothesis holds that intermediate exchange rate regimes are vanishing, or should be. Surprisingly for a new conventional wisdom, this hypothesis so far lacks analytic foundations. In part, the generalization is overdone. We nevertheless offer one possible theoretical rationale, a contribution to the list of arguments against intermediate regimes: they lack verifiability, needed for credibility. Central banks announce intermediate targets such as exchange rates, so that the public can judge from observed data whether they are following the policy announced. Our general point is that simple regimes are more verifiable by market participants than complicated ones. Of the various intermediate regimes (managed float, peg with escape clause, etc.), we focus on basket pegs, with bands. Statistically, it takes a surprisingly long span of data to distinguish such a regime from a floating exchange rate. We apply the econometrics, first, to the example of Chile and, second, by performing Monte Carlo simulations. The amount of data required to verify the declared regime may exceed the length of time during which the regime is maintained. The amount of information necessary increases with the complexity of the regime, including the width of the band and the number of currencies in the basket.
Handle: RePEc:nbr:nberwo:7901
Template-Type: ReDIF-Paper 1.0
Title: International Capital Inflows, Domestic Financial Intermediation and Financial Crises under Imperfect Information
Classification-JEL: F31; F41
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: Kenneth M. Kletzer
Note: IFM
Number: 7902
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7902
File-URL: http://www.nber.org/papers/w7902.pdf
File-Format: application/pdf
Publication-Status: published as Menzie D. Chinn & Kenneth M. Kletzer, 1999. "International capital inflows, domestic financial intermediation and financial crises under imperfect information," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
Abstract: A model of financial crises in emerging markets based on problems of agency in financial intermediation is developed. This model generates dynamic relationships between foreign capital inflows, domestic investment and domestic bank debt in an endogenous growth model. As a consequence of loan renegotiation between limited liability banks and firms, financial crises inevitably occur. Banking and currency crises are concurrent events under an exchange rate peg combined with deposit insurance and implicit government guarantees of foreign currency loans. The model links high pre-crisis growth rates, the accumulation of bank debt and increasing concentration of domestic lending and investment to the anticipation of contingent government insurance of private financial transactions. The dynamics of capital inflows and growth before and after a financial crisis are compared to the experience of the Asian crisis countries. We find evidence consistent with this agency model of domestic bank intermediation of foreign capital inflows under exchange rate pegs.
Handle: RePEc:nbr:nberwo:7902
Template-Type: ReDIF-Paper 1.0
Title: The Effect of the Tax Reform Act of 1986 on the Location of Assets in Financial Services Firms
Classification-JEL: H25; H32
Author-Name: Rosanne Altshuler
Author-Person: pal34
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Note: PE
Number: 7903
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7903
File-URL: http://www.nber.org/papers/w7903.pdf
File-Format: application/pdf
Publication-Status: published as Altshuler, Rosanne and R. Glenn Hubbard. "The Effect Of The Tax Reform Act Of 1986 On The Location Of Assets In Financial Services Firms," Journal of Public Economics, 2003, v87(1,Jan), 109-127.
Abstract: This paper examines the effects of the Tax Reform Act of 1986 on the international location decisions of U.S. financial services firms. The Act included rule changes that made it substantially more difficult for U.S. firms to defer U.S. taxes on overseas financial services income held in low-tax jurisdictions. These same rule changes were not applied to other forms of income; in particular, income generated from active manufacturing operations was still eligible for deferral after the Act. We use information from the tax returns of U.S. corporations to examine how local taxes affect the allocation of assets held abroad. We find that, before the Act, the location of assets in financial subsidiaries was responsive to differences in host country tax rates across jurisdictions. However, after the Act, differences in host country tax rates no longer explain the distribution of assets held in financial services subsidiaries abroad. In contrast, we find that assets held in manufacturing subsidiaries have become more sensitive to variations in tax rates. Our results suggest that the tightening of the anti-deferral provisions applicable to financial services companies has been successful in neutralizing the effect of host country income taxes on investment location decisions.
Handle: RePEc:nbr:nberwo:7903
Template-Type: ReDIF-Paper 1.0
Title: The World Technology Frontier
Classification-JEL: E1; O3
Author-Name: Francesco Caselli
Author-Person: pca205
Author-Name: Wilbur John Coleman II
Note: EFG PR
Number: 7904
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7904
File-URL: http://www.nber.org/papers/w7904.pdf
File-Format: application/pdf
Publication-Status: published as Francesco Caselli & Wilbur John Coleman, 2006. "The World Technology Frontier," American Economic Review, American Economic Association, vol. 96(3), pages 499-522, June.
Abstract: We define a country's technology as a triple of efficiencies: one for unskilled labor, one for skilled labor, and one for capital. We find a negative cross-country correlation between the efficiency of unskilled labor and the efficiencies of skilled labor and capital. We interpret this finding as evidence of the existence of a World Technology Frontier. On this frontier, increases in the efficiency of unskilled labor are obtained at the cost of declines in the efficiency of skilled labor and capital. We estimate a model in which firms in each country optimally choose from a menu of technologies, i.e. they choose their technology subject to a Technology Frontier. The optimal choice of technology depends on the country's endowment of skilled and unskilled labor, so that the model is one of appropriate technology. The estimation allows for country-specific technology frontiers, due to barriers to technology adoption. We find that poor countries tend disproportionately to be inside the World Technology Frontier.
Handle: RePEc:nbr:nberwo:7904
Template-Type: ReDIF-Paper 1.0
Title: Occupation-Level Income Shocks and Asset Returns: Their Covariance and Implications for Portfolio Choice
Classification-JEL: G11; D91
Author-Name: Steven J. Davis
Author-Person: pda15
Author-Name: Paul Willen
Author-Person: pwi457
Note: AP LS
Number: 7905
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7905
File-URL: http://www.nber.org/papers/w7905.pdf
File-Format: application/pdf
Publication-Status: published as Steven J. Davis & Paul Willen, 2013. "Occupation-Level Income Shocks and Asset Returns: Their Covariance and Implications for Portfolio Choice," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 1350011-1-1.
Abstract: This paper develops and applies a simple graphical approach to portfolio selection that accounts for covariance between asset returns and an investor's labor income. Our graphical approach easily handles income shocks that are partly hedgable, multiple risky assets, many periods and life cycle considerations. We apply the approach to occupation-level components of individual income innovations estimated from repeated cross sections of the Current Population Survey. We characterize several properties of these innovations, including their covariance with aggregate equity returns, long-term bond returns and returns on several other assets. Aggregate equity returns are uncorrelated with the occupation-level income innovations, but a portfolio formed on firm size is significantly correlated with income innovations for several occupations, and so are selected industry-level equity portfolios. An application of the theory to the empirical results shows (a) large predicted levels of risky asset holdings compared to observed levels, (b) considerable variation in optimal portfolio allocations over the life cycle, and (c) large departures from the two-fund separation principle.
Handle: RePEc:nbr:nberwo:7905
Template-Type: ReDIF-Paper 1.0
Title: Do the Rich Save More?
Classification-JEL: E2; D1
Author-Name: Karen E. Dynan
Author-Name: Jonathan Skinner
Author-Person: psk23
Author-Name: Stephen P. Zeldes
Note: EFG PE
Number: 7906
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7906
File-URL: http://www.nber.org/papers/w7906.pdf
File-Format: application/pdf
Publication-Status: published as Dynan, Karen E., Jonathan Skinner and Stephen P. Zeldes. "Do The Rich Save More?," Journal of Political Economy, 2004, v112(2,Apr), 397-444.
Abstract: The issue of whether higher lifetime income households save a larger fraction of their income is an important factor in the evaluation of tax and macroeconomic policy. Despite an outpouring of research on this topic in the 1950s and 1960s, the question remains unresolved and has since received little attention. This paper revisits the issue, using new empirical methods and the Panel Study on Income Dynamics, the Survey of Consumer Finances, and the Consumer Expenditure Survey. We first consider the various ways in which life cycle models can be altered to generate differences in saving rates by income groups: differences in Social Security benefits, different time preference rates, non-homothetic preferences, bequest motives, uncertainty, and consumption floors. Using a variety of instruments for lifetime income, we find a strong positive relationship between personal saving rates and lifetime income. The data do not support theories relying on time preference rates, non-homothetic preferences, or variations in Social Security benefits. Instead, the evidence is consistent with models in which precautionary saving and bequest motives drive variations in saving rates across income groups. Finally, we illustrate how models that assume a constant rate of saving across income groups can yield erroneous predictions.
Handle: RePEc:nbr:nberwo:7906
Template-Type: ReDIF-Paper 1.0
Title: How Do Doctors Behave When Some (But Not All) of Their Patients are in Managed Care?
Classification-JEL: I1
Author-Name: Sherry Glied
Author-Name: Joshua Zivin
Author-Person: pgr314
Note: EH
Number: 7907
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7907
File-URL: http://www.nber.org/papers/w7907.pdf
File-Format: application/pdf
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: Most physicians today treat a variety of patients within their practices and operate in markets where a variety of insurance arrangements co-exist. In this paper, we propose several theoretical explanations for physician treatment patterns when the patient population is heterogeneous at the practice and market level. Data from the 1993-1996 National Ambulatory Medical Care Survey (NAMCS) are used to test how practice-level and market-level HMO penetration affect treatment intensity. Practice composition has strong effects on treatment. HMO-dominated practices have shorter, but otherwise more treatment intensive visits than do other practices. Market characteristics are less important determinants of treatment. As HMO practice share rises, the differences between the treatment of non-HMO and HMO patients are attenuated. These results provide strong evidence for a model of physician behavior with fixed costs of effort in the form of visit duration. For tests ordered, medications prescribed, and return visits specified, the empirical evidence supports a model with marginal cost pricing for excess capacity. HMO and non-HMO treatment patterns are most distinct at the level of the practice, not the patient. HMO-dominated practices appear to use a practice style that is quite different from that used in other practices. These findings suggest that practices are likely to become more segregated over time.
Handle: RePEc:nbr:nberwo:7907
Template-Type: ReDIF-Paper 1.0
Title: An Optimizing IS-LM Framework with Endogenous Investment
Classification-JEL: E10; E30
Author-Name: Miguel Casares
Author-Name: Bennett T. McCallum
Note: EFG ME
Number: 7908
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7908
File-URL: http://www.nber.org/papers/w7908.pdf
File-Format: application/pdf
Publication-Status: published as Casares, Miguel & McCallum, Bennett T., 2006. "An optimizing IS-LM framework with endogenous investment," Journal of Macroeconomics, Elsevier, vol. 28(4), pages 621-644, December.
Abstract: Dynamic optimizing models with an IS-LM-type structure and slow price adjustments have been used for much recent monetary policy analysis, but usually with capital and investment treated as exogenous a significant restriction. This paper demonstrates that investment decisions can be endogenized without undue complexity in such models and that these can be calibrated to provide reasonably realistic dynamic behavior. It is necessary, however, to include capital adjustment costs; models with no adjustment costs match cyclical data very poorly. Indeed, their match is considerably poorer than models with constant capital. The paper also finds that the preferred adjustment-cost specification is not close to quadratic.
Handle: RePEc:nbr:nberwo:7908
Template-Type: ReDIF-Paper 1.0
Title: Are Two Heads Better Than One?: An Experimental Analysis of Group vs. Individual Decisionmaking
Classification-JEL: E5
Author-Name: Alan S. Blinder
Author-Person: pbl41
Author-Name: John Morgan
Author-Person: pmo131
Note: ME
Number: 7909
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7909
File-URL: http://www.nber.org/papers/w7909.pdf
File-Format: application/pdf
Publication-Status: published as Blinder, Alan S. and John Morgan. "Are Two Heads Better Than One? Monetary Policy By Committee," Journal of Money, Credit and Banking, 2005, v37(5,Oct), 789-811.
Abstract: Two laboratory experiments - one a statistical urn problem, the other a monetary policy experiment - were run to test the commonly-believed hypothesis that groups make decisions more slowly than individuals do. Surprisingly, this turns out not to be true there is no significant difference in average decision lags. Furthermore, and also surprisingly, there is no significant difference in the decision lag when groups decisions are made by majority rule versus when they are made under a unanimity requirement. In addition, group decisions are on average superior to individual decisions. The results are strikingly similar across the two experiments.
Handle: RePEc:nbr:nberwo:7909
Template-Type: ReDIF-Paper 1.0
Title: Policy Rules and External Shocks
Classification-JEL: E52; E58
Author-Name: Laurence Ball
Author-Person: pba605
Note: ME EFG
Number: 7910
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7910
File-URL: http://www.nber.org/papers/w7910.pdf
File-Format: application/pdf
Publication-Status: published as Loayza, Norman and Klaus Schmidt-Hebbel. Monetary policy: Rules and transmission mechanisms, Series on Central Banking, Analysis, and Economic Policies, vol. 4. Santiago: Central Bank of Chile, 2002.
Abstract: This essay discusses rules for monetary policy in open economies. If policymakers seek to stabilize output and inflation, optimal rules in open economies differ considerably from optimal rules in closed economies. In open economies, stability is best achieved by targeting long-run inflation' a measure of inflation adjusted to remove transitory effects of exchange-rate movements. Stability is also enhanced by adding an exchange-rate term to "Taylor rules" for setting interest rates. Finally, central banks must choose whether their policy instrument is an interest rate or a "monetary conditions index": an average of the interest rate and the exchange rate. The nature of shocks to the exchange rate determines which of these choices keeps output and inflation more stable.
Handle: RePEc:nbr:nberwo:7910
Template-Type: ReDIF-Paper 1.0
Title: International Data on Educational Attainment Updates and Implications
Classification-JEL: O11; O40
Author-Name: Robert J. Barro
Author-Person: pba251
Author-Name: Jong-Wha Lee
Author-Person: ple164
Note: CH EFG PE
Number: 7911
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7911
File-URL: http://www.nber.org/papers/w7911.pdf
File-Format: application/pdf
Publication-Status: published as Barro, Robert J. and Jong-Wha Lee. "International Data On Educational Attainment: Updates And Implications," Oxford Economic Papers, 2001, v53(3,Jul), 541-563.
Abstract: This paper presents a data set that improves the measurement of educational attainment for a broad group of countries. We extend our previous estimates of educational attainment for the population over age 15 and over age 25 up to 1995 and provide projections for 2000. We discuss the estimation method for the measures of educational attainment and relate our estimates to alternative international measures of human capital stocks.
Handle: RePEc:nbr:nberwo:7911
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Rental Adjustment Process
Classification-JEL: R0; R3
Author-Name: Patric H. Hendershott
Author-Name: Bryan D. MacGregor
Author-Name: Raymond Y.C. Tse
Note: EFG
Number: 7912
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7912
File-URL: http://www.nber.org/papers/w7912.pdf
File-Format: application/pdf
Publication-Status: published as Hendershott, P. H., B. D. MacGregor and R. Y. C. Tse. "Estimation Of The Rental Adjustment Process," Real Estate Economics, 2002, v30(2,Summer), 165-183.
Abstract: Rental adjustment equations have been estimated for a quarter century. In the U.S., models have used the deviation of the actual vacancy rate from the natural rate as the main explanatory variable, while in the UK, drivers of the demand for space have dominated the estimation. The recent papers of Hendershott (1996) and Hendershott, Lizieri and Matysiak (HLM, 1999) fall into the former category. We re-estimate these equations using alternative formulations but can do little to improve them overall. However, we identify econometric concerns with the specifications. We then derive a model incorporating both supply and demand factors within an Error Correction framework, and show how the U.S. and UK traditions are special cases of this more general formulation. We next estimate this equation using data from the City of London office market. Our initial specification of this more generalized model is greatly superior to the vacancy rate model. Finally, we estimate a two-equation variant with a separate vacancy rate equation; this model also performs much better than that of HLM. Importantly, our model passes standard modern econometric requirements for unit roots and co-integration. We find little evidence of special or temporal variation in natural vacancy rates.
Handle: RePEc:nbr:nberwo:7912
Template-Type: ReDIF-Paper 1.0
Title: A New Approach to Measuring Financial Contagion
Classification-JEL: G10; G15
Author-Name: Kee-Hong Bae
Author-Name: G. Andrew Karolyi
Author-Person: pka329
Author-Name: Rene M. Stulz
Note: AP CF IFM
Number: 7913
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7913
File-URL: http://www.nber.org/papers/w7913.pdf
File-Format: application/pdf
Publication-Status: published as Proceedings, Federal Reserve Bank of Chicago, May 2001 issue, pages 489-529
Publication-Status: published as Review of Financial Studies, Vol. 16, no. 3 (July 2003): 717-763
Abstract: This paper proposes a new approach to evaluate contagion in financial markets. Our measure of contagion captures the co-incidence of extreme return shocks across countries within a region and across regions that cannot be explained by linear propagation models of shocks. We characterize the extent of contagion, its economic significance, and its determinants using a multinomial logistic regression model. Applying our approach to daily returns of emerging markets during the 1990s, we find that contagion, when measured by the co-incidence within and across regions of extreme return shocks, is predictable and depends on regional interest rates, exchange rate changes, and conditional stock return volatility. Evidence that contagion is stronger for extreme negative returns than for extreme positive returns is mixed.
Handle: RePEc:nbr:nberwo:7913
Template-Type: ReDIF-Paper 1.0
Title: Endogenous Pricing to Market and Financing Costs
Classification-JEL: F15; F36
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: ITI
Number: 7914
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7914
File-URL: http://www.nber.org/papers/w7914.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua. "Endogenous Pricing To Market And Financing Costs," Journal of Monetary Economics, 2004, v51(4,May), 691-712.
Abstract: This paper studies the endogenous determination of pricing to market, in a model with time dependent transportation costs, where the future terms of trade are random. Allowing time dependent transportation costs adds a dimension of investment to the pre-buying of imports, implying that financial considerations determine the frequency of pricing to market, and the deviations from relative PPP. If the expected discounted cost of last minute delivery is higher than pre-buying, one exercises the option of spot market imports if the realized terms of trade are favorable enough. Pricing to market is observed in countries characterized by low terms of trade volatility and low financing costs. In these circumstances, imports are pre-bought, and the spot market for imports is inactive. In countries where the financing costs and the terms of trade volatility are high, few imports are pre-bought, the price of imports is determined by the realized real exchange rate, and a version of relative PPP holds. With an intermediate level of terms of trade volatility and of financing costs, a mixed regime is observed, and some imports are pre-bought. If the realized real exchange rate is favorable enough more imports are purchased in the spot market, the price of imports is determined by the realized real exchange rate, and the relative PPP holds. If the realized real exchange rate is weak, pricing to market would prevail, increasing consumers' welfare by shielding them from the adverse purchasing power consequences of weak terms of trade. Higher financing costs increase the cost of pre-buying imports, reducing thereby the frequency of pricing to market, increasing the expected relative price of imports, reducing the expected deviations from relative PPP, and reducing welfare.
Handle: RePEc:nbr:nberwo:7914
Template-Type: ReDIF-Paper 1.0
Title: Timeless Perspectives vs. Discretionary Monetary Policy In Forward-Looking Models
Classification-JEL: E52; E58
Author-Name: Bennett T. McCallum
Author-Name: Edward Nelson
Author-Person: pne58
Note: EFG ME
Number: 7915
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7915
File-URL: http://www.nber.org/papers/w7915.pdf
File-Format: application/pdf
Publication-Status: published as Bennett T. McCallum & Edward Nelson, 2004. "Timeless perspective vs. discretionary monetary policy in forward-looking models," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 43-56.
Abstract: This paper reviews the distinction between the timeless perspective and discretionary modes of monetary policymaking, the former representing rule-based policy as recently formalized by Woodford (1999b). In models with forward-looking expectations, this distinction is greater than in the models that have been typical in the rules-vs.-discretion literature; typically there is a second inefficiency from discretionary policymaking, distinct from the familiar inflationary bias. The paper presents calculations of the quantitative magnitude of this second inefficiency, using calibrated models of two types prominent in the current literature. In addition, it examines the distinction between instrument rules and targeting rules; the results indicate that targeting-rule outcomes can be very closely approximated by instrument rules. Also included is a brief investigation of operationality issues, involving the unobservability of current output and the possibility that an incorrect concept of the natural-rate level of output, essential in measuring the output gap, is used by the policymaker. In all of the cases examined, the unconditional average performance of timeless perspective policymaking is at least as good as that provided by optimal discretionary behavior.
Handle: RePEc:nbr:nberwo:7915
Template-Type: ReDIF-Paper 1.0
Title: The Present and Future of Monetary Policy Rules
Classification-JEL: E58; E42
Author-Name: Bennett T. McCallum
Note: EFG ME
Number: 7916
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7916
File-URL: http://www.nber.org/papers/w7916.pdf
File-Format: application/pdf
Publication-Status: published as McCallum, Bennett T, 2000. "The Present and Future of Monetary Policy Rules," International Finance, Blackwell Publishing, vol. 3(2), pages 273-86, July.
Abstract: To consider the prospects, looking 20-30 years into the future, for monetary policymaking in accordance with policy rules, one must evaluate their present importance. That requires some definition of what constitutes rule-based monetary policy in practice, since no actual central bank will ever be literally bound by any simple formula (or any strict optimal control scheme). Consideration of the rules-versus-discretion literature, plus more recent analysis by Woodford (1999), indicates that rule-based policy is conducted to satisfy relationships specified from a timeless perspective.' Given this conception, it seems reasonably clear that today's prominent regimes (e.g., inflation targeting) do largely represent rule-based policymaking. Whether these will prevail into the future will depend in part on political trends, but their fundamental soundness gives room for hope. Regarding the effects of a gradually diminishing role of money, it would appear that the feasibility and attractiveness of rule-based policymaking will not be seriously impaired so long as a tangible medium of exchange has some importance, even if small. In the complete absence of monetary transactions, there would be no monetary policy of any type, rule-based or discretionary. But it seems highly unlikely that money will disappear in the foreseeable future.
Handle: RePEc:nbr:nberwo:7916
Template-Type: ReDIF-Paper 1.0
Title: Environmental Levies and Distortionary Taxation: Pigou, Taxation, and Pollution
Classification-JEL: H21; H23
Author-Name: Gilbert E. Metcalf
Note: PE EEE
Number: 7917
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7917
File-URL: http://www.nber.org/papers/w7917.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, 87(2002): 313-322.
Abstract: Bovenberg and de Mooij (1994) showed that, in the presence of preexisting distorting taxes, the optimal pollution tax typically lies below social marginal damages. Many have viewed this result as a refutation of the so-called double dividend hypothesis,' which suggests that a tax on pollution can both improve the environment and reduce distortions in the tax system. Bovenberg and de Mooij's paper triggered a large literature on optimal environmental tax rates in a second-best world. In this note, I argue that the emphasis on tax rates is misguided. Using an analytical general equilibrium model, I show that for reasonable parameter values, an increase in tax distortions (arising from an increase in required tax revenues) leads to a fall in the optimal Pigouvian tax rate even while environmental quality improves. In general, knowledge of the direction of changes in optimal environmental tax rates due to changes in the economy is not sufficient for understanding the impact on environmental quality.
Handle: RePEc:nbr:nberwo:7917
Template-Type: ReDIF-Paper 1.0
Title: Where Does State Street Lead? A First Look at Finance Patents, 1971-2000
Author-Name: Josh Lerner
Author-Person: ple60
Note: PR CF
Number: 7918
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7918
File-URL: http://www.nber.org/papers/w7918.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, 57 (April 2002) 901-930.
Abstract: This paper empirically examines patents for financial formulas and methods, whose patentability was recently confirmed in the litigation between State Street Bank and Trust and Signature Financial Group. The number of such filings and awards has been accelerating. Patent filings by academics have been very infrequent, which appears to be a consequence of a lack of awareness or interest on the part of faculty members, rather than any fundamental unsuitability of their research for patenting. The failure to cite academic research in this area appears to be problematic and may reflect patent examiners' limited exposure to finance research and patents. The final section discusses the challenges that these developments pose to academic finance.
Handle: RePEc:nbr:nberwo:7918
Template-Type: ReDIF-Paper 1.0
Title: Causes of U.S. Bank Distress During the Depression
Classification-JEL: G2; N2
Author-Name: Charles W. Calomiris
Author-Person: pca421
Author-Name: Joseph R. Mason
Note: DAE ME
Number: 7919
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7919
File-URL: http://www.nber.org/papers/w7919.pdf
File-Format: application/pdf
Publication-Status: published as Charles W. Calomiris & Joseph R. Mason, 2001. "Causes of U.S. bank distress during the depression," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 530-554.
Abstract: This paper provides the first comprehensive econometric analysis of the causes of bank distress during the Depression. We assemble bank-level data for virtually all Fed member banks, and combine those data with county-level, state-level, and national-level economic characteristics to capture cross-sectional and inter-temporal variation in the determinants of bank failure. We construct a model of bank survival duration using these fundamental determinants of bank failure as predictors, and investigate the adequacy of fundamentals for explaining bank failures during alleged episodes of nationwide or regional banking panics. We find that fundamentals explain most of the incidence of bank failure, and argue that contagion' or liquidity crises' were a relatively unimportant influence on bank failure risk prior to 1933. We construct upper-bound measures of the importance of contagion or liquidity crises. At the national level, we find that the first two banking crises identified by Friedman and Schwartz in 1930 and 1931 are not associated with positive unexplained residual failure risk, or with changes in the importance of liquidity measures for forecasting bank failures. The third banking crisis they identify is a more ambiguous case, but even if one views it as a bona fide national liquidity crisis, the size of the contagion effect could not have been very large. The last banking crisis they identify at the beginning of 1933 is associated with important, unexplained increases in bank failure risk. We also investigate the potential role of regional or local contagion and illiquidity crises for promoting bank failure and find some evidence in support of such effects, but these are of small importance in the aggregate. We also investigate the causes of bank distress measured as deposit contraction, using county-level measures of deposits of all commercial banks, and reach similar conclusions about the importance of fundamentals in determining deposit contraction.
Handle: RePEc:nbr:nberwo:7919
Template-Type: ReDIF-Paper 1.0
Title: Taxing Multinationals
Classification-JEL: H2
Author-Name: Michael P. Devereux
Author-Person: pde32
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Note: IFM PE
Number: 7920
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7920
File-URL: http://www.nber.org/papers/w7920.pdf
File-Format: application/pdf
Publication-Status: published as Devereux, Michael P. and R. Glenn Hubbard. "Taxing Multinationals," International Tax and Public Finance, 2003, v10(4,Aug), 469-487.
Abstract: This paper analyzes the effects of tax policy on the strategic choices of a domestic multinational company competing with a foreign multinational company in a third country. We demonstrate the role of the effective average tax rate and the effective marginal tax rate on the company's choices. We consider the impact on national welfare of alternative tax policies for outbound investment. Our results differ from existing models. In contrast to Feldstein and Hartman (1979), in our model, taxing foreign source income on accrual with a deduction for foreign taxes is not generally optimal. However, unlike Mintz and Tulkens (1996), the optimal policy for domestic and outbound investment is linked through the strategic choices of the multinational.
Handle: RePEc:nbr:nberwo:7920
Template-Type: ReDIF-Paper 1.0
Title: Different Approaches to Bankruptcy
Classification-JEL: G3
Author-Name: Oliver Hart
Author-Person: pha222
Note: CF
Number: 7921
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7921
File-URL: http://www.nber.org/papers/w7921.pdf
File-Format: application/pdf
Publication-Status: published as Oliver Hart, 2006. "Different approaches to bankruptcy," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 4(1), pages 3-8, 04.
Abstract: In the last fifteen years or so, lawyers working in law and economics and economists with an interest in legal matters have turned their attention to the topic of bankruptcy. A large amount of work has resulted, both theoretical and empirical, some of which has been concerned with the functioning of existing bankruptcy procedures and some with bankruptcy reform. Although researchers in this area have expressed different views, I believe that one can identify a consensus on certain issues, e.g., the goals of bankruptcy and some of the characteristics of an efficient bankruptcy procedure. This paper summarizes this consensus. One point I will stress is that it is unlikely that one size fits all.' That is, although some bankruptcy procedures can probably be rejected as being manifestly bad, there is a class of procedures that satisfy the main criteria of efficiency. Which procedure a country chooses or should choose may then depend on other factors, e.g., the country's institutional structure and legal tradition. One can also imagine a country choosing a menu of procedures and allowing firms to select among them.
Handle: RePEc:nbr:nberwo:7921
Template-Type: ReDIF-Paper 1.0
Title: The Optimal Elasticity of Taxable Income
Classification-JEL: H21; H23
Author-Name: Joel Slemrod
Author-Person: psl10
Author-Name: Wojciech Kopczuk
Author-Person: pko20
Note: PE
Number: 7922
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7922
File-URL: http://www.nber.org/papers/w7922.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, 2002, 84(1), 91-112.
Abstract: The strength of the behavioral response to a tax rate change depends on the environment individuals operate in, and may be manipulated by instruments controlled by the government. We first derive a measure of the social benefit to affecting this elasticity. The paper then examines this effect in the solution to the optimal income taxation problem when such an instrument is available, first in a general model and then in an example when the government chooses the income tax base.
Handle: RePEc:nbr:nberwo:7922
Template-Type: ReDIF-Paper 1.0
Title: Does the Social Security Earnings Test Affect Labor Supply and Benefits Receipt?
Classification-JEL: H55; J26
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Peter Orszag
Author-Person: por201
Note: AG LS PE
Number: 7923
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7923
File-URL: http://www.nber.org/papers/w7923.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan and Peter Orszag. "Does The Social Security Earnings Test Affect Labor Supply And Benefits Receipt?," National Tax Journal, 2003, v56(4,Dec), 755-773.
Abstract: The Social Security earnings test, a version of which still applies to those ages 62-64, reduces immediate payments to beneficiaries whose labor income exceeds a given threshold. Although benefits are subsequently increased to compensate for any such reduction, the earnings test is typically perceived as a tax on working. As a result, it is considered by many to be an important disincentive to paid work for older Americans. Yet there is little evidence to suggest an economically significant effect of the earnings test on hours of work, and almost no research on the effect of the test on the decision to work at all. We investigate these issues using the significant changes in the structure of the earnings test over the past 25 years, using data over the past 25 years, using data over the 1973-1998 period from the March Supplement to the Current Population Survey (CPS), which provide large samples of observations on the elderly. Our analysis suggests two major conclusions. First, the earnings test exerts no robust influence on the labor supply decisions of men. Neither graphical analyses of breaks in labor supply trends, nor regression estimates that control for underlying trends in labor supply by age group, reveal any significant impact of changes in earnings test parameters on aggregate employment, hours of work, or earnings for men. For women, there is more suggestive evidence that the earnings test is affecting labor supply decisions. Second, loosening the earnings test appears to accelerate benefits receipt among the eligible population, lowering benefits levels, and heightening concerns about the standard of living of these elderly at very advanced ages. Our findings suggest some cause for caution before rushing to remove the earnings test at younger ages.
Handle: RePEc:nbr:nberwo:7923
Template-Type: ReDIF-Paper 1.0
Title: Does Managed Care Change the Mission of Nonprofit Hospitals? Evidence From the Managerial Labor Market
Classification-JEL: J44; L3
Author-Name: Richard Arnould
Author-Name: Marianne Bertrand
Author-Person: pbe697
Author-Name: Kevin F. Hallock
Author-Person: pha176
Note: EH LS
Number: 7924
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7924
File-URL: http://www.nber.org/papers/w7924.pdf
File-Format: application/pdf
Publication-Status: published as Arnould, Richard, Kevin Hallock and Marianne Bertrand. “Does Managed Care Change Nonprofit Hospitals’ Behavior? Evidence from the Managerial Labor Market." Industrial and Labor Relations Review 58, 3 (2005): 494-514.
Abstract: This paper examines how the managerial labor market in nonprofit hospitals has adjusted to the negative income pressures created by HMO penetration. Using a panel of about 1500 nonprofit hospitals over the period 1992 to 1996, we find that top executive turnover increases following an increase in HMO penetration. Moreover, the increase in turnover is concentrated among the hospitals that have low levels of economic profitability and are more financially leveraged. While the link between top executive pay and for-profit performance measures is on average very weak, HMO penetration substantially tightens that link: as HMO penetration increases, top executives are compensated more for improving the profitability of their hospitals. These results are consistent with the view that HMO penetration increases the importance of for-profit performance objectives among not-for-profit hospitals. Boards appear to fire the managers that are least able to compete in the new competitive environment and reward incumbent managers more for achieving for-profit goals. Consistent with donors' belief that these changes represent a weakening of the nonprofit mission and not simply an attempt by altruistic boards to protect intergenerational equity, we find that public donations fall as HMO market share increases.
Handle: RePEc:nbr:nberwo:7924
Template-Type: ReDIF-Paper 1.0
Title: On the Nature of Capital Adjustment Costs
Author-Name: Russell W. Cooper
Author-Name: John C. Haltiwanger
Author-Person: pha231
Note: EFG
Number: 7925
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7925
File-URL: http://www.nber.org/papers/w7925.pdf
File-Format: application/pdf
Publication-Status: published as Russell W. Cooper & John C. Haltiwanger, 2006. "On the Nature of Capital Adjustment Costs," Review of Economic Studies, Blackwell Publishing, vol. 73(3), pages 611-633, 07.
Abstract: This paper studies the nature of capital adjustment at the plant-level. We use an indirect inference procedure to estimate the structural parameters of a rich specification of capital adjustment costs. In effect, the parameters are optimally chosen to reproduce the nonlinear relationship between investment and profitability that we uncover in the plant-level data. Our findings indicate that a model which mixes both convex and nonconvex adjustment costs with irreversibility fits the data best.
Handle: RePEc:nbr:nberwo:7925
Template-Type: ReDIF-Paper 1.0
Title: Prudential Supervision: Why Is It Important and What are the Issues?
Classification-JEL: G21
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: ME
Number: 7926
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7926
File-URL: http://www.nber.org/papers/w7926.pdf
File-Format: application/pdf
Publication-Status: published as Prudential Supervision: Why Is It Important and What Are the Issues?, Frederic S. Mishkin. in Prudential Supervision: What Works and What Doesn't, Mishkin. 2001
Abstract: This paper outlines what problems asymmetric information creates for the financial system and shows and shows that the presence of asymmetric information explains why banks are so important. The paper then goes on to explain why prudential supervision of these institutions is needed, and what forms it takes. The paper ends by outlining the key issues in the design of prudential supervision and uses them to organize a general discussion of the papers in this conference volume, providing a brief overview of their content. The linkages between these papers are explored, which highlights some general conclusions.
Handle: RePEc:nbr:nberwo:7926
Template-Type: ReDIF-Paper 1.0
Title: Currency Unions
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Robert J. Barro
Author-Person: pba251
Note: IFM
Number: 7927
Creation-Date: 2000-09
Order-URL: http://www.nber.org/papers/w7927
File-URL: http://www.nber.org/papers/w7927.pdf
File-Format: application/pdf
Publication-Status: published as Alesina, Alberto and Robert J. Barro. "Currency Unions," Quarterly Journal of Economics, 2002, v107(2,May), 409-436.
Abstract: What is the optimal number of currencies in the world? Common currencies affect trading costs and, thereby, the amounts of trade, output, and consumption. From the perspective of monetary policy, the adoption of another country's currency trades off the benefits of commitment to price stability against the loss of an independent stabilization policy. The nature of the tradeoff depends on co-movements of disturbances, on distance, trading costs, and on institutional arrangements such as the willingness of anchor countries to accommodate to the interests of clients.
Handle: RePEc:nbr:nberwo:7927
Template-Type: ReDIF-Paper 1.0
Title: Taxing and Subsidizing Housing Investment: The Rise and Fall of Housing's Favored Status
Classification-JEL: H2
Author-Name: Patric H. Hendershott
Author-Name: Michael White
Note: PE
Number: 7928
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7928
File-URL: http://www.nber.org/papers/w7928.pdf
File-Format: application/pdf
Abstract: This paper surveys and interprets a wide body of literature on the taxation and subsidization of investment in owner-occupied and rental housing. Where available, the study considers experiences outside of the United States. Issues addressed include what nonneutral taxation is, how taxation/subsidization has varied relative to this standard over the last thirty years, the impact of subsidies on house prices, housing consumption and tenure, and rationales for preferring one tenure choice over another. We find a broad increase in housing's favored status during the 1970s, a reversal during the 1980s, and a further decline in this status during the 1990s. There are two broad components to these shifts. First, there is an endogenous component caused by variations in the inflation rate. Because housing is the tax-favored asset, the higher are nominal returns, the greater is the tax advantage. This is reinforced by tax bracket creep; again, being the tax-favored asset, the higher are tax rates, the greater is the tax advantage. Second, there is an exogenous component, largely reflected in the cutting of tax rates even below what they were in 1970 and the weakening of the mortgage interest deduction in many countries. We attribute this component to the aging of the baby-boomers, which first provided a constituency for more generous treatment of owner-occupied housing, but now is working in the opposite direction.
Handle: RePEc:nbr:nberwo:7928
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Bilateral Tax Treaties on U.S. FDI Activity
Classification-JEL: F21; F23
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: Ronald B. Davies
Author-Person: pda64
Note: ITI PE
Number: 7929
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7929
File-URL: http://www.nber.org/papers/w7929.pdf
File-Format: application/pdf
Publication-Status: published as Blonigen, Bruce A. and Ronald B. Davies. "The Effects Of Bilateral Tax Treaties On U.S. FDI Activity," International Tax and Public Finance, 2004, v11(5,Sep), 601-622.
Abstract: The effects of bilateral tax treaties on FDI activity have been unexplored, despite significant ongoing activities by countries to negotiate and ratify these treaties. This paper estimates the impact of bilateral tax treaties using both U.S. inbound and outbound FDI over the period 1966-1992. Our estimates suggest a statistically significant average annual increase of FDI activity for each additional year of a treaty which ranges from 2% to 8%, depending on the FDI activity measure and empirical framework we employ. Examination for nonlinear effects of treaty age on FDI activity suggests that while treaties have an immediate impact on FDI flows, there is a substantial lag before treaty adoption positively affects FDI stocks and affiliate sales. Finally, our results suggest that bilateral tax treaties have an effect on investment outside of the withholding tax rates they alter, which may include the commitment and risk reduction effects of these treaties.
Handle: RePEc:nbr:nberwo:7929
Template-Type: ReDIF-Paper 1.0
Title: R&D Policy in Israel: An Overview and Reassessment
Classification-JEL: O38; L52
Author-Name: Manuel Trajtenberg
Author-Person: ptr35
Note: PR
Number: 7930
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7930
File-URL: http://www.nber.org/papers/w7930.pdf
File-Format: application/pdf
Publication-Status: published as Feldman, Maryann P. and Albert N. Link (eds.) Innovation Policy in the Knowledge-Based Economy. Boston: Kluwer Academic Publishers, 2001.
Abstract: The goal of this paper is to provide an overview of R&D policy in Israel, and critically examine the policies currently in place as well as proposals to change them. We review in Part I the various programs of the Office of the Chief Scientist (OCS) of the Ministry of Industry and Trade in Israel, followed by a discussion of studies on the impact of OCS support, and an overview of the rise of the High-Tech sector in Israel with the aid patent data. Part II examines outstanding policy issues and suggestions for reform. It opens with a discussion of allocation schemes for the OCS Grants Program in view of a rigid budget constraint, and an assessment of possible departures from neutrality.' We then examine the payback system, the conditionality of production in Israel, the Magnet' program for the support of generic R&D, and related issues. Next we review the difficulties in setting a policy target for R&D spending, and lastly we ask whether government policy should perhaps be aimed also at the supply side (of the market for R&D personnel), rather than just keep subsidizing the demand side. Clearly, these policy issues are of relevance not just for Israel but for any economy contemplating active government involvement in R&D.
Handle: RePEc:nbr:nberwo:7930
Template-Type: ReDIF-Paper 1.0
Title: The Gender Gap in Top Corporate Jobs
Author-Name: Marianne Bertrand
Author-Person: pbe697
Author-Name: Kevin F. Hallock
Author-Person: pha176
Note: LS
Number: 7931
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7931
File-URL: http://www.nber.org/papers/w7931.pdf
File-Format: application/pdf
Publication-Status: published as Marianne Bertrand & Kevin F. Hallock, 2001. "The Gender Gap in Top Corporate Jobs," ILR Review, Cornell University, ILR School, vol. 55(1), pages 3-21, October.
Abstract: This paper studies the gender compensation gap among high-level executives in US corporations. We use the ExecuComp data set that contains information on total compensation for the top five highest paid executives of a large group of US firms over the period 1992-1997. About 2.5% of the executives in the sample are women. These women earn about 45% less than their male counterparts. As much as 75% of this gap can be accounted for by the fact that women manage smaller companies and are less likely to be CEO, Chair, or President of their company. The unexplained gender gap can be reduced to less than 5% when one further accounts for the fact that female executives are younger and have less seniority than male executives. Over the period under study, women have nearly tripled their participation in the top executive ranks and have also strongly improved their relative compensation, mostly by gaining representation into the larger corporations. While the absence of a significant gender gap (once we control for measurable characteristics) implies that women and men who hold similar jobs in firms of similar size received fairly equal treatment in terms of compensation, it does not rule out the possibility of discrimination in terms of gender segregation or promotion.
Handle: RePEc:nbr:nberwo:7931
Template-Type: ReDIF-Paper 1.0
Title: Rising Wage Dispersion Across American Manufacturing Establishments, 1850-1880
Classification-JEL: N61; N31
Author-Name: Jeremy Atack
Author-Person: pat28
Author-Name: Fred Bateman
Author-Name: Robert A. Margo
Author-Person: pma319
Note: DAE LS
Number: 7932
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7932
File-URL: http://www.nber.org/papers/w7932.pdf
File-Format: application/pdf
Abstract: We use data from the manuscript censuses of manufacturing for 1850, 1860, 1870, and 1880 to study the dispersion of average monthly wages across establishments. We find a marked increased in wage inequality over the period, an increase that cannot be explained by biases in the data or changes in census enumeration procedures. Based on log wage regressions on establishment characteristics we compute a decomposition of the change in wage inequality between 1850 and 1880. The decomposition reveals that changes in wage structure' the regression coefficients and the standard error of the residuals largely offset each: changes in the coefficients produced a reduction in wage inequality, while residual inequality increased. Most of the rise in wage inequality can be attributed to an increased concentration of employment in large establishments, which paid relatively low wages. We present indirect evidence that the negative effect of size on wages reflected differences in skill composition: workforces in large establishments were less skilled than in small establishments.
Handle: RePEc:nbr:nberwo:7932
Template-Type: ReDIF-Paper 1.0
Title: The Distribution of Stock Return Volatility
Author-Name: Torben G. Andersen
Author-Name: Tim Bollerslev
Author-Person: pbo66
Author-Name: Francis X. Diebold
Author-Person: pdi1
Author-Name: Heiko Ebens
Note: AP
Number: 7933
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7933
File-URL: http://www.nber.org/papers/w7933.pdf
File-Format: application/pdf
Publication-Status: published as Andersen, Torben G., Tim Bollerslev, Francis X. Diebold and Heiko Ebens. "The Distribution Of Realized Stock Return Volatility," Journal of Financial Economics, 2001, v61(1,Jul), 43-76.
Abstract: We exploit direct model-free measures of daily equity return volatility and correlation obtained from high-frequency intraday transaction prices on individual stocks in the Dow Jones Industrial Average over a five-year period to confirm, solidify and extend existing characterizations of stock return volatility and correlation. We find that the unconditional distributions of the variances and covariances for all thirty stocks are leptokurtic and highly skewed to the right, while the logarithmic standard deviations and correlations all appear approximately Gaussian. Moreover, the distributions of the returns scaled by the realized standard deviations are also Gaussian. Consistent with our documentation of remarkably precise scaling laws under temporal aggregation, the realized logarithmic standard deviations and correlations all show strong temporal dependence and appear to be well described by long-memory processes. Positive returns have less impact on future variances and correlations than negative returns of the same absolute magnitude, although the economic importance of this asymmetry is minor. Finally, there is strong evidence that equity volatilities and correlations move together, possibly reducing the benefits to portfolio diversification when the market is most volatile. Our findings are broadly consistent with a latent volatility fact or structure, and they set the stage for improved high-dimensional volatility modeling and out-of-sample forecasting, which in turn hold promise for the development of better decision making in practical situations of risk management, portfolio allocation, and asset pricing.
Handle: RePEc:nbr:nberwo:7933
Template-Type: ReDIF-Paper 1.0
Title: Using Locational Equilibrium Models to Evaluate Housing Price Indexes
Classification-JEL: C43; H73
Author-Name: Holger Sieg
Author-Name: V. Kerry Smith
Author-Person: psm143
Author-Name: Spencer Banzhaf
Author-Person: pba328
Author-Name: Randy Walsh
Note: PE
Number: 7934
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7934
File-URL: http://www.nber.org/papers/w7934.pdf
File-Format: application/pdf
Abstract: This paper analyses how the properties of locational equilibrium models can be used to evaluate approaches for constructing price indexes for heterogeneous houses. Housing markets play a key role in locational equilibrium models. Prices for houses determine that implicit costs that households bear when locating in a given community. We evaluate a variety of price indexes all relying on hedonic models for predicting interjurisdictional housing prices. The application uses a unique panel data set of housing transactions in Southern California. The rank predictions of different models are robust with respect to the hedonic model and the composite commodity definition used in aggregation. They do not depend significantly on the spatial or temporal definitions used to define the choice set of local housing markets. Finally, housing price estimates are strongly correlated with education and environmental amenities.
Handle: RePEc:nbr:nberwo:7934
Template-Type: ReDIF-Paper 1.0
Title: IPO Market Cycles: Bubbles or Sequential Learning?
Classification-JEL: G32; G24
Author-Name: Michelle Lowry
Author-Name: G. William Schwert
Author-Person: psc116
Note: CF
Number: 7935
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7935
File-URL: http://www.nber.org/papers/w7935.pdf
File-Format: application/pdf
Publication-Status: published as Lowry, Michelle and G. William Schwert. "IPO Market Cycles: Bubbles Or Sequential Learning?," Journal of Finance, 2002, v57(3,Jun), 1171-1200.
Abstract: We examine the strong cycles in the number of initial public offerings (IPOs) and in the average initial returns realized by investors who participated in the IPOs. At the aggregate level, initial returns are predictably related to past initial returns and also to future IPO volume from 1960-1997. To understand these patterns, we use firm-level data from 1985-97 to model the initial return. Our results show that aggregate IPO cycles occur because of the time it takes to complete an IPO, the clustering of similar types of IPOs in time, and information spillovers among IPOs.
Handle: RePEc:nbr:nberwo:7935
Template-Type: ReDIF-Paper 1.0
Title: Idiosyncratic Risk and Aggregate Employment Dynamics
Classification-JEL: E00; L00
Author-Name: Jeffrey R. Campbell
Author-Person: pca89
Author-Name: Jonas D.M.Fisher
Author-Person: pfi4
Note: EFG
Number: 7936
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7936
File-URL: http://www.nber.org/papers/w7936.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, Jeffrey R. and Jonas D. M. Fisher. "Idiosyncratic Risk And Aggregate Employment Dynamics," Review of Economic Dynamics, 2004, v7(2,Apr), 331-353.
Abstract: This paper studies how producers' idiosyncratic risks affect an industry's aggregate dynamics in an environment where certainty equivalence fails. In the model, producers can place workers in two types of jobs, organized and temporary. Workers are less productive in temporary jobs, but creating an organized job requires an irreversible investment of managerial resources. Increasing productivity risk raises the value of an unexercised option to create an organized job. Losing this option is one cost of immediate organized job creation, so an increase in its value induces substitution towards cheaper temporary jobs. Because they are costless to create and destroy, a producer using temporary jobs can be more flexible, responding more to both idiosyncratic and aggregate shocks. If all of an industry's producers adapt to heightened idiosyncratic risk in this way, the industry as a whole can respond more to a given aggregate shock. This insight is used to better understand the observation from the U.S. manufacturing sector that groups of plants displaying high idiosyncratic variability also have large aggregate fluctuations.
Handle: RePEc:nbr:nberwo:7936
Template-Type: ReDIF-Paper 1.0
Title: Does Comparable Worth Work in a Decentralized Labor Market?
Classification-JEL: J16; J38
Author-Name: Michael Baker
Author-Person: pba400
Author-Name: Nicole M. Fortin
Author-Person: pfo101
Note: LS
Number: 7937
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7937
File-URL: http://www.nber.org/papers/w7937.pdf
File-Format: application/pdf
Publication-Status: published as Baker, Michael and Nicole M. Fortin. "Comparable Worth In A Decentralized Labour Market: The Case Of Ontario," Canadian Journal of Economics, 2004, v37(4,Nov), 850-878.
Abstract: We investigate the effect of pro-active comparable worth legislation covering both the public and private sectors on wages, the gender wage gap and the gender composition of employment. The focus is the pay equity initiative of the Canadian province of Ontario in the early 1990s. We document substantial lapses in compliance and problems with the implementation of the law among smaller firms where the majority of men and women work. This evidence provides important lessons of the obstacles to extending pay equity to the private sector of a decentralized labor market. When we focus on those sectors of the labor market where compliance was relatively strict, our results suggest that any positive effects on the wages of women in female jobs were very modest. Our most consistently estimated effects of the law on wages are negative: slower wage growth for women in male jobs and for men in female jobs.
Handle: RePEc:nbr:nberwo:7937
Template-Type: ReDIF-Paper 1.0
Title: Credit Market Imperfections and Persistent Unemployment
Classification-JEL: J64; E24
Author-Name: Daron Acemoglu
Author-Person: pac16
Note: CH
Number: 7938
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7938
File-URL: http://www.nber.org/papers/w7938.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron. "Credit Market Imperfections And Persistent Unemployment," European Economic Review, 2001, v45(4-6,May), 665-679.
Abstract: This paper develops the thesis that credit market frictions may be an important contributor to high unemployment in Europe. When a change in the technological regime necessitates the creation of new firms, this can happen relatively rapidly in the U.S. where credit markets function efficiently. In contrast, in Europe, job creation is constrained by credit market imperfections, so unemployment rises and remains high for an extended period. The data show that there has not been slower growth in the most credit dependent industries in Europe relative to the U.S., but the share of employment in these industries is lower than in the U.S.. This suggests that although credit market imperfections are unlikely to have been the major cause of the increase in European unemployment, they may have played some role in limiting European employment growth.
Handle: RePEc:nbr:nberwo:7938
Template-Type: ReDIF-Paper 1.0
Title: The Evolution of Employment Relations in U.S. and Japanese Manufacturing Firms, 1900-1960: A Comparative Historical and Institutional Analysis
Classification-JEL: N30; N40
Author-Name: Chiaki Moriguchi
Author-Person: pmo419
Note: DAE LS
Number: 7939
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7939
File-URL: http://www.nber.org/papers/w7939.pdf
File-Format: application/pdf
Publication-Status: published as Moriguchi, Chiaki. "Implicit Contracts, The Great Depression, And Institutional Change: A Comparative Analysis Of U.S. And Japanese Employment Relations, 1920-1940," Journal of Economic History, 2003, v63(3,Sep), 625-665.
Abstract: This paper offers a comparative study of the evolution of employment systems in the U.S. and Japan, using a game-theoretic framework in which an employment system is viewed as an equilibrium outcome of the strategic interactions among management, labor, and government. The paper identifies parallel institutional developments in large manufacturing firms in the U.S.and Japan during the first three decades of this century. In both countries, employment relations evolved from ones governed by simple, short-term contracts with individual bargaining toward employer paternalism' characterized by implicit, long-term contracts and company-wide employee representation.The paper then documents the subsequent processes of bifurcation. While Japan continued down the same path during the 1930s,the U.S. witnessed the breakdown of implicit contracts during the Great Depression, which eventually led to an endogenous hange in the legal framework. The paper describes how the two institutional paths further diverged during WWII under wartime regulations, and explains why Japan's trajectory did not converge to the American system despite the legal reforms in Japan under U.S. occupation. By the early 1960s, explicit, elaborate, and legally enforceable employment contracts and industrial unionism had developed in large U.S. manufacturing firms, whereas implicit, ambiguous, and self-enforcing employment contracts and enterprise unionism had emerged in their Japanese counterparts.
Handle: RePEc:nbr:nberwo:7939
Template-Type: ReDIF-Paper 1.0
Title: Why Is Productivity Procyclical? Why Do We Care?
Author-Name: Susanto Basu
Author-Person: pba274
Author-Name: John Fernald
Author-Person: pfe43
Note: EFG
Number: 7940
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7940
File-URL: http://www.nber.org/papers/w7940.pdf
File-Format: application/pdf
Publication-Status: published as Why Is Productivity Procyclical? Why Do We Care?, Susanto Basu, John Fernald. in New Developments in Productivity Analysis, Hulten, Dean, and Harper. 2001
Abstract: Productivity rises in booms and falls in recessions. There are four main explanations for this procyclical productivity: (i) procyclical technology shocks, (ii) widespread imperfect competition and increasing returns, (iii) variable utilization of inputs over the cycle, and (iv) resource reallocations. Recent macroeconomic literature views this stylized fact of procyclical productivity as an essential feature of business cycles because each explanation has important implications for macroeconomic modeling. In this paper, we discuss empirical methods for assessing the importance of these four explanations. We provide microfoundations for our preferred approach of estimating an explicitly first-order approximation to the production function, using a theoretically motivated proxy for utilization. When we implement this approach, we find that variable utilization and resource reallocations are particularly important in explaining procyclical productivity. We also argue that the reallocation effects that we identify are not biases' they reflect changes in an economy's ability to produce goods and services for final consumption from given primary inputs of capital and labor. Thus, from a normative viewpoint, reallocations are significant for welfare; from a positive viewpoint, they constitute potentially important amplification and propagation mechanisms for macroeconomic modeling.
Handle: RePEc:nbr:nberwo:7940
Template-Type: ReDIF-Paper 1.0
Title: Increasing Returns and All That: A View From Trade
Classification-JEL: F11; F12
Author-Name: Werner Antweiler
Author-Name: Daniel Trefler
Author-Person: ptr44
Note: ITI
Number: 7941
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7941
File-URL: http://www.nber.org/papers/w7941.pdf
File-Format: application/pdf
Publication-Status: published as Werner Antweiler & Daniel Trefler, 2002. "Increasing Returns and All That: A View from Trade," American Economic Review, American Economic Association, vol. 92(1), pages 93-119, March.
Abstract: Do scale economies contribute to our understanding of international trade? Do international trade flows encode information about the extent of scale economies? To answer these questions we examine the large class of general equilibrium theories that imply Helpman-Krugman variants of the Vanek factor content prediction. Using an ambitious database on output, trade flows, and factor endowments, we find that scale economies significantly increase our understanding of the sources of comparative advantage. Further, the Helpman-Krugman framework provides a remarkable lens for viewing the general equilibrium scale elasticities encoded in trade flows. In particular, we find that a third of all goods-producing industries are characterized by scale. (The modal range of scale elasticities for this group is 1.10-1.20 and the economy-wide scale elasticity is 1.05.) Implications are drawn for the trade-and-wages debate (skill-biased scale effects) and endogenous growth.
Handle: RePEc:nbr:nberwo:7941
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Effects of Covariates on Health Expenditures
Classification-JEL: I1
Author-Name: Donna B. Gilleskie
Author-Name: Thomas A. Mroz
Author-Person: pmr8
Note: EH
Number: 7942
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7942
File-URL: http://www.nber.org/papers/w7942.pdf
File-Format: application/pdf
Publication-Status: published as Gilleskie, Donna and Thomas A. Mroz. “A Flexible Approach for Estimating the Effects of Covariates on Health Expenditures.” Journal of Health Economics 23, 2 (2004): 391-418.
Abstract: This paper addresses estimation of an outcome characterized by mass at zero, significant skewness, and heteroscedasticity. Unlike other approaches suggested recently that require retransformations or arbitrary assumptions about error distributions, our estimation strategy uses sequences of conditional probability functions, similar to those used in discrete time hazard rate analyses, to construct a discrete approximation to the density function of the outcome of interest conditional on exogenous explanatory variables. Once the conditional density function has been constructed, we can examine expectations of arbitrary functions of the outcome of interest and evaluate how these expectations vary with observed exogenous covariates. This removes a researcher's reliance on strong and often untested maintained assumptions. We demonstrate the features and precision of the conditional density estimation method through Monte Carlo experiments and an application to health expenditures using the RAND Health Insurance Experiment data. Overall, we find that the approximate conditional density estimator that we propose provides accurate and precise estimates of derivatives of expected outcomes for a wide range of types of explanatory variables. We find that two-part smearing models often used by health economists do not perform well. Our results, both in Monte Carlo experiments and in our real application, also indicate that simple one-part OLS models of level health expenditures can provide more accurate estimates than commonly used two-part models with smearing, provided one uses enough expansion terms in the one-part model to fit the data well.
Handle: RePEc:nbr:nberwo:7942
Template-Type: ReDIF-Paper 1.0
Title: Do R&D Subsidies Stimulate or Displace Private R&D? Evidence from Israel
Classification-JEL: O32; O38
Author-Name: Saul Lach
Author-Person: pla110
Note: PR PE
Number: 7943
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7943
File-URL: http://www.nber.org/papers/w7943.pdf
File-Format: application/pdf
Publication-Status: published as Lach, Saul, 2002. "Do R&D Subsidies Stimulate or Displace Private R&D? Evidence from Israel," Journal of Industrial Economics, Blackwell Publishing, vol. 50(4), pages 369-90, December.
Abstract: In evaluating the effect of an R&D subsidy we need to know what the subsidized firm would have spent on R&D had it not received the subsidy. Using data on Israeli manufacturing firms in the 1990s we find evidence suggesting that the R&D subsidies granted by the Ministry of Industry and Trade stimulated long-run company-financed R&D expenditures: their long-run elasticity with respect to R&D subsidies is 0.22. At the means of the data, an extra dollar of R&D subsidies increases long-run company-financed R&D expenditures by 41 cents (total R&D expenditures increase by 1.41 dollars). Although the magnitude of this effect is large enough to justify the existence of the subsidy program, it is lower than expected given the dollar-by-dollar matching upon which most subsidized projects are based. This less than full' effect reflects two forces: first, subsidies are sometimes granted to projects that would have been undertaken even in the absence of the subsidy and, second, firms adjust their portfolio of R&D projects-closing or slowing down non-subsidized projects-after the subsidy is received.
Handle: RePEc:nbr:nberwo:7943
Template-Type: ReDIF-Paper 1.0
Title: Who Benefits Whom in Daily Newspaper Markets?
Classification-JEL: L13; L82
Author-Name: Lisa George
Author-Person: pge24
Author-Name: Joel Waldfogel
Author-Person: pwa46
Note: LE
Number: 7944
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7944
File-URL: http://www.nber.org/papers/w7944.pdf
File-Format: application/pdf
Publication-Status: published as George, Lisa and Joel Waldfogel. "Who Affects Whom In Daily Newspaper Markets?," Journal of Political Economy, 2003, v111(4,Aug), 765-784.
Abstract: Markets are generally thought to avoid problems, such as tyranny of the majority, that arise when allocation is accomplished through collective processes. Yet, with fixed costs, differentiated product markets deliver only products desired by substantial constituencies. When consumers share similar preferences, then additional consumers will bring forth additional products or improve the attributes or position of existing products and the consumers confer positive pecuniary preference externalities' on each other. However, if distinct groups of consumers have substantially different preferences, the groups can hurt each other through product markets. We document the pattern of preference externalities among black and white consumers of daily newspapers in the US. We find that, in their capacity as newspaper consumers, members of each group benefits themselves and either harm, or fail to benefit, each other through the product market. We document that product positioning provides the mechanism underlying our results. While Friedman (1962) argues that the use of political channels tends to strain the social cohesion essential for a stable society,' while, by contrast, widespread use of the market reduces the strain on the social fabric by rendering conformity unnecessary,' mounting evidence on media markets suggests otherwise.
Handle: RePEc:nbr:nberwo:7944
Template-Type: ReDIF-Paper 1.0
Title: Class Struggle Inside the Firm: A Study of German Codetermination
Classification-JEL: G32; G34
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: Frank Schmid
Note: CF
Number: 7945
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7945
File-URL: http://www.nber.org/papers/w7945.pdf
File-Format: application/pdf
Abstract: Who should control the firm? What should be the firm's objective function? If contracts are incomplete, then the group of input providers that most needs their interests protected should be allocated control rights to the firm. Existing theories argue that the suppliers of capital are most in need of protection. We empirically assess this answer by examining the German system of codetermination,' a governance system under which employees are allocated some control rights over corporate assets by law. Codetermination laws require that employees be represented on the (supervisory) board of directors. If codetermination sufficiently empowers employees, and if stockholders' rights cannot be contractually protected, then employees may redistribute the firm's surplus towards themselves. In addition, if employee interests are not contractually protected, then employees' may prefer a different objective function for the firm. For example, employees may hamper capitalist flexibility by resisting restructuring of the firm if that would jeopardize their human capital. We examine this with particular reference to the unification of East Germany and West Germany, a shock that may have caused employees in the former West to resist restructuring; the more so in codetermined firms. We also examine whether shareholders respond to codetermination with more concentrated block holdings, perhaps increasing their bargaining power with employees, or with higher leverage, committing more cash to leave the firm. Finally, we examine the relationship between codetermination and the performance sensitivity of compensation for board members.
Handle: RePEc:nbr:nberwo:7945
Template-Type: ReDIF-Paper 1.0
Title: A Historical Test of the Tiebout Hypothesis: Local Heterogeneity from 1850 to 1990
Classification-JEL: D7; H7
Author-Name: Paul W. Rhode
Author-Person: prh14
Author-Name: Koleman S. Strumpf
Note: DAE
Number: 7946
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7946
File-URL: http://www.nber.org/papers/w7946.pdf
File-Format: application/pdf
Publication-Status: published as Rhode, Paul W. and Koleman S. Strumpf. "Assessing The Importance Of Tiebout Sorting: Local Heterogeneity From 1850 To 1990," American Economic Review, 2003, v93(5,Dec), 1648-1677.
Abstract: The Tiebout hypothesis, which states that individuals will costlessly sort themselves across local communities according to their public good preferences, is the workhorse of the local public finance literature. This paper develops a test of the Tiebout hypothesis using historical variation in mobility costs. Our extension of the Tiebout model to incorporate such costs yields the following comparative statics: as mobility costs fall, the heterogeneity across communities of individual public good preferences and, under some standard assumptions, of public good provision must (weakly) increase. Given mobility costs have fallen over time, a natural test of the Tiebout hypothesis is to take these predictions to the data here all US counties over the 1850-1990 period. Contrary to the predictions, we find decreasing heterogeneity between counties in policy outcomes (local education spending and total taxes or revenues) and in a wide variety of proxies for public good preferences (age groups, education levels, election outcomes, home ownership, income, race, and religious affiliation). Using the Boston SMSA as a case study, we show that the heterogeneity trends are similar at the municipal and county levels. These results suggest that forces working in opposition to Tiebout sorting have dominated individual location decisions over the past century.
Handle: RePEc:nbr:nberwo:7946
Template-Type: ReDIF-Paper 1.0
Title: The Diffusion of the Tractor in American Agriculture: 1910-60
Classification-JEL: N52; O33
Author-Name: Alan L. Olmstead
Author-Person: pol50
Author-Name: Paul W. Rhode
Author-Person: prh14
Note: DAE
Number: 7947
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7947
File-URL: http://www.nber.org/papers/w7947.pdf
File-Format: application/pdf
Publication-Status: published as Olmstead, Alan L. & Rhode, Paul W., 2001. "Reshaping The Landscape: The Impact And Diffusion Of The Tractor In American Agriculture, 1910 1960," The Journal of Economic History, Cambridge University Press, vol. 61(03), pages 663-698, September.
Abstract: This paper examines the impact and diffusion of the gasoline tractor in American agriculture. A key feature of the transition from horses to tractors was a long intermediate stage when both modes of power were used on the same farm. This is largely explained in the technical limitations of early tractors. In addition, we explore how rural markets and institutions adjusted to facilitate diffusion. Our simultaneous-equation regression analysis reveals that farm scale and tractor adoption had positive, independent effects on each other. Finally, we analyze diffusion as a capital replacement problem, which reveals that the shift to the new technology came far sooner than has generally been thought.
Handle: RePEc:nbr:nberwo:7947
Template-Type: ReDIF-Paper 1.0
Title: Behavioral Economics
Classification-JEL: D0; H0
Author-Name: Sendhil Mullainathan
Author-Person: pmu103
Author-Name: Richard H. Thaler
Note: AP LS
Number: 7948
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7948
File-URL: http://www.nber.org/papers/w7948.pdf
File-Format: application/pdf
Publication-Status: published as International Encyclopedia of SocialSciences, Pergamon Press, 1st edition, October 1, 2001: 1094-1100.
Abstract: Behavioral Economics is the combination of psychology and economics that investigates what happens in markets in which some of the agents display human limitations and complications. We begin with a preliminary question about relevance. Does some combination of market forces, learning and evolution render these human qualities irrelevant? No. Because of limits of arbitrage less than perfect agents survive and influence market outcomes. We then discuss three important ways in which humans deviate from the standard economic model. Bounded rationality reflects the limited cognitive abilities that constrain human problem solving. Bounded willpower captures the fact that people sometimes make choices that are not in their long-run interest. Bounded self-interest incorporates the comforting fact that humans are often willing to sacrifice their own interests to help others. We then illustrate how these concepts can be applied in two settings: finance and savings. Financial markets have greater arbitrage opportunities than other markets, so behavioral factors might be thought to be less important here, but we show that even here the limits of arbitrage create anomalies that the psychology of decision making helps explain. Since saving for retirement requires both complex calculations and willpower, behavioral factors are essential elements of any complete descriptive theory.
Handle: RePEc:nbr:nberwo:7948
Template-Type: ReDIF-Paper 1.0
Title: The Nature and Nurture of Economic Outcomes
Classification-JEL: J0; I2
Author-Name: Bruce Sacerdote
Note: CH LS
Number: 7949
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7949
File-URL: http://www.nber.org/papers/w7949.pdf
File-Format: application/pdf
Publication-Status: published as Sacerdote, Bruce. "The Nature and Nurture of Economic Outcomes." American Economic Review 92, 2 (May 2002): 344-48.
Abstract: This paper uses data on adopted children to examine the relative importance of biology and environment in determining educational and labor market outcomes. I employ three long-term panel data sets which contain information on adopted children, their adoptive parents, and their biological parents. In at least two of the three data sets, the mechanism for assigning children to adoptive parents is fairly random and does not match children to adoptive parents based on health, race, or ability. I find that adoptive parents' education and income have a modest impact on child test scores but a large impact on college attendance, marital status, and earnings. In contrast with existing work on IQ scores, I do not find that the influence of adoptive parents declines with child age.
Handle: RePEc:nbr:nberwo:7949
Template-Type: ReDIF-Paper 1.0
Title: Simple Estimators for Treatment Parameters in a Latent Variable Framework with an Application to Estimating the Returns to Schooling
Classification-JEL: C10; C34
Author-Name: James J. Heckman
Author-Name: Justin L. Tobias
Author-Name: Edward Vytlacil
Author-Person: pvy2
Note: CH LS PE
Number: 7950
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7950
File-URL: http://www.nber.org/papers/w7950.pdf
File-Format: application/pdf
Publication-Status: published as Heckman, James J., Justin L. Tobias, and Edward Vytlacil. "Simple Estimators for Treatment Parameters within a Latent Variable Framework." Review of Economics and Statistics 85, 3 (2003).
Abstract: This paper derives simply computed closed-form expressions for the Average Treatment Effect (ATE), the effect of Treatment on the Treated (TT), Local Average Treatment Effect (LATE) and Marginal Treatment Effect (MTE) in a latent variable framework for both normal and non-normal models. The techniques presented in the paper are applied to estimating a variety of treatment parameters capturing the returns to a college education for various populations using data from the National Longitudinal Survey of Youth (NLSY).
Handle: RePEc:nbr:nberwo:7950
Template-Type: ReDIF-Paper 1.0
Title: The Credit Crunch in East Asia: What can Bank Excess Liquid Assets Tell us?
Classification-JEL: E42; F31
Author-Name: P.R. Agenor
Author-Person: pag16
Author-Name: J. Aizenman
Author-Person: pai8
Author-Name: A. Hoffmaister
Author-Person: pho135
Note: IFM
Number: 7951
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7951
File-URL: http://www.nber.org/papers/w7951.pdf
File-Format: application/pdf
Publication-Status: published as Agenor, Pierre-Richard, Joshua Aizenman and Alexander W. Hoffmaister. "The Credit Crunch In East Asia: What Can Bank Excess Liquidity Assets Tell Us?," Journal of International Money and Finance, 2004, v23(1,Feb), 27-49.
Abstract: The paper proposes a two-step approach to assessing the extent to which the fall in credit in crisis-stricken East Asian countries was a supply- or demand-induced phenomenon. The first step is based on the estimation of a demand function for excess liquid assets by commercial banks. Such a function is derived analytically in the first part of the paper. The second step consists in establishing dynamic projections for the periods following the crisis and assessing whether or not residuals are large enough to be viewed as indicators of involuntary' accumulation of excess reserves. Results for Thailand indicate that the contraction in bank lending that accompanied the crisis was the result of supply factors.
Handle: RePEc:nbr:nberwo:7951
Template-Type: ReDIF-Paper 1.0
Title: Ferreting Out Tunneling: An Application to Indian Business Groups
Classification-JEL: G3
Author-Name: Marianne Bertrand
Author-Person: pbe697
Author-Name: Paras Mehta
Author-Name: Sendhil Mullainathan
Author-Person: pmu103
Note: CF
Number: 7952
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7952
File-URL: http://www.nber.org/papers/w7952.pdf
File-Format: application/pdf
Publication-Status: published as Marianne Bertrand & Paras Mehta & Sendhil Mullainathan, 2002. "Ferreting Out Tunneling: An Application To Indian Business Groups," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 121-148, February.
Abstract: In many countries, controlling shareholders are accused of tunneling, transferring resources from companies where they have few cash flow rights to ones where they have more cash flow rights. Quantifying the extent of such tunneling, however, has proven difficult because of its illicit nature. This paper develops a general empirical technique for quantifying tunneling. We use the responses of different firms to performance shocks to map out the flow of resources within a group of firms and to quantify the extent to which the marginal dollar is tunneled. We apply our technique to data on Indian business groups. The results suggest a significant amount of tunneling between firms in these groups.
Handle: RePEc:nbr:nberwo:7952
Template-Type: ReDIF-Paper 1.0
Title: Indicator Variables for Optimal Policy
Classification-JEL: E37; E47
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG ME
Number: 7953
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7953
File-URL: http://www.nber.org/papers/w7953.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, Vol. 50, no. 3 (April 2003): 691-720
Publication-Status: published as Lars E.O. Svensson & Michael Woodford, 2000. "Indicator variables for optimal policy," Proceedings, Federal Reserve Bank of San Francisco.
Abstract: The optimal weights on indicators in models with partial information about the state of the economy and forward-looking variables are derived and interpreted, both for equilibria under discretion and under commitment. An example of optimal monetary policy with a partially observable potential output and a forward-looking indicator is examined. The optimal response to the optimal estimate of potential output displays certainty-equivalence, whereas the optimal response to the imperfect observation of output depends on the noise in this observation.
Handle: RePEc:nbr:nberwo:7953
Template-Type: ReDIF-Paper 1.0
Title: A Re-examination of the Predictability of Economic Activity Using the Yield Spread
Classification-JEL: E32; E37
Author-Name: James D. Hamilton
Author-Person: pha60
Author-Name: Dong Heon Kim
Note: EFG
Number: 7954
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7954
File-URL: http://www.nber.org/papers/w7954.pdf
File-Format: application/pdf
Publication-Status: published as Hamilton, James D. and Dong Heon Kim. "A Reexamination Of The Predictability Of Economic Activity Using The Yield Spread," Journal of Money, Credit and Banking, 2002, v34(2,May), 340-360.
Abstract: This paper revisits the yield spread's usefulness for predicting future real GDP growth. We show that the contribution of the spread can be decomposed into the effect of expected future changes in short rates and the effect of the term premium. We find that both factors are relevant for predicting real GDP growth but the respective contributions differ. We investigate whether the cyclical behavior of interest rate volatility could account for either or both effects. We find that while volatility displays important correlations with both the term structure of interest rates and GDP, it does not appear to account for the yield spread's usefulness for predicting GDP growth.
Handle: RePEc:nbr:nberwo:7954
Template-Type: ReDIF-Paper 1.0
Title: Decoupling at the Margin: The Threat to Monetary Policy from the Electronic Revolution in Banking
Classification-JEL: E58
Author-Name: Benjamin M. Friedman
Note: ME
Number: 7955
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7955
File-URL: http://www.nber.org/papers/w7955.pdf
File-Format: application/pdf
Publication-Status: published as Friedman, Benjamin M. "Decoupling at the Margin: The Threat to Monetary Policy from the Electronic Revolution in Banking." International Finance 3, 2 (July 2000): 261-72.
Abstract: The threat to monetary policy from the electronic revolution in banking is the possibility of a decoupling' of the operations of the central bank from markets in which financial claims are created and transacted in ways that, at some operative margin, affect the decisions of households and firms on such matters as how much to spend (and on what), how much (and what) to produce, and what to pay or charge for ordinary goods and services. The object of this paper is to discuss how this possibility arises and what it implies, to dismiss as unessential to the argument various extreme characterizations that have arisen in the recent debate on this issue (for example, that no one will use money for ordinary economic transactions), and to address the specific arguments on the issue offered by Charles Goodhart, Charles Freedman and Michael Woodford.
Handle: RePEc:nbr:nberwo:7955
Template-Type: ReDIF-Paper 1.0
Title: Competition Between Private and Public Schools: Testing Stratification and Pricing Predictions
Classification-JEL: I21; I22
Author-Name: Dennis Epple
Author-Person: pep21
Author-Name: David Figlio
Author-Person: pfi57
Author-Name: Richard Romano
Author-Person: pro223
Note: CH PE
Number: 7956
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7956
File-URL: http://www.nber.org/papers/w7956.pdf
File-Format: application/pdf
Publication-Status: published as Epple, Dennis, David Figlio and Richard Romano. "Competition Between Private And Public Schools: Testing Stratification And Pricing Predictions," Journal of Public Economics, 2004, v88(7-8,Jul), 1215-1245.
Abstract: When there are peer effects in education, private schools have an incentive to vary tuition to attract relatively able students. Epple and Romano (1998) develop a general equilibrium model characterizing equilibrium pricing and student selection into schools when peer effects are present. The model predicts that competition will lead private schools to give tuition discounts to more able students, and that this will give rise to an equilibrium exhibiting stratification by income and ability between the public and private sectors and to a hierarchy of schools within the private sector. The model also yields a variety of comparative-static predictions. The predictions of the model are tested in this paper using a unique data set assembled by Figlio and Stone (1999). Tests of equilibrium predictions of the model reveal that: The propensity to attend private school increases with both income and ability, and, among private schools, the propensity to attend the highest-tuition school rises with both income and ability. Within private schools, tuition declines with student ability, with a substantial of even high-income households paying little or no tuition. The correlation between income and ability is greater in public than private schools. Tests of comparative static predictions of the model reveal that: Both income and ability become stronger predictors of private school attendance as public school expenditure falls. Income becomes increasingly important in determining placement in the private school hierarchy as public school expenditure falls. Discounts to ability in the lowest-quality private school decline as public school expenditure rises while discounts to ability in the highest-quality private school are little affected by changes in public school expenditure. Expenditure in private schools rises as expenditure in public school increases. These empirical results are consistent with the predictions of the theoretical model.
Handle: RePEc:nbr:nberwo:7956
Template-Type: ReDIF-Paper 1.0
Title: The Zero Bound in an Open Economy: A Foolproof Way of Escaping from a Liquidity Trap
Classification-JEL: E52; F31
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: IFM ME
Number: 7957
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7957
File-URL: http://www.nber.org/papers/w7957.pdf
File-Format: application/pdf
Publication-Status: published as Monetary and Economic Studies, Vol. 19, S1 (February 2001): 277-312
Publication-Status: published as as "Escaping From A Liquidity Trap And Deflation: The Foolproof Way And Others," Journal of Economic Perspectives, Vol. 17, no. 4 (Autumn 2003): 145-166
Abstract: The paper examines the transmission mechanism of monetary policy in an open economy with and without a binding zero bound on nominal interest rates. In particular, a foolproof way of escaping from a liquidity trap is presented, consisting of a price-level target path, a devaluation of the currency and a temporary exchange rate peg, which is later abandoned in favor of price-level or inflation targeting when the price-level target has been reached. This will jump-start the economy and escape deflation by a real depreciation of the domestic currency, a lower long real interest rate, and increased inflation expectations. The abandonment of the exchange-rate peg and the shift to price-level or inflation targeting will avoid the risk of overheating. Some conclusions for Japan are included.
Handle: RePEc:nbr:nberwo:7957
Template-Type: ReDIF-Paper 1.0
Title: The Governance of the New Enterprise
Classification-JEL: G3; L2
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Author-Name: Luigi Zingales
Note: CF
Number: 7958
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7958
File-URL: http://www.nber.org/papers/w7958.pdf
File-Format: application/pdf
Abstract: The changing nature of the corporation forces us to re-examine much of what we take for granted in corporate governance. What precisely is the entity that is being governed? How does the governance system obtain power over it, and what determines the division of power between various stakeholders? And is the objective of allocating power only to enhance the returns of outside investors? In this paper we argue that, given the changing nature of the firm, the focus of corporate governance must shift from alleviating the agency problems between managers and shareholders to studying mechanisms that give the firm the power to provide incentives to human capital. We also provide some examples of the kind of subjects that should now be the main focus of study in corporate governance.
Handle: RePEc:nbr:nberwo:7958
Template-Type: ReDIF-Paper 1.0
Title: Wiring the Labor Market
Classification-JEL: J0; O3
Author-Name: David Autor
Author-Person: pau9
Note: LS
Number: 7959
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7959
File-URL: http://www.nber.org/papers/w7959.pdf
File-Format: application/pdf
Publication-Status: published as Autor, David H. "Wiring The Labor Market," Journal of Economic Perspectives, 2001, v15(1,Winter), 25-40.
Abstract: Workers and jobs are naturally heterogeneous and the quality of their interaction when paired is difficult to forecast. The Internet promises to open new channels for worker-firm communications. What are the consequences of this opening? I discuss three labor market features that may be altered: how worker-firm matches are made; how labor services are delivered; and how local markets shape labor demand. Theory predicts these developments will produce social benefits. But the gains are unlikely to be uniform and realizing them will generate novel problems. One result may be the formation of new institutions to address issues accompanying these opportunities.
Handle: RePEc:nbr:nberwo:7959
Template-Type: ReDIF-Paper 1.0
Title: The Impact of the Estate Tax on the Wealth Accumulation and Avoidance Behavior of Donors
Classification-JEL: H2; H3
Author-Name: Joel Slemrod
Author-Person: psl10
Author-Name: Wojciech Kopczuk
Author-Person: pko20
Note: PE
Number: 7960
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7960
File-URL: http://www.nber.org/papers/w7960.pdf
File-Format: application/pdf
Publication-Status: Published in William G. Gale, James R. Hines Jr., and Joel B. Slemrod (eds.), "Rethinking Estate and Gift Taxation," Washington, DC: Brookings Institution Press, 2001, 299-343.
Abstract: Using estate tax return data from 1916 to 1996, we investigate the impact of the estate tax on reported estates, which reflects the impact of the tax on both wealth accumulation and avoidance. An aggregate measure of reported estates is generally negatively correlated with summary measures of the level of estate taxation, holding constant other influences. In pooled cross-sectional analysis that makes use of individual decedent information, the relationship between the concurrent tax rate and the reported estate is fragile and sensitive to the set of instruments that are used to capture exogenous tax rate variation. However, the negative effect of taxes appears to be stronger for those who die at a more advanced age and with a will, both of which are consistent with the theory of how estate taxes affect altruistic individuals. Finally, we find that the tax rate that prevailed at age 45 or ten years before death is more clearly (negatively) associated with reported estates than the tax rate prevailing at death. Future research should concentrate on developing lifetime measures of the effective tax rates and on better measurements of the effective tax rate for married couples.
Handle: RePEc:nbr:nberwo:7960
Template-Type: ReDIF-Paper 1.0
Title: Internet Car Retailing
Classification-JEL: L1; L8
Author-Name: Fiona Scott Morton
Author-Name: Florian Zettelmeyer
Author-Name: Jorge Silva Risso
Note: IO
Number: 7961
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7961
File-URL: http://www.nber.org/papers/w7961.pdf
File-Format: application/pdf
Publication-Status: published as Scott Morton, Fiona, Florian Zettelmeyer, and Jorge Silva-Risso. “Internet Car Retailing." The Journal of Industrial Economics 49, 4 (2001): 501-519.
Publication-Status: published as Internet Car Retailing, Fiona Scott Morton, Florian Zettelmeyer, Jorge Silva-Risso. in E-commerce, Borenstein and Saloner. 2001
Abstract: This paper investigates the effect of Internet car referral services on dealer pricing of automobiles in California. Combining data from J.D. Power and Associates and Autobytel.com, a major online auto referral service, we compare online transaction prices to regular street' prices. We find that the average customer of this online service pays approximately 2% less for her car, which corresponds to about $450 for the average car. Fifteen percent of the savings comes from making the purchase at a low-price dealership affiliated with the web service. The remaining 85% of the savings seem to be due to the bargaining power of the referral service and the lower cost of serving an online consumer. Dealer price dispersion declines with online sales, indicating we are picking up more than a selection effect. Online consumers who indicate they are ready to buy in the next two days pay even lower prices. Dealers pay less for an online customer's trade-in vehicle, although on-line customers are still better off overall than offline customers. Dealer average gross margin on an online vehicle sale is lower by about $300 than an equivalent offline sale. However, because online consumers are cheaper to serve and online sales may be new business for the dealerships, web-affiliated dealers are likely to be better off. Consumers who use the web do better than at least 61% of offline consumers.
Handle: RePEc:nbr:nberwo:7961
Template-Type: ReDIF-Paper 1.0
Title: Technology, Trade, and Adjustment to Immigration in Israel
Classification-JEL: F16; F22
Author-Name: Neil Gandal
Author-Person: pga644
Author-Name: Gordon H. Hanson
Author-Person: pha80
Author-Name: Matthew J. Slaughter
Note: ITI
Number: 7962
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7962
File-URL: http://www.nber.org/papers/w7962.pdf
File-Format: application/pdf
Publication-Status: published as Gandal, Neil & Hanson, Gordon H. & Slaughter, M.J.Matthew J., 2004. "Technology, trade, and adjustment to immigration in Israel," European Economic Review, Elsevier, vol. 48(2), pages 403-428, April.
Abstract: In the early 1990s Israel experienced a large and concentrated surge of immigration from the former Soviet Union. Most Russian immigrants had high education levels relative to the average Israeli. Despite the size and skill mix of the immigration shock, existing research has found little evidence that it put downward pressure on Israeli wages. In this paper we examine two open-economy mechanisms through which Israel may have absorbed changes in labor supplies related to the Russian immigration inflow: the adoption of global changes in production technology, and national changes in the mix of traded goods produced. Our main finding is that global changes in production techniques, which appear consistent with skill-biased technical change, were sufficient to more than offset Israel's change in relative factor supplies due to the Russian influx and other events. We also find that changes in output mix (in either traded or nontraded industries) did not help Israel absorb changes in relative factor supplies.
Handle: RePEc:nbr:nberwo:7962
Template-Type: ReDIF-Paper 1.0
Title: Retirement Responses to Early Social Security Benefit Reductions
Classification-JEL: J26; H55
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: John W.R. Phillips
Note: AG LS
Number: 7963
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7963
File-URL: http://www.nber.org/papers/w7963.pdf
File-Format: application/pdf
Abstract: This paper evaluates potential responses to reductions in early Social Security retirement benefits. Using the Health and Retirement Study (HRS) linked to administrative records, we find that Social Security coverage is quite uneven in the older population: one-quarter of respondents in their late 50's lacks coverage under the Disability Insurance program, and one-fifth lacks coverage for old-age benefits. Among those eligible for benefits, respondents who subsequently retired early appear quite similar initially to those who later filed for normal retirement benefits, but both groups were healthier and better educated than those who later filed for disability benefits. Next we investigate the potential impact of curtailing, and then eliminating, early Social Security benefits. A life-cycle model of retirement behavior provides estimated parameters used to simulate the effects of cutting early Social Security benefits on retirement pathways. We find that cutting early Social Security benefits would boost the probability of normal retirement by twice as much as it would the probability of disability retirement.
Handle: RePEc:nbr:nberwo:7963
Template-Type: ReDIF-Paper 1.0
Title: Does Factor-Biased Technological Change Stifle International Covergence? Evidence from Manufacturing
Classification-JEL: J3; L60
Author-Name: Eli Berman
Author-Person: pbe188
Note: LS PR
Number: 7964
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7964
File-URL: http://www.nber.org/papers/w7964.pdf
File-Format: application/pdf
Abstract: Factor-biased technological change implies divergent productivity growth across countries with different amounts of skill and capital per worker. I estimate the extent of factor bias within industries and countries using a 19-country panel of manufacturing data covering the 1980s. Estimates using both production functions and total factor productivity functions show that technological change is strongly biased against less-skilled workers and toward both skilled workers and capital. An industry or country with twice the capital and skill per less-skilled worker enjoys 1.4%-1.8% faster total factor productivity growth annually due to the effects of factor-bias. These results are consistent with the empirical literature on skill-biased technological change. They may well explain why conditional convergence' of per capita income across countries is so slow.
Handle: RePEc:nbr:nberwo:7964
Template-Type: ReDIF-Paper 1.0
Title: The Recent Transformation of Participatory Employment Practices in Japan
Classification-JEL: J53; J33
Author-Name: Takao Kato
Author-Person: pka69
Note: LS
Number: 7965
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7965
File-URL: http://www.nber.org/papers/w7965.pdf
File-Format: application/pdf
Publication-Status: published as Kato, Takao and Motohiro Morishima. "The Productivity Effects Of Participatory Employment Practices: Evidence From New Japanese Panel Data," Industrial Relations, 2002, v41(4,Oct), 487-520.
Publication-Status: published as The Recent Transformation of Participatory Employment Practices in Japan, Takao Kato. in Labor Markets and Firm Benefit Policies in Japan and the United States, Ogura, Tachibanaki, and Wise. 2003
Abstract: Using both quantitative data from national surveys and qualitative data from our own field research, this paper provides evidence on changes in participatory employment practices in Japan during the economic slowdown in the 1990s. Overall, consistent with the complementarity of such practices and the long-term nature of their effects, evidence points to the enduring nature of such practices (except for small to medium size firms with no union where we find evidence for management to try to weaken the role of employee participation). There are, however, a few early signs of trouble even for large, unionized firms, which might eventually result in the breakdown of the system if left untreated. First, while the number of full time union officials has been falling substantially as a result of continued downsizing of the firm's labor force, the amount of time and effort that union officials need to put into participatory employment practices have not been falling. This often results in an uncompensated increase in workload for union officials. If this trend continues, union officials who have been playing a key role in Japanese participatory management will become less effective and less committed to the interest of the rank and files. Second, top management sometimes finds its participatory management system detrimental to timely and efficient management, and hence tries to streamline the system. Overloaded union officials may offer less resistance to this kind of management initiative. Third, the current system tends to produce a gap in the quantity and quality of information acquired from management between top union officials and their general membership. It is conceivable that such a gap may eventually result in the breakdown of the system.
Handle: RePEc:nbr:nberwo:7965
Template-Type: ReDIF-Paper 1.0
Title: Hospital Market Structure and the Behavior of Not-for-Profit Hospitals: Evidence from Responses to California's Disproportionate Share Program
Author-Name: Mark Duggan
Author-Person: pdu194
Note: EH PE
Number: 7966
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7966
File-URL: http://www.nber.org/papers/w7966.pdf
File-Format: application/pdf
Publication-Status: published as Duggan, Mark. "Hospital Market Structure And The Behavior Of Not-For-Profit Hospitals," Rand Journal of Economics, 2002, v33(3,Autumn), 433-446.
Abstract: I exploit a plausibly exogenous change in hospital financial incentives to examine whether the behavior of private not-for-profit hospitals varies with the share of nearby hospitals organized as for-profit firms. My results show that not-for-profit hospitals in for-profit intensive areas are significantly more responsive to an increased incentive to treat low-income patients insured by the Medicaid program than are other not-for-profit providers. The heterogeneity in behavior is not due to differences in financial constraints but is instead likely driven by different degrees of market competitiveness in areas with one or more for-profit hospitals. The observed variation in the governing boards of not-for-profit hospitals across market areas supports the hypothesis that increased for-profit penetration makes these facilities more profit-oriented.
Handle: RePEc:nbr:nberwo:7966
Template-Type: ReDIF-Paper 1.0
Title: More Guns, More Crime
Author-Name: Mark Duggan
Author-Person: pdu194
Note: PE
Number: 7967
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7967
File-URL: http://www.nber.org/papers/w7967.pdf
File-Format: application/pdf
Publication-Status: published as Duggan, Mark. "More Guns, More Crime," Journal of Political Economy, 2001, v109(5,Oct), 1086-1114.
Abstract: This paper examines the relationship between gun ownership and crime. Previous research has suffered from a lack of reliable data on gun ownership. I exploit a unique data set to reliably estimate annual gun ownership rates at both the state and the county level during the past two decades. My findings demonstrate that changes in gun ownership are significantly positively related to changes in the homicide rate, with this relationship driven entirely by the impact of gun ownership on murders in which a gun is used. The effect of gun ownership on all other crime categories is much less marked. Recent reductions in the fraction of households owning a gun can explain at least one-third of the differential decline in gun homicides relative to non-gun homicides since 1993. I also use this data to examine the impact of Carrying Concealed Weapons legislation on crime, and reject the hypothesis that these laws led to increases in gun ownership or reductions in criminal activity.
Handle: RePEc:nbr:nberwo:7967
Template-Type: ReDIF-Paper 1.0
Title: Is Making Divorce Easier Bad for Children? The Long Run Implications of Unilateral Divorce
Classification-JEL: J12; J13
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: LS CH PE
Number: 7968
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7968
File-URL: http://www.nber.org/papers/w7968.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan. "Is Making Divorce Easier Bad For Children? The Long-Run Implications Of Unilateral Divorce," Journal of Labor Economics, 2004, v22(4,Oct), 799-833.
Abstract: Most states in the U.S. allow for unilateral divorce, which increases the ease of divorce by not requiring the explicit consent of both partners. Such regulations have come under fire for their perceived negative consequences for marital stability and resulting child outcomes, but there is no evidence to date to support the contention that easier divorce regulations are actually bad for children. I assess the long run implications for children of growing up in a unilateral divorce environment, by measuring how such youth exposure affects adult outcomes. Using 40 years of census data to exploit the variation across states and over time in changes in divorce regulation, I confirm that unilateral divorce regulations do significantly increase the incidence of divorce. I also find that adults who were exposed to unilateral divorce regulations as children are less well educated and have lower family incomes. They are also more likely themselves to be both married and separated, and both of these effects appear to reflect primarily a shift towards earlier marriage and separation. Women in these exposed cohorts are less attached to the labor force, while men are somewhat more attached; the timing of these effects appears consistent with a causal role for marriage. Thus, exposure to easier divorce regulation as a youth appears to worsen adult outcomes along a number of dimensions, but the ultimate implications depend on the long run impacts of earlier family formation among this cohort.
Handle: RePEc:nbr:nberwo:7968
Template-Type: ReDIF-Paper 1.0
Title: Corruption and Composition of Foreign Direct Investment: Firm-Level Evidence
Classification-JEL: F23
Author-Name: Beata K. Smarzynska
Author-Person: pja78
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: IFM ITI
Number: 7969
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7969
File-URL: http://www.nber.org/papers/w7969.pdf
File-Format: application/pdf
Abstract: This paper studies the impact of corruption in a host country on foreign investor's preference for a joint venture versus a wholly-owned subsidiary. There is a basic trade-off in using local partners. On the one hand, corruption makes local bureaucracy less transparent and increases the value of using a local partner to cut through the bureaucratic maze. On the other hand, corruption decreases the effective protection of investor's intangible assets and lowers the probability that disputes between foreign and domestic partners will be adjudicated fairly, which reduces the value of having a local partner. The importance of protecting intangible assets increases with investor's technological sophistication, which tilts the preference away from joint ventures in a corrupt country. Empirical tests of the hypothesis on a firm-level data set show that corruption reduces inward FDI and shifts the ownership structure towards joint ventures. Technologically more advanced firms are found to be less likely to engage in joint ventures.
Handle: RePEc:nbr:nberwo:7969
Template-Type: ReDIF-Paper 1.0
Title: Technological Change and the Environment
Author-Name: Adam B. Jaffe
Author-Person: pja49
Author-Name: Richard G. Newell
Author-Person: pne29
Author-Name: Robert N. Stavins
Author-Person: pst167
Note: PR EEE
Number: 7970
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7970
File-URL: http://www.nber.org/papers/w7970.pdf
File-Format: application/pdf
Publication-Status: published as Jaffe, Adam B., Richard G. Newell and Robert N. Stavins. "Environmental Policy And Technological Change," Environmental and Resource Economics, 2002, v22(1-2,Jun), 41-70.
Publication-Status: published as Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2003. "Chapter 11 Technological change and the environment," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 11, pages 461-516 Elsevier.
Abstract: Environmental policy discussions increasingly focus on issues related to technological change. This is partly because the environmental consequences of social activity are frequently affected by the rate and direction of technological change, and partly because environmental policy interventions can themselves create constraints and incentives that have significant effects on the path of technological progress. This paper, prepared as a chapter draft for the forthcoming Handbook of Environmental Economics (North-Holland/Elsevier Science), summarizes for environmental economists current thinking on technological change in the broader economics literature, surveys the growing economic literature on the interaction between technology and the environment, and explores the normative implications of these analyses. We begin with a brief overview of the economics of technological change, and then examine three important areas where technology and the environment intersect: the theory and empirical evidence of induced innovation and the related literature on the effects of environmental policy on the creation of new, environmentally friendly technology; the theory and empirics of environmental issues related to technology diffusion; and analyses of the comparative technological impacts of alternative environmental policy instruments. We conclude with suggestions for further research on technological change and the environment.
Handle: RePEc:nbr:nberwo:7970
Template-Type: ReDIF-Paper 1.0
Title: International and Domestic Collateral Constraints in a Model of Emerging Market Crises
Classification-JEL: G00; E4
Author-Name: Ricardo Caballero
Author-Person: pca44
Author-Name: Arvind Krishnamurthy
Author-Person: pkr393
Note: EFG IFM
Number: 7971
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7971
File-URL: http://www.nber.org/papers/w7971.pdf
File-Format: application/pdf
Publication-Status: published as Caballero, Ricardo J. and Arvind Krishnamurthy. "International And Domestic Collateral Constraints In A Model Of Emerging Market Crises," Journal of Monetary Economics, 2001, v48(3,Dec), 513-548.
Abstract: We build a model of emerging markets crises which features two types of collateral constraints. Firms in a domestic economy have limited borrowing capacity from international investors. They also have limited borrowing capacity with respect to each other. We study how the presence of and changes in these collateral constraints affect financial and real variables. A binding international constraint in the aggregate leads to a sharp rise in interest rates and fire sales of domestic assets, while limited domestic collateral can lead to wasted international collateral. These two collateral constraints can interact in important ways. The first is disintermediation: a fire sale of domestic assets causes banks to fail in their function of reallocating resources across the economy leading to wasted international collateral. The second is a dynamic effect. We show that firms in an economy with limited domestic collateral and a binding international collateral constraint will not adequately precaution against adverse shocks, increasing the severity of these shocks. Our approach is distinctive in that, while much of the literature on the role of financial constraints in macroeconomics draws their insights within either of these collateral deficiencies, we argue that their static and dynamic interactions have important consequences for emerging markets' performance.
Handle: RePEc:nbr:nberwo:7971
Template-Type: ReDIF-Paper 1.0
Title: When Do Research Consortia Work Well and Why? Evidence from Japanese Panel Data
Classification-JEL: O32; O31
Author-Name: Lee G. Branstetter
Author-Person: pbr854
Author-Name: Mariko Sakakibara
Note: PR
Number: 7972
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7972
File-URL: http://www.nber.org/papers/w7972.pdf
File-Format: application/pdf
Publication-Status: published as Branstetter, Lee G. and Mariko Sakakibara. "When Do Research Consortia Work Well and Why? Evidence from Japanese Panel Data." American Economic Review 92, 1 (March 2002): 143-159.
Abstract: We examine the impact of a large number of Japanese government-sponsored research consortia on the research productivity of participating firms by measuring their patenting in the targeted technologies before, during, and after participation. Consistent with the theoretical predictions of Katz (1986) and others, we find consortium outcomes are positively associated with the level of potential R&D spillovers within the consortium and (weakly) negatively associated with the degree of product market competition among consortium members. Furthermore, our evidence suggests that consortia are most effective when they focus on basic research.
Handle: RePEc:nbr:nberwo:7972
Template-Type: ReDIF-Paper 1.0
Title: Moving to Opportunity in Boston: Early Results of a Randomized Mobility Experiment
Classification-JEL: H43; I18
Author-Name: Lawrence F. Katz
Author-Person: pka266
Author-Name: Jeffrey R. Kling
Author-Person: pkl126
Author-Name: Jeffrey B. Liebman
Author-Person: pli184
Note: LS PE CH
Number: 7973
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7973
File-URL: http://www.nber.org/papers/w7973.pdf
File-Format: application/pdf
Publication-Status: published as Katz, Lawrence F., Jeffrey R. Kling and Jeffrey B. Liebman. "Moving To Opportunity In Boston: Early Results Of A Randomized Mobility Experiment," Quarterly Journal of Economics, 2001, v116(2,May), 607-654.
Abstract: This paper examines the short-run impacts of a change in residential neighborhood on the well-being of low-income families, using evidence from the Moving To Opportunity (MTO) program in which eligibility for a housing voucher was determined by random lottery. Applicants in high poverty public housing projects were assigned by lottery to one of three groups: Experimental offered mobility counseling and a voucher valid only in a low-poverty Census tract; Section 8 Comparison offered a geographically unrestricted voucher; or Control offered no new assistance, but continued eligibility for public housing. Our quantitative analyses of program impacts at the Boston site of MTO uses data on 540 families approximately two years after program enrollment. 48 percent of the Experimental group and 62 percent of the Section 8 Comparison group moved through the MTO program. Households in both treatment groups experienced improvements in multiple measures of well-being relative to the Control group including increased safety, improved health among household heads, and fewer behavior problems among boys. There were no significant short-run impacts of either MTO treatment on employment, earnings, or welfare receipt. Experimental group children were less likely to be personally victimized by crime, to be injured, or to experience an asthma attack.
Handle: RePEc:nbr:nberwo:7973
Template-Type: ReDIF-Paper 1.0
Title: Investor Protection and Equity Markets
Classification-JEL: G31; G32
Author-Name: Andrei Shleifer
Author-Person: psh93
Author-Name: Daniel Wolfenson
Note: CF
Number: 7974
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7974
File-URL: http://www.nber.org/papers/w7974.pdf
File-Format: application/pdf
Publication-Status: published as Shleifer, Andrei & Wolfenzon, Daniel, 2002. "Investor protection and equity markets," Journal of Financial Economics, Elsevier, vol. 66(1), pages 3-27, October.
Abstract: We present a simple model of an entrepreneur going public in an environment with poor legal protection of outside shareholders. The model incorporates elements of Becker's (1968) crime and punishment' framework into a corporate finance environment of Jensen and Meckling (1976). We examine the entrepreneur's decision and the market equilibrium. The model is consistent with a number of empirical regularities concerning the relationship between investor protection and corporate finance.
Handle: RePEc:nbr:nberwo:7974
Template-Type: ReDIF-Paper 1.0
Title: Accounting for Recent Declines in Employment Rates among the Working-Aged Disabled
Classification-JEL: J2; I3
Author-Name: John Bound
Author-Person: pbo406
Author-Name: Timothy Waidmann
Author-Person: pwa241
Note: LS PE
Number: 7975
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7975
File-URL: http://www.nber.org/papers/w7975.pdf
File-Format: application/pdf
Publication-Status: published as Bound, John and Timothy Waidmann. "Accounting For Recent Declines In Employment Rates Among The Working-aged Men And Women With Disabilities," Journal of Human Resources, 2002, v37(2,Spring), 231-250.
Abstract: During the 1990s, while overall employment rates for working-aged men and women either remained roughly constant (men) or rose (women), employment rates for the disabled fell. During the same period the fraction of the working-aged population receiving Social Security Disability Insurance (DI) benefits increased quite dramatically. We present simple time series and cross-state evidence suggesting that the growth in the DI program can account for much of the decline in the relative employment position of the disabled.
Handle: RePEc:nbr:nberwo:7975
Template-Type: ReDIF-Paper 1.0
Title: Tax Policy, Venture Capital, and Entrepreneurship
Classification-JEL: D82; G24
Author-Name: Christian Keuschnigg
Author-Person: pke42
Author-Name: Soren Bo Nielsen
Author-Person: pni248
Note: PE
Number: 7976
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7976
File-URL: http://www.nber.org/papers/w7976.pdf
File-Format: application/pdf
Publication-Status: published as Keuschnigg, Christian and Soren Bo Nielsen. "Tax Policy, Venture Capital, And Entrepreneurship," Journal of Public Economics, 2003, v87(1,Jan), 185-203.
Abstract: The paper studies the effects of tax policy on venture capital activity. Entrepreneurs pursue a single high risk project each but have no own resources. Financiers provide equity finance. They must structure the entrepreneur's profit share and base salary to assure their incentives for full effort. In addition to providing equity finance, venture capitalists assist with valuable business advice to enhance survival rates. Within a general equilibrium framework with a traditional and an entrepreneurial sector, the paper investigates the effects of taxes on the equilibrium level of entrepreneurship and managerial advice. It considers dierential wage and capital income taxes, a comprehensive income tax, incomplete loss offset, progressive taxation as well as investment and output subsidies to the entrepreneurial sector.
Handle: RePEc:nbr:nberwo:7976
Template-Type: ReDIF-Paper 1.0
Title: Nonprofit Sector and Part-Time Work: An Analysis of Employer-Employee Matched Data of Child Care Workers
Classification-JEL: J2; J3
Author-Name: H. Naci Mocan
Author-Person: pmo270
Author-Name: Erdal Tekin
Author-Person: pte12
Note: CH LS
Number: 7977
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7977
File-URL: http://www.nber.org/papers/w7977.pdf
File-Format: application/pdf
Publication-Status: published as "Nonprofit Sector and Part-Time Work: An Analysis of Employer-Employee Matched Data of Child Care Workers", The Review of Economics and Statistics, February 2003, Vol. 85, No. 1, pp.38-50.
Abstract: This paper uses a rich employer-employee matched data set to investigate the existence and the extent of nonprofit and part-time wage and compensation differentials in child care. The empirical strategy adjusts for workers' self-selection into the for-profit or nonprofit sectors, into full-time or part-time work, as well as unobserved worker heterogeneity using a discrete factor model. We find differences between the regimes (full-time for-profit, full-time nonprofit, part-time for-profit, part-time nonprofit) in the way in which human capital of the workers are rewarded. There is substantial variation in wages as a function of employee characteristics, and there is variation in wages within sectors. The results indicate that part-time jobs are good' jobs in center-based child care. Furthermore, despite the evidence supporting the labor donation hypothesis, our results indicate the existence of nonprofit wage and compensation premiums, which support the property rights hypothesis.
Handle: RePEc:nbr:nberwo:7977
Template-Type: ReDIF-Paper 1.0
Title: Using Asset Prices to Measure the Cost of Business Cycles
Classification-JEL: E32; G12
Author-Name: Fernando Alvarez
Author-Name: Urban J. Jermann
Author-Person: pje4
Note: AP EFG
Number: 7978
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7978
File-URL: http://www.nber.org/papers/w7978.pdf
File-Format: application/pdf
Publication-Status: published as Alvarez, Fernando and Urban J. Jermann. "Using Asset Prices To Measure The Persistence Of The Marginal Utility Of Wealth," Econometrica, 2005, v73(6,Nov), 1977-2016. Also Fernando Alvarez & Urban J. Jermann. "Using Asset Prices to Measure the Cost of Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1223-1256, December 2004.
Abstract: We propose a method to measure the welfare cost of economic fluctuations that does not require full specification of consumer preferences and instead uses asset prices. The method is based on the marginal cost of consumption fluctuations, the per unit benefit of a marginal reduction in consumption fluctuations expressed as a percentage of consumption. We show that this measure is an upper bound for the benefit of reducing all consumption fluctuations. We also clarify the link between the cost of consumption uncertainty, the equity premium, and the slope of the real term structure. To measure the marginal cost of fluctuations, we fit a variety of pricing kernels that reproduce key asset pricing statistics. We find that consumers would be willing to pay a very high price for a reduction in overall consumption uncertainty. However, for consumption fluctuations corresponding to business cycle frequencies, we estimate the marginal cost to be about 0.55% of lifetime consumption based on the period 1889-1997 and about 0.30% based on 1954-97.
Handle: RePEc:nbr:nberwo:7978
Template-Type: ReDIF-Paper 1.0
Title: The Health Care Consequences of Smoking and its Regulation
Classification-JEL: I18
Author-Name: Michael J. Moore
Author-Person: pmo284
Author-Name: James W. Hughes
Note: EH
Number: 7979
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7979
File-URL: http://www.nber.org/papers/w7979.pdf
File-Format: application/pdf
Publication-Status: published as Moore, Michael J. and James W. Hughes. "The Health Care Consequences Of Smoking And Its Regulation," Forum for Health Economics and Policy, 2001, v4, Article 3.
Publication-Status: published as The Health Care Consequences of Smoking and Its Regulation, Michael J. Moore, James W. Hughes. in Frontiers in Health Policy Research, Volume 4, Garber. 2001
Abstract: The literature on the health economics of smoking presents two principal facts: that smoking increases health care costs, and that restrictions on smoking lead to reductions in smoking prevalence and intensity. Some researchers have hypothesized that these two facts, in combination, allow the inference that restricting smoking will lower health care costs. For a variety of reasons, however, observed associations between smoking and health care use on the one hand, and regulations and smoking on the other, do not imply a casual effect of the restrictions on health care. This paper extends the literature by examining whether cigarette tax increases lead to lower health care costs. Using data from the 1991 and 1993 National Heath Interview Surveys, it first reproduces the principal results in the literature on smoking, taxes, and health care utilization, and then estimates the effects of tobacco taxes on health care. The results indicate that once one controls for endogenous quits, the health care benefits of smoking cessation are greater than previously believed. There is weak evidence that tax increases lead to higher cessation rates. In combination, these results suggest that, in addition providing a source for funding excess health care costs, tax increases may lower health care costs (for given longevity) directly by inducing smokers to quit.
Handle: RePEc:nbr:nberwo:7979
Template-Type: ReDIF-Paper 1.0
Title: Personal Income Taxes and the Growth of Small Firms
Classification-JEL: J23; H24
Author-Name: Robert Carroll
Author-Name: Douglas Holtz-Eakin
Author-Name: Mark Rider
Author-Name: Harvey S. Rosen
Author-Person: pro55
Note: PE
Number: 7980
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7980
File-URL: http://www.nber.org/papers/w7980.pdf
File-Format: application/pdf
Publication-Status: published as Personal Income Taxes and the Growth of Small Firms, Robert Carroll, Douglas Holtz-Eakin, Mark Rider, Harvey S. Rosen. in Tax Policy and the Economy, Volume 15, Poterba. 2001
Abstract: This paper investigates the effect of entrepreneurs' personal income tax situations on the growth rates of their enterprises. We analyze the personal income tax returns of a large number of sole proprietors before and after the Tax Reform Act of 1986 and determine how the substantial reductions in marginal tax rates associated with that law affected the growth of their firms as measured by gross receipts. We find that individual income taxes exert a statistically and quantitatively significant influence on firm growth rates. Raising the sole proprietor's tax price (one minus the marginal tax rate) by 10 percent increases receipts by about 8.4 percent. This finding is consistent with the view that raising income tax rates discourages the growth of small businesses.
Handle: RePEc:nbr:nberwo:7980
Template-Type: ReDIF-Paper 1.0
Title: Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data
Classification-JEL: L13; E32
Author-Name: Judith A. Chevalier
Author-Person: pch151
Author-Name: Anil K. Kashyap
Author-Person: pka35
Author-Name: Peter E. Rossi
Author-Person: pro227
Note: EFG IO ME
Number: 7981
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7981
File-URL: http://www.nber.org/papers/w7981.pdf
File-Format: application/pdf
Publication-Status: published as Chevalier, Judity A., Anil K. Kashyap and Peter E. Rossi. "Why Don't Prices Rise During Periods Of Peak Demand? Evidence From Scanner Data," American Economic Review, 2003, v93(1,Mar), 15-37.
Abstract: We examine the retail prices and wholesale prices of a large supermarket chain in Chicago over seven and one-half years. We show that prices tend to fall during the seasonal demand peak for a product and that changes in retail margins account for most of those price changes; thus we add to the growing body of evidence that markups are counter-cyclical. The pattern of margin changes that we observe is consistent with loss leader' models such as the Lal and Matutes (1994) model of retailer pricing and advertising competition. Other models of imperfect competition are less consistent with retailer behavior. Manufacturer behavior plays a more limited role in the counter-cyclicality of prices.
Handle: RePEc:nbr:nberwo:7981
Template-Type: ReDIF-Paper 1.0
Title: An Economic Analysis of Alcohol, Drugs, and Violent Crime in the National Crime Victimization Survey
Classification-JEL: I0; K0
Author-Name: Sara Markowitz
Author-Person: pma138
Note: EH
Number: 7982
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7982
File-URL: http://www.nber.org/papers/w7982.pdf
File-Format: application/pdf
Publication-Status: published as Markowitz, Sara. "Alcohol, Drugs And Violent Crime," International Review of Law and Economics, 2005, v25(1,Mar), 20-44.
Abstract: The purpose of this paper is to examine the direct relationship between the prices of alcohol and drugs and the incidence of criminal violence in a nationally representative sample of individuals in the United States. The positive association between substance use and violence is well documented, as is the negative relationship between the quantity of alcohol or drugs consumed and their prices. These two relationships together form the principal hypothesis examining whether increases in substance prices will directly decrease the incidence of criminal violence. Violence is measured by assault, rape/sexual assault and robbery. Measures of alcohol or drug involved violent crimes are also considered. The data come from the 1992, 1993 and 1994 National Crime Victimization Surveys. A reduced form model is estimated in which the probability of being a victim of a violent crime is determined by the full prices of alcohol and illegal drugs, the arrest rates for violent crimes, and characteristics of the respondent. Individual- level fixed effects are also employed in some models. Results from the preferred specifications indicate that higher beer taxes lead to a lower incidence of assault, but not rape or robbery. Higher beer taxes will also lead to lower probabilities of alcohol- or drug-involved assault. Decriminalizing marijuana will result in a higher incidence of assault and robbery, while higher cocaine prices will decrease these crimes.
Handle: RePEc:nbr:nberwo:7982
Template-Type: ReDIF-Paper 1.0
Title: The Social Discount Rate
Classification-JEL: D60; D90
Author-Name: Andrew Caplin
Author-Person: pca77
Author-Name: John Leahy
Author-Person: ple189
Note: PE
Number: 7983
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7983
File-URL: http://www.nber.org/papers/w7983.pdf
File-Format: application/pdf
Publication-Status: published as Andrew Caplin & John Leahy, 2004. "The Social Discount Rate," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1257-1268, December.
Abstract: In welfare theory it is standard to pick the consumption stream that maximizes the welfare of the representative agent. We argue against this position, and show that a benevolent social planner will generally place a greater weight on future consumption than does the representative agent. Our analysis has immediate implications for public policy: agents discount the future too much and the government should promote future oriented policies.
Handle: RePEc:nbr:nberwo:7983
Template-Type: ReDIF-Paper 1.0
Title: Commercial Policy with Altruistic Voters
Classification-JEL: F13; D64
Author-Name: Julio J. Rotemberg
Author-Person: pro30
Note: ITI
Number: 7984
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7984
File-URL: http://www.nber.org/papers/w7984.pdf
File-Format: application/pdf
Publication-Status: published as Rotemberg, Julio J. "Commercial Policy With Altruistic Voters," Journal of Political Economy, 2003, v111(1,Feb), 174-201.
Abstract: This paper considers a specific factor model with two sectors in which agents are altruistic towards domestic residents. I show that, even if the degree of altruism is small, direct democracy leads to commercial policies that are biased against trade as long as the mobile factor is unbiased in the sense of Jones and Ruffin (1977) and the income of the owners of the factor which is specific to the import competing sector is lower than the income of the owners of the other specific factor. Tariffs may be preferred to subsidies by the median voter if subsidies require that beneficiaries spend a fixed cost to demonstrate that they are entitled to these subsidies and there is heterogeneity in the size of producers. Lastly, I construct a model of indirect democracy where legislators can receive campaign contributions from potential lobbyists. Even if campaign contributions are positive in equilibrium, the tariffs that emerge from votes taken after lobbying can represent the wishes of the median voter. In this model, campaign contributions do not buy votes. Instead, consistent with what is claimed in the qualitative literature, they buy access to legislators' time. The model is also consistent with the evidence showing that campaign contributions and lobbying activity are directed mainly at legislators who already agree with their contributors and their lobbyists.
Handle: RePEc:nbr:nberwo:7984
Template-Type: ReDIF-Paper 1.0
Title: Do High Grading Standards Affect Student Performance?
Classification-JEL: I2
Author-Name: David N. Figlio
Author-Person: pfi57
Author-Name: Maurice E. Lucas
Note: CH
Number: 7985
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7985
File-URL: http://www.nber.org/papers/w7985.pdf
File-Format: application/pdf
Publication-Status: published as Figlio, David N. and Maurice E. Lucas. "Do High Grading Standards Affect Student Performance?," Journal of Public Economics, 2004, v88(9-10,Aug), 1815-1834.
Abstract: This paper explores the effects of high grading standards on student test performance in elementary school. While high standards have been advocated by policy-makers, business groups, and teacher unions, very little is known about their effects on outcomes. Most of the existing research on standards is theoretical, generally finding that standards have mixed effects on students. However, very little empirical work has to date been completed on this topic. This paper provides the first empirical evidence on the effects of grading standards, measured at the teacher level. Using an exceptionally rich set of data including every third, fourth, and fifth grader in a large school district over four years, we match students' test score gains and disciplinary problems to teacher-level grading standards. In models in which we control for student-level fixed effects, we find substantial evidence that higher grading standards benefit students. We find that these effects are not uniform: High-achieving students apparently benefit most from high standards when in a relatively low-achieving class, and low-achieving students benefit most from high standards when in a relatively high-achieving class.
Handle: RePEc:nbr:nberwo:7985
Template-Type: ReDIF-Paper 1.0
Title: Changes in the Wage Structure, Family Income, and Children's Education
Classification-JEL: J31; I21
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Jorn-Steffen Pischke
Author-Person: ppi29
Note: CH LS
Number: 7986
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7986
File-URL: http://www.nber.org/papers/w7986.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron and J. S. Pischke. "Changes In The Wage Structure, Family Income, And Children's Education," European Economic Review, 2001, v45(4-6,May), 890-904.
Abstract: We exploit the changes in the distribution of family income to estimate the effect of parental resources on college education. Our strategy exploits the fact that families at the bottom of the income distribution were much poorer in the 1990s than they were in the 1970s, while the opposite is true for families in the top quartile of the distribution. Our estimates suggest large effects of family income on enrollments. For example, we find that a 10 percent increase in family income is associated with a 1.4 percent increase in the probability of attending a four-year college.
Handle: RePEc:nbr:nberwo:7986
Template-Type: ReDIF-Paper 1.0
Title: Computers, Work Organization, and Wage Outcomes
Classification-JEL: J3
Author-Name: Peter Cappelli
Author-Name: William H. Carter
Note: LS PR
Number: 7987
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7987
File-URL: http://www.nber.org/papers/w7987.pdf
File-Format: application/pdf
Abstract: We examine two factors frequently thought to be changing the U.S. workplace, high performance work practices and computer use, and their relationships with pay using a national probability sample of U.S. establishments. The analysis controls for both organizational and individual characteristics and finds that higher wages are associated with several practices, particularly computer use and teamwork, for front-line workers who are the targets of most high performance work practices. Not surprisingly, relationships are not as strong for other occupations and are very weak in the non-manufacturing sector. Computer use is a particularly important influence on the wages of managers and supervisors, although it is computer use by their subordinates that is the important factor. The most unusual result may be the consistently negative and significant relationship between wages and job rotation where additional analyses suggest that job rotation in isolation from other high performance practices may proxy lower skill jobs. Some of the positive relationships vanish when various controls for human capital are added, suggesting that those wage premiums are a return to human capital and may be driven by greater skill requirements.
Handle: RePEc:nbr:nberwo:7987
Template-Type: ReDIF-Paper 1.0
Title: Near-Rationality and Inflation in Two Monetary Regimes
Classification-JEL: E31
Author-Name: Laurence Ball
Author-Person: pba605
Note: EFG ME
Number: 7988
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7988
File-URL: http://www.nber.org/papers/w7988.pdf
File-Format: application/pdf
Publication-Status: published as Laurence Ball, 2000. "Near-rationality and inflation in two monetary regimes," Proceedings, Federal Reserve Bank of San Francisco.
Abstract: Sticky-price models with rational expectations fail to capture the inertia in U.S. inflation. Models with backward-looking expectations capture current inflation behavior, but are unlikely to fit other monetary regimes. This paper seeks to overcome these problems with a near-rational model of expectations. In the model, agents make univariate forecasts of inflation: they use information on past inflation optimally, but they ignore other variables. The paper tests sticky-price models with near-rational expectations for two periods in U.S. history, the post-1960 period of persistent inflation and the period from 1879 to 1914, when inflation was not persistent. The models fit the data for both periods; in contrast, both rational-expectations and backward-looking models fail for at least one period.
Handle: RePEc:nbr:nberwo:7988
Template-Type: ReDIF-Paper 1.0
Title: Interpreting Instrumental Variables Estimates of the Returns to Schooling
Classification-JEL: J3
Author-Name: Jeffrey R. Kling
Author-Person: pkl126
Note: LS CH
Number: 7989
Creation-Date: 2000-10
Order-URL: http://www.nber.org/papers/w7989
File-URL: http://www.nber.org/papers/w7989.pdf
File-Format: application/pdf
Publication-Status: published as Kling, Jeffrey R. "Interpreting Instrumental Variables Estimates Of The Returns To Schooling," Journal of Business and Economic Statistics, 2001, v19(3,Jul), 358-364.
Abstract: This paper synthesizes economic insights from theoretical models of schooling choice based on individual benefits and econometric work interpreting instrumental variables estimates as weighted averages of individual-specific causal effects. Linkages are illustrated using college proximity to instrument for schooling. After characterizing groups differentially affected by the instrument according to family background, I directly compute weights underlying estimation of the overall return. In analyzing the level of schooling at which individuals change their behavior in response to the instrument, I demonstrate that this instrument has its greatest impact on the transition from high school to college. Specification robustness is also examined.
Handle: RePEc:nbr:nberwo:7989
Template-Type: ReDIF-Paper 1.0
Title: Sex, Drugs, and Catholic Schools: Private Schooling and Non-Market Adolescent Behaviors
Classification-JEL: I2
Author-Name: David Figlio
Author-Person: pfi57
Author-Name: Jens Ludwig
Note: EH
Number: 7990
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w7990
File-URL: http://www.nber.org/papers/w7990.pdf
File-Format: application/pdf
Publication-Status: published as David Figlio & Jens Ludwig, 2012. "Sex, Drugs, and Catholic Schools: Private Schooling and Non-Market Adolescent Behaviors," German Economic Review, Verein für Socialpolitik, vol. 13(4), pages 385-415, November.
Abstract: This paper examines the effects of private schooling on adolescent non-market behaviors. We control for differences between private and public school students by making use of the rich set of covariates available with our NELS micro-dataset. We also employ an instrumental-variables strategy that exploits variation across metropolitan areas in the costs that parents face in transporting their children to private schools, which stem from differences in the quality of the local transportation infrastructure. We find evidence to suggest that religious private schooling reduces teen sexual activity, arrests, and use of hard drugs (cocaine), but not drinking, smoking, gang involvement, or marijuana use.
Handle: RePEc:nbr:nberwo:7990
Template-Type: ReDIF-Paper 1.0
Title: Asset Location for Retirement Savers
Classification-JEL: G11; E21
Author-Name: James M. Poterba
Author-Person: ppo19
Author-Name: John B. Shoven
Author-Name: Clemens Sialm
Author-Person: psi59
Note: AG AP PE
Number: 7991
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w7991
File-URL: http://www.nber.org/papers/w7991.pdf
File-Format: application/pdf
Publication-Status: published as Gale, W., J. Shoven, and M. Warshawsky (eds.) Public Policies and Private Pensions. Washington: Brookings Institution, 2004.
Abstract: This paper uses data on actual returns on taxable bonds, tax-exempt bonds, and a small sample of equity mutual funds over the 1962-1998 period to compare two asset location strategies for retirement savers. The first strategy gives priority to holding equities, through equity mutual funds, in a saver's tax-deferred account, while the second strategy gives priority to holding fixed-income investments in the tax-deferred account. We consider high-income taxable individual investors who saved in each year and invested in one of actively-managed funds in our sample. Over the thirty-seven year span that we consider, such savers would have accumulated a larger stock of wealth if they had held their equity mutual fund in their tax-deferred account than if they had held the fund in a conventional taxable form. The explanation for this apparent contradiction of the often-stated bonds in the tax-deferred account' prescription has two parts. First, many equity mutual funds impose substantial tax burdens on their investors. This raises the effective tax rate on investing in equities through mutual funds rather than in a buy-and-hold personal portfolio. Second, taxable investors who wish to hold fixed income assets can do so by holding tax-exempt bonds as well as by holding taxable bonds. The interest rate differential between taxable and tax-exempt bonds suggests that the effective tax rate on fixed income investments may be lower than the statutory tax rate for high-income investors.
Handle: RePEc:nbr:nberwo:7991
Template-Type: ReDIF-Paper 1.0
Title: Private Inflows when Crises are Anticipated: A Case Study of Korea
Author-Name: Michael P. Dooley
Author-Person: pdo13
Author-Name: Inseok Shin
Note: IFM
Number: 7992
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w7992
File-URL: http://www.nber.org/papers/w7992.pdf
File-Format: application/pdf
Publication-Status: published as Michael P. Dooley & Inseok Shin, 1999. "Private inflows when crises are anticipated: a case study of Korea," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
Abstract: Models of financial crises based on distortions in capital markets have strong implications for the behavior of investors leading up to crises. In this paper we evaluate the hypothesis that deregulation of financial markets in Korea provided the incentives and opportunities for a sequence of capital inflows and crisis. We show that deregulation was associated with a sharp declines in the franchise value of Korean banks. Banks responded by expanding their balance sheets and accumulating high risk, high return assets. The regulatory mechanism appears to have failed because of the failure to consolidate onshore and offshore activities of banks. Foreign banks that supplied deposits to Korean banks behaved as if they were insured in that they did not discriminate between weak and strong Korean banks. Finally, this expectation was validated at the time of crisis by government intervention that allowed foreign banks to liquidate their claims on Korean banks.
Handle: RePEc:nbr:nberwo:7992
Template-Type: ReDIF-Paper 1.0
Title: Fear of Floating
Classification-JEL: F31; F33
Author-Name: Guillermo A. Calvo
Author-Person: pca694
Author-Name: Carmen M. Reinhart
Author-Person: pre33
Note: IFM
Number: 7993
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w7993
File-URL: http://www.nber.org/papers/w7993.pdf
File-Format: application/pdf
Publication-Status: published as Calvo, Guillermo A. and Carmen M. Reinhart. "Fear Of Floating," Quarterly Journal of Economics, 2002, v107(2,May), 379-408.
Abstract: In recent years, many countries have suffered severe financial crises, producing a staggering toll on their economies, particularly in emerging markets. One view blames fixed exchange rates-- soft pegs'--for these meltdowns. Adherents to that view advise countries to allow their currency to float. We analyze the behavior of exchange rates, reserves, the monetary aggregates, interest rates, and commodity prices across 154 exchange rate arrangements to assess whether official labels' provide an adequate representation of actual country practice. We find that, countries that say they allow their exchange rate to float mostly do not--there seems to be an epidemic case of fear of floating.' Since countries that are classified as having a free or a managed float mostly resemble noncredible pegs--the so-called demise of fixed exchange rates' is a myth--the fear of floating is pervasive, even among some of the developed countries. We present an analytical framework that helps to understand why there is fear of floating.
Handle: RePEc:nbr:nberwo:7993
Template-Type: ReDIF-Paper 1.0
Title: Wages, Productivity, and the Dynamic Interaction of Businesses and Workers
Classification-JEL: J21; J23
Author-Name: John Haltiwanger
Author-Person: pha231
Author-Name: Julia Lane
Author-Person: pla36
Author-Name: James Spletzer
Author-Person: psp146
Note: LS PR
Number: 7994
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w7994
File-URL: http://www.nber.org/papers/w7994.pdf
File-Format: application/pdf
Publication-Status: published as Haltiwanger, John C. & Lane, Julia I. & Spletzer, James R., 2007. "Wages, productivity, and the dynamic interaction of businesses and workers," Labour Economics, Elsevier, vol. 14(3), pages 575-602, June.
Abstract: This paper exploits a new matched universal and longitudinal employer-employee database at the US Census Bureau to empirically investigate the link between firms' choice of worker mix and the implied relationships between productivity and wages. We particularly focus on the decision making process of new firms and examine the role of both learning and selection. Our key empirical results are: (i) We find substantial and persistent differences in earnings per worker, output per worker, and worker mix across businesses within narrowly defined industries, which remain even after controlling for other observable characteristics. (ii) We find that new businesses exhibit even greater heterogeneity in earnings and productivity than do mature businesses, but that they adjust to the mature business pattern as they age. The adjustment process, while different for earnings and productivity, is consistent both with firms learning as they age and with the exit of mistake' prone firms. (iii) The dynamics of the reduction in productivity heterogeneity of new firms as they age is both complex and very different from the dynamic reduction of earnings heterogeneity.
Handle: RePEc:nbr:nberwo:7994
Template-Type: ReDIF-Paper 1.0
Title: Consumption and Risk Sharing Over the Life Cycle
Classification-JEL: E21; D31
Author-Name: Kjetil Storesletten
Author-Person: pst4
Author-Name: Chris I. Telmer
Author-Person: pte102
Author-Name: Amir Yaron
Author-Person: pya156
Note: AP EFG
Number: 7995
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w7995
File-URL: http://www.nber.org/papers/w7995.pdf
File-Format: application/pdf
Publication-Status: published as Storesletten, Kjetil, Christopher I. Telmer and Amir Yaron. "Consumption And Risk Sharing Over The Life Cycle," Journal of Monetary Economics, 2004, v51(3,Apr), 609-633.
Abstract: A striking feature of U.S. data on income and consumption is that inequality increases with age. Using both panel data and an equilibrium life cycle model, we argue that this is informative for understanding the importance and the characteristics of idiosyncratic labor market risk. We find that uncertainty distributed throughout the working years accounts for 40 percent of life time uncertainty, with the remainder being realized prior to entering the labor market. We estimate that the shocks received over the life cycle contain a highly persistent component, with an autocorrelation coefficient between 0.98 and unity. The joint behavior of earnings and consumption inequality, interpreted using our model, adds to the body of evidence suggesting that labor market risks are imperfectly pooled and that a precautionary motive is an important aspect of U.S. savings behavior. The restrictions imposed by general equilibrium theory play an important role in arriving at each of these conclusions.
Handle: RePEc:nbr:nberwo:7995
Template-Type: ReDIF-Paper 1.0
Title: Does the Internet Make Markets More Competitive?
Classification-JEL: L1; O4
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Author-Name: Austan Goolsbee
Author-Person: pgo49
Note: AG IO PE
Number: 7996
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w7996
File-URL: http://www.nber.org/papers/w7996.pdf
File-Format: application/pdf
Publication-Status: published as Brown, Jeffrey R. and Austan Goolsbee. "Does The Internet Make Markets More Competitive? Evidence From The Life Insurance Industry," Journal of Political Economy, 2002, v110(3,Jun), 481-507.
Abstract: The Internet has the potential to significantly reduce search costs by allowing consumers to engage in low-cost price comparisons online. This paper provides empirical evidence on the impact that the rise of Internet comparison shopping sites has had for the prices of life insurance in the 1990s. Using micro data on individual life insurance policies, the results indicate that, controlling for individual and policy characteristics, a 10 percent increase in the share of individuals in a group using the Internet reduces average insurance prices for the group by as much as 5 percent. Further evidence indicates that prices did not fall with rising Internet usage for insurance types that were not covered by the comparison websites, nor did they in the period before the insurance sites came online. The results suggest that growth of the Internet has reduced term life prices by 8 to 15 percent and increased consumer surplus by $115-215 million per year and perhaps more. The results also show that the initial introduction of the Internet search sites is initially associated with an increase in price dispersion within demographic groups, but as the share of people using the technology rises further, dispersion falls.
Handle: RePEc:nbr:nberwo:7996
Template-Type: ReDIF-Paper 1.0
Title: Japan Premium and Stock Prices: Two Mirrors of Japanese Banking Crises
Classification-JEL: G21; G15
Author-Name: Takatoshi Ito
Author-Name: Kimie Harada
Note: AP CF IFM
Number: 7997
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w7997
File-URL: http://www.nber.org/papers/w7997.pdf
File-Format: application/pdf
Publication-Status: published as as "Credit Derivatives Premium As A New Japan Premium," Journal of Money, Credit and Banking, Vol. 36, no. 5 (October 2004): 965-968
Publication-Status: published as International Journal of Finance & Economics, Vol. 10, no. 3 (July 2005): 195-211
Abstract: This paper investigates how financial troubles among Japanese banks in the second half of the 1990s were viewed by the market. Two indicators, the Japan premium and the stock price index of the banking sector in Tokyo, were examined. Econometric tests were employed to see whether different kinds of investors saw the banking crisis differently, and what kind of news had most impacts on market pricing of Japanese banks. Our findings are as follows. (1) Factors that pushed up the Japan Premium most were the Daiwa Bank incidence in the fall of 1995, failures of large financial institutions in November 1997, and uncertainties in the resolution of banking problem in fall 1998. (2) The bank stock index declined (in relative to the general stock index) most in bank failures, in particular by the Yamaichi Securities failure in November 1997. (3) Individual failures of financial institutions may or may not have impact on other banks' stock prices. (4) The bank stock index and the general stock index historically had co-movements, but the structural changes occurred in the co-movement relationship at around the summer of 1995. (5) News that affected Japan premium and bank stocks are sometimes different. The bank stock price index Granger-causes the Japan premium, but the reverse does not hold. The result is consistent with the view that Japan premium reflects both domestic structural problems and banks' liquidity problem in the euro dollar market, while the bank stock prices reflect the former only.
Handle: RePEc:nbr:nberwo:7997
Template-Type: ReDIF-Paper 1.0
Title: Who Wins the Olympic Games: Economic Development and Medal Totals
Classification-JEL: O10; L83
Author-Name: Andrew B. Bernard
Author-Name: Meghan R. Busse
Note: ITI
Number: 7998
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w7998
File-URL: http://www.nber.org/papers/w7998.pdf
File-Format: application/pdf
Publication-Status: published as Andrew B. Bernard & Meghan R. Busse, 2004. "Who Wins the Olympic Games: Economic Resources and Medal Totals," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 413-417, December.
Abstract: This paper examines determinants of Olympic success at the country level. Does the U.S. win its fair share of Olympic medals? Why does China win 6% of the medals even though it has 1/5 of the world's population? We consider the role of population and economic development in determining medal totals from 1960-1996. We also provide out of sample predictions for the 2000 Olympics in Sydney.
Handle: RePEc:nbr:nberwo:7998
Template-Type: ReDIF-Paper 1.0
Title: Interracial Contact in High School Extracurricular Activities
Classification-JEL: I2
Author-Name: Charles T. Clotfelter
Author-Person: pcl34
Note: CH PE
Number: 7999
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w7999
File-URL: http://www.nber.org/papers/w7999.pdf
File-Format: application/pdf
Publication-Status: published as Clotfelter, Charles T. "Interracial Contact in High School Extracurricular Activities." The Urban Review 34, 1 (March 2002): 24-46.
Abstract: Using data from yearbooks for 194 high schools, this study examines the degree of interracial contact in 8,875 high school teams and other organizations. Tabulations show that the degree of interracial exposure was typically less than what would occur if all organizations in each school had been racially balanced and was much less than the exposure that would have occurred if all organizations reflected the racial composition of the schools containing them. Whereas the nonwhite percentage of the students enrolled in the sample high schools was 25.1 percent, the membership of clubs and teams was 21.1 percent, reflecting a lower rate of participation by nonwhites. Furthermore, because the racial compositions of clubs and teams were not uniform, the average white member was in an organization that was only 15.6 percent nonwhite. Although clearly less than its theoretical maximum, this rate of contact nonetheless appears to be much higher than what would occur if friendships were the only vehicle for interracial contact outside the classroom. Finally, the extent of segregation associated with these organizations was the same or less in the South as compared to the rest of the country.
Handle: RePEc:nbr:nberwo:7999
Template-Type: ReDIF-Paper 1.0
Title: Understanding Mid-Life and Older Age Mortality Declines: Evidence from Union Army Veterans
Classification-JEL: J1; I1
Author-Name: Dora L. Costa
Author-Person: pco358
Note: AG DAE EH
Number: 8000
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8000
File-URL: http://www.nber.org/papers/w8000.pdf
File-Format: application/pdf
Publication-Status: published as Costa, Dora L. "Understanding Mid-Life And Older Age Mortality Declines: Evidence From Union Army Veterans," Journal of Econometrics, 2003, v112(1,Jan), 175-192.
Abstract: During the twentieth century the 17 year survival rate of 50-64 year old men rose by 24 percentage points. I examine waiting time until death from all natural causes and from all chronic, all acute, respiratory, stomach, infectious, all heart, ischemic, and myocarditis disease among Union Army veterans first observed in 1900. The effect of such specific early life infections as stomach ailments, rheumatic fever, syphilis, measles, respiratory infections, malaria, diarrhea, and tuberculosis on older age mortality depended upon the cause of death that was being investigated but all of these infections reduced cause-specific longevity. Men who grew up in a large city faced an elevated mortality risk from all causes of death controlling for later residence. The immediate effect of reduced infectious disease rates and reduced mortality from acute disease accounts for 62 percent of the twentieth century increase in survival rates and the long-run effect of reduced early life infectious disease rates accounts for 12 percent of the increase. The findings imply that although the current effects of improved public health and medical care are larger than the cohort effects, cost-benefit analyses and forecasts of future mortality still need to account for long-run effects; that mortality in populations in which infectious, respiratory, and parasitic deaths are common is best described by a competing risks model; and, that the urbanization that accompanied early industrialization was extremely costly.
Handle: RePEc:nbr:nberwo:8000
Template-Type: ReDIF-Paper 1.0
Title: The Environmental Kuznets Curve: Exploring A Fresh Specification
Classification-JEL: O1; C4
Author-Name: David F. Bradford
Author-Name: Rebecca Schlieckert
Author-Name: Stephen H. Shore
Note: PE
Number: 8001
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8001
File-URL: http://www.nber.org/papers/w8001.pdf
File-Format: application/pdf
Publication-Status: published as Bradford, David F., Rebecca A. Fender, Stephen H. Shore, and Martin Wagner (2005) "The Environmental Kuznets Curve: Exploring a Fresh Specification," Contributions to Economic Analysis & Policy: Vol. 4: Iss. 1, Article 5. (B.E. Journal of Economic Analysis and Policy)
Abstract: Using a new specification, we reanalyze the data on worldwide environmental quality investigated by Gene Grossman and Alan Krueger in a well-known paper on the environmental Kuznets curve (which postulates an inverse U shaped relationship between income level and pollution). The new specification enables us to draw conclusions from fixed effects estimation. In general, we find support for the environmental Kuznets curve for some pollutants and for its rejection in other cases. The fresh specification offers some promise for analysis of such phenomena.
Handle: RePEc:nbr:nberwo:8001
Template-Type: ReDIF-Paper 1.0
Title: On the Desirability of a Regional Basket Currency Arrangement
Classification-JEL: F31; F33
Author-Name: Eiji Ogawa
Author-Name: Takatoshi Ito
Note: IFM
Number: 8002
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8002
File-URL: http://www.nber.org/papers/w8002.pdf
File-Format: application/pdf
Publication-Status: published as Ogawa, Eiji and Takatoshi Ito. "On The Desirability Of A Regional Basket Currency Arrangement," Journal of the Japanese and International Economies, 2002, v16(3,Sep), 317-334.
Abstract: This paper considers a theoretical model to examine an optimal exchange rate regime for (Asian) emerging market economies that export goods to the U.S., Japan, and neighboring countries. The optimality of the exchange rate regime is defined as minimizing the fluctuation of trade balances, in the environment where the yen-dollar exchange rate fluctuates. Since the de facto dollar peg regime is blamed as one of the factors that caused the Asian currency crisis, the question of the optimal exchange rate regime is quite relevant in Asia. The novelty of this paper is to show how an emerging market economy's choice of the exchange rate regime (or weights in the basket) is dependent on the neighboring country's. The dollar weights in the currency baskets of the two countries are determined as a Nash equilibrium. In general, there are multiple equilibria, and a coordination failure' may result.
Handle: RePEc:nbr:nberwo:8002
Template-Type: ReDIF-Paper 1.0
Title: Bank Runs and Banking Policies: Lessons for African Policymakers
Classification-JEL: F3; G2
Author-Name: Edward J. Kane
Author-Person: pka853
Author-Name: Tara Rice
Note: CF IFM
Number: 8003
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8003
File-URL: http://www.nber.org/papers/w8003.pdf
File-Format: application/pdf
Publication-Status: published as Edward J. Kane & Tara Rice, 2001. "Bank Runs and Banking Policies: Lessons for African Policy Makers," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 10(suppl_1), pages 36-71.
Abstract: This paper documents and explains the near-permanent banking stress African countries have experienced during the last 20 years. The central hypothesis is that banking stress comes predominantly from unbooked losses and that the level of unbooked losses a banking system can accumulate depends on its information environment and on the effectiveness of government efforts to supervise and guarantee bank solvency. African depositors face high costs for mitigating the loss exposures that banks and regulators impose on them and African regulators have not been made accountable for these costs. We present evidence that over 1980-99 the average length of time an African banking system spent in crisis increased with the level of government corruption.
Handle: RePEc:nbr:nberwo:8003
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Legalized Abortion on Crime
Author-Name: John Donohue
Author-Person: pdo40
Author-Name: Steven Levitt
Author-Person: ple59
Note: CH LE PE
Number: 8004
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8004
File-URL: http://www.nber.org/papers/w8004.pdf
File-Format: application/pdf
Publication-Status: published as Donohue, John J., III and Steven D. Levitt. "The Impact Of Legalized Abortion On Crime," Quarterly Journal of Economics, 2001, v116(2,May), 379-420.
Abstract: We offer evidence that legalized abortion has contributed significantly to recent crime reductions. Crime began to fall roughly 18 years after abortion legalization. The 5 states that allowed abortion in 1970 experienced declines earlier than the rest of the nation, which legalized in 1973 with Roe v. Wade. States with high abortion rates in the 1970s and 1980s experienced greater crime reductions in the 1990s. In high abortion states, only arrests of those born after abortion legalization fall relative to low abortion states. Legalized abortion appears to account for as much as 50 percent of the recent drop in crime.
Handle: RePEc:nbr:nberwo:8004
Template-Type: ReDIF-Paper 1.0
Title: GATT-Think
Classification-JEL: F02; F11
Author-Name: Kyle Bagwell
Author-Person: pba409
Author-Name: Robert W. Staiger
Author-Person: pst85
Note: ITI
Number: 8005
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8005
File-URL: http://www.nber.org/papers/w8005.pdf
File-Format: application/pdf
Abstract: We describe recent work on the theory of trade agreements that speaks to the purpose and design of GATT. Our discussion proceeds in three steps. First, we examine the purpose of a trade agreement. In both the traditional economic and the political-economy approaches to the study of trade agreements, the problem for a trade agreement to solve is the excessive protection that arises in the absence of an agreement as a consequence of the terms-of-trade externality. Second, we consider the origin and design of GATT. We note that GATT is a rules-based institution whose origin can be traced to the disastrous economic performance that accompanied the high tariffs of the 1920's and 1930's. Finally, we review the theoretical literature that interprets and evaluates the institutional features found in GATT. We consider in particular whether GATT articles can be interpreted as offering negotiation rules that help governments undo the inefficient restrictions in trade that are caused by the terms-of-trade externality. On the whole, our review suggests that the core principles of GATT indeed may be interpreted in this manner. Specifically, we report findings that indicate that the principles of reciprocity and non-discrimination work in concert to remedy the inefficiency created by the terms-of-trade externality. We also extract a variety of predictions from the literature on enforcement and trade policy, and we argue that these predictions are broadly compatible with both the design of GATT and certain historical experiences in trade-policy conduct. We thus interpret the literature reviewed here as providing a strong presumption for the view that GATT can be understood as an institution whose central principles are well-designed to assist governments in their attempt to escape from a terms-of-trade-driven Prisoners' Dilemma. Our review therefore offers support for the (politically-augmented) terms-of-trade theory as an appropriate framework within which to interpret and evaluate GATT.
Handle: RePEc:nbr:nberwo:8005
Template-Type: ReDIF-Paper 1.0
Title: Fixing for Your Life
Author-Name: Guillermo A. Calvo
Author-Person: pca694
Author-Name: Carmen M. Reinhart
Author-Person: pre33
Note: IFM
Number: 8006
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8006
File-URL: http://www.nber.org/papers/w8006.pdf
File-Format: application/pdf
Publication-Status: published as Calvo, G. (ed.) Emerging Capital Markets in Turmoil: Bad Luck or Bad Policy? Cambridge, MA: MIT Press 2005.
Abstract: The Asian crisis took place against a background of exchange rate regimes that were characterized as soft pegs. This has led many analysts to conclude that the peg did it' and that emerging markets (EMs) should just say no' to pegged exchange rates. We present evidence that EMs are very different from developed economies in key dimensions that play a key role when it comes to the choice of exchange rate regime--floating for EMs is no panacea. In EMs currency crashes are contractionary, the adjustments in the current account are far more acute. Credibility and market access, as captured in the behavior of credit ratings and interest rates, is adversely affected by devaluations or depreciations. Exchange rate volatility is more damaging to trade and the passthrough from exchange rate swings to inflation is far higher in EMs. These differences between emerging and developed economies may explain EMs reluctance to tolerate large exchange rate movements. In a simple framework we illustrate why large exchange rate swings are feared when access to international credit may be lost.
Handle: RePEc:nbr:nberwo:8006
Template-Type: ReDIF-Paper 1.0
Title: The Long-Term Gains from GAIN: A Re-Analysis of the Impacts of the California GAIN Program
Classification-JEL: I3
Author-Name: V. Joseph Hotz
Author-Person: pho4
Author-Name: Guido W. Imbens
Author-Person: pim4
Author-Name: Jacob A. Klerman
Note: CH LS
Number: 8007
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8007
File-URL: http://www.nber.org/papers/w8007.pdf
File-Format: application/pdf
Publication-Status: published as Hotz, V. Joseph, Guido W. Imbens and Jacob A. Klerman. "Evaluating The Differential Effects Of Alternative Welfare-to-Work Training Components: A Reanalysis Of The California GAIN Program," Journal of Labor Economics, 2006, v24(3,Jul), 521-566.
Abstract: As part of recent reforms of the welfare programs in the U.S., many states and localities have refocused their Welfare-to-Work programs from an emphasis on human capital acquisition (i.e., providing basic education and vocational training) to an emphasis on "work-first," (i.e., moving welfare recipients into unsubsidized employment as quickly as possible). This change in emphasis has been motivated, in part, by results from the experimental evaluation, conducted by the Manpower Demonstration Research Corporation (MDRC), of California's Greater Avenues to Independence (GAIN) programs during the early 1990s. Their evaluation found that, compared to programs in other countries that emphasized skill accumulation, the work-first program in Riverside County had larger effects on employment, earnings, and welfare receipt. In addition, the Riverside program was cheaper per recipient than the other programs. The paper reexamines the GAIN programs from two complementary perspectives. First, we extend the earlier analysis through nine years post-randomization, which is the longest follow-up of any randomized training program, and find that the stronger impacts of Riverside County's work first program tend to shrink, whereas the weaker impacts for the human capital programs in Alameda and Los Angeles Counties tend to remain constant or even grow over time. Second, we develop and implement methods to allow the comparison of programs implemented by random assignment in different places despite striking differences in the composition of the participant populations. On a substantive level, our reexamination of the GAIN experiment lead us to conclude that although the work first programs were more successful than the human capital accumulation programs in the early years, this relative advantage disappears in later years. On a methodological level, our results suggest that--at least in this welfare context--these methods are a promising approach both for the estimation of program effects from non-experimental data and for extrapolating program results from one location to a different location with a different population mix.
Handle: RePEc:nbr:nberwo:8007
Template-Type: ReDIF-Paper 1.0
Title: Evolution and Revolution in the Argentine Banking System under Convertibility: The Roles of Crises and Path Dependence
Classification-JEL: E52; G21
Author-Name: Lee J. Alston
Author-Person: pal162
Author-Name: Andres Gallo
Author-Person: pga528
Note: CH IFM
Number: 8008
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8008
File-URL: http://www.nber.org/papers/w8008.pdf
File-Format: application/pdf
Abstract: We provide an analytical narrative of the political and economic causes and consequences of institutional changes in the Argentine banking system. We devote most of our attention to the privatization of the provincial banks. Our story differs from the prevailing wisdom in its stress on the key roles played by convertibility and an independent Central Bank rather than the Fondo Fiduciario.
Handle: RePEc:nbr:nberwo:8008
Template-Type: ReDIF-Paper 1.0
Title: The Uneasy Marriage of Export Incentives and the Income Tax
Classification-JEL: H87; H25
Author-Name: Mihir A. Desai
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: ITI PE
Number: 8009
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8009
File-URL: http://www.nber.org/papers/w8009.pdf
File-Format: application/pdf
Publication-Status: published as The Uneasy Marriage of Export Incentives and the Income Tax, Mihir A. Desai, James R. Hines, Jr.. in Tax Policy and the Economy, Volume 15, Poterba. 2001
Abstract: This paper investigates the economic impact of tax incentives for American exports. These incentives include a partial tax exemption for export profits (available by routing exports through Foreign Sales Corporations), and the allocation of some export profits to foreign source income for purposes of U.S. taxation. The analysis highlights three important aspects of these policies. First, official figures appear to understate dramatically the tax expenditures associated with some U.S. export incentives. Correctly measured, total export benefits provided through the income tax are equivalent to a one percent ad valorem subsidy. Second, the 1984 imposition of more rigorous requirements for obtaining tax benefits through Foreign Sales Corporations is contemporaneous with a significant change in the pattern of U.S. exports. Estimates imply that the 1984 changes reduced U.S. manufacturing exports by 3.1 percent. Third, there were significant market reactions to the 1997 event in which the European Union charged that U.S. income tax provisions are inconsistent with World Trade Organization rules prohibiting export subsidies. Filing of the European complaint coincides with a 0.1 percent fall in the value of the U.S. dollar and steep drops in the share prices of major American exporters.
Handle: RePEc:nbr:nberwo:8009
Template-Type: ReDIF-Paper 1.0
Title: Macroeconomic Factors and Antidumping Filings: Evidence from Four Countries
Classification-JEL: F13
Author-Name: Michael M. Knetter
Author-Name: Thomas J. Prusa
Author-Person: ppr249
Note: ITI
Number: 8010
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8010
File-URL: http://www.nber.org/papers/w8010.pdf
File-Format: application/pdf
Publication-Status: published as Knetter, Michael M. and Thomas J. Prusa. "Macroeconomic Factors and Antidumping Filings: Evidence from Four Countries." Journal of International Economics 61, 1 (October 2003): 1-17.
Publication-Status: published as Nelson, Douglas R. and Hylke Vandenbussche (eds.) The WTO and Anti-Dumping. Volume 1, Critical Perspectives on the Global Trading System and the WTO, vol. 7. An Elgar Reference Collection. Cheltenham, U.K. and Northampton, MA: Elgar, 2005.
Abstract: This paper examines the relationship between antidumping filings and macroeconomic factors. We show that real exchange rate fluctuations affect the two criteria for dumping in opposite ways, making the overall effect on filings ambiguous in theory. Interestingly, no such ambiguity is evidenced in the data. Examining the filing patterns of the four major users of AD law during the 1980--98 period we find that real exchange rates and domestic real GDP growth both have statistically significant impacts on filings. Bilateral filing data indicate that a one-standard deviation real appreciation of the domestic currency increases filings by 33% while a one-standard deviation fall in domestic real GDP increases filings by 23%.
Handle: RePEc:nbr:nberwo:8010
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Capital Gains Taxes on Stock Price Reactions to S&P 500 Inclusion
Classification-JEL: H24; G12
Author-Name: Jennifer L. Blouin
Author-Name: Jana Smith Raedy
Author-Name: Douglas A. Shackelford
Author-Person: psh631
Note: AP PE
Number: 8011
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8011
File-URL: http://www.nber.org/papers/w8011.pdf
File-Format: application/pdf
Publication-Status: published as Blouin, Jennifer L., Jana Smith Raedy and Douglas A. Shackelford. "Equity Price Pressure From The 1998 Reduction In The Capital Gains Holding Period." Journal of the American Taxation Association 24(2002 Supp): 70-93.
Abstract: This paper contributes to our understanding of the determinants of price responses to inclusion in the S&P 500 by providing evidence consistent with capital gains tax planning impacting stock reactions. Tests are conducted on 426 additions from 1978-1999. We regress the returns on the first trading day following announcement on a capital gains tax measure and controls. The evidence is consistent with the share prices of appreciated firms being temporarily bid up to compensate individual shareholders for any unanticipated capital gains taxes triggered when they sell to index funds and the share prices of depreciated firms being temporarily diminished when individual shareholders sell because buyers and sellers share the tax savings associated with deductible capital losses. We infer from these findings that in rebalancing their portfolios after S&P 500 additions, index funds share individual shareholders' capital gains taxes (or tax savings) through sales price adjustments. Consistent with temporary price pressure, further analysis shows that much of the price reaction unwinds over the following week's trading. Finding that personal capital gains taxes affect stock returns in a setting that does not bias toward taxes mattering suggests that capital gains tax capitalization may be a pervasive feature in equity valuation.
Handle: RePEc:nbr:nberwo:8011
Template-Type: ReDIF-Paper 1.0
Title: A Century of Purchasing-Power Parity
Classification-JEL: F41; F02
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE IFM ITI
Number: 8012
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8012
File-URL: http://www.nber.org/papers/w8012.pdf
File-Format: application/pdf
Publication-Status: published as Taylor, Alan M. "A Century Of Purchasing-Power Parity," Review of Economics and Statistics, 2002, v84(1,Feb), 139-150.
Abstract: This paper investigates purchasing-power parity (PPP) since the late nineteenth century. I collected data for a group of twenty countries over one hundred years, a larger historical panel of annual data than has ever been studied before. The evidence for long-run PPP is favorable using recent multivariate and univariate tests of higher power. Residual variance analysis shows that episodes of floating exchange rates have generally been associated with larger deviations from PPP, as expected; this result is not attributable to significantly greater persistence (longer halflives) of deviations in such regimes, but is due to the larger shocks to the real-exchange rate process in such episodes. In the course of the twentieth century there was relatively little change in the capacity of international market integration to smooth out real exchange rate shocks. Instead, changes in the size of shocks depended on the political economy of monetary and exchange-rate regime choice under the constraints imposed by the trilemma.
Handle: RePEc:nbr:nberwo:8012
Template-Type: ReDIF-Paper 1.0
Title: Scale Economies and the Geographic Concentration of Industry
Classification-JEL: F2; J6
Author-Name: Gordon H. Hanson
Author-Person: pha80
Note: ITI
Number: 8013
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8013
File-URL: http://www.nber.org/papers/w8013.pdf
File-Format: application/pdf
Publication-Status: published as Hanson, Gordon H. "Scale Economies and the Geographic Concentration of Industry." Journal of Economic Geography 1, 3 (July 2001): 255-76.
Abstract: In recent empirical literature on spatial agglomeration, many papers find evidence consistent with location-specific externalities of some sort. Our willingness to accept evidence of agglomeration economies depends on how well key estimation problems have been addressed. Three issues are particularly troublesome for identifying agglomeration effects: unobserved regional characteristics, simultaneity in regional data, and multiple sources of externalities. Two empirical results appear to be robust to problems created by the first two issues: (a) individual wages are increasing in the presence of more-educated workers in the local labor force, which is consistent with localized human-capital externalities, and (b) long-run industry growth is higher in locations with a wider range of industrial activities, which suggests that firms benefit from being in more diverse urban environments. Other evidence is supportive of agglomeration effects related to regional demand linkages and short-run, industry-specific externalities.
Handle: RePEc:nbr:nberwo:8013
Template-Type: ReDIF-Paper 1.0
Title: Are Profits Shared Across Borders? Evidence on International Rent Sharing
Classification-JEL: F23; J30
Author-Name: John W. Budd
Author-Person: pbu1
Author-Name: Matthew J.Slaughter
Note: ITI LS
Number: 8014
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8014
File-URL: http://www.nber.org/papers/w8014.pdf
File-Format: application/pdf
Publication-Status: published as Budd, John W. and Matthew J. Slaughter. "Are Profits Shared Across Borders? Evidence on International Rent Sharing." Journal of Labor Economics 22, 3 (2004).
Abstract: In the literature on rent sharing in the labor market, many studies have documented a robustly positive correlation between wages for various micro-units firms, individuals, union-firm bargaining units with profits per worker at the level of that micro-unit's industry, where industry profits are interpreted as prosperity in the product market enjoyed by firms and available for sharing with workers. But these industry studies delineate product markets by the same country as that of the micro-units, and this implicitly closed-economy perspective may miss important international aspects of wage setting. In this paper we examine how profit sharing may be conditioned by the international linkages which help shape economic openness, by analyzing negotiated contract wages for a sample of over 1000 Canadian labor contracts spanning all manufacturing from 1980 through 1992. Our central finding is that the relevant measure of product-market prosperity, and thus the pattern of rent or profit sharing, varies significantly across international linkages including multinational ownership, union type, and trade barriers. There seems to be international rent sharing, with profit sharing across borders conditioned by institutions at both the firm and industry level.
Handle: RePEc:nbr:nberwo:8014
Template-Type: ReDIF-Paper 1.0
Title: Is Foreign Direct Investment a Channel of Knowledge Spillovers? Evidence from Japan's FDI in the United States
Classification-JEL: F2; O3
Author-Name: Lee Branstetter
Author-Person: pbr854
Note: ITI PR
Number: 8015
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8015
File-URL: http://www.nber.org/papers/w8015.pdf
File-Format: application/pdf
Publication-Status: published as Branstetter, Lee. "Is Foreign Direct Investment A Channel Of Knowledge Spillovers? Evidence From Japan's FDI In The United States," Journal of International Economics, 2006, v68(2,Mar), 325-344.
Abstract: Recent empirical work has examined the extent to which international trade fosters international spillovers' of technological information. FDI is an alternate, potentially equally important channel for the mediation of such knowledge spillovers. I introduce a framework for measuring international knowledge spillovers at the firm level, and I use this framework to directly test the hypothesis that FDI is a channel of knowledge spillovers for Japanese multinationals undertaking direct investments in the United States. Using an original firm-level data set on Japanese firms' FDI and innovative activity find evidence that FDI increases the flow of knowledge spillovers both from and to the investing Japanese firms.
Handle: RePEc:nbr:nberwo:8015
Template-Type: ReDIF-Paper 1.0
Title: 12 Million Salaried Workers Are Missing
Classification-JEL: J33; Z13
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Note: LS
Number: 8016
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8016
File-URL: http://www.nber.org/papers/w8016.pdf
File-Format: application/pdf
Publication-Status: published as Daniel S. Hamermesh, 2002. "12 Million Salaried Workers are Missing," ILR Review, Cornell University, ILR School, vol. 55(4), pages 649-666, July.
Abstract: Evidence from Current Population Surveys through 1997, various cohorts of the National Longitudinal Surveys, and the Panel Study of Income Dynamics suggests that the fraction of American employees paid salaries stayed constant from the late 1960s through the late 1970s, but fell slightly thereafter through the late 1990s. Accounting for the changing industrial, occupational, demographic and economic structure of the work force shows that the fraction was 9 percentage points below what would have been expected in the late 1970s. This shortfall is not explained by growth in the temporary help industry, by institutional changes in overtime or wage payment regulation, by the increasing openness of American labor and product markets, nor by convergence of nonwage aspects of hourly and salaried employment. A theory of worker commitment and employers' monitoring costs explains the determination of pay status. While monitoring costs may have changed consistent with the decline in salaried work, only declining worker commitment is also consistent with an observed relative decline in earnings of hourly workers. Various waves of the General Social Surveys provide direct evidence that workers' commitment/trustworthiness declined during this period. Data from several cohorts of men in the NLS imply that there was a detrimental change in the work attitudes of young men in the lower half of the distribution of early-career job satisfaction, a conclusion that is bolstered by the relative decline in job tenure among hourly-paid workers.
Handle: RePEc:nbr:nberwo:8016
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Business-to-Business E-Commerce on Transaction Costs
Classification-JEL: D2; D4
Author-Name: Luis Garicano
Author-Person: pga77
Author-Name: Steven N. Kaplan
Note: CF IO
Number: 8017
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8017
File-URL: http://www.nber.org/papers/w8017.pdf
File-Format: application/pdf
Publication-Status: published as Garicano, Luis & Kaplan, Steven N, 2001. "The Effects of Business-to-Business E-Commerce on Transaction Costs," Journal of Industrial Economics, Blackwell Publishing, vol. 49(4), pages 463-85, December.
Publication-Status: published as The Effects of Business-to-Business E-Commerce on Transaction Costs, Luis Garicano, Steven N. Kaplan. in E-commerce, Borenstein and Saloner. 2001
Abstract: In this paper, we study the changes in transaction costs from the introduction of the Internet in transactions between firms (i.e., business-to-business (B2B) e-commerce). We begin with a conceptual framework to organize the changes in transaction costs that are likely to result when a transaction is transferred from a physical marketplace to an Internet-based one. Following Milgrom and Roberts (1992), we differentiate between the impact on coordination costs and motivation costs. We argue that it is likely that B2B e-commerce reduces coordination costs and increases efficiency. We classify these efficiencies into three broad categories (1) process improvements; (2) marketplace benefits; and (3) indirect improvements. At the same time, B2B e-commerce affects incentive costs. In particular, we discuss the impact of the introduction of e-commerce on informational asymmetries. We implement this framework by analyzing detailed internal data from one Internet-based firm to measure process improvements, marketplace benefits, and motivation costs. We present less detailed data and analyses for one other firm. Our results suggest that process improvements and marketplace benefits are potentially large. We find little evidence that informational asymmetries are more important in the electronic marketplace we study than the existing physical ones.
Handle: RePEc:nbr:nberwo:8017
Template-Type: ReDIF-Paper 1.0
Title: Retrospective vs. Prospective Analyses of School Inputs: The Case of Flip Charts in Kenya
Classification-JEL: I21; N37
Author-Name: Paul Glewwe
Author-Person: pgl14
Author-Name: Michael Kremer
Author-Person: pkr20
Author-Name: Sylvie Moulin
Author-Name: Eric Zitzewitz
Author-Person: pzi23
Note: CH
Number: 8018
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8018
File-URL: http://www.nber.org/papers/w8018.pdf
File-Format: application/pdf
Publication-Status: published as Glewwe, Paul & Kremer, Michael & Moulin, Sylvie & Zitzewitz, Eric, 2004. "Retrospective vs. prospective analyses of school inputs: the case of flip charts in Kenya," Journal of Development Economics, Elsevier, vol. 74(1), pages 251-268, June.
Abstract: This paper compares retrospective and prospective analyses of the effect of flip charts on test scores in rural Kenyan schools. Retrospective estimates that focus on subjects for which flip charts are used suggest that flip charts raise test scores by up to 20 percent of a standard deviation. Controlling for other educational inputs does not reduce this estimate. In contrast, prospective estimators based on a study of 178 schools, half of which were randomly selected to receive charts, provide no evidence that flip charts increase test scores. One interpretation is that the retrospective results were subject to omitted variable bias despite the inclusion of control variables. If the direction of omitted variable bias were similar in other retrospective analyses of educational inputs in developing countries, the effects of inputs may be even more modest than retrospective studies suggest. Bias appears to be reduced by a differences-in-differences estimator that examines the impact of flip charts on the relative performance of students in flip chart and other subjects across schools with and without flip charts, but it is not clear that this approach is applicable more generally.
Handle: RePEc:nbr:nberwo:8018
Template-Type: ReDIF-Paper 1.0
Title: What's in a Grade? School Report Cards and House Prices
Classification-JEL: I2; H7
Author-Name: David N. Figlio
Author-Person: pfi57
Author-Name: Maurice E. Lucas
Note: CH PE
Number: 8019
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8019
File-URL: http://www.nber.org/papers/w8019.pdf
File-Format: application/pdf
Publication-Status: published as Figlio, David N. and Maurice E. Lucas. "What's In A Grade? School Report Cards And The Housing Market," American Economic Review, 2004, v94(3,Jun), 591-604.
Abstract: Throughout the last decade, many states around the country have begun making public student test scores or other evaluative measures of school quality available to the general public. The most recent trends in state policies under consideration, already enacted in Florida and a n major component of George W. Bush's education platform, involve the assignment of letter grades to rate school quality. Because school quality is one of a group of local public goods purchased along with a house, one would anticipate that additional information about school quality would capitalize into real estate values. This paper takes the first look at the role that this type of added information plays in the capitalization of school quality measures. We use rich student test score and housing value data from a medium-sized Florida school district, one of the nation's 200 largest, to directly investigate this link. Using data on repeat sales of properties before and after the assignment of school letter grades, we find significant evidence that arbitrary distinctions embedded in school report cards lead to major housing price effects.
Handle: RePEc:nbr:nberwo:8019
Template-Type: ReDIF-Paper 1.0
Title: Managed Care and Technology Adoption in Health Care: Evidence from Magnetic Resonance Imaging
Classification-JEL: I1
Author-Name: Laurence C. Baker
Note: EH PR
Number: 8020
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8020
File-URL: http://www.nber.org/papers/w8020.pdf
File-Format: application/pdf
Publication-Status: published as Baker, Laurence C. and Ciaran S. Phibbs. "Managed Care, Technology Adoption And Health Care: The Adoption Of Neonatal Intensive Care," Rand Journal of Economics, 2002, v33(3,Autumn), 524-548.
Abstract: Increasing managed care activity could influence the adoption and diffusion of new medical technologies. This paper empirically examines the relationship between HMO market share and the diffusion of magnetic resonance imaging (MRI) equipment. Across markets, increases in HMO market share are associated with slower diffusion of MRI into hospitals between 1983 and 1993, and with substantially lower overall MRI availability in and outside of hospitals in the mid and later 1990s. High managed care areas also had markedly lower rates of MRI procedure use. These results suggest that technology adoption in health care can respond to changes in financial and other incentives associated with managed care, which may have implications for health care costs and patient welfare.
Handle: RePEc:nbr:nberwo:8020
Template-Type: ReDIF-Paper 1.0
Title: How Elastic is the Firm's Demand for Health Insurance?
Classification-JEL: H51; I18
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Michael Lettau
Note: EH PE
Number: 8021
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8021
File-URL: http://www.nber.org/papers/w8021.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan and Michael Lettau. "How Elastic Is The Firm's Demand For Health Insurance?," Journal of Public Economics, 2004, v88(7-8,Jul), 1273-1293.
Abstract: We investigate the impact of tax subsidies on the firms decision to offer insurance, and on conditional firm spending on insurance. We do so using the micro-data underlying the Employee Compensation Index, which has a major advantage for this exercise: the matching of very high quality compensation data with information on a sample of workers in the firm. We find that, overall, there is a modest elasticity of insurance offering with respect to after-tax prices (elasticity of -0.31 to -0.41), but a larger elasticity of insurance spending (elasticity of 0.66 to 0.99). We also find that the elasticity of offering is driven solely by small firms, for whom the elasticity is much larger, but that spending is more elastic in large firms. We provide some evidence on how the aggregation of worker preferences determines benefits provision decisions. In particular, we find evidence to support a median voter model of benefits determination, along with some additional influence for the most highly compensated workers in the firm. Our simulation results suggest that major tax reform could lead to an enormous reduction in employer-provided health insurance spending.
Handle: RePEc:nbr:nberwo:8021
Template-Type: ReDIF-Paper 1.0
Title: Technological Change, the Labor Market and the Stock Market
Classification-JEL: E24; J64
Author-Name: Rodolfo E. Manuelli
Note: EFG
Number: 8022
Creation-Date: 2000-11
Order-URL: http://www.nber.org/papers/w8022
File-URL: http://www.nber.org/papers/w8022.pdf
File-Format: application/pdf
Abstract: This paper presents a model in which a partially anticipated technological shock results, in the short-run, in lower investment and higher unemployment. Because of the expectation of future lower profits, the market value of existing firms --and the wages they pay-- decrease before the technology becomes available. When the new technology arrives, the market value of new firms rises, investment and average wages increase, but endogenous gradual adoption results in temporary wage dispersion among identical workers. The model shows that the factors that affect the rate of adoption of a new technology also influence the cross sectional dispersion of labor earnings among identical workers, and firms' market values. The predictions of the model seem to be broadly consistent with the U.S. experience of the last thirty years.
Handle: RePEc:nbr:nberwo:8022
Template-Type: ReDIF-Paper 1.0
Title: Generalized Solow-Neutral Technical Progress and Postwar Economic Growth
Classification-JEL: O3; O4
Author-Name: Michael J. Boskin
Author-Name: Lawrence J. Lau
Note: EFG
Number: 8023
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8023
File-URL: http://www.nber.org/papers/w8023.pdf
File-Format: application/pdf
Abstract: Using revised, updated, and consistent annual post-World War II data from the G-7 countries developed by us, we econometrically estimate and test alternative explanations of the structure of economic growth in a model with three inputs tangible capital, labor, and human capital which permits the identification of the magnitudes of and biases in both returns to scale and technical progress. We find: 1. Technical progress is simultaneously purely tangible capital and human capital augmenting, that is, generalized Solow-neutral.' This finding provides an alternative explanation of the slow pace of convergence in real GDP per capita: the benefits from technical progress depend directly on the levels of tangible and human capital; countries with higher levels of capital realize higher rates of technical progress.2. Technical progress has been capital, not labor, saving and thus is not a cause of systemic structural unemployment. 3. Technical progress accounts for more than 50 percent of the economic growth of the G-7 countries except Canada. Tangible capital input is next most important; together with technical progress, they account for three quarters or more of the growth of real output in the G-7 countries, except Canada. 4. The most important source of the growth slowdown since the mid-1970's decline in the rate of capital (both tangible and human)-augmenting technical progress.
Handle: RePEc:nbr:nberwo:8023
Template-Type: ReDIF-Paper 1.0
Title: A Framework for Applied Dynamic Analysis in I.O.
Classification-JEL: L0; L1
Author-Name: Ariel Pakes
Author-Person: ppa20
Note: IO PR
Number: 8024
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8024
File-URL: http://www.nber.org/papers/w8024.pdf
File-Format: application/pdf
Publication-Status: published as Handbook of Industrial Organization Volume 3. Elsevier, 2007.
Abstract: This paper outlines a framework which computes and analyzes the equilibria from a class of dynamic games. The framework dates to Ericson and Pakes (1995), and allows for a finite number of heterogeneous firms, sequential investments with stochastic outcomes, and entry and exit. The equilibrium analyzed is a Markov Perfect equilibrium in the sense of Maskin and Tirole (1988). The simplest version of the framework is supported by a publically accessible computer program which computes equilibrium policies for user-specified primitives, and then analyzes the evolution of the industry from user-specified initial conditions. We begin by outlining the publically accessible framework. It allows for three types of competition in the spot market for current output (specified up to a set of parameter values set by the user), and has modules which allow the user to compare the industry structures generated by the Markov Perfect equilibrium to those that would be generated by a social planner and to those that would be generated by prefect collusion.' Next we review extensions that have been made to the simple framework. These were largely made by other authors who needed to enrich the framework so that it could be used to provide a realistic analysis of particular applied problems. The third section provides a simple way of evaluating the computational burden of the algorithm for a given set of primitives, and then shows that computational constraints are still binding in many applied situations. The last section reviews two computational algorithms designed to alleviate this computational constraint; one of which is based on functional form approximations and the other on learning techniques similar to those used in the artificial intelligence literature.
Handle: RePEc:nbr:nberwo:8024
Template-Type: ReDIF-Paper 1.0
Title: Money and Inflation in the Euro Area: A Case for Monetary Indicators?
Classification-JEL: E42; E52
Author-Name: Stefan Gerlach
Author-Person: pge41
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: ME
Number: 8025
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8025
File-URL: http://www.nber.org/papers/w8025.pdf
File-Format: application/pdf
Publication-Status: published as Gerlach, Stefan and Lars E. O. Svensson. "Money And Inflation In The Euro Area: A Case For Monetary Indicators?," Journal of Monetary Economics, 2003, v50(8,Nov), 1649-1672.
Abstract: This paper studies the relationship between inflation, output, money and interest rates in the euro area, using data spanning 1980 2000. The P* model is shown to have considerable empirical support. Thus, the price gap' or, equivalently, the real money gap' (the gap between current real balances and long-run equilibrium real balances), has substantial predictive power for future inflation. The real money gap contains more information about future inflation than the output gap and the Eurosystem's money-growth indicator (the gap between current M3 growth and a reference value). The results suggest that the Eurosystem's money-growth indicator is an inferior indicator of future inflation.
Handle: RePEc:nbr:nberwo:8025
Template-Type: ReDIF-Paper 1.0
Title: Games for Central Bankers: Markets v/s Politics in Public Policy Decisions
Classification-JEL: F33; H41
Author-Name: Alessandra Casella
Author-Person: pca496
Note: IFM
Number: 8026
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8026
File-URL: http://www.nber.org/papers/w8026.pdf
File-Format: application/pdf
Abstract: This paper questions the link between the establishment of a common currency among several countries and the necessity of political coordination. It begins by discussing why conducting a single monetary policy is thought to be easier within a single political unit. It then proceeds to enquire whether market mechanisms could be used to choose optimally the common policy of heterogenous actors, and thus provide an alternative to political decision-making. The advantage of market mechanisms is that they are transparent, predictable, and usually more efficient. In particular, the paper studies a simple game through which national representatives could choose the monetary policy of a single, multinational central bank. There are no fundamental logical objections or impossible practical obstacles to such market games, and even if they are rejected in principle they are useful in suggesting desirable amendments to traditional voting schemes.
Handle: RePEc:nbr:nberwo:8026
Template-Type: ReDIF-Paper 1.0
Title: Market Mechanisms for Policy Decisions: Tools for the European Union
Classification-JEL: F33; H41
Author-Name: Alessandra Casella
Author-Person: pca496
Note: IFM
Number: 8027
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8027
File-URL: http://www.nber.org/papers/w8027.pdf
File-Format: application/pdf
Publication-Status: published as Casella, Alessandra. "Market Mechanisms For Policy Decisions: Tools For The European Union," European Economic Review, 2001, v45(4-6,May), 995-1006.
Abstract: The thesis of this paper is that more transparent, rule-bound and subtle mechanisms for policy coordination will be needed to ensure the success of an enlarged European Union. A common policy is a public good with distributional implications. Economists have developed a large number of plausible market mechanisms for the efficient provision of public goods, and the European Union, with its limited number of members and relative ease of information is a promising ground for such schemes. An important open area of applied research is thus the tailoring of incentive schemes to the specific needs of the European Union and its policy choices. The paper discusses two possible examples: a system of tradable deficit permits to implement the fiscal constraints imposed by the Maastricht treaty; and a rule allowing country representatives to shift their own votes intertemporally when deliberations are taken by vote in periodic committee meetings.
Handle: RePEc:nbr:nberwo:8027
Template-Type: ReDIF-Paper 1.0
Title: Where did British Foreign Capital Go? Fundamentals, Failures and the Lucas Paradox: 1870-1913
Classification-JEL: F21; N20
Author-Name: Michael A. Clemens
Author-Person: pcl20
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE
Number: 8028
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8028
File-URL: http://www.nber.org/papers/w8028.pdf
File-Format: application/pdf
Publication-Status: published as Michael A. Clemens and Jeffrey G. Williamson (2004), “Wealth Bias in the First Global Capital Market Boom, 1870–1913”, Economic Journal, 114 (495): 304–337.
Abstract: A decade has passed since Robert Lucas asked why capital does not flow from rich to poor countries. Lucas used a contemporary example to illustrate his Paradox, the very modest flow of capital from the United States to India during the second great global capital market boom, after 1970. Had he paid more attention to the first great global capital market boom, after 1870, he might have been less surprised. Very little of British capital exports went to poor, labor-abundant countries. Indeed, about two-thirds of it went to the labor-scarce New World where only a tenth of the world's population lived, and only about a quarter of it went to labor-abundant Asia and Africa where almost two-thirds of the world's population lived. Why? Was it caused by some international market failure, or was it due to some shortfall in underlying economic, demographic or geographic fundamentals that made capital's productivity low in poor countries? This paper constructs a panel data set for 34 countries who as a group got 92 percent of British capital, and uses it to conclude that international capital market failure (including whether the country was on or off the Gold Standard) was not involved. It then ranks the three big fundamentals that mattered schooling, natural resources and demography.
Handle: RePEc:nbr:nberwo:8028
Template-Type: ReDIF-Paper 1.0
Title: The Desirability of Commodity Taxation under Non-Linear Income Taxation and Heterogeneous Tastes
Classification-JEL: H21; H23
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE
Number: 8029
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8029
File-URL: http://www.nber.org/papers/w8029.pdf
File-Format: application/pdf
Publication-Status: published as Saez, Emmanuel. "The Desirability Of Commodity Taxation Under Non-Linear Income Taxation And Heterogeneous Tastes," Journal of Public Economics, 2002, v83(2,Feb), 217-230.
Abstract: This paper revisits the Atkinson-Stiglitz result on uselessness of commodity taxation in the presence of optimal non-linear income taxation in a more general setup, namely when tastes are heterogeneous. This general analysis displays the key economic assumptions under which the Atkinson-Stiglitz result is robust. A small tax on a given commodity is desirable if high income earners have a relatively higher taste for this commodity or if consumption of this commodity increases with leisure. An application to the case of savings suggests that, even in the presence of optimal non-linear earnings taxation, there is a role for a supplemental capital income tax in the standard overlapping generation model.
Handle: RePEc:nbr:nberwo:8029
Template-Type: ReDIF-Paper 1.0
Title: An sS Model with Adverse Selection
Classification-JEL: D82; E21
Author-Name: Christopher L. House
Author-Person: pho56
Author-Name: John V. Leahy
Author-Person: ple189
Note: EFG
Number: 8030
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8030
File-URL: http://www.nber.org/papers/w8030.pdf
File-Format: application/pdf
Publication-Status: published as Christopher L. House & John V. Leahy, 2004. "An sS Model with Adverse Selection," Journal of Political Economy, University of Chicago Press, vol. 112(3), pages 581-614, June.
Abstract: We present a model of the market for used cars in which agents face a fixed cost of adjustment, the magnitude of which depend on the degree of adverse selection in the secondary market. We find that, unlike typical models, the sS bands in our model contract as the variance of the shock process increases. We also analyze a dynamic version of the model in which agents are allowed to make decisions that are conditional of the age of a used car. We find that, as a car ages, the lemons problem tends to decline in importance, and the sS bands contract.
Handle: RePEc:nbr:nberwo:8030
Template-Type: ReDIF-Paper 1.0
Title: The Middle Class Parent Penalty: Child Benefits in the U.S. Tax Code
Classification-JEL: H24; J12
Author-Name: David T. Ellwood
Author-Name: Jeffrey B. Liebman
Author-Person: pli184
Note: AG LS PE
Number: 8031
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8031
File-URL: http://www.nber.org/papers/w8031.pdf
File-Format: application/pdf
Publication-Status: published as The Middle-Class Parent Penalty: Child Benefits in the US Tax Code, David T. Ellwood, Jeffrey B. Liebman. in Tax Policy and the Economy, Volume 15, Poterba. 2001
Abstract: Low-income families with children receive large tax benefits from the Earned Income Tax Credit, while high income taxpayers receive large tax benefits from dependent exemptions (whose value is greater to those in higher tax brackets). In contrast, middle-income parents receive substantially smaller tax benefits associated with children. This U-shaped pattern of benefits by income, which we call the middle-class parent penalty,' not only raises issues of fairness; it also generates marginal tax rates and marriage penalties for moderate income families that are as high or higher than those facing more well-to-do taxpayers. This paper documents how the tax benefits of children vary with income, and illustrates their impact on marginal tax rates and marriage penalties. It then examines five options for reducing or eliminating the middle-class parent penalty and the high marginal tax rates and marriage penalties it produces.
Handle: RePEc:nbr:nberwo:8031
Template-Type: ReDIF-Paper 1.0
Title: The Effects of 401(k) Plans on Household Wealth: Differences Across Earnings Groups
Author-Name: Eric M. Engen
Author-Name: William G. Gale
Author-Person: pga40
Note: AG PE
Number: 8032
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8032
File-URL: http://www.nber.org/papers/w8032.pdf
File-Format: application/pdf
Abstract: This paper provides a new econometric specification and new evidence on the impact of 401(k) plans on household wealth. We allow the impact of 401(k)s to vary over both time and earnings groups. Our specification--motivated by a variety of theoretical considerations and data patterns--generalizes earlier work in the literature, and we show that the modeling constraints imposed by previous authors are rejected by the data. Using data from 1987 and 1991 from the Survey of Income and Program Participation, we find that the effects of 401(k)s on household wealth vary significantly by earnings level. Our analysis implies that 401(k)s held by groups with low earnings, who hold a small portion of 401(k) balances, are more likely to represent additions to net wealth than 401(k)s held by high-earning groups, who hold the bulk of 401(k) assets. Overall, between 0 and 30 percent of 401(k) balances represent net additions to private saving in the sample period.
Handle: RePEc:nbr:nberwo:8032
Template-Type: ReDIF-Paper 1.0
Title: On the Japanese Economy and Japanese National Accounts
Classification-JEL: E60; C82
Author-Name: Albert Ando
Note: EFG
Number: 8033
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8033
File-URL: http://www.nber.org/papers/w8033.pdf
File-Format: application/pdf
Publication-Status: published as Ando, Albert. "The Elusive Total Budget Outlay Of The Japanese Government: An Inquiry Into The Japanese National Accounts II," Journal of the Japanese and International Economies, 2002, v16(2,Jun), 177-193.
Abstract: A review of the Japanese National Accounts reveals that the Japanese household sector has apparently suffered a capital loss of some 400 trillion-yen in 1990 consumption prices since 1970. This loss is large enough to explain most of the Japanese recession of the 1990's. We can trace some three-fourths of this capital loss to the loss in the market value of Japanese corporations relative to their accounting value (at reproduction cost). While some plausible explanations for this loss can be offered, they are subject to serious doubts because of difficulties encountered in working with the Japanese National Accounts data. Similarly, we find total government expenditures reported in Japanese fiscal statistics difficult to interpret, and the difference between this total and total expenditures for the general government sector in the National Accounts hard to identify and understand. Until the relationship between the budget totals and the corresponding figures in the National Accounts is fully clarified, we are unable to say what the actual history of Japanese fiscal policy has been. We conclude the paper with a set of suggestions for improving the Japanese government's fiscal statistics and its National Income Accounts. We also hope that our discussion will serve as a guide for users of these statistics as to where they must be cautious.
Handle: RePEc:nbr:nberwo:8033
Template-Type: ReDIF-Paper 1.0
Title: The Social Consequences of Housing
Classification-JEL: J0; R0
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Bruce Sacerdote
Note: LE PE
Number: 8034
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8034
File-URL: http://www.nber.org/papers/w8034.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. and Bruce Sacerdote. "The Social Consequences Of Housing," Journal of Housing Economics, 2000, v9(1/2,Mar/Jun), 1-23.
Abstract: The social capital literature documents a connection between social connection and economic outcomes of interest ranging from government quality to economic growth. Popular authors suggest that housing and architecture are important determinants of social connection. This paper examines the connection between housing structure and social connection. We find that residents of large apartment buildings are more likely to be socially connected with their neighbors, perhaps because the distance between neighbors is lower in apartment buildings. Apartment residents are less involved in local politics, presumably because they are less connected with the public infrastructure and space that surrounds them. Street crime (robbery, auto theft) is also more common around big apartment buildings and we believe that this also occurs because of there is less connection between people in apartments and the streets that surround them.
Handle: RePEc:nbr:nberwo:8034
Template-Type: ReDIF-Paper 1.0
Title: The EMS Crisis in Retrospect
Classification-JEL: F3; N1
Author-Name: Barry Eichengreen
Author-Person: pei2
Note: IFM
Number: 8035
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8035
File-URL: http://www.nber.org/papers/w8035.pdf
File-Format: application/pdf
Publication-Status: published as Eichengreen, Barry (ed.) Capital flows and crises. Cambridge and London: MIT Press, 2003.
Abstract: This paper reconsiders the 1992-3 crisis in the European Monetary System in light of its emerging market successors. That episode was a predecessor of the Mexican and Asian crises in the sense that both capital movements and domestic financial fragility placed important roles. The output effects of this currency crisis resemble those of the typical emerging market crisis as much as they do the moderate effects of the typical industrial-country event of its kind to take place in an environment of fully free capital mobility. Leading indicator models' constructed using data from the Tequila and the Asian flu are shown to do a surprisingly good job at backcasting' which European countries suffered currency instability in 1992-3, although these models also point to what was distinctive about the European case.
Handle: RePEc:nbr:nberwo:8035
Template-Type: ReDIF-Paper 1.0
Title: Issue Unbundling via Citizens' Initiatives
Author-Name: Timothy Besley
Author-Person: pbe46
Author-Name: Stephen Coate
Author-Person: pco66
Note: PE
Number: 8036
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8036
File-URL: http://www.nber.org/papers/w8036.pdf
File-Format: application/pdf
Publication-Status: published as Besley, Timothy & Coate, Stephen, 2008. "Issue Unbundling via Citizens' Initiatives," International Quarterly Journal of Political Science, now publishers, vol. 3(4), pages 379-397, December.
Abstract: The role of citizens' initiatives figures prominently in contemporary debates on constitutional change. A basic question is why are initiatives necessary in a representative democracy where candidates must already compete for the right to control policy? This paper offers one answer to this question. In a representative democracy, the bundling of issues together with the fact that citizens have only one vote, means that policy outcomes on specific issues may diverge far from what the majority of citizens want. In such circumstances, allowing citizens to put legislation directly on the ballot, permits the unbundling' of these issues, which forces a closer relationship between policy outcomes and popular preferences. To the extent that it is considered socially undesirable for outcomes on specific issues to stray too far from what the majority wants, this creates a role for citizens' initiatives.
Handle: RePEc:nbr:nberwo:8036
Template-Type: ReDIF-Paper 1.0
Title: The Optimal Treatment of Tax Expenditures
Classification-JEL: H21
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE
Number: 8037
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8037
File-URL: http://www.nber.org/papers/w8037.pdf
File-Format: application/pdf
Publication-Status: published as Saez, Emmanuel. "The Optimal Treatment Of Tax Expenditures," Journal of Public Economics, 2004, v88(12,Dec), 2657-2684.
Abstract: This paper analyzes the optimal treatment of tax expenditures. It develops an optimal tax model where individuals derive utility from spending on a contribution' good such as charitable giving. The contribution good has also a public good effect on all individuals in the economy. The government imposes linear taxes on earnings and on the contribution good so as to maximize welfare. The government may also finance directly the contribution good out of tax revenue. Optimal tax and subsidy rates on earnings and the contribution good are expressed in terms of empirically estimable parameters and the redistributive tastes of the government. The optimal subsidy on the contribution good is increasing in the size of the price elasticity of contributions, the size of the crowding-out effect of public contributions on private contributions, and the size of the public good effect of the contribution good. Numerical simulations show that the optimal subsidy on contributions is fairly sensitive to the size of these parameters but that, in most cases, it should be lower than the earnings tax rate.
Handle: RePEc:nbr:nberwo:8037
Template-Type: ReDIF-Paper 1.0
Title: Firm Level Investment and R&D in France and the United States: A Comparison
Classification-JEL: E22; C33
Author-Name: Benoit Mulkay
Author-Person: pmu215
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Author-Name: Jacques Mairesse
Author-Person: pma712
Note: IO PR
Number: 8038
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8038
File-URL: http://www.nber.org/papers/w8038.pdf
File-Format: application/pdf
Abstract: This paper is a contribution to the small but growing literature that compares the investment and R&D behavior of manufacturing firms in large developed countries that have varying financial and capital market institutions. Specifically, we look at two similar samples of French and United States firms during the period 1982-1993. We estimate a dynamic specification of a simple error-corrected investment model for both ordinary investment and for R&D investment, a model that incorporates both output (sales or turnover) and cash flow as predictors for investment. Our focus is on two comparisons: France versus United States and physical investment versus R&D investment. In general, we do not find any significant differences between the two countries in the long run effects of demand (output) on investment. However, we do find that cash flow or profits appear to have a much larger impact on both R&D and investment in the U.S. Except for the well-known difference in the serial correlation of the two types of capital spending, we reject any significant differences between investment and R&D behavior for each country; the major differences are between countries.
Handle: RePEc:nbr:nberwo:8038
Template-Type: ReDIF-Paper 1.0
Title: Style Investing
Classification-JEL: G11; G12
Author-Name: Nicholas Barberis
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: AP
Number: 8039
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8039
File-URL: http://www.nber.org/papers/w8039.pdf
File-Format: application/pdf
Publication-Status: published as Barberis, Nicholas & Shleifer, Andrei, 2003. "Style investing," Journal of Financial Economics, Elsevier, vol. 68(2), pages 161-199, May.
Abstract: We study asset prices in an economy where some investors classify risky assets into different styles and move funds back and forth between these styles depending on their relative performance. Our assumptions imply that news about one style can affect the prices of other apparently unrelated styles, that assets in the same style will comove too much while assets in different styles comove too little, and that high average returns on a style will be associated with common factors for reasons unrelated to risk. They also lead to a rich pattern of own- and cross-autocorrelations, sample premia that can be very different from true premia, and imply that style momentum strategies will be profitable. We use our model to shed light on many puzzling features of the data.
Handle: RePEc:nbr:nberwo:8039
Template-Type: ReDIF-Paper 1.0
Title: The Welfare Cost of Business Cycles Revisited: Finite Lives and Cyclical Variation in Idiosyncratic Risk
Classification-JEL: F21; D31
Author-Name: Kjetil Storesletten
Author-Person: pst4
Author-Name: Chris I. Telmer
Author-Person: pte102
Author-Name: Amir Yaron
Author-Person: pya156
Note: EFG
Number: 8040
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8040
File-URL: http://www.nber.org/papers/w8040.pdf
File-Format: application/pdf
Publication-Status: published as Storesletten, Kjetil, Chris T. Telmer and Amir Yaron. "The Welfare Cost Of Business Cycles Revisited: Finite Lives And Cyclical Variation In Idiosyncratic Risk," European Economic Review, 2001, v45(7,Jun), 1311-1339.
Abstract: This paper investigates the welfare costs of business cycles in a heterogeneous agent, overlapping generations economy which is distinguished by idiosyncratic labor market risk. Aggregate variation arises both in terms of aggregate productivity shocks and countercyclical variation in the volatility of idiosyncratic shocks. Based on both aggregate data and microeconomic data from the Panel Study on Income Dynamics, we find the welfare benefits of eliminating aggregate variation to be large an order of magnitude larger than those originally documented by Lucas (1987). The key difference is countercyclical variation in idiosyncratic risk, which both amplifies the welfare cost of aggregate productivity shocks and imposes a cost of its own. The magnitude of these effects increases non-linearly in risk aversion. Our results support the increasingly popular notion that distributional effects are an important aspect of understanding the welfare cost of business cycles.
Handle: RePEc:nbr:nberwo:8040
Template-Type: ReDIF-Paper 1.0
Title: Growth Economics and Reality
Classification-JEL: O4; C1
Author-Name: William A. Brock
Author-Person: pbr142
Author-Name: Steven N.Durlauf
Author-Person: pdu117
Note: EFG
Number: 8041
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8041
File-URL: http://www.nber.org/papers/w8041.pdf
File-Format: application/pdf
Abstract: This paper questions current empirical practice in the study of growth. We argue that much of the modern empirical growth literature is based on assumptions concerning regressors, residuals, and parameters which are implausible both from the perspective of economic theory as well as from the perspective of the historical experiences of the countries under study. A number of these problems are argued to be forms of violations of an exchangeability assumption which underlies standard growth exercises. We show that relaxation of these implausible assumptions can be done by allowing for uncertainty in model specification. Model uncertainty consists of two types: theory uncertainty, which relates to which growth determinants should be included in a model, and heterogeneity uncertainty, which relates to which observations in a data set comprise draws from the same statistical model. We propose ways to account for both theory and heterogeneity uncertainty. Finally, using an explicit decision-theoretic framework, we describe how one can engage in policy-relevant empirical analysis.
Handle: RePEc:nbr:nberwo:8041
Template-Type: ReDIF-Paper 1.0
Title: Consequences of Imbalanced Sex Ratios: Evidence from America's Second Generation
Author-Name: Josh Angrist
Author-Person: pan29
Note: LS
Number: 8042
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8042
File-URL: http://www.nber.org/papers/w8042.pdf
File-Format: application/pdf
Publication-Status: published as Angrist, Josh. "How Do Sex Ratios Affect Marriage And Labor Markets? Evidence From America's Second Generation," Quarterly Journal of Economics, 2002, v107(3,Aug), 997-1038.
Abstract: A combination of changing migration patterns and US immigration restrictions acted to shift the male-female balance in many ethnic groups in the early 20th Century. I use this variation to study the consequences of changing sex ratios for the children of immigrants. Immigrant sex ratios affected the second generation for a number of reasons, most importantly because immigrants and their children typically married in the same ethnic group. The results suggest that higher sex ratios, defined as the number of men per woman, had a large positive impact on the likelihood of female marriage. More surprisingly, second-generation male marriage rates were also an increasing function of immigrant sex ratios. The results also suggest that higher sex ratios raised male earnings and the incomes of parents with young children. The interpretation of these findings is complicated by changes in extended family structure associated with changing sex ratios. On balance, however, the results are consistent with theories where higher sex ratios increase male competition for women in the marriage market.
Handle: RePEc:nbr:nberwo:8042
Template-Type: ReDIF-Paper 1.0
Title: Closed and Open Economy Models of Business Cycles with Marked Up and Sticky Prices
Author-Name: Robert J. Barro
Author-Person: pba251
Author-Name: Silvana Tenreyro
Author-Person: pte171
Note: EFG IFM
Number: 8043
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8043
File-URL: http://www.nber.org/papers/w8043.pdf
File-Format: application/pdf
Publication-Status: published as The Economic Journal, Vol. 116, no. 511 (April 2006): 434-456
Publication-Status: published as Robert Barro & Silvana Tenreyro, 2001. "Closed and open economy models of business cycles with marked-up and sticky prices," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
Abstract: Shifts in the extent of competition, which affect markup ratios, are possible sources of aggregate business fluctuations. Markups are countercyclical, and booms are times at which the economy operates more efficiently. We begin with a real model in which markup ratios correspond to the prices of differentiated intermediate inputs relative to the price of undifferentiated final product. If the nominal prices of the differentiated goods are relatively sticky, then unexpected inflation reduces the relative price of intermediates and thereby mimics the output effects from an increase in competition. In an open economy, domestic output is stimulated by reductions in the relative price of foreign intermediates and, therefore, by unexpected inflation abroad. The various versions of the model imply that the relative prices of less competitive goods move countercyclically. We find support for this hypothesis from price data of four-digit manufacturing industries.
Handle: RePEc:nbr:nberwo:8043
Template-Type: ReDIF-Paper 1.0
Title: European Financial Markets After EMU: A First Assessment
Classification-JEL: E44; F21
Author-Name: Jean-Pierre Danthine
Author-Name: Francesco Giavazzi
Author-Person: pgi18
Author-Name: Ernst-Ludwig von Thadden
Author-Person: pvo28
Note: IFM
Number: 8044
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8044
File-URL: http://www.nber.org/papers/w8044.pdf
File-Format: application/pdf
Abstract: This paper reviews the first evidence on the impact of European Monetary Union on European capital markets, one year after the launch of the single currency. Our assessment of this evidence is very favourable. On almost all counts EMU has either changed the European financial landscape already drastically or has the potential to do so in the future. We argue that this is less due to the well-known direct effects of EMU, such as the elimination of intra-European currency risk, than to a number of indirect consequences through feedback mechanisms that seem to have been triggered by EMU.
Handle: RePEc:nbr:nberwo:8044
Template-Type: ReDIF-Paper 1.0
Title: Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market
Classification-JEL: D82; G22
Author-Name: Amy Finkelstein
Author-Person: pfi264
Author-Name: James Poterba
Author-Person: ppo19
Note: AG CF PE
Number: 8045
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8045
File-URL: http://www.nber.org/papers/w8045.pdf
File-Format: application/pdf
Publication-Status: published as Finkelstein, Amy and James Poterba. "Adverse Selection In Insurance Markets: Policyholder Evidence From The U.K. Annuity Market," Journal of Political Economy, 2004, v112(1,Feb), 183-208.
Abstract: This paper presents new evidence on the importance of adverse selection in insurance markets. We use a unique data set, consisting of all annuity policies sold by a large U.K. insurance company since the early 1980s, to analyze mortality differences across groups of individuals who purchased different types of policies. We find systematic relationships between ex-post mortality and annuity policy characteristics, such as whether the annuity will make payments to the estate in the event of an untimely death and whether the payments from the annuity rise over time. These mortality patterns are consistent with models of asymmetric information in insurance markets. We find no evidence of mortality differences, however, across annuities of different size, as measured by the initial annual payment from the annuity. We also study differences in the pricing of different annuity products, and find that the pricing of various features of annuity contracts is consistent with the self-selection patterns we find in mortality rates. Our results therefore suggest that many specific features of insurance contracts can serve as screening mechanisms. This implies that insurance markets may be characterized by adverse selection, even when stratifying policyholders by the amount of payment in case of a claim does not support the existence of selection effects.
Handle: RePEc:nbr:nberwo:8045
Template-Type: ReDIF-Paper 1.0
Title: Industrial Groupings and Strategic FDI: Theory and Evidence
Classification-JEL: F10; F21
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: Christopher J. Ellis
Author-Name: Dietrich Fausten
Note: ITI
Number: 8046
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8046
File-URL: http://www.nber.org/papers/w8046.pdf
File-Format: application/pdf
Publication-Status: published as Blonigen, Bruce A., Christopher J. Ellis and Dietrich Fausten. "Industrial Groupings And Strategic FDI," Japan and the World Economy, 2005, v17(2,Apr), 125-150.
Abstract: We show that industrial ownership structures, such as keiretsu groupings in Japan, may significantly impact firms' incentives to engage in FDI. While the previous literature has mainly focused on the cost of capital advantages enjoyed by keiretsu firms, this paper examines two relatively unexplored channels by which ownership structure matters for FDI incentives. The first channel involves the direct incentives generated via standard product and factor market interactions whereby keiretsu firms with cross-ownership consider more directly the congestion effects of further FDI into a market. The second channel involves the indirect incentives generated by sharing of information across keiretsu firms which reduces entry costs for subsequent FDI. Using data on Japanese FDI activity by both keiretsu and non-keiretsu manufacturing firms, we find evidence to support the importance of the second channel (information-sharing incentives) as an explanation for firm-level FDI patterns, but not for the first channel.
Handle: RePEc:nbr:nberwo:8046
Template-Type: ReDIF-Paper 1.0
Title: The Role of Interest Rates in Federal Reserve Policymaking
Classification-JEL: E52
Author-Name: Benjamin M. Friedman
Note: ME
Number: 8047
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8047
File-URL: http://www.nber.org/papers/w8047.pdf
File-Format: application/pdf
Publication-Status: published as Benjamin M. Friedman, 2000. "The role of interest rates in Federal Reserve policymaking," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, issue Oct, pages 43-66.
Abstract: Most central banks, including the U.S. Federal Reserve System, implement their monetary policy by setting interest rates. This paper reviews the major changes that have taken place along the way from the Federal Reserve's interest rate-based policy structure of the 1960s to the interest rate-based structure in place today, and then goes on to consider three open questions that this way of conducting monetary policy presents: (1) whether there is a nominal anchor' problem, and if so whether explicit inflation targeting would solve it, (2) whether there is a role in this policymaking process for interest rates other than whatever particular rate the Federal Reserve chooses to set, or equivalently for equity prices, and (3) to what extent the electronic revolution now under way in banking threatens the efficacy of an interest rate-based monetary policy. The paper concludes by considering the implications of the rules-versus-discretion debate for the role of interest rates in monetary policymaking.
Handle: RePEc:nbr:nberwo:8047
Template-Type: ReDIF-Paper 1.0
Title: Health Effects in a Model of Second-Best Environmental Taxation or Reconsidering "Reconsidering the Tax-Interaction Effect"
Classification-JEL: H21; H23
Author-Name: Roberton C. Williams
Author-Person: pwi38
Note: PE
Number: 8048
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8048
File-URL: http://www.nber.org/papers/w8048.pdf
File-Format: application/pdf
Publication-Status: published as Williams, Roberton C., III. "Health Effects And Optimal Environmental Taxes," Journal of Public Economics, 2003, v87(2,Feb), 323-335.
Abstract: The literature on environmental taxation in the presence of pre-existing distortionary taxes has shown that the interactions with pre-existing taxes tend to raise the cost of an environmental tax, and thus that the optimal environmental tax in that context is less than marginal environmental damages. A recent paper by Schwartz and Repetto (2000) challenges this finding, arguing that the health benefits from reduced pollution will also interact with pre-existing taxes, possibly causing the optimal environmental tax to exceed marginal environmental damages. Schwartz and Repetto's analysis aimed to account for health effects by representing environmental quality and leisure as substitutes in utility. The present paper employs an analytically tractable general equilibrium model that, in contrast with Schwartz and Repetto's analysis, explicitly considers health effects. It shows that interactions with health effects from pollution actually will tend to reduce the optimal environmental tax. This result contradicts Schwartz and Repetto's conclusion. This demonstrates the usefulness of explicitly modeling health effects, and it reinforces the general notion that tax-interactions tend to raise the costs of an environmental tax.
Handle: RePEc:nbr:nberwo:8048
Template-Type: ReDIF-Paper 1.0
Title: Environmental Tax Interactions When Pollution Affects Health or Productivity
Classification-JEL: L51; H21
Author-Name: Roberton C. Williams
Author-Person: pwi38
Note: PE
Number: 8049
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8049
File-URL: http://www.nber.org/papers/w8049.pdf
File-Format: application/pdf
Publication-Status: published as Williams, Roberton C., II. "Environmental Tax Interactions When Pollution Affects Health Or Productivity," Journal of Environmental Economics and Management, 2002, v44(2,Sep), 261-270.
Abstract: Numerous recent studies have indicated that interactions with a tax-distorted labor market increase the cost of pollution regulation. However, these studies have made restrictive assumptions regarding individual preferences and have ignored key links between pollution, human health, and labor productivity. Together, these assumptions imply that the benefits of regulation do not affect labor supply. This paper develops an analytically tractable general equilibrium model that allows regulation to provide benefits through several different channels, including improved health or productivity. The model shows that when the benefits of reduced pollution come in the form of improved health or productivity, the benefits do affect labor supply, and therefore create a benefit-side tax-interaction effect in addition to the familiar cost-side interaction. This effect can magnify or diminish the benefits of reduced pollution. When reduced pollution boosts labor productivity, the effect substantially magnifies such benefits. When pollution affects consumer health, the effect will tend to be opposite, diminishing the benefits of reduced pollution. This result is of far more than just theoretical interest; the benefit-side interaction is of the same magnitude as the cost-side interaction, and thus can fundamentally affect the optimal level of regulation. The paper considers only environmental regulation, but the concepts developed here apply equally to other policies affecting productivity or health, such as research subsidies or occupational safety regulations.
Handle: RePEc:nbr:nberwo:8049
Template-Type: ReDIF-Paper 1.0
Title: The Anatomy of Employee Involvement and Its Effects on Firms and Workers
Author-Name: Richard B. Freeman
Author-Person: pfr23
Author-Name: Morris M. Kleiner
Author-Name: Cheri Ostroff
Note: LS
Number: 8050
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8050
File-URL: http://www.nber.org/papers/w8050.pdf
File-Format: application/pdf
Abstract: A great many American firms have organized workplace decision-making in new ways to get employees more involved in their jobs -- using policies like self-directed work teams, total equality management, quality circles, profit-sharing, and diverse other programs. This paper uses a firm-based data set and employee-based information to illuminate several aspects about the locus and economic impacts of employee involvement (EI). Having information from employees as well as from firms allows us to ask not only what EI does for firms, the principal question in the literature on the subject, but also what EI does for workers; and to examine EI from the bottom up' perspective of participants rather than managers. We find that EI practices are linked in an hierarchical structure that provides a natural scaling of EI activities and the intensity of the EI effort. Firms that have EI are also more likely to have profit-sharing and other forms of shared compensation. However, EI has a weak and poorly specified effect on output per worker, but it has a strong and positive impact on employee well-being.
Handle: RePEc:nbr:nberwo:8050
Template-Type: ReDIF-Paper 1.0
Title: The Incentive for Working Hard: Explaining Hours Worked Differences in the U.S. and Germany
Classification-JEL: J21; J22
Author-Name: Linda A. Bell
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 8051
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8051
File-URL: http://www.nber.org/papers/w8051.pdf
File-Format: application/pdf
Publication-Status: published as “The Incentive for Working Hard: Explaining Hours Worked Differences in the US and Germany,” with Linda A. Bell. Labour Economics Special Conference Volume 8:2 (May 2001) pp 181-202.
Abstract: This paper seeks to explain the greater hours worked by Americans compared to Germans in terms of forward-looking labor supply responses to differences in earnings inequality between the countries. We argue that workers choose current hours of work to gain promotions and advance in the distribution of earnings. Since US earnings are more unequally distributed than German earnings, the same extra work pays off more in the US, generating more hours worked. Supporting this inequality-hours hypothesis, we show that in both countries hours worked is positively related to earnings inequality in cross section occupational contrasts and that hours worked raises future wages and promotion prospects in longitudinal data.
Handle: RePEc:nbr:nberwo:8051
Template-Type: ReDIF-Paper 1.0
Title: Stock Options for Undiversified Executives
Classification-JEL: J33; J44
Author-Name: Brian J. Hall
Author-Name: Kevin J. Murphy
Author-Person: pmu30
Note: CF LS
Number: 8052
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8052
File-URL: http://www.nber.org/papers/w8052.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Accounting and Economics, Vol. 33, no. 1 (February 2002): 3-42
Abstract: We employ a certainty-equivalence framework to analyze the cost and value of, and pay/performance incentives provided by, non-tradable options held by undiversified, risk-averse executives. We derive Executive Value' lines, the risk-adjusted analogues to Black-Scholes lines, and distinguish between executive value' and company cost.' We demonstrate that the divergence between the value and cost of options explains, or provides insight into, virtually every major issue regarding stock option practice including: executive views about Black-Scholes measures of options; tradeoffs between options, stock and cash; exercise price policies; connections between the pay-setting process and exercise price policies; institutional investor views regarding options and restricted stock; option repricings; early exercise policies and decisions; and the length of vesting periods. It also leads to reinterpretations of both cross-sectional facts and longitudinal trends in the level of executive compensation.
Handle: RePEc:nbr:nberwo:8052
Template-Type: ReDIF-Paper 1.0
Title: Non-Market Interactions
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Jose Scheinkman
Author-Person: psc26
Note: EFG
Number: 8053
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8053
File-URL: http://www.nber.org/papers/w8053.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward and Jose Scheinkman. “The Future of Urban Economics: Non-Market Interactions,” Brookings-Wharton Papers on Urban Affairs 1 (2000): 101-150.
Abstract: A large body of recent research argues that social, or non-market, interactions can explain a wide range of puzzling phenomena from fashion cycles to stock market crashes. This paper attempts to connect the range of these papers with a general model and a broad empirical overview. We establish conditions for existence and uniqueness of equilibria in social interactions models. The existence of multiple equilibria requires sufficient non-linearity in social interactions and only moderate heterogeneity across agents strategic complementarities are neither necesssary nor sufficient for multiple equilibria. We establish conditions for the existence of a social multiplier, which is the ratio of the aggregate outcome-input relationship to the individual outcome-input relationship. Models with multiple equilibria are empirically indistinguishable from models with significant social multipliers. Finally, we show the formal relationship between three known methods of empirically estimating social interactions, and suggests the plusses and minuses of these three approaches.
Handle: RePEc:nbr:nberwo:8053
Template-Type: ReDIF-Paper 1.0
Title: Longer Term Effects of Head Start
Author-Name: Eliana Garces
Author-Name: Duncan Thomas
Author-Person: pth20
Author-Name: Janet Currie
Author-Person: pcu13
Note: CH LS
Number: 8054
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8054
File-URL: http://www.nber.org/papers/w8054.pdf
File-Format: application/pdf
Publication-Status: published as Garces, Eliana, Duncan Thomas and Janet Currie. "Longer-Term Effects Of Head Start," American Economic Review, 2002, v92(4,Sep), 999-1012.
Abstract: Little is known about the long-term effects of participation in Head Start. This paper draws on unique non-experimental data from the Panel Study of Income Dynamics to provide new evidence on the effects of participation in Head Start on schooling attainment, earnings, and criminal behavior. Among whites, participation in Head Start is associated with a significantly increased probability of completing high school and attending college, and we find some evidence of elevated earnings in one's early twenties. African Americans who participated in Head Start are significantly less likely to have been charged or convicted of a crime. The evidence also suggests that there are positive spillovers from older children who attended Head Start to their younger siblings.
Handle: RePEc:nbr:nberwo:8054
Template-Type: ReDIF-Paper 1.0
Title: School Choice and the Distributional Effects of Ability Tracking: Does Separation Increase Equality?
Classification-JEL: I2
Author-Name: David N. Figlio
Author-Person: pfi57
Author-Name: Marianne E. Page
Author-Person: ppa539
Note: CH
Number: 8055
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8055
File-URL: http://www.nber.org/papers/w8055.pdf
File-Format: application/pdf
Publication-Status: published as Figlio, David N. and Marianne E. Page. "School Choice And The Distributional Effects Of Ability Tracking: Does Separation Increase Inequality?," Journal of Urban Economics, 2002, v51(3,May), 497-514.
Abstract: Tracking programs have been criticized on the grounds that they harm disadvantaged children. The bulk of empirical research supports this view. These studies are conducted by comparing outcomes for across students placed in different tracks. Track placement, however, is likely to be endogenous with respect to outcomes. We use a new strategy for overcoming the endogeneity of track placement and find no evidence that tracking hurts low-ability children. We also demonstrate that tracking programs help schools attract more affluent students. Previous studies have been based on the assumption that students' enrollment decisions are unrelated to whether or not the school tracks. When we take school choice into account, we find evidence that low-ability children may be helped by tracking programs.
Handle: RePEc:nbr:nberwo:8055
Template-Type: ReDIF-Paper 1.0
Title: Understanding Child Support Trends: Economic, Demographic, and Political Contributions
Classification-JEL: J1; H7
Author-Name: Anne Case
Author-Person: pca108
Author-Name: I-Fen Lin
Author-Name: Sara McLanahan
Note: CH
Number: 8056
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8056
File-URL: http://www.nber.org/papers/w8056.pdf
File-Format: application/pdf
Publication-Status: published as Case, Anne, I-Fen Lin and Sara McLanahan. “Explaining Trends in Child Support: Economic, Demographic, and Policy Effects.” Demography 40, 1 (2003): 171-189.
Abstract: We use data from the Panel Study of Income Dynamics (PSID) to examine trends in child support payments over the past thirty years and to assess five different explanations for these trends: inflation, the shift to unilateral divorce, changes in marital status composition, changes in men's and women's earnings, and ineffective child support laws. We find that during the 1970s and early 1980s, three factors high inflation, increase in non-marital childbearing, and shifts to unilateral divorse--exerted downward pressure on child support payments. Throughout this time period, child support policies were weak, and average real payments declined sharply. Our findings indicate that two child support policies legislative guidelines for awards and universal wage withholding--are important for insuring child support payments. Finally, our analyses suggest that further gains in child support payments will rest with our ability to collect child support for children born to unwed parents. These children are the fastest growing group of children in the US, and they are the least likely to receive child support. To date, child support policies have been ineffective in assuring child support for never married mothers.
Handle: RePEc:nbr:nberwo:8056
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy
Classification-JEL: E52
Author-Name: Benjamin M. Friedman
Note: ME
Number: 8057
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8057
File-URL: http://www.nber.org/papers/w8057.pdf
File-Format: application/pdf
Abstract: Monetary policy is one of the two principal means (the other being fiscal policy) by which government authorities in a market economy regularly influence the pace and direction of overall economic activity, importantly including not only the level of aggregate output and employment but also the general rate at which prices rise or fall. The ability of central banks to carry out monetary policy stems from their monopoly position as suppliers of their own liabilities, which banks in turn need (either as legally required reserves or as balances for settling interbank claims) in order to create the money and credit used in everyday economic transactions. Important developments both in research and in the actual conduct of monetary policy in recent decades have revolved around the choice of a short-term interest rate versus a reserve quantity as the central bank's direct operating instrument, whether to use some measure of money as an intermediate target, whether to constrain the central bank to follow some fairly simple policy rule, what degree of political independence a central bank should have, and whether to target inflation. Some key areas of ongoing research in this area, as of the beginning of the 21st century, are whether the behavioral process by which monetary policy affects nonfinancial economic activity centers more on money or on credit, quantitative measurement of whatever is the mechanism at work, the trade-off between price inflation and real aspects of economic activity like output and employment, and just why it is that the public in most industrialized countries is as averse to inflation as is apparently the case.
Handle: RePEc:nbr:nberwo:8057
Template-Type: ReDIF-Paper 1.0
Title: Wages Around the World: Pay Across Occupations and Countries
Author-Name: Richard B. Freeman
Author-Person: pfr23
Author-Name: Remco Oostendorp
Author-Person: poo17
Note: LS
Number: 8058
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8058
File-URL: http://www.nber.org/papers/w8058.pdf
File-Format: application/pdf
Publication-Status: published as Freeman, Richard (ed.) Inequality Around the World. London, UK: Palgrave, 2002.
Abstract: This study transforms the October Inquiry' Survey of wages conducted by the International Labour Organization into a consistent data file on pay in 161 occupations in over 150 countries from 1983 to 1998 to examine the pattern of pay across occupations and countries. The new file tells us that: 1. Skill differentials vary inversely with gross domestic product per capita. During the 1980s-1990s, they fell modestly in advanced countries; fell more sharply in upper middle income countries while rising markedly in countries moving from communism to free markets and in lower middle income countries. 2. Wages in the same occupation vary greatly across countries measured by common currency exchange rates and measured by purchasing power parity. Cross-country differences in pay for comparable work increased, despite increased world trade. 3. The principal forces that affect the occupational wage structure around the world are the level of gross domestic product per capita and unionisation/wage-setting institutions.
Handle: RePEc:nbr:nberwo:8058
Template-Type: ReDIF-Paper 1.0
Title: Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles
Classification-JEL: G12
Author-Name: Ravi Bansal
Author-Person: pba818
Author-Name: Amir Yaron
Author-Person: pya156
Note: AP
Number: 8059
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8059
File-URL: http://www.nber.org/papers/w8059.pdf
File-Format: application/pdf
Publication-Status: published as Bansal, Ravi and Amir Yaron. "Risks For The Long Run: A Potential Resolution Of Asset Pricing Puzzles," Journal of Finance, 2004, v59(4,Aug), 1481-1509.
Abstract: We model dividend and consumption growth rates as containing a small long-run predictable component and economic uncertainty (i.e., growth rate volatility) as being time-varying. The magnitudes of the predictable variation and changing volatility in growth rates, as in the data, are quite small. These growth rate dynamics, for which we provide empirical support, in conjunction with plausible parameter configurations of the Epstein and Zin (1989) preferences can explain key observed asset markets phenomena. In particular, we show that the model can justify the observed equity premium, the low risk free rate, and the ex-post volatilities of the market return, real risk free rate, and the price-dividend ratio. As in the data, the model also implies that dividend yields predict returns and that market return volatility is stochastic. The main economic insight we capture is that news about growth rates significantly alter agent's perceptions regarding long run expected growth rates and growth rate uncertainty--in equilibrium, this leads to a large equity risk premium, low risk free interest rate, and large market volatility.
Handle: RePEc:nbr:nberwo:8059
Template-Type: ReDIF-Paper 1.0
Title: Balance SHeet Effects, Bailout Guarantees and Financial Crises
Classification-JEL: E32; E44
Author-Name: Martin Schneider
Author-Person: psc69
Author-Name: Aaron Tornell
Author-Person: pto157
Note: IFM
Number: 8060
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8060
File-URL: http://www.nber.org/papers/w8060.pdf
File-Format: application/pdf
Publication-Status: published as Schneider, Martin and Aaron Tornell. "Balance Sheet Effects, Bailout Guarantees And Financial Crises," Review of Economic Studies, 2004, v71(248,Jul), 883-913.
Abstract: Several recent twin' currency and banking crises were preceded by lending booms during which the banking system financed rapid growth of the nontradable (N) sector by borrowing in foreign currency. They were followed by recessions during which a sharp decline in credit especially hurt the N-sector. This paper presents a model that accounts for these stylized facts. A crucial element is that we model a banking system that is simultaneously subject to two distortions typical of international credit markets: bailout guarantees and the imperfect enforceability of contracts. The interaction of these distortions produces unusually fast N-sector growth, together with a real appreciation, during the boom. However, it is also responsible for self-fulfilling twin crises, which have persistent adverse effects on N-sector output.
Handle: RePEc:nbr:nberwo:8060
Template-Type: ReDIF-Paper 1.0
Title: Grandmothers and Granddaughters: Old Age Pension and Intra-household Allocation in South Africa
Classification-JEL: H55; O15
Author-Name: Esther Duflo
Author-Person: pdu166
Note: CH
Number: 8061
Creation-Date: 2000-12
Order-URL: http://www.nber.org/papers/w8061
File-URL: http://www.nber.org/papers/w8061.pdf
File-Format: application/pdf
Publication-Status: published as Duflo, Esther, "Child Health And Household Resources In South Africa: Evidence From The Old Age Pension Program," American Economic Review, Vol. 90. no. 2 (May 2000): 393-398
Publication-Status: published as Duflo, Esther, "Grandmothers and Granddaughters: Old-Age Pensions and Intrahousehold Allocation in South Africa," World Bank Economic Review, Vol. 17, no. 1, (June 2003): 1-25
Abstract: This paper studies whether the impact of a cash transfer on child nutritional status is affected by the gender of its recipient. In the early 1990's, the benefits and coverage of the South African social pension program were expanded for the black population. In 1993, the benefits were about twice the median income per capita in rural areas. Over a quarter of black South African children under age five live with a pension recipient. My estimates suggest that pensions received by women had a large impact on the anthropometric status of girls (it improved their weight given height by 1.19 standard deviations, and their height given age by 1.16 standard deviations), but little effect on that of boys. In contrast, I found no similar effect for pensions received by men. This suggests that the household does not function as a unitary entity, and that they efficiency of public transfer programs may depend on the gender of the recipient.
Handle: RePEc:nbr:nberwo:8061