This paper empirically examines the New Deal's impact on local economic activity, as measured by retail sales, during the 1930s. Using a recently-uncovered data set that describes over 30 federal New Deal spending, loan, and mortgage insurance programs across all U.S. counties from 1933 to 1939, we estimate how the various New Deal programs that were designed to accomplish different objectives influenced retail spending. Our empirical approach accounts for both the simultaneity between New Deal allocations and economic activity and the geographic spillovers that likely resulted when spending in one county may have affected the economies of its neighbors. We find that New Deal spending on public works tended to promote retail sales in both the county where the money was spent and in contiguous neighbors, while spending on work relief increased economic activity in the county where the money was spent but at the expense of neighboring counties. Agricultural spending that limited production was associated with lower retail spending. New Deal loan programs appear to have had little or a somewhat negative effect. Finally, increases in the value of mortgages insured by the Federal Housing Administration had a strong positive effect on local economic growth during the Depression. Handle: RePEc:nbr:nberwo:8108 Template-Type: ReDIF-Paper 1.0 Title: Annexation or Conquest? The Economics of Empire Building Classification-JEL: D74; F02 Author-Name: Herschel I. Grossman Author-Name: Juan Mendoza Note: EFG Number: 8109 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8109 File-URL: http://www.nber.org/papers/w8109.pdf File-Format: application/pdf Abstract: This paper develops an economic theory of empire building. This theory addresses the choice among three strategies that empire builders historically have used. We call these strategies Uncoerced Annexation, Coerced Annexation, and Attempted Conquest. The theory shows how the choice among these strategies depends on such factors as the economic gains from imperial expansion, the relative effectiveness of imperial armies, the costs of projecting imperial military power, and liquidity constraints on financing imperial armies. This theory also addresses the scope of imperial ambitions. The paper uses examples from the history of the Roman, Mongol, Ottoman, and Nazi German empires to illustrate the applicability of the theory. Handle: RePEc:nbr:nberwo:8109 Template-Type: ReDIF-Paper 1.0 Title: The Market for Catastrophe Risk: A Clinical Examination Classification-JEL: G12 Author-Name: Kenneth A. Froot Author-Person: pfr60 Note: AP CF Number: 8110 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8110 File-URL: http://www.nber.org/papers/w8110.pdf File-Format: application/pdf Publication-Status: published as Froot, Kenneth A. "The Market For Catastrophe Risk: A Clinical Examination," Journal of Financial Economics, 2001, v60(2-3,May), 529-571. Abstract: This paper examines the market for catastrophe event risk i.e., financial claims that are linked to losses associated with natural hazards, such as hurricanes and earthquakes. Risk management theory suggests protection by insurers and other corporations against the largest cat events is most valuable. We show, however, that historically most insurers have purchased relatively little cat reinsurance against large events. We also find that premiums are high relative to expected losses, especially after cat events. We then examine clinical evidence to understand why the theory fails. Specifically, we examine transactions that look to capital markets, rather than traditional reinsurance markets, for risk-bearing capacity. These provide hints as to why the theory fails. We explore these hints in eight theoretical explanations and find the most compelling to be supply restrictions associated with capital market imperfections and market power exerted by traditional reinsurers. Handle: RePEc:nbr:nberwo:8110 Template-Type: ReDIF-Paper 1.0 Title: External Job Churning and Internal Job Flexibility Classification-JEL: J63; J50 Author-Name: Peter Cappelli Author-Name: David Neumark Author-Person: pne16 Note: LS Number: 8111 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8111 File-URL: http://www.nber.org/papers/w8111.pdf File-Format: application/pdf Publication-Status: published as Neumark, David, and Peter Cappelli. “External Job Churning and Internal Job Flexibility." Industrial Relations (January 2004): 148-82. Abstract: Concern about job instability and insecurity has a long history and has generated a considerable body of research across the social sciences, most recently focused on whether job stability and security have declined. Internally flexible systems for organizing work, sometimes called 'functionally flexible' systems, have been proposed as arrangements that can reduce job instability and insecurity by reducing the need for firms to rely on job cuts or contingent work to be able to respond to changes in their environments. Related arguments have been made with regard to contingent work - that it allows firms to adjust labor while 'buffering' their core of permanent workers from instability. We examine these arguments using three measures of instability and insecurity - voluntary and involuntary turnover and the use of contingent work - drawn from a national probability sample of establishments. We find evidence that internally flexible work systems are associated with reduced voluntary and involuntary turnover in manufacturing. But in the rest of the economy and indeed overall, they tend to be positively associated with all three measures. Further, the use of contingent work is, in fact, positively related to involuntary turnover even in manufacturing. The evidence therefore suggests that on net employers seeking flexibility in labor tend to use flexible work practices, contingent work, and turnover as complements, while only in manufacturing is there some evidence of substitutability between internal job flexibility and external job churning. Handle: RePEc:nbr:nberwo:8111 Template-Type: ReDIF-Paper 1.0 Title: The Law of One Price - A Case Study Classification-JEL: F2; F3 Author-Name: Jonathan Haskel Author-Person: pha161 Author-Name: Holger Wolf Note: IFM ITI Number: 8112 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8112 File-URL: http://www.nber.org/papers/w8112.pdf File-Format: application/pdf Publication-Status: published as Haskel, J. and H. Wolf. "The Law Of One Price - A Case Study," Scandinavian Journal of Economics, 2001, v103(4,Dec), 545-558. Abstract: We use retail transaction prices for a multinational retailer to examine the extent and permanence of violations of the law of one price (LOOP). For identical products, we find typical deviations of twenty to fifty percent, though there is muted evidence for convergence over time. Such differences might be due to differences in local costs. If so, relative prices of similar products (round versus square mirrors) should be equal across countries. In fact, relative prices vary significantly across very similar goods within a product group; indeed, the ordering of common currency prices often differs for similar products. The finding suggests that differences in local distribution costs, local taxes, and probably tariffs do not explain the price pattern, leaving strategic pricing or other factors resulting in varying markups as alternative explanations for the observed divergences. Handle: RePEc:nbr:nberwo:8112 Template-Type: ReDIF-Paper 1.0 Title: Was the Federal Reserve Fettered? Devaluation Expectations in the 1932 Monetary Expansion Classification-JEL: N1; E5 Author-Name: Chang-Tai Hsieh Author-Name: Christina D. Romer Author-Person: pro407 Note: DAE EFG ME Number: 8113 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8113 File-URL: http://www.nber.org/papers/w8113.pdf File-Format: application/pdf Publication-Status: published as Hsieh, Chang-Tai and Christina D. Romer. "Was The Federal Reserve Constrained By The Gold Standard During The Great Depression? Evidence From The 1932 Open Market Purchase Program," Journal of Economic History, 2006, v66(1,Mar), 140-176. Abstract: A key question about the Great Depression is whether expansionary monetary policy in the United States would have led to a loss of confidence in the U. S. commitment to the gold standard. This paper uses the $1 billion expansionary open market operation undertaken in the spring of 1932 as a crucial case study of the link between monetary expansion and expectations of devaluation. Data on forward exchange rates are used to measure expectations of devaluation during this episode. We find little evidence that the large monetary expansion led investors to believe that the United States would devalue. The financial press and the records of the Federal Reserve also show little evidence of expectations of devaluation or fear of a speculative attack. We find that a flawed model of the effects of monetary policy and conflict among the twelve Federal Reserve banks, rather than concern about the gold standard, led the Federal Reserve to suspend the expansionary policy in the summer of 1932. Handle: RePEc:nbr:nberwo:8113 Template-Type: ReDIF-Paper 1.0 Title: Institutions and Geography: Comment on Acemoglu, Johnson and Robinson (2000) Classification-JEL: O11; P16 Author-Name: John W. McArthur Author-Name: Jeffrey D. Sachs Note: EFG Number: 8114 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8114 File-URL: http://www.nber.org/papers/w8114.pdf File-Format: application/pdf Abstract: This paper responds to findings by Acemoglu, Johnson and Robinson (2000) that suggest weak institutions, but not physical geography and correlates like disease burden, explain current variation in levels of economic development across former colonies. Using similar data and expanding the sample of countries analyzed, our regression analysis shows that both institutions and geographically-related variables such as malaria incidence or life expectancy at birth are strongly linked to gross national product per capita. We argue that the evidence presented in Acemoglu, Johnson and Robinson is likely limited by the inherently small sample of ex-colonies and the limited geographic dispersion of those countries. Handle: RePEc:nbr:nberwo:8114 Template-Type: ReDIF-Paper 1.0 Title: Money's Role in the Monetary Business Cycle Classification-JEL: E31; E32 Author-Name: Peter N. Ireland Author-Person: pir1 Note: ME Number: 8115 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8115 File-URL: http://www.nber.org/papers/w8115.pdf File-Format: application/pdf Publication-Status: published as Ireland, Peter N. "Money's Role In The Monetary Business Cycle," "Journal of Money, Credit and Banking, 2004, v36(6,Dec), 969-983. Abstract: A small, structural model of the monetary business cycle implies that real money balances enter into a correctly-specified, forward-looking IS curve if and only if they enter into a correctly-specified, forward-looking Phillips curve. The model also implies that empirical measures of real balances must be adjusted for shifts in money demand to accurately isolate and quantify the dynamic effects of money on output and inflation. Maximum likelihood estimates of the model's parameters take both of these considerations into account, but still suggest that money plays a minimal role in the monetary business cycle. Handle: RePEc:nbr:nberwo:8115 Template-Type: ReDIF-Paper 1.0 Title: FX Trading and Exchange Rate Dynamics Classification-JEL: F31; G12 Author-Name: Martin D. D. Evans Author-Person: pev5 Note: IFM Number: 8116 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8116 File-URL: http://www.nber.org/papers/w8116.pdf File-Format: application/pdf Publication-Status: published as Evans, Martin D. D. "FX Trading And Exchange Rate Dynamics," Journal of Finance, 2002, v57(6,Dec), 2405-2447. Abstract: This paper provides new perspective on the poor performance of exchange rate models by focusing on the information structure of FX trading. I present a new theoretical model of FX trading that emphasizes the role of incomplete and heterogeneous information. The model shows how an equilibrium distribution of FX transaction prices and orders can arise at each point in time from the optimal trading decisions of dealers. This result motivates an empirical investigation of how the equilibrium distribution of FX prices behaves using a new data set that details trading activity in the FX market. This analysis produces two striking results: (i) Much of the observed short-term volatility in exchange rates comes from sampling the heterogeneous trading decisions of dealers in an equilibrium distribution that, under normal market conditions, changes comparatively slowly. (ii) In contrast to the assumptions of traditional macro models, public news is rarely the predominant source of exchange rate movements over any horizon. Handle: RePEc:nbr:nberwo:8116 Template-Type: ReDIF-Paper 1.0 Title: Decentralized Employment and the Transformation of the American City Author-Name: Edward L. Glaeser Author-Person: pgl9 Author-Name: Matthew E. Kahn Author-Person: pka41 Note: EFG LE PE Number: 8117 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8117 File-URL: http://www.nber.org/papers/w8117.pdf File-Format: application/pdf Publication-Status: published as Glaeser, E. and M. Kahn. “Decentralized Employment and the Transformation of the American City." Brookings-Wharton Papers on Urban Affairs 2 (2001). Abstract: This paper examines the decentralization of employment using zip code data on employment by industry. Most American cities are decentralized on average less than 16 percent of employment in metropolitan areas is within a three mile radius of the city center. In decentralized cities, the classic stylized facts of urban economics (i.e. prices fall with distance to the city center, commute times rise with distance and poverty falls with distance) no longer hold. Decentralization is most common in manufacturing and least common in services. The human capital level of an industry predicts its centralization, but the dominant factor explaining decentralization is the residential preferences of workers. Political borders also impact employment density which suggests that local government policies significantly influence the location of industry. Handle: RePEc:nbr:nberwo:8117 Template-Type: ReDIF-Paper 1.0 Title: Contagion: How to Measure It? Classification-JEL: C30; F32 Author-Name: Roberto Rigobon Author-Person: pri12 Note: IFM Number: 8118 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8118 File-URL: http://www.nber.org/papers/w8118.pdf File-Format: application/pdf Publication-Status: published as Contagion: How to Measure It?, Roberto Rigobon. in Preventing Currency Crises in Emerging Markets, Edwards and Frankel. 2002 Abstract: The empirical literature on contagion has mainly measured the propagation of shocks across countries using daily stock markets, interest rates, and exchange rates. Several methodologies have been used for this purpose, however, the properties of the data introduces important limitations on the implementation of these procedures, as well as on the interpretation of the results. This paper, has three objectives: First, it evaluates some of the techniques that have been used frequently to measure contagion. The paper argues that if the data suffers from heteroskedasticity (conditional or not), omitted variables and simultaneous equation problems, the conclusions drawn from most of the procedures could be biased. Second, the paper summarizes two new procedures that have been developed to cope with these problems. One methodology is aimed to test for the stability of parameters, while the other one estimates consistently the contemporaneous relationship across countries. Finally, the paper estimates (consistently) the contemporaneous transmission mechanism between emerging stock markets, and bond markets. Furthermore, it is found that regional variables, as well as trade linkages, constitute a sizeable explanation of the strength of the propagation of shocks across bond markets, but not as important in stock markets. Handle: RePEc:nbr:nberwo:8118 Template-Type: ReDIF-Paper 1.0 Title: Tropical Underdevelopment Classification-JEL: O11; O13 Author-Name: Jeffrey D. Sachs Note: EFG EEE Number: 8119 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8119 File-URL: http://www.nber.org/papers/w8119.pdf File-Format: application/pdf Abstract: Most recent cross-country analyses of economic growth have neglected the importance of physical geography. This paper reviews the distinctive development challenges faced by economies situated in tropical climates. Using geographic information system (GIS) mapping, the paper presents evidence that production technology in the tropics has lagged behind temperate zone technology in the two critical areas of agriculture and health, and this in turn opened a substantial income gap between climate zones. The difficulty of mobilizing energy resources in tropical economies is emphasized as another significant contributor to the income gap. These factors have been amplified by geopolitical power imbalances and by the difficulty of applying temperate-zone technological advances in the tropical setting. The income gap has also been amplified because poor public health and weak agricultural technology in the tropics have combined to slow the demographic transition from high fertility and mortality rates to low fertility and mortality rates. The analysis suggests that economic development in tropical ecozones would benefit from a concerted international effort to develop health and agricultural technologies specific to the needs of the tropical economies. Handle: RePEc:nbr:nberwo:8119 Template-Type: ReDIF-Paper 1.0 Title: Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets Classification-JEL: E24; L16 Author-Name: Olivier Blanchard Author-Person: pbl2 Author-Name: Francesco Giavazzi Author-Person: pgi18 Note: EFG Number: 8120 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8120 File-URL: http://www.nber.org/papers/w8120.pdf File-Format: application/pdf Publication-Status: published as Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects Of Regulation And Deregulation In Goods And Labor Markets," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 879-907, August. Abstract: Product and labor market deregulation are fundamentally about reducing and redistributing rents, leading economic players to adjust in turn to this new distribution. Thus, even if deregulation eventually proves beneficial, it comes with strong distribution and dynamic effects. The transition may imply the decline of incumbent firms. Unemployment may increase for a while. Real wages may decrease before recovering, and so on. To study these issues, we build a model based on two central assumptions: Monopolistic competition in the goods market, which determines the size of rents; and bargaining in the labor market, which determines the distribution of rents between workers and firms. We then think of product market regulation as determining both the entry costs faced by firms, and the degree of competition between firms. We think of labor market regulation as determining the bargaining power of workers. Having characterized the effects of labor and product market deregulation, we then use our results to study two specific issues. First, to shed light on macroeconomic evolutions in Europe over the last twenty years, in particular on the behavior of the labor share. Second, to look at political economy interactions between product and labor market deregulation. Handle: RePEc:nbr:nberwo:8120 Template-Type: ReDIF-Paper 1.0 Title: Exchange Rates and Tax-Based Export Promotion Classification-JEL: H87; H25 Author-Name: Mihir A. Desai Author-Name: James R. Hines Jr. Author-Person: phi111 Note: IFM PE Number: 8121 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8121 File-URL: http://www.nber.org/papers/w8121.pdf File-Format: application/pdf Publication-Status: published as Proceedings of the 93rd Annual Conference on Taxation. National Tax Association: Washington D.C., 2001. Abstract: This paper examines the impact of tax-based export promotion on exchange rates and patterns of trade. The threatened removal of Foreign Sales Corporations (FSCs) due to the 1997 European Union complaint before the World Trade Organization (WTO) is used to identify the adjustment of exchange rates to reduced after-tax margins for American exporters. The evidence indicates that days associated with significant developments in the European complaint are characterized by predicted changes in the value of the U.S. dollar. Additionally, foreign trading relationships with the United States appear to influence currency responses to the possibility of FSC repeal. Exchange rate movements on the date of the initial European complaint indicate that 10 percent greater net trade deficits with the United States are associated with currency appreciations of 0.2 percent against the U.S. dollar. This evidence is consistent with a combination of trade-based exchange rate determination and important effects of U.S. export promotion policies. Handle: RePEc:nbr:nberwo:8121 Template-Type: ReDIF-Paper 1.0 Title: Generalized Cash Flow Taxation Classification-JEL: H24; G11 Author-Name: Alan A. Auerbach Author-Person: pau33 Author-Name: David F. Bradford Note: PE Number: 8122 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8122 File-URL: http://www.nber.org/papers/w8122.pdf File-Format: application/pdf Publication-Status: published as Auerbach, Alan J. and David F. Bradford. "Generalized Cash-Flow Taxation," Journal of Public Economics, 2004, v88(5,Apr), 957-980. Abstract: We show the unique form that must be taken by a tax system based entirely on realization accounting to implement a uniform capital income tax, or, equivalently, a uniform wealth tax. This system combines elements of an accrual based capital income tax and a traditional cash flow tax, having many of the attributes of the latter while still imposing a tax burden on marginal capital income. Like the traditional cash flow tax, this system may be integrated with a tax on labor income. We also show how such a tax can be supplemented with an optional accounting for a segregated subset of actively traded securities, subjected separately to mark-to-market taxation at the uniform capital income tax rate, to permit a fully graduated tax system applicable to labor income. Handle: RePEc:nbr:nberwo:8122 Template-Type: ReDIF-Paper 1.0 Title: Administered Prices and Suboptimal Prevention: Evidence from the Medicare Dialysis Program Classification-JEL: H51; I12 Author-Name: Avi Dor Note: EH Number: 8123 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8123 File-URL: http://www.nber.org/papers/w8123.pdf File-Format: application/pdf Publication-Status: published as Dor, Avi. "Optimal Price Rules, Administered Prices And Suboptimal Prevention: Evidence From A Medicare Program," Journal of Regulatory Economics, 2004, v25(1,Jan), 81-104. Abstract: Pricing methodologies in Medicare vary from one component of the system to another, often leading to conflicting incentives. The dialysis program represents a particularly interesting case, whereby outpatient payments are much more rigid than payments for related hospital care. Failure to recognize the preventive nature of outpatient services may result in inefficient allocation of medical care and higher overall costs. To motivate the analysis, a simple extension of basic prevention and insurance theory to fit a welfare-maximizing regulator is offered. I show that while optimal inpatient payments are standard Ramsey prices, optimal outpatient payments must incorporate net loss due to unnecessary hospitalizations, as well as supply elasticities. A myopic regulator will tend to ignore this, leading to underprovision of preventive services. With constant prices, empirical analysis examines the effect of dialysis intensity on various measures of hospital use, for a local sample of patients, using count data models. Results indicate that greater dialysis intensity (measured by a state-of -the-art clinical index) indeed reduces hospital use. Moreover, this is found even at moderate or high levels of intensity, where dialysis is viewed ex ante as being adequate. A simple cost-benefit calculation suggests that for every dollar of additional spending on outpatient intensity, nearly $2 in hospital expenditures can be saved. The research confirms that the current pricing structure within aspects of the Medicare program is inefficient. Handle: RePEc:nbr:nberwo:8123 Template-Type: ReDIF-Paper 1.0 Title: Demographic and Economic Pressure on Emigration Out of Africa Classification-JEL: F22; J1 Author-Name: Timothy J. Hatton Author-Person: pha305 Author-Name: Jeffrey G. Williamson Author-Person: pwi169 Note: ITI LS Number: 8124 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8124 File-URL: http://www.nber.org/papers/w8124.pdf File-Format: application/pdf Publication-Status: published as as "Out Of Africa? Using The Past To Project African Emigration Pressure In The Future," Review of International Economics, Vol. 10, no. 3 (August 2002): 556-573 Publication-Status: published as Scandinavian Journal of Economics, Vol. 105, no. 3 (September 2003): 465-486 Abstract: Two of the main forces driving European emigration in the late nineteenth century were real wage gaps between sending and receiving regions and demographic booms in the low-wage sending regions (directly augmenting the supply of potential movers as well as indirectly making already-measured employment conditions less attractive). These two features are even more prominent in Africa today, but do or can Africans respond to them with the same elasticity as in the days of 'free' migration? Our new estimates of net migration and labor market performance for the countries of sub-Saharan Africa suggest that exactly the same forces are at work driving African across-border migration today. Rapid growth in the cohort of young potential migrants, population pressure on the resource base, and poor economic performance are the main forces driving African migration. A century ago, more modest demographic forces in Europe were accompanied by strong catching-up economic growth in the low-wage emigrant regions, followed by a slowdown in already-modest demographic growth. Yet, migrations were still mass. In Africa today, economic growth has faltered, its economies have fallen further behind the high-wage OECD leaders, and there is a demographic speed up in the making. Our estimates suggest that the pressure on emigration out of Africa will intensify, manifested in part by a growing demand for entrance into high-wage OECD labor markets. Handle: RePEc:nbr:nberwo:8124 Template-Type: ReDIF-Paper 1.0 Title: Two Mezzogiornos Author-Name: Hans-Werner Sinn Author-Person: psi146 Author-Name: Frank Westermann Author-Person: pwe84 Note: PE Number: 8125 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8125 File-URL: http://www.nber.org/papers/w8125.pdf File-Format: application/pdf Publication-Status: published as Sinn, Hans-Werner and Frank Westermann. "Due 'Mezzogiorni'." L'Industria, Nuova Serie 27, 1 (January-MArch 2006): 49-51. Abstract: The analogy between the economic problems of the Mezzogiorno region and East Germany has been initially contested by many authors. This paper argues that there are striking similarities in the two regions, in terms of the causes of their economic predicament. With an aggregate labour productivity of 55% relative to the rest of the country, both are true transfer economies, whose consumption exceeds production by far. Beyond locational disadvantages, the present paper identifies overdrawn wages, high social security spending and the Dutch disease problem as core reasons for the poor economic performance and discusses possible cures. Handle: RePEc:nbr:nberwo:8125 Template-Type: ReDIF-Paper 1.0 Title: Antitrust and the Not-For-Profit Sector Author-Name: Tomas J. Philipson Author-Person: pph37 Author-Name: Richard A. Posner Author-Person: ppo25 Note: EH PE Number: 8126 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8126 File-URL: http://www.nber.org/papers/w8126.pdf File-Format: application/pdf Publication-Status: published as Tomas J. Philipson & Richard A. Posner, 2009. "Antitrust in the Not-for-Profit Sector," Journal of Law & Economics, University of Chicago Press, vol. 52(1), pages 1-18, 02. Abstract: Although the not-for-profit sector contributes greatly to aggregate output in many industries, there is little explicit analysis of the consequences of applying antitrust policy in this sector. This paper argues that the same incentives to collude exist in the non-profit sector as in the for-profit sector and that therefore, since competition is socially valuable regardless of the particular objectives of producers, the fact that antitrust law does not distinguish between the two sectors is efficient. The similarity in incentives derives from the fact that altruistic firms benefit from exploiting market power even when they would price below cost without regard to competition. Although the legal regulations governing the nonprofit sector limit the degree to which profits can be distributed, and therefore seek to reduce rents in a similar manner to antitrust laws, this nondistribution constraint does not obviate the need for antitrust in that sector. The argument for uniform antitrust doctrine in the two sectors extends to the exemptions from antitrust as well. In particular, patents (lawful monopolies intended to create incentives for innovation) stimulate innovation in the nonprofit sector only when they enable market power to be exploited, just as in the for-profit sector, and so the patent exemption from antitrust should be as broad in the nonprofit sector. Handle: RePEc:nbr:nberwo:8126 Template-Type: ReDIF-Paper 1.0 Title: Variable Selection for Portfolio Choice Classification-JEL: G11; C43 Author-Name: Yacine Ait-Sahalia Author-Person: pai23 Author-Name: Michael W. Brandt Note: AP Number: 8127 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8127 File-URL: http://www.nber.org/papers/w8127.pdf File-Format: application/pdf Publication-Status: published as "Variability Selection for Portfolio Choice", Journal of Finance, Vol. 56,pp. 1297-1351 (2001). Abstract: We study asset allocation when the conditional moments of returns are partly predictable. Rather than first model the return distribution and subsequently characterize the portfolio choice, we determine directly the dependence of the optimal portfolio weights on the predictive variables. We combine the predictors into a single index that best captures time-variations in investment opportunities. This index helps investors determine which economic variables they should track and, more importantly, in what combination. We consider investors with both expected utility (mean-variance and CRRA) and non-expected utility (ambiguity aversion and prospect theory) objectives and characterize their market-timing, horizon effects, and hedging demands. Handle: RePEc:nbr:nberwo:8127 Template-Type: ReDIF-Paper 1.0 Title: A Re-Examination of Exchange Rate Exposure Classification-JEL: F23; F31 Author-Name: Kathryn M.E. Dominguez Author-Person: pdo227 Author-Name: Linda L. Tesar Author-Person: pte111 Note: IFM Number: 8128 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8128 File-URL: http://www.nber.org/papers/w8128.pdf File-Format: application/pdf Publication-Status: published as "A Re-Examination of Exchange Rate Exposure", American Economic Review, Vol. 91, No. 2, Papers and Proceedings, pp. 396-399, May 2001 Abstract: Finance theory suggests that changes in exchange rates should have little influence on asset prices in a world that has become increasingly with integrated capital markets. Indeed, the existing literature examining the relationship between international stock prices and exchange rates finds little evidence of systematic exchange rate exposure. We argue in this paper that the absence of evidence may be due to restrictions imposed on the sample of data and the empirical specifications used in previous studies. We study a broad sample of firms in eight countries over an eighteen-year period. We find that firm-level and industry-level share values are significantly influenced by exchange rates. Further, we do not find evidence that exchange rate exposure is falling (or becoming less statistically significant) over time. Our results suggest that significant firm, industry and country-specific differences remain even as financial markets become more and more 'integrated'. Handle: RePEc:nbr:nberwo:8128 Template-Type: ReDIF-Paper 1.0 Title: Trade and Exposure Classification-JEL: F23; F14 Author-Name: Kathryn M.E. Dominguez Author-Person: pdo227 Author-Name: Linda L. Tesar Author-Person: pte111 Note: IFM Number: 8129 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8129 File-URL: http://www.nber.org/papers/w8129.pdf File-Format: application/pdf Publication-Status: published as "Trade and Exposure",American Economic Review, Vol. 91, No. 2, Papers and Proceedings, pp.367-370, May 2001 Abstract: Are firms that engage in trade more vulnerable to exchange rate risk? Or, put another way, that exchange rate movements will influence firm asset value through the trade channel. In this paper we examine the relationship between exchange rate movements, firm value and trade. Our empirical work tests whether exchange rate exposure can be explained by variables that proxy for the level of international activity, firm size, industry affiliation and country affiliation. The results suggest that while a significant fraction of firms in these countries is exposed to exchange rate movements, there is little evidence of a systematic link between exposure and trade. Indeed, what little evidence there is of a link suggests that firms that engage in greater trade exhibit lower degrees of exposure. This may reflect the fact that those firms most engaged in trade are also the most aware of exchange rate risk, and therefore are the most likely to hedge their exposure. Handle: RePEc:nbr:nberwo:8129 Template-Type: ReDIF-Paper 1.0 Title: Cross-Country Technology Diffusion: The Case of Computers Classification-JEL: E1; O3 Author-Name: Francesco Caselli Author-Person: pca205 Author-Name: Wilbur John Coleman II Note: ITI PR Number: 8130 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8130 File-URL: http://www.nber.org/papers/w8130.pdf File-Format: application/pdf Publication-Status: published as Francesco Caselli & Wilbur John Coleman II, 2001. "Cross-Country Technology Diffusion: The Case of Computers," American Economic Review, American Economic Association, vol. 91(2), pages 328-335, May. Abstract: We use data on imports of computer equipment for a large sample of countries between 1 970 and 1990 to investigate the determinants of computer-technology adoption. We find strong evidence that computer adoption is associated with higher levels of human capital and with manufacturing trade openness vis-a-vis the OECD. We also find evidence that computer adoption is enhanced by high investment rates, good property rights protection, and a small share of agriculture in GDP. Finally, there is some evidence that adoption is reduced by a large share of government in GDP, and increased by a large share of manufacturing. After controlling for the above-mentioned variables, we do not find an independent role for the English- (or European-) language skills of the population. Handle: RePEc:nbr:nberwo:8130 Template-Type: ReDIF-Paper 1.0 Title: Will Bequests Attenuate the Predicted Meltdown in Stock Prices When Baby Boomers Retire? Classification-JEL: G12 Author-Name: Andrew B. Abel Author-Person: pab10 Note: AP EFG Number: 8131 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8131 File-URL: http://www.nber.org/papers/w8131.pdf File-Format: application/pdf Publication-Status: published as Abel, Andrew B. "Will Bequests Attenuate The Predicted Meltdown In Stock Prices When Baby Boomers Retire?," Review of Economics and Statistics, 2001, v83(4,Nov), 589-595. Abstract: Jim Poterba finds that consumers do not spend all of their assets during retirement, and he projects that the demand for assets will remain high when the baby boomers retire. Based on his forecast of continued high demand for capital, Poterba rejects the asset market meltdown hypothesis, which predicts a fall in stock prices when the baby boomers retire. I develop a rational expectations general equilibrium model with a bequest motive and an aggegate supply curve for capital. In this model, a baby boom generates an increase in stock prices, and stock prices are rationally anticipated to fall when the baby boomers retire, even though, as emphasized by Poterba, consumers do not spend all of their assets during retirement. This finding contradicts Poterba's conclusion that continued high demand for assets by retired baby boomers will prevent a fall in the price of capital. Handle: RePEc:nbr:nberwo:8131 Template-Type: ReDIF-Paper 1.0 Title: An Exploration of the Effects of Pessimism and Doubt on Asset Returns Classification-JEL: G12 Author-Name: Andrew B. Abel Author-Person: pab10 Note: AP Number: 8132 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8132 File-URL: http://www.nber.org/papers/w8132.pdf File-Format: application/pdf Publication-Status: published as Abel, Andrew B., 2002. "An exploration of the effects of pessimism and doubt on asset returns," Journal of Economic Dynamics and Control, Elsevier, vol. 26(7-8), pages 1075-1092, July. Abstract: The subjective distribution of growth rates of aggregate consumption is characterized by pessimism if it is first-order stochastically dominated by the objective distribution. Uniform pessimism is a leftward translation of the objective distribution of the logarithm of the growth rate. The subjective distribution is characterized by doubt if it is mean-preserving spread of the objective distribution. Pessimism and doubt both reduce the riskfree rate and thus can help resolve the riskfree rate puzzle. Uniform pessimism and doubt both increase the average equity premium and thus can help resolve the equity premium puzzle. Handle: RePEc:nbr:nberwo:8132 Template-Type: ReDIF-Paper 1.0 Title: Are For-Profit Hospitals Really Different? Medicare Upcoding and Market Structure Classification-JEL: L3; I1 Author-Name: Elaine Silverman Author-Name: Jonathan Skinner Author-Person: psk23 Note: EH Number: 8133 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8133 File-URL: http://www.nber.org/papers/w8133.pdf File-Format: application/pdf Abstract: How do for-profit and not-for-profit hospitals differ? We consider one dimension: the shifting of a patient's diagnostic related group (DRG) to one that yields a greater reimbursement from the Medicare system, also known as upcoding. It has played a major role in recent federal lawsuits against hospitals and hospital chains, but more importantly provides a valuable window for understanding how for-profit and not-for-profit hospitals make tradeoffs between pecuniary benefits and reputational or penalty costs. Our empirical work focuses primarily on hospital admissions involving pneumonia and respiratory infections; while the two diagnostic categories are often difficult to distinguish from one another, the latter pays about $2000 more to the hospital. Between 1989 and 1996, the incidence of the most expensive DRG (relative to all DRGs for pneumonia and respiratory infections) rose by 10 percentage points among stable not-for-profit hospitals, 23 percent among stable for-profit hospitals, and 37 percentage points among hospitals that had converted to for-profit status. (Since 1996, the upcoding index has dropped significantly in response to adverse publicity and lawsuits.) There is some evidence that not-for-profit hospitals operating in heavily for-profit markets were almost as likely to upcode as their for-profit brethren, as well as for important regional effects. Handle: RePEc:nbr:nberwo:8133 Template-Type: ReDIF-Paper 1.0 Title: Breast Cancer Survival, Work, and Earnings Classification-JEL: I12; J22 Author-Name: Cathy J. Bradley Author-Name: Heather Bednarek Author-Name: David Neumark Author-Person: pne16 Note: LS Number: 8134 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8134 File-URL: http://www.nber.org/papers/w8134.pdf File-Format: application/pdf Publication-Status: published as Bradley, Cathy J., Heather L. Bednarek and David Neumark. "Breast Cancer Survival, Work, And Earnings," Journal of Health Economics, 2002, v21(5,Sep), 757-779. Abstract: Relying on data from the Health and Retirement Study, we examine differences between breast cancer survivors and a non-cancer control group in employment, hours worked, wages, and earnings. Overall, breast cancer has a negative impact on the decision to work. However, among survivors who work, hours of work and, correspondingly, annual earnings are higher compared to women in the non-cancer control group. These findings suggest that while breast cancer has a negative effect on women's employment, breast cancer may not be debilitating for those who remain in the work force. We explore numerous possible biases underlying our estimates especially selection based on information in the Health and Retirement Study, and examine related evidence from supplemental data sources. Handle: RePEc:nbr:nberwo:8134 Template-Type: ReDIF-Paper 1.0 Title: Asymptotic Methods for Asset Market Equilibrium Analysis Classification-JEL: C63; D52 Author-Name: Kenneth L. Judd Author-Person: pju19 Author-Name: Sy-Ming Guu Note: AP Number: 8135 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8135 File-URL: http://www.nber.org/papers/w8135.pdf File-Format: application/pdf Publication-Status: published as Judd, Kenneth L. and Sy-Ming Guu. “Asymptotic Methods for Asset Market Equilibrium Analysis." Economic Theory 18 (2001): 127-157. Abstract: General equilibrium analysis is difficult when asset markets are incomplete. We make the simplifying assumption that uncertainty is small and use bifurcation methods to compute Taylor series approximations for asset demand and asset market equilibrium. A computer must be used to derive these approximations since they involve large amounts of algebraic manipulation. To illustrate this method, we apply it to analyzing the allocative, price, and welfare effects of introducing a new derivative security. We find that the introduction of any derivative will raise the value of the risky asset relative to bonds. Handle: RePEc:nbr:nberwo:8135 Template-Type: ReDIF-Paper 1.0 Title: The Real Balance Effect Classification-JEL: E31; E52 Author-Name: Peter N. Ireland Author-Person: pir1 Note: ME Number: 8136 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8136 File-URL: http://www.nber.org/papers/w8136.pdf File-Format: application/pdf Publication-Status: published as Ireland, Peter N. “The Liquidity Trap, the Real Balance Effect, and the Friedman Rule." International Economic Review (November 2005). Abstract: This paper extends a conventional cash-in-advance model to incorporate a real balance effect of the kind described by de Scitovszky, Haberler, Pigou, and Patinkin. When operative, this real balance effect eliminates the liquidity trap, allowing the central bank to control the price level even when the nominal interest rate hits its lower bound of zero. Curiously, the same mechanism that gives rise to the real balance effect also implies that monetary policies have distributional consequences that make some agents much worse off under a zero nominal interest rate than they are when the nominal interest rate is positive. Handle: RePEc:nbr:nberwo:8136 Template-Type: ReDIF-Paper 1.0 Title: Exchange Rates and Wages Classification-JEL: F3; F4 Author-Name: Linda Goldberg Author-Person: pgo256 Author-Name: Joseph Tracy Author-Person: ptr23 Note: IFM ITI LS Number: 8137 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8137 File-URL: http://www.nber.org/papers/w8137.pdf File-Format: application/pdf Abstract: The effects of exchange rate fluctuations across the population is an important issue for increasingly globalized economies. Previous studies using industry aggregate data have found differences across industries in the labor market implications of exchange rates, reporting that industry wages are significantly more responsive than industry employment. We offer an explanation for this paradoxical finding. Using Current Population Survey data for 1976 through 1998, we document that the main mechanism for exchange rate effects on wages occurs through job turnover and the strong consequences this has for the wages of workers undergoing such job transitions. By contrast, workers who remain with the same employer experience little if any wage impacts from exchange rate shocks. In addition, we find that the least educated workers who also have the most frequent job changes shoulder the largest adjustments to exchange rates. Handle: RePEc:nbr:nberwo:8137 Template-Type: ReDIF-Paper 1.0 Title: Perfect Taxation with Imperfect Competition Classification-JEL: H21; D43 Author-Name: Alan J. Auerbach Author-Person: pau33 Author-Name: James R. Hines Jr. Author-Person: phi111 Note: PE Number: 8138 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8138 File-URL: http://www.nber.org/papers/w8138.pdf File-Format: application/pdf Publication-Status: published as Cnossen, S. and H. Sinn (eds.) Public Finance and Public Policy in the New Century. 2003. Abstract: This paper analyzes features of perfect taxation also known as optimal taxation when one or more private markets is imperfectly competitive. Governments with perfect information and access to lump-sum taxes can provide corrective subsidies that render outcomes efficient in the presence of imperfect competition. Relaxing either of these two conditions removes the government's ability to support efficient resource allocation and changes the perfect policy response. When governments cannot use lump-sum taxes, perfect tax policies represent compromises between the benefits of subsidizing output in the imperfectly competitive sectors of the economy and the costs of imposing higher taxes elsewhere. This tradeoff is formally identical for ad valorem and specific taxes, even though ad valorem taxation is welfare superior to specific taxation in the presence of imperfect competition. When governments have uncertain knowledge of the degree of competition in product markets, perfect corrective tax policy is generally of smaller magnitude than that when the degree of competition is known with certainty. Handle: RePEc:nbr:nberwo:8138 Template-Type: ReDIF-Paper 1.0 Title: How Severe is the Time Inconsistency Problem in Monetary Policy? Classification-JEL: E5; E61 Author-Name: Stefania Albanesi Author-Person: pal30 Author-Name: V.V. Chari Author-Person: pch40 Author-Name: Lawrence J. Christiano Author-Person: pch45 Note: EFG Number: 8139 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8139 File-URL: http://www.nber.org/papers/w8139.pdf File-Format: application/pdf Publication-Status: published as Albanesi, Stefania, V. V. Chari and Lawrence J. Christiano. "How Severe Is The Time-Inconsistency Problem In Monetary Policy?," FRB Minneapolis - Quarterly Review, 2003, v27(3,Summer), 17-33. Abstract: We analyze two monetary economies - a cash-credit good model and a limited participation model. In our models, monetary policy is made by a benevolent policymaker who cannot commit to future policies. We define and analyze Markov equilibrium in these economies. We show that there is no time inconsistency problem for a wide range of parameter values. Handle: RePEc:nbr:nberwo:8139 Template-Type: ReDIF-Paper 1.0 Title: Does Inequality in Skills Explain Inequality in Earnings Across Advanced Countries? Classification-JEL: J31 Author-Name: Dan Devroye Author-Name: Richard B. Freeman Author-Person: pfr23 Note: LS Number: 8140 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8140 File-URL: http://www.nber.org/papers/w8140.pdf File-Format: application/pdf Abstract: The distribution of earnings and the distribution of skills vary widely among advanced countries, with the major English-speaking countries, the US, UK, and Canada, having much greater inequality in both earnings and skills than continental European Union countries. This raises the possibility that cross-country differences in the distribution of skills determine cross-country differences in earnings inequality. Using the International Adult Literacy Survey, we find that skill inequality explains only about 7% of the cross-country difference in inequality. Most striking, the dispersion of earnings in the US is larger in narrowly defined skill groups than is the dispersion of earnings for European workers overall. The bulk of cross-country differences in earnings inequality occur within skill groups, not between them. Handle: RePEc:nbr:nberwo:8140 Template-Type: ReDIF-Paper 1.0 Title: International Liquidity Illusion: On the Risks of Sterilization Classification-JEL: E59; F31 Author-Name: Ricardo J. Caballero Author-Person: pca44 Author-Name: Arvind Krishnamurthy Author-Person: pkr393 Note: EFG IFM Number: 8141 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8141 File-URL: http://www.nber.org/papers/w8141.pdf File-Format: application/pdf Abstract: During the booms that precede crises in emerging economies, policymakers often struggle to limit capital flows and their expansionary consequences. The main policy tool for this task is a sterilization of capital inflows - essentially a swap of international reserves for public bonds. Despite its widespread use, sterilization is often criticized for its ineffectiveness and, in extreme cases, its potential backfiring. We argue that these concerns are justified when countries experience occasional external crises and domestic financial markets are illiquid. In this context, while standard Mundell-Fleming considerations may determine the impact of the sterilization on short term peso interest rates, a potentially more powerful and offsetting mechanism is triggered by the anticipated reversal of this policy in the event of an external crisis. If the instruments used in the sterilization are illiquid or result in fiscal deficits that reduce the liquidity of the private sector, then the effective dollar cost of capital, which considers the whole path of expected future rates, may be lowered rather than raised by this policy. Most importantly, this dollar cost of capital reduction does not reflect a true increase in the country's international liquidity during the external crisis and reversal, as would be the case with a successful sterilization, but just a decline in domestic private liquidity. The impact of the latter on relative asset prices creates a sort of 'international liquidity illusion' which fosters rather than depress aggregate demand, and exacerbates short term capital inflows. Handle: RePEc:nbr:nberwo:8141 Template-Type: ReDIF-Paper 1.0 Title: Did the Malaysian Capital Controls Work? Classification-JEL: F30; O57 Author-Name: Ethan Kaplan Author-Person: pka532 Author-Name: Dani Rodrik Author-Person: pro60 Note: IFM Number: 8142 Creation-Date: 2001-02 Order-URL: http://www.nber.org/papers/w8142 File-URL: http://www.nber.org/papers/w8142.pdf File-Format: application/pdf Publication-Status: published as Did the Malaysian Capital Controls Work?, Ethan Kaplan, Dani Rodrik. in Preventing Currency Crises in Emerging Markets, Edwards and Frankel. 2002 Abstract: Malaysia recovered from the Asian financial crisis swiftly after the imposition of capital controls in September 1998. The fact that Korea and Thailand recovered in parallel has been interpreted as suggesting that capital controls did not play a significant role in facilitating Malaysia's rebound. However, the financial crisis was deepening in Malaysia in the summer of 1998, while it had significantly eased up in Korea and Thailand. We employ a time-shifted differences-in- differences technique to exploit the differences in the timing of the crises. Compared to IMF programs, we find that the Malaysian policies produced faster economic recovery, smaller declines in employment and real wages, and more rapid turnaround in the stock market. Handle: RePEc:nbr:nberwo:8142 Template-Type: ReDIF-Paper 1.0 Title: Loss Aversion and Seller Behavior: Evidence from the Housing Market Classification-JEL: L10; R21 Author-Name: David Genesove Author-Person: pge30 Author-Name: Christopher Mayer Author-Person: pma212 Note: AP IO Number: 8143 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8143 File-URL: http://www.nber.org/papers/w8143.pdf File-Format: application/pdf Publication-Status: published as Genesove, David and Christohper Mayer. "Loss Aversion And Seller Behavior: Evidence From The Housing Market," Quarterly Journal of Economics, 2001, v116(4,Nov), 1233-1260. Abstract: Data from downtown Boston in the 1990s show that loss aversion determines seller behavior in the housing market. Condominium owners subject to nominal losses 1) set higher asking prices of 25-35 percent of the difference between the property's expected selling price and their original purchase price; 2) attain higher selling prices of 3-18 percent of that difference; and 3) exhibit a much lower sale hazard than other sellers. The list price results are twice as large for owner-occupants as investors, but hold for both. These findings are consistent with prospect theory and help explain the positive price-volume correlation in real estate markets. Handle: RePEc:nbr:nberwo:8143 Template-Type: ReDIF-Paper 1.0 Title: Repatriation Taxes, Repatriation Strategies and Multinational Financial Policy Classification-JEL: H25; H87 Author-Name: Rosanne Altshuler Author-Person: pal34 Author-Name: Harry Grubert Note: PE Number: 8144 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8144 File-URL: http://www.nber.org/papers/w8144.pdf File-Format: application/pdf Publication-Status: published as Altshuler, Rosanne and Harry Grubert. "Repatriation Taxes, Repatriation Strategies And Multinational Financial Policy," Journal of Public Economics, 2003, v87(1,Jan), 73-107. Abstract: Several investment-repatriation strategies are added to the standard model of a multinational in which an affiliate is located in a low-tax country and is limited to two alternatives: repatriating taxable dividends to the parent or investing in its own real operations. In our model, affiliates can invest in passive assets, which the parent can borrow against, or in related affiliates which can be used as vehicles for tax-favored repatriations. We show analytically how the availability of alternative strategies can effect real investment throughout the worldwide corporation. We use firm level data for U.S. multinationals to test for the importance of alternative strategies. The evidence is generally consistent with the theory, particularly the strategies using related affiliates. Handle: RePEc:nbr:nberwo:8144 Template-Type: ReDIF-Paper 1.0 Title: Rules, Communication and Collusion: Narrative Evidence from the Sugar Institute Case Classification-JEL: L13; L41 Author-Name: David Genesove Author-Person: pge30 Author-Name: Wallace P. Mullin Note: IO Number: 8145 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8145 File-URL: http://www.nber.org/papers/w8145.pdf File-Format: application/pdf Publication-Status: published as Genesove, David and Wallace P. Mullin. "Rules, Communication, And Collusion: Narrative Evidence From The Sugar Institute Case," American Economic Review, 2001, v91(3,Jun), 379-398. Abstract: Detailed notes on weekly meetings of the sugar refining cartel show how communication helps firms collude, and so highlight the deficiencies in the current formal theory of collusion. The Sugar Institute did not fix prices or output. Prices were increased by homogenizing business practices to make price cutting more transparent. Meetings were used to interpret and adapt the agreement, coordinate on jointly profitable actions, ensure unilateral actions were not misconstrued as cheating, and determine whether cheating had occurred. In contrast to established theories, cheating did occur, but sparked only limited retaliation, partly due to the contractual relations with selling agents. Handle: RePEc:nbr:nberwo:8145 Template-Type: ReDIF-Paper 1.0 Title: How to Auction an Essential Facility When Underhand Integration is Possible Classification-JEL: D44; L12 Author-Name: Eduardo M.R.A. Engel Author-Person: pen3 Author-Name: Ronald D. Fischer Author-Person: pfi53 Author-Name: Alexander Galetovic Author-Person: pga381 Note: IO Number: 8146 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8146 File-URL: http://www.nber.org/papers/w8146.pdf File-Format: application/pdf Publication-Status: published as Engel, Eduardo M. R. A., Ronald A. Fischer and Alexander Galetovic. "How To Auction A Bottleneck Monopoly When Underhand Vertical Agreements Are Possible," Journal of Industrial Economics, 2004, v52(3,Sep), 427-455. Abstract: There are many industries in which potentially competitive segments require services provided by natural monopoly bottlenecks (essential facilities). Since it is difficult to regulate these facilities, developing countries are using Demsetz auctions, where the facility is awarded to the firm that bids the lowest user fee. In this paper we show that when underhand agreements between the monopoly bottleneck and downstream firms are possible, Demsetz auctions need floors on bids, since otherwise welfare can be lower than with an unregulated monopoly. We model an underhand agreement using a standard hidden information model. The essential facility is an uninformed principal randomly matched to a downstream company, which observes its costs after closing the underhand agreement. When the essential facility prefers the option of vertical separation, there is downstream competition, which implies that only low cost firms survive. We find that a sufficiently high floor on bids promotes vertical separation, yielding higher welfare than either an unregulated or a vertically integrated monopoly. Moreover, prohibiting open vertical integration means this floor can be lower, thus enhancing welfare. The incentive compatibility constraints required by underhand agreements imply rent sharing and production distortions that make vertical integration less attractive. Handle: RePEc:nbr:nberwo:8146 Template-Type: ReDIF-Paper 1.0 Title: The Benefits and Costs of Newer Drugs: Evidence from the 1996 Medical Expenditure Panel Survey Classification-JEL: I1; L65 Author-Name: Frank R. Lichtenberg Author-Person: pli76 Note: EH PR Number: 8147 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8147 File-URL: http://www.nber.org/papers/w8147.pdf File-Format: application/pdf Publication-Status: published as Frank R. Lichtenberg, 2007. "Benefits and costs of newer drugs: an update," Health Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 485-490. Abstract: The nation's spending for prescription drugs has grown dramatically in recent years. Previous studies have shown that the replacement of older drugs by newer, more expensive, drugs is the single most important reason for this increase, but they did not measure how much of the difference between new and old drug prices reflects changes in quality as better, newer drugs replace older, less effective medications. In this paper we analyzed prescribed medicine event-level data (linked to person- and condition-level data) from the 1996 Medical Expenditure Panel Survey (MEPS) to provide evidence about the effect of drug age on mortality morbidity, and total medical expenditure, controlling for a number of characteristics of the individual and the event. (Previous researchers have hypothesized that differences in treatment patterns across individuals and areas may occur because of physicians' uncertainty and ignorance over the best medical practice.) The MEPS data enable us to control for many important attributes of the individual, condition, and prescription that influence outcomes and non-drug expenditures and that may be correlated with drug age. These include sex, age, education, race, income, insurance status, who paid for the drug, the condition for which the drug was prescribed, how long the person has had the condition, and the number of medical conditions reported by the person. Indeed, the fact that many individuals in the sample have both multiple medical conditions and multiple prescriptions means that we can control for all individual characteristics both observed and unobserved by including individual effects'. The results provide strong support for the hypothesis that the replacement of older by newer drugs results in reductions in mortality morbidity, and total medical expenditure. Although the mortality rate in this sample is quite low making it difficult to detect any... Handle: RePEc:nbr:nberwo:8147 Template-Type: ReDIF-Paper 1.0 Title: A New Approach to Takeover Law and Regulatory Competition Classification-JEL: G30; H70 Author-Name: Lucian Arye Bebchuk Author-Person: pbe72 Author-Name: Allen Ferrell Note: LE Number: 8148 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8148 File-URL: http://www.nber.org/papers/w8148.pdf File-Format: application/pdf Publication-Status: published as "A New Approach to Takeover Law and Regulatory Competition" Virginia Law Review, Vol. 87, No. 1, pp. 111-164 (2001). Abstract: The development of U.S. state takeover law in the past three decades has produced considerable and quite possibly excessive protection for incumbent managers from hostile takeovers. Although the shortcomings of state takeover law have been widely recognized, there has been little support for federal intervention because of the concern that such intervention might produce even worse takeover arrangements. This paper puts forward a novel form of federal intervention in the regulation of takeovers that would address these shortcomings without raising such a concern. Rather than mandating particular substantive takeover arrangements, this form of federal intervention would focus on increasing shareholder choice. Choice-enhancing' federal intervention would consist of two elements: (i) an optional body of substantive federal takeover law which shareholders would be able to opt into (or out of) and (ii) a mandatory process rule that would provide shareholders the right to initiate and adopt, regardless of managers' wishes, proposals for opting into (or out of) the federal takeover law. We argue that such a federal role in takeover law cannot harm and would likely improve the regulation of takeovers. Moreover, by showing how federal law can be used to improve regulatory competition in the provision of takeover law rather than preempt it, our analysis lays the groundwork for a more general reconsideration of regulatory competition in the corporate law area. Handle: RePEc:nbr:nberwo:8148 Template-Type: ReDIF-Paper 1.0 Title: Population Growth, Technological Adoption and Economic Outcomes: A Theory of Cross-Country Differences for the Information Era Classification-JEL: J0; O3 Author-Name: Paul Beaudry Author-Person: pbe35 Author-Name: David Green Author-Person: pgr285 Note: LS Number: 8149 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8149 File-URL: http://www.nber.org/papers/w8149.pdf File-Format: application/pdf Publication-Status: published as Beaudry, Paul and David A. Green. "Population Growth, Technological Adoption, And Economic Outcomes In The Information Era," Review of Economic Dynamics, 2002, v5(4,Oct), 749-774. Abstract: The object of this paper is to show how population growth, through its interaction with recent technological and organizational developments, can account for many of the cross-country differences in economic outcome observed among industrialized countries over the last 20 years. In particular, our model illustrates how a large decrease in the price of information technology can create a comparative advantage for high population growth economies to jump ahead in the adoption of computer- and skill-intensive models of production as a means to exploiting their relative abundance of human capital versus physical capital. The predictions of the model are that, over the span of the information revolution, industrial countries with higher population growth rates will experience a more pronounced adoption of new technology, a better performance in terms of increased employment rates, a poorer performance in terms of wage growth for less skilled workers, a larger increase in the service sector and a larger increase in the returns to education. We provide preliminary evidence in suport of the theory based on a comparative study of observed developments in the US, UK and Germany since the mid-seventies, complemented by an examination of broad wage and employment changes for 18 OECD countries over the same period. Handle: RePEc:nbr:nberwo:8149 Template-Type: ReDIF-Paper 1.0 Title: The Geography and Channels of Diffusion at the World's Technology Frontier Classification-JEL: O3; F2 Author-Name: Wolfgang Keller Author-Person: pke8 Note: ITI PR Number: 8150 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8150 File-URL: http://www.nber.org/papers/w8150.pdf File-Format: application/pdf Abstract: Convergence in per capita income turns on whether technological knowledge spillovers are global or local. Global spillovers favor convergence, while a geographically limited scope of knowledge diffusion can lead to regional clusters of countries with persistently different levels of income per capita. This paper estimates the importance of geographic distance for technology diffusion, how this changed over time, and whether international trade, foreign direct investment, and communication flows serve as important channels of diffusion. The analysis is based on examining the productivity effects of R&D expenditures in the world's seven major industrialized countries between 1970 and 1995. First, I find that the scope of technology diffusion is severely limited by distance: the geographic half-life of technology, the distance at which half of the technology has disappeared, is estimated to be only 1,200 kilometers. Second, technological knowledge has become a lot more global from the early 1970s to the 1990s. Third, I estimate that trade patterns account for the majority of all differences in bilateral technology diffusion, whereas foreign direct investment and language skills differences contribute circa 15% each. Lastly, these three channels together account for almost the entire localization effect that would otherwise be attributed to geographic distance. Handle: RePEc:nbr:nberwo:8150 Template-Type: ReDIF-Paper 1.0 Title: Breadth of Ownership and Stock Returns 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: 8151 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8151 File-URL: http://www.nber.org/papers/w8151.pdf File-Format: application/pdf Publication-Status: published as Chen, Joseph, Harrison Hong and Jeremy C. Stein. "Breadth Of Ownership And Stock Returns," Journal of Financial Economics, 2002, v66(2-3,Nov-Dec), 171-205. Abstract: We develop a model of stock prices in which there are both differences of opinion among investors as well as short-sales constraints. The key insight that emerges is that breadth of ownership is a valuation indicator. When breadth is low i.e., when few investors have long positions in the stock this signals that the short-sales constraint is binding tightly, implying that prices are high relative to fundamentals and that expected returns are therefore low. Thus reductions (increases) in breadth should forecast lower (higher) returns. Using quarterly data on mutual fund holdings over the period 1979-1998, we find evidence supportive of this prediction: stocks whose change in breadth in the prior quarter places them in the lowest decile of the sample underperform those in the top change-in-breadth decile by 6.38% in the first twelve months after portfolio formation. After adjusting for size, book-to-market and momentum, the corresponding figure is 4.95%. Handle: RePEc:nbr:nberwo:8151 Template-Type: ReDIF-Paper 1.0 Title: Age Discrimination Legislation in the United States Classification-JEL: J1; J7 Author-Name: David Neumark Author-Person: pne16 Note: AG LS Number: 8152 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8152 File-URL: http://www.nber.org/papers/w8152.pdf File-Format: application/pdf Publication-Status: published as Neumark, David. "Age Discrimination Legislation In The United States," Contemporary Economic Policy, 2003, v21(3,Jul), 297-317. Abstract: Legislation prohibiting age discrimination in the United States dates back to the decade of the 1960s, when along with the Equal Pay Act and the Civil Rights Act barring discrimination against women and minorities, the U.S. Congress passed the 1967 Age Discrimination in Employment Act. Many critical issues regarding the rationale for or effectiveness of age discrimination legislation have been addressed, and continue to be studied, by researchers in both economics and law, while many questions remain. These questions are likely to become increasingly important as rapidly aging workforces in the United States and other industrialized countries threaten to vastly increase the social costs of any barriers to older workers' employment. This paper provides a summary, critical review, and synthesis of what we know about age discrimination legislation. It first traces out the legislative history and the evolving case law, and discusses implementation of the law. It then moves on to review the existing research on age discrimination legislation research that addresses the rationale for the legislation, evidence on its effectiveness, and criticisms of age discrimination legislation. Handle: RePEc:nbr:nberwo:8152 Template-Type: ReDIF-Paper 1.0 Title: The Effects of Time Limits and Other Policy Changes on Welfare Use, Work, and Income Among Female-Headed Families Classification-JEL: I3 Author-Name: Jeffrey Grogger Author-Person: pgr125 Note: LS PE Number: 8153 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8153 File-URL: http://www.nber.org/papers/w8153.pdf File-Format: application/pdf Publication-Status: published as Grogger, Jeffrey. "The Effects Of Time Limits, The EITC, And Other Policy Changes On Welfare Use, Work, And Income Among Female-headed Families," Review of Economics and Statistics, 2003, v85(2,May), 394-408. Abstract: Of all of the welfare reforms that were implemented during the 1990's, time limits may represent the single greatest break from past policy. This paper expands on what is known about this important welfare reform measure by exploiting the predictions from Grogger and Michalopoulos (1999) to estimate the effects of time limits on welfare use, employment, labor supply, earnings, and income among female-headed families. Results based on data from the March Current Population Survey suggest that time limits have had important effects on welfare use and work, accounting for about one-eighth of the decline in welfare use and about 7 percent of the rise in employment since 1993. They have had no significant effect on earnings or income, however. The analysis also shows that the collective effects of other reforms have had important impacts on employment and labor supply. Furthermore, it identifies the Earned Income Tax Credit (EITC) as a particularly important contributor to both the recent decrease in welfare use and the recent increase in employment, labor supply, and earnings. Handle: RePEc:nbr:nberwo:8153 Template-Type: ReDIF-Paper 1.0 Title: Electoral Rules and Corruption Classification-JEL: D7; H1 Author-Name: Torsten Persson Author-Person: ppe28 Author-Name: Guido Tabellini Author-Person: pta37 Author-Name: Francesco Trebbi Author-Person: ptr40 Note: PE Number: 8154 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8154 File-URL: http://www.nber.org/papers/w8154.pdf File-Format: application/pdf Publication-Status: published as Torsten Persson & Guido Tabellini & Francesco Trebbi, 2003. "Electoral Rules and Corruption," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 958-989, 06. Abstract: Is corruption systematically related to electoral rules? A number of studies have tried to uncover economic and social determinants of corruption but, as far as we know, nobody has yet empirically investigated how electoral systems ináuence corruption. We try to address this lacuna in the literature, by relating corruption to dierent features of the electoral system in a sample from the late nineties encompassing more than 80 (developed and developing) democracies. Our empirical results are based on traditional regression methods, as well as non-parametric estimators. The evidence is consistent with the theoretical models reviewed in the paper. Holding constant a variety of economic and social variables, we find that larger voting districts - and thus lower barriers to entry - are associated with less corruption, whereas larger shares of candidates elected from party lists - and thus less individual accountability - are associated with more corruption. Altogether, proportional elections are associated with more corruption, since voting over party lists is the dominant effect, while the district magnitude effect is less robust. Handle: RePEc:nbr:nberwo:8154 Template-Type: ReDIF-Paper 1.0 Title: The Rising Tide Lifts...? Author-Name: Richard B. Freeman Author-Person: pfr23 Note: LS Number: 8155 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8155 File-URL: http://www.nber.org/papers/w8155.pdf File-Format: application/pdf Publication-Status: published as “The Rising Tide Lifts...?” In Understanding Poverty, eds. Sheldon Danziger and Robert Haveman (Cambridge, MA: Harvard University Press, 2002). Abstract: To what extent did the economic boom of the 1990s-early 2000s improve the well-being of persons in the bottom rungs of the income distribution? This paper uses a pooled cross-state time series regression design to estimate the effect of earnings, unemployment, and inequality on poverty in the boom. I find that the tight labor market reduced poverty substantively, gainsaying the gloom that developed in the 1980s about the effect of economic growth on the less advantaged; and that socially undesirable behaviour also fell in the period, potentially due in part to the boom.. While the rising tide of economic progress can lift many boats, however, around 6-8% of Americans cannot be so helped, and thus constitute a relatively long term poverty population. Moreover, the level of the tide needed to improve the conditions of the less advantaged is a 4-5% unemployment rate, not the 6-6.5% unemployment once viewed as the NAIRU. Handle: RePEc:nbr:nberwo:8155 Template-Type: ReDIF-Paper 1.0 Title: Improving School Accountability Measures Classification-JEL: I2 Author-Name: Thomas J. Kane Author-Name: Douglas O. Staiger Author-Person: pst466 Note: CH PE Number: 8156 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8156 File-URL: http://www.nber.org/papers/w8156.pdf File-Format: application/pdf Publication-Status: published as Kane, Thomas J. and Douglas O. Staiger. "The Promise And Pitfalls Of Using Imprecise School Accountability Measures," Journal of Economic Perspectives, 2002, v16(4,Fall), 91-114. Abstract: A growing number of states are using annual school-level test scores as part of their school accountability systems. We highlight an under-appreciated weakness of that approach the imprecision of school-level test score means -- and propose a method for better discerning signal from noise in annual school report cards. For an elementary school of average size in North Carolina, we estimate that 28 percent of the variance in 5th grade reading scores is due to sampling variation and about 10 percent is due to other non-persistent sources. More troubling, we estimate that less than half of the variance in the mean gain in reading performance between 4th and 5th grade is due to persistent differences between schools. We use these estimates of the variance components in an empirical Bayes framework to generate filtered' predictions of school performance, which have much greater predictive value than the mean for a single year. We also identify evidence of within-school heterogeneity in classroom level gains, which suggests the importance of teacher effects. Handle: RePEc:nbr:nberwo:8156 Template-Type: ReDIF-Paper 1.0 Title: A Quantitative Analysis of Pricing Behavior in California's Wholesale Electricity Market During Summer 2000 Author-Name: Paul Joskow Author-Person: pjo110 Author-Name: Edward Kahn Note: IO Number: 8157 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8157 File-URL: http://www.nber.org/papers/w8157.pdf File-Format: application/pdf Publication-Status: published as Joskow, Paul L. and Edward Kahn. "A Quantitative Analysis Of Pricing Behavior In California's Wholesale Electricity Market During Summer 2000," Energy Journal, 2002, v23(4), 1-36. Abstract: We simulate competitive benchmark wholesale prices for electricity in California during the summer of 2000, taking account of changes in natural gas prices, electricity demand, and imports of electricity from other states during this time period. We also examine the impact of changes in the prices of NOx emissions permits on estimated competitive benchmark prices for electricity. The competitive benchmark prices are then compared to actual prices. A significant fraction of the changes in wholesale electricity prices in California during Summer 2000 can be explained by these four factors. The impact of higher NOx permit prices, and their interaction with reduced imports into California, have a particularly large impact on competitive benchmark prices. However, during June, July and August a large unexplained difference between actual prices and competitive benchmark prices remains. We tentatively attribute this difference to supplier market power and related market imperfections. We then examine whether there is evidence of strategic behavior by suppliers during the highest priced hours during the summer. Evidence of supply withholding --- exercise of market power --- during these hours is identified. Handle: RePEc:nbr:nberwo:8157 Template-Type: ReDIF-Paper 1.0 Title: Dying to Save Taxes: Evidence from Estate Tax Returns on the Death Elasticity Classification-JEL: H2 Author-Name: Wojciech Kopczuk Author-Person: pko20 Author-Name: Joel Slemrod Author-Person: psl10 Note: PE Number: 8158 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8158 File-URL: http://www.nber.org/papers/w8158.pdf File-Format: application/pdf Publication-Status: published as Review of Economics and Statistics, 2003, 85(2), 256-265. Abstract: This paper examines data from U.S. federal tax returns to shed light on whether the timing of death is responsive to its tax consequences. We investigate the temporal pattern of deaths around the time of changes in the estate tax system periods when living longer, or dying sooner, could significantly affect estate tax liability. We find some evidence that there is a small death elasticity, although we cannot rule out that what we have uncovered is ex post doctoring of the reported date of death. However, the fact that we find that postponement, rather than acceleration, of death is more likely to occur suggests that this phenomenon is at last partly a real (albeit timing) response to taxation. Handle: RePEc:nbr:nberwo:8158 Template-Type: ReDIF-Paper 1.0 Title: Aggregate Implications of Indivisible Labor Classification-JEL: J22; D11 Author-Name: Casey B. Mulligan Author-Person: pmu64 Note: EFG LS Number: 8159 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8159 File-URL: http://www.nber.org/papers/w8159.pdf File-Format: application/pdf Publication-Status: published as Advances in Macroeconomics, (B.E. Journal of Macroeconomics), Vol. 1: Iss. 1, Article 4 (2001). Abstract: I suggest that the aggregate implications of indivisible labor are few, and subtle. First, I model behavior in an 'indivisible labor' environment like those of Diamond and Mirrlees (1978, 1986), Hansen (1985), Rogerson (1988), Christiano and Eichenbaum (1992) and show that aggregate behavior in such an economy is indistinguishable from aggregates generated by the divisible labor model of Lucas and Rapping (1969); any data on aggregate hours and earnings generated by the divisible (indivisible) model can be generated by a similar parameterization of the indivisible (divisible) model. Second, I generalize the aforementioned models of indivisible labor to allow for labor supply on the 'intensive' margin, and to allow for nonlinear taxes. The aggregate implications of doing the former are quite subtle, but doing the latter suggests that the indivisibility of labor may have implications for public finance. My results also imply that backward bending aggregate labor supply, and any nonnegative degree of aggregate intertemporal substitution, are consistent with standard economic theory even when all labor is supplied on the so-called 'extensive' margin. Finally, my results suggest that the classic aggregate studies of labor supply by Mincer, Bowen and Finegan, and others have a simple microeconomic interpretation. Handle: RePEc:nbr:nberwo:8159 Template-Type: ReDIF-Paper 1.0 Title: Modeling and Forecasting Realized Volatility Classification-JEL: C1; G1 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 IFM Number: 8160 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8160 File-URL: http://www.nber.org/papers/w8160.pdf File-Format: application/pdf Publication-Status: published as Andersen, Torben G., Tim Bollerslev, Francis X. Diebold and Paul Labys. "Modeling And Forecasting Realized Volatility," Econometrica, 2003, v71(2,Mar), 579-625. Abstract: This paper provides a general framework for integration of high-frequency intraday data into the measurement forecasting of daily and lower frequency volatility and return distributions. Most procedures for modeling and forecasting financial asset return volatilities, correlations, and distributions rely on restrictive and complicated parametric multivariate ARCH or stochastic volatility models, which often perform poorly at intraday frequencies. Use of realized volatility constructed from high-frequency intraday returns, in contrast, permits the use of traditional time series procedures for modeling and forecasting. Building on the theory of continuous-time arbitrage-free price processes and the theory of quadratic variation, we formally develop the links between the conditional covariancematrix and the concept of realized volatility. Next, using continuously recorded observations for the Deutschemark Dollar and Yen / Dollar spot exchange rates covering more than a decade, we find that forecasts from a simple long-memory Gaussian vector autoregression for the logarithmic daily realized volatilities perform admirably compared to popular daily ARCH and related models. Moreover, the vector autoregressive volatility forecast, coupled with a parametric lognormal-normal mixture distribution implied by the theoretically and empirically grounded assumption of normally distributed standardized returns, gives rise to well-calibrated density forecasts of future returns, and correspondingly accurate quantile estimates. Our results hold promise for practical modeling and forecasting of the large covariance matrices relevant in asset pricing, asset allocation and financial risk management applications. Handle: RePEc:nbr:nberwo:8160 Template-Type: ReDIF-Paper 1.0 Title: Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature Classification-JEL: G3; L2 Author-Name: Benjamin E. Hermalin Author-Person: phe59 Author-Name: Michael S. Weisbach Note: CF Number: 8161 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8161 File-URL: http://www.nber.org/papers/w8161.pdf File-Format: application/pdf Publication-Status: published as Hermalin, Benjamin E. and Michael S. Weisbach. "Boards Of Directors As An Endogenously Determined Institution: A Survey Of The Economic Literature," FRB New York - Economic Policy Review, 2003, v9(1,Apr), 7-26. Abstract: This paper surveys the economic literature on boards of directors. Although a legal requirement for many organizations, boards are also an endogenously determined governance mechanism for addressing agency problems inherent to many organizations. Formal theory on boards of directors has been quite limited to this point. Most empirical work on boards has been aimed at answering one of three questions: 1) How are board characteristics such as composition or size related to profitability? 2) How do board characteristics affect the observable actions of the board? 3) What factors affect the makeup of boards and how they evolve over time? The primary findings from the empirical literature on boards are: Board composition is not related to corporate performance, while board size has a negative relation to corporate performance. Both board composition and size are correlated with the board's decisions regarding CEO replacement, acquisitions, poison pills, and executive compensation. Finally, boards appear to evolve over time as a function of the bargaining power of the CEO relative to the existing directors. Firm performance, CEO turnover, and changes in ownership structure appear to be important factors affecting changes to boards. Handle: RePEc:nbr:nberwo:8161 Template-Type: ReDIF-Paper 1.0 Title: High- and Low-Frequency Exchange Rate Volatility Dynamics: Range-Based Estimation of Stochastic Volatility Models Classification-JEL: G1; F3 Author-Name: Sassan Alizadeh Author-Name: Michael W. Brandt Author-Name: Francis X. Diebold Author-Person: pdi1 Note: AP Number: 8162 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8162 File-URL: http://www.nber.org/papers/w8162.pdf File-Format: application/pdf Publication-Status: published as Alizadeh, Sassan, Michael W. Brandt and Francis X. Diebold. "Range-Based Estimation Of Stochastic Volatility Models," Journal of Finance, 2002, v57(3,Jun), 1047-1091. Abstract: We propose using the price range in the estimation of stochastic volatility models. We show theoretically, numerically, and empirically that the range is not only a highly efficient volatility proxy, but also that it is approximately Gaussian and robust to microstructure noise. The good properties of the range imply that range-based Gaussian quasi-maximum likelihood estimation produces simple and highly efficient estimates of stochastic volatility models and extractions of latent volatility series. We use our method to examine the dynamics of daily exchange rate volatility and discover that traditional one-factor models are inadequate for describing simultaneously the high- and low-frequency dynamics of volatility. Instead, the evidence points strongly toward two-factor models with one highly persistent factor and one quickly mean-reverting factor. Handle: RePEc:nbr:nberwo:8162 Template-Type: ReDIF-Paper 1.0 Title: Generational Policy Classification-JEL: H6 Author-Name: Laurence J. Kotlikoff Author-Person: pko44 Note: AG PE Number: 8163 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8163 File-URL: http://www.nber.org/papers/w8163.pdf File-Format: application/pdf Publication-Status: published as Kotlikoff, Laurence J., 2002. "Generational policy," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 27, pages 1873-1932 Elsevier. Abstract: Generational policy is a fundamental aspect of a nation's fiscal affairs. The policy involves redistributing resources across generations and allocating to particular generations the burden of paying the government's bills. This chapter of the second edition of The Handbook of Public Economics shows how generational policy works, how it's measured, and how much it matters to virtual as well as real economies. The chapter shows the zero-sum nature of generational policy. It then illustrates generational policy the difference between statutory and true fiscal incidence. It also illuminates the arbitrary nature of fiscal labels as well as their associated fiscal aggregates, including the budget deficit, aggregate tax revenues, and aggregate transfer payments. Finally, it illustrates the various guises of generational policy, including structural tax changes, running budget deficits, altering investment incentives, and expanding pay-as-you-go-financed social security. Once this example has been milked, the chapter shows that its lessons about the arbitrary nature of fiscal labels are general. They apply to any neoclassical model with rational economic agents and rational economic institutions. This demonstration sets the stage for the description, illustration, and critique of generational accounting. The chapter's final sections use a simulation model to illustrate generational policy, consider the theoretical and empirical case for and against Ricardian Equivalence, discuss government risk sharing and risk making, and summarize lessons learned. Handle: RePEc:nbr:nberwo:8163 Template-Type: ReDIF-Paper 1.0 Title: Protection of Minority Shareholder Interests, Cross-listings in the United States, and Subsequent Equity Offerings Classification-JEL: G3; F3 Author-Name: William A. Reese, Jr. Author-Name: Michael S. Weisbach Note: CF Number: 8164 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8164 File-URL: http://www.nber.org/papers/w8164.pdf File-Format: application/pdf Publication-Status: published as Reese, William Jr. & Weisbach, Michael S., 2002. "Protection of minority shareholder interests, cross-listings in the United States, and subsequent equity offerings," Journal of Financial Economics, Elsevier, vol. 66(1), pages 65-104, October. Abstract: This paper examines the hypothesis that non-U.S. firms cross-list in the United States to increase protection of their minority shareholders. Cross-listing on an organized exchange (NYSE or Nasdaq) in the U.S. subjects a non-U.S. firm to a number of provisions of U.S. securities law and requires the firm to conform to U.S. GAAP. It therefore increases the expected cost to managers of extracting private benefits, and commits the firm to protecting minority shareholders' interests. The expected relation between the quantity of cross-listings and shareholder protection in the home country is ambiguous, because managers will consider both expected private benefits and the public value of their shares. However, there are clear predictions about the relation between subsequent equity issues, shareholder protection and cross-listings: 1) Equity issues increase following all cross-listings, regardless of shareholder protection. 2) The increase should be larger for cross-listings from countries with weak protection. 3) Equity issues following cross-listings in the U.S. will tend to be in the U.S. for firms from countries with strong protection and outside the U.S. for firms from countries with weak protection. We find strong evidence supporting predictions 1) and 3), and weak evidence consistent with hypothesis 2). Overall, the desire to protect shareholder rights appears to be one reason why some non-U.S. firms cross-list in the United States. However, it probably is not an important determinant of the large recent increase in cross-listings, because legal requirements potentially deter a number of firms that do have a demand for equity capital from cross-listing in the U.S. Handle: RePEc:nbr:nberwo:8164 Template-Type: ReDIF-Paper 1.0 Title: The Spatial Distribution of Housing-Related Tax Benefits in the United States Classification-JEL: H20; R38 Author-Name: Todd Sinai Author-Person: psi354 Author-Name: Joseph Gyourko Author-Person: pgy3 Note: PE Number: 8165 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8165 File-URL: http://www.nber.org/papers/w8165.pdf File-Format: application/pdf Publication-Status: published as Sinai, Todd and Joseph Gyourko. “The Spatial Distribution of Housing-Related Tax Benefits in the United States." Real Estate Economics 31, 4 (2003): 527-576. Abstract: Using 1990 Census tract-level data, we estimate how tax subsidies to owner-occupied housing are distributed spatially across the United States, calculating their value as the difference in taxes currently paid by home owners and the taxes owners would pay if there were no preference for investing in one's home relative to other assets. The $164 billion national tax subsidy is highly skewed spatially with a few areas receiving large subsidies and most areas receiving small ones. If the program were self-financed on a lump sum basis, less than 20 percent of states and 10 percent of metropolitan areas would have net positive subsidies. These few metropolitan areas are situated almost exclusively along the California coast and in the Northeast from Washington, DC to Boston. At the state level, California stands out because it receives 25 percent of the national aggregate subsidy flow while being home to only 10 percent of the country's owners. At the metropolitan area level, owners in just three large CMSAs receive over 75 percent of all positive net benefits. And within a number of the larger metropolitan areas, the top quarter of owners receives 70 percent or more of the total subsidy flowing to the metro area. Handle: RePEc:nbr:nberwo:8165 Template-Type: ReDIF-Paper 1.0 Title: Vintage Organization Capital Classification-JEL: O3; N2 Author-Name: Boyan Jovanovic Author-Name: Peter L. Rousseau Author-Person: pro64 Note: AP DAE Number: 8166 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8166 File-URL: http://www.nber.org/papers/w8166.pdf File-Format: application/pdf Publication-Status: published as Boyan Jovanovic & Peter L. Rousseau, 2000. "Vintage organization capital," Proceedings, Federal Reserve Bank of San Francisco, issue Apr. Abstract: We study 114 years of U.S. stock market data and find That there are large cohort effects in stock prices, effects that we label 'organization capital,' That cohort effects grew at a rate of 1.75% per year, That the debt-equity ratio of all vintages declined, That three big technological waves took place: electricity (1895-1930), a 'World War II' wave (1945-1970), and information technology (1971-), and That organization capital tends to grow fastest during the second half of a technological wave. Handle: RePEc:nbr:nberwo:8166 Template-Type: ReDIF-Paper 1.0 Title: Expectation Puzzles, Time-varying Risk Premia, and Dynamic Models of the Term Structure Classification-JEL: G0 Author-Name: Qiang Dai Author-Name: Kenneth J. Singleton Author-Person: psi735 Note: AP Number: 8167 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8167 File-URL: http://www.nber.org/papers/w8167.pdf File-Format: application/pdf Publication-Status: published as Dai, Qiang and Kenneth J. Singleton. "Expectation Puzzles, Time-Varying Risk Premia, And Affine Models Of The Term Structure," Journal of Financial Economics, 2002, v63(3,Mar), 415-441. Abstract: Though linear projections of returns on the slope of the yield curve have contradicted the implications of the traditional expectations theory,' we show that these findings are not puzzling relative to a large class of richer dynamic term structure models. Specifically, we are able to match all of the key empirical findings reported by Fama and Bliss and Campbell and Shiller, among others, within large subclasses of affine and quadratic-Gaussian term structure models. Additionally, we show that certain risk-premium adjusted' projections of changes in yields on the slope of the yield curve recover the coefficients of unity predicted by the models. Key to this matching are parameterizations of the market prices of risk that let the risk factors affect the market prices of risk directly, and not only through the factor volatilities. The risk premiums have a simple form consistent with Fama's findings on the predictability of forward rates, and are shown to also be consistent with interest rate, feedback rules used by a monetary authority in setting monetary policy. Handle: RePEc:nbr:nberwo:8167 Template-Type: ReDIF-Paper 1.0 Title: Medical Care Price Indices: Problems and Opportunities / The Chung-Hua Lectures Classification-JEL: I1; O3 Author-Name: Joseph P. Newhouse Note: EH Number: 8168 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8168 File-URL: http://www.nber.org/papers/w8168.pdf File-Format: application/pdf Abstract: These Chung-Hua Lectures, given at the Academia Sinica in Taiwan in December 2000, summarize work that has been done by myself and others on biases in medical care price indices. I begin by reviewing various uses of price indices and therefore why biases in the overall indices - and changes in those biases - matter. I then describe briefly the assumptions and theory underlying the official price indices. I next turn to the problems of measuring medical prices, assuming the basic applicability of the theory upon which the official indices are based. Finally I take up the potential inapplicability of the assumptions made by that theory and the resulting issues for measuring medical price changes. I describe an alternative theory and its implications for the measurement of medical prices. I conclude that the biases in the official medical care index, while substantially reduced by recent improvements, likely remain substantial enough to affect the overall official indices in the United States, especially the GDP deflator, where the weight of medical care is around 13 percent. Handle: RePEc:nbr:nberwo:8168 Template-Type: ReDIF-Paper 1.0 Title: How Reasonable Are Assumptions Used in Theoretical Models?: Computational Evidence on the Likelihood of Trade Pattern Changes Classification-JEL: F10; F13 Author-Name: Lisandro Abrego Author-Name: Raymond Riezman Author-Person: pri43 Author-Name: John Whalley Author-Person: pwh8 Note: ITI Number: 8169 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8169 File-URL: http://www.nber.org/papers/w8169.pdf File-Format: application/pdf Publication-Status: published as Abrego, Lisandro, Raymond Riezman and John Whalley. “How Reasonable are Assumptions Used in Theoretical Models? Computational Evidence on the Likelihood of Trade Pattern Changes." Canadian Journal of Economics 39, 3 (August 2006): 781-789. Abstract: This paper seeks to contribute to discussion of the reasonableness of sometimes seemingly innocent assumptions used in theoretical trade models that the direction of trade is both predetermined for each good for each country and fixed. Here, we provide computational evidence as to the reasonableness of this assumption. We consider a simple three-country, three-good, pure-exchange model with CES preferences. We compute free trade competitive equilibria, three-country non-cooperative Nash equilibria, and customs union equilibria for randomized parameterizations, and find that trade patterns change in around 35% of the cases between free trade and customs union equilibria. In three-country Nash and customs unions comparisons trade patterns change roughly 40% of the time. We evaluate alternative cases, including with different numbers of randomizations in the parameter space. Results remain robust, reinforcing our conclusion that the assumption of unchanged trade pattern changes, common in theoretical analysis, does not have firm numerical support in the cases we consider. Handle: RePEc:nbr:nberwo:8169 Template-Type: ReDIF-Paper 1.0 Title: Life-Cycle Saving, Limits on Contributions to DC Pension Plans, and Lifetime Tax Benefits Classification-JEL: D9 Author-Name: Jagadeesh Gokhale Author-Name: Laurence J. Kotlikoff Author-Person: pko44 Author-Name: Mark J. Warshawsky Note: AG PE Number: 8170 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8170 File-URL: http://www.nber.org/papers/w8170.pdf File-Format: application/pdf Publication-Status: published as Gale, Bill, John Shoven, and Mark Warshawsky (eds.) Public Policies and Private Pensions. The Brookings Institution, 2004. Abstract: This paper addresses three questions related to limits on DC contributions. The first is whether statutory limits on tax-deductible contributions to defined contribution (DC) plans are likely to be binding, focusing on households in various economic situations. The second is how large is the tax benefit from participating in defined contribution plans. The third is how does the defined contribution tax benefit depend on the level of lifetime income. We find that the statutory limits bind those older middle-income households who started their pension savings programs late in life, those who plan to retire early, single-earner households, those who are not borrowing constrained, and those with rapid rates of real wage growth. Most households with high levels of earnings, regardless of age or situation, are also constrained by the contribution limits. Lower or middle-income two-eamer households that can look forward to modest real earnings growth are likely to be borrowing constrained for most of their pre-retirement years because of the costs of paying a mortgage and sending children to college. These households are not in a position to save the 25 percent of earnings allowed as a contribution to DC plans. Some of these middle-income households, however, are constrained by the $10,500 limit on elective employee contributions to 401(k) plans if the households have access to only these plans and their employers make no pension contributions for them. The borrowing constraints faced by many lower- and middle-income Americans means that contributions to DC plans must come at the price of lower consumption when young and the benefit of higher consumption when old. Indeed, for a stylized household earning $50,000, consistently contributing 10 percent of salary to a DC plans that earns a 4 percent real return means consuming almost two times more when old than when young. Measured as a share of lifetime consumption, the tax benefit from participating in a DC plan can be significant. Assuming annual contribution rates at the average of the maximum levels allowed by employers in 401 (k) plans and assuming a 4 percent real return on DC and non-DC assets, the benefit is 2 percent for two-earner households earning $25,000 per year, 3.4 percent for those earning $100,000 per year, and 9.8 percent for those earning $300,000 per year... Handle: RePEc:nbr:nberwo:8170 Template-Type: ReDIF-Paper 1.0 Title: Country Risk and Capital Flow Reversals Classification-JEL: F3 Author-Name: Assaf Razin Author-Person: pra388 Author-Name: Efraim Sadka Author-Person: psa492 Note: IFM Number: 8171 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8171 File-URL: http://www.nber.org/papers/w8171.pdf File-Format: application/pdf Publication-Status: published as Razin, Assaf and Efraim Sadka. "Country Risk And Capital Flow Reversals," Economics Letters, 2001, v72(1,Jul), 73-77. Abstract: A financial crisis with a capital flow reversal occurs when a country shifts abruptly from a 'good' equilibrium with a low country-specific risk premium to a 'bad' equilibrium with a high country-specific risk premium and no foreign credit. Handle: RePEc:nbr:nberwo:8171 Template-Type: ReDIF-Paper 1.0 Title: The Declining U.S. Equity Premium Classification-JEL: E3; G11 Author-Name: Ravi Jagannathan Author-Person: pja91 Author-Name: Ellen R. McGrattan Author-Person: pmc46 Author-Name: Anna Scherbina Note: AP Number: 8172 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8172 File-URL: http://www.nber.org/papers/w8172.pdf File-Format: application/pdf Publication-Status: published as Ravi Jagannathan & Ellen R. McGrattan & Anna Scherbina., 2000. "The declining U.S. equity premium," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 3-19. Abstract: This study demonstrates that the U.S. equity premium has declined significantly during the last three decades. The study calculates the equity premium using a variation of a formula in the classic Gordon stock valuation model. The calculation includes the bond yield, the stock dividend yield, and the expected dividend growth rate, which in this formulation can change over time. The study calculates the premium for several measures of the aggregate U.S. stock portfolio and several assumptions about bond yields and stock dividends and gets basically the same result. The premium averaged about 7 percentage points during 1926 70 and only about 0.7 of a percentage point after that. This result is shown to be reasonable by demonstrating the roughly equal returns that investments in stocks and consol bonds of the same duration would have earned between 1982 and 1999, years when the equity premium is estimated to have been zero. Handle: RePEc:nbr:nberwo:8172 Template-Type: ReDIF-Paper 1.0 Title: Hedge Funds With Style Classification-JEL: G0; G2 Author-Name: Stephen J. Brown Author-Person: pbr268 Author-Name: William N. Goetzmann Author-Person: pgo59 Note: AP Number: 8173 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8173 File-URL: http://www.nber.org/papers/w8173.pdf File-Format: application/pdf Publication-Status: published as Brown, Stephen J. and William N. Goetzmann. "Hedge Funds With Style," Journal of Portfolio Management, 2003, v29(2,Winter), 101-112. Abstract: The popular perception is that hedge funds follow a reasonably well defined market-neutral investment style. While this long-short investment strategy may have characterized the first hedge funds, today hedge funds are a reasonably heterogeneous group. They are better defined in terms of their freedom from the constraints imposed by the Investment Company Act of 1940, than they are by the particular style of investment. We study the monthly return history of hedge funds over the period 1989 through to January 2000 and find that there are in fact a number of distinct styles of management. We find that differences in investment style contribute about 20 per cent of the cross sectional variability in hedge fund performance. This result is consistent across the years of our sample and is robust to the way in which we determine investment style. We conclude that appropriate style analysis and style management are crucial to success for investors looking to invest in this market. Handle: RePEc:nbr:nberwo:8173 Template-Type: ReDIF-Paper 1.0 Title: Monetary Policy Analysis in Models Without Money Classification-JEL: E52; E30 Author-Name: Bennett T. McCallum Note: EFG ME Number: 8174 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8174 File-URL: http://www.nber.org/papers/w8174.pdf File-Format: application/pdf Publication-Status: published as McCallum, Bennett T. "Recent Developments In Monetary Policy Analysis: The Roles Of Theory And Evidence," FRB Richmond - Economic Review, 2002, v88(1,Winter), 67-96. Abstract: The following arguments are developed: (i) models without monetary aggregates do not imply that inflation is a non-monetary phenomenon and are not necessarily non-monetary models; (ii) theoretical considerations suggest that such models are misspecified, but the quantitative significance of this misspecification is very small; (iii) some prominent arguments based on indeterminacy' findings are of dubious merit: there are reasons for believing that findings of solution multiplicity are theoretical curiosities that have no real world significance; (iv) monetary policy rules that violate the Taylor principle, by contrast, possess another characteristic the absence of E-stability that suggests undesirable behavior in practice. Handle: RePEc:nbr:nberwo:8174 Template-Type: ReDIF-Paper 1.0 Title: Monetary Policy for an Open Economy: An Alternative Framework with Optimizing Agents and Sticky Prices Classification-JEL: E52; E58 Author-Name: Bennett T. McCallum Author-Name: Edward Nelson Author-Person: pne58 Note: EFG ME Number: 8175 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8175 File-URL: http://www.nber.org/papers/w8175.pdf File-Format: application/pdf Publication-Status: published as McCallum, Bennett T & Nelson, Edward, 2000. "Monetary Policy for an Open Economy: An Alternative Framework with Optimizing Agents and Sticky Prices," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 74-91, Winter. Abstract: The new open-economy macroeconomics' seeks to provide an improved basis for monetary and exchange-rate policy through the construction of open-economy models that feature rational expectations, optimizing agents, and slowly adjusting prices of goods. This paper promotes an alternative approach for constructing such models by treating imports not as finished consumer goods but rather as raw-material inputs to the home economy's productive process. This treatment leads to a clean and simple theoretical structure that has some empirical attractions as well. A particular small-economy model is calibrated and its properties exhibited, primarily by means of impulse response functions. The preferred variant is shown to feature a pattern of correlations between exchange-rate changes and inflation that is more realistic than provided by a more standard specification. Important recent events are interpreted in light of the alternative models. Handle: RePEc:nbr:nberwo:8175 Template-Type: ReDIF-Paper 1.0 Title: High-Frequency Substitution and the Measurement of Price Indexes Classification-JEL: C43; D13 Author-Name: Robert C. Feenstra Author-Person: pfe116 Author-Name: Matthew D. Shapiro Author-Person: psh144 Note: PR Number: 8176 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8176 File-URL: http://www.nber.org/papers/w8176.pdf File-Format: application/pdf Publication-Status: published as High-Frequency Substitution and the Measurement of Price Indexes, Robert C. Feenstra, Matthew D. Shapiro. in Scanner Data and Price Indexes, Feenstra and Shapiro. 2003 Abstract: This paper investigates the use of high-frequency scanner data to construct price indexes. In the presence of inventory behavior, purchases and consumption by individuals differ over time. Cost-of-living indexes can still be constructed using data on purchases. For weekly data on canned tuna, the paper contrast two different types of price indexes: fixed-base and chained indexes. Only the former are theoretically correct, and in fact, the chained indexes have a pronounced upward bias for most regions of the U.S. This upward bias can be caused by consumers purchasing goods for inventory. The paper presents some direct statistical support for inventory behavior being the cause of the upward bias, though advertising and special displays also have a very significant impact on shopping patterns. Handle: RePEc:nbr:nberwo:8176 Template-Type: ReDIF-Paper 1.0 Title: The Influence of the Financial Revolution on the Nature of Firms Classification-JEL: G3; L2 Author-Name: Raghuram G. Rajan Author-Person: pra149 Author-Name: Luigi Zingales Note: CF IO Number: 8177 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8177 File-URL: http://www.nber.org/papers/w8177.pdf File-Format: application/pdf Publication-Status: published as Rajan, Raghuram G. and Luigi Zingales. "The Influence Of The Financial Revolution On The Nature Of Firms," American Economic Review, 2001, v91(2,May), 206-211. Abstract: Major technological, regulatory, and institutional changes have made finance more widely available in recent years, amounting to a bone fide 'financial revolution'. In this article, we focus on the impact the financial revolution has had on the way firms are (or should be) organized and managed, and on the policy consequences. Handle: RePEc:nbr:nberwo:8177 Template-Type: ReDIF-Paper 1.0 Title: The Great Reversals: The Politics of Financial Development in the 20th Century Classification-JEL: G30; O16 Author-Name: Raghuram G. Rajan Author-Person: pra149 Author-Name: Luigi Zingales Note: CF Number: 8178 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8178 File-URL: http://www.nber.org/papers/w8178.pdf File-Format: application/pdf Publication-Status: published as Rajan, Raghuram G. and Luigi Zingales. "The Great Reversals: The Politics of Financial Development in the 20th Century." Journal of Financial Economics 69, 1 (July 2003): 5-50. Publication-Status: published as Falvey, Rodney and Edward Udo Kreickemeier (eds.) Developments in International Trade Theory. Cheltenham: Elgar, 2005. Abstract: We show that the development of the financial sector does not change monotonically over time. In particular, we find that by most measures, countries were more financially developed in 1913 than in 1980 and only recently have they surpassed their 1913 levels. This pattern is inconsistent with most recent theories of why cross-country differences in financial development do not track differences in economic development, since these theories are based upon time-invariant factors, such as a country's legal origin. We propose instead an 'interest group' theory of financial development. Incumbents oppose financial development because it breeds competition. The theory predicts that incumbents' opposition will be weaker when an economy allows both cross-border trade and capital flows. This theory can go some way in accounting for the cross-country differences and the time series variation of financial development. Handle: RePEc:nbr:nberwo:8178 Template-Type: ReDIF-Paper 1.0 Title: International Franchising: Evidence from US and Canadian Franchisors in Mexico Classification-JEL: L2; L8 Author-Name: Francine Lafontaine Author-Person: pla92 Author-Name: Joanne Oxley Author-Person: pox3 Note: IO Number: 8179 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8179 File-URL: http://www.nber.org/papers/w8179.pdf File-Format: application/pdf Publication-Status: published as Francine Lafontaine & Joanne E. Oxley, 2004. "International Franchising Practices in Mexico: Do Franchisors Customize Their Contracts?," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 13(1), pages 95-123, 03. Abstract: The contracting practices of franchisors outside of theirdomestic markets have received limited attention in the empirical literature on franchising, mostly due to data limitations. We exploit a newly assembled data set that allows us not only to describe the contracting practices of US and Canadian franchisors in Mexico but, most importantly, to compare them to their domestic counterparts. We briefly but systematically review the two theoretical frameworks that have been used most to study franchisors' domestic and international operations, namely agency and internationalization theory, and use implications derived from these to guide our analyses. We focus in turn on franchisors' decision to operate in the Mexican market, their propensity to enter via company-owned versus franchised units as compared to the same decision domestically, and finally the financial contract terms they adopt (royalty rate, franchise fee and advertising fee) for their franchise agreements in Mexico compared to their home market. Our empirical results confirm hypotheses derived from the theories, particularly with respect to the decision to operate in Mexico. But we also find some surprises - for example, the vast majority of US and Canadian franchisors employ exactly the same financial contract terms in Mexico as in their home market. We argue that this tendency is probably best explained by the same arguments used in the franchising literature to explain contract uniformity within domestic markets. Further implications for future research and practice are also discussed. Handle: RePEc:nbr:nberwo:8179 Template-Type: ReDIF-Paper 1.0 Title: Forecasting Output and Inflation: The Role of Asset Prices Classification-JEL: C32; E37 Author-Name: James H. Stock Author-Person: pst148 Author-Name: Mark W. Watson Author-Person: pwa582 Note: EFG ME Number: 8180 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8180 File-URL: http://www.nber.org/papers/w8180.pdf File-Format: application/pdf Publication-Status: published as Proceedings, Federal Reserve Bank of San Francisco meeting, "Asset Prices, Exchange Rates, and Monetary Policy," March 2-3, 2001 Publication-Status: published as Journal of Economic Literature, Vol. 41, no. 3 (September 2003): 788-829 Abstract: This paper examines old and new evidence on the predictive performance of asset prices for inflation and real output growth. We first review the large literature on this topic, focusing on the past dozen years. We then undertake an empirical analysis of quarterly data on up to 38 candidate indicators (mainly asset prices) for seven OECD countries for a span of up to 41 years (1959 1999). The conclusions from the literature review and the empirical analysis are the same. Some asset prices predict either inflation or output growth in some countries in some periods. Which series predicts what, when and where is, however, itself difficult to predict: good forecasting performance by an indicator in one period seems to be unrelated to whether it is a useful predictor in a later period. Intriguingly, forecasts produced by combining these unstable individual forecasts appear to improve reliably upon univariate benchmarks. Handle: RePEc:nbr:nberwo:8180 Template-Type: ReDIF-Paper 1.0 Title: Taxation and Economic Efficiency Classification-JEL: H21 Author-Name: Alan J. Auerbach Author-Person: pau33 Author-Name: James R. Hines Jr. Author-Person: phi111 Note: PE Number: 8181 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8181 File-URL: http://www.nber.org/papers/w8181.pdf File-Format: application/pdf Publication-Status: published as Auerbach, Alan J. & Hines, James Jr., 2002. "Taxation and economic efficiency," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 21, pages 1347-1421 Elsevier. Abstract: This paper analyzes the distortions created by taxation and the features of tax systems that minimize such distortions (subject to achieving other government objectives). It starts with a review of the theory and practice of deadweight loss measurement, followed by characterizations of optimal commodity taxation and optimal linear and nonlinear income taxation. The framework is then extended to a variety of settings, initially consisting of optimal taxation in the presence of externalities or public goods. The optimal tax analysis is subsequently applied to situations in which product markets are imperfectly competitive. This is followed by consideration of the features of optimal intertemporal taxation. The purpose of the paper is not only to provide an up-to-date review and analysis of the optimal taxation literature, but also to identify important cross-cutting themes within that literature. Handle: RePEc:nbr:nberwo:8181 Template-Type: ReDIF-Paper 1.0 Title: Exhuming Q: Market Power vs. Capital Market Imperfections Classification-JEL: E22; E44 Author-Name: Russell Cooper Author-Name: Joao Ejarque Author-Person: pej1 Note: EFG Number: 8182 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8182 File-URL: http://www.nber.org/papers/w8182.pdf File-Format: application/pdf Abstract: Evidence of the statistical significance of profits in Q regressions remains one of the principal findings in the empirical investment literature. This result is frequently taken to support the view that capital market imperfections are an important element for understanding investment. This paper challenges that conclusion. We argue that allowing the profit function at the firm level to be strictly concave, reflecting, for example, market power, is sucent to replicate the Q theory based regression results in which profits are a significant factor determining investment. To be clear, our ability to replicate the existing results does not require the specification of any capital market imperfections. Thus the friction that explains the statistical significance of profits could be market power by sellers rather than capital market imperfections. Handle: RePEc:nbr:nberwo:8182 Template-Type: ReDIF-Paper 1.0 Title: Public Versus Secret Reserve Prices in eBay Auctions: Results from a Pokemon Field Experiment Classification-JEL: D44 Author-Name: Rama Katkar Author-Name: David Lucking-Reiley Author-Person: pre371 Note: IO Number: 8183 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8183 File-URL: http://www.nber.org/papers/w8183.pdf File-Format: application/pdf Publication-Status: published as Katkar, Rama and David H. Reiley. "Public Versus Secret Reserve Prices in eBay Auctions: Results from a Pokemon Field Experiment." B.E. Journal of Economic Analysis and Policy: Advances in Economic Analysis and Policy 6, 2 (2006): 1-23. Abstract: Sellers in eBay auctions have the opportunity to choose both a public minimum bid amount and a secret reserve price. We ask, empirically, whether the seller is made better or worse off by setting a secret reserve above a low minimum bid, versus the option of making the reserve public by using it as the minimum bid level. In a field experiment, we auction 50 matched pairs of Pok‚mon cards on eBay, half with secret reserves and half with equivalently high public minimum bids. We find that secret reserve prices make us worse off as sellers, by reducing the probability of the auction resulting in a sale, deterring serious bidders from entering the auction, and lowering the expected transaction price of the auction. We also present evidence that some sellers choose to use secret reserve prices for reasons other than increasing their expected auction prices. Handle: RePEc:nbr:nberwo:8183 Template-Type: ReDIF-Paper 1.0 Title: A Case for Quantity Regulation Classification-JEL: L51; H21 Author-Name: Edward L. Glaeser Author-Person: pgl9 Author-Name: Andrei Shleifer Author-Person: psh93 Note: CF LE PE Number: 8184 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8184 File-URL: http://www.nber.org/papers/w8184.pdf File-Format: application/pdf Abstract: Contrary to the standard economic advice, many regulations of financial intermediaries, as well as other regulations such as blue laws, fishing rules, zoning restrictions, or pollution controls, take the form of quantity controls rather than taxes. We argue that costs of enforcement are crucial to understanding these choices. When violations of quantity regulations are cheaper to discover than failures to pay taxes, the former can emerge as the optimal instrument for the government, even when it is less attractive in the absence of enforcement costs. This analysis is especially relevant to situations where private enforcement of regulations is crucial. Handle: RePEc:nbr:nberwo:8184 Template-Type: ReDIF-Paper 1.0 Title: What can the take-up of other programs teach us about how to improve take-up of health insurance programs? Classification-JEL: I1 Author-Name: Dahlia K. Remler Author-Name: Jason E. Rachlin Author-Name: Sherry A. Glied Note: EH Number: 8185 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8185 File-URL: http://www.nber.org/papers/w8185.pdf File-Format: application/pdf Abstract: Many uninsured Americans are already eligible for free or low-cost public coverage through Medicaid or CHIP but do not take up that coverage. Several other programs, such as food stamps and unemployment insurance, also have less than complete take-up rates and take-up rates vary considerably among programs. This paper examines the take-up literature across a variety of programs to learn what effects non-financial features, such as administrative complexity, have on take-up. We find that making benefit receipt automatic is the most effective means of ensuring high take-up, while there is little evidence that stigma is important. Overall, surprisingly little is known about the quantitative impact, of non-financial characteristics of programs on take-up. New research that could be used to draw measurable causal inferences about how features as administrative complexity, renewal rules, and organizational structure affect participation, would be extremely valuable. Handle: RePEc:nbr:nberwo:8185 Template-Type: ReDIF-Paper 1.0 Title: After Columbus: Explaining the Global Trade Boom 1500-1800 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: 8186 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8186 File-URL: http://www.nber.org/papers/w8186.pdf File-Format: application/pdf Publication-Status: published as O'Rourke, Kevin H. and Jeffrey G. Williamson. "After Columbus: Explaining Europe's Overseas Trade Boom, 1500-1800," Journal of Economic History, 2002, v62(2,Jun), 417-456. Abstract: This paper documents the size and timing of the world inter-continental trade boom following the great voyages in the 1490s of Columbus, da Gama and their followers. Indeed, a trade boom followed over the subsequent three centuries. But what was its cause? The conventional wisdom in the world history literature offers globalization as the answer: it alleges that declining trade barriers, falling transport costs and overseas 'discovery' explains the boom. In contrast, this paper reports the evidence that confirms unambiguously that there was no commodity price convergence between continents, something that would have emerged had globalization been a force that mattered. Thus, the trade boom must have been caused by some combination of European import demand and foreign export supply from Asia and the Americas. Furthermore, the behavior of the relative price of foreign importables in European cities should tell us which mattered most and when. We offer detailed evidence on the relative prices of such importables in European markets over the five centuries1350-1850. We then offer a model which is used to decompose the sources of the trade boom 1500-1800. Handle: RePEc:nbr:nberwo:8186 Template-Type: ReDIF-Paper 1.0 Title: Negative Alchemy? Corruption, Composition of Capital Flows, and Currency Crises Classification-JEL: F2 Author-Name: Shang-Jin Wei Author-Person: pwe20 Author-Name: Yi Wu Note: IFM ITI Number: 8187 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8187 File-URL: http://www.nber.org/papers/w8187.pdf File-Format: application/pdf Publication-Status: published as Negative Alchemy? Corruption, Composition of Capital Flows, and Currency Crises, Shang-Jin Wei, Yi Wu. in Preventing Currency Crises in Emerging Markets, Edwards and Frankel. 2002 Abstract: Crony capitalism and self-fulfilling expectations by international creditors are often suggested as two rival explanations for currency crisis. This paper examines a possible linkage between the two that has not been explored much in the literature: corruption may affect a country's composition of capital inflows in a way that makes it more likely to experience a currency crisis that is triggered/aided by a sudden reversal of international capital flows. We find robust evidence that poor public governance is associated with a higher loan-to-FDI ratio. Such a composition of capital flows has been identified as being associated with a higher incidence of a currency crisis. We also find some weaker evidence that poor public governance is associated with a country's inability to borrow internationally in its own currency. The latter is also associated with a higher incidence of a currency crisis. To sum up, even though crony capitalism does not forecast the timing of a crisis, it can nevertheless increase its likelihood. This paper illustrates a particular channel through which this can happen. Handle: RePEc:nbr:nberwo:8187 Template-Type: ReDIF-Paper 1.0 Title: Terms of Trade Shocks and Economic Performance 1870-1940: Prebisch and Singer Revisited Classification-JEL: F1; N10 Author-Name: Yael S. Hadass Author-Person: pha251 Author-Name: Jeffrey G. Williamson Author-Person: pwi169 Note: DAE ITI Number: 8188 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8188 File-URL: http://www.nber.org/papers/w8188.pdf File-Format: application/pdf Publication-Status: published as Hadass, Yael S & Williamson, Jeffrey G, 2003. "Terms-of-Trade Shocks and Economic Performance, 1870-1940: Prebisch and Singer Revisited," Economic Development and Cultural Change, University of Chicago Press, vol. 51(3), pages 629-56, April. Abstract: Debate over trends in the terms of trade between primary commodities and manufactures, their causes and their impact has dominated the literature for more than a century. Classical economists claimed that the terms of trade of primary commodities should improve since land and natural resources are always in inelastic supply. Following the Great Depression, a new view emerged. What came to be known as the Prebisch-Singer thesis was instead that the terms of trade for primary products had deteriorated up to the 1950s. The subsequent literature has almost exclusively and obsessively asked whether a deterioration has actually taken place over the 130 years following 1870. Nowhere in this literature has the impact of these terms of trade shocks on long run growth been assessed, although it is certainly full of lively speculation and debate. This paper fills part of this empirical gap by constructing a country-specific panel data base 1870-1940, by documenting terms of trade trends by country and region, and, finally, by estimating the impact of the price shocks on long run economic performance. We find the impact to have been asymmetric between center and periphery. Handle: RePEc:nbr:nberwo:8188 Template-Type: ReDIF-Paper 1.0 Title: Expenditure Competition Author-Name: Roger H. Gordon Author-Person: pgo95 Author-Name: John D. Wilson Note: PE Number: 8189 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8189 File-URL: http://www.nber.org/papers/w8189.pdf File-Format: application/pdf Publication-Status: published as John Douglas Wilson & Roger H. Gordon, 2003. "Expenditure Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 399-417, 04. Abstract: Given the temptation on government officials to use some of their budget for 'perks,' residents face the problem of inducing officials to reduce such 'waste.' The threat to vote out of office officials who perform poorly is one possible response. In this paper, we explore the effect that competition for residents induced by fiscal decentralization has on 'waste' in government. We find not only that such competition reduces waste and raises the utility of residents, but also that it should increase the desired level of public expenditures, and to a point above the level that jurisdictions would choose if they could coordinate. These results are in sharp contrast to the presumed effects from such 'tax competition,' and suggest an additional advantage of fiscal decentralization. Handle: RePEc:nbr:nberwo:8189 Template-Type: ReDIF-Paper 1.0 Title: Mental Accounting, Loss Aversion, and Individual Stock Returns Classification-JEL: G12 Author-Name: Nicholas Barberis Author-Name: Ming Huang Author-Person: phu425 Note: AP Number: 8190 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8190 File-URL: http://www.nber.org/papers/w8190.pdf File-Format: application/pdf Publication-Status: published as Barberis, N. and M. Huang. “Mental Accounting, Loss Aversion, and Individual Stock Returns." Journal of Finance 56 (2001): 1247-1292. Abstract: We study equilibrium firm-level stock returns in two economies: one in which investors are loss averse over the fluctuations of their stock portfolio and another in which they are loss averse over the fluctuations of individual stocks that they own. Both approaches can shed light on empirical phenomena, but we find the second approach to be more successful: in that economy, the typical individual stock return has a high mean and excess volatility, and there is a large value premium in the cross-section which can, to some extent, be captured by a commonly used multifactor model. Handle: RePEc:nbr:nberwo:8190 Template-Type: ReDIF-Paper 1.0 Title: Identification and Estimation of Cost Functions Using Observed Bid Data: An Application to Electricity Markets Classification-JEL: L9; L1 Author-Name: Frank A. Wolak Note: IO Number: 8191 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8191 File-URL: http://www.nber.org/papers/w8191.pdf File-Format: application/pdf Abstract: This paper presents several techniques for recovering cost function estimates for electricity generation from a model of optimal bidding behavior in a competitive electricity market. Two techniques are developed based on different models of the price-setting process in a competitive electricity market. The first assumes that the firm is able to choose the price that maximizes its realized profits given the bids of its competitors and the realization of market demand. This procedure is straightforward to apply, but does not impose all of the market rules on the assumed price-setting process. The second procedure uses the assumption that the firm bids to maximize its expected profits. This procedure is considerably more complex, but can yield more insights about the nature of the firm's variable costs, because it allows the researcher to recover generation unit-level variable cost functions. These techniques are applied to bid, market outcomes and financial hedge contract data obtained from the first three months of operation of the National Electricity Market (NEM1) in Australia. The empirical analysis illustrates the usefulness of these techniques in measuring actual market power and the ability to exercise market power possessed by generation unit owners in competitive electricity markets. Handle: RePEc:nbr:nberwo:8191 Template-Type: ReDIF-Paper 1.0 Title: The Life Cycle of US Economic Expansions Classification-JEL: E3 Author-Name: Edward E. Leamer Author-Person: ple440 Note: EFG Number: 8192 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8192 File-URL: http://www.nber.org/papers/w8192.pdf File-Format: application/pdf Abstract: Graphs that allow side by side comparisons of the six longer US expansions since 1950 suggest that these expansions have four distinct phases: (1) a high growth recovery during which the rate of unemployment declines to its pre-recession level, (2) a modest growth plateau during which the rate of unemployment is constant, (3) a growth spurt that drives unemployment down further and (4) a second plateau with modest growth and constant rate of unemployment. There have been only three expansions that have experienced the spurt and none has experienced a second spurt. These phases involve substantially different rates of GDP growth, but within each of these four phases GDP growth is largely unpredictable. Forecast accuracy thus comes mostly from understanding the transitions. This requires both data and economics. The economics takes the form of a predator/prey model of the cycle, where the prey are investment opportunities and the predators are entrepreneurs. A probit model of the transition into recession raises concerns about how much longer the aged Bush/Clinton expansion can last. Handle: RePEc:nbr:nberwo:8192 Template-Type: ReDIF-Paper 1.0 Title: Home Bias in Portfolios and Taxation of Asset Income Author-Name: Roger Gordon Author-Person: pgo95 Author-Name: Vitor Gaspar Note: IFM PE Number: 8193 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8193 File-URL: http://www.nber.org/papers/w8193.pdf File-Format: application/pdf Publication-Status: published as Roger Gordon & Vitor Gaspar, 2001. "Home Bias in Portfolios and Taxation of Asset Income," Advances in Economic Analysis & Policy, Berkeley Electronic Press, vol. 1(advances/), pages 1001-1001. Abstract: Intuitively, the observed 'home bias' in individual portfolios plausibly explains the international capital immobility in aggregate data reported by Feldstein and Horioka (1980) as well as the survival of taxes on capital income. These intuitions are examined explicitly in a model where random consumer prices cause individuals to invest heavily in domestic equity as a hedge against these price fluctuations. Neither intuition is fully supported by the model. While the model forecasts that extra domestic savings generate extra investment primarily in the home country, consistent with the evidence in Feldstein and Horioka, this is true regardless of whether consumer price are random and so whether portfolios have 'home bias.' In addition, while random equity returns facilitate taxes on equity income, as shown in Gordon and Varian (1989) and Huizinga and Nielsen (1997), random consumer prices appear to undermine taxes on capital income. Handle: RePEc:nbr:nberwo:8193 Template-Type: ReDIF-Paper 1.0 Title: Are Trade Linkages Important Determinants of Country Vulnerability to Crises? Classification-JEL: F10; F36 Author-Name: Kristin J. Forbes Author-Person: pfo1 Note: IFM ITI Number: 8194 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8194 File-URL: http://www.nber.org/papers/w8194.pdf File-Format: application/pdf Publication-Status: published as Are Trade Linkages Important Determinants of Country Vulnerability to Crises?, Kristin J. Forbes. in Preventing Currency Crises in Emerging Markets, Edwards and Frankel. 2002 Abstract: This paper measures whether trade linkages are important determinants of a country's vulnerability to crises that originate elsewhere in the world. It explains that trade can transmit crises internationally via three distinct, and possible counteracting, channels: a competitiveness effect (when changes in relative prices affect a country's ability to compete abroad); an income effect (when a crisis affects incomes and the demand for imports); and a cheap-import effect (when a crisis reduces import prices and acts as a positive supply shock). Next, the paper develops a series of statistics measuring each of these trade linkages for a sample of 58 countries during 16 crises from 1994 through 1999. Of particular interest is the competitiveness statistic, which uses 4-digit industry information to calculate how each crisis affects exports from other countries. Empirical results suggest that countries which compete with exports from a crisis country and which export to the crisis country (i.e. the competitiveness and income effects) had significantly lower stock market returns. Although trade linkages only partially explain stock market returns during recent crises, they are significant and economically important. Handle: RePEc:nbr:nberwo:8194 Template-Type: ReDIF-Paper 1.0 Title: The Comovements between Real Activity and Prices in the G7 Classification-JEL: E31; E37 Author-Name: Wouter J. Den Haan Author-Person: pde12 Author-Name: Steven Sumner Note: IFM Number: 8195 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8195 File-URL: http://www.nber.org/papers/w8195.pdf File-Format: application/pdf Publication-Status: published as den Haan, Wouter J. & Sumner, Steven W., 2004. "The comovement between real activity and prices in the G7," European Economic Review, Elsevier, vol. 48(6), pages 1333-1347, December. Abstract: In this paper, we study the short-run and long-run comovement between prices and real activity in the G7 countries during the postwar period using VAR forecast errors and frequency domain filters. We find that there are several patterns of the correlation coefficients that are the same in all countries. In particular, the correlation at the 'long-run' horizon is virtually always negative and the correlation at the 'short-run' horizon is typically substantially higher. Although there is evidence of positive 'short-run' correlations for some countries it is not very robust to the choice of the price and output variables. In addition, we propose a more efficient method to calculate the covariances of VAR forecast errors and - in contrast to claims made in the literature - we show that band-pass filters isolate the desired set of frequencies not only when the series are stationary but also when they are first or second-order integrated processes. Handle: RePEc:nbr:nberwo:8195 Template-Type: ReDIF-Paper 1.0 Title: Integrating Expenditure and Tax Decisions: The Marginal Cost of Funds and the Marginal Benefit of Projects Classification-JEL: H21; H41 Author-Name: Joel Slemrod Author-Person: psl10 Author-Name: Shlomo Yitzhaki Author-Person: pyi12 Note: PE Number: 8196 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8196 File-URL: http://www.nber.org/papers/w8196.pdf File-Format: application/pdf Publication-Status: published as Slemrod, Joel and Shlomo Yitzhaki. "Integrating Expenditure And Tax Decisions: The Marginal Cost Of Funds And The Marginal Benefit Of Projects," National Tax Journal, 2001, v54(2,Jun), 189-201. Abstract: This paper seeks to clarify the extent to which the rule for providing public goods ought to correct for the distortionary cost of raising funds. We argue that, in evaluating public projects, the marginal cost of funds (MCF) concept must be supplemented by a symmetrical concept, which we label the marginal benefit of public projects, or MBP, which indicates the value to individuals of the dollars spent. Each of these concepts can be decomposed into two separate components, one reflecting efficiency and the other characterizing the distributional impact of the project itself or its financing. We conclude that efficiency of the financing cannot be ignored, that distributional considerations are also relevant, and that the availability and optimality of tax instruments is critical for evaluating the appropriateness of proceeding with a public good-cum financing project. However, one can construct special cases, as in Kaplow (1996), where the simple cost-benefit criterion applies. Handle: RePEc:nbr:nberwo:8196 Template-Type: ReDIF-Paper 1.0 Title: An Empirical Investigation of the Competitive Effects of Domestic Airline Alliances Classification-JEL: L Author-Name: Gustavo E. Bamberger Author-Name: Dennis W. Carlton Author-Person: pca14 Author-Name: Lynette R. Neumann Note: IO Number: 8197 Creation-Date: 2001-03 Order-URL: http://www.nber.org/papers/w8197 File-URL: http://www.nber.org/papers/w8197.pdf File-Format: application/pdf Publication-Status: published as Bamberger, Gustavo E & Carlton, Dennis W & Neumann, Lynette R, 2004. "An Empirical Investigation of the Competitive Effects of Domestic Airline Alliances," Journal of Law & Economics, University of Chicago Press, vol. 47(1), pages 195-222, April. Abstract: In this paper, we investigate empirically the effect of two recent domestic airline alliances. We find that both alliances benefited consumers - average fares fell and total traffic increased after the creation of the alliances on those city pairs affected by the alliances. We also find that these effects are found both on city pairs where the alliance created one or two new online carriers, and on city pairs where the alliance increased the service offered by one or both alliance partners. Finally, we find that the size of the fare effect of the alliance depends on the pre-alliance level of competition on a city pair with the effect being larger on those city pairs where the level of competition was relatively low. Handle: RePEc:nbr:nberwo:8197 Template-Type: ReDIF-Paper 1.0 Title: Inequality and Happiness: Are Europeans and Americans Different? Author-Name: Alberto Alesina Author-Person: pal207 Author-Name: Rafael Di Tella Author-Person: pdi128 Author-Name: Robert MacCulloch Note: PE Number: 8198 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8198 File-URL: http://www.nber.org/papers/w8198.pdf File-Format: application/pdf Publication-Status: published as Alesina, Alberto, Rafael Di Tella and Robert MacCulloch. "Inequality And Happiness: Are Europeans And Americans Different?," Journal of Public Economics, 2004, v88(9-10,Aug), 2009-2042. Abstract: The answer to the question posed in the title is 'yes.' Using a total of 128,106 answers to a survey question about happiness,' we find that there is a large, negative and significant effect of inequality on happiness in Europe but not in the US. There are two potential explanations. First, Europeans prefer more equal societies (inequality belongs in the utility function for Europeans but not for Americans). Second, social mobility is (or is perceived to be) higher in the US so being poor is not seen as affecting future income. We test these hypotheses by partitioning the sample across income and ideological lines. There is evidence of inequality generated' unhappiness in the US only for a sub-group of rich leftists. In Europe inequality makes the poor unhappy, as well as the leftists. This favors the hypothesis that inequality affects European happiness because of their lower social mobility (since no preference for equality exists amongst the rich or the right). The results help explain the greater popular demand for government to fight inequality in Europe relative to the US. Handle: RePEc:nbr:nberwo:8198 Template-Type: ReDIF-Paper 1.0 Title: Child Support: Interaction Between Private and Public Transfers Classification-JEL: I3; H3 Author-Name: Robert I. Lerman Author-Name: Elaine Sorensen Note: PE Number: 8199 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8199 File-URL: http://www.nber.org/papers/w8199.pdf File-Format: application/pdf Publication-Status: published as Child Support: Interactions between Private and Public Transfers, Robert I. Lerman, Elaine Sorenson. in Means-Tested Transfer Programs in the United States, Moffitt. 2003 Abstract: Child support is a private transfer that is integral to the means-tested public transfer system. Support payments generally lower the budget costs of welfare as well the incentives for parents to participate. The Child Support Enforcement (CSE) program, which establishes and enforces support obligations, also affects the incentives of the non-custodial parent donors and ultimately the distribution of incomes. While not formally income-tested, CSE still targets low-income families because so many custodial families are poor. This paper reviews the history of the CSE program; the economic rationale for government's role; trends in support awards and payments; the importance of child support to low-income families; the capacity of non-custodial parents to pay child support; trends in costs, financing and effectiveness of the CSE program; the effects of child support on behavior; equity issues in child support; and proposals for reform. Despite efficiency gains in the CSE program, especially in establishing paternity, a shift in the composition of cases has offset these improvements, causing support payments per custodial mother to rise only modestly in real terms. Handle: RePEc:nbr:nberwo:8199 Template-Type: ReDIF-Paper 1.0 Title: Understanding International Differences in the Gender Pay Gap Classification-JEL: J3; J5 Author-Name: Francine D. Blau Author-Person: pbl16 Author-Name: Lawrence M. Kahn Author-Person: pka63 Note: LS Number: 8200 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8200 File-URL: http://www.nber.org/papers/w8200.pdf File-Format: application/pdf Publication-Status: published as Francine D. Blau & Lawrence M. Kahn, 2003. "Understanding International Differences in the Gender Pay Gap," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 106-144, January. Abstract: This paper tests the hypotheses that overall wage compression and low female supply relative to demand reduce a country's gender pay gap. Using micro-data for 22 countries over the 1985-94 period, we find that more compressed male wage structures and lower female net supply are both associated with a lower gender pay gap. Since it is likely that labor market institutions are responsible for an important portion of international differences in wage inequality, the inverse relationship between the gender pay gap and male wage inequality suggests that wage-setting mechanisms, such as encompassing collective bargaining agreements, that provide for relatively high wage floors raise the relative pay of women, who tend to be at the bottom of the wage distribution. Consistent with this view, we find that the extent of collective bargaining coverage in each country is significantly negatively associated with its gender pay gap. Moreover, the effect of pay structures on the gender pay gap is quantitatively very important: a large part of the difference in the gender differential between high gap and low gap countries is explained by the differences across these countries in overall wage structure, with another potentially important segment due to differences in female net supply. Handle: RePEc:nbr:nberwo:8200 Template-Type: ReDIF-Paper 1.0 Title: Hospital Governance, Performance Objectives, and Organizational Form Classification-JEL: G3; L3 Author-Name: Leslie Eldenburg Author-Name: Benjamin E. Hermalin Author-Person: phe59 Author-Name: Michael S. Weisbach Author-Name: Marta Wosinska Note: CF EH Number: 8201 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8201 File-URL: http://www.nber.org/papers/w8201.pdf File-Format: application/pdf Publication-Status: published as Eldenburg, Leslie, Benjamin E. Hermalin, Michael S. Weisbach, and Marta Wosinska. “Hospital Governance, Performance Objectives, and Organizational Form." Journal of Corporate Finance 10 (September 2004): 527-548. Abstract: This paper studies the governance of a sample of California hospitals. We document a number of empirical relations about hospital governance: The composition of the board of directors varies systematically across ownership types; poor performance and low levels of uncompensated care increase board turnover, with this sensitivity varying by organizational type. Poor performance, high administrative costs, and high uncompensated care lead to higher CEO turnover, with these effects again varying across different organizational types. Overall, these results are consistent with the view that boards of directors of hospitals of different organizational forms are substantially different, and that these boards make decisions to maximize different objective functions. Handle: RePEc:nbr:nberwo:8201 Template-Type: ReDIF-Paper 1.0 Title: Venture Capitalists As Principals: Contracting, Screening, and Monitoring Classification-JEL: G24; G32 Author-Name: Steven N. Kaplan Author-Name: Per Stromberg Author-Person: pst18 Note: CF Number: 8202 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8202 File-URL: http://www.nber.org/papers/w8202.pdf File-Format: application/pdf Publication-Status: published as Kaplan, Steven and Per Strömberg. “Venture Capitalists As Principals: Contracting, Screening, and Monitoring." American Economic Review 91 (2001): 426-430. Abstract: Theoretical work on the principal-agent problem in financial contracting focuses on the conflicts of interest between an agent / entrepreneur with a venture that needs financing, and a principal / investor providing funds for the venture. Theory has identified three primary ways that the investor / principal can mitigate these conflicts - structuring financial contracts, pre-investment screening, and post-investment monitoring and advising. In this paper, we describe recent empirical work and its relation to theory for one prominent class of principals venture capitalists (VCs). The empirical studies indicate that VCs attempt to mitigate principal-agent conflicts in the three ways suggested by theory. The evidence also shows that contracting, screening, and monitoring are closely interrelated. In screening, the VCs identify areas where they can add value through monitoring and support. In contracting, the VCs allocate rights in order to facilitate monitoring and minimize the impact of identified risks. Also, the equity allocated to VCs provides incentives to engage in costly support activities that increase upside values, rather than just minimizing potential losses. There is room for future empirical research to study these activities in greater detail for VCs, for other intermediaries such as banks, and within firms. Handle: RePEc:nbr:nberwo:8202 Template-Type: ReDIF-Paper 1.0 Title: Taxation and Corporate Financial Policy Classification-JEL: H32; G30 Author-Name: Alan J. Auerbach Author-Person: pau33 Note: CF PE Number: 8203 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8203 File-URL: http://www.nber.org/papers/w8203.pdf File-Format: application/pdf Publication-Status: published as Auerbach, Alan J., 2002. "Taxation and corporate financial policy," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 19, pages 1251-1292 Elsevier. Abstract: This paper reviews the theory and evidence regarding the impact of taxation on corporate financial policy. Starting from a basic characterization of the classical corporate income tax and its effects, the analysis focuses on three areas of research: equity policy, debt-equity decisions, and choices regarding ownership structure and organizational form. The discussion stresses the distinction between nominal and more fundamental financial differences for example, in the relationship between borrowing and leasing and that financial policy involves choices not only among different underlying policies but also among characterizations of a given policy. The final section offers some brief reflections on the implications of continuing financial innovation. Handle: RePEc:nbr:nberwo:8203 Template-Type: ReDIF-Paper 1.0 Title: What We Spend and What We Get: Public and Private Provision of Crime Prevention Classification-JEL: H5; K14 Author-Name: Ann Dryden Witte Author-Name: Robert Witt Author-Person: pwi138 Note: PE Number: 8204 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8204 File-URL: http://www.nber.org/papers/w8204.pdf File-Format: application/pdf Publication-Status: published as Witte, Anne Dryden and Robert Witt. “What We Spend and What We Get: Crime and Criminal Justice, a Multinational Examination.” Fiscal Studies 22, 1 (March 2001): 1-40. Publication-Status: published as Miles, D., G. Myles & I. Preston (eds.) THE ECONOMICS OF PUBLIC SPENDING. London: Oxford University Press, 2003. Abstract: In this paper, we consider a number of issues regarding crime prevention and criminal justice. We begin by considering how crime is measured and present both general and specific evidence on the level of crime in a variety of countries. Crime is pervasive and varies substantially across countries. We outline the arguments for some public roll in crime prevention, enforcement, prosecution, defence, and adjudication. We consider the relative role of the public and private sectors in crime control and criminal justice. We discuss various measures for the effectiveness of the criminal justice system. We conclude by suggesting some potential areas for research. Handle: RePEc:nbr:nberwo:8204 Template-Type: ReDIF-Paper 1.0 Title: Rethinking the Estate and Gift Tax: Overview Classification-JEL: H2 Author-Name: William G. Gale Author-Person: pga40 Author-Name: Joel B. Slemrod Author-Person: psl10 Note: PE Number: 8205 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8205 File-URL: http://www.nber.org/papers/w8205.pdf File-Format: application/pdf Publication-Status: published as Rethinking Estate and Gift Taxation. Washington, D.C.: Brookings Institution Press, 2001. Abstract: This paper surveys, integrates, and extends research on estate and gift taxes. The paper begins with information on features of U.S. transfer taxes, characteristics of recent estate tax returns, the evolution of transfer taxes, the role of such taxes in other countries, and theory and evidence concerning why people give intergenerational transfers. The next sections examine the incidence, equity, and efficiency of transfer taxes. Subsequent sections cover administrative issues and the effects on saving, labor supply, entrepreneurship, inter vivos gifts, charitable contributions, and capital gains realizations. The paper closes with a discussion of policy options and a short conclusion. Handle: RePEc:nbr:nberwo:8205 Template-Type: ReDIF-Paper 1.0 Title: Educational Inequality Classification-JEL: D3; J3 Author-Name: Yoshiaki Azuma Author-Name: Herschel I. Grossman Note: EFG Number: 8206 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8206 File-URL: http://www.nber.org/papers/w8206.pdf File-Format: application/pdf Publication-Status: published as Yoshiaki Azuma & Herschel I. Grossman, 2003. "Educational Inequality," LABOUR, CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd, vol. 17(3), pages 317-335, 09. Abstract: This paper develops a theoretical model that relates changes in educational inequality to the combined effects of innovations that have increased the relative demand for more educated labor and innovations that have increased ability premiums. Under the assumption that in the long run individual decisions to become more educated equalize the lifetime earnings of more educated workers and comparable less educated workers, our model yields two novel implications: First, given the existence of ability premiums, an innovation in the relative demand for more educated labor increases educational inequality in the short run, but, ceteris paribus, would decrease educational inequality in the long run. Second, in the long run innovations that increase ability premiums cause educational inequality to be larger than otherwise. In applying our theory to recent changes in educational inequality in the United States, we suggest that increases in ability premiums are dampening the long-run response of the relative supply of more educated workers that otherwise would reverse previous increases in educational inequality. Handle: RePEc:nbr:nberwo:8206 Template-Type: ReDIF-Paper 1.0 Title: Stock Return Predictability: Is it There? Classification-JEL: C12; C51 Author-Name: Andrew Ang Author-Person: pan374 Author-Name: Geert Bekaert Author-Person: pbe52 Note: AP Number: 8207 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8207 File-URL: http://www.nber.org/papers/w8207.pdf File-Format: application/pdf Publication-Status: published as Ang, Andrew and Geert Bekaert. "Stock Return Predictability: Is it There?" Review of Financial Studies 20, 3 (2007): 651-707. Abstract: We ask whether stock returns in France, Germany, Japan, the UK and the US are predictable by three instruments: the dividend yield, the earnings yield and the short rate. The predictability regression is suggested by a present value model with earnings growth, payout ratios and the short rate as state variables. We use this model imposing a constant risk premium to examine the finite sample evidence on predictability. Not only do we find the short rate to be a relevant state variable theoretically, it is also the only robust short-run predictor of equity returns. The evidence in Lamont (1998) on earnings and dividend yield predictability is not robust to our increased sample period, does not survive finite sample corrections and does not extend to other countries. We find no evidence of long-horizon predictability once we account for finite sample influence. Finally, cross-country predictability appears stronger than predictability using local instruments. Handle: RePEc:nbr:nberwo:8207 Template-Type: ReDIF-Paper 1.0 Title: Housing Programs for Low-Income Households Classification-JEL: H Author-Name: Edgar O. Olsen Note: PE Number: 8208 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8208 File-URL: http://www.nber.org/papers/w8208.pdf File-Format: application/pdf Publication-Status: published as Housing Programs for Low-Income Households, Edgar O. Olsen. in Means-Tested Transfer Programs in the United States, Moffitt. 2003 Abstract: The primary purposes of this paper are to (1) consider the justifications that have been offered for housing subsidies to low-income households and the implications of these justifications for the evaluation and design of housing programs, (2) describe the most important features of the largest rental housing programs for low-income households in the United States, (3) summarize the empirical evidence on the major effects of these programs, and (4) analyze the major options for reform of the system of housing subsidies. The largest rental programs are HUD's Public Housing, Section 236, Section 8 New Construction/Substantial Rehab, Section 8 Existing, USDA's Section 515, and the IRS's Low Income Housing Tax Credit. The effects of these programs that will be considered include effects on the housing occupied by recipients of the subsidy and their consumption of other goods, effects on labor supply of assisted households, the distribution of benefits among recipients, participation rates among different types of households, effects on the types of neighborhoods in which subsidized households live and the effect of subsidized housing and households on their neighbors, the effect on prices of unsubsidized housing, and the cost-effectiveness of alternative methods for delivering housing assistance. Handle: RePEc:nbr:nberwo:8208 Template-Type: ReDIF-Paper 1.0 Title: When Is U.S. Bank Lending to Emerging Markets Volatile? Classification-JEL: F3; F4 Author-Name: Linda S. Goldberg Author-Person: pgo256 Note: IFM Number: 8209 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8209 File-URL: http://www.nber.org/papers/w8209.pdf File-Format: application/pdf Publication-Status: published as When Is US Bank Lending to Emerging Markets Volatile?, Linda S. Goldberg. in Preventing Currency Crises in Emerging Markets, Edwards and Frankel. 2002 Abstract: Using bank-specific data on U.S. bank claims on individual foreign countries since the mid-1980s, this paper: 1) characterizes the size and portfolio diversification patterns of the U.S. banks engaging in foreign lending; and 2) econometrically explores the determinants of fluctuations in U.S. bank claims on a broad set of countries. U.S. bank claims on Latin American and Asian emerging markets, and on industrialized countries, are sensitive to U.S. macroeconomic conditions. When the United States grows rapidly, there is substitution between claims on industrialized countries and claims on the United States. The pattern of response of claims on emerging markets to U.S. conditions differs across banks of different sizes and across emerging market regions. Moreover, unlike U.S. bank claims on industrialized countries, we find that claims on emerging markets are not highly sensitive to local country GDP and interest rates. Handle: RePEc:nbr:nberwo:8209 Template-Type: ReDIF-Paper 1.0 Title: Do Cognitive Test Scores Explain Higher US Wage Inequality? Classification-JEL: J3; J5 Author-Name: Francine D. Blau Author-Person: pbl16 Author-Name: Lawrence M. Kahn Author-Person: pka63 Note: LS Number: 8210 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8210 File-URL: http://www.nber.org/papers/w8210.pdf File-Format: application/pdf Publication-Status: published as Francine D. Blau & Lawrence M. Kahn, 2005. "Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 184-193, December. Abstract: Using microdata from the 1994-6 International Adult Literacy Survey (IALS), we examine the role of cognitive skills in explaining higher wage inequality in the US. We find that while the greater dispersion of cognitive test scores in the US plays a part in explaining higher US wage inequality, higher labor market prices (i.e., higher returns to measured human capital and cognitive performance) and greater residual inequality still play important roles for both men and women. And we find that, on average, prices are quantitatively considerably more important than differences in the distribution of test scores in explaining the relatively high level of US wage inequality. This finding holds up when we examine natives only and when we correct for sample selection. Handle: RePEc:nbr:nberwo:8210 Template-Type: ReDIF-Paper 1.0 Title: Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry Classification-JEL: J0; L5 Author-Name: Marianne Bertrand Author-Person: pbe697 Author-Name: Francis Kramarz Author-Person: pkr29 Note: LS Number: 8211 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8211 File-URL: http://www.nber.org/papers/w8211.pdf File-Format: application/pdf Publication-Status: published as Bertrand, Marianne and Francis Kramarz. "Does Entry Regulation Hinder Job Creation? Evidence From The French Retail Industry," Quarterly Journal of Economics, 2002, v107(4,Nov), 1369-1413. Abstract: Does entry regulation hinder job creation? We investigate this question in the context of the French retail industry, a sector that has experienced especially low rates of job creation over the last 25 years. Since the early 70s, the French government has required regional zoning board approval for the creation or extension of any large retail store. Using a unique database that provides time and regional variation in boards' approval decisions, we show that this requirement created barriers to entry in the retail sector. We also show that these barriers to entry, either measured directly by approval rates or predicted by the political composition of the boards, weakened employment growth in the retail industry. Our findings indicate that retail employment could have been more than 10% higher today had entry regulation not been introduced. Promoting product market competition may thus be a key reform for countries with poor employment performance. Handle: RePEc:nbr:nberwo:8211 Template-Type: ReDIF-Paper 1.0 Title: An Empirical Analysis of the Impact of Hedge Contracts on Bidding Behavior Classification-JEL: L9; L1 Author-Name: Frank A. Wolak Note: IO Number: 8212 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8212 File-URL: http://www.nber.org/papers/w8212.pdf File-Format: application/pdf Abstract: A major concern in the design of wholesale electricity markets is the potential for the exercise of market power by generating unit owners. To better understand the determinants of generating unit owner market power and how it is exercised, this paper derives a model of bidding behavior in a competitive electricity market which incorporates various sources of uncertainty and the impact of the electricity generator's position in the financial hedge contract market on its expected profit-maximizing bidding behavior. The model is first used to characterize the profit- maximizing market price that a generator would like set by its bidding strategy for several hedge contract and spot sales combinations. This model applied to bid and contract data obtained from the first three months of operation of the National Electricity Market (NEM1) in Australia to answer several questions about the bidding behavior of a major participant in this market. This analysis illustrates the sensitivity of expected profit-maximizing bidding strategies to the amount of financial hedge contracts held by the generating unit owner. It also provides strong evidence for the effectiveness of financial hedge contracts as a means to mitigate market power during initial stages of operation of a wholesale electricity market. Handle: RePEc:nbr:nberwo:8212 Template-Type: ReDIF-Paper 1.0 Title: Estimating the Customer-Level Demand for Electricity Under Real-Time Market Prices Classification-JEL: L9; Q4 Author-Name: Robert H. Patrick Author-Person: ppa199 Author-Name: Frank A. Wolak Note: IO EEE Number: 8213 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8213 File-URL: http://www.nber.org/papers/w8213.pdf File-Format: application/pdf Abstract: This paper presents estimates of the customer-level demand for electricity by industrial and commercial customers purchasing electricity according to the half-hourly energy prices from the England and Wales (E&W) electricity market. These customers also face the possibility of a demand charge on their electricity consumption during the three half-hour periods that are coincident with E&W system peaks. Although energy charges are largely known by 4 PM the day prior to consumption, a fraction of the energy charge and the identity of the half-hour periods when demand charges occur are only known with certainty ex post of consumption. Four years of data from a Regional Electricity Company (REC) in the United Kingdom is used to quantify the half-hourly customer-level demands under this real-time pricing program. The econometric model developed and estimated here quantifies the extent of intertemporal substitution in electricity consumption across pricing periods within the day due to changes in all components of day-ahead E&W electricity prices, the level of the demand charge and the probability that a demand charge will be imposed. The results of this modeling framework can be used by distribution companies supplying consumers purchasing electricity according to real-time market prices to construct demand-side bids into a competitive electricity market. The paper closes with several examples of how this might be done. Handle: RePEc:nbr:nberwo:8213 Template-Type: ReDIF-Paper 1.0 Title: Do Political Institutions Shape Economic Policy? Classification-JEL: D7; E6 Author-Name: Torsten Persson Author-Person: ppe28 Note: PE Number: 8214 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8214 File-URL: http://www.nber.org/papers/w8214.pdf File-Format: application/pdf Publication-Status: published as Persson, Torsten. "Do Political Institutions Shape Economic Policy," Econometrica, 2002, v70(3,May), 883-905. Abstract: Do political institutions shape economic policy? I argue that this question should naturally appeal to economists. Moreover, the answer is in the affirmative, both in theory and in practice. In particular, recent theoretical work predicts systematic eects of electoral rules and political regimes on the size and composition of government spending. And results from ongoing empirical work indicate that such eect are indeed present in international panel data. Some empirical results are consistent with theoretical predictions: presidential regimes have smaller governments and countries with majoritarian elections have smaller welfare-state programs and less corruption. Other results present puzzles for future research: the adjustment to economic events is clearly institution-dependent, as is the timing and nature of the electoral cycle. Handle: RePEc:nbr:nberwo:8214 Template-Type: ReDIF-Paper 1.0 Title: The Effects of Race and Sex Discrimination Laws Classification-JEL: J7; J1 Author-Name: David Neumark Author-Person: pne16 Author-Name: Wendy A. Stock Note: LS Number: 8215 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8215 File-URL: http://www.nber.org/papers/w8215.pdf File-Format: application/pdf Publication-Status: published as Neumark, David and Wendy Stock. “The Labor Market Effects of Race and Sex Discrimination Laws." Economic Inquiry (2006): 385-419. Abstract: The question of the effects of race and sex discrimination laws on relative economic outcomes for blacks and women has been of interest at least since the Civil Rights and Equal Pay Acts passed in the 1960s. We present new evidence on the effects of these laws based on variation induced first by state anti-discrimination statutes passed prior to the federal legislation and then by the extension of anti-discrimination prohibitions to the remaining states with the passage of federal legislation. This evidence improves upon earlier time-series studies of the effects of anti-discrimination legislation. It is complementary to more recent work that revisits this question using data and statistical experiments that provide 'treatment' and 'comparison' groups. We examine the effects of race and sex discrimination laws on employment and earnings, in each case focusing on outcomes for black females, black males, and white females relative to white males. Overall, we interpret the evidence as corroborating the general conclusion that race discrimination laws positively impacted the relative employment and earnings of blacks, although the evidence is less dramatic than that reported in other research, and there are some cases (in particular, earnings effects for black males) and periods for which we find little positive impact. We find some evidence that sex discrimination/equal pay laws boosted the relative earnings of black and white females. Finally, we find that sex discrimination/equal pay laws reduced the relative employment of both black women and white women. Handle: RePEc:nbr:nberwo:8215 Template-Type: ReDIF-Paper 1.0 Title: The Silent Majority Fallacy of the Elzinga-Hogarty Criteria: A Critique and New Approach to Analyzing Hospital Mergers Classification-JEL: L4; I1 Author-Name: Cory S. Capps Author-Name: David Dranove Author-Person: pdr111 Author-Name: Shane Greenstein Author-Person: pgr134 Author-Name: Mark Satterthwaite Note: EH IO Number: 8216 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8216 File-URL: http://www.nber.org/papers/w8216.pdf File-Format: application/pdf Abstract: Elzinga/Hogarty inflow/outflow analysis is a mainstay of geographic market definition in antitrust analysis. For example, U.S. antitrust agencies lost several hospital merger challenges when evidence showed that a nontrivial fraction of local patients traveled outside the local community for care. We show that the existence of traveling consumers may not limit seller market power with respect to non-traveling consumers--a phenomenon we label the silent majority fallacy. We estimate a random coefficients logit model of hospital demand and use the estimates to predict the increase in price that various mergers would generate. Two distinct methods of predicting the price increase are implemented and both indicate that even in suburban areas with high outflows of consumers, some hospital mergers could lead to significant price increases. Handle: RePEc:nbr:nberwo:8216 Template-Type: ReDIF-Paper 1.0 Title: The International Macroeconomics of Taxation and the Case Against European Tax Harmonization Classification-JEL: F4; H2 Author-Name: Enrique G. Mendoza Author-Person: pme30 Note: IFM PE Number: 8217 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8217 File-URL: http://www.nber.org/papers/w8217.pdf File-Format: application/pdf Publication-Status: published as Helpman, Elhanan and Efraim Sadka (eds.) Economic Policy in the International Economy: Essays in Honor of Assaf Razin. Cambridge, UK: Cambridge University Press, 2003. Abstract: The theory of international macroeconomics shows that domestic tax policy in a global economy affects foreign economic conditions via complex, dynamic interactions through relative prices, tax revenues, and wealth distribution. This paper proposes a tractable quantitative framework for assessing tax policies that is consistent with this theory. The significance of the international transmission channels of tax policy is evaluated in the context of a 'workhorse' two-country dynamic general equilibrium model. The model is used to assess the potential effects of the European harmonization of capital income taxes. The results show that this policy, if enacted along the lines followed in harmonizing value-added taxes, yields large capital outflows and a significant erosion of tax revenue for Continental Europe while the opposite effects benefit the United Kingdom. Welfare in the United Kingdom rises as result, while Continental Europe may incur a substantial welfare cost. Handle: RePEc:nbr:nberwo:8217 Template-Type: ReDIF-Paper 1.0 Title: European Inflation Dynamics Classification-JEL: E31 Author-Name: Jordi Gali Author-Person: pga43 Author-Name: Mark Gertler Author-Person: pge11 Author-Name: J. David Lopez-Salido Author-Person: plo26 Note: AP EFG ME Number: 8218 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8218 File-URL: http://www.nber.org/papers/w8218.pdf File-Format: application/pdf Publication-Status: published as Gali, Jordi, Mark Gertler and J. David Lopez-Salido. "European Inflation Dynamics," European Economic Review, 2001, v45(7,Jun), 1237-1270. Abstract: We provide evidence on the fit of the New Phillips Curve (NPQ for the Euro area over the period 1970-1998, and use it as a tool to compare the characteristics of European inflation dynamics with those observed in the U.S. We also analyze the factors underlying inflation inertia by examining the cyclical behavior of marginal costs, as well as that of its two main components, namely, labor productivity and real wages. Some of the findings can be summarized as follows: (a) the NPC fits Euro area data very well, possibly better than U.S. data, (b) the degree of price stickiness implied by the estimates is substantial, but in line with survey evidence and U.S. estimates, (c) inflation dynamics in the Euro area appear to have a stronger forward- looking component (i.e., less inertia) than in the U.S., (d) labor market frictions, as manifested in the behavior of the wage markup, appear to have played a key role in shaping the behavior of marginal costs and, consequently, inflation in Europe. Handle: RePEc:nbr:nberwo:8218 Template-Type: ReDIF-Paper 1.0 Title: The Perverse Effects of Partial Labor Market Reform: Fixed Duration Contracts in France Classification-JEL: J60; J63 Author-Name: Olivier Blanchard Author-Person: pbl2 Author-Name: Augustin Landier Author-Person: pla423 Note: EFG Number: 8219 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8219 File-URL: http://www.nber.org/papers/w8219.pdf File-Format: application/pdf Publication-Status: published as Blanchard, O. and A. Landier. "The Perverse Effects Of Partial Labour Market Reform: Fixed-Term Contracts In France," Economic Journal, 2002, v112(480,Jun), F214-F244. Abstract: Rather than decrease firing costs across the board, a number of European countries have allowed firms to hire workers on fixed-duration contracts. At the end of a given duration, these contracts can be terminated at little or no cost. If workers are kept on however, the contracts become subject to regular firing costs. We argue in this paper that the effects of such a partial reform of employment protection may be perverse. The main effect may be high turnover in fixed-duration jobs, leading in turn to higher, not lower, unemployment. And, even if unemployment comes down, workers may actually be worse off, going through many spells of unemployment and fixed duration jobs, before obtaining a regular job. Looking at French data for young workers since the early 1980s, we conclude that the reforms have substantially increased turnover, without a substantial reduction in unemployment duration. If anything, their effect on welfare of young workers appears to have been negative. Handle: RePEc:nbr:nberwo:8219 Template-Type: ReDIF-Paper 1.0 Title: Corporate Governance and Merger Activity in the U.S.: Making Sense of the 1980s and 1990s Classification-JEL: G3; L2 Author-Name: Bengt Holmstrom Author-Person: pho488 Author-Name: Steven N. Kaplan Note: CF Number: 8220 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8220 File-URL: http://www.nber.org/papers/w8220.pdf File-Format: application/pdf Publication-Status: published as Holmstrom, Bengt and Steven N. Kaplan. "Corporate Governance And Merger Activity In The United States: Making Sense Of The 1980s And 1990s," Journal of Economic Perspectives, 2001, v15(2,Spring), 121-144. Abstract: This paper describes and considers explanations for changes in corporate governance and merger activity in the United States since 1980. Corporate governance in the 1980s was dominated by intense merger activity distinguished by the prevalence of leveraged buyouts (LBOs) and hostility. After a brief decline in the early 1990s, substantial merger activity resumed in the second half of the decade, while LBOs and hostility did not. Instead, internal corporate governance mechanisms appear to have played a larger role in the 1990s. We conclude by considering whether these changes and the movement toward shareholder value are likely to be permanent. Handle: RePEc:nbr:nberwo:8220 Template-Type: ReDIF-Paper 1.0 Title: Valuation Ratios and the Long-Run Stock Market Outlook: An Update Classification-JEL: G12 Author-Name: John Y. Campbell Author-Person: pca54 Author-Name: Robert J. Shiller Author-Person: psh69 Note: AP EFG ME Number: 8221 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8221 File-URL: http://www.nber.org/papers/w8221.pdf File-Format: application/pdf Publication-Status: published as Thaler, Richard H. (ed.) Advances in Behavioral Finance, Volume II. Princeton University Press, 2005. Publication-Status: published as John Y Campbell & Robert J Shiller, 1998. "Valuation Ratios and the Long-Run Stock Market Outlook," The Journal of Portfolio Management, vol 24(2), pages 11-26. Abstract: The use of price earnings ratios and dividend-price ratios as forecasting variables for the stock market is examined using aggregate annual US data 1871 to 2000 and aggregate quarterly data for twelve countries since 1970. Various simple efficient-markets models of financial markets imply that these ratios should be useful in forecasting future dividend growth, future earnings growth, or future productivity growth. We conclude that, overall, the ratios do poorly in forecasting any of these. Rather, the ratios appear to be useful primarily in forecasting future stock price changes, contrary to the simple efficient-markets models. This paper is an update of our earlier paper (1998), to take account of the remarkable behavior of the stock market in the closing years of the twentieth century. Handle: RePEc:nbr:nberwo:8221 Template-Type: ReDIF-Paper 1.0 Title: Culture, Openness, and Finance Classification-JEL: G15; G30 Author-Name: Rene M. Stulz Author-Name: Rohan Williamson Note: CF Number: 8222 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8222 File-URL: http://www.nber.org/papers/w8222.pdf File-Format: application/pdf Publication-Status: published as Stulz, Rene M. & Williamson, Rohan, 2003. "Culture, openness, and finance," Journal of Financial Economics, Elsevier, vol. 70(3), pages 313-349, December. Abstract: Religions have little to say about shareholders but have much to say about creditors. We find that the origin of a country's legal system is more important than its religion and language in explaining shareholder rights. However, a country's principal religion helps predict the cross-sectional variation in creditor rights better than a country's openness to international trade, its language, its income per capita, or the origin of its legal system. Catholic countries protect the rights of creditors less than other countries, and long-term debt is less important in these countries. A country's openness to international trade mitigates the influence of religion on creditor rights. Religion and language are also important predictors of how countries enforce rights. Handle: RePEc:nbr:nberwo:8222 Template-Type: ReDIF-Paper 1.0 Title: Taxation and Portfolio Structure: Issues and Implications Classification-JEL: H24; G11 Author-Name: James M. Poterba Author-Person: ppo19 Note: AP PE Number: 8223 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8223 File-URL: http://www.nber.org/papers/w8223.pdf File-Format: application/pdf Publication-Status: published as Guiso, L., M. Haliassos, and T. Jappelli (eds.) Household Portfolios. MIT Press, 2001. Abstract: overview of how taxation affects household portfolio structure. It begins by outlining six aspects of portfolio behavior that may be influenced by the tax system. These are asset selection, asset allocation, borrowing, asset location in taxable and tax-deferred accounts, asset turnover, and whether to hold assets directly or through financial intermediaries. The analysis considers how ignoring tax considerations may bias estimates of how other variables, such as income or net worth, affect the structure of household portfolios. The paper then describes the tax rules that apply to various portfolio instruments in a range of major industrialized nations. This illustrates the wide variation in the potential impact of tax rules on portfolio choice. Finally, the paper selectively reviews the existing evidence on how taxation affects portfolio choice. A small but growing literature, primarily based on the analysis of U.S. data, suggests that taxes have important effects on several aspects of portfolio choice. There remain a number of decisions, however, for which it appears difficult to reconcile household choices with tax-efficient behavior. Handle: RePEc:nbr:nberwo:8223 Template-Type: ReDIF-Paper 1.0 Title: Financial Safety Nets: Reconstructing and Modeling a Policymaking Metaphor Classification-JEL: G2; F3 Author-Name: Edward J. Kane Author-Person: pka853 Note: CF Number: 8224 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8224 File-URL: http://www.nber.org/papers/w8224.pdf File-Format: application/pdf Publication-Status: published as Edward J. Kane, 2001. "Financial safety nets: reconstructing and modelling a policymaking metaphor," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 10(3), pages 237-273, September. Abstract: This paper explains that financial safety nets exist because of difficulties in enforcing contracts and shows that elements of deposit-insurance schemes differ substantially across countries. It argues that differences in the design of financial safety nets correlate significantly with differences in the informational and contracting environments of individual countries and that a country's GDP per capita is correlated with proxies for a country's level of: (1) informational transparency, (2) contract enforcement and deterrent rights, and (3) accountability for safety net officials. The analysis portrays deposit insurance as a part of a country's larger safety net and contracting environment. This means that there is no universal method for preventing and resolving banking problems and that the structure of a country's safety net should evolve over time with changes in private and government regulators' capacity for: valuing financial institutions, for disciplining risk taking and resolving insolvency promptly, and for being held accountable for how well they perform these tasks. Handle: RePEc:nbr:nberwo:8224 Template-Type: ReDIF-Paper 1.0 Title: Inflation Targeting and the Liquidity Trap Classification-JEL: E52; E3 Author-Name: Bennett T. McCallum Note: EFG ME Number: 8225 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8225 File-URL: http://www.nber.org/papers/w8225.pdf File-Format: application/pdf Publication-Status: published as Bennett McCallum, 2001. "Inflation targeting and the liquidity trap," Proceedings, Federal Reserve Bank of San Francisco, issue Mar. Publication-Status: published as Bennett McCallum, 2002. "Inflation Targeting and the Liquidity Trap," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.), Inflation Targeting: Desing, Performance, Challenges, edition 1, volume 5, chapter 9, pages 395-438 Central Bank of Chile. Abstract: This paper considers whether 'liquidity trap' issues have important bearing on the desirability of inflation targeting as a strategy for monetary policy. From a theoretical perspective, it has been suggested that 'expectation trap' and 'indeterminacy' dangers are created by variants of inflation targeting, the latter when forecasts of future inflation enter the policy rule. This paper argues that these alleged dangers are probably not of practical importance. From an empirical perspective, a quantitative open-economy model is developed and the likelihood of encountering a liquidity trap is explored for several policy rules. Also, it is emphasized that, if the usual interest rate instrument is immobilized by a liquidity trap, there is still an exchange-rate channel by means of which monetary policy can exert stabilizing effects. The relevant target variable can still be the inflation rate. Handle: RePEc:nbr:nberwo:8225 Template-Type: ReDIF-Paper 1.0 Title: Should Monetary Policy Respond Strongly to Output Gaps? Classification-JEL: E50; E10 Author-Name: Bennett T. McCallum Note: EFG ME Number: 8226 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8226 File-URL: http://www.nber.org/papers/w8226.pdf File-Format: application/pdf Publication-Status: published as McCallum, Bennett T. "Should Monetary Policy Respond Strongly To Output Gaps?," American Economic Review, 2001, v91(2,May), 258-262. Abstract: Much recent monetary policy analysis has featured stochastic simulations with small structural macroeconomic models that include: a spending vs. saving ( IS') sector; a price-adjustment sector; and an interest rate policy rule. The first two are frequently specified so as to reflect optimizing behavior; policy may or may not be specified as optimizing depending on the study's objectives. Some leading issues concern modifications to simple quantitative optimizing models that are needed to generate realistic degrees of persistence in inflation and output-gap variables. A major policy issue is whether it is desirable for monetary policy to respond strongly to the output gap. The paper argues that the latter is unobservable and considers the implications of using a trend-type measure while the true concept is of a type more in keeping with basic theory. In such circumstances, highly undesirable consequences are likely to ensue if policy responds strongly to the measured gap. Handle: RePEc:nbr:nberwo:8226 Template-Type: ReDIF-Paper 1.0 Title: Quantifying the Benefits of New Products: The Case of the Minivan Classification-JEL: C51; D12 Author-Name: Amil Petrin Note: IO Number: 8227 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8227 File-URL: http://www.nber.org/papers/w8227.pdf File-Format: application/pdf Publication-Status: published as Petrin, Amil. "Quantifying The Benefits Of New Products: The Case Of The Minivan," Journal of Political Economy, 2002, v110(4,Aug), 705-729. Abstract: I develop a technique useful for obtaining more precise estimates of demand and supply curves when constrained to market-level data. It augments the estimation routine with data on the average characteristics of consumers that purchase different products. I apply the technique to the automobile market, estimating the economic effects of the minivan introduction. I show that standard approaches yield results that are meaningfully different from those obtained with my extension. I report benefits accruing to both minivan and non-minivan consumers. I complete the welfare picture by measuring the extent of first- mover advantage and of profit cannibalization both initially by the innovator and later by the imitators. My results support a simple economic story where large improvements in consumers' standard of living arise from competition as firms, ignoring the externalities they impose on one another, cannibalize each others profits by continually seeking new goods that give them some temporary market power. Handle: RePEc:nbr:nberwo:8227 Template-Type: ReDIF-Paper 1.0 Title: Does Globalization Make the World More Unequal? Classification-JEL: D3; F1 Author-Name: Peter H. Lindert Author-Person: pli466 Author-Name: Jeffrey G. Williamson Author-Person: pwi169 Note: DAE ITI Number: 8228 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8228 File-URL: http://www.nber.org/papers/w8228.pdf File-Format: application/pdf Publication-Status: published as Does Globalization Make the World More Unequal?, Peter H. Lindert, Jeffrey G. Williamson. in Globalization in Historical Perspective, Bordo, Taylor, and Williamson. 2003 Abstract: The world economy has become more unequal over the last two centuries. Since within- country inequality exhibits no ubiquitous trend, it follows that virtually all of the observed rise in world income inequality has been driven by widening gaps between nations, while almost none of it has driven by widening gaps within nations. Meanwhile, the world economy has become much more globally integrated over the past two centuries. If correlation meant causation, these facts would imply that globalization has raised inequality between nations, but that it has had no clear effect on inequality within nations. This paper argues that the likely impact of globalization on world inequality has been very different from what these simple correlations suggest. Globalization probably mitigated rising inequality between participating nations. The nations that gained the most from globalization are those poor ones that changed their policies to exploit it, while the ones that gained the least did not, or were too isolated to do so. The effect of globalization on inequality within nations has gone both ways, but here too those who have lost the most from globalization typically have been the excluded non-participants. In any case far too small to explain the observed long run rise in world inequality. Handle: RePEc:nbr:nberwo:8228 Template-Type: ReDIF-Paper 1.0 Title: Retirement and Wealth Classification-JEL: J26; H55 Author-Name: Alan L. Gustman Author-Person: pgu327 Author-Name: Thomas L. Steinmeier Note: AG LS PE Number: 8229 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8229 File-URL: http://www.nber.org/papers/w8229.pdf File-Format: application/pdf Publication-Status: published as Gustman, Alan L. and Thomas L. Steinmeier. "Retirement and Wealth." Social Security Bulletin 64, 2 (2001-2002): 66-91. Abstract: This paper estimates reduced form retirement and wealth equations, and analyzes the relationship between them. Data are from the first four waves of the longitudinal Health and Retirement Study, individuals born from 1931 to 1941. Single equation retirement models relate the probability of retiring to forward looking measures of changes in the values of social security and pension benefits when retirement is postponed. Such simple models suggest that if the social security early retirement age were to be raised or abolished, more people would retire earlier rather than later. Our work analyzes the reasons for such counter intuitive predictions, and discusses the need to analyze these policies in the context of a structural model of retirement and wealth. To improve retirement analysis, we develop the premium value, a measure of the future value of pensions and social security that better reflects the accrual of benefits under defined contribution plans. We also introduce a new definition of retirement to blend information on objective hours worked with subjective self reports of retirement status. Our findings also explore the effects of social security incentives on partial retirement, and consider the importance of partial retirement in any study relating social security to retirement behavior. Handle: RePEc:nbr:nberwo:8229 Template-Type: ReDIF-Paper 1.0 Title: International Dimensions of Optimal Monetary Policy Classification-JEL: E31; E52 Author-Name: Giancarlo Corsetti Author-Name: Paolo Pesenti Author-Person: ppe152 Note: IFM Number: 8230 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8230 File-URL: http://www.nber.org/papers/w8230.pdf File-Format: application/pdf Publication-Status: published as Corsetti, Giancarlo & Pesenti, Paolo, 2005. "International dimensions of optimal monetary policy," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 281-305, March. Abstract: This paper provides a baseline general-equilibrium model of optimal monetary policy among interdependent economies, with monopolistic firms that set prices one period in advance. Strict adherence to inward-looking policy objectives such as the stabilization of domestic output cannot be optimal when firms' markups are exposed to currency fluctuations. Such policies induce excessive volatility in exchange rates and foreign sales revenue, leading exporters to set higher prices in response to higher profit risk. In general, optimal rules trade off a larger domestic output gap against lower import prices. Monetary rules in a world Nash equilibrium lead to smaller exchange rate volatility relative to both inward-looking rules and discretionary policies, even when the latter do not suffer from any inflationary (or deflationary) bias. Gains from international monetary cooperation are related in a non-monotonic way to the degree of exchange rate pass-through. Handle: RePEc:nbr:nberwo:8230 Template-Type: ReDIF-Paper 1.0 Title: Why is Health Related to Socioeconomic Status? Classification-JEL: I1 Author-Name: Ellen Meara Note: EH Number: 8231 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8231 File-URL: http://www.nber.org/papers/w8231.pdf File-Format: application/pdf Abstract: There are striking disparities in morbidity and mortality by socioeconomic status (SES) within the United States. I examine pregnancy and health at birth to investigate possible mechanisms linking SES and health. I find that a limited set of maternal health habits during pregnancy, particularly smoking habits, can explain about half (one third) of the correlation between SES and low birth weight among white (black) mothers. I show evidence on three hypotheses to explain why health habits vary by SES. First, differences in knowledge by SES create only modest differences in health behaviors by SES, explaining about 10 percent of differential smoking by education. Second, women respond to common knowledge differentially by SES, so that knowledge and its use combined explain up to one third of differential smoking by education. Third, the most important determinants of differential health behavior are 'third variables,' or variables that can simultaneously determine health habits and SES. Finally, I show evidence that network effects at the family level exacerbate differences in behavior regardless of the source. Handle: RePEc:nbr:nberwo:8231 Template-Type: ReDIF-Paper 1.0 Title: Markets and Multiunit Firms from an American Historical Perspective Classification-JEL: N0; L2 Author-Name: Sukkoo Kim Note: DAE Number: 8232 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8232 File-URL: http://www.nber.org/papers/w8232.pdf File-Format: application/pdf Publication-Status: published as Advances in Strategic Management v. 18. Emerald Group Publishing Limited, 2001. Abstract: The expansion of markets and industrialization greatly increased the benefits of specialization in the U.S. economy. However, since the benefits of specialization can only be realized through trade, specialization significantly increases the volume of market transactions in the economy. The analysis presented in this paper suggests that a better understanding of the historical changes in the nature of market transactions costs, especially those related to information, is likely to provide considerable insights on the rise of the modern business enterprise and a richer understanding of the industrial organization of the U.S. economy. Handle: RePEc:nbr:nberwo:8232 Template-Type: ReDIF-Paper 1.0 Title: Precautionary Saving and the Marginal Propensity to Consume out of Permanent Income Classification-JEL: D81; D91 Author-Name: Christopher D. Carroll Author-Person: pca45 Note: ME Number: 8233 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8233 File-URL: http://www.nber.org/papers/w8233.pdf File-Format: application/pdf Publication-Status: published as Christopher D. Carroll, 2001. "Mathematica code for Precautionary Saving and the Marginal Propensity to Consume out of Permanent Income," QM&RBC Codes 39, Quantitative Macroeconomics & Real Business Cycles. Publication-Status: published as Carroll, Christopher D. "Precautionary Saving and the Marginal Propensity to Consume Out of Permanent Income." Journal of Monetary Economics 56, 6 (September 2009): 780-90. Abstract: The budget constraint requires that, eventually, consumption must adjust fully to any permanent shock to income. Intuition suggests that, knowing this, optimizing agents will fully adjust their spending immediately upon experiencing a permanent shock. However, this paper shows that if consumers are impatient and are subject to transitory as well as permanent shocks, the optimal marginal propensity to consume out of permanent shocks (the MPCP) is strictly less than 1, because buffer stock savers have a target wealth-to-permanent-income ratio; a positive shock to permanent income moves the ratio below its target, temporarily boosting saving. Handle: RePEc:nbr:nberwo:8233 Template-Type: ReDIF-Paper 1.0 Title: Individual Learning About Consumption Classification-JEL: C6; D1 Author-Name: Todd W. Allen Author-Name: Christopher D. Carroll Author-Person: pca45 Note: ME Number: 8234 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8234 File-URL: http://www.nber.org/papers/w8234.pdf File-Format: application/pdf Publication-Status: published as Allen, Todd W. & Carroll, Christopher D., 2001. "Individual Learning About Consumption," Macroeconomic Dynamics, Cambridge University Press, vol. 5(02), pages 255-271, April. Abstract: The standard approach to modelling consumption/saving problems is to assume that the decisionmaker is solving a dynamic stochastic optimization problem. However, under realistic descriptions of utility and uncertainty, the optimal consumption/saving decision is so difficult that only recently have economists have managed to find solutions, using numerical methods that require previously infeasible amounts of computation. Yet empirical evidence suggests that household behavior conforms fairly well with the prescriptions of the optimal solution, raising the question of how average households can solve problems that economists, until recently, could not. This paper examines whether consumers might be able to find a reasonably good 'rule-of-thumb' approximation to optimal behavior by trial-and-error methods, as Friedman (1953) proposed long ago. We find that such individual learning methods can reliably identify reasonably good rules of thumb only if the consumer is able to spend absurdly large amounts of time searching for a good rule. Handle: RePEc:nbr:nberwo:8234 Template-Type: ReDIF-Paper 1.0 Title: Pre-Contractual Reliance Classification-JEL: C78; D23 Author-Name: Lucian Arye Bebchuk Author-Person: pbe72 Author-Name: Omri Ben-Shahar Note: LE Number: 8235 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8235 File-URL: http://www.nber.org/papers/w8235.pdf File-Format: application/pdf Publication-Status: published as "Pre-Contractual Reliance" Journal of Legal Studies, Vol. 30, pp. 423-457, June 2001. Abstract: During contractual negotiations, parties often make (reliance) expenditures that would increase the surplus should a contract be made. This paper analyzes decisions to invest in pre-contractual reliance under alternative legal regimes. Investments in reliance will be socially suboptimal in the absence of any pre-contractual liability -- and will be socially excessive under strict liability for all reliance expenditures. Given the results for these polar cases, we focus on exploring how 'intermediate' liability rules could be best designed to induce efficient reliance decisions. One of our results indicates that the case for liability is shown to be stronger when a party retracts from terms that it has proposed or from preliminary understandings reached by the parties. Our results have implications, which we discuss, for various contract doctrines and debates. Finally, we show that pre-contractual liability does not necessarily have an overall adverse effect on parties' decisions to enter into contractual negotiations. Handle: RePEc:nbr:nberwo:8235 Template-Type: ReDIF-Paper 1.0 Title: The Financial Problems of the Elderly: A Holistic Approach Classification-JEL: J14; I10 Author-Name: Victor R. Fuchs Author-Person: pfu157 Note: EH AG Number: 8236 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8236 File-URL: http://www.nber.org/papers/w8236.pdf File-Format: application/pdf Abstract: A holistic approach to the financial problems of the elderly focuses simultaneously on their expenditures that are self financed as well as those that are financed by transfers from the young (under age65). It also focuses simultaneously on paying for health care and paying for other goods and services. The income and health care expenditures not paid from personal income, provides a useful framework for empirical application of the holistic approach . In 1997, approximately 35 percent of the elderly's full income was devoted to health care; 65 percent to other goods and services. Approximately 56 percent of full income was provided by transfers from the young and 44 percent by the elderly themselves. The paper shows how these percentages might change under alternative assumptions about the growth of health care relative to other goods and services and the effect of these changes on the need for more saving and more work prior to retirement. Handle: RePEc:nbr:nberwo:8236 Template-Type: ReDIF-Paper 1.0 Title: Saving Puzzles and Saving Policies in the United States Classification-JEL: E2; D1 Author-Name: Annamaria Lusardi Author-Person: plu347 Author-Name: Jonathan Skinner Author-Person: psk23 Author-Name: Steven Venti Note: AG PE Number: 8237 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8237 File-URL: http://www.nber.org/papers/w8237.pdf File-Format: application/pdf Publication-Status: published as A Lusardi & J Skinner & S Venti, 2001. "Saving puzzles and saving policies in the United States," Oxford Review of Economic Policy, Oxford University Press, vol. 17(1), pages 95-115, Spring. Abstract: In the past two decades the widely reported personal saving rate in the United States has dropped from double digits to below zero. First, we attempt to account for the decline in the National Income and Product Accounts (NIPA) saving rate. The macroeconomic literature suggests that about half of the drop since 1988 can be attributed to households spending stock market capital gains. Another thirty percent is accounting transfers from personal saving into government and corporate saving because of the way pensions and capital gains taxes are treated in the NIPA. Second, while NIPA saving measures are well suited for measuring the supply of new funds for investment and capital accumulation, it is not clear that they should be the target of government saving policies. Finally, we emphasize that the NIPA saving rate is not useful in judging whether households are preparing for retirement or other contingencies. Many households have accumulated significant wealth, primarily through retirement saving vehicles and capital gains, even as the saving rate slid. There remains a segment of the population, however, who save little and whose behavior appears untouched either by the stock market boom or the slide in personal saving. We explore reasons and policy options for their puzzlingly low saving rate. Handle: RePEc:nbr:nberwo:8237 Template-Type: ReDIF-Paper 1.0 Title: Union Effects on Health Insurance Provision and Coverage in the United States Classification-JEL: I1; J3 Author-Name: Thomas C. Buchmueller Author-Person: pbu179 Author-Name: John DiNardo Author-Person: pdi178 Note: EH LS Number: 8238 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8238 File-URL: http://www.nber.org/papers/w8238.pdf File-Format: application/pdf Publication-Status: published as Thomas C. Buchmueller & John DiNardo & Robert G. Valletta, 2002. "Union effects on health insurance provision and coverage in the United States," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 55(4), pages 610-627, July. Abstract: During the past two decades, union density has declined in the United States and employer provision of health benefits has undergone substantial changes in extent and form. Using individual data spanning the years 1983-1997, combined with establishment data for 1993, we update and extend previous analyses of private-sector union effects on employer-provided health benefits. We find that the union effect on health insurance coverage rates has fallen somewhat but remains large, due to an increase over time in the union effect on employee 'take-up' of offered insurance, and that declining unionization explains 20-35 percent of the decline in employee health coverage. The increasing union take-up effect is linked to union effects on employees' direct costs for health insurance and the availability of retiree coverage. Handle: RePEc:nbr:nberwo:8238 Template-Type: ReDIF-Paper 1.0 Title: The Human Capital Century and American Leadership: Virtues of the Past Classification-JEL: J2; N3 Author-Name: Claudia Goldin Author-Person: pgo601 Note: DAE LS Number: 8239 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8239 File-URL: http://www.nber.org/papers/w8239.pdf File-Format: application/pdf Publication-Status: published as Goldin, Claudia. "The Human-Capital Century And American Leadership: Virtues Of The Past," Journal of Economic History, 2001, v61(2,Jun), 263-292. Abstract: The modern concept of the wealth of nations emerged by the early twentieth century. Capital embodied in people human capital mattered. The United States led all nations in mass postelementary education during the human-capital century.' The American system of education was shaped by New World endowments and Republican ideology and was characterized by virtues including publicly funded mass education that was open and forgiving, academic yet practical, secular, gender neutral, and funded and controlled by small districts. The American educational template was a remarkable success, but recent educational concerns and policy have redefined some of its 'virtues' as 'vices.' Handle: RePEc:nbr:nberwo:8239 Template-Type: ReDIF-Paper 1.0 Title: What Drives Firm-Level Stock Returns? Classification-JEL: G12; G14 Author-Name: Tuomo Vuolteenaho Note: AP Number: 8240 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8240 File-URL: http://www.nber.org/papers/w8240.pdf File-Format: application/pdf Publication-Status: published as Vuolteenaho, Tuomo. "What Drives Firm-Level Stock Returns?," Journal of Finance, 2002, v57(1,Feb), 233-264. Abstract: I use a vector autoregressive model (VAR) to decompose an individual firm's stock return into two components: changes in cash-flow expectations (i.e., cash-flow news) and changes in discount rates (i.e., expected-return news). The VAR yields three main results. First, firm-level stock returns are mainly driven by cash-flow news. For a typical stock, the variance of cash-flow news is more than twice that of expected-return news. Second, shocks to expected returns and cash flows are positively correlated for a typical small stock. Third, expected-return-news series are highly correlated across firms, while cash-flow news can largely be diversified away in aggregate portfolios. Handle: RePEc:nbr:nberwo:8240 Template-Type: ReDIF-Paper 1.0 Title: Differential Mortality in the UK Classification-JEL: J1; I1 Author-Name: Orazio P. Attanasio Author-Person: pat7 Author-Name: Carl Emmerson Note: AG EH Number: 8241 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8241 File-URL: http://www.nber.org/papers/w8241.pdf File-Format: application/pdf Abstract: In this paper we use the two waves of the British Retirement Survey (1988/89 and 1994) to quantify the relationship between socio-economic status and health outcomes. We find that, even after conditioning on the initial health status, wealth rankings are important determinants of mortality and the evolution of the health indicator in the survey. For men aged 65 moving from the 40th percentile to the 60th percentile in the wealth distribution increases the probability of survival by between 2.4 and 3.4 percentage points depending on the measure of wealth used. A slightly smaller effect is found for women of between 1.5 and 1.9 percentage points. In the process of estimating these effects we control for non-random attrition from our sample. Handle: RePEc:nbr:nberwo:8241 Template-Type: ReDIF-Paper 1.0 Title: The Value Spread Classification-JEL: G12; G14 Author-Name: Randolph B. Cohen Author-Name: Christopher Polk Author-Person: ppo238 Author-Name: Tuomo Vuolteenaho Note: AP Number: 8242 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8242 File-URL: http://www.nber.org/papers/w8242.pdf File-Format: application/pdf Publication-Status: published as Randolph B. Cohen & Christopher Polk & Tuomo Vuolteenaho, 2003. "The Value Spread," Journal of Finance, American Finance Association, vol. 58(2), pages 609-642, 04. Abstract: We decompose the cross-sectional variance of firms' book-to-market ratios using both a long U.S. panel and a shorter international panel. In contrast to typical aggregate time-series results, transitory cross-sectional variation in expected 15-year stock returns causes only a relatively small fraction (20%) of the total cross-sectional variance. The remaining dispersion can be explained by expected 15-year profitability and persistence of valuation levels. Furthermore, this fraction appears stable across time and across types of stocks. We also show that the expected return on value-minus-growth strategies is atypically high at times when the value spread (the difference between the book-to-market ratio of a typical value stock and a typical growth stock) is wide. Handle: RePEc:nbr:nberwo:8242 Template-Type: ReDIF-Paper 1.0 Title: Do We Have A New E-Conomy? Classification-JEL: E2; O4 Author-Name: Martin N. Baily Author-Name: Robert Lawrence Author-Person: pla608 Note: EFG PR Number: 8243 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8243 File-URL: http://www.nber.org/papers/w8243.pdf File-Format: application/pdf Publication-Status: published as American Economic Review (American Economic Association) May 2001 Publication-Status: published as Martin Neil Baily & Robert Z. Lawrence, 2001. "Do We Have a New E-conomy?," American Economic Review, American Economic Association, vol. 91(2), pages 308-312, May. Abstract: Used properly, the term 'new e-conomy' is warranted. Since 1995, there has been a wave of innovation associated with both the production and use of information technology that has been translated into improved US economic performance. In particular, there has been a substantial acceleration in trend total factor productivity growth. Most of this acceleration actually took place outside of the computer sector. Almost none of the acceleration was cyclical. There is now clear supportive evidence of an acceleration of productivity in service industries that are major purchasers of information technology such as finance and wholesale and retail trade. These gains reflect not only increased investment in information technology but also complementary innovations in business organization and policy. To be sure, as evidenced by recent financial market volatility, there have been speculative excesses, but these should not obscure the fundamental gains that have been made. Handle: RePEc:nbr:nberwo:8243 Template-Type: ReDIF-Paper 1.0 Title: One Size Fits All? Heckscher-Ohlin Specialization in Global Production Classification-JEL: F11; F14 Author-Name: Peter K. Schott Author-Person: psc98 Note: ITI Number: 8244 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8244 File-URL: http://www.nber.org/papers/w8244.pdf File-Format: application/pdf Publication-Status: published as Schott, Peter K. "One Size Fits All? Heckscher-Ohlin Specialization In Global Production," American Economic Review, 2003, v93(3,Jun), 686-708. Abstract: Many previous tests of Heckscher-Ohlin trade theory have found underwhelming support for the idea that countries' endowments determine their production and trade. This paper demonstrates that those efforts suffer from their focus on the narrower of the model's two potential equilibria, which assumes that all countries produce all goods. In this paper we introduce a more general technique for testing the model that allows for the possibility that countries with sufficiently disparate endowments specialize in unique subsets of goods. Results using this technique indicate strong support for Heckscher-Ohlin specialization versus one-size-fits-all homogeneity. Our results also demonstrate that the empirical evaluation of trade models has been hampered by the coarse aggregation of output inherent in existing datasets. Indeed, we show that traditional categorizations of goods hide a substantial degree of cross-country price and input intensity heterogeneity, violating the assumptions of the factor proportions framework and rendering previous estimation results difficult to interpret. To overcome this problem, we introduce a methodology for aggregating goods that corrects for underlying product variation. Estimation of the model using corrected aggregates reveals even stronger support for Heckscher-Ohlin specialization. The importance of specialization for the evolution of developed country wage inequality is also discussed. Handle: RePEc:nbr:nberwo:8244 Template-Type: ReDIF-Paper 1.0 Title: Does Financial Liberalization Spur Growth? Classification-JEL: O1; O4 Author-Name: Geert Bekaert Author-Person: pbe52 Author-Name: Campbell R. Harvey Author-Person: pha102 Author-Name: Christian Lundblad Author-Person: plu185 Note: AP EFG Number: 8245 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8245 File-URL: http://www.nber.org/papers/w8245.pdf File-Format: application/pdf Publication-Status: published as Journal of Financial Economics, Vol. 77, no. 1 (July 2005): 3-55 Abstract: We show that equity market liberalizations, on average, lead to a one percent increase in annual real economic growth over a five-year period. The liberalization effect is not spuriously accounted for by macro-economic reforms and does not reflect a business cycle effect. Although financial liberalizations further financial development, measures of financial development fail to fully drive out the liberalization effect. The investment/GDP ratio increases post liberalization, with the investment partially financed by foreign capital inducing worsened trade balances. Differentiating across liberalizing countries, a large secondary school enrollment, a small government sector and an Anglo-Saxon legal system tend to enhance the liberalization effect. Finally, the conditional convergence effect is larger once financial liberalization is accounted for. Handle: RePEc:nbr:nberwo:8245 Template-Type: ReDIF-Paper 1.0 Title: An Econometric Model of the Yield Curve with Macroeconomic Jump Effects Classification-JEL: E4; E5 Author-Name: Monika Piazzesi Author-Person: ppi37 Note: AP ME Number: 8246 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8246 File-URL: http://www.nber.org/papers/w8246.pdf File-Format: application/pdf Abstract: This paper develops an arbitrage-free time-series model of yields in continuous time that incorporates central bank policy. Policy-related events, such as FOMC meetings and releases of macroeconomic news the Fed cares about, are modeled as jumps. The model introduces a class of linear-quadratic jump-diffusions as state variables, which allows for a wide variety of jump types but still leads to tractable solutions for bond prices. I estimate a version of this model with U.S. interest rates, the Federal Reserve's target rate, and key macroeconomic aggregates. The estimated model improves bond pricing, especially at short maturities. The snake-shape' of the volatility curve is linked to monetary policy inertia. A new monetary policy shock series is obtained by assuming that the Fed reacts to information available right before the FOMC meeting. According to the estimated policy rule, the Fed is mainly reacting to information contained in the yield-curve. Surprises in analyst forecasts turn out to be merely temporary components of macro variables, so that the hump-shaped' yield response to these surprises is not consistent with a Taylor-type policy rule. Handle: RePEc:nbr:nberwo:8246 Template-Type: ReDIF-Paper 1.0 Title: Are the Young Becoming More Disabled? Classification-JEL: I1 Author-Name: Darius Lakdawalla Author-Person: pla295 Author-Name: Dana Goldman Author-Person: pgo681 Author-Name: Jay Bhattacharya Note: EH Number: 8247 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8247 File-URL: http://www.nber.org/papers/w8247.pdf File-Format: application/pdf Publication-Status: published as Lakdawalla, Darius, Jay Bhattacharya, and Dana Goldman. “Are the Young Becoming More Disabled?” Health Affairs 23, 1 (January/February 2004): 168-176. Abstract: A fair amount of research suggests that health has been improving among the elderly over the past 10 to 15 years. Comparatively little research effort, however, has been focused on analyzing disability among the young. In this paper, we argue that health among the young has been deteriorating, at the same time that the elderly have been becoming healthier. Moreover, this growth in disability may end up translating into higher disability rates for tomorrow's elderly. Using data from the National Health Interview Survey, we find that, from 1984 to 1996, the rate of disability among those in their 40s rose by one full percentage point, or almost forty percent. Over the same period, the rate of disability declined for the elderly. The recent growth in disability has coincided with substantial growth in asthma and diabetes among the young. Indeed, the growth in asthma alone seems more than enough to explain the change in disability. Therefore, we argue that the growth in disability stems from real changes in underlying health status. Handle: RePEc:nbr:nberwo:8247 Template-Type: ReDIF-Paper 1.0 Title: The Impact of Market Rules and Market Structure on the Price Determination Process in the England and Wales Electricity Market Classification-JEL: E44; E51 Author-Name: Frank A. Wolak Author-Name: Robert H. Patrick Author-Person: ppa199 Note: IO Number: 8248 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8248 File-URL: http://www.nber.org/papers/w8248.pdf File-Format: application/pdf Abstract: This paper argues that the market rules governing the operation of the England and Wales electricity market in combination with the structure of this market presents the two major generators National Power and PowerGen with opportunities to earn revenues substantially in excess of their costs of production for short periods of time. Generators competing to serve this market have two strategic weapons at their disposal: (1) the price bid for each generation set and (2) the capacity of each generation set made available to supply the market each half-hour period during the day. We argue that because of the rules governing the price determination process in this market, by the strategic use of capacity availability declarations, when conditions exogenous to the behavior of the two major generators favor it, these two generators are able to obtain prices for their output substantially in excess of their marginal costs of generation. The paper establishes these points in the following manner. First, we provide a description of the market structure and rules governing the operation of the England and Wales electricity market, emphasizing those aspects that are important to the success of the strategy we believe the two generators use to exercise market power. We then summarize the time series properties of the price of electricity emerging from this market structure and price-setting process. By analyzing four fiscal years of actual market prices, quantities and generator bids into the market, we provide various pieces of evidence in favor of the strategic use of the market rules by the two major participants. The paper closes with a discussion of the lessons that the England and Wales experience can provide for the design of competitive power markets in the US, particularly California, and other countries. Handle: RePEc:nbr:nberwo:8248 Template-Type: ReDIF-Paper 1.0 Title: Lending Booms: Latin America and the World Author-Name: Pierre-Olivier Gourinchas Author-Person: pgo28 Author-Name: Rodrigo Valdes Author-Person: pva726 Author-Name: Oscar Landerretche Note: IFM Number: 8249 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8249 File-URL: http://www.nber.org/papers/w8249.pdf File-Format: application/pdf Publication-Status: published as Pierre-Olivier Gourinchas & Rodrigo Valdes & Oscar Landerretche, 2001. "Lending Booms: Latin America and the World," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, January. Abstract: Recent theories of crisis put lending booms at the root of financial collapses. Yet lending booms may be a natural consequence of economic development and fluctuations. So are lending booms dangerous? In this paper, we investigate empirically this question using a broad sample of lending boom episodes over 40 years, with a special eye for Latin America. Our results indicate that (1) lending booms are often associated with (i) a domestic investment boom; (ii) an increase in domestic interest rates; (iii) a worsening of the current account; (iv) a declines in reserves; (v) a real appreciation; (vi) a decline in output growth, (2) 'typical' lending booms do not increase substantially the vulnerability of the banking sector or the balance of payments. Comparing Latin America and the rest of the world, we find that Latin America lending booms make the economy considerably more volatile and vulnerable to financial and balance of payment crisis. Handle: RePEc:nbr:nberwo:8249 Template-Type: ReDIF-Paper 1.0 Title: Searching for Prosperity Classification-JEL: O47 Author-Name: Michael Kremer Author-Person: pkr20 Author-Name: Alexei Onatski Author-Person: pon27 Author-Name: James Stock Author-Person: pst148 Note: EFG Number: 8250 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8250 File-URL: http://www.nber.org/papers/w8250.pdf File-Format: application/pdf Publication-Status: published as Kremer, Michael & Onatski, Alexei & Stock, James, 2001. "Searching for prosperity," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 55(1), pages 275-303, December. Abstract: Quah's [1993a] transition matrix analysis of world income distribution based on annual data suggests an ergodic distribution with twin peaks at the rich and poor end of the distribution. Since the ergodic distribution is a highly non-linear function of the underlying transition matrix estimated extremely noisily. Estimates over the foreseeable future are more precise. The Markovian assumptions underlying the analysis are much better satisfied with an analysis based on five-year transitions than one-year transitions. Such an analysis yields an ergodic distribution with 72% of mass in the top income category, but a prolonged transition, during which some inequality measures increase. The rosy ergodic forecast and prolonged transition arise because countries' relative incomes move both up and down at moderate levels, but once countries reach the highest income category, they rarely leave it. This is consistent with a model in which countries search among policies until they reach an income level at which further experimentation is too costly. If countries can learn from each other's experience, the future may be much brighter than would be predicted based on projecting forward the historical transition matrix. Handle: RePEc:nbr:nberwo:8250 Template-Type: ReDIF-Paper 1.0 Title: Links and Hyperlinks: An Empirical Analysis of Internet Portal Alliances, 1995-1999 Classification-JEL: L14 Author-Name: Dan Elfenbein Author-Name: Josh Lerner Author-Person: ple60 Note: CF IO PR Number: 8251 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8251 File-URL: http://www.nber.org/papers/w8251.pdf File-Format: application/pdf Publication-Status: published as "Ownership and Control Rights in Internet Portal Alliances," Rand Journal of Economics, 34 (Summer 2003) 356-369. Abstract: This paper examines the structure of over 100 alliances by Internet portals from 1995 to 1999. These alliances were an attractive empirical testing ground because of the large number and heterogeneous nature of the contracts, the high standards for disclosure in the industry, and the careful delineation of ownership, control, exclusivity, and other provisions in the contracts. The division of ownership and allocation of control rights displayed patterns consistent with the predictions in the incomplete contracting literature. Similarly, the exclusivity of the agreements appeared to vary, at least weakly, with the value of the product or service being made available to the portal, consistent with the licensing literature. In other cases, particularly in regard to the differing allocation of ownership and control and the varying completeness of the contracts, the empirical patterns indicated a more complex world than the one that theory led us to anticipate. Handle: RePEc:nbr:nberwo:8251 Template-Type: ReDIF-Paper 1.0 Title: Electoral Acceleration: The Effect of Minority Population on Minority Voter Turnout Classification-JEL: D72; L82 Author-Name: Felix Oberholzer-Gee Author-Name: Joel Waldfogel Author-Person: pwa46 Note: LE PE Number: 8252 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8252 File-URL: http://www.nber.org/papers/w8252.pdf File-Format: application/pdf Publication-Status: published as Oberholzer-Gee, Felix and Joel Waldfogel. “Strength in Numbers: Group Size and Political Mobilization.” Journal of Law & Economics (October 2005). Abstract: Political outcomes are well understood to depend on the spatial distribution of citizen preferences. In this paper, we document that the same holds for the individual decision to be politically active. Using both cross-sectional and longitudinal evidence on turnout, we show that citizens are more likely to vote if they live in a jurisdiction with a larger number of persons sharing similar political preferences. As a result, changes in the identity of a district's median citizen lead to even larger changes in the identity of its median voter, a phenomenon we term electoral acceleration. We present evidence that electoral acceleration is in part due to the structure of media markets. Candidates find it easier to direct campaign efforts at larger groups because many existing media outlets cater to this audience. Handle: RePEc:nbr:nberwo:8252 Template-Type: ReDIF-Paper 1.0 Title: Whither Poverty in Great Britain and the United States? The Determinants of Changing Poverty and Whether Work Will Work Classification-JEL: I3 Author-Name: Richard Dickens Author-Name: David T. Ellwood Note: LS PE Number: 8253 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8253 File-URL: http://www.nber.org/papers/w8253.pdf File-Format: application/pdf Publication-Status: published as Dickens, Richard and David T. Ellwood. "Child Poverty In Britain And The United States," Economic Journal, 2003, v113(488,Jun), F219-239. Publication-Status: published as Whither Poverty in Great Britain and the United States? The Determinants of Changing Poverty and Whether Work Will Work, Dickens, David T. Ellwood. in Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980–2000, Card, Blundell, and Freeman. 2004 Abstract: Scholars emphasize that poverty in Britain has risen sharply since the late 1970s. Meanwhile in the United States, both official figures and traditional poverty scholars report sharp declines in poverty. We seek to provide a comparison of poverty levels in Britain and the US based on a set of common definitions. We then proceed to ask what factors-demographic, economic, or policy-account for the observed changes in poverty in the two nations and what role could policy play in reducing poverty? We develop a procedure that allows one to trace out the relative impacts of altered demographics, rising wage inequality, work changes, and policy innovations in explaining changing poverty patterns. We find that the forces influencing poverty differ between nations and across absolute and relative poverty measures. Demographic and wage change is a dominant force in both nations. Britain has experienced a dramatic rise in workless households while the US has simultaneously had a sharp fall. These differences had a sizable impact on absolute poverty in both nations and a significant impact on relative poverty in Britain. Government benefits directly reduced relative and absolute poverty considerably in Britain over this period but had little impact in the US. However, changing patterns of benefits and work suggest that policy changes have significantly increased work in the US, particularly among single parents. In Britain, policy changes may have had the reverse effect, reducing work among many groups. The UK government has committed itself to reducing child poverty by half over the next 10 years and to its abolition within 20 years, largely through policy changes designed to make work pay. We conclude that any purely work-based strategy, which doesn't tackle demographics and wage dispersion, may not have a dramatic effect on relative poverty. Handle: RePEc:nbr:nberwo:8253 Template-Type: ReDIF-Paper 1.0 Title: Global Corporations and Local Politics: A Theory of Voter Backlash Classification-JEL: D78; F23 Author-Name: Eckhard Janeba Author-Person: pja312 Note: ITI Number: 8254 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8254 File-URL: http://www.nber.org/papers/w8254.pdf File-Format: application/pdf Publication-Status: published as Janeba, Eckhard, 2004. "Global corporations and local politics: income redistribution vs. FDI subsidies," Journal of Development Economics, Elsevier, vol. 74(2), pages 367-391, August. Abstract: Host governments often display two types of behavior toward outside investors. At an initial stage they eagerly compete for production facilities by offering subsidy packages, but often reverse these policies at a later point. In contrast to the literature that explains the behavior as a result of a hold-up problem, this paper argues that policy reversals are the result of a change in the policy choice or identity of the policy maker. Voters disagree over the net benefits of attracting corporations because of a redistributional conflict. Economic shocks change who is policy maker over time by affecting (i) the number of people who support the corporation, (ii) the incentive of an opponent of the firm to become a candidate, and (iii) the opponent's probability of winning the election against a proponent. The paper shows also that societies with more skewed income distributions are less likely to attract outside investment. While the interpretation of the model is cast in the context of foreign investment, the model has more applications and can be seen as a general theory of voter backlash. Handle: RePEc:nbr:nberwo:8254 Template-Type: ReDIF-Paper 1.0 Title: Indicator Variables for Optimal Policy under Asymmetric Information Classification-JEL: E37; E47 Author-Name: Lars E.O. Svensson Author-Person: psv2 Author-Name: Michael Woodford Author-Person: pwo3 Note: EFG ME Number: 8255 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8255 File-URL: http://www.nber.org/papers/w8255.pdf File-Format: application/pdf Publication-Status: published as Svensson, Lars E. O. and Michael Woodford. "Indicator Variables For Optimal Policy," Journal of Monetary Economics, 2003, v50(3,Apr), 691-720. Publication-Status: published as Svensson, Lars E. O. and Michael Woodford. "Indicator Variables for Optimal Policy under Asymmetric Information," Journal of Economic Dynamics and Control, 28(4): 661-690, January 2004 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. The private sector is assumed to have information about the state of the economy that the policymaker does not possess. Certainty-equivalence is shown to apply, in the sense that optimal policy reactions to optimally estimated states of the economy are independent of the degree of uncertainty. The usual separation principle does not hold, since the estimation of the state of the economy is not independent of optimization and is in general quite complex. We present a general characterization of optimal filtering and control in settings of this kind, and discuss an application of our methods to the problem of the optimal use of 'real-time' macroeconomic data in the conduct of monetary policy. Handle: RePEc:nbr:nberwo:8255 Template-Type: ReDIF-Paper 1.0 Title: Payment Systems and Interchange Fees Classification-JEL: L Author-Name: Richard Schmalensee Author-Person: psc313 Note: IO Number: 8256 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8256 File-URL: http://www.nber.org/papers/w8256.pdf File-Format: application/pdf Publication-Status: published as Schmalensee, Richard. "Payment Systems And Interchange Fees," Journal of Industrial Economics, 2002, v50(2,Jun), 103-122. Abstract: In a typical bank credit card transaction, the merchant's bank pays an interchange fee, collectively determined by all participating banks, to the cardholder's bank. This paper shows how the interchange fee balances charges between cardholders and merchants under imperfect competition. The privately optimal fee depends mainly on differences between cardholders' and merchants' banks, not their collective market power. In a non-extreme case, the profit-maximizing interchange fee also maximizes total output and producers' plus consumers' surplus. There is no economic basis for favoring proprietary payment systems, which do not need interchange fees to balance charges, over the cooperative bank card systems. Handle: RePEc:nbr:nberwo:8256 Template-Type: ReDIF-Paper 1.0 Title: A Biological Model of Unions Classification-JEL: J51; E24 Author-Name: Michael Kremer Author-Person: pkr20 Author-Name: Benjamin A. Olken Author-Person: pol170 Note: EFG LS Number: 8257 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8257 File-URL: http://www.nber.org/papers/w8257.pdf File-Format: application/pdf Publication-Status: published as Olken, Benjamin A. and Michael Kremer. “A Biological Model of Unions." American Economic Journal: Applied Economics 1, 2 (April 2009): 150-175. Abstract: This paper applies principles from evolutionary biology to the study of unions. We show that unions which maximize the present discounted wages of current members will be displaced in evolutionary competition by unions with more moderate wage policies that allow their firms to live longer. This suggests that unions with constitutional incumbency advantages that allow leaders to moderate members' wage demands may have a selective advantage. The model also suggests that industries with high turnover of firms will have low unionization rates, and that there may be one equilibrium with high unionization and long-lived firms and another with low unionization and short-lived firms. These predictions seem broadly consistent with the data. Handle: RePEc:nbr:nberwo:8257 Template-Type: ReDIF-Paper 1.0 Title: Finding a Way Out of America's Demographic Dilemma Classification-JEL: H3 Author-Name: Laurence J. Kotlikoff Author-Person: pko44 Author-Name: Kent Smetters Author-Person: psm21 Author-Name: Jan Walliser Note: AG PE Number: 8258 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8258 File-URL: http://www.nber.org/papers/w8258.pdf File-Format: application/pdf Abstract: Notwithstanding the rosy short-term fiscal scenarios being advanced in Washington, the demographic transition presents the United States with a very serious fiscal crisis. In 30 years there will be twice the number of elderly, but only 15 percent more workers to help pay Social Security and Medicare benefits. A realistic reading of the government demographic projections suggests a two thirds increase in payroll tax rates over the next three to five decades. However, these forecasts ignore macroeconomic feedback effects. In particular, they ignore the possibility that the nation will have more capital per worker as the number of elderly wealth-holders rises relative to the number of young workers. More capital per worker would mean higher worker productivity, higher real wages, and the lower return to capital that worries Wall Street. It would also mean a bigger payroll tax base and a smaller rise in tax rates. On the other hand, a higher payroll tax will leave workers with less after-tax income out of which to save and, therefore, fewer retirement assets than would otherwise be the case. Thus capital deepening is not a foregone conclusion. This study develops a dynamic general equilibrium life-cycle simulation model to study these conflicting forces. The model is the first of its kind to admit realistic patterns of fertility and lifespan extension. It also features heterogeneity, within as well as across generations, and, thus, can be used to study both intra- and intergenerational equity. Unfortunately, our baseline demographic simulation, which assumes the continuation of current social security policy, shows deteriorating macroeconomic conditions that will exacerbate, rather than mitigate, our fiscal problems. Real wages per effective unit of labor fall 4 percent over the next 30 years and 10 percent over the century. For Wall Street, this bad news about real wages is good news about the real return on capital, which rises 100 basis points by 2030 and 300 basis points by 2100. The model's gradual capital shallowing reflects the concomitant major rise in tax rates. In 2030, payroll tax rates and average income-tax rates applied to wages are 77 and 9 percent higher, respectively, than in 2000. Together, these tax hikes raise Handle: RePEc:nbr:nberwo:8258 Template-Type: ReDIF-Paper 1.0 Title: The Equivalence of the Social Security's Trust Fund Portfolio Allocation and Capital Income Tax Policy Classification-JEL: H3; E6 Author-Name: Kent Smetters Author-Person: psm21 Note: AG PE Number: 8259 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8259 File-URL: http://www.nber.org/papers/w8259.pdf File-Format: application/pdf Publication-Status: published as Smetters, Kent. "Is The Social Security Trust Fund A Store Of Value?," American Economic Review, 2004, v94(2,May), 176-181. Abstract: This paper proves that the stock-bond portfolio choice of the Social Security trust fund is equivalent in general equilibrium to the tax treatment of capital income by the non-social security part of government. A larger [smaller] share of social security's portfolio invested in stocks is equivalent to a larger [smaller] symmetric linear tax on risky capital income returns received on assets held by private agents. This general-equilibrium equivalency holds despite the fact that the stock-bond portfolio choice is not neutral in the presence of several market frictions. These frictions include incomplete markets between generations as well as the presence of endogenously binding borrowing constraints within generations. To the extent that trust fund investment in equities is used to improve market efficiency in the context of these frictions, the equivalent capital income tax rate can be interpreted as a Lindahl tax. This tax gives a decentralized way of achieving the same command-economy outcome that would occur if the government directly controlled part of the capital stock. General-equilibrium simulation results, using a new overlapping-generations model with aggregate uncertainty, suggest that investing the entire US Social Security trust fund in equities is equivalent to increasing the capital income tax rate by about 4 percentage points. Handle: RePEc:nbr:nberwo:8259 Template-Type: ReDIF-Paper 1.0 Title: Worker Displacement and the Added Worker Effect Classification-JEL: J22; J60 Author-Name: Melvin Stephens Jr. Author-Person: pst400 Note: LS Number: 8260 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8260 File-URL: http://www.nber.org/papers/w8260.pdf File-Format: application/pdf Publication-Status: published as Stephens, Melvin, Jr. "Worker Displacement and the Added Worker Effect." Journal of Labor Economics 20, 3 (July 2002): 504-37. Abstract: This paper examines the effect of a husband's job loss on the labor supply of his wife, an effect known as the 'added worker' effect. Unlike past added worker effect studies which focus on the effect of the husband's current unemployment status, this paper analyzes the wife's labor supply response in the periods before and after her husband's job displacement in order to examine the short- and long-run adjustments to an earnings shock. Using the Panel Study of Income Dynamics, small pre-displacement effects are found along with larger and persistent post-displacement effects. The timing of the wives' responses differs by the type of displacement (plant closing vs. permanent layoff), possibly due to differences in the information wives acquire prior to the displacement. In addition, the response is found to increase with the magnitude of the husband's wage loss, to have changed over time (70's vs. 80's) and to vary by the husband's pre-displacement earnings. The long-run increases in the wife's labor supply account for over 25% of the husband's lost income. Handle: RePEc:nbr:nberwo:8260 Template-Type: ReDIF-Paper 1.0 Title: Distortion Costs of Taxing Wealth Accumulation: Income Versus Estate Taxes Classification-JEL: H2 Author-Name: Douglas Holtz-Eakin Author-Name: Donald Marples Note: PE Number: 8261 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8261 File-URL: http://www.nber.org/papers/w8261.pdf File-Format: application/pdf Abstract: Recently, attention has focused on the estate tax. To date, however, the debate over estate taxes has been nearly devoid of standard considerations of deadweight loss. We develop a framework for computing the deadweight loss of a revenue-neutral switch from an estate tax to a capital income tax, focusing on the potential lifetime behavioral responses in anticipation of paying the estate tax, while requiring relatively few parameters to estimate. We conclude that eliminating the estate tax and replacing the revenue with that from a capital income tax will likely enhance economic efficiency. Specifically, using our baseline parameter estimates we estimate that the mean decrease in deadweight loss is $0.018 per dollar of wealth. There is, however, considerable heterogeneity in the estimated impact. Importantly, our estimates are based on data that do not contain the 'super-rich' who are most highly affected by the estate tax. Handle: RePEc:nbr:nberwo:8261 Template-Type: ReDIF-Paper 1.0 Title: The Exchange Theory of Teenage Smoking and the Counterproductiveness of Moderate Regulation Classification-JEL: D11; L1 Author-Name: Kent Smetters Author-Person: psm21 Author-Name: Jennifer Gravelle Note: CH PE Number: 8262 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8262 File-URL: http://www.nber.org/papers/w8262.pdf File-Format: application/pdf Abstract: About three-quarters of secondary schools are reluctant to vigorously enforce smoking bans due to various social pressures; ten percent of these schools do not have bans at all. Empirically, school-based smoking regulations appear, at best, ineffective at reducing teenage smoking and, more likely, may actually increase participation. Only schools which vigorously enforce bans have a lower smoking participation. In sum, teenage smoking participation appears to be non-monotonic in the level of enforcement. This paper develops an exchange model that explains this non-monotonic pattern. Smoking bans provide an exchange opportunity to less popular students. Less popular students who begin smoking validate the risk-taking behavior of existing teenage smokers who, in exchange, provide friendship to the newcomers. The enforcement itself becomes the glue which holds the group together. Teenage smoking bans, unless vigorously enforced, increase teenage smoking participation. An increase in self-esteem and other non-smoking related qualities, however, undermines the trading channel, which can help combat teenage smoking. Numerous pieces of empirical evidence, culled from the empirical social psychology literature, are consistent with all of the key predictions of the model. Handle: RePEc:nbr:nberwo:8262 Template-Type: ReDIF-Paper 1.0 Title: The Declining Quality of Teachers Classification-JEL: J3 Author-Name: Darius Lakdawalla Author-Person: pla295 Note: LS ED Number: 8263 Creation-Date: 2001-04 Order-URL: http://www.nber.org/papers/w8263 File-URL: http://www.nber.org/papers/w8263.pdf File-Format: application/pdf Abstract: Concern is often voiced about the declining quality of American schoolteachers. This paper shows that, while the relative quality of teachers is declining, this decline is a result of technical change, which improves the specialized knowledge of skilled workers outside teaching, but not the general knowledge of schoolteachers. This raises the price of skilled teachers, but not their productivity. Schools respond by lowering the relative skill of teachers and raising teacher quantity. On the other hand, college professors, who teach specialized knowledge, are predicted to experience increases in skill relative to schoolteachers. Finally, the lagging productivity of primary schools is predicted to raise the unit cost of primary education. These predictions appear consistent with the data. Analysis of US Census microdata suggests that, from the 1900 birth cohort to the 1950 birth cohort, the relative schooling of teachers has declined by about three years, and the human capital of teachers may have declined in value relative to that of college graduates by as much as thirty percent, but the teacher-student ratio has more than doubled over the last half century in a wide array of developed countries. Moreover, the per student cost of primary school education in the US has also risen dramatically over the past 50 years. Finally, the human capital of college professors has risen by nearly thirty percent relative to schoolteachers. Handle: RePEc:nbr:nberwo:8263 Template-Type: ReDIF-Paper 1.0 Title: Economic Problems of Ireland in Europe Classification-JEL: F0 Author-Name: Martin Feldstein Author-Person: pfe112 Note: IFM PE Number: 8264 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8264 File-URL: http://www.nber.org/papers/w8264.pdf File-Format: application/pdf Publication-Status: published as The Thirty-First Geary Lecture. Dublin, Ireland: The Economic and Social Research Institute, 2001. Abstract: This paper uses the recent controversy between the European Union and the Irish Republic to discuss the more general relation between the European Union, the EMU and the member countries. Despite outstanding economic growth and budget surpluses, Ireland has been criticized by the European Commission because it has reduced taxes in the context of a relatively high rate of inflation. The first part of the paper considers the ways in which the EMU is likely to affect inflation and cyclical unemployment in the member countries over the longer term. The second part deals more specifically with the current Irish situation and the reasons for an EU reprimand of a very small country. That part suggests that an alternative standard, based on the principle of 'do no harm' would have lead to a different outcome. Finally, the paper describes a policy of creating investment-based personal retirement accounts that would allow Ireland to share its future budget surpluses with taxpayers in a way that does not contribute to inflationary pressures. Handle: RePEc:nbr:nberwo:8264 Template-Type: ReDIF-Paper 1.0 Title: Stock Market Liberalizations and the Repricing of Systematic Risk Classification-JEL: F3; F4 Author-Name: Anusha Chari Author-Person: pch288 Author-Name: Peter Blair Henry Author-Person: phe166 Note: AP IFM Number: 8265 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8265 File-URL: http://www.nber.org/papers/w8265.pdf File-Format: application/pdf Publication-Status: published as Chari, Anusha and Peter Blair Henry. "Risk Sharing and Asset Prices: Evidence from a Natural Experiment." The Journal of Finance 59, 3 (June 2004): 1295-1324. Abstract: When countries open their stock markets to foreign investors, firms that become eligible for purchase by foreigners (investible) are repriced according to the difference in the covariance of their returns with the local and world market. An investible firm whose return covariance with the local market exceeds that with the world market by 0.01 will experience a firm-specific revaluation of 3.4 percent. In contrast, the repricing of firms that remain off limits to foreign investors (non-investible) bears no significant relationship to differences in local and world covariances. These findings suggest that the CAPM has predictive power for the cross-sectional repricing of systematic risk when barriers to capital movements are removed. Handle: RePEc:nbr:nberwo:8265 Template-Type: ReDIF-Paper 1.0 Title: Measuring Masters and Masterpieces: French Rankings of French Painters and Paintings from Realism to Surrealism Author-Name: Martin Bruegel Author-Name: David W. Galenson Note: LS Number: 8266 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8266 File-URL: http://www.nber.org/papers/w8266.pdf File-Format: application/pdf Publication-Status: published as Galenson, David W. “Measuring Masters and Masterpieces: French Rankings of French Painters and Paintings from Realism to Surrealism." Histoire et Mesure 17, 1-2 (2002): 47-85. Abstract: For 35 leading painters who worked in France during the first century of modern art, this paper uses illustrations in French textbooks as the basis for measuring the importance of both painters and individual paintings. The rankings closely resemble those obtained earlier from a similar analysis of American textbooks. They also pose a puzzle: why do some of the greatest artists not produce famous paintings, while some relatively minor artists produce famous individual works? The answer appears to lie in a difference in approach between experimental artists, who innovate incrementally, and conceptual innovators, who produce individual breakthrough works. This paper further demonstrates the value of quantifying artistic success, for doing so can improve our understanding of the sources of human creativity. Handle: RePEc:nbr:nberwo:8266 Template-Type: ReDIF-Paper 1.0 Title: Preferences for Redistribution in the Land of Opportunities Author-Name: Alberto Alesina Author-Person: pal207 Author-Name: Eliana La Ferrara Author-Person: pla68 Note: PE Number: 8267 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8267 File-URL: http://www.nber.org/papers/w8267.pdf File-Format: application/pdf Publication-Status: published as Alesina, Alberto and Eliana La Ferrara. "Preferences For Redistribution In The Land Of Opportunities," Journal of Public Economics, 2005, v89(5-6,Jun), 897-931. Abstract: The poor favor redistribution and the rich oppose it, but that is not all. Social mobility may make some of today's poor into tomorrow's rich and since redistributive policies do not change often, individual preferences for redistribution should depend on the extent and the nature of social mobility. We estimate the determinants of preferences for redistribution using individual level data from the US, and we find that individual support for redistribution is negatively affected by social mobility. Furthermore, the impact of mobility on attitudes towards redistribution is affected by individual perceptions of fairness in the mobility process. People who believe that the American society offers equal opportunities to all are more averse to redistribution in the face of increased mobility. On the other hand, those who see the social rat race as a biased process do not see social mobility as an alternative to redistributive policies. Handle: RePEc:nbr:nberwo:8267 Template-Type: ReDIF-Paper 1.0 Title: Some Economic Aspects of Antitrust Analysis in Dynamically Competitive Industries Classification-JEL: L4 Author-Name: David S. Evans Author-Name: Richard Schmalensee Author-Person: psc313 Note: IO Number: 8268 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8268 File-URL: http://www.nber.org/papers/w8268.pdf File-Format: application/pdf Publication-Status: published as Some Economic Aspects of Antitrust Analysis in Dynamically Competitive Industries, David S. Evans, Richard Schmalensee. in Innovation Policy and the Economy, Volume 2, Jaffe, Lerner, and Stern. 2002 Abstract: Competition in many important industries centers on investment in intellectual property. Firms engage in dynamic, Schumpeterian competition for the market, through sequential winner-take-all races to produce drastic innovations, rather than through static price/output competition in the market. Sound antitrust economic analysis of such industries requires explicit consideration of dynamic competition. Most leading firms in these dynamically competitive industries have considerable short-run market power, for instance, but ignoring their vulnerability to drastic innovation may yield misleading conclusions. Similarly, conventional tests for predation cannot discriminate between practices that increase or decrease consumer welfare in winner-take-all industries. Finally, innovation in dynamically competitive industries often involves enhancing feature sets; there is no sound economic basis for treating such enhancements as per se illegal ties. Handle: RePEc:nbr:nberwo:8268 Template-Type: ReDIF-Paper 1.0 Title: Does Money Matter? Regression-Discontinuity Estimates from Education Finance Reform in Massachusetts Author-Name: Jonathan Guryan Author-Person: pgu126 Note: CH LS Number: 8269 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8269 File-URL: http://www.nber.org/papers/w8269.pdf File-Format: application/pdf Abstract: The paper studies a typical state-level education finance equalization scheme, and considers two questions. First, what fraction of state education aid is spent on schools? And second, does increased educational funding for historically low-spending districts lead to improved student achievement? Estimates based on variation in spending caused by state aid formulas suggest that 50 to 75 cents of each dollar of education aid were spent on schools. Estimates also suggest that increased spending improved 4 th -grade test scores, but show no effect on 8 th -grade test scores. Further analysis shows that increases in 4 th -grade average test scores were associated with improved performance by low-scoring students. Handle: RePEc:nbr:nberwo:8269 Template-Type: ReDIF-Paper 1.0 Title: Intergenerational Risk Sharing in the Spirit of Arrow, Debreu, and Rawls, with Applications to Social Security Design Classification-JEL: E0; H0 Author-Name: Laurence Ball Author-Person: pba605 Author-Name: N. Gregory Mankiw Note: EFG PE Number: 8270 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8270 File-URL: http://www.nber.org/papers/w8270.pdf File-Format: application/pdf Publication-Status: published as Laurence Ball & N. Gregory Mankiw, 2007. "Intergenerational Risk Sharing in the Spirit of Arrow, Debreu, and Rawls, with Applications to Social Security Design," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 523-547, 08. Abstract: This paper examines the optimal allocation of risk in an overlapping-generations economy. It compares the allocation of risk the economy reaches naturally to the allocation that would be reached if generations behind a Rawlsian 'veil of ignorance' could share risk with one another through complete Arrow-Debreu contingent-claims markets. The paper then examines how the government might implement optimal intergenerational risk sharing with a social security system. One conclusion is that the system must either hold equity claims to capital or negatively index benefits to equity returns. Handle: RePEc:nbr:nberwo:8270 Template-Type: ReDIF-Paper 1.0 Title: Prices and Price Dispersion on the Web: Evidence from the Online Book Industry Classification-JEL: L Author-Name: Karen Clay Author-Person: pcl25 Author-Name: Ramayya Krishnan Author-Name: Eric Wolff Note: IO Number: 8271 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8271 File-URL: http://www.nber.org/papers/w8271.pdf File-Format: application/pdf Publication-Status: published as Clay, Karen & Krishnan, Ramayya & Wolff, Eric, 2001. "Prices and Price Dispersion on the Web: Evidence from the Online Book Industry," Journal of Industrial Economics, Blackwell Publishing, vol. 49(4), pages 521-39, December. Publication-Status: published as Prices and Price Dispersion on the Web: Evidence from the Online Book Industry, Karen Clay, Ramayya Krishnan, Eric Wolff. in E-commerce, Borenstein and Saloner. 2001 Abstract: Using data collected between August 1999 and January 2000 covering 399 books, including New York Times bestsellers, computer bestsellers, and random books, we examine pricing by thirty-two online bookstores. One common prediction is that the reduction in search costs on the Internet relative to the physical channel would cause both price and price dispersion to fall. Over the sample period, we find no change in either price or price dispersion. Another prediction of the search literature is that the prices and price dispersion of advertised items or items that are purchased repeatedly will be lower than for unadvertised or infrequently purchased items. Prices across categories of books appear to conform to this prediction, with New York Times bestsellers having the lowest prices as a fraction of the publisher's suggested price and random books having the highest prices. Interestingly, price dispersion does not conform with this prediction, apparently for reasons related to stores' decisions to carry particular books. One reason why we may not observe convergence in prices is because stores have succeeded in differentiating themselves even though they are selling a commodity product. We observe differentiation (or attempted differentiation) by a significant number of firms. Handle: RePEc:nbr:nberwo:8271 Template-Type: ReDIF-Paper 1.0 Title: Legal Origins Classification-JEL: K4; N4 Author-Name: Edward L. Glaeser Author-Person: pgl9 Author-Name: Andrei Shleifer Author-Person: psh93 Note: CF LE Number: 8272 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8272 File-URL: http://www.nber.org/papers/w8272.pdf File-Format: application/pdf Publication-Status: published as Glaeser, Edward I. and Andrei Shleifer. "Legal Origins," Quarterly Journal of Economics, 2002, v107(4,Nov), 1193-1229. Abstract: A central requirement in the design of a legal system is the protection of law enforcers from coercion by litigants through either violence or bribes. The higher the risk of coercion, the greater the need for protection and control of law enforcers by the state. This perspective explains why, in the 12 th and 13 th centuries, the relatively more peaceful England developed trials by jury, while the less peaceful France relied on state-employed judges for both collecting evidence and making decisions. Despite considerable legal evolution, these initial design choices have persisted for centuries (largely because France remained less peaceful than England), and may explain many differences between common and civil law traditions with respect to both the structure of legal systems and the observed social and economic outcomes. Handle: RePEc:nbr:nberwo:8272 Template-Type: ReDIF-Paper 1.0 Title: Two-Sided Learning, Labor Turnover and Displacement Classification-JEL: J23; J63 Author-Name: Gerard A. Pfann Author-Person: ppf10 Author-Name: Daniel S. Hamermesh Author-Person: pha78 Note: LS Number: 8273 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8273 File-URL: http://www.nber.org/papers/w8273.pdf File-Format: application/pdf Publication-Status: published as Pfann, Gerard A. and Daniel S. Hamermesh. “Two-Sided Learning, with Applications to Labor Turnover and Worker Displacement.” Jahrbücher für Nationalökonomie und Statistik (December 2008). Abstract: We construct a general dynamic structural model of two-sided learning between a firm and its workers. We estimate an empirical version of the model using personnel data from Fokker Aircraft that cover the path of layoffs and quits through its bankruptcy. We find that the firm learns about its workers' loyalty (demonstrating the role of information in repeated cooperative principal-agent relationships). There is no evidence that workers learn (consistent with earlier empirical results on American workers). The type of data that we use also generates information on the value of learning and on whether and how the characteristics of workers who remain until the firm's death differ from those of all affected workers. It thus allows us to measure the increases in the firm's value from learning about its workers' behavior and to infer the extent of biases in estimated losses from displacement from samples restricted to displaced workers. Handle: RePEc:nbr:nberwo:8273 Template-Type: ReDIF-Paper 1.0 Title: Dollarization and Economic Performance: An Empirical Investigation Classification-JEL: F3; F33 Author-Name: Sebastian Edwards Author-Person: ped3 Note: IFM ITI Number: 8274 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8274 File-URL: http://www.nber.org/papers/w8274.pdf File-Format: application/pdf Publication-Status: published as Edwards, Sebastian and I. Igal Magendzo. "Dollarization And Economic Performance: What Do We Really Know?," International Journal of Finance and Economics, 2003, v8(4,Oct), 351-363. Abstract: In this paper I investigate the historical record of countries that have lived under a 'dollarized' monetary system. As it turns out, this is a very small group of counties, most of which have operated under very special circumstances, and for which there are very limited data. The results reported in this paper suggests that, when compared to other countries, the dollarized nations have: (a) have had significantly lower inflation; (b) grown at a significantly lower rate; (c) have had a similar fiscal record; (d) have not been spared from major current account reversals. Additionally, my analysis of Panama's case suggests that external shocks result in greater costs - in terms of lower investment and growth - in dollarized than in non-dollarized countries. Handle: RePEc:nbr:nberwo:8274 Template-Type: ReDIF-Paper 1.0 Title: Does the Current Account Matter? Classification-JEL: F3; F32 Author-Name: Sebastian Edwards Author-Person: ped3 Note: IFM ITI Number: 8275 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8275 File-URL: http://www.nber.org/papers/w8275.pdf File-Format: application/pdf Publication-Status: published as Edwards, Sebastian. "Thirty Years Of Current Account Imbalances, Current Account Reversals And Sudden Stops," International Monetary Fund Staff Papers, 2004, v51(4), 1-49. Publication-Status: published as Does the Current Account Matter?, Sebastian Edwards. in Preventing Currency Crises in Emerging Markets, Edwards and Frankel. 2002 Abstract: The purpose of this paper is to investigate in detail the behavior of the current account in emerging economies, and in particular its role if any in financial crises. Models of current account behavior are reviewed, and a dynamic model of current account sustainability is developed. The empirical analysis is based on a massive data set that covers over 120 countries during more than 25 years. Important controversies related to the current account including the extent to which current account deficits help predict currency crises are also analyzed. Throughout the paper I am interested in analyzing whether there is evidence supporting the idea that there are costs involved in running 'very large' deficits. Moreover, I investigate the nature of these potential costs, including whether they are particularly high in the presence of other type of imbalances. Handle: RePEc:nbr:nberwo:8275 Template-Type: ReDIF-Paper 1.0 Title: A New Approach to Valuing Secured Claims in Bankruptcy Classification-JEL: G33; K22 Author-Name: Lucian Arye Bebchuk Author-Person: pbe72 Author-Name: Jesse M. Fried Note: LE Number: 8276 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8276 File-URL: http://www.nber.org/papers/w8276.pdf File-Format: application/pdf Publication-Status: published as "A New Approach to Valuing Secured Claims in Bankruptcy" Harvard Law Review , Vol. 114, pp. 2386-2436 (2001). Abstract: In many business bankruptcies in which the firm is to be preserved as a going concern, one of the most difficult and important problems is that of valuing the assets that serve as collateral for secured creditors. Valuing a secured creditor's collateral is needed to determine the amount of the creditor's secured claim, which in turn affects the payout that must be made to the creditor. Such valuation has generally been believed to require either litigation or bargaining among the parties, which in turn give rise to uncertainty, delay, and deviations from parties' entitlements. This paper puts forward a new approach to valuing collateral that involves neither bargaining nor litigation. Under this approach, a market-based mechanism would determine the value of collateral in such a way that no participant in the bankruptcy would have a basis for complaining that secured creditors are either over- or under-compensated. Our approach would considerably improve the performance of business bankruptcy and could constitute an important element of any proposal for bankruptcy reform. Handle: RePEc:nbr:nberwo:8276 Template-Type: ReDIF-Paper 1.0 Title: On the Fiscal Implications of Twin Crises Classification-JEL: F31 Author-Name: Craig Burnside Author-Person: pbu20 Author-Name: Martin Eichenbaum Author-Person: pei4 Author-Name: Sergio Rebelo Note: EFG IFM ME Number: 8277 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8277 File-URL: http://www.nber.org/papers/w8277.pdf File-Format: application/pdf Publication-Status: published as On the Fiscal Implications of Twin Crises, A. Craig Burnside, Martin S. Eichenbaum, Sergio Rebelo. in Managing Currency Crises in Emerging Markets, Dooley and Frankel. 2003 Abstract: This paper explores the implications of different strategies for financing the fiscal costs of twin crises for inflation and depreciation rates. We use a first-generation type model of speculative attacks which has four key features: (i) the crisis is triggered by prospective deficits; (ii) there exists outstanding non-indexed government debt issued prior to the crises; (iii) a portion of the government's liabilities are not indexed to inflation; and (iv) there are nontradable goods and costs of distributing tradable goods, so that purchasing power parity does not hold. We show that the model can account for the high rates of devaluation and moderate rates of inflation often observed in the wake of currency crises. We use our model and the data to interpret the recent currency crises in Mexico and Korea. Our analysis suggests that the Mexican government is likely to pay for the bulk of the fiscal costs of its crisis through seignorage revenues. In contrast, the Korean government is likely to rely more on a combination of implicit and explicit fiscal reforms. Handle: RePEc:nbr:nberwo:8277 Template-Type: ReDIF-Paper 1.0 Title: Ownership and Use Taxes as Congestion Correcting Instruments Author-Name: Ngee-Choon Chia Author-Person: pch1453 Author-Name: Albert K. C. Tsui Author-Name: John Whalley Author-Person: pwh8 Note: PE Number: 8278 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8278 File-URL: http://www.nber.org/papers/w8278.pdf File-Format: application/pdf Abstract: In countries, such as Singapore, that have implemented vehicle congestion policies, recent years have seen a shift towards motor vehicle taxes based on car use. Ownership taxes reduce the number of cars on the road, leaving the price per trip largely unaffected. Use taxes such as fuel taxes and road use charges decrease the price of trips without necessarily penalising vehicle ownership per se. This paper presents a simple general equilibrium model involving trips from residential areas to a central business district, along with modal choice between cars and public transit. Car trips involve fixed costs but have lower variable costs per trip (including convenience costs) then bus trips. Using a calibrated numerical model, we investigate the relative merits of ownership and use taxes. We compare full internalisation of congestion externalities to optimal tax outcomes for the different tax types. In our framework, use taxes restore Pareto optimality since congestion damage rises with more trips. Ownership taxes only partially internalise congestion externalities. However, in terms of revenue-raising ability, the marginal excess burdens of ownership taxes in the neighbourhood of optimal taxes are typically lower than use taxes. This is because marginal increases in ownership taxes take away part of the surplus accruing to consumers who still choose to travel by car, and thus have less distortion at the margin. Handle: RePEc:nbr:nberwo:8278 Template-Type: ReDIF-Paper 1.0 Title: Keiretsu and Relationship-Specific Investment: Implications for Market-Opening Trade Policy Classification-JEL: F12; F13 Author-Name: Larry D. Qiu Author-Person: pqi8 Author-Name: Barbara J. Spencer Author-Person: psp2 Note: ITI Number: 8279 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8279 File-URL: http://www.nber.org/papers/w8279.pdf File-Format: application/pdf Publication-Status: published as Qiu, Larry D. and Barbara J. Spencer. "Keiretsu And Relationship-Specific Investment: Implications For Market-Opening Trade Policy," Journal of International Economics, 2002, v57(1,Oct), 49-79. Abstract: This paper considers the implications of relationship-specific investment within keiretsu for policies aimed at opening the Japanese market for intermediate goods, such as auto parts. Both VIEs applied to parts and VERs restricting Japanese exports of autos cause the keiretsu to import a wider range of parts, but of a relatively unimportant type, such as seat covers. Since keiretsu investment and output fall, the total value of U.S. parts exports may actually fall. For a given value of these exports, a VIE is less costly for U.S. consumers and Japanese producers, but a VER is preferred by U.S. automakers. Handle: RePEc:nbr:nberwo:8279 Template-Type: ReDIF-Paper 1.0 Title: Who Bears the Burden of the Corporate Tax in The Open Economy? Classification-JEL: H2 Author-Name: Jane Gravelle Author-Person: pgr185 Author-Name: Kent Smetters Author-Person: psm21 Note: PE Number: 8280 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8280 File-URL: http://www.nber.org/papers/w8280.pdf File-Format: application/pdf Publication-Status: published as Gravelle, Jane G. and Kent A. Smetters. "Does The Open Economy Assumption Really Mean That Labor Bears The Burden Of A Capital Income Tax?," Advances in Economic Analysis and Policy, 2006, v6(1), Article 3. Abstract: This paper investigates the long-run incidence of the corporate income tax in an open-economy model calibrated with two economies: the United States and a larger mirror economy representing the rest of the world. Imperfect substitutability of domestic and foreign products plays a key role in limiting - often eliminating - the incidence borne by domestic labor. We reach two novel conclusions. First, contrary to conventional wisdom, our analysis reveals that most of the long-run incidence of the corporate income tax is not borne by domestic labor. Nor is much of it borne by landowners. This finding is usually true even at an implausibly large portfolio substitution elasticity. The incidence is typically borne by domestic capital, as in the original Harberger (1962) closed-economy model. Second, for those parameter values in which the incidence is not borne mostly by domestic capital, interestingly, most of the incidence is exported. The exportation of the incidence of the corporate income tax, which has received little or no attention in the previous literature, might motivate tax coordination between countries. These results are robust to a range of parameter values and model assumptions. Our model is also compatible with several empirical rigidities. Handle: RePEc:nbr:nberwo:8280 Template-Type: ReDIF-Paper 1.0 Title: Employment, Dynamic Deterrence and Crime Author-Name: Susumu Imai Author-Name: Kala Krishna Author-Person: pkr26 Note: LS Number: 8281 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8281 File-URL: http://www.nber.org/papers/w8281.pdf File-Format: application/pdf Publication-Status: published as Imai, Susumu and Kala Krishna. “Employment, Dynamic Deterrence and Crime.” International Economic Review 45, 3 (2004): 845-872. Abstract: Using monthly panel data we solve and estimate, using maximum likelihood techniques, an explicitly dynamic model of criminal behavior where current criminal activity adversely affects future employment outcomes. This acts as 'dynamic deterrence' to crime: the threat of future adverse effects on employment payoffs when caught committing crimes reduces the incentive to commit them. We show that this dynamic deterrence effect is strong in the data. Hence, policies which weaken dynamic deterrence will be less effective in fighting crime. This suggests that prevention is more powerful than redemption since the latter weakens dynamic deterrence as anticipated future redemption allows criminals to look forward to negating the consequences of their crimes. Static models of criminal behavior neglect this and hence sole reliance on them can result in misleading policy analysis. Handle: RePEc:nbr:nberwo:8281 Template-Type: ReDIF-Paper 1.0 Title: The Level and Persistence of Growth Rates Classification-JEL: G12; G14 Author-Name: Louis K.C. Chan Author-Name: Jason Karceski Author-Name: Josef Lakonishok Note: AP Number: 8282 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8282 File-URL: http://www.nber.org/papers/w8282.pdf File-Format: application/pdf Publication-Status: published as Chan, Louis K. C., Jason Karceski, and Josef Lakonishok. "The Level and Persistence of Growth Rates." Journal of Finance 58, 2 (April 2003): 643-84. Abstract: Expected long-term earnings growth rates are crucial inputs to valuation models and for cost of capital estimates. We analyze historical long-term growth rates across a broad cross-section of stocks using several operating performance indicators. We test whether growth persists, and whether it is forecastable. Cases of very high growth have occurred, but are relatively rare. There is scant persistence in growth beyond chance, and limited ability to identify firms with high future long-term growth. IBES forecasts are too optimistic, and have low predictive power for long-term growth. Regressions using a variety of predictors confirm the low predictability in growth. Valuations that assume persistently high growth over prolonged periods rest on shaky foundations. Handle: RePEc:nbr:nberwo:8282 Template-Type: ReDIF-Paper 1.0 Title: Do Federal Programs Affect Internal Migration? The Impact of New Deal Expenditures on Mobility During the Great Depression Classification-JEL: H53; I38 Author-Name: Price V. Fishback Author-Person: pfi13 Author-Name: William C. Horrace Author-Person: pho33 Author-Name: Shawn Kantor Author-Person: pka54 Note: DAE PE Number: 8283 Creation-Date: 2001-05 Order-URL: http://www.nber.org/papers/w8283 File-URL: http://www.nber.org/papers/w8283.pdf File-Format: application/pdf Publication-Status: published as Fishback, Price V., William C. Horrace and Shawn Kantor. "The Impact Of New Deal Expenditures On Mobility During The Great Depression," Explorations in Economic History, 2006, v43(2,Apr), 179-222. Abstract: ** Revised version 2005**
Using a recently-uncovered data set that describes over 30 federal New Deal spending, loan, and mortgage insurance programs across all U.S. counties from 1933 to 1939, this paper empirically examines the New Deal's impact on inter-county migration from 1930 to 1940. We construct a net migration measure for each county as the difference between the Census's reported population change from 1930 to 1940 and the natural increase in population (births minus infant deaths minus non-infant deaths) over the same period. Our empirical approach accounts for both the simultaneity between New Deal allocations and migration and the geographic spillovers that likely resulted when spending in one county may have affected the migration decisions of people in neighboring counties. We find that greater spending on relief and public works and a larger value of loans insured by the Federal Housing Administration were all associated with migration into counties where such money was allocated. The FHA's stimulus to the housing industry and large-scale public works projects explain most of the regional variation in migration rates across the country. New Deal loans and agricultural spending to take land out of production had negligible effects on migration patterns.
Handle: RePEc:nbr:nberwo:8283
Template-Type: ReDIF-Paper 1.0
Title: Induced Innovation and Energy Prices
Classification-JEL: O31; Q40
Author-Name: David Popp
Note: PR EEE
Number: 8284
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8284
File-URL: http://www.nber.org/papers/w8284.pdf
File-Format: application/pdf
Publication-Status: published as Popp, Daid. "Induced Innovation And Energy Prices," American Economic Review, 2002, v92(1,Mar), 160-180.
Abstract: I use U.S. patent data from 1970 to 1994 to estimate the effect of energy prices on energy-efficient innovations. Using patent citations to construct a measure of the usefulness of the existing base of scientific knowledge, I consider the effect of both demand-side factors, which spur innovative activity by increasing the value of new innovations, and supply-side factors, such as scientific advancements that make new innovations possible. I find that both energy prices and the quality of existing knowledge have strongly significant positive effects on innovation. Furthermore, I show that omitting the quality of knowledge adversely affects the estimation results.
Handle: RePEc:nbr:nberwo:8284
Template-Type: ReDIF-Paper 1.0
Title: Financial Contracting
Classification-JEL: D2; G3
Author-Name: Oliver Hart
Author-Person: pha222
Note: CF
Number: 8285
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8285
File-URL: http://www.nber.org/papers/w8285.pdf
File-Format: application/pdf
Publication-Status: published as Hart, Oliver. "Financial Contracting," Journal of Economic Literature, 2001, v39(4,Dec), 1070-1100.
Abstract: This paper discusses how economists' views of firms' financial structure decisions have evolved from treating firms' profitability as given; to acknowledging that managerial actions affect profitability; to recognizing that firm value depends on the allocation of decision or control rights. The paper argues that the decision or control rights approach is useful, even though it is at an early stage of development, and that the approach has some empirical content: it can throw light on the structure of venture capital contracts and the reasons for the diversity of claims.
Handle: RePEc:nbr:nberwo:8285
Template-Type: ReDIF-Paper 1.0
Title: Norms and the Theory of the Firm
Classification-JEL: D2; G3
Author-Name: Oliver Hart
Author-Person: pha222
Note: CF
Number: 8286
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8286
File-URL: http://www.nber.org/papers/w8286.pdf
File-Format: application/pdf
Publication-Status: published as Brousseau, Eric and Jean-Michel Glachant (eds.) The economics of contracts: Theories and applications. Cambridge, New York, and Melbourne: Cambridge University Press, 2002.
Publication-Status: published as Oliver Hart, 2001. "Norms and the Theory of the Firm," University of Pennsylvania Law Review, vol 149(6).
Abstract: This paper discusses some of the attempts economists have made in the last ten years or so to integrate norms into the theory of the firm. The paper argues that (a) although norms are undoubtedly very important both inside and between firms, incorporating them into the theory has been very difficult and is likely to continue to be so in the near future; (b) so far norms have not added a great deal to our understanding of such issues as the determinants of firm boundaries (the 'make-or-buy' decision) that is, at this point a norm-free theory of the firm and a norm-rich theory of the firm don't seem to have very different predictions.
Handle: RePEc:nbr:nberwo:8286
Template-Type: ReDIF-Paper 1.0
Title: Directed Technical Change
Classification-JEL: E25; J31
Author-Name: Daron Acemoglu
Author-Person: pac16
Note: DAE EFG LS
Number: 8287
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8287
File-URL: http://www.nber.org/papers/w8287.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron. "Directed Technical Change," Review of Economic Studies, 2002, v69(4,241,Oct), 781-809.
Abstract: For many problems in macroeconomics, development economics, labor economics, and international trade, whether technical change is biased towards particular factors is of central importance. This paper develops a simple framework to analyze the forces that shape these biases. There are two major forces affecting equilibrium bias: the price effect and the market size effect. While the former encourages innovations directed at scarce factors, the latter leads to technical change favoring abundant factors. The elasticity of substitution between different factors regulates how powerful these effects are, and this has implications about how technical change and factor prices respond to changes in relative supplies. If the elasticity of substitution is sufficiently large, the long-run relative demand for a factor can slope up. I apply this framework to discuss a range of issues including: Why technical change over the past 60 years was skill-biased, and why the skill bias may have accelerated over the past twenty-five years. Why new technologies introduced during the late eighteenth and early nineteenth centuries were unskill-biased. Why biased technical change may increase the income gap between rich and poor countries. Why international trade may induce skill-biased technical change. Why a large wage-push, as in continental Europe during the 1970s, may cause capital-biased technical change. Why technical change may be generally labor-augmenting rather than capital-augmenting.
Handle: RePEc:nbr:nberwo:8287
Template-Type: ReDIF-Paper 1.0
Title: Who Owns the Media?
Classification-JEL: L3; H4
Author-Name: Simeon Djankov
Author-Person: pdj4
Author-Name: Caralee McLiesh
Author-Name: Tatiana Nenova
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: PE
Number: 8288
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8288
File-URL: http://www.nber.org/papers/w8288.pdf
File-Format: application/pdf
Publication-Status: published as Djankov, Simeon, Caralee McLiesh, Tatiana Nenova and Andrei Shleifer. "Who Owns The Media?," Journal of Law and Economics, 2003, v46(2,Oct), 341-382.
Abstract: We examine the patterns of media ownership in 97 countries around the world. We find that almost universally the largest media firms are owned by the government or by private families. Government ownership is more pervasive in broadcasting than in the printed media. Government ownership of the media is generally associated with less press freedom, fewer political and economic rights, and, most conspicuously, inferior social outcomes in the areas of education and health. It does not appear that adverse consequences of government ownership of the media are restricted solely to the instances of government monopoly.
Handle: RePEc:nbr:nberwo:8288
Template-Type: ReDIF-Paper 1.0
Title: Is Disinflation Good for the Stock Market?
Classification-JEL: E6; F3
Author-Name: Peter Blair Henry
Author-Person: phe166
Note: IFM ME
Number: 8289
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8289
File-URL: http://www.nber.org/papers/w8289.pdf
File-Format: application/pdf
Publication-Status: published as "Is Disinflation Good for the Stock Market?", Journal of Finance, August 2002, 57 (4), pp. 1617-1648.
Abstract: When countries attempt to stabilize annual inflation rates that are greater than 40 percent, the domestic stock market appreciates by 24 percent on average. The present value of the long-run benefits to shareholders of reducing high inflation outweighs the present value of the short-run costs. In contrast, the average market response is economically weak and statistically insignificant, if the pre-stabilization inflation rate is less than 40 percent. Stock market responses also help predict the change in inflation and output in the year following stabilization efforts. This additional result indicates that the stock market evidence for the 81 episodes studied is not spurious.
Handle: RePEc:nbr:nberwo:8289
Template-Type: ReDIF-Paper 1.0
Title: Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve
Classification-JEL: E0; E3
Author-Name: N. Gregory Mankiw
Author-Name: Ricardo Reis
Author-Person: pre73
Note: EFG ME
Number: 8290
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8290
File-URL: http://www.nber.org/papers/w8290.pdf
File-Format: application/pdf
Publication-Status: published as Mankiw, N. Gregory and Ricardo Reis. "Sticky Information Versus Sticky Prices: A Proposal To Replace The New Keynesian Phillips Curve," Quarterly Journal of Economics, Nov. 2002, v117(4): 1295-1328
Publication-Status: published as N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky information versus sticky prices: a proposal to replace the New-Keynesian Phillips curve," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
Abstract: This paper examines a model of dynamic price adjustment based on the assumption that information disseminates slowly throughout the population. Compared to the commonly used sticky-price model, this sticky-information model displays three, related properties that are more consistent with accepted views about the effects of monetary policy. First, disinflations are always contractionary (although announced disinflations are less contractionary than surprise ones). Second, monetary policy shocks have their maximum impact on inflation with a substantial delay. Third, the change in inflation is positively correlated with the level of economic activity.
Handle: RePEc:nbr:nberwo:8290
Template-Type: ReDIF-Paper 1.0
Title: Can Consumers Detect Lemons? Information Asymmetry in the Market for Child Care
Classification-JEL: D8; J1
Author-Name: H. Naci Mocan
Author-Person: pmo270
Note: CH
Number: 8291
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8291
File-URL: http://www.nber.org/papers/w8291.pdf
File-Format: application/pdf
Publication-Status: published as Naci Mocan, 2007. "Can consumers detect lemons? An empirical analysis of information asymmetry in the market for child care," Journal of Population Economics, Springer, vol. 20(4), pages 743-780, October.
Abstract: This paper applies direct tests for adverse selection and moral hazard in the market for child care. A unique data set containing quality measures of various characteristics of child care provided by 746 rooms in 400 centers, as well as the evaluation of the same attributes by 3,490 affiliated consumers (parents) is employed. Comparisons of consumer evaluations of quality to actual quality show that, after adjusting for scale effects, parents are weakly rational. The hypothesis of strong rationality is rejected, indicating that parents do not utilize all available information in forming their assessment of quality. Parent characteristics impact the accuracy of their evaluations. An analysis of easy-to-observe versus difficult-to-observe aspects of quality reveals that parents are trying to extract signals more heavily in cases of difficult-to-observe items. A comparison of parent assessments to results obtained from standard quality production functions reveals that, for the most part, parents interpret the signals incorrectly. The results demonstrate the existence of information asymmetry and adverse selection in the market. There is some limited evidence for moral hazard as nonprofit centers with very clean reception areas tend to produce lower level of quality for unobservable items. These results provide an explanation for low average quality in the child care market.
Handle: RePEc:nbr:nberwo:8291
Template-Type: ReDIF-Paper 1.0
Title: Comparative Localization of Academic and Industrial Spillovers
Classification-JEL: O31; O33
Author-Name: James D. Adams
Author-Person: pad11
Note: PR
Number: 8292
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8292
File-URL: http://www.nber.org/papers/w8292.pdf
File-Format: application/pdf
Publication-Status: published as James D. Adams, 2002. "Comparative localization of academic and industrial spillovers," Journal of Economic Geography, Oxford University Press, vol. 2(3), pages 253-278, July.
Abstract: This paper studies localization of academic and industrial knowledge spillovers. Using data on U.S. Research and Development laboratories, that quantify spatial aspects of learning about universities and firms as well as their locations, I find that academic spillovers are more localized than industrial spillovers. I also find that localization is increased by nearby stocks of R&D, but reduced by laboratory and firm size. These results on localized academic spillovers reflect open science and the industry-university cooperative movement, which encourage firms to work with local universities, so that localization coincides with the public goods nature of science. This situation contrasts with relations to other firms, where contractual arrangements are needed to access proprietary information, often at a considerable distance.
Handle: RePEc:nbr:nberwo:8292
Template-Type: ReDIF-Paper 1.0
Title: The Long and Short of the Canada-U.S. Free Trade Agreement
Classification-JEL: F1
Author-Name: Daniel Trefler
Author-Person: ptr44
Note: ITI
Number: 8293
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8293
File-URL: http://www.nber.org/papers/w8293.pdf
File-Format: application/pdf
Publication-Status: published as Trefler, Danie. "The Long And Short Of The Canada-U.S. Free Trade Agreement," American Economic Review, 2004, v94(4,Sep), 870-895.
Abstract: The Canada-U.S. Free Trade Agreement (FTA) provides a unique window on the effects of trade liberalization. It was an unusually clean trade policy exercise in that it was not bundled into a larger package of macroeconomic or market reforms. This paper uses the 1989-96 Canadian FTA experience to examine the short-run adjustment costs and long-run efficiency gains that flow from trade liberalization. For industries subject to large tariff cuts (these are typically low-end' manufacturing industries), the short-run costs included a 15% decline in employment and about a 10% decline in both output and the number of plants. Balanced against these large short-run adjustment costs were long-run labour productivity gains of 17% or a spectacular 1.0% per year. Although good capital stock and plant-level data are lacking, an attempt is made to identify the sources of FTA-induced labour productivity growth. Surprisingly, this growth is not due to rising output per plant, increased investment, or market share shifts to high-productivity plants. Instead, half of the 17% labour productivity growth appears due to favourable plant turnover (entry and exit) and rising technical efficiency.
Handle: RePEc:nbr:nberwo:8293
Template-Type: ReDIF-Paper 1.0
Title: Empirical Implications of Equilibrium Bidding in First-Price, Symmetric, Common Value Auctions
Classification-JEL: C7; D4
Author-Name: Kenneth Hendricks
Author-Name: Joris Pinkse
Author-Name: Robert H. Porter
Author-Person: ppo97
Note: IO
Number: 8294
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8294
File-URL: http://www.nber.org/papers/w8294.pdf
File-Format: application/pdf
Publication-Status: published as Hendricks, Kenneth, Joris Pinkse and Robert H. Porter. "Empirical Implications Of Equilibrium Bidding In First-price, Symmetric, Common Value Auctions," Review of Economic Studies, 2003, v70(1,Jan), 115-145.
Abstract: This paper studies federal auctions for wildcat leases on the Outer Continental Shelf from 1954 to 1970. These are leases where bidders privately acquire (at some cost) noisy, but equally informative, signals about the amount of oil and gas that may be present. We develop a test of equilibrium bidding in a common values model that is implemented using data on bids and ex post values. We compute bid markups and rents under the alternative hypotheses of private and common values and find that the data are more consistent with the latter hypothesis. Finally, we use data on tract location and ex post values to test the comparative static prediction in common value auctions that bidders may bid less aggressively when they expect more competition.
Handle: RePEc:nbr:nberwo:8294
Template-Type: ReDIF-Paper 1.0
Title: Understanding the Decline in Social Capital, 1952-1998
Classification-JEL: Z13; J22
Author-Name: Dora L. Costa
Author-Person: pco358
Author-Name: Matthew E. Kahn
Author-Person: pka41
Note: DAE
Number: 8295
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8295
File-URL: http://www.nber.org/papers/w8295.pdf
File-Format: application/pdf
Publication-Status: published as Costa, Dora L. and Matthew E. Kahn. "Understanding The American Decline In Social Capital, 1952-1998," Kyklos, 2003, v56(1), 17-46.
Abstract: We evaluate trends in social capital since 1952 and assess explanations for the observed declines. We examine both social capital centered in the community and in the home and argue that the decline in social capital has been over-stated. Controlling for education, there have been small declines in the probability of volunteering, larger declines in group membership, and still larger declines in the probability of entertaining since the 1970s. There have been no declines in the probability of spending frequent evenings with friends or relatives, but there have been decreases in daily visits with friends or relatives. Rising community heterogeneity (particularly income inequality) explains the fall in social capital produced outside the home whereas the rise in women's labor force participation rates explains the decline in social capital produced within the home.
Handle: RePEc:nbr:nberwo:8295
Template-Type: ReDIF-Paper 1.0
Title: Lumpy Consumer Durables, Market Power, and Endogenous Business Cycles
Classification-JEL: E32; E13
Author-Name: Kala Krishna
Author-Person: pkr26
Author-Name: Cemile Yavas
Note: EFG
Number: 8296
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8296
File-URL: http://www.nber.org/papers/w8296.pdf
File-Format: application/pdf
Publication-Status: published as Krishna, Kala and Cemile Yavas. "Lumpy Consumer Durables, Market Power, And Endogenous Business Cycles," Canadian Journal of Economics, 2004, v37(2,May), 375-391.
Abstract: This paper examines the role of lumpy consumer durables and market power in generating endogenous cycles which seem to be consistent with the facts. When goods are durable, past consumption choices determine the current market size which consists of consumers who have not purchased the good previously, and who have the income to make their potential demand effective. Larger past sales, ceteris paribus, thus naturally result in a smaller current market size and income. In this manner, the seeds of a downturn are sown in an upturn.
Handle: RePEc:nbr:nberwo:8296
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Technological Change on Older Workers: Evidence from Data on Computer Use
Classification-JEL: J24; J26
Author-Name: Leora Friedberg
Note: CH LS PE
Number: 8297
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8297
File-URL: http://www.nber.org/papers/w8297.pdf
File-Format: application/pdf
Publication-Status: published as Leora Friedberg, 2003. "The Impact of Technological Change on Older Workers: Evidence from Data on Computer Use," ILR Review, Cornell University, ILR School, vol. 56(3), pages 511-529, April.
Abstract: New technologies like computers alter skill requirements. This paper explores two related effects of computers on older workers, who use computers less. The evolution of computer use in the Current Population Survey suggests that impending retirement reduces the incentive of older workers to acquire new skills. The Health and Retirement Study shows, further, that computer users retire later than non-users. This may arise because computer users choose to retire later and also because workers planning later retirement choose to acquire computer skills. Instrumental variables estimates suggest that computer use directly lowers the probability of retirement.
Handle: RePEc:nbr:nberwo:8297
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Welfare and Tax Reform: The Material Well-Being of Single Mothers in the 1980s and 1990s
Classification-JEL: D12; H31
Author-Name: Bruce D. Meyer
Author-Person: pme273
Author-Name: James X. Sullivan
Note: AG LS PR
Number: 8298
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8298
File-URL: http://www.nber.org/papers/w8298.pdf
File-Format: application/pdf
Publication-Status: published as Meyer, Bruce D. and James X. Sullivan. "The Effects Of Welfare And Tax Reform: The Material Well-Being Of Single Mothers In The 1980s And 1990s," Journal of Public Economics, 2004, v88(7-8,Jul), 1387-1420.
Abstract: The tax and welfare programs that provide income and in-kind benefits to single mothers have changed dramatically in recent years. These changes began as far back as the mid-1980s and culminated with the 1996 welfare law that 'ended welfare as we knew it.' These tax and welfare changes have sharply increased the employment of single mothers and cut welfare rolls. However, little is know about the effects of these policy changes on the living conditions of single mothers and their children. Studies of those leaving welfare have found that a substantial percentage have problems paying rent, purchasing enough food, and paying utility bills. Other studies have found a decline in income among the worst-off single mothers. The goal of this paper is to examine the material well-being of single mothers and their families before and soon after welfare reform. Using data from two nationally representative household surveys we examine the consumption patterns of single mothers and their families. We find that the material conditions of single mothers did not decline in recent years, either in absolute terms or relative to single childless women or married mothers. In most cases, our evidence suggests that the material conditions of single mothers have improved slightly, even for highly disadvantaged single mothers.
Handle: RePEc:nbr:nberwo:8298
Template-Type: ReDIF-Paper 1.0
Title: Foreign Direct Investment and Wages in Indonesian Manufacturing
Classification-JEL: O12; F23
Author-Name: Robert E. Lipsey
Author-Person: pli259
Author-Name: Fredrik Sjoholm
Author-Person: psj1
Note: ITI
Number: 8299
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8299
File-URL: http://www.nber.org/papers/w8299.pdf
File-Format: application/pdf
Publication-Status: published as Lipsey, Robert E. & Sjoholm, Fredrik, 2004. "Foreign direct investment, education and wages in Indonesian manufacturing," Journal of Development Economics, Elsevier, vol. 73(1), pages 415-422, February.
Abstract: This paper asks two types of questions. One is about the behavior of foreign-owned firms in Indonesian labor markets and the other is about the effect of the presence of foreign-owned firms on Indonesian wages. We ask first whether foreign-owned plants pay a higher price for labor, that is, more than locally-owned plants for workers of a given quality, as we can measure it. We then ask whether foreign-owned plants pay a higher price for labor given the characteristics of the plants such as their size, industry, and location. The answer is that foreign firms do pay a higher price, and even a higher price given their plant characteristics. The second set of questions is whether a larger presence of foreign-owned plants results in higher wages in locally-owned plants and overall. Higher foreign presence leads to higher wages in locally-owned plants. Since the foreign plants also pay higher wages than locally-owned ones, the two factors together mean that higher foreign presence raises the general wage level in a province and industry.
Handle: RePEc:nbr:nberwo:8299
Template-Type: ReDIF-Paper 1.0
Title: Affiliation, Integration, and Information: Ownership Incentives and Industry Structure
Classification-JEL: L11; L22
Author-Name: Thomas N. Hubbard
Note: IO
Number: 8300
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8300
File-URL: http://www.nber.org/papers/w8300.pdf
File-Format: application/pdf
Publication-Status: published as Hubbard, Thomas. "Affiliation, Integration, and Information: Ownership Incentives and Industry Structure." Journal of Industrial Economics (June 2004): 201-228.
Abstract: This paper presents theory and evidence on horizontal industry structure, focusing on situations where plant-level scale economies are small and market power is not an issue. At issue is the question: what makes industries necessarily fragmented? The theoretical model distinguishes between the structure of brands and firms in an industry by examining trade-offs associated with affiliation and integration, and how they are affected by the contracting environment. I show how contractual incompleteness can lead industries to be necessarily fragmented. I also show that improvements in the contracting environment will tend to lead to a greater concentration of brands, but whether they lead industries to be more or less concentrated depends on what becomes contractible. I then discuss the propositions generated by the model through a series of case study examples.
Handle: RePEc:nbr:nberwo:8300
Template-Type: ReDIF-Paper 1.0
Title: A Century of Missing Trade?
Classification-JEL: F2; F11
Author-Name: Antoni Estevadeordal
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: ITI
Number: 8301
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8301
File-URL: http://www.nber.org/papers/w8301.pdf
File-Format: application/pdf
Publication-Status: published as Estevadeordal, Antoni and Alan M. Taylor. "A Century Of Missing Trade?," American Economic Review, 2002, v92(1,Mar), 383-393.
Abstract: In contemporary data, the measured factor content of trade is far smaller than its predicted magnitude in the pure Heckscher-Ohlin-Vanek framework, the so-called 'missing trade' mystery. We wonder if this problem has been there from the beginning: that is, we ask if the Heckscher-Ohlin theory was so much at odds with reality at its time of conception. We apply contemporary tests to historical data, focusing on the major trading zone that inspired the factor abundance theory, the Old and New Worlds of the pre-1914 'Greater Atlantic' economy. This places our analysis in a very different context than contemporary studies: an era with lower trade barriers, higher transport costs, a more skewed global distribution of the relevant factors (especially land), and comparably large productivity divergence. These conditions might seem more favorable to the theory, but the results are still very poor.
Handle: RePEc:nbr:nberwo:8301
Template-Type: ReDIF-Paper 1.0
Title: Can the Market Add and Subtract? Mispricing in Tech Stock Carve-Outs
Classification-JEL: G14
Author-Name: Owen A. Lamont
Author-Name: Richard H. Thaler
Note: AP CF
Number: 8302
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8302
File-URL: http://www.nber.org/papers/w8302.pdf
File-Format: application/pdf
Publication-Status: published as Lamont, Owen A. and Richard H. Thaler. "Can The Market Add And Subtract? Mispricing In Tech Stock Carve-Outs," Journal of Political Economy, 2003, v111(2,Apr), 227-268.
Abstract: Recent equity carve-outs in US technology stocks appear to violate a basic premise of financial theory: identical assets have identical prices. In our 1998-2000 sample, holders of a share of company A are expected to receive x shares of company B, but the price of A is less than x times the price of B. A prominent example involves 3Com and Palm. Arbitrage does not eliminate these blatant mispricing due to short sale constraints, so that B is overpriced but expensive or impossible to sell short. Evidence from options prices shows that shorting costs are extremely high, eliminating exploitable arbitrage opportunities.
Handle: RePEc:nbr:nberwo:8302
Template-Type: ReDIF-Paper 1.0
Title: The Role of Large Players in Currency Crises
Classification-JEL: F31; G15
Author-Name: Giancarlo Corsetti
Author-Name: Paolo Pesenti
Author-Person: ppe152
Author-Name: Nouriel Roubini
Author-Person: pro145
Note: IFM
Number: 8303
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8303
File-URL: http://www.nber.org/papers/w8303.pdf
File-Format: application/pdf
Publication-Status: published as The Role of Large Players in Currency Crises, Giancarlo Corsetti, Paolo Pesenti, Nouriel Roubini. in Preventing Currency Crises in Emerging Markets, Edwards and Frankel. 2002
Abstract: During recent episodes of financial turmoil some policy makers voiced concerns about aggressive, and possibly manipulative, practices by highly leveraged institutions in emerging markets. This paper addresses these concerns by reconsidering in detail, at both theoretical and empirical levels, the role of large players in currency crises. The first part of the study discusses analytical results from different models of speculative attack, suggesting that the presence of agents with market power can increase a country's vulnerability to a crisis and make other investors more aggressive in their position-taking. Both size and reputation for quality of information matter in determining large players' impact on the market. The second part of the study presents evidence on the correlation between exchange rate movements and major market participants' net currency positions, and delves into a comparative analysis of several recent crisis episodes in Thailand, Hong Kong, Malaysia, Australia, and South Africa in light of the previous theoretical results.
Handle: RePEc:nbr:nberwo:8303
Template-Type: ReDIF-Paper 1.0
Title: How Often Are Propositions on the Effects of Customs Unions Theoretical Curiosa and When Should They Guide Policy?
Classification-JEL: F10; F13
Author-Name: Lisandro Abrego
Author-Name: Raymond Riezman
Author-Person: pri43
Author-Name: John Whalley
Author-Person: pwh8
Note: ITI
Number: 8304
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8304
File-URL: http://www.nber.org/papers/w8304.pdf
File-Format: application/pdf
Publication-Status: published as Abrego, Lisandro, Raymond Riezman and John Whalley. "How Often Are Propositions On The Effects Of Regional Trade Agreements Theoretical Curiosa?," Journal of International Economics, 2006, v68(1,Jan), 59-78.
Abstract: This paper uses computational techniques to assess whether or not various propositions that have been advanced as plausible in the literature on Customs Unions (or other regional trade agreements) may actually hold. The idea is to make probabilistic statements as to whether propositions of interest might hold, rather than to restrict assumptions so they unambiguously hold. Our aim is to blend theory and numerical simulation and go beyond the ambiguous analytically derived propositions that dominate the theoretical literature so as to assess the likelihood of propositions holding for particular model specifications.
Handle: RePEc:nbr:nberwo:8304
Template-Type: ReDIF-Paper 1.0
Title: A Cure Worse Than the Disease? Currency Crises and the Output Costs of IMF-Supported Stabilization Programs
Classification-JEL: E63; F34
Author-Name: Michael M. Hutchison
Author-Person: phu149
Note: IFM
Number: 8305
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8305
File-URL: http://www.nber.org/papers/w8305.pdf
File-Format: application/pdf
Publication-Status: published as Hutchison, Michael M. and Ilan Noy. "Macroeconomic Effects Of IMF-Sponsored Programs In Latin America: Output Costs, Program Recidivism And The Vicious Cycle Of Failed Stabilizations," Journal of Interntional Money and Finance, 2003, v22(7,Dec), 991-1014.
Publication-Status: published as A Cure Worse Than the Disease? Currency Crises and the Output Costs of IMF-Supported Stabilization Programs, Michael Hutchison. in Managing Currency Crises in Emerging Markets, Dooley and Frankel. 2003
Abstract: This paper investigates the output effects of IMF-supported stabilization programs, especially those introduced at the time of a severe balance of payments/currency crisis. Using a panel data set over the 1975-97 period and covering 67 developing and emerging-market economies (with 461 IMF stabilization programs and 160 currency crises), we find that currency crises even after controlling for macroeconomic developments, political and regional factors significantly reduce output growth for 1-2 years. Output growth is also lower (0.7 percentage points annually) during IMF-stabilization programs, but it appears that growth generally slows prior to implementation of the program. Moreover, programs coinciding with recent balance of payments or currency crises do not appear to further damage short-run growth prospects. Countries participating in IMF programs significantly reduce domestic credit growth, but no effect is found on budget policy. Applying this model to the collapse of output in East Asia following the 1997 crisis, we find that the unexpected (forecast error) collapse of output in Malaysia where an IMF-program was not followed-- was similar in magnitude to those countries adopting IMF programs (Indonesia, Korea, Philippines and Thailand).
Handle: RePEc:nbr:nberwo:8305
Template-Type: ReDIF-Paper 1.0
Title: Opportunity Counts: Teams and the Effectiveness of Production Incentives
Classification-JEL: J24; J41
Author-Name: Brent Boning
Author-Name: Casey Ichniowski
Author-Name: Kathryn Shaw
Author-Person: psh162
Note: LS PR
Number: 8306
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8306
File-URL: http://www.nber.org/papers/w8306.pdf
File-Format: application/pdf
Publication-Status: published as Boning, Brent, Casey Ichniowski, and Kathryn Shaw. "Opportunity Counts: Teams and the Effectiveness of Production Incentives." Journal of Labor Economics 25, 4 (October 2007): 613-50.
Abstract: This paper investigates the individual and joint effects of group incentive pay and problem-solving teams on productivity. To estimate models of adoption of these work practices and models of the effects of the work practices on productivity, we constructed a data set on the operations of 34 production lines in U.S. steel minimills. Through site visits and interviews, we collected longitudinal data including precise measures on productivity, work practices, and technology of each of these production lines. We find strong support for the proposition that problem-solving teams are an important means for increasing the effectiveness of group incentive pay plans in establishments with complex production processes. With regard to adoption of work practices, we find that problem-solving teams are adopted only in the presence of incentive pay plans, and that more technologically complex production lines are much more likely to adopt teams. The latter result implies that teams are more valuable in these types of production environments. We also present estimates of the productivity effects of adopting these work practices. Group-based incentive pay, on average, raises productivity, and the adoption of teams in addition to incentive pay leads to a further increase in productivity. The average effect of teams together with group incentives is economically important, corresponding to an annual increase of over 3000 additional tons of steel with a value of over $1.4 million. We also find that the productivity effect of teams is significantly larger in more complex production lines, consistent with the result that more complex production lines are more likely to adopt problem-solving teams. Finally, we show that our estimates of the productivity effects of these work practices are little changed by corrections for possible selectivity bias.
Handle: RePEc:nbr:nberwo:8306
Template-Type: ReDIF-Paper 1.0
Title: The Sources and Uses of Annual Giving at Private Research Universities
Classification-JEL: I22; L3
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Author-Name: Christopher L. Smith
Author-Person: psm208
Note: PE
Number: 8307
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8307
File-URL: http://www.nber.org/papers/w8307.pdf
File-Format: application/pdf
Publication-Status: published as Alexander, F.K. and R. Ehrenberg (eds.) Maximizing Resources: Universities, Public Policy and Revenue Production. Jossey-Bass, 2003.
Abstract: Private research universities differ in the shares of their annual giving coming from different sources (alumni, other individuals, foundations, corporations) and the shares of their annual giving applied to different uses (current operations, buildings and equipment, enhancing their endowments). After providing background data on the aggregate variation in these shares over time and their interuniversity variation at a point in time, our econometric analyses use data from a panel of research universities that span a 30-year period to provide explanations for these differences. These differences are seen to depend upon institutional characteristics, macroeconomic variables and tax parameters. One key finding is that richer institutions, as measured by endowment per student, devote a larger share of their annual giving to further building their endowments. This contributes to the increasing dispersion of wealth across private research universities.
Handle: RePEc:nbr:nberwo:8307
Template-Type: ReDIF-Paper 1.0
Title: Earnings Quality and Stock Returns
Classification-JEL: G12; G14
Author-Name: Konan Chan
Author-Name: Louis K. C. Chan
Author-Name: Narasimhan Jegadeesh
Author-Name: Josef Lakonishok
Note: AP
Number: 8308
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8308
File-URL: http://www.nber.org/papers/w8308.pdf
File-Format: application/pdf
Publication-Status: published as Chan, Konan, Louis K. C. Chan, Narsimhan Jegadeesh, and Josef Lakonishok. "Earnings Quality and Stock Returns." Journal of Business 79, 3 (May 2006): 1041-82.
Abstract: An exclusive focus on bottom-line income misses important information about the quality of earnings. Accruals (the difference between accounting earnings and cash flow) are reliably, negatively associated with future stock returns. Earnings increases that are accompanied by high accruals, suggesting low-quality earnings, are associated with poor future returns. We explore various hypotheses -- earnings manipulation, extrapolative biases about future growth, and under-reaction to business conditions -- to explain accruals' predictive power. Distinctions between the hypotheses are based on evidence from operating performance, the behavior of individual accrual items, and discretionary versus nondiscretionary components of accruals.
Handle: RePEc:nbr:nberwo:8308
Template-Type: ReDIF-Paper 1.0
Title: Labor Income and Predictable Stock Returns
Classification-JEL: G1
Author-Name: Tano Santos
Author-Name: Pietro Veronesi
Note: AP
Number: 8309
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8309
File-URL: http://www.nber.org/papers/w8309.pdf
File-Format: application/pdf
Publication-Status: published as Santos, Tano and Pietro Veronesi. "Labor Income and Predictable Stock Returns." Review of Financial Studies 19, 1 (Spring 2004): 1-44.
Abstract: We propose and test a novel economic mechanism that generates stock return predictability on both the time series and the cross section. In our model, investors' income has two sources, wages and dividends, that grow stochastically over time. As a consequence, the fraction of total income produced by wages changes over time de-pending on economic conditions. We show that as this fraction fluctuates, the risk premium that investors require to hold stocks varies as well. We test the main implications of the model and find substantial support for it. A regression of stock returns on lagged values of the labor income to consumption ratio produces statistically significant coefficients and adjusted R2 's that are larger than those generated when using the dividend price ratio. Tests of the cross sectional implication find considerable improvements on the performance of both the conditional CAPM and CCAPM when compared to their unconditional counterparts.
Handle: RePEc:nbr:nberwo:8309
Template-Type: ReDIF-Paper 1.0
Title: The Labor Market Impact of State-Level Anti-Discrimination Laws, 1940-1960
Author-Name: William J. Collins
Author-Person: pco315
Note: DAE
Number: 8310
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8310
File-URL: http://www.nber.org/papers/w8310.pdf
File-Format: application/pdf
Publication-Status: published as Collins, William J. "The Labor Market Impact Of State-Level Anti-Discrimination Laws, 1940-1960," Industrial and Labor Relations Review, 2003, v56(2,Jan), 244-272.
Abstract: By the time Congress passed the 1964 Civil Rights Act, 98 percent of non-southern blacks (40 percent of all blacks) were already covered by state-level 'fair employment' laws which prohibited labor market discrimination. This paper assesses the impact of fair employment legislation on black workers' income, unemployment, labor force participation, and occupational and industrial distributions relative to whites using a difference-in-difference-in-difference framework. In general, the fair employment laws adopted in the 1940s appear to have had larger effects than those adopted in the 1950s, and the laws had relatively small effects on the labor market outcomes of black men compared to those of black women.
Handle: RePEc:nbr:nberwo:8310
Template-Type: ReDIF-Paper 1.0
Title: Asset Prices and Trading Volume Under Fixed Transactions Costs
Classification-JEL: G1
Author-Name: Andrew W. Lo
Author-Person: plo171
Author-Name: Harry Mamaysky
Author-Name: Jiang Wang
Note: AP
Number: 8311
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8311
File-URL: http://www.nber.org/papers/w8311.pdf
File-Format: application/pdf
Publication-Status: published as Andrew W. Lo & Harry Mamaysky & Jiang Wang, 2004. "Asset Prices and Trading Volume under Fixed Transactions Costs," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 1054-1090, October.
Abstract: We propose a dynamic equilibrium model of asset prices and trading volume with heterogeneous agents facing fixed transactions costs. We show that even small fixed costs can give rise to large 'no-trade' regions for each agent's optimal trading policy and a significant illiquidity discount in asset prices. We perform a calibration exercise to illustrate the empirical relevance of our model for aggregate data. Our model also has implications for the dynamics of order flow, bid/ask spreads, market depth, the allocation of trading costs between buyers and sellers, and other aspects of market microstructure, including a square-root power law between trading volume and fixed costs which we confirm using historical US stock market data from 1993 to 1997.
Handle: RePEc:nbr:nberwo:8311
Template-Type: ReDIF-Paper 1.0
Title: Dynamic Volume-Return Relation of Individual Stocks
Classification-JEL: G1
Author-Name: Guillermo Llorente
Author-Name: Roni Michaely
Author-Person: pmi132
Author-Name: Gideon Saar
Author-Name: Jiang Wang
Note: AP
Number: 8312
Creation-Date: 2001-05
Order-URL: http://www.nber.org/papers/w8312
File-URL: http://www.nber.org/papers/w8312.pdf
File-Format: application/pdf
Publication-Status: published as Llorente, G., R. Michaely, G. Saar and J. Wang. "Dynamic Volume-Return Relation Of Individual Stocks," Review of Financial Studies, 2002, v15(4), 1005-1047.
Abstract: We examine the dynamic relation between return and volume of individual stocks. Using a simple model in which investors trade to share risk or speculate on private information, we show that returns generated by risk-sharing trades tend to reverse themselves while returns generated by speculative trades tend to continue themselves. We test this theoretical prediction by analyzing the relation between daily volume and first-order return autocorrelation for individual stocks listed on the NYSE and AMEX. We find that the cross-sectional variation in the relation between volume and return autocorrelation is related to the extent of informed trading in a manner consistent with the theoretical prediction.
Handle: RePEc:nbr:nberwo:8312
Template-Type: ReDIF-Paper 1.0
Title: The "New Keynesian" Phillips Curve: Closed Economy vs. Open Economy
Classification-JEL: E1; F3
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Chi-Wa Yuen
Note: IFM
Number: 8313
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8313
File-URL: http://www.nber.org/papers/w8313.pdf
File-Format: application/pdf
Publication-Status: published as Razin, Assaf and Chi-Wa Yuen. "The 'New Keynesian' Phillips Curve: Closed Economy Versus Open Economy," Economics Letters, 2002, v75(1,Mar), 1-9.
Abstract: The paper extends Woodford's (2000) analysis of the closed economy Phillips curve to an open economy with both commodity trade and capital mobility. We show that consumption smoothing, which comes with the opening of the capital market, raises the degree of strategic complementarity among monopolistically competitive suppliers, thus rendering prices more sticky and magnifying output responses to nominal GDP shocks.
Handle: RePEc:nbr:nberwo:8313
Template-Type: ReDIF-Paper 1.0
Title: Do Liquidity Constraints and Interest Rates Matter for Consumer Behavior? Evidence from Credit Card Data
Classification-JEL: E21; E51
Author-Name: David B. Gross
Author-Name: Nicholas S. Souleles
Author-Person: pso104
Note: ME
Number: 8314
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8314
File-URL: http://www.nber.org/papers/w8314.pdf
File-Format: application/pdf
Publication-Status: published as Gross, David B. and Nicholas S. Souleles. "Do Liquidity Constraints And Interest Rates Matter For Consumer Behavior? Evidence From Credit Card Data," Quarterly Journal of Economics, 2002, v107(1,Feb), 149-185.
Abstract: This paper utilizes a unique new dataset of credit card accounts to analyze how people respond to changes in credit supply. The data consist of a panel of thousands of individual credit card accounts from several different card issuers, with associated credit bureau data. We estimate both marginal propensities to consume (MPCs) out of liquidity and interest-rate elasticities. We also evaluate the ability of different models of consumption to rationalize our results, distinguishing the Permanent-Income Hypothesis (PIH), liquidity constraints, precautionary saving, and behavioral models. We find that increases in credit limits generate an immediate and significant rise in debt, counter to the PIH. The average 'MPC out of liquidity' (dDebt/dLimit) ranges between 10%-14%. The MPC is much larger for people starting near their limits, consistent with binding liquidity constraints. However, the MPC is significant even for people starting well below their limit. We show this response is consistent with buffer-stock models of precautionary saving. Nonetheless there are other results that conventional models cannot easily explain, e.g. why so many people are borrowing on their credit cards, and simultaneously holding low yielding assets. Unlike most other studies, we also find strong effects from changes in account-specific interest rates. The long-run elasticity of debt to the interest rate is approximately -1.3. Less than half of this elasticity represents balance-shifting across cards, with most reflecting net changes in total borrowing. The elasticity is larger for decreases in interest rates than for increases, which can explain the widespread use of temporary promotional rates. The elasticity is smaller for people starting near their credit limits, again consistent with liquidity constraints.
Handle: RePEc:nbr:nberwo:8314
Template-Type: ReDIF-Paper 1.0
Title: Rescue Packages and Output Losses Following Crises
Author-Name: Michael P. Dooley
Author-Person: pdo13
Author-Name: Sujata Verma
Note: IFM
Number: 8315
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8315
File-URL: http://www.nber.org/papers/w8315.pdf
File-Format: application/pdf
Publication-Status: published as Rescue Packages and Output Losses Following Crises, Michael P. Dooley, Sujata Verma. in Managing Currency Crises in Emerging Markets, Dooley and Frankel. 2003
Abstract: This paper examines the role of the third party (the IMF) in resolving sovereign default on external debt. We first show that the effects of third party intervention in debt negotiations are quite sensitive to the assumed enforcement mechanism for sovereign debt. The model is then adapted to an insurance crisis. The main result is that the unanticipated component of third party intervention can either intensify or mitigate the dead weight loss following default.
Handle: RePEc:nbr:nberwo:8315
Template-Type: ReDIF-Paper 1.0
Title: The Self-Employed are Less Likely to Have Health Insurance Than Wage Earners. So What?
Classification-JEL: I12
Author-Name: Craig William Perry
Author-Name: Harvey S. Rosen
Author-Person: pro55
Note: EH PE
Number: 8316
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8316
File-URL: http://www.nber.org/papers/w8316.pdf
File-Format: application/pdf
Publication-Status: published as Holtz-Eakin, Douglas and Harvey S. Rosen (eds.) Entrepreneurship and Public Policy. MIT Press, 2004.
Abstract: There is considerable public policy concern over the relatively low rates of health insurance coverage among the self-employed in the United States. Presumably, the reason for the concern is that their low rates of insurance lead to worse health outcomes. We use data from the Medical Expenditure Panel Survey conducted in 1996 to analyze how the self-employed and wage-earners differ with respect to insurance coverage and health status. Using a variety of ways to measure health status, we find that the relative lack of health insurance among the self-employed does not affect their health. For virtually every subjective and objective measure of health status, the self-employed and wage earners are statistically indistinguishable from each other. Further, we present some evidence that this phenomenon is not due to the fact that individuals who select into self-employment are healthier than wage-earners, ceteris paribus. Thus, the public policy concern with the relative lack of health insurance among the self-employed may be somewhat misplaced.
Handle: RePEc:nbr:nberwo:8316
Template-Type: ReDIF-Paper 1.0
Title: The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable Television
Classification-JEL: L1; L8
Author-Name: Austan Goolsbee
Author-Person: pgo49
Author-Name: Amil Petrin
Note: IO PR
Number: 8317
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8317
File-URL: http://www.nber.org/papers/w8317.pdf
File-Format: application/pdf
Publication-Status: published as Goolsbee, Austan and Amil Petrin. "The Consumer Gains From Direct Broadcast Satellites And The Competition With Cable TV," Econometrica, 2004, v72(2,Mar), 351-381.
Abstract: This paper examines the introduction of Direct Broadcast Satellites as an alternative to cable television and the welfare gains such satellites generated for consumers. The extent to which satellites compete with cable has become an important issue in the debate over re-regulation of cable prices. We estimate a consumer level demand system for satellite, basic cable, premium cable and local antenna using extensive micro data on the television choices of more than 15,000 people as well as price and characteristics data on cable companies throughout the nation. The results indicate that, after properly controlling for unobservable product attributes and the endogeneity of prices, the direct welfare gain to satellite buyers averages about $50 dollars per year or approximately $450 million annually in the aggregate. Estimates that do not control for unobserved attributes and endogenous prices overstate the welfare gains by almost a factor of fifteen. The price sensitivity of satellite to both its own price and the price of cable is extremely high. The price sensitivity of cable, however, is low, likely indicating that satellite is not a close substitute at the time of our sample.
Handle: RePEc:nbr:nberwo:8317
Template-Type: ReDIF-Paper 1.0
Title: Health, Inequality, and Economic Development
Classification-JEL: I12
Author-Name: Angus Deaton
Author-Person: pde30
Note: AG CH EH
Number: 8318
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8318
File-URL: http://www.nber.org/papers/w8318.pdf
File-Format: application/pdf
Publication-Status: published as Angus Deaton, 2003. "Health, Inequality, and Economic Development," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 113-158, March.
Abstract: I explore the connection between income inequality and health in both poor and rich countries. I discuss a range of mechanisms, including nonlinear income effects, credit restrictions, nutritional traps, public goods provision, and relative deprivation. I review the evidence on the effects of income inequality on the rate of decline of mortality over time, on geographical pattens of mortality, and on individual-level mortality. Much of the literature needs to be treated skeptically, if only because of the low quality of much of the data on income inequality. Although there are many puzzles that remain, I conclude that there is no direct link from income inequality to ill-health; individuals are no more likely to die if they live in more unequal places. The raw correlations that are sometimes found are likely the result of factors other than income inequality, some of which are intimately linked to broader notions of inequality and unfairness. That income inequality itself is not a health risk does not deny the importance for health of other inequalities, nor of the social environment. Whether income redistribution can improve population health does not depend on a direct effect of income inequality and remains an open question.
Handle: RePEc:nbr:nberwo:8318
Template-Type: ReDIF-Paper 1.0
Title: Did Legalized Abortion Lower Crime?
Classification-JEL: K4
Author-Name: Ted Joyce
Author-Person: pjo112
Note: CH EH
Number: 8319
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8319
File-URL: http://www.nber.org/papers/w8319.pdf
File-Format: application/pdf
Publication-Status: published as Joyce, Ted. "Did Legalized Abortion Lower Crime?" Journal of Human Resources XXXIX, 1 (2004): 1-28.
Abstract: This paper examines the relationship between the legalization of abortion and subsequent decreases in crime. In a current study, researchers estimate that the legalization of abortion explains over half of the recent decline in national crime rates. The association is identified by correlating changes in crime with changes in the abortion ratio weighted by the proportion of the criminal population exposed to legalized abortion. In this paper, I use an alternative identification strategy. I analyze changes in homicide and arrest rates among teens and young adults born before and after 1970 in states that legalized abortion prior to Roe v. Wade. I compare these changes with variation in homicide and arrest rates among cohorts from the same period but who were unexposed to legalized abortion. I find little evidence to support the claim that legalized abortion caused the reduction in crime. I conclude that the association between abortion and crime is not causal, but most likely the result of confounding from unmeasured period effects such as changes in crack cocaine use and its spillover effects.
Handle: RePEc:nbr:nberwo:8319
Template-Type: ReDIF-Paper 1.0
Title: Prices, Wages and the U.S. NAIRU in the 1990s
Classification-JEL: E31; E50
Author-Name: Douglas Staiger
Author-Person: pst466
Author-Name: James H. Stock
Author-Person: pst148
Author-Name: Mark W. Watson
Author-Person: pwa582
Note: EFG ME
Number: 8320
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8320
File-URL: http://www.nber.org/papers/w8320.pdf
File-Format: application/pdf
Publication-Status: published as Krueger, Alan B. and Robert Solow (eds.) The Roaring ‘90s: Can Full Employment Be Sustained. New York: Russell Sage and Century Fund, 2001.
Abstract: Using quarterly macro data and annual state panel data, we examine various explanations of the low rate of price inflation, strong real wage growth, and low rate of unemployment in the U.S. economy during the late 1990s. Many of these explanations imply shifts in the coefficients of price and wage Phillips curves. We find, however, that once one accounts for the univariate trends in the unemployment rate and in the rate of productivity growth, these coefficients are stable. This suggests that many explanations, such as persistent beneficial supply shocks, changes in firms' pricing power, changes in price expectations arising from shifts in Fed policy, and changes in wage setting behavior miss the mark. Rather, we suggest that explanations of movements of wages, prices and unemployment over the 1990s, and indeed over the past forty years, must focus on understanding the univariate trends in the unemployment rate and in productivity growth and, perhaps, the relation between the two.
Handle: RePEc:nbr:nberwo:8320
Template-Type: ReDIF-Paper 1.0
Title: The Sputtering Labor Force of the 21st Century. Can Social Policy Help?
Author-Name: David T. Ellwood
Note: LS
Number: 8321
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8321
File-URL: http://www.nber.org/papers/w8321.pdf
File-Format: application/pdf
Publication-Status: published as Krueger, Alan and Robert Solow (eds.) The Roaring Nineties: Can Full Employment Be Sustained? New York: Russell Sage Foundation, 2001.
Abstract: This paper examines two questions: how will the labor force change over the next 20 years, and can social policy significantly alter its size and shape. In the last twenty years, the overall labor force grew by 35 percent and the so-called prime age workforce those aged 25-54 grew by a remarkable 54 percent. The number of college educated workers more than doubled, and increased as a fraction of the labor force from 22 percent of the total to over 30 percent. In the next twenty, there will be virtually no growth in the prime age workforce at all. Indeed the number of native born white workers in that group will fall by 10%. Growth will be almost exclusively among older workers and people of color, in part due to immigration. Whether a sharply slowing labor force is a problem is debatable, but more troubling is the finding that even under the most optimistic scenario, the educational level of the workforce will improve far less in the next 20 years. At best college graduates might rise from 30% to 35% as a share of the workforce. The second part of the paper examines in detail what we know about the incentive effects of a variety of social programs from welfare, to the Earned Income Tax Credit, to UI, to disability programs to Social Security. There is clear evidence that incentives matter. But when I examine what plausible policy changes might accomplish the aggregate impact is not large. Moreover, most of these changes would tend to bring the least educated and most marginal workers into the labor force, while the need will be greatest for more skilled workers. Only strategies that would encourage more wives to work or that would significantly retard retirement are likely to generate many more educated workers. The findings suggest that immigration and education and training changes will loom far larger in future years and may be a better place to look for answers.
Handle: RePEc:nbr:nberwo:8321
Template-Type: ReDIF-Paper 1.0
Title: Domestic Bank Regulation and Financial Crises: Theory and Empirical Evidence from East Asia
Classification-JEL: F31; F41
Author-Name: Robert Dekle
Author-Person: pde414
Author-Name: Kenneth M. Kletzer
Note: IFM ME
Number: 8322
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8322
File-URL: http://www.nber.org/papers/w8322.pdf
File-Format: application/pdf
Publication-Status: published as Domestic Bank Regulation and Financial Crises: Theory and Empirical Evidence from East Asia, Robert Dekle, Kenneth Kletzer. in Preventing Currency Crises in Emerging Markets, Edwards and Frankel. 2002
Abstract: A model of the domestic financial intermediation of foreign capital inflows based on agency costs is developed for studying financial crises in emerging markets. In equilibrium for the model economy, the banking system becomes progressively more fragile under imperfect prudential regulation and public sector loan guarantees until a crisis occurs with an expected reversal of capital flows. The crisis in this model evolves endogenously as the banking system becomes increasingly vulnerable through the renegotiation of firm debts. Firm revenues are subject to idiosyncratic firm-specific technology shocks, but there are no aggregate shocks. The model generates dynamic relationships between foreign capital inflows, domestic investment, firm debt and the value of firm and bank equity in an endogenous growth model. Prior to crisis, foreign capital inflows and bank debt rise relative to investment and domestic production. The aggregate portfolio of the banking sector deteriorates and the total value of bank equities declines in proportion to that for goods producers progressively. The model's assumptions and implications for the behavior of the economy before and after crisis are compared to the experience of five East Asian countries. The case studies compare three or near-crisis countries non-crisis economies, Taiwan and Singapore, and lend support to the model.
Handle: RePEc:nbr:nberwo:8322
Template-Type: ReDIF-Paper 1.0
Title: Financial Systems, Economic Growth, and Globalization
Classification-JEL: E44; F36
Author-Name: Peter L. Rousseau
Author-Person: pro64
Author-Name: Richard Sylla
Note: DAE
Number: 8323
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8323
File-URL: http://www.nber.org/papers/w8323.pdf
File-Format: application/pdf
Publication-Status: published as Rousseau, Peter L. and Richard Sylla. "Financial Revolutions And Economic Growth: Introducing This EEH Symposium," Explorations in Economic History, 2006, v43(1,Jan), 1-12.
Publication-Status: published as Financial Systems, Economic Growth, and Globalization , Peter L. Rousseau, Richard Sylla. in Globalization in Historical Perspective, Bordo, Taylor, and Williamson. 2003
Abstract: This paper brings together two strands of the economic literature -- that on the finance-growth nexus and that on capital market integration -- and explores key issues surrounding each strand through both institutional/country histories and formal quantitative analysis. We begin with studies of the Dutch Republic, England, the U.S., France, Germany and Japan that span three centuries, detailing how in each case the emergence of a financial system jump-started economic growth. Using a cross-country panel of seventeen countries covering the 1850-1997 period, we then uncover a robust correlation between financial factors and economic growth that is consistent with a leading role for finance, and show that these effects were strongest over the 80 years preceding the Great Depression. Next, we show that countries with more sophisticated financial systems engage in more trade and appear to be better integrated with other economies by identifying roles for both finance and trade in the convergence of interest rates that occurred among the Atlantic economies prior to 1914. Our results suggest that the growth and increasing globalization of these economies might indeed have been 'finance-led.'
Handle: RePEc:nbr:nberwo:8323
Template-Type: ReDIF-Paper 1.0
Title: Fewer Monies, Better Monies
Classification-JEL: F3
Author-Name: Rudi Dornbusch
Note: IFM
Number: 8324
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8324
File-URL: http://www.nber.org/papers/w8324.pdf
File-Format: application/pdf
Publication-Status: published as Dornbusch, Rudi. "Fewer Monies, Better Monies," American Economic Review, 2001, v91(2,May), 238-242.
Abstract: In the aftermath of emerging market crises from Russia to Asia and Latin America, there is a quest for better monetary arrangements that are more crisis-proof. Fixed rates are out, flexible rates are in with a policy focus on inflation targeting. But there is, of course, the alternative of abolishing exchange rates all together. This paper revisits the issue of dollarization or currency boards to review what arguments in the debate stand up. The case for flexible exchange rates emphasizes the need for a tool to accomplish relative price adjustment. This paper argues that in an intertemporal perspective most shocks require financing in the capital market rather than adjustment. Moreover, countries frequently do not use their flexible rate to play a cyclical role and, as a result, only a pay a premium for the option to depreciate but do not take advantage of the flexibility; on the contrary, they engineer systematic overvaluation in the context of inflation targeting.
Handle: RePEc:nbr:nberwo:8324
Template-Type: ReDIF-Paper 1.0
Title: Malaysia: Was it Different?
Classification-JEL: F3
Author-Name: Rudi Dornbusch
Note: IFM
Number: 8325
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8325
File-URL: http://www.nber.org/papers/w8325.pdf
File-Format: application/pdf
Abstract: In the Asian crisis of 1997-98 some countries followed IMF prescriptions for stabilization and recovery. Malaysia went another route, placing an emphasis on capital controls. Did this strategy work out to lower the costs of the crisis and foster a more rapid recovery as claimed by some observers and notably the Malaysian authorities? It remains to explore whether that claim is indeed appropriate or whether it is primarily domestic grand standing of a weakened and challenged leadership which uses the international issue to deflect from severe domestic political problems. In evaluating the Malaysian experience it must be understood that for this country two crises were unfolding simultaneously. One was the Asian financial crisis that brought down countries with vulnerable financial structures. The other one was the domestic political. The paper concludes that there is no evidence of a better performance and not surprisingly so. Capital controls were imposed after the crisis was over, as interest rates in all Asian crisis economies, including Malaysia, were already declining rapidly and as US interest rate cuts fostered a more stable environment.
Handle: RePEc:nbr:nberwo:8325
Template-Type: ReDIF-Paper 1.0
Title: A Primer on Emerging Market Crises
Classification-JEL: F3
Author-Name: Rudi Dornbusch
Note: IFM
Number: 8326
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8326
File-URL: http://www.nber.org/papers/w8326.pdf
File-Format: application/pdf
Publication-Status: published as A Primer on Emerging-Market Crises, Rudi Dornbusch. in Preventing Currency Crises in Emerging Markets, Edwards and Frankel. 2002
Abstract: Over the past 20 years there has been a proliferation of emerging market crises and a vast accumulation of commentary -- descriptive, theoretical and applied -- highlighting the origins and mechanics of each crisis and of crises in general. And there is plenty of analysis on how to deal with crises both in terms of prevention and of cures. Is it possible now to distill from all this a simple set of propositions that summarize the experience and capture the chief lessons? This paper sets out a few propositions that summarize what is known and accepted. The interest in doing so is to promote a set of presumptions about what is unsound practice with a presumption that it cannot fail to engender, in time, a crisis. At the center of that discussion is the role of balance sheets. Moreover, crises are not just financial experiences but rather involve large and lasting social costs and important redistribution of income and wealth. That makes it especially important to secure agreement on what constitutes bad practice and identify areas of continuing controversy.
Handle: RePEc:nbr:nberwo:8326
Template-Type: ReDIF-Paper 1.0
Title: Who Dies? International Trade, Market Structure, and Industrial Restructuring
Classification-JEL: F11; L16
Author-Name: Andrew B. Bernard
Author-Name: J. Bradford Jensen
Author-Person: pje75
Note: ITI
Number: 8327
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8327
File-URL: http://www.nber.org/papers/w8327.pdf
File-Format: application/pdf
Abstract: This paper examines the role of changing factor endowments in the growth and decline of industries and regions. The implications of an endowment-based Heckscher-Ohlin trade model for plant entry and exit are tested on 20 years of data for the entire US manufacturing sector. The trade model provides predictions for which industries will see growth through the positive net entry of plants. A multi-region version of the same model has predictions for which regions will see high turnover and net entry of plants. In a country such as the U.S. that is augmenting both its physical and human capital, the least capital-intensive, least skill-intensive industries are correctly predicted to have the lowest rate of net entry. In addition, increases in regional capital and skill intensity are associated with higher probabilities of shutdown, especially for plants in industries with low initial capital and skill intensities.
Handle: RePEc:nbr:nberwo:8327
Template-Type: ReDIF-Paper 1.0
Title: Understanding Health Disparities Across Education Groups
Classification-JEL: I1
Author-Name: Dana Goldman
Author-Person: pgo681
Author-Name: Darius Lakdawalla
Author-Person: pla295
Note: EH
Number: 8328
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8328
File-URL: http://www.nber.org/papers/w8328.pdf
File-Format: application/pdf
Abstract: Better-educated people are healthier, but the magnitude of the relationship between health and education varies substantially across groups and over time. We undertake a theoretical and empirical study of how health disparities by education vary over time and across the population, according to underlying health characteristics and market forces. One surprising implication of the theory we develop is that health disparities actually increase as the price of health inputs falls. Therefore, government subsidies for health care research or even universal health insurance may worsen health inequality. Moreover, technological progress in health care will tend to raise inequality over time. The theory also implies that health disparities will be larger for sicker, older and more vulnerable groups. The first prediction is consistent with significant expansions in health disparities over the last thirty years in the US. The second is consistent with observed patterns in the National Health Interview Survey, the Medicare Current Beneficiary Survey, and the Framingham Heart Study. The returns to schooling are twice as high for the chronically ill and for those out of the labor force, and they tend to rise with age.
Handle: RePEc:nbr:nberwo:8328
Template-Type: ReDIF-Paper 1.0
Title: Social Security as a Financial Asset: Gender-Specific Risks and Returns
Classification-JEL: G2; H3
Author-Name: Marianne Baxter
Author-Person: pba102
Note: PE
Number: 8329
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8329
File-URL: http://www.nber.org/papers/w8329.pdf
File-Format: application/pdf
Publication-Status: published as Baxter, Marianne. "Social Security as a Financial Asset: Gender-Specific Risks and Returns." Journal of Pension Economics and Finance 1, 1 (March 2002): 35-52.
Abstract: Social Security is a financial asset whose 'purchase' is compulsory for most working individuals; the return during the individual's working lifetime is related to the rate of change of aggregate labor income. If an individual's labor income is strongly related to aggregate labor income, then the Social Security asset is a particularly unattractive asset. In this situation, the individual would benefit from a reformed Social Security system that would permit investment of retirement funds in other financial assets. This paper investigates how this aspect of Social Security risk varies across groups of individuals who differ according to gender; education; race; and age. The main finding is that there are important differences across groups in this component of Social Security risk, as captured by the sensitivity of individual-level income growth to changes in the SSWI. This element of risk is most important for women, especially women who are young-to-middle aged and with more education. This analysis suggests that women would have more to gain, compared with men, from a reformed Social Security system.
Handle: RePEc:nbr:nberwo:8329
Template-Type: ReDIF-Paper 1.0
Title: Economic Growth in East Asia Before and After the Financial Crisis
Classification-JEL: O4; O1
Author-Name: Robert J. Barro
Author-Person: pba251
Note: EFG
Number: 8330
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8330
File-URL: http://www.nber.org/papers/w8330.pdf
File-Format: application/pdf
Publication-Status: published as Coe, D.T. and S.J. Kim (eds.) Korean Crisis and Recovery, International Monetary Fund, 2002.
Abstract: In 1997-98, five east Asian countries -- Indonesia, Malaysia, South Korea, the Philippines, and Thailand -- experienced sharp currency and banking crises. The contraction of real GDP was severe in relation to the previous history and in comparison with five east Asian countries that were less affected by the financial crisis. Recoveries in the five crisis countries in 1999-2000 were strong in most cases, but it is unclear whether the pre-crisis growth paths will be reattained. Indications for permanently depressed prospects come from the sharp reductions in investment ratios, which have recovered only slightly, and the lowered stock-market prices. A panel analysis for a broad group of economies shows that a combined currency and banking crisis typically reduces economic growth over a five-year period by 2% per year, compared with 3% per year for the 1997-98 crisis in east Asia. The broader analysis found no evidence that financial crises had effects on growth that persisted beyond a five-year period.
Handle: RePEc:nbr:nberwo:8330
Template-Type: ReDIF-Paper 1.0
Title: Effects of Price and Access Laws on Teenage Smoking Initiation: A National Longitudinal Analysis
Classification-JEL: I1
Author-Name: John A. Tauras
Author-Person: pta136
Author-Name: Patrick M. O'Malley
Author-Name: Lloyd D. Johnston
Note: CH EH
Number: 8331
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8331
File-URL: http://www.nber.org/papers/w8331.pdf
File-Format: application/pdf
Abstract: Over the past three decades a significant amount of economic research has established that increasing cigarette prices reduces cigarette smoking among both adults and adolescents. The consensus estimates for the price elasticity of adult demand from these studies fall in a narrow range of 0.3 to 0.5, suggesting that a 10% increase in the price of cigarettes would decrease adult consumption by 3%-5%. A smaller literature on youth responsiveness to cigarette prices has also emerged. A majority of these studies concluded that youth are up to three times as responsive to price as are adults. Only four econometric studies have attempted to model youth and young adult smoking initiation decisions. All four studies concluded that cigarette prices (or cigarette excise taxes) are insignificant determinants of smoking initiation. This study addresses the limitations of the previous studies on smoking initiation and examines the impact of cigarette prices and youth access laws on adolescent smoking initiation. Nationally representative longitudinal surveys of 8th and 10th graders as part of the Monitoring the Future project are employed in the analysis. State-specific prices and several measures of youth access restrictions are added to the survey data. Discrete-time hazard methods are used to model the probability of initiation. Contradicting the results of the four previous studies on smoking initiation, the results of this study clearly indicate that increases in the price of cigarettes would significantly reduce the number of adolescents who start smoking. The results are mixed with respect to youth access restrictions.
Handle: RePEc:nbr:nberwo:8331
Template-Type: ReDIF-Paper 1.0
Title: The Demand for Nicotine Replacement Therapies
Classification-JEL: I1
Author-Name: John A. Tauras
Author-Person: pta136
Author-Name: Frank J. Chaloupka
Author-Person: pch236
Note: CH EH
Number: 8332
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8332
File-URL: http://www.nber.org/papers/w8332.pdf
File-Format: application/pdf
Publication-Status: published as Tauras, John A. and Frank J. Chaloupka. "The demand for nicotine replacement therapies." Nicotine & Tobacco Research 5, 2 (2003):237-243.
Abstract: This paper is the first econometric study to examine the determinants of nicotine replacement therapy (NRT) demand. Pooled cross-sectional time-series scanner-based data for 50 major metropolitan markets in the United States covering the period between the second quarter 1996 and the third quarter 1999 are used in the analysis. Fixed-effects modeling is employed to assess the impact of NRT prices, cigarette prices, and other determinants on NRT demand. The estimates indicate that decreases in the price of NRT and increases in the price of cigarettes would lead to substantial increases in per-capita sales of NRT products. The average own-price elasticity of demand for Nicoderm CQ, Nicorette, and Nicotrol is -1.4, -1.5, and -1.1 respectively. The average cross-price elasticity of demand for Nicoderm CQ and Nicorette is 0.68 and 0.81 respectively.
Handle: RePEc:nbr:nberwo:8332
Template-Type: ReDIF-Paper 1.0
Title: Do Estate and Gift Taxes Affect the Timing of Private Transfers?
Classification-JEL: H2
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Author-Name: Robert J. Lemke
Author-Name: John Karl Scholz
Note: AG PE
Number: 8333
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8333
File-URL: http://www.nber.org/papers/w8333.pdf
File-Format: application/pdf
Publication-Status: published as Bernheim, B. Douglas, Robert J. Lemke and John Karl Scholz. "Do Estate And Gift Taxes Affect The Timing Of Private Transfers?," Journal of Public Economics, 2004, v88(12,Dec), 2617-2634.
Abstract: Proposals to alter the estate tax are contentious and have been debated largely in an empirical vacuum. This paper examines time series and cross-sectional variation to identify the effects of gift and estate taxation on the timing of private transfers. The analysis is based on data from the 1989, 1992, 1995, and 1998 waves of the Surveys of Consumer Finances. Legislative activity during this period reduced the tax disadvantage of bequests relative to gifts. Moreover, the magnitude of this reduction differed systematically across identifiable household categories. We find that households experiencing larger declines in the expected tax disadvantages of bequests substantially reduced inter vivos transfers relative to households experiencing small declines in the tax disadvantages of bequests. This implies that the timing of transfers is highly responsive to applicable gift and estate tax rates. These conclusions are based both on simple comparisons of the probability of giving across different time periods and groups, and on empirical specifications that control for a variety of potentially confounding factors, such as systematic changes in the fraction of wealth attributable to unrealized capital gains. The results also provide evidence of a systematic bequest motive for some high-wealth households.
Handle: RePEc:nbr:nberwo:8333
Template-Type: ReDIF-Paper 1.0
Title: General-Equilibrium Approaches to the Multinational Firm: A Review of Theory and Evidence
Classification-JEL: F13; F23
Author-Name: James R. Markusen
Author-Person: pma528
Author-Name: Keith E. Maskus
Author-Person: pma232
Note: ITI
Number: 8334
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8334
File-URL: http://www.nber.org/papers/w8334.pdf
File-Format: application/pdf
Publication-Status: published as Harrigan, James and Kwan Choi (eds.) Handbook of Empirical International Trade, 2003.
Abstract: Beginning in the early 1980s, theoretical analyses have incorporated the multinational firm into the microeconomic, general-equilibrium theory of international trade. Recent advances indicate how vertical and horizontal multinationals arise endogenously as determined by country characteristics, including relative size and relative endowment differences, and trade and investment costs. Results also characterize the relationship between foreign affiliate production and international trade in goods and services. In this paper, we survey some of this recent work, and note the testable predictions generated in the theory. In the second part of the paper, we examine empirical results that relate foreign affiliate production to country characteristics and trade/investment cost factors. We also review findings from analyses of the pattern of substitutability or complementarity between trade and foreign production.
Handle: RePEc:nbr:nberwo:8334
Template-Type: ReDIF-Paper 1.0
Title: A Unified Approach to Intra-Industry Trade and Direct Foreign Investment
Classification-JEL: F13; F23
Author-Name: James R. Markusen
Author-Person: pma528
Author-Name: Keith E. Maskus
Author-Person: pma232
Note: ITI
Number: 8335
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8335
File-URL: http://www.nber.org/papers/w8335.pdf
File-Format: application/pdf
Publication-Status: published as Lloyd, Peter, Herbert Grubel, and Hyun-Hoon Lee (eds.) The Frontiers of Intra-Industry Trade. London: Macmillan, 2002.
Abstract: Economic interactions among the high-income developed countries are characterized by high degrees of both intra-industry trade and intra-industry affiliate production and sales. Similar high-income countries both heavily trade with and invest into each other. The purpose of this paper is to show how the theory of direct investment can now be integrated with the theory of international trade in goods, and to show how the two combine to determine the pattern of trade and foreign affiliate production. Empirical estimation gives good support to the predictions of the theory for intra-industry affiliate sales, with somewhat weaker results for intra-industry trade. Results confirm that the intra-industry affiliate sales index rises relative to the intra-industry trade index as countries become richer and more similar in size and in relative endowments.
Handle: RePEc:nbr:nberwo:8335
Template-Type: ReDIF-Paper 1.0
Title: The Rise in Disability Recipiency and the Decline in Unemployment
Classification-JEL: H53; I12
Author-Name: David H. Autor
Author-Person: pau9
Author-Name: Mark G. Duggan
Author-Person: pdu194
Note: LS PE
Number: 8336
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8336
File-URL: http://www.nber.org/papers/w8336.pdf
File-Format: application/pdf
Publication-Status: published as Autor, David H. and Mark G. Duggan. "The Rise In The Disability Rolls And The Decline In Unemployment," Quarterly Journal of Economics, 2003, v118(1,Feb), 157-205.
Abstract: Between 1984 and 2000, the share of non-elderly adults receiving benefits from the Social Security Disability Insurance (DI) and Supplemental Security Income (SSI) programs rose from 3.1 to 5.3 percent. We trace this growth to reduced screening stringency and, due to the interaction between growing wage inequality and a progressive benefits formula, a rising earnings replacement rate. We explore the implications of these changes for the level of labor force participation among the less skilled and their employment responses to adverse employment shocks. Following program liberalization in 1984, DI application and recipiency rates became two to three times as responsive to plausibly exogenous labor demand shocks. Contemporaneously, male and female high school dropouts became increasingly likely to exit the labor force rather than enter unemployment in the event of an adverse shock. The liberalization of the disability program appears to explain both facts. Accounting for the role of disability in inducing labor force exit among the low-skilled unemployed, we calculate that the U.S. unemployment rate would be two-thirds of a percentage point higher at present were it not for the liberalized disability system.
Handle: RePEc:nbr:nberwo:8336
Template-Type: ReDIF-Paper 1.0
Title: The Skill Content of Recent Technological Change: An Empirical Exploration
Classification-JEL: O30; J23
Author-Name: David H. Autor
Author-Person: pau9
Author-Name: Frank Levy
Author-Person: ple351
Author-Name: Richard J. Murnane
Author-Person: pmu87
Note: LS PR
Number: 8337
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8337
File-URL: http://www.nber.org/papers/w8337.pdf
File-Format: application/pdf
Publication-Status: published as Autor, David, Frank Levy, and Richard Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, Nov. 7-8, 2003.
Publication-Status: published as Autor, David, Frank Levy, and Richard Murnane. "The Skill Content of Recent Technological Change: An Empirical Exploration." Quarterly Journal of Economic, 118(4): 1279-1333, Nov. 2003.
Abstract: We apply an understanding of what computers do -- the execution of procedural or rules-based logic -- to study how computer technology alters job skill demands. We contend that computer capital (1) substitutes for a limited and well-defined set of human activities, those involving routine (repetitive) cognitive and manual tasks; and (2) complements activities involving non-routine problem solving and interactive tasks. Provided these tasks are imperfect substitutes, our model implies measurable changes in the task content of employment, which we explore using representative data on job task requirements over 1960 -- 1998. Computerization is associated with declining relative industry demand for routine manual and cognitive tasks and increased relative demand for non-routine cognitive tasks. Shifts are evident within detailed industries, within detailed occupations, and within education groups within industries. Translating observed task shifts into educational demands, the sum of within-industry and within-occupation task changes explains thirty to forty percent of the observed relative demand shift favoring college versus non-college labor during 1970 to 1998, with the largest impact felt after 1980. Changes in task content within nominally identical occupations explain more than half of the overall demand shift induced by computerization.
Handle: RePEc:nbr:nberwo:8337
Template-Type: ReDIF-Paper 1.0
Title: Credit, Prices, and Crashes: Business Cycles with a Sudden Stop
Classification-JEL: E3; F4
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Note: IFM
Number: 8338
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8338
File-URL: http://www.nber.org/papers/w8338.pdf
File-Format: application/pdf
Publication-Status: published as Credit, Prices, and Crashes: Business Cycles with a Sudden Stop, Enrique G. Mendoza. in Preventing Currency Crises in Emerging Markets, Edwards and Frankel. 2002
Abstract: The 1990s emerging-markets crises were characterized by sudden reversals in inflows of foreign capital followed by unusually large declines in current account deficits, private expenditures, production, and prices of nontradable goods relative to tradables. This paper shows that these Sudden Stops can be the outcome of the equilibrium dynamics of a flexible-price economy with imperfect credit markets. Foreign debt is denominated in units of tradables and a liquidity constraint links credit-market access to the income generated in the nontradables sector and the relative price of nontradables. Sudden Stops occur when real shocks of foreign or domestic origin, or policy-induced shocks make this constraint binding. Sudden Stops are not reflected in long-run business cycle statistics but still they entail nontrivial welfare costs. These results question crises-management policies seeking to impose direct controls on private capital flows and favor those that work to weaken credit frictions.
Handle: RePEc:nbr:nberwo:8338
Template-Type: ReDIF-Paper 1.0
Title: Globalization and Inequality: Historical Trends
Classification-JEL: F0; N7
Author-Name: Kevin H. O'Rourke
Author-Person: por7
Note: ITI
Number: 8339
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8339
File-URL: http://www.nber.org/papers/w8339.pdf
File-Format: application/pdf
Publication-Status: published as Reprinted in Aussenwirtschaft 57, 1 (2002): 65-101.
Publication-Status: published as O'Rourke, Kevin H. “Globalization and inequality: historical trends.” Annual World Bank Conference on Development Economics (2001/2): 39-67.
Abstract: This paper surveys trends in both international economic integration and inequality over the past 150 years, as well as the links between them. In doing so, it distinguishes between (a) the different dimensions of globalization; and (b) between-country and within-country inequality. Theory suggests that globalization will have very different implications for within-country inequality, depending on the dimension of globalization involved (e.g. trade versus factor flows), on the country concerned, and on the distribution of endowments; the historical record provides ample evidence of this ambiguous relationship. Late 19th century globalization had large effects on within-country income distribution, but the effect on inequality differed greatly across countries: both trade and migration (but not capital flows) made the rich New World more unequal, and the (less rich) Old World more equal. The evidence on the links between within-country inequality and globalization in the late 20th century is mixed. The balance of evidence suggests that globalization has been a force for between-country convergence in both the late 19th and late 20th centuries; long run patterns of divergence are due to other factors (e.g. the unequal spread of the Industrial Revolution).
Handle: RePEc:nbr:nberwo:8339
Template-Type: ReDIF-Paper 1.0
Title: Taxation, Risk-Taking, and Household Portfolio Behavior
Classification-JEL: H2; G1
Author-Name: James M. Poterba
Author-Person: ppo19
Note: AP PE
Number: 8340
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8340
File-URL: http://www.nber.org/papers/w8340.pdf
File-Format: application/pdf
Publication-Status: published as Poterba, James M., 2002. "Taxation, risk-taking, and household portfolio behavior," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 17, pages 1109-1171 Elsevier.
Abstract: This paper summarizes the current state of research on how taxation affects household decisions with respect to portfolio structure and asset trading. It discusses long-standing issues, such as the impact of differential taxation of income flows from stocks and bonds on the incentives for households to invest in these assets, and the effect of capital gains taxation on asset sales. It also addresses a range of emerging issues, such as the impact of taxation on the behavior of mutual funds and their investors, and the effect of tax changes and tax uncertainty on investor behavior. It concludes that taxation exerts a systematic influence on the nature of risk-taking and the structure of household portfolios. Research on the effects of taxation on portfolio structure is more advanced than work on the welfare costs of portfolio distortions.
Handle: RePEc:nbr:nberwo:8340
Template-Type: ReDIF-Paper 1.0
Title: Does Participating in a 401(k) Raise Your Lifetime Taxes?
Classification-JEL: H2
Author-Name: Jagadeesh Gokhale
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: Todd Neumann
Note: AG PE
Number: 8341
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8341
File-URL: http://www.nber.org/papers/w8341.pdf
File-Format: application/pdf
Abstract: Contributing to 401(k)s and similar tax-deferred retirement accounts certainly lowers current taxes. But does it lower your lifetime taxes? If average and marginal tax rates were independent of income and didn't change through time, the answer would be an unambiguous yes. The reduction in current taxes would exceed the increase in future taxes when measured in present value. But tax rates may be higher when retirement account withdrawals occur, either because one moves into higher marginal federal and state tax brackets or because the government raises tax rates. In addition, reducing tax brackets when young, at the price of higher tax brackets when old, may reduce the value of mortgage deductions. Finally, and very importantly, shifting taxable income from youth to old age can substantially increase the share of Social Security benefits subject to federal income taxation. This paper uses ESPlanner, a detailed life-cycle personal financial planning model to study the lifetime tax advantage to stylized young couples of participating in a 401(k) plan. Assuming a percent real return on assets, we find that low- and moderate-income households actually raise their lifetime taxes and lower their lifetime expenditures by saving in a 401(k) plan. In the case of a couple with $50,000 in annual earnings, partaking fully in the typical 401(k) plan raises lifetime tax payments by 1.1 percent and lowers lifetime expenditures by 0.4 percent. The lifetime tax hike is 6.4 percent and the lifetime spending reduction is 1.7 percent for such households if they receive an 8 percent real rate of return. These figures rise to 7.3 percent and 2.3 percent, respectively, if taxes are increased by 20 percent when the couple retires. These findings are driven, in large part, by the additional Social Security benefit taxation induced by 401(k) withdrawals. The picture is quite different for high-income young couples with so much income that 401(k) participation cannot a) lower and then raise their marginal income tax rates or b) raise the share of their Social Security benefits that is taxable. For such couples 401(k) participation means major lifetime tax savings. At a 6 percent real return, a couple earning at the rate of $300,000 per year would enjoy a 6.8 percent lifetime tax break, which translates into a 3.9 percent increase in lifetime spending. These couples' continue to enjoy a large lifetime subsidy even if tax rates are raised by as much as a fifth when they retire. In addition to demonstrating the regressivity of the fe
Handle: RePEc:nbr:nberwo:8341
Template-Type: ReDIF-Paper 1.0
Title: Agency, Information and Corporate Investment
Classification-JEL: D21; D23
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: CF
Number: 8342
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8342
File-URL: http://www.nber.org/papers/w8342.pdf
File-Format: application/pdf
Publication-Status: published as Stein, Jeremy C., 2003. "Agency, information and corporate investment," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 2, pages 111-165 Elsevier.
Abstract: This essay surveys the body of research that asks how the efficiency of corporate investment is influenced by problems of asymmetric information and agency. I organize the material around two basic questions. First, does the external capital market channel the right amount of money to each firm? That is, does the market get across-firm allocations right, so that the marginal return to investment in firm i is the same as the marginal return to investment in firm j? Second, do internal capital markets channel the right amount of money to individual projects within firms? That is, does the internal capital budgeting process get within-firm allocations right, so that the marginal return to investment in firm i's division A is the same as the marginal return to investment in firm i's division B? In addition to discussing the theoretical and empirical work that bears most directly on these questions, the essay also briefly sketches some of the implications of this work for broader issues in both macroeconomics and the theory of the firm.
Handle: RePEc:nbr:nberwo:8342
Template-Type: ReDIF-Paper 1.0
Title: Vouchers for Private Schooling in Colombia: Evidence from a Randomized Natural Experiment
Classification-JEL: I2; H4
Author-Name: Joshua Angrist
Author-Person: pan29
Author-Name: Eric Bettinger
Author-Person: pbe413
Author-Name: Erik Bloom
Author-Name: Elizabeth King
Author-Name: Michael Kremer
Author-Person: pkr20
Note: ED LS
Number: 8343
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8343
File-URL: http://www.nber.org/papers/w8343.pdf
File-Format: application/pdf
Publication-Status: published as Joshua Angrist & Eric Bettinger & Erik Bloom & Elizabeth King & Michael Kremer, 2002. "Vouchers for Private Schooling in Colombia: Evidence from a Randomized Natural Experiment," American Economic Review, American Economic Association, vol. 92(5), pages 1535-1558, December.
Abstract: Colombia's PACES program provided over 125,000 pupils from poor neighborhoods with vouchers that covered approximately half the cost of private secondary school. Since many vouchers were allocated by lottery, we use differences in outcomes between lottery winners and losers to assess program effects. Three years into the program, lottery winners were 15 percentage points more likely to have attended private school, had completed .1 more years of schooling, and were about 10 percentage points more likely to have finished 8 th grade, primarily because they were less likely to repeat grades. The program did not significantly affect dropout rates. Lottery winners scored .2 standard deviations higher on standardized tests. There is some evidence that winners worked less than losers and were less likely to marry or cohabit as teenagers. On average, lottery winners increased their educational expenditure by about 70% of the value of the voucher. Since winners also worked less, they devoted more total resources to education. Compared to an equivalent expansion of the public education system, the voucher program increased annual government educational expenditure by about $24 per winner. But the costs to the government and to participants were probably much less than the increase in winners' earnings due to greater educational attainment.
Handle: RePEc:nbr:nberwo:8343
Template-Type: ReDIF-Paper 1.0
Title: Economic Status and Health in Childhood: The Origins of the Gradient
Classification-JEL: I1
Author-Name: Anne Case
Author-Person: pca108
Author-Name: Darren Lubotsky
Author-Person: plu41
Author-Name: Christina Paxson
Author-Person: ppa335
Note: CH EH
Number: 8344
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8344
File-URL: http://www.nber.org/papers/w8344.pdf
File-Format: application/pdf
Publication-Status: published as Case, Anne, Darren Lubotsky and Christina Paxson. "Economic Status And Health In Childhood: The Origins Of The Gradient," American Economic Review, 2002, v92(5,Dec), 1308-1334.
Abstract: We show that the well-known positive association between health and income in adulthood has antecedents in childhood. Using the National Health Interview Surveys, the Panel Study of Income Dynamics, and the National Health and Nutrition Examination Survey, we find that children's health is positively related to household income. The relationship between household income and children's health status becomes more pronounced as children grow older. A large component of the relationship between income and children's health can be explained by the arrival and impact of chronic health conditions in childhood. Children from lower-income households with chronic health conditions have worse health than do children from higher-income households. Further, we find that children's health is closely associated with long-run average household income, and that the adverse health effects of lower permanent income accumulate over children's lives. Part of the intergenerational transmission of socioeconomic status may work through the impact of parents' long run average income on children's health.
Handle: RePEc:nbr:nberwo:8344
Template-Type: ReDIF-Paper 1.0
Title: Desegregation and Black Dropout Rates
Classification-JEL: H4; I2
Author-Name: Jonathan Guryan
Author-Person: pgu126
Note: LS
Number: 8345
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8345
File-URL: http://www.nber.org/papers/w8345.pdf
File-Format: application/pdf
Publication-Status: published as Guryan, Jonathan. "Desegregation And Black Dropout Rates," American Economic Review, 2004, v94(4,Sep), 919-943.
Abstract: In 1954 the Supreme Court of the United States ruled that separate schools for black and white children were 'inherently unequal.' This paper studies whether the desegregation plans of the next 30 years in fact benefited the black students for whom the plans were designed. Analysis of data from the 1970 and 1980 censuses suggests that desegregation plans of the 1970's reduced the high school dropout rates of blacks by one to three percentage points during this decade. Desegregation plans can account for about half of the decline in dropout rates of blacks between 1970 and 1980. A similar analysis suggests that desegregation plans had no effect on the dropout rates of whites. The results are robust to controls for time-varying region and family income effects, as well as to tests for selective migration, though mean reversion may account for some portion of the larger estimated effects. Further investigation of conditions in segregated schools in 1970 suggests that peer effects explain at least some of the decline in the dropout rates of blacks due to desegregation plans.
Handle: RePEc:nbr:nberwo:8345
Template-Type: ReDIF-Paper 1.0
Title: Standards and Related Regulations in International Trade: A Modeling Approach
Classification-JEL: F1; F2
Author-Name: Mattias Ganslandt
Author-Name: James R. Markusen
Author-Person: pma528
Note: ITI
Number: 8346
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8346
File-URL: http://www.nber.org/papers/w8346.pdf
File-Format: application/pdf
Publication-Status: published as Maskus, Keith E. and John S. Wilson (eds.) Quantifying the impact of technical barriers to trade: Can it be done? Studies in International Economics. Ann Arbor: University of Michigan Press, 2001.
Abstract: Standards and technical regulations which govern the admissibility of imported goods into an economy raise costs of exporters entering new markets, and may have a particularly high impact on firms seeking to export from developing countries. Yet standards may also have a positive side, such as certifying product quality and safety for the consumer. This paper suggests approaches to modeling standards and technical regulations, with a particular concern that these approaches are at least potentially implementable in an applied general-equilibrium model with real data.
Handle: RePEc:nbr:nberwo:8346
Template-Type: ReDIF-Paper 1.0
Title: Multi-Issue Bargaining and Linked Agendas: Ricardo Revisited or No Pain No Gain
Classification-JEL: F2; F13
Author-Name: Ignatius J. Horstmann
Author-Person: pho167
Author-Name: James R. Markusen
Author-Person: pma528
Author-Name: Jack Robles
Note: ITI
Number: 8347
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8347
File-URL: http://www.nber.org/papers/w8347.pdf
File-Format: application/pdf
Publication-Status: published as Horstmann, Ignatius J., James R. Markusen and Jack Robles. "Issue Linking In Trading Negotiations: Ricardo Revisited Or Not Pain No Gain," Review of International Economics, 2005, v13(2,May), 185-204.
Abstract: There has been much discussion about what issues should be included in international 'trade' negotiations. Different countries, firms and activists groups have quite different views regarding which items should (or should not) be negotiated together. Proposals run the gamut from no linking to linking trade with investment, the environment, labor and human-rights codes. This paper provides a formal framework for analyzing these questions. It employs a two-country, two-issue bargaining model and contrasts outcomes when issues are negotiated separately and when they are linked in some form. A key concept is 'comparative interest', analogous to Ricardian comparative advantage. We provide general results and note, in particular, where a country can benefit by agreeing to include an agenda item for which, when viewed by itself, the country does not receive a positive payoff.
Handle: RePEc:nbr:nberwo:8347
Template-Type: ReDIF-Paper 1.0
Title: Creative Destruction or Just Plain Destruction?: The U.S. Textile and Apparel Industries since 1972
Author-Name: Jim Levinsohn
Author-Person: ple386
Author-Name: Wendy Petropoulos
Note: IO ITI
Number: 8348
Creation-Date: 2001-06
Order-URL: http://www.nber.org/papers/w8348
File-URL: http://www.nber.org/papers/w8348.pdf
File-Format: application/pdf
Abstract: Are the U.S. textile and apparel industries examples of creative destruction or are they just plain destructing? We investigate this question using both aggregate industry-level data and plant-level data from the U.S. Census' LRD. We find that while the aggregate-level evidence is consistent with the common view of these industries as examples of declining industries, the plant-level data support a very different and much more hopeful view. We find that in the face of intensified international competition, each industry has evolved in its own way. In textiles, there has been tremendous capitalization. In apparel, the organization of production has changed. In both cases, industry productivity has increased markedly, and this is mostly because individual plants are becoming more productive.
Handle: RePEc:nbr:nberwo:8348
Template-Type: ReDIF-Paper 1.0
Title: Why Some Firms Export
Classification-JEL: F20; D21
Author-Name: Andrew B. Bernard
Author-Name: J. Bradford Jensen
Author-Person: pje75
Note: ITI
Number: 8349
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8349
File-URL: http://www.nber.org/papers/w8349.pdf
File-Format: application/pdf
Publication-Status: published as Andrew B. Bernard & J. Bradford Jensen, 2004. "Why Some Firms Export," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 561-569, 04.
Abstract: This paper presents a dynamic model of the export decision by a profit-maximizing firm. Using a panel of U.S. manufacturing plants, we test for the role of plant characteristics, spillovers from neighboring exporters, entry costs and government export promotion expenditures. Entry and exit in the export market by U.S. plants is substantial, past exporters are apt to reenter, and plants are likely to export in consecutive years. However, we find that entry costs are significant and spillovers from the export activity of other plants negligible. State export promotion expenditures have no significant effect on the probability of exporting. Plant characteristics, especially those indicative of past success, strongly increase the probability of exporting as do favorable exchange rate shocks.
Handle: RePEc:nbr:nberwo:8349
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Reaction of Monetary Policy to the Stock Market
Classification-JEL: E44; E47
Author-Name: Roberto Rigobon
Author-Person: pri12
Author-Name: Brian Sack
Note: AP IFM ME
Number: 8350
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8350
File-URL: http://www.nber.org/papers/w8350.pdf
File-Format: application/pdf
Publication-Status: published as Rigobon, Robert and Brian Sack. "Measuring The Reaction Of Monetary Policy To The Stock Market," Quarterly Journal of Economics, 2003, v118(2,May), 639-669.
Abstract: Movements in the stock market can have a significant impact on the macroeconomy and are therefore likely to be an important factor in the determination of monetary policy. However, little is known about the magnitude of the Federal Reserve's reaction to the stock market. One reason is that it is difficult to estimate the policy reaction because of the simultaneous response of equity prices to interest rate changes. This paper uses an identification technique based on the heteroskedasticity of stock market returns to identify the reaction of monetary policy to the stock market. The results indicate that monetary policy reacts significantly to stock market movements, with a 5% rise (fall) in the S&P 500 index increasing the likelihood of a 25 basis point tightening (easing) by about a half. This reaction is roughly of the magnitude that would be expected from estimates of the impact of stock market movements on aggregate demand. Thus, it appears that the Federal Reserve systematically responds to stock price movements only to the extent warranted by their impact on the macroeconomy.
Handle: RePEc:nbr:nberwo:8350
Template-Type: ReDIF-Paper 1.0
Title: Competition in the Computer Industry
Classification-JEL: L1
Author-Name: Austan Goolsbee
Author-Person: pgo49
Note: IO PR
Number: 8351
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8351
File-URL: http://www.nber.org/papers/w8351.pdf
File-Format: application/pdf
Publication-Status: published as Goolsbee, Austan. "Competition in the Computer Industry: Online versus Retail." Journal of Industrial Economics 49, 4 (December 2001): 487-99.
Abstract: This paper estimates the relative price sensitivity of individuals' choice of whether to buy computers online versus in retail stores using a new data source on the computer purchase behavior of more than 20,000 people. To estimate the degree of competition between the two channels, the paper uses a two step approach. First, it fits hedonic regressions for the prices paid for a computer in a retail store as a function of characteristics. The coefficients on the city fixed effects in these regressions give a measure of the retail price level The second stage then looks at whether individuals purchase their computers in stores versus online as a function of the retail price and their own personal characteristics. The results indicate that the decision to buy remotely is sensitive to the relative price of computers in retail stores and that it varies by type of customer and type of computer. Conditional on buying a computer, the overall elasticity of buying remotely with respect to retail store prices is about 1.5.
Handle: RePEc:nbr:nberwo:8351
Template-Type: ReDIF-Paper 1.0
Title: Why Has the Euro Been Falling? An Investigation into the Determinants of the Exchange Rate
Classification-JEL: F31; E41
Author-Name: Hans-Werner Sinn
Author-Person: psi146
Author-Name: Frank Westermann
Author-Person: pwe84
Note: IFM
Number: 8352
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8352
File-URL: http://www.nber.org/papers/w8352.pdf
File-Format: application/pdf
Abstract: This paper reconsiders the determinants of the exchange rate by studying the historical episode after the fall of the Iron Curtain. Testing a modified portfolio balance model, we attribute the strength of the deutschmark in the early nineties and the puzzling decline of the euro during its virtual existence to changes in the demand for deutschmarks in eastern Europe and to variations in the demand for black money balances in Europe as a whole. We reject the view that the strength of the dollar and the weakness of the euro reflect the prosperity of the US and the weakness of the European economy on both theoretical and empirical grounds.
Handle: RePEc:nbr:nberwo:8352
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Employee Stock Options on the Evolution of Compensation in the 1990s
Classification-JEL: J33; J38
Author-Name: Hamid Mehran
Author-Person: pme276
Author-Name: Joseph Tracy
Author-Person: ptr23
Note: ME
Number: 8353
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8353
File-URL: http://www.nber.org/papers/w8353.pdf
File-Format: application/pdf
Publication-Status: published as Mehran, Hamid and Joseph Tracy. "The Effect Of Employee Stock Options On The Evolution Of Compensation In The 1990s," FRB New York- Economic Policy Review, 2001, v7(3,Dec), 17-34.
Abstract: Between 1995 and 1998, actual growth in nominal compensation per hour (CPH) accelerated from approximately 2 percent to 5 percent. Yet as labor markets continued to tighten in 1999, the growth in CPH paradoxically slowed. In this article, we attempt to solve this aggregate wage puzzle by exploring whether changes in pay structure - specifically, the increased use of employee stock options - can account for the behavior of CPH in the late 1990s. CPH reflects employee stock options on the date they are realized rather than on the date they are granted. When we recalculate CPH growth to reflect the value of current stock options when they are granted - rather than their value when they are realized - we find that our adjusted CPH measure accelerated in each year from 1995 to 1999.
Handle: RePEc:nbr:nberwo:8353
Template-Type: ReDIF-Paper 1.0
Title: Financial Structure, Macroeconomic Stability and Monetary Policy
Classification-JEL: E5; G1
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Author-Name: Stefan Krause
Note: ME
Number: 8354
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8354
File-URL: http://www.nber.org/papers/w8354.pdf
File-Format: application/pdf
Abstract: Over the past twenty years, macroeconomic performance has improved markedly in industrialized and developing countries alike. Both inflation and real growth are more stable now than they were in the 1980s. This stability has been accompanied by dramatic changes in financial structure. We examine the connection between these concurrent events using data from 23 developed and emerging markets countries. There are a number of possible explanations for the widespread improvement in economic outcomes over the past two decades. There is the very real possibility that the world has become a more stable place. Alternatively, monetary policymakers may have become more skillful in carry out their stabilization objectives. That is, the monetary policy of the 1990s may have been more efficient than it was in the 1980s. We provide evidence that policy has in fact improved, suggesting that a rise in the competence of central bankers. But the ability of policymakers to carry out their job depends crucially on their having the tools necessary to reduce inflation and output volatility. The transmission of these interest rate movements to domestic output and prices depends on the structure of the country's banking system and financial markets. We show that a reduction in direct state ownership of banking system assets and the introduction of explicit deposit insurance can help explain the simultaneous improvement in the efficiency of monetary policy and stabilization of the macroeconomy.
Handle: RePEc:nbr:nberwo:8354
Template-Type: ReDIF-Paper 1.0
Title: Centralization, Fiscal Federalism and Private School Attendance
Classification-JEL: H7; I2
Author-Name: Thomas J. Nechyba
Author-Person: pne28
Note: ED PE
Number: 8355
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8355
File-URL: http://www.nber.org/papers/w8355.pdf
File-Format: application/pdf
Publication-Status: published as Nechyba, Thomas J. "Centralization, Fiscal Federalism, And Private School Attendance," International Economic Review, 2003, v44(1,Feb), 179-204.
Abstract: This paper uses a computational general equilibrium model to analyze the impact of public school finance regimes on rates of private school attendance. It is shown that, when viewed in such a general equilibrium context, state intervention in locally financed systems can have somewhat unexpected and counterintuitive effects on the level of private school attendance. In particular, the common perception that centralization of public school finance will necessarily lead to greater private school attendance is no longer correct when general equilibrium forces are taken into account even when that centralization involves an extreme equalization of the kind observed in California. Furthermore, if centralization occurs through less dramatic means that allow for some remaining discretion on the part of local districts, declines in private school attendance become much more unambiguous and pronounced. These results then weaken the speculation that low exit rates to private schools in centralizing states imply that general public school quality does not drop as a result of such centralization.
Handle: RePEc:nbr:nberwo:8355
Template-Type: ReDIF-Paper 1.0
Title: Portfolio Balance, Price Impact, and Secret Intervention
Classification-JEL: F31; G12
Author-Name: Martin D. D. Evans
Author-Person: pev5
Author-Name: Richard K. Lyons
Author-Person: ply9
Note: IFM
Number: 8356
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8356
File-URL: http://www.nber.org/papers/w8356.pdf
File-Format: application/pdf
Abstract: This paper tests the portfolio-balance approach to exchange rate determination in a new way. Past work on portfolio balance in foreign exchange falls into two groups: (1) tests using measures of asset supply and (2) tests using measures of central-bank asset demand. We address the demand side, but we use a broad measure of public demand, rather than focusing on demand by central banks. Under floating rates, changing public demand has no direct effect on interest rates, current or future. This provides an opportunity to test for portfolio-balance effects on price. We develop and estimate a micro portfolio-balance model that has both Walrasian and microstructure features. Portfolio-balance effects are clearly present: the immediate price impact of public trades is 0.44 percent per $1 billion (of which, about 80 percent persists indefinitely). This estimate is applicable to central-bank trades as well, as long as they are sterilized, secret, and provide no monetary-policy signal. Intervention of this type is most effective when the flow of macroeconomic news is strong.
Handle: RePEc:nbr:nberwo:8356
Template-Type: ReDIF-Paper 1.0
Title: Is There a New Urbanism? The Growth of U.S. Cities in the 1990s
Classification-JEL: R1
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Jesse Shapiro
Author-Person: psh70
Note: PE
Number: 8357
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8357
File-URL: http://www.nber.org/papers/w8357.pdf
File-Format: application/pdf
Abstract: The 1990s were an unusually good decade for the largest American cities and, in particular, for the cities of the Midwest. However, fundamentally urban growth in the 1990s looked extremely similar to urban growth during the prior post-war decades. The growth of cities was determined by three large trends: (1) cities with strong human capital bases grew faster than cities without skills, (2) people moved to warmer, drier places, and (3) cities built around the automobile replaced cities that rely on public transportation. In the 1990s (as in the 1980s), more local government spending was associated with slower growth, unless that spending was on highways. We shouldn't be surprised by the lack of change in patterns of urban growth, after all the correlation of city growth rates across decades is generally over 70 percent.
Handle: RePEc:nbr:nberwo:8357
Template-Type: ReDIF-Paper 1.0
Title: Social Interaction and Stock-Market Participation
Classification-JEL: G11; E44
Author-Name: Harrison Hong
Author-Person: pho390
Author-Name: Jeffrey D. Kubik
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: AP CF
Number: 8358
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8358
File-URL: http://www.nber.org/papers/w8358.pdf
File-Format: application/pdf
Publication-Status: published as Hong, Harrison, Jeffrey D. Kubik and Jeremy C. Stein. "Social Interaction And Stock-Market Participation," Journal of Finance, 2004, v59(1,Feb), 137-163.
Abstract: We investigate the idea that stock-market participation is influenced by social interaction. We build a simple model in which any given 'social' investor finds it more attractive to invest in the market when the participation rate among his peers is higher. The model predicts higher participation rates among social investors than among 'non-socials'. It also admits the possibility of multiple social equilibria. We then test the theory using data from the Health and Retirement Study. Social households - defined as those who interact with their neighbors, or who attend church - are indeed substantially more likely to invest in the stock market than non-social households, controlling for other factors like wealth, race, education and risk tolerance. Moreover, consistent with a peer-effects story, the impact of sociability is stronger in states where stock-market participation rates are higher.
Handle: RePEc:nbr:nberwo:8358
Template-Type: ReDIF-Paper 1.0
Title: Productivity Growth in the 1990s: Technology, Utilization, or Adjustment?
Classification-JEL: O47; E23
Author-Name: Susanto Basu
Author-Person: pba274
Author-Name: John G. Fernald
Author-Person: pfe43
Author-Name: Matthew D. Shapiro
Author-Person: psh144
Note: EFG PR
Number: 8359
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8359
File-URL: http://www.nber.org/papers/w8359.pdf
File-Format: application/pdf
Publication-Status: published as Basu, Susanto & Fernald, John G. & Shapiro, Matthew D., 2001. "Productivity growth in the 1990s: technology, utilization, or adjustment?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 55(1), pages 117-165, December.
Abstract: Measured productivity growth increased substantially during the second half of the 1990s. This paper examines whether this increase owes to an increase in the rate of technological change or whether it can be explained by non-technological factors relating to factor utilization, factor accumulation, or returns to scale. It finds that the recent increase in productivity growth does appear to arise from an increase in technological change. Cyclical utilization raised measured productivity growth relative to technology growth in the first part of the expansion, but lowered it subsequently. Factor adjustment leads to a steady-state understatement of technology growth by measured productivity growth. The understatement was greater in the second half of the expansion than the first. Changes in the distribution of inputs across industries with different returns to scale lead to a modest understatement in the growth in technology. Although the increase technological change is most pronounced in durable manufacturing, technological change also increased outside of manufacturing.
Handle: RePEc:nbr:nberwo:8359
Template-Type: ReDIF-Paper 1.0
Title: The Size of the Permanent Component of Asset Pricing Kernels
Classification-JEL: G12; E43
Author-Name: Fernando Alvarez
Author-Name: Urban J. Jermann
Author-Person: pje4
Note: AP EFG IFM
Number: 8360
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8360
File-URL: http://www.nber.org/papers/w8360.pdf
File-Format: application/pdf
Abstract: We derive a lower bound for the size of the permanent component of asset pricing kernels. The bound is based on return properties of long-term zero-coupon bonds, risk-free bonds, and other risky securities. We find the permanent component of the pricing kernel to be very large; its volatility is about 100% of the volatility of the stochastic discount factor. This result implies that, if the pricing kernel is a function of consumption, innovations to consumption need to have permanent effects.
Handle: RePEc:nbr:nberwo:8360
Template-Type: ReDIF-Paper 1.0
Title: Current Accounts and Exchange Rates: A New Look at the Evidence
Classification-JEL: F4
Author-Name: Greg Leonard
Author-Name: Alan C. Stockman
Author-Person: pst94
Note: IFM
Number: 8361
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8361
File-URL: http://www.nber.org/papers/w8361.pdf
File-Format: application/pdf
Publication-Status: published as Leonard, Greg and Alan C. Stockman. "Current Accounts And Exchange Rates: A New Look At The Evidence," Review of International Economics, 2002, v10(3,Aug), 483-496.
Abstract: This paper 'goes back to basics' in empirical analysis of the J-Curve. First, we document strong violations in the distributional assumptions that underlie nearly all previous work on this issue. Second, we employ distribution-free, non-parametric statistical tests to characterize the data and summarize the key relationships between real exchange rates, the current account, and real GDP. We find some (weak) evidence of a J-Curve in the data. Interestingly, however, we document that this evidence is not consistent with the standard theoretical explanation of the J-Curve. Consequently, our empirical results pose a strong challenge for international economic theory.
Handle: RePEc:nbr:nberwo:8361
Template-Type: ReDIF-Paper 1.0
Title: Rational Speculation and Exchange Rates
Classification-JEL: F3; F4
Author-Name: Margarida Duarte
Author-Person: pdu125
Author-Name: Alan C. Stockman
Author-Person: pst94
Note: IFM
Number: 8362
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8362
File-URL: http://www.nber.org/papers/w8362.pdf
File-Format: application/pdf
Publication-Status: published as Duarte, Margarida and Alan C. Stockman. "Rational Speculation And Exchange Rates," Journal of Monetary Economics, 2005, v52(1,Jan), 3-29.
Abstract: In this paper we develop a general equilibrium model of exchange rates where expectations of future variables directly affect the current exchange rate through an 'asset-market' term. This term, which results from the assumptions of incomplete asset markets and segmented product markets, does not appear in most models of exchange rates and it allows for changes in expectations about variables at t+1 to affect the date-t exchange rates without requiring changes in other contemporaneous variables. Therefore, the model has the potential to deliver changes in exchange rates, resulting from rational speculation, without much change in consumption allocations or goods' prices, making it consistent with the common view that exchange rates behave like asset prices. To implement the idea that exchange rates respond to expectations about future economic conditions, we introduce a regime variable governing the covariance structure of shocks to productivity and money growth in each country. Changes in the information variable are intended to generate changes in home and foreign agents' perceptions of the relative risks of holding the nominal asset. The model is roughly consistent with the common view that exchange rates behave like asset prices. However, it does not generate a sufficient degree of rational speculation to explain either observed variation of risk premia in foreign exchange markets or observed variation in exchange rates.
Handle: RePEc:nbr:nberwo:8362
Template-Type: ReDIF-Paper 1.0
Title: A No-Arbitrage Vector Autoregression of Term Structure Dynamics with Macroeconomic and Latent Variables
Classification-JEL: E4; E5
Author-Name: Andrew Ang
Author-Person: pan374
Author-Name: Monika Piazzesi
Author-Person: ppi37
Note: AP ME
Number: 8363
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8363
File-URL: http://www.nber.org/papers/w8363.pdf
File-Format: application/pdf
Publication-Status: published as Ang, Andrew and Monika Piazzesi. "A No-Arbitrage Vector Autoregression Of Term Structure Dynamics With Macroeconomic And Latent Variables," Journal of Monetary Economics, 2003, v50(4,May), 745-787.
Abstract: This paper describes the joint dynamics of bond yields and macroeconomic variables in a Vector Autoregression, where identifying restrictions are based on the absence of arbitrage. Using a term structure model with inflation and economic growth factors, we investigate how macro variables affect bond prices and the dynamics of the yield curve. The setup accommodates higher order autoregressive lags for the macro factors. The macro variables are augmented by traditional unobserved term structure factors. We find that the forecasting performance of a VAR improves when no-arbitrage restrictions are imposed. Models that incorporate macro factors forecast better than traditional term structure models with only unobservable factors. Variance decompositions show that macro factors explain up to 85% of the variation in bond yields. Macro factors primarily explain movements at the short end and middle of the yield curve while unobservable factors still account for most of the movement at the long end of the yield curve.
Handle: RePEc:nbr:nberwo:8363
Template-Type: ReDIF-Paper 1.0
Title: Social Dumping in the Transformation Process?
Classification-JEL: J30; H50
Author-Name: Hans-Werner Sinn
Author-Person: psi146
Note: ITI PE
Number: 8364
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8364
File-URL: http://www.nber.org/papers/w8364.pdf
File-Format: application/pdf
Abstract: Business representatives and union leaders in highly industrialised countries often accuse the governments of less-developed countries of practising social dumping in the sense of deliberately neglecting work-place safety legislation, co-determination rights and other fringe benefits which define the quality of workplaces. This paper refutes this view by modelling the transition path of a less-developed small open economy that faces transactions costs when trading capital and labour with the rest of the world. It shows that competitive markets and competitive governments choose Pareto efficient transition strategies which are characterised by a sluggish development of market wages and government-imposed social standards.
Handle: RePEc:nbr:nberwo:8364
Template-Type: ReDIF-Paper 1.0
Title: Is Growth Exogenous? Taking Mankiw, Romer and Weil Seriously
Classification-JEL: O4
Author-Name: Ben S. Bernanke
Author-Person: pbe55
Author-Name: Refet S. Gurkaynak
Author-Person: pgu93
Note: EFG
Number: 8365
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8365
File-URL: http://www.nber.org/papers/w8365.pdf
File-Format: application/pdf
Publication-Status: published as Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously, Ben S. Bernanke, Refet S. Gürkaynak. in NBER Macroeconomics Annual 2001, Volume 16, Bernanke and Rogoff. 2002
Publication-Status: published as Ben S. Bernanke & Refet S. Gürkaynak, 2001. "Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously," NBER/Macroeconomics Annual, vol 16(1), pages 11-57.
Abstract: Is long-run economic growth exogenous? To address this question, we show that the empirical framework of Mankiw, Romer, and Weil (1992) can be extended to test any growth model that admits a balanced growth path; and we use that framework both to revisit variants of the Solow growth model and to evaluate simple alternative models of endogenous growth. To allow for the possibility that economies in our sample are not on their balanced growth paths, we also study the cross-sectional behavior of TFP growth, which we estimate using alternative measures of labor's share. Our broad conclusion, based on both model estimation and growth accounting, is that long-run growth is significantly correlated with behavioral variables such as the savings rate, and that this correlation is not easily explained by models in which growth is treated as the exogenous variable. Hence, future empirical studies should focus on models that exhibit endogenous growth.
Handle: RePEc:nbr:nberwo:8365
Template-Type: ReDIF-Paper 1.0
Title: Long-Term Capital Movements
Classification-JEL: F21; F34
Author-Name: Philip R. Lane
Author-Person: pla15
Author-Name: Gian Milesi-Ferretti
Author-Person: pmi28
Note: IFM
Number: 8366
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8366
File-URL: http://www.nber.org/papers/w8366.pdf
File-Format: application/pdf
Publication-Status: published as Long-Term Capital Movements, Philip R. Lane, Gian Maria Milesi-Ferretti. in NBER Macroeconomics Annual 2001, Volume 16, Bernanke and Rogoff. 2002
Publication-Status: published as Philip R. Lane & Gian Maria Milesi-Ferretti, 2001. "Long-Term Capital Movements," NBER/Macroeconomics Annual, vol 16(1), pages 73-116.
Abstract: International financial integration allows countries to become net creditors or net debtors with respect to the rest of the world. In this paper, we show that a small set of fundamentals--shifts in relative output levels, the stock of public debt and demographic factors--can do much to explain the evolution of net foreign asset positions. In addition, we highlight that external wealth' plays a critical role in determining the behavior of the trade balance, both through shifts in the desired net foreign asset position and the investment returns generated on the outstanding stock of net foreign assets. Finally, we provide some evidence that a portfolio balance effect exists: real interest rate differentials are inversely related to net foreign asset positions.
Handle: RePEc:nbr:nberwo:8366
Template-Type: ReDIF-Paper 1.0
Title: Referrals
Classification-JEL: D2; G3
Author-Name: Luis Garicano
Author-Person: pga77
Author-Name: Tano Santos
Note: AP
Number: 8367
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8367
File-URL: http://www.nber.org/papers/w8367.pdf
File-Format: application/pdf
Publication-Status: published as Garicano, Luis and Tano Santos. "Referrals," American Economic Review, 2004, v94(3,Jun), 499-525.
Abstract: Specialization requires that workers deal with some valuable opportunities themselves and refer other, possibly unverifiable, opportunities to other workers. How do markets and organizations ensure the matching of opportunities with talent in the presence of informational asymmetries about their value? The cost of providing incentives for effort in this context is that they increase the risk of the agent appropriating an opportunity she should refer upstream. Thus spot markets are severely limited in their ability to support referrals, as they involve very powerful effort incentives on those opportunities kept by the referring agents. We show that partnerships, in which agents agree to share opportunities and the income from the opportunities, appear endogenously as a solution to this problem. Partnership contracts support better communication rules at the expense of biasing effort provision away from first best for all activities. The structure of the contract depends both on the frequency of communications and on the interaction between the relative skill of the agents and the direction of the referral flow.
Handle: RePEc:nbr:nberwo:8367
Template-Type: ReDIF-Paper 1.0
Title: Young Geniuses and Old Masters: The Life Cycles of Great Artists from Masaccio to Jasper Johns
Author-Name: David W. Galenson
Author-Name: Robert Jensen
Note: LS
Number: 8368
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8368
File-URL: http://www.nber.org/papers/w8368.pdf
File-Format: application/pdf
Publication-Status: published as David W. Galenson, 2007. "Introduction to Old Masters and Young Geniuses: The Two Life Cycles of Artistic Creativity," Introductory Chapters, in: Old Masters and Young Geniuses: The Two Life Cycles of Artistic Creativity Princeton University Press.
Publication-Status: published as David Galenson, 2009. "Old masters and young geniuses: The two life cycles of human creativity," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 1-9, May.
Abstract: There have been two very different life cycles for great artists: some have made their greatest contributions very early in their careers, whereas others have produced their best work late in their lives. These two patterns have been associated with different working methods, as art's young geniuses have worked deductively to make conceptual innovations, while its old masters have worked inductively, to innovate experimentally. We demonstrate the value of this typology by considering the careers of four great conceptual innovators - Masaccio, Raphael, Picasso, and Johns - and five great experimental innovators - Michelangelo, Titian, Rembrandt, C‚zanne, and Pollock. Recognition of the effect of an artist's methods on the timing of his contribution appears to solve a puzzle that has been recognized by art historians for more than a century.
Handle: RePEc:nbr:nberwo:8368
Template-Type: ReDIF-Paper 1.0
Title: International Macroeconomics: Beyond the Mundell-Fleming Model
Classification-JEL: F41; F31
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: EFG IFM
Number: 8369
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8369
File-URL: http://www.nber.org/papers/w8369.pdf
File-Format: application/pdf
Publication-Status: published as Obstfeld, Maurice. "International Macroeconomics: Beyond the Mundell-Fleming Model." International Monetary Fund Staff Papers. Special Issue, 2001.
Abstract: This lecture presents a broad overview of postwar analytical thinking on international macroeconomics, culminating in a more detailed discussion of very recent progress. Along the way, it reviews important empirical evidence that has inspired alternative modeling approaches, as well as theoretical and policy considerations behind developments in the field. The most recent advances in model building center on the 'new open economy macroeconomics,' which synthesizes Keynesian nominal rigidities, intertemporal approaches to open economy dynamics, and the effects of market structure on international trade.
Handle: RePEc:nbr:nberwo:8369
Template-Type: ReDIF-Paper 1.0
Title: Mortality, Inequality and Race in American Cities and States
Classification-JEL: I12
Author-Name: Angus Deaton
Author-Person: pde30
Author-Name: Darren Lubotsky
Author-Person: plu41
Note: AG CH EH
Number: 8370
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8370
File-URL: http://www.nber.org/papers/w8370.pdf
File-Format: application/pdf
Publication-Status: published as Deaton, Angus and Darren Lubotsky. "Mortality, inequality and race in American cities and states." Social Science and Medicine 56, 6 (2003): 1139–53.
Abstract: A number of studies have found that mortality rates are positively correlated with income inequality across the cities and states of the US. We argue that this correlation is confounded by the effects of racial composition. Across states and MSAs, the fraction of the population that is black is positively correlated with average white incomes, and negatively correlated with average black incomes. Between-group income inequality is therefore higher where the fraction black is higher, as is income inequality in general. Conditional on the fraction black, neither city nor state mortality rates are correlated with income inequality. Mortality rates are higher where the fraction black is higher, not only because of the mechanical effect of higher black mortality rates and lower black incomes, but because white mortality rates are higher in places where the fraction black is higher. This result is present within census regions, and for all age groups and both sexes (except for boys aged 1 9). It is robust to conditioning on income, education, and (in the MSA results) on state fixed effects, and cannot plausibly be attributed to variations in the local provision of health care.
Handle: RePEc:nbr:nberwo:8370
Template-Type: ReDIF-Paper 1.0
Title: Political Market Structure
Classification-JEL: L0
Author-Name: James E. Anderson
Author-Person: pan2
Author-Name: Thomas J. Prusa
Author-Person: ppr249
Note: IO
Number: 8371
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8371
File-URL: http://www.nber.org/papers/w8371.pdf
File-Format: application/pdf
Abstract: Many political markets are essentially uncontested, in the sense that one candidate raises little (or no) money and consequently has little chance of election. This presents a puzzle in the presence of apparently low barriers to entry. Using a variant of Baron (1989) we provide a theory encompassing both contested and uncontested markets. The essential addition is the presence of fixed costs of campaigning. We show that these may be quite small and yet constitute decisive barriers to entry.
Handle: RePEc:nbr:nberwo:8371
Template-Type: ReDIF-Paper 1.0
Title: Global Production Sharing and Rising Inequality: A Survey of Trade and Wages
Classification-JEL: F16
Author-Name: Robert Feenstra
Author-Person: pfe116
Author-Name: Gordon Hanson
Author-Person: pha80
Note: ITI
Number: 8372
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8372
File-URL: http://www.nber.org/papers/w8372.pdf
File-Format: application/pdf
Publication-Status: published as Choi, Kwan and James Harrigan (eds.) Handbook of International Trade. Basil Blackwell, 2003.
Abstract: We argue that trade in intermediate inputs, or 'global production sharing,' is a potentially important explanation for the increase in the wage gap between skilled and unskilled workers in the U.S. and elsewhere. Using a simple model of heterogeneous activities within an industry, we show that trade in inputs has much the same impact on labor demand as does skill-biased technical change: both of these will shift demand away from low-skilled activities, while raising relative demand and wages of the higher skilled. Thus, distinguishing whether the change in wages is due to international trade, or technological change, is fundamentally an empirical rather than a theoretical question. We review three empirical methods that have been used to estimate the effects of trade in intermediate inputs and technological change on wages, and summarize the evidence for the U.S. and other countries.
Handle: RePEc:nbr:nberwo:8372
Template-Type: ReDIF-Paper 1.0
Title: Recovery and Sustainability in East Asia
Classification-JEL: F3; F4
Author-Name: Yung Chul Park
Author-Name: Jong-Wha Lee
Author-Person: ple164
Note: IFM
Number: 8373
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8373
File-URL: http://www.nber.org/papers/w8373.pdf
File-Format: application/pdf
Publication-Status: published as Recovery and Sustainability in East Asia, Yung Chul Park, Jong-Wha Lee. in Managing Currency Crises in Emerging Markets, Dooley and Frankel. 2003
Abstract: This paper analyzes the macroeconomic adjustment from the crisis in East Asia in a broad international prospective. The stylized pattern from the previous 160 currency crisis episodes over the period from 1970 to 1995 shows a V-type adjustment of real GDP growth in the years prior to and following a crisis. The adjustment shows a much sharper V-type in the crisis episodes with the IMF program, compared to those without. Cross-country regressions show that depreciation of real exchange rate, expansionary macroeconomic policies and favorable global environments are critical for the speedy post-crisis recovery. In this sense, the East Asian process of adjustment is not much different from the stylized pattern from the previous currency crisis episodes. However, the degree of initial contraction and following recovery has been far greater in East Asia than what the cross-country evidence predicts. This paper argues that the sharper adjustment pattern in East Asia is attributed to the severe liquidity crisis that was triggered by investor's panic and then amplified by the weak corporate and bank balance sheet. We find no evidence for a direct impact of a currency crisis on long-run growth.
Handle: RePEc:nbr:nberwo:8373
Template-Type: ReDIF-Paper 1.0
Title: Forced Out of the Closet: The Impact of the American Inventors Protection Act on the Timing of Patent Disclosure
Classification-JEL: O34; O38
Author-Name: Daniel K.N. Johnson
Author-Person: pjo32
Author-Name: David Popp
Note: PR
Number: 8374
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8374
File-URL: http://www.nber.org/papers/w8374.pdf
File-Format: application/pdf
Publication-Status: published as Johnson, Daniel K. N. and David Popp. "Forced Out Of The Closet: The Impact Of The American Inventors Protection Act On The Timing Of Patent Disclosure," Rand Journal of Economics, 2003, v34(1,Spring), 96-112.
Abstract: Beginning in November 2000, patent applications filed in the United States are disclosed after 18 months, rather than when the patent is granted. Using U.S. patent data from 1976-1996, we find that major inventions are most likely to be affected, as they take longer to go through the application process. We provide evidence that this change will result in faster knowledge diffusion, and conclude with a simulation of the law's potential effect on patent grants.
Handle: RePEc:nbr:nberwo:8374
Template-Type: ReDIF-Paper 1.0
Title: Agricultural Labor Productivity in the Lower South, 1720-1800
Classification-JEL: N5; N1
Author-Name: Peter C. Mancall
Author-Name: Joshua L. Rosenbloom
Author-Person: pro664
Author-Name: Thomas Weiss
Author-Person: pwe260
Note: DAE
Number: 8375
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8375
File-URL: http://www.nber.org/papers/w8375.pdf
File-Format: application/pdf
Publication-Status: published as Mancall, Peter, Josh Rosenbloom and Thomas Weiss. "Agricultural Labor Productivity in the Lower South, 1720-1800." Explorations in Economic History (Oct 2002): 390-424.
Abstract: Agriculture dominated the economy of eighteenth-century British America, and the pace of agricultural productivity advance was the primary determinant of the rate of economic growth. In this paper we offer new measures of agricultural productivity advance in the Lower South between 1720 and 1800. Past efforts and quantification have focused exclusively on the region's export performance. In addition to extending and refining measures of regional exports, we develop two new series based on the value of slave labor and on measurements of total agricultural production in the region. Despite differences in their short-term behavior, all of the indices show that long-run productivity improvements were modest at best, and may have been negative. Surprisingly, taking account of production for domestic consumption yields the most favorable long-term performance.
Handle: RePEc:nbr:nberwo:8375
Template-Type: ReDIF-Paper 1.0
Title: Favoritism Under Social Pressure
Classification-JEL: D8; J2
Author-Name: Luis Garicano
Author-Person: pga77
Author-Name: Ignacio Palacios
Author-Person: ppa164
Author-Name: Canice Prendergast
Note: LS
Number: 8376
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8376
File-URL: http://www.nber.org/papers/w8376.pdf
File-Format: application/pdf
Publication-Status: published as Luis Garicano & Ignacio Palacios-Huerta & Canice Prendergast, 2005. "Favoritism Under Social Pressure," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 208-216, 05.
Abstract: This paper provides empirical evidence of favoritism by agents, where that favoritism is generated by social pressure. To do so, we explore the behavior of professional soccer referees. Referees have discretion over the addition of extra time at the end of a soccer game (called injury time), to compensate for lost time due to unusual stoppages. We test for systematic bias shown by Spanish referees in favor of home teams. We show that referees systematically favor home teams by shortening close games where the home team is ahead, and lengthening close games where the home team is behind. They show no such bias for games that are not close. We further show that when the rewards for winning games increase, referees change their bias accordingly. We also identify that the mechanism through which bias operates is the referees' desire to satisfy the crowd, by documenting how the size and composition of the crowd affect referee favoritism.
Handle: RePEc:nbr:nberwo:8376
Template-Type: ReDIF-Paper 1.0
Title: Education, Segregation and Marital Sorting: Theory and an Application to UK Data
Classification-JEL: I20; J12
Author-Name: Raquel Fernandez
Author-Person: pfe17
Note: EFG LE PE
Number: 8377
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8377
File-URL: http://www.nber.org/papers/w8377.pdf
File-Format: application/pdf
Publication-Status: published as Fernandez, Raquel. "Education, Segregation And Marital Sorting: Theory And An Application To The UK," European Economic Review, 2002, v46(6,Jun), 993-1022.
Abstract: This paper presents a model of the intergenerational transmission of education and marital sorting where parents matter both because of their household income and because parental human capital determines the expected value of a child's disutility from making an effort to become skilled. We show that an increase in segregation has potentially ambiguous effects on the fraction of individuals that become skilled in the steady state, and hence on marital sorting, the personal and household income distribution, and welfare. We calibrate the steady-state of our model to UK statistics and compare a version of the model to the results obtained previously for the US. We find that segregation is likely to have a smaller negative impact in the UK than in the US as a result of the fertility and education transmission process. When the relative supply of skilled individuals is endogenous, the welfare effect of increased sorting on unskilled individuals depends on the magnitude of the supply increase.
Handle: RePEc:nbr:nberwo:8377
Template-Type: ReDIF-Paper 1.0
Title: Did the Elimination of Mandatory Retirement Affect Faculty Retirement Flows?
Classification-JEL: J26; I21
Author-Name: Orley Ashenfelter
Author-Person: pas9
Author-Name: David Card
Author-Person: pca271
Note: LS
Number: 8378
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8378
File-URL: http://www.nber.org/papers/w8378.pdf
File-Format: application/pdf
Publication-Status: published as Ashenfelter, Orley and David Card. "Did The Elimination Of Mandatory Retirement Affect Faculty Retirement?," American Economic Review, 2002, v92(4,Sep), 957-980.
Abstract: A special exemption from the 1986 Age Discrimination Act allowed colleges and universities to enforce mandatory retirement of faculty at age 70 until 1994. We compare faculty turnover rates at a large sample of institutions before and after the federal law change, and at a set of institutions that were covered by earlier state laws prohibiting compulsory retirement. Retirement rates at institutions that enforced mandatory retirement exhibited sharp 'spikes' at ages 70 and 71. About 90 percent of professors who were still teaching at age 70 retired within two years. After the elimination of compulsory retirement the retirement rates of 70 and 71-year-olds fell to levels comparable to 69-year-olds, and over one-half of 70-year-olds were still teaching two years later. These findings indicate that U.S. colleges and universities will experience a rise in the number of older faculty over the coming years. The increase is likely to be larger at private research universities, where a higher fraction of faculty has traditionally remained at work until age 70.
Handle: RePEc:nbr:nberwo:8378
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy in a Data-Rich Environment
Classification-JEL: E5
Author-Name: Ben S. Bernanke
Author-Person: pbe55
Author-Name: Jean Boivin
Author-Person: pbo43
Note: EFG ME
Number: 8379
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8379
File-URL: http://www.nber.org/papers/w8379.pdf
File-Format: application/pdf
Publication-Status: published as Bernanke, Ben S. and Jean Boivin. "Monetary Policy In A Data-Rich Environment," Journal of Monetary Economics, 2003, v50(3,Apr), 525-546.
Abstract: Most empirical analyses of monetary policy have been confined to frameworks in which the Federal Reserve is implicitly assumed to exploit only a limited amount of information, despite the fact that the Fed actively monitors literally thousands of economic time series. This article explores the feasibility of incorporating richer information sets into the analysis, both positive and normative, of Fed policymaking. We employ a factor-model approach, developed by Stock and Watson (1999a,b), that permits the systematic information in large data sets to be summarized by relatively few estimated factors. With this framework, we reconfirm Stock and Watson's result that the use of large data sets can improve forecast accuracy, and we show that this result does not seem to depend on the use of finally revised (as opposed to 'real-time') data. We estimate policy reaction functions for the Fed that take into account its data-rich environment and provide a test of the hypothesis that Fed actions are explained solely by its forecasts of inflation and real activity. Finally, we explore the possibility of developing an 'expert system' that could aggregate diverse information and provide benchmark policy settings.
Handle: RePEc:nbr:nberwo:8379
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Separate Taxation on the Intra-Household Allocation of Assets: Evidence from the UK
Classification-JEL: H24; H31
Author-Name: Melvin Stephens Jr.
Author-Person: pst400
Author-Name: Jennifer Ward-Batts
Note: PE
Number: 8380
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8380
File-URL: http://www.nber.org/papers/w8380.pdf
File-Format: application/pdf
Publication-Status: published as Stephens, Melvin Jr & Ward-Batts, Jennifer, 2004. "The impact of separate taxation on the intra-household allocation of assets: evidence from the UK," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1989-2007, August.
Abstract: The income tax system in the United Kingdom moved from joint to independent taxation of husbands' and wives' income in 1990. One interesting aspect of independent taxation is the ability for households to choose the division of household assets between the two spouses. This tax reform therefore creates an opportunity for households to engage in a form of tax avoidance by shifting their investment income to the spouse with the lower marginal tax rate. We use Family Expenditure Survey data to examine the impact of this tax reform on the magnitude of investment income shifting between spouses with different marginal tax rates. We find a sizeable shift in the share and incidence of asset income claimed by wives, who typically have lower marginal tax rates, as well as in the incidence of the wife claiming all the household asset income, indicating that households responded to this policy change by reallocating asset ownership.
Handle: RePEc:nbr:nberwo:8380
Template-Type: ReDIF-Paper 1.0
Title: The International Lender of Last Resort: How Large is Large Enough?
Classification-JEL: F32; F33
Author-Name: Olivier Jeanne
Author-Person: pje59
Author-Name: Charles Wyplosz
Author-Person: pwy2
Note: IFM
Number: 8381
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8381
File-URL: http://www.nber.org/papers/w8381.pdf
File-Format: application/pdf
Publication-Status: published as The International Lender of Last Resort. How Large Is Large Enough?, Olivier Jeanne, Charles Wyplosz. in Managing Currency Crises in Emerging Markets, Dooley and Frankel. 2003
Publication-Status: published as Olivier Jeanne, 2001. "The International Lender of Last Resort: How Large is Large Enought?," IMF Working Papers, vol 01(76).
Abstract: This paper considers how an international lender of last resort (LOLR) can prevent self-fulfilling banking and currency crises in emerging economies. We compare two different arrangements: one in which the international LOLR injects liquidity into international financial markets, and one in which its resources are used to back domestic banking safety nets. Both arrangements would require important changes in the global financial architecture: the first one would require a global central bank issuing an international currency, while the second one would have to be operated by an 'international banking fund' closely involved in the supervision of domestic banking systems.
Handle: RePEc:nbr:nberwo:8381
Template-Type: ReDIF-Paper 1.0
Title: The Budgetary Repercussions of Capital Convictions
Classification-JEL: H7; K4
Author-Name: Katherine Baicker
Note: PE
Number: 8382
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8382
File-URL: http://www.nber.org/papers/w8382.pdf
File-Format: application/pdf
Publication-Status: published as Advances in Economic Analysis and Policy, Volume 4, no. 1. B.E. Press, 2004.
Publication-Status: published as Katherine Baicker, 2004. "The Budgetary Repercussions Of Capital Convictions," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1).
Abstract: Control of public spending and revenues is increasingly being left to states and localities. In order to understand the consequences of such a movement on the distribution of social spending, it is necessary to understand how fiscal distress will affect state and local budgets. This paper exploits the large and unexpected negative shock to county budgets imposed by the presence of capital crime trials, first to understand the real incidence of the cost of capital convictions, and second to uncover the effects of local fiscal distress on the level and distribution of public spending and revenues. I show that these trials are quite costly relative to county budgets, and that the costs are borne in part by reducing expenditures on highways and police and in large part by increasing taxes. The results highlight the vulnerability of county budgets to fiscal shocks: each trial causes an increase in county spending of 1.8 percent and an increase in county revenues of 1.6 percent, implying an increase of more than $1.6 billion in both expenditures and revenues between 1982 and 1997. Using these trials as a source of exogenous variation to examine inter-jurisdictional spillovers, I find significant spillovers of both spending and revenues between counties.
Handle: RePEc:nbr:nberwo:8382
Template-Type: ReDIF-Paper 1.0
Title: The Spillover Effects of State Spending
Classification-JEL: H7
Author-Name: Katherine Baicker
Note: PE
Number: 8383
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8383
File-URL: http://www.nber.org/papers/w8383.pdf
File-Format: application/pdf
Publication-Status: published as Baicker, Katherine. "The Spillover Effects Of State Spending," Journal of Public Economics, 2005, v89(2-3,Feb), 529-544.
Abstract: This paper estimates the degree to which state spending is influenced by the spending of neighboring states. Focusing on mandated increases in welfare spending, I find that each dollar of state spending causes spending in neighboring states to increase by 37 to 88 cents. I use more plausibly exogenous variation than previous studies to abstract from the endogeneity of neighbors' spending, and show that previous estimates may have been biased. I also explore the strength of several different measures of neighborliness. The most predictive measure is the degree of population mobility between states, suggesting that concerns about migration may drive the interdependence of state spending policy.
Handle: RePEc:nbr:nberwo:8383
Template-Type: ReDIF-Paper 1.0
Title: Extensive or Intensive Generosity? The Price and Income Effects of Federal Grants
Classification-JEL: H5; H7
Author-Name: Katherine Baicker
Note: PE
Number: 8384
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8384
File-URL: http://www.nber.org/papers/w8384.pdf
File-Format: application/pdf
Publication-Status: published as Baicker, Katherine. "Extensive or Intensive Generosity? The Price and Income Effects of Federal Grants." Review of Economics and Statistics 87, 2 (May 2005): 371-384.
Abstract: When TANF replaced AFDC in 1996 the marginal subsidy for state welfare spending was eliminated. This paper exploits data from a period in the history of AFDC when the structure of federal subsidies and legislative changes allow us to estimate not only the price and income elasticities of federal grants, but also to disentangle state reactions to subsidies along two different dimensions: the intensive margin of spending per recipient, and the extensive margin of spending on additional recipients. I find that states respond much more strongly to these incentives than previous analyses that neither adequately controlled for the endogeneity of prices nor estimated the two margins separately would imply. I show that state spending on benefits per recipient responds significantly to the marginal price of benefits, with an elasticity of -.38, and that state spending on the number of recipients responds significantly to the marginal price of additional recipients, with an elasticity of -.34. Cross-price elasticities are positive, implying a substitutability of extensive for intensive generosity and indicating that an analysis that groups the two margins together masks significant behavioral responses along each dimension. These results correspond very well to estimates of the early effects of TANF, predicting a significantly larger drop in caseloads than in benefits.
Handle: RePEc:nbr:nberwo:8384
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Relative Performance of Providers of a Health Service
Classification-JEL: L22; I11
Author-Name: Daniel A. Ackerberg
Author-Person: pac11
Author-Name: Matilde P. Machado
Author-Name: Michael H. Riordan
Author-Person: pri109
Note: EH
Number: 8385
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8385
File-URL: http://www.nber.org/papers/w8385.pdf
File-Format: application/pdf
Abstract: A methodology is developed and applied to compare the performance of publicly funded agencies providing treatment for alcohol abuse in Maine. The methodology estimates a Wiener process that determines the duration of completed treatments, while allowing for agency differences in the effectiveness of treatment, standards for completion of treatment, patient attrition, and the characteristics of patient populations. Notably, the Wiener process model separately identifies agency fixed effects that describe differences in the effectiveness of treatment ('treatment effects'), and effects that describe differences in the unobservable characteristics of patients ('population effects'). The estimated model enables hypothetical comparisons of how different agencies would treat the same populations. The policy experiment of transferring the treatment practices of more cost-effective agencies suggests that Maine could have significantly reduced treatment costs without compromising health outcomes by identifying and transferring best practices.
Handle: RePEc:nbr:nberwo:8385
Template-Type: ReDIF-Paper 1.0
Title: Financial Restructuring in Banking and Corporate Sector Crises: What Policies to Pursue?
Classification-JEL: G18; G21
Author-Name: Stijn Claessens
Author-Person: pcl16
Author-Name: Daniela Klingebiel
Author-Name: Luc Laeven
Author-Person: pla174
Note: IFM
Number: 8386
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8386
File-URL: http://www.nber.org/papers/w8386.pdf
File-Format: application/pdf
Abstract: We review the literature on resolving bank and corporate sector crises to identify government policies that affect the depth of a crisis and the ease and sustainability of recovery, and to analyze their fiscal cost. A consistent framework - including sufficient resources for loss-absorption and private agents facing the right framework of sticks and carrots - is the, although often missing key to successful bank and corporate restructuring. Sustainability of restructuring calls for deeper structural reforms, which often requires dealing with political economy factors up-front. Using data for 687 corporations from eight crisis countries, we find empirically that a package of specific resolution measures can help accelerate the recovery from a crisis. These policies, however, come with significant fiscal costs.
Handle: RePEc:nbr:nberwo:8386
Template-Type: ReDIF-Paper 1.0
Title: A Theory of the Consumption Function, With and Without Liquidity Constraints (Expanded Version)
Classification-JEL: A23; B22
Author-Name: Christopher D. Carroll
Author-Person: pca45
Note: ME
Number: 8387
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8387
File-URL: http://www.nber.org/papers/w8387.pdf
File-Format: application/pdf
Publication-Status: published as Carroll, Christopher D. "A Theory Of The Consumption Function, With And Without Liquidity Constraints," Journal of Economic Perspectives, 2001, v15(3,Summer), 23-45.
Publication-Status: published as Christopher D. Carroll, 2001. "Codes for A Theory of the Consumption Function, With and Without Liquidity Constraints," QM&RBC Codes 37, Quantitative Macroeconomics & Real Business Cycles.
Abstract: This paper argues that the modern stochastic consumption model, in which impatient consumers face uninsurable labor income risk, matches Milton Friedman's (1957) original description of the Permanent Income Hypothesis much better than the perfect foresight or certainty equivalent models did. The model can explain the high marginal propensity to consume, the high discount rate on future income, and the important role for precautionary behavior that were all part of Friedman's original framework. The paper also explains the relationship of these questions to the Euler equation literature, and argues that the effects of precautionary saving and liquidity constraints are often virtually indistinguishable.
Handle: RePEc:nbr:nberwo:8387
Template-Type: ReDIF-Paper 1.0
Title: Ex Ante Costs of Violating Absolute Priority in Bankruptcy
Classification-JEL: G33; K20
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Note: LE
Number: 8388
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8388
File-URL: http://www.nber.org/papers/w8388.pdf
File-Format: application/pdf
Publication-Status: published as Bebchuk, Lucian Arye. "Ex Ante Costs Of Violating Absolute Priority In Bankruptcy," Journal of Finance, 2002, v57(1,Feb), 445-460.
Abstract: A basic question for the design of bankruptcy law concerns whether value should be divided in accordance with absolute priority. Research done in the past decade has suggested that deviations from absolute priority have beneficial ex ante effects. In contrast, this paper shows that ex post deviations from absolute priority also have negative effects on ex ante decisions taken by shareholders. Such deviations aggravate the moral hazard problem with respect to project choice - increasing the equityholders' incentive to favor risky projects - as well as with respect to borrowing and dividend decisions.
Handle: RePEc:nbr:nberwo:8388
Template-Type: ReDIF-Paper 1.0
Title: Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative
Author-Name: Robert B. Barsky
Author-Person: pba670
Author-Name: Lutz Kilian
Author-Person: pki110
Note: ME
Number: 8389
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8389
File-URL: http://www.nber.org/papers/w8389.pdf
File-Format: application/pdf
Publication-Status: published as Do We Really Know That Oil Caused the Great Stagflation? A Monetary Alternative, Robert B. Barsky, Lutz Kilian. in NBER Macroeconomics Annual 2001, Volume 16, Bernanke and Rogoff. 2002
Publication-Status: published as Robert B. Barsky & Lutz Kilian, 2001. "Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative," NBER/Macroeconomics Annual, vol 16(1), pages 137-183.
Abstract: This paper argues that major oil price increases were not nearly as essential a part of the causal mechanism that generated the stagflation of the 1970s as is often thought. There is neither a theoretical presumption that oil supply shocks are stagflationary nor robust empirical evidence for this view. In contrast, we show that monetary expansions and contractions can generate stagflation of realistic magnitude even in the absence of supply shocks. Furthermore, monetary fluctuations help to explain the historical movements of the prices of oil and other commodities, including the surge in the prices of industrial commodities that preceded the 1973/74 oil price increase. Thus, they can account for the striking coincidence of major oil price increases and worsening stagflation.
Handle: RePEc:nbr:nberwo:8389
Template-Type: ReDIF-Paper 1.0
Title: Resource Curse or Debt Overhang?
Classification-JEL: O4
Author-Name: Osmel Manzano
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: EFG IFM
Number: 8390
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8390
File-URL: http://www.nber.org/papers/w8390.pdf
File-Format: application/pdf
Publication-Status: published as Lederman, Daniel and William F. Maloney (eds.) Natural Resources and Development: Are They a Curse? Are They Destiny? Stanford University Press, 2003.
Abstract: It has been widely believed that resource abundant economies grow less than other economies. In a very influential paper, Sachs and Warner (1997), point out that there is a negative relationship between resource abundance and growth. Two important econometric problems are present in the traditional empirical literature: First, the result might depend on factors that are correlated with primary exports but that have been excluded from the regression. Second, total GDP includes the production in the resource sector that has been declining in the last 30 years. We correct for those issues. Our results indicate that the so called 'Natural Resource Curse' might be related to a debt overhang. In the 70's when commodities' prices were high, natural resource abundant countries used them as collateral for debt. The 80's witnessed an important fall in the prices that drove these countries to debt crises. When we estimate the model taking these into account, we found that the effect of resource abundance disappears.
Handle: RePEc:nbr:nberwo:8390
Template-Type: ReDIF-Paper 1.0
Title: Living with the Fear of Floating: An Optimal Policy Perspective
Classification-JEL: F41; E52
Author-Name: Amartya Lahiri
Author-Person: pla150
Author-Name: Carlos A. Vegh
Author-Person: pve34
Note: IFM
Number: 8391
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8391
File-URL: http://www.nber.org/papers/w8391.pdf
File-Format: application/pdf
Publication-Status: published as Living with the Fear of Floating: An Optimal Policy Perspective, Amartya Lahiri, Carlos A. Végh. in Preventing Currency Crises in Emerging Markets, Edwards and Frankel. 2002
Abstract: As documented in recent studies, developing countries (classified by the IMF as floaters or managed floaters) are extremely reluctant to allow for large nominal exchange rate fluctuations. This 'fear of floating' is reflected in the fact that, in spite of being subject to larger shocks, developing countries exhibit lower exchange rate variability and higher reserve variability than developed countries. Moreover, there is a positive correlation between changes in the exchange rate and interest rates and a negative correlation between both changes in reserves and the exchange rate and changes in interest rates and reserves. We build a simple model that rationalizes these key features as the outcome of an optimal policy response to monetary shocks. The model incorporates three key frictions: an output cost of nominal exchange rate fluctuations, an output cost of higher interest rates to defend the currency, and a fixed cost of intervention.
Handle: RePEc:nbr:nberwo:8391
Template-Type: ReDIF-Paper 1.0
Title: Variable Factor Utilization and International Business Cycles
Classification-JEL: F2; F4
Author-Name: Marianne Baxter
Author-Person: pba102
Author-Name: Dorsey Farr
Note: EFG IFM ITI
Number: 8392
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8392
File-URL: http://www.nber.org/papers/w8392.pdf
File-Format: application/pdf
Publication-Status: published as Baxter, Marianne and Dorsey D. Farr. "Variable Capital Utilization And International Business Cycles," Journal of International Economics, 2005, v65(2,Mar), 335-347.
Abstract: When an economic boom produces high output, employment, and investment in the United States, there is usually a simultaneous boom in other industrialized countries. But, why? Answering this question is a central goal of international macroeconomics. However, multi-country dynamic equilibrium models have struggled with two major problems. The first difficulty is that the productivity shocks required by the model are implausibly large and volatile. Second, these models have difficulty explaining why factor inputs move together so closely across countries: realistic international comovement of business cycles requires implausibly high cross-country correlations of productivity shocks. This paper builds a model in which the utilization rates of capital and labor can be varied in response to shocks. We find that variable factor utilization is quite successful in (i) reducing the required size of productivity shocks; and (ii) increasing international comovement of factor inputs, with most of the improvement stemming from variable capital utilization.
Handle: RePEc:nbr:nberwo:8392
Template-Type: ReDIF-Paper 1.0
Title: Living Wages: Protection For or Protection From Low-Wage Workers?
Classification-JEL: J51; J58
Author-Name: David Neumark
Author-Person: pne16
Note: LS
Number: 8393
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8393
File-URL: http://www.nber.org/papers/w8393.pdf
File-Format: application/pdf
Publication-Status: published as David Neumark, 2004. "Living wages: Protection for or protection from low-wage workers?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(1), pages 27-51, October.
Abstract: Living wage laws, which were introduced in the mid-1990s and have expanded rapidly since then, are typically touted as anti-poverty measures. Yet they frequently restrict coverage to employers with city contracts, and in such cases apply to a small fraction of workers. This apparent contradiction leads to the question of whether there are alternative motivations for various economic and political actors to seek passage of living wage laws. This paper considers the hypothesis that unions representing municipal employees work for the implementation of living wage laws to maintain or increase rents. By raising the wages that city contractors would have to pay, living wage laws may reduce the incentives for cities to contract out work that would otherwise be done by municipal employees, hence increasing the bargaining power of municipal unions and leading to higher wages. The empirical analysis leads to evidence that the wages of unionized municipal workers are increased as a result of living wages. This evidence does not imply that living wages offer no assistance to low-wage workers or low-income families. However, it suggests that alternative policies intended to achieve the goal of reducing urban poverty may be more effective, as living wage laws may result more from considerations of self-interest of narrow but politically-powerful groups of workers than from consideration of the optimal way of achieving this goal.
Handle: RePEc:nbr:nberwo:8393
Template-Type: ReDIF-Paper 1.0
Title: Intergenerational Fiscal Constitutions: How to Protect Future Generations Using Land Taxes and Federalism
Classification-JEL: D7; D9
Author-Name: John P. Conley
Author-Person: pco46
Author-Name: Antonio Rangel
Author-Person: pra69
Note: PE
Number: 8394
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8394
File-URL: http://www.nber.org/papers/w8394.pdf
File-Format: application/pdf
Publication-Status: published as John Conley & Antonio Rangel, 2001. "Intergenerational Fiscal Constitutions: How to Protect Future Generations Using Land Taxes and Federalism," Economics Bulletin, AccessEcon, vol. 28(17), pages A0.
Abstract: This paper studies how to design a fiscal constitution that, by capitalizing intergenerational spillovers into land values, is able to protect future generations from expropriation and to generate optimal investment in intergenerational public goods. In particular, we study how to accomplish these goals by changing two dimensions of the fiscal constitution: (1) the level of government to which different types of intergenerational public goods are assigned, and (2) the tax base of the different jurisdictions. We show that the instruments required to generate capitalization of the intergenerational spillovers depend on the type of the spillover. Land taxation is the essential instrument for policies that mostly generate fiscal spillovers, such as debt and public infrastructure. By contrast, interjurisdictional competition is the essential instrument for policies that mostly generate direct spillovers, such as irreversible environmental damages. Furthermore, we show that it is possible to design a fiscal constitution that generates full capitalization of fiscal spillovers, but in general, not one that generates full capitalization of direct spillovers.
Handle: RePEc:nbr:nberwo:8394
Template-Type: ReDIF-Paper 1.0
Title: The Efficiency of Medicare
Classification-JEL: H5; I1
Author-Name: Jonathan Skinner
Author-Person: psk23
Author-Name: Elliott Fisher
Author-Name: John E. Wennberg
Note: AG EH PE
Number: 8395
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8395
File-URL: http://www.nber.org/papers/w8395.pdf
File-Format: application/pdf
Publication-Status: published as The Efficiency of Medicare, Jonathan S. Skinner, Elliott S. Fisher, John Wennberg. in Analyses in the Economics of Aging, Wise. 2005
Abstract: Technological advances in health care have been shown to yield large average health benefits for the U.S. elderly population. However, less is known about the marginal or incremental benefits of health care spending. We use geographical variations in health care spending to measure the marginal value of greater health care intensity among the elderly Medicare population. To correct for the reverse causation problem -- that sicker areas tend to require more health care -- we use regional averages of physician visits in the last six months of life as a natural randomization for health care intensity. Using linear and semiparametric instrumental variables, we find that a large component of Medicare expenditures -- $26 billion in 1996 dollars, or nearly 20 percent of total Medicare expenditures -- appears to provide no benefit in terms of survival, nor is it likely that this extra spending improves the quality of life. While secular trends in health care technology have delivered large health benefits, variation in health care intensity at a point in time have not.
Handle: RePEc:nbr:nberwo:8395
Template-Type: ReDIF-Paper 1.0
Title: Does a Currency Union Affect Trade? The Time Series Evidence
Classification-JEL: F15; F33
Author-Name: Reuven Glick
Author-Person: pgl13
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: IFM ITI
Number: 8396
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8396
File-URL: http://www.nber.org/papers/w8396.pdf
File-Format: application/pdf
Publication-Status: published as Glick, Reuven and Andrew K. Rose. "Does A Currency Union Affect Trade? The Time-Series Evidence," European Economic Review, 2002, v46(6,Jun), 1125-1151.
Abstract: Does leaving a currency union reduce international trade? We answer this question using a large annual panel data set covering 217 countries from 1948 through 1997. During this sample a large number of countries left currency unions; they experienced economically and statistically significant declines in bilateral trade, after accounting for other factors. Assuming symmetry, we estimate that a pair of countries that starts to use a common currency experiences a doubling in bilateral trade.
Handle: RePEc:nbr:nberwo:8396
Template-Type: ReDIF-Paper 1.0
Title: One Decade of Inflation Targeting in the World: What Do We Know and What Do We Need to Know?
Classification-JEL: E52; E51
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Author-Name: Klaus Schmidt-Hebbel
Author-Person: psc42
Note: ME
Number: 8397
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8397
File-URL: http://www.nber.org/papers/w8397.pdf
File-Format: application/pdf
Publication-Status: published as Loayza, Norman and Raimundo Soto (eds.) Inflation Targeting: Design, Performance, Challenges. Santiago: Central Bank of Chile, 2002.
Abstract: One decade of inflation targeting in the world offers lessons on the design and implementation of inflation targeting, the conduct of monetary policy, and country performance under inflation targeting. This paper reviews briefly the main design features of 18 inflation targeting experiences, analyzes statistically if countries under inflation targeting are structurally different from non-inflation targeting industrial countries, and reviews existing evidence about the success of inflation targeting. The interaction of inflation targeting design features and the conduct of monetary policy during transition to low inflation are tackled next. The paper ends by focusing on unresolved issues on design and implementation of inflation targeting and their relation to the conduct of monetary policy open issues that have to be addressed in the next decade of inflation targeting.
Handle: RePEc:nbr:nberwo:8397
Template-Type: ReDIF-Paper 1.0
Title: Antidumping
Classification-JEL: F13
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: Thomas J. Prusa
Author-Person: ppr249
Note: ITI
Number: 8398
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8398
File-URL: http://www.nber.org/papers/w8398.pdf
File-Format: application/pdf
Abstract: We review the growing literature on the effects of antidumping, a trade policy that has emerged as the most serious impediment to international trade. Over the past 25 years countries have increasingly turned to antidumping in order to offer protection to import-competing industries. Antidumping is a trade policy where the institutional process surrounding the investigation and determinations has significant impacts beyond the antidumping duty we observe, and where the filing decision, the legal determination, and the protective impact are all endogenous with firms' decisions in the market, leading to a wealth of potential strategic actions and distorted market outcomes. This theme underlies our discussion as we review the literature in three broad areas connected with different phases of the antidumping trade policy process: 1) pre-investigation, 2) investigation, and 3) post-investigation.
Handle: RePEc:nbr:nberwo:8398
Template-Type: ReDIF-Paper 1.0
Title: Using Deferred Compensation to Strengthen the Ethicsof Financial Regulation
Classification-JEL: G2; G3
Author-Name: Edward J. Kane
Author-Person: pka853
Note: CF
Number: 8399
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8399
File-URL: http://www.nber.org/papers/w8399.pdf
File-Format: application/pdf
Publication-Status: published as Kane, Edward J. "Using Deferred Compensation To Strengthen The Ethics Of Financial Regulation," Journal of Banking and Finance, 2002, v26(9,Sep), 1919-1933.
Abstract: Defects in the corporate governance of government-owned enterprises tempt opportunistic officials to breach duties of public stewardship. Corporate-governance theory suggests that incentive-based deferred compensation could intensify the force that common-law duties actually exert on regulatory managers. In principle, a forfeitable fund of deferred compensation could be combined with provisions for measuring, verifying, and rewarding multiperiod performance to make top regulators accountable for maximizing the long-run net social benefits their enterprise produces. Because government deposit-insurance enterprises are purveyors of credit enhancements for which private substitute and reinsurance markets exist, their performance could be measured accurately enough to make employment contracts for deposit-insurance CEOs a promising place to experiment with this kind of accountability reform.
Handle: RePEc:nbr:nberwo:8399
Template-Type: ReDIF-Paper 1.0
Title: Attracting FDI in a Politically Risky World
Classification-JEL: F2; H2
Author-Name: Eckhard Janeba
Author-Person: pja312
Note: ITI
Number: 8400
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8400
File-URL: http://www.nber.org/papers/w8400.pdf
File-Format: application/pdf
Publication-Status: published as Janeba, Eckhard. "Attracting FDI In A Politically Risky World," International Economic Review, 2002, v43(4,Nov), 1127-1155.
Abstract: Conventional wisdom holds that lack of government commitment deters foreign investment in developing countries. Yet this explanation is not convincing because some econometric studies have found little support for the role of political risk and host governments can offer upfront subsidies that compensate foreign investors for their sunk cost. This paper shows that a second commitment problem upsets the argument. A multinational firm cannot credibly commit to invest in only one country. Since countries differ in production costs and government credibility, this paper explains the pattern of investment in a politically risky world.
Handle: RePEc:nbr:nberwo:8400
Template-Type: ReDIF-Paper 1.0
Title: Alcohol and Marijuana Use Among College Students: Economic Complements or Substitutes?
Classification-JEL: I10
Author-Name: Jenny Williams
Author-Name: Rosalie Liccardo Pacula
Author-Person: ppa1299
Author-Name: Frank J. Chaloupka
Author-Person: pch236
Author-Name: Henry Wechsler
Note: CH EH
Number: 8401
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8401
File-URL: http://www.nber.org/papers/w8401.pdf
File-Format: application/pdf
Publication-Status: published as J. Williams & Rosalie Liccardo Pacula & Frank J. Chaloupka & Henry Wechsler, 2004. "Alcohol and marijuana use among college students: economic complements or substitutes?," Health Economics, John Wiley & Sons, Ltd., vol. 13(9), pages 825-843.
Abstract: College campuses have been cracking down on underage and binge drinking in light of recent highly publicized student deaths. Although there is evidence showing that stricter college alcohol policies have been effective at discouraging both drinking in general and frequent binge drinking on college campuses, recent evidence from the Harvard School Of Public Health College Alcohol Study (CAS) shows that marijuana use among college students rose 22 percent between 1993 and 1999. Are current policies aimed at reducing alcohol consumption inadvertently encouraging marijuana use? This paper begins to address this question by investigating the relationship between the demands for alcohol and marijuana for college students using data from the 1993, 1997 and 1999 CAS. We find that alcohol and marijuana are economic complements and that policies that increase the full price of alcohol decrease participation in marijuana use.
Handle: RePEc:nbr:nberwo:8401
Template-Type: ReDIF-Paper 1.0
Title: Market Integration and Convergence to the Law of One Price: Evidence from the European Car Market
Classification-JEL: F0; L0
Author-Name: Pinelopi K. Goldberg
Author-Person: pgo1
Author-Name: Frank Verboven
Author-Person: pve137
Note: IO ITI
Number: 8402
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8402
File-URL: http://www.nber.org/papers/w8402.pdf
File-Format: application/pdf
Publication-Status: published as Goldberg, Pinelopi K. and Frank Verboven. "Market Integration And Convergence To The Law Of One Price: Evidence From The European Car Market," Journal of International Economics, 2005, v65(1,Jan), 49-73.
Abstract: This paper exploits the unique experiment of European market integration to investigate the relationship between integration and price convergence in international markets. Using a panel data set of car prices we examine how the process of integration has affected cross-country price dispersion in Europe. We find surprisingly strong evidence of convergence towards both the absolute and the relative versions of Purchasing Power Parity. Our analysis illuminates the main sources of segmentation in international markets and suggests the type of institutional changes that can successfully reduce it.
Handle: RePEc:nbr:nberwo:8402
Template-Type: ReDIF-Paper 1.0
Title: Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy
Classification-JEL: E3; E4
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Charles Evans
Author-Person: pev23
Note: EFG ME
Number: 8403
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8403
File-URL: http://www.nber.org/papers/w8403.pdf
File-Format: application/pdf
Publication-Status: published as Christiano, Lawrence J., Martin Eichenbaum, and Charles L. Evans. 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, 113(1): 1-45, February 2005
Publication-Status: published as Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
Abstract: We present a model embodying moderate amounts of nominal rigidities which accounts for the observed inertia in inflation and persistence in output. The key features of our model are those that prevent a sharp rise in marginal costs after an expansionary shock to monetary policy. Of these features, the most important are staggered wage contracts of average duration three quarters, and variable capital utilization.
Handle: RePEc:nbr:nberwo:8403
Template-Type: ReDIF-Paper 1.0
Title: International Risk Sharing is Better Than You Think (or Exchange Rates are Much Too Smooth)
Classification-JEL: G12; G15
Author-Name: Michael W. Brandt
Author-Name: John H. Cochrane
Author-Person: pco57
Author-Name: Pedro Santa-Clara
Author-Person: psa1486
Note: AP IFM
Number: 8404
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8404
File-URL: http://www.nber.org/papers/w8404.pdf
File-Format: application/pdf
Publication-Status: published as Brandt, Michael W., John H. Cochrane and Pedro Santa-Clara. "International Risk Sharing Is Better Than You Think, Or Exchange Rates Are Too Smooth," Journal of Monetary Economics, 2006, v53(4,May), 671-698.
Abstract: Exchange rates depreciate by the difference between the domestic and foreign marginal utility growths. Exchange rates vary a lot , as much as 10% per year. However, equity premia imply that marginal utility growths vary much more, by at least 50% per year. This means that marginal utility growths must be highly correlated across countries -- international risk sharing is better than you think. Conversely, if risks really are not shared internationally, exchange rates should vary more than they do -- exchange rates are much too smooth. We calculate an index of international risk sharing that formalizes this intuition in the context of both complete and incomplete capital markets. Our results suggest that risk sharing is indeed very high across several pairs of countries.
Handle: RePEc:nbr:nberwo:8404
Template-Type: ReDIF-Paper 1.0
Title: The Aging Population and the Size of the Welfare State
Classification-JEL: H0
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Author-Name: Phillip Swagel
Author-Person: psw34
Note: PE
Number: 8405
Creation-Date: 2001-07
Order-URL: http://www.nber.org/papers/w8405
File-URL: http://www.nber.org/papers/w8405.pdf
File-Format: application/pdf
Publication-Status: published as Razin, Assaf, Efraim Sadka and Phillip Swagel. "The Aging Population And The Size Of The Welfare State," Journal of Political Economy, 2002, v110(4,Aug), 900-918.
Abstract: Data for the United States and countries in Western Europe indicate a negative correlation between the dependency ratio and labor tax rates and the generosity of social transfers, after controlling for other factors that influence the size of the welfare state. This is despite the increased political clout of the dependent population implied by the aging of the population. This paper develops an overlapping generations model of intra-and inter-generational transfers (including old-age social security) and human capital formation which addresses this seeming puzzle. We show that with democratic voting, an increase in the dependency ratio can lead to lower taxes or less generous social transfers.
Handle: RePEc:nbr:nberwo:8405
Template-Type: ReDIF-Paper 1.0
Title: Imperfect Knowledge, Retirement and Saving
Classification-JEL: J26; H55
Author-Name: Alan L. Gustman
Author-Person: pgu327
Author-Name: Thomas L. Steinmeier
Note: AG LS
Number: 8406
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8406
File-URL: http://www.nber.org/papers/w8406.pdf
File-Format: application/pdf
Publication-Status: published as Alan L. Gustman and Thomas L. Steinmeier. “Imperfect Knowledge of Social Security and Pensions”. Industrial Relations. Vol. 44, No. 2 (April, 2005): 373 -395.
Abstract: Using data from the Health and Retirement Study, this paper creates variables measuring knowledge about future social security and pension benefits by comparing respondent reports of their expected benefits with benefits calculated from social security earnings records and employer provided descriptions of pension plans. The knowledge measures suggest that misinformation, imprecision and lack of information about retirement benefits is the norm. Those who are most dependent on social security are the least well informed about their social security benefits, while those who are most dependent on pensions are best informed about their pension benefits. Women and minorities are less well informed about both types of retirement benefits. Having documented the extent of misinformation, we turn to questions about the production of information, and the consequences of misinformation for real outcomes. Relating measures of information to planning activities, we find that those who plan are somewhat better informed than those who do not, but with the exception of having requested a social security earnings record, the effects of planning activities on knowledge are modest. In descriptive and reduced form equations for planned and actual retirement and saving, there is at best a modest relation of knowledge measures to planned and actual retirement and to nonpension, nonsocial security wealth as a share of lifetime earnings. Individuals who overestimate their benefits are likely to retire sooner than they planned, but the measured effects are relatively modest. Coefficients of measures of the increase in reward from postponed retirement are barely affected by the addition of measures of respondent knowledge of their retirement benefits to standard reduced form retirement and wealth equations.
Handle: RePEc:nbr:nberwo:8406
Template-Type: ReDIF-Paper 1.0
Title: Pricing, Production and Persistence
Classification-JEL: E1; E3
Author-Name: Michael Dotsey
Author-Name: Robert G. King
Author-Person: pki21
Note: EFG
Number: 8407
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8407
File-URL: http://www.nber.org/papers/w8407.pdf
File-Format: application/pdf
Publication-Status: published as Michael Dotsey & Robert G. King, 2006. "Pricing, Production, and Persistence," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 893-928, 09.
Abstract: Though built with increasingly precise microfoundations, modern optimizing sticky price models have displayed a chronic inability to generate large and persistent real responses to monetary shocks, as recently stressed by Chari, Kehoe and McGrattan [2000]. This is an ironic finding, since Taylor [1980] and other researchers were motivated to study sticky price models in part by the objective of generating large and persistent business fluctuations. We trace this lack of persistence to a standard view of the cyclical behavior of real marginal cost built into current sticky price macro models. Using both a small loglinear macroeconomic model and a larger fully articulated model, we show how an alternative view of real marginal cost can lead to substantial persistence. This alternative view is based on three features of the 'supply side' of the economy that we believe are realistic: an important role for produced inputs, variable capacity utilization, and labor supply variability through changes in employment. Importantly, these 'real flexibilities' work together to dramatically reduce the elasticity of marginal cost with respect to output, from levels much larger than unity in CKM to values much smaller than unity in our analysis. These 'real flexibilities' consequently reduce the extent of price adjustments by firms in time-dependent pricing economies and the incentives for paying fixed costs of adjustment in state-dependent pricing economies. The structural features also lead the sticky price model to display volatility and comovement of factor inputs and factor prices that are more closely in line with conventional wisdom about business cycles.
Handle: RePEc:nbr:nberwo:8407
Template-Type: ReDIF-Paper 1.0
Title: Australian Growth: A California Perspective
Classification-JEL: F2; F43
Author-Name: Ian W. McLean
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE IFM ITI
Number: 8408
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8408
File-URL: http://www.nber.org/papers/w8408.pdf
File-Format: application/pdf
Publication-Status: published as Rodrik. D. (ed.) In Search of Prosperity: Analytic Narratives on Economic Growth. Princeton, NJ: Princeton University Press, 2003.
Abstract: Examination of special cases assists understanding of the mechanics of long-run economic growth more generally. Australia and California are two economies having the rare distinction of achieving 150 years of sustained high and rising living standards for rapidly expanding populations. They are suitable comparators since in some respects they are quite similar, especially in their initial conditions in the mid-nineteenth century, their legal and cultural inheritances, and with respect to some long-term performance indicators. However, their growth trajectories have differed markedly in some sub-periods, and over the longer term with respect to the growth in the size of their economies. Most important, the comparison of an economy that remained a region in a much larger national economy with one that evolved into an independent political unit helps identify the role of several key policies. California had no independent monetary policy, or exchange rate, or controls over immigration or capital movements, or trade policy. Australia did, and after 1900 pursued an increasingly interventionist and inward-oriented development strategy until the 1970s. What difference did this make to long-run growth? And what other factors, exogenous and endogenous, account for the differences that have emerged between two economies that shared such similar initial conditions?
Handle: RePEc:nbr:nberwo:8408
Template-Type: ReDIF-Paper 1.0
Title: An Empirical Analysis of Personal Bankruptcy and Delinquency
Classification-JEL: E21; E51
Author-Name: David B. Gross
Author-Name: Nicholas S. Souleles
Author-Person: pso104
Note: EFG
Number: 8409
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8409
File-URL: http://www.nber.org/papers/w8409.pdf
File-Format: application/pdf
Publication-Status: published as Gross, D. B. and N. S. Souleles. "An Empirical Analysis Of Personal Bankruptcy And Delinquency," Review of Financial Studies, 2002, v15(1,Mar), 319-347.
Abstract: This paper uses a new panel data set of credit card accounts to analyze credit card delinquency, personal bankruptcy, and the stability of credit risk models. We estimate duration models for default and assess the relative importance of different variables in predicting default. We investigate how the propensity to default has changed over time, disentangling the two leading explanations for the recent increase in default rates - a deterioration in the risk - composition of borrowers versus an increase in borrowers' willingness to default due to declines in default costs, including social, information, and legal costs. Even after controlling for risk-composition and other economic fundamentals, the propensity to default significantly increased between 1995 and 1997. By contrast, increases in credit limits and other changes in risk-composition explain only a small part of the change in default rates. Standard default models appear to have missed an important time-varying default factor, consistent with a decline in default costs.
Handle: RePEc:nbr:nberwo:8409
Template-Type: ReDIF-Paper 1.0
Title: Consumer Sentiment: Its Rationality and Usefulness in Forecasting Expenditure - Evidence from the Michigan Micro Data
Classification-JEL: E21
Author-Name: Nicholas S. Souleles
Author-Person: pso104
Note: EFG ME
Number: 8410
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8410
File-URL: http://www.nber.org/papers/w8410.pdf
File-Format: application/pdf
Publication-Status: published as Souleles, Nicholas S. "Expectations, Heterogeneous Forecast Errors, And Consumption: Micro Evidence Form The Michigan Consumer Sentiment Surveys," Journal of Money, Credit and Banking, 2004, v36(1,Feb), 39-72.
Abstract: This paper provides one of the first comprehensive analyses of the household data underlying the Michigan Index of Consumer Sentiment. This data is used to test the rationality of consumer expectations and to assess their usefulness in forecasting expenditure. The results can also be interpreted as characterizing the shocks that have hit different types of households over time. Expectations are found to be biased, at least ex post, in that forecast errors do not average out even over a sample period lasting almost 20 years. People underestimated the disinflation of the early 1980's and in the 1990's, and generally appear to underestimate the amplitude of business cycles. Forecasts are also inefficient, in that people's forecast errors are correlated with their demographic characteristics and/or aggregate shocks did not hit all people uniformly. Further, sentiment is found to be useful in forecasting future consumption, even controlling for lagged consumption and macro variables like stock prices. This excess sensitivity is counter to the permanent income hypothesis [PIH]. Higher confidence is correlated with less saving, consistent with precautionary motives and increases in expected future resources. Some of the rejection of the PIH is found to be due to the systematic demographic components in forecast errors. But even after controlling for these components, some excess sensitivity persists. More broadly, these results suggest that empirical implementations of forward-looking models need to better account for systematic heterogeneity in forecast errors.
Handle: RePEc:nbr:nberwo:8410
Template-Type: ReDIF-Paper 1.0
Title: Economic Perspectives on Software Design: PC Operating Systems and Platforms
Classification-JEL: L86; L13
Author-Name: Steven J. Davis
Author-Person: pda15
Author-Name: Jack MacCrisken
Author-Name: Kevin M. Murphy
Author-Person: pmu108
Note: PR
Number: 8411
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8411
File-URL: http://www.nber.org/papers/w8411.pdf
File-Format: application/pdf
Publication-Status: published as Microsoft, Antitrust and the New Economy: Selected Essays, The Milken Institute Series on Financial Innovation and Economic Growth Volume 2. Springer US, 2002.
Abstract: Improvements in the software that provides hardware management, user interface and platform functions have played a central role in the growth and transformation of the personal computer (PC) industry. Several forces shape the design of these 'operating system' products and propel their evolution over time, including: A. The need to efficiently manage the interacting components of PC systems so as to keep pace with rapid advances in computer technologies the development of applications software. B. The need to maintain compatibility with existing applications while preserving the flexibility to incorporate additional functions that support new applications. C. The desire to economize on customer support costs and assign clear responsibility for making the interacting components of the PC work together. D. The desire to bundle multiple software features into a single package so as to more effectively meet the demand for complementary applications or reduce the diversity in product valuations among consumers. We analyze these forces and the factors that determine whether and when new features and functions are included in commercial operating system products. We also explain how this integration and bundling spurs growth in the PC industry and fosters innovation.
Handle: RePEc:nbr:nberwo:8411
Template-Type: ReDIF-Paper 1.0
Title: Another Look at Whether a Rising Tide Lifts All Boats
Classification-JEL: E24; J23
Author-Name: James R. Hines Jr.
Author-Person: phi111
Author-Name: Hilary W. Hoynes
Author-Person: pho278
Author-Name: Alan B. Krueger
Author-Person: pkr63
Note: LS PE
Number: 8412
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8412
File-URL: http://www.nber.org/papers/w8412.pdf
File-Format: application/pdf
Publication-Status: published as Krueger, Alan and Robert Solow (eds.) The Roaring Nineties: Can Full Employment Be Sustained? New York: Russell Sage Foundation, 2001.
Abstract: Periods of rapid U.S. economic growth during the 1960s and 1970s coincided with improved living standards for many segments of the population, including the disadvantaged as well as the affluent, suggesting to some that a rising economic tide lifts all demographic boats. This paper investigates the impact of U.S. business cycle conditions on population well-being since the 1970s. Aggregate employment and hours worked in this period are strongly procyclical, particularly for low-skilled workers, while aggregate real wages are only mildly procyclical. Similar patterns appear in a balanced panel of PSID respondents that removes the effects of changing workforce composition, though the magnitude of the responsiveness of real wages to unemployment appears to have declined in the last 20 years. Economic upturns increase the likelihood that workers acquire jobs in sectors with positively sloped career ladders. Spending by state and local governments in all categories rises during economic expansions, including welfare spending, for which needs vary countercyclically. Since the disadvantaged are likely to benefit disproportionately from such government spending, it follows that the public finances also contribute to conveying the benefits of a strong economy to diverse population groups.
Handle: RePEc:nbr:nberwo:8412
Template-Type: ReDIF-Paper 1.0
Title: Labour Market Reforms and Changes in Wage Inequality in the United Kingdom and the United States
Classification-JEL: J3; J5
Author-Name: Amanda Gosling
Author-Name: Thomas Lemieux
Author-Person: ple92
Note: LS
Number: 8413
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8413
File-URL: http://www.nber.org/papers/w8413.pdf
File-Format: application/pdf
Publication-Status: published as Labor Market Reforms and Changes in Wage Inequality in the United Kingdom and the United States, Amanda Gosling, Thomas Lemieux. in Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980–2000, Card, Blundell, and Freeman. 2004
Abstract: This paper compares trends in male and female hourly wage inequality in the United Kingdom and the United States between 1979 and 1998. Our main finding is that the extent and pattern of wage inequality became increasingly similar in the two countries during this period. We attribute this convergence to 'U.S. style' reforms in the U.K. labour market. In particular, we argue that the much steeper decline in unionisation in the United Kingdom explains why inequality increased faster than in the United States. For women, we conclude that the fall and subsequent recovery in the real value of the U.S. minimum wage explains why wage inequality increased faster in the United States than in the United Kingdom during the 1980s, while the opposite happened during the 1990s. Interestingly, the introduction of the National Minimum Wage in the U.K. in 1999 also contributed to the convergence in labour market institutions and wage inequality between the two countries.
Handle: RePEc:nbr:nberwo:8413
Template-Type: ReDIF-Paper 1.0
Title: When Does Capital Account Liberalization Help More than It Hurts?
Classification-JEL: F0; F2
Author-Name: Carlos Arteta
Author-Person: par12
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Charles Wyplosz
Author-Person: pwy2
Note: IFM
Number: 8414
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8414
File-URL: http://www.nber.org/papers/w8414.pdf
File-Format: application/pdf
Abstract: In this paper we reconsider the evidence on capital account liberalization and growth. While we find indications of a positive association, the effects vary with time, with how capital account liberalization is measured, and with how the relationship is estimated. The evidence that the effects of capital account liberalization are stronger in high-income countries is similarly fragile. There is some evidence that the positive growth effects of liberalization are stronger in countries with strong institutions, as measured by standard indicators of the rule of law, but only weak evidence that the benefits grow with a country's financial depth and development. We find more evidence of a correlation between capital account liberalization and growth when we allow the effect to vary with other dimensions of openness. There are two interpretations of this finding, one in terms of the sequencing of trade and financial liberalization, the other in terms of the need to eliminate major macroeconomic imbalances before opening the capital account. By and large our results support the second interpretation.
Handle: RePEc:nbr:nberwo:8414
Template-Type: ReDIF-Paper 1.0
Title: Toward a Framework for Improving Health Care Financing for an Aging Population: The Case of Israel
Classification-JEL: I1
Author-Name: Dov Chernichovsky
Author-Name: Sara Markowitz
Author-Person: pma138
Note: AG EH
Number: 8415
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8415
File-URL: http://www.nber.org/papers/w8415.pdf
File-Format: application/pdf
Publication-Status: published as "Aging and Aggregate Costs of Medical Care: Conceptual and Policy Issues," Health Economics, Volume 13 Issue 6, Pages 543 - 562 (December 2003)
Abstract: The conventional wisdom is that because at any time the aged cost more than the young, there is a positive relationship between aging and health care spending. It is hard, however, to find evidence that aging correlates positively with such spending. Intrigued by the puzzle, we account for the factors that contribute to changes of the age distribution of medical costs and their potential effect on aggregate cost. As changes in costs are not age neutral, the health system needs to facilitate a dynamic shift of resources from those whose relative cost rise less -- the young -- to those whose relative costs rise more -- the old. As there is an apparent market failure associated with uncertainty about growth in longevity (no market for 'death insurance'), the private market does not seem to effectively facilitate this shift. Aging, and its known correlates and antecedents produce a complex picture about the potential effect of aging on total cost of medical care in Israel. Shifting morbidity and mortality to older age can lower cost of care, all other things equal. Growth in incomes and insurance coverage are likely to increase use of care particularly amongst the old. Rising levels of education would have the opposite effect, but among the relatively young. The effect of a key element, technology, remains unknown. The Israeli experience also points to the advantages of a unified publicly financed health system with a timely allocation mechanism.
Handle: RePEc:nbr:nberwo:8415
Template-Type: ReDIF-Paper 1.0
Title: Targeting Managerial Control: Evidence from Franchising
Classification-JEL: L2; J4
Author-Name: Francine Lafontaine
Author-Person: pla92
Author-Name: Kathryn L. Shaw
Author-Person: psh162
Note: IO
Number: 8416
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8416
File-URL: http://www.nber.org/papers/w8416.pdf
File-Format: application/pdf
Publication-Status: published as Lafontaine, Francine and Kathryn L. Shaw. "Targeting Managerial Control: Evidence From Franchising," Rand Journal of Economics, 2005, v36(1,Spring), 131-150.
Abstract: Using an extensive longitudinal data set on franchising firms, we show that established franchisors manage their portfolio of company and franchised units to maintain a particular target level of corporate control and ownership of outlets. On average, established franchisors maintain about 15 percent of their outlets as company owned - with the other 85 percent owned by franchisees. Interestingly, the rate of company ownership does not rise or fall within firms as they gain experience or learn, or as they succeed or fail. However, the targeted rate does vary considerably across firms: firm-specific fixed effects explain 90 percent of the variance of company ownership rates in our longitudinal data. Given strong evidence that firms target specific, but different, rates of company ownership, what factors determine firms' optimal targeted rates? We find that brandname value is an important determinant: franchisors with high brandname value, as measured by advertising fees or major media expenditures, target high rates of company ownership. We argue that targeting high rates of company ownership is desirable in chains with more valuable brands because individual franchisees have incentives to free ride on brandname value. Consequently, high-value franchisors need to exert more direct managerial control over outlets in their chain. In addition, high company ownership rates give franchisors better incentives to maintain the value of their brand.
Handle: RePEc:nbr:nberwo:8416
Template-Type: ReDIF-Paper 1.0
Title: Luxury Goods and the Equity Premium
Classification-JEL: G12; E21
Author-Name: Yacine Ait-Sahalia
Author-Person: pai23
Author-Name: Jonathan A. Parker
Author-Person: ppa21
Author-Name: Motohiro Yogo
Author-Person: pyo20
Note: AP
Number: 8417
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8417
File-URL: http://www.nber.org/papers/w8417.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, 2004, vol. 59, pp. 2959-3004
Abstract: This paper evaluates the return on equity using novel data on the consumption of luxury goods. Specifying household utility as a nonhomothetic function of the consumption of both a luxury good and a basic good, we derive and evaluate the riskiness of equity in such a world. Household survey and national accounts consumption data overstate the risk aversion necessary to match the observed equity premium because they contain basic consumption goods. The risk aversion implied by equity returns and the consumption of luxury goods is more than an order of magnitude less than found using national accounts consumption data. For the very rich, the equity premium is much less of a puzzle.
Handle: RePEc:nbr:nberwo:8417
Template-Type: ReDIF-Paper 1.0
Title: Plant- and Firm-Level Evidence on "New" Trade Theories
Classification-JEL: F1; L1
Author-Name: James R. Tybout
Note: ITI
Number: 8418
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8418
File-URL: http://www.nber.org/papers/w8418.pdf
File-Format: application/pdf
Publication-Status: published as Hoekman, Bernard and Beata Smarzynska Javorcik (eds.) Global Integration and Technology Transfer, Trade and Development series. Washington, D.C.: World Bank; Houndmills, U.K. and New York: Palgrave Macmillan, 2006.
Abstract: By relaxing the assumption of perfect competition, the 'new' trade theory has generated a rich body of predictions concerning the effects of commercial policy on price-cost mark-ups, firm sizes, exports, productivity and profitability among domestic producers. This paper critically assesses the plant- and firm-level evidence on these linkages. Several robust findings are identified. First, mark-ups generally fall with import competition, but it is not clear whether this phenomenon reflect the elimination of market power or the creation of negative economic profits. Second, import-competing firms cut back their production levels when foreign competition intensifies, at least in the short run. This suggests that sunk entry or exit costs are important in most sectors. Third, trade rationalizes production in the sense that markets for the most efficient plants are expanded, but large import-competing firms tend to simultaneously contract. Fourth exposure to foreign competition often improves intra-plant efficiency. Fifth, firms that engage in international activities tend to be larger, more productive, and supply higher quality products. However the literature is mixed on whether international activities cause these characteristics or vice versa. Finally, the short-run and long-run effects of commercial policy on exports and market structure can be quite different. Both types of response depend upon initial conditions, sunk entry costs, and the extent of firm heterogeneity.
Handle: RePEc:nbr:nberwo:8418
Template-Type: ReDIF-Paper 1.0
Title: What do Self-Reported, Objective, Measures of Health Measure?
Classification-JEL: I12; J22
Author-Name: Michael Baker
Author-Person: pba400
Author-Name: Mark Stabile
Author-Person: pst179
Author-Name: Catherine Deri
Note: EH LS
Number: 8419
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8419
File-URL: http://www.nber.org/papers/w8419.pdf
File-Format: application/pdf
Publication-Status: published as Baker, Michael, Mark Stabile and Catherine Deri. "What Do Self-Reported, Objective, Measures Of Health Measure?," Journal of Human Resources, 2004, v39(4,Fall), 1067-1093.
Abstract: Survey reports of the incidence of chronic conditions are considered by many researchers to be more objective, and thus preferable, measures of unobserved health status than self-assessed measures of global well being. The former are 1) responses to specific questions about different ailments, which may constrain the likelihood that respondents rationalize their own behavior through their answers, and 2) more comparable across respondents. In this paper we evaluate this hypothesis by exploring measurement error in these 'objective, self-reported' measures of health. Our analysis makes use of a unique data set that matches a variety of self-reports of health with respondents' medical records. Our findings are striking. For example, the ratio of the error variance to the total variance ranges from just over 30 percent for the incidence of diabetes to over 80 percent for the incidence of arthritis. Furthermore, for many conditions the error is significantly related to individuals' labor market activity, as hypothesized in the literature. In the final section of the paper we compare estimates of the effect of these different measures of health on labor market activity.
Handle: RePEc:nbr:nberwo:8419
Template-Type: ReDIF-Paper 1.0
Title: A Framework to Compare Environmental Policies
Classification-JEL: H20; H23
Author-Name: Don Fullerton
Author-Person: pfu10
Note: PE EEE
Number: 8420
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8420
File-URL: http://www.nber.org/papers/w8420.pdf
File-Format: application/pdf
Publication-Status: published as Fullerton, Don. "A Framework To Compare Environmental Policies," Southern Economic Journal, 2001, v68(2,Oct), 224-238.
Abstract: This paper builds a single model that can be used to show efficiency and distributional effects of eight different types of environmental policies (including taxes, subsidies, regulations, permits, and legal liability). All eight approaches can be designed to have the same efficiency effects, even while they have different distributional effects. For further evaluation of these policies, the paper discusses other criteria outside the simple model (including administrative efficiency, enforcement capabilities, and political feasibility). The paper ends with a discussion of likely trade-offs among these often-competing objectives of environmental policy.
Handle: RePEc:nbr:nberwo:8420
Template-Type: ReDIF-Paper 1.0
Title: Productivity Growth and the Phillips Curve
Classification-JEL: E31; E32
Author-Name: Laurence Ball
Author-Person: pba605
Author-Name: Robert Moffitt
Author-Person: pmo48
Note: EFG ME
Number: 8421
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8421
File-URL: http://www.nber.org/papers/w8421.pdf
File-Format: application/pdf
Publication-Status: published as Krueger, A. and R. Solow (eds.) The Roaring Nineties: Can Full Employment Be Sustained? Russell Sage Foundation, 2002.
Abstract: We present a model in which workers' aspirations for wage increases adjust slowly to shifts in productivity growth. The model yields a Phillips curve with a new variable: the gap between productivity growth and an average of past wage growth. Empirically, this variable shows up strongly in the U.S. Phillips curve. Including it explains the otherwise puzzling shift in the unemployment-inflation tradeoff since 1995.
Handle: RePEc:nbr:nberwo:8421
Template-Type: ReDIF-Paper 1.0
Title: Temporary Controls on Capital Inflows
Classification-JEL: F32; F34
Author-Name: Carmen M. Reinhart
Author-Person: pre33
Author-Name: R. Todd Smith
Note: IFM
Number: 8422
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8422
File-URL: http://www.nber.org/papers/w8422.pdf
File-Format: application/pdf
Publication-Status: published as Reinhart, Carmen M. and R. Todd Smith. "Temporary Controls On Capital Inflows," Journal of International Economics, 2002, v57(2,Aug), 327-351.
Abstract: During the past decade a number of countries imposed capital controls that had two distinguishing features: they were asymmetric, in that they were designed principally to discourage capital inflows, and they were temporary. This paper studies formally the consequences of these policies, calibrates their potential effectiveness, and assesses their welfare implications in an environment in which the level of capital inflows can be sub-optimal. In addition, motivated by the fact that these types of controls have often been left in place after the dissipation of the shock that lead to the controls being implemented, the paper evaluates the welfare cost of procrastination in removing these types of controls.
Handle: RePEc:nbr:nberwo:8422
Template-Type: ReDIF-Paper 1.0
Title: The Case for Price Stability
Classification-JEL: E3; E5
Author-Name: Marvin Goodfriend
Author-Person: pgo19
Author-Name: Robert G. King
Author-Person: pki21
Note: EFG
Number: 8423
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8423
File-URL: http://www.nber.org/papers/w8423.pdf
File-Format: application/pdf
Abstract: Reasoning within the New Neoclassical Synthesis (NNS) we previously recommended that price stability should be the primary objective of monetary policy. We called this a neutral policy because it keeps output at its potential, defined as the outcome of an imperfectly competitive real business cycle model with a constant markup of price over marginal cost. We explore the foundations of neutral policy more fully in this paper. Using the principles of public finance, we derive conditions under which markup constancy is optimal monetary policy. Price stability as the primary policy objective has been criticized on a number of grounds which we evaluate in this paper. We show that observed inflation persistence in U.S. time series is consistent with the absence of structural inflation stickiness as is the case in the benchmark NNS economy. We consider reasons why monetary policy might depart from markup constancy and price stability, but we argue that optimal departures are likely to be minor. Finally, we argue that the presence of nominal wage stickiness in labor markets does not undermine the case for neutral policy and price stability.
Handle: RePEc:nbr:nberwo:8423
Template-Type: ReDIF-Paper 1.0
Title: The Economic and Strategic Motives for Antidumping Filings
Classification-JEL: F1
Author-Name: Thomas J. Prusa
Author-Person: ppr249
Author-Name: Susan Skeath
Note: ITI
Number: 8424
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8424
File-URL: http://www.nber.org/papers/w8424.pdf
File-Format: application/pdf
Publication-Status: published as Thomas Prusa & Susan Skeath, 2002. "The economic and strategic motives for antidumping filings," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(3), pages 389-413, September.
Abstract: This paper takes a critical look at the trends in worldwide antidumping (AD) case filings during the last two decades. We examine the motives for AD filings by countries in an attempt to identify whether economic or strategic concerns are driving the recent upsurge in AD use. We begin by providing a comprehensive overview of the data on cases initiated in the 1980 to 1998 period. We then use non-parametric methods to identify national motivations for the use of antidumping. Results show considerable support for the importance of strategic concerns in driving AD case filings. This suggests that the rise in AD activity cannot be solely explained by an increase in unfair trading practices.
Handle: RePEc:nbr:nberwo:8424
Template-Type: ReDIF-Paper 1.0
Title: New Products, Quality Changes and Welfare Measures Computed From Estimated Demand Systems
Author-Name: Aviv Nevo
Author-Person: pne133
Note: IO PR
Number: 8425
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8425
File-URL: http://www.nber.org/papers/w8425.pdf
File-Format: application/pdf
Publication-Status: published as Nevo, Aviv. "New Products, Quality Changes, And Welfare Measures Computed From Estimated Demand Systems," Review of Economics and Statistics, 2003, v85(2,May), 266-275.
Abstract: This paper examines the construction of a price index based on an estimated demand system. In principle the method examined can produce a price index that accounts for introduction of new products and quality changes in existing products. However, I isolate two key assumptions that have to be made in order to interpret the demand estimates into welfare measures. Using estimates of a brand-level demand system for ready-to-eat cereal I demonstrate the empirical importance of the assumptions. For the data I use, depending on the interpretation of the demand estimates, a price index can range between a 35% percent increase over the five years examined to a 2.4% decrease.
Handle: RePEc:nbr:nberwo:8425
Template-Type: ReDIF-Paper 1.0
Title: What Can the Price Gap between Branded and Private Label Products Tell Us about Markups?
Author-Name: Robert Barsky
Author-Person: pba670
Author-Name: Mark Bergen
Author-Name: Shantanu Dutta
Author-Name: Daniel Levy
Author-Person: ple114
Note: EFG ME
Number: 8426
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8426
File-URL: http://www.nber.org/papers/w8426.pdf
File-Format: application/pdf
Publication-Status: published as What Can the Price Gap between Branded and Private-Label Products Tell Us about Markups? , Robert B. Barsky, Mark Bergen, Shantanu Dutta, Daniel Levy. in Scanner Data and Price Indexes, Feenstra and Shapiro. 2003
Abstract: In this paper we investigate the size of markups for nationally branded products sold in the U.S. retail grocery industry. Using scanner data from a large Midwestern supermarket chain, we compute several measures of upper and lower bounds on markup ratios for over 230 nationally branded products in 19 categories. Our method is based on the insight that retail and wholesale prices of private label products provide information on marginal costs that are also applicable to the appropriately matched nationally branded products. Under reasonable assumptions - the accuracy of which we consider in some detail - the wholesale price of a private label product is an upper bound for the marginal manufacturing cost of its nationally branded equivalent, while the retailer's margin on the national brand is an upper bound on the retailer's marginal handling cost for both the brand and private label versions. We find that lower bounds on the 'full' markup ratio range from 3.44 for toothbrushes and 2.23 for soft drinks to about 1.15-1.20 for canned tuna and frozen entrees, with the majority of categories falling in the range 1.40-2.10. Lower bounds on manufacturers' markups are even higher. Thus the data indicate that markups on nationally branded products sold in U.S. supermarkets are large.
Handle: RePEc:nbr:nberwo:8426
Template-Type: ReDIF-Paper 1.0
Title: Smoothing Sudden Stops
Classification-JEL: E0; E4
Author-Name: Ricardo Caballero
Author-Person: pca44
Author-Name: Arvind Krishnamurthy
Author-Person: pkr393
Note: EFG IFM
Number: 8427
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8427
File-URL: http://www.nber.org/papers/w8427.pdf
File-Format: application/pdf
Publication-Status: published as Caballero, Ricardo J. and Arvind Krishnamurthy. "Smoothing Sudden Stops," Journal of Economic Theory, 2004, v119(1,Nov), 104-127.
Abstract: Emerging economies are exposed to severe and sudden shortages of international financial resources. Yet domestic agents seem not to undertake enough precautions against these sudden stops. Following our previous work, we highlight in this paper the central role played by limited domestic development in ex-ante (insurance) and ex-post (spot) financial markets in generating this collective undervaluation of external resources and insurance. Within this structure, this paper studies several canonical policies to counteract the external underinsurance. We do this by first solving for the optimal mechanism given the constraints imposed by limited domestic financial development, and then considering the main - in terms of the model and practical relevance - implementations of this mechanism.
Handle: RePEc:nbr:nberwo:8427
Template-Type: ReDIF-Paper 1.0
Title: A "Vertical" Analysis of Crises and Intervention: Fear of Floating and Ex-ante Problems
Classification-JEL: E0; E4
Author-Name: Ricardo Caballero
Author-Person: pca44
Author-Name: Arvind Krishnamurthy
Author-Person: pkr393
Note: EFG IFM
Number: 8428
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8428
File-URL: http://www.nber.org/papers/w8428.pdf
File-Format: application/pdf
Abstract: Emerging economies are prone to crises triggered by external shocks. During these crises, should the central bank stabilize the currency or domestic interest rates? If the choice is outside the central bank's control, as in a currency board, are there good policy substitutes? We argue that these questions are best analyzed in a 'vertical' framework, where the supply of external funds faced by the country is inelastic during the crisis and monetary policy affects mostly the domestic cost of scarce international liquidity. This is in contrast to the standard 'horizontal' framework where supply is elastic at the (now higher) international interest rate. In this vertical view, raising domestic interest rates during a crisis has relatively limited output consequences, while not doing so causes a sharp exchange rate overshooting. This asymmetry naturally leads to the widely observed fear of floating. However, while this response is ex-post rationalizable, it has negative ex-ante consequences as it exacerbates the structurally insufficient private sector incentives to insure against crises. Ex-ante, optimal monetary policy is countercyclical, and increasingly so as financial development falls. The silver lining for countries with limited financial development that cannot (or should not) overcome this conservative-central-bank time inconsistency problem, is that since the main role of monetary policy in the vertical view is one of incentives, it can be substituted by ex-ante measures to induce the private sector to insure against crises.
Handle: RePEc:nbr:nberwo:8428
Template-Type: ReDIF-Paper 1.0
Title: The Inter-War Gold Exchange Standard: Credibility and Monetary Independence
Classification-JEL: F31; G15
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Ronald MacDonald
Note: DAE ME
Number: 8429
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8429
File-URL: http://www.nber.org/papers/w8429.pdf
File-Format: application/pdf
Publication-Status: published as Bordo, Michael D. and Ronald MacDonald. "Interest Rate Interactions In The Classical Gold Standard, 1880-1914: Was There Any Monetary Independence?," Journal of Monetary Economics, March 2005, v52(2): 307-327
Publication-Status: published as Bordo, Michael D. and Ronald MacDonald. "The Inter-war Gold Exchange Standard: Credibility and Monetary Independence." Journal of International Money and Finance, February 2003, 22(1): 1-32
Abstract: In this paper we analyze the operation of the inter-war gold exchange standard to see if the evident credibility of the system conferred on participating central banks the ability to pursue independent monetary policies. To answer this question we econometrically analyze two key parity, or arbitrage, conditions, namely uncovered interest rate parity and a yield gap relationship. We find that there were both long- and short-run deviations from the arbitrage conditions. The use to which this policy independence was put is analyzed in the context of a multivariate system, which includes reaction function variables.
Handle: RePEc:nbr:nberwo:8429
Template-Type: ReDIF-Paper 1.0
Title: The Composite Index of Leading Economic Indicators: How to Make It More Timely
Author-Name: Robert H. McGuckin
Author-Name: Ataman Ozyildirim
Author-Name: Victor Zarnowitz
Note: EFG
Number: 8430
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8430
File-URL: http://www.nber.org/papers/w8430.pdf
File-Format: application/pdf
Abstract: A major shortcoming of the U.S. leading index is that it does not use the most recent information for stock prices and yield spreads. The index methodology ignores these data in favor of a time-consistent set of components (i.e., all of the components must refer to the previous month). An alternative is to bring the series with publication lags up-to-date with forecasts and create an index with a complete set of most recent components. This study uses tests of ex-ante predictive ability of the U.S. leading index to evaluate the gains to this new 'hot box' procedure of statistical imputation. We find that, across a variety of simple forecasting models, the new approach offers substantial improvements.
Handle: RePEc:nbr:nberwo:8430
Template-Type: ReDIF-Paper 1.0
Title: Mobility as Progressivity: Ranking Income Processes According to Equality of Opportunity
Classification-JEL: D31; D63
Author-Name: Roland Benabou
Author-Person: pbe27
Author-Name: Efe A. Ok
Note: PE
Number: 8431
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8431
File-URL: http://www.nber.org/papers/w8431.pdf
File-Format: application/pdf
Abstract: Interest in economic mobility stems largely from its perceived role as an equalizer of opportunities, though not necessarily of outcomes. In this paper we show that this view leads very naturally to a methodology for the measurement of social mobility which has strong parallels with the theory of progressive taxation. We characterize opportunity--equalizing mobility processes, and provide simple criteria to determine when one process is more equalizing than another. We then explain how this mobility ordering relates to social welfare analysis, and how it differs from existing ones. We also extend standard indices of tax progressivity to mobility processes, and illustrate our general methodology on intra- and intergenerational mobility data from the United States and Italy.
Handle: RePEc:nbr:nberwo:8431
Template-Type: ReDIF-Paper 1.0
Title: Teachers, Race and Student Achievement in a Randomized Experiment
Classification-JEL: I2
Author-Name: Thomas S. Dee
Note: CH ED
Number: 8432
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8432
File-URL: http://www.nber.org/papers/w8432.pdf
File-Format: application/pdf
Publication-Status: published as Dee, Thomas S. “Teachers, Race and Student Achievement in a Randomized Experiment." The Review of Economics and Statistics 86, 1 (February 2004): 195-210. T D ee Dee, Thomas S. "Teachers, Race and Student Achievement in a Randomized Experiment." The Review of Economics and Statistics 86, 1 (February 2004): 195-210.
Abstract: Recommendations for the aggressive recruitment of minority teachers are based on hypothesized role-model effects for minority students as well as evidence of racial biases among non-minority teachers. However, prior empirical studies have found little or no association between exposure to an own-race teacher and student achievement. This paper presents new evidence on this question by evaluating the test score data from Tennessee's Project STAR class-size experiment, which randomly matched students and teachers within participating schools. Empirical results based on these data confirm that the racial pairings of students and teachers in this experiment were independently given. Models of student achievement indicate that a one-year assignment to an own-race teacher significantly increased the math and reading achievement of both black and white students by roughly three to four percentile points.
Handle: RePEc:nbr:nberwo:8432
Template-Type: ReDIF-Paper 1.0
Title: Expansion Strategies of U.S. Multinational Firms
Author-Name: Gordon H. Hanson
Author-Person: pha80
Author-Name: Raymond J. Mataloni, Jr.
Author-Name: Matthew J. Slaughter
Note: ITI
Number: 8433
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8433
File-URL: http://www.nber.org/papers/w8433.pdf
File-Format: application/pdf
Publication-Status: published as Rodrik, Dani and Susan Collins (eds.) Brookings Trade Forum 2001. Brookings Institution Press, 2001.
Abstract: Recent theoretical work tends to characterize multinational enterprises as arising through either horizontal or vertical foreign direct investment (FDI). Empirical research tends to find stronger support for the former than for the latter. In this paper, we use recent, detailed data on U.S. multinational firms to revisit the question of why multinationals go abroad. We examine three types of foreign activities of U.S. multinationals: global outsourcing, the use of export platforms, and wholesale trading. Our results suggest that vertical FDI is more common than previous research suggests, and more generally that the foreign affiliates of multinationals span a diverse set of activities that each respond to policies and characteristics of host countries in quite different ways.
Handle: RePEc:nbr:nberwo:8433
Template-Type: ReDIF-Paper 1.0
Title: The Quality Distribution of Jobs and the Structure of Wages in Search Equilibrium
Classification-JEL: J31; J24
Author-Name: Steven J. Davis
Author-Person: pda15
Note: EFG LS
Number: 8434
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8434
File-URL: http://www.nber.org/papers/w8434.pdf
File-Format: application/pdf
Abstract: When match formation is costly and wage determination is decentralized, privately optimal investments in job and worker quality diverge from socially efficient outcomes. To explore this issue, I consider search equilibrium environments with endogenous quality distributions for jobs and workers. I show that a search equilibrium with decentralized wage setting exhibits excessive relative supplies of inferior jobs and inferior workers. Moreover, there are fundamental tensions between the standard wage-setting condition for an efficient total supply of jobs (and workers) in two-sided search models and the conditions required for efficient mixes of jobs and workers. I also derive the efficient wage structure, contrast its properties to the decentralized wage structure and evaluate the welfare and productivity gains of moving to an efficient wage structure. Numerical exercises show that centralized bargaining between a labor union and an employer confederation over the structure of wages can improve productivity and welfare by compressing job-related wage differentials.
Handle: RePEc:nbr:nberwo:8434
Template-Type: ReDIF-Paper 1.0
Title: "Hall of Fame" Voting: The Econometric Society
Classification-JEL: D71; A14
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Author-Name: Peter Schmidt
Note: LS
Number: 8435
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8435
File-URL: http://www.nber.org/papers/w8435.pdf
File-Format: application/pdf
Publication-Status: published as "The Determinants of Econometric Society Fellows Elections" Hamermesh, Daniel S.; Schmidt, Peter; Econometrica, January 2003, v. 71, iss. 1, pp. 399-407
Abstract: We examine the determinants of election as Fellow of the Econometric Society, an example of voting within a group to confer honor on some members and perhaps achieve additional status for the entire group. Using data from annual elections from 1990-2000, we find that objective measures of quality help determine elections, as do attestations of quality by previous honorees. What one might view as ascriptive characteristics, such as candidates' subspecialty or institutional affiliation/location, also affect their electoral success.
Handle: RePEc:nbr:nberwo:8435
Template-Type: ReDIF-Paper 1.0
Title: Stock Volatility in the New Millennium: How Wacky Is Nasdaq?
Classification-JEL: G14; G12
Author-Name: G. William Schwert
Author-Person: psc116
Note: AP
Number: 8436
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8436
File-URL: http://www.nber.org/papers/w8436.pdf
File-Format: application/pdf
Publication-Status: published as Schwert, G. William. "Stock Volatility In The New Millennium: How Wacky Is Nasdaq?," Journal of Monetary Economics, 2002, v49(1,Jan), 3-26.
Abstract: The recent volatility of stock prices has caused many people to conclude that investors have become irrational in valuing at least some stocks. This paper investigates the behavior of the volatility of stocks on the Nasdaq, which tend to be smaller companies with more growth options, in relation to the more seasoned issues reflected in the Standard & Poor's 500 portfolio. It also analyzes the relation of the unusual Nasdaq volatility to the hot IPO market in 1998 and 1999. The factor that seems to explain unusual volatility best is technology, not firm size or the immaturity of the firm.
Handle: RePEc:nbr:nberwo:8436
Template-Type: ReDIF-Paper 1.0
Title: The Clinton Legacy for America's Poor
Classification-JEL: I3; H5
Author-Name: Rebecca M. Blank
Author-Person: pbl56
Author-Name: David T. Ellwood
Note: CH LS PE
Number: 8437
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8437
File-URL: http://www.nber.org/papers/w8437.pdf
File-Format: application/pdf
Publication-Status: published as Frankel, Jeffrey A. and Peter R. Orszag (eds.) American Economic Policy in the 1990s. Cambridge, MA: MIT Press, 2002.
Abstract: This paper examines the impact of Clinton era social policy changes on the poor. It explores shifts in incentives, behavior, and incomes and discusses the role Clinton did or did not play in influencing the policy mix and the nature of the political debate surrounding poverty. Policy changes included a radical shift in welfare policy, a sizable expansion in supports for low income workers with children, new child support enforcement measures, more restricted support for immigrants, and altered housing policies. Partly as a result of these policies, but also in part due to the strong economy, welfare use plummeted, work rose dramatically among single parents, and poverty was reduced. At the same time, there are indications that some families are doing worse than before and that some working families are not getting health and food benefits to which they are entitled. Significant questions remain about what will happen to poor families in the next recession.
Handle: RePEc:nbr:nberwo:8437
Template-Type: ReDIF-Paper 1.0
Title: Does Direct Foreign Investment Affect Domestic Firms' Credit Constraints?
Classification-JEL: F2; G3
Author-Name: Ann E. Harrison
Author-Person: pha441
Author-Name: Margaret S. McMillan
Author-Person: pmc26
Note: ITI
Number: 8438
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8438
File-URL: http://www.nber.org/papers/w8438.pdf
File-Format: application/pdf
Publication-Status: published as Harrison, Ann E. and Margaret McMillan. “Does Foreign Direct Investment Affect Domestic Firm Credit Constraints?” Journal of International Economics 61, 1 (October 2003): 73-100.
Abstract: Firms in developing countries cite credit constraints as one of their primary obstacles to investment. Direct foreign investment, by bringing in scarce capital, may ease domestic firms' credit constraints. Alternatively, if foreign firms borrow heavily from domestic banks, they may exacerbate domestic firms' credit constraints by crowding them out of domestic capital markets. One plausible mechanism by which this may happen is indirect. Foreign firms may be more experienced and have better financial ratios and thus, be a safer bet for lending institutions. Using firm-level data from the Ivory Coast for the period 1974-1987 we test the following hypotheses: (1) domestic firms are more credit constrained than foreign firms and (2) borrowing by foreign firms exacerbates the credit constraints of domestic firms. Results suggest that domestic firms are significantly more credit constrained that foreign firms and that borrowing by foreign firms aggravates domestic firms' credit constraints. By splitting the sample into state-owned (SOE) and privately owned domestic enterprises we are able to show that SOEs are less financially constrained than other domestic enterprises, consistent with the notion of a 'soft budget constraint'. Borrowing by foreign firms affects only privately owned enterprises. Finally, we explore possible explanations for the crowding out effect.
Handle: RePEc:nbr:nberwo:8438
Template-Type: ReDIF-Paper 1.0
Title: Stock Market Driven Acquisitions
Classification-JEL: G34
Author-Name: Andrei Shleifer
Author-Person: psh93
Author-Name: Robert W. Vishny
Author-Person: pvi218
Note: AP CF
Number: 8439
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8439
File-URL: http://www.nber.org/papers/w8439.pdf
File-Format: application/pdf
Publication-Status: published as Shleifer, Andrei & Vishny, Robert W., 2003. "Stock market driven acquisitions," Journal of Financial Economics, Elsevier, vol. 70(3), pages 295-311, December.
Abstract: We present a model of mergers and acquisitions based on stock market misvaluations of the combining firms. The key ingredients of the model are the relative valuations of the merging firms, the horizons of their respective managers, and the market's perception of the synergies from the combination. The model explains who acquirers whom, whether the medium of payment is cash or stock, what are the valuation consequences of mergers, and why there are merger waves. The model is consistent with available empirical findings about characteristics and returns of merging firms, and yields new predictions as well.
Handle: RePEc:nbr:nberwo:8439
Template-Type: ReDIF-Paper 1.0
Title: Foreign Direct Investment in a World of Multiple Taxes
Classification-JEL: H87; H25
Author-Name: Mihir A. Desai
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: ITI PE
Number: 8440
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8440
File-URL: http://www.nber.org/papers/w8440.pdf
File-Format: application/pdf
Publication-Status: published as Desai, Mihir A. & Foley, C. Fritz & Hines, James Jr., 2004. "Foreign direct investment in a world of multiple taxes," Journal of Public Economics, Elsevier, vol. 88(12), pages 2727-2744, December.
Abstract: While governments have multiple tax instruments available to them, studies of the effect of tax policy on the locational decisions of multinationals typically focus exclusively on host country corporate income tax rates and their interaction with home country tax rules. This paper examines the impact of indirect (non-income) taxes on the location and character of foreign direct investment by American multinational firms. Indirect tax burdens significantly exceed foreign income tax obligations for these firms and appear to influence strongly their behavior. The influence of indirect taxes is shown to be partly attributable to the inability of American investors to claim foreign tax credits for indirect tax payments. Estimates imply that 10 percent higher indirect tax rates are associated with 9.2 percent lower reported income of American affiliates and 8.6 percent lower capital/labor ratios. These estimates carry implications for efficient tradeoffs between direct and indirect taxation in raising revenue while attracting mobile capital.
Handle: RePEc:nbr:nberwo:8440
Template-Type: ReDIF-Paper 1.0
Title: The Electoral Advantage to Incumbency and Voters' Valuation of Politicians' Experience: A Regression Discontinuity Analysis of Elections to the U.S...
Classification-JEL: D70; D72
Author-Name: David S. Lee
Note: LS PE
Number: 8441
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8441
File-URL: http://www.nber.org/papers/w8441.pdf
File-Format: application/pdf
Abstract: Using data on elections to the United States House of Representatives (1946-1998), this paper exploits a quasi-experiment generated by the electoral system in order to determine if political incumbency provides an electoral advantage - an implicit first-order prediction of principal-agent theories of politician and voter behavior. Candidates who just barely won an election (barely became the incumbent) are likely to be ex ante comparable in all other ways to candidates who barely lost, and so their differential electoral outcomes in the next election should represent a true incumbency advantage. The regression discontinuity analysis provides striking evidence that incumbency has a significant causal effect of raising the probability of subsequent electoral success - by about 0.40 to 0.45. Simulations - using estimates from a structural model of individual voting behavior - imply that about two-thirds of the apparent electoral success of incumbents can be attributed to voters' valuation of politicians' experience. The quasi-experimental analysis also suggest that heuristic 'fixed effects' and 'instrumental variable' modeling approaches would have led to misleading inferences in this context.
Handle: RePEc:nbr:nberwo:8441
Template-Type: ReDIF-Paper 1.0
Title: California's Electricity Crisis
Classification-JEL: L5; L9
Author-Name: Paul L. Joskow
Author-Person: pjo110
Note: IO
Number: 8442
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8442
File-URL: http://www.nber.org/papers/w8442.pdf
File-Format: application/pdf
Publication-Status: published as Paul L. Joskow, 2001. "California's Electricity Crisis," Oxford Review of Economic Policy, Oxford University Press, vol. 17(3), pages 365-388.
Abstract: This paper discusses the political, regulatory and economic factors that led to California's electricity crisis in 2000 and 2001. It begins with a discussion of the origins of California's electricity restructuring and competition programs. It then discusses the structure of the wholesale and retail markets and associated transition institutions created in 1996-98 and the performance of these institutions during their first two years of operation. The discussion of the electricity crisis is then conveniently broken down into three phases: (a) May 2000 through September 2000, (b) October 2000 through December 2000, January 2001 to the June 2001. Each phase is discussed in turn. The paper concludes with a discussion of lessons about electricity market liberalization gained from the recent experience in California.
Handle: RePEc:nbr:nberwo:8442
Template-Type: ReDIF-Paper 1.0
Title: Between Meltdown and Moral Hazard: The International Monetary and Financial Policies of the Clinton Administration
Classification-JEL: F3
Author-Name: J. Bradford DeLong
Author-Name: Barry Eichengreen
Author-Person: pei2
Note: IFM
Number: 8443
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8443
File-URL: http://www.nber.org/papers/w8443.pdf
File-Format: application/pdf
Publication-Status: published as Frankel, Jeffrey A. and Peter R. Orszag (eds.) American Economic Policy in the 1990s. Cambridge, MA: MIT Press, 2002.
Abstract: We review and analyze the monetary and financial policies of the Clinton administration with a focus on the strong dollar policy, the Mexican rescue, the response to the Asian crisis, and the debate over reform of the international financial architecture. While we consider the role of ideas, interests and institutions in the formulation of policy, our emphasis here is on institutions, and specifically on how personnel and administrative arrangements allowed the Treasury department to exercise an unusually important influence in the development of these policies. This allowed a set of ideas imported by Treasury from academia and the markets to strongly influence the formulation of the international monetary and financial policies during the Clinton years.
Handle: RePEc:nbr:nberwo:8443
Template-Type: ReDIF-Paper 1.0
Title: The Limits to Wage Growth: Measuring the Growth Rate of Wages For Recent Welfare Leavers
Classification-JEL: J30; I38
Author-Name: David Card
Author-Person: pca271
Author-Name: Charles Michalopoulos
Author-Person: pmi91
Author-Name: Philip K. Robins
Author-Person: pro189
Note: LS PE
Number: 8444
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8444
File-URL: http://www.nber.org/papers/w8444.pdf
File-Format: application/pdf
Abstract: We study the rate of wage growth among welfare leavers in the Self Sufficiency Program (SSP), an experimental earnings subsidy offered to long-term welfare recipients in Canada. Single parents who started working in response to the SSP incentive are younger, less educated, and have more young children than those who would have been working regardless of the program. They also earn relatively low wages in their first few months of work: typically within $1 of the minimum wage. Despite these differences, their rate of wage growth is similar to other welfare leavers. We estimate that people who were induced to work by SSP experienced real wage growth of about 2.5 - 3 percent per year - a rate consistent with conventional measures of the return to experience for similar workers.
Handle: RePEc:nbr:nberwo:8444
Template-Type: ReDIF-Paper 1.0
Title: Consumers and Agency Problems
Classification-JEL: D8
Author-Name: Canice J. Prendergast
Note: LS
Number: 8445
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8445
File-URL: http://www.nber.org/papers/w8445.pdf
File-Format: application/pdf
Publication-Status: published as Prendergast, Canice. "Consumers And Agency Problems," Economic Journal, 2002, v112(478,Mar), C34-C51.
Abstract: Consumers solve many agency problems, by pointing out when they believe that agents have made mistakes. This paper considers the role that consumers play in inducing efficient behavior by agents. I distinguish between two case: those where consumers have similar preferences to the principal, and those where consumer preferences diverge from those of the principal. In the former case, allowing consumer feedback improves allocations, and increasing consumer information is unambiguously beneficial. In the case where consumers disagree with principals over desired outcomes, which characterizes many benefits given by the public sector, consumers feedback about the performance of agents can reduce welfare. This may result in efficiently restricting the ability of consumers to complain about agent performance.
Handle: RePEc:nbr:nberwo:8445
Template-Type: ReDIF-Paper 1.0
Title: Ginis in General Equilibrium: Trade, Technology and Southern Inequality
Classification-JEL: F1
Author-Name: Susan Chun Zhu
Author-Person: pzh95
Author-Name: Daniel Trefler
Author-Person: ptr44
Note: ITI
Number: 8446
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8446
File-URL: http://www.nber.org/papers/w8446.pdf
File-Format: application/pdf
Abstract: Within developing and newly industrialized countries, rising wage inequality is both common and highly correlated with export growth. This is incompatible with the Stolper-Samuelson theorem, but suggestive of a role for technological catch-up. We develop this insight using a model that features both Ricardian and endowments-based comparative advantage. In this model Southern catch-up induces a correlation between rising inequality and export growth. It also induces a shift in trade patterns that results in skill upgrading and rising inequality in both the South and the North. A rudimentary empirical exercise reveals that, as predicted, Southern skill upgrading is correlated with the trade-weighted average rate of Southern catch-up.
Handle: RePEc:nbr:nberwo:8446
Template-Type: ReDIF-Paper 1.0
Title: Economic Expansions Are Unhealthy: Evidence from Microdata
Classification-JEL: E32; I12
Author-Name: Christopher J. Ruhm
Author-Person: pru7
Note: EH
Number: 8447
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8447
File-URL: http://www.nber.org/papers/w8447.pdf
File-Format: application/pdf
Abstract: This study uses microdata from the 1972-1981 National Health Interview Surveys to examine how health status and medical care utilization fluctuate with state macroeconomic conditions, after controlling for personal characteristics, location fixed-effects, general time effects and (usually) state-specific time trends. The major finding is that there is a countercyclical variation in physical health that is especially pronounced for individuals of prime-working age, employed persons, and males. The negative health effects of economic expansions accumulate over several years, are larger for acute than chronic ailments, and occur despite increased use of medical care. Finally, there is some evidence that mental health is procyclical, in sharp contrast to physical well-being.
Handle: RePEc:nbr:nberwo:8447
Template-Type: ReDIF-Paper 1.0
Title: Shared Modes of Compensation and Firm Performance: UK Evidence
Author-Name: Martin J. Conyon
Author-Person: pco299
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 8448
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8448
File-URL: http://www.nber.org/papers/w8448.pdf
File-Format: application/pdf
Publication-Status: published as Shared Modes of Compensation and Firm Performance U.K. Evidence, Martin Conyon, Richard B. Freeman. in Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980–2000, Card, Blundell, and Freeman. 2004
Abstract: This paper examines the use and consequences of shared compensation plans (profit sharing, profit related pay, SAYE schemes and company stock option plans) in a sample of UK workplaces and firms in the 1990s. The use of these plans has increased over time, in part in response to government programs. The evidence shows that companies and workplaces adopting shared compensation practices have had higher productivity than other firms, but the effects vary among programs, suggesting that the particulars matter a lot in aligning shared compensation and work place activities. Consistent with incentive theory, the evidence also shows that firms and workplaces with shared compensation practices have a higher incidence of shared decision-making / information sharing practices.
Handle: RePEc:nbr:nberwo:8448
Template-Type: ReDIF-Paper 1.0
Title: Corporate Governance and Equity Prices
Classification-JEL: G3
Author-Name: Paul A. Gompers
Author-Person: pgo301
Author-Name: Joy L. Ishii
Author-Name: Andrew Metrick
Author-Person: pme99
Note: AP CF
Number: 8449
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8449
File-URL: http://www.nber.org/papers/w8449.pdf
File-Format: application/pdf
Publication-Status: published as Paul Gompers & Joy Ishii & Andrew Metrick, 2003. "Corporate Governance And Equity Prices," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 107-155, February.
Abstract: Corporate-governance provisions related to takeover defenses and shareholder rights vary substantially across firms. In this paper, we use the incidence of 24 different provisions to build a 'Governance Index' for about 1,500 firms per year, and then we study the relationship between this index and several forward-looking performance measures during the 1990s. We find a striking relationship between corporate governance and stock returns. An investment strategy that bought the firms in the lowest decile of the index (strongest shareholder rights) and sold the firms in the highest decile of the index (weakest shareholder rights) would have earned abnormal returns of 8.5 percent per year during the sample period. Furthermore, the Governance Index is highly correlated with firm value. In 1990, a one-point increase in the index is associated with a 2.4 percentage-point lower value for Tobin's Q. By 1999, this difference had increased significantly, with a one-point increase in the index associated with an 8.9 percentage-point lower value for Tobin's Q. Finally, we find that weaker shareholder rights are associated with lower profits, lower sales growth, higher capital expenditures, and a higher amount of corporate acquisitions. We conclude with a discussion of several causal interpretations.
Handle: RePEc:nbr:nberwo:8449
Template-Type: ReDIF-Paper 1.0
Title: The Economic Geography of the Internet Age
Classification-JEL: F15; R11
Author-Name: Edward E. Leamer
Author-Person: ple440
Author-Name: Michael Storper
Author-Person: pst139
Note: ITI PR
Number: 8450
Creation-Date: 2001-08
Order-URL: http://www.nber.org/papers/w8450
File-URL: http://www.nber.org/papers/w8450.pdf
File-Format: application/pdf
Publication-Status: published as Edward E Leamer & Michael Storper, 2001. "The Economic Geography of the Internet Age," Journal of International Business Studies, Palgrave Macmillan Journals, vol. 32(4), pages 641-665, December.
Abstract: This paper combines the perspective of an international economist with that of an economic geographer to reflect on how and to what extent the Internet will affect the location of economic activity. Even after the very substantial transportation and communication improvements during the 20th Century, most exchanges of physical goods continue to take place within geographically-limited 'neighborhoods.' Previous rounds of infrastructure improvement always have had a double effect, permitting dispersion of certain routine activities but also increasing the complexity and time-dependence of productive activity, and thus making agglomeration more important. We argue that the Internet will produce more of the same forces for deagglomeration, but offsetting and possibly stronger tendencies toward agglomeration. Increasingly the economy is dependent on the transmission of complex uncodifiable messages, which require understanding and trust that historically have come from .face-to-face contact. This is not likely to be affected by the Internet, which allows long distance 'conversations' but not 'handshakes.'
Handle: RePEc:nbr:nberwo:8450
Template-Type: ReDIF-Paper 1.0
Title: Social Security
Classification-JEL: H55
Author-Name: Martin Feldstein
Author-Person: pfe112
Author-Name: Jeffrey B. Liebman
Author-Person: pli184
Note: AG PE
Number: 8451
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8451
File-URL: http://www.nber.org/papers/w8451.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
Abstract: This paper, a forthcoming chapter in the Handbook of Public Economics, reviews the theoretical and empirical issues dealing with Social Security pensions. The first part of the paper discusses pure pay-as-you-go plans. It considers the effects of introducing such a plan on the present value of consumption, the optimal level of benefits in such plans, and the emprical research on the effects of pay-as-you-go pension systems on labor supply and saving. The second part of the paper discusses the transition to investment-based systems, analyzing the effect on the present value of consumption of such a transition and considering such issues as the distributional effects and risk associated with such systems.
Handle: RePEc:nbr:nberwo:8451
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Capital Structure When Expected Agency Costs are Extreme
Classification-JEL: G32; G30
Author-Name: Campbell R. Harvey
Author-Person: pha102
Author-Name: Karl V. Lins
Author-Name: Andrew H. Roper
Note: AP
Number: 8452
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8452
File-URL: http://www.nber.org/papers/w8452.pdf
File-Format: application/pdf
Publication-Status: published as Harvey, Campbell R., Karl V. Lins and Andrew H. Roper. "The Effect Of Capital Structure When Expected Agency Costs Are Extreme," Journal of Financial Economics, 2004, v74(1,Oct), 3-30.
Abstract: We provide new evidence that debt creates shareholder value for firms that face agency costs. Our tests are unique in two respects. First, we focus on a sample of firms with potentially extreme agency problems. We study emerging market firms where the routine use of pyramid ownership structures provides an acute separation of management cash flow rights and control rights. Second, we argue that not all debt is the same. Using new data on global debt issuance, we find that the type of debt that positively impacts shareholder value is the type that closely monitors management. This combination of a sample of firms with extreme expected agency problems and detailed information on the different types of debt allows us to construct powerful tests of whether debt can mitigate the effects of agency and information problems. Among other results, we find that the abnormal returns resulting from syndicated term loans (which provide monitoring) are significantly related to the extent of the separation of ownership and control. Our results are consistent with the idea that debt creates value because it reduces the agency costs associated with overinvestment.
Handle: RePEc:nbr:nberwo:8452
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Exposure
Classification-JEL: F23; F31
Author-Name: Kathryn M.E. Dominguez
Author-Person: pdo227
Author-Name: Linda L. Tesar
Author-Person: pte111
Note: AP IFM
Number: 8453
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8453
File-URL: http://www.nber.org/papers/w8453.pdf
File-Format: application/pdf
Publication-Status: published as Dominguez, Kathryn M. E. and Linda L. Tesar. "Exchange Rate Exposure," Journal of International Economics, 2006, v68(1,Jan), 188-218.
Abstract: In this paper we examine the relationship between exchange rate movements and firm value. We estimate the exchange rate exposure of publicly listed firms in a sample of eight (non-US) industrialized and emerging markets, and find that a significant percentage of these firms are indeed exposed. These results differ substantially from most previous studies in the literature that find little evidence of exposure. In robustness checks we find that: (i) the choice of exchange rate matters, and using the trade-weighted exchange rate is likely to understate the extent of exposure, (ii) conditioning on the value-weighted vs. the equally-weighted market index has little effect on estimated exposure, while conditioning on the international index does change the estimate of exposure, (iii) the extent of exposure is not a result of a spurious correlation between random variables with high variances, (iv) exposure increases with the return horizon, (v) within a country and within an industry, exposure coefficients are roughly evenly split between positive and negative values, (vi) averaging across the (absolute value of the) significant exposure coefficients in our sample of countries, we find an exposure coefficient of about 0.5, (vii) the extent of exposure is not sensitive to the sample period, but the set of firms that is exposed does vary over time, and (viii) the sign of the exposure coefficients changes across subperiods for about half of the firms of our sample. We find that exposure is not systematically related to firm size, industry affiliation, multinational status, foreign sales, international assets or industry-level trade.
Handle: RePEc:nbr:nberwo:8453
Template-Type: ReDIF-Paper 1.0
Title: U.S. Energy Policy During the 1990s
Classification-JEL: Q4; L7
Author-Name: Paul L. Joskow
Author-Person: pjo110
Note: IO
Number: 8454
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8454
File-URL: http://www.nber.org/papers/w8454.pdf
File-Format: application/pdf
Abstract: This paper discusses U.S. energy policy and the associated evolution of energy supply, energy demand, energy prices and the industrial organization of the domestic energy industries during the period 1991 through 2000. This period covers the last two years of the George H. W. Bush administration and the entire Clinton administration. The paper begins with a background discussion of energy supply, consumption and energy policy prior to the 1990s. It then provides an overview of the evolution of energy markets and energy policy during the 1990s. This discussion is followed by a more detailed discussion of supply, demand and public policies affecting the primary sources of energy supply and demand during the 1990s: petroleum, natural gas, electricity, coal, nuclear energy, renewable energy and energy efficiency.
Handle: RePEc:nbr:nberwo:8454
Template-Type: ReDIF-Paper 1.0
Title: Health Policy in the Clinton Era: Once Bitten, Twice Shy
Classification-JEL: I1; H5
Author-Name: David Cutler
Author-Person: pcu64
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: EH PE
Number: 8455
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8455
File-URL: http://www.nber.org/papers/w8455.pdf
File-Format: application/pdf
Publication-Status: published as Frankel, Jeffrey A. and Peter R. Orszag (eds.) American Economic Policy in the 1990s. Cambridge, MA: MIT Press, 2002.
Abstract: This paper reviews the formation and outcomes of health policy making during the Clinton Administration. We begin by reviewing the state of the health economy at the dawn of the Clinton era. We then review the promise and pitfalls of the Health Security Act, and its implications for all health policy that followed. We then turn to discussing accomplishments and failures in a variety of other areas of health policy: coverage expansions; insurance market regulation; Medicaid reforms; long term care; tobacco regulation; and other public health. We conclude that the dramatic failure of the HSA led to a very cautious and incremental approach to health policy making in subsequent years, but that viewed from the perspective of that that low point the health policy gains in the Clinton years were actually quite substantial.
Handle: RePEc:nbr:nberwo:8455
Template-Type: ReDIF-Paper 1.0
Title: Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments
Classification-JEL: G10; J31
Author-Name: Joshua Angrist
Author-Person: pan29
Author-Name: Alan B. Krueger
Author-Person: pkr63
Note: LS PE
Number: 8456
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8456
File-URL: http://www.nber.org/papers/w8456.pdf
File-Format: application/pdf
Publication-Status: published as Angrist, Joshua D. and Alan B. Krueger. "Instrumental Variables And The Search For Identification: From Supply And Demand To Natural Experiments," Journal of Economic Perspectives, 2001, v15(4,Fall), 69-85.
Abstract: The method of instrumental variables was first used in the 1920s to estimate supply and demand elasticities, and later used to correct for measurement error in single-equation models. Recently, instrumental variables have been widely used to reduce bias from omitted variables in estimates of causal relationships such as the effect of schooling on earnings. Intuitively, instrumental variables methods use only a portion of the variability in key variables to estimate the relationships of interest; if the instruments are valid, that portion is unrelated to the omitted variables. We discuss the mechanics of instrumental variables, and the qualities that make for a good instrument, devoting particular attention to instruments that are derived from 'natural experiments.' A key feature of the natural experiments approach is the transparency and refutability of identifying assumptions. We also discuss the use of instrumental variables in randomized experiments.
Handle: RePEc:nbr:nberwo:8456
Template-Type: ReDIF-Paper 1.0
Title: Tax Credits, the Distribution of Subsidized Health Insurance Premiums, and the Uninsured
Classification-JEL: I11; I18
Author-Name: Mark V. Pauly
Author-Name: Bradley Herring
Author-Person: phe204
Author-Name: David Song
Note: EH
Number: 8457
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8457
File-URL: http://www.nber.org/papers/w8457.pdf
File-Format: application/pdf
Publication-Status: published as Pauly, Mark V., Bradley Herring and David Song. "Tax Credits, The Distribution Of Subsidized Health Insurance Premiums, And The Uninsured," Forum for Health Economics and Policy, 2002, v5, Article 5.
Publication-Status: published as Tax Credits, the Distribution of Subsidized Health Insurance Premiums, and the Uninsured, Mark V. Pauly, Bradley Herring, David Song. in Frontiers in Health Policy Research, Volume 5, Garber. 2002
Abstract: This paper investigates the impact of a $1000 refundable tax credit for self-only coverage on net premiums and insurance purchases for a representative sample of potential buyers in the individual insurance market. Two methods are used to estimate the distribution of premiums: predicted premiums based on a sample of actual purchasers, and premium quotations drawn from an e-insurance web site. In most of the simulations, the net premiums for half or more of the prospective buyers are reduced to zero or low levels. The number of uninsured is reduced by between 21 percent and 85 percent depending on the size of the deductible in the benchmark plan. However, the results are sensitive to assumptions about insurer underwriting practices.
Handle: RePEc:nbr:nberwo:8457
Template-Type: ReDIF-Paper 1.0
Title: Environmental Taxation and Regulation
Classification-JEL: H21; H22
Author-Name: A. Lans Bovenberg
Author-Person: pbo45
Author-Name: Lawrence H. Goulder
Note: PE EEE
Number: 8458
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8458
File-URL: http://www.nber.org/papers/w8458.pdf
File-Format: application/pdf
Publication-Status: published as Bovenberg, A. Lans & Goulder, Lawrence H., 2002. "Environmental taxation and regulation," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 23, pages 1471-1545 Elsevier.
Abstract: This chapter examines government policy alternatives for protecting the environment. We compare environmentally motivated taxes and various non-tax environmental policy instruments in terms of their efficiency and distributional impacts. Much of the analysis is performed in a second-best setting where the government relies on distortionary taxes to finance some of its budget. The chapter indicates that in this setting, general equilibrium considerations have first-order importance in the evaluation of environmental policies. Indeed, some of the most important impacts of environmental policies take place outside of the market that is targeted for regulation. Section 2 examines the optimal (efficiency-maximizing) level of environmental taxes. Section 3 analyzes the impacts of environmental tax reforms, concentrating on revenue-neutral policies in which revenues from environmental taxes are used to finance cuts in ordinary, distortionary taxes. We explore in particular the circumstances under which the 'recycling' of revenues from environmental taxes through cuts in distortionary taxes can eliminate the non-environmental costs of such reforms. Section 4 compares environmental taxes with other policy instruments including emissions quotas, performance standards, and subsidies to abatement in economies with pre-existing distortionary taxes. We first compare these instruments assuming that regulators face no uncertainties as to firms' abatement costs or the benefits of environmental improvement, and then consider how uncertainty and associated monitoring and enforcement costs affect the choice among alternative policy instruments. Section 5 concentrates on the trade-offs between efficiency and distribution in a second-best setting. Section 6 offers conclusions.
Handle: RePEc:nbr:nberwo:8458
Template-Type: ReDIF-Paper 1.0
Title: A Tariff-Growth Paradox? Protection's Impact the World Around 1875-1997
Classification-JEL: F1; N7
Author-Name: Michael A. Clemens
Author-Person: pcl20
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI
Number: 8459
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8459
File-URL: http://www.nber.org/papers/w8459.pdf
File-Format: application/pdf
Abstract: This paper uses a new database to establish two findings covering the first globalization boom before World War I, the second since World War II, and the autarkic interlude in between. First, there is strong evidence supporting a Tariff-Growth Paradox: protection was associated with fast growth before World War II, while it was associated with slow growth thereafter. Second, there is strong evidence supporting regional asymmetry: while the tariff-growth association was powerful and positive in the Core and rich New World before World War II, it was typically weak and negative in the poor Periphery. The paper offers explanations for the Paradox by controlling for a changing world economic environment. It shows how the oft-quoted Sachs-Warner results for 1970-1989 are significantly revised when one controls for trading partners' growth, trading partners' tariffs and the effective distance between them over the longer half-century 1950-1997. Falling partners' tariffs was the most important force accounting for the switch in sign on the tariff-growth connection after 1950. An increase in own tariffs after 1950 hurt growth, but it would not have hurt growth in a world where partners' tariffs were much higher, trading partners' growth much slower, and the world less closely connected by transportation. World environment matters. Leader-country reaction to big world events (like the Great Depression) matter. Followers take notice.
Handle: RePEc:nbr:nberwo:8459
Template-Type: ReDIF-Paper 1.0
Title: Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution
Classification-JEL: O10; P16
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Simon Johnson
Author-Person: pjo44
Author-Name: James A. Robinson
Author-Person: pro179
Note: CF DAE EFG
Number: 8460
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8460
File-URL: http://www.nber.org/papers/w8460.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron, Simon Johnson and James A. Robinson. "Reversal Of Fortune: Geography And Institutions In The Making Of The Modern World Income Distribution," Quarterly Journal of Economics, 2002, v107(4,Nov), 1231-1294.
Abstract: Among countries colonized by European powers during the past 500 years those that were relatively rich in 1500 are now relatively poor. We document this reversal using data on urbanization patterns and population density, which, we argue, proxy for economic prosperity. This reversal is inconsistent with a view that links economic development to geographic factors. According to the geography view, societies that were relatively rich in 1500 should also be relatively rich today. In contrast, the reversal is consistent with the role of institutions in economic development. The expansion of European overseas empires starting in the 15th century led to a major change in the institutions of the societies they colonized. In fact, the European intervention appears to have created an 'institutional reversal' among these societies, in the sense that Europeans were more likely to introduce institutions encouraging investment in regions that were previously poor. This institutional reversal accounts for the reversal in relative incomes. We provide further support for this view by documenting that the reversal in relative incomes took place during the 19th century, and resulted from societies with good institutions taking advantage of industrialization opportunities.
Handle: RePEc:nbr:nberwo:8460
Template-Type: ReDIF-Paper 1.0
Title: Why Are Some People (and Countries) More Protectionist Than Others?
Classification-JEL: F10
Author-Name: Anna Maria Mayda
Author-Person: pma505
Author-Name: Dani Rodrik
Author-Person: pro60
Note: IFM ITI
Number: 8461
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8461
File-URL: http://www.nber.org/papers/w8461.pdf
File-Format: application/pdf
Publication-Status: published as Mayda, Anna Maria and Dani Rodrik. "Why Are Some People (And Countries) More Protectionist Than Others?," European Economic Review, 2005, v49(6,Aug), 1393-1430.
Abstract: We analyze a rich cross-country data set that contains information on attitudes toward trade as well as a broad range of socio-demographic and other indicators. We find that pro-trade preferences are significantly and robustly correlated with an individual's level of human capital, in the manner predicted by the factor endowments model. Preferences over trade are also correlated with the trade exposure of the sector in which an individual is employed: individuals in non-traded sectors tend to be the most pro-trade, while individuals in sectors with a revealed comparative disadvantage are the most protectionist. Third, an individual's relative economic status, measured in terms of either relative income within each country or self-expressed social status, has a very strong positive association with pro-trade attitudes. Finally, non-economic determinants, in the form of values, identities, and attachments, play an important role in explaining the variation in preferences over trade. High degrees of neighborhood attachment and nationalism/patriotism are associated with protectionist tendencies, while cosmopolitanism is correlated with pro-trade attitudes. Our framework does a reasonable job of explaining differences across individuals and a fairly good job of explaining differences across countries.
Handle: RePEc:nbr:nberwo:8461
Template-Type: ReDIF-Paper 1.0
Title: Liquidity Risk and Expected Stock Returns
Classification-JEL: G12
Author-Name: Lubos Pastor
Author-Person: ppa276
Author-Name: Robert F. Stambaugh
Author-Person: pst282
Note: AP
Number: 8462
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8462
File-URL: http://www.nber.org/papers/w8462.pdf
File-Format: application/pdf
Publication-Status: published as Pastor, Lubos and Robert F. Stambaugh. "Liquidity Risk And Expected Stock Returns," Journal of Political Economy, 2003, v111(3,Jun), 642-685.
Abstract: This study investigates whether market-wide liquidity is a state variable important for asset pricing. We find that expected stock returns are related cross-sectionally to the sensitivities of returns to fluctuations in aggregate liquidity. Our monthly liquidity measure, an average of individual-stock measures estimated with daily data, relies on the principle that order flow induces greater return reversals when liquidity is lower. Over a 34-year period, the average return on stocks with high sensitivities to liquidity exceeds that for stocks with low sensitivities by 7.5% annually, adjusted for exposures to the market return as well as size, value, and momentum factors.
Handle: RePEc:nbr:nberwo:8462
Template-Type: ReDIF-Paper 1.0
Title: Shocks and Institutions in a Job Matching Model
Classification-JEL: E24; J64
Author-Name: Wouter Den Haan
Author-Person: pde12
Author-Name: Christian Haefke
Author-Person: pha13
Author-Name: Garey Ramey
Author-Person: pra338
Note: EFG
Number: 8463
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8463
File-URL: http://www.nber.org/papers/w8463.pdf
File-Format: application/pdf
Abstract: This paper explains the divergent behavior of European and US unemployment rates using a job market matching model of the labor market with an interaction between shocks and institutions. It shows that a reduction in TFP growth rates, an increase in real interest rates, and an increase in tax rates leads to a permanent increase in unemployment rates when the replacement rates or initial tax rates are high, while no increase in unemployment occurs when institutions are 'employment friendly.' The paper also shows that an increase in turbulence, modeled as an increased probability of skill loss, is not a robust explanation for the European unemployment puzzle in the context of a matching model with both endogenous job creation and job destruction.
Handle: RePEc:nbr:nberwo:8463
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Has-Beens
Classification-JEL: D2; L2
Author-Name: Glenn MacDonald
Author-Name: Michael Weisbach
Note: CF LS
Number: 8464
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8464
File-URL: http://www.nber.org/papers/w8464.pdf
File-Format: application/pdf
Publication-Status: published as MacDonald, Glenn and Michael S. Weisbach. "The Economics Of Has-Beens," Journal of Political Economy, 2004, v112(2,Part2), S289-S310.
Abstract: Evolution of technology causes human capital to become obsolete. We study this phenomenon in an overlapping generations setting, assuming it is hard to predict how technology will evolve, and that older workers find updating uneconomic. Among our results is the proposition that (under certain conditions) a more rapid pace of technological advance is especially unfavorable to the old in the sense that the implied within-industry division of output or income between young and old becomes much more skewed, i.e., a smaller number of young earn comparatively more. We apply our results to architecture, an occupation in which the has-beens phenomenon has had a particularly acute impact.
Handle: RePEc:nbr:nberwo:8464
Template-Type: ReDIF-Paper 1.0
Title: Pollution Havens and Foreign Direct Investment: Dirty Secret or Popular Myth?
Classification-JEL: F2
Author-Name: Beata K. Smarzynska
Author-Person: pja78
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: IFM ITI
Number: 8465
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8465
File-URL: http://www.nber.org/papers/w8465.pdf
File-Format: application/pdf
Publication-Status: published as Javorcik, Beata Smarzynska and Shang-Jin Wei, 2004. "Pollution Havens and Foreign Direct Investment: Dirty Secret or Popular Myth?," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 3(2): 1244-1244, (article 8)
Abstract: The 'pollution haven' hypothesis refers to the possibility that multinational firms, particularly those engaged in highly polluting activities, relocate to countries with weaker environmental standards. Despite the plausibility and popularity of this hypothesis, the existing literature has found little evidence to support it. This paper identifies four areas of difficulties that may have impeded the researcher's ability to uncover this 'dirty secret.' This includes the possibility that some features of FDI host countries, such as bureaucratic corruption, may deter inward FDI, but are positively correlated with laxity of environmental standard. Omitting this information in statistical analyses may give rise to misleading results. Another potential problem is that country- or industry-level data, typically used in the literature, may have masked the effect at the firm level. In addition, environmental standard of the host countries and pollution intensity of the multinational firms are not easy to measure. This study addresses these problems present in the earlier literature by taking explicitly into account corruption level in host countries and using a firm-level data set on investment projects in 24 transition economies. With these improvements, we find some support for the 'pollution haven' hypothesis, but the overall evidence is relatively weak and does not survive numerous robustness checks.
Handle: RePEc:nbr:nberwo:8465
Template-Type: ReDIF-Paper 1.0
Title: Accounting for the Black-White Wealth Gap: A Nonparametric Approach
Classification-JEL: E21; J15
Author-Name: Robert Barsky
Author-Person: pba670
Author-Name: John Bound
Author-Person: pbo406
Author-Name: Kerwin Charles
Author-Name: Joseph Lupton
Note: AG LS
Number: 8466
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8466
File-URL: http://www.nber.org/papers/w8466.pdf
File-Format: application/pdf
Publication-Status: published as Barsky, Robert, John Bound, Kerwin Kofi Charles and Joseph P. Lupton. "Accounting For The Black-White Wealth Gap: A Nonparametric Approach," Journal of the American Statistical Association, 2002, v97(459,Sep), 663-673.
Abstract: This paper notes a potential problem in the method of Blinder and Oaxaca the most popular method in the literature for decomposing the mean difference between groups of a given variable into the portion attributable to differences in the distribution of some explanatory variables and differences in the conditional expectation functions. In its conventional application, the Blinder-Oaxaca method requires that a parametric assumption be made about the form of the conditional expectations function. We show that misspecification is likely to result in non-trivial errors in inference regarding the portion attributable to differences in the distribution of explanatory variables. A nonparametric alternative to the Blinder-Oaxaca method is proposed. Rather than specify an arbitrary functional form for the conditional expectations function, the method re-weights the empirical distribution of the outcome variable using weights that equalize the empirical distributions of the explanatory variable. Applying this method to the large black-white gap in net worth, we document a substantial difference in the estimated role of earnings differences between the two methods. Our estimates suggest that differences in earnings account for roughly two-thirds of the overall wealth gap.
Handle: RePEc:nbr:nberwo:8466
Template-Type: ReDIF-Paper 1.0
Title: Income Inequality in the United States, 1913-1998 (series updated to 2000 available)
Classification-JEL: H2; J3
Author-Name: Thomas Piketty
Author-Person: ppi17
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE
Number: 8467
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8467
File-URL: http://www.nber.org/papers/w8467.pdf
File-Format: application/pdf
Publication-Status: published as Piketty, Thomas and Emmanuel Saez. "Income Inequality In The United States, 1913-1998," Quarterly Journal of Economics, 2003, v118(1,Feb), 1-39.
Abstract: This paper presents new homogeneous series on top shares of income and wages from 1913 to 1998 in the US using individual tax returns data. Top income and wages shares display a U-shaped pattern over the century. Our series suggest that the 'technical change' view of inequality dynamics cannot fully account for the observed facts. The large shocks that capital owners experienced during the Great Depression and World War II seem to have had a permanent effect: top capital incomes are still lower in the late 1990s than before World War I. A plausible explanation is that steep progressive taxation, by reducing drastically the rate of wealth accumulation at the top of the distribution, has prevented large fortunes to recover fully yet from these shocks. The evidence on wage inequality shows that top wage shares were flat before WWII and dropped precipitously during the war. Top wage shares have started recovering from this shock since the 1960s-1970s and are now higher than before WWII. We emphasize the role of social norms as a potential explanation for the pattern of wage shares. All the tables and figures have been updated to the year 2000, the are available in excel format in the data appendix of the paper.
Handle: RePEc:nbr:nberwo:8467
Template-Type: ReDIF-Paper 1.0
Title: Limiting Currency Volatility to Stimulate Goods Market Integration: A Price Based Approach
Classification-JEL: F1; F3
Author-Name: David C. Parsley
Author-Person: ppa30
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: IFM ITI
Number: 8468
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8468
File-URL: http://www.nber.org/papers/w8468.pdf
File-Format: application/pdf
Publication-Status: published as David C. Parsley & Shang-Jin Wei, 2001. "Limiting Currency Volatility to Stimulate Goods Market Integration: A Price-Based Approach," IMF Working Papers, vol 01(197).
Abstract: This paper empirically studies the effect of instrumental and institutional stabilization of the exchange rate on the integration of goods markets. An instrumental stabilization of the exchange rate is accomplished through intervention in the foreign exchange market, or by monetary policies. An institutional stabilization, is an adoption a currency board or a common currency. In contrast to the literature that employs data on the volume of trade, an important novelty of this paper is the use of a 3-dimensional panel of prices of 95 very disaggregated goods (e.g., light bulbs) in 83 cities from around the world from 1990 to 2000. We find that goods market integration is increasing over time and is inversely related to distance, exchange rate variability, and tariff barriers. In addition, the impact of an institutional stabilization of the exchange rate provides a stimulus to goods market integration that goes far beyond an instrumental stabilization. Among the institutional arrangements, long-term currency unions demonstrate greater integration than more recent currency boards. All of them can improve their integration further relative to a U.S. benchmark.
Handle: RePEc:nbr:nberwo:8468
Template-Type: ReDIF-Paper 1.0
Title: From Wild West to the Godfather: Enforcement Market Structure
Classification-JEL: K0; H1
Author-Name: James E. Anderson
Author-Person: pan2
Author-Name: Oriana Bandiera
Author-Person: pba451
Note: ITI
Number: 8469
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8469
File-URL: http://www.nber.org/papers/w8469.pdf
File-Format: application/pdf
Publication-Status: published as Anderson, James E. and Oriana Bandiera. “Private Enforcement and Social Efficiency." Journal of Development Economics 77 (2005): 341-366.
Abstract: Weak states enable private enforcement but it does not always fade away in the presence of strong states. We develop a general equilibrium model of the market organization of enforcers (self-enforcers, competitive specialized enforcers or monopoly) who defend endowments from predators. We provide conditions under which a Mafia emerges, persists and is stable. Mafias are most likely to emerge at intermediate stages of economic development. Private enforcers might provide better enforcement to the rich than would a welfare-maximizing state - hence the State may find it difficult to replace the Mafia or competitive private enforcers.
Handle: RePEc:nbr:nberwo:8469
Template-Type: ReDIF-Paper 1.0
Title: A Fuzzy Logic Approach Toward Solving the Analytic Maze of Health System Financing
Author-Name: Dov Chernichovsky
Note: EH
Number: 8470
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8470
File-URL: http://www.nber.org/papers/w8470.pdf
File-Format: application/pdf
Publication-Status: published as Chernichovsky, D., Bolotin A., and de-leeuw, D. “A Fuzzy Logic Approach toward Solving the Analytic Maze of Health System Financing." The European Journal of Health Economics 4, 3 (2003): 158-175.
Abstract: Improved health, equity, macro-economic efficiency, efficient provision of care, and client satisfaction are the common goals of the health system. The relative significance of these goals varies, however, across nations, communities, and with time. As for health care finance, the attainment of these goals under varying circumstances involves alternative policy options for each of the following elements: sources of finance, allocation of finance, pay to providers, and public-private mix. The intricate set of multiple goals, elements, and policy options defies human reasoning, and, hence, hinders effective policymaking. Indeed, health system finance' is not amenable to a clear set of structural relationships. Neither is there a universe that can be subject to statistical scrutiny: each health system is unique. 'Fuzzy logic' and its underlying 'Expert System' that model human reasoning by managing knowledge' close to the way it is handled by human language, provides a powerful tool for systematic analysis of health system finance, and for guiding policy making. Assuming equal welfare weights for alternative goals, and mutually exclusive policy options under each health-financing element, the exploratory model we present here suggests that a German type health system is best. Other solutions depend on the welfare weights and mixes of policy options.
Handle: RePEc:nbr:nberwo:8470
Template-Type: ReDIF-Paper 1.0
Title: U.S. Monetary Policy During the 1990s
Classification-JEL: E5
Author-Name: N. Gregory Mankiw
Note: EFG ME
Number: 8471
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8471
File-URL: http://www.nber.org/papers/w8471.pdf
File-Format: application/pdf
Publication-Status: published as Frankel, Jefrey and Peter Orszag (eds.) American Economic Policy in the 1990s. Cambridge, MA: MIT Press, 2002.
Abstract: This paper discusses the conduct and performance of U.S. monetary policy during the 1990s, comparing it to policy during the previous several decades. It reaches four broad conclusions. First, the macroeconomic performance of the 1990s was exceptional, especially if judged by the volatility of growth, unemployment, and inflation. Second, much of the good performance was due to good luck arising from the supply-side of the economy: Food and energy prices were well behaved, and productivity growth experienced an unexpected acceleration. Third, monetary policymakers deserve some of the credit by making interest rates more responsive to inflation than was the case in previous periods. Fourth, although the 1990s can be viewed as an example of successful discretionary policy, Fed policymakers may have been engaged in 'covert inflation targeting' at a rate of about 3 percent. The avoidance of an explicit policy rule, however, means that future policymakers inherit only a limited legacy.
Handle: RePEc:nbr:nberwo:8471
Template-Type: ReDIF-Paper 1.0
Title: The Information Content of International Portfolio Flows
Classification-JEL: G15; F21
Author-Name: Kenneth A. Froot
Author-Person: pfr60
Author-Name: Tarun Ramadorai
Author-Person: pra44
Note: AP IFM
Number: 8472
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8472
File-URL: http://www.nber.org/papers/w8472.pdf
File-Format: application/pdf
Publication-Status: published as Froot, Kenneth A. and T. Ramadorai. “Institutional Portfolio Flows and International Investments." Review of Financial Studies 21, 2 (April 2008): 937-971.
Abstract: We examine the forecasting power of international portfolio flows for local equity markets and attempt to attribute it to either better information about fundamentals on the part of international investors, or to price pressure. Price pressure is a potential explanation because flows have positive contemporaneous price impacts and are strongly positively autocorrelated. We find that cross-border flows forecast both individual country equity market prices and associated US closed-end country fund prices, even after controlling for closed-end fund purchases. Cross-border flows have no discernable impact on the difference, the closed-end fund discount. This fact is consistent with the information story, which says that cross-border inflows predict no change in the discount, but forecast positive changes in both net asset values and closed-end fund prices. This fact also contradicts the price pressure story, which predicts that cross-border inflows increase local country equity prices, thereby increasing the closed-end fund discount. We also use our approach to test for the presence of trend following in cross-border flows based on relative, as well as absolute returns. Like other studies, we find evidence of trend following based on absolute returns. Interestingly, however, we find also that flows are trend reversing based on relative returns. Flows therefore seem to be stabilizing with respect to notions of relative, but not absolute, value.
Handle: RePEc:nbr:nberwo:8472
Template-Type: ReDIF-Paper 1.0
Title: The Role of Permanent Income and Demographics in Black/White Differences in Wealth
Classification-JEL: D1; D31
Author-Name: Joseph G. Altonji
Author-Person: pal266
Author-Name: Ulrich Doraszelski
Note: LS PE
Number: 8473
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8473
File-URL: http://www.nber.org/papers/w8473.pdf
File-Format: application/pdf
Publication-Status: published as Altonji, Joseph G. and Ulrich Doraszelski. "The Role of Permanent Income and Demographics in Black/White Differences in Wealth." Journal of Human Resources 40, 1 (Winter 2005): 1-30.
Abstract: We explore the extent to which the huge race gap in wealth can be explained with properly constructed income and demographic variables. In some instances we explain the entire wealth gap with income and demographics provided that we estimate the wealth model on a sample of whites. However, we typically explain a much smaller fraction when we estimate the wealth model on a black sample. Using sibling comparisons to control for intergenerational transfers and the effects of adverse history, we find that differences in income and demographics are not likely to account for the lower explanatory power of the black wealth models. Our analysis of growth models of wealth suggests that differences in savings behavior and/or rates of return play an important role.
Handle: RePEc:nbr:nberwo:8473
Template-Type: ReDIF-Paper 1.0
Title: Making a Name
Classification-JEL: J12; J16
Author-Name: Claudia Goldin
Author-Person: pgo601
Author-Name: Maria Shim
Note: DAE LS
Number: 8474
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8474
File-URL: http://www.nber.org/papers/w8474.pdf
File-Format: application/pdf
Publication-Status: published as Goldin, Claudia and M. Shim. “Making a Name: Surnames of College Women at Marriage and Beyond." Journal of Economic Perspectives 18 (Spring 2004): 143-60.
Abstract: Ever since Lucy Stone decided to retain her surname at marriage in 1855, women in America have tried to do the same. But their numbers were extremely low until the 1970s. The increased age at first marriage, rising numbers with professional degrees and Ph.D.'s, the diffusion of 'the Pill,' state legal decisions, and the acceptance of the appellation 'Ms.,' among other factors, spurred surname retention among married women in the late 1970s and early 1980s. This paper tracks the fraction of college graduate women who kept their surnames upon marriage and after childbirth and explores some of the correlates of surname retention. We use two decades of data from The New York Times and twenty years of information on the Harvard class of 1980. A time series on surname retention at marriage for college graduate women, gleaned from wedding announcements in The New York Times, shows a large increase from 1980 to 1984, a leveling off to 1998, and a possible subsequent increase. About 35 percent kept their surname at marriage in 2001, but fewer than 10 percent did in 1980. Among the women in the Harvard class of 1980, about 52 percent kept their surname at some time after marriage and only a small fraction of this group changed their surname after having children. The observable characteristics of importance in surname retention are those revealing that the bride had already 'made a name' for herself.
Handle: RePEc:nbr:nberwo:8474
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Variable Capital Utilization on the Measurement and Properties of Sectoral Productivity: Some International Evidence
Classification-JEL: E3; F4
Author-Name: Marianne Baxter
Author-Person: pba102
Author-Name: Dorsey D. Farr
Note: EFG ITI PR
Number: 8475
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8475
File-URL: http://www.nber.org/papers/w8475.pdf
File-Format: application/pdf
Publication-Status: published as Baxter, Marianne and Dorsey D. Farr. "Variable Capital Utilization And International Business Cycles," Journal of International Economics, 2005, v65(2,Mar), 335-347.
Abstract: This paper explores how accounting for variations in factor utilization rates alters the empirical characteristics of productivity residuals in the United States and Canada. Using data on 19 manufacturing industries, we study the behavior of productivity using three proxies for capital services. We find that adjusting for cyclical movements in capital utilization alters many of the empirical characteristics of productivity, both within and across countries.
Handle: RePEc:nbr:nberwo:8475
Template-Type: ReDIF-Paper 1.0
Title: Financial Super-Markets: Size Matters for Asset Trade
Classification-JEL: F4; F12
Author-Name: Philippe Martin
Author-Person: pma588
Author-Name: Helene Rey
Author-Person: pre8
Note: IFM
Number: 8476
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8476
File-URL: http://www.nber.org/papers/w8476.pdf
File-Format: application/pdf
Publication-Status: published as Martin, Philippe and Helene Rey. "Financial Super-Markets: Size Matters For Asset Trade," Journal of International Economics, 2004, v64(2,Dec), 335-361.
Abstract: We introduce a new theoretical framework to analyze imperfectly competitive financial markets and trade in assets in an international context. We present a two-country macroeconomic model in which agents are risk averse, assets are imperfect substitutes, the number of financial assets is endogenous, and cross-border asset trade entails transaction costs. We show that demand effects have important implications for the link between market size, asset prices and financial market development. These effects are consistent with existing empirical evidence. Due to co-ordination failures, the extent of financial market incompleteness is inefficiently high. We also analyze the impact of domestic transaction costs and issuing costs on financial markets and returns.
Handle: RePEc:nbr:nberwo:8476
Template-Type: ReDIF-Paper 1.0
Title: Dynamic Pricing in the Presence of Antidumping Policy: Theory and Evidence
Classification-JEL: F13; L11
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: Jee-Hyeong Park
Note: ITI
Number: 8477
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8477
File-URL: http://www.nber.org/papers/w8477.pdf
File-Format: application/pdf
Publication-Status: published as Blonigen, Bruce A. and Jee-Hyeong Park. "Dynamic Pricing In The Presence Of Antidumping Policy: Theory And Evidence," American Economic Review, 2004, v94(1,Mar), 134-154.
Abstract: Antidumping (AD) duties are calculated as the difference between the foreign firm's product price in the export market and some definition of 'normal' or 'fair' value, often the foreign firm's product price in its own market. Additionally, AD laws allow for recalculation of these AD duties over time in what are known as administrative reviews. This paper examines for the first time the resulting dynamic pricing problem of a foreign firm that faces such an AD trade protection policy in its export market. When AD duties are certain for any dumping that occurs, we obtain the surprising result that dumping and AD duties should increase over time toward a stationary equilibrium value. Adding uncertainties prevalent in AD enforcement into our analysis changes these conclusions substantially and leads to more realistic testable implications. Firms with ex ante expectations that the probability of AD enforcement is low, or with expectations that the probability of a termination/VER (instead of AD duties) is high, will decrease their dumping and AD duties over time in the administrative review process once they face AD duties. Using detailed data from U.S. AD investigations filed from 1980-1995, we find evidence consistent with these hypotheses stemming from our analysis with uncertain AD enforcement and provide empirical evidence consistent with James Anderson's domino dumping hypothesis.
Handle: RePEc:nbr:nberwo:8477
Template-Type: ReDIF-Paper 1.0
Title: The Economic Costs of Conflict: A Case-Control Study for the Basque Country
Classification-JEL: D74; G14
Author-Name: Alberto Abadie
Author-Person: pab7
Author-Name: Javier Gardeazabal
Note: LS
Number: 8478
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8478
File-URL: http://www.nber.org/papers/w8478.pdf
File-Format: application/pdf
Publication-Status: published as Abadie, Alberto and J. Gardeazabal. “The Economic Costs of Conflict: A Case Study of the Basque Country." American Economic Review 93, 1 (2003): 113-132.
Abstract: This paper investigates the economic effects of conflict, using the terrorist conflict in the Basque Country as a case study. Our analysis rests on two different strategies. First, we use a combination of other regions to construct a 'synthetic' control region which resembles many relevant economic characteristics of the Basque Country before the outset of political terrorism in the 1970's. The subsequent economic evolution of this 'counterfactual' Basque Country without terrorism is compared to the actual experience of the Basque Country. We find that, after the outbreak of terrorism, per capita GDP in the Basque Country declined about 10 percent points relative to the synthetic control region. Moreover, this gap seemed to widen in response to spikes in terrorist activity. The second part of this study uses the truce declared in September 1998 as a natural experiment to estimate the effects of the conflict. If the terrorist conflict was perceived to have a negative impact on the Basque economy, stocks of firms with a significant part of their business in the Basque Country should have shown a positive relative performance as the truce became credible, and a negative relative performance at the end of the cease-fire. We find evidence that is consistent with this conjecture using event study methods.
Handle: RePEc:nbr:nberwo:8478
Template-Type: ReDIF-Paper 1.0
Title: Disruption versus Tiebout Improvement: The Costs and Benefits of Switching Schools
Classification-JEL: I2; H4
Author-Name: Eric A. Hanushek
Author-Person: pha97
Author-Name: John F. Kain
Author-Name: Steven G. Rivkin
Author-Person: pri265
Note: CH LE PE ED
Number: 8479
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8479
File-URL: http://www.nber.org/papers/w8479.pdf
File-Format: application/pdf
Publication-Status: published as Hanushek, Eric A., John F. Kain and Steven G. Rivkin. "Disruption Versus Tiebout Improvements: The Costs And Benefits Of Switching Schools," Journal of Public Economics, 2004, v88(9-10,Aug), 1721-1746.
Abstract: Most students change schools at some point in their academic careers, but some change very frequently and some schools experience a great deal of turnover. Many researchers, teachers, and administrators argue that mobility harms students, particularly disadvantaged students in high turnover, inner city schools. On the other hand, economists emphasize the importance of Tiebout type moves to procure better school quality. Empirical research on mobility has yielded inconclusive results, no doubt in part because of small sample sizes and the difficulty of separating mobility effects from other confounding factors. This paper develops a general theoretical model that identifies school quality changes resulting from moving. The empirical analysis, which exploits the rich longitudinal data of the UTD Texas Schools Project, disentangles the disruption effects associated with moves from changes in school quality. The results suggest that there is a small average increase in school quality for district switchers, while there is no evidence that those switching schools within districts obtain higher school quality on average. Perhaps most important for policy, the results also show a significant externality from moves: students in schools with high turnover suffer a disadvantage, and the cost is largest for lower income and minority students who typically attend much higher turnover schools.
Handle: RePEc:nbr:nberwo:8479
Template-Type: ReDIF-Paper 1.0
Title: Plant Vintage, Technology, and Environmental Regulation
Classification-JEL: O3; Q2
Author-Name: Wayne B. Gray
Author-Person: pgr111
Author-Name: Ronald J. Shadbegian
Author-Person: psh911
Note: PR
Number: 8480
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8480
File-URL: http://www.nber.org/papers/w8480.pdf
File-Format: application/pdf
Publication-Status: published as Gray, Wayne B. and Ronald J. Shadbegian. "Plant Vintage, Technology, And Environmental Regulation," Journal of Environmental Economics and Management, 2003, v46(3,Nov), 384-402.
Abstract: Does the impact of environmental regulation differ by plant vintage and technology? We answer this question using annual Census Bureau information on 116 pulp and paper mills' vintage, technology, productivity, and pollution abatement operating costs for 1979-1990. We find a significant negative relationship between pollution abatement costs and productivity levels. This is due almost entirely to integrated mills (those incorporating a pulping process), where a one standard deviation increase in abatement costs is predicted to reduce productivity by 5.4 percent. Older plants appear to have lower productivity but are less sensitive to abatement costs, perhaps due to 'grandfathering' of regulations. Mills which undergo renovations are also less sensitive to abatement costs, although these vintage and renovation results are not generally significant. We find similar results using a log-linear version of a three input Cobb-Douglas production function in which we include our technology, vintage, and renovation variables. Sample calculations of the impact of pollution abatement on productivity show the importance of allowing for differences based on plant technology. In a model incorporating technology interactions we estimate that total pollution abatement costs reduce productivity levels by an average of 4.7 percent across all the plants. The comparable estimate without technology interactions is 3.3 percent, approximately 30% lower.
Handle: RePEc:nbr:nberwo:8480
Template-Type: ReDIF-Paper 1.0
Title: Worms: Education and Health Externalities in Kenya
Classification-JEL: I00; I10
Author-Name: Edward Miguel
Author-Person: pmi499
Author-Name: Michael Kremer
Author-Person: pkr20
Note: EH PE
Number: 8481
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8481
File-URL: http://www.nber.org/papers/w8481.pdf
File-Format: application/pdf
Publication-Status: published as Miguel, Edward and Michael Kremer. "Worms: Identifying Impacts On Education And Health In The Presence Of Treatment Externalities," Econometrica, 2004, v72(1,Jan), 159-217.
Abstract: Intestinal helminths - including hookworm, roundworm, schistosomiasis, and whipworm - infect more than one-quarter of the world's population. A randomized evaluation of a project in Kenya suggests that school-based mass treatment with deworming drugs reduced school absenteeism in treatment schools by one quarter; gains are especially large among the youngest children. Deworming is found to be cheaper than alternative ways of boosting school participation. By reducing disease transmission, deworming creates substantial externality health and school participation benefits among untreated children in the treatment schools and among children in neighboring schools. These externalities are large enough to justify fully subsidizing treatment. We do not find evidence that deworming improves academic test scores. Existing experimental studies, in which treatment is randomized among individuals in the same school, find small and insignificant deworming treatment effects on education; however, these studies underestimate true treatment effects if deworming creates positive externalities for the control group and reduces treatment group attrition.
Handle: RePEc:nbr:nberwo:8481
Template-Type: ReDIF-Paper 1.0
Title: Pharmaceutical Prices and Political Activity
Classification-JEL: L5; L6
Author-Name: Sara Fisher Ellison
Author-Name: Catherine Wolfram
Note: IO
Number: 8482
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8482
File-URL: http://www.nber.org/papers/w8482.pdf
File-Format: application/pdf
Abstract: Drug prices have been a conspicuous political issue in much of recent history, but no more so than during health care reform debates in 1993 and 1994. This paper investigates possible effects of political activity on pharmaceutical prices, with a particular focus on the health care reform period. It evaluates the extent to which pharmaceutical companies slowed the rates at which they increased prices in an attempt to preempt government intervention. To do so, we characterize companies based on their vulnerability to future price regulation. We then consider patterns in price movements across companies. The results suggest that companies whose drugs had longer patent lives and who had recently increased contributions to their corporate Political Action Committees (PACs) slowed price increases during 1992 and 1994 more than their competitors. It is difficult to distinguish pricing differences across companies in 1993, perhaps because most companies had pledged to keep price increases below the rate of inflation.
Handle: RePEc:nbr:nberwo:8482
Template-Type: ReDIF-Paper 1.0
Title: Will Unionism Prosper in Cyber-Space? The Promise of the Internet for Employee Organization
Author-Name: Wayne J. Diamond
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 8483
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8483
File-URL: http://www.nber.org/papers/w8483.pdf
File-Format: application/pdf
Publication-Status: published as Diamond, W. J. and R. B. Freeman. "Will Unionism Prosper In CyberSpace? The Promise Of The Internet For Employee Organization," British Journal of Industrial Relations, 2002, v40(3,Sep), 569-596.
Abstract: This paper argues that the low cost of information, communication, and interaction on the Web offers trade unions opportunities to improve services and attract members and thus reinvent themselves for the 21st Century. Analyzing current use of the Internet by unions in the United Kingdom and United States, we develop five hypothesis about the impact of the Internet on unions. 1) the Customized Services hypothesis that unions will individualize services; 2) the Cyber-organizing hypothesis that the Web will ease organization and produce virtual minority unions at many non-union firms; 3) the Cyber-democracy hypothesis that the Web will enhance democracy in unions; 4) the Cyber-dispute hypothesis that the Web will become an important space for industrial disputes; and 5) the New Internationalism hypothesis that the Web will strengthen the international labor community. If unions fail to exploit the opportunities on the Web to gain members, we expect other organizations, Internet recruitment sites, specialized advice centers, and the like, to fill the e-union niche.
Handle: RePEc:nbr:nberwo:8483
Template-Type: ReDIF-Paper 1.0
Title: The Impacts of Environmental Regulations on Industrial Activity: Evidence from the 1970 & 1977 Clean Air Act Amendments and the Census of Manufactures
Author-Name: Michael Greenstone
Author-Person: pgr38
Number: 8484
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8484
File-URL: http://www.nber.org/papers/w8484.pdf
File-Format: application/pdf
Publication-Status: published as Greenstone, Michael. "The Impacts Of Environmental Regulations On Industrial Activity: Evidence From The 1970 And 1977 Clean Air Act Amendments And The Census Of Manufactures," Journal of Political Economy, 2002, v110(6,Dec), 1175-1219.
Abstract: This paper estimates the effects of environmental regulations on industrial activity. The analysis is conducted with the most comprehensive data available on both regulations from the Clean Air Act Amendments' division of counties into pollutant-specific nonattainment and attainment categories and manufacturing activity from the 1.75 million plant observations that comprise the 1967-87 Censuses of Manufactures. Emitters of the controlled pollutants are subject to greater regulatory oversight in nonattainment counties. I find that in the first 15 years after the Amendments became law (1972- 1987), nonattainment counties (relative to attainment ones) lost approximately 590,000 jobs, $37 billion in capital stock, and $75 billion (1987$) of output in pollution intensive industries. These estimates are derived from a statistical model for plant-level growth that controls for plant fixed effects, unrestricted industry shocks, and unrestricted county shocks. Importantly these findings are robust across many specifications, and the effects are apparent across a wide range of polluting industries. Although the decline in manufacturing activity was substantial in nonattainment counties, it was modest compared to the size of the entire manufacturing sector.
Handle: RePEc:nbr:nberwo:8484
Template-Type: ReDIF-Paper 1.0
Title: A General Purpose Technology at Work: The Corliss Steam Engine in the late 19th Century US
Classification-JEL: N11; N61
Author-Name: Nathan Rosenberg
Author-Name: Manuel Trajtenberg
Author-Person: ptr35
Note: DAE PR
Number: 8485
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8485
File-URL: http://www.nber.org/papers/w8485.pdf
File-Format: application/pdf
Publication-Status: published as Rosenberg, Nathan and Manuel Trajtenberg. "A General Purpose Technology at Work: The Corliss Steam Engine in the late 19th Century US." The Journal of Economic History 64, 1 (March 2004): 61-99.
Abstract: The steam engine is widely regarded as the icon of the Industrial Revolution and a prime example of a 'General Purpose Technology,' and yet its contribution to growth is far from transparent. This paper examines the role that a particular innovative design in steam power, the Corliss engine, played in the intertwined processes of industrialization and urbanization that characterized the growth of the US economy in the late 19th century. Waterpower offered abundant and cheap energy, but restricted the location of manufacturing just to areas with propitious topography and climate. Steam engines offered the possibility of relaxing this severe constraint, allowing industry to locate where key considerations such as access to markets for inputs and outputs directed. The enhanced performance of the Corliss engine as well as its fuel efficiency helped tip the balance in favor of steam in the fierce contest with waterpower. With the aid of detailed data on the location of Corliss engines and waterwheels and a two-stage estimation strategy, we show that the deployment of Corliss engines indeed served as a catalyst for the massive relocation of industry away from rural areas and into large urban centers, thus fueling agglomeration economies, and attracting further population growth. This illustrates what we believe is an important aspect of the dynamics of GPTs, whether it is electricity in the early 20th century or Information Technologies in the present era: the fact that GPTs induce the widespread and more efficient relocation of economic activity, which in turn fosters long-term growth.
Handle: RePEc:nbr:nberwo:8485
Template-Type: ReDIF-Paper 1.0
Title: Dividend Taxes and Share Prices: Evidence from Real Estate Investment Trusts
Classification-JEL: H25; G32
Author-Name: William M. Gentry
Author-Name: Deen Kemsley
Author-Name: Christopher J. Mayer
Author-Person: pma212
Note: PE
Number: 8486
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8486
File-URL: http://www.nber.org/papers/w8486.pdf
File-Format: application/pdf
Publication-Status: published as William M. Getry & Deen Kemsley & Christopher J. Mayer, 2003. "Dividend Taxes and Share Prices: Evidence from Real Estate Investment Trusts," Journal of Finance, American Finance Association, vol. 58(1), pages 261-282, 02.
Abstract: Financial economists have debated the impact of dividend taxes on firm valuation for decades, but existing empirical evidence is mixed. In this study, we avoid certain complications inherent in previous empirical work by exploiting institutional characteristics of Real Estate Investment Trusts (REITs). For REITs, dividend policy is largely non-discretionary, share repurchases are not tax advantaged relative to dividends, and the market value of a firm's assets is relatively transparent to investors. In addition, REITs are exempt from corporate taxes, so their tax deductions flow directly to shareholders as reductions in dividend taxes. Within this environment, we regress the market value of a REIT's equity on the market value of its assets and its tax basis in assets, which creates tax deductions that lower future dividend taxes. We find that tax basis has a positive effect on firm value, which suggests that investors capitalize future dividend taxes into share prices.
Handle: RePEc:nbr:nberwo:8486
Template-Type: ReDIF-Paper 1.0
Title: The Future of Social Security Pensions in Europe
Classification-JEL: H55
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: AG PE
Number: 8487
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8487
File-URL: http://www.nber.org/papers/w8487.pdf
File-Format: application/pdf
Publication-Status: published as Naar beste vermogen, Essays Honoring Pieter Korteweg, eds. JJ van Duijn, et. al., Kluwer, December 2001.
Publication-Status: published as Feldstein, Martin, 2002. "The future of social security pensions in Europe," Journal of Financial Transformation, Capco Institute, vol. 5, pages 8-12.
Abstract: This paper discusses a possible solution to the double problem that faces European governments in dealing with the future of Social Security pensions. Like other governments around the world, they must deal with the rising cost of pensions that will result from the increasing life expectancy of the population. But the European governments have the extra problem that any solution must be compatible with a European Union labor market in which individuals from any member country are free to work anywhere within the European Union. The solution to this double problem that is developed in this paper combines an investment-based system of individual accounts with a 'notional defined contribution' system financed by pay-as-you-go taxes.
Handle: RePEc:nbr:nberwo:8487
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Policy and Social Security Policy During the 1990s
Classification-JEL: H55; H6
Author-Name: Douglas W. Elmendorf
Author-Person: pel79
Author-Name: Jeffrey B. Liebman
Author-Person: pli184
Author-Name: David W. Wilcox
Author-Person: pwi165
Note: AG EFG PE
Number: 8488
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8488
File-URL: http://www.nber.org/papers/w8488.pdf
File-Format: application/pdf
Publication-Status: published as Frankel, Jeffrey and Peter Orszag (eds.) American economic policy in the 1990s. Cambridge: MIT Press, 2002.
Abstract: This paper reviews the course of fiscal policy and Social Security policy during the 1990s. The 1990s witnessed two fundamental changes in U.S. fiscal policy: a dramatic improvement in the current and projected budget balance, and a shift to a new political consensus in favor of balancing the budget excluding Social Security rather than the unified budget. The dramatic improvement in the budget outlook stemmed both from favorable developments in the economic environment and from deliberate policy actions that reduced budget deficits and later did not spend down the surpluses. In contrast, the 1990s did not witness significant changes in Social Security policy, although alternative visions of Social Security reform received tremendous analytic and popular attention. The 1994-1996 Advisory Council on Social Security presented three reform plans that placed important emphasis on additional prefunding. Each involved some form of investment in equities either centrally, through the trust fund, or in a decentralized manner, through individual accounts. Late in the decade, with the emergence of on-budget surpluses, the possibility of general revenue contributions to the Social Security system came under serious consideration. In the end, President Clinton decided to pursue Social Security reform based on general revenue contributions to the trust fund and centralized investment in equities rather than creating individual accounts, but his proposal was not adopted.
Handle: RePEc:nbr:nberwo:8488
Template-Type: ReDIF-Paper 1.0
Title: An Empirical Analysis of Imprisoning Drug Offenders
Classification-JEL: K4; H7
Author-Name: Ilyana Kuziemko
Author-Name: Steven D. Levitt
Author-Person: ple59
Note: EH LE PE
Number: 8489
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8489
File-URL: http://www.nber.org/papers/w8489.pdf
File-Format: application/pdf
Publication-Status: published as Kuziemko, Ilyana and Steven D. Levitt. "An Empirical Analysis Of Imprisoning Drug Offenders," Journal of Public Economics, 2004, v88(9-10,Aug), 2043-2066.
Abstract: The number of prisoners incarcerated on drug-related offenses rose fifteen-fold between 1980 and 2000. This paper provides the first systematic empirical analysis of the implications of that dramatic shift in public policy. We show that the increase in drug prisoners led to reductions in expected time served for other crimes, especially for less serious offenses. Reductions in time served, however, increased other crimes by no more than a few percent. Moreover, incarcerating drug offenders is found to be almost as effective in reducing violent and property crime as locking up other types of offenders. We estimate that cocaine prices are 10-15 percent higher today as a consequence of increases in drug punishment since 1985. Based on previous estimates of the price elasticity of demand for cocaine, this implies a reduction in cocaine consumed of as much as 20 percent.
Handle: RePEc:nbr:nberwo:8489
Template-Type: ReDIF-Paper 1.0
Title: Insurance and the Utilization of Medical Services Among the Self-Employed
Classification-JEL: I12
Author-Name: Craig William Perry
Author-Name: Harvey S. Rosen
Author-Person: pro55
Note: EH PE
Number: 8490
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8490
File-URL: http://www.nber.org/papers/w8490.pdf
File-Format: application/pdf
Publication-Status: published as Cnossen, Sijbren and Hans-Werner Sinn (eds.) Public Finances and Public Policy in the New Millennium. MIT Press: Cambridge, 2003.
Abstract: There has been substantial public policy concern over the relatively low rates of health insurance coverage among the self-employed in the United States. We use data from the Medical Expenditure Panel Survey conducted in 1996 to analyze how the self-employed and wage-earners differ both with respect to insurance coverage and utilization of a variety of health care services. Our results suggest that for the self-employed, the link between insurance and utilization of health care services is not as strong as assumed in the policy debate. For a number of medical care services, the self-employed have the same rates of utilization as wage-earners, despite the fact that they are substantially less likely to be insured. And when the self-employed are less likely than wage-earners to utilize a particular medical service, the differences generally do not seem very large. The self-employed thus appear to be able to finance access to health care from sources other than insurance. Further, analysis of out-of-pocket expenditures on health care suggests that doing so does not lead to substantial reductions in their ability to consume other goods and services. Finally, there is no evidence that children of the self-employed have less access to health care than the children of wage-earners. Hence, the public policy concerns that the relative lack of health insurance among the self-employed substantially reduces utilization of health care services or creates economic hardship appear to be misplaced.
Handle: RePEc:nbr:nberwo:8490
Template-Type: ReDIF-Paper 1.0
Title: Fixed versus Flexible: Lessons from EMS Order Flow
Classification-JEL: F31; G12
Author-Name: William P. Killeen
Author-Name: Richard K. Lyons
Author-Person: ply9
Author-Name: Michael J. Moore
Author-Person: pmo284
Note: IFM
Number: 8491
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8491
File-URL: http://www.nber.org/papers/w8491.pdf
File-Format: application/pdf
Publication-Status: published as Killeen, William P., Richard K. Lyons and Michael J. Moore. "Fixed Versus Flexible: Lessons From EMS Order Flow," Journal of International Money and Finance, 2006, v25(4,Jun), 551-579.
Abstract: This paper addresses the puzzle of regime-dependent volatility in foreign exchange. We extend the literature in two ways. First, our microstructural model provides a qualitatively new explanation for the puzzle. Second, we test implications of our model using Europe's recent shift to rigidly fixed rates (EMS to EMU). In the model, shocks to order flow induce volatility under flexible rates because they have portfolio-balance effects on price, whereas under fixed rates the same shocks do not have portfolio-balance effects. These effects arise in one regime and not the other because the elasticity of speculative demand for foreign exchange is (endogenously) regime-dependent: low elasticity under flexible rates magnifies portfolio-balance effects; under credibly fixed rates, elasticity of speculative demand is infinite, eliminating portfolio-balance effects. New data on FF/DM transactions show that order flow had persistent effects on the exchange rate before EMU parities were announced. After announcement, determination of the FF/DM rate was decoupled from order flow, as predicted by the model.
Handle: RePEc:nbr:nberwo:8491
Template-Type: ReDIF-Paper 1.0
Title: Do Rich and Poor Countries Specialize in a Different Mix of Goods? Evidence from Product-Level US Trade Data
Classification-JEL: F11; F14
Author-Name: Peter K. Schott
Author-Person: psc98
Note: ITI
Number: 8492
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8492
File-URL: http://www.nber.org/papers/w8492.pdf
File-Format: application/pdf
Publication-Status: published as Schott, Peter K. 2004. "Across-Product versus Within-Product Specialization in International Trade." Quarterly Journal of Economics 119(2):647-678
Abstract: Unit values of US imports at the product level reveal a substantial degree of vertical product differentiation among countries exporting to the US. This specialization is not apparent by looking solely at trade flows. Two trends stand out. First, the portion of US import products originating in either rich or poor countries exclusively has fallen dramatically as US trade barriers have fallen, from 41% in 1972 to 17% in 1994. Indeed, by 1994, nearly three quarters the products imported into the US were sourced simultaneously from rich and poor countries. Second, within-product unit value dispersion is positively and significantly correlated with source country income: men's shirts imported from Japan in 1994, for example, are about thirty times as expensive as shirts originating in the Philippines. These unit value premia, and their increase over time, are consistent with the factor proportions framework but convey a stark warning: industry trade flow data alone are too coarse to meet the assumptions underlying most tests of trade theory.
Handle: RePEc:nbr:nberwo:8492
Template-Type: ReDIF-Paper 1.0
Title: Deposit Insurance Around the Globe: Where Does it Work?
Classification-JEL: G2; F3
Author-Name: Edward J. Kane
Author-Person: pka853
Author-Name: Asli Demirguc-Kunt
Author-Person: pde226
Note: CF
Number: 8493
Creation-Date: 2001-09
Order-URL: http://www.nber.org/papers/w8493
File-URL: http://www.nber.org/papers/w8493.pdf
File-Format: application/pdf
Publication-Status: published as Asli Demirguc-Kunt & Edward J. Kane, 2002. "Deposit Insurance around the Globe: Where Does It Work?," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 175-195, Spring.
Abstract: Explicit deposit insurance has been spreading rapidly in recent years, even to countries with low levels of financial and institutional development. Economic theory indicates that deposit-insurance design features interact--for good or ill--with country-specific elements of the financial and governmental contracting environment. This paper documents the extent of cross-country differences in deposit-insurance design and reviews empirical evidence on how particular design features affect private market discipline, banking stability, financial development, and the effectiveness of crisis resolution. This evidence challenges the wisdom of encouraging countries to adopt explicit deposit insurance without first stopping to assess and remedy weaknesses in their informational and supervisory environments.
Handle: RePEc:nbr:nberwo:8493
Template-Type: ReDIF-Paper 1.0
Title: Short Sale Constraints and Stock Returns
Classification-JEL: G14
Author-Name: Charles M. Jones
Author-Name: Owen A. Lamont
Note: AP
Number: 8494
Creation-Date: 2001-10
Order-URL: http://www.nber.org/papers/w8494
File-URL: http://www.nber.org/papers/w8494.pdf
File-Format: application/pdf
Publication-Status: published as Jones, Charles M. and Owen A. Lamont. "Short-Sale Constraints and Stock Returns." Journal of Financial Economics 66, 2-3 (November-December 2002): 207-39.
Abstract: Stocks can be overpriced when short sale constraints bind. We study the costs of short selling equities, 1926-1933, using the publicly observable market for borrowing stock. Some stocks are sometimes expensive to short, and it appears that stocks enter the borrowing market when shorting demand is high. We find that stocks that are expensive to short or which enter the borrowing market have high valuations and low subsequent returns, consistent with the overpricing hypothesis. Size-adjusted returns are one to two percent lower per month for new entrants, and despite high costs it is profitable to short them.
Handle: RePEc:nbr:nberwo:8494
Template-Type: ReDIF-Paper 1.0
Title: Does Money Protect Health Status? Evidence from South African Pensions
Classification-JEL: I1; D1
Author-Name: Anne Case
Author-Person: pca108
Note: AG PE
Number: 8495
Creation-Date: 2001-10
Order-URL: http://www.nber.org/papers/w8495
File-URL: http://www.nber.org/papers/w8495.pdf
File-Format: application/pdf
Publication-Status: published as Does Money Protect Health Status? Evidence from South African Pensions, Anne Case. in Perspectives on the Economics of Aging, Wise. 2004
Abstract: The channels by which better health leads to higher income, and those by which higher income protects health status, are of interest to both researchers and policy makers. In general, quantifying the impact of income on health is difficult, given the simultaneous determination of health and income. In this paper, we quantify the impact on health status of a large, exogenous increase in income that associated with the South African state old age pension. Elderly Black and Coloured men and women who did not anticipate receiving large pensions in their lifetimes, and who did not pay into a pension system, are currently receiving more than twice median Black income per capita. These elderly men and women generally live in large households, and this paper documents the effect of the pension on the pensioners, on other adult members of their households, and on the children who live with them. We find, in households that pool income, that the pension protects the health of all household members, working in part to protect the nutritional status of household members, in part to improve living conditions, and in part to reduce the stress under which the adult household members negotiate day to day life. The health effects of delivering cash provide a benchmark against which other health-related interventions can be evaluated.
Handle: RePEc:nbr:nberwo:8495
Template-Type: ReDIF-Paper 1.0
Title: Liquidity Constraints and Precautionary Saving
Classification-JEL: C6; D91
Author-Name: Christopher D. Carroll
Author-Person: pca45
Author-Name: Miles S. Kimball
Author-Person: pki97
Note: EFG ME
Number: 8496
Creation-Date: 2001-10
Order-URL: http://www.nber.org/papers/w8496
File-URL: http://www.nber.org/papers/w8496.pdf
File-Format: application/pdf
Publication-Status: published as Carroll, Christopher D. & Holm, Martin B. & Kimball, Miles S., 2021. "Liquidity constraints and precautionary saving," Journal of Economic Theory, Elsevier, vol. 195(C).