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Template-Type: ReDIF-Paper 1.0
Title: Is More Information Better? The Effects of 'Report Cards' on Health Care Providers
Classification-JEL: I1; L5
Author-Name: David Dranove
Author-Person: pdr111
Author-Name: Daniel Kessler
Author-Name: Mark McClellan
Author-Name: Mark Satterthwaite
Note: AG EH
Number: 8697
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8697
File-URL: http://www.nber.org/papers/w8697.pdf
File-Format: application/pdf
Publication-Status: published as Dranove, David, Daniel Kessler, Mark McClellan and Mark Satterthwaite. "Is More Information Better? The Effects Of `Report Cards' On Health Care Providers," Journal of Political Economy, 2003, v111(3,Jun), 555-588.
Abstract: Health care report cards - public disclosure of patient health outcomes at the level of the individual physician and/or hospital - may address important informational asymmetries in markets for health care, but they may also give doctors and hospitals incentives to decline to treat more difficult, severely ill patients. Whether report cards are good for patients and for society depends on whether their financial and health benefits outweigh their costs in terms of the quantity, quality, and appropriateness of medical treatment that they induce. Using national data on Medicare patients at risk for cardiac surgery, we find that cardiac surgery report cards in New York and Pennsylvania led both to selection behavior by providers and to improved matching of patients with hospitals. On net, this led to higher levels of resource use and to worse health outcomes, particularly for sicker patients. We conclude that, at least in the short run, these report cards decreased patient and social welfare.
Handle: RePEc:nbr:nberwo:8697
Template-Type: ReDIF-Paper 1.0
Title: Dividend Policy inside the Firm
Classification-JEL: F23; G31
Author-Name: Mihir A. Desai
Author-Name: C. Fritz Foley
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: CF ITI PE
Number: 8698
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8698
File-URL: http://www.nber.org/papers/w8698.pdf
File-Format: application/pdf
Publication-Status: published as Desai, Mihir A., C. Fritz Folley and James R. Hines Jr. “Dividend Policy Inside the Multinational Firm." Financial Management 36, 1 (2007): 5-26.
Abstract: This paper analyzes dividend remittances by a large panel of foreign affiliates of U.S. multinational firms. The dividend policies of foreign affiliates, which convey no signals to public capital markets, nevertheless resemble those used by publicly held companies in paying dividends to diffuse common shareholders. Robustness checks verify that dividend policies of foreign affiliates are little affected by the dividend policies of their parent companies or parent company exposure to public capital markets. Systematic differences in the payout behavior of affiliates that differ in organizational form, and those that face differing tax costs of paying dividends, reveal the importance of tax factors; nevertheless, dividend policies are not solely determined by tax considerations. The absence of capital market considerations and the incompleteness of tax explanations together suggest that dividend policies are largely driven by the need to control managers of foreign affiliates. Parent firms are more willing to incur tax penalties by simultaneously investing funds while receiving dividends when their foreign affiliates are partially owned, located far from the United States, or in jurisdictions in which property rights are weak, all of which are implied by control theories of dividends.
Handle: RePEc:nbr:nberwo:8698
Template-Type: ReDIF-Paper 1.0
Title: Mental Illness and the Demand for Alcohol, Cocaine and Cigarettes
Classification-JEL: I1
Author-Name: Henry Saffer
Author-Person: psa935
Author-Name: Dhaval Dave
Author-Person: pda245
Note: EH
Number: 8699
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8699
File-URL: http://www.nber.org/papers/w8699.pdf
File-Format: application/pdf
Publication-Status: published as Henry Saffer & Dhaval Dave, 2005. "Mental Illness and the Demand for Alcohol, Cocaine, and Cigarettes," Economic Inquiry, Oxford University Press, vol. 43(2), pages 229-246, April.
Abstract: The purpose of this paper is to estimate the effect that mental illness has on the demand for addictive goods. Mental illness could affect the level of consumption of addictive goods and could affect the price elasticities of addictive goods. Demand theory suggests that mental illness would affect consumption if mental illness affected marginal utility. In addition, mental illness would affect the price elasticity if mental illness affected the rate at which marginal utility diminishes. The empirical models allow for endogeneity between mental illness and addictive consumption since prior research suggests such a relationship. The results show that individuals with a history of mental illness are 25 percent more likely to consume alcohol, 69 percent more likely to consume cocaine and 94 percent more likely to consume cigarettes. Individuals with a history of mental illness are responsive to price although the price elasticites differ somewhat from whose without mental illness. These results provide an added justification for higher taxes and other supply reduction activities since they show that these policies are effective with this high participation group. The results also suggest that an additional method of reducing the consumption of addictive goods is to subsidize the treatment of mental illness.
Handle: RePEc:nbr:nberwo:8699
Template-Type: ReDIF-Paper 1.0
Title: Asset Prices in the Measurement of Inflation
Classification-JEL: E31; C43
Author-Name: Michael F. Bryan
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Author-Name: Roisin O'Sullivan
Note: AP ME
Number: 8700
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8700
File-URL: http://www.nber.org/papers/w8700.pdf
File-Format: application/pdf
Abstract: The debate over including asset prices in the construction of an inflation statistic has attracted renewed attention in recent years. Virtually all of this (and earlier) work on incorporating asset prices into an aggregate price statistic has been motivated by a presumed, but unidentified transmission mechanism through which asset prices are leading indicators of inflation at the retail level. In this paper, we take an alternative, longer-term perspective on the issue and argue that the exclusion of asset prices introduces an 'excluded goods bias' in the computation of the inflation statistic that is of interest to the monetary authority. We implement this idea using a relatively modern statistical technique, a dynamic factor index. This statistical algorithm allows us to see through the excessively 'noisy' asset price data that have frustrated earlier researchers who have attempted to integrate these prices into an aggregate measure. We find that the failure to include asset prices in the aggregate price statistic has introduced a downward bias in the U.S. Consumer Price Index on the order of magnitude of roughly 1/4 percentage point annually. Of the three broad assets categories considered here -- equities, bonds, and houses -- we find that the failure to include housing prices resulted in the largest potential measurement error. This conclusion is also supported by a cursory look at some cross-country evidence.
Handle: RePEc:nbr:nberwo:8700
Template-Type: ReDIF-Paper 1.0
Title: Network Effects, Congestion Externalities, and Air Traffic Delays: Or Why All Delays Are Not Evil
Classification-JEL: L2; L5
Author-Name: Christopher Mayer
Author-Person: pma212
Author-Name: Todd Sinai
Author-Person: psi354
Note: PE
Number: 8701
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8701
File-URL: http://www.nber.org/papers/w8701.pdf
File-Format: application/pdf
Publication-Status: published as Mayer, Christopher and Todd Sinai. "Network Effects, Congestion Externalities, And Air Traffic Delays: Or Why Not Al Delays Are Evil," American Economic Review, 2003, v93(4,Sep), 1194-1215.
Abstract: We examine two factors that might explain the extent of air traffic delays in the United States: network benefits due to hubbing and congestion externalities. Airline hubs enable passengers to cross-connect to many destinations, thus creating network benefits that increase in the number of markets served from the hub. Delays are the equilibrium outcome of a hub airline equating high marginal benefits from hubbing with the marginal cost of delays. Congestion externalities are created when airlines do not consider that adding flights may lead to increased delays for other air carriers. In this case, delays represent a market failure. Using data on all domestic flights by major US carriers from 1988-2000, we find that delays are increasing in hubbing activity at an airport and decreasing in market concentration but the hubbing effect dominates empirically. In addition, most delays due to hubbing actually accrue to the hub carrier, primarily because the hub carrier clusters its flights in short spans of time in order to maximize passenger interconnections. Non hub flights at hub airports operate with minimal additional travel time by avoiding the congested peak connecting times of the hub carrier. These results suggest that an optimal congestion tax would have a relatively small impact on air traffic delays since hub carriers already internalize most of the costs of hubbing and a tax that did not take the network benefits of hubbing into account could reduce social welfare.
Handle: RePEc:nbr:nberwo:8701
Template-Type: ReDIF-Paper 1.0
Title: Are There Differential Effects of Price and Policy on College Students' Drinking Intensity?
Classification-JEL: D12; I10
Author-Name: Jenny Williams
Author-Name: Frank J. Chaloupka
Author-Person: pch236
Author-Name: Henry Wechsler
Note: CH EH
Number: 8702
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8702
File-URL: http://www.nber.org/papers/w8702.pdf
File-Format: application/pdf
Publication-Status: published as Williams, Jenny, Frank J. Chaloupka and Henry Wechsler. "Are There Differential Effects Of Price And Policy On College Students' Drinking Intensity?," Contemporary Economic Policy, 2005, v23(1,Jan), 78-90.
Abstract: This paper investigates whether college students' response to alcohol price and policies differ according to their drinking intensity. Individual level data on drinking behavior, price paid per drink, and college alcohol policies come from the student and administrator components of the 1997 and 1999 waves of the Harvard School of Public Health (HSPH) College Alcohol Study (CAS). Students drinking behavior is classified on the basis of the number of drinks they typically consume on a drinking occasion, and the number of times they have been drunk during the 30 days prior to survey. A generalized ordered logit model is used to determine whether key variables impact differentially the odds of drinking and the odds of heavy drinking. We find that students who faced a higher money price for alcohol are less likely to make the transition from abstainer to moderate drinker and moderate drinker to heavy drinker, and this effect is equal across thresholds. Campus bans on the use of alcohol are a greater deterrent to moving from abstainer to moderate drinker than moderate drinker to heavy drinker.
Handle: RePEc:nbr:nberwo:8702
Template-Type: ReDIF-Paper 1.0
Title: Optimal Defaults for Corporate Law Evolution
Classification-JEL: G3; G34
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Assaf Hamdani
Note: LE
Number: 8703
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8703
File-URL: http://www.nber.org/papers/w8703.pdf
File-Format: application/pdf
Publication-Status: published as Bebchuk, Lucian Arye and Assaf Hamdani. "Optimal Defaults for Corporate Law Evolution." Northwestern Law Review 96 (2002): 489-520.
Abstract: Public corporations live in a dynamic and ever-changing business environment. This paper examines how courts and legislators should choose default arrangements in the corporate area to address new circumstances. We show that the interests of the shareholders of existing companies would not be served by adopting those defaults arrangements that public officials view as most likely to be value-enhancing. Because any charter amendment requires the board's initiative, opting out of an inefficient default arrangement is much more likely to occur when management disfavors the arrangement than management supports it. We develop a 'reversible defaults' approach that takes into account this asymmetry. When public officials must choose between two or more default arrangements and face significant uncertainty as to which one would best serve shareholders, they should err in favor of the arrangement that is less favorable to managers. Such an approach, we show, would make it most likely that companies would be ultimately governed by the arrangement that would maximize shareholder value. Evaluating some of the main choices that state corporate law has made in the past two decades in light of our proposed approach, we endorse some but question others. The arrangements we examine include those developed with respect to director liability, state antitakeover statutes, and the range of permitted defensive tactics.
Handle: RePEc:nbr:nberwo:8703
Template-Type: ReDIF-Paper 1.0
Title: International Protection of Intellectual Property
Classification-JEL: O34; F13
Author-Name: Gene Grossman
Author-Person: pgr21
Author-Name: Edwin L.-C. Lai
Author-Person: pla349
Note: ITI
Number: 8704
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8704
File-URL: http://www.nber.org/papers/w8704.pdf
File-Format: application/pdf
Publication-Status: published as Grossman, Gene M. and Edwin L.-C. Lai. "International Protection Of Intellectual Property," American Economic Review, 2004, v94(5,Dec), 1635-1653.
Abstract: We study the incentives that governments have to protect intellectual property in a trading world economy. We consider a world economy with ongoing innovation in two countries that differ in market size, in their capacities for innovation, and in their absolute and comparative advantage in manufacturing. We associate the strength of IPR protection with the duration of a country's patents that are applied with national treatment. After describing the determination of national policies in a non-cooperative regime of patent protection, we ask, Why are patents longer in the North? We also study international patent agreements by deriving the properties of an efficient global regime of patent protection and asking whether harmonization of patent policies is necessary or sufficient for global efficiency.
Handle: RePEc:nbr:nberwo:8704
Template-Type: ReDIF-Paper 1.0
Title: When Do Firms Shift Production Across States to Avoid Environmental Regulation?
Classification-JEL: D2; Q2
Author-Name: Wayne B. Gray
Author-Person: pgr111
Author-Name: Ronald J. Shadbegian
Author-Person: psh911
Note: PE EEE
Number: 8705
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8705
File-URL: http://www.nber.org/papers/w8705.pdf
File-Format: application/pdf
Abstract: This paper takes a new approach to testing the impact of state environmental regulatory stringency on firms' location decisions, focusing on firms' allocation of production across states. We use Census data for the paper industry to measure the share of each firm's production in each state during 1967-2002. We use a conditional logit model, controlling for a variety of state characteristics that influence firm costs and revenues, and testing several measures of state environmental stringency. Firms allocate significantly smaller production shares to states with stricter regulations, but there is significant heterogeneity across firms in their sensitivity to regulatory stringency. Firms with low compliance rates are more sensitive than firms with high compliance rates, consistent with a model where compliance rates are driven by differences across firms in the costs of compliance, rather than in the benefits of compliance.
Handle: RePEc:nbr:nberwo:8705
Template-Type: ReDIF-Paper 1.0
Title: Disinflation and Fiscal Reform: A Neoclassical Perspective
Classification-JEL: F31; F32
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: IFM
Number: 8706
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8706
File-URL: http://www.nber.org/papers/w8706.pdf
File-Format: application/pdf
Publication-Status: published as Rigobon, Roberto. "Disinflation And Fiscal Reform: A Neoclassical Perspective," Journal of International Economics, 2002, v57(2,Dec), 265-297.
Abstract: During the last two decades, many Latin American countries engaged in disinflation programs based on both exchange rate management and fiscal reforms. However, in most instances, part of the fiscal reform was delayed or not implemented completely, so the fiscal deficit increased and the program had to be abandoned. The aftermath of these programs is not encouraging, since most of these policies turned out to be failures, lowering reserves and causing higher inflation rates. Given this record, it is worth asking why governments start a disinflation program even though the fiscal equilibrium is not guaranteed. In this paper we show that, if the reform process is uncertain and inflation has welfare costs, the optimal exchange rate policy implies the initiation of a disinflation program at the announcement of the fiscal reform. Additionally, we show that even if there exists a possibility of a balance of payments crisis, it is still optimal to initiate a disinflation program. This means that, in this set up, avoiding the crisis with probability one is suboptimal. Finally, we show that it is optimal to engage in a sequence of stabilization programs until one of them is successful.
Handle: RePEc:nbr:nberwo:8706
Template-Type: ReDIF-Paper 1.0
Title: How Migration Restrictions Limit Agglomeration and Productivity in China
Classification-JEL: J6; O1
Author-Name: Chun-Chung Au
Author-Name: Vernon Henderson
Author-Person: phe30
Note: PR
Number: 8707
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8707
File-URL: http://www.nber.org/papers/w8707.pdf
File-Format: application/pdf
Publication-Status: published as Au, Chun-Chung and J. Vernon Henderson. "How Migration Restrictions Limit Agglomeration And Productivity In China," Journal of Development Economics, 2006, v80(1,Jun), 350-388.
Abstract: China strongly restricts rural-rural, urban-urban, and rural-urban migration. The result which this paper documents is a surplus of labor in agriculture. However, the paper argues that these restrictions also lead to insufficient agglomeration of economic activity within both rural industrial and urban areas, with resulting first order losses in GDP. For urban areas the paper estimates a city productivity relationship, based on city GDP numbers for 1990-97. The effects of access, educational attainment, FDI, and public infrastructure on productivity are estimated. Worker productivity is shown to be an inverted U-shape function of city employment level, with the peak point shifting out as industrial composition moves from manufacturing to services. As far as we know this is the first paper to actually estimate the relationship between output per worker and city scale, as it varies with industrial composition. The majority of Chinese cities are shown to be potentially undersized - below the lower bound on the 95% confidence interval about the size where their output per worker peaks. The paper calculates the large gains from increased agglomeration in both the rural industrial and urban sectors. It also examines the effect of capital reallocations, where the rural sector is grossly undercapitalized.
Handle: RePEc:nbr:nberwo:8707
Template-Type: ReDIF-Paper 1.0
Title: Entrepreneurship in International Trade
Classification-JEL: F20; J41
Author-Name: James E. Rauch
Author-Person: pra166
Author-Name: Joel Watson
Author-Person: pwa36
Note: ITI
Number: 8708
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8708
File-URL: http://www.nber.org/papers/w8708.pdf
File-Format: application/pdf
Publication-Status: published as "Network Intermediaries in International Trade", Journal of Economics and Management Strategy. Vol 13 (Spring 2004), pp. 69-93.
Abstract: Motivated by evidence on the importance of incomplete information and networks in international trade, we investigate the supply of 'network intermediation.' We hypothesize that the agents who become international trade intermediaries first accumulate networks of foreign contacts while working as employees in production or sales, then become entrepreneurs who sell access to and use of the networks they accumulated. We report supportive results regarding this hypothesis from a pilot survey of international trade intermediaries. We then build a simple general-equilibrium model of this type of entrepreneurship, and use it for comparative statics and welfare analysis. One welfare conclusion is that intermediaries may have inadequate incentives to maintain or expand their networks, suggesting a rationale for the policies followed by some countries to encourage large-scale trading companies that imitate the Japanese sogo shosha.
Handle: RePEc:nbr:nberwo:8708
Template-Type: ReDIF-Paper 1.0
Title: Do Low-Income Housing Subsidies Increase Housing Consumption?
Classification-JEL: H42; R21
Author-Name: Todd Sinai
Author-Person: psi354
Author-Name: Joel Waldfogel
Author-Person: pwa46
Note: PE
Number: 8709
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8709
File-URL: http://www.nber.org/papers/w8709.pdf
File-Format: application/pdf
Publication-Status: published as Sinai, Todd and Joel Waldfogel. "Do Low-Income Housing Subsidies Increase The Occupied Housing Stock?," Journal of Public Economics, 2005, v89(11-12,Dec), 2137-2164.
Abstract: A necessary condition for justifying a policy such as publicly provided or subsidized low-income housing is that it has a real effect on recipients' outcomes. In this paper, we examine one aspect of the real effect of public or subsidized housing -- does it increase the housing stock? If subsidized housing raises the quantity of occupied housing per capita, either more people are finding housing or they are being housed less densely. On the other hand, if public or subsidized housing merely crowds out equivalent-quality low-income housing that otherwise would have been provided by the private sector, the housing policy may have little real effect on housing consumption. Using Census place-level data from the decennial census and from the Department of Housing and Urban Development, we ask whether places with more public and subsidized housing also have more total housing, after accounting for housing demand. We find that government-financed units raise the total number of units in a Census place, although on average three government-subsidized units displace two units that would otherwise have been provided by the private market. There is less crowd out in more populous markets, and more crowd out in places where there is less excess demand for public housing, as measured by the number of government-financed units per eligible person. Tenant-based housing programs, such as Section 8 Certificates and Vouchers, seem to be more effective than project-based programs at targeting subsidized housing units to people who otherwise would not have their own.
Handle: RePEc:nbr:nberwo:8709
Template-Type: ReDIF-Paper 1.0
Title: The Medium Run Effects of Educational Expansion: Evidence from a Large School Construction Program in Indonesia
Classification-JEL: O1; O4
Author-Name: Esther Duflo
Author-Person: pdu166
Note: CH
Number: 8710
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8710
File-URL: http://www.nber.org/papers/w8710.pdf
File-Format: application/pdf
Publication-Status: published as Duflo, Esther, 2004. "The medium run effects of educational expansion: evidence from a large school construction program in Indonesia," Journal of Development Economics, Elsevier, vol. 74(1), pages 163-197, June.
Abstract: This paper studies the medium run consequences of an increase in the rate of accumulation of human capital in a developing country. From 1974 to 1978, the Indonesian government built over 61,000 primary schools. The school construction program led to an increase in education among individuals who were young enough to attend primary school after 1974, but not among the older cohorts. 2SLS estimates suggest that an increase of 10 percentage points in the proportion of primary school graduates in the labor force reduced the wages of the older cohorts by 3.8% to 10% and increased their formal labor force participation by 4% to 7%. I propose a two-sector model as a framework to interpret these findings. The results suggest that physical capital did not adjust to the faster increase in human capital.
Handle: RePEc:nbr:nberwo:8710
Template-Type: ReDIF-Paper 1.0
Title: Private Benefits of Control: An International Comparison
Classification-JEL: G30; G15
Author-Name: Alexander Dyck
Author-Person: pdy5
Author-Name: Luigi Zingales
Note: CF
Number: 8711
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8711
File-URL: http://www.nber.org/papers/w8711.pdf
File-Format: application/pdf
Publication-Status: published as Dyck, Alexander and Luigi Zingales. "Private Benefits Of Control: An International Comparison," Journal of Finance, 2004, v59(2,Apr), 537-600.
Abstract: We construct a measure of the private benefits of control in 39 countries based on 412 control transactions between 1990 and 2000. We find that the value of control ranges between 4% and +65%, with an average of 14 percent. As predicted by theory, in countries where private benefits of control are larger capital markets are less developed, ownership is more concentrated, and privatizations are less likely to take place as public offerings. We also analyze what institutions are most important in curbing these private benefits. A high degree of statutory protection of minority shareholders and high degree of law enforcement are associated with lower levels of private benefits of control, but so are a high level of diffusion of the press, a high rate of tax compliance, and a high degree of product market competition. A crude R-squared test suggests that the 'non traditional' mechanisms have at least as much explanatory power as the legal ones commonly mentioned in the literature. In fact, in a multivariate analysis newspapers' circulation and tax compliance seem to be the dominating factors. We advance an explanation why this might be the case.
Handle: RePEc:nbr:nberwo:8711
Template-Type: ReDIF-Paper 1.0
Title: The Variety and Quality of a Nation's Trade
Classification-JEL: F43; F12
Author-Name: David Hummels
Author-Person: phu100
Author-Name: Peter J. Klenow
Note: EFG ITI
Number: 8712
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8712
File-URL: http://www.nber.org/papers/w8712.pdf
File-Format: application/pdf
Publication-Status: published as Hummels, David and Peter J. Klenow. "The Variety And Quality Of A Nation's Exports," American Economic Review, 2005, v95(2,May), 704-723.
Abstract: Not surprisingly, big countries trade more than small countries. In this paper we use data on shipments by 110 exporters to 59 importers in 5,000 product categories to ask: how? Do big countries trade larger quantities of a common set of goods (the intensive margin), a larger set of goods (the extensive margin), or higher quality goods? We find that the extensive margin accounts for two-thirds of the greater exports of larger economies, and one-third of the greater imports of larger economies. Richer countries export more units at higher prices. These calculations are useful for distinguishing features of trade models that correspond more or less well to the data. Models with Armington national product differentiation do not feature the extensive margin, and wrongly predict that greater output will be accompanied by worse terms of trade. 'Krugman' style models with firm level product differentation fare better, but must be modified to include quality differentiation and fixed costs of trading to match all of the facts. Estimates based on these modifications imply that differences in goods' quality could be the proximate cause of about 25% of country differences in real income per worker.
Handle: RePEc:nbr:nberwo:8712
Template-Type: ReDIF-Paper 1.0
Title: Technological Diffusion, Conditional Convergence, and Economic Growth
Classification-JEL: O3; O4
Author-Name: David E. Bloom
Author-Person: pbl79
Author-Name: David Canning
Author-Person: pca340
Author-Name: Jaypee Sevilla
Note: EFG PR
Number: 8713
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8713
File-URL: http://www.nber.org/papers/w8713.pdf
File-Format: application/pdf
Abstract: Technological diffusion implies a form of 'conditional convergence' as lagging countries catch up with technological leaders. We find strong evidence of technological diffusion but not full convergence; differences in total factor productivity (TFP) persist even in the long run due to differences in geography and institutions. TFP differentials explain a large part of cross-country income differences in our model; our estimates of the rate of return to capital, labor and schooling are completely consistent with micro-economic studies, implying the absence of externalities in aggregate production.
Handle: RePEc:nbr:nberwo:8713
Template-Type: ReDIF-Paper 1.0
Title: The Wealth of Nations: Fundamental Forces Versus Poverty Traps
Classification-JEL: O1
Author-Name: David E. Bloom
Author-Person: pbl79
Author-Name: David Canning
Author-Person: pca340
Author-Name: Jaypee Sevilla
Note: EFG
Number: 8714
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8714
File-URL: http://www.nber.org/papers/w8714.pdf
File-Format: application/pdf
Abstract: We test the view the large differences in income levels we see across the world are due to differences in underlying characteristics, i.e. fundamental forces, against the alternative that there are poverty traps. Taking geographical variables as fundamental characteristics, we find that we can reject fundamental forces in favor of a poverty trap model with high and low level equilibria. The high level equilibrium state is found to be the same for all countries while income in the low level equilibrium, and the probability of being in the high level equilibrium, are greater in cool, coastal countries with high, year- round, rainfall.
Handle: RePEc:nbr:nberwo:8714
Template-Type: ReDIF-Paper 1.0
Title: A Reconsideration of Hedonic Price Indices with an Application to PC's
Classification-JEL: C8; L0
Author-Name: Ariel Pakes
Author-Person: ppa20
Note: IO PR
Number: 8715
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8715
File-URL: http://www.nber.org/papers/w8715.pdf
File-Format: application/pdf
Publication-Status: published as Pakes, Ariel. "A Reconsideration Of Hedonic Price Indexes With An Application To PC's," American Economic Review, 2003, v93(5,Dec), 1578-1614.
Abstract: This paper provides a justification for hedonic price indices and details the properties of hedonic price functions. The analysis is done in a market setting in which a finite number of goods, each defined by its characteristics, interact. We note that proper hedonic indices can be constructed from the same data currently used to construct matched model indices. Since the matched model index does not incorporate price changes for goods which exit, and the goods that exited tend to be those goods whose prices fall, the matched model index has a selection problem which biases it upwards. The hedonic index does not have this problem. We illustrate with a new study of price indices for PC's. The hedonic index shows steep price declines in every year. On average, the matched model indices indicate no price fall at all and one commonly used matched model index is negatively correlated with the hedonic. We also construct and compare alternative price indices used either in research or by the federal statistical agencies. Of these the one that seems to work well is a Pasche style hedonic. Its advantage is that since it does not require computation of the current period's hedonic function, it is easier to use when monthly timetables need to be met.
Handle: RePEc:nbr:nberwo:8715
Template-Type: ReDIF-Paper 1.0
Title: Crises Now and Then: What Lessons from the Last Era of Financial Globalization
Classification-JEL: F33; N20
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Michael D. Bordo
Author-Person: pbo243
Note: DAE IFM ME
Number: 8716
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8716
File-URL: http://www.nber.org/papers/w8716.pdf
File-Format: application/pdf
Publication-Status: published as Mizen, Paul (ed.) Monetary History, Exchange Rates and Financial Markets: Essays in Honor of Charles Goodhart, Vol 2. London: Edward Elgar Publisher, 2003.
Abstract: We consider the operation of international capital markets in two periods of globalization, before 1914 and after 1971, with a focus on the crisis problem. We explore the idea that the incidence of crises in these two periods reflects how capital flows were embedded in the larger economic system. Other authors have made similar connections, suggesting that the international monetary framework was responsible for the relatively short-lived and mild nature of pre-World War I financial crises. However, we show that currency crises in fact were of longer duration before 1914. Only for banking and twin crises is there evidence that recovery was faster then than now. This leads us to a somewhat different view of the role of the monetary regime in the propagation of financial crises. A key difference between then and now, we suggest, is that prior to 1914 banking crises were less prone to undermine confidence in the currency, and to thereby compound financial problems, in the countries that were at the core of the international monetary system.
Handle: RePEc:nbr:nberwo:8716
Template-Type: ReDIF-Paper 1.0
Title: Charles Goodhart's Contributions to the History of Monetary Institutions
Classification-JEL: E58; G18
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Anna J. Schwartz
Note: DAE ME
Number: 8717
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8717
File-URL: http://www.nber.org/papers/w8717.pdf
File-Format: application/pdf
Publication-Status: published as Mizen, Paul (ed.) Essays in honour of Charles Goodhart. Volume 2. Monetary history, exchange rates and financial markets. Cheltenham, U.K. and Northampton, MA: Elgar, 2003.
Abstract: Our paper examines Charles Goodhart's work on the history of monetary institutions: central bank operations under the gold standard, their behaviour in relation to the financial system in which they functioned, including their responses to banking crises, and their performance as lenders of last resort. Although we differ with Charles on some of the conclusions that he has reached, we pay tribute to his importance in shaping the discussion by economists over a thirty-year span on questions related to the functioning of banks, their customers, and the historic central banks that evolved from serving government to serving banks.
Handle: RePEc:nbr:nberwo:8717
Template-Type: ReDIF-Paper 1.0
Title: Social Security Expectations and Retirement Savings Decisions
Classification-JEL: H55; D84
Author-Name: Jeff Dominitz
Author-Name: Charles F. Manski
Author-Person: pma111
Author-Name: Jordan Heinz
Note: AG PE
Number: 8718
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8718
File-URL: http://www.nber.org/papers/w8718.pdf
File-Format: application/pdf
Abstract: Retirement savings decisions should depend on expectations of Social Security retirement income. Persons may be uncertain of their future Social Security benefits for several reasons, including uncertainty about their future labor earnings, the formula now determining social security benefits, and the future structure of the Social Security system. To learn how Americans perceive their benefits, we have elicited Social Security expectations from respondents to the Survey of Economic Expectations. We have also performed a more intensive face-to-face survey on a small sample of respondents. This paper presents the empirical findings. It also illustrates how data on expectations may help predict how Social Security policy affects retirement savings.
Handle: RePEc:nbr:nberwo:8718
Template-Type: ReDIF-Paper 1.0
Title: Do We Need CAPM for Capital Budgeting?
Classification-JEL: G3
Author-Name: Ravi Jagannathan
Author-Person: pja91
Author-Name: Iwan Meier
Note: AP CF
Number: 8719
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8719
File-URL: http://www.nber.org/papers/w8719.pdf
File-Format: application/pdf
Publication-Status: published as Ravi Jagannathan & Iwan Meier, 2002. "Do We Need CAPM for Capital Budgeting?," Financial Management, Financial Management Association, vol. 31(4), Winter.
Abstract: A key input to the capital budgeting process is the cost of capital. Financial managers most often use the CAPM for estimating the cost of capital for which they need to know the market risk premium. Textbooks advocate using the historical value for the U.S. equity premium as the market risk premium. The CAPM as a model has been seriously challenged in the academic literature. In addition recent research indicates that the true market risk premium might have been as low as half the historical U.S. equity premium during the last two decades. If business finance courses have been teaching the use of the wrong model along with wrong inputs for twenty years, why has no one complained? We provide an answer to this puzzle.
Handle: RePEc:nbr:nberwo:8719
Template-Type: ReDIF-Paper 1.0
Title: Voter Turnout: Theory and Evidence from Texas Liquor Referenda
Classification-JEL: D72
Author-Name: Stephen Coate
Author-Person: pco66
Author-Name: Michael Conlin
Note: PE
Number: 8720
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8720
File-URL: http://www.nber.org/papers/w8720.pdf
File-Format: application/pdf
Publication-Status: published as Coate, Stephen and Michael Conlin. "A Group Rule—Utilitarian Approach to Voter Turnout: Theory and Evidence." American Economic Review 94, 5 (December 2004): 1476-1504.
Abstract: This paper uses data from Texas liquor referenda to explore a new approach to understanding voter turnout, inspired by the theoretical work of Harsanyi (1980) and Feddersen and Sandroni (2001). It presents a model based on this approach and structurally estimates it using the referendum data. It then compares the performance of the model with two alternative models of turnout. The results are encouraging: the structural estimation yields sensible parameter estimates and the model performs better than the two alternatives considered.
Handle: RePEc:nbr:nberwo:8720
Template-Type: ReDIF-Paper 1.0
Title: Optimal Interest Rate Policy in a Small Open Economy
Classification-JEL: E52; F41
Author-Name: Eric Parrado
Author-Name: Andres Velasco
Note: IFM
Number: 8721
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8721
File-URL: http://www.nber.org/papers/w8721.pdf
File-Format: application/pdf
Abstract: Using an optimizing model we derive the optimal monetary and exchange rate policy for a small stochastic open economy with imperfect competition and short run price rigidity. The optimal monetary policy has an exact closed-form solution and is obtained using the utility function of the representative home agent as welfare criterion. The optimal policy depends on the source of stochastic disturbances affecting the economy, much as in the literature pioneered by Poole (1970). Optimal monetary policy reacts to domestic and foreign disturbances. If the intertemporal elasticity of substitution in consumption is less than one, as is likely to be the case empirically, the optimal exchange rate policy implies a dirty float: interest rate shocks from abroad are met partially by adjusting home interest rates, and partially by allowing the exchange rate to move. This optimal pattern may help rationalize the observed fear of floating.
Handle: RePEc:nbr:nberwo:8721
Template-Type: ReDIF-Paper 1.0
Title: Measuring Organization Capital
Classification-JEL: E13; E22
Author-Name: Andrew Atkeson
Author-Person: pat52
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Note: EFG PR
Number: 8722
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8722
File-URL: http://www.nber.org/papers/w8722.pdf
File-Format: application/pdf
Publication-Status: published as Atkeson, Andrew and Patrick J. Kehoe. “Modeling and Measuring Organization Capital." Journal of Political Economy 113, 5 (October 2005): 1026-1053.
Abstract: In the manufacturing sector of the U.S. economy, nearly 9% of output is not accounted for as payments to either physical capital or labor. The value of this output is a little larger than the value of the stock of physical capital. We build a model to measure how much of this output can be attributed to payments to organization capital-organization-specific knowledge that is built up with experience. We find that roughly 4% of output can be accounted for as payments to organization capital and that this capital has roughly two-thirds the value of the stock of physical capital.
Handle: RePEc:nbr:nberwo:8722
Template-Type: ReDIF-Paper 1.0
Title: Suggested Subsidies are Sub-optimal Unless Combined with an Output Tax
Classification-JEL: H23; H25
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Robert D. Mohr
Note: PE EEE
Number: 8723
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8723
File-URL: http://www.nber.org/papers/w8723.pdf
File-Format: application/pdf
Publication-Status: published as Don Fullerton & Robert Mohr, 2003. "Suggested Subsidies are Sub-optimal Unless Combined with an Output Tax," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 2(1), article 1, pages 1097-1097.
Abstract: Because of difficulties measuring pollution, many prior papers suggest a subsidy to some observable method of reducing pollution. We take three papers from the Journal of Environmental Economics and Management as examples, and we extend them to make an additional important point. In each case, we show that welfare under the suggested subsidy can be increased by the addition of an output tax. While the suggested subsidy reduces damage per unit of output, it also decreases the firm's cost of production and the equilibrium break-even price. It might therefore increase output -- unless combined with an output tax. Using one example, we show that a properly-constructed subsidy-tax combination is equivalent to a Pigovian tax. Another example is a computational model, used to show that the subsidy-tax combination can yield a welfare gain that is more than three times the gain from using the subsidy alone. The third example is a theoretical model, used to show that the subsidy alone increases production and thus could increase total pollution. An additional output tax offsets this increase in production.
Handle: RePEc:nbr:nberwo:8723
Template-Type: ReDIF-Paper 1.0
Title: Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?
Classification-JEL: F2; L1
Author-Name: Jonathan E. Haskel
Author-Person: pha161
Author-Name: Sonia C. Pereira
Author-Name: Matthew J. Slaughter
Note: ITI PR
Number: 8724
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8724
File-URL: http://www.nber.org/papers/w8724.pdf
File-Format: application/pdf
Publication-Status: published as Jonathan E Haskel & Sonia C Pereira & Matthew J Slaughter, 2007. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 482-496, 03.
Abstract: Are there productivity spillovers from FDI to domestic firms, and, if so, how much should host countries be willing to pay to attract FDI? To examine these questions we use a plant-level panel covering U.K. manufacturing from 1973 through 1992. Across a wide range of specifications, we estimate a significantly positive correlation between a domestic plant's TFP and the foreign-affiliate share of activity in that plant's industry. This is consistent with positive FDI spillovers. We do not generally find significant effects on plant TFP of the foreign-affiliate share of activity in that plant's region. Typical estimates suggest that a 10 percentage-point increase in foreign presence in a U.K. industry raises the TFP of that industry's domestic plants by about 0.5 percent. We also use these estimates to calculate the per-job value of these spillovers. These calculated values appear to be less than per-job incentives governments have granted in recent high-profile cases, in some cases several times less.
Handle: RePEc:nbr:nberwo:8724
Template-Type: ReDIF-Paper 1.0
Title: The Responsiveness of Consumer Prices to Exchange Rates And the Implications for Exchange-Rate Policy: A Survey Of a Few Recent New Open-Economy...
Classification-JEL: F4; F3
Author-Name: Charles Engel
Author-Person: pen14
Note: IFM
Number: 8725
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8725
File-URL: http://www.nber.org/papers/w8725.pdf
File-Format: application/pdf
Publication-Status: published as Engel, Charles, 2002. "The Responsiveness of Consumer Prices to Exchange Rates: A Synthesis of Some New Open Economy Macro Models," Manchester School, University of Manchester, vol. 70(0), pages 1-15, Supplemen.
Abstract: The traditional case for flexibility in nominal exchange rates assumes that there is nominal price stickiness that prevents relative prices from adjusting in response to real shocks. When prices are sticky in producers' currencies, nominal exchange rate changes can achieve the relative price change that is required between home and foreign goods. The nominal exchange rate flexibility provides the desired 'expenditure-switching' effect of relative price changes. But if prices are fixed ex ante in consumers' currencies, nominal exchange rate flexibility cannot achieve any relative price adjustment. In fact, nominal exchange rate fluctuations are undesirable because they lead to deviations from the law of one price. So, fixed exchange rates are optimal. The empirical literature appears to support the notion that prices are sticky in consumers' currencies. This paper surveys the approaches taken in the new open economy macroeconomic literature to formalize the role of optimal monetary policy. The survey explores how this literature has dealt with the empirical evidence on pass-through of exchange rate changes to consumer prices.
Handle: RePEc:nbr:nberwo:8725
Template-Type: ReDIF-Paper 1.0
Title: Is the Technology-Driven Real Business Cycle Hypothesis Dead?
Classification-JEL: E3
Author-Name: Neville Francis
Author-Name: Valerie A. Ramey
Author-Person: pra154
Note: EFG
Number: 8726
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8726
File-URL: http://www.nber.org/papers/w8726.pdf
File-Format: application/pdf
Publication-Status: published as Francis, Neville and Valerie A. Ramey. "Is The Technology-Driven Real Business Cycle Hypothesis Dead? Shocks And Aggregate Fluctuations Revisited," Journal of Monetary Economics, 2005, v52(8,Nov), 1379-1399.
Abstract: In this paper, we re-examine the recent evidence that technology shocks do not produce business cycle patterns in the data. We first extend Gal¡'s (1999) work, which uses long-run restrictions to identify technology shocks, by examining whether the identified shocks can be plausibly interpreted as technology shocks. We do this in three ways. First, we derive additional long-run restrictions and use them as tests of overidentification. Second, we compare the qualitative implications from the model with the impulse responses of variables such as wages and consumption. Third, we test whether some standard 'exogenous' variables predict the shock variables. We find that oil shocks, military build-ups, and Romer dates do not predict the shock labeled 'technology.' We then show ways in which a standard DGE model can be modified to fit Gal¡'s finding that a positive technology shock leads to lower labor input. Finally, we re-examine the properties of the other key shock to the system.
Handle: RePEc:nbr:nberwo:8726
Template-Type: ReDIF-Paper 1.0
Title: Make Versus Buy in Trucking: Asset Ownership, Job Design and Information
Classification-JEL: D23; L22
Author-Name: George P. Baker
Author-Name: Thomas N. Hubbard
Note: IO LS
Number: 8727
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8727
File-URL: http://www.nber.org/papers/w8727.pdf
File-Format: application/pdf
Publication-Status: published as Baker, George P. and Thomas N. Hubbard. "Make Versus Buy In Trucking: Asset Ownership, Job Design, And Information," American Economic Review, 2003, v93(3,Jun), 551-572.
Abstract: Explaining patterns of asset ownership in the economy is a central goal of both organizational economics and industrial organization. We develop a model of asset ownership in trucking, which we test by examining how the adoption of different classes of on-board computers (OBCs) between 1987 and 1997 influenced whether shippers use their own trucks for hauls or contract with for-hire carriers. We find that OBCs' incentive-improving features pushed hauls toward private carriage, but their resource-allocation-improving features pushed them toward for-hire carriage. We conclude that ownership patterns in trucking reflect the importance of both incomplete contracts (Grossman and Hart (1986)) and of job design and measurement issues (Holmstrom and Milgrom (1994)).
Handle: RePEc:nbr:nberwo:8727
Template-Type: ReDIF-Paper 1.0
Title: Outsourcing in a Global Economy
Classification-JEL: F12; L14
Author-Name: Gene M. Grossman
Author-Person: pgr21
Author-Name: Elhanan Helpman
Author-Person: phe205
Note: ITI
Number: 8728
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8728
File-URL: http://www.nber.org/papers/w8728.pdf
File-Format: application/pdf
Publication-Status: published as Grossman, Gene M. and Elhanan Helpman. "Outsourcing In A Global Economy," Review of Economic Studies, 2005, v72(250,Jan), 135-159.
Abstract: We study the determinants of the location of sub-contracted activity in a general equilibrium model of outsourcing and trade. We model outsourcing as an activity that requires search for a partner and relationship-specific investments that are governed by incomplete contracts. The extent of international outsourcing depends inter alia on the thickness of the domestic and foreign market for input suppliers, the relative cost of searching in each market, the relative cost of customizing inputs, and the nature of the contracting environment in each country.
Handle: RePEc:nbr:nberwo:8728
Template-Type: ReDIF-Paper 1.0
Title: Do Industrial Relations Institutions Impact Economic Outcomes?: International and U.S. State-Level Evidence
Classification-JEL: J5; F2
Author-Name: Morris M. Kleiner
Author-Name: Hwikwon Ham
Note: LS
Number: 8729
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8729
File-URL: http://www.nber.org/papers/w8729.pdf
File-Format: application/pdf
Abstract: The impact of government social and labor market institutions on economic outcomes have generated a great deal of attention by economists and policymakers in the U.S. and in other nations. The theoretical model suggests that there are trade offs of higher levels of economic outcomes with more equity-producing labor market institutions. This study examines the impact of national levels of unionization, strike levels, public policies toward labor, and the structure of collective bargaining within a nation on a country's foreign direct investment (FDI). As an additional test of the relationship of labor market institutions and state labor market policies and economic outcomes, we examine the empirical relationship with the economic growth of U.S. states. Examining 20 OECD nations from 1985 through 1995 and all U.S. states from 1990 to 1999, our statistical analysis shows that higher levels of industrial relations institutions are usually associated with lower levels of FDI and slower economic growth for U.S. states. However, within the context of the model the results do not necessarily suggest that a nation or state would be better off trading social equity through fewer restrictive industrial relations institutions for higher levels of economic growth.
Handle: RePEc:nbr:nberwo:8729
Template-Type: ReDIF-Paper 1.0
Title: Economic Effects of Means-Tested Transfers in the U.S.
Author-Name: Robert Moffitt
Author-Person: pmo48
Note: CH PE
Number: 8730
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8730
File-URL: http://www.nber.org/papers/w8730.pdf
File-Format: application/pdf
Publication-Status: published as Economic Effects of Means-Tested Transfers in the US, Robert Moffitt. in Tax Policy and the Economy, Volume 16, Poterba. 2002
Abstract: The system of means-tested transfers in the U.S. has evolved in important ways over the last decade, with significant expansions of Medicaid , the Earned Income Tax Credit, and the Supplemental Security Income program, and with significant contraction in Aid to Families with Dependent Children, now titled the Temporary Assistance for Needy Families program. To determine where we are in our understanding of each of these programs, as well as the other major programs in the system of means-tested transfers, a volume is under preparation by the National Bureau of Economic Research that surveys the current structure and historical evolution of each of these programs and that synthesizes the results of the research that has been conducted on their economic effects. In addition to the AFDC-TANF, Medicaid, EITC, and SSI programs, reviews have been conducted for the Food Stamp program and for housing, child care, job training, and child support programs. This paper summarizes the results of those reviews and highlights the large number of important findings from existing research.
Handle: RePEc:nbr:nberwo:8730
Template-Type: ReDIF-Paper 1.0
Title: Guaranteeing Defined Contribution Pensions: The Option to Buy-Back a Defined Benefit Promise
Classification-JEL: G2; H
Author-Name: Marie-Eve Lachance
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Note: AG AP LS PE
Number: 8731
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8731
File-URL: http://www.nber.org/papers/w8731.pdf
File-Format: application/pdf
Publication-Status: published as Marie-Eve Lachance & Olivia S. Mitchell & Kent Smetters, 2003. "Guaranteeing Defined Contribution Pensions: The Option to Buy Back a Defined Benefit Promise," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(1), pages 1-16.
Abstract: After a long commitment to defined benefit (DB) pension plans for US public sect or employees, many state legislatures have introduced defined contribution (DC) plans for their public employees. In this process, investment risk which was previously borne by state DB plans has now devolved to employees covered by the new DC plans. In light of this trend, some states have proposed a guarantee mechanism to help protect DC plan participants. One such guarantee takes the form of an option permitting DC plan participants to bu y back their DB benefit for a price. This paper develops a theoretical framewor k to analyze the option design and illustrate how employee characteristics influ ence the option's cost. We illustrate the potential magnitude of a buy-back opt ion value enacted recently by the State of Florida for its public employees. If employees were to exercise the buy-back option optimally, the market value of t his option could represent up to 100 percent of the DC contributions over the wo rklife.
Handle: RePEc:nbr:nberwo:8731
Template-Type: ReDIF-Paper 1.0
Title: Controlling the Cost of Minimum Benefit Guarantees in Public Pension Conversions
Classification-JEL: G12; G13
Author-Name: Kent Smetters
Author-Person: psm21
Note: AG PE
Number: 8732
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8732
File-URL: http://www.nber.org/papers/w8732.pdf
File-Format: application/pdf
Publication-Status: published as Smetters, Kent, 2002. "Controlling the cost of minimum benefit guarantees in public pension conversions," Journal of Pension Economics and Finance, Cambridge University Press, vol. 1(01), pages 9-33, March.
Abstract: Unfunded defined-benefit (DB) public pension plans throughout the world are being converted to funded defined-contribution (DC) plans that typically contain a minimum benefit guarantee (DC-MB). Risk management techniques must be used to control the cost of these guarantees. The most common technique is to 'over-fund' the benefit: the contribution rate is set high enough so that the expected benefit is much larger than the guaranteed minimum benefit. This paper shows that while over-funding is very effective in controlling guarantee costs in traditional DB plans, it is highly ineffective for DC-MB plans. This result holds even at very large contribution rates and when risky investments are restricted to a very diversified index like the S&P500. Calculations show that the true risk-adjusted value of unfunded guarantees in a realistic DC-MB plan equals 40 to 90 percent (or more) of the value of the unfunded liability in the DB benefit being replaced, depending on design. This result is true even when the contribution rate in the DC-MB plan is chosen to produce an expected benefit five times larger than the DB benefit. This paper considers two approaches to controlling guarantee costs. The first approach borrows from the recent catastrophic insurance literature. A 'standardized' portfolio is guaranteed, requiring agents to accept 'basis risk' if they chose a non-standard portfolio. However, for large conversions from DB to DC-MB plans, in which there is little or no DB benefit remaining the government must still worry about any 'implicit guarantee' extending beyond the standardized portfolio, thereby enticing agents to accept a lot of basis risk (a 'Samaritan's Dilemma'). The second method, therefore, uses a more brute force approach: private portfolio returns in the good states of the world are taxed while returns in the bad states are subsidized. Both options are very effective at controlling guarantee costs, and they can be used separately or together. Calculations demonstrate that all of the unfunded liabilities associated with modern pay-as-you-go public pension programs can be eliminated under both approaches even at a modest contribution rate.
Handle: RePEc:nbr:nberwo:8732
Template-Type: ReDIF-Paper 1.0
Title: Constitution or Conflict?
Classification-JEL: D7
Author-Name: Herschel I. Grossman
Note: EFG
Number: 8733
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8733
File-URL: http://www.nber.org/papers/w8733.pdf
File-Format: application/pdf
Publication-Status: published as Herschel I. Grossman, 2004. "Constitution or Conflict?," Conflict Management and Peace Science, Peace Science Society (International), vol. 21(1), pages 29-42, February.
Abstract: A self-enforcing constitution creates a political process that provides an alternative to civil conflict for resolving disputes among the constituent groups of the polity. This paper is concerned with discovering the conditions under which it is possible to design such a self-enforcing constitution. The paper is also concerned with discovering generic features of a self-enforcing constitution. The analysis yields the following theoretical propositions: If and only if (1) none of the parties to a dispute regards the dispute to be too important relative to the expected incremental cost of civil conflict and (2) no party has too big of an advantage in civil conflict, then the parties are able to resolve a dispute constitutionally. Also, under a constitution that is self enforcing the outcomes of constitutional contests for political power do not matter too much. The paper illustrates the relevance of the theoretical analysis by applying these propositions to two dramatic historical examples of constitutional failure: the secession of eleven Southern states from the Union in 1861 and the National Socialist revolution in Germany in 1933.
Handle: RePEc:nbr:nberwo:8733
Template-Type: ReDIF-Paper 1.0
Title: The Disposition Effect and Momentum
Classification-JEL: G0; G1
Author-Name: Mark Grinblatt
Author-Person: pgr231
Author-Name: Bing Han
Author-Person: pha1002
Note: AP
Number: 8734
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8734
File-URL: http://www.nber.org/papers/w8734.pdf
File-Format: application/pdf
Abstract: Prior experimental and empirical research documents that many investors have a lower propensity to sell those stocks on which they have a capital loss. This behavioral phenomenon, known as 'the disposition effect,' has implications for equilibrium prices. We investigate the temporal pattern of stock prices in an equilibrium that aggregates the demand functions of both rational and disposition investors. The disposition effect creates a spread between a stock's fundamental value -- the stock price that would exist in the absence of a disposition effect -- and its market price. Even when a stock's fundamental value follows a random walk, and thus is unpredictable, its equilibrium price will tend to underreact to information. Spread convergence, arising from the random evolution of fundamental values, generates predictable equilibrium prices. This convergence implies that stocks with large past price runups and stocks on which most investors experienced capital gains have higher expected returns that those that have experienced large declines and capital losses. The profitability of a momentum strategy, which makes use of this spread, depends on the path of past stock prices. Crosssectional empirical tests of the model find that stocks with large aggregate unrealized capital gains tend to have higher expected returns than stocks with large aggregate unrealized capital losses and that this capital gains 'overhang' appears to be the key variable that generates the profitability of a momentum strategy. When this capital gains variable is used as a regressor along with past returns and volume to predict future returns, the momentum effect disappears.
Handle: RePEc:nbr:nberwo:8734
Template-Type: ReDIF-Paper 1.0
Title: Retirement Consumption: Insights from a Survey
Classification-JEL: E2; D1
Author-Name: John Ameriks
Author-Person: pam72
Author-Name: Andrew Caplin
Author-Person: pca77
Author-Name: John Leahy
Author-Person: ple189
Note: EFG
Number: 8735
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8735
File-URL: http://www.nber.org/papers/w8735.pdf
File-Format: application/pdf
Publication-Status: published as John Ameriks & Andrew Caplin & John Leahy, 2007. "Retirement Consumption: Insights from a Survey," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 265-274, 03.
Abstract: Prior research has established that consumption falls significantly at retirement. What is not known is the extent to which this fall is anticipated during the working years. Do working households expect such a large fall in consumption upon retirement, or are they taken by surprise? Using data from a new survey, we show that many working households do expect a considerable fall in consumption when they retire. In fact, those who are already retired report significantly smaller falls in consumption than are expected by those who are still working. We show that participation in the stock market plays a dominant role in explaining the gap between expectations and outcomes, indicating that much of the gap is a result of unexpected stock market appreciation. The survey produces new insights into the high level of uncertainty in the period leading up to retirement, and the surprises that may lie in store when households actually retire.
Handle: RePEc:nbr:nberwo:8735
Template-Type: ReDIF-Paper 1.0
Title: Time Series Decomposition and Measurement of Business Cycles, Trends and Growth Cycles
Classification-JEL: E32; N10
Author-Name: Victor Zarnowitz
Author-Name: Ataman Ozyildirim
Note: EFG
Number: 8736
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8736
File-URL: http://www.nber.org/papers/w8736.pdf
File-Format: application/pdf
Publication-Status: published as Zarnowitz, Victor & Ozyildirim, Ataman, 2006. "Time series decomposition and measurement of business cycles, trends and growth cycles," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1717-1739, October.
Abstract: A study of business cycles defined as sequences of expansions and contractions in the level of general economic activity does not require trend estimation and elimination, but a study of growth cycles defined as sequences of high and low growth phases does. Major cyclical slowdowns and booms deserve to be analyzed along with classical recessions and expansions, but the needed time series decomposition presents difficult problems, mainly because trends and cycles influence each other. We compare cyclical movements in levels, deviations from trend, and smoothed growth rates of the principal measures of aggregate economic activity - the quarterly real GDP and the monthly U.S. Coincident Index - using the phase average trend (PAT). Then we compare alternative trend estimates, deterministic and stochastic, linear and nonlinear, and the corresponding estimates of 'cyclical components,' that is, series of deviations from these trends. We discuss how these measures differ in terms of the patterns, timing, amplitudes, and smoothness of the resulting estimates of U.S. growth cycles in the post-World War II period. The results of PAT show great similarity to the results obtained with the H-P and band-pass filtering methods, but in matters of detail PAT is often superior.
Handle: RePEc:nbr:nberwo:8736
Template-Type: ReDIF-Paper 1.0
Title: Existence and Persistence of Price Dispersion: an Empirical Analysis
Classification-JEL: L11
Author-Name: Saul Lach
Author-Person: pla110
Note: IO PR
Number: 8737
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8737
File-URL: http://www.nber.org/papers/w8737.pdf
File-Format: application/pdf
Publication-Status: published as Lach, Saul. "Existence And Persistence Of Price Dispersion: An Empirical Analysis," Review of Economics and Statistics, 2002, v84(3,Aug), 433-444.
Abstract: Using a unique data set on store-level monthly prices of four homogenous products sold in Israel, I study the existence and characteristics of the dispersion of prices across stores, as well as its persistence over time. I find that price dispersion prevails even after controlling for observed and unobserved product heterogeneity. Moreover, intra-distribution mobility is significant: stores move up and down the cross-sectional price distribution. Thus, consumers cannot learn about stores that consistently post low prices. As a consequence, price dispersion does not disappear and persists over time as predicted by Varian's (1980) model of sales.
Handle: RePEc:nbr:nberwo:8737
Template-Type: ReDIF-Paper 1.0
Title: Default, Currency Crises and Sovereign Credit Ratings
Classification-JEL: F30; F31
Author-Name: Carmen M. Reinhart
Author-Person: pre33
Note: IFM
Number: 8738
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8738
File-URL: http://www.nber.org/papers/w8738.pdf
File-Format: application/pdf
Publication-Status: published as Carmen M. Reinhart, 2002. "Default, Currency Crises, and Sovereign Credit Ratings," World Bank Economic Review, Oxford University Press, vol. 16(2), pages 151-170, August.
Abstract: Sovereign credit ratings play an important role in determining the terms and the extent to which countries have access to international capital markets. In principle, there is no reason why changes in sovereign credit ratings should be expected to systematically predict a currency crisis. In practice, however, in developing countries there is a strong link between currency crises and default. About 85 percent of all the defaults in the sample are linked with currency crises. The results presented here suggest that sovereign credit ratings systematically fail to anticipate currency crises--but do considerably better predicting defaults. Downgrades usually follow the currency crisis--possibly highlighting how currency instability increases default risk.
Handle: RePEc:nbr:nberwo:8738
Template-Type: ReDIF-Paper 1.0
Title: Interpreting the Tariff-Growth Correlation of the Late Nineteenth Century
Classification-JEL: F1; N7
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: DAE ITI
Number: 8739
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8739
File-URL: http://www.nber.org/papers/w8739.pdf
File-Format: application/pdf
Publication-Status: published as Irwin, Douglas A. "Interpreting The Tariff-Growth Correlation Of The Late 19th Century," American Economic Review, 2002, v92(2,May), 165-169.
Abstract: Recent research has documented a positive relationship between tariffs and growth in the late nineteenth century. Such a correlation does not establish a causal relationship between tariffs and growth, but it is tempting to view the correlation as constituting evidence that protectionist or inward-oriented trade strategies were successful during this period. This paper argues that such a conclusion is unwarranted and that the tariff-growth correlation should be interpreted with care. First, several individual country experiences in the late nineteenth century are not consistent with the view that import substitution promoted growth. For example, the two most rapidly expanding, high tariff countries of the period Argentina and Canada grew because capital imports helped stimulate export-led growth in agricultural staples products, not because of protectionist trade policies. Second, most land-abundant countries (such as Argentina and Canada) imposed high tariffs to raise government revenue, and revenue tariffs have a different structure than protective tariffs. The fact that labor-scarce, land-abundant countries had a high potential for growth and also tended to impose high revenue-generating tariffs confounds the inference that high tariffs were responsible for their strong economic performance during this period.
Handle: RePEc:nbr:nberwo:8739
Template-Type: ReDIF-Paper 1.0
Title: The Q-Theory of Mergers
Classification-JEL: O3
Author-Name: Boyan Jovanovic
Author-Name: Peter L. Rousseau
Author-Person: pro64
Note: AP CF EFG PR
Number: 8740
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8740
File-URL: http://www.nber.org/papers/w8740.pdf
File-Format: application/pdf
Publication-Status: published as Jovanovic, Boyan and Peter L. Rousseau. "The Q-Theory Of Mergers," American Economic Review, 2002, v92(2,May), 198-204.
Abstract: The Q-theory of investment says that a firm's investment rate should rise with its Q. We argue here that this theory also explains why some firms buy other firms. We find that 1. A firm's merger and acquisition (M&A) investment responds to its Q more -- by a factor of 2.6 -- than its direct investment does, probably because M&A investment is a high fixed cost and a low marginal adjustment cost activity, 2. The typical firm wastes some cash on M&As, but not on internal investment, i.e., the 'Free-Cash Flow' story works, but explains a small fraction of mergers only, and 3. The merger waves of 1900 and the 1920's, `80s, and `90s were a response to profitable reallocation opportunities, but the `60s wave was probably caused by something else.
Handle: RePEc:nbr:nberwo:8740
Template-Type: ReDIF-Paper 1.0
Title: New Evidence about Brown v. Board of Education: The Complex Effects of School Racial Composition on Achievement
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 PE ED
Number: 8741
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8741
File-URL: http://www.nber.org/papers/w8741.pdf
File-Format: application/pdf
Publication-Status: published as Hanushek, Eric A., John F. Kain and Steven G. Rivkin. "New evidence about Brown v. Board of Education: The complex effects of school racial composition on achievement." Journal of Labor Economics 27, 3 (July 2009).
Abstract: Uncovering the effects of school racial composition on achievement is difficult, because racial mixing in the schools is not an accident but instead represents a complex mixture of government and family choices. While the goals of the integration of schools legally inspired by Brown v. Board of Education are very broad, here we focus more narrowly on how school racial composition effects scholastic achievement. Our evaluation, made possible by rich panel data on the achievement of Texas students, disentangles racial composition effects from other aspects of school quality and from differences in student abilities and family background. The results show that a higher percentage of Black schoolmates has a strong adverse effect on achievement of Blacks and, moreover, that the effects are highly concentrated in the upper half of the ability distribution. In contrast, racial composition has a noticeably smaller effect on achievement of lower ability blacks, of whites, and of Hispanics -- strongly suggesting that the results are not a simple reflection of unmeasured school quality.
Handle: RePEc:nbr:nberwo:8741
Template-Type: ReDIF-Paper 1.0
Title: Mortality Change, the Uncertainty Effect, and Retirement
Classification-JEL: E21; I12
Author-Name: Sebnem Kalemli-Ozcan
Author-Person: pka37
Author-Name: David N. Weil
Author-Person: pwe24
Note: AG EFG PE
Number: 8742
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8742
File-URL: http://www.nber.org/papers/w8742.pdf
File-Format: application/pdf
Publication-Status: published as Sebnem Kalemli-Ozcan & David Weil, 2010. "Mortality change, the uncertainty effect, and retirement," Journal of Economic Growth, Springer, vol. 15(1), pages 65-91, March.
Abstract: We examine the role of changing mortality in explaining the rise of retirement over the course of the 20th century. We construct a model in which individuals make labor/leisure choices over their lifetimes subject to uncertainty about their date of death. In an environment in which mortality is high, an individual who saved up for retirement would face a high risk of dying before he could enjoy his planned leisure. In this case, the optimal plan is for people to work until they die. As mortality falls, however, it becomes optimal to plan, and save for, retirement. We simulate our model using actual changes in the US life table over the last century, and show that this 'uncertainty effect' of declining mortality would have more than outweighed the 'horizon effect' by which rising life expectancy would have led to later retirement. One of our key results is that continuous changes in mortality can lead to discontinuous changes in retirement behavior.
Handle: RePEc:nbr:nberwo:8742
Template-Type: ReDIF-Paper 1.0
Title: Productivity, Computerization, and Skill Change
Classification-JEL: D24; O30
Author-Name: Edward N. Wolff
Note: PR
Number: 8743
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8743
File-URL: http://www.nber.org/papers/w8743.pdf
File-Format: application/pdf
Publication-Status: published as Wolff, Edward N. "Productivity, Computerization, And Skill Change," FFB Atlanta - Economic Review, 2002, v87(3,Third-Qtr), 63-87.
Abstract: Using pooled cross-section, time-series data for 44 industries over the decades of the 1960s, 1970s, and 1980s in the United States, I find no econometric evidence that computer investment is positively linked to TFP growth (over and above its inclusion in the TFP measure). However, computerization is positively associated with occupational restructuring and changes in the composition of intermediate inputs and capital coefficients. There is modest evidence that the growth of worker skills is positively related to industry productivity growth. The effects are very modest -- adding at most 0.07 percentage points to annual labor productivity growth.
Handle: RePEc:nbr:nberwo:8743
Template-Type: ReDIF-Paper 1.0
Title: What Do We Really Know About the Cross-Sectional Relation Between Past and Expected Returns?
Classification-JEL: G0; G1
Author-Name: Mark Grinblatt
Author-Person: pgr231
Author-Name: Tobias J. Moskowitz
Note: AP
Number: 8744
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8744
File-URL: http://www.nber.org/papers/w8744.pdf
File-Format: application/pdf
Abstract: Multihorizon temporal relationships between stock returns are complex due to confounding sources of return premia, microstructure effects, and changes in the relationship over various horizons. We find the relation to be further complicated by the sign and consistency of the past return that also varies, somewhat sensibly, with the season and the tax environment. Accounting for these additional effects using a parsimonious technical trading rule generates surprisingly large abnormal returns, despite controlling for microstructure effects, transaction costs, and data-snooping biases. The documented variation in profits across stock characteristics, season, and tax environment appear inconsistent with existing theory, but may point to future explanations for the relation between past and expected returns.
Handle: RePEc:nbr:nberwo:8744
Template-Type: ReDIF-Paper 1.0
Title: Tax-Loss Trading and Wash Sales
Classification-JEL: G0; G1
Author-Name: Mark Grinblatt
Author-Person: pgr231
Author-Name: Matti Keloharju
Author-Person: pke264
Note: AP PE
Number: 8745
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8745
File-URL: http://www.nber.org/papers/w8745.pdf
File-Format: application/pdf
Publication-Status: published as Grinblatt, Mark & Keloharju, Matti, 2004. "Tax-loss trading and wash sales," Journal of Financial Economics, Elsevier, vol. 71(1), pages 51-76, January.
Abstract: An analysis of trades in the Finnish stock market around the turn of the year shows that Finnish investors tend to realize losses more than gains towards the end of December. They also buy back the same stocks they recently sold, with a repurchase rate that depends on the size of the capital loss and how close the sale is to the end of December. The resulting net buying pressure from these 'wash sale' repurchases is greater for stocks with small market capitalizations and has a calendar pattern that is similar to that of stock returns.
Handle: RePEc:nbr:nberwo:8745
Template-Type: ReDIF-Paper 1.0
Title: Information Aggregation, Security Design and Currency Swaps
Classification-JEL: G0; G1
Author-Name: Bhagwan Chowdhry
Author-Name: Mark Grinblatt
Author-Person: pgr231
Author-Name: David Levine
Author-Person: ple80
Note: AP
Number: 8746
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8746
File-URL: http://www.nber.org/papers/w8746.pdf
File-Format: application/pdf
Publication-Status: published as Chowdhry, Bhagwan, Mark Grinblatt and David Levine. "Information Aggregation, Security Design, And Currency Swaps," Journal of Political Economy, 2002, v110(3,Jun), 609-633.
Abstract: A model of security design based on the principle of information aggregation and alignment is used to show that (i) firms needing to finance their operations should issue different securities to different groups of investors in order to aggregate their disparate information and (ii) each security should be highly correlated (closely aligned) with the private information signal of the investor to whom it is marketed. This alignment reduces the adverse selection penalty paid by a firm with superior information. Adverse selection costs are often contingent on ex post publicly observable and contractible state variables such as exchange rates. In such cases, debt contracts are dominated by currency swaps. Moreover, optimal securities are derivative contracts that are contingent on state variables that influence adverse selection costs. This is because the netting of cash flows in these derivative contracts, in effect, alters the state-by-state seniority of different claims in a desirable way.
Handle: RePEc:nbr:nberwo:8746
Template-Type: ReDIF-Paper 1.0
Title: The New Systems Competition
Classification-JEL: G1; H7
Author-Name: Hans-Werner Sinn
Author-Person: psi146
Note: PE
Number: 8747
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8747
File-URL: http://www.nber.org/papers/w8747.pdf
File-Format: application/pdf
Publication-Status: published as Hans-Werner Sinn, 2004. "The New Systems Competition," Perspektiven der Wirtschaftspolitik, Blackwell Publishing, vol. 5(1), pages 23-38, 02.
Abstract: While the old systems competition took place with closed borders, globalisation has brought about a new type of systems competition that is driven by the mobility of factors of production. The new systems competition will likely imply the erosion of the European welfare state, induce a race to the bottom in the sense that capital will not even pay for the infrastructure it uses and erode national regulatory systems. In general, it will suffer from the same type of market failure which induced the respective government activity in the first place. The new systems competition will force inefficient governments to seek national efficiency, but national efficiency does not imply that systems competition will itself be efficient.
Handle: RePEc:nbr:nberwo:8747
Template-Type: ReDIF-Paper 1.0
Title: Why Are Rates of Inflation So Low After Large Devaluations?
Classification-JEL: F31
Author-Name: Ariel Burstein
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Sergio Rebelo
Note: EFG IFM ME
Number: 8748
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8748
File-URL: http://www.nber.org/papers/w8748.pdf
File-Format: application/pdf
Abstract: This paper studies the behavior of inflation after nine large post-1990 contractionary devaluations. A salient feature of the data is that inflation is low relative to the rate of devaluation. We argue that distribution costs and substitution away from imports to lower quality local goods can account quantitatively for the post-devaluation behavior of prices.
Handle: RePEc:nbr:nberwo:8748
Template-Type: ReDIF-Paper 1.0
Title: The Temporary Assistance for Needy Families Program
Classification-JEL: I3
Author-Name: Robert Moffitt
Author-Person: pmo48
Note: CH LE PE
Number: 8749
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8749
File-URL: http://www.nber.org/papers/w8749.pdf
File-Format: application/pdf
Publication-Status: published as The Temporary Assistance for Needy Families Program, Robert A. Moffitt. in Means-Tested Transfer Programs in the United States, Moffitt. 2003
Abstract: The Temporary Assistance for Needy Families (TANF) program was created in 1996 from what was previously named the Aid to Families with Dependent Children (AFDC) program. The TANF program is intended to serve low-income families, primarily those with only a single parent present, as did the AFDC program. The TANF program is distinguished from AFDC by strong work requirements, time limits on receipt, options for the provision of noncash assistance, and by a block grant financing structure. This paper reviews the rules of the TANF program and the research that has been conducted on it and on the AFDC program.
Handle: RePEc:nbr:nberwo:8749
Template-Type: ReDIF-Paper 1.0
Title: When Does the Market Matter? Stock Prices and the Investment of Equity-Dependent Firms
Classification-JEL: E22; G31
Author-Name: Malcolm Baker
Author-Person: pba735
Author-Name: Jeremy C. Stein
Author-Person: pst43
Author-Name: Jeffrey Wurgler
Author-Person: pwu8
Note: AP CF
Number: 8750
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8750
File-URL: http://www.nber.org/papers/w8750.pdf
File-Format: application/pdf
Publication-Status: published as Baker, Malcolm, Jeremy C. Stein and Jeffrey Wurgler. "When Does The Market Matter? Stock Prices And The Investment Of Equity-Dependent Firms," Quarterly Journal of Economics, 2003, v118(3,Aug), 969-1006.
Abstract: We use a simple model of corporate investment to determine when investment will be sensitive to non-fundamental movements in stock prices. The key cross-sectional prediction of the model is that stock prices will have a stronger impact on the investment of firms that are 'equity dependent' - firms that need external equity to finance their marginal investments. Using an index of equity dependence based on the work of Kaplan and Zingales (1997), we find strong support for this prediction. In particular, firms that rank in the top quintile of the KZ index have investment that is almost three times as sensitive to stock prices as firms in the bottom quintile. We also verify several other predictions of the model.
Handle: RePEc:nbr:nberwo:8750
Template-Type: ReDIF-Paper 1.0
Title: Did Import Substitution Promote Growth in the Late Nineteenth Century?
Classification-JEL: F1; N7
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: DAE ITI
Number: 8751
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8751
File-URL: http://www.nber.org/papers/w8751.pdf
File-Format: application/pdf
Publication-Status: published as Irwin, Douglas A. "Interpreting The Tariff-Growth Correlation Of The Late 19th Century," American Economic Review, 2002, v92(2,May), 165-169.
Abstract: The positive correlation between import tariffs and economic growth across countries in the late nineteenth century suggests that tariffs may have played a causal role in promoting growth. This paper seeks to determine if high tariffs stimulated growth by shifting resources out of agriculture and into manufacturing. The most rapidly growing countries were indeed those that reduced the share of employment in agriculture. Tariffs in agricultural exporting (importing) countries may have promoted (retarded) this shift, although two high tariff, high growth, agricultural-exporting outliers (Argentina and Canada) experienced export-oriented growth and did not pursue import substitution policies. This raises the question of whether economic growth led to changes in the structure of employment rather than changes in employment leading to economic growth.
Handle: RePEc:nbr:nberwo:8751
Template-Type: ReDIF-Paper 1.0
Title: Does Function Follow Organizational Form? Evidence From the Lending Practices of Large and Small Banks
Classification-JEL: D21; D23
Author-Name: Allen N. Berger
Author-Person: pbe359
Author-Name: Nathan H. Miller
Author-Name: Mitchell A. Petersen
Author-Person: ppe42
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: CF
Number: 8752
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8752
File-URL: http://www.nber.org/papers/w8752.pdf
File-Format: application/pdf
Publication-Status: published as Allen N. Berger & Nathan H. Miller & Mitchell A. Petersen & Raghuran G. Rajan & Jeremy C. Stein, 2002. "Does function follow organizational form? evidence from the lending practices of large and small banks," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 383-400
Publication-Status: published as Journal of Financial Economics, May 2005, 76(2): 237-269
Abstract: Theories based on incomplete contracting suggest that small organizations may do better than large organizations in activities that require the processing of soft information. We explore this idea in the context of bank lending to small firms, an activity that is typically thought of as relying heavily on soft information. We find that large banks are less willing than small banks to lend to informationally 'difficult' credits, such as firms that do not keep formal financial records. Moreover, controlling for the endogeneity of bank-firm matching, large banks lend at a greater distance, interact more impersonally with their borrowers, have shorter and less exclusive relationships, and do not alleviate credit constraints as effectively. All of this is consistent with small banks being better able to collect and act on soft information than large banks.
Handle: RePEc:nbr:nberwo:8752
Template-Type: ReDIF-Paper 1.0
Title: Is a Bird in Hand Worth More than a Bird in the Bush? Intergenerational Transfers and Savings Behavior
Classification-JEL: H0
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Author-Name: Scott J. Weisbenner
Note: AG PE
Number: 8753
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8753
File-URL: http://www.nber.org/papers/w8753.pdf
File-Format: application/pdf
Publication-Status: published as Wise, D. (ed.) Perspectives on the Economics of Aging. Chicago, IL: University of Chicago Press, 2004.
Abstract: This paper provides new evidence on the decomposition of aggregate household wealth into life-cycle and transfer wealth. Using the 1998 Survey of Consumer Finances, it finds that transfer wealth accounts for approximately one-fifth to one-quarter of aggregate wealth, suggesting a larger role for life-cycle savings than some previous estimates. Despite the smaller aggregate size of transfer wealth, its concentration among a small number of households suggests that it can still have an important effect on the savings decisions of recipients. Estimates suggest that past receipts of transfer wealth reduce life-cycle savings by as much as dollar-for-dollar, while expected future transfers do not produce such a crowd-out effect.
Handle: RePEc:nbr:nberwo:8753
Template-Type: ReDIF-Paper 1.0
Title: Why has the Employment-Productivity Tradeoff among Industrialized Countries been so strong?
Classification-JEL: O33; O41
Author-Name: Paul Beaudry
Author-Person: pbe35
Author-Name: Fabrice Collard
Author-Person: pco44
Note: LS
Number: 8754
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8754
File-URL: http://www.nber.org/papers/w8754.pdf
File-Format: application/pdf
Abstract: This paper is motivated by a set of cross-country observations on labor productivity growth among industrial countries over the period 1960-1997. In particular, we show that over this period, the speed of convergence among industrialized countries has decreased substantially while the negative effect of a country's own employment growth (or labor force growth) on labor productivity has increased dramatically. The main contribution of the paper is to show how these observations are consistent with the view that industrialized countries have been undergoing a particularly drastic technological revolution over the recent past. In effect, we show how the process of endogenous technological adoption, following the diffusion of a general purpose technology, can explain these observations by causing the emergence of an AK accumulation phase where demographic factors temporarily become an major determinant of labor productivity growth. Our estimation of the model implies that the AK phase has been in effect since the early to mid-seventies, but that this phase may now be coming to an end. An important contribution of the paper is to analyze growth experiences across advanced industrialized countries within an open economy framework and to evaluate the explanation by estimating a multicountry dynamic general model.
Handle: RePEc:nbr:nberwo:8754
Template-Type: ReDIF-Paper 1.0
Title: Sources of U.S. Longevity Increase, 1960-1997
Classification-JEL: I1; O3
Author-Name: Frank R. Lichtenberg
Author-Person: pli76
Note: EH PR
Number: 8755
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8755
File-URL: http://www.nber.org/papers/w8755.pdf
File-Format: application/pdf
Publication-Status: published as Lichtenberg, Frank R. "Sources Of U.S. Longevity Increase, 1960-2001," Quarterly Review of Economics and Finance, 2004, v44(3,Jul), 369-389.
Abstract: Between 1960 and 1997, life expectancy at birth of Americans increased approximately 10% - from 69.7 to 76.5 years - and it has been estimated that the value of life extension during this period nearly equaled the gains in tangible consumption. We investigate whether an aggregate health production function can help to explain the substantial fluctuations in the rate of increase in longevity since 1960. We view longevity as the output of the health production function, and output fluctuations as the consequence of fluctuations in medical inputs (expenditure) and technology. We estimate longevity models using annual U.S. time-series data on life expectancy, health expenditure, and medical innovation. Reliable annual data are available for only one type of innovation - new drugs - but pharmaceutical R&D accounts for a significant fraction of total biomedical research. The empirical analysis provides strong support for the hypothesis that both medical innovation (in the form of new drug approvals) and expenditure on medical care (especially public expenditure) contributed to longevity increase during the period 1960-1997. The estimates imply that the medical expenditure needed to gain one life-year is about $11,000, and that the pharmaceutical R&D expenditure needed to gain one life-year is about $1,345. Previous researchers have estimated that the average value of a life-year is approximately $150,000.
Handle: RePEc:nbr:nberwo:8755
Template-Type: ReDIF-Paper 1.0
Title: Entry and Asymmetric Lobbying: Why Governments Pick Losers
Classification-JEL: F1; L5
Author-Name: Richard E. Baldwin
Author-Person: pba124
Author-Name: Frederic Robert-Nicoud
Author-Person: pro136
Note: ITI
Number: 8756
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8756
File-URL: http://www.nber.org/papers/w8756.pdf
File-Format: application/pdf
Publication-Status: published as Richard E. Baldwin & Frédéric Robert-Nicoud, 2007. "Entry and Asymmetric Lobbying: Why Governments Pick Losers," Journal of the European Economic Association, MIT Press, vol. 5(5), pages 1064-1093, 09.
Abstract: Governments frequently intervene to support domestic industries, but a surprising amount of this support goes to ailing sectors. We explain this with a lobbying model that allows for entry and sunk costs. Specifically, policy is influenced by pressure groups that incur lobbying expenses to create rents. In expanding industry, entry tends to erode such rents, but in declining industries, sunk costs rule out entry as long as the rents are not too high. This asymmetric appropriablity of rents means losers lobby harder. Thus it is not that government policy picks losers, it is that losers pick government policy.
Handle: RePEc:nbr:nberwo:8756
Template-Type: ReDIF-Paper 1.0
Title: International Labor Economics
Classification-JEL: J0
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Note: LS
Number: 8757
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8757
File-URL: http://www.nber.org/papers/w8757.pdf
File-Format: application/pdf
Publication-Status: published as Hamermesh, Daniel S. "International Labor Economics," Journal of Labor Economics, 2002, v20(4,Oct), 709-732.
Abstract: I argue for increased reliance on non-U.S. data and policy evaluations to understand basic labor- market parameters and to predict the effects of changes in U.S. labor-market policies. Foreign experiences generate exogenous shocks to labor costs that create unusual opportunities to measure impacts on labor demand. Foreign policies often provide more variation in the underlying parameters in systems that are often structured like their American counterparts. Foreign data sets are often larger and better suited to inferring behavior. An examination of empirical studies in labor economics shows the effect of the location of the author, data set and journal on the subsequent impact of the research on other scholars.
Handle: RePEc:nbr:nberwo:8757
Template-Type: ReDIF-Paper 1.0
Title: A Dual Liquidity Model for Emerging Markets
Classification-JEL: E0; E4
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Arvind Krishnamurthy
Author-Person: pkr393
Note: EFG IFM
Number: 8758
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8758
File-URL: http://www.nber.org/papers/w8758.pdf
File-Format: application/pdf
Publication-Status: published as Ricardo J. Caballero & Arvind Krishnamurthy, 2002. "A Dual Liquidity Model for Emerging Markets," American Economic Review, American Economic Association, vol. 92(2), pages 33-37, May.
Abstract: The last few years have seen a significant re-evaluation of the models used to analyze crises in emerging markets. Recent models typically stress financial constraints or distorted financial incentives. While this certainly represents progress, these models share a weakness with the earlier work: neither is uniquely about emerging markets. Adaptations of the Mundell-Fleming model represent Argentina as a Belgium with larger external shocks. Likewise, emerging market models of financial constraints are adaptations of developed economy ones with tighter financial constraints. In our work, we have advocated a model which distinguishes between the financial constraints affecting borrowing and lending among agents within an emerging economy, and those affecting borrowing from foreign lenders. This 'dual liquidity' model offers a parsimonious description of the behavior of firms, governments, and asset prices during financial crises. It also provides prescriptions for optimal policy responses to these crises.
Handle: RePEc:nbr:nberwo:8758
Template-Type: ReDIF-Paper 1.0
Title: The Guarantees of Freedom
Classification-JEL: K0; N40
Author-Name: Rafael La Porta
Author-Person: pla273
Author-Name: Florencio Lopez-de-Silane
Author-Person: plo137
Author-Name: Cristian Pop-Eleches
Author-Person: ppo349
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: CF PE
Number: 8759
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8759
File-URL: http://www.nber.org/papers/w8759.pdf
File-Format: application/pdf
Abstract: Hayek (1960) distinguishes the institutions of English freedom, which guarantee the independence of judges from political interference in the administration of justice, from those of American freedom, which allow judges to restrain law-making powers of the sovereign through constitutional review. We create a data base of constitutional rules in 71 countries that reflect these institutions of English and American freedom, and ask whether these rules predict economic and political freedom in a cross-section of countries. We find that the English institutions of judicial independence are strong predictors of economic freedom and weaker predictors of political freedom. The American institutions of checks and balances are strong predictors of political but not of economic freedom. Judicial independence explains half of the positive effect of common law legal origin on measures of economic freedom.
Handle: RePEc:nbr:nberwo:8759
Template-Type: ReDIF-Paper 1.0
Title: Does Globalization Increase Child Labor? Evidence from Vietnam
Classification-JEL: F15; F14
Author-Name: Eric Edmonds
Author-Person: ped27
Author-Name: Nina Pavcnik
Author-Person: ppa511
Note: ITI LS
Number: 8760
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8760
File-URL: http://www.nber.org/papers/w8760.pdf
File-Format: application/pdf
Publication-Status: published as Edmonds, Eric V. and Nina Pavcnik. "International Trade And Child Labor: Cross-Country Evidence," Journal of International Economics, 2006, v68(1,Jan), 115-140.
Abstract: This paper considers the impact of liberalized trade policy on child labor in a developing country. While trade liberalization entails an increase in the relative price of the exported product, trade theory provides ambiguous predictions on how this price change affects the incidence of child labor. In this paper, we exploit regional and intertemporal variation in the real price of rice to examine the relationship between price movements of a primary export and the economic activities of children. Using a panel of Vietnamese households, we find that reductions in child labor are increasing with rice prices. Declines in child labor are largest for girls of secondary school age, and we find a corresponding increase in school attendance for this group. Overall, rice price increases can account for almost half of the decline in child labor that occurs in Vietnam in the 1990s. Greater market integration, at least in this case, appears to be associated with less child labor. Our results suggest that the use of trade sanctions on exports from developing countries to eradicate child labor is unlikely to yield the desired outcome.
Handle: RePEc:nbr:nberwo:8760
Template-Type: ReDIF-Paper 1.0
Title: Medicare and Disparities in Women's Health
Author-Name: Sandra Decker
Author-Name: Carol Rapaport
Note: EH
Number: 8761
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8761
File-URL: http://www.nber.org/papers/w8761.pdf
File-Format: application/pdf
Abstract: We investigate the effect of universal health insurance on health outcome and the use of health services by exploiting a natural experiment that changes the insurance status of most Americans at age 65; that is, eligibility for the U.S. Medicare program. We compare inequalities in health and health care use just before and after the age of universal Medicare coverage (65) in the United States. We focus in this paper on the use of services related to breast cancer. We test whether Medicare improves the use of early detection services and ultimately stage of diagnosis of breast cancer particularly for groups shown to be more likely to be uninsured prior to age 65, such as black women or women with less than a high school education. Our results show that education differences in mammography and breast exam receipt and ultimately in stage of diagnosis of breast cancer lessen after the age of 65 for white women. We also find that turning 65 significantly increases the chance that a black woman, especially a less educated black woman, has had a mammogram. We do not find comparable evidence that stage of diagnosis is improved for black women after the age of 65.
Handle: RePEc:nbr:nberwo:8761
Template-Type: ReDIF-Paper 1.0
Title: Moore's Law and Learning-By-Doing
Classification-JEL: O3; N1
Author-Name: Boyan Jovanovic
Author-Name: Peter L. Rousseau
Author-Person: pro64
Note: PR
Number: 8762
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8762
File-URL: http://www.nber.org/papers/w8762.pdf
File-Format: application/pdf
Publication-Status: published as Boyan Jovanovic & Peter L. Rousseau, 2002. "Moore's Law and Learning-By-Doing," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 346-375, April.
Abstract: We model Moore's Law as efficiency of computer producers that rises as a by-product of their experience. We find that (1) Because computer prices fall much faster than the prices of electricity-driven and diesel-driven capital ever did, growth in the coming decades should be very fast, and that (2) The obsolescence of firms today occurs faster than before, partly because the physical capital they own becomes obsolete faster.
Handle: RePEc:nbr:nberwo:8762
Template-Type: ReDIF-Paper 1.0
Title: Measuring Investment Distortions when Risk-Averse Managers Decide Whether to Undertake Risky Projects
Classification-JEL: G3; H2
Author-Name: Robert Parrino
Author-Name: Allen M. Poteshman
Author-Name: Michael S. Weisbach
Note: CF
Number: 8763
Creation-Date: 2002-01
Order-URL: http://www.nber.org/papers/w8763
File-URL: http://www.nber.org/papers/w8763.pdf
File-Format: application/pdf
Publication-Status: published as Robert Parrino & Allen M. Poteshman & Michael S. Weisbach, 2005. "Measuring Investment Distortions when Risk-Averse Managers Decide Whether to Undertake Risky Projects," Financial Management, Financial Management Association, vol. 34(1), Spring.
Abstract: This paper examines distortions in corporate investment decisions when a new project changes firm risk. It presents a dynamic model in which a self-interested, risk-averse manager makes investment decisions at a levered firm. The model, calibrated using data from public firms, is used to estimate the magnitude of distortions in investment decisions. Despite potential wealth transfers from debtholders, managers compensated with equity prefer safe projects to risky ones. Important factors in this decision are the expected changes in the values of future tax shields and bankruptcy costs when firm risk changes. We also evaluate the extent to which this effect varies with firm leverage, managerial risk aversion, managerial non-firm wealth, project size, debt duration, and the structure of management compensation packages.
Handle: RePEc:nbr:nberwo:8763
Template-Type: ReDIF-Paper 1.0
Title: Characteristics, Contracts, and Actions: Evidence from Venture Capitalist Analyses
Classification-JEL: G24; G32
Author-Name: Steven N. Kaplan
Author-Name: Per Stromberg
Author-Person: pst18
Note: CF
Number: 8764
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8764
File-URL: http://www.nber.org/papers/w8764.pdf
File-Format: application/pdf
Publication-Status: published as Kaplan, Steven N. and Per Stromberg. "Characteristics, Contracts, And Actions: Evidence From Venture Capitalist Analyses," Journal of Finance, 2004, v59(5,Oct), 2177-2210.
Abstract: We study the investment analyses of 67 portfolio investments by 11 venture capital (VC) firms. VCs consider the attractiveness and risks of the business, management, and deal terms as well as expected post-investment monitoring. We then consider the relation of the analyses to the contractual terms. Greater internal and external risks are associated with more VC cash flow rights, VC control rights; greater internal risk, also with more contingencies for the entrepreneur; and greater complexity, with less contingent compensation. Finally, expected VC monitoring and support are related to the contracts. We interpret these results in relation to financial contracting theories.
Handle: RePEc:nbr:nberwo:8764
Template-Type: ReDIF-Paper 1.0
Title: The Need for International Policy Coordination: What's Old, What's New, What's Yet to Come?
Classification-JEL: E42; E52
Author-Name: Matthew B. Canzoneri
Author-Person: pca260
Author-Name: Robert E. Cumby
Author-Person: pcu115
Author-Name: Behzad T. Diba
Author-Person: pdi273
Note: IFM
Number: 8765
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8765
File-URL: http://www.nber.org/papers/w8765.pdf
File-Format: application/pdf
Publication-Status: published as Canzoneri, Matthew B., Robert E. Cumby and Behzad T. Diba. "The Need For International Policy Coordination: What's Old, What's New, What's Yet To Come?," Journal of International Economics, 2005, v66(2,Jul), 363-384.
Abstract: Fifty years ago, the Chicago School argued that flexible exchange rates would insulate employment from foreign economic disturbances: there is no need for policy coordination; flexible exchange rates suffice. Twenty five years later, the Bretton Woods system was gone, and the first generation of policy coordination models was introduced. Chicago School arguments not withstanding, these Old-Keynesian models provided a theoretical rational for policy coordination. Now, a new generation of policy coordination models is emerging. These New-Keynesian models incorporate optimizing households, monopolistic competition and nominal inertia. Here, we examine macroeconomic interdependence and the scope for policy coordination in a tractable second generation model that has received much recent attention. We relate our discussion to the old Chicago School arguments, to earlier analyses of first generation models, to recent empirical work on productivity, and to recent theoretical work on closed economy models. We conclude that second generation models may have more scope for policy coordination than did the first, and we identify the empirical work that is needed to give a serious answer to the question.
Handle: RePEc:nbr:nberwo:8765
Template-Type: ReDIF-Paper 1.0
Title: Productivity, Output, and Failure: A Comparison of Taiwanese and Korean Manufacturers
Classification-JEL: D2; L0
Author-Name: Bee Yan Aw
Author-Name: Sukkyun Chung
Author-Name: Mark J. Roberts
Author-Person: pro190
Note: PR
Number: 8766
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8766
File-URL: http://www.nber.org/papers/w8766.pdf
File-Format: application/pdf
Publication-Status: published as Aw, Bee Yan, Sukkyun Chung and Mark J. Roberts. "Productivity, Output, And Failure: A Comparison Of Taiwanese And Korean Manufacturers," Economic Journal, 2003, v113(491,Nov), F485-F510.
Abstract: Industry cost and demand conditions can vary across countries leading to differences in industry market structure, including the distribution of output and productivity across firms and the magnitude of entry and exit flows. It has been argued that despite many outward similarities, two of the most successful Southeast Asian economies, Taiwan and South Korea, differ systematically in the nature of entry costs, the competitiveness of output markets, and the working of their capital markets. In this paper we use micro panel data for producers in seven two-digit manufacturing industries in South Korea and Taiwan and identify a number of systematic differences in industry structure between the two countries. Our empirical findings indicate that, relative to their counterparts in Korea, Taiwanese industries are characterized by less concentrated market structure, more producer turnover, smaller within-industry productivity dispersion across producers, a smaller percentage of plants operating at low productivity levels, and smaller productivity differentials between surviving and failing producers. These patterns are consistent with strong competitive pressures in Taiwan that lead to market selection based on productivity differences. In contrast, the patterns in Korea are consistent with the presence of some impediments to exit or entry that insulate inefficient producers from market pressures.
Handle: RePEc:nbr:nberwo:8766
Template-Type: ReDIF-Paper 1.0
Title: New Perspectives on Monetary Policy, Inflation, and the Business Cycle
Classification-JEL: E42; E52
Author-Name: Jordi Gali
Author-Person: pga43
Note: EFG ME
Number: 8767
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8767
File-URL: http://www.nber.org/papers/w8767.pdf
File-Format: application/pdf
Publication-Status: published as Dewatripont, M., L. Hansen, and S. Turnovsky (eds.) Advances in Economics and Econometrics, volume III. Cambridge University Press, 2003.
Abstract: The present paper provides an overview of recent developments in the analysis of monetary policy in the presence of nominal rigidities. The paper emphasizes the existence of several dimensions in which the recent literature provides a new perspective on the linkages among monetary policy, inflation, and the business cycle. It is argued that the adoption of an explicitly optimizing, general equilibrium framework has not been superfluous; on the contrary, it has yielded many insights which, by their nature, could hardly have been obtained with earlier non-optimizing models.
Handle: RePEc:nbr:nberwo:8767
Template-Type: ReDIF-Paper 1.0
Title: Technology Shocks and Monetary Policy: Assessing the Fed's Performance
Classification-JEL: E31; E58
Author-Name: Jordi Gali
Author-Person: pga43
Author-Name: J. David Lopez-Salido
Author-Person: plo26
Author-Name: Javier Valles
Author-Person: pva889
Note: EFG ME
Number: 8768
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8768
File-URL: http://www.nber.org/papers/w8768.pdf
File-Format: application/pdf
Publication-Status: published as Gali, Jordi, J. David Lopez-Salido and Javier Valles. "Technology Shocks And Monetary Policy: Assessing The Fed's Performance," Journal of Monetary Economics, 2003, v50(4,May), 723-743.
Abstract: The purpose of the present paper is twofold. First, we characterize the Fed's systematic response to technology shocks and its implications for U.S. output, hours and inflation. Second, we evaluate the extent to which those responses can be accounted for by a simple monetary policy rule (including the optimal one) in the context of a standard business cycle model with sticky prices. Our main results can be described as follows: First, we detect significant differences across periods in the response of the economy (as well as the Fed's) to a technology shock. Second, the Fed's response to a technology shock in the Volcker-Greenspan period is consistent with an optimal monetary policy rule. Third, in the pre-Volcker period the Fed's policy tended to over stabilize output at the cost of generating excessive inflation volatility. Our evidence reinforces recent results in the literature suggesting an improvement in the Fed's performance.
Handle: RePEc:nbr:nberwo:8768
Template-Type: ReDIF-Paper 1.0
Title: Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles
Classification-JEL: J31; O33
Author-Name: David Card
Author-Person: pca271
Author-Name: John E. DiNardo
Author-Person: pdi178
Note: LS
Number: 8769
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8769
File-URL: http://www.nber.org/papers/w8769.pdf
File-Format: application/pdf
Publication-Status: published as Card, David and John E. DiNardo. "Skill-Based Technological Change And Rising Wage Inequality: Some Problems And Puzzles," Journal of Labor Economics, 2002, v20(4,Oct), 733-783.
Abstract: The rise in wage inequality in the U.S. labor market during the 1980s is usually attributed to skill-biased technical change (SBTC), associated with the development of personal computers and related information technologies. We review the evidence in favor of this hypothesis, focusing on the implications of SBTC for economy-wide trends in wage inequality, and for the evolution of wage differentials between various groups. A fundamental problem for the SBTC hypothesis is that wage inequality stabilized in the 1990s, despite continuing advances in computer technology. SBTC also fails to explain the closing of the gender gap, the stability of the racial wage gap, and the dramatic rise in education-related wage gaps for younger versus older workers. We conclude that the SBTC hypothesis is not very helpful in understanding the myriad shifts in the structure of wages that have occurred over the past three decades.
Handle: RePEc:nbr:nberwo:8769
Template-Type: ReDIF-Paper 1.0
Title: Maternal Employment and Overweight Children
Classification-JEL: J13; I12
Author-Name: Patricia M. Anderson
Author-Name: Kristin F. Butcher
Author-Person: pbu245
Author-Name: Phillip B. Levine
Author-Person: ple553
Note: CH EH
Number: 8770
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8770
File-URL: http://www.nber.org/papers/w8770.pdf
File-Format: application/pdf
Publication-Status: published as Anderson, Patricia M., Phillip Levine, and Kristin Butcher. "Maternal Emplyment and Overweight Children." Journal of Health Economics 22 (May 2003): 477-504.
Abstract: This paper investigates whether children are more or less likely to be overweight if their mothers work. The prevalence of both overweight children and working mothers has risen dramatically over the past few decades, although these parallel trends may be coincidental. The goal of this paper is to help determine whether a causal relationship exists between maternal employment and childhood overweight. To accomplish this, we mainly utilize matched mother/child data from the National Longitudinal Survey of Youth and employ three main econometric techniques, probit models, sibling difference models, and instrumental variables models in this analysis. Our results indicate that a child is more likely to be overweight if his/her mother worked more intensively (in the form of greater hours per week) over the child's life. This effect is particularly evident for children of white mothers, of mothers with more education, and of mothers with a high income level. Applying our estimates to the trend towards greater maternal employment indicates that the increased hours worked per week among mothers between 1975 and 1999 led to about a 0.4 to 0.7 percentage point increase in overweight children, which represents a relatively small share of the overall increase.
Handle: RePEc:nbr:nberwo:8770
Template-Type: ReDIF-Paper 1.0
Title: Technology and Economic Performance in the American Economy
Classification-JEL: O30; O40
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG PR
Number: 8771
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8771
File-URL: http://www.nber.org/papers/w8771.pdf
File-Format: application/pdf
Abstract: This paper examines the sources of the U. S. macroeconomic miracle of 1995-2000 and attempts to distinguish among permanent sources of American leadership in high-technology industries, as contrasted with the particular post-1995 episode of technological acceleration, and with other independent sources of the economic miracle unrelated to technology. The core of the American achievement was the maintenance of low inflation in the presence of a decline in the unemployment rate to the lowest level reached in three decades. The post-1995 technological acceleration, particularly in information technology (IT) and accompanying revival of productivity growth, directly contributed both to faster output growth and to holding down the inflation rate, but inflation was also held down by a substantial decline in real non-oil import prices, by low energy prices through early 1999, and by a temporary cessation in 1996-98 of inflation in real medical care prices. In turn low inflation allowed the Fed to maintain an easy monetary policy that fueled rapid growth in real demand, profits, and stock prices, which fed back into growth of consumption in excess of growth in income. The technological acceleration was made possible in part by permanent sources of American advantage over Europe and Japan, most notably the mixed system of government- and privately-funded research universities, the large role of U. S. government agencies providing research funding based on peer review, the strong tradition of patent and securities regulation, the leading worldwide position of U.S. business schools and U. S.-owned investment banking, accounting, and management-consulting firms, and the particular importance of the capital market for high-tech financing led by a uniquely dynamic venture capital industry. While these advantages help to explain why the IT boom happened in the United States, they did not prevent the U. S. from experiencing a dismal period of slow productivity growth between 1972 and 1995 nor from falling behind in numerous industries outside the IT sector. The 1995-2000 productivity growth revival was fragile, both because a portion rested on unsustainably rapid output growth in 1999-2000 in the growth rate of computer investment after 1995 that could not continue forever. The web could only be invented once, Y2K artificially compressed the computer replacement cycle, and some IT purchases were made by dot-coms that by early 2001 were bankrupt. As an invention, the web provided abundant consumer surplus but no recipe for most dot-coms to make a profit from providing free services. High
Handle: RePEc:nbr:nberwo:8771
Template-Type: ReDIF-Paper 1.0
Title: Social Security, Pensions and Retirement Behavior Within the Family
Classification-JEL: J26; H55
Author-Name: Alan L. Gustman
Author-Person: pgu327
Author-Name: Thomas L. Steinmeier
Note: AG LS PE
Number: 8772
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8772
File-URL: http://www.nber.org/papers/w8772.pdf
File-Format: application/pdf
Publication-Status: published as Gustman, Alan L. and Thomas L. Steinmeier. "Social Security, Pensions And Retirement Behavior Within The Family," Journal of Applied Econometrics, 2004, v19(6,Spec), 723-737.
Abstract: This paper estimates a structural model of family retirement using U.S. data from the Health and Retirement Study (HRS) and from the National Longitudinal Survey of Mature Women. Estimates using the HRS benefit from having, for each spouse, earnings histories provided by the respondent and the Social Security Administration, and employer provided pension plan descriptions. We find that a measure of how much each spouse values being able to spend time in retirement with the other accounts for a good portion of the apparent interdependence of the retirement decisions of husbands and wives. When we include this measure, the simulations almost double the frequency of predicted joint retirements. Once estimated, we use the model to investigate the labor supply effects of alternative social security policies, examining the effect of dividing credit for earnings evenly between spouses, or of basing social security benefits on the amounts accumulated in private accounts. Both policies change the relative importance of spouse and survivor social security benefits within the household and both raise the relative reward to work later in the life cycle. The incentives created are modest, and retirement responds accordingly. Nevertheless, at some ages, such as 65, there may be as much as a 6 percent increase in the old age work force under privatized accounts.
Handle: RePEc:nbr:nberwo:8772
Template-Type: ReDIF-Paper 1.0
Title: The Financing of Research and Development
Classification-JEL: G32; O32
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Note: CF PR
Number: 8773
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8773
File-URL: http://www.nber.org/papers/w8773.pdf
File-Format: application/pdf
Publication-Status: published as Bronwyn H. Hall, 2002. "The Financing of Research and Development," Oxford Review of Economic Policy, Oxford University Press, vol. 18(1), pages 35-51, Spring.
Abstract: Evidence on the 'funding gap' for R&D is surveyed. The focus is on financial market reasons for underinvestment in R&D that persist even in the absence of externality-induced underinvestment. The conclusions are that 1) small and new innovative firms experience high costs of capital that are only partly mitigated by the presence of venture capital; 2) evidence for high costs of R&D capital for large firms is mixed, although these firms do prefer internal funds for financing these investments; 3) there are limits to venture capital as a solution to the funding gap, especially in countries where public equity markets are not highly developed; and 4) further study of governmental seed capital and subsidy programs using quasi-experimental methods is warranted.
Handle: RePEc:nbr:nberwo:8773
Template-Type: ReDIF-Paper 1.0
Title: A Century of Labor-Leisure Distortions
Classification-JEL: H20; H30
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Note: PE
Number: 8774
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8774
File-URL: http://www.nber.org/papers/w8774.pdf
File-Format: application/pdf
Abstract: I construct direct measures of labor-leisure distortions for the American economy during the period 1889-1996, using a new method for empirically evaluating competitive equilibrium models and extending that method to some noncompetitive situations. I then compare measured labor-leisure distortions to proxies for potential restraints of trade: distortionary taxes and subsidies, labor market regulation, monopoly unionism, and search frictions. Distortions have grown steadily over the century, with the exception of the Great Depression (when distortions were above trend), WWII (below trend), and the 1980's (below trend). Marginal tax rates are well correlated with labor-leisure distortions at low frequencies, but cannot explain Depression, wartime, or 1980's distortions. Monopoly unionism might explain a small part of the Depression distortions, and the decline of unions might explain some of the reduced distortions in the 1980's. In general, I find the decade-to-decade aggregate fluctuations in consumption, wages, and work to be hard to reconcile with simple quantitative models of labor supply and demand.
Handle: RePEc:nbr:nberwo:8774
Template-Type: ReDIF-Paper 1.0
Title: A Dual Method of Empirically Evaluating Dynamic Competitive Equilibrium Models with Market Distortions, Applied to the Great Depression & World War II
Classification-JEL: H30; C68
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Note: EFG PE
Number: 8775
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8775
File-URL: http://www.nber.org/papers/w8775.pdf
File-Format: application/pdf
Abstract: I prove some theorems for competitive equilibria in the presence of market distortions, and use those theorems to motivate an algorithm for (simply and exactly) computing and empirically evaluating competitive equilibria for dynamic economies. Although a competitive equilibrium models interactions between all sectors, all consumer types, and all time periods, I show how my algorithm permits separate empirical evaluation of these pieces of the model and hence is practical even when very little data is available. I then compute a neoclassical growth model with distortionary taxes that fits aggregate U.S. time series for the period 1929-50 and conclude that, if it is to explain aggregate behavior during the period, government policy must have heavily taxed labor income during the Great Depression and lightly taxed it during the war. In other words, the challenge for the competitive equilibrium approach is not so much why output might change over time, but why the marginal product of labor and the marginal value of leisure diverged so much and why that wedge persisted so long. In this sense, explaining aggregate behavior during the period has been reduced to a public finance question -- were actual government policies distorting behavior in the same direction and magnitude as government policies in the model?
Handle: RePEc:nbr:nberwo:8775
Template-Type: ReDIF-Paper 1.0
Title: Family Firms
Classification-JEL: G32; K22
Author-Name: Mike Burkart
Author-Person: pbu112
Author-Name: Fausto Panunzi
Author-Person: ppa224
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: CF
Number: 8776
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8776
File-URL: http://www.nber.org/papers/w8776.pdf
File-Format: application/pdf
Publication-Status: published as Mike Burkart & Fausto Panunzi & Andrei Shleifer, 2003. "Family Firms," Journal of Finance, American Finance Association, vol. 58(5), pages 2167-2202, October.
Abstract: We present a model of succession in a firm controlled and managed by its founder. The founder decides between hiring a professional manager or leaving management to his heir, as well as on how much, if any, of the shares to float on the stock exchange. We assume that a professional is a better manager than the heir, and describe how the founder's decision is shaped by the legal environment. Specifically, we show that, in legal regimes that successfully limit the expropriation of minority shareholders, the widely held professionally managed corporation emerges as the equilibrium outcome. In legal regimes with intermediate protection, management is delegated to a professional, but the family stays on as large shareholders to monitor the manager. In legal regimes with the weakest protection, the founder designates his heir to manage and ownership remains inside the family. This theory of separation of ownership from management includes the Anglo-Saxon and the Continental European patterns of corporate governance as special cases, and generates additional empirical predictions consistent with cross-country evidence.
Handle: RePEc:nbr:nberwo:8776
Template-Type: ReDIF-Paper 1.0
Title: A Theory of Government Regulation of Addictive Bads: Optimal Tax Levels and Tax Incidence for Cigarette Excise Taxation
Classification-JEL: H2; I1
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Botond Koszegi
Note: CH EH PE
Number: 8777
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8777
File-URL: http://www.nber.org/papers/w8777.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan and Botond Koszegi. "Tax Incidence When Individuals Are Time-Inconsistent: The Case Of Cigarette Excise Taxes," Journal of Public Economics, 2004, v88(9-10,Aug), 1959-1987.
Abstract: The traditional normative analysis of government policy towards addictive bads is carried out in the context of a 'rational addiction' model, whereby the only role for government is in correcting the external costs of consumption of such goods. But available evidence is at least as consistent, if not more so, with an alternative where individuals are 'time inconsistent' about decisions such as smoking, having a higher discount rate between this period and the next than between future periods. We develop this time inconsistent model, and show that this alternative formulation delivers radically different implications for government policy towards smoking. Unlike the traditional model, our alternative implies that there is a role for government taxation of addictive bads even if there are no external costs; we estimate that the optimal tax on cigarettes is $1 or more higher than that implied by the traditional model. And we estimate that cigarette excise taxes are much less regressive than previously believed, and indeed for most parameter values are progressive, since lower income groups are much more price elastic and therefore benefit more from the commitment device provided by higher excise taxes.
Handle: RePEc:nbr:nberwo:8777
Template-Type: ReDIF-Paper 1.0
Title: The North-South Wage Gap, Before and After the Civil War
Classification-JEL: N31
Author-Name: Robert A. Margo
Author-Person: pma319
Note: DAE LS
Number: 8778
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8778
File-URL: http://www.nber.org/papers/w8778.pdf
File-Format: application/pdf
Publication-Status: published as Eltis, D., F. Lewis, and K. Sokoloff (eds.) Slavery in the Development of the Americas. New York: Cambridge University Press, 2004.
Abstract: In an economy with 'national' factor markets, the factor price effects of a permanent, regional specific shock register everywhere, perhaps with a brief lag. The United States in the nineteenth century does not appear to have been such an economy. Using data for a variety of occupations, I document that the Civil War occasioned a dramatic divergence in the regional structure of wages -- in particular, wages in the South Atlantic and South Central states relative to the North fell sharply after the War. The divergence was immediate, being apparent as early as 1866. It was persistent: for none of the occupations examined did the regional wage structure return to its ante-bellum configuration by century's end. The divergence cannot be explained by the changing racial composition of the Southern wage labor force after the War, but does appear consistent with a sharp drop in labor productivity in Southern agriculture. I also use previously neglected data to argue that the South probably experienced a decline in the relative price of non-traded goods after the War.
Handle: RePEc:nbr:nberwo:8778
Template-Type: ReDIF-Paper 1.0
Title: The Life Cycles of Modern Artists
Author-Name: David W. Galenson
Note: LS
Number: 8779
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8779
File-URL: http://www.nber.org/papers/w8779.pdf
File-Format: application/pdf
Publication-Status: published as Galenson, David W. "The Life Cycles of Modern Artists." Historical Methods: A Journal of Quantitative and Interdisciplinary History 37, 3 (Summer 2004): 123 - 136.
Publication-Status: published as David Galenson, 2002. "The Life Cycles of Modern Artists," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 3(3), pages 161-178, July.
Abstract: There have been two very different life cycles for great modern artists: some have made their major contributions early in their careers, while others have produced their best work later in their lives. These patterns have been associated with different artistic goals and working methods: artists who peak late are motivated by aesthetic considerations and work by trial and error, whereas artists who peak early are motivated by conceptual concerns and plan their work in advance. This paper shows that Jackson Pollock, Mark Rothko, and the other leading Abstract Expressionists, who were experimental innovators, produced their best work considerably later in their careers than did Jasper Johns, Andy Warhol, and the other leading conceptual innovators of the generation that followed them. These results not only yield a new understanding of the life cycles of creative individuals, but also provide new insights into the value of works of art.
Handle: RePEc:nbr:nberwo:8779
Template-Type: ReDIF-Paper 1.0
Title: How Does Job Loss Affect the Timing of Retirement?
Classification-JEL: J6; J2
Author-Name: Sewin Chan
Author-Name: Ann Huff Stevens
Author-Person: pst180
Note: AG LS
Number: 8780
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8780
File-URL: http://www.nber.org/papers/w8780.pdf
File-Format: application/pdf
Publication-Status: published as Sewin Chan & Ann Stevens, 2004. "How Does Job Loss Affect the Timing of Retirement?," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 3(1), article 5, pages 1187-1187.
Abstract: We use the Health and Retirement Study to examine the effects of job loss on factors affecting retirement incentives, including earnings, assets and pensions. We then estimate models of the retirement decision, which take into account the incentive to retire and any additional effects of displacement that are not captured by retirement incentives. There are substantial effects of displacement on retirement incentives as the result of changes to both earnings and pensions. Displacement significantly increases the probability of retirement, but only a small fraction of the displacement-induced changes in retirement behavior and labor force participation are the result of workers responding to these altered retirement incentives.
Handle: RePEc:nbr:nberwo:8780
Template-Type: ReDIF-Paper 1.0
Title: Exchange Traded Funds: A New Investment Option for Taxable Investors
Classification-JEL: H24; G23
Author-Name: James M. Poterba
Author-Person: ppo19
Author-Name: John B. Shoven
Note: AP PE
Number: 8781
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8781
File-URL: http://www.nber.org/papers/w8781.pdf
File-Format: application/pdf
Publication-Status: published as Poterba, Jaems M. and John B. Shoven. "Exchange-Traded Funds: A New Investment Option For Taxable Investors," American Economic Review, 2002, v92(2,May), 422-427.
Abstract: Exchange traded funds (ETFs) are a new variety of mutual fund that first became available in 1993. ETFs have grown rapidly and now hold nearly $80 billion in assets. ETFs are sometimes described as more 'tax efficient' than traditional equity mutual funds, since in recent years, some large ETFs have made smaller distributions of realized and taxable capital gains than most mutual funds. This paper provides an introduction to the operation of exchange traded funds. It also compares the pre-tax and post-tax returns on the largest ETF, the SPDR trust that invests in the S&P500, with the returns on the largest equity index fund, the Vanguard Index 500. The results suggest that between 1994 and 2000, the before- and after-tax returns on the SPDR trust and this mutual fund were very similar. Both the after-tax and the pre-tax returns on the fund were slightly greater than those on the ETF. These findings suggest that ETFs offer taxable investors a method of holding broad baskets of stocks that deliver returns comparable to those of low-cost index funds.
Handle: RePEc:nbr:nberwo:8781
Template-Type: ReDIF-Paper 1.0
Title: Columbus' Egg: The Real Determinant of Capital Structure
Classification-JEL: G24
Author-Name: Ivo Welch
Author-Person: pwe95
Note: CF
Number: 8782
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8782
File-URL: http://www.nber.org/papers/w8782.pdf
File-Format: application/pdf
Publication-Status: published as Welch, Ivo. "Capital Structure and Stock Returns." Journal of Political Economy 112-1 (February 2004): 106-131.
Abstract: This paper shows that managers fail to readjust their capital structure in response to external stock returns. Thus, the typical firm's capital structure is not caused by attempts to time the market, by attempts to minimize taxes or bankruptcy costs, or by any other attempts at firm-value maximization. Instead, capital structure is almost entirely determined by lagged stock returns (which, when applied to ancient equity values, predict current equity value and with it debt equity ratios). Consequently, one should conclude that capital structure is determined primarily by external stock market influences, and not by internal corporate optimizing decisions.
Handle: RePEc:nbr:nberwo:8782
Template-Type: ReDIF-Paper 1.0
Title: Self-Validating Optimum Currency Areas
Classification-JEL: E5; F4
Author-Name: Giancarlo Corsetti
Author-Name: Paolo Pesenti
Author-Person: ppe152
Note: IFM
Number: 8783
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8783
File-URL: http://www.nber.org/papers/w8783.pdf
File-Format: application/pdf
Abstract: In this paper we show that a currency area can be a self-validating optimal policy regime, even when monetary unification does not foster real economic integration and intra-industry trade. This is because profit-maximizing producers in a currency area adopt endogenous pricing strategies that make exchange rate fluctuations highly costly in welfare terms. In our model exporters choose the degree of exchange rate pass-through onto export prices given monetary policy rules, and monetary authorities choose optimal policy rules taking firms' pass-through as given. We show that there exist two equilibria, which define two self-validating currency regimes. In the first, firms preset prices in domestic currency only, and let foreign-currency prices to be determined by the law of one price. Optimal policy rules then target the domestic output gap and floating exchange rates support the flex-price allocation. In the second equilibrium firms optimally preset prices in local currency, and a monetary union is the optimal policy choice for all countries. Although business cycles are more synchronized with a common currency, flexible exchange rates are superior in terms of welfare.
Handle: RePEc:nbr:nberwo:8783
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Welfare Reform on Living Arrangements
Classification-JEL: I3; J1
Author-Name: Marianne P. Bitler
Author-Person: pbi12
Author-Name: Jonah B. Gelbach
Author-Person: pge238
Author-Name: Hilary W. Hoynes
Author-Person: pho278
Note: CH PE
Number: 8784
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8784
File-URL: http://www.nber.org/papers/w8784.pdf
File-Format: application/pdf
Publication-Status: published as Bitler, Marianne P., Jonah B. Gelbach and Hilary W. Hoynes. "Welfare Reform and Children's Living Arrangements," Journal of Human Resources, 2006, v41(1,Winter), 1-27.
Abstract: Labor market outcomes of welfare reform have been the subject of extensive research by economists, but there has been relatively little work on living arrangements, which was an important focus of reformers. Our research fills that gap by using data from the March CPS to examine the impacts of 1990s welfare waivers and the 1996 Federal welfare reform on living arrangements in samples of both children and women. Our findings suggest three main conclusions. First, welfare reform has had large effects on some important measures of living arrangements, including household size, parental co-residence among children, and marital status among women. Second, those effects are neither entirely aligned with the stated goals of reform nor entirely in spite of these goals. For example, in states that never had waivers, TANF was associated with a reduction of 14 percentage points in the fraction of Black children living in central cities who live with an unmarried parent. However, the fraction of these children living with neither parent rose by 8 percentage points, essentially doubling the baseline level. Third, there is a great deal of treatment heterogeneity both with respect to racial and ethnic groups, and with respect to whether reforms were waivers, TANF in states that had waivers, or TANF in states that did not (e.g., waiver effects on parental co-residence among Black, central-city children was much smaller than were TANF effects). Standard approaches - using only data on adult women, pooling the data across racial and ethnic groups, focusing only on high school dropouts, and/or assuming that TANF effects are the same in waiver and nonwaiver states - would generally not uncover these important changes in living arrangements.
Handle: RePEc:nbr:nberwo:8784
Template-Type: ReDIF-Paper 1.0
Title: The Fed and the New Economy
Classification-JEL: E58; E65
Author-Name: Laurence Ball
Author-Person: pba605
Author-Name: Robert Tchaidze
Note: EFG ME
Number: 8785
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8785
File-URL: http://www.nber.org/papers/w8785.pdf
File-Format: application/pdf
Publication-Status: published as Ball, Laurence and Robert R. Tchaidze. "The Fed And The New Economy," American Economic Review, 2002, v92(2,May), 108-115.
Abstract: This paper seeks to understand the behavior of Greenspan's Federal Reserve in the late 1990s. Some authors suggest that the Fed followed a simple 'Taylor rule,' while others argue that it deviated from such a rule because it recognized that the 'New Economy' permitted an easing of policy. We find that a Taylor rule based on inflation and unemployment does break down in the late 1990s. However, the Fed's behavior appears stable once one accounts for the falling NAIRU of the period. A rule based on inflation and the deviation of unemployment from the NAIRU captures the Fed's behavior through the entire period from 1987 to 2000.
Handle: RePEc:nbr:nberwo:8785
Template-Type: ReDIF-Paper 1.0
Title: Will You Miss Me When I Am Gone? The Economic Consequences of Absent Parents
Classification-JEL: I3; J3
Author-Name: Marianne E. Page
Author-Person: ppa539
Author-Name: Ann Huff Stevens
Author-Person: pst180
Note: CH LS
Number: 8786
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8786
File-URL: http://www.nber.org/papers/w8786.pdf
File-Format: application/pdf
Abstract: This paper examines the effects of family structure on the economic resources available to children, using family fixed-effects to control for unobservable characteristics of the family. The effects of divorce on the income and consumption of children born to two-parent households, and the effects of marriage on children born into single-parent households are both considered. In the long-run (six or more years after the most recent divorce) family income falls by 40 to 45% after divorce, and food consumption is reduced by 17%. Six or more years after the most recent marriage, income of children born to single parents rises by 50 to 57%, but there is no statistically significant increase in food consumption. These estimates are substantially less than the difference in income implied by cross-sectional comparisons of different family types. When income changes are measured according to time since the parents first divorce, there is substantial recovery in income, virtually all of which is explained by subsequent remarriages. Similarly, when we look at income several years after a parent's first marriage, the gain is 28 to 33%, reflecting the short-lived nature of many of these marriages.
Handle: RePEc:nbr:nberwo:8786
Template-Type: ReDIF-Paper 1.0
Title: Changes in U.S. Wages 1976-2000: Ongoing Skill Bias or Major Technological Change?
Classification-JEL: J3; O3
Author-Name: Paul Beaudry
Author-Person: pbe35
Author-Name: David A. Green
Author-Person: pgr285
Note: LS PR
Number: 8787
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8787
File-URL: http://www.nber.org/papers/w8787.pdf
File-Format: application/pdf
Publication-Status: published as Beaudry, Paul and David A. Green. "Changes In U.S. Wages, 1876-2000: Ongoing Skill Bias Or Major Technological Change?," Journal of Labor Economics, 2005, v23(3,Jul), 609-648.
Abstract: This paper examines the determinants of changes in the US wage structure over the period 1976-2000, with the objective of evaluating whether these changes are best described as the result of ongoing skill-biased technological change, or alternatively, as the outcome of an adjustment process associated with a major discrete change in technological opportunities. The main empirical observation we uncover is that change in both the level of wages and the returns to skill over this period appear to be primarily driven by changes in the ratio of human capital (as measured by effective units of skilled workers) to physical capital. Although at first pass this pattern may appear difficult to interpret, we show that it conforms extremely well to a simple model of technological adoption following a major change in technological opportunities. In contrast, we do not find much empirical support for the view that ongoing (factor-augmenting) skill-biased technological progress has been an important driving force over this period, nor do we find support for the view that physical capital accumulation has contributed to the increased differential between more and less educated workers (in fact, we find the opposite).
Handle: RePEc:nbr:nberwo:8787
Template-Type: ReDIF-Paper 1.0
Title: Predicting the Equity Premium With Dividend Ratios
Classification-JEL: G12; G14
Author-Name: Amit Goyal
Author-Person: pgo419
Author-Name: Ivo Welch
Author-Person: pwe95
Note: AP CF
Number: 8788
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8788
File-URL: http://www.nber.org/papers/w8788.pdf
File-Format: application/pdf
Publication-Status: published as Goyal, Amit, and Ivo Welch. "Predicting the Equity Premium With Dividend Ratios." Management Science 49-5 (May 2003): 639-654.
Abstract: Our paper reexamines the forecasting regressions which predict annual aggregate stock market returns net of the risk-free rate with lagged aggregate dividend-yield ratios and dividend-price ratios. Prior to 1990, the conditional dividend yield could reliably outperform the historical equity premium mean in predicting future equity premia *in-sample*. But our paper shows that the dividend ratios could not outperform the prevailing unconditional mean *out-of-sample*, plus any residual power was directly related to only two years, 1974 and 1975. As of 2000, even this in-sample predictive ability has disappeared. Our paper also documents changes in the time-series processes of the dividends themselves and shows that an increasing persistence of dividend-price ratio is largely responsible for weak stock return predictability.
Handle: RePEc:nbr:nberwo:8788
Template-Type: ReDIF-Paper 1.0
Title: Stochastic Discount Factor Bounds with Conditioning Information
Classification-JEL: G12; C31
Author-Name: Wayne E. Ferson
Author-Person: pfe32
Author-Name: Andrew Siegel
Note: AP
Number: 8789
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8789
File-URL: http://www.nber.org/papers/w8789.pdf
File-Format: application/pdf
Publication-Status: published as Ferson, Wayne E. and Andrew F. Siegel. "Stochastic Discount Factor Bounds With Conditioning Information," Review of Financial Studies, 2003, v16(2,Summer), 567-595.
Abstract: Hansen and Jagannathan (HJ, 1991) describe restrictions on the volatility of stochastic discount factors (SDFs) that price a given set of asset returns. This paper compares the sampling properties of different versions of HJ bounds that use conditioning information in the form of a given set of lagged instruments. HJ describe one way to use conditioning information. Their approach is to multiply the original returns by the lagged variables, and much of the asset pricing literature to date has followed this ihmultiplicativel. approach. We also study two versions of optimized HJ bounds with conditioning information. One is from Gallant, Hansen and Tauchen (1990) and the second is based on the unconditionally-efficient portfolios derived in Ferson and Siegel (2000). We document finite-sample biases in the HJ bounds, where the biased bounds reject asset-pricing models too often. We provide useful correction factors for the bias. We also evaluate the asymptotic standard errors for the HJ bounds, from Hansen, Heaton and Luttmer (1995).
Handle: RePEc:nbr:nberwo:8789
Template-Type: ReDIF-Paper 1.0
Title: Conditional Performance Measurement Using Portfolio Weights: Evidence for Pension Funds
Classification-JEL: G12; G14
Author-Name: Wayne Ferson
Author-Person: pfe32
Author-Name: Kenneth Khang
Note: AP
Number: 8790
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8790
File-URL: http://www.nber.org/papers/w8790.pdf
File-Format: application/pdf
Publication-Status: published as Ferson, Wayne and Kenneth Khang. "Conditional Performance Measurement Using Portfolio Weights: Evidence For Pension Funds," Journal of Financial Economics, 2002, v65(2,Aug), 249-282.
Abstract: This paper combines the use of portfolio holdings data and conditioning information to create a new performance measure. Our conditional weight-based measure has several advantages. Using conditioning information avoids biases in weight-based measures as discussed by Grinblatt and Titman (1993). When conditioning information is used, returns-based measures face a bias if managers can trade between observation dates. The new measures avoid this interim trading bias. We use the new measures to provide fresh insights about performance in a sample of U.S. equity pension fund managers.
Handle: RePEc:nbr:nberwo:8790
Template-Type: ReDIF-Paper 1.0
Title: Performance Evaluation with Stochastic Discount Factors
Classification-JEL: G12; G14
Author-Name: Heber Farnsworth
Author-Name: Wayne E. Ferson
Author-Person: pfe32
Author-Name: David Jackson
Author-Name: Steven Todd
Note: AP
Number: 8791
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8791
File-URL: http://www.nber.org/papers/w8791.pdf
File-Format: application/pdf
Publication-Status: published as Farnsworth, Heber, Wayne Ferson, David Jackson and Steven Todd. "Performance Evaluation With Stochastic Discount Factors," Journal of Business, 2002, v75(3,Jul), 473-503.
Abstract: We study the use of stochastic discount factor (SDF) models in evaluating the investment performance of portfolio managers. By constructing artificial mutual funds with known levels of investment ability, we evaluate a large set of SDF models. We find that the measures of performance are not highly sensitive to the SDF model, and that most of the models have a mild negative bias when performance is neutral. We use the models to evaluate a sample of U.S. equity mutual funds. Adjusting for the observed bias, we find that the average mutual fund has enough ability to cover its transactions costs. Extreme funds are more likely to have good rather than poor risk adjusted performance. Our analysis also reveals a number of implementation issues relevant to other applications of SDF models.
Handle: RePEc:nbr:nberwo:8791
Template-Type: ReDIF-Paper 1.0
Title: Within State Transitions from 2-Year to 4-Year Public Institutions
Classification-JEL: I2
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Author-Name: Christopher L. Smith
Author-Person: psm208
Note: CH LS
Number: 8792
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8792
File-URL: http://www.nber.org/papers/w8792.pdf
File-Format: application/pdf
Publication-Status: published as Ehrenberg, Ronald G. and Christopher L. Smith. "Analyzing The Success Of Student Transitions From 2- To 4- Year Institutions Within A State," Economics of Education Review, 2004, v23(1,Feb), 11-28.
Abstract: Within many large states there are multiple 2-year and 4-year public institutions. Our paper develops a methodology that can be used to help evaluate how well each 2-year public institution in a state is doing in preparing those of its students who transfer to 4-year public institutions to successfully complete their 4-year programs. Similarly, the methodology can be used to help evaluate how well each 4-year public institution is doing in graduating the those students from 2-year institutions who transfer to it. The methodology is illustrated using data provided by the Office of Institutional Research and Analysis of the State University of New York.
Handle: RePEc:nbr:nberwo:8792
Template-Type: ReDIF-Paper 1.0
Title: Who Underreacts to Cash-Flow News? Evidence from Trading between Individuals and Institutions
Classification-JEL: G12; G14
Author-Name: Randolph B. Cohen
Author-Name: Paul A. Gompers
Author-Person: pgo301
Author-Name: Tuomo Vuolteenaho
Note: AP CF
Number: 8793
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8793
File-URL: http://www.nber.org/papers/w8793.pdf
File-Format: application/pdf
Publication-Status: published as Cohen, Randolph B., Paul A. Gompers and Tuomo Vuolteenaho. "Who Underreacts To Cash-Flow News? Evidence From Trading Between Individuals And Institutions," Journal of Financial Economics, 2002, v66(2-3,Nov-Dec), 409-462.
Abstract: A large body of literature suggests that firm-level stock prices 'underreact' to news about future cash flows, i.e., shocks to a firm's expected cash flows are positively correlated with shocks to expected returns on its stock. We estimate a vector autoregession to examine the joint behavior of returns, cash-flow news, and trading between individuals and institutions. Our main finding is that institutions buy shares from individuals in response to good cash-flow news, thus exploiting the underreaction phenomenon. Institutions are not simply following price momentum strategies: When price goes up in the absence of positive cash-flow news, institutions sell shares to individuals. Although institutions are trading in the 'right' direction, institutions as a group outperform individuals by only 1.44 percent per annum before transaction and other costs, because they are extremely conservative in deviating from the value-weight market index.
Handle: RePEc:nbr:nberwo:8793
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Monetary Policy on Asset Prices
Classification-JEL: E44; E47
Author-Name: Roberto Rigobon
Author-Person: pri12
Author-Name: Brian P. Sack
Note: AP IFM
Number: 8794
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8794
File-URL: http://www.nber.org/papers/w8794.pdf
File-Format: application/pdf
Publication-Status: published as Rigobon, Roberto and Brian Sack. "The Impact Of Monetary Policy On Asset Prices," Journal of Monetary Economics, 2004, v51(8,Nov), 1553-1575.
Abstract: Estimating the response of asset prices to changes in monetary policy is complicated by the endogeneity of policy decisions and the fact that both interest rates and asset prices react to numerous other variables. This paper develops a new estimator that is based on the heteroskedasticity that exists in high frequency data. We show that the response of asset prices to changes in monetary policy can be identified based on the increase in the variance of policy shocks that occurs on days of FOMC meetings and of the Chairman's semi-annual monetary policy testimony to Congress. The identification approach employed requires a much weaker set of assumptions than needed under the 'event-study' approach that is typically used in this context. The results indicate that an increase in short-term interest rates results in a decline in stock prices and in an upward shift in the yield curve that becomes smaller at longer maturities. The findings also suggest that the event-study estimates contain biases that make the estimated effects on stock prices appear too small and those on Treasury yields too large.
Handle: RePEc:nbr:nberwo:8794
Template-Type: ReDIF-Paper 1.0
Title: Uncovered Interest Rate Parity and the Term Structure
Classification-JEL: F3
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Min Wei
Author-Name: Yuhang Xing
Author-Person: pxi126
Note: AP
Number: 8795
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8795
File-URL: http://www.nber.org/papers/w8795.pdf
File-Format: application/pdf
Publication-Status: published as Bekaert, Geert & Wei, Min & Xing, Yuhang, 2007. "Uncovered interest rate parity and the term structure," Journal of International Money and Finance, Elsevier, vol. 26(6), pages 1038-1069, October.
Abstract: This paper examines uncovered interest rate parity (UIRP) and the expectations hypotheses of the term structure (EHTS) at both short and long horizons. The statistical evidence against UIRP is mixed and is currency- not horizon-dependent. Economically, the deviations from UIRP are less pronounced than previously documented. The evidence against the EHTS is statistically more uniform, but, economically, actual spreads and theoretical spreads (spreads constructed under the null of the EHTS) do not behave very differently, especially at long horizons. Partly because of this, the deviations from the EHTS only play a minor role in explaining deviations from UIRP at long horizons. A random walk model for both exchange rates and interest rates fits the data marginally better than the UIRP-EHTS model.
Handle: RePEc:nbr:nberwo:8795
Template-Type: ReDIF-Paper 1.0
Title: Quantity Controls, License Transferability, and the Level of Investment
Classification-JEL: F3
Author-Name: Kala Krishna
Author-Person: pkr26
Author-Name: Ling Hui Tan
Author-Person: pta161
Author-Name: Ram Ranjan
Note: ITI
Number: 8796
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8796
File-URL: http://www.nber.org/papers/w8796.pdf
File-Format: application/pdf
Publication-Status: published as Kala Krishna & Ling Hui Tan & Ram Ranjan, 2004. "Quantity Controls, License Transferability, and the Level of Investment," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 3(1), article 8, pages 1206-1206.
Abstract: This paper models investment/entry decisions in a competitive industry that is subject to a quantity control on an input for production. The quantity control is implemented by auctioning licenses for the restricted input. The paper shows that liberalizing the quantity control could reduce investment in the industry under certain circumstances. Furthermore, the level of investment is quite different when licenses are tradable than when they are not. Key factors in the comparison include the elasticity of demand for the final good and the degree of input substitutability. Two examples are computed to illustrate the results.
Handle: RePEc:nbr:nberwo:8796
Template-Type: ReDIF-Paper 1.0
Title: Marketization of Production and the US-Europe Employment Gap
Author-Name: Richard B. Freeman
Author-Person: pfr23
Author-Name: Ronald Schettkat
Note: LS
Number: 8797
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8797
File-URL: http://www.nber.org/papers/w8797.pdf
File-Format: application/pdf
Publication-Status: published as Freeman, Richard B & Schettkat, Ronald, 2001. " Marketization of Production and the US-Europe Employment Gap," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(0), pages 647-70, Special I.
Abstract: Women work much more in the US than in Germany and most other EU economies. We find that the US-German employment gap is not strongly related to cross-country differences in the level of pay or social benefits. The difference in employment is due to the different marketization of activities between the two economies: German women work as many hours as US women when we consider time spent in household production as well as in market production. For instance, German women spend more time preparing meals while US women use take-out and restaurants more intensely. The organization of some social activities, such as schooling, and the dispersion of skills, as well as pay differences, affect the degree of marketization.
Handle: RePEc:nbr:nberwo:8797
Template-Type: ReDIF-Paper 1.0
Title: Unobserved Product Differentiation in Discrete Choice Models: Estimating Price Elasticities and Welfare Effects
Classification-JEL: L10; C25
Author-Name: Daniel A. Ackerberg
Author-Person: pac11
Author-Name: Marc Rysman
Author-Person: pry6
Note: PR
Number: 8798
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8798
File-URL: http://www.nber.org/papers/w8798.pdf
File-Format: application/pdf
Publication-Status: published as Daniel A. Ackerberg & Marc Rysman, 2005. "Unobserved Product Differentiation in Discrete-Choice Models: Estimating Price Elasticities and Welfare Effects," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 771-788, Winter.
Abstract: Standard discrete choice models such as logit, nested logit, and random coefficients models place very strong restrictions on how unobservable product space increases with the number of products. We argue (and show with Monte Carlo experiments) that these restrictions can lead to biased conclusions regarding price elasticities and welfare consequences from additional products. In addition, these restrictions can identify parameters which are not intuitively identified given the data at hand. We suggest two alternative models that relax these restrictions, both motivated by structural interpretations. Monte-Carlo experiments and an application to data show that these alternative models perform well in practice.
Handle: RePEc:nbr:nberwo:8798
Template-Type: ReDIF-Paper 1.0
Title: Publicly Provided Education
Classification-JEL: H4; I2
Author-Name: Eric A. Hanushek
Author-Person: pha97
Note: CH LS PE ED
Number: 8799
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8799
File-URL: http://www.nber.org/papers/w8799.pdf
File-Format: application/pdf
Publication-Status: published as Hanushek, Eric A., 2002. "Publicly provided education," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 30, pages 2045-2141 Elsevier.
Abstract: Historically, most attention in public programs has been given to the resources devoted to the activity, and resources have been used to index both commitment and quality. Education differs from other areas of public expenditure because direct measures of outcomes are available, making it is possible to consider results and, by implication, to consider the efficiency of provision. Early interpretations of the evidence, emanating from popular interpretations of the Coleman Report that 'schools do not make a difference,' are incorrect, but the basic evidence behind the statement suggests serious performance problems of government supply, because purchased inputs to schools are not closely related to outcomes. This paper reviews that evidence along with providing an evaluation of the various controversial aspects including issues of causality, consumer behavior, and estimation approaches. Two detailed policy areas are discussed in terms of the evidence on performance: public versus private provision and the financing of schools.
Handle: RePEc:nbr:nberwo:8799
Template-Type: ReDIF-Paper 1.0
Title: A Rehabilitation of Monetary Policy in the 1950s
Classification-JEL: E50; N12
Author-Name: Christina D. Romer
Author-Person: pro407
Author-Name: David H. Romer
Author-Person: pro406
Note: DAE EFG ME
Number: 8800
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8800
File-URL: http://www.nber.org/papers/w8800.pdf
File-Format: application/pdf
Publication-Status: published as Romer, Christina D. and David H. Romer. "A Rehabilitation Of Monetary Policy In The 1950's," American Economic Review, 2002, v92(2,May), 121-127.
Abstract: Monetary policy in the United States in the 1950s was remarkably modern. Analysis of Federal Reserve records shows that policymakers had an overarching aversion to inflation and were willing to accept significant costs to prevent it from rising to even moderate levels. This aversion to inflation was the result of policymakers' beliefs that higher inflation could not raise output in the long run, that the level of output that would trigger increases in inflation was only moderate, and that inflation had large real costs in the medium and long runs. Furthermore, both narrative and empirical analysis indicates that policymakers were not wedded to free reserves or other faulty indicators in their implementation of policy. Empirical estimates of a forward-looking Taylor rule show that policymakers in the 1950s raised nominal interest rates more than one-for-one with increases in expected inflation, and suggests that monetary policy in the 1950s was more similar to policy in the 1980s and 1990s than to that in the late 1960s and 1970s. One implication of these findings is that the inflation of the late 1960s and 1970s must have been the result of a change in the conduct of policy.
Handle: RePEc:nbr:nberwo:8800
Template-Type: ReDIF-Paper 1.0
Title: What Have Two Decades of British Economic Reform Delivered?
Author-Name: David Card
Author-Person: pca271
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: EFG LS PR
Number: 8801
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8801
File-URL: http://www.nber.org/papers/w8801.pdf
File-Format: application/pdf
Publication-Status: published as David Card & Richard B. Freeman, 2002. "What Have Two Decades of British Economic Reform Delivered in Terms of Productivity Growth?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 5, pages 41-52, Fall.
Publication-Status: published as What Have Two Decades of British Economic Reform Delivered?, David Card, Richard B. Freeman. in Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980–2000, Card, Blundell, and Freeman. 2004
Abstract: Beginning in 1979 with the newly electted Thatcher Government and continuing under successive Conservative and Labour Governments, the United Kingdom has embarked on a two-decade-long experiment in economic reform. We present evidence that the reform process has succeeded in making the UK more market-friendly than its European competitors. In fact, by the 1990s Britain ranked near the top of the league tables for freedom of markets, in some cases even ahead of the United States. To evaluate the effects of these reforms we compare trends in macroeconomic outcomes in the UK relative to the US, Germany, and France. During the 1980s and 1990s Britain halted the relative declines in GDP per capita and labour productivity that had characterized earlier decades, and partially closed the gap in income per capita with France and Germany. These gains were mainly attributable to relative rises in employment and hours. Unlike its EU competitors, Britain was able to achieve high employment-population rates with rising real wages for workers. The case that the change in economic performance can be credited to market-oriented reforms is harder to prove. Nevertheless, based on our own macro-level analyses, and micro-level evidence from several companion studies, we conclude that economic reforms contributed to halting the nearly century-long trend in relative economic decline of the UK relative to its historic competitors, Germany and France.
Handle: RePEc:nbr:nberwo:8801
Template-Type: ReDIF-Paper 1.0
Title: Health Care and the Public Sector
Classification-JEL: H11; H21
Author-Name: David M. Cutler
Author-Person: pcu64
Note: EH PE
Number: 8802
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8802
File-URL: http://www.nber.org/papers/w8802.pdf
File-Format: application/pdf
Publication-Status: published as Cutler, David M., 2002. "Health care and the public sector," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 31, pages 2143-2243 Elsevier.
Abstract: This paper summarizes the many aspects of public policy for health care. I first consider government policy affecting individual behaviors. Government intervention to change individual actions such as smoking and drinking is frequently justified on externality grounds. External costs of smoking in particular are not very high relative to current taxes, however. More important quantitatively are the internal costs of smoking to the smoker. A recent literature has debated whether such internalities justify government action. I then turn to markets for medical care and health insurance. Virtually all governments provide health insurance for some part of the population. Governments face several fundamental choices in this provision. The first choice is between operating the medical system publicly or contracting for care from private providers. The make-or-buy decision is difficult in medical care because medical quality is not fully observable. Thus, private sector efficiency may come at the expense of quality. A second choice is in the degree of cost sharing. More generous insurance reduces the utility cost of illness but also leads to overconsumption of care when sick. Optimal insurance balances the marginal costs of risk bearing and moral hazard. In the US, government policy has historically tilted towards more generous insurance, by excluding employer payments for health insurance from income taxation. The welfare loss from this subsidy has been a theme of much research. Finally, governments face issues of competition and selection. Sick people prefer more generous insurance than do healthy people. If insurers know who is sick and who is healthy, they will charge the sick more than the healthy. This differential pricing is welfare loss, since it denies sick people the benefits of ex ante pooling of risk type. Even if insurers cannot separate sick from healthy, there are still losses: high costs of generous plans discourage people from enrolling in those plans. Generous plans also have incentives to reduce their generosity, to induce sick people to enroll elsewhere. Adverse selection is empirically very important. To date, public policies have not been able to offset it. Finally, I turn to the distributional aspects of medical care. Longstanding norms support at least basic medical care for everyone in society. But the generosity of health programs for the poor runs up against the possibility of crowding out private insurance coverage. Analysis from Medicaid program expansions shows that crowdout does occur. Still, coverage expansions are worth the cost, given the health
Handle: RePEc:nbr:nberwo:8802
Template-Type: ReDIF-Paper 1.0
Title: Highway Franchising and Real Estate Values
Classification-JEL: D44; H40
Author-Name: Eduardo Engel
Author-Person: pen3
Author-Name: Ronald Fischer
Author-Person: pfi53
Author-Name: Alexander Galetovic
Author-Person: pga381
Note: IO
Number: 8803
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8803
File-URL: http://www.nber.org/papers/w8803.pdf
File-Format: application/pdf
Publication-Status: published as Engel, Eduardo, Ronald Fischer and Alexander Galetovic. "Highway Franchising And Real Estate Values," Journal of Urban Economics, 2005, v57(3,May), 432-448.
Abstract: It has become increasingly common to allocate highway franchises to the bidder that offers to charge the lowest toll. Often, building a highway increases the value of land held by a small group of developers, an effect that is more pronounced with lower tolls. We study the welfare implications of highway franchises that benefit large developers, focusing on the incentives developers have to internalize the effect of the toll they bid on the value of their land. We study how participation by developers in the auction affects equilibrium tolls and welfare. We find that large developers bid more aggressively than construction companies that own no land. As long as land ownership is sufficiently concentrated, allowing developers in the auction leads to lower tolls and higher welfare. Moreover, collusion among developers is socially desirable. We also analyze the case when the franchise holder can charge lower tolls to those buying her land (`toll discrimination'). Relative to uniform tolls, discrimination decreases welfare when land is highly concentrated, but increases welfare otherwise. Finally, we consider the welfare implications of subsidies and bonuses for proposing new highway projects.
Handle: RePEc:nbr:nberwo:8803
Template-Type: ReDIF-Paper 1.0
Title: Trade Integration and Risk Sharing
Classification-JEL: F15; F36
Author-Name: Aart Kraay
Author-Person: pkr80
Author-Name: Jaume Ventura
Author-Person: pve110
Note: IFM ITI
Number: 8804
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8804
File-URL: http://www.nber.org/papers/w8804.pdf
File-Format: application/pdf
Publication-Status: published as Kraay, Aart and Jaume Ventura. "Trade Integration And Risk Sharing," European Economic Review, 2002, v46(6,Jun), 1023-1048.
Abstract: What are the effects of increased trade in goods and services on the trade balance? We study the effects of reducing transport costs in a Ricardian model with complete asset markets. Trade integration has three effects on the structure of the economy: a reduction in the home bias in consumption, an increase in the degree of international competition in goods markets, and a reduction in real exchange rate volatility. The reduction in the home bias increases the volatility of the trade balance regardless of the source of shocks. Except for the case where supply shocks lead to counter-cyclical trade balances, (i) the increase in international competition also increases the volatility of the trade balance; and (ii) the reduction in real exchange rate volatility increases the volatility of the trade balance if risk aversion is low but lowers it if risk aversion is high. The opposite applies when supply shocks lead to counter-cyclical trade balances. We calibrate the model to U.S. data and provide a quantitative assessment of the effects of increased trade in services on the trade balance.
Handle: RePEc:nbr:nberwo:8804
Template-Type: ReDIF-Paper 1.0
Title: A Review of IPO Activity, Pricing, and Allocations
Classification-JEL: G24
Author-Name: Jay Ritter
Author-Person: pri69
Author-Name: Ivo Welch
Author-Person: pwe95
Note: CF
Number: 8805
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8805
File-URL: http://www.nber.org/papers/w8805.pdf
File-Format: application/pdf
Publication-Status: published as Ritter, Jay R. and Ivo Welch. "A Review Of IPO Activity, Pricing, And Allocations," Journal of Finance, 2002, v57(4,Aug), 1795-1828.
Abstract: We review the theory and evidence on IPO activity: why firms go public, why they reward first-day investors with considerable underpricing, and how IPOs perform in the long run. Our perspective on the literature is three-fold: First, we believe that many IPO phenomena are not stationary. Second, we believe research into share allocation issues is the most promising area of research in IPOs at the moment. Third, we argue that asymmetric information is not the primary driver of many IPO phenomena. Instead, we believe future progress in the literature will come from non-rational and agency conflict explanations. We describe some promising such alternatives.
Handle: RePEc:nbr:nberwo:8805
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Website Provision on the Demand for German Women's Magazines
Classification-JEL: C3; L1
Author-Name: Ulrich Kaiser
Note: PR
Number: 8806
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8806
File-URL: http://www.nber.org/papers/w8806.pdf
File-Format: application/pdf
Abstract: The effect of website provision on the demand for German women's magazines is analyzed using differentiated product demand models estimated on panel data that cover the period 1990 2000. Descriptive evidence on the magazines' website contents suggests that websites are used to provide supplementary information and to advertise the current print issue. Website provision does not significantly affect magazines' market shares. This result is robust with respect to the application of alternative econometric approaches to identify the demand model. A counter-factual analysis shows, however, that online magazines would loose around 0.3 per cent in market shares if they went back offline. Likewise, magazines that are currently offline may gain market shares of between 0.07 and 0.37 per cent if they launched a website. Interestingly, some of the potential winners' from going online actually launched a website in 2001.
Handle: RePEc:nbr:nberwo:8806
Template-Type: ReDIF-Paper 1.0
Title: Post-Issue Patent "Quality Control": A Comparative Study of US Patent Re-examinations and European Patent Oppositions
Classification-JEL: K41; L00
Author-Name: Stuart J. H. Graham
Author-Person: pgr179
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Author-Name: Dietmar Harhoff
Author-Person: pha276
Author-Name: David C. Mowery
Note: IO PR
Number: 8807
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8807
File-URL: http://www.nber.org/papers/w8807.pdf
File-Format: application/pdf
Abstract: We report the results of the first comparative study of the determinants and effects of patent oppositions in Europe and of re-examinations on corresponding patents issued in the United States. The analysis is based on a dataset consisting of matched EPO and US patents. Our analysis focuses on two broad technology categories - biotechnology and pharmaceuticals, and semiconductors and computer software. Within these fields, we collect data on all EPO patents for which oppositions were filed at the EPO. We also construct a random sample of EPO patents with no opposition in these technologies. We match these EPO patents with the 'equivalent' US patents covering the same invention in the United States. Using the matched sample of USPTO and EPO patents, we compare the determinants of opposition and of re-examination. Our results indicate that valuable patents are more likely to be challenged in both jurisdictions. But the rate of opposition at the EPO is more than thirty times higher than the rate of re-examination at the USPTO. Moreover, opposition leads to a revocation of the patent in about 41 percent of the cases, and to a restriction of the patent right in another 30 percent of the cases. Re-examination results in a cancellation of the patent right in only 12.2 percent of all cases. We also find that re-examination is frequently initiated by the patentholders themselves.
Handle: RePEc:nbr:nberwo:8807
Template-Type: ReDIF-Paper 1.0
Title: Longevity and Life Cycle Savings
Classification-JEL: E21; I12
Author-Name: David E. Bloom
Author-Person: pbl79
Author-Name: David Canning
Author-Person: pca340
Author-Name: Bryan Graham
Author-Person: pgr95
Note: AG
Number: 8808
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8808
File-URL: http://www.nber.org/papers/w8808.pdf
File-Format: application/pdf
Publication-Status: published as David E. Bloom & David Canning & Bryan Graham, 2003. "Longevity and Life-cycle Savings," Scandinavian Journal of Economics, Blackwell Publishing, vol. 105(3), pages 319-338, 09.
Abstract: We add health and longevity to a standard model of life cycle saving and show that, under plausible assumptions, increases in longevity lead to higher savings rates at every age, even when retirement is endogenous. In a stable population these higher savings rates are offset by increased old age dependency, but during the disequilibrium phase, when longevity is rising, the effect on aggregate savings rates can be substantial. Our results explain the boom in savings in East Asia during 1950-90 as a combination of rising life expectancy and falling youth dependency, though they predict that savings in the region will return to more normal levels as populations age. We also find that falling life expectancies in Africa are associated with declining savings rates.
Handle: RePEc:nbr:nberwo:8808
Template-Type: ReDIF-Paper 1.0
Title: International Rent Sharing in Multinational Firms
Classification-JEL: F23; J30
Author-Name: John W. Budd
Author-Person: pbu1
Author-Name: Josef Konings
Author-Person: pko61
Author-Name: Matthew J. Slaughter
Note: ITI
Number: 8809
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8809
File-URL: http://www.nber.org/papers/w8809.pdf
File-Format: application/pdf
Publication-Status: published as Budd, John W., Jozef Konings, and Matthew J. Slaughter. "Wages and International Rent Sharing in Multinational Firms." Review of Economics and Statistics 87, 1 (February 2005): 73-84.
Abstract: We use a unique firm-level panel data set of multinational parents and their foreign affiliates to analyze whether profits are shared across borders within multinational firms. Using both fixed-effects and generalized method-of-moments estimators, affiliate wage levels are estimated to respond to both affiliate and parent profitability. The elasticity of affiliate wages to parent profits per worker is approximately 0.03, which can explain over 20 percent of the observed variation in affiliate wages. These results reveal a previously ignored aspect of labor-market rent sharing. They also reveal an important micro-level linkage with potential macro-level implications. International rent sharing can transmit economic conditions across national borders, and can thereby provide an implicit cross-country risk-sharing mechanism.
Handle: RePEc:nbr:nberwo:8809
Template-Type: ReDIF-Paper 1.0
Title: Substance Use and Suicidal Behaviors Among Young Adults
Classification-JEL: I0
Author-Name: Sara Markowitz
Author-Person: pma138
Author-Name: Pinka Chatterji
Author-Person: pch732
Author-Name: Robert Kaestner
Author-Person: pka42
Author-Name: Dhaval Dave
Author-Person: pda245
Note: CH EH
Number: 8810
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8810
File-URL: http://www.nber.org/papers/w8810.pdf
File-Format: application/pdf
Publication-Status: published as Chatterji, Pinka, Dhaval Dave, Robert Kaestner and Sara Markowitz. “Alcohol Abuse and Suicide Attempts Among Youth—Correlation or Causation?” Economics and Human Biology 2, 2 (2004): 159-180.
Abstract: The purpose of this paper is to examine the causal impact of alcohol and illicit drug use on suicidal behaviors among college students. Every year, more American youth die from suicide than from all leading natural causes of death combined. Substance use has been identified as a leading risk factor in suicidal behaviors. We use instrumental variables to estimate a structural model of suicidal thoughts and attempts. A reduced form equation is also estimated which directly relates the determinants of alcohol and drug use to suicidal behaviors. Data come from the Core Institute's Alcohol and Drug Surveys of College Students. The results are consistent with a causal mechanism from alcohol and illicit drug consumption to suicide thoughts and attempts.
Handle: RePEc:nbr:nberwo:8810
Template-Type: ReDIF-Paper 1.0
Title: Monitoring, Motivation and Management: The Determinants of Opportunistic Behavior in a Field Experiment
Classification-JEL: D2; J2
Author-Name: Daniel Nagin
Author-Name: James Rebitzer
Author-Person: pre77
Author-Name: Seth Sanders
Author-Name: Lowell Taylor
Author-Person: pta912
Note: LS
Number: 8811
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8811
File-URL: http://www.nber.org/papers/w8811.pdf
File-Format: application/pdf
Publication-Status: published as Daniel S. Nagin & James B. Rebitzer & Seth Sanders & Lowell J. Taylor, 2002. "Monitoring, Motivation, and Management: The Determinants of Opportunistic Behavior in a Field Experiment," American Economic Review, American Economic Association, vol. 92(4), pages 850-873, September.
Abstract: Economic models of incentives in employment relationships are based on a specific theory of motivation. Employees are 'rational cheaters,' who anticipate the consequences of their actions and shirk when the perceived marginal benefit exceeds the marginal cost. Managers respond to this decision calculus by implementing monitoring and incentive pay practices that lessen the attraction of shirking. This 'rational cheater model' is not the only model of opportunistic behavior, and indeed is viewed skeptically by human resource practitioners and by many non-economists who study employment relationships. We investigate the 'rational cheater model' using data from a double-blind field experiment that allows us to observe the effect of experimentally-induced variations in monitoring on employee opportunism. The experiment is unique in that it occurs in the context of an ongoing employment relationship, i.e., with the firm's employees producing output as usual under the supervision of their front-line managers. The results indicate that a significant fraction of employees behave roughly in ccordance with the 'rational cheater model.' We also find, however, that a substantial proportion of employees do not respond to manipulations in the monitoring rate. This heterogeneity is related to employee assessments about their general treatment by the emp loyer.
Handle: RePEc:nbr:nberwo:8811
Template-Type: ReDIF-Paper 1.0
Title: Medicaid Managed Care: Effects on Children's Medicaid Coverage and Utilization
Classification-JEL: I38; I11
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: John Fahr
Note: CH EH PE
Number: 8812
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8812
File-URL: http://www.nber.org/papers/w8812.pdf
File-Format: application/pdf
Publication-Status: published as Currie, Janet and John Fahr. "Medicaid Managed Care: Effects On Children's Medicaid Coverage And Utilization," Journal of Public Economics, 2005, v89(1,Jan), 85-108.
Abstract: We use data from the National Health Interview Surveys to measure the effects of the growth of Medicaid managed care on children. We examine both the probability that individual children were Medicaid-covered and their utilization of care. We find that managed care penetration has significant effects on the composition of the Medicaid caseload. Poor white and Hispanic children are more likely to be enrolled in Medicaid where Medicaid managed care organizations are more prevalent, whereas black children are less likely to be enrolled. Also, toddlers are less likely to be enrolled than school age children. These lower enrollment rates are linked to increases in the numbers of black children and toddlers who go without any doctor visits in a year. Our results are consistent with cream-skimming by Medicaid managed care organizations along the lines of race and age.
Handle: RePEc:nbr:nberwo:8812
Template-Type: ReDIF-Paper 1.0
Title: Abortion as Insurance
Classification-JEL: I18; J13
Author-Name: Phillip B. Levine
Author-Person: ple553
Author-Name: Douglas Staiger
Author-Person: pst466
Note: CH EH
Number: 8813
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8813
File-URL: http://www.nber.org/papers/w8813.pdf
File-Format: application/pdf
Abstract: This paper views abortion access as an insurance policy that protects women from unwanted pregnancies. Within this framework, we present a theoretical model where greater access provides value in the form of insurance against unwanted births and also reduces the incentive to avoid pregnancy. This model predicts that legalized abortion should lead to a reduction in the likelihood of giving birth. It also predicts that if abortion access becomes relatively inexpensive (including both monetary and psychic costs), then pregnancies would rise and births would remain unchanged or may even rise as well. We review the evidence on the impact of changes in abortion policy mainly from the United States and find support for both predictions. Then we test these hypotheses using recent changes in abortion policy in several Eastern European countries. We find that countries which changed from very restrictive to liberal abortion laws experienced a large reduction in births, highlighting the insurance value. Changes from modest restrictions to abortion available upon request, however, led to no such change in births despite large increases in abortions, indicating that pregnancies rose as well. These findings are consistent with the incentive effect implications of our model.
Handle: RePEc:nbr:nberwo:8813
Template-Type: ReDIF-Paper 1.0
Title: Partnership and Hold-Up in Early America
Classification-JEL: L14; L22
Author-Name: Howard Bodenhorn
Author-Person: pbo547
Note: DAE
Number: 8814
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8814
File-URL: http://www.nber.org/papers/w8814.pdf
File-Format: application/pdf
Abstract: Williamson (1985) argues that individuals form firms with specific internal governance structures to mitigate certain types of opportunistic behavior that may inhibit efficient contracting between independent contractors. But once firms are established, the individuals that comprise them may still act opportunistically. This paper investigates a specific historical case: the partnership in early America. Partnerships grappled with information-based problems, such as adverse selection, moral hazard, as well as ex ante and ex post contractual opportunism, including hold-up. Asset specificity and imperfect contracts made partnerships vulnerable to hold-up, especially when one partner invested in a sunk asset that enhanced the productivity of all other partners. This was a particular problem facing existing partners when they invited a new partner into their firm. Empirical evidence from the mid-nineteenth century suggests that individuals mitigated the effects of pre- and post-contractual opportunism by forming partnerships with others of similar age, productivity, and capital. This finding brings the traditional interpretation of partnerships as mentor-prot‚g‚ relationships into question.
Handle: RePEc:nbr:nberwo:8814
Template-Type: ReDIF-Paper 1.0
Title: Human Capital Formation with Endogenous Credit Constraints
Classification-JEL: I2; E0
Author-Name: Lance Lochner
Author-Person: plo31
Author-Name: Alexander Monge-Naranjo
Author-Person: pmo730
Note: LS
Number: 8815
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8815
File-URL: http://www.nber.org/papers/w8815.pdf
File-Format: application/pdf
Abstract: We study the accumulation of human capital and the behavior of consumption and earnings in a life cycle equilibrium model with endogenous borrowing constraints. Constraints arise endogenously from the inalienability of human capital and the limited punishments that creditors are able to impose on those who default. The endogeneity of borrowing constraints produces a number of interesting relationships. First, efficient borrowing limits are functions of individual observable characteristics and choices, especially ability and human capital investments. The connection between human capital investments and borrowing limits creates additional incentives to invest beyond those present in models with exogenous constraints. Second, government policies affect the incentives to default and, hence, the limits on private borrowing. As opposed to exogenous constraint models, additional subsidies for investment in human capital should be accompanied by increases in credit, since borrowers are more able to re-pay higher debts. Finally, general equilibrium considerations have an additional role, since borrowing limits depend on the returns to physical and human capital. We calibrate the model to U.S. data and are able to replicate key features of the economy regarding human capital investment, earnings, and consumption. The calibrated model is then used to study the steady state impacts of changes in government policies. We find that changes in bankruptcy laws can have sizeable effects on the accumulation of both human and physical capital. At the aggregate level, general equilibrium forces are important and can reverse the results predicted in partial equilibrium. Government subsidies to education (financed with a proportional tax on earnings) cause lenders to increase credit limits and substantially increase aggregate human and physical capital. Most importantly, we show that the implications of our model are very different from those of standard exogenous constraint models. For example, the effects of increases in initial wealth and government subsidies on investment are substantially greater in our model than in a similar model with exogenous constraints.
Handle: RePEc:nbr:nberwo:8815
Template-Type: ReDIF-Paper 1.0
Title: Market Liquidity as a Sentiment Indicator
Classification-JEL: G12; G14
Author-Name: Malcolm Baker
Author-Person: pba735
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: AP CF
Number: 8816
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8816
File-URL: http://www.nber.org/papers/w8816.pdf
File-Format: application/pdf
Publication-Status: published as Baker, Malcolm & Stein, Jeremy C., 2004. "Market liquidity as a sentiment indicator," Journal of Financial Markets, Elsevier, vol. 7(3), pages 271-299, June.
Abstract: We build a model that helps explain why increases in liquidity - such as lower bid-ask spreads, a lower price impact of trade, or higher share turnover - predict lower subsequent returns in both firm-level and aggregate data. The model features a class of irrational investors, who underreact to the information contained in order flow, thereby boosting liquidity. In the presence of short-sales constraints, unusually high liquidity is a symptom of the fact that the market is currently dominated by these irrational investors, and hence is overvalued. This theory can also explain how managers might successfully time the market for seasoned equity offerings (SEOs), by simply following a rule of thumb that involves issuing when the SEO market is particularly liquid. Empirically, we find that: i) aggregate measures of equity issuance and share turnover are highly correlated; yet ii) in a multiple regression, both have incremental predictive power for future equal-weighted market returns.
Handle: RePEc:nbr:nberwo:8816
Template-Type: ReDIF-Paper 1.0
Title: Health Insurance, Labor Supply, and Job Mobility: A Critical Review of the Literature
Classification-JEL: I12; J32
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Brigitte C. Madrian
Author-Person: pma384
Note: AG EH LS PE
Number: 8817
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8817
File-URL: http://www.nber.org/papers/w8817.pdf
File-Format: application/pdf
Publication-Status: published as McLaughlin, Catherine (ed.) Health Policy and the Uninsured. Washington, D.C.: Urban Institute Press, 2004.
Abstract: This paper provides a critical review of the empirical literature on the relationship between health insurance, labor supply, and job mobility. We review over 50 papers on this topic, almost exclusively written in the last 10 years. We reach five conclusions. First, there is clear and unambiguous evidence that health insurance is a central determinant of retirement decisions. Second, there is fairly clear evidence that health insurance is not a major determinant of the labor supply and welfare exit decisions of low income mothers. Third, there is fairly compelling evidence that health insurance is an important factor in the labor supply decisions of secondary earners. Fourth, while there is some division in the literature, the most convincing evidence suggests that health insurance plays an important role in job mobility decisions. Finally, there is virtually no evidence in the literature on the welfare implications of these results. We present some rudimentary calculations which suggest that the welfare costs of job lock are likely to be modest. Our general conclusion is that health insurance has important effects on both labor force participation and job choice, but that it is not clear whether or not these effects results in large losses of either welfare or efficiency.
Handle: RePEc:nbr:nberwo:8817
Template-Type: ReDIF-Paper 1.0
Title: The Health of Nations: The Contribution of Improved Health to Living Standards
Classification-JEL: I1; N1
Author-Name: William D. Nordhaus
Author-Person: pno115
Note: EFG EH PR
Number: 8818
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8818
File-URL: http://www.nber.org/papers/w8818.pdf
File-Format: application/pdf
Publication-Status: published as Nordhaus, William D. "Irving Fisher And The Contribution Of Improved Longevity To Living Standards," American Journal of Economics and Sociology, 2005, v64(1,Jan), 367-392.
Abstract: Nations generally measure their economic performance using the yardstick of national output and income. It is not widely recognized, however, that conventional measures of national income and output exclude the value of improvements in the health status of the population. The present study develops a methodology and presents preliminary estimates of how standard economic measures would change if they adequately reflected improvements in health status. The study first discusses the theory of the measurement of national income, examines some of the shortcomings of traditional concepts, and proposes a new concept called 'health income' that can be used to incorporate improvements in health status. The study next discusses how the proposed measure fits into existing theories for measuring and valuing consumption and health status. The study applies the new concepts to data for the United States over the twentieth century and concludes that accounting for improvements in the health status would substantially increase the estimated improvement in economic welfare for the U.S. over the twentieth century.
Handle: RePEc:nbr:nberwo:8818
Template-Type: ReDIF-Paper 1.0
Title: Innovating Firms and Aggregate Innovation
Classification-JEL: L11; O31
Author-Name: Tor Jakob Klette
Author-Name: Samuel Kortum
Author-Person: pko74
Note: PR
Number: 8819
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8819
File-URL: http://www.nber.org/papers/w8819.pdf
File-Format: application/pdf
Publication-Status: published as Tor Jakob Klette & Samuel Kortum, 2004. "Innovating Firms and Aggregate Innovation," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 986-1018, October.
Abstract: We develop a parsimonious model of innovating firms rich enough to confront firm-level evidence. It captures the dynamic behavior of individual heterogenous firms, describes the evolution of an industry with simultaneous entry and exit, and delivers a general equilibrium model of technological change. While unifying the theoretical analysis of firms, industries, and the aggregate economy, the model yields insights into empirical work on innovating firms. It accounts for the persistence over time of firms' R&D investment, the concentration of R&D among incumbent firms, and the link between R&D and patenting. Furthermore, it explains why R&D as a fraction of revenues is strongly related to firm productivity yet largely unrelated to firm size or growth.
Handle: RePEc:nbr:nberwo:8819
Template-Type: ReDIF-Paper 1.0
Title: Can Equity and Efficiency Complement Each Other?
Classification-JEL: D3; I3
Author-Name: Rebecca M. Blank
Author-Person: pbl56
Note: LS PE
Number: 8820
Creation-Date: 2002-02
Order-URL: http://www.nber.org/papers/w8820
File-URL: http://www.nber.org/papers/w8820.pdf
File-Format: application/pdf
Publication-Status: published as Blank, Rebecca M. "Can Equity And Efficiency Complement Each Other?" Labour Economics, September 2002, 9(4): 451-468
Abstract: Economists tend to assume that redistributive transfers increase equity but cause a loss in efficiency, the so-called 'leaky bucket' effect. This paper explores situations where efficiency losses are small or where equity and efficiency might even complement each other. A simple model identifies key parameters that cause leaky buckets and which policy can affect. Three situations are discussed where the equity/efficiency tradeoff may be low: When transfers go to populations with no capacity to change their behavior; when transfers go to programs that limit efficiency losses through behavioral requirements; and when commodities are subsidized that function as long-term investments and create future income gains.
Handle: RePEc:nbr:nberwo:8820
Template-Type: ReDIF-Paper 1.0
Title: Implementing the Friedman Rule
Classification-JEL: E52
Author-Name: Peter N. Ireland
Author-Person: pir1
Note: ME
Number: 8821
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8821
File-URL: http://www.nber.org/papers/w8821.pdf
File-Format: application/pdf
Publication-Status: published as Ireland, Peter N. "Implementing The Friedman Rule," Review of Economic Dynamics, 2003, v6(1,Jan), 120-134.
Abstract: In cash-in-advance models, necessary and sufficient conditions for the existence of an equilibrium with zero nominal interest rates and Pareto optimal allocations place restrictions mainly on the very long-run, or asymptotic, behavior of the money supply. When these asymptotic conditions are satisfied, they leave the central bank with a great deal of flexibility to manage the money supply over any finite horizon. But what happens when these asymptotic conditions fail to hold? This paper shows that the central bank can still implement the Friedman rule if its actions are appropriately constrained in the short run.
Handle: RePEc:nbr:nberwo:8821
Template-Type: ReDIF-Paper 1.0
Title: Asset Pricing with Heterogeneous Consumers and Limited Participation: Empirical Evidence
Classification-JEL: G12; D91
Author-Name: Alon Brav
Author-Name: George M. Constantinides
Author-Person: pco144
Author-Name: Christopher C. Geczy
Author-Person: pge340
Note: AP
Number: 8822
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8822
File-URL: http://www.nber.org/papers/w8822.pdf
File-Format: application/pdf
Publication-Status: published as Alon Brav & George M. Constantinides & Christopher C. Geczy, 2002. "Asset Pricing with Heterogeneous Consumers and Limited Participation: Empirical Evidence," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 793-824, August.
Abstract: We present evidence that the equity premium and the premium of value stocks over growth stocks are explained in the 1982 1996 period with a stochastic discount factor (SDF) calculated as the weighted average of individual households' marginal rate of substitution with low and economically plausible values of the relative risk aversion (RRA) coefficient. Household consumption of non-durables and services is reconstructed from the CEX database. Since the above premia are not explained with a SDF calculated as the per capita marginal rate of substitution with low value of the RRA coefficient, the evidence supports the hypothesis of incomplete consumption insurance. We also present evidence is that a SDF calculated as the per capita marginal rate of substitution is better able to explain the equity premium and does so with a lower value of the RRA coefficient, as the definition of asset holders is tightened to recognize the limited participation of households in the capital market.
Handle: RePEc:nbr:nberwo:8822
Template-Type: ReDIF-Paper 1.0
Title: A Theory of the Informal Sector
Classification-JEL: H0; K4
Author-Name: Yoshiaki Azuma
Author-Name: Herschel I. Grossman
Note: EFG PE
Number: 8823
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8823
File-URL: http://www.nber.org/papers/w8823.pdf
File-Format: application/pdf
Publication-Status: published as Yoshiaki Azuma & Herschel I. Grossman, 2008. "A Theory Of The Informal Sector," Economics and Politics, Blackwell Publishing, vol. 20(1), pages 62-79, 03.
Abstract: In many countries, especially poor countries, a heavy burden of taxes, bribes, and bureaucratic hassles drives many producers into the informal sector. Is this situation explicable only as a consequence of either the ignorance or the ineptitude of the state authorities? On the contrary this paper shows that we can attribute the existence of a large informal sector to the fact that, because productive endowments contain important unobservable components, the state cannot adjust the amounts that it extracts from producers in the formal sector according to each producer's endowment. Given this fact we find that, if either the distribution of endowments is sufficiently inegalitarian or the production of private substitutes for public services is sufficiently easy, then the state would extract a large enough amount from producers in the formal sector that poorly endowed producers would choose to work in the informal sector. This result obtains both for a proprietary state, which maximizes its own net revenue, and for a hypothetical benevolent state, which would maximize the total net income of producers. But, we also find that a proprietary state would create an informal sector for a larger set of combinations of parameter values than would a hypothetical benevolent state.
Handle: RePEc:nbr:nberwo:8823
Template-Type: ReDIF-Paper 1.0
Title: Productivity and the Euro-Dollar Exchange Rate Puzzle
Classification-JEL: F31; F41
Author-Name: Ron Alquist
Author-Person: pal453
Author-Name: Menzie D. Chinn
Author-Person: pch129
Note: IFM
Number: 8824
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8824
File-URL: http://www.nber.org/papers/w8824.pdf
File-Format: application/pdf
Abstract: This paper documents the evidence for a productivity based model of the dollar/euro real exchange rate over the 1985-2001 period. We estimate cointegrating relationships between the real exchange rate, productivity, and the real price of oil using the Johansen (1988) and Stock-Watson (1993) procedures. We find that each percentage point in the US-Euro area productivity differential results in a five percentage point real appreciation of the dollar. This finding is robust to the estimation methodology, the variables included in the regression, and the sample period. We conjecture that productivity-based models cannot explain the observed patterns with the standard set of assumptions, and describe a case in which the model can be reconciled with the observed data.
Handle: RePEc:nbr:nberwo:8824
Template-Type: ReDIF-Paper 1.0
Title: Is the Threat of Reemployment Services More Effective than the Services Themselves? Experimental Evidence from the UI System
Classification-JEL: H0; J6
Author-Name: Dan A. Black
Author-Person: pbl23
Author-Name: Jeffrey A. Smith
Author-Person: psm73
Author-Name: Mark C. Berger
Author-Name: Brett J. Noel
Note: LS PE
Number: 8825
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8825
File-URL: http://www.nber.org/papers/w8825.pdf
File-Format: application/pdf
Publication-Status: published as Black, Dan A., Jeffrey A. Smith, Mark C. Berger and Brett J. Noel. "Is The Threat Of Reemployment Services More Effective Than The Services Themselves? Evidence From Random Assignment In The UI System," American Economic Review, 2003, v93(4,Sep), 1313-1327.
Abstract: This paper examines the effect of the Worker Profiling and Reemployment Services (WPRS) system. This program 'profiles' UI claimants to determine their probability of benefit exhaustion (or expected spell duration) and then provides mandatory employment and training services to claimants with high predicted probabilities (or long expected spells). Using a unique experimental design, we estimate that the WPRS program reduces mean weeks of UI benefit receipt by about 2.2 weeks, reduces mean UI benefits received by about $143, and increases subsequent earnings by over $1,050. Much (but not all) of the effect results from a sharp increase in early exits from UI in the experimental treatment group compared to the experimental control group. These exits coincide with claimants finding out about their mandatory program obligations rather than with actual receipt of employment and training services. While the program targets those with the highest expected durations of UI benefit receipt, we find no evidence that these claimants benefit disproportionately from the program. In addition, we find strong evidence against the 'common effect' assumption, as the estimated treatment effect differs dramatically across quantiles of the untreated outcome distribution. Overall, the profiling program appears to successfully reduce the moral hazard associated with the UI program without increasing the take-up rate.
Handle: RePEc:nbr:nberwo:8825
Template-Type: ReDIF-Paper 1.0
Title: Rational Asset Prices
Classification-JEL: G1; E2
Author-Name: George M. Constantinides
Author-Person: pco144
Note: AP
Number: 8826
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8826
File-URL: http://www.nber.org/papers/w8826.pdf
File-Format: application/pdf
Publication-Status: published as Constantinides, George M. "Presidential Address: Rational Asset Prices," Journal of Finance, 2002, v57(4,Aug), 1567-1591.
Abstract: The mean, co-variability, and predictability of the return of different classes of financial assets challenge the rational economic model for an explanation. The unconditional mean aggregate equity premium is almost seven percent per year and remains high after adjusting downwards the sample mean premium by introducing prior beliefs about the stationarity of the price-dividend ratio and the (non) forecastability of the long-term dividend growth and price-dividend ratio. Recognition that idiosyncratic income shocks are uninsurable and concentrated in recessions contributes toward an explanation. Also borrowing constraints over the investors' life cycle that shift the stock market risk to the saving middle-aged consumers contribute toward an explanation.
Handle: RePEc:nbr:nberwo:8826
Template-Type: ReDIF-Paper 1.0
Title: Trade Openness and Investment Instability
Classification-JEL: F4; E3
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Author-Name: Tarek Coury
Note: ITI
Number: 8827
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8827
File-URL: http://www.nber.org/papers/w8827.pdf
File-Format: application/pdf
Publication-Status: published as Razin, Assaf, Efraim Sadka and Tarek Coury. “Trade openness, investment instability, and terms-oftrade volatility.” Journal of International Economics 59, 2 (2003).
Abstract: In the presence of lumpy investment cost of adjustment, globalization may have non-conventional effects on the level of investment and its cyclical behavior. Trade openness may lead to a discrete 'jump' in the level of investment, as it may trigger a discrete change in the terms of trade. Such a shift creates a sizeable boost in aggregate investment. But trade openness may also lead to boom-bust cycles of investment (namely, multiple equilibrium) supported by self-validating expectations. In this sense globalization destabilizes the economy. There can be substantial gains from globalization in the investment-boom equilibrium. However, gains could be small, or negative, in the investment-bust equilibrium.
Handle: RePEc:nbr:nberwo:8827
Template-Type: ReDIF-Paper 1.0
Title: Global Transmission of Interest Rates: Monetary Independence and Currency Regime
Classification-JEL: F31; F32
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Author-Name: Sergio L. Schmukler
Author-Person: psc64
Author-Name: Luis Serven
Author-Person: pse75
Note: IFM
Number: 8828
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8828
File-URL: http://www.nber.org/papers/w8828.pdf
File-Format: application/pdf
Publication-Status: published as Frankel, Jeffrey, Sergio L. Schmukler and Luis Serven. "Global Transmission Of Interest Rates: Monetary Independence And Currency Regime," Journal of International Money and Finance, 2004, v23(5,Sep), 701-733.
Abstract: Using a large sample of developing and industrialized economies during 1970-1999, this paper explores whether the choice of exchange rate regime affects the sensitivity of local interest rates to international interest rates. In most cases, we cannot reject full transmission of international interest rates in the long run, even for countries with floating regimes. Only large industrial countries can benefit, or choose to benefit, from independent monetary policy. However, short-run effects differ across regimes. Dynamic estimates show that interest rates of countries with more flexible regimes adjust more slowly to changes in international rates.
Handle: RePEc:nbr:nberwo:8828
Template-Type: ReDIF-Paper 1.0
Title: Tax Incidence
Classification-JEL: H22
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Gilbert E. Metcalf
Note: PE
Number: 8829
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8829
File-URL: http://www.nber.org/papers/w8829.pdf
File-Format: application/pdf
Publication-Status: published as Fullerton, Don & Metcalf, Gilbert E., 2002. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 26, pages 1787-1872 Elsevier.
Abstract: This chapter reviews the concepts, methods, and results of studies that analyze the incidence of taxes. The purpose of such studies is to determine how the burden of a particular tax is allocated among consumers through higher product prices, workers through a lower wage rate, or other factors of production through lower rates of return to those factors. The methods might involve simple partial equilibrium models, analytical general equilibrium models, or computable general equilibrium models. We review partial equilibrium models, where the burden of a tax is shown to depend on the elasticity of supply relative to the elasticity of demand. In particular, we consider partial equilibrium models with imperfect competition. Turning to a general equilibrium setting, we review the classic model of Harberger (1962) and illustrate its generality by applying it to a number of different contexts. We also use this model to demonstrate the practicality of analytical general equilibrium modeling through the use of log linearization techniques. We then turn to dynamic models to show how a tax on capital affects capital accumulation, future wage rates, and overall burdens. Such models might also provide analytical results or computational results. We also focus on relatively recent models that calculate the lifetime incidence of taxes, with both intratemporal and intertemporal redistribution. Finally, the chapter reviews the use of incidence methods and results in the policy process.
Handle: RePEc:nbr:nberwo:8829
Template-Type: ReDIF-Paper 1.0
Title: Was Jackson Pollock the Greatest Modern American Painter? A Quantitative Investigation
Author-Name: David W. Galenson
Note: LS
Number: 8830
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8830
File-URL: http://www.nber.org/papers/w8830.pdf
File-Format: application/pdf
Publication-Status: published as David W. Galenson, 2002. "Was Jackson Pollock the Greatest Modern American Painter?: A Quantitative Investigation," Historical Methods: A Journal of Quantitative and Interdisciplinary History, vol 35(3), pages 117-128.
Abstract: A survey of the illustrations in textbooks of modern art demonstrates that scholars do consider Jackson Pollock the most important modern American painter, but not by a wide margin over Jasper Johns and Andy Warhol, the leading artists of the following generation. The distribution of the illustrations furthermore reveals a sharp contrast in the careers of the major artists of these two generations: the Abstract Expressionists produced their most important contributions late in their careers, whereas their successors innovated early in theirs. This difference resulted from the differing approaches of the artists, for the Abstract Expressionists were experimental innovators, who developed new visual images by a process of trial and error, while the leading artists of the 1960s were conceptual innovators, whose work embodied new ideas.
Handle: RePEc:nbr:nberwo:8830
Template-Type: ReDIF-Paper 1.0
Title: Economic Backwardness in Political Perspective
Classification-JEL: H2; N10
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: James A. Robinson
Author-Person: pro179
Note: EFG
Number: 8831
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8831
File-URL: http://www.nber.org/papers/w8831.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron and James Robinson. "Economic Backwardness in Political Perspective." American Political Science Review 100 (February 2006): 115-131.
Abstract: We construct a simple model where political elites may block technological and institutional development, because of a 'political replacement effect'. Innovations often erode elites' incumbency advantage, increasing the likelihood that they will be replaced. Fearing replacement, political elites are unwilling to initiate change, and may even block economic development. We show that elites are unlikely to block development when there is a high degree of political competition, or when they are highly entrenched. It is only when political competition is limited and also their power is threatened that elites will block development. We also show that such blocking is more likely to arise when political stakes are higher, and that external threats may reduce the incentives to block. We argue that this model provides an interpretation for why Britain, Germany and the U.S. industrialized during the nineteenth century, while the landed aristocracy in Russia and Austria-Hungary blocked development.
Handle: RePEc:nbr:nberwo:8831
Template-Type: ReDIF-Paper 1.0
Title: Cross-Country Inequality Trends
Classification-JEL: J30; J31
Author-Name: Daron Acemoglu
Author-Person: pac16
Note: EFG LS PR
Number: 8832
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8832
File-URL: http://www.nber.org/papers/w8832.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron. "Cross-Country Inequality Trends," Economic Journal, 2003, v113(485,Feb), F121-F149.
Abstract: The economics profession has made considerable progress in understanding the increase in wage inequality in the U.S. and the UK over the past several decades, but currently lacks a consensus on why inequality did not increase, or increased much less, in (continental) Europe over the same time period. I review the two most popular explanations for these differential trends: that relative supply of skills increased faster in Europe, and that European labor market institutions prevented inequality from increasing. I argue that these two explanations go some way towards accounting for the differential cross-country inequality trends, but do not provide an entirely satisfactory explanation. In addition, it appears that relative demand for skills increased differentially across countries. Motivated by this reasoning, I develop a simple theory where labor market institutions creating wage compression in Europe also encourage more investment in technologies increasing the productivity of less-skilled workers, thus implying less skill-biased technical change in Europe than in the U.S.
Handle: RePEc:nbr:nberwo:8832
Template-Type: ReDIF-Paper 1.0
Title: Direct or Indirect Tax Instruments for Redistribution: Short-run versus Long-run
Classification-JEL: H21; H23
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE
Number: 8833
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8833
File-URL: http://www.nber.org/papers/w8833.pdf
File-Format: application/pdf
Publication-Status: published as Saez, Emmanuel. "Direct Or Indirect Tax Instruments For Redistribution: Short-Run Versus Long-Run," Journal of Public Economics, 2004, v88(3-4,Mar), 507-518.
Abstract: Optimal tax theory has shown that, under weak assumptions, indirect taxation such as production subsidies, tariffs, or differentiated commodity taxation, are sub-optimal and that redistribution should be achieved solely with the direct income tax. However, these important results of optimal tax theory, namely production efficiency and uniform commodity taxation under non-linear income taxation, have been shown to break down when labor taxation is based on income only and when there is imperfect substitution of labor types in the production function. These results in favor of indirect tax instruments are valid in the short-run when skills are exogenous and individuals cannot move from occupation to occupation. In the long-run, it is more realistic to assume that individuals choose their occupation based on the relative after-tax rewards. This paper shows that, in that context, production efficiency and the uniform commodity tax result are restored. Therefore, in a long-run context, direct income taxation should be preferred to indirect tax instruments to raise revenue and achieve redistribution.
Handle: RePEc:nbr:nberwo:8833
Template-Type: ReDIF-Paper 1.0
Title: Do Bilateral Tax Treaties Promote Foreign Direct Investment?
Classification-JEL: F21; F23
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: Ronald B. Davies
Author-Person: pda64
Note: ITI PE
Number: 8834
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8834
File-URL: http://www.nber.org/papers/w8834.pdf
File-Format: application/pdf
Publication-Status: published as Bruce A. Blonigen & Ronald B. Davies, 2004. "The Effects of Bilateral Tax Treaties on U.S. FDI Activity," International Tax and Public Finance, Springer, vol. 11(5), pages 601-622, 09.
Publication-Status: published as Hartigan, J. (ed.) Handbook of International Trade, Volume II: Economic and Legal Analysis of Laws and Institutions. Oxford, U.K. and Cambridge, MA: Blackwell Publishers, 2005.
Abstract: We explore the impact of bilateral tax treaties on foreign direct investment using data from OECD countries over the period 1982-1992. We find that recent treaty formation does not promote new investment, contrary to the common expectation. For certain specifications we find that treaty formation may actually reduce investment as predicted by arguments suggesting treaties are intended to reduce tax evasion rather than promote foreign investment.
Handle: RePEc:nbr:nberwo:8834
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Zoning on Housing Affordability
Classification-JEL: R
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Joseph Gyourko
Author-Person: pgy3
Note: PE
Number: 8835
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8835
File-URL: http://www.nber.org/papers/w8835.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. and Joseph Gyourko. "The Impact Of Building Restrictions On Housing Affordability," FRB New York - Economic Policy Review, 2003, v9(2,Jun), 21-39.
Abstract: Does America face an affordable housing crisis and, if so, why? This paper argues that in much of America the price of housing is quite close to the marginal, physical costs of new construction. The price of housing is significantly higher than construction costs only in a limited number of areas, such as California and some eastern cities. In those areas, we argue that high prices have little to do with conventional models with a free market for land. Instead, our evidence suggests that zoning and other land use controls, play the dominant role in making housing expensive.
Handle: RePEc:nbr:nberwo:8835
Template-Type: ReDIF-Paper 1.0
Title: Exploring the Racial Gap in Infant Mortality Rates, 1920-1970
Classification-JEL: I12; J15
Author-Name: William J. Collins
Author-Person: pco315
Author-Name: Melissa A. Thomasson
Author-Person: pth24
Note: CH EH
Number: 8836
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8836
File-URL: http://www.nber.org/papers/w8836.pdf
File-Format: application/pdf
Publication-Status: published as Collins, William J. and Melissa A. Thomasson. "The Declining Contribution Of Socioeconomic Disparities To The Racial Gap In Infant Mortality Rates, 1920-1970," Southern Economic Journal, 2004, v70(4,Apr), 746-776.
Abstract: This paper examines the racial gap in infant mortality rates from 1920 to 1970. Using state-level panel data with information on income, urbanization, women's education, and physicians per capita, we can account for a large portion of the racial gap in infant mortality rates between 1920 and 1945, but a smaller portion thereafter. We re-examine the post-war period in light of trends in birth weight, smoking, air pollution, breast-feeding, insurance, and hospital births.
Handle: RePEc:nbr:nberwo:8836
Template-Type: ReDIF-Paper 1.0
Title: Economic and Financial Crises in Emerging Market Economies: Overview of Prevention and Management
Classification-JEL: F3; F4
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: IFM ME PE
Number: 8837
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8837
File-URL: http://www.nber.org/papers/w8837.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin (ed.) Economic and financial crises in emerging market economies, NBER Conference Report series. Chicago and London: University of Chicago Press, 2003.
Abstract: This is the introductory chapter to an NBER conference volume that examined the lessons to be drawn from the financial and currency crises of the late 1990s. The paper does not attempt to summarize the specific content of that meeting but provides the author's personal conclusions about crisis prevention and management. The first part of the paper deals with policies of the emerging market economies that affect the likelihood of crises, including exchange rate regimes, capital account convertibility, foreign exchange liabilities and reserves, domestic credit structure, and financial supervision. The paper then considers policies of industrial countries that affect the risk of crises in emerging market economies, including exchange rate instability, interest rates, banking supervision, trade policy, and the provision of a lender of last resort facility. The second half of the paper deals with the way that the crises were managed by the IMF and attempts to answer the following questions: (1) Have the crises been resolved, permitting the crisis countries to return to solid economic growth and to achieve renewed access to international capital markets? (2) Did the IMF stabilization policies resolve the crisis with as little economic pain as possible? (3) Did the agreed structural reforms actually occur and, if so, were they successful? (4) How did the experience of the crisis countries affect the incentives of lenders, borrowers, and countries facing crises in the future? (5) Were the actions of the IMF politically legitimate for an international agency? (6) What were the political consequences of the crises and the policies that followed?
Handle: RePEc:nbr:nberwo:8837
Template-Type: ReDIF-Paper 1.0
Title: Dollarization: Analytical Issues
Classification-JEL: E42; F41
Author-Name: Roberto Chang
Author-Person: pch80
Author-Name: Andres Velasco
Note: IFM
Number: 8838
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8838
File-URL: http://www.nber.org/papers/w8838.pdf
File-Format: application/pdf
Publication-Status: published as Sturzenegger, Federico and Eduardo Levy-Yeyati (eds.) Dollarization. Cambridge, MA: MIT Press, 2002.
Abstract: This paper discusses major analytical aspects of dollarization and their practical implications. We develop a simple model to stress that dollarization implies the loss of independent monetary policy and of seigniorage, yet the significance of such losses can only be evaluated in conjunction with assumptions about the policymaking process. If the government is benevolent and has no credibility problems, dollarization causes a fall in welfare, which can be measured by the implied seigniorage loss or using Mundellian optimal currency area criteria. However, outcomes are rather different if credibility is absent and dollarization can serve as a commitment device: the welfare impact of dollarization is ambiguous, and seigniorage measures and Mundellian criteria may be misleading indicators of the true cost of dollarization. We also evaluate other implications of dollarization, such as those related to last resort lending and financial stability.
Handle: RePEc:nbr:nberwo:8838
Template-Type: ReDIF-Paper 1.0
Title: The Fed and Interest Rates: A High-Frequency Identification
Classification-JEL: E4; E5
Author-Name: John H. Cochrane
Author-Person: pco57
Author-Name: Monika Piazzesi
Author-Person: ppi37
Note: AP EFG ME
Number: 8839
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8839
File-URL: http://www.nber.org/papers/w8839.pdf
File-Format: application/pdf
Publication-Status: published as Cochrane, John H. and Monica Piazzesi. "The Fed And Interest Rates - A High-Frequency Identification," American Economic Review, 2002, v92(2,May), 90-91.
Abstract: We measure monetary policy shocks as changes in the Fed funds target rate that surprise bond markets in daily data. These shock series avoid the omitted variable, time-varying parameter, and orthogonalization problem of monthly VARs, and do not impose the expectations hypothesis. We find surprisingly large and persistent responses of bond yields to these shocks. 10 year rates rise as much as 8/10 of a percent to a one percent target shock. The usual view that monetary policy only temporarily raises long term rates and influences inflation would lead one to predict a negative long rate response.
Handle: RePEc:nbr:nberwo:8839
Template-Type: ReDIF-Paper 1.0
Title: Removing the Veil of Ignorance in Assessing the Distributional Impacts of Social Policies
Classification-JEL: I28; D33
Author-Name: Pedro Carneiro
Author-Person: pca130
Author-Name: Karsten T. Hansen
Author-Name: James J. Heckman
Note: CH LS PE ED
Number: 8840
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8840
File-URL: http://www.nber.org/papers/w8840.pdf
File-Format: application/pdf
Publication-Status: published as Carneiro, Pedro, Karsten T. Hansen, and James J. Heckman. "Removing the Veil of Ignorance in Assessing the Distributional Impacts of Social Policies." Swedish Economic Policy Review 8, 2 (Fall 2001): 273-301.
Abstract: This paper summarizes our recent research on evaluating the distributional consequences of social programs. This research advances the economic policy evaluation literature beyond estimating assorted mean impacts to estimate distributions of outcomes generated by different policies and determine how those policies shift persons across the distributions of potential outcomes produced by them. Our approach enables analysts to evaluate the distributional effects of social programs without invoking the 'Veil of Ignorance' assumption often used in the literature in applied welfare economics. Our methods determine which persons are affected by a given policy, where they come from in the ex-ante outcome distribution and what their gains are. We apply our methods to analyze two proposed policy reforms in American education. These reforms benefit the middle class and not the poor.
Handle: RePEc:nbr:nberwo:8840
Template-Type: ReDIF-Paper 1.0
Title: How Much Should We Trust Differences-in-Differences Estimates?
Classification-JEL: C10; C13
Author-Name: Marianne Bertrand
Author-Person: pbe697
Author-Name: Esther Duflo
Author-Person: pdu166
Author-Name: Sendhil Mullainathan
Author-Person: pmu103
Note: CH LS PE
Number: 8841
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8841
File-URL: http://www.nber.org/papers/w8841.pdf
File-Format: application/pdf
Publication-Status: published as Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
Abstract: Most Difference-in-Difference (DD) papers rely on many years of data and focus on serially correlated outcomes. Yet almost all these papers ignore the bias in the estimated standard errors that serial correlation introduce4s. This is especially troubling because the independent variable of interest in DD estimation (e.g., the passage of law) is itself very serially correlated, which will exacerbate the bias in standard errors. To illustrate the severity of this issue, we randomly generate placebo laws in state-level data on female wages from the Current Population Survey. For each law, we use OLS to compute the DD estimate of its 'effect' as well as the standard error for this estimate. The standard errors are severely biased: with about 20 years of data, DD estimation finds an 'effect' significant at the 5% level of up to 45% of the placebo laws. Two very simple techniques can solve this problem for large sample sizes. The first technique consists in collapsing the data and ignoring the time-series variation altogether; the second technique is to estimate standard errors while allowing for an arbitrary covariance structure between time periods. We also suggest a third technique, based on randomization inference testing methods, which works well irrespective of sample size. This technique uses the empirical distribution of estimated effects for placebo laws to form the test distribution.
Handle: RePEc:nbr:nberwo:8841
Template-Type: ReDIF-Paper 1.0
Title: Testing Trade Theory in Ohlin's Time
Classification-JEL: F11; N70
Author-Name: Antoni Estevadeordal
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE IFM ITI
Number: 8842
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8842
File-URL: http://www.nber.org/papers/w8842.pdf
File-Format: application/pdf
Publication-Status: published as Findlay, R., L. Jonung, and M. Lundahl (eds.) Bertil Ohlin: A Centennial Celebration, 1899–1999. Cambridge: MIT Press, 2002.
Abstract: An empirical tradition in international trade seeks to establish whether the predictions of factor abundance theory match present-day data. In the analysis of goods trade and factor endowments, mildly encouraging results were found by Leamer et al. But ever since the appearance of Leontief's paradox, the measured factor content of trade has always been found to be far smaller than its predicted magnitude in the Heckscher-Ohlin-Vanek framework, the so-called 'missing trade' mystery. We wonder if this problem was there in the theory from the beginning. This seems like a fairer test of its creators' original enterprise. We apply contemporary tests to historical data on goods and factor trade from Ohlin's time. Our analysis is set 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. We find some support for the theory, but also encounter common problems. Our work thus complements the tests applied to today's data and informs our search for improved models of trade.
Handle: RePEc:nbr:nberwo:8842
Template-Type: ReDIF-Paper 1.0
Title: The Measure of Man and Older Age Mortality: Evidence from the Gould Sample
Classification-JEL: J11; I12
Author-Name: Dora L. Costa
Author-Person: pco358
Note: AG CH DAE LS
Number: 8843
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8843
File-URL: http://www.nber.org/papers/w8843.pdf
File-Format: application/pdf
Publication-Status: published as Costa, Dora L., 2004. "The Measure of Man and Older Age Mortality: Evidence from the Gould Sample," The Journal of Economic History, Cambridge University Press, vol. 64(01), pages 1-23, March.
Abstract: This paper documents differences in body size between white, black, and Indian mid-nineteenth century American men and investigates the socioeconomic and demographic determinants of frame size using a unique data set of Civil War soldiers. It finds that over time men have grown taller and heavier and have relatively less abdominal fat. Abdominal fat in young adulthood was an excellent predictor of older age mortality from ischemic heart disease or stroke. Changes in frame size explain roughly three-fifths of the mortality decline among white men between 1915 and 1988 and predict even sharper declines in older age mortality between 1988 and 2022.
Handle: RePEc:nbr:nberwo:8843
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Lending, Borrowing, and Anti-Smoking Policies on Cigarette Consumption by Teens
Classification-JEL: I0
Author-Name: Brett Katzman
Author-Name: Sara Markowitz
Author-Person: pma138
Author-Name: Kerry Anne McGeary
Author-Person: pmc116
Note: CH EH
Number: 8844
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8844
File-URL: http://www.nber.org/papers/w8844.pdf
File-Format: application/pdf
Abstract: A major factor contributing to smoking initiation and experimentation by teenagers is the ability to 'bum' cigarettes. Yet research until now has ignored the impact of a lending/borrowing market on the smoking decisions of teenagers. In this paper, we develop a theoretical model where smoking decisions are determined by an individual's utility maximization process that includes an incentive to lend cigarettes. Predictions from this model are tested using data from the Youth Risk Behavior Surveys that can distinguish between teens who primarily buy and those who primarily bum their cigarettes. We show the ways in which price and restrictions on smoking will impact the decision to buy or bum cigarettes, as well as the impact on the allocation of purchased cigarettes between those self-consumed and those lent to others. Key results indicate that as prices and restrictions increase, teenagers are less likely to be regular smokers who purchase cigarettes and are more likely to consume smaller quantities obtained via the lending market. The basic conclusions are that anti-smoking policies have significant effects on the quantity of cigarettes consumed by teens and that these policies can help reduce the number of teens that escalate from experimental to regular smoking.
Handle: RePEc:nbr:nberwo:8844
Template-Type: ReDIF-Paper 1.0
Title: Subsidizing the Stork: New Evidence on Tax Incentives and Fertility
Classification-JEL: H3; J1
Author-Name: Kevin Milligan
Author-Person: pmi14
Note: CH PE
Number: 8845
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8845
File-URL: http://www.nber.org/papers/w8845.pdf
File-Format: application/pdf
Publication-Status: published as Kevin Milligan, 2005. "Subsidizing the Stork: New Evidence on Tax Incentives and Fertility," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 539-555, 06.
Abstract: Variation in tax policy presents an opportunity to estimate the responsiveness of fertility to prices. This paper exploits the introduction of a pro-natalist transfer policy in the Canadian province of Quebec that paid up to C$8,000 to families having a child. I implement a quasi-experimental strategy by forming treatment and control groups defined by time, jurisdiction, and family type. This permits a triple-difference estimator to be implemented -- both on the program's introduction and cancellation. Furthermore, the incentive was available broadly, rather than to a narrow subset of the population as studied in the literature on AFDC and fertility. This provides a unique opportunity to investigate heterogeneous responses. I find a strong effect of the policy on fertility, and some evidence of a heterogeneous response that may help reconcile these results with the AFDC literature.
Handle: RePEc:nbr:nberwo:8845
Template-Type: ReDIF-Paper 1.0
Title: Globalization and Capital Markets
Classification-JEL: F2; F33
Author-Name: Maurice Obstfeld
Author-Person: pob13
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE IFM
Number: 8846
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8846
File-URL: http://www.nber.org/papers/w8846.pdf
File-Format: application/pdf
Publication-Status: published as Globalization and Capital Markets , Maurice Obstfeld, Alan M. Taylor. in Globalization in Historical Perspective, Bordo, Taylor, and Williamson. 2003
Abstract: The ebb and flow of international capital since the nineteenth century illustrates recurring difficulties, as well as the alternative perspectives from which policymakers have tried to confront them. This paper is devoted to documenting these vicissitudes quantitatively and explaining them. Economic theory and economic history together can provide useful insights into events of the past and deliver relevant lessons for today. We argue that theories of how international capital mobility has evolved must be understood within the framework of the basic policy trilemma constraining an open economy's choice of monetary regime.
Handle: RePEc:nbr:nberwo:8846
Template-Type: ReDIF-Paper 1.0
Title: Imperfect Contract Enforcement
Classification-JEL: F10; L14
Author-Name: James E. Anderson
Author-Person: pan2
Author-Name: Leslie Young
Note: ITI
Number: 8847
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8847
File-URL: http://www.nber.org/papers/w8847.pdf
File-Format: application/pdf
Abstract: We model imperfect contract enforcement when repudiators and their victims default to spot trading. The interaction between the contract and spot markets under improved enforcement can exacerbate repudiation and reduce contract execution, harming all traders. Improved contract execution benefits traders on the excess side of the spot market by attracting potential counter-parties, but harms them by impeding their exit from contracts found to be unfavorable. Multiple equilibria and multiple optima are possible, with anarchy a local optimum, perfect enforcement a local minimum and imperfect enforcement a global optimum. LDCs exhibit parameter combinations such that imperfect enforcement is optimal from their side of international markets. The model thus rationalizes the internationally varying patterns of imperfect enforceability observable in survey data.
Handle: RePEc:nbr:nberwo:8847
Template-Type: ReDIF-Paper 1.0
Title: Related Lending
Classification-JEL: G3
Author-Name: Rafael La Porta
Author-Person: pla273
Author-Name: Florencio Lopez-de-Silane
Author-Person: plo137
Author-Name: Guillermo Zamarripa
Note: CF IFM
Number: 8848
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8848
File-URL: http://www.nber.org/papers/w8848.pdf
File-Format: application/pdf
Publication-Status: published as La Porta, Rafael, Florencio Lopez-de-Silanes and Guillermo Zamarripa. "Related Lending," Quarterly Journal of Economics, 2003, v118(1,Feb), 231-268.
Abstract: In many countries, banks lend to firms controlled by the bank?s owners. We examine the benefits of related lending using a newly assembled dataset for Mexico. Related lending is prevalent (20% of commercial loans) and takes place on better terms than arm?s-length lending (annual interest rates are 4 percentage points lower). Related loans are 33% more likely to default and, when they do, have lower recovery rates (30% less) than unrelated ones. The evidence supports the view that rather than enhance information sharing, related lending is a manifestation of looting.
Handle: RePEc:nbr:nberwo:8848
Template-Type: ReDIF-Paper 1.0
Title: Industry Dynamics with Adjustment Costs
Classification-JEL: E3; J23
Author-Name: Robert E. Hall
Note: EFG PR
Number: 8849
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8849
File-URL: http://www.nber.org/papers/w8849.pdf
File-Format: application/pdf
Abstract: Adjustment costs determine the dynamics of the response of an industry's output to a shift in demand. Absent any adjustment costs, an increase in demand not accompanied by any change in factor prices raises output, labor, capital, and materials in the same proportion. In the presence of adjustment costs, the elasticity of the response of factors with higher costs is less than one while the elasticity of those without adjustment costs exceeds one. I develop a model of industry dynamics to capture these properties and a related econometric framework to infer adjustment costs from the observed ratios of factor responses to output responses. I find relatively precise evidence of moderate adjustment costs.
Handle: RePEc:nbr:nberwo:8849
Template-Type: ReDIF-Paper 1.0
Title: Markups, Gaps, and the Welfare Costs of Business Fluctuations
Classification-JEL: E3
Author-Name: Jordi Gali
Author-Person: pga43
Author-Name: Mark Gertler
Author-Person: pge11
Author-Name: J. David Lopez-Salido
Author-Person: plo26
Note: EFG ME
Number: 8850
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8850
File-URL: http://www.nber.org/papers/w8850.pdf
File-Format: application/pdf
Publication-Status: published as Jordi Galí & Mark Gertler & J. David López-Salido, 2007. "Markups, Gaps, and the Welfare Costs of Business Fluctuations," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 44-59, November.
Abstract: In this paper we present a simple, theory-based measure of the variations in aggregate economic efficiency associated with business fluctuations. We decompose this indicator, which we refer to as 'the gap', into two constituent parts: a price markup and a wage markup, and show that the latter accounts for the bulk of the fluctuations in our gap measure. Finally, we derive a measure of the welfare costs of business cycles that is directly related to our gap variable, and which takes into account explicitly the existence of a varying aggregate inefficiency. When applied to postwar U.S. data, for plausible parametrizations, our measure suggests welfare losses of fluctuations that are of a higher order of magnitude than those derived by Lucas (1987). It also suggests that the major postwar recessions involved substantial efficiency costs.
Handle: RePEc:nbr:nberwo:8850
Template-Type: ReDIF-Paper 1.0
Title: Ricardian Equivalence with Incomplete Household Risk Sharing
Classification-JEL: H3
Author-Name: Shinichi Nishiyama
Author-Person: pni21
Author-Name: Kent Smetters
Author-Person: psm21
Note: AG PE
Number: 8851
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8851
File-URL: http://www.nber.org/papers/w8851.pdf
File-Format: application/pdf
Abstract: Several important empirical studies (e.g., Altonji, Hayashi, and Kotlikoff, 1992, 1996, 1997) find that households are not altruistically-linked in a way consistent with the standard Ricardian model, as put forward by Barro (1974). We build a two-sided altruistic-linkage model in which private transfers are made in the presence of two types of shocks: an 'observable' shock that is public information (e.g., public redistribution) and an 'unobservable' shock that is private information (e.g., idiosyncratic wages). Parents and children observe each other's total income but not each other's effort level. In the second-best optimum, unobservable shocks are only partially shared whereas, for any utility function satisfying a condition derived herein, observable shocks are fully shared. The model, therefore, can generate the low degree of risk sharing found in the recent studies, but Ricardian equivalence still holds.
Handle: RePEc:nbr:nberwo:8851
Template-Type: ReDIF-Paper 1.0
Title: Property Rights and Finance
Classification-JEL: D23; P23
Author-Name: Simon Johnson
Author-Person: pjo44
Author-Name: John McMillan
Author-Person: pmc60
Author-Name: Christopher Woodruff
Author-Person: pwo165
Note: CF
Number: 8852
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8852
File-URL: http://www.nber.org/papers/w8852.pdf
File-Format: application/pdf
Publication-Status: published as Johnson, Simon, John McMillan and Christoher Woodruff. "Property Rights And Finance," American Economic Review, 2002, v92(5,Dec), 1335-1356.
Abstract: Which is the tighter constraint on private sector investment: weak property rights or limited access to external finance? From a survey of new firms in post-communist countries, we find that weak property rights discourage firms from reinvesting their profits, even when bank loans are available. Where property rights are relatively strong, firms reinvest their profits; where they are relatively weak, entrepreneurs do not want to invest from retained earnings.
Handle: RePEc:nbr:nberwo:8852
Template-Type: ReDIF-Paper 1.0
Title: One Reason Countries Pay their Debts: Renegotiation and International Trade
Classification-JEL: F10; F34
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: IFM ITI
Number: 8853
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8853
File-URL: http://www.nber.org/papers/w8853.pdf
File-Format: application/pdf
Publication-Status: published as Rose, Andrew K. "One Reason Countries Pay Their Debts: Renegotiation And International Trade," Journal of Development Economics, 2005, v77(1,Jun), 189-206.
Abstract: This paper estimates the effect of sovereign debt renegotiation on international trade. Sovereign default may be associated with a subsequent decline in international trade either because creditors want to deter default by debtors, or because trade finance dries up after default. To estimate the effect, I use an empirical gravity model of bilateral trade and a large panel data set covering fifty years and over 200 trading partners. The model controls for a host of factors that influence bilateral trade flows, including the incidence of IMF programs. Using the dates of sovereign debt renegotiations conducted through the Paris Club as a proxy measure for sovereign default, I find that renegotiation is associated with an economically and statistically significant decline in bilateral trade between a debtor and its creditors. The decline in bilateral trade is approximately eight percent a year and persists for around fifteen years.
Handle: RePEc:nbr:nberwo:8853
Template-Type: ReDIF-Paper 1.0
Title: International Taxation
Classification-JEL: H87; H25
Author-Name: Roger H. Gordon
Author-Person: pgo95
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: PE
Number: 8854
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8854
File-URL: http://www.nber.org/papers/w8854.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, A.J. and M. Feldstein (eds.) Handbook of Public Economics, edition 1, volume 4. Amsterdam: Elsevier, 2002.
Abstract: The integration of world capital markets carries important implications for the design and impact of tax policies. This paper evaluates research findings on international taxation, drawing attention to connections and inconsistencies between theoretical and empirical observations. Diamond and Mirrlees (1971) note that small open economies incur very high costs in attempting to tax the returns to local capital investment, since local factors bear the burden of such taxes in the form of productive inefficiencies. Richman (1963) argues that countries may simultaneously want to tax the worldwide capital income of domestic residents, implying that any taxes paid to foreign governments should be merely deductible from domestic taxable income. Governments do not adopt policies that are consistent with these forecasts. Corporate income is taxed at high rates by wealthy countries, and most countries either exempt foreign-source income of domestic multinationals from tax provide credits rather than deductions for taxes paid abroad. Furthermore, individual investors can use various methods to avoid domestic taxes on their foreign-source incomes, in the process also avoiding taxes on their domestic-source incomes. Individual and firm behavior also differs from that forecast by simple theories. Observed portfolios are not fully diversified worldwide. Foreign direct investment is common even when it faces tax penalties relative to other investment in host countries. While economic activity, and tax avoidance activity, is highly responsive to tax rates and tax structure, there are many aspects of tax-motivated behavior that are difficult to reconcile with simple microeconomic incentives. There are promising recent efforts to reconcile observations with theory. To the extent that multinational firms possess intangible capital on which they earn returns with foreign direct investment, even small countries may have a degree of market power, leading to fiscal externalities. Tax avoidance is pervasive, generating further fiscal externalities. These concepts are useful in explaining behavior, and observed tax policies, and they also suggest that international agreements have the potential to improve the efficiency of tax systems worldwide.
Handle: RePEc:nbr:nberwo:8854
Template-Type: ReDIF-Paper 1.0
Title: The Cost of Accountability
Classification-JEL: I2; H0
Author-Name: Caroline M. Hoxby
Author-Person: pho46
Note: CH LE PE ED
Number: 8855
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8855
File-URL: http://www.nber.org/papers/w8855.pdf
File-Format: application/pdf
Publication-Status: published as Evers, Williamson M. and Herbert J. Walberg (eds.) School Accountability. Stanford University, Stanford, CA: Hoover Institution Press, 2002.
Abstract: Discussions of school accountability focus on two issues: poor test administration and the expense of accountability. Up to this point, researchers have focused on test quality and simply assumed that the programs are expensive enough to crowd out other policies, such as class size reduction or higher teacher salaries. Researchers have also assumed that it is so expensive to have a good accountability program (which includes good comprehensive tests, well-defined standards, an effective report card system, and safeguards that prevent cheating and teaching the test) that only poor accountability systems will be affordable. In this paper, I present the facts about how much accountability costs. The facts are, fortunately, highly knowable because costs show up both as expenditures on government budgets and as revenues on companies' (mainly test makers') accounts. Moreover, it turns out that worrying about measurement error in the cost data is pointless. The costs of accountability programs are so tiny that even the most generous accounting could not make them appear large, relative to the cost of other education programs. The 'most expensive' programs in the United States generally cost less than one quarter of 1 percent of per pupil spending, and most of these are only as costly as they are because a state is in the 'expensive' and temporary phase of developing its own comprehensive tests.
Handle: RePEc:nbr:nberwo:8855
Template-Type: ReDIF-Paper 1.0
Title: Who Panics During Panics? Evidence from a Nineteenth Century Savings Bank
Classification-JEL: N2; E5
Author-Name: Cormac O. Grada
Author-Name: Eugene N. White
Author-Person: pwh5
Note: DAE ME
Number: 8856
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8856
File-URL: http://www.nber.org/papers/w8856.pdf
File-Format: application/pdf
Abstract: Using records of the bank accounts of individual depositors, this paper provides a detailed microeconomic analysis of two nineteenth century banking panics. The panics of 1854 and 1857 were not characterized by an immediate mass panic of depositors and had important time dimensions. We examine depositor behavior using a hazard model. Contagion was the key factor in 1854 but it was not strong enough to create more than a local panic. In contrast, the panic of 1857 began with runs by businessmen and banking sophisticates followed by less informed depositors. Uninformed contagion may have been present, but the evidence suggests that this panic was driven by informational shocks in the face of asymmetric information about the true condition of bank portfolios.
Handle: RePEc:nbr:nberwo:8856
Template-Type: ReDIF-Paper 1.0
Title: The Reconstruction of the American Urban Landscape in the Twentieth Century
Classification-JEL: R11; N70
Author-Name: Sukkoo Kim
Note: DAE
Number: 8857
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8857
File-URL: http://www.nber.org/papers/w8857.pdf
File-Format: application/pdf
Abstract: One of the most important representations of an urban spatial structure is its density. Indeed, an urban area is defined as a densely populated place with a sizeable number of inhabitants. Yet, despite the fact that the defining element of an urban area is its density, few scholars have systematically examined the long-run changes in the densities of economic activities in these areas. This paper documents the historical changes in population and employment densities in U.S. cities and metropolitan areas and explores the causes of their rise and decline between the late nineteenth and the twentieth centuries.
Handle: RePEc:nbr:nberwo:8857
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Pass-Through, Exchange Rate Volatility, and Exchange Rate Disconnect
Classification-JEL: F3; F4
Author-Name: Michael B. Devereux
Author-Person: pde32
Author-Name: Charles Engel
Author-Person: pen14
Note: IFM
Number: 8858
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8858
File-URL: http://www.nber.org/papers/w8858.pdf
File-Format: application/pdf
Publication-Status: published as Devereux, Michael B. and Charles Engel. "Exchange Rate Pass-Through, Exchange Rate Volatility, And Exchange Rate Disconnect," Journal of Monetary Economics, 2002, v49(5,Jul), 913-940.
Abstract: This paper explores the hypothesis that high volatility of real and nominal exchange rates may be due to the fact that local currency pricing eliminates the pass-through from changes in exchange rates to consumer prices. Exchange rates may be highly volatile because in a sense they have little effect on macroeconomic variables. The paper shows the ingredients necessary to construct such an explanation for exchange rate volatility. In addition to the presence of local currency pricing, we need a) incomplete international financial markets, b) a structure of international pricing and product distribution such that wealth effects of exchange rate changes are minimized, and c) stochastic deviations from uncovered interest rate parity. Together, it is shown that these elements can produce exchange rate volatility that is much higher than shocks to economic fundamentals, and `disconnected' from the rest of the economy in the sense that the volatility of all other macroeconomic aggregates are of the same order as that of fundamentals.
Handle: RePEc:nbr:nberwo:8858
Template-Type: ReDIF-Paper 1.0
Title: Contracting in the Absence of Specific Investments and Moral Hazard: Understanding Carrier-Driver Relations in U.S. Trucking
Classification-JEL: L2; D2
Author-Name: Francine Lafontaine
Author-Person: pla92
Author-Name: Scott E. Masten
Author-Person: pma558
Note: IO
Number: 8859
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8859
File-URL: http://www.nber.org/papers/w8859.pdf
File-Format: application/pdf
Abstract: This paper considers functions of contracting other than the protection of relationship-specific investments and the provision of marginal incentives, and applies the theory to explain variation in the form of compensation of over-the-road truck drivers in the U.S. Specifically, we argue that contracts in this industry serve to economize on the costs of price determination for heterogeneous transactions. We show that the actual terms of those contracts vary systematically with the nature of hauls in a way that is consistent with the theory. By contrast, we find that vehicle ownership, which defines a driver's status as an owner operator or company driver, depends on driver, but not trailer or haul, characteristics.
Handle: RePEc:nbr:nberwo:8859
Template-Type: ReDIF-Paper 1.0
Title: Gallman's Annual Output Series for the United States, 1834-1909
Classification-JEL: N11; O47
Author-Name: Paul W. Rhode
Author-Person: prh14
Note: DAE
Number: 8860
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8860
File-URL: http://www.nber.org/papers/w8860.pdf
File-Format: application/pdf
Abstract: This paper presents Robert Gallman's classic, but heretofore unpublished annual series for US national product over the 1834-59 and 1869-1909 periods. The 'Volume 30' series, reported as decadal averages, underlie much of what we know about American income growth and capital formation before 1909. This paper briefly documents Gallman's construction and use of the annual series, offers corrections for minor errors found in the previously circulated versions, compares the series with alternative national product estimates, and explores promising avenues for further research. Most importantly, this paper lays out why Gallman considered his annual 'Volume 30' series unsuitable for business-cycle analysis.
Handle: RePEc:nbr:nberwo:8860
Template-Type: ReDIF-Paper 1.0
Title: Collective Bargaining and Staff Salaries in American Colleges and Universities
Classification-JEL: I2; J5
Author-Name: Daniel B. Klaff
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Note: LS ED
Number: 8861
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8861
File-URL: http://www.nber.org/papers/w8861.pdf
File-Format: application/pdf
Publication-Status: published as Daniel B. Klaff & Ronald G. Ehrenberg, 2003. "Collective bargaining and staff salaries in American colleges and universities," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 57(1), pages 92-104, October.
Abstract: Our study is the first study that addresses the impact of collective bargaining coverage on salaries in academia for employees other than faculty. We use data from a 1997-98 study on the costs of staffing in higher education conducted by the Association of Higher Education Facilities Officers and other sources to estimate the impact of staff unions on staff salaries in American higher education. Our best estimate is that for the occupations in our sample, collective bargaining coverage raises staff salaries by at most 10 to 20 percent relative to the salaries of comparable higher education employees not covered by union contracts.
Handle: RePEc:nbr:nberwo:8861
Template-Type: ReDIF-Paper 1.0
Title: Technology, Agglomeration, and Regional Competition for Investment
Classification-JEL: H71; L23
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: Van Kolpin
Note: ITI
Number: 8862
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8862
File-URL: http://www.nber.org/papers/w8862.pdf
File-Format: application/pdf
Publication-Status: published as Blonigen, Bruce A. and Van Kolpin. “Technology, Agglomeration, and Regional Competition for Investment.” Canadian Journal of Economics 40 (November 2007): 1149-1167.
Abstract: The active 'courting' of firms by municipalities, regions, and even nations has a long-standing history and the competition for firm location through a wide variety of incentives seems to have escalated to new heights in recent years. We develop a model that explores technology development by firms that face regional competition for their investment and examine the endogenous determination of regions' policies, firm technology, and agglomeration externalities. In particular, we find that regional competition leads firms to inefficiently distort their research and development efforts in hopes of improving their standing in the competition amongst regions for their investment. This loss in efficiency is aggravated by the agglomeration externalities that are inherently present in many industries. We offer several case studies that provide evidence consistent with our theoretical conclusions.
Handle: RePEc:nbr:nberwo:8862
Template-Type: ReDIF-Paper 1.0
Title: The Red Queen and the Hard Reds: Productivity Growth in American Wheat, 1800-1940
Classification-JEL: N5; Q1
Author-Name: Alan L. Olmstead
Author-Person: pol50
Author-Name: Paul W. Rhode
Author-Person: prh14
Note: DAE
Number: 8863
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8863
File-URL: http://www.nber.org/papers/w8863.pdf
File-Format: application/pdf
Publication-Status: published as Olmstead, Alan L. and Paul W. Rhode. "The Red Queen And The Hard Reds: Productivity And Growth In American Wheat, 1800-1940," Journal of Economic History, 2002, v62(4,Dec), 929-966.
Abstract: The standard treatment of U.S. agriculture asserts that, before the 1930s, productivity growth was almost exclusively the result of mechanization rather than biological innovations. This paper shows that, to the contrary, U.S. wheat production witnessed a biological revolution during the 19th and early 20th centuries with wholesale changes in the varieties grown and cultural practices employed. Without these changes, vast expanses of the wheat belt could not have sustained commercial production and yields everywhere would have plummeted due to the increasing severity of insects, diseases, and weeds. Our revised estimates of Parker and Klein's productivity calculations indicate that biological innovations account for roughly one-half of labor productivity growth between 1839 and 1909.
Handle: RePEc:nbr:nberwo:8863
Template-Type: ReDIF-Paper 1.0
Title: Can Subsidiaries of Foreign Banks Contribute to the Stability of the Forex Market in Emerging Economies? A Look at Some Evidence from the Mexican...
Classification-JEL: E58; F31
Author-Name: Alejandro Reynoso
Note: IFM ME
Number: 8864
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8864
File-URL: http://www.nber.org/papers/w8864.pdf
File-Format: application/pdf
Abstract: Over the last decade, the ownership of the banking sector in Latin America has changed hands from local shareholders to large foreign banks from Spain and the United States. It is also a fact that the foreign exchange market in these countries has been segmented through various kinds of restrictions, because the central bank is unable to function as a lender of last resort in a currency other than its own. The standing issue is whether in practice, a parent bank effectively takes the role of such lender of last resort in supporting its subsidiaries overseas. If that were to be the case, the question is if having a significant participation of foreign subsidiaries is a necessary condition for lifting such restrictions. The data on the compliance of domestic and foreign banks with the dollar reserve requirements in Mexico is used to try to address this question. The answer is a qualified yes. When there are weak domestic banks, it seems that subsidiaries of foreign banks have a better access to funding in foreign exchange, specially in times of stress. However, when compared with strong domestic banks, the evidence suggests that these local entities can do as well or even better than the foreign subsidiaries.
Handle: RePEc:nbr:nberwo:8864
Template-Type: ReDIF-Paper 1.0
Title: The Costs of Price Stability - Downward Nominal Wage Rigidity in Europe
Classification-JEL: J5; J6
Author-Name: Steinar Holden
Note: EFG ME
Number: 8865
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8865
File-URL: http://www.nber.org/papers/w8865.pdf
File-Format: application/pdf
Publication-Status: published as Holden, Steinar. "The Costs Of Price Stability: Downward Nominal Wage Rigidity In Europe," Economica, 2004, v71(281,Feb), 183-208.
Abstract: In most European countries, the prevailing terms of employment, including the nominal wage, can only be changed by mutual consent. I show that this feature implies that workers have a strategic advantage in the wage negotiations when they try to prevent a cut in nominal wages. If inflation is so low that some nominal wages have to be cut, the strategic advantage of the workers' induces higher unemployment in equilibrium. The upshot is a long run tradeoff between inflation and unemployment for low levels of inflation. The prediction that low inflation involves higher unemployment in Europe but not in the US, is consistent with previous empirical findings.
Handle: RePEc:nbr:nberwo:8865
Template-Type: ReDIF-Paper 1.0
Title: The Corporate Profit Base, Tax Sheltering Activity, and the Changing Nature of Employee Compensation
Classification-JEL: D33; G30
Author-Name: Mihir A. Desai
Note: CF LS PE
Number: 8866
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8866
File-URL: http://www.nber.org/papers/w8866.pdf
File-Format: application/pdf
Abstract: This paper examines the evolution of the corporate profit base and the relationship between book income and tax income for U.S. corporations over last two decades. The paper demonstrates that this relationship has broken down over the 1990s and has broken down in a manner that is consistent with increased sheltering activity. The paper traces the growing discrepancy between book and tax income associated with differential treatments of depreciation, the reporting of foreign source income, and, in particular, the changing nature of employee compensation. For the largest public companies, proceeds from option exercises equaled 27 percent of operating cash flow from 1996 to 2000 and these deductions appear to be fully utilized thereby creating the largest distinction between book and tax income. While the differential treatment of these items has historically accounted fully for the discrepancy between book and tax income, the paper demonstrates that book and tax income have diverged markedly for reasons not associated with these items during the late 1990s. In 1998, more than half of the difference between tax and book income - approximately $154.4 billion or 33.7 percent of tax income - cannot be accounted for by these factors. This paper proceeds to develop and test a model of costly sheltering and demonstrates that the breakdown in the relationship between tax and book income is consistent with increasing levels of sheltering during the late 1990s. These tests also explore an alternative explanation of these results - coincident increased levels of earnings management - and finds that the nature of the breakdown between book and tax income cannot be fully explained by this alternative explanation.
Handle: RePEc:nbr:nberwo:8866
Template-Type: ReDIF-Paper 1.0
Title: Stochastic Dominance Bounds on Derivative Prices in a Multiperiod Economy with Proportional Transaction Costs
Classification-JEL: G13
Author-Name: George M. Constantinides
Author-Person: pco144
Author-Name: Stylianos Perrakis
Author-Person: ppe489
Note: AP
Number: 8867
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8867
File-URL: http://www.nber.org/papers/w8867.pdf
File-Format: application/pdf
Publication-Status: published as Constantinides, George M. & Perrakis, Stylianos, 2002. "Stochastic dominance bounds on derivatives prices in a multiperiod economy with proportional transaction costs," Journal of Economic Dynamics and Control, Elsevier, vol. 26(7-8), pages 1323-1352, July.
Abstract: By applying stochastic dominance arguments, upper bounds on the reservation write price of European calls and puts and lower bounds on the reservation purchase price of these derivatives are derived in the presence of proportional transaction costs incurred in trading the underlying security. The primary contribution is the derivation of bounds when intermediate trading in the underlying security is allowed over the life of the option. A tight upper bound is derived on the reservation write price of a call and a tight lower bound is derived on the reservation purchase price of a put. These results jointly impose tight upper and lower bounds on the implied volatility.
Handle: RePEc:nbr:nberwo:8867
Template-Type: ReDIF-Paper 1.0
Title: The Role of Residual Claims and Self-Enforcement in Franchise Contracting
Classification-JEL: L2; D2
Author-Name: Francine Lafontaine
Author-Person: pla92
Author-Name: Emmanuel Raynaud
Author-Person: pra1122
Note: IO
Number: 8868
Creation-Date: 2002-03
Order-URL: http://www.nber.org/papers/w8868
File-URL: http://www.nber.org/papers/w8868.pdf
File-Format: application/pdf
Abstract: Much of the economic literature on franchising has been concerned with incentive issues and how these are managed in franchised contracts. Two main types of incentive mechanisms have been identified: residual claims and self enforcement. In this paper we describe these incentive mechanisms, and their use in franchise contracts. We argue that although these two types of mechanisms are usually thought of as alternative ways to align franchisee and franchisor incentives, they are in fact complementary in franchise contracts because they address different incentive problems. We explore what these incentive problems are, and then describe specifically how franchise contract terms and practices support each type of incentive mechanism. Finally, we discuss briefly, via two examples, how our analysis also applies to non-franchised systems with common marks or other reputation concerns.
Handle: RePEc:nbr:nberwo:8868
Template-Type: ReDIF-Paper 1.0
Title: Competition in or for the Field: Which is Better?
Classification-JEL: D44; L12
Author-Name: Eduardo Engel
Author-Person: pen3
Author-Name: Ronald Fischer
Author-Person: pfi53
Author-Name: Alexander Galetovic
Author-Person: pga381
Note: IO
Number: 8869
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8869
File-URL: http://www.nber.org/papers/w8869.pdf
File-Format: application/pdf
Abstract: In many circumstances, a principal, who wants prices to be as low as possible, must contract with agents who would like to charge the monopoly price. This paper compares a Demsetz auction, which awards an exclusive contract to the agent bidding the lowest price (competition for the field) with having two agents provide the good under (imperfectly) competitive conditions (competition in the field). We obtain a simple sufficient condition showing unambiguously which option is best. The condition depends only on the shapes of the surplus function of the principal and the profit function of agents, and is independent of the particular duopoly game played ex post. We apply this condition to three canonical examples -- procurement, royalty contracts and dealerships -- and find that whenever marginal revenue for the final good is decreasing in the quantity sold, a Demsetz auction is best. Moreover, a planner who wants to maximize social surplus also prefers a Demsetz auction.
Handle: RePEc:nbr:nberwo:8869
Template-Type: ReDIF-Paper 1.0
Title: A Simple Framework for International Monetary Policy Analysis
Classification-JEL: E5; F3
Author-Name: Richard Clarida
Author-Person: pcl69
Author-Name: Jordi Gali
Author-Person: pga43
Author-Name: Mark Gertler
Author-Person: pge11
Note: ME
Number: 8870
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8870
File-URL: http://www.nber.org/papers/w8870.pdf
File-Format: application/pdf
Publication-Status: published as Clarida, Richard, Jordi Gali and Mark Gertler. "A Simple Framework For International Monetary Policy Analysis," Journal of Monetary Economics, 2002, v49(5,Jul), 879-904.
Abstract: We study the international monetary policy design problem within an optimizing two-country sticky price model, where each country faces a short run tradeoff between output and inflation. The model is sufficiently tractable to solve analytically. We find that in the Nash equilibrium, the policy problem for each central bank is isomorphic to the one it would face if it were a closed economy. Gains from cooperation arise, however, that stem from the impact of foreign economic activity on the domestic marginal cost of production. While under Nash central banks need only adjust the interest rate in response to domestic inflation, under cooperation they should respond to foreign inflation as well. In either scenario, flexible exchange rates are desirable.
Handle: RePEc:nbr:nberwo:8870
Template-Type: ReDIF-Paper 1.0
Title: Interdependent Security: The Case of Identical Agents
Classification-JEL: C7; H2
Author-Name: Howard Kunreuther
Author-Name: Geoffrey Heal
Author-Person: phe40
Note: PE
Number: 8871
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8871
File-URL: http://www.nber.org/papers/w8871.pdf
File-Format: application/pdf
Publication-Status: published as Kunreuther, Howard and Geoffrey Heal. "Interdependent Security: the case of identical agents." Journal of Risk and Uncertainty 2003.
Abstract: Do firms have adequate incentives to invest in anti-terrorism mechanisms? This paper develops a framework for addressing this issue when the security choices by one agent affect the risks faced by others. We utilize the airline security problem to illustrate how the incentive by one airline to invest in baggage checking is affected by the decisions made by others. Specifically if an airline believes that others will not invest in security systems it has much less economic incentive to do so on its own. Private sector mechanisms such as insurance and liability will not necessarily lead to an efficient outcome. To induce adoption of security measures one must turn to regulation, taxation or institutional coordinating mechanisms such as industry associations. We compare the airline security example with problems having a similar structure (i.e., computer security and fire protection) as well as those with different structures (i.e., theft protection and vaccinations). The paper concludes with suggestions for future research.
Handle: RePEc:nbr:nberwo:8871
Template-Type: ReDIF-Paper 1.0
Title: Do Cigarette Taxes Make Smokers Happier?
Classification-JEL: H2; I1
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Sendhil Mullainathan
Author-Person: pmu103
Note: CH EH PE
Number: 8872
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8872
File-URL: http://www.nber.org/papers/w8872.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan H. and Sendhil Mullainathan. "Do Cigarette Taxes Make Smokers Happier," Advances in Economic Analysis and Policy, 2005, v5(1), Article 4.
Publication-Status: published as Jonathan H. Gruber & Sendhil Mullainathan, 2005. "Do Cigarette Taxes Make Smokers Happier," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1), pages 4.
Abstract: To measure how policy changes affect social welfare, economists typically look at how policies affect behavior, and use a formal model to infer welfare consequences from the behavioral responses. But when different models can map the same behavior to very different welfare impacts, it becomes hard to draw firm conclusions about many policies. An excellent example of this conundrum is the taxation of addictive substances such as cigarettes. Existing empirical evidence on smoking is equally consistent with two models that have radically different welfare implications. Under the rational addiction model, cigarette taxes make time consistent smokers worse off. But, under alternative time inconsistent models, smokers are made better off by taxes, as they provide a valuable self-control device. We therefore propose an alternative approach to assessing the welfare implications of policy interventions: examining directly the impact on subjective well-being. We do so by matching information on cigarette excise taxation to separate surveys from the U.S. and Canada that contain data on self-reported happiness. And we model the differential impact of excise taxes on those predicted to be likely to be smokers, relative to others, in order to control for omitted correlations between happiness and excise taxation. We find consistent evidence in both countries that excise taxes make predicted smokers happier. This evidence suggests that the time inconsistent model of smoking is more appropriate, and that as a result welfare is improved by higher cigarette taxes.
Handle: RePEc:nbr:nberwo:8872
Template-Type: ReDIF-Paper 1.0
Title: School Choice and School Productivity (or Could School Choice be a Tide that Lifts All Boats?)
Classification-JEL: I2; H0
Author-Name: Caroline M. Hoxby
Author-Person: pho46
Note: CH LE PE ED
Number: 8873
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8873
File-URL: http://www.nber.org/papers/w8873.pdf
File-Format: application/pdf
Abstract: A school that is more productive is one that produces higher achievement in its pupils for each dollar it spends. In this paper, I comprehensively review how school choice might affect productivity. I begin by describing the importance of school productivity, then explain the economic logic that suggests that choice will affect productivity, and finish by presenting much of the available evidence on school choice and school productivity. The most intriguing evidence comes from three important, recent choice reforms: vouchers in Milwaukee, charter schools in Michigan, and charter schools in Arizona. I show that public school students' achievement rose significantly and rapidly in response to competition, under each of the three reforms. Public school spending was unaffected, so the productivity of public schools rose, dramatically in the case in Milwaukee.
Handle: RePEc:nbr:nberwo:8873
Template-Type: ReDIF-Paper 1.0
Title: Informal Financial Networks: Theory and Evidence
Classification-JEL: G2; G3
Author-Name: Mark J. Garmaise
Author-Name: Tobias J. Moskowitz
Note: AP CF
Number: 8874
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8874
File-URL: http://www.nber.org/papers/w8874.pdf
File-Format: application/pdf
Publication-Status: published as Garmaise, Mark and Tobias J. Moskowitz. “Informal Financial Networks: Theory and Evidence." Review of Financial Studies 16, 4 (2003): 1007-1040.
Abstract: We develop a model of informal financial networks and present corroborating evidence by studying the role of professional property brokers in the U.S. commercial real estate market. Our model demonstrates how service intermediaries, who do not supply finance themselves, can facilitate their clients' access to finance via repeated informal relationships with lenders. Empirically, we find that, controlling for endogenous broker selection, hiring a broker strikingly increases the probability of obtaining a bank loan from 40 to 58 percent. Our results demonstrate that even in the U.S., with its well-developed capital markets, informal networks play an important role in controlling access to finance.
Handle: RePEc:nbr:nberwo:8874
Template-Type: ReDIF-Paper 1.0
Title: Economic Considerations and Class Size
Classification-JEL: I21; J31
Author-Name: Alan B. Krueger
Author-Person: pkr63
Note: CH LS PE ED
Number: 8875
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8875
File-URL: http://www.nber.org/papers/w8875.pdf
File-Format: application/pdf
Publication-Status: published as Alan B. Krueger, 2003. "Economic Considerations and Class Size," Economic Journal, Royal Economic Society, vol. 113(485), pages F34-F63, February.
Abstract: This paper examines evidence on the effect of class size on student achievement. First, it is shown that results of quantitative summaries of the literature, such as Hanushek (1997), depend critically on whether studies are accorded equal weight. Hanushek summarizes 277 estimates extracted from 59 published studies, and weights all estimates equally, which implicitly places more weight on some studies than others. A small number of studies, which often present estimates for several small subsamples of a larger sample, account for more than half of the estimates. Studies from which relatively many estimates were extracted tend to find negative effects of school resources, whereas the majority of studies from which relatively few estimates were extracted tend to find positive effects. When all studies in Hanushek's literature summary are given equal weight, resources are systematically related to student achievement. In addition, when studies are assigned weights in proportion to the 'impact factor' of the journal in which they were published -- a crude measure of journal quality -- class size is systematically related to achievement. When studies are given weights in proportion to their number of estimates, however, resources and achievement are not systematically related. It is argued that assigning equal weights to studies, or weights according to quality, is preferable to assigning weights according to the number of estimates extracted from the studies, because study quality is unlikely to be related to the number of estimates taken from the study, and because researcher discretion in selecting estimates is limited when studies are assigned equal weight. Second, a cost-benefit analysis of class size reduction is performed. Results of the Tennessee STAR class-size experiment suggest that the internal rate of return from reducing class size from 22 to 15 students is around 6%.
Handle: RePEc:nbr:nberwo:8875
Template-Type: ReDIF-Paper 1.0
Title: The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?
Classification-JEL: G11; G12
Author-Name: Tobias J. Moskowitz
Author-Name: Annette Vissing-Jorgensen
Author-Person: pvi437
Note: AP CF
Number: 8876
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8876
File-URL: http://www.nber.org/papers/w8876.pdf
File-Format: application/pdf
Publication-Status: published as Moskowitz, Tobias J. and Annette Vissing-Jørgensen. “The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?" American Economic Review 92, 4 (2002): 745-778.
Abstract: We document the return to investing in U.S. nonpublicly traded equity. Entrepreneurial investment is extremely concentrated, yet despite its poor diversification, we find that the returns to private equity are no higher than the returns to public equity. Given the large public equity premium, it is puzzling why households willingly invest substantial amounts in a single privately held firm with a seemingly far worse risk-return tradeoff. We briefly discuss how large nonpecuniary benefits, a preference for skewness, or overestimates of the probability of survival could potentially explain investment in private equity despite these findings.
Handle: RePEc:nbr:nberwo:8876
Template-Type: ReDIF-Paper 1.0
Title: Confronting Information Asymmetries: Evidence from Real Estate Markets
Classification-JEL: G2; G3
Author-Name: Mark J. Garmaise
Author-Name: Tobias J. Moskowitz
Note: AP CF
Number: 8877
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8877
File-URL: http://www.nber.org/papers/w8877.pdf
File-Format: application/pdf
Publication-Status: published as Garmaise, Mark J. and Tobias J. Moskowitz. "Confronting Information Asymmetries: Evidence From Real Estate Markets," Review of Financial Studies, 2004, v17(2,Summer), 405-437.
Abstract: This paper studies the role of asymmetric information in commercial real estate markets in the U.S. We propose a novel and exogenous measure of information based on the quality of property tax assessments in different regions. Employing direct and indirect information variables, we find strong evidence that information considerations are significant in this market. We show that market participants resolve information asymmetries by purchasing nearby properties, trading properties with long income histories, and avoiding transactions with informed professional brokers. The evidence that the choice of financing is used to address information concerns is mixed and weak.
Handle: RePEc:nbr:nberwo:8877
Template-Type: ReDIF-Paper 1.0
Title: Why Did Employee Health Insurance Contributions Rise?
Classification-JEL: H2; I1
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Robin McKnight
Note: EH
Number: 8878
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8878
File-URL: http://www.nber.org/papers/w8878.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan and Robin McKnight. “Why Did Employee Health Insurance Contributions Rise?" Journal of Health Economics 22, 6 (November 2003): 1085-1104.
Abstract: We explore the causes of the dramatic rise in employee contributions to health insurance over the past two decades. In 1982, 44% of those who were covered by their employer-provided health insurance had their costs fully financed by their employer, but by 1998 this had fallen to 28%. We discuss the theory of why employers might shift premiums to their employees, and empirically model the role of six factors suggested by the theory. We find that there was a large impact of falling tax rates, rising eligibility for insurance through the Medicaid system and through spouses, and deteriorating economic conditions (in the late 1980s and early 1990s). We also find much more modest impacts of increased managed care penetration and rising health care costs. Overall, this set of factors can explain about one-quarter of the rise in employee premiums over the 1982-1996 period.
Handle: RePEc:nbr:nberwo:8878
Template-Type: ReDIF-Paper 1.0
Title: Dollarization and Trade
Classification-JEL: F15; F33
Author-Name: Michael W. Klein
Author-Person: pkl9
Note: IFM ITI
Number: 8879
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8879
File-URL: http://www.nber.org/papers/w8879.pdf
File-Format: application/pdf
Publication-Status: published as Klein, Michael W. "Dollarization And Trade," Journal of International Money and Finance, 2005, v24(6,Oct), 935-943.
Abstract: Dollarization has been suggested as a policy that might, among other goals, promote trade between a country adopting the dollar and the United States. Evidence supporting this conjecture could be drawn from a recent series of papers by Rose and co-authors who show that a currency union increases bilateral trade among its members, and that this effect is both large and statistically significant. In this paper we show that this result is not robust if we consider bilateral United States trade (even though the United States accounts for 60 percent of all observations of currency unions between industrial and non-industrial countries), nor if we consider bilateral trade of countries that have adopted the United States dollar, like Panama. Furthermore, the effect of dollarization on trade with the United States is not statistically distinct from the effect of a fixed dollar exchange rate on trade with the United States.
Handle: RePEc:nbr:nberwo:8879
Template-Type: ReDIF-Paper 1.0
Title: Credit Frictions and 'Sudden Stops' in Small Open Economies: An Equilibrium Business Cycle Framework for Emerging Markets Crises
Classification-JEL: F41; F32
Author-Name: Cristina Arellano
Author-Person: par171
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Note: IFM
Number: 8880
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8880
File-URL: http://www.nber.org/papers/w8880.pdf
File-Format: application/pdf
Publication-Status: published as Altug, S., J. Chadha and C. Nolan (eds.) Dynamic Macroeconomic Analysis: Theory and Policy in General Equilibrium. Cambridge University Press, 2003.
Abstract: Financial frictions are a central element of most of the models that the literature on emerging markets crises has proposed for explaining the Sudden Stop' phenomenon. To date, few studies have aimed to examine the quantitative implications of these models and to integrate them with an equilibrium business cycle framework for emerging economies. This paper surveys these studies viewing them as ability-to-pay and willingness-to-pay variations of a framework that adds occasionally binding borrowing constraints to the small open economy real-business-cycle model. A common feature of the different models is that agents factor in the risk of future Sudden Stops in their optimal plans, so that equilibrium allocations and prices are distorted even when credit constraints do not bind. Sudden Stops are a property of the unique, flexible-price competitive equilibrium of these models that occurs in a particular region of the state space in which negative shocks make borrowing constraints bind. The resulting nonlinear effects imply that solving the models requires non-linear numerical methods, which are described in the survey. The results show that the models can yield relatively infrequent Sudden Stops with large current account reversals and deep recessions nested within smoother business cycles. Still, research in this area is at an early stage and this survey aims to stimulate further work.
Handle: RePEc:nbr:nberwo:8880
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity
Classification-JEL: F1
Author-Name: Mark J. Melitz
Author-Person: pme260
Note: ITI
Number: 8881
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8881
File-URL: http://www.nber.org/papers/w8881.pdf
File-Format: application/pdf
Publication-Status: published as Melitz, Marc J. "The Impact Of Trade On Intra-Industry Reallocations And Aggregate Industry Productivity," Econometrica, 2003, v71(6,Nov), 1695-1725.
Abstract: This paper builds a dynamic industry model with heterogeneous firms that explains why international trade induces reallocations of resources among firms in an industry. The paper shows how the exposure to trade will induce only the more productive firms to enter the export market (while some less productive firms continue to produce only for the domestic market) and will simultaneously force the least productive firms to exit. It then shows how further increases in the industry's exposure to trade lead to additional inter-firm reallocations towards more productive firms. These phenomena have been empirically documented but can not be explained by current general equilibrium trade models, because they rely on a representative firm framework. The paper also shows how the aggregate industry productivity growth generated by the reallocations contributes to a welfare gain, thus highlighting a benefit from trade that has not been examined theoretically before. The paper adapts Hopenhayn's (1992a) dynamic industry model to monopolistic competition in a general equilibrium setting. In so doing, the paper provides an extension of Krugman's (1980) trade model that incorporates firm level productivity differences. Firms with different productivity levels coexist in an industry because each firm faces initial uncertainty concerning its productivity before making an irreversible investment to enter the industry. Entry into the export market is also costly, but the firm's decision to export occurs after it gains knowledge of its productivity.
Handle: RePEc:nbr:nberwo:8881
Template-Type: ReDIF-Paper 1.0
Title: The Non-Optimality of Proposed Monetary Policy Rules Under Timeless-Perspective Commitment
Classification-JEL: E52; E58
Author-Name: Christian Jensen
Author-Person: pje86
Author-Name: Bennett C. McCallum
Note: EFG ME
Number: 8882
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8882
File-URL: http://www.nber.org/papers/w8882.pdf
File-Format: application/pdf
Publication-Status: published as Jensen, Christian and Bennett T. McCallum. "The Non-Optimality Of Proposed Monetary Policy Rules Under Timeless Perspective Commitment," Economics Letters, 2002, v77(2,Oct), 163-168.
Abstract: Several recent papers have usefully emphasized the inefficiency that arises from discretionary monetary policymaking, relative to optimal policy from a 'timeless perspective,' in macroeconomic models with forward-looking private behavior. The inefficiency in question is in terms of average outcomes of the conditional expectation of a policy objective that reflects the discounted present value of current and future period losses (which involve squared deviations of inflation and output from specified target levels). In the literature, most of the analysis has been conducted in an optimizing model that features a Calvo-Rotemberg price adjustment equation that includes a 'cost-push' shock term. This literature suggests that policy, which keeps inflation equal to a negative multiple of the change in the output gap, is optimal with respect to the criterion mentioned above -- the unconditional expectation of the policymaker's objective function. Results reported here show, however, that this is not the case -- that an alternative policy rule, suggested by the approach of 'policy design' rather than by 'optimal control,' delivers superior results.
Handle: RePEc:nbr:nberwo:8882
Template-Type: ReDIF-Paper 1.0
Title: Middlemen versus Market Makers: A Theory of Competitive Exchange
Classification-JEL: D4; D5
Author-Name: John Rust
Author-Person: pru5
Author-Name: George Hall
Author-Person: pha118
Note: IO
Number: 8883
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8883
File-URL: http://www.nber.org/papers/w8883.pdf
File-Format: application/pdf
Publication-Status: published as Rust, John and George Hall. "Middlemen Versus Market Makers: A Theory Of Competitive Exchange," Journal of Political Economy, 2003, v111(2,Apr), 353-403.
Abstract: We present a model in which the microstructure of trade in a commodity or asset is endogenously determined. Producers and consumers of a commodity (or buyers and sellers of an asset) who wish to trade can choose between two competing types of intermediaries: 'middlemen' (dealer/brokers) and 'market makers' (specialists). Market makers post publicly observable bid and ask prices, whereas the prices quoted by different middlemen are private information that can only be obtained through a costly search process. We consider an initial equilibrium where there are no market makers but there is free entry of middlemen with heterogeneous transactions costs. We characterize conditions under which entry of a single market maker can be profitable even though it is common knowledge that all surviving middlemen will undercut the market maker's publicly posted bid and ask prices in the post-entry equilibrium. The market maker's entry induces the surviving middlemen to reduce their bid-ask spreads, and as a result, all producers and consumers who choose to participate in the market enjoy a strict increase in their expected gains from trade. We show that strict Pareto improvements occur even in cases where the market maker's entry drives all middlemen out of business, monopolizing the intermediation of trade in the market.
Handle: RePEc:nbr:nberwo:8883
Template-Type: ReDIF-Paper 1.0
Title: Towards an Explanation of Household Portfolio Choice Heterogeneity: Nonfinancial Income and Participation Cost Structures
Classification-JEL: G11; G12
Author-Name: Annette Vissing-Jorgensen
Author-Person: pvi437
Note: AP
Number: 8884
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8884
File-URL: http://www.nber.org/papers/w8884.pdf
File-Format: application/pdf
Publication-Status: published as Vissing-Jørgensen, Annette. “Perspectives on Behavioral Finance: Does ’Irrationality’ Disappear withWealth? Evidence from Expectations and Actions." NBER Macroeconomics Annual, 2003.
Abstract: The paper uses micro data on income and asset holdings from the Panel Study of Income Dynamics and other US household level data sets to analyze reasons for nonparticipation in the stock market and for heterogeneity in portfolio choice within the set of stock market participants. I find evidence of a positive effect of mean nonfinancial income on the probability of stock market participation and on the proportion of wealth invested in stocks conditional on being a participant. The volatility of nonfinancial income is found to have a negative impact on these two quantities. However, there is no evidence of an effect of the correlation of nonfinancial income with the stock market return on portfolio choice. Three different costs of stock market participation are considered, a fixed transactions cost, a proportional transactions cost, and a per period participation cost. I find evidence of structural state dependence in the stock market participation decision supporting the importance of fixed transactions costs. This is supported by findings of higher trading frequencies for high wealth households. Based on a simple model of the benefits of stock market participation I estimate that a per period stock market participation cost of just 50 dollars is sufficient to explain the choices of half of stock market nonparticipants.
Handle: RePEc:nbr:nberwo:8884
Template-Type: ReDIF-Paper 1.0
Title: The Role of Information and Social Interactions in Retirement Plan Decisions: Evidence from a Randomized Experiment
Classification-JEL: D83; I22
Author-Name: Esther Duflo
Author-Person: pdu166
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: AG LS PE
Number: 8885
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8885
File-URL: http://www.nber.org/papers/w8885.pdf
File-Format: application/pdf
Publication-Status: published as Duflo, Esther and Emmanuel Saez. "The Role Of Information And Social Interactions In Retirement Plan Decisions: Evidence From A Randomized Experiment," Quarterly Journal of Economics, 2003, v118(3,Aug), 815-842.
Abstract: This paper analyzes a randomized experiment to shed light on the role of information and social interactions in employees' decisions to enroll in a Tax Deferred Account (TDA) retirement plan within a large university. The experiment encouraged a random sample of employees in a subset of departments to attend a benefits information fair organized by the university, by promising a monetary reward for attendance. The experiment more than tripled the attendance rate of these treated individuals (relative to controls), and doubled that of untreated individuals within departments where some individuals were treated. TDA enrollment 5 and 11 months after the fair was significantly higher in departments where some individuals were treated than in departments where nobody was treated. However, the effect on TDA enrollment is almost as large for individuals in treated departments who did not receive the encouragement as for those who did. We provide three interpretations, differential treatment effects, social network effects, and motivational reward effects, to account for these results.
Handle: RePEc:nbr:nberwo:8885
Template-Type: ReDIF-Paper 1.0
Title: Take-Up Rates and Trade Offs After the Age of Entitlement: Some Thoughts and Empirical Evidence for Child Care Subsidies
Classification-JEL: I38; H40
Author-Name: Ann Dryden Witte
Author-Name: Magaly Queralt
Note: CH LS PE
Number: 8886
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8886
File-URL: http://www.nber.org/papers/w8886.pdf
File-Format: application/pdf
Abstract: In this paper we develop a model of an eligible family's decision to take or not to take child care subsidies. This decision depends on the net benefits the family expects to derive from the subsidies over their expected duration. We contend that such a demand-side model for the take-up of child care subsidies and use of the term 'take-up' rate are only appropriate for programs that guarantee services to all eligible applicants. After welfare reform, most states do not offer such guarantees. For states that do not guarantee subsidies, the proportion of the eligible population that receives subsidies is better called a service rate than a take-up rate. Modeling service rates requires consideration of both governments' decisions (the supply side) and families' decisions (the demand side) regarding child care subsidies. We survey the general literature on take-up rates for social welfare programs and review existing estimates of the take-up rates and service rates for child care subsidy programs in various states. Using administrative data and survey data for states that guarantee subsidies for all eligible families, we estimate the family-level take-up rate for child care subsidies to be around 40% in early 2000. For states that do not guarantee subsidies, service rates range from 14% in Minnesota to 50% in Massachusetts. Finally, we suggest indicators to assess the trade offs that governments are making when designing and funding their child care subsidy programs. We use the percent of federally eligible families that receive child care subsidies and public expenditures per subsidized child to discern the relative importance that states place on using child care subsidies (1) to facilitate parental work and (2) to prepare its future work force by improving services to low-income children. For Rhode Island, we find increasing emphasis on the latter between 1996 and 2000. We also find that the Illinois subsidized child care program places relatively more emphasis on parental work facilitation, while Minnesota's program makes a more substantial investment in children through relatively more comprehensive and in-depth services.
Handle: RePEc:nbr:nberwo:8886
Template-Type: ReDIF-Paper 1.0
Title: Global Capital Flows and Financing Constraints
Classification-JEL: F2
Author-Name: Ann E. Harrison
Author-Person: pha441
Author-Name: Inessa Love
Author-Person: plo223
Author-Name: Margaret S. McMillan
Author-Person: pmc26
Note: ITI
Number: 8887
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8887
File-URL: http://www.nber.org/papers/w8887.pdf
File-Format: application/pdf
Publication-Status: published as Harrison, Ann E., Inessa Love and Margaret S. McMillan. "Global Capital Flows And Financing Constraints," Journal of Development Economics, 2004, v75(1,Oct), 269-301.
Abstract: Firms often cite financing constraints as one of their primary obstacles to investment. Global capital flows, by bringing in scarce capital, may ease host-country firms' financing constraints. However, if incoming foreign investors borrow heavily from domestic basnks, direct foreign investment (DFI) may exacerbate financing constraints by crowding host country firms out of domestic capital markets. Combininb a unique cross-country firm-level panel with time-series data on restrictions on international transactions and capital flows, we find that different measures of global flows are associated with a reduction in firm-level financing constraints. First, we show that one type of capital inflow--DFI--is associated with a reduction in financing constraints. Second, we test whether restrictions on international transactions affect firms' financing constraints. Our results suggest that only one type of restriction--those on capital account transactions--negatively affect firms' financing constraints. We also show that multinational firms are not financially constrained and do not appear to be sensitive to the level of DFI. This implies that DFI eases financing constraints for non-multinational firms. Finally, we show that DFI only eases financing constraints in the non-G7 countries.
Handle: RePEc:nbr:nberwo:8887
Template-Type: ReDIF-Paper 1.0
Title: Moving to Greener Pastures? Multinationals and the Pollution Haven Hypothesis
Classification-JEL: F23; Q2
Author-Name: Gunnar A. Eskeland
Author-Person: pes96
Author-Name: Ann E. Harrison
Author-Person: pha441
Note: ITI
Number: 8888
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8888
File-URL: http://www.nber.org/papers/w8888.pdf
File-Format: application/pdf
Publication-Status: published as Eskeland, Gunnar S. and Ann E. Harrison. "Moving To Greener Pastures? Multinationals And The Pollution Haven Hypothesis," Journal of Development Economics, 2003, v70(1,Feb), 1-23.
Abstract: This paper presents evidence on whether multinationals are flocking to developing country 'pollution havens'. Although we find some evidence that foreign investors locate in sectors with high levels of air pollution, the evidence is weak at best. We then examine whether foreign firms pollute less than their peers. We find that foreign plants are significantly more energy efficient and use cleaner types of energy. We conclude with an analysis of US outbound investment. Although the pattern of US foreign investment is skewed towards industries with high costs of pollution abatement, the results are not robust across specifications.
Handle: RePEc:nbr:nberwo:8888
Template-Type: ReDIF-Paper 1.0
Title: Comparative Advantage, Learning, and Sectoral Wage Determination
Classification-JEL: J3
Author-Name: Robert Gibbons
Author-Person: pgi283
Author-Name: Lawrence F. Katz
Author-Person: pka266
Author-Name: Thomas Lemieux
Author-Person: ple92
Author-Name: Daniel Parent
Author-Person: ppa285
Note: EFG LS
Number: 8889
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8889
File-URL: http://www.nber.org/papers/w8889.pdf
File-Format: application/pdf
Publication-Status: published as Gibbons, Robert, Lawrence F. Katz, Thomas Lemieux and Daniel Parent. "Comparative Advantage, Learning, and Sectoral Wage Determination," Journal of Labor Economics, 2005, v23(4,Oct), 681-723.
Abstract: We develop a model in which a worker's skills determine the worker's current wage and sector. Both the market and the worker are initially uncertain about some of the worker's skills. Endogenous wage changes and sector mobility occur as labor-market participants learn about these unobserved skills. We show how the model can be estimated using non-linear instrumental-variables techniques. We then apply our methodology to study the wages and allocation of workers across occupations and across industries. For both occupations and industries, we find that high-wage sectors employ high-skill workers and offer high returns to workers' skills. Estimates of these sectoral wage differences that do not account for sector-specific returns are therefore misleading. We also suggest further applications of our theory and methodology.
Handle: RePEc:nbr:nberwo:8889
Template-Type: ReDIF-Paper 1.0
Title: Courts: the Lex Mundi Project
Classification-JEL: K10; K40
Author-Name: Simeon Djankov
Author-Person: pdj4
Author-Name: Rafael La Porta
Author-Person: pla273
Author-Name: Florencio Lopez-de-Silane
Author-Person: plo137
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: CF PE
Number: 8890
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8890
File-URL: http://www.nber.org/papers/w8890.pdf
File-Format: application/pdf
Publication-Status: published as Djankov, S., R. La Porta, F. Lopez-de-Silanes, and A. Shleifer. “Courts." Quarterly Journal of Economics, May 2003.
Abstract: In cooperation with Lex Mundi member law firms in 109 countries, we measure and describe the exact procedures used by litigants and courts to evict a tenant for non-payment of rent and to collect a bounced check. We use these data to construct an index of procedural formalism of dispute resolution for each country. We find that such formalism is systematically greater in civil than in common law countries. Moreover, procedural formalism is associated with higher expected duration of judicial proceedings, more corruption, less consistency, less honesty, less fairness in judicial decisions, and inferior access to justice. These results suggest that legal transplantation may have led to an inefficiently high level of procedural formalism, particularly in developing countries.
Handle: RePEc:nbr:nberwo:8890
Template-Type: ReDIF-Paper 1.0
Title: Strengthening Employment-Based Pensions in Japan
Classification-JEL: G2; J3
Author-Name: Robert L. Clark
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Note: AG
Number: 8891
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8891
File-URL: http://www.nber.org/papers/w8891.pdf
File-Format: application/pdf
Publication-Status: published as Clark, Robert L. & Olivia S. Mitchell. “Strengthening Employment-Based Pensions in Japan.” Benefits Quarterly, 2nd Q (2002): 22-43.
Publication-Status: published as Tachibanaki, Toshiaki (ed.) The Economics of Social Security in Japan. Surrey, UK: Elgar, 2004.
Abstract: We investigate how the Japanese pension market for funded employment-based pensions is changing and how it might be strengthened in order to better serve one of the most rapidly aging populations in the world. Public and private pensions in Japan are estimated to hold around US$3 trillion, making that system the second largest globally after the United States. However, unfavorable economic developments have cut sharply cut into asset values, and the weak economy is undermining traditional lifetime employment contracts. Recent legislation permitting the establishment of defined contribution plans in Japan may provide new employer-sponsored retirement plan opportunities. We first describe the Japanese pension system at the end of the 20th century and provide an overview and evaluation of the changes in the pension arena emerging from the 2001 legislation. Next we show that important design questions remain to be answered, if Japanese employment-based pensions are to be reformed and modernized. Finally we indicate lessons gleaned from recent changes in US pension plans.
Handle: RePEc:nbr:nberwo:8891
Template-Type: ReDIF-Paper 1.0
Title: Policy-Driven Productivity in Chile and Mexico in the 1980s and 1990s
Classification-JEL: E52; N6
Author-Name: Raphael Bergoeing
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Author-Name: Timothy J. Kehoe
Author-Person: pke16
Author-Name: Raimundo Soto
Note: EFG IFM
Number: 8892
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8892
File-URL: http://www.nber.org/papers/w8892.pdf
File-Format: application/pdf
Publication-Status: published as Bergoeing, Raphael, Patrick J. Kehoe, Timothy J. Kehoe and Raimundo Soto. "Policy-Driven Productivity In Chile And Mexico In The 1980's And 1990's," American Economic Review, 2002, v92(2,May), 16-21.
Abstract: Both Chile and Mexico experienced severe economic crises in the early 1980s, but Chile recovered much faster than did Mexico. Using growth accounting and a calibrated dynamic general equilibrium model, we conclude that the crucial determinant of this difference between the two countries was the faster productivity growth in Chile, rather than higher investment or employment. Our hypothesis is that this difference in productivity was driven by earlier policy reforms in Chile, the most crucial of which were in banking and bankruptcy procedures. We propose a theoretical framework in which government policy affects both the allocation of resources and the composition of firms.
Handle: RePEc:nbr:nberwo:8892
Template-Type: ReDIF-Paper 1.0
Title: The Policy Context and Infant and Toddler Care in the Welfare Reform Era
Classification-JEL: I38; H40
Author-Name: Ann Witte
Author-Name: Magaly Queralt
Author-Name: Robert Witt
Author-Person: pwi138
Author-Name: Harriet Griesinger
Note: CH
Number: 8893
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8893
File-URL: http://www.nber.org/papers/w8893.pdf
File-Format: application/pdf
Abstract: We provide descriptive evidence from Miami-Dade County (MDC), FL and from five representative areas in Massachusetts (MA) that government policies governing welfare reform, the child-care subsidy system and minimum-standards regulation have had considerable impact on the availability, price, and quality of infant and toddler care, as welfare reform progressed from 1996 to 2000. Among our more interesting findings are the following: (1) There has been more than a doubling of the number of low-income infants and toddlers with child care subsidies in formal care in MDC, an area where cash assistance recipients are required to be active when their youngest child is three years old; and (2) Child care centers in both MA and MDC appear to be subsidizing their infant and toddler programs; this helps to explain why it has been difficult to expand the amount of infant and toddler care available.
Handle: RePEc:nbr:nberwo:8893
Template-Type: ReDIF-Paper 1.0
Title: Exports and Manufacturing Productivity in East Asia: A Comparative Analysis with Firm-Level Data
Classification-JEL: O3; O1
Author-Name: Mary Hallward-Driemeier
Author-Person: pha451
Author-Name: Giuseppe Iarossi
Author-Name: Kenneth L. Sokoloff
Note: ITI PR
Number: 8894
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8894
File-URL: http://www.nber.org/papers/w8894.pdf
File-Format: application/pdf
Abstract: This paper uses new firm level data from five East Asian countries to explore the patterns of manufacturing productivity across the region. One of the striking patterns that emerges is how the extent of openness and the competitiveness of markets affects the relative productivity of firms across the region. Firms with foreign ownership and firms that export are significantly more productive, and the productivity gap is larger the less developed is the local market. We exploit the rich set of firm characteristics available in the database to explore the sources of export firms' greater productivity. We argue that it is in aiming for export markets that firms make decisions that raise productivity. It is not simply that more-productive firms self-select into exporting; rather, firms that explicitly target export markets consistently make different decisions regarding investment, training, technology and the selection of inputs, and thus raise their productivity.
Handle: RePEc:nbr:nberwo:8894
Template-Type: ReDIF-Paper 1.0
Title: Comovement
Classification-JEL: G11; G12
Author-Name: Nicholas Barberis
Author-Name: Andrei Shleifer
Author-Person: psh93
Author-Name: Jeffrey Wurgler
Author-Person: pwu8
Note: AP
Number: 8895
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8895
File-URL: http://www.nber.org/papers/w8895.pdf
File-Format: application/pdf
Publication-Status: published as Barberis, Nicholas, Andrei Shleifer and Jeffrey Wurgler. "Comovement," Journal of Financial Economics, 2005, v75(2,Feb), 283-317.
Abstract: A number of studies have identifed patterns of positive correlation of returns, or comovement, among different traded securities. We distinguish three views of such comovement. The traditional 'fundamentals' view explains the comovement of securities through positive correlations in the rational determinants of their values, such as cash flows or discount rates. 'Category-based' comovement occurs when investors classify different securities into the same asset class and shift resources in and out of this class in correlated ways. A related phenomenon of 'habitat-based' comovement arises when a group of investors restricts its trading to a given set of securities, and moves in and out of that set in tandem. We present models of each of the three types of comovement, and then assess them empirically using data on stock inclusions into and deletions from the S&P 500 index. Index changes are noteworthy because they change a stock's category and investor clientele (habitat), but do not change its fundamentals. We find that when a stock is added to the index, its beta and R-squared with respect to the index increase, while its beta with respect to stocks outside the index falls. The converse happens when a stock is deleted. These results are broadly supportive of the category and habitat views of comovement, but not of the fundamentals view. More generally, we argue that these non-traditional views may help explain other instances of comovement in the data.
Handle: RePEc:nbr:nberwo:8895
Template-Type: ReDIF-Paper 1.0
Title: Limited Asset Market Participation and the Elasticity of Intertemporal Substitution
Classification-JEL: E2; G1
Author-Name: Annette Vissing-Jorgensen
Author-Person: pvi437
Note: EFG
Number: 8896
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8896
File-URL: http://www.nber.org/papers/w8896.pdf
File-Format: application/pdf
Publication-Status: published as Vissing-Jorgensen, Annette. "Limited Asset Market Participation And The Elasticity Of Intertemporal Substitution," Journal of Political Economy, 2002, v110(4,Aug), 825-853.
Abstract: The paper presents empirical evidence based on the US Consumer Expenditure Survey that accounting for limited asset market participation is important for estimating the elasticity of intertemporal substitution (EIS). Differences in estimates of the EIS between assetholders and non-assetholders are large and statistically significant. This is the case whether estimating the EIS based on the Euler equation for stock index returns or the Euler equation for T-bills, in each case distinguishing between assetholders and non-assetholders as best possible. Estimates of the EIS are around 0.3-0.4 for stockholders and around 0.8-1 for bondholders, and are larger for households with larger asset holdings within these two groups.
Handle: RePEc:nbr:nberwo:8896
Template-Type: ReDIF-Paper 1.0
Title: Geography, Economic Policy, and Regional Development in China
Classification-JEL: D30; O18
Author-Name: Sylvie Demurger
Author-Person: pdm3
Author-Name: Jeffrey D. Sachs
Author-Name: Wing Thye Woo
Author-Person: pwo41
Author-Name: Shuming Bao
Author-Name: Gene Chang
Author-Name: Andrew Mellinger
Note: EFG IFM
Number: 8897
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8897
File-URL: http://www.nber.org/papers/w8897.pdf
File-Format: application/pdf
Publication-Status: published as Sylvie Démurger & Jeffrey D. Sachs & Wing Thye Woo & Shuming Bao & Gene Chang & Andrew Mellinger, 2002. "Geography, Economic Policy, and Regional Development in China," Asian Economic Papers, MIT Press, vol. 1(1), pages 146-197.
Abstract: Many studies of regional disparity in China have focused on the preferential policies received by the coastal provinces. We decomposed the location dummies in provincial growth regressions to obtain estimates of the effects of geography and policy on provincial growth rates in 1996-99. Their respective contributions in percentage points were 2.5 and 3.5 for the province-level metropolises, 0.6 and 2.3 for the northeastern provinces, 2.8 and 2.8 for the coastal provinces, 2.0 and 1.6 for the central provinces, 0 and 1.6 for the northwestern provinces, and 0.1 and 1.8 for the southwestern provinces. Because the so-called preferential policies are largely deregulation policies that have allowed coastal Chinese provinces to integrate into the international economy, it is far superior to reduce regional disparity by extending these deregulation policies to the interior provinces than by re-regulating the coastal provinces. Two additional inhibitions to income convergence are the household registration system, which makes the movement of the rural poor to prosperous areas illegal, and the monopoly state bank system that, because of its bureaucratic nature, disburses most of its funds to its large traditional customers, few of whom are located in the western provinces. Improving infrastructure to overcome geographic barriers is fundamental to increasing western growth, but increasing human capital formation (education and medical care) is also crucial because only it can come up with new better ideas to solve centuries-old problems like unbalanced growth.
Handle: RePEc:nbr:nberwo:8897
Template-Type: ReDIF-Paper 1.0
Title: Teacher Quality and the Future of America
Classification-JEL: I21; J45
Author-Name: Peter Temin
Author-Person: pte231
Note: DAE LS PE ED
Number: 8898
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8898
File-URL: http://www.nber.org/papers/w8898.pdf
File-Format: application/pdf
Publication-Status: published as Temin, Peter. "Teacher Quality And The Future Of America," Eastern Economic Journal, 2002, v28(3,Summer), 285-300.
Abstract: I argue in this paper that we do not pay teachers enough to get high-quality applicants. The reasons we find ourselves in this inferior equilibrium are rooted in our history. Most American teachers are and have been women; we have not accommodated to the increasing opportunities for women in the economy today. Schools are locally funded, and we also have not accommodated to the declining effectiveness of the property tax. The result of having low-quality teachers is that current reforms sub-optimize with the current stock of teachers and therefore result at best in only small gains in educational quality. We are in danger of losing the educational advantage that the United States enjoyed in the 20th century.
Handle: RePEc:nbr:nberwo:8898
Template-Type: ReDIF-Paper 1.0
Title: HMO Penetration, Ownership Status, and the Rise of Hospital Advertising
Classification-JEL: I1; L3
Author-Name: Jason R. Barro
Author-Name: Michael Chu
Note: EH
Number: 8899
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8899
File-URL: http://www.nber.org/papers/w8899.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. (ed.) The governance of not-for-profit organizations, NBER Conference Report series. Chicago and London: University of Chicago Press, 2003.
Publication-Status: published as HMO Penetration, Ownership Status, and the Rise of Hospital Advertising, Jason Barro, Michael Chu. in The Governance of Not-for-Profit Organizations, Glaeser. 2003
Abstract: We examine the recent increase in hospital advertising expenditures. We first illustrate that the rise in hospital advertising has not been universal. Large, not-for-profit, teaching hospitals have, by far, experienced the largest increase in spending. Adjusting for size, for-profit hospitals over this period have actually decreased their marketing expenses. This increase in advertising spending is best explained by managed care penetration. There is a small and marginally significant relationship between increases in for-profit presence in hospital markets and an increase in advertising spending by the not-for-profit hospitals in those markets.
Handle: RePEc:nbr:nberwo:8899
Template-Type: ReDIF-Paper 1.0
Title: Financial Opening: Evidence and Policy Options
Classification-JEL: F21; F32
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: IFM ITI
Number: 8900
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8900
File-URL: http://www.nber.org/papers/w8900.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua. "Financial Opening And Development: Evidence And Policy Controversies," American Economic Review, 2004, v94(2,May), 65-70.
Publication-Status: published as Financial Opening: Evidence and Policy Options, Joshua Aizenman. in Challenges to Globalization: Analyzing the Economics, Baldwin and Winters. 2004
Abstract: This paper evaluates the empirical evidence of increasing the chances of financial crises induced by opening up developing countries to short-term capital inflows, and appraises the various proposals made for mitigating the severity of financial crises. We point out that there is solid evidence that financial opening increases the chance of financial crises. There is more tenuous evidence that financial opening contributes positively to long-run growth. Hence, there may be a complex trade off between the adverse intermediate run and the beneficial long run effects of financial opening. The literature is abounded with proposals aimed at improving this intertemporal trade-off, reducing the costs of financial crises. A version of the Lucas critic may limit the welfare gain of these proposals. Hence, a better understanding of the structural characteristics leading to exposure and crises is the key for designing a successful restructuring of the global capital market. Some of the reforms may fall short of success due to coordination failure: they may be effective only if they were adopted comprehensively by all the relevant financial centers. Finally, some of the proposals may be too optimistic, ignoring the time inconsistency and political economy considerations, as well as presuming the ability to verify unambiguously the quality of adjustment.
Handle: RePEc:nbr:nberwo:8900
Template-Type: ReDIF-Paper 1.0
Title: Cap and Trade Policies in the Presence of Monopoly and Distortionary Taxation
Classification-JEL: H2; Q2
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Gilbert E. Metcalf
Note: PE EEE
Number: 8901
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8901
File-URL: http://www.nber.org/papers/w8901.pdf
File-Format: application/pdf
Publication-Status: published as Resource and Energy Economics, 24(2002) 327-347.
Abstract: We extend an analytical general equilibrium model of environmental policy with pre-existing labor tax distortions to include pre-existing monopoly power as well. We show that the existence of monopoly power has two offsetting effects on welfare. First, the environmental policy reduces monopoly profits, and the negative effect on income increases labor supply in a way that partially offsets the pre-existing labor supply distortion. Second, environmental policy raises prices, so interaction with the pre-existing monopoly distortion further exacerbates the labor supply distortion. This second effect is larger, for reasonable parameter values, so the existence of monopoly reduces the welfare gain (or increases the loss) from environmental restrictions.
Handle: RePEc:nbr:nberwo:8901
Template-Type: ReDIF-Paper 1.0
Title: The Welfare of Children During the Great Depression
Classification-JEL: I38; J11
Author-Name: Price V. Fishback
Author-Person: pfi13
Author-Name: Michael R. Haines
Author-Person: pha740
Author-Name: Shawn Kantor
Author-Person: pka54
Note: DAE
Number: 8902
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8902
File-URL: http://www.nber.org/papers/w8902.pdf
File-Format: application/pdf
Abstract: This paper examines the impact of New Deal relief programs on demographic outcomes in major U.S. cities during the 1930s. A five-equation structural model is estimated that tests the effect of the relief spending on infant mortality, non-infant mortality, and fertility. For 111 cities for which data on relief spending during the 1930s were available, we collected annual data that matched the relief spending to the demographic variables, socioeconomic descriptions of the cities, and retail sales, which serve as a proxy for the level of economic activity. Relief spending directly lowered infant mortality rates to the degree that changes in relief spending can explain nearly one-third of the decline in infant mortality during the 1930s. Relief spending also raised general fertility rates. Our estimates suggest that the cost of saving an infant life during this period ranged from $2 to 4.5 million dollars (measured in year 2000 dollars). This range is similar to that found in modern studies of the effect of Medicaid and is within the range of market values of human life.
Handle: RePEc:nbr:nberwo:8902
Template-Type: ReDIF-Paper 1.0
Title: Can the New Deal's Three R's Be Rehabilitated? A Program-by-Program, County-by-County Analysis
Classification-JEL: D78; E62
Author-Name: Price V. Fishback
Author-Person: pfi13
Author-Name: Shawn Kantor
Author-Person: pka54
Author-Name: John Joseph Wallis
Note: DAE
Number: 8903
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8903
File-URL: http://www.nber.org/papers/w8903.pdf
File-Format: application/pdf
Publication-Status: published as Fishback, Price V. & Kantor, Shawn & Wallis, John Joseph, 2003. "Can the New Deal's three Rs be rehabilitated? A program-by-program, county-by-county analysis," Explorations in Economic History, Elsevier, vol. 40(3), pages 278-307, July.
Abstract: We examine the importance of Roosevelt's 'relief, recovery, and reform' motives to the distribution of New Deal funds across over 3,000 U.S. counties, program by program. The major relief programs most closely followed Roosevelt's three R's. Other programs were tilted more in favor of areas with higher incomes. For all programs spending for political advantage in upcoming elections was a significant factor. Roosevelt's successful reelections were based on developing specific programs for a broad range of constituents, delivering on his stated goals, but also spending more at the margin for political purposes.
Handle: RePEc:nbr:nberwo:8903
Template-Type: ReDIF-Paper 1.0
Title: The Disturbing "Rise" of Global Income Inequality
Classification-JEL: D31; F0
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Note: IFM ITI
Number: 8904
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8904
File-URL: http://www.nber.org/papers/w8904.pdf
File-Format: application/pdf
Abstract: We use aggregate GDP data and within-country income shares for the period 1970-1998 to assign a level of income to each person in the world. We then estimate the gaussian kernel density function for the worldwide distribution of income. We compute world poverty rates by integrating the density function below the poverty lines. The $1/day poverty rate has fallen from 20% to 5% over the last twenty five years. The $2/day rate has fallen from 44% to 18%. There are between 300 and 500 million less poor people in 1998 than there were in the 70s. We estimate global income inequality using seven different popular indexes: the Gini coefficient, the variance of log-income, two of Atkinson's indexes, the Mean Logarithmic Deviation, the Theil index and the coefficient of variation. All indexes show a reduction in global income inequality between 1980 and 1998. We also find that most global disparities can be accounted for by across-country, not within- country, inequalities. Within-country disparities have increased slightly during the sample period, but not nearly enough to offset the substantial reduction in across-country disparities. The across-country reductions in inequality are driven mainly, but not fully, by the large growth rate of the incomes of the 1.2 billion Chinese citizens. Unless Africa starts growing in the near future, we project that income inequalities will start rising again. If Africa does not start growing, then China, India, the OECD and the rest of middle-income and rich countries diverge away from it, and global inequality will rise. Thus, the aggregate GDP growth of the African continent should be the priority of anyone concerned with increasing global income inequality.
Handle: RePEc:nbr:nberwo:8904
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy and Exchange Rate Volatility in a Small Open Economy
Classification-JEL: E52; F41
Author-Name: Jordi Gali
Author-Person: pga43
Author-Name: Tommaso Monacelli
Author-Person: pmo32
Note: EFG IFM ME
Number: 8905
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8905
File-URL: http://www.nber.org/papers/w8905.pdf
File-Format: application/pdf
Publication-Status: published as Gali, Jordi and Tommaso Monacelli. "Monetary Policy And Exchange Rate Volatility In A Small Open Economy," Review of Economic Studies, 2005, v72(252,Jul), 707-734.
Abstract: We lay out a small open economy version of the Calvo sticky price model, and show how the equilibrium dynamics can be reduced to a tractable canonical system in domestic inflation and the output gap. We employ this framework to analyze the macroeconomic implications of three alternative monetary policy regimes for the small open economy: domestic inflation targeting, CPI targeting and an exchange rate peg. We show that a key difference among these regimes lies in the relative amount of exchange rate volatility that they entail. We also discuss a special case for which domestic inflation targeting constitutes the optimal policy, and where a simple second order approximation to the utility of the representative consumer can be derived and used to evaluate the welfare losses associated with suboptimal regimes.
Handle: RePEc:nbr:nberwo:8905
Template-Type: ReDIF-Paper 1.0
Title: Junior Must Pay: Pricing the Implicit Put in Privatizing Social Security
Classification-JEL: D91; E2
Author-Name: George M. Constantinides
Author-Person: pco144
Author-Name: John B. Donaldson
Author-Name: Rajnish Mehra
Author-Person: pme56
Note: AG AP PE
Number: 8906
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8906
File-URL: http://www.nber.org/papers/w8906.pdf
File-Format: application/pdf
Publication-Status: published as Constantinides, G. M., J. B. Donaldson and R. Mehra. "Junior Must Pay: Pricing The Implicit Put In Privatizing Social Security," Annals of Finance, 2005, v1(1,Jan), 1-34.
Abstract: Proposals that portion of the Social Security Trust Fund assets be invested in equities entail the possibility that a severe decline in equity prices renders the Fund assets insufficient to provide the currently mandated level of benefits. In this event, existing taxpayers may be compelled to act as insurers of last resort. The cost to taxpayers of such an implicit commitment equals the value of a put option with payoff equal to the benefit's shortfall. We calibrate an OLG model that generates realistic equity premia and value the put. With 20 percent of the Fund assets invested in equities, the highest level currently under serious discussion, we value a put that guarantees the currently mandated level of benefits at one percent of GDP, or a temporary increase in Social Security taxation of at most 25 percent. We value a put that guarantees 90 percent of benefits at merely .03 percent of GDP. In contrast to earlier literature, our results account for the significant changes in the distribution of security returns resulting from Trust Fund purchases. We also explore the inter-generational welfare implications of the guarantee.
Handle: RePEc:nbr:nberwo:8906
Template-Type: ReDIF-Paper 1.0
Title: Physician Income Prediction Errors: Sources and Implications for Behavior
Classification-JEL: J24; J3
Author-Name: Sean Nicholson
Author-Person: pni108
Author-Name: Nicholas S. Souleles
Author-Person: pso104
Note: EFG EH
Number: 8907
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8907
File-URL: http://www.nber.org/papers/w8907.pdf
File-Format: application/pdf
Abstract: Although income expectations play a central role in many economic decisions, little is known about the sources of income prediction errors and how agents respond to income shocks. This paper uses a unique panel data set to examine the accuracy of physicians' income expectations, the sources of income prediction errors, and the effect of income prediction errors on physician behavior. The data set contains direct survey measures of income expectations for medical students who graduated between 1970 and 1998, their corresponding income realizations, and a rich summary of the shocks hitting their medical practices. We find that income prediction errors were positive on average over the sample period, but varied significantly over time and cross-sectionally. We trace these results to persistent specialty-specific shocks, such as the growth of health maintenance organizations (HMOs) and other changes across health care markets. Physicians who experienced negative income shocks were more likely to respond by increasing their hours worked, allocating fewer of their work hours to teaching/research and more to patient care, and were more likely to switch specialties.
Handle: RePEc:nbr:nberwo:8907
Template-Type: ReDIF-Paper 1.0
Title: Capital Account Liberalization: Allocative Efficiency or Animal Spirits?
Classification-JEL: E2; F3
Author-Name: Anusha Chari
Author-Person: pch288
Author-Name: Peter Blair Henry
Author-Person: phe166
Note: CF IFM
Number: 8908
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8908
File-URL: http://www.nber.org/papers/w8908.pdf
File-Format: application/pdf
Abstract: In the year that capital-poor countries open their stock markets to foreign investors, the growth rate of their typical firm's capital stock exceeds its pre-liberalization mean by 4.1 percentage points. In each of the next three years the average growth rate of the capital stock for the 369 firms in the sample exceeds its pre-liberalization mean by 6.1 percentage points. However, there is no evidence that differences in the liberalization-induced changes in the cost of capital or investment opportunities drive the cross-sectional variation in the post-liberalization investment increases.
Handle: RePEc:nbr:nberwo:8908
Template-Type: ReDIF-Paper 1.0
Title: On the Timeliness of Tax Reform
Classification-JEL: H21; H25
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: PE
Number: 8909
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8909
File-URL: http://www.nber.org/papers/w8909.pdf
File-Format: application/pdf
Publication-Status: published as Hines, James R., Jr. "On The Timeliness Of Tax Reform," Journal of Public Economics, 2004, v88(5,Apr), 1043-1059.
Abstract: This paper analyzes efficient reactions of policy makers to unanticipated tax avoidance. The strategy of many governments is to reform their tax laws and regulations to reduce the effectiveness of elaborate tax avoidance techniques as soon as they are identified. This tax reform process can successfully prevent the widespread use of new tax avoidance strategies, and in that way prevents erosion of the tax base. But it also encourages the rapid development of new tax avoidance techniques by innovators whose competitors are thereby unable to copy their methods -- as a consequence of which, there can be a great premium on being the first to develop and use a new tax avoidance method. An activist reform agenda may therefore divert greater resources into tax avoidance activity, and lead to a faster rate of tax base erosion, than would a less reactive government strategy. Efficient government policy therefore often entails a slow and deliberate pace of tax reform in response to taxpayer innovation.
Handle: RePEc:nbr:nberwo:8909
Template-Type: ReDIF-Paper 1.0
Title: Employment Relationships in the New Economy
Classification-JEL: J00
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Deborah Reed
Note: LS
Number: 8910
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8910
File-URL: http://www.nber.org/papers/w8910.pdf
File-Format: application/pdf
Publication-Status: published as Neumark, David & Reed, Deborah, 2004. "Employment relationships in the new economy," Labour Economics, Elsevier, vol. 11(1), pages 1-31, February.
Abstract: It is often argued that 'new economy' jobs are less likely to use traditional employment relationships, and more likely to rely on 'alternative' or 'contingent' work. When we look at new economy jobs classified on the basis of employment in high-tech industries, we do not find greater use of contingent or alternative employment relationships. However, when we classify new economy workers based on residence in high-tech cities, contingent and alternative employment relationships are more common, even after accounting for the faster employment growth in these cities. Finally, defining 'new economy' more literally to be those industries with the fastest growth yields the most striking differences, as workers in the fastest-growing industries are much more likely to be in contingent or alternative employment relationships, with a large share of this difference driven by employment in the fast-growing construction and personnel supply services industries where employment is perhaps 'intrinsically' contingent or alternative. While subject to numerous qualifications, the combined evidence gives some support to the hypothesis that the new economy may entail a possibly significant and long-lasting increase in contingent and alternative employment relationships.
Handle: RePEc:nbr:nberwo:8910
Template-Type: ReDIF-Paper 1.0
Title: Social Security and Elderly Living Arrangements
Classification-JEL: H3; J1
Author-Name: Gary V. Engelhardt
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Cynthia D. Perry
Note: AG PE
Number: 8911
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8911
File-URL: http://www.nber.org/papers/w8911.pdf
File-Format: application/pdf
Publication-Status: published as Engelhardt, Gary V., Jonathan Gruber and Cynthia D. Perry. "Social Security and Elderly Living Arrangements," Journal of Human Resources, 2005, v40(2,Spring), 354-372.
Abstract: One of the most important economic decisions facing the elderly, and their families, is whether to live independently. A number of previous studies suggest that widows are fairly responsive to Social Security benefits in deciding whether to live independently. But these previous studies have either generally relied on differences in benefits across families or cohorts, which are potentially correlated with other determinants of living arrangements, or have used data from the distant past. We propose a new approach that relies on the large exogenous shifts in benefits generosity for cohorts born in the 1910-1921 period, and we study the impact of this change in living arrangements in the 1980s and 1990s. In this period, benefits rose quickly, due to double-indexing of the benefit formula, and then fell dramatically, as this double-indexing was corrected over a five-year period. Using these legislative changes in benefits that the living arrangements of widows are much more sensitive to Social Security income than implied by previous studies. We also find that the living arrangements of divorcees, the fastest growing group of elderly, are even more sensitive to benefit levels. Overall, our findings suggest that living arrangements are elastically demanded by non-married elderly, privacy is a normal good, and that reductions in Social Security benefits would significantly alter the living arrangements of the elderly. Our estimates imply that a 10% cut in Social Security benefits would lead more than 600,000 independent elderly households to move into shared living arrangements.
Handle: RePEc:nbr:nberwo:8911
Template-Type: ReDIF-Paper 1.0
Title: Expectation Traps and 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 ME
Number: 8912
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8912
File-URL: http://www.nber.org/papers/w8912.pdf
File-Format: application/pdf
Publication-Status: published as Albanesi, Stefania, V. V. Chari and Lawrence J. Christiano. "Expectation Traps And Monetary Policy," Review of Economic Studies, 2003, v70(4,Oct), 715-741.
Abstract: Why is it that inflation is persistently high in some periods and persistently low in other periods? We argue that lack of commitment in monetary policy may bear a large part of the blame. We show that, in a standard equilibrium model, absence of commitment leads to multiple equilibria, or expectation traps. In these traps, expectations of high or low inflation lead the public to take defensive actions which then make it optimal for the monetary authority to validate those expectations. We find support in cross-country evidence for key implications of the model.
Handle: RePEc:nbr:nberwo:8912
Template-Type: ReDIF-Paper 1.0
Title: The Property Tax as a Tax on Value: Deadweight Loss
Classification-JEL: H2
Author-Name: Richard Arnott
Author-Person: par13
Author-Name: Petia Petrova
Note: PE
Number: 8913
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8913
File-URL: http://www.nber.org/papers/w8913.pdf
File-Format: application/pdf
Publication-Status: published as Arnott, Richard and Petia Petrova. "The Property Tax As A Tax On Value: Deadweight Loss," International Tax and Public Finance, 2006, v13(2-3,May), 241-266.
Abstract: Consider an atomistic developer who decides when and at what density to develop his land, under a property tax system characterized by three time-invariant tax rates: the tax rate on pre-development land value, the tax rate on post-development residual site value, and the tax rate on structure. Arnott (2002) identified the subset of property value tax systems which are neutral. This paper investigates the relative efficiency of four idealized, non-neutral property value tax systems (Canadian property tax system, simple property tax system, residual site value tax system, and differentiated property tax system) under the assumption of a constant rental growth rate.
Handle: RePEc:nbr:nberwo:8913
Template-Type: ReDIF-Paper 1.0
Title: Is Foreign Exchange Intervention Effective?: The Japanese Experiences in the 1990s
Classification-JEL: F31; E58
Author-Name: Takatoshi Ito
Note: IFM
Number: 8914
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8914
File-URL: http://www.nber.org/papers/w8914.pdf
File-Format: application/pdf
Publication-Status: published as Mizen, Paul (ed.) Monetary History, Exchange Rates and Financial Markets, Essays in Honour of Charles Goodhart, Volume 2. Cheltenham U.K. : Edward Elgar Pub, 2003.
Abstract: This paper examines Japanese foreign exchanges interventions from April 1991 to March 2001 based on newly disclosed official data. All the yen-selling (dollar-purchasing) interventions were carried out when the yen/dollar rate was below 125, while all the yen-purchasing (dollar-selling) interventions were carried out when the yen/dollar was above 125. The Japanese monetary authorities, by buying the dollar low and selling it high, have produced large profits, in terms of realized capital gains, unrealized capital gains, and carrying (interest rate differential) profits, from interventions during the ten years. Profits amounted to 9 trillion yen (2% of GDP) in 10 years. Interventions are found to be effective in the second half of the 1990s, when daily yen/dollar exchange rate changes were regressed on various factors including interventions. The US interventions in the 1990s were always accompanied by the Japanese interventions. The joint interventions were found to be 20-50 times more effective than the Japanese unilateral interventions. Japanese interventions were found to be prompted by rapid changes in the yen/dollar rate and the deviation from the long-run mean (say, 125 yen). The interventions in the second half were less predictable than the first half.
Handle: RePEc:nbr:nberwo:8914
Template-Type: ReDIF-Paper 1.0
Title: The Rising (and then Declining) Significance of Gender
Classification-JEL: J2; J7
Author-Name: Claudia Goldin
Author-Person: pgo601
Note: DAE LS
Number: 8915
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8915
File-URL: http://www.nber.org/papers/w8915.pdf
File-Format: application/pdf
Publication-Status: published as Blau, F. D. , M. C. Brinton, and D. B. Grusky (eds.) The Declining Significance of Gender? New York: Russell Sage Foundation, 2006.
Abstract: In the past two decades gender pay differences have narrowed considerably and a declining significance of gender has pervaded the labor market in numerous ways. This paper contends that in the first several decades of the twentieth century there was a rising significance of gender. The emergence of gender distinctions accompanied several important changes in the economy including the rise of white-collar work for women and increases in women's educational attainment. Firms adopted policies not to hire women in particular occupations and to exclude men from other occupations. A model of discrimination is developed in which men oppose the hiring of women into certain positions. The assumptions of the model break down when women acquire known and verifiable credentials. The shift from the rising to the declining significance of gender may have involved such a change.
Handle: RePEc:nbr:nberwo:8915
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Teacher Training on Student Achievement: Quasi-Experimental Evidence from School Reform Efforts in Chicago
Classification-JEL: I21; I28
Author-Name: Brian A. Jacob
Author-Name: Lars Lefgren
Author-Person: ple392
Note: CH ED
Number: 8916
Creation-Date: 2002-04
Order-URL: http://www.nber.org/papers/w8916
File-URL: http://www.nber.org/papers/w8916.pdf
File-Format: application/pdf
Publication-Status: published as Jacob, B. and L. Lefgren. “The Impact of Teacher Training on Student Achievement: Quasi-Experimental Evidence from School Reform Efforts in Chicago.” Journal of Human Resources 39, 1 (2004): 50-79.
Abstract: While there is a substantial literature on the relationship between general teacher characteristics and student learning, school districts and states often rely on in-service teacher training as a part of school reform efforts. Recent school reform efforts in Chicago provide an opportunity to examine in-service training using a quasi-experimental research design. In this paper, we use a regression discontinuity strategy to estimate the effect of teacher training on the math and reading performance of elementary students. We find that marginal increases in-service training have no statistically or academically significant effect on either reading or math achievement, suggesting that modest investments in staff development may not be sufficient to increase the achievement of elementary school children in high poverty schools.
Handle: RePEc:nbr:nberwo:8916
Template-Type: ReDIF-Paper 1.0
Title: Minimum Standards and Insurance Regulation: Evidence from the Medigap Market
Classification-JEL: I18; I11
Author-Name: Amy Finkelstein
Author-Person: pfi264
Note: EH PE
Number: 8917
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8917
File-URL: http://www.nber.org/papers/w8917.pdf
File-Format: application/pdf
Publication-Status: published as Finkelstein, Amy. "Minimum Standards, Insurance Regulation And Adverse Selection: Evidence From The Medigap Market," Journal of Public Economics, 2004, v88(12,Dec), 2515-2547.
Abstract: This paper examines the consequences of imposing binding minimum standards on the market for voluntary private health insurance for the elderly. Theoretically, the effect of these standards on insurance coverage and on welfare is ambiguous. I find robust evidence of a substantial decline in insurance associated with the minimum standards. The central estimates suggest that the standards are associated with an 8 percentage point (25 percent) decrease in the proportion of the population with coverage in the affected market; I find no evidence of substitution to other, unregulated sources of insurance coverage. Additional evidence suggests that the minimum standards are also associated with reduced coverage of non-mandated benefits among the insured. The empirical results are most consistent with a model of the effect of minimum standards on insurance markets with adverse selection, and suggest that adverse selection exacerbates the potential for unintended negative consequences of minimum standards. The final section of the paper considers the welfare implications of the changes in risk bearing associated with the minimum standards. The results suggest that the imposition of these standards was, even under relatively conservative assumptions, welfare reducing on net.
Handle: RePEc:nbr:nberwo:8917
Template-Type: ReDIF-Paper 1.0
Title: Remedial Education and Student Achievement: A Regression-Discontinuity Analysis
Classification-JEL: I21; I28
Author-Name: Brian A. Jacob
Author-Name: Lars Lefgren
Author-Person: ple392
Note: CH ED
Number: 8918
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8918
File-URL: http://www.nber.org/papers/w8918.pdf
File-Format: application/pdf
Publication-Status: published as Brian A. Jacob & Lars Lefgren, 2004. "Remedial Education and Student Achievement: A Regression-Discontinuity Analysis," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 226-244, November.
Abstract: As standards and accountability have become an increasingly prominent feature of the educational landscape, educators have relied more on remedial programs such as summer school and grade retention to help low-achieving students meet minimum academic standards. Yet the evidence on the effectiveness of such programs is mixed, and prior research suffers from selection bias. However, recent school reform efforts in Chicago provide an opportunity to examine the causal impact of these remedial education programs. In 1996, the Chicago Public Schools instituted an accountability policy that tied summer school and promotional decisions to performance on standardized tests, which resulted in a highly non-linear relationship between current achievement and the probability of attending summer school or being retained. Using a regression discontinuity design, we find that the net effect of these programs was to substantially increase academic achievement among third graders, but not sixth graders. In addition, contrary to conventional wisdom and prior research, we find that retention increases achievement for third grade students and has little effect on math achievement for sixth grade students.
Handle: RePEc:nbr:nberwo:8918
Template-Type: ReDIF-Paper 1.0
Title: Stochastic Technical Progress, Nearly Smooth Trends and Distinct Business Cycles
Classification-JEL: E3; O4
Author-Name: Julio J. Rotemberg
Author-Person: pro30
Note: EFG ME
Number: 8919
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8919
File-URL: http://www.nber.org/papers/w8919.pdf
File-Format: application/pdf
Publication-Status: published as Rotemberg, Julio J. "Stochastic Technical Progress, Smooth Trends, And Nearly Distinct Business Cycles," American Economic Review, 2003, v93(5,Dec), 1543-1559.
Abstract: This paper investigates whether it is possible to entertain simultaneously two attractive views about US GDP. The first is that long term growth in US GDP is attributable to an empirically plausible specification of random technical progress. The second is that deviations of GDP from a fitted smooth 'trend' are mostly attributable to shocks that have only temporary effects, so that they are unrelated to the shocks to technical progress that lead to long term growth. The paper shows that these two views are not incompatible by constructing a model where stochastic technical progress (whose properties are calibrated to fit some features of US data) has essentially no effect on suitably detrended time series of GDP. The paper also studies variations in wedges between price and marginal cost that are capable of giving rise to these transitory movements.
Handle: RePEc:nbr:nberwo:8919
Template-Type: ReDIF-Paper 1.0
Title: Wealth Accumulation and the Propensity to Plan
Classification-JEL: E2; D1
Author-Name: John Ameriks
Author-Person: pam72
Author-Name: Andrew Caplin
Author-Person: pca77
Author-Name: John Leahy
Author-Person: ple189
Note: AG EFG
Number: 8920
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8920
File-URL: http://www.nber.org/papers/w8920.pdf
File-Format: application/pdf
Publication-Status: published as Ameriks, John, Andrew Caplin and John Leahy. "Wealth Accumulation And The Propensity To Plan," Quarterly Journal of Economics, 2003, v118(3,Aug), 1007-1048.
Abstract: Why do similar households end up with very different levels of wealth? We show that differences in the attitudes and skills with which they approach financial planning are a significant factor. We use new and unique survey data to assess these differences and to measure each household's 'propensity to plan.' We show that those with a higher such propensity spend more time developing financial plans, and that this shift in planning effort is associated with increased wealth. The propensity to plan is uncorrelated with survey measures of the discount factor and the bequest motive, raising a question as to why it is associated with wealth accumulation. Part of the answer lies in the very strong relationship we uncover between the propensity to plan and how carefully households monitor their spending. It appears that this detailed monitoring activity helps households to save more and to accumulate more wealth.
Handle: RePEc:nbr:nberwo:8920
Template-Type: ReDIF-Paper 1.0
Title: The Governance of Not-For-Profit Firms
Classification-JEL: G3; H4
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Note: LE PE
Number: 8921
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8921
File-URL: http://www.nber.org/papers/w8921.pdf
File-Format: application/pdf
Abstract: Many factors including incentive-pay, powerful shareholders, and takeover threats push for-profits managers towards maximizing shareholder value. One of the most striking factors about non-profit firms is that they have no comparable governance institutions, and the only check on managers are boards that are themselves rarely responsible to anyone outside the firm. This essay discusses the implications of these weak governance institutions on non-profit behavior. A primary implication is that non-profits will often evolve into organizations that resemble workers' cooperatives. The primary check on this tendency is the need of the organizations to compete in outside markets. After presenting a model of non-profit behavior, I look at four different sectors (hospitals, museums, universities and the church). All display significant signs of capture by elite workers, but all still perform their basic missions reasonably, probably because of market competition.
Handle: RePEc:nbr:nberwo:8921
Template-Type: ReDIF-Paper 1.0
Title: Risk Reduction in Large Portfolios: Why Imposing the Wrong Constraints Helps
Classification-JEL: C49; G11
Author-Name: Ravi Jagannathan
Author-Person: pja91
Author-Name: Tongshu Ma
Note: AP
Number: 8922
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8922
File-URL: http://www.nber.org/papers/w8922.pdf
File-Format: application/pdf
Publication-Status: published as Ravi Jagannathan & Tongshu Ma, 2003. "Risk Reduction in Large Portfolios: Why Imposing the Wrong Constraints Helps," Journal of Finance, American Finance Association, vol. 58(4), pages 1651-1684, 08.
Abstract: Mean-variance efficient portfolios constructed using sample moments often involve taking extreme long and short positions. Hence practitioners often impose portfolio weight constraints when constructing efficient portfolios. Green and Hollifield (1992) argue that the presence of a single dominant factor in the covariance matrix of returns is why we observe extreme positive and negative weights. If this were the case then imposing the weight constraint should hurt whereas the empirical evidence is often to the contrary. We reconcile this apparent contradiction. We show that constraining portfolio weights to be nonnegative is equivalent to using the sample covariance matrix after reducing its large elements and then form the optimal portfolio without any restrictions on portfolio weights. This shrinkage helps reduce the risk in estimated optimal portfolios even when they have negative weights in the population. Surprisingly, we also find that once the nonnegativity constraint is imposed, minimum variance portfolios constructed using the monthly sample covariance matrix perform as well as those constructed using covariance matrices estimated using factor models, shrinkage estimators, and daily data. When minimizing tracking error is the criterion, using daily data instead of monthly data helps. However, the sample covariance matrix without any correction for microstructure effects performs the best.
Handle: RePEc:nbr:nberwo:8922
Template-Type: ReDIF-Paper 1.0
Title: Does Local Financial Development Matter?
Classification-JEL: G0; G2
Author-Name: Luigi Guiso
Author-Person: pgu58
Author-Name: Paola Sapienza
Author-Person: psa155
Author-Name: Luigi Zingales
Note: CF
Number: 8923
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8923
File-URL: http://www.nber.org/papers/w8923.pdf
File-Format: application/pdf
Publication-Status: published as Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "Does Local Financial Development Matter?," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 929-969, August.
Abstract: We study the effects of differences in local financial development within an integrated financial market. To do so, we construct a new indicator of financial development by estimating a regional effect on the probability that, ceteris paribus, a household is shut off from the credit market. By using this indicator we find that financial development enhances the probability an individual starts his own business, favors entry, increases competition, and promotes growth of firms. As predicted by theory, these effects are weaker for larger firms, which can more easily raise funds outside of the local area. Overall, the results suggest local financial development is an important determinant of the economic success of an area even in an environment where there are no frictions to capital movements.
Handle: RePEc:nbr:nberwo:8923
Template-Type: ReDIF-Paper 1.0
Title: Social Security Privatization Reform and Labor Markets: The Case of Chile
Classification-JEL: H55; J3
Author-Name: Sebastian Edwards
Author-Person: ped3
Author-Name: Alejandra Cox Edwards
Note: AG LS PE
Number: 8924
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8924
File-URL: http://www.nber.org/papers/w8924.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian and Alejandra Cox Edwards. "Social Security Privatization Reform And Labor Market: The Case Of Chile," Economic Development and Cultural Change, 2002, v50(3,Apr), 465-489.
Abstract: We analyze the way in which social security privatization reform affects labor market outcomes. We develop a model of the labor market where we assume that, as is the case in most emerging markets, a formal and an informal sectors coexist side by side. According to our model, a social security reform that reduces the implicit tax on labor in the formal sector, will result in an increase in the wage rate in the informal sector and will have an undetermined effect on aggregate unemployment. Results from simulation exercises suggest that in the case of Chile the reforms resulted in an increase in informal sector wages of approximately 2.0%. These results also suggest that the reforms made a positive, but small, contribution to the reduction of Chile's aggregate of unemployment.
Handle: RePEc:nbr:nberwo:8924
Template-Type: ReDIF-Paper 1.0
Title: Inflation Targeting: Should It Be Modeled as an Instrument Rule or a Targeting Rule?
Classification-JEL: E42; E52
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: AP IFM ME
Number: 8925
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8925
File-URL: http://www.nber.org/papers/w8925.pdf
File-Format: application/pdf
Publication-Status: published as Svensson, Lars E. O. "Inflation Targeting: Should It Be Modeled As An Instrument Rule Or A Targeting Rule?," European Economic Review, 2002, v46(4-5,May), 771-780.
Abstract: The paper discusses how current inflation targeting should be modeled, and argues that it is better represented as a commitment to a targeting rule (a rule specifying operational objectives for monetary policy or a condition for the target variables), than as a commitment to a simple instrument rule (like a Taylor rule).
Handle: RePEc:nbr:nberwo:8925
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Gun Prevalence on Burglary: Deterrence vs Inducement
Classification-JEL: K42
Author-Name: Philip J. Cook
Author-Person: pco30
Author-Name: Jens Ludwig
Note: EH
Number: 8926
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8926
File-URL: http://www.nber.org/papers/w8926.pdf
File-Format: application/pdf
Publication-Status: published as Ludwig, J and PJ Cook (eds.) Evaluating Gun Policy. Washington, DC: Brookings Institution Press, 2003.
Abstract: The proposition that widespread gun ownership serves as a deterrent to residential burglary is widely touted by advocates, but the evidence is weak, consisting of anecdotes, interviews with burglars, casual comparisons with other countries, and the like. A more systematic exploration requires data on local rates of gun ownership and of residential burglary, and such data have only recently become available. In this paper we exploit a new well-validated proxy for local gun-ownership prevalence -- the proportion of suicides that involve firearms -- together with newly available geo-coded data from the National Crime Victimization Survey, to produce the first systematic estimates of the net effects of gun prevalence on residential burglary patterns. The importance of such empirical work stems in part from the fact that theoretical considerations do not provide much guidance in predicting the net effects of widespread gun ownership. Guns in the home may pose a threat to burglars, but also serve as an inducement, since guns are particularly valuable loot. Other things equal, a gun-rich community provides more lucrative burglary opportunities than one where guns are more sparse. The new empirical results reported here provide no support for a net deterrent effect from widespread gun ownership. Rather, our analysis concludes that residential burglary rates tend to increase with community gun prevalence.
Handle: RePEc:nbr:nberwo:8926
Template-Type: ReDIF-Paper 1.0
Title: A Century of Current Account Dynamics
Classification-JEL: F2; F21
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE IFM
Number: 8927
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8927
File-URL: http://www.nber.org/papers/w8927.pdf
File-Format: application/pdf
Publication-Status: published as Taylor, Alan M. "A Century Of Current Account Dynamics," Journal of International Money and Finance, 2002, v21(6,Nov), 725-748.
Abstract: Recent globalization trends have refocused attention on the historical evolution of international capital mobility over the long run. The issue is examined here using time-series analysis of current-account dynamics for fifteen countries since circa 1850. The inter-war period emerges as an era of low capital mobility and only recently can we observe a tentative return to the degree of capital mobility witnessed during the late nineteenth century. The analysis of saving and investment dynamics also helps make sense of the frequently observed high correlation of saving and investment rates in historical data.
Handle: RePEc:nbr:nberwo:8927
Template-Type: ReDIF-Paper 1.0
Title: Financial Intermediation
Classification-JEL: G0; G2
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: Andrew Winton
Note: CF
Number: 8928
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8928
File-URL: http://www.nber.org/papers/w8928.pdf
File-Format: application/pdf
Publication-Status: published as Constantinides, George, Milton Harris, and Rene Stulz. The Handbook of the Economics of Finance: Corporate Finance. Elsevier Science, 2003.
Abstract: The savings/investment process in capitalist economies is organized around financial intermediation, making them a central institution of economic growth. Financial intermediaries are firms that borrow from consumer/savers and lend to companies that need resources for investment. In contrast, in capital markets investors contract directly with firms, creating marketable securities. The prices of these securities are observable, while financial intermediaries are opaque. Why do financial intermediaries exist? What are their roles? Are they inherently unstable? Must the government regulate them? Why is financial intermediation so pervasive? How is it changing? In this paper we survey the last fifteen years' of theoretical and empirical research on financial intermediation. We focus on the role of bank-like intermediaries in the savings-investment process. We also investigate the literature on bank instability and the role of the government.
Handle: RePEc:nbr:nberwo:8928
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Knowledge-Capital Model of the Multinational Enterprise: Comment
Classification-JEL: F2
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: Ronald B. Davies
Author-Person: pda64
Author-Name: Keith Head
Note: ITI
Number: 8929
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8929
File-URL: http://www.nber.org/papers/w8929.pdf
File-Format: application/pdf
Publication-Status: published as Blonigen, Bruce A., Ronald B. Davies and Keith Head. "Estimating The Knowledge-Capital Model Of The Multinational Enterprise: Comment," American Economic Review, 2003, v93(3,Jun), 980-994.
Abstract: A recent American Economic Review article by David L. Carr, James R. Markusen, and Keith E. Maskus (CMM) estimates a regression specification based upon the 'knowledge-capital' model of the Multinational Enterprise (MNE). The knowledge-capital model combines 'horizontal' motivations for FDI -- the desire to place production close to customers and thereby avoid trade costs -- with 'vertical' motivations -- the desire to carry out unskilled-labor intensive production activities in locations with relatively abundant unskilled labor. The CMM estimates pool inward and outward U.S. affiliate sales data from 1986 through 1994 and appear to support the knowledge-capital model of the MNE. We show that CMM's empirical framework mis-specifies the terms measuring differences in skilled-labor abundance, key variables that identify vertical MNE motivations. After correcting this specification error estimates no longer reject the horizontal model in favor of the knowledge-capital model. Instead, the data strongly support the predictions of the horizontal model of MNEs: affiliate activity between countries decreases as absolute differences in skill-labor abundance widen. Qualitatively identical results are also found using data that include a wider variety of parent and host countries, including data for the OECD.
Handle: RePEc:nbr:nberwo:8929
Template-Type: ReDIF-Paper 1.0
Title: Modern Hyper- and High Inflations
Classification-JEL: F41; E63
Author-Name: Stanley Fischer
Author-Name: Ratna Sahay
Author-Person: psa1709
Author-Name: Carlos A. Vegh
Author-Person: pve34
Note: EFG IFM ME
Number: 8930
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8930
File-URL: http://www.nber.org/papers/w8930.pdf
File-Format: application/pdf
Publication-Status: published as Fischer, Stanley, Ratna Sahay and Carlos Vegh. "Modern Hyper- And High Inflations," Journal of Economic Literature, 2002, v40(3,Sep), 837-880.
Abstract: Since 1947, hyperinflations (by Cagan's definition) in market economies have been rare. Much more common have been longer inflationary processes with inflation rates above 100 percent per annum. Based on a sample of 133 countries, and using the 100 percent threshold as the basis for a definition of very high inflation episodes, this paper examines the main characteristics of such inflations. Among other things, we find that (i) close to 20 percent of countries have experienced inflation above 100 percent per annum; (ii) higher inflation tends to be more unstable; (iii) in high inflation countries, the relationship between the fiscal balance and seigniorage is strong both in the short and long-run; (iv) inflation inertia decreases as average inflation rises; (v) high inflation is associated with poor macroeconomic performance; and (vi) stabilizations from high inflation that rely on the exchange rate as the nominal anchor are expansionary.
Handle: RePEc:nbr:nberwo:8930
Template-Type: ReDIF-Paper 1.0
Title: Religion and Political Economy in an International Panel
Classification-JEL: O1; O4
Author-Name: Robert J. Barro
Author-Person: pba251
Author-Name: Rachel M. McCleary
Note: EFG
Number: 8931
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8931
File-URL: http://www.nber.org/papers/w8931.pdf
File-Format: application/pdf
Publication-Status: published as Barro, Robert J. and R.M. McCleary. "Religion and Political Economy in an International Panel." Journal for the Scientific Study of Religion (June 2006).
Abstract: Economic and political developments affect religiosity, and the extent of religious participation and beliefs influence economic performance and political institutions. We study these two directions of causation in a broad cross-country panel that includes survey information over the last 20 years on church attendance and an array of religious beliefs. Although religiosity declines overall with economic development, the nature of the response varies with the dimension of development. Church attendance and religious beliefs are positively related to education (thereby conflicting with theories in which religion reflects non-scientific thinking) and negatively related to urbanization. Attendance also declines with higher life expectancy and lower fertility. We investigate the effects of official state religions, government regulation of the religion market, Communism, religious pluralism, and the denominational composition of religious adherence. On the other side, we find that economic growth responds positively to the extent of some religious beliefs but negatively to church attendance. That is, growth depends on the extent of believing relative to belonging. These results hold up when we use as instrumental variables the measures of official state religion, government regulation, and religious pluralism.
Handle: RePEc:nbr:nberwo:8931
Template-Type: ReDIF-Paper 1.0
Title: Has Welfare Reform Changed Teenage Behaviors?
Classification-JEL: I3
Author-Name: Robert Kaestner
Author-Person: pka42
Author-Name: June O'Neill
Author-Person: pon36
Note: CH EH
Number: 8932
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8932
File-URL: http://www.nber.org/papers/w8932.pdf
File-Format: application/pdf
Publication-Status: published as Kaestner, Robert, Sanders Korenman and June O’Neill. “Has Welfare Reform Changed Teenage Behaviors?” Journal of Policy Analysis and Management 22, 2 (2003): 225-248.
Abstract: We use data from the National Longitudinal Surveys of Youth 1979 and 1997 cohorts to compare welfare use, fertility rates, educational attainment, and marriage rates among teenage women in the years before and the years immediately following welfare reform. Our first objective is to document differences between these cohorts in welfare use and outcomes and behaviors correlated with 'entry' into welfare, and with future economic and social well-being. Our second objective is to investigate the causal role of welfare reform in behavioral change. We find significant differences between cohorts in welfare use and in outcomes related to welfare use. Further, difference-in-differences estimates suggest that welfare reform has been associated with reduced welfare receipt, reduced fertility, reduced marriage, and lower school drop-out among young women who, because of a disadvantaged family background, are at high risk of welfare receipt (relative to those at lower risk). Finally, in the post-welfare reform era, teenage mothers are less likely to receive welfare and are more likely to live with a spouse or to live with at least one parent than in the pre-reform era. Establishing definitively that welfare reform is responsible for these changes among teenagers will require further investigation.
Handle: RePEc:nbr:nberwo:8932
Template-Type: ReDIF-Paper 1.0
Title: The World Distribution of Income (estimated from Individual Country Distributions)
Classification-JEL: D31; F0
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Note: EFG
Number: 8933
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8933
File-URL: http://www.nber.org/papers/w8933.pdf
File-Format: application/pdf
Abstract: We estimate the world distribution of income by integrating individual income distributions for 125 countries between 1970 and 1998. We estimate poverty rates and headcounts by integrating the density function below the $1/day and $2/day poverty lines. We find that poverty rates decline substantially over the last twenty years. We compute poverty headcounts and find that the number of one-dollar poor declined by 235 million between 1976 and 1998. The number of $2/day poor declined by 450 million over the same period. We analyze poverty across different regions and countries. Asia is a great success, especially after 1980. Latin America reduced poverty substantially in the 1970s but progress stopped in the 1980s and 1990s. The worst performer was Africa, where poverty rates increased substantially over the last thirty years: the number of $1/day poor in Africa increased by 175 million between 1970 and 1998, and the number of $2/day poor increased by 227. Africa hosted 11% of the world's poor in 1960. It hosted 66% of them in 1998. We estimate nine indexes of income inequality implied by our world distribution of income. All of them show substantial reductions in global income inequality during the 1980s and 1990s.
Handle: RePEc:nbr:nberwo:8933
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Pass-Through into Import Prices: A Macro or Micro Phenomenon?
Classification-JEL: F3; F4
Author-Name: Jose Manuel Campa
Author-Person: pca393
Author-Name: Linda S. Goldberg
Author-Person: pgo256
Note: IFM ITI
Number: 8934
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8934
File-URL: http://www.nber.org/papers/w8934.pdf
File-Format: application/pdf
Publication-Status: published as Campa, Jose and Linda S. Goldberg. “Exchange Rate Pass Through into Import Prices." Review of Economics and Statistics 87, 4 (November 2005): 679-690.
Abstract: Exchange rate regime optimality, as well as monetary policy effectiveness, depends on the tightness of the link between exchange rate movements and import prices. Recent debates hinge on whether producer-currency-pricing (PCP) or local currency pricing (LCP) of imports is more prevalent, and on whether exchange rate pass-through rates are endogenous to a country's macroeconomic conditions. We provide cross-country and time series evidence on both of these issues for the imports of twenty-five OECD countries. Across the OECD and especially within manufacturing industries, there is compelling evidence of partial pass-through in the short-run- rejecting both PCP and LCP. Over the long run, PCP is more prevalent for many types of imported goods. Higher inflation and exchange rate volatility are weakly associated with higher pass-through of exchange rates into import prices. However, for OECD countries, the most important determinants of changes in pass-through over time are microeconomic and relate to the industry composition of a country's import bundle.
Handle: RePEc:nbr:nberwo:8934
Template-Type: ReDIF-Paper 1.0
Title: The New Economy and the Challenges for Macroeconomic Policy
Classification-JEL: E3; E5
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Note: ME
Number: 8935
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8935
File-URL: http://www.nber.org/papers/w8935.pdf
File-Format: application/pdf
Publication-Status: published as Jansen, Dennis W. (ed.) The New Economy and Beyond: Past, Present and Future, Bush School Series in the Economics of Public Policy, vol. 5. Cheltenham, U.K. and Northampton, MA: Elgar, 2006.
Abstract: The accelerated introduction of information and communications technology into the economy has created numerous challenges for policymakers. This paper describes this New Economy and then proceeds to examine difficulties created for policymakers. The increased flexibility of the new economy argues against trying to use fiscal policy for stabilization and creates both immediate and long-term difficulties for monetary policy. Immediate difficulties concern the problems associated with estimating potential output when the productivity trend is shifting. During periods of transition, it is extremely difficult to distinguish permanent from transitory shifts in output growth, and adjust policy correctly. In the long-term, central banks must face the prospect of a significant decline in the demand for their liabilities, and a resulting loss of their primary interest rate policy instrument. The disappearance of the demand for central bank money for interbank settlement seems very unlikely, and so this concern seems unwarranted.
Handle: RePEc:nbr:nberwo:8935
Template-Type: ReDIF-Paper 1.0
Title: Medicaid Managed Care and Infant Health: A National Evaluation
Classification-JEL: I1
Author-Name: Robert Kaestner
Author-Person: pka42
Author-Name: Lisa Dubay
Author-Name: Genevieve Kenney
Note: CH EH
Number: 8936
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8936
File-URL: http://www.nber.org/papers/w8936.pdf
File-Format: application/pdf
Publication-Status: published as Kaestner, Robert, Lisa Dubay and Jenny Kenney. “Managed Care and Infant Health: An Evaluation of Medicaid in the US.” Social Science and Medicine 60 (2005): 1815-1833.
Abstract: In this study, we examine the effects of Medicaid managed care (MMC) on prenatal care utilization and infant health. We obtain separate estimates of the effect of primary care case management (PCCM) managed care programs and HMO managed care plans on prenatal care utilization, birth weight, and cesarean section. The results suggest the following: MMC was associated with a small, clinically unimportant decrease in the number of prenatal care visits; MMC had no statistically significant relationship to the APNCU index of the adequacy of prenatal care; MMC was associated with a significant increase in the incidence of low-birth weight and pre-term birth; and MMC had no association with the incidence of cesarean section. We argue that a causal interpretation of the first and third findings is unsupported by a careful reading of the evidence, and we conclude that Medicaid managed care had virtually no causal effect on, prenatal care use, birth outcomes, and cesarean section.
Handle: RePEc:nbr:nberwo:8936
Template-Type: ReDIF-Paper 1.0
Title: Liquidity Shortages and Banking Crises
Author-Name: Douglas W. Diamond
Author-Person: pdi80
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Note: CF EFG IFM ME
Number: 8937
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8937
File-URL: http://www.nber.org/papers/w8937.pdf
File-Format: application/pdf
Publication-Status: published as Douglas W. Diamond & Raghuram G. Rajan, 2005. "Liquidity Shortages and Banking Crises," Journal of Finance, American Finance Association, vol. 60(2), pages 615-647, 04.
Abstract: Banks can fail either because they are insolvent or because an aggregate shortage of liquidity can render them insolvent. We show that bank failures can themselves cause liquidity shortages. The failure of some banks can then lead to a cascade of failures and a possible total meltdown of the system. Contagion here is not caused by contractual or informational links between banks but because bank failure could lead to a contraction in the common pool of liquidity. There is a possible role for government intervention. Unfortunately, liquidity problems and solvency problems interact, and can each cause the other. It is therefore hard to determine the root cause of a crisis from observable factors. The practical difficulty of determining the most appropriate intervention, as well as the costs of the wrong kind of intervention (such as infusing capital when the need is for liquidity) have to be traded off against the costs of a meltdown, which can be substantial. We propose a robust sequence of intervention.
Handle: RePEc:nbr:nberwo:8937
Template-Type: ReDIF-Paper 1.0
Title: The Mildest Recession: Output, Profits, and Stock Prices as the U.S. Emerges from the 2001 Recession
Classification-JEL: E3; E5
Author-Name: William D. Nordhaus
Author-Person: pno115
Note: EFG
Number: 8938
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8938
File-URL: http://www.nber.org/papers/w8938.pdf
File-Format: application/pdf
Publication-Status: published as Nordhaus, William D. "The Recent Recession, The Current Recovery, And Stock Prices," Brookings Papers, 2002, v32(1), 199-220.
Abstract: This paper examines the state of the United States economy as it emerges from the 2001 recession. A comparison of several central economic variables indicates that the 2001 recession was the mildest recession in the postwar period. In light of highly differentiated characteristics of recessions, the paper suggests that we differentiate among downturns by a five-category 'recession severity scale,' analogous to the Saffir-Simpson Hurricane Scale. According to this approach, the 2001 recession fits in the least severe box, a 'category I recession,' along with the 1963 and 1967 non-recessions. The paper next examines the behavior of profits in recent years and shows that financial finagling has infected the aggregate profits numbers. Finally, the study constructs a measure of the forward-looking return on equities and concludes that the prospective real yield on equities in early 2002 is at its low point of the last half-century.
Handle: RePEc:nbr:nberwo:8938
Template-Type: ReDIF-Paper 1.0
Title: Debt Relief and Fiscal Sustainability
Classification-JEL: F3; F34
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM
Number: 8939
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8939
File-URL: http://www.nber.org/papers/w8939.pdf
File-Format: application/pdf
Publication-Status: published as Sebastian Edwards, 2003. "Debt relief and fiscal sustainability," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 139(1), pages 38-65, March.
Abstract: In this paper I analyze the relationship between fiscal policy, aggregate public sector debt sustainability, and debt relief. I develop a methodology to compute the fiscal policy path that is compatible with aggregate debt sustainability in the post-HIPC era. The model explicitly considers the role of domestic debt, and quantifies the extent to which future debt sustainability depends on the availability of concessional loans at subsidized interest rates. The working of the model is illustrated for the case of Nicaragua, a country that in 2002 had one of the highest net present value of public external debt to GDP ratios.
Handle: RePEc:nbr:nberwo:8939
Template-Type: ReDIF-Paper 1.0
Title: The NAIRU in Theory and Practice
Classification-JEL: E24; E31
Author-Name: Laurence Ball
Author-Person: pba605
Author-Name: N. Gregory Mankiw
Note: EFG ME
Number: 8940
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8940
File-URL: http://www.nber.org/papers/w8940.pdf
File-Format: application/pdf
Publication-Status: published as Ball, Laurence and N. Gregory Mankiw. "The NAIRU In Theory And Practice," Journal of Economic Perspectives, 2002, v16(4,Fall), 115-136.
Abstract: This paper discusses the NAIRU -- the non-accelerating inflation rate of unemployment. It first considers the role of the NAIRU concept in business cycle theory, arguing that this concept is implicit in any model in which monetary policy influences both inflation and unemployment. The exact value of the NAIRU is hard to measure, however, in part because it changes over time. The paper then discusses why the NAIRU changes and, in particular, why it fell in the United States during the 1990s. The most promising hypothesis is that the decline in the NAIRU is attributable to the acceleration in productivity growth.
Handle: RePEc:nbr:nberwo:8940
Template-Type: ReDIF-Paper 1.0
Title: Estimation and Identification of Structural Parameters in the Presence of Multiple Equilibria
Classification-JEL: E1; E3
Author-Name: Russell W. Cooper
Note: EFG
Number: 8941
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8941
File-URL: http://www.nber.org/papers/w8941.pdf
File-Format: application/pdf
Publication-Status: published as Cooper, Russell W. "Estimation And Identification Of Structural Parameters In The Presence Of Multiple Equilibria," Eastern Economic Journal, v31(1,Winter), 2005, 107-130.
Abstract: This paper studies quantitative implications of model economies that exhibit multiple equilibria. The goal is to assess two interrelated issues. First, do economies with multiple equilibria have falsifiable predictions? Second, is identification possible in economies that exhibit multiple equilibria? Put differently, are these economies observationally equivalent to economies with unique equilibria? We raise these questions within a general framework and then study a series of examples to determine how the existing literature has addressed them.
Handle: RePEc:nbr:nberwo:8941
Template-Type: ReDIF-Paper 1.0
Title: The Curley Effect
Classification-JEL: D70; D72
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: PE
Number: 8942
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8942
File-URL: http://www.nber.org/papers/w8942.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. and Andrei Shleifer. "The Curley Effect: The Economics Of Shaping The Electorate," Journal of Law, Economics and Organization, 2005, v21(1,Apr), 1-19.
Abstract: James Michael Curley, a four-time mayor of Boston, used wasteful redistribution to his poor Irish constituents and incendiary rhetoric to encourage richer citizens to emigrate from Boston, thereby shaping the electorate in his favor. Boston as a consequence stagnated, but Curley kept winning elections. We present a model of the Curley effect, in which inefficient redistributive policies are sought not by interest groups protecting their rents, but by incumbent politicians trying to shape the electorate through emigration of their opponents or reinforcement of class identities. The model sheds light on ethnic politics in the United States and abroad, as well as on class politics in many countries including Britain.
Handle: RePEc:nbr:nberwo:8942
Template-Type: ReDIF-Paper 1.0
Title: Network Externalities and Technology Adoption: Lessons from Electronic Payments
Classification-JEL: C33; C35
Author-Name: Gautam Gowrisankaran
Author-Name: Joanna Stavins
Author-Person: pst787
Note: PR
Number: 8943
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8943
File-URL: http://www.nber.org/papers/w8943.pdf
File-Format: application/pdf
Publication-Status: published as Gowrisankaran, Gautam and Joanna Stavins. “Network Externalities and Technology Adoption: Lessons from Electronic Payments.” RAND Journal of Economics 35 (2004): 260–276.
Abstract: We seek to analyze the extent and sources of network externalities for the automated clearinghouse (ACH) electronic payments system using a quarterly panel data set on individual bank adoption and usage of ACH. We provide three methods to identify network externalities using this panel data. The first method identifies network externalities from the clustering of ACH adoption. The second method identifies them by examining whether banks in areas with higher market concentration or larger competitors are more likely to adopt ACH. The third method identifies them by examining whether the ACH adoption by small branches of large banks affects the adoption by local competitors. Using fixed effects and panel data these methods separately identify network externalities from technological advancement, peer-group effects, economies of scale and market power. We find evidence that the network externalities are moderately large.
Handle: RePEc:nbr:nberwo:8943
Template-Type: ReDIF-Paper 1.0
Title: Nonparametric Option Pricing under Shape Restrictions
Classification-JEL: G12; C14
Author-Name: Yacine Ait-Sahalia
Author-Person: pai23
Author-Name: Jefferson Duarte
Note: AP
Number: 8944
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8944
File-URL: http://www.nber.org/papers/w8944.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Econometrics, 2003, vol. 116, pp. 9-47
Abstract: Frequently, economic theory places shape restrictions on functional relationships between economic variables. This paper develops a method to constrain the values of the first and second derivatives of nonparametric locally polynomial estimators. We apply this technique to estimate the state price density (SPD), or risk-neutral density, implicit in the market prices of options. The option pricing function must be monotonic and convex. Simulations demonstrate that nonparametric estimates can be quite feasible in the small samples relevant for day-to-day option pricing, once appropriate theory-motivated shape restrictions are imposed. Using S&P500 option prices, we show that unconstrained nonparametric estimators violate the constraints during more than half the trading days in 1999, unlike the constrained estimator we propose.
Handle: RePEc:nbr:nberwo:8944
Template-Type: ReDIF-Paper 1.0
Title: Homeownership in the Immigrant Population
Classification-JEL: J1; R2
Author-Name: George J. Borjas
Author-Person: pbo44
Note: LS PE
Number: 8945
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8945
File-URL: http://www.nber.org/papers/w8945.pdf
File-Format: application/pdf
Publication-Status: published as Borjas, George J. "Homeownership In The Immigrant Population," Journal of Urban Economics, 2002, v52(3,Nov), 448-476.
Abstract: This paper analyzes the determinants of homeownership in immigrant households over the 1980-2000 period. The study finds that immigrants have lower homeownership rates than natives and that the homeownership gap widened significantly during that period. The differential location decisions of immigrant and native households, as well as the changing national origin mix of the immigrant population, helps explain much of the homeownership gap. The evidence also indicates that the growth of ethnic enclaves in major American cities could become an important factor in increasing immigrant demand for owner-occupied housing in many metropolitan areas.
Handle: RePEc:nbr:nberwo:8945
Template-Type: ReDIF-Paper 1.0
Title: The Growth of Obesity and Technological Change: A Theoretical and Empirical Examination
Classification-JEL: I1
Author-Name: Darius Lakdawalla
Author-Person: pla295
Author-Name: Tomas Philipson
Author-Person: pph37
Note: EH
Number: 8946
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8946
File-URL: http://www.nber.org/papers/w8946.pdf
File-Format: application/pdf
Publication-Status: published as Lakdawalla, Darius & Philipson, Tomas, 2009. "The growth of obesity and technological change," Economics and Human Biology, Elsevier, vol. 7(3), pages 283-293, December.
Abstract: This paper provides a theoretical and empirical examination of the long-run growth in weight over time. We argue that technological change has induced weight growth by making home- and market-production more sedentary and by lowering food prices through agricultural innovation. We analyze how such technological change leads to unexpected relationships among income, food prices, and weight. Using individual-level data from 1976 to 1994, we then find that such technology-based reductions in food prices and job-related exercise have had significant impacts on weight across time and populations. In particular, we find that about forty percent of the recent growth in weight seems to be due to agricultural innovation that has lowered food prices, while sixty percent may be due to demand factors such as declining physical activity from technological changes in home and market production.
Handle: RePEc:nbr:nberwo:8946
Template-Type: ReDIF-Paper 1.0
Title: Growing by Leaps and Inches: Creative Destruction, Real Cost Reduction, and Inching Up
Classification-JEL: O30; L11
Author-Name: Michael R. Darby
Author-Name: Lynne G. Zucker
Author-Person: pzu2
Note: PR
Number: 8947
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8947
File-URL: http://www.nber.org/papers/w8947.pdf
File-Format: application/pdf
Publication-Status: published as Darby, Michael R. and Lynne G. Zucker. "Growing By Leaps And Inches: Creative Destruction, Real Cost Reduction, And Inching Up," Economic Inquiry, January 2003, 41(1): 1-19.
Publication-Status: published as • Reprinted in Michael R. Darby & Lynne G. Zucker, 2003. "Growing by leaps and inches: creative destruction, real cost reduction, and inching up," Proceedings, Federal Reserve Bank of Dallas, issue Sep, pages 13-42.
Abstract: Most firms achieve perfective progress, incrementally improving commodities or productivity. But technological progress is concentrated in a few firms achieving metamorphic progress: forming or transforming industries with technological breakthroughs (e.g., biotechnology, lasers, semiconductors, nanotechnology). Unless congruent with incumbents' science and technology base, metamorphic progress promotes entry. Scientific breakthroughs embodied in discovering scientists, protected by natural excludability, and transferred by learning-by-doing-with at the bench generally drive metamorphic progress. Embodied knowledge is rivalrous and leads to entry and industry dominance by star-scientist-linked firms. Incorporating this scientific-entrepreneurial process is essential to improving - if not transforming - endogenous growth models.
Handle: RePEc:nbr:nberwo:8947
Template-Type: ReDIF-Paper 1.0
Title: Economic Interpretations of Intergenerational Correlations
Classification-JEL: J62; D10
Author-Name: Nathan D. Grawe
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Note: EFG PE
Number: 8948
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8948
File-URL: http://www.nber.org/papers/w8948.pdf
File-Format: application/pdf
Publication-Status: published as Grawe, Nathan D. and Casey B. Mulligan. "Economic Interpretations Of Intergenerational Correlations," Journal of Economic Perspectives, 2002, v16(3,Summer), 45-58.
Abstract: Economic theory offers interpretations of intergenerational correlations that are different from the theories of other disciplines, and have important policy implications. Our paper presents a subset of those theories, and shows how they are consistent with observed mobility patterns as they vary across countries, demographic groups, and economic status measure. The data may suggest that the economic approach overemphasizes credit constraints, although more work is needed to further develop some of the alternative economic models. We also show how, in the models, 'progressive' policy may reduce mobility depending on how the policy is administered and how mobility is measured.
Handle: RePEc:nbr:nberwo:8948
Template-Type: ReDIF-Paper 1.0
Title: Efficiency and Equity in Schools around the World
Classification-JEL: I2; H4
Author-Name: Eric A. Hanushek
Author-Person: pha97
Author-Name: Javier A. Luque
Note: CH LS PE ED
Number: 8949
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8949
File-URL: http://www.nber.org/papers/w8949.pdf
File-Format: application/pdf
Publication-Status: published as Hanushek, Eric A. & Luque, Javier A., 2003. "Efficiency and equity in schools around the world," Economics of Education Review, Elsevier, vol. 22(5), pages 481-502, October.
Abstract: Attention to the quality of human capital in different countries naturally leads to concerns about how school policies relate to student performance. The data from the Third International Mathematics and Science Study (TIMSS) provide a way of comparing performance in different schooling systems. The results of analyses of educational production functions within a range of developed and developing countries show general problems with the efficiency of resource usage similar to those found previously in the United States. These effects do not appear to be dictated by variations related to income level of the country or level of resources in the schools. Neither do they appear to be determined by school policies that involve compensatory application of resources. The conventional view that school resources are relatively more important in poor countries also fails to be supported.
Handle: RePEc:nbr:nberwo:8949
Template-Type: ReDIF-Paper 1.0
Title: Why Should Emerging Economies Give up National Currencies: A Case for 'Institutions Substitution'
Classification-JEL: F3; F41
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Note: IFM
Number: 8950
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8950
File-URL: http://www.nber.org/papers/w8950.pdf
File-Format: application/pdf
Publication-Status: published as Mendoza, Enrique G. “Porqué las Economías Emergentes Deberian Renunciar a las Monedas Nacionales: Un Caso para la Sustitución de Instituciones,” (Why Should Emerging Economies Give up National Currencies: A Case for ‘Institutions Substitution.') El Trimestre Economico LXXI (1) 281 (Enero-Marzo 2004).
Abstract: Financial contagion and Sudden Stops of capital inflows experienced in emerging-markets crises may originate in an explosive mix of lack of policy credibility and world capital market imperfections that afflict emerging economies with national currencies. Hence, this paper argues that abandoning national currencies to adopt a hard currency can significantly reduce the emerging countries' vulnerability to these crises. The credibility of their financial policies would be greatly enhanced by the implicit subordination to the policy-making institutions of the hard currency issuer. Their access to international capital markets would improve as the same expertise and information that global investors gather already to evaluate the monetary policy of the hard currency issuer would apply to emerging economies. Yet, adopting a hard currency does not eliminate business cycles, rule out all forms of financial crises, or solve severe fiscal problems that plague emerging economies, and it entails giving up seigniorage and potential benefits of conducting independent monetary policy. However, these disadvantages seem dwarfed by the urgent need to enable emerging countries to access global capital markets without exposing them to the risk of recurrent Sudden Stops.
Handle: RePEc:nbr:nberwo:8950
Template-Type: ReDIF-Paper 1.0
Title: IMF Programs: Who is Chosen and What Are the Effects?
Classification-JEL: F3; F4
Author-Name: Robert J. Barro
Author-Person: pba251
Author-Name: Jong-Wha Lee
Author-Person: ple164
Note: EFG IFM PE
Number: 8951
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8951
File-URL: http://www.nber.org/papers/w8951.pdf
File-Format: application/pdf
Publication-Status: published as Barro, Robert J. and Jong-Wha Lee. "IMF Programs: Who Is Chosen And What Are The Effects?," Journal of Monetary Economics, 2005, v52(7,Oct), 1245-1269.
Abstract: IMF lending practices respond to economic conditions but are also sensitive to political-economy variables. Specifically, the sizes and frequencies of loans are influenced by a country's presence at the Fund, as measured by the country's share of quotas and professional staff. IMF lending is also sensitive to a country's political and economic proximity to some major shareholding countries of the IMF -- the United States, France, Germany, and the United Kingdom. We measured political proximity by voting patterns in the United Nations and economic proximity by bilateral trading volumes. These results are of considerable interest for their own sake but also provide instrumental variables for estimating the effects of IMF lending on economic performance. Instrumental estimates indicate that the size of IMF lending is insignificantly related to economic growth in the contemporaneous five-year period but has a significantly negative effect in the subsequent five years.
Handle: RePEc:nbr:nberwo:8951
Template-Type: ReDIF-Paper 1.0
Title: Economic Development as Self-Discovery
Classification-JEL: O1; L1
Author-Name: Ricardo Hausmann
Author-Person: pha552
Author-Name: Dani Rodrik
Author-Person: pro60
Note: ITI
Number: 8952
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8952
File-URL: http://www.nber.org/papers/w8952.pdf
File-Format: application/pdf
Publication-Status: published as Hausmann, Ricardo and Dani Rodrik. "Economic Development As Self-Discovery," Journal of Development Economics, 2003, v72(2,Dec), 603-633.
Abstract: In the presence of uncertainty about what a country can be good at producing, there can be great social value to discovering costs of domestic activities because such discoveries can be easily imitated. We develop a general-equilibrium framework for a small open economy to clarify the analytical and normative issues. We highlight two failures of the laissez-faire outcome: there is too little investment and entrepreneurship ex ante, and too much production diversification ex post. Optimal policy consists of counteracting these distortions: to encourage investments in the modern sector ex ante, but to rationalize production ex post. We provide some informal evidence on the building blocks of our model.
Handle: RePEc:nbr:nberwo:8952
Template-Type: ReDIF-Paper 1.0
Title: Odious Debt
Classification-JEL: F34; K33
Author-Name: Michael Kremer
Author-Person: pkr20
Author-Name: Seema Jayachandran
Author-Person: pja86
Note: EFG IFM
Number: 8953
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8953
File-URL: http://www.nber.org/papers/w8953.pdf
File-Format: application/pdf
Publication-Status: published as Seema Jayachandran & Michael Kremer, 2006. "Odious Debt," American Economic Review, American Economic Association, vol. 96(1), pages 82-92, March.
Abstract: Some argue that sovereign debt incurred without the consent of the people and not for their benefit, such as that of apartheid South Africa, should be considered odious and not transferable to successor governments. We argue that an institution that truthfully announced whether regimes are odious could create an equilibrium in which successor governments suffer no reputational loss from failure to repay odious debt and hence creditors curtail odious lending. Equilibria with odious lending could be eliminated by amending creditor country laws to prevent seizure of assets for failure to repay odious debt and restricting foreign assistance to countries not repaying odious debt. Shutting down the borrowing capacity of illegitimate regimes can be viewed as a form of economic sanction and has two advantages over most sanctions: it helps rather than hurts the population, and it does not create incentives for evasion by third parties. However, an institution empowered to assess regimes might falsely term debt odious if it favored debtors, and if creditors anticipate this, they would not make loans to legitimate governments. An institution empowered only to declare future lending to a particular government odious would have greater incentives to judge truthfully. A similar approach could be used to reduce moral hazard associated with World Bank and IMF loans.
Handle: RePEc:nbr:nberwo:8953
Template-Type: ReDIF-Paper 1.0
Title: Going Public When You Can in Biotechnology
Classification-JEL: O31; G32
Author-Name: Michael R. Darby
Author-Name: Lynne G. Zucker
Author-Person: pzu2
Note: CF PR
Number: 8954
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8954
File-URL: http://www.nber.org/papers/w8954.pdf
File-Format: application/pdf
Publication-Status: published as Michael R. Darby and Lynne G. Zucker, “Real Effects of Knowledge Capital on Going Public and Market Valuation,” in Naomi Lamoreaux and Kenneth Sokoloff, eds., Financing Innovation in the United States, 1870 to the Present, Cambridge, MA: The MIT Press, 2007. [ISBN 0-262-12289-8, pp. 433-467]
Abstract: Scientist-entrepreneurs prominent in biotech and other high-technology industries view going public not as a cost-effective source of capital but as a cross between selling a now-proven innovation and winning a lottery. Unlike most empirical IPO analyses confined to those firms that go public, we study substantially all the non-public biotech firms founded up through 1989. The probability that one of these firms goes public in any given year increases with the quality of the firm's science base (use of recombinant DNA technology, number of articles by star scientists as or with firm employees, number of biotech patents), the percentage of eligible firms going public the year the firm was founded as a strategy indicator, recent biotech returns as an indicator of a hot market, and whether or how many rounds of venture capital has been obtained. The same key factors increase the expected proceeds raised from IPOs, but the quality of the firm's science base plays a more dominant role. All firms going public try to look like the next Genentech, but only those with the strong science base necessary for success attract large investments.
Handle: RePEc:nbr:nberwo:8954
Template-Type: ReDIF-Paper 1.0
Title: From Malthus to Ohlin: Trade, Growth and Distribution Since 1500
Classification-JEL: F1; N1
Author-Name: Kevin H. O'Rourke
Author-Person: por7
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI
Number: 8955
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8955
File-URL: http://www.nber.org/papers/w8955.pdf
File-Format: application/pdf
Publication-Status: published as O'Rourke, Kevin and Jeffrey G. Williamson “From Malthus to Ohlin: Trade, Growth and Distribution Since 1500." Journal of Economic Growth 10, 1 (January 2005): 5-34.
Publication-Status: published as Brown, D. K. and R. M. Stern (eds.) THE WTO AND LABOR AND EMPLOYMENT (Elgar 2007).
Abstract: A recent endogenous growth literature has focused on the transition from a Malthusian world where real wages were linked to factor endowments, to one where modern growth has broken that link. In this paper we present evidence on another, related phenomenon: the dramatic reversal in distributional trends -- from a steep secular fall to a steep secular rise in wage-land rent ratios -- which occurred some time early in the 19th century. What explains this reversal? While it may seem logical to locate the causes in the Industrial Revolutionary forces emphasized by endogenous growth theorists, we provide evidence that something else mattered just as much: the opening up of the European economy to international trade.
Handle: RePEc:nbr:nberwo:8955
Template-Type: ReDIF-Paper 1.0
Title: Closed-Form Likelihood Expansions for Multivariate Diffusions
Classification-JEL: C32; G12
Author-Name: Yacine Ait-Sahalia
Author-Person: pai23
Note: AP
Number: 8956
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8956
File-URL: http://www.nber.org/papers/w8956.pdf
File-Format: application/pdf
Publication-Status: published as Ait-Sahalia, Yacine. "Closed-Form Likelihood Expansions for Multivariate Diffusions," Annals of Statistics, 2008, 36, 906-937. (1,Jan), 223-262.
Abstract: This paper provides closed-form expansions for the transition density and likelihood function of arbitrary multivariate diffusions. The expansions are based on a Hermite series, whose coefficients are calculated explicitly by exploiting the special structure afforded by the diffusion hypothesis. Because the transition function for most diffusion models is not known explicitly, the expansions of this paper can help make maximum-likelihood a practical estimation method for discretely sampled multivariate diffusions. Examples of interest in financial econometrics are included.
Handle: RePEc:nbr:nberwo:8956
Template-Type: ReDIF-Paper 1.0
Title: The Complexion Gap: The Economic Consequences of Color among Free African Americans in the Rural Antebellum South
Classification-JEL: N3; J7
Author-Name: Howard Bodenhorn
Author-Person: pbo547
Note: DAE
Number: 8957
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8957
File-URL: http://www.nber.org/papers/w8957.pdf
File-Format: application/pdf
Publication-Status: published as Kauffman, Kyle D. (ed.) Advances in agricultural economic history. Volume 2. Amsterdam, New York and London: Elsevier Science, JAI, 2003.
Abstract: Historians of U.S. race relations typically portray southern whites as reluctant to recognize or act favorably upon complexion-based differences within the African American community. Historians contend that mixed-race African Americans (mulattoes) received few advantages as a result of their partly white heritage. This paper shows that a there was a distinct complexion gap in late antebellum America. Mulatto men were more likely than black men to own farms or operate them as tenants, whereas black men were more likely to find employment as farm laborers throughout their lives. Quantile regressions also reveal a complexion gap in wealth accumulation. Mulattoes acquired more property than blacks, particularly at the upper end of the wealth distribution. Thus, an analysis of data included in the 1860 census implies a complex social hierarchy based on subtle gradations in skin color. At the upper end of the wealth distribution, light-complected mulattoes demonstrated a greater propensity to socioeconomic advancement than dark-complected blacks.
Handle: RePEc:nbr:nberwo:8957
Template-Type: ReDIF-Paper 1.0
Title: Social Security and Democracy
Classification-JEL: H11; H55
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Author-Name: Ricard Gil
Author-Person: pgi177
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Note: AG PE
Number: 8958
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8958
File-URL: http://www.nber.org/papers/w8958.pdf
File-Format: application/pdf
Publication-Status: published as Casey B. Mulligan & Ricard Gil & Xavier X. Sala-i-Martin, 2010. "Social Security and Democracy," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 10(1).
Abstract: Many political economic theories use and emphasize the process of voting in their explanation of the growth of Social Security, government spending, and other public policies. But is there an empirical connection between democracy and Social Security program size or design? Using some new international data sets to produce both country-panel econometric estimates as well as case studies of South American and southern European countries, we find that Social Security policy varies according to economic and demographic factors, but that very different political histories can result in the same Social Security policy. We find little partial effect of democracy on the size of Social Security budgets, on how those budgets are allocated, or how economic and demographic factors affect Social Security. If there is any observed difference, democracies spend a little less of their GDP on Social Security, grow their budgets a bit more slowly, and cap their payroll tax more often, than do economically and demographically similar nondemocracies. Democracies and nondemocracies are equally likely to have benefit formulas inducing retirement and, conditional on GDP per capita, equally likely to induce retirement with a retirement test vs. an earnings test.
Handle: RePEc:nbr:nberwo:8958
Template-Type: ReDIF-Paper 1.0
Title: Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange
Classification-JEL: F3; G1
Author-Name: Torben G. Andersen
Author-Name: Tim Bollerslev
Author-Person: pbo66
Author-Name: Francis X. Diebold
Author-Person: pdi1
Author-Name: Clara Vega
Author-Person: pve43
Note: AP IFM
Number: 8959
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8959
File-URL: http://www.nber.org/papers/w8959.pdf
File-Format: application/pdf
Publication-Status: published as Andersen, Torben G., Tim Bollerslev, Francis X. Diebold and Clara Vega. "Micro Effects Of Macro Announcements: Real-Time Price Discovery In Foreign Exchange," American Economic Review, 2003, v93(1,Mar), 38-62.
Abstract: Using a new dataset consisting of six years of real-time exchange rate quotations, macroeconomic expectations, and macroeconomic realizations (announcements), we characterize the conditional means of U.S. dollar spot exchange rates versus German Mark, British Pound, Japanese Yen, Swiss Franc, and the Euro. In particular, we find that announcement surprises (that is, divergences between expectations and realizations, or 'news') produce conditional mean jumps; hence high-frequency exchange rate dynamics are linked to fundamentals. The details of the linkage are intriguing and include announcement timing and sign effects. The sign effect refers to the fact that the market reacts to news in an asymmetric fashion: bad news has greater impact than good news, which we relate to recent theoretical work on information processing and price discovery.
Handle: RePEc:nbr:nberwo:8959
Template-Type: ReDIF-Paper 1.0
Title: Trade Credit, Financial Intermediary Development and Industry Growth
Classification-JEL: G15; G21
Author-Name: Raymond Fisman
Author-Person: pfi257
Author-Name: Inessa Love
Author-Person: plo223
Note: CF
Number: 8960
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8960
File-URL: http://www.nber.org/papers/w8960.pdf
File-Format: application/pdf
Publication-Status: published as Raymond Fisman & Inessa Love, 2003. "Trade Credit, Financial Intermediary Development, and Industry Growth," Journal of Finance, American Finance Association, vol. 58(1), pages 353-374, 02.
Abstract: Recent work suggests that financial development is important for economic growth, since financial markets more effectively allocate capital to firms with high value projects. For firms in poorly developed financial markets, implicit borrowing in the form of trade credit may provide an alternative source of funds. We show that industries with higher dependence on trade credit financing exhibit higher rates of growth in countries with weaker financial institutions. Furthermore, consistent with barriers to trade credit access among young firms, we show that most of the effect that we report comes from growth in the size of pre-existing firms.
Handle: RePEc:nbr:nberwo:8960
Template-Type: ReDIF-Paper 1.0
Title: Equity Volatility and Corporate Bond Yields
Classification-JEL: G12
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Glen B. Taksler
Note: AP
Number: 8961
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8961
File-URL: http://www.nber.org/papers/w8961.pdf
File-Format: application/pdf
Publication-Status: published as John Y. Campbell & Glen B. Taksler, 2003. "Equity Volatility and Corporate Bond Yields," Journal of Finance, American Finance Association, vol. 58(6), pages 2321-2350, December.
Abstract: This paper explores the effect of equity volatility on corporate bond yields. Panel data for the late 1990's show that idiosyncratic firm-level volatility can explain as much cross-sectional variation in yields as can credit ratings. This finding, together with the upward trend in idiosyncratic equity volatility documented by Campbell, Lettau, Malkiel, and Xu (2001), helps to explain recent increases in corporate bond yields.
Handle: RePEc:nbr:nberwo:8961
Template-Type: ReDIF-Paper 1.0
Title: Estimating Price Elasticities When there is Smuggling: The Sensitivity of Smoking to Price in Canada
Classification-JEL: I1; H2
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Anindya Sen
Author-Person: pse208
Author-Name: Mark Stabile
Author-Person: pst179
Note: EH PE
Number: 8962
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8962
File-URL: http://www.nber.org/papers/w8962.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan & Sen, Anindya & Stabile, Mark, 2003. "Estimating price elasticities when there is smuggling: the sensitivity of smoking to price in Canada," Journal of Health Economics, Elsevier, vol. 22(5), pages 821-842, September.
Abstract: A central parameter for evaluating tax policies is the price elasticity of demand for cigarettes. But in many countries this parameter is difficult to estimate reliably due to widespread smuggling, which significantly biases estimates using legal sales data. An excellent example is Canada, where widespread smuggling in the early 1990s, in response to large tax increases, biases upwards the response of legal cigarette sales to price. We surmount this problem through two approaches: excluding the provinces and years where smuggling was greatest; and using household level expenditure data on smoking, where there is a downward bias to estimated elasticities from smuggling. These two approaches yield a tightly estimated elasticity in the range of -0.45 to -0.47. We also show that the sensitivity of smoking to price is much larger among lower income Canadians. In the context of recent behavioral models of smoking, whereby higher taxes reduce unwanted smoking among price sensitive populations, this finding suggests that cigarette taxes may not be as regressive as previously suggested. Finally, we show that price increases on cigarettes do not increase, and may actually decrease, consumption of alcohol; as a result, smuggling of cigarettes may have raised consumption of alcohol as well.
Handle: RePEc:nbr:nberwo:8962
Template-Type: ReDIF-Paper 1.0
Title: The Modern History of Exchange Rate Arrangements: A Reinterpretation
Classification-JEL: F30; F31
Author-Name: Carmen M. Reinhart
Author-Person: pre33
Author-Name: Kenneth S. Rogoff
Author-Person: pro164
Note: IFM
Number: 8963
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8963
File-URL: http://www.nber.org/papers/w8963.pdf
File-Format: application/pdf
Publication-Status: published as Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 1-48, February.
Abstract: We develop a novel system of re-classifying historical exchange rate regimes. One difference between our study and previous classification efforts is that we employ an extensive data base on market-determined parallel exchange rates. Our 'natural' classification algorithm leads to a stark reassessment of the post-war history of exchange rate arrangements. When the official categorization is a form of peg, roughly half the time our classification reveals the true underlying monetary regime to be something radically different, often a variant of a float. Conversely, when official classification is floating, our scheme routinely suggests that the reality was a form of de facto peg. Our new classification scheme points to a complete rethinking of economic performance under alternative exchange rate regimes. Indeed, the breakup of Bretton Woods had a far less dramatic impact on most exchange rate regimes than is popularly believed. Also, contrary to an influential empirical literature, our evidence suggests that exchange rate arraignments may be quite important for growth, trade and inflation. Our newly compiled monthly data set on market-determined exchange rates goes back to 1946 for 153 countries.
Handle: RePEc:nbr:nberwo:8963
Template-Type: ReDIF-Paper 1.0
Title: Where the boys aren't: Non-cognitive skills, returns to school and the gender gap in higher education
Classification-JEL: I20; J16
Author-Name: Brian A. Jacob
Note: CH ED
Number: 8964
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8964
File-URL: http://www.nber.org/papers/w8964.pdf
File-Format: application/pdf
Publication-Status: published as Jacob, Brian. “Where the Boys Aren’t: Non-Cognitive Skills, Returns to School and the Gender Gap in Higher Education.” Economics of Education Review 21 (2002): 589-598.
Abstract: Nearly 60 percent of college students today are women. Using longitudinal data on a nationally representative cohort of eighth grade students in 1988, I examine two potential explanations for the differential attendance rates of men and women -- returns to schooling and non-cognitive skills. The attendance gap is roughly five percentage points for all high school graduates. Conditional on attendance, however, there are few differences in type of college, enrollment status or selectivity of institution. The majority of the attendance gap can be explained by differences in the characteristics of men and women, despite some gender differences in the determinants of college attendance. I find that higher non-cognitive skills and college premiums among women account for nearly 90 percent of the gender gap in higher education. Interestingly, non-cognitive factors continue to influence college enrollment after controlling for high school achievement.
Handle: RePEc:nbr:nberwo:8964
Template-Type: ReDIF-Paper 1.0
Title: Studying Ourselves: The Academic Labor Market
Classification-JEL: I2; J5
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Note: LS
Number: 8965
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8965
File-URL: http://www.nber.org/papers/w8965.pdf
File-Format: application/pdf
Publication-Status: published as Ehrenberg, Ronald G. "Studying Ourselves: The Academic Labor Market," Journal of Labor Economics, 2003, v21(2,Apr), 267-287.
Abstract: This paper addresses three academic labor market issues; the declining salaries of faculty employed at public colleges and universities relative to their private institution counterparts, the growing dispersion of average faculty salaries across academic institutions within both the public and private sectors, and the impacts of the growing importance and costs of science on the academic labor market and universities. The decline in the salaries of faculty in public institutions relative to their private sector counterparts is attributed primarily to private institutions' tuition levels rising by more in real terms than public institutions' tuition levels. The growing dispersion in average faculty salaries across institutions within each sector is attributed primarily to the growing disperion of endowmentper student levels across private institutions and the growing dispersion of state appropriations per student across public institutions. Finally, controlling for other factors, those universities whose real research expenditures per faculty from institutional funds are growing the most experience the greatest increase in their student/faculty ratio, other variables held constant.
Handle: RePEc:nbr:nberwo:8965
Template-Type: ReDIF-Paper 1.0
Title: Boom-Busts in Asset Prices, Economic Instability, and Monetary Policy
Classification-JEL: E52; N20
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Olivier Jeanne
Author-Person: pje59
Note: EFG ME
Number: 8966
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8966
File-URL: http://www.nber.org/papers/w8966.pdf
File-Format: application/pdf
Publication-Status: published as Bordo, M. C. and O. Jeanne. "Monetary Policy And Asset Prices: Does 'Benign Neglect' Make Sense?," International Finance, 2002, v5(2,Summer), 139-164.
Abstract: The link between monetary policy and asset price movements has been of perennial interest to policy makers. In this paper we consider the potential case for pre-emptive monetary restrictions when asset price reversals can have serious effects on real output. First, we provide some historical background on two famous asset price reversals: the U.S. stock market crash of 1929 and the bursting of the Japanese bubble in 1989. We then present some stylized facts on boom-bust dynamics in stock and property prices in developed economies. We then discuss the case for a pre-emptive monetary policy in the context of a stylized 'Dynamic New Keynesian' framework with collateral constraints in the productive sector. We find that whether such a policy is warranted depends on the economic conditions in a complex, non-linear way. The optimal policy cannot be summarized by a simple policy rule of the type considered in the inflation-targeting literature.
Handle: RePEc:nbr:nberwo:8966
Template-Type: ReDIF-Paper 1.0
Title: Capital Account Liberalization, Institutions and Financial Development: Cross Country Evidence
Classification-JEL: F36; F43
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: Hiro Ito
Author-Person: pit4
Note: IFM
Number: 8967
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8967
File-URL: http://www.nber.org/papers/w8967.pdf
File-Format: application/pdf
Abstract: The empirical relationship between capital controls and the financial development of credit and equity markets is examined. We extend the literature on this subject along a number of dimensions. Specifically, we (1) investigate a substantially broader set of proxy measures of financial development; (2) create and utilize a new index based on the IMF measures of exchange restrictions that incorporates a measure of the intensity of capital controls; and (3) extend the previous literature by systematically examining the implications of institutional (legal) factors. The results suggest that the rate of financial development, as measured by private credit creation and stock market activity, is linked to the existence of capital controls. However, the strength of this relationship varies with the empirical measure used, and the level of development. These results also suggest that only in an environment characterized by a combination of a higher level of legal and institutional development will the link between financial openness and financial development be readily detectable. A disaggregated analysis indicates that in emerging markets the most important components of these legal factors are the levels of shareholder protection and of accounting standards.
Handle: RePEc:nbr:nberwo:8967
Template-Type: ReDIF-Paper 1.0
Title: Accountability, Incentives and Behavior: The Impact of High-Stakes Testing in the Chicago Public Schools
Classification-JEL: I20; I28
Author-Name: Brian A. Jacob
Note: CH ED
Number: 8968
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8968
File-URL: http://www.nber.org/papers/w8968.pdf
File-Format: application/pdf
Publication-Status: published as Jacob, Brian A. "Accountability, Incentives And Behavior: The Impact Of High-Stakes Testing In The Chicago Public Schools," Journal of Public Economics, 2005, v89(5-6,Jun), 761-796.
Abstract: The recent federal education bill, No Child Left Behind, requires states to test students in grades three to eight each year, and to judge school performance on the basis of these test scores. While intended to maximize student learning, there is little empirical evidence about the effectiveness of such policies. This study examines the impact of an accountability policy implemented in the Chicago Public Schools in 1996-97. Using a panel of student-level, administrative data, I find that math and reading achievement increased sharply following the introduction of the accountability policy, in comparison to both prior achievement trends in the district and to changes experienced by other large, urban districts in the mid-west. I demonstrate that these gains were driven largely by increases in test-specific skills and student effort, and did not lead to comparable gains on a state-administered, low-stakes exam. I also find that teachers responded strategically to the incentives along a variety of dimensions -- by increasing special education placements, preemptively retaining students and substituting away from low-stakes subjects like science and social studies.
Handle: RePEc:nbr:nberwo:8968
Template-Type: ReDIF-Paper 1.0
Title: Paper millionaires: How valuable is stock to a stockholder who is restricted from selling it?
Classification-JEL: G11
Author-Name: Matthias Kahl
Author-Name: Jun Liu
Author-Name: Francis A. Longstaff
Author-Person: plo283
Note: AP
Number: 8969
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8969
File-URL: http://www.nber.org/papers/w8969.pdf
File-Format: application/pdf
Publication-Status: published as Kahl, Matthias, Jun Liu, and Francis A. Longstaff. "Paper Millionaires: How Valuable is Stock to a Stockholder Who is Restricted from Selling it?" The Journal of Financial Economics 67 (2003): 385-410.
Abstract: Many firms have stockholders who face severe restrictions on their ability to sell their shares and diversify the risk of their personal wealth. We study the costs of these liquidity restrictions on stockholders using a continuous-time portfolio choice framework. These restrictions have major effects on the optimal investment and consumption strategies because of the need to hedge the illiquid stock position and smooth consumption in anticipation of the eventual lapse of the restrictions. These results provide a number of important insights about the effects of illiquidity in financial markets.
Handle: RePEc:nbr:nberwo:8969
Template-Type: ReDIF-Paper 1.0
Title: Asset Prices in a Flexible Inflation Targeting Framework
Classification-JEL: E5; G0
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Author-Name: Hans Genberg
Author-Name: Sushil Wadhwani
Author-Person: pwa225
Note: ME
Number: 8970
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8970
File-URL: http://www.nber.org/papers/w8970.pdf
File-Format: application/pdf
Publication-Status: published as Hunter, William C., George G. Kaufman and Michael Pomerleano (eds.) Asset Price Bubbles: Implications for Monetary, Regulatory, and International Policies." Cambridge, MA: MIT Press, 2002.
Abstract: We argue that there are sound theoretical reasons for believing that an inflation targeting central bank might improve macroeconomic performance by reacting to asset price misalignments over and above the deviation of, say, a two-year ahead inflation forecast from target. In this paper, we first summarize the arguments for our basic proposition. We then discuss some of the counter-arguments. Specifically, we counter those who argue that reacting to asset prices does not improve macroeconomic performance by claiming that they are attacking the 'straw man' under which central bankers react in the same way to all asset price changes. We continue to emphasize that policy reactions to asset price misalignments must be qualitatively different from reactions to asset prices changes driven by fundamentals. Hence, we stand by our earlier results and conclusions. In practice, we do believe that central bankers can detect large misalignments (e.g. the Nikkei in 1989 or the NASDAQ in early 2000), and that they might be in a better position to react to long-lived bubbles than many market participants. However, we recognize that our proposal may present communication challenges, and it is critically important that policy set to react to asset price misalignments both be explained well and that it be based on a broad consensus. It is also important to emphasize that our proposal is wholly consistent with the remit of most inflation-targeting central banks, as we are recommending that while they might react to asset price misalignments, they must not target them.
Handle: RePEc:nbr:nberwo:8970
Template-Type: ReDIF-Paper 1.0
Title: Technological Superiority and the Losses from Migration
Classification-JEL: F2; J6
Author-Name: Donald R. Davis
Author-Person: pda33
Author-Name: David E. Weinstein
Author-Person: pwe34
Note: ITI
Number: 8971
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8971
File-URL: http://www.nber.org/papers/w8971.pdf
File-Format: application/pdf
Abstract: Two facts motivate this study. (1) The United States is the world's most productive economy. (2) The US is the destination for a broad range of net factor inflows: unskilled labor, skilled labor, and capital. Indeed, these two facts may be strongly related: All factors seek to enter the US because of the US technological superiority. The literature on international factor flows rarely links these two phenomena, instead considering one-at-a-time analyses that stress issues of relative factor abundance. This is unfortunate, since the welfare calculations differ markedly. In a simple Ricardian framework, a country that experiences immigration of factors motivated by technological differences always loses from this migration relative to a free trade baseline, while the other country gains. We provide simple calculations suggesting that the magnitude of the losses for US natives may be quite large $72 billion dollars per year or 0.8 percent of GDP.
Handle: RePEc:nbr:nberwo:8971
Template-Type: ReDIF-Paper 1.0
Title: The Use and Meaning of Words in Central Banking: Inflation Targeting, Credibility, and Transparency
Classification-JEL: E52
Author-Name: Benjamin M. Friedman
Note: EFG ME
Number: 8972
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8972
File-URL: http://www.nber.org/papers/w8972.pdf
File-Format: application/pdf
Publication-Status: published as Mizen, Paul (ed.) Essays in honour of Charles Goodhart. Volume 1. Central banking, monetary theory and practice. Cheltenham, U.K. and Northampton, MA: Elgar, 2003.
Abstract: Inflation targeting offers the promise of introducing to monetary policy a logic and consistency that some central banks' deliberations sorely missed in the past. At least in today's inherited monetary policymaking context, however, inflation targeting also serves two further objectives that are of more questionable import, and while seemingly contradictory, the two are ultimately related: By forcing participants in the monetary policy debate to conduct the discussion in a vocabulary pertaining solely to inflation, inflation targeting fosters over time the atrophication of concerns for real outcomes. In the meanwhile, inflation targeting hides from public view whatever concerns for real outcomes policymakers do maintain. Both objectives are understandable. Whether either is desirable on economic grounds is an open question. Neither is very consistent with the role of monetary policy in a democracy.
Handle: RePEc:nbr:nberwo:8972
Template-Type: ReDIF-Paper 1.0
Title: Democratic Policy Making with Real-Time Agenda Setting: Part 1
Classification-JEL: D7; H0
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Author-Name: Antonio Rangel
Author-Person: pra69
Author-Name: Luis Rayo
Note: PE
Number: 8973
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8973
File-URL: http://www.nber.org/papers/w8973.pdf
File-Format: application/pdf
Abstract: We examine democratic policy-making in a simple institution with real-time agenda setting. Individuals are recognized sequentially. Once recognized, an individual makes a proposal, which is immediately put to a vote. If a proposal passes, it supercedes all previously passed proposals. The policy that emerges from this process is implemented. For some familiar classes of policy spaces with rich distributional politics, we show that the last proposer is effectively a dictator under a variety of natural conditions. Most notably, this occurs whenever a sufficient number of individuals have opportunities to make proposals. Thus, under reasonably general assumptions, control of the final proposal with real-time agenda setting confers as much power as control of the entire agenda.
Handle: RePEc:nbr:nberwo:8973
Template-Type: ReDIF-Paper 1.0
Title: The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence and Policy
Classification-JEL: G30; G34
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: John C. Coates IV
Author-Name: Guhan Subramanian
Note: CF LE
Number: 8974
Creation-Date: 2002-05
Order-URL: http://www.nber.org/papers/w8974
File-URL: http://www.nber.org/papers/w8974.pdf
File-Format: application/pdf
Publication-Status: published as Bebchuk, Lucian, John Coates, Guhan Subramanian. "The Powerful Antitakeover Force of Staggered Boards: Further Findings and a Reply to Symposium Participants." Stanford Law Review 55 (2002): 885-917.
Abstract: Staggered boards, which a majority of public companies now have, provide a powerful antitakeover defense, stronger than is commonly recognized. They provide antitakeover protection both by (i) forcing any hostile bidder, no matter when it emerges, to wait at least one year to gain control of the board and (ii) requiring such a bidder to win two elections far apart in time rather than a one-time referendum on its offer. Using a new data set of hostile bids in the five-year period 1996-2000, we find that not a single hostile bid won a ballot box victory against an 'effective' staggered board (ESB). We also find that an ESB nearly doubled the odds of remaining independent for an average target in our data set, from 34% to 61%, halved the odds that a first bidder would be successful, from 34% to 14%, and reduced the odds of a sale to a white knight, from 32% to 25%. Furthermore, we find that the shareholders of targets that remained independent were made worse off compared with accepting the bid and that ESBs did not provide sufficient countervailing benefits in terms of increased premiums to offset the costs of remaining independent. Overall, we estimate that, in the period studied, ESBs reduced the returns of shareholders of hostile bid targets on the order of 8-10%. Finally, we show that most staggered boards were adopted before the developments in takeover doctrine that made ESBs such a potent defense.
Handle: RePEc:nbr:nberwo:8974
Template-Type: ReDIF-Paper 1.0
Title: Understanding the Black-White Test Score Gap in the First Two Years of School
Classification-JEL: J15; I20
Author-Name: Roland G. Fryer, Jr.
Author-Person: pfr43
Author-Name: Steven D. Levitt
Author-Person: ple59
Note: CH ED
Number: 8975
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8975
File-URL: http://www.nber.org/papers/w8975.pdf
File-Format: application/pdf
Publication-Status: published as Roland G. Fryer & Steven D. Levitt, 2004. "Understanding the Black-White Test Score Gap in the First Two Years of School," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 447-464, 06.
Abstract: In previous research, a substantial gap in test scores between White and Black students persists, even after controlling for a wide range of observable characteristics. Using a newly available data set (Early Childhood Longitudinal Study), we demonstrate that in stark contrast to earlier studies, the Black-White test score gap among incoming kindergartners disappears when we control for a small number of covariates. Over the first two years of school, however, Blacks lose substantial ground relative to other races. There is suggestive evidence that differences in school quality may be an important part of the explanation. None of the other hypotheses we test to explain why Blacks are losing ground receive any empirical backing. The difference between our findings and previous research is consistent with real gains made by recent cohorts of Blacks, although other explanations are also possible.
Handle: RePEc:nbr:nberwo:8975
Template-Type: ReDIF-Paper 1.0
Title: Intellectual Property, Antitrust and Strategic Behavior
Classification-JEL: L
Author-Name: Dennis W. Carlton
Author-Person: pca14
Author-Name: Robert H. Gertner
Note: IO PR
Number: 8976
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8976
File-URL: http://www.nber.org/papers/w8976.pdf
File-Format: application/pdf
Publication-Status: published as Intellectual Property, Antitrust, and Strategic Behavior, Dennis W. Carlton, Robert H. Gertner. in Innovation Policy and the Economy, Volume 3, Jaffe, Lerner, and Stern. 2003
Abstract: Economic growth depends in large part on technological change. Laws governing intellectual property rights protect inventors from competition in order to create incentives for them to innovate. Antitrust laws constrain how a monopolist can act in order to maintain its monopoly in an attempt to foster competition. There is a fundamental tension between these two different types of laws. Attempts to adapt static antitrust analysis to a setting of dynamic R&D competition through the use of 'innovation markets' are likely to lead to error. Applying standard antitrust doctrines such as tying and exclusivity to R&D settings is likely to be complicated. Only detailed study of the industry of concern has the possibility of uncovering reliable relationships between innovation and industry behavior. One important form of competition, especially in certain network industries, is between open and closed systems. We have presented an example to illustrate how there is a tendency for systems to close even though an open system is socially more desirable. Rather than trying to use the antitrust laws to attack the maintenance of closed systems, an alternative approach would be to use intellectual property laws and regulations to promote open systems and the standard setting organizations that they require. Recognition that optimal policy toward R&D requires coordination between the antitrust and intellectual property laws is needed.
Handle: RePEc:nbr:nberwo:8976
Template-Type: ReDIF-Paper 1.0
Title: Patent Protection and Innovation Over 150 Years
Classification-JEL: O31; O34
Author-Name: Josh Lerner
Author-Person: ple60
Note: CF PR
Number: 8977
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8977
File-URL: http://www.nber.org/papers/w8977.pdf
File-Format: application/pdf
Publication-Status: published as Lerner, Josh. "150 Years Of Patent Protection," American Economic Review, 2002, v92(2,May), 221-225.
Abstract: The paper seeks to understand the impact of the patent system on innovation by examining shifts in the strength of patent protection across sixty countries and a 150-year period. An examination of 177 policy changes reveals that strengthening patent protection appears to have few positive effects on patent applications by entities in the country undertaking the policy change, whether filings in Great Britain or the nation making the policy change are considered. Cross-sectional analyses suggest that the impact of patent protection-enhancing shifts were greater in nations with weaker initial protection and greater economic development, consistent with economic theory. I address concerns about the endogeneity of these changes by employing an instrumental variable approach.
Handle: RePEc:nbr:nberwo:8977
Template-Type: ReDIF-Paper 1.0
Title: The Distribution of Tax Burdens: An Introduction
Classification-JEL: H2; H3
Author-Name: Gilbert E. Metcalf
Author-Name: Don Fullerton
Author-Person: pfu10
Note: PE
Number: 8978
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8978
File-URL: http://www.nber.org/papers/w8978.pdf
File-Format: application/pdf
Abstract: This paper summarizes important developments in tax incidence analysis over the past forty years. We mark the date of the beginning of modern tax incidence analysis with the publication of Harberger (1962) and discuss the relation of subsequent work to this seminal paper.
Handle: RePEc:nbr:nberwo:8978
Template-Type: ReDIF-Paper 1.0
Title: Social Networks and the Aggregation on Individual Decisions
Classification-JEL: D8; H0
Author-Name: D. Lee Heavner
Author-Name: Lance Lochner
Author-Person: plo31
Note: CH LS
Number: 8979
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8979
File-URL: http://www.nber.org/papers/w8979.pdf
File-Format: application/pdf
Abstract: This paper analyzes individual decisions to participate in an activity and the aggregation of those decisions when individuals gather information about the outcomes and choices of (a few) others in their social network. In this environment, aggregate participation rates are generally inefficient. Increasing the size of social networks does not necessarily increase efficiency and can lead to less efficient long-run outcomes. Both subsidies for participation and penalties for non-participation can increase participation rates, though not necessarily by the same amount. Punishing non-participation has much greater effects on participation rates than rewarding participation when current rates are very low. A program that provides youth with mentors who have participated themselves can increase participation rates, especially when those rates are low. Finally, communities plagued by the flight of successful participants will experience lower short- and long-run participation rates.
Handle: RePEc:nbr:nberwo:8979
Template-Type: ReDIF-Paper 1.0
Title: Are All Patent Examiners Equal? The Impact of Examiner Characteristics
Classification-JEL: O3; K3
Author-Name: Iain M. Cockburn
Author-Person: pco166
Author-Name: Samuel Kortum
Author-Person: pko74
Author-Name: Scott Stern
Note: PR
Number: 8980
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8980
File-URL: http://www.nber.org/papers/w8980.pdf
File-Format: application/pdf
Publication-Status: published as Cohen, Wesley and Steven Merrill (eds.) Patents in the Knowledge-Based Economy. National Academies Press, 2003.
Abstract: Building on insights gained from interviewing administrators and patent examiners at the United States Patent and Trademark Office (USPTO), we collect and analyze a novel dataset on patent examiners and patent outcomes. This dataset is based on 182 patents for which the Court of Appeals for the Federal Circuit (CAFC) ruled on validity between 1997 and 2000. For each patent, we identify a USPTO primary examiner, and collect historical statistics derived from their entire patent examination history. These data are used to explore a number of hypotheses about the connection between the patent examination process and the strength of ensuing patent rights. Our main findings are as follows. (i) Patent examiners and the patent examination process are not homogeneous. There is substantial variation in observable characteristics of patent examiners, such as their tenure at the USPTO, the number of patents they have examined and the degree to which the patents that they examine are later cited by other patents. (ii) There is no evidence that examiner experience or workload at the time a patent is issued affects the probability that the CAFC finds a patent invalid. (iii) Examiners whose patents tend to be more frequently cited tend to have a higher probability of a CAFC invalidity ruling. The results suggest that all patent examiners are not equal, and that one of the roles of the CAFC is to review the exercise of discretion in the patent examination process.
Handle: RePEc:nbr:nberwo:8980
Template-Type: ReDIF-Paper 1.0
Title: The Allocation of Resources by Interest Groups: Lobbying, Litigation and Administrative Regulation
Classification-JEL: D7; K2
Author-Name: John M. de Figueiredo
Author-Name: Rui J.P. de Figueiredo
Note: LE
Number: 8981
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8981
File-URL: http://www.nber.org/papers/w8981.pdf
File-Format: application/pdf
Publication-Status: published as de Figueiredo, John M. and Rui J. P. de Figueiredo Jr. "The Allocation of Resources by Interest Groups: Lobbying, Litigation and Administrative Regulation." Business and Politics, Volume 4, Number 2, 1 August 2002 , pp. 161-181(21)
Abstract: One of the central concerns about American policy-making institutions is the degree to which political outcomes can be influenced by interested parties. While the literature on interest group strategies in particular institutions - legislative, administrative, and legal is extensive, there is very little scholarship which examines how the interdependencies between institutions affects the strategies of groups. In this paper we examine in a formal theoretical model, how the opportunity to litigate administrative rulemaking in the courts affects the lobbying strategies of competing interest groups at the rulemaking stage. Using a resource-based view of group activity, we develop a number of important insights about each stage - which cannot be observed by examining each one in isolation. We demonstrate that lobbying effort responds to the ideology of the court, and the responsiveness of the court to resources. In particular, 1) as courts become more biased toward the status quo, interest group lobbying investments become smaller, and may be eliminated all together, 2) as interest groups become wealthier, they spend more on lobbying, and 3) as the responsiveness of courts to resources decreases, the effect it has on lobbying investments depends on the underlying ideology of the court.
Handle: RePEc:nbr:nberwo:8981
Template-Type: ReDIF-Paper 1.0
Title: Industry Growth and Capital Allocation: Does Having a Market- or Bank-Based System Matter?
Classification-JEL: G0; K2
Author-Name: Thorsten Beck
Author-Person: pbe266
Author-Name: Ross Levine
Author-Person: ple61
Note: AG CF
Number: 8982
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8982
File-URL: http://www.nber.org/papers/w8982.pdf
File-Format: application/pdf
Publication-Status: published as Beck, Thorsten and Ross Levine. "Industry Growth And Capital Allocation: Does Having A Market- Or Bank-Based System Matter?," Journal of Financial Economics, 2002, v64(2,May), 147-180.
Abstract: Are market-based or bank-based financial systems better at financing the expansion of industries that depend heavily on external finance, facilitating the formation of new establishments, and improving the efficiency of capital allocation across industries? We find evidence for neither the market-based nor the bank-based hypothesis. While legal system efficiency and overall financial development boost industry growth, new establishment formation, and efficient capital allocation, having a bank-based or market-based system per se does not seem to matter much.
Handle: RePEc:nbr:nberwo:8982
Template-Type: ReDIF-Paper 1.0
Title: Evaluating Welfare Reform in the United States
Classification-JEL: I
Author-Name: Rebecca M. Blank
Author-Person: pbl56
Note: CH LS
Number: 8983
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8983
File-URL: http://www.nber.org/papers/w8983.pdf
File-Format: application/pdf
Publication-Status: published as Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1105-1166, December.
Abstract: This paper reviews the economics literature on welfare reform over the 1990s. A brief summary of the policy changes over this period is followed by a discussion of the methodological techniques utilized to analyze the effects of these changes on outcomes. The paper then critically reviews the econometric and experimental literature on caseload changes, labor force changes, poverty and income changes, and family formation changes. A growing body of evidence suggests that the recent policy changes have influenced economic behavior and well-being in a variety of ways. One particular set of 'new-style' welfare programs seems to show especially promising results, with significantly increased work and earnings and reduced poverty.
Handle: RePEc:nbr:nberwo:8983
Template-Type: ReDIF-Paper 1.0
Title: Private and Social Incentives for Fertility: Israeli Puzzles
Classification-JEL: J1; H2
Author-Name: Charles F. Manski
Author-Person: pma111
Author-Name: Joram Mayshar
Author-Person: pma2277
Note: CH
Number: 8984
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8984
File-URL: http://www.nber.org/papers/w8984.pdf
File-Format: application/pdf
Publication-Status: published as Charles F. Manski & Joram Mayshar, 2003. "Private Incentives and Social Interactions: Fertility Puzzles in Israel," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 181-211, 03.
Abstract: Whereas most of the world has experienced decreasing fertility during the past half century, Israel has experienced a puzzling mix of trends. Completed fertility has decreased sharply in some ethnic-religious groups (Mizrahi Jews and non-Bedouin Arabs) and increased moderately in other groups (non-ultra-orthodox Ashkenazi and Israeli-born Jews). In a phenomenon that can only be described as a reverse fertility transition, fertility has increased substantially (from about 3 to 6 children per women) among ultra-orthodox Ashkenazi and Israeli-born Jews. This paper explores how private and social incentives for fertility may have combined to produce the complex pattern of fertility in Israel. Theoretical analysis of the social dynamics of fertility shows that this pattern could have been generated by the joint effects of (a) private preferences for childbearing, (b) preferences for conformity to group fertility norms, and (c) the major child-allowance program introduced by the Israeli government in the 1970s. Econometric analysis of fertility decisions shows that fundamental identification problems make it difficult to infer the actual Israeli fertility process from data on completed fertility. Hence we are able to conjecture meaningfully on what may have happened, but we cannot definitively resolve the Israeli fertility puzzles.
Handle: RePEc:nbr:nberwo:8984
Template-Type: ReDIF-Paper 1.0
Title: A Pollution Theory of Discrimination: Male and Female Differences in Occupations and Earnings
Classification-JEL: J7; N3
Author-Name: Claudia Goldin
Author-Person: pgo601
Note: DAE LS
Number: 8985
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8985
File-URL: http://www.nber.org/papers/w8985.pdf
File-Format: application/pdf
Publication-Status: published as A Pollution Theory of Discrimination: Male and Female Differences in Occupations and Earnings, Claudia Goldin. in Human Capital in History: The American Record, Boustan, Frydman, and Margo. 2014
Abstract: Occupations are segregated by sex today, but were far more segregated in the early to mid-twentieth century when married women began to enter the labor force in large numbers. It is difficult to rationalize sex segregation and 'wage discrimination' on the basis of men's taste for distance from women in the same way differences between other groups in work and housing have been explained. Rather, this paper constructs a 'pollution' theory model of discrimination in which new female hires may reduce the prestige of a previously all-male occupation. The predictions of the model concern the range of segregated and integrated occupations with respect to a productivity characteristic and how occupational segregation changes as the characteristic distributions become more similar by sex. The historical record reveals numerous cases of the model's predictions. Occupations that were more segregated by sex, for both men and women, contained individuals with higher levels of the productivity characteristic. 'Credentialization,' the shattering of old stereotypes, and information about individual women's productivities can help expunge 'pollution.'
Handle: RePEc:nbr:nberwo:8985
Template-Type: ReDIF-Paper 1.0
Title: The Relationship Between Education and Adult Mortality in the United States
Classification-JEL: I12; I20
Author-Name: Adriana Lleras-Muney
Author-Person: pll45
Note: EH
Number: 8986
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8986
File-URL: http://www.nber.org/papers/w8986.pdf
File-Format: application/pdf
Publication-Status: published as Lleras-Muney, Adriana. "The Relationships Between Education And Adult Mortality In The United States," Review of Economic Studies, 2005, v72(250,Jan), 189-221.
Abstract: Prior research has uncovered a large and positive correlation between education and health. This paper examines whether education has a causal impact on health. I follow synthetic cohorts using successive U.S. censuses to estimate the impact of educational attainment on mortality rates. I use compulsory education laws from 1915 to 1939 as instruments for education. The results suggest that education has a causal impact on mortality, and that this effect is perhaps larger than has been previously estimated in the literature.
Handle: RePEc:nbr:nberwo:8986
Template-Type: ReDIF-Paper 1.0
Title: Stocks as Money: Convenience Yield and the Tech-Stock Bubble
Classification-JEL: G1
Author-Name: John H. Cochrane
Author-Person: pco57
Note: AP EFG
Number: 8987
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8987
File-URL: http://www.nber.org/papers/w8987.pdf
File-Format: application/pdf
Publication-Status: published as Hunter, William C., George G. Kaufman, and Michael Pomerleano (eds.) Asset price bubbles: The implications for monetary, regulatory, and international policies. Cambridge and London: MIT Press, 2003.
Publication-Status: published as John H. Cochrane, 2005. "Money as stock," Journal of Monetary Economics, vol 52(3), pages 501-528.
Abstract: What caused the rise and fall of tech stocks? I argue that a mechanism much like the transactions demand for money drove many stock prices above the 'fundamental value' they would have had in a frictionless market. I start with the Palm/3Com microcosm and then look at tech stocks in general. High prices are associated with high volume, high volatility, low supply of shares, wide dispersion of opinion, and restrictions on long-term short selling. I review competing theories, and only the convenience yield view makes all these connections.
Handle: RePEc:nbr:nberwo:8987
Template-Type: ReDIF-Paper 1.0
Title: Risk Sharing and Asset Prices: Evidence From a Natural Experiment
Classification-JEL: F3; F4
Author-Name: Anusha Chari
Author-Person: pch288
Author-Name: Peter Blair Henry
Author-Person: phe166
Note: CF IFM
Number: 8988
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8988
File-URL: http://www.nber.org/papers/w8988.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," Journal of Finance, 2004, v59(3,Jun), 1295-1324.
Abstract: When countries liberalize their stock markets, firms that become eligible for purchase by foreigners (investible), experience an average stock price revaluation of 10.4 percent. Since the covariance of the median investible firm's stock return with the local market is 30 times larger than its covariance with the world market, liberalization reduces the systematic risk associated with holding investible securities. Consistent with this fact: 1) the average effect of the reduction in systematic risk is 3.4 percentage points, or roughly one third of the total effect; and 2) variation in the firm-specific response is directly proportional to the firm-specific change in systematic risk. The statistical significance of this proportionality persists after controlling for changes in expected future profits and index inclusion criteria such as size and liquidity.
Handle: RePEc:nbr:nberwo:8988
Template-Type: ReDIF-Paper 1.0
Title: Ownership Form and Trapped Capital in the Hospital Industry
Classification-JEL: G3; I1
Author-Name: Henry Hansmann
Author-Name: Daniel Kessler
Author-Name: Mark McClellan
Note: CF EH LE
Number: 8989
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8989
File-URL: http://www.nber.org/papers/w8989.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. (ed.) The governance of not-for-profit organizations, NBER Conference Report series. Chicago and London: University of Chicago Press, 2003.
Publication-Status: published as Ownership Form and Trapped Capital in the Hospital Industry, Henry Hansmann, Daniel Kessler, Mark B. McClellan. in The Governance of Not-for-Profit Organizations, Glaeser. 2003
Abstract: Over the past 20 years, demand for acute care hospital services has declined more rapidly than has hospital capacity. This paper investigates the extent to which the preponderance of the nonprofit form in this industry might account for this phenomenon. We test whether rates of exit from the hospital industry differ significantly across the different forms of ownership, and especially whether secular nonprofit hospitals reduce capacity more slowly than do other types of hospitals. We estimate the effect of population changes (a proxy for changes in demand) at the zip-code level between 1985 and 1994 on changes in the capacity of for-profit, secular nonprofit, religious nonprofit, and public hospitals over the same period, holding constant metropolitan statistical area (MSA) fixed effects and other 1985 baseline characteristics of residential zip codes. We find that for-profit hospitals are the most responsive to reductions in demand, followed in turn by public and religiously affiliated nonprofit hospitals, while secular nonprofits are distinctly the least responsive of the four ownership types.
Handle: RePEc:nbr:nberwo:8989
Template-Type: ReDIF-Paper 1.0
Title: The Market Price of Credit Risk: An Empirical Analysis of Interest Rate Swap Spreads
Classification-JEL: E4
Author-Name: Jun Liu
Author-Name: Francis A. Longstaff
Author-Person: plo283
Author-Name: Ravit E. Mandell
Note: AP
Number: 8990
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8990
File-URL: http://www.nber.org/papers/w8990.pdf
File-Format: application/pdf
Publication-Status: published as Liu, Jun, Francis A. Longstaff, and Ravit Mandell. "The Market Price of Risk in Interest Rate Swaps: The Roles of Default and Liquidity Risks." The Journal of Business 79, 5 (September 2006): 2337-2360.
Abstract: This paper studies the market price of credit risk incorporated into one of the most important credit spreads in the financial markets: interest rate swap spreads. Our approach consists of jointly modeling the swap and Treasury term structures using a general five-factor affine credit framework and estimating the parameters by maximum likelihood. We solve for the implied special financing rate for Treasury bonds and find that the liquidity component of on-the-run bond prices can be significant. We also find that credit premia in swap spreads are positive on average. These premia, however, vary significantly over time and were actually negative for much of the 1990s.
Handle: RePEc:nbr:nberwo:8990
Template-Type: ReDIF-Paper 1.0
Title: Stock Valuation and Learning about Profitability
Classification-JEL: G12
Author-Name: Lubos Pastor
Author-Person: ppa276
Author-Name: Pietro Veronesi
Note: AP
Number: 8991
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8991
File-URL: http://www.nber.org/papers/w8991.pdf
File-Format: application/pdf
Publication-Status: published as Lubos PÁstor & Veronesi Pietro, 2003. "Stock Valuation and Learning about Profitability," Journal of Finance, American Finance Association, vol. 58(5), pages 1749-1790, October.
Abstract: We develop a simple approach to valuing stocks in the presence of learning about average profitability. The market-to-book ratio (M/B) increases with uncertainty about average profitability, especially for firms that pay no dividends. M/B is predicted to decline over a firm's lifetime due to learning, with steeper decline when the firm is young. These predictions are confirmed empirically. Data also support the predictions that younger stocks and stocks that pay no dividends have more volatile returns. Firm profitability has become more volatile recently, helping explain the puzzling increase in average idiosyncratic return volatility observed over the past few decades.
Handle: RePEc:nbr:nberwo:8991
Template-Type: ReDIF-Paper 1.0
Title: U.S. Stock Market Crashes and Their Aftermath: Implications for Monetary Policy
Classification-JEL: E58; E44
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Author-Name: Eugene N. White
Author-Person: pwh5
Note: DAE EFG ME
Number: 8992
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8992
File-URL: http://www.nber.org/papers/w8992.pdf
File-Format: application/pdf
Publication-Status: published as Hunter, William B., George G. Kaufman and Michael Pormerleano (eds.) Asset Price Bubbles: The Implications for Monetary, Regulatory and International Policies. Cambridge MA: MIT Press, 2003.
Abstract: This paper examines fifteen historical episodes of stock market crashes and their aftermath in the United States over the last one hundred years. Our basic conclusion from studying these episodes is that financial instability is the key problem facing monetary policy makers and not stock market crashes, even if they reflect the possible bursting of a bubble. With a focus on financial stability rather than the stock market, the response of central banks to stock market fluctuations is more likely to be optimal and maintain support for the independence of the central bank.
Handle: RePEc:nbr:nberwo:8992
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Unionization on Establishment Closure: A Regression Discontinuity Analysis of Representation Elections
Classification-JEL: J0; J2
Author-Name: John DiNardo
Author-Person: pdi178
Author-Name: David S. Lee
Note: LS
Number: 8993
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8993
File-URL: http://www.nber.org/papers/w8993.pdf
File-Format: application/pdf
Abstract: Using data on more than 27,000 establishments (1983-1999) in the United States, this paper produces estimates of the causal effect of unionization of employer closure by exploiting the fact that most employers become 'unionized' as a partial consequence of a secret ballot election among the workers. If employers where unions barely won the election (e.g. by one vote) are ex ante comparable in all other ways to employers where unions barely lost (by one vote), differences in their subsequent outcomes should represent the true impact of union recognition. The regression discontinuity analysis finds little or no union effect on short- and long-run employer survival rates over 1- to 18-year horizons. We thus conclude that evidence of large effects of unions would more likely be found 1) along the within-employer (intensive margin) of employment and/or 2) in analyses of union threat effects.
Handle: RePEc:nbr:nberwo:8993
Template-Type: ReDIF-Paper 1.0
Title: Are Financial Assets Priced Locally or Globally?
Classification-JEL: G11; G12
Author-Name: G. Andrew Karolyi
Author-Person: pka329
Author-Name: Rene M. Stulz
Note: AP CF
Number: 8994
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8994
File-URL: http://www.nber.org/papers/w8994.pdf
File-Format: application/pdf
Publication-Status: published as Karolyi, G. Andrew & Stulz, Rene M., 2003. "Are financial assets priced locally or globally?," 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 16, pages 975-1020 Elsevier.
Abstract: We review the international finance literature to assess the extent to which international factors affect financial asset demands and prices. International asset pricing models with mean-variance investors predict that an asset's risk premium depends on its covariance with the world market portfolio and, possibly, with exchange rate changes. The existing empirical evidence shows that a country's risk premium depends on its covariance with the world market portfolio and that there is some evidence that exchange rate risk affects expected returns. However, the theoretical asset pricing literature relying on mean-variance optimizing investors fails in explaining the portfolio holdings of investors, equity flows, and the time-varying properties of correlations across countries. The home bias has the effect of increasing local influences on asset prices, while equity flows and cross-country correlations increase global influences on asset prices.
Handle: RePEc:nbr:nberwo:8994
Template-Type: ReDIF-Paper 1.0
Title: When Does Trade Hurt? Market, Transition and Developing Economies
Classification-JEL: F16; O17
Author-Name: Kala Krishna
Author-Person: pkr26
Author-Name: Cemile Yavas
Note: ITI
Number: 8995
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8995
File-URL: http://www.nber.org/papers/w8995.pdf
File-Format: application/pdf
Abstract: This paper argues that labor market distortions in transition and developing economies help explain differential impacts of trade liberalization. We assume that workers differ in ability. In a market economy their earnings depend on their ability. However, earnings are independent of ability due to a common wage set in manufacturing in a transition economy and because of family farms in a developing economy. Our work suggests that trade liberalization without structural reform can have serious adverse effects in transition and developing economies: there can even be mutual losses from trade.
Handle: RePEc:nbr:nberwo:8995
Template-Type: ReDIF-Paper 1.0
Title: Benefits and Costs of Newer Drugs: An Update
Classification-JEL: I12; L65
Author-Name: Frank Lichtenberg
Author-Person: pli76
Note: EH PE
Number: 8996
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8996
File-URL: http://www.nber.org/papers/w8996.pdf
File-Format: application/pdf
Publication-Status: published as Frank R. Lichtenberg, 2007. "Benefits and costs of newer drugs: an update," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 485-490.
Abstract: We update and extend our previous study of the effect of drug age -- years since FDA approval -- on total medical expenditure, in several respects. The estimates indicate that, in the entire population, a reduction in the age of drugs utilized reduces non-drug expenditure 7.2 times as much as it increases drug expenditure. In the Medicare population, a reduction in the age of drugs utilized reduces non-drug expenditure by all payers 8.3 times as much as it increases drug expenditure; it reduces Medicare non-drug expenditure 6.0 times as much as it increases drug expenditure. About two-thirds of the non-drug Medicare cost reduction is due to reduced hospital costs. The remaining third is approximately evenly divided between reduced Medicare home health care cost and reduced Medicare office-visit cost. We also found that the mean age of drugs used by Medicare enrollees with private Rx insurance is about 9% lower than the mean age of drugs used by Medicare enrollees without either private or public Rx insurance.
Handle: RePEc:nbr:nberwo:8996
Template-Type: ReDIF-Paper 1.0
Title: Art Auctions: A Survey of Empirical Studies
Classification-JEL: D44
Author-Name: Orley Ashenfelter
Author-Person: pas9
Author-Name: Kathryn Graddy
Author-Person: pgr151
Note: AP IO LE
Number: 8997
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8997
File-URL: http://www.nber.org/papers/w8997.pdf
File-Format: application/pdf
Publication-Status: published as Orley Ashenfelter & Kathryn Graddy, 2003. "Auctions and the Price of Art," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 763-787, September.
Abstract: This paper contains a review of the burgeoning research that has been designed to shed light on how the art auction system actually works and what it indicates about price formation. First, we find that in recent years returns on art assets appear to be little different from returns on other assets. In addition, some researchers have found that because of the weak correlation between art asset returns with other returns, there may be a case for the inclusion of art assets in a diversified portfolio. Second, we find evidence of several anomalies in art market pricing. The evidence clearly suggests that, contrary to the view of the art trade, 'masterpieces' underperform the market. In addition, there is considerable evidence that there are fairly long periods in which art prices may diverge across geographic areas and even auction houses. Third, we review the public record of the criminal trial of Sotheby's former Chairman, who was accused of price fixing, to show how the collusion with Christie's, the other great public auction house, was actually engineered. Contrary to the way the proceeds from the settlement of the civil suit in this case were distributed, we show that buyers were almost certainly not injured by the collusion, but that sellers were. In addition, based on the public record of settlement, it appears that the plaintiffs in the civil suit were very handsomely repaid for their injury. Finally, we review the extensive research on the effects of the auction institution on price formation. There is now considerable theoretical research on strategic behavior in auctions, much of it in response to empirical findings, and we review three key findings. First, the evidence suggests that art experts provide extremely accurate predictions of market prices, but that these predictions do not optimally process the publicly available information. Second, high reserve prices, and the resulting high unsold ('buy-in') rates are best explained as optimal search in the face of stochastic demand. Third, extensive research has documented that the prices of identical objects are more likely to decline than to increase when multiple units are sold, and this has led to considerable theoretical research. Subsequent empirical research has tended to document declining demand prices even when the objects are imperfect substitutes.
Handle: RePEc:nbr:nberwo:8997
Template-Type: ReDIF-Paper 1.0
Title: Where Do U.S. Immigrants Come From, and Why?
Classification-JEL: F22; J1
Author-Name: Ximena Clark
Author-Name: Timothy J. Hatton
Author-Person: pha305
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI
Number: 8998
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8998
File-URL: http://www.nber.org/papers/w8998.pdf
File-Format: application/pdf
Abstract: The United States has experienced rising immigration levels and changing source since the 1950s. The changes in source have been attributed to the 1965 Amendments to the Immigration Act that abolished country-quotas and replaced them with a system that emphasized family reunification. Some believed that the Amendments would not change the 'traditional' sources of US immigrants. Given this view, it seems all the more remarkable that the sources of immigration changed so dramatically. This paper isolates the economic and demographic fundamentals that determined immigration rates by source from 1971 to 1998 -- income, education, demographic composition and inequality. The paper also allows for persistence - big US foreign-born stocks implying a strong 'friends and neighbors' pull on current immigrant flows. Specific policy variables are included which are derived directly from the quotas allocated to different visa categories. Parameter estimates from the panel data are then used to implement counterfactual simulations that serve to isolate the effects of immigration policy as well as source-country economic and demographic conditions.
Handle: RePEc:nbr:nberwo:8998
Template-Type: ReDIF-Paper 1.0
Title: The Roots of Latin American Protectionism: Looking Before the Great Depression
Classification-JEL: F1; N7
Author-Name: John H. Coatsworth
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI LS
Number: 8999
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w8999
File-URL: http://www.nber.org/papers/w8999.pdf
File-Format: application/pdf
Publication-Status: published as Estevadeordal, A., D. Rodrik, A. Taylor and A. Velasco (eds.) INTEGRATING THE AMERICAS: FTAA AND BEYOND. Cambridge, MA: Harvard University Press, 2004.
Abstract: This paper uncovers a fact that has not been well appreciated: tariffs in Latin America were far higher than anywhere else in the century before the Great Depression. This is a surprising fact given that this region has been said to have exploited globalization forces better than most during the pre-1914 belle epoque and for which the Great Depression has always been viewed as a critical policy turning point towards protection and de-linking from the world economy. This paper shows that the explanation cannot lie with output gains from protection, since, while such gains were present in Europe and its non-Latin offshoots, they were not present in Latin America. The paper then explores Latin American tariffs as a revenue source, as a protective device for special interests, and as the result of other political economy struggles. We conclude by asking whether the same pro-protection conditions exist today as those which existed more than a century ago.
Handle: RePEc:nbr:nberwo:8999
Template-Type: ReDIF-Paper 1.0
Title: Daily Cross-Border Equity Flows: Pushed or Pulled?
Classification-JEL: G11; G15
Author-Name: John M. Griffin
Author-Name: Federico Nardari
Author-Name: Rene M. Stulz
Note: AP
Number: 9000
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9000
File-URL: http://www.nber.org/papers/w9000.pdf
File-Format: application/pdf
Publication-Status: published as Nardari, Federico, John Griffin, and Rene M. Stulz. "Daily Cross-Border Flows: Pushed or Pulled?" Review of Economics and Statistics 86, 3 (2004): 641-657.
Abstract: In a model that is consistent with the existence of a home bias and with foreign investors that are less informed than domestic investors, we show that unexpectedly high worldwide returns lead to net equity inflows into small countries. In addition, a small country experiences net equity inflows when its stocks earn unexpectedly high returns. We investigate these predictions using daily data on net equity flows for nine emerging market countries and find that equity flows are positively related to host country stock returns as well as market performance abroad. Both our theoretical model and our empirical analysis show that global stock return performance is an important factor in understanding equity flows.
Handle: RePEc:nbr:nberwo:9000
Template-Type: ReDIF-Paper 1.0
Title: Entrepreneurship in Equilibrium
Classification-JEL: G3
Author-Name: Denis Gromb
Author-Person: pgr309
Author-Name: David Scharfstein
Author-Person: psc177
Note: CF
Number: 9001
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9001
File-URL: http://www.nber.org/papers/w9001.pdf
File-Format: application/pdf
Abstract: This paper compares the financing of new ventures in start-ups (entrepreneurship) and in established firms (intrapreneurship). Intrapreneurship allows established firms to use information on failed intrapreneurs to redeploy them into other jobs. By contrast, failed entrepreneurs must seek other jobs in an imperfectly informed external labor market. While this external labor market leads to ex post inefficient allocations, it provides entrepreneurs with high-powered incentives ex ante. We show that two types of equilibria can arise (and sometimes coexist). In a low entrepreneurship equilibrium, the market for failed entrepreneurs is thin, making internal labor markets and intrapreneurship particularly valuable. In a high entrepreneurship equilibrium, the active labor market reduces the value of internal labor markets and encourages entrepreneurship. We also show that there can be too little or too much entrepreneurial activity. There can be too little because entrepreneurs do not take into account their positive effect on the quality of the labor market. There can be too much because a high quality labor market is bad for entrepreneurial incentives.
Handle: RePEc:nbr:nberwo:9001
Template-Type: ReDIF-Paper 1.0
Title: The Performance of Performance Standards
Classification-JEL: C31
Author-Name: James Heckman
Author-Name: Carolyn Heinrich
Author-Name: Jeffrey Smith
Author-Person: psm73
Note: LS PE
Number: 9002
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9002
File-URL: http://www.nber.org/papers/w9002.pdf
File-Format: application/pdf
Publication-Status: published as Heckman, James J., Carolyn Heinrich and Jeffrey Smith. "The Performance Of Performance Standards," Journal of Human Resources, 2002, v37(4,Fall), 778-811.
Abstract: This paper examines the performance of the JTPA performance system, a widely emulated model for inducing efficiency in government organizations. We present a model of how performance incentives may distort bureaucratic decisions. We define cream skimming within the model. Two major empirical findings are (a) that the short run measures used to monitor performance are weakly, and sometimes perversely, related to long run impacts and (b) that the efficiency gains or losses from cream skimming are small. We find evidence that centers respond to performance standards.
Handle: RePEc:nbr:nberwo:9002
Template-Type: ReDIF-Paper 1.0
Title: Food Insecurity or Poverty? Measuring Need-Related Dietary Adequacy
Classification-JEL: I32; I12
Author-Name: Jayanta Bhattacharya
Author-Name: Steven Haider
Author-Person: pha224
Author-Name: Janet Currie
Author-Person: pcu13
Note: CH EH LS PE
Number: 9003
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9003
File-URL: http://www.nber.org/papers/w9003.pdf
File-Format: application/pdf
Publication-Status: published as Bhattacharya J., J. Currie, and S. Haider. “Food Insecurity or Poverty? Measuring Need-Related Diet Adequacy." Journal of Health Economics 23, 4 (2004): 839-862.
Abstract: We examine the extent to which food insecurity questions and the standard poverty measure are correlated with various dietary and physiologic outcomes. Our findings suggest that the correlations vary tremendously by age. We find that the food insecurity questions are correlated with the dietary outcomes of older household members, but that they are not consistently related to the diets of children. In contrast, poverty predicts dietary outcomes among preschoolers. Among adults, both poverty and food insecurity questions are good predictors of many dietary outcomes.
Handle: RePEc:nbr:nberwo:9003
Template-Type: ReDIF-Paper 1.0
Title: Heat or Eat? Cold Weather Shocks and Nutrition in Poor American Families
Classification-JEL: I32; I12
Author-Name: Jayanta Bhattacharya
Author-Name: Thomas DeLeire
Author-Person: pde167
Author-Name: Steven Haider
Author-Person: pha224
Author-Name: Janet Currie
Author-Person: pcu13
Note: CH EH
Number: 9004
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9004
File-URL: http://www.nber.org/papers/w9004.pdf
File-Format: application/pdf
Publication-Status: published as Bhattacharya J., T. Deleire, S. Haider, and J. Currie. “Heat or Eat? Cold-Weather Shocks and Nutrition in Poor American Families." American Journal of Public Health 93, 7 (2003): 1149-1154.
Abstract: We examine the effects of cold weather periods on family budgets and on nutritional outcomes in poor American families. Expenditures on food and home fuels are tracked by linking the Consumer Expenditure Survey to temperature data. Using the Third National Health and Nutrition Examination Survey, we track calorie consumption, dietary quality, vitamin deficiencies, and anemia in summer and winter months. We find that both rich and poor families increase fuel expenditures in response to unusually cold weather (a 10 degree F drop below normal). At same time, poor families reduce food expenditures by roughly the same amount as the increase in fuel expenditures, while rich families increase food expenditures. Poor adults and children reduce caloric intake by roughly 200 calories during winter months, unlike richer adults and children. In sensitivity analyses, we find that decreases in food expenditure are most pronounced outside the South. We conclude that poor parents and their children outside the South spend and eat less food during cold weather temperature shocks. We surmise that existing social programs fail to buffer against these shocks.
Handle: RePEc:nbr:nberwo:9004
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy in a Financial Crisis
Classification-JEL: E5; F3
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Christopher Gust
Author-Person: pgu329
Author-Name: Jorge Roldos
Note: EFG ME
Number: 9005
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9005
File-URL: http://www.nber.org/papers/w9005.pdf
File-Format: application/pdf
Publication-Status: published as Christiano, Lawrence J., Christopher Gust and Jorge Roldos. "Monetary Policy In A Financial Crisis," Journal of Economic Theory, 2004, v119(1,Nov), 64-103.
Abstract: What are the economic effects of an interest rate cut when an economy is in the midst of a financial crisis? Under what conditions will a cut stimulate output and employment, and raise welfare? Under what conditions will a cut have the opposite e ffects? We answer these questions in a general class of open economy models, where a financial crisis is modeled as a time when collateral constraints are suddenly binding. We find that when there are frictions in adjusting the level of output in the traded good sector and in adjusting the rate at which that output can be used in other parts of the economy, then a cut in the interest rate is most likely to result in a welfare-reducing fall in output and employment. When these frictions are absent, a cut in the interest rate improves asset positions and promotes a welfare-increasing economic expansion.
Handle: RePEc:nbr:nberwo:9005
Template-Type: ReDIF-Paper 1.0
Title: Endogenous Political Institutions
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Francesco Trebbi
Author-Person: ptr40
Note: EFG PE
Number: 9006
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9006
File-URL: http://www.nber.org/papers/w9006.pdf
File-Format: application/pdf
Publication-Status: published as Philippe Aghion & Alberto Alesina & Francesco Trebbi, 2004. "Endogenous Political Institutions," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 565-611, May.
Abstract: Political institutions influence economic policy, but they are themselves endogenous since they are chosen, in some way, by members of the polity. An important aspect of institutional design is how much society chooses to delegate unchecked power to its leaders. If, once elected, a leader cannot be restrained, society runs the risk of a tyranny of the majority, if not the tyranny of a dictator. If a leader faces too many ex post checks and balances, legislative action is too often blocked. As our critical constitutional choice we focus upon the size of the minority needed to block legislation, or conversely the size of the (super) majority needed to govern. We analyze both 'optimal' constitutional design and 'positive' aspects of this process. We derive several empirical implications which we then discuss.
Handle: RePEc:nbr:nberwo:9006
Template-Type: ReDIF-Paper 1.0
Title: Biotech-Pharmaceutical Alliances as a Signal of Asset and Firm Quality
Classification-JEL: I11; L24
Author-Name: Sean Nicholson
Author-Person: pni108
Author-Name: Patricia M. Danzon
Author-Person: pda291
Author-Name: Jeffrey S. McCullough
Note: CF EH
Number: 9007
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9007
File-URL: http://www.nber.org/papers/w9007.pdf
File-Format: application/pdf
Publication-Status: published as Sean Nicholson, 2005. "Biotech-Pharmaceutical Alliances as a Signal of Asset and Firm Quality," Journal of Business, University of Chicago Press, vol. 78(4), pages 1433-1464, July.
Abstract: Biotechnology companies rely heavily on alliances with pharmaceutical companies to finance their research and development expenditures, and pharmaceutical firms rely heavily on alliances to supplement their internal research and development. Previous studies suggest that asymmetric information may lead to inefficient contracting. We examine the determinants of biotech-pharmaceutical deal prices to determine whether the market for deals between biotech and pharmaceutical companies functions as a well-informed market or whether it is characterized by asymmetric information. We find that inexperienced biotech companies receive substantially discounted payments when signing their first deal. Drugs that are jointly developed are more likely to advance in clinical trials than drugs that are developed by a single company, so the first-deal discount is not consistent with the post-deal performance of these drugs. We also find that biotech companies that sign deals receive substantially higher valuations from venture capitalists and from the public equity market, which implies that the discounts are rational; a biotechnology company that is developing its first product benefits from forming an alliance with a pharmaceutical company because it sends a positive signal to prospective investors.
Handle: RePEc:nbr:nberwo:9007
Template-Type: ReDIF-Paper 1.0
Title: Gains from FDI Inflows with Incomplete Information
Classification-JEL: F2; F3
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Note: IFM
Number: 9008
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9008
File-URL: http://www.nber.org/papers/w9008.pdf
File-Format: application/pdf
Publication-Status: published as Razin, Assaf & Sadka, Efraim, 2003. "Gains from FDI inflows with incomplete information," Economics Letters, Elsevier, vol. 78(1), pages 71-77, January.
Abstract: The paper develops an international macroeconomic model of FDI flows with a unique feature: a hands-on management ability to react in real time to changing economic environments. Anticipating this advantage, foreign direct investors can outbid other investors in a certain industry in which they specialize in the source country. The model can explain both two-way FDI flows among developed countries and one-way FDI flows from developed to developing country. The unique gains from FDI to the host country stem from the increased eciency of domestic investment.
Handle: RePEc:nbr:nberwo:9008
Template-Type: ReDIF-Paper 1.0
Title: Bidder Discounts and Target Premia in Takeovers
Classification-JEL: G3
Author-Name: Boyan Jovanovic
Author-Name: Serguey Braguinsky
Author-Person: pbr60
Note: AP CF
Number: 9009
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9009
File-URL: http://www.nber.org/papers/w9009.pdf
File-Format: application/pdf
Publication-Status: published as Jovanovic, Boyan and Serguey Braguinsky. "Bidder Discounts And Target Premia In Takeovers," American Economic Review, 2004, v94(1,Mar), 46-56.
Abstract: When a takeover is announced, the sum of the stock-market values of the firms involved often falls, and the value of the acquirer almost always does. Does this mean that takeovers do not raise the values of the firms involved? Not necessarily. We set up a model in which the equilibrium number of takeovers is constrained efficient. Yet, upon news of a takeover, a target's price rises, the bidder's price falls, and, most of the time the joint value of the target and acquirer also falls.
Handle: RePEc:nbr:nberwo:9009
Template-Type: ReDIF-Paper 1.0
Title: Bankruptcy and Small Firms' Access to Credit
Classification-JEL: K2; E5
Author-Name: Jeremy Berkowitz
Author-Name: Michelle J. White
Author-Person: pwh52
Note: CF LE
Number: 9010
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9010
File-URL: http://www.nber.org/papers/w9010.pdf
File-Format: application/pdf
Publication-Status: published as Berkowitz, Jeremy and Michelle J. White. "Bankruptcy and Small Firms' Access to Credit." RAND Journal of Economics 35, 1 (Spring 2004): 69-84.
Abstract: In this paper, we investigate how personal bankruptcy law affects small firms' access to credit. When a firm is unincorporated, its debts are personal liabilities of the firm's owner, so that lending to the firm is legally equivalent to lending to its owner. If the firm fails, the owner has an incentive to file for personal bankruptcy, since the firm's debts will be discharged and the owner is only obliged to use assets above an exemption level to repay creditors. The higher the exemption level, the greater is the incentive to file for bankruptcy. We show that supply of credit falls and demand for credit rises when non-corporate firms are located in states with higher bankruptcy exemptions. We test the model and find that, if small firms are located in states with unlimited rather than low homestead exemptions, they are more likely to be denied credit, they receive smaller loans and interest rates are higher. Results for non-corporate versus corporate firms suggest that lenders often disregard small firms' organizational status in making loan decisions.
Handle: RePEc:nbr:nberwo:9010
Template-Type: ReDIF-Paper 1.0
Title: How Could Everyone Have Been So Wrong? Forecasting the Great Depression with the Railroads
Classification-JEL: E30; N12
Author-Name: John Landon-Lane
Author-Person: pla84
Author-Name: Eugene N. White
Author-Person: pwh5
Author-Name: Adam Klug
Note: DAE
Number: 9011
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9011
File-URL: http://www.nber.org/papers/w9011.pdf
File-Format: application/pdf
Publication-Status: published as Klug, Adam & Landon-Lane, John S. & White, Eugene N., 2005. "How could everyone have been so wrong? Forecasting the Great Depression with the railroads," Explorations in Economic History, Elsevier, vol. 42(1), pages 27-55, January.
Abstract: Contemporary observers viewed the recession that began in the summer of 1929 as nothing extraordinary. Recent analyses have shown that the subsequent large deflation was econometrically forecastable, implying that a driving force in the depression was the high expected real interest rates faced by business. Using a neglected data set of forecasts by railroad shippers, we find that business was surprised by the magnitude of the great depression. We show that an ARIMA or Holt-Winters model of railroad shipments would have produced much smaller forecast errors than those indicated by the surveys. The depth and duration of the depression was beyond the experience of business, which appears to have believed that recovery would happen quickly as in previous recessions. This failure to anticipate the collapse of the economy suggests roles for both high real rates of interest and a debt deflation in the propagation of the depression.
Handle: RePEc:nbr:nberwo:9011
Template-Type: ReDIF-Paper 1.0
Title: The Bush Tax Cut and National Saving
Classification-JEL: E62; D91
Author-Name: Alan J. Auerbach
Author-Person: pau33
Note: PE
Number: 9012
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9012
File-URL: http://www.nber.org/papers/w9012.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. "The Bush Tax Cut And National Saving," National Tax Journal, 2002, v55(3,Sep), 387-407.
Abstract: Following through on pledges made during his election campaign, President Bush proposed and Congress passed a substantial tax cut in 2001, the Economic Growth and Tax Relief Reconciliation Act (EGTRRA). Much has been written about the size of the tax cut, its impact on the federal budget, its distributional consequences, and its short-run macroeconomic impact. There has been less focus on EGTRRA's incentive effects; one of the most important potential behavioral effects is on saving. To analyze the behavioral effects of the Bush tax cut on saving and other macroeconomic variables, I use the Auerbach-Kotlikoff (1987) model in conjunction with the NBER's TAXSIM model. An interesting by-product of this analysis is the 'dynamic scorin g' of the tax cut - the estimated feedback effects of behavior on revenue. By comparing the revenue losses generated by the model with those that would occur without any behavioral response, one can estimate how much of the static revenue loss would be recouped by expanded economic activity. The simulations suggest that dynamic scoring has a significant impact on estimated revenue losses, but that the tax cut's impact on national saving is still negative in the long run.
Handle: RePEc:nbr:nberwo:9012
Template-Type: ReDIF-Paper 1.0
Title: Women, War and Wages: The Effect of Female Labor Supply on the Wage Structure at Mid-Century
Classification-JEL: J21; J22
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: David H. Autor
Author-Person: pau9
Author-Name: David Lyle
Note: EFG LS
Number: 9013
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9013
File-URL: http://www.nber.org/papers/w9013.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron, Davidh. Autor and David Lyle. "Women, War, And Wages: The Effect Of Female Labor Supply On The Wage Structure At Midcentury," Journal of Political Economy, 2004, v112(3,Jun), 497-551.
Abstract: This paper investigates the effects of female labor supply on the wage structure. To identify variation in female labor supply, we exploit the military mobilization for World War II, which drew many women into the workforce as males exited civilian employment. The extent of mobilization was not uniform across states, however, with the fraction of eligible males serving ranging from 41 to 54 percent. We find that in states with greater mobilization of men, women worked substantially more after the War and in 1950, though not in 1940. We interpret these differentials as labor supply shifts induced by the War. We find that increases in female labor supply lower female wages, lower male wages, and increase the college and premium and male wage inequality generally. Our findings indicate that at mid-century, women were closer substitutes to high school graduate and relatively low-skill males, but not to those with the lowest skills.
Handle: RePEc:nbr:nberwo:9013
Template-Type: ReDIF-Paper 1.0
Title: Labor Supply Effects of Social Insurance
Classification-JEL: H55; J22
Author-Name: Alan B. Krueger
Author-Person: pkr63
Author-Name: Bruce D. Meyer
Author-Person: pme273
Note: LS PE
Number: 9014
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9014
File-URL: http://www.nber.org/papers/w9014.pdf
File-Format: application/pdf
Publication-Status: published as Krueger, Alan B. & Meyer, Bruce D., 2002. "Labor supply effects of social insurance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 33, pages 2327-2392 Elsevier.
Abstract: This chapter examines the labor supply effects of social insurance programs. We argue that this topic deserves separate treatment from the rest of the labor supply literature because individuals may be imperfectly informed as to the rules of the programs and because key parameters are likely to differ for those who are eligible for social insurance programs, such as the disabled. Furthermore, differences in social insurance programs often provide natural experiments with exogenous changes in wages or incomes that can be used to estimate labor supply responses. Finally, social insurance often affects different margins of labor supply. For example, the labor supply literature deals mostly with adjustments in the number of hours worked, whereas the incentives of social insurance programs frequently affect the decision of whether to work at all. The empirical work on unemployment insurance (UI) and workers' compensation (WC) insurance finds that the programs tend to increase the length of time employees spend out of work. Most of the estimates of the elasticities of lost work time that incorporate both the incidence and duration of claims are close to 1.0 for unemployment insurance and between 0.5 and 1.0 for workers' compensation. These elasticities are substantially larger than the labor supply elasticities typically found for men in studies of the effects of wages or taxes on hours of work. The evidence on disability insurance and (especially) social security retirement suggests much smaller and less conclusively established labor supply effects. Part of the explanation for this difference probably lies in the fact that UI and WC lead to short-run variation in wages with mostly a substitution effect. Our review suggest that it would be misleading to apply a universal set of labor supply elasticities to these diverse problems and populations.
Handle: RePEc:nbr:nberwo:9014
Template-Type: ReDIF-Paper 1.0
Title: Taxes and Entrepreneurial Activity: Theory and Evidence for the U.S.
Classification-JEL: H3; H2
Author-Name: Roger H. Gordon
Author-Person: pgo95
Author-Name: Julie Berry Cullen
Author-Person: pcu44
Note: CF PE
Number: 9015
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9015
File-URL: http://www.nber.org/papers/w9015.pdf
File-Format: application/pdf
Publication-Status: published as Cullen, Julie Berry and Roger H. Gordon. “Taxes and entrepreneurial risk-taking: theory and evidence for the U.S." Journal of Public Economics 9, 7 (2007): 1479-505.
Abstract: Entrepreneurial activity is presumed to generate important spillovers, potentially justifying tax subsidies. How does the tax law affect individual incentives? How much of an impact has it had in practice? We first show theoretically that taxes can affect the incentives to be an entrepreneur due simply to differences in tax rates on business vs. wage and salary income, due to differences in the tax treatment of losses vs. profits through a progressive rate structure and through the option to incorporate, and due to risk-sharing with the government. We then provide empirical evidence using U.S. individual tax return data that these aspects of the tax law have had large effects on actual behavior.
Handle: RePEc:nbr:nberwo:9015
Template-Type: ReDIF-Paper 1.0
Title: Expenditure Switching and Exchange Rate Policy
Classification-JEL: F3; F4
Author-Name: Charles Engel
Author-Person: pen14
Note: IFM
Number: 9016
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9016
File-URL: http://www.nber.org/papers/w9016.pdf
File-Format: application/pdf
Publication-Status: published as Expenditure Switching and Exchange-Rate Policy, Charles Engel. in NBER Macroeconomics Annual 2002, Volume 17, Gertler and Rogoff. 2003
Abstract: Nominal exchange rate changes can lead to 'expenditure switching' when they change relative international prices. A traditional argument for flexible nominal exchange rates posits that when prices are sticky in producers' currencies, nominal exchange rate movements can change relative prices between home and foreign goods. But if prices are fixed ex ante in consumers' currencies, nominal exchange rate flexibility cannot achieve any relative price adjustment. In that case nominal exchange rate fluctuations have the undesirable feature that they lead to deviations from the law of one price. The case for floating exchange rates is weakened if prices are sticky in this way. The empirical literature appears to support the notion that prices are sticky in consumers' currencies. Here, additional support for this conclusion is provided. We then review some new approaches in the theoretical literature that imply an important expenditure-switching role even when consumer prices are sticky in consumers' currencies. Further empirical research is needed to resolve the quantitative importance of the expenditure-switching role for nominal exchange rates.
Handle: RePEc:nbr:nberwo:9016
Template-Type: ReDIF-Paper 1.0
Title: Intermediaries in the U.S. Market for Technology, 1870-1920
Classification-JEL: O31; N00
Author-Name: Naomi R. Lamoreaux
Author-Name: Kenneth L. Sokoloff
Note: DAE PR
Number: 9017
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9017
File-URL: http://www.nber.org/papers/w9017.pdf
File-Format: application/pdf
Publication-Status: published as Engerman, Stanley L., Philip T. Hoffman, Jean-Laurent Rosenthal, and Kenneth L. Sokoloff (eds.) Finance, Intermediaries, and Economic Development. New York: Cambridge University Press, 2003.
Abstract: We argue that the emergence of a well-developed market for patented technologies over the late nineteenth and early twentieth centuries facilitated the emergence of a group of highly specialized and productive inventors by making it possible for them to transfer to others responsibility for developing and commercializing their inventions. The most basic of the institutional supports that made this market possible was, of course, the patent system, which created secure and tradable property rights in invention. But trade was also facilitated by the emergence of intermediaries who economized on the information costs associated with assessing the value of inventions and helped to match sellers and buyers of patent rights. Patent agents and lawyers were particularly well placed to provide these kinds of services, because they were linked to similar attorneys in other parts of the country and because, in the course of their regular business activities, they accumulated information about participants on both sides of the market for technology. Our quantitative analysis of assignment contracts demonstrates that patentees whose assignments were handled by these specialists produced more patents over their careers, assigned a greater fraction of their patents, and also were able to find buyers for their inventions much more quickly than other patentees. In other words, the development of institutions supporting market trade in patented technology seems to have made it possible for creative individuals to specialize more fully in inventive work -- that is, it seems to have set in motion the kind of Smithian processes that have generally been associated with higher rates of productivity growth.
Handle: RePEc:nbr:nberwo:9017
Template-Type: ReDIF-Paper 1.0
Title: Child Labor: The Role of Income Variability and Access to Credit Across Countries
Classification-JEL: J22; G1
Author-Name: Rajeev Dehejia
Author-Person: pde179
Author-Name: Roberta Gatti
Author-Person: pga278
Note: LS
Number: 9018
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9018
File-URL: http://www.nber.org/papers/w9018.pdf
File-Format: application/pdf
Publication-Status: published as Dehejia, Rajeev H. and Roberta Gatti. "Child Labor: The Role Of Financial Development And Income Variability Across Countries," Economic Development and Cultural Change, 2005, v53(4,Jul), 913-932.
Abstract: This paper examines the relationship between child labor and access to credit at a cross-country level. Even though this link is theoretically central to child labor, so far there has been little work done to assess its importance empirically. We measure child labor as a country aggregate, and credit constraints are proxied by the extent of financial development. These two variables display a strong negative relationship, which we show is robust to selection on observables (by controlling for a wide range of variables such as GDP per capita, urbanization, initial child labor, schooling, fertility, legal institutions, inequality, and openness, and by allowing for a nonparametric functional form), and to selection on unobservables (by allowing for fixed effects). We find that the magnitude of the association between our proxy of access to credit and child labor is large in the sub-sample of poor countries. Moreover, in the absence of developed financial markets, households appear to resort substantially to child labor in order to cope with income variability. This evidence suggests that policies aimed at widening households' access to credit could be effective in reducing the extent of child labor.
Handle: RePEc:nbr:nberwo:9018
Template-Type: ReDIF-Paper 1.0
Title: Globalization and Changing Patterns in the International Transmission of Shocks in Financial Markets
Classification-JEL: F20; F31
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Antu Panini Murshid
Author-Person: pmu38
Note: DAE IFM ME
Number: 9019
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9019
File-URL: http://www.nber.org/papers/w9019.pdf
File-Format: application/pdf
Publication-Status: published as Bordo, Michael D. and Antu Panini Murshid. "Globalization And Changing Patterns In The International Transmission Of Shocks In Financial Markets," Journal of International Money and Finance, 2006, v25(4,Jun), 655-674.
Abstract: In this paper we compare various characteristics of the cross-country transmission of shocks in the financial markets of both advanced and emerging countries during two periods of globalization -- the pre-World War I classical gold standard era, 1880-1914, and the post-Bretton Woods era, 1975-2000. Based on principal components analysis on monthly spreads on long-term sovereign bond yields and on an EMP measure of currency crises, an index of global stress, and impulse response functions from VARs estimated using weekly data on short-term interest rates, we conclude that financial market shocks were more globalized before 1914 compared to the present. We postulate that this difference in systemic stability between the two eras of globalization reflects factors such as strong cross-country interdependence fostered through links to gold, the growing financial maturity of advanced countries, and the widening of the center to include a more diverse group of countries spanning several regions.
Handle: RePEc:nbr:nberwo:9019
Template-Type: ReDIF-Paper 1.0
Title: Explaining Home Bias in Consumption: The Role of Intermediate Input Trade
Classification-JEL: F12; F15
Author-Name: Russell Hillberry
Author-Person: phi69
Author-Name: David Hummels
Author-Person: phu100
Note: ITI
Number: 9020
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9020
File-URL: http://www.nber.org/papers/w9020.pdf
File-Format: application/pdf
Publication-Status: published as Hillberry, Russell and David Hummels. “Intra-national Home Bias: Some Explanations." Review of Economics and Statistics 85 (2003): 1089-1092.
Abstract: We show that 'home bias' in trade patterns will arise endogenously due to the co-location decisions of intermediate and final goods producers. Our model identifies four implications of home bias arising out of specialized industrial demands. Regions absorb different bundles of goods. Buyers and sellers of intermediate goods co-locate. Intermediate input trade is highly localized. The effect of spatial frictions on trade are magnified. These implications are examined and confirmed using a unique data source that matches the detailed subnational geography of shipments to the characteristics of the shipping establishments. Our results broaden the measurement and interpretation of home bias, and provide new evidence on the role of intermediate inputs in concentrating production.
Handle: RePEc:nbr:nberwo:9020
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Social Policy and Economic Activity Throughout the Fertility Decision Tree
Classification-JEL: I18; I38
Author-Name: Phillip B. Levine
Author-Person: ple553
Note: EH LS PE
Number: 9021
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9021
File-URL: http://www.nber.org/papers/w9021.pdf
File-Format: application/pdf
Abstract: This paper considers the impact of changes in abortion and welfare policies along with economic conditions over the 1985 to 1996 period at each stage of the fertility decision tree, including sexual activity, contraception, pregnancy, abortion, and birth. Examining the impact of policy at each stage of the decision tree represents a useful approach because consistent findings provide stronger evidence of a causal link than focusing on just one stage. The abortion policies considered are parental involvement laws and mandatory waiting periods; welfare policies include benefit generosity as well as state-level welfare waivers as a whole and the 'family cap.' State-level data over this period are used to examine abortion, birth, and pregnancy outcomes, while microdata from the 1988 and 1995 National Surveys of Family Growth are employed to examine sexual activity and contraception. For those policies that target certain subgroups of the population, estimates are provided separately for each group and compared to help further identify causality. I find that parental involvement laws increase contraception use among minors, leading to fewer pregnancies and, therefore, fewer abortions; teen births do not rise in response. Evidence regarding welfare policies does not consistently support any impact throughout the decision tree.
Handle: RePEc:nbr:nberwo:9021
Template-Type: ReDIF-Paper 1.0
Title: Intra-national Home Bias: Some Explanations
Classification-JEL: F15; R12
Author-Name: Russell Hillberry
Author-Person: phi69
Author-Name: David Hummels
Author-Person: phu100
Note: ITI
Number: 9022
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9022
File-URL: http://www.nber.org/papers/w9022.pdf
File-Format: application/pdf
Publication-Status: published as Hillberry, Russell and David Hummels. "Intranational Home Bias: Some Explanations," Review of Economics and Statistics, 2003, v85(4,Nov), 1089-1092.
Abstract: Wolf (2000) demonstrates that trade within the U.S. appears substantially impeded by state borders. We revisit this finding with improved data. We show that much intra-national home bias can be explained by wholesaling activity. Shipments by wholesalers are much more localized within states than shipments from manufacturing establishments. Controlling for relative prices and the use of actual, rather than imputed, shipment distances also reduces home bias estimates.
Handle: RePEc:nbr:nberwo:9022
Template-Type: ReDIF-Paper 1.0
Title: Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture
Classification-JEL: F1
Author-Name: David Hummels
Author-Person: phu100
Author-Name: Alexandre Skiba
Author-Person: psk37
Note: ITI
Number: 9023
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9023
File-URL: http://www.nber.org/papers/w9023.pdf
File-Format: application/pdf
Publication-Status: published as David Hummels & Alexandre Skiba, 2004. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1384-1402, December.
Abstract: We model demand for quality differentiated goods to derive a relationship between trade costs and the quality composition of trade. Detailed data on traded goods' prices, quantities and shipping costs for many importers and exporters are used to test these predictions. These data provide a strong rejection of the iceberg assumption on transportation costs and a strong confirmation of the classical Alchian Allen hypothesis. Within a narrowly defined commodity classification, exporters charge destination-varying prices that co-vary positively with shipping costs and negatively with tariffs. Shipping costs operate as a quantitative restriction similar to quotas.
Handle: RePEc:nbr:nberwo:9023
Template-Type: ReDIF-Paper 1.0
Title: It's Fourth Down and What Does the Bellman Equation Say? A Dynamic Programming Analysis of Football Strategy
Classification-JEL: L10; D21
Author-Name: David Romer
Author-Person: pro406
Note: IO
Number: 9024
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9024
File-URL: http://www.nber.org/papers/w9024.pdf
File-Format: application/pdf
Abstract: This paper uses play-by-play accounts of virtually all regular season National Football League games for 1998-2000 to analyze teams' choices on fourth down between trying for a first down and kicking. Dynamic programming is used to estimate the values of possessing the ball at different points on the field. These estimates are combined with data on the results of kicks and conventional plays to estimate the average payoffs to kicking and going for it under different circumstances. Examination of teams' actual decisions shows systematic, overwhelmingly statistically significant, and quantitatively large departures from the decisions the dynamic-programming analysis implies are preferable.
Handle: RePEc:nbr:nberwo:9024
Template-Type: ReDIF-Paper 1.0
Title: Peer Effects in Medical School
Classification-JEL: I21; J24
Author-Name: Peter Arcidiacono
Author-Name: Sean Nicholson
Author-Person: pni108
Note: EH LS
Number: 9025
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9025
File-URL: http://www.nber.org/papers/w9025.pdf
File-Format: application/pdf
Publication-Status: published as Arcidiacono, Peter and Sean Nicholson. "Peer Effects In Medical School," Journal of Public Economics, 2005, v89(2-3,Feb), 327-350.
Abstract: Using data on the universe of students who graduated from U.S. medical schools between 1996 and 1998, we examine whether the abilities and specialty preferences of a medical school class affect a student's academic achievement in medical school and his choice of specialty. We mitigate the selection problem by including school-specific fixed effects, and show that this method yields an upper bound on peer effects for our data. We estimate positive peer effects that disappear when school-specific fixed effects are added to control for the endogeneity of a peer group. We find no evidence that peer effects are stronger for blacks, that peer groups are formed along racial lines, or that students with relatively low ability benefit more from their peers than students with relatively high ability. However, we do find some evidence that peer groups form along gender lines.
Handle: RePEc:nbr:nberwo:9025
Template-Type: ReDIF-Paper 1.0
Title: The Deaths of Manufacturing Plants
Classification-JEL: D2; F1
Author-Name: Andrew B. Bernard
Author-Name: J. Bradford Jensen
Author-Person: pje75
Note: ITI PR
Number: 9026
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9026
File-URL: http://www.nber.org/papers/w9026.pdf
File-Format: application/pdf
Abstract: This paper examines the causes of manufacturing plant deaths within and across industries in the U.S. from 1977-1997. The effects of international competition from low wage countries, exporting, ownership structure, product diversity, productivity, geography, and plant characteristics are considered. The probability of shutdowns is higher in industries that face increased competition from low-income countries, especially for low-wage, labor-intensive plants within those industries. Conditional on industry and plant characteristics, closures occur more often at plants that are part of a multi-plant firm and at plants that have recently experienced a change in ownership. Plants owned by U.S. multinationals are more likely to close than similar plants at non-multinational firms. Exits occur less frequently at multi-product plants, at exporters, at plants that pay above average wages, and at large, older, more productive and more capital-intensive plants.
Handle: RePEc:nbr:nberwo:9026
Template-Type: ReDIF-Paper 1.0
Title: Tariff-jumping FDI and Domestic Firms' Profits
Classification-JEL: F13; F23
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: KaSaundra Tomlin
Author-Name: Wesley W. Wilson
Author-Person: pwi277
Note: ITI
Number: 9027
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9027
File-URL: http://www.nber.org/papers/w9027.pdf
File-Format: application/pdf
Publication-Status: published as Blonigen, Bruce A., KaSaundra Tomlin, and Wesley W. Wilson. “Tariff-jumping FDI and Domestic Firms’ Profits.” Canadian Journal of Economics 37 (August 2004): 656-77.
Abstract: Studies of the welfare implications of trade policy often do not take account of the potential for tariff-jumping FDI to mitigate positive gains to domestic producers. We use event study methodology to examine the market effects for U.S. domestic firms that petitioned for antidumping (AD) relief, as well as the effect of announcements of FDI by their foreign rivals in the U.S. market on these U.S. petitioning firms. On average, affirmative U.S. AD decisions are associated with 3% abnormal gains to a petitioning firm when there is no tariff-jumping FDI, but no abnormal gains if there is tariff-jumping FDI. The evidence for this mitigating effect is strongest when announcements of the intended tariff-jumping FDI have already occurred before an AD decision takes place, which happened in a fair number of cases. We also find evidence that the announcements of plant expansions (and, to some extent, new plants) have significantly larger negative effects on U.S. domestic firms' profits than other types of FDI, including acquisitions and joint ventures.
Handle: RePEc:nbr:nberwo:9027
Template-Type: ReDIF-Paper 1.0
Title: Gender Differences in Completed Schooling
Classification-JEL: I20; J16
Author-Name: Kerwin Kofi Charles
Author-Name: Ming-Ching Luoh
Note: LS
Number: 9028
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9028
File-URL: http://www.nber.org/papers/w9028.pdf
File-Format: application/pdf
Publication-Status: published as Charles, Kerwin Kofi and Ming-Ching Luoh. "Gender Differences In Completed Schooling," Review of Economics and Statistics, 2003, v85(3,Aug), 559-577.
Abstract: This paper summarizes the dramatic changes in relative male-females educational attainment over the past three decades. Stock measures of education among the entire adult population show rising attainment levels for both men and women, with men enjoying an advantage in schooling levels throughout this interval. Cohort specific analysis reveals that these stock measures mask two interesting patterns: (a) gender difference at the cohort level had vanished by the early 1950 birth cohort and reversed sign ever since; (b) for several cohorts, attainment rates were flat for women and flat and falling for men. This last is puzzling in the face of the large college premia that these cohorts observed when making their schooling choices. We present a simple human capital model showing how the anticipated dispersion of future wages should affect educational investment and find that a model which includes measures of future earnings dispersion fits the data for relative schooling patterns quite well.
Handle: RePEc:nbr:nberwo:9028
Template-Type: ReDIF-Paper 1.0
Title: Beyond Markets and Hierarchies: Toward a New Synthesis of American Business History
Classification-JEL: N0; M0
Author-Name: Naomi R. Lamoreaux
Author-Name: Daniel M.G. Raff
Author-Name: Peter Temin
Author-Person: pte231
Note: DAE
Number: 9029
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9029
File-URL: http://www.nber.org/papers/w9029.pdf
File-Format: application/pdf
Publication-Status: published as Lamoreaux, Naomi R., Daniel M. G. Raff, and Peter Temin. “Beyond Markets and Hierarchies: Towards a New Synthesis of American Business History." American Historical Review 108 (April 2003): 404-33.
Abstract: We sketch a new synthesis of American business history to replace (and subsume) that put forward by Alfred D. Chandler, Jr., most famously in his book The Visible Hand (1977). We see the broader subject as the history of the institutions of coordination in the economy, with the management of information and the addressing of problems of informational asymmetries representing central problems for firm- and relationship design. Our analysis emphasizes the endogenous adoption of coordination mechanisms in the context of evolving but specific operating conditions and opportunities. This naturally gives rise both to change and to heterogeneity in the population of coordination mechanisms to be observed in use at any moment in time. In discussing the changes in the population of mechanisms over time, we seek to avoid the tendency, exemplified by Chandler's work but characteristic of the field, to see history of adoption in teleological rather than evolutionary perspective. We see a richer set of mechanisms in play than is conventional and a more complex historical process at work, in particular a process in which hierarchical institutions have both risen and, more recently, declined in significance.
Handle: RePEc:nbr:nberwo:9029
Template-Type: ReDIF-Paper 1.0
Title: Current Accounts in the Long and Short Run
Classification-JEL: F32; F41
Author-Name: Aart Kraay
Author-Person: pkr80
Author-Name: Jaume Ventura
Author-Person: pve110
Note: IFM ITI
Number: 9030
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9030
File-URL: http://www.nber.org/papers/w9030.pdf
File-Format: application/pdf
Publication-Status: published as Gertler, Mark and Kenneth S. Rogoff (eds.) NBER Macroeconomics Annual 2002, Volume 17. Cambridge, MA: The MIT Press, 2003.
Publication-Status: published as Aart Kraay & Jaume Ventura, 2002. "Current Accounts in the Long and the Short Run," NBER Macroeconomics Annual, vol 17, pages 65-94.
Abstract: Faced with income fluctuations, countries smooth their consumption by raising savings when income is high, and vice versa. How much of these savings do countries invest at home and abroad? In other words, what are the effects of fluctuations in savings on domestic investment and the current account? In the long run, we find that countries invest the marginal unit of savings in domestic and foreign assets in the same proportions as in their initial portfolio, so that the latter is remarkably stable. In the short run, we find that countries invest the marginal unit of savings mostly in foreign assets, and only gradually do they rebalance their portfolio back to its original composition. This means that countries not only try to smooth consumption, but also domestic investment. To achieve this, they use foreign assets as a buffer stock.
Handle: RePEc:nbr:nberwo:9030
Template-Type: ReDIF-Paper 1.0
Title: The Interaction of Partial Public Insurance Programs and Residual Private Insurance Markets: Evidence from the U.S. Medicare Program
Classification-JEL: I18; H42
Author-Name: Amy Finkelstein
Author-Person: pfi264
Note: EH PE
Number: 9031
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9031
File-URL: http://www.nber.org/papers/w9031.pdf
File-Format: application/pdf
Publication-Status: published as Finkelstein, Amy. "The Interaction of Partial Public Insurance Programs and Residual Private Insurance Markets: Evidence from the U.S. Medicare Program." Journal of Health Economics 23, 1 (2004): 1-24.
Abstract: A ubiquitous form of government intervention in insurance markets is to provide compulsory, but partial, public insurance coverage and to allow voluntary purchases of supplementary insurance on the private market. Yet we know little about the effects of such programs on total insurance coverage and on welfare. A primary concern is that the compulsory public insurance program - designed to counter the effects of adverse selection in the private insurance market - may in fact exacerbate adverse selection pressures in the residual private insurance market. Theoretically, however, these programs may either improve or impair the functioning of the residual private insurance market. To examine this question empirically, I investigate the effect of the U.S. Medicare program - which provides partial public health insurance to individuals aged 65 and over - on the private insurance market for prescription drugs, a benefit not provided by the public program. The results suggest that Medicare does not have substantial spillover effects on residual private insurance markets. In particular, there is no evidence that Medicare is associated with increased adverse selection problems in the residual private health insurance market.
Handle: RePEc:nbr:nberwo:9031
Template-Type: ReDIF-Paper 1.0
Title: Is There an Optimal Industry Financial Structure?
Classification-JEL: G3
Author-Name: Peter MacKay
Author-Name: Gordon M. Phillips
Author-Person: pph31
Note: CF PE
Number: 9032
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9032
File-URL: http://www.nber.org/papers/w9032.pdf
File-Format: application/pdf
Publication-Status: published as MacKay, Peter and Gordon M. Phillips. “How Does Industry Affect Firm Financial Structure?” The Review of Financial Studies (December 2005).
Abstract: We examine how intra-industry variation in financial structure relates to industry factors and whether real and financial decisions are jointly determined within competitive industries. We find that industry and group factors beyond standard industry fixed effects are also important to firm financial structure. Firm financial leverage, capital intensity, and cash-flow risk are interdependent decisions that depend on the firm's proximity to the median industry capital-labor ratio, the actions of firms within its industry quintile, and its status as entrant, incumbent, or exiting firm. Our results support competitive industry equilibrium models of financial structure in which debt, technology, and risk are simultaneous decisions.
Handle: RePEc:nbr:nberwo:9032
Template-Type: ReDIF-Paper 1.0
Title: Is Retirement Depressing?: Labor Force Inactivity and Psychological Well-Being in Later Life
Classification-JEL: I31; J14
Author-Name: Kerwin Kofi Charles
Note: LS
Number: 9033
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9033
File-URL: http://www.nber.org/papers/w9033.pdf
File-Format: application/pdf
Publication-Status: published as Charles, Kerwin Kofi. “Is Retirement Depressing?: Labor Force Inactivity and Psychological Well Being in Later Life." Research in Labor Economics 23 (2004): 269-299.
Abstract: This paper assesses how retirement - defined as permanent labor force non-participation in a man's mature years - affects psychological welfare. The raw correlation between retirement and well-being is negative. But this does not imply causation. In particular, people with idiosyncratically low well-being, or people facing transitory shocks which adversely affect well-being might disproportionately select into retirement. Discontinuous retirement incentives in the Social Security System, and changes in laws affecting mandatory retirement and Social Security benefits allows the exogenous effect of retirement on happiness to be estimated. The paper finds that the direct effect of retirement on well-being is positive once the fact that retirement and well being are simultaneously determined is accounted for.
Handle: RePEc:nbr:nberwo:9033
Template-Type: ReDIF-Paper 1.0
Title: Stock Market Boom and the Productivity Gains of the 1990s
Classification-JEL: E23; G14
Author-Name: Urban Jermann
Author-Person: pje4
Author-Name: Vincenzo Quadrini
Author-Person: pqu2
Note: EFG
Number: 9034
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9034
File-URL: http://www.nber.org/papers/w9034.pdf
File-Format: application/pdf
Publication-Status: published as Jermann, U. J. and V. Quadrini. "Stock Market Boom and the Productivity Gains of the 1990s." Journal of Monetary Economics (March 2007): 413-432.
Abstract: Together with a sense of entering a New Economy, the US experienced in the second half of the 1990s an economic expansion, a stock market boom, a financing boom for new firms and productivity gains. In this paper, we propose an interpretation of these events within a general equilibrium model with financial frictions and decreasing returns to scale in production. We show that the mere prospect of high future productivity growth can generate sizable gains in current productivity, as well as the other above mentioned events.
Handle: RePEc:nbr:nberwo:9034
Template-Type: ReDIF-Paper 1.0
Title: When Can Partial Public Insurance Produce Pareto Improvements?
Classification-JEL: H42; D82
Author-Name: Amy Finkelstein
Author-Person: pfi264
Note: PE
Number: 9035
Creation-Date: 2002-06
Order-URL: http://www.nber.org/papers/w9035
File-URL: http://www.nber.org/papers/w9035.pdf
File-Format: application/pdf
Abstract: Wilson (1977) provided the striking result that the government can always Pareto dominate a pooling equilibrium in a private insurance market with adverse selection by providing the pooling policy as a compulsory public policy and allowing individuals to buy supplementary private insurance. I show that this Pareto improving role for the government does not derive from its unique capacity to compel participation in a public insurance program. Rather, it stems from the fact that, with the introduction of the public policy, individuals may now hold multiple insurance policies: one public and one private. If, instead, we relax the assumption of the Wilson model that individuals may only hold one private insurance policy, the private market equilibrium is always second best Pareto efficient and there is no possibility of Pareto improvement through government intervention. Whether in fact individuals are restricted to purchasing only one private insurance policy - and hence whether there is scope for Pareto improvement through government policy in this model - varies in a predictable manner across different insurance markets.
Handle: RePEc:nbr:nberwo:9035
Template-Type: ReDIF-Paper 1.0
Title: Employee Costs and the Decline in Health Insurance Coverage
Classification-JEL: I10; J32
Author-Name: David M. Cutler
Author-Person: pcu64
Note: EH PE
Number: 9036
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9036
File-URL: http://www.nber.org/papers/w9036.pdf
File-Format: application/pdf
Publication-Status: published as Cutler, David M. "Employee Costs And The Decline In Health Insurance Coverage," Forum for Health Economics and Policy, 2003, v6, Article 3.
Publication-Status: published as Employee Costs and the Decline in Health Insurance Coverage, David M. Cutler. in Frontiers in Health Policy Research, Volume 6, Cutler and Garber. 2003
Abstract: This paper examines why health insurance coverage fell despite the lengthy economic boom of the 1990s. I show that insurance coverage declined primarily because fewer workers took up coverage when offered it, not because fewer workers were offered insurance or were eligible for it. The reduction in take-up is associated with the increase in employee costs for health insurance. Estimates suggest that increased costs to employees can explain the entire decline in take-up rates in the 1990s.
Handle: RePEc:nbr:nberwo:9036
Template-Type: ReDIF-Paper 1.0
Title: Ethnicity, Language, and Workplace Segregation: Evidence from a New Matched Employer-Employee Data Set
Author-Name: Judith K. Hellerstein
Author-Person: phe270
Author-Name: David Neumark
Author-Person: pne16
Note: LS
Number: 9037
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9037
File-URL: http://www.nber.org/papers/w9037.pdf
File-Format: application/pdf
Publication-Status: published as Judith Hellerstein & David Neumark, 2003. "Ethnicity, Language, and Workplace Segregation: Evidence from a New Matched Employer-Employee Data Set," Annales d'Economie et de Statistique, ADRES, issue 71-72, pages 02, Juillet-D.
Abstract: We describe the construction and assessment of a new matched employer-employee data set (the Decennial Employer-Employee Dataset, or DEED) that we have undertaken as a part of a broad research agenda to study segregation in the U.S. labor market. In this paper we examine the role of segregation by Hispanic ethnicity and language proficiency, contributing new, previously unavailable descriptive information on segregation along these lines, and evidence on the wage premia or penalties associated with this segregation. The DEED is much larger and more representative across regional and industry dimensions than previous matched data sets for the United States, and improvements along both of these dimensions are essential to isolating the importance of segregation by language and ethnicity in the workplace. Our empirical results reveal considerable segregation by Hispanic ethnicity and by English language proficiency. We find that Hispanic workers, but not white workers, suffer wage penalties from employment in a workplace with a large share of Hispanic workers, and even more so a large share of Hispanic workers with poor English language proficiency. In addition, we find that segregation of Hispanic workers among other Hispanics with similar English language proficiency does not reduce the penalties associated with poor own language skills.
Handle: RePEc:nbr:nberwo:9037
Template-Type: ReDIF-Paper 1.0
Title: Drug Treatment as a Crime Fighting Tool
Classification-JEL: I1; J0
Author-Name: Mireia Jofre-Bonet
Author-Person: pjo124
Author-Name: Jody L. Sindelar
Note: EH
Number: 9038
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9038
File-URL: http://www.nber.org/papers/w9038.pdf
File-Format: application/pdf
Abstract: Drugs and crime are known to be correlated, but the direction of causality and the magnitude of the relationship have not been well established. We take a new approach to estimating this relationship and examine a little used, multi-site dataset of 3,500 inner-city drug users entering treatment. We analyze the change in crime and in drug use pre and post treatment, controlling for other covariates. We take first differences to address omitted variable problems. For our sample, we find that treatment reduces drug use which, in turn, reduced drug decreases crime. Reduced drug use due to treatment is associated with 54% fewer days of crime for profit, ceteris paribus. Our evidence suggests that, reduced drug use is causally related to reduced crime. This finding is robust to different specifications and subsamples. Our findings broadly suggest that drug treatment may be an effective crime-fighting tool. Given the huge and growing expense of the criminal justice system, drug treatment might be cost-effective relative to incarceration.
Handle: RePEc:nbr:nberwo:9038
Template-Type: ReDIF-Paper 1.0
Title: A Theory of the Currency Denomination of International Trade
Classification-JEL: F4
Author-Name: Philippe Bacchetta
Author-Person: pba111
Author-Name: Eric van Wincoop
Author-Person: pva387
Note: IFM ITI
Number: 9039
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9039
File-URL: http://www.nber.org/papers/w9039.pdf
File-Format: application/pdf
Publication-Status: published as Bacchetta, Philippe and Eric van Wincoop. "A Theory Of The Currency Denomination Of International Trade," Journal of International Economics, 2005, 67(2,Dec), 295-319
Abstract: Nominal rigidities due to menu costs have become a standard element in closed economy macroeconomic modeling. The 'New Open Economy Macroeconomics' literature has investigated the implications of nominal rigidities in an open economy context and found that the currency in which prices are set has significant implications for exchange rate pass-through to import prices, the level of trade and net capital flows, and optimal monetary and exchange rate policy. While the literature has exogenously assumed in which currencies goods are priced, in this paper we solve for the equilibrium optimal pricing strategies of firms. We find that the higher the market share of an exporting country in an industry, and the more differentiated its goods, the more likely its exporters will price in the exporter's currency. Country size and the cyclicality of real wages play a role as well, but are empirically less important. We also show that when a set of countries forms a monetary union, the new currency is likely to be used more extensively in trade than the sum of the currencies it replaces.
Handle: RePEc:nbr:nberwo:9039
Template-Type: ReDIF-Paper 1.0
Title: The Failure of Input-based Schooling Policies
Classification-JEL: I2; H4
Author-Name: Eric A. Hanushek
Author-Person: pha97
Note: PE
Number: 9040
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9040
File-URL: http://www.nber.org/papers/w9040.pdf
File-Format: application/pdf
Publication-Status: published as Hanushek, Eric A. "The Failure Of Input-Based Schooling Policies," Economic Journal, 2003, v113(485,Feb), F64-F98.
Abstract: In an effort to improve the quality of schools, governments around the world have dramatically increased the resources devoted to them. By concentrating on inputs and ignoring the incentives within schools, the resources have yielded little in the way of general improvement in student achievement. This paper provides a review of the United States and international evidence on the effectiveness of such input policies. It then contrasts the impact of resources with that of variations in teacher quality that are not systematically related to school resources. Finally, alternative performance incentive policies are described.
Handle: RePEc:nbr:nberwo:9040
Template-Type: ReDIF-Paper 1.0
Title: Relational Costs and the Production of Social Capital: Evidence from Carpooling
Classification-JEL: Z13
Author-Name: Kerwin Charles
Author-Name: Patrick Kline
Note: LS
Number: 9041
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9041
File-URL: http://www.nber.org/papers/w9041.pdf
File-Format: application/pdf
Publication-Status: published as Charles, Kerwin Kofi and Patrick Kline. "Relational Costs And The Production Of Social Capital: Evidence From Carpooling," Economic Journal, 2006, v116(511,Apr), 581-604.
Abstract: This paper posits that individuals can more easily form social connections with persons of the same race. If true, the greater the incidence among his neighbors of persons of his race, the more likely an individual is to make neighborhood social capital connections, and the more likely he is to engage in activities which require it. The paper tests this idea using an indicator of individual social capital never previously studied: whether the person uses a carpool to get to work. We identify exogenous variation in adult neighborhood racial makeup arising from the racial makeup of the state in which the person was born in the year that he was born, and relate this exogenous portion of adult neighborhood racial composition to individual carpooling propensity using a TSLS approach. The results from this analysis, and from robustness tests which focus on neighborhoods with virtually identical racial distributions, show evidence of strong cross-racial relational difficulties, but interestingly, only for particular pairs of racial groups.
Handle: RePEc:nbr:nberwo:9041
Template-Type: ReDIF-Paper 1.0
Title: Ethnic Differences in Demographic Behavior in the United States: Has There Been Convergence?
Classification-JEL: N3; J1
Author-Name: Michael R. Haines
Author-Person: pha740
Note: DAE
Number: 9042
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9042
File-URL: http://www.nber.org/papers/w9042.pdf
File-Format: application/pdf
Publication-Status: published as Haines, Michael R. "Ethnic Differences in Demographic Behavior in the United States: Has There Been Convergence?" Historical Methods: A Journal of Quantitative and Interdisciplinary History. Volume 36, Number 4, Falll 2003
Abstract: This paper looks at the fertility, mortality, and marriage experience of racial, ethnic, and nativity groups in the United States from the 19th to the late 20th centuries. The first part consist of a description and critique of the racial and ethnic categories used in the federal census and in the published vital statistics. The second part looks at these three dimensions of demographic behavior. There has been both absolute and relative convergence of fertility across groups, It has been of relatively recent origin and has been due, in large part, to stable, or even slightly increasing, birth rates for the majority white population combined with declining birth rates for blacks and the Asian-origin, Hispanic-origin, and Amerindian populations. This has not been true for mortality. The black population has experienced absolute convergence but relative deterioration in mortality (neonatal and infant mortality, maternal mortality, expectation of life at birth, and age-adjusted death rates), in contrast to the Amerindian and Asian-origin populations. The Asian-origin population actually now has age-adjusted death rates significantly lower than those for the white population. The disadvantaged condition of the black population and the deteriorating social safety net are the likely origins of this outcome. Finally, there was a trend toward earlier and more extensive marriage from about 1900 up to the 1960s. At this point, coincident with the end of the 'Baby Boom,' there has been a movement to later marriage for both males and females among whites, blacks, and the Hispanic-origin populations. This trend has been more extreme in the black population, especially among females. There has also been a significant rise in proportions never-married at ages 45-54 among blacks and, to a lesser extent, among Hispanics. So here too, there has been some divergence.
Handle: RePEc:nbr:nberwo:9042
Template-Type: ReDIF-Paper 1.0
Title: Labor Market Institutions and Demographic Employment Patterns
Classification-JEL: J1; J2
Author-Name: Giuseppe Bertola
Author-Person: pbe54
Author-Name: Francine D. Blau
Author-Person: pbl16
Author-Name: Lawrence M. Kahn
Author-Person: pka63
Note: LS
Number: 9043
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9043
File-URL: http://www.nber.org/papers/w9043.pdf
File-Format: application/pdf
Publication-Status: published as Giuseppe Bertola & Francine Blau & Lawrence Kahn, 2007. "Labor market institutions and demographic employment patterns," Journal of Population Economics, Springer, vol. 20(4), pages 833-867, October.
Abstract: Using data from 17 OECD countries over the 1960-96 period, we investigate the impact of institutions on the relative employment of youth, women, and older individuals. Theoretically, we show that labor market institutions meant to improve workers' income share imply larger disemployment effects for groups whose labor supply is more elastic. Using an empirical model that allows us to control for unmeasured country-specific factors that affect relative employment and unemployment, we find that, for both men and women, more extensive involvement of unions in wage-setting significantly decreases the employment rate of young and older individuals relative to the prime-aged, with no significant effects on the relative unemployment of these groups. In contrast, a larger role for unions has insignificant effects on male-female employment differentials, but raises female unemployment relative to male unemployment. These results suggest that union wage-setting policies price the young and elderly out of employment and drive disemployed individuals in these groups to non-labor-force (education, retirement) states. A possible scenario for women is that high union wages encourage female labor force participation, but that women who would otherwise be disemployed by high wage floors are able to find work in unregulated sectors or are absorbed by public employment.
Handle: RePEc:nbr:nberwo:9043
Template-Type: ReDIF-Paper 1.0
Title: Closing the Gap or Widening the Divide: The Effects of the G.I. Bill and World War II on the Educational Outcomes of Black Americans
Classification-JEL: I2
Author-Name: Sarah E. Turner
Author-Person: ptu103
Author-Name: John Bound
Author-Person: pbo406
Note: LS PE ED
Number: 9044
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9044
File-URL: http://www.nber.org/papers/w9044.pdf
File-Format: application/pdf
Publication-Status: published as Turner, Sarah and John Bound. "Closing The Gap Or Widening The Divide: The Effects Of The G.I. Bill And World War II On The Educational Outcomes Of Black Americans," Journal of Economic History, 2003, v63(1,Mar), 145-177.
Abstract: The effects of the G.I. Bill on collegiate attainment may have differed for black and white Americans owing to differential returns to education and differences in opportunities at colleges and universities, with men in the South facing explicitly segregated colleges. The empirical evidence suggests that World War II and the availability of G.I. benefits had a substantial and positive impact on the educational attainment of white men and black men born outside the South. However, for those black veterans likely to be limited to the South in their educational choices, the G.I. Bill had little effect on collegiate outcomes, resulting in the exacerbation of the educational differences between black and white men from southern states.
Handle: RePEc:nbr:nberwo:9044
Template-Type: ReDIF-Paper 1.0
Title: The New Social Security Commission Personal Accounts: Where Is the Investment Principal?
Classification-JEL: H55; J26
Author-Name: Alan L. Gustman
Author-Person: pgu327
Author-Name: Thomas L. Steinmeier
Note: AG LS PE
Number: 9045
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9045
File-URL: http://www.nber.org/papers/w9045.pdf
File-Format: application/pdf
Publication-Status: published as Alan L. Gustman and Thomas L. Steinmeier. “Offsetting the Principal in the New Social Security Accounts”. Tax Notes, Volume 7, No. 1, (April 4, 2005): 109-114.
Abstract: The President's Commission to Strengthen Social Security suggests three plans for reforming Social Security. These plans divert various amounts of the payroll tax to a personal account if the worker chooses to participate in the account. In return, Social Security benefits are offset using accounts with real returns ranging from 2% to 3.5%. In addition, the second and third plans proposed by the Commission include features that are designed to balance the finances of the system by reducing the rate of growth of benefits relative to the levels prescribed under current law, to make the system more redistributive, and to make other changes. The measures to increase redistribution and resolve the solvency of the system are relatively separate from the personal accounts. When 'personal accounts' are mentioned, most people think of accounts that are in some sense separate and shielded from the uncertainties of the Social Security system. That is not the case for the personal accounts proposed by the Commission. Because the participating individual is not entitled to the principal in the account, participating in the account does not shield the individual from the political risks of being in the Social Security system. The offset to the plan essentially taxes away the principal in the account, but leaves intact the full Social Security benefit, so that any change in retirement income due to the account reflects the difference in interest earned on the portfolio beyond a stated real rate of interest offset. Thus our analysis describes the account as a financial instrument equivalent to a bet that the real return will exceed the level of offset specified in the plan, ranging from 2 percent to 3.5 percent real. As a result, the reduction in political risk fostered by the Commission's proposals comes mainly from the improvement in the financial status of the system fostered by other provisions of the recommended plans. Measures to improve the benefits of low income individuals, widows and widowers and to enhance the rewards to retirement all create incentive effects that are also discussed in the paper.
Handle: RePEc:nbr:nberwo:9045
Template-Type: ReDIF-Paper 1.0
Title: Optimal Progressive Capital Income Taxes in the Infinite Horizon Model
Classification-JEL: H21; H62
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE
Number: 9046
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9046
File-URL: http://www.nber.org/papers/w9046.pdf
File-Format: application/pdf
Publication-Status: published as Emmanuel Saez, 2013. "Optimal progressive capital income taxes in the infinite horizon model," Journal of Public Economics, vol 97(), pages 61-74.
Abstract: This paper analyzes optimal progressive capital income taxation in an infinite horizon model where individuals differ only through their initial wealth. We show that, in that context, progressive taxation is a much more powerful and efficient tool to redistribute wealth than linear taxation on which previous literature has focused. We consider progressive capital income tax schedules taking a simple two-bracket form with an exemption bracket at the bottom and a single marginal tax rate above a time varying exemption threshold. Individuals are taxed until their wealth is reduced down to the exemption threshold. When the intertemportal elasticity of substitution is not too large and the top tail of the initial wealth distribution is infinite and thick enough, the optimal exemption threshold converges to a finite limit. As a result, the optimal tax system drives all the large fortunes down a finite level and produces a truncated long-run wealth distribution. A number of numerical simulations illustrate the theoretical result.
Handle: RePEc:nbr:nberwo:9046
Template-Type: ReDIF-Paper 1.0
Title: Pricing Currency Risk: Facts and Puzzles from Currency Boards
Classification-JEL: F31; F36
Author-Name: Sergio L. Schmukler
Author-Person: psc64
Author-Name: Luis Serven
Author-Person: pse75
Note: AP IFM
Number: 9047
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9047
File-URL: http://www.nber.org/papers/w9047.pdf
File-Format: application/pdf
Publication-Status: published as Schmukler, Sergio L. and Luis Serven. "Pricing Currency Risk Under Currency Boards," Journal of Development Economics, 2002, v69(2,Dec), 367-391.
Abstract: Hard pegs, such as currency boards, intend to reduce or even eliminate currency risk. This paper investigates the patterns and determinants of the currency risk premium in two currency boards -- Argentina and Hong Kong. Despite the presumed rigidity of currency boards, the currency premium is almost always positive and at times very large. Its term structure is usually upward sloping, but flattens out or even becomes inverted at times of turbulence. Currency premia differ across markets. The forward discount typically exceeds the currency premium derived from interbank rates, particularly during crisis times. The large magnitude of these cross-market differences can be the consequence of unexploited arbitrage opportunities, market segmentation, or other risks embedded in typical measures of currency risk. The premium and its term structure depend on domestic and global factors, related to devaluation expectations and risk perceptions.
Handle: RePEc:nbr:nberwo:9047
Template-Type: ReDIF-Paper 1.0
Title: Sales and Consumer Inventory
Classification-JEL: L0; L4
Author-Name: Igal Hendel
Author-Name: Aviv Nevo
Author-Person: pne133
Note: IO PR
Number: 9048
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9048
File-URL: http://www.nber.org/papers/w9048.pdf
File-Format: application/pdf
Publication-Status: published as Igal Hendel & Aviv Nevo, 2006. "Sales and Consumer Inventory," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 543-561, Autumn.
Abstract: Temporary price reductions (sales) are common for many goods and naturally result in large increase in the quantity sold. We explore whether the data support the hypothesis that these increases are, at least partly, due to dynamic consumer behavior: at low prices consumers stockpile for future consumption. This effect, if present, renders standard static demand estimates misleading, which has broad economic implications. We construct a dynamic model of consumer choice, use it to derive testable predictions and test these predictions using two years of scanner data on the purchasing behavior of a panel of households. The results support the existence of household stockpiling behavior and suggest that static demand estimates, which neglect dynamics, may overestimate price sensitiveness by up to a factor of 2 to 6.
Handle: RePEc:nbr:nberwo:9048
Template-Type: ReDIF-Paper 1.0
Title: Evaluating Value Weighting: Corporate Events and Market Timing
Classification-JEL: G14; G32
Author-Name: Owen A. Lamont
Note: AP CF
Number: 9049
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9049
File-URL: http://www.nber.org/papers/w9049.pdf
File-Format: application/pdf
Abstract: Corporate events, such as new issues and new lists, appear in waves. These waves imply that the market portfolio has a time-varying weight in new lists, and one can decompose the market return into a fixed weight return plus a timing return. Most of the reduction in aggregate market returns caused by holding new lists comes from timing, not from average underperformance. When new lists are a high fraction of the market, subsequent returns for both new and old lists are low. A mean variance optimizing investor holding the market would be better off replacing holdings of new lists with old lists, t-bills, or even currency stuffed in a mattress.
Handle: RePEc:nbr:nberwo:9049
Template-Type: ReDIF-Paper 1.0
Title: Moral Hazard in Reinsurance Markets
Classification-JEL: D8; G0
Author-Name: Neil Doherty
Author-Name: Kent Smetters
Author-Person: psm21
Note: AP PE
Number: 9050
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9050
File-URL: http://www.nber.org/papers/w9050.pdf
File-Format: application/pdf
Publication-Status: published as Doherty, Neil and Kent Smetters. "Moral Hazard In Reinsurance Markets," Journal of Risk and Insurance, 2005, v72(3,Sep), 375-391.
Abstract: This paper attempts to identify moral hazard in the traditional reinsurance market. We build a multi-period principle agent model of the reinsurance transaction from which we derive predictions on premium design, monitoring, loss control and insurer risk retention. We then use panel data on U.S. property liability reinsurance to test the model. The empirical results are consistent with the model's predictions. In particular, we find evidence for the use of loss sensitive premiums when the insurer and reinsurer are not affiliates (i.e., not part of the same financial group), but little or no use of monitoring. In contrast, we find evidence for the use of monitoring when the insurer and reinsurer are affiliates, where monitoring costs are lower, but little use of price controls.
Handle: RePEc:nbr:nberwo:9050
Template-Type: ReDIF-Paper 1.0
Title: The Role of the Family in Immigrants' Labor-Market Activity: Evidence from the United States
Classification-JEL: J1; J2
Author-Name: Francine D. Blau
Author-Person: pbl16
Author-Name: Lawrence M. Kahn
Author-Person: pka63
Author-Name: Joan Y. Moriarty
Author-Name: Andre Portela Souza
Note: LS
Number: 9051
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9051
File-URL: http://www.nber.org/papers/w9051.pdf
File-Format: application/pdf
Publication-Status: published as Blau, Francine D., Lawrence M. Kahn, Joan Moriarty, and Andre Souza. "The Role of the Family in Immigrants’ Labor-Market Activity: An Evaluation of Alternative Explanations: Comment." American Economic Review (March 2003).
Abstract: We use Census of Population microdata for 1980 and 1990 to examine the labor supply and wages of immigrant husbands and wives in the United States in a family context. Earlier research by Baker and Benjamin (1997) posits a family investment model in which, upon arrival, immigrant husbands invest in their human capital while immigrant wives work to provide the family with liquidity during this period. Consistent with this model, they find for Canada that immigrant wives work longer hours upon arrival than comparable natives, but, with time in Canada, they are eventually overtaken by native wives. In contrast, we find that, among immigrants to the United States, both husbands and wives work and earn less than comparable natives upon arrival, with similar shortfalls for men and women. Further, both immigrant husbands and wives have similar, positive assimilation profiles in wages and labor supply and eventually overtake both the wages and the labor supply of comparable natives.
Handle: RePEc:nbr:nberwo:9051
Template-Type: ReDIF-Paper 1.0
Title: Factor Price Equalization in the UK?
Classification-JEL: F1; C1
Author-Name: Andrew B. Bernard
Author-Name: Stephen Redding
Author-Person: pre64
Author-Name: Peter K. Schott
Author-Person: psc98
Author-Name: Helen Simpson
Author-Person: psi261
Note: ITI
Number: 9052
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9052
File-URL: http://www.nber.org/papers/w9052.pdf
File-Format: application/pdf
Abstract: This paper develops a general test of factor price equalization that is robust to unobserved regional productivity differences, unobserved region-industry factor quality differences and variation in production technology across industries. We test relative factor price equalization across regions of the UK. Although the UK is small and densely-populated, we find evidence of statistically significant and economically important departures from relative factor price equalization. Our estimates suggest three distinct relative factor price areas with a clear spatial structure. We explore explanations for these findings, including multiple cones of diversification, region-industry technology differences, agglomeration and increasing returns to scale.
Handle: RePEc:nbr:nberwo:9052
Template-Type: ReDIF-Paper 1.0
Title: Cheap Labor Meets Costly Capital: The Impact of Devaluations on Commodity Firms
Classification-JEL: F1; F2
Author-Name: Kristin J. Forbes
Author-Person: pfo1
Note: IFM
Number: 9053
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9053
File-URL: http://www.nber.org/papers/w9053.pdf
File-Format: application/pdf
Publication-Status: published as Forbes, Kristin J. "Cheap Labor Meets Costly Capital: The Impact Of Devaluations On Commodity Firms," Journal of Development Economics, 2002, v69(2,Dec), 335-365.
Abstract: This paper examines how devaluations affect the relative costs of labor and capital and therefore influence production, profitability, investment, and stock returns for firms in the 'crisis' country as well as competitors in the rest of the world. After developing these ideas in a small, open-economy model, the paper performs a series of empirical tests using information for about 1,100 firms in 10 commodity industries between 1996 and 2000. The empirical tests support the model's main predictions: 1) Immediately after devaluations, commodity firms in the crisis country have output growth rates about 10%-20% higher than competitors in other countries; 2) Immediately after devaluations, commodity firms in the crisis country have operating-profit growth rates about 15%-25% higher than competitors in other countries; 3) The effect of devaluations on fixed capital investment and stock returns (and therefore expected long-run output and profits) is determined by capital/labor ratios and changes in the cost of capital. For example, crisis-country firms have higher rates of capital growth and better stock performance after devaluations if they had lower capital/labor ratios and there was no substantial increase in their interest rates.
Handle: RePEc:nbr:nberwo:9053
Template-Type: ReDIF-Paper 1.0
Title: Using Market Valuation to Assess Public School Spending
Classification-JEL: I2; H4
Author-Name: Lisa Barrow
Author-Person: pba144
Author-Name: Cecilia Elena Rouse
Note: CH ED
Number: 9054
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9054
File-URL: http://www.nber.org/papers/w9054.pdf
File-Format: application/pdf
Publication-Status: published as Barrow, Lisa and Cecilia Elena Rouse. "Using Market Valuation To Assess Public School Spending," Journal of Public Economics, 2004, v88(9-10,Aug), 1747-1769.
Abstract: In this paper we use a 'market-based' approach to examine whether increased school expenditures are valued by potential residents and whether the current level of public school provision is inefficient. We do so by employing an instrumental variables strategy to estimate the effect of state education aid on residential property values. We find evidence that, on net, additional state aid is valued by potential residents and that school districts do not appear to overspend on education. We also find that school districts may overspend in areas in which residents are poor or less educated, in large districts, and in districts with higher shares of rental property. One interpretation of these results is that increased competition has the potential to reduce overspending on public schools in some areas.
Handle: RePEc:nbr:nberwo:9054
Template-Type: ReDIF-Paper 1.0
Title: The Evidence on Credit Constraints in Post-Secondary Schooling
Classification-JEL: I28; D33
Author-Name: Pedro Carneiro
Author-Person: pca130
Author-Name: James J. Heckman
Note: CH LS PE ED
Number: 9055
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9055
File-URL: http://www.nber.org/papers/w9055.pdf
File-Format: application/pdf
Publication-Status: published as Carneiro, P. and J. J. Heckman. "The Evidence On Credit Constraints In Post-Secondary Schooling," Economic Journal, 2002, v112(482,Oct), 705-734.
Abstract: This paper examines the family income -- college enrollment relationship and the evidence on credit constraints in post-secondary schooling. We distinguish short-run liquidity constraints from the long-term factors that promote cognitive and noncognitive ability. Long-run factors crystallized in ability are the major determinants of the family income -- schooling relationship, although there is some evidence that up to 8% of the U.S. population is credit constrained in a short-run sense. Evidence that IV estimates of the returns to schooling exceed OLS estimates is sometimes claimed to support the existence of substantial credit constraints. This argument is critically examined.
Handle: RePEc:nbr:nberwo:9055
Template-Type: ReDIF-Paper 1.0
Title: On the Relationship Between the Conditional Mean and Volatility of Stock Returns: A Latent VAR Approach
Classification-JEL: G10; G12
Author-Name: Michael W. Brandt
Author-Name: Qiang Kang
Note: AP
Number: 9056
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9056
File-URL: http://www.nber.org/papers/w9056.pdf
File-Format: application/pdf
Publication-Status: published as Brandt, Michael W. and Qiang Kang. "On The Relationship Between Conditional Mean And Volatility Of Stock Returns: A Latent VAR Approach," Journal of Financial Economics, 2004, v72(2,May), 217-257.
Abstract: We model the conditional mean and volatility of stock returns as a latent vector autoregressive (VAR) process to study the contemporaneous and intertemporal relationship between expected returns and risk in a flexible statistical framework and without relying on exogenous predictors. We find a strong and robust negative correlation between the innovations to the conditional moments that leads to pronounced counter-cyclical variation in the Sharpe ratio. We document significant lead-lag correlations between the conditional moments that also appear related to business cycles. Finally, we show that although the conditional correlation between the mean and volatility is negative, the unconditional correlation is positive due to the lead-lag correlations.
Handle: RePEc:nbr:nberwo:9056
Template-Type: ReDIF-Paper 1.0
Title: Expectations and Expatriations: Tracing the Causes and Consequences of Corporate Inversions
Classification-JEL: H87; H25
Author-Name: Mihir A. Desai
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: CF PE
Number: 9057
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9057
File-URL: http://www.nber.org/papers/w9057.pdf
File-Format: application/pdf
Publication-Status: published as Desai, Mihir A. and James R. Hines, Jr. "Expectations And Expatriations: Tracing The Causes And Consequences Of Corporate Inversions," National Tax Journal, 2002, v55(3,Sep), 409-440.
Abstract: This paper investigates the determinants of corporate expatriations. American corporations that seek to avoid U.S. taxes on their foreign incomes can do so by becoming foreign corporations, typically by 'inverting' the corporate structure, so that the foreign subsidiary becomes the parent company and U.S. parent company becomes a subsidiary. Three types of evidence are considered in order to understand this rapidly growing practice. First, an analysis of the market reaction to Stanley Works's expatriation decision implies that market participants expect its foreign inversion to be accompanied by a reduction in tax liabilities on U.S. source income, since savings associated with the taxation of foreign income alone cannot account for the changed valuations. Second, statistical evidence indicates that large firms, those with extensive foreign assets, and those with considerable debt are the most likely to expatriate - suggesting that U.S. taxation of foreign income, including the interest expense allocation rules, significantly affect inversions. Third, share prices rise by an average of 1.7 percent in response to expatriation announcements. Ten percent higher leverage ratios are associated with 0.7 percent greater market reactions to expatriations, reflecting the benefit of avoiding the U.S. rules concerning interest expense allocation. Shares of inverting companies typically stand at only 88 percent of their average values of the previous year, and every ten percent of prior share price appreciation is associated with 1.1 percent greater market reaction to an inversion announcement. Taken together, these patterns suggest that managers maximize shareholder wealth rather than share prices, avoiding expatriations unless future tax savings - including reduced costs of repatriation taxes and expense allocation, and the benefits of enhanced worldwide tax planning opportunities - more than compensate for current capital gains tax liabilities.
Handle: RePEc:nbr:nberwo:9057
Template-Type: ReDIF-Paper 1.0
Title: Using Discontinuous Eligibility Rules to Identify the Effects of the Federal Medicaid Expansions on Low Income Children
Classification-JEL: I18; I38
Author-Name: David Card
Author-Person: pca271
Author-Name: Lara D. Shore-Sheppard
Author-Person: psh71
Note: CH EH PE
Number: 9058
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9058
File-URL: http://www.nber.org/papers/w9058.pdf
File-Format: application/pdf
Publication-Status: published as David Card & Lara D. Shore-Sheppard, 2004. "Using Discontinuous Eligibility Rules to Identify the Effects of the Federal Medicaid Expansions on Low-Income Children," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 752-766, November.
Abstract: This paper exploits the discrete nature of the eligibility criteria for two major federal expansions of Medicaid to measure the effects on Medicaid coverage, overall health insurance coverage, and the probability of visiting a doctor. The '100 percent' expansion, effective in 1991, extended Medicaid eligibility to children born after September 30, 1983 in families below the poverty line. We estimate that this law led to about a 10 percentage point rise in Medicaid coverage for children born just after the cutoff date, and a similar or slightly smaller rise in overall health insurance. It also increased the fraction of children in the newly eligible group with a doctor visit in the previous year. The '133 percent' expansion, effective in 1990, extended Medicaid to children under 6 in families with incomes below 133 percent of the poverty line. This law had relatively small effects on Medicaid coverage for children near the eligibility limits, and little or no effect on health insurance coverage.
Handle: RePEc:nbr:nberwo:9058
Template-Type: ReDIF-Paper 1.0
Title: Managing Option Fragility
Classification-JEL: J3; G3
Author-Name: Brian J. Hall
Author-Name: Thomas A. Knox
Note: CF LS
Number: 9059
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9059
File-URL: http://www.nber.org/papers/w9059.pdf
File-Format: application/pdf
Abstract: We analyze and explore option fragility, the notion that option incentives are fragile due to their non-linear payoff structure. Option incentives become weaker as options fall underwater, leading to pressures to reprice options or restore incentives through additional grants of equity-based pay. We build a detailed data set on executives' portfolios of stock and options and find that executive options are frequently underwater, even when average stock returns have been high. For example, at the height of the bull market in 1999, approximately one-third of all executive options were underwater. We find that, in contrast to the incentives provided by stock, the incentives provided by options are quite sensitive to stock price changes, especially on the downside. Overall, we find that the incentives created by all executive holdings have an elasticity with respect to stock price decreases of about 0.7, and this elasticity is larger for high-option executives and for executives with high percentages of options already underwater. The dominant mechanism through which companies manage option fragility is larger option grants following stock price declines; on average, these larger grants restore approximately 40% of the stock-price-induced incentive declines. Option repricings are far less prevalent, despite the attention they have garnered. Interestingly, we find that for positive stock returns, higher returns lead to larger option grants, which raise incentives further. Thus, option grants are largest when companies do very poorly or very well. Executive exercising behavior also affects option fragility. Since executives are much less likely to exercise options following stock price decreases, the natural declines in incentives due to exercises are attenuated on the downside, leading executives to 'manage their own incentives' in a way that augments company management of option fragility.
Handle: RePEc:nbr:nberwo:9059
Template-Type: ReDIF-Paper 1.0
Title: Does Sales-only Apportionment of Corporate Income Violate the GATT?
Classification-JEL: H2; H7
Author-Name: Charles E. McLure, Jr.
Author-Person: pmc33
Author-Name: Walter Hellerstein
Note: ITI PE
Number: 9060
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9060
File-URL: http://www.nber.org/papers/w9060.pdf
File-Format: application/pdf
Publication-Status: published as McLure Jr., Charles E. and Walter Hellerstein. Tax Notes, Vol. 96, No. 11 (September 9, 2002), pp. 1513-1520
Publication-Status: published as State Tax Notes, Vol. 25, No. 11 (September 9, 2002), pp. 779-86
Publication-Status: published as Tax Notes International, Vol. 27, No. 11 (September 9, 2002), pp. 1315-23
Publication-Status: published as CES/ifo Forum, Vol. 3, No.4 (Winter 2002), pp. 23-30.
Abstract: There has been a pronounced change in the formulas states use to apportion the income of multistate corporations from one that placed equal weight on payroll, profits, and sales to one that places at least half the weight on sales, and eight base apportionment solely on sales. This paper, which is intended to stimulate further analysis and debate, rather than provide a definitive conclusion, suggests that sales-only apportionment may violate the provisions of the General Agreement on Tariffs and Trade (the GATT) that prohibits export subsidies.
Handle: RePEc:nbr:nberwo:9060
Template-Type: ReDIF-Paper 1.0
Title: Carrots, Sticks and Broken Windows
Classification-JEL: K4; J18
Author-Name: Hope Corman
Author-Name: Naci Mocan
Author-Person: pmo270
Note: PE
Number: 9061
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9061
File-URL: http://www.nber.org/papers/w9061.pdf
File-Format: application/pdf
Publication-Status: published as Corman, Hope and Naci Mocan. "Carrots, Sticks, and Broken Windows," Journal of Law and Economics, 2005, v48(1,Apr), 235-266.
Abstract: This paper investigates the impact of economics conditions (carrots) and sanctions (sticks) on murder, assault, robbery, burglary and motor vehicle theft in New York City, using monthly time-series data spanning 1974-1999. Carrots are measured by the unemployment rate and the real minimum wage; sticks are measured by felony arrests, police force and New York City residents in prison. In addition, the paper tests the validity of the 'broken windows' hypothesis, where misdemeanor arrests are used as a measure of broken windows policing. The broken windows hypothesis has validity in case of robbery and motor vehicle theft. The models explain between 33 and 86 percent of the observed decline in these crimes between 1990 and 1999. While both economic and deterrence variables are important in explaining the decline in crime, the contribution of deterrence measures is larger than those of economic variables.
Handle: RePEc:nbr:nberwo:9061
Template-Type: ReDIF-Paper 1.0
Title: Identifying the Efficacy of Central Bank Interventions: The Australian Case
Classification-JEL: F30
Author-Name: Jonathan Kearns
Author-Person: pke53
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: IFM ME
Number: 9062
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9062
File-URL: http://www.nber.org/papers/w9062.pdf
File-Format: application/pdf
Publication-Status: published as Kearns, Jonathan and Roberto Rigobon. "Identifying The Efficacy Of Central Bank Interventions: Evidence From Australia And Japan," Journal of International Economics, 2005, v66(1,May), 31-48.
Abstract: The endogeneity of exchange rates and intervention has long plagued studies of the effectiveness of central banks actions in foreign exchange markets. Researchers have either excluded contemporaneous intervention, so that their explanators are predetermined, or obtained a small, and typically incorrectly signed, coefficient on contemporaneous intervention. Failing to account for the endogeneity, when central banks lean against the wind and trade strategically, will likely result in a large downward bias to the coefficient on contemporaneous intervention -- explaining the negative coefficient frequently obtained. We use an alternative identification assumption, a change in Reserve Bank of Australia intervention policy, that allows us to estimate, using simulated GMM, a model that includes the contemporaneous impact of intervention. There are three main results. Our point estimates suggest that central bank intervention has a economically significant contemporaneous effect. A $US100m purchase of the domestic currency will appreciate the exchange rate by 1.35 to 1.81 per cent. This estimate is remarkably similar to the calibration conducted by Dominguez and Frankel (1993), who themselves noted their estimate was larger than previous empirical findings. Secondly, the vast majority of the effect of an intervention on the exchange rate is found to occur during the day in which it is conducted, with only a smaller impact on subsequent days. Finally, we confirm findings that Australian central bank intervention policy can be characterized by leaning aginst the wind.
Handle: RePEc:nbr:nberwo:9062
Template-Type: ReDIF-Paper 1.0
Title: Empirical Analysis of Policy Interventions
Classification-JEL: E52; E47
Author-Name: Eric M. Leeper
Author-Person: ple3
Author-Name: Tao Zha
Author-Person: pzh80
Note: EFG ME
Number: 9063
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9063
File-URL: http://www.nber.org/papers/w9063.pdf
File-Format: application/pdf
Publication-Status: published as Eric Leeper & Tao Zha, 2002. "Empirical analysis of policy interventions," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
Abstract: We construct linear projections of macro variables conditional on hypothetical paths of monetary policy, using as an example an identified VAR model. Hypothetical policies are restricted to ones where both the policy intervention and its impacts are consistent with history -- otherwise the linear projections are likely to be unreliable. We use the approach to interpret Federal Reserve decisions, modeling their frequent reassessment in light of new information about the tradeoffs policymakers face. The interventions we consider matter: they can shift projected paths and probability distributions of macro variables in economically meaningful ways.
Handle: RePEc:nbr:nberwo:9063
Template-Type: ReDIF-Paper 1.0
Title: Academic Earmarks and the Returns to Lobbying
Classification-JEL: K0; H1
Author-Name: John M. de Figueiredo
Author-Name: Brian S. Silverman
Author-Person: psi162
Note: LE PE
Number: 9064
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9064
File-URL: http://www.nber.org/papers/w9064.pdf
File-Format: application/pdf
Publication-Status: published as de Figueiredo, John M., Brian S. Silverman. "Academic Earmarks and the Returns to Lobbying." Journal of Law and Economics 49, 2 (October 2006): 597-625.
Abstract: Despite a large literature on lobbying and information transmission by interest groups, no prior study has measured returns to lobbying. In this paper, we statistically estimate the returns to lobbying by universities for educational earmarks (which now represent 10 percent of federal funding of university research). The returns to lobbying approximate zero for universities not represented by a member of the Senate Appropriations Committee (SAC) or House Appropriations Committee (HAC). However, the average lobbying university with representation on the SAC receives an average return to one dollar of lobbying of $11-$17; lobbying universities with representation on the HAC obtain $20-$36 for each dollar spent. Moreover, we cannot reject the hypothesis that lobbying universities with SAC or HAC representation set the marginal benefit of lobbying equal to its marginal cost, although the large majority of universities with representation on the HAC and SAC do not lobby, and thus do not take advantage of their representation in Congress. On average, 45 percent of universities are predicted to choose the optimal level of lobbying. In addition to addressing questions about the federal funding of university research, we also discuss the impact of our results for the structure of government.
Handle: RePEc:nbr:nberwo:9064
Template-Type: ReDIF-Paper 1.0
Title: How's Life? Combining Individual and National Variables to Explain Subjective Well-Being
Classification-JEL: F0; I0
Author-Name: John F. Helliwell
Author-Person: phe368
Note: EFG
Number: 9065
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9065
File-URL: http://www.nber.org/papers/w9065.pdf
File-Format: application/pdf
Publication-Status: published as Helliwell, John F. "How's Life? Combining Individual And National Variables To Explain Subjective Well-Being," Economic Modelling, 2003, v20(2,Mar), 331-360.
Abstract: This paper attempts to explain international and inter-personal differences in subjective well-being over the final fifth of the twentieth century. The empirical work makes use of data from three waves of the World Values survey covering about fifty different countries. The analysis proceeds in stages. First there is a brief review of some reasons for giving a key role to subjective measures of well-being. This is followed by a survey of earlier empirical studies, a description of the main variables used, a report of results and tests, and discussion of the links among social capital, education, income and well-being. The main innovation of the paper, relative to earlier studies of subjective well-being, lies in its use of large international samples of data combining individual and societal level variables, thus permitting the simultaneous identification of individual-level and societal-level determinants of well-being. This is particularly useful in identifying the direct and indirect linkages between social capital and well-being.
Handle: RePEc:nbr:nberwo:9065
Template-Type: ReDIF-Paper 1.0
Title: Distance to Frontier, Selection, and Economic Growth
Classification-JEL: O31; O33
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Fabrizio Zilibotti
Author-Person: pzi3
Note: EFG
Number: 9066
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9066
File-URL: http://www.nber.org/papers/w9066.pdf
File-Format: application/pdf
Publication-Status: published as Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2006. "Distance to Frontier, Selection, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 37-74, 03.
Abstract: We analyze an economy where managers engage both in the adaptation of technologies from the world frontier and in innovation activities. The selection of high-skill managers is more important for innovation activities. As the economy approaches the technology frontier, selection becomes more important. As a result, countires at early stages of development pursue an investment-based strategy, with long term relationships, high average size and age of firms, large average investments, but little selection. Closer to the world technology frontier, there is a switch to innovation-based strategy with short-term relationships, younger firms, less investment and better selection of managers. We show that relatively backward economies may switch out of the investment-based strategy too soon, so certain economic institutions and policies, such as limits on product market competition or investment subsidies, that encourage the investment-based strategy may be beneficial. However, societies that cannot switch out of the investment-based strategy fail to converge to the world technology frontier. Non-convergence traps are more likely when policies and institutions are endogenized, enabling beneficiaries of existing policies to bribe politicians to maintain these policies.
Handle: RePEc:nbr:nberwo:9066
Template-Type: ReDIF-Paper 1.0
Title: Intertemporal State Budgeting
Classification-JEL: H7
Author-Name: Bruce Baker
Author-Name: Daniel Besendorfer
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Note: PE
Number: 9067
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9067
File-URL: http://www.nber.org/papers/w9067.pdf
File-Format: application/pdf
Abstract: This study presents intertemporal budgeting as of 1999 for all 50 U.S.states. Intertemporal state budgeting compares the present value of a state's projected receipts with the present value of its projected expenditures (exclusive of interest payments)plus the current value of its net debt (liabilities minus assets). Our projections start with the 1999 U.S.Census Bureau's State Government Finances survey of receipts,expenditures,and debt.We group these highly detailed data into a framework that is consistent with the National Income and Product Account accounts. The 1999 Census data are the latest available.To project total receipts and expenditures for years beyond 1999,we first form average 1999 receipts and expenditures by age and sex using relative age-and sex-specific receipts and expenditure profiles.We estimate these profiles the Current Population Survey and the Consumer Expenditure Survey. Next we grow these averages using an assumed growth rate in labor productivity. Finally,year-and state-specific age-sex population estimates are multiplied by projected average receipts and expenditures by age and sex in that year to form that year's total projected state-specific receipts and expenditures.We form our year-age-sex-and state-specific population projections using the 2001 Social Security Administration 's projection of the total U.S. population by age and sex in conjunction with the 1995 Census projections on state-specific age-sex population shares. Our base-case results use a 3 percent real discount rate and assume a 1.5 percent real productivity growth rate.They show a great range of state intertemporal imbalances. When measured as a share of (scaled by) the present value of projected expenditures, imbalances range from positive 48 percent in Alaska to negative 19 percent in Vermont. These and other findings proved to be very robust to changes in productivity and discount rates as well as changes in demographic assumptions. State official liabilities are not good proxies for their intertemporal imbalances.Indeed, the correlation between scaled state intertemporal imbalances and gross state debt scaled by state income is essentially zero.The corresponding correlation based on net state debt is negative. Given this, it's not surprising that we find very little correspondence between the ranking of the states based on their intertemporal budget imbalances and the credit ratings published by either Moody's or Standard and Poor's. Our user-friendly program for calculating intertemporal state budget imbalances (the difference between a)the present value of
Handle: RePEc:nbr:nberwo:9067
Template-Type: ReDIF-Paper 1.0
Title: Managerial Power and Rent Extraction in the Design of Executive Compensation
Classification-JEL: D23; G32
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Jesse M. Fried
Author-Name: David I. Walker
Note: CF LS LE
Number: 9068
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9068
File-URL: http://www.nber.org/papers/w9068.pdf
File-Format: application/pdf
Publication-Status: published as Bebchuk, Lucian Arye, Jesse Fried and David Walker. “Managerial Power and Rent Extraction in the Design of Executive Compensation." University of Chicago Law Review 69 (2002): 751-846.
Abstract: This paper develops an account of the role and significance of managerial power and rent extraction in executive compensation. Under the optimal contracting approach to executive compensation, which has dominated academic re-search on the subject, pay arrangements are set by a board of directors that aims to maximize shareholder value. In contrast, the managerial power approach suggests that boards do not operate at arm's length in devising executive compensation arrangements; rather, executives have power to influence their own pay, and they use that power to extract rents. Furthermore, the desire to camouflage rent extraction might lead to the use of inefficient pay arrangements that provide suboptimal incentives and thereby hurt shareholder value. The authors show that the processes that produce compensation arrangements, and the various market forces and constraints that act on these processes, leave managers with considerable power to shape their own pay arrangements. Examining the large body of empirical work on executive compensation, the authors show that managerial power and the desire to camouflage rents can explain significant features of the executive compensation landscape, including ones that have long been viewed as puzzling or problematic from the optimal contracting perspective. The authors conclude that the role managerial power plays in the design of executive compensation is significant and should be taken into account in any examination of executive pay arrangements or of corporate governance generally.
Handle: RePEc:nbr:nberwo:9068
Template-Type: ReDIF-Paper 1.0
Title: Some Evidence on the Importance of Sticky Prices
Classification-JEL: E31; E32
Author-Name: Mark Bils
Author-Person: pbi148
Author-Name: Peter J. Klenow
Note: EFG
Number: 9069
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9069
File-URL: http://www.nber.org/papers/w9069.pdf
File-Format: application/pdf
Publication-Status: published as Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
Abstract: We examine the frequency of price changes for 350 categories of goods and services covering about 70% of consumer spending, based on unpublished data from the BLS for 1995 to 1997. Compared with previous studies we find much more frequent price changes, with half of prices lasting less than 4.3 months. The frequency of price changes differs dramatically across categories. We exploit this variation to ask how inflation for 'flexible-price goods' (goods with frequent changes in individual prices) differs from inflation for 'sticky-price goods' (those displaying infrequent price changes). Compared to the predictions of popular sticky price models, actual inflation rates are far more volatile and transient, particularly for sticky-price goods. The data appendix for this paper can be found at http://www.nber.org/data-appendix/w9069/
Handle: RePEc:nbr:nberwo:9069
Template-Type: ReDIF-Paper 1.0
Title: Institutional Allocation In Initial Public Offerings: Empirical Evidence
Classification-JEL: G2; G3
Author-Name: Reena Aggarwal
Author-Name: Nagpurnanand R. Prabhala
Author-Name: Manju Puri
Author-Person: ppu153
Note: AP
Number: 9070
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9070
File-URL: http://www.nber.org/papers/w9070.pdf
File-Format: application/pdf
Publication-Status: published as Aggarwal, R., N.R. Prabhala, and Manju Puri. “Institutional allocation in initial public offerings: Empirical evidence." Journal of Finance 57, 3 (2002): 1421-1442.
Abstract: We analyze institutional allocation in initial public offerings (IPOs) using a new dataset of US offerings between 1997 and 1998. We document a positive relationship between institutional allocation and day one IPO returns. This is partly explained by the practice of giving institutions more shares in IPOs with strong pre-market demand, consistent with book-building theories. However, institutional allocation also contains private information about first-day IPO returns not reflected in pre-market demand and other public information. Our evidence supports book-building theories of IPO underpricing, but suggests that institutional allocation in underpriced issues is in excess of that explained by book-building alone.
Handle: RePEc:nbr:nberwo:9070
Template-Type: ReDIF-Paper 1.0
Title: The Long Run Importance of School Quality
Classification-JEL: I2; H4
Author-Name: Eric A. Hanushek
Author-Person: pha97
Note: CH LS PE ED
Number: 9071
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9071
File-URL: http://www.nber.org/papers/w9071.pdf
File-Format: application/pdf
Abstract: The role of schooling and school quality in the economy has become very confused, in part because of attempts to argue different positions on educational policy. Research demonstrates that school quality has a strong impact on individual earnings, on the distribution of income, and on overall economic growth. In contrast to these long run factors, today's school quality has little to do with current business cycles or unemployment rates. This paper emphasizes the importance of school quality -- measured by math and science test scores -- on economic growth. While U.S. growth has been strong over the 20th century, it has not been the result of high quality schooling relative to that in other countries. Instead other factors such as open labor markets and high quality colleges and universities appear to have masked the mediocre performance by U.S. students.
Handle: RePEc:nbr:nberwo:9071
Template-Type: ReDIF-Paper 1.0
Title: Optimal Currency Areas
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Robert J. Barro
Author-Person: pba251
Author-Name: Silvana Tenreyro
Author-Person: pte171
Note: EFG IFM ME
Number: 9072
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9072
File-URL: http://www.nber.org/papers/w9072.pdf
File-Format: application/pdf
Publication-Status: published as Optimal Currency Areas, Alberto Alesina, Robert J. Barro, Silvana Tenreyro. in NBER Macroeconomics Annual 2002, Volume 17, Gertler and Rogoff. 2003
Abstract: As the number of independent countries increases and their economies become more integrated, we would expect to observe more multi-country currency unions. This paper explores the pros and cons for different countries to adopt as an anchor the dollar, the euro, or the yen. Although there appear to be reasonably well-defined euro and dollar areas, there does not seem to be a yen area. We also address the question of how trade and co-movements of outputs and prices would respond to the formation of a currency union. This response is important because the decision of a country to join a union would depend on how the union affects trade and co-movements.
Handle: RePEc:nbr:nberwo:9072
Template-Type: ReDIF-Paper 1.0
Title: Price Uncertainty, Tax Policy, and Addiction: Evidence and Implications
Classification-JEL: C8; D8
Author-Name: Mark Coppejans
Author-Name: Holger Sieg
Note: EH PE
Number: 9073
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9073
File-URL: http://www.nber.org/papers/w9073.pdf
File-Format: application/pdf
Abstract: Consumption of addictive goods is subject to habit formation. Forward-looking individuals must, therefore, be concerned about future prices when making current consumption decisions. We study prices for tobacco products based on a unique data set provided by the Bureau of Labor Statistics. Our empirical findings suggest that prices have been highly volatile during the past decade. Price uncertainty has a potentially large impact on the economic well-being of young individuals with relatively low levels of disposable income. We develop a model to study consumption of addictive substances under price uncertainty. Our results indicate that optimal decision rules of low income individuals can crucially depend on subjective beliefs about future prices and the length of the planning horizon. These results imply that tax policies are most effective in reducing teenage cigarette consumption if they credibly alter individuals' beliefs about future prices.
Handle: RePEc:nbr:nberwo:9073
Template-Type: ReDIF-Paper 1.0
Title: Education, Poverty, Political Violence and Terrorism: Is There a Causal Connection?
Classification-JEL: J2
Author-Name: Alan B. Krueger
Author-Person: pkr63
Author-Name: Jitka Maleckova
Note: LS PE ED
Number: 9074
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9074
File-URL: http://www.nber.org/papers/w9074.pdf
File-Format: application/pdf
Publication-Status: published as Krueger, Alan B. and Jitka Maleckova. "Education, Poverty And Terrorism: Is There A Causal Connection?," Journal of Economic Perspectives, 2003, v17(4,Fall), 119-144.
Abstract: The paper investigates whether there is a causal link between poverty or low education and participation in politically motivated violence and terrorist activities. After presenting a discussion of theoretical issues, we review evidence on the determinants of hate crimes. This literature finds that the occurrence of hate crimes is largely independent of economic conditions. Next we analyze data on support for attacks against Israeli targets from public opinion polls conducted in the West Bank and Gaza Strip. These polls indicate that support for violent attacks does not decrease among those with higher education and higher living standards. The core contribution of the paper is a statistical analysis of the determinants of participation in Hezbollah militant activities in Lebanon. The evidence we have assembled suggests that having a living standard above the poverty line or a secondary school or higher education is positively associated with participation in Hezbollah. We also find that Israeli Jewish settlers who attacked Palestinians in the West Bank in the early 1980s were overwhelmingly from high-paying occupations. The conclusion speculates on why economic conditions and education are largely unrelated to participation in, and support for, terrorism.
Handle: RePEc:nbr:nberwo:9074
Template-Type: ReDIF-Paper 1.0
Title: Foreign Currency for Long-Term Investors
Classification-JEL: G12
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Luis M. Viceira
Author-Person: pvi31
Author-Name: Joshua S. White
Note: AP IFM ME
Number: 9075
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9075
File-URL: http://www.nber.org/papers/w9075.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, John Y., Luis M. Viceira and Joshua S. White. "Foreign Currency For Long-Term Investors," Economic Journal, 2003, v113(486,Mar), C1-C25.
Abstract: Conventional wisdom holds that conservative investors should avoid exposure to foreign currency risk. Even if they hold foreign equities, they should hedge the currency exposure of these positions and should hold only domestic Treasury bills. This paper argues that the conventional wisdom may be wrong for long-term investors. Domestic bills are risky for long-term investors, because real interest rates vary over time and bills must be rolled over at uncertain future interest rates. This risk can be hedged by holding foreign currency if the domestic currency tends to depreciate when the domestic real interest rate falls, as implied by the theory of uncovered interest parity. Empirically this effect is important and can lead conservative long-term investors to hold more than half their wealth in foreign currency.
Handle: RePEc:nbr:nberwo:9075
Template-Type: ReDIF-Paper 1.0
Title: The Home Market Effect and Bilateral Trade Patterns
Classification-JEL: F0; F1
Author-Name: Gordon H. Hanson
Author-Person: pha80
Author-Name: Chong Xiang
Author-Person: pxi42
Note: ITI
Number: 9076
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9076
File-URL: http://www.nber.org/papers/w9076.pdf
File-Format: application/pdf
Publication-Status: published as Gordon H. Hanson & Chong Xiang, 2004. "The Home-Market Effect and Bilateral Trade Patterns," American Economic Review, American Economic Association, vol. 94(4), pages 1108-1129, September.
Abstract: We test for home-market effects using a difference-in-difference gravity specification. The home-market effect is the tendency for large countries to be net exporters of goods with high transport costs and strong scale economies. It is predicted by models of trade based on increasing returns to scale but not by models of trade based on comparative advantage. In our estimation approach, we select pairs of exporting countries that belong to a common preferential trade area and examine their exports of goods with high transport costs and strong scale economies relative to their exports of goods with low transport costs and weak scale economies. We find that home-market effects exist and that the nature of these effects depends on industry transport costs. For industries with very high transport costs, it is national market size that determines national exports. For industries with moderately high transport costs, it is neighborhood market size that matters. In this case, national market size plus market size in nearby countries determine national exports.
Handle: RePEc:nbr:nberwo:9076
Template-Type: ReDIF-Paper 1.0
Title: Competitive Equilibria With Limited Enforcement
Classification-JEL: D5; E21
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Author-Name: Fabrizio Perri
Author-Person: ppe52
Note: EFG
Number: 9077
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9077
File-URL: http://www.nber.org/papers/w9077.pdf
File-Format: application/pdf
Publication-Status: published as Kehoe, Patrick J. and Fabrizio Perri. "Competitive Equilibria With Limited Enforcement," Journal of Economic Theory, 2004, v119(1,Nov), 184-206.
Abstract: This study demonstrates how constrained efficient allocations can arise endogenously as equilibria in an economy with a limited ability to enforce contracts and with private agents behaving competitively, taking a set of taxes as given. The taxes in this economy limit risk-sharing and arise in an equilibrium of a dynamic game between governments of sovereign nations. The equilibrium allocations depend on governments choosing to tax both the repayment of international debt and the income from capital investment in their countries.
Handle: RePEc:nbr:nberwo:9077
Template-Type: ReDIF-Paper 1.0
Title: The Case Against Board Veto in Corporate Takeovers
Classification-JEL: G30; G34
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Note: CF LE
Number: 9078
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9078
File-URL: http://www.nber.org/papers/w9078.pdf
File-Format: application/pdf
Publication-Status: published as Bebchuk, Lucian Arye. 58. “The Case Against Board Veto in Corporate Takeovers." University of Chicago Law Review 69 (2002): 973-1035.
Abstract: This paper argues that once undistorted shareholder choice is ensured -- which can be done by making it necessary for hostile bidders to win a vote of shareholder support -- boards should not have veto power over takeover bids. The paper considers all of the arguments that have been offered for board veto -- including ones based on analogies to other corporate decisions, directors' superior information, bargaining by management, pressures on managers to focus on the short-run, inferences from IPO charters, interests of long-term shareholders, aggregate shareholder wealth, and protection of stakeholders. Examining these arguments both at the level of theory and in light of all available empirical evidence, the paper concludes that none of them individually, nor all of them taken together, warrants a board veto. Finally, the paper discusses the implications that the analysis has for judicial review of defensive tactics.
Handle: RePEc:nbr:nberwo:9078
Template-Type: ReDIF-Paper 1.0
Title: Decomposing the Persistence of International Equity Flows
Classification-JEL: G15; F21
Author-Name: Kenneth A. Froot
Author-Person: pfr60
Author-Name: Jessica D. Tjornhom
Note: AP IFM
Number: 9079
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9079
File-URL: http://www.nber.org/papers/w9079.pdf
File-Format: application/pdf
Publication-Status: published as Froot, Kenneth A. and J. Tjornhom Donohue. “Decomposing the Persistence of International Equity Flows." Finance Research Letters 1, 3 (September 2004): 154-170.
Abstract: The portfolio flows of institutional investors are widely known to be persistent. What is less well known, however, is the source of this persistence. One possibility is the ?informed trading hypothesis?: that persistence arises from autocorrelated trades of investors who believe they have information about value and who face an imperfectly liquid market. Another possibility is that there are asynchroneities with respect to investment decisions across funds, across investments, or both. These asynchroneities could be due to wealth effects (across investments for a single fund), investor herding (across funds for a single investment), or generalized contagion (across funds and across investments). We use daily data on institutional flows into 21 developed countries by 471 funds to measure and decompose aggregate flow persistence. We find that the informed trading hypothesis explains about 75% of total persistence, and that the remaining amount is attributable entirely to cross-fund own-country persistence. In other words, we find statistically and economically significant flow asynchroneities across funds investing in the same country. There are no meaningful asynchroneities across countries, either within a given fund, or across funds. The cross-fund flow lags we identify might result from different fund investment processes, or from some funds mimicking others? decisions. We reject the hypothesis that wealth effects explain persistence.
Handle: RePEc:nbr:nberwo:9079
Template-Type: ReDIF-Paper 1.0
Title: Currency Returns, Institutional Investor Flows, and Exchange Rate Fundamentals
Classification-JEL: G11; G15
Author-Name: Kenneth A. Froot
Author-Person: pfr60
Author-Name: Tarun Ramadorai
Author-Person: pra44
Note: AP IFM
Number: 9080
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9080
File-URL: http://www.nber.org/papers/w9080.pdf
File-Format: application/pdf
Publication-Status: published as Froot, Kenneth and T. Ramadorai. “Currency Returns, Intrinsic Value, and Institutional Investor Flows." Journal of Finance 60, 3 (June 2005): 1535-1566.
Abstract: We explore the interaction between exchange rates, institutional investor currency flows and exchange-rate fundamentals. We find that these flows are highly correlated with contemporaneous and lagged exchange rate changes, and that they carry information for future excess currency returns. This information, however, is not strongly linked to future fundamentals. Flows are important in understanding transitory elements of excess returns, which include short-run underreaction and long-run overreaction. However, flows have a zero or negative correlation with permanent components of excess returns. We find that measured fundamentals - not flows - seem important in understanding permanent elements of excess returns. We conclude that investor flows are important for understanding deviations of exchange rates from fundamentals, but not for understanding the long-run currency values.
Handle: RePEc:nbr:nberwo:9080
Template-Type: ReDIF-Paper 1.0
Title: Work and Play: International Evidence of Gender Equality in Employment and Sports
Classification-JEL: J16; L83
Author-Name: Michael W. Klein
Author-Person: pkl9
Note: LS PE
Number: 9081
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9081
File-URL: http://www.nber.org/papers/w9081.pdf
File-Format: application/pdf
Publication-Status: published as Klein, Michael W. “Work and Play: International Evidence of Gender Equality in Employment and Sports." Journal of Sports Economics 5, 3 (August 2004): 227-242.
Abstract: This paper addresses the question of whether societies that afford economic opportunity to women offer other opportunities as well. The analysis in this paper shows that the performance of a country's women in international athletic competition reflects the degree of their relative participation in that country's labor market. There is a significant positive relationship across countries between a high ratio of the labor force participation rate of women to the labor force participation rate of men and the number and type of medals won by a country's women in the 2000 Sydney Summer Olympics. Teams representing countries with high relative labor force participation rates also were both more likely to qualify for the 1999 Women's Soccer World Cup and to do well in that competition. This effect of relative labor force participation rates on athletic success is found while controlling for a nation's income per capita, population, men's performance in related sporting events, rate of participation of women in government, and fertility rate. These results suggest that the participation of women in a country's labor force is an important reflection of their opportunities in other areas as well.
Handle: RePEc:nbr:nberwo:9081
Template-Type: ReDIF-Paper 1.0
Title: Stock Markets, Banks, and Growth: Panel Evidence
Classification-JEL: G00; O16
Author-Name: Thorsten Beck
Author-Person: pbe266
Author-Name: Ross Levine
Author-Person: ple61
Note: IFM
Number: 9082
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9082
File-URL: http://www.nber.org/papers/w9082.pdf
File-Format: application/pdf
Publication-Status: published as Beck, Thorsten & Levine, Ross, 2004. "Stock markets, banks, and growth: Panel evidence," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 423-442, March.
Abstract: This paper investigates the impact of stock markets and banks on economic growth using a panel data set for the period 1976-98 and applying recent GMM techniques developed for dynamic panels. On balance, we find that stock markets and banks positively influence economic growth and these findings are not due to potential biases induced by simultaneity, omitted variables or unobserved country-specific effects.
Handle: RePEc:nbr:nberwo:9082
Template-Type: ReDIF-Paper 1.0
Title: Learning-By-Doing Vs. On-the-Job Training: Using Variation Induced by the EITC to Distinguish Between Models of Skill Formation
Classification-JEL: H24; J24
Author-Name: James Heckman
Author-Name: Lance Lochner
Author-Person: plo31
Author-Name: Ricardo Cossa
Note: LS PE
Number: 9083
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9083
File-URL: http://www.nber.org/papers/w9083.pdf
File-Format: application/pdf
Publication-Status: published as Phelps. E. (ed.) Designing Inclusion: Tools to Raise Low-end Pay and Employment in Private Enterprise. Cambridge: Cambridge University Press, 2003.
Abstract: This paper investigates the impact of wage subsidies on skill formulation. We analyze two prototypical models of skill formation: (a) a learning-by-doing model and (b) an on-the-job training model. We develop conditions on the pricing of jobs under which the two models are equivalent. In general they are different and have different implications of wage subsidies on skill formation. On-the-job training models predict that wage subsidies reduce skill formation. Learning-by-doing models predict the opposite. The provisional evidence favors the learning-by-doing model. We apply our estimates to investigate the impact of the EITC on skill formation. We estimate that the EITC reduced the long term wages of participants with low levels of education.
Handle: RePEc:nbr:nberwo:9083
Template-Type: ReDIF-Paper 1.0
Title: The Price Level, the Quantity Theory of Money, and the Fiscal Theory of the Price Level
Classification-JEL: E31; E41
Author-Name: David B. Gordon
Author-Person: pgo64
Author-Name: Eric M. Leeper
Author-Person: ple3
Note: EFG
Number: 9084
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9084
File-URL: http://www.nber.org/papers/w9084.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, David B. and Eric M. Leeper. "The Price Level, The Quantity Theory Of Money, And The Fiscal Theory Of The Price Level," Scottish Journal of Political Economy, 2006, v53(1,Feb), 4-27.
Abstract: We consider price level determination from the perspective of portfolio choice. Arbitrages among money balances, bonds, and investment goods determine their relative demands. Returns to real balance holdings (transactions services), the nominal interest rate, and after-tax returns to investment goods determine the relative values of nominal and real assets. Since expectations of government policies ultimately determine the expected returns to both nominal and real assets, monetary and fiscal policies jointly determine the price level. Special cases of the fiscal and monetary policies considered produce the quantity theory of money and the fiscal theory of the price level.
Handle: RePEc:nbr:nberwo:9084
Template-Type: ReDIF-Paper 1.0
Title: Measuring Prices and Price Competition Online: Amazon and Barnes and Noble
Classification-JEL: L8
Author-Name: Austan Goolsbee
Author-Person: pgo49
Author-Name: Judith Chevalier
Author-Person: pch151
Note: IO
Number: 9085
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9085
File-URL: http://www.nber.org/papers/w9085.pdf
File-Format: application/pdf
Publication-Status: published as Goolsbee, Austan and Judith Chevalier. “Measuring prices and price competition online: Amazon vs. Barnes and Noble." Quantitative Marketing and Economics I, 2 (June 2003).
Abstract: Despite the interest in measuring price sensitivity of online consumers, most academic work on Internet commerce is hindered by a lack of data on quantity. In this paper we use publicly available data on the sales ranks of about 20,000 books to derive quantity proxies at the two leading online booksellers. Matching this information to prices, we can directly estimate the elasticities of demand facing both merchants as well as create a consumer price index for online books. The results show significant price sensitivity at both merchants but demand at Barnes and Noble is much more price-elastic than is demand at Amazon. The data also allow us to estimate the magnitude of retail outlet substitution bias in the CPI due to the rise of Internet sales. The estimates suggest that prices online are much more variable than the CPI, which understates inflation by more than double in one period and gets the sign wrong in another.
Handle: RePEc:nbr:nberwo:9085
Template-Type: ReDIF-Paper 1.0
Title: Trade with Labor Market Distortions and Heterogeneous Labor: Why Trade Can Hurt
Classification-JEL: F16; O17
Author-Name: Kala Krishna
Author-Person: pkr26
Author-Name: Abhiroop Mukhopadhyay
Author-Person: pmu75
Author-Name: Cemile Yavas
Note: ITI
Number: 9086
Creation-Date: 2002-07
Order-URL: http://www.nber.org/papers/w9086
File-URL: http://www.nber.org/papers/w9086.pdf
File-Format: application/pdf
Publication-Status: published as Krishna, Kala & Yavas, Cemile, 2005. "When trade hurts: Consumption indivisibilities and labor market distortions," Journal of International Economics, Elsevier, vol. 67(2), pages 413-427, December.
Abstract: This paper explains the differential impacts of trade on countries in terms of institutional differences which result in factor market distortions. We modify the Ricardian, Specific Factor and Hecksher Ohlin models of trade to capture these. Trade has both terms of trade effects and output effects. Both work to raise welfare in an undistorted economy. In a distorted economy, price effects work to improve welfare, while output effects work to reduce it. Large distorted countries are more likely to lose from trade as beneficial price effects are lower. In addition the greater the substitutability between goods, the more likely it is that welfare rises through trade.
Handle: RePEc:nbr:nberwo:9086
Template-Type: ReDIF-Paper 1.0
Title: Defining Benchmark Status: An Application using Euro-Area Bonds
Classification-JEL: F36; G12
Author-Name: Peter G. Dunne
Author-Person: pdu13
Author-Name: Michael J. Moore
Author-Person: pmo284
Author-Name: Richard Portes
Author-Person: ppo132
Note: AP IFM
Number: 9087
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9087
File-URL: http://www.nber.org/papers/w9087.pdf
File-Format: application/pdf
Abstract: The introduction of the euro on 1 January 1999 created the conditions for an integrated government bond market in the euro area. Using a unique data set from the electronic trading platform Euro-MTS, we consider what is the benchmark' in this market. We develop and apply two definitions of benchmark status that differ from the conventional view that the benchmark is the security with lowest yield at a given maturity. Using Granger-causality and cointegration methods, we find a complex pattern of benchmark status in euro-area government bonds.
Handle: RePEc:nbr:nberwo:9087
Template-Type: ReDIF-Paper 1.0
Title: Why Do School District Budget Referenda Fail?
Classification-JEL: I2; H4
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Author-Name: Randy A. Ehrenberg
Author-Name: Christopher L. Smith
Author-Person: psm208
Author-Name: Liang Zhang
Note: PE ED
Number: 9088
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9088
File-URL: http://www.nber.org/papers/w9088.pdf
File-Format: application/pdf
Publication-Status: published as Ehrenberg, Ronald G., RAndy A. Ehrenberg, Christopher L. Smith, and Liang Zhang. "Why Do School District Budget Referenda Fail?" Educational Evaluation and Policy Analysis 26, 2 (2004): 111-125.
Abstract: Our paper analyzes historical data for New York State on the percentagee of school budget proposals that are defeated each year and panel data that we have collected on budget vote success for indvidual school districts in the state. We find that changes in state aid matter, but not as much as one might expect. Defeating a budget proposal in one year neither increases nor decreases the likelihood that voters will defeat a proposal the next year. Districts whose school board members have longer terms have lower probabilities of having their budget proposals defeated. Finally, measures of school district educational and financial performance do not appear to influence budget vote outcomes.
Handle: RePEc:nbr:nberwo:9088
Template-Type: ReDIF-Paper 1.0
Title: Law, Endowment, and Finance
Classification-JEL: G2; K2
Author-Name: Thorsten Beck
Author-Person: pbe266
Author-Name: Asli Demirguc-Kunt
Author-Person: pde226
Author-Name: Ross Levine
Author-Person: ple61
Note: IFM LE PE
Number: 9089
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9089
File-URL: http://www.nber.org/papers/w9089.pdf
File-Format: application/pdf
Publication-Status: published as Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Law, endowments, and finance," Journal of Financial Economics, Elsevier, vol. 70(2), pages 137-181, November.
Abstract: This paper assesses two theories regarding the historical determinants of international differences in financial development. The law and finance theory holds that legal traditions differ in terms of the priority they attach to protecting the rights of private investors vis-a-vis the State and this has important implications for financial development. The endowment theory argues that the disease and geographical environment influence the formation of long-lasting institutions that influence financial development. Using a sample of former colonies, we explore whether the legal system brought by colonizers and/or the initial disease/geographical endowments encountered by colonizers explain financial development today. The empirical results indicate that both the legal systems brought by colonizers and the initial endowments in the colonies are important determinants of stock market development and private property rights protection. However, initial endowments are more robustly associated with financial intermediary development than legal origin and initial endowments explain more of the cross-country variation in financial intermediary and stock market development than legal origin.
Handle: RePEc:nbr:nberwo:9089
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Internet Subsidies in Public Schools
Classification-JEL: I2; H2
Author-Name: Austan Goolsbee
Author-Person: pgo49
Author-Name: Jonathan Guryan
Author-Person: pgu126
Note: PE ED
Number: 9090
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9090
File-URL: http://www.nber.org/papers/w9090.pdf
File-Format: application/pdf
Publication-Status: published as Goolsbee, Austan and Jonathan Guryan. "The Impact Of Internet Subsidies In Public Schools," Review of Economics and Statistics, 2006, v88(2,May), 336-347.
Abstract: In an effort to alleviate the perceived growth of a digital divide, the U.S. government enacted a major subsidy for Internet and communications investment in schools starting in 1998. The program subsidized spending by 20-90 percent, depending on school characteristics. Using new data on school technology usage in every school in California from 1996 to 2000 as well as application data from the E-Rate program, this paper shows that the subsidy did succeed in significantly increasing Internet investment. The implied first-dollar price elasticity of demand for Internet investment is between -0.9 and -2.2 and the greatest sensitivity shows up among urban schools and schools with large black and Hispanic student populations. Rural and predominantly white and Asian schools show much less sensitivity. Overall, by the final year of the sample, there were about 66 percent more Internet classrooms than there would have been without the subsidy. Using a variety of test score results, however, it is clear that the success of the E-Rate program, at least so far, has been restricted to the increase in access. The increase in Internet connections has had no measurable impact on any measure of student achievement.
Handle: RePEc:nbr:nberwo:9090
Template-Type: ReDIF-Paper 1.0
Title: Does Contracting Out Increase the Efficiency of Government Programs? Evidence from Medicaid HMOs
Classification-JEL: H51; H57
Author-Name: Mark Duggan
Author-Person: pdu194
Note: EH PE
Number: 9091
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9091
File-URL: http://www.nber.org/papers/w9091.pdf
File-Format: application/pdf
Publication-Status: published as Duggan, Mark. "Does Contracting Out Increase The Efficiency Of Government Programs? Evidence From Medicaid HMOs," Journal of Public Economics, 2004, v88(12,Dec), 2549-2572.
Abstract: State governments contract with health maintenance organizations (HMOs) to coordinate medical care for nearly 20 million Medicaid recipients. Identifying the causal effect of HMO enrollment on government spending and health care quality is difficult if, as is often the case, recipients have the option to enroll in a plan. To estimate the average effect of HMO enrollment, this paper exploits county-level mandates introduced during the last several years in the state of California that required most Medicaid recipients to enroll in a managed care plan. The empirical results demonstrate that the resulting switch from fee-for-service to managed care was associated with a substantial increase in government spending but no observable improvement in health outcomes, thus apparently reducing the efficiency of this large government program. The findings cast doubt on the hypothesis that HMO contracting has reduced the strain on government budgets.
Handle: RePEc:nbr:nberwo:9091
Template-Type: ReDIF-Paper 1.0
Title: Annuities for an Ageing World
Classification-JEL: G2; H4
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: David McCarthy
Note: AG
Number: 9092
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9092
File-URL: http://www.nber.org/papers/w9092.pdf
File-Format: application/pdf
Publication-Status: published as Fornero. E. & E. Luciano (eds.) Developing an Annuities Market in Europe. Elgar, 2004.
Abstract: Substantial research attention has been devoted to the pension accumulation process, whereby employees and those advising them work to accumulate funds for retirement. Until recently, less analysis has been devoted to the pension decumulation process -- the process by which retirees finance their consumption during retirement. This gap has recently begun to be filled by an active group of researchers examining key aspects of the pension payout market. One of the areas of most interesting investigation has been in the area of annuities, which are financial products intended to cover the risk of retirees outliving their assets. This paper reviews and extends recent research examining the role of annuities in helping finance retirement consumption. We also examine key market and regulatory factors.
Handle: RePEc:nbr:nberwo:9092
Template-Type: ReDIF-Paper 1.0
Title: Is There an Effect of Incremental Welfare Benefits on Fertility Behavior? A Look at the Family Cap
Classification-JEL: H53; I18
Author-Name: Melissa Schettini Kearney
Note: CH PE
Number: 9093
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9093
File-URL: http://www.nber.org/papers/w9093.pdf
File-Format: application/pdf
Publication-Status: published as Kearney, Melissa S. “Is There an Effect of Incremental Welfare Benefits on Fertility Behavior? A Look at the Family Cap." Journal of Human Resources 39, 2 (2004): 295-325.
Abstract: A number of states have recently instituted family cap policies, under which women who conceive a child while receiving cash assistance are not entitled to additional cash benefits upon the birth of the child. This paper takes advantage of the variation across states in the timing of the policy's implementation to determine if family cap policies are discouraging women from having additional births. Vital statistics birth data for the years 1989 to 1998 offer no evidence that family cap policies lead to a reduction in births to women ages 15 to 34. The data reject a decline in births of more than one percent. The finding is robust to multiple specification checks. The data also reject large declines in higher-order births among demographic groups with relatively high welfare participation rates. Curiously, the data suggest increases in higher-order births to unmarried black and white high-school dropouts and to unmarried black teens approximately one year after the implementation of a family cap. The data reject a decline in births of more than four percent for unmarried white high-school graduates and unmarried white teens.
Handle: RePEc:nbr:nberwo:9093
Template-Type: ReDIF-Paper 1.0
Title: Using Mandated Speed Limits to Measure the Value of a Statistical Life
Classification-JEL: J17; H43
Author-Name: Orley Ashenfelter
Author-Person: pas9
Author-Name: Michael Greenstone
Author-Person: pgr38
Note: EH LS PE
Number: 9094
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9094
File-URL: http://www.nber.org/papers/w9094.pdf
File-Format: application/pdf
Publication-Status: published as Ashenfelter, Orley and Micahel Greenstone. "Using Mandated Speed Limits To Measure The Value Of A Statistical Life," Journal of Political Economy, 2004, v112(2,Part2), S226-S267.
Abstract: In 1987 the federal government permitted states to raise the speed limit on their rural interstate roads, but not on their urban interstate roads, from 55 mph to 65 mph for the first time in over a decade. Since the states that adopted the higher speed limit must have valued the travel hours they saved more than the fatalities incurred, this experiment provides a way to estimate an upper bound on the public's willingness to trade off wealth for a change in the probability of death. We find that the 65 mph limit increased speeds by approximately 3.5% (i.e., 2 mph), and increased fatality rates by roughly 35%. In the 21 states that raised the speed limit and for whom we have complete data, the estimates suggest that about 125,000 hours were saved per lost life. Valuing the time saved at the average hourly wage implies that adopting states were willing to accept risks that resulted in a savings of $1.54 million (1997$) per fatality, with a sampling error that might be around one-third this value. Since this estimate is an upper bound of the value of a statistical life (VSL), we set out a simple structural model that is identified by variability across the states in the probability of the adoption of increased speed limits to recover the VSL. The impirical implementation of this model produces estimates of the VSL that are generally smaller that $1.54 million, but these estimates are very imprecise.
Handle: RePEc:nbr:nberwo:9094
Template-Type: ReDIF-Paper 1.0
Title: How Do Large Depreciations Affect Firm Performance?
Classification-JEL: F1; F2
Author-Name: Kristin J. Forbes
Author-Person: pfo1
Note: IFM
Number: 9095
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9095
File-URL: http://www.nber.org/papers/w9095.pdf
File-Format: application/pdf
Publication-Status: published as Kristin J Forbes, 2002. "How Do Large Depreciations Affect Firm Performance?," IMF Staff Papers, Palgrave Macmillan, vol. 49(Special i), pages 214-238.
Abstract: This paper examines how 12 'major depreciations' between 1997 and 2000 affected different measures of firm performance in a sample of over 13,500 companies from around the world. Results suggest that in the year after depreciations, firms have significantly higher growth in market capitalization, but significantly lower growth in net income (when measured in local currency). Firms with a higher share of foreign sales exposure have significantly better performance after depreciations, according to a range of indicators. Firms with higher debt ratios tend to have lower net income growth, but there is no robust relationship between debt exposure and the other performance variables. Larger firms frequently have worse performance than smaller firms, although the significance and robustness of this result fluctuates across specifications.
Handle: RePEc:nbr:nberwo:9095
Template-Type: ReDIF-Paper 1.0
Title: Does It Pay to Work?
Classification-JEL: H2
Author-Name: Jagadeesh Gokhale
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: Alexi Sluchynsky
Note: PE
Number: 9096
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9096
File-URL: http://www.nber.org/papers/w9096.pdf
File-Format: application/pdf
Abstract: Does it pay to work? Given the number and complexity of federal and state tax and transfer systems, this is a tough question to answer. The problem is greatly compounded by the fact that what one earns in one year alters not just current taxes and transfer payments in that year, but in future years as well. Thus, understanding the net effective tax on work and the changes in this taxation associated with policy reforms requires an intertemporal model capable of carefully determining tax and transfer payments at each stage of the life cycle. This study uses ESPlanner, a financial planning software program, to study the net work tax levied on workers with different earnings capacities. ESPlanner smooths households' living standards subject to their capacities to borrow. In so doing, it makes highly detiled, year-by-year federal and state income tax and Social Security benefit calculations. To produce a comprehensive net work tax measure, we added to ESPlanner all other major transfer programs. We focus on lifetime average and marginal net work-tax rates, which are measured by comparing the present values of lifetime spending from working through retirement both in the presence and in the absence of all tax-transfer programs. We form these tax rates for young stylized married workers. We report seven findings. First, our fiscal system is highly progressive. Households earning the minimum wage receive 18 cents in benefits net of taxes for every dollar they earn. In contrast, households with million dollar salaries pay 54 cents in taxes net of benefits pe r dollar earned. Second, progressively is primarily restriced to the bottom end of the income distribution. Average net work tax rates of middle class households are relatively high compared with those of the rich. Third, while the poor face negative average taxes, they face significant positive marginal net taxes on working. Indeed, a minimum wage household that chooses to work is forced to surrender 34 cents of every dollar earned in net taxes. Those with earnings that exceed 1.5 times the minimum wage face marginal net taxes on full-time work above 50 percent. Fourth, low-wage workers face confiscatory tax rates on switching from part-time to full-time work. Fifth, the same is true of secondary earnings spouses in low- wage households with low incomes. Six, the marginal net tax on working is particularly high for young households with low incomes. Seventh, average and marginal net work tax rates are relatively insensitive to the assumed rate of real wage growth and the discount rate. And eighth, major tax reforms, such as switching from income to consumption taxation, can have an significant affect on the fiscal system's overall progressivity.
Handle: RePEc:nbr:nberwo:9096
Template-Type: ReDIF-Paper 1.0
Title: An Assessment of the Proposals of the President's Commission to Strengthen Social Security
Author-Name: Peter A. Diamond
Author-Person: pdi24
Author-Name: Peter R. Orszag
Author-Person: por201
Note: PE
Number: 9097
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9097
File-URL: http://www.nber.org/papers/w9097.pdf
File-Format: application/pdf
Publication-Status: published as Diamond, Peter, and Peter Orszag. 2002. "An Assessment of the Proposals of the President's Commission to Strengthen Social Security," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 1(1), article 10, pages 1072-1072
Publication-Status: published as Diamond, Peter, and Peter Orszag. "An Assessment of the Proposals of the President's Commission to Strengthen Social Security." Brookings Institution paper, June 18, 2002
Abstract: The President's Commission to Strengthen Social Security proposed three reform plans. Two, analyzed here, restore actuarial balance in the absence of individual accounts. One achieves this balance solely through benefit reductions. The other uses new dedicated revenue to cover one-third of the actuarial deficit, reducing benefits to close the rest. Both plans cut disability and young survivor benefits in step with retirement benefits, while bolstering benefits for long-career low earners and surviving spouses with low benefits. The plans both include voluntary individual accounts that replace part of the scaled-back Social Security system. Payroll taxes are diverted to the accounts and one of the plans also requires a (subsidized) add-on contribution for those choosing accounts. Under both models, any payroll tax deposited in an individual account is also recorded in a 'liability account' for the worker. The liability account tracks the diverted payroll revenue (with interest) and is paid off by reducing traditional benefits. The individual accounts are subsidized through a sub-market interest rate on the liability accounts. This subsidy worsens the financial position of the Trust Fund. The accounts also create a cash-flow problem. Consequently, by themselves, the individual accounts make Social Security's solvency problems worse both in the short run and over the long run. To offset the adverse impact of the accounts, the plans call for large transfers of general revenues (despite substantial projected budget deficits). If all (two-thirds of) eligible workers opted for the accounts, the new revenues required over the next 75 years would amount to between 1.2 and 1.5 (0.8 and 1.1) percent of payroll. Holding the disabled harmless from the benefit reductions would raise the required transfers to between 1.5 and 1.7 (1.1 and 1.3) percent of payroll (compared to a projected actuarial deficit of 1.9 percent of payroll under current law). Despite requiring this much general revenue relative to paying scheduled benefits, the plans would produce significant reductions in expected combined benefits. At the end of 75 years, however, assets in the accounts would amount to between 53 and 66 (35 and 44) percent of GDP, and the value to Social Security of the accumulated liabilities that reduce later benefits would amount to more than 20 (15) percent of GDP.
Handle: RePEc:nbr:nberwo:9097
Template-Type: ReDIF-Paper 1.0
Title: Socioeconomic Status and Health: Why is the Relationship Stronger for Older Children?
Classification-JEL: I1
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Mark Stabile
Author-Person: pst179
Note: CH EH
Number: 9098
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9098
File-URL: http://www.nber.org/papers/w9098.pdf
File-Format: application/pdf
Publication-Status: published as Currie, Janet and Mark Stabile. "Socioeconomic Status And Child Health: Why Is The Relationship Stronger For Older Children?," American Economic Review, 2003, v93(5,Dec), 1813-1823.
Abstract: Case, Lubotsky, and Paxson (2001) show that the well-known relationship between socio- economic status (SES) and health exists in childhood and grows more pronounced with age. However, in cross-sectional data it is difficult to distinguish between two possible explanations. The first is that low-SES children are less able to respond to a given health shock. The second is that low SES children experience more shocks. We show, using panel data on Canadian children that: 1) the gradient we estimate in the cross section is very similar to that estimated previously using U.S. children; 2) both high and low-SES children recover from past health shocks to about the same degree; and 3) that the relationship between SES and health grows stronger over time mainly because low-SES children receive more negative health shocks. In addition, we examine the effect of health shocks on math and reading scores. We find that health shocks affect test scores and future health in very similar ways. Our results suggest that public policy aimed at reducing SES-related health differentials in children should focus on reducing the incidence of health shocks as well as on reducing disparities in access to palliative care.
Handle: RePEc:nbr:nberwo:9098
Template-Type: ReDIF-Paper 1.0
Title: An Intergenerational Model of Domestic Violence
Classification-JEL: D1
Author-Name: Robert A. Pollak
Author-Person: ppo36
Note: LS
Number: 9099
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9099
File-URL: http://www.nber.org/papers/w9099.pdf
File-Format: application/pdf
Publication-Status: published as Pollak, Robert A. "An Intergenerational Model Of Domestic Violence," Journal of Population Economics, 2004, v17(2,Jun), 311-329.
Abstract: This paper proposes and analyzes an intergenerational model of domestic violence (IMDV) in which behavioral strategies or scripts are transmitted from parents to children. The model rests upon three key assumptions: * The probability that a husband will be violent depends on whether he grew up in a violent home. * The probability that a wife will remain with a violent husband depends on whether she grew up in a violent home. * Individuals who grew up in violent homes tend to marry individuals who grew up in violent homes. The IMDV calls attention to three features neglected in the domestic violence literature. The first is the marriage market. If some men are more likely than others to be violent as husbands and some women are more likely than others to remain in violent marriages, then the probability that such individuals marry each other is crucial. The second neglected feature is divorce: ongoing domestic violence requires the conjunction of a husband who is violent and a wife who stays. Third, variables and policies that reduce the rate of domestic violence in the short run are likely to reduce it even further in the long run.
Handle: RePEc:nbr:nberwo:9099
Template-Type: ReDIF-Paper 1.0
Title: Capital Account Liberalization and Economic Performance: Survey and Synthesis
Classification-JEL: F32; F33
Author-Name: Hali J. Edison
Author-Person: ped1
Author-Name: Michael W. Klein
Author-Person: pkl9
Author-Name: Luca Ricci
Author-Person: pri55
Author-Name: Torsten Sloek
Note: EFG IFM
Number: 9100
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9100
File-URL: http://www.nber.org/papers/w9100.pdf
File-Format: application/pdf
Publication-Status: published as Hali J. Edison & Michael W. Klein & Luca Antonio Ricci & Torsten Sløk, 2004. "Capital Account Liberalization and Economic Performance: Survey and Synthesis," IMF Staff Papers, Palgrave Macmillan Journals, vol. 51(2), pages 2.
Abstract: This paper reviews the literature on the effects of capital account liberalization and stock market liberalization on economic growth. The various empirical measures used to gauge the presence of controls on capital account transactions as well as indicators of stock market liberalization are discussed. We compare detailed measures of capital account controls that attempt to capture the intensity of enforcement with others that simply capture whether or not controls are present. Our review of the literature shows the contrasting results that have been obtained. These differences may reflect differences in country coverage, sample periods and indicators of liberalization. In order to reconcile these differences, we present new estimates of the effects on growth of capital account liberalization and stock market liberalization. We find some support for a positive effect of capital account liberalization on growth, especially for developing countries.
Handle: RePEc:nbr:nberwo:9100
Template-Type: ReDIF-Paper 1.0
Title: Currency Returns, Institutional Investor Flows, and Exchange Rate Fundamentals
Classification-JEL: G11; G15
Author-Name: Kenneth A. Froot
Author-Person: pfr60
Author-Name: Tarun Ramadorai
Author-Person: pra44
Note: AP IFM
Number: 9101
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9101
File-URL: http://www.nber.org/papers/w9101.pdf
File-Format: application/pdf
Publication-Status: published as Froot, Kenneth and T. Ramadorai. “Currency Returns, Intrinsic Value, and Institutional Investor Flows." Journal of Finance 60, 3 (June 2005): 1535-1566.
Abstract: We explore the interaction between exchange rates, institutional investor currency flows and exchange-rate fundamentals. We find that these flows are highly correlated with contemporaneous and lagged exchange rate changes, and that they carry information for future excess currency returns. This information, however, is not strongly linked to future fundamentals. Flows are important in understanding transitory elements of excess returns, which include short-run underreaction and long-run overreaction. However, flows have a zero or negative correlation with permanent components of excess returns. We find that measured fundamentals - not flows - seem important in understanding permanent elements of excess returns. We conclude that investor flows are important for understanding deviations of exchange rates from fundamentals, but not for understanding the long-run currency values.
Handle: RePEc:nbr:nberwo:9101
Template-Type: ReDIF-Paper 1.0
Title: Bank Panics and the Endogeneity of Central Banking
Classification-JEL: G21; E58
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: Lixin Huang
Author-Person: phu108
Note: CF ME
Number: 9102
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9102
File-URL: http://www.nber.org/papers/w9102.pdf
File-Format: application/pdf
Publication-Status: published as Gorton, Gary & Huang, Lixin, 2006. "Bank panics and the endogeneity of central banking," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1613-1629, October.
Abstract: Central banking is intimately related to liquidity provision to banks during times of crisis, the lender-of-last-resort function. This activity arose endogenously in certain banking systems. Depositors lack full information about the value of bank assets so that during macroeconomic downturns they monitor their banks by withdrawing in a banking panic. The likelihood of panics depends on the industrial organization of the banking system. Banking systems with many small, undiversified banks, are prone to panics and failures, unlike systems with a few big banks that are heavily branched and well diversified. Systems of many small banks are more efficient if the banks form coalitions during times of crisis. We provide conditions under which the industrial organization of banking leads to incentive compatible state contingent bank coalition formation. Such coalitions issue money that is a kind of deposit insurance and examine and supervise banks. Bank coalitions of small banks, however, cannot replicate the efficiency of a system of big banks.
Handle: RePEc:nbr:nberwo:9102
Template-Type: ReDIF-Paper 1.0
Title: Dynamic Asset Allocation With Event Risk
Classification-JEL: G1
Author-Name: Jun Liu
Author-Name: Francis A. Longstaff
Author-Person: plo283
Author-Name: Jun Pan
Author-Person: ppa1004
Note: AP
Number: 9103
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9103
File-URL: http://www.nber.org/papers/w9103.pdf
File-Format: application/pdf
Publication-Status: published as Liu, Jun, Francis A. Longstaff and Jun Pan. "Dynamic Asset Allocations with Event Risk." The Journal of Finance 58, 1 (February 2003): 231-259.
Abstract: Major events often trigger abrupt changes in stock prices and volatility. We study the implications of jumps in prices and volatility on investment strategies. Using the event-risk framework of Duffie, Pan, and Singleton (2000), we provide analytical solutions to the optimal portfolio problem. Event risk dramatically affects the optimal strategy. An investor facing event risk is less willing to take leveraged or short positions. The investor acts as if some portion of his wealth may become illiquid and the optimal strategy blends both dynamic and buy-and-hold strategies. Jumps in prices and volatility both have important effects.
Handle: RePEc:nbr:nberwo:9103
Template-Type: ReDIF-Paper 1.0
Title: R&D, Implementation and Stagnation: A Schumpeterian Theory of Convergence Clubs
Classification-JEL: O1
Author-Name: Peter Howitt
Author-Person: pho22
Author-Name: David Mayer-Foulkes
Author-Person: pma494
Note: EFG
Number: 9104
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9104
File-URL: http://www.nber.org/papers/w9104.pdf
File-Format: application/pdf
Publication-Status: published as Howitt, Peter & Mayer-Foulkes, David, 2005. "R&D, Implementation, and Stagnation: A Schumpeterian Theory of Convergence Clubs," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(1), pages 147-77, February.
Abstract: We construct a Schumpeterian growth theory consistent with the divergence in per-capita income that has occurred between countries since the mid 19th Century, and with the convergence that occurred between the richest countries during the second half of the 20th Century. The theory assumes that technological change underwent a transformation late in the 19th Century, associated with modern R&D labs. Countries sort themselves into three groups. Those in the highest group converge to a steady state where they do leading edge R&D, while those in the intermediate group converge to a steady state where they implement technologies developed elsewhere. Countries in both of these groups grow at the same rate in the long run, as a result of technology transfer, but inequality between them increases during the transition. Countries in the lowest group grow at a slower rate, with relative incomes that fall asymptotically to zero. Once modern R&D has been introduced, a country may have only a finite window of opportunity in which to introduce the institutions that support it.
Handle: RePEc:nbr:nberwo:9104
Template-Type: ReDIF-Paper 1.0
Title: How Prevalent is Tax Arbitrage? Evidence from the Market for Municipal Bonds
Classification-JEL: H2
Author-Name: Merle Erickson
Author-Name: Austan Goolsbee
Author-Person: pgo49
Author-Name: Edward Maydew
Note: AP PE
Number: 9105
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9105
File-URL: http://www.nber.org/papers/w9105.pdf
File-Format: application/pdf
Publication-Status: published as Merle Erickson & Austan Goolsbee & Edward Maydew, 2003. "How Prevalent is Tax Arbitrage? Evidence from the Market for Municipal Bonds," National Tax Journal, vol 56(1, Part 2), pages 259-270.
Abstract: Although tax arbitrage is central to the literatures on tax capitalization, implicit taxes, and even capital structure, there is little empirical evidence of the extent to which firms actually engage in tax arbitrage. This paper provides some evidence on the topic by focusing on a simple and observable corporate arbitrage strategy in the market for municipal bonds. It poses a puzzle for the literature, however, in that we find little evidence of municipal bond tax arbitrage by non-financial corporations. The overwhelming majority of firms are not engaging in the arbitrage at all and even among those engaged in arbitrage, many firms do less than a safe-harbor amount allowed by the tax authorities. Such a pattern is consistent with the presence of both fixed and marginal (i.e., that depend on size of the position) costs of arbitrage, though we cannot observe what those costs are.
Handle: RePEc:nbr:nberwo:9105
Template-Type: ReDIF-Paper 1.0
Title: Tropics, Germs, and Crops: How Endowments Influence Economic Development
Classification-JEL: O1; N1
Author-Name: William Easterly
Author-Person: pea1
Author-Name: Ross Levine
Author-Person: ple61
Note: EFG IFM
Number: 9106
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9106
File-URL: http://www.nber.org/papers/w9106.pdf
File-Format: application/pdf
Publication-Status: published as Easterly, William & Levine, Ross, 2003. "Tropics, germs, and crops: how endowments influence economic development," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 3-39, January.
Abstract: Does economic development depend on geographic endowments like temperate instead of tropical location, the ecological conditions shaping diseases, or an environment good for grains or certain cash crops? Or do these endowments of tropics, germs, and crops affect economic development only through institutions or policies? We test the endowment, institution, and policy views against each other using cross country evidence. We find evidence that tropics, germs, and crops affect development through institutions. We find no evidence that tropics, germs, and crops affect country incomes directly other than through institutions, nor do we find any effect of policies on development once we control for institutions.
Handle: RePEc:nbr:nberwo:9106
Template-Type: ReDIF-Paper 1.0
Title: Firms' Decisions Where to Incorporate
Classification-JEL: G30; G38
Author-Name: Lucian Bebchuk
Author-Person: pbe72
Author-Name: Alma Cohen
Author-Person: pco678
Note: CF LE
Number: 9107
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9107
File-URL: http://www.nber.org/papers/w9107.pdf
File-Format: application/pdf
Publication-Status: published as Bebchuk, Lucian and Alma Cohen. “Firms’ Decisions Where to Incorporate." Journal of Law and Economics 46 (2003): 383-425.
Abstract: This paper empirically investigates the decisions of publicly traded firms where to incorporate. We study the features of states that make them attractive to incorporating firms and the characteristics of firms that determine whether they incorporate in or out of their state of location. We find that states that offer stronger antitakeover protections are substantially more successful both in retaining in-state firms and in attracting out-of-state incorporations. We estimate that, compared with adopting no antitakeover statutes, adopting all standard antitakeover statutes enabled the states that adopted them to more than double the percentage of local firms that incorporated in-state (from 23% to 49%). Indeed, the incorporation market has not even penalized the three states that passed two extreme antitakeover statutes that have been widely viewed as detrimental to shareholders. We also find that there is commonly a big difference between a state's ability to attract incorporations from firms located in and out of the state, and we investigate several possible explanations for this home-state advantage. Finally, we find that Delaware's dominance is greater than has been recognized and can be expected to increase further in the future. Our findings have significant implications for corporate governance, regulatory competition, and takeover law.
Handle: RePEc:nbr:nberwo:9107
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Social Return to Higher Education: Evidence From Longitudinal and Repeated Cross-Sectional Data
Classification-JEL: J3; I2
Author-Name: Enrico Moretti
Author-Person: pmo392
Note: CH ED
Number: 9108
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9108
File-URL: http://www.nber.org/papers/w9108.pdf
File-Format: application/pdf
Publication-Status: published as Moretti, Enrico, 2004. "Estimating the social return to higher education: evidence from longitudinal and repeated cross-sectional data," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 175-212.
Abstract: Economists have speculated for at least a century that the social return to education may exceed the private return. In this paper, I estimate spillovers from college education by comparing wages for otherwise similar individuals who work in cities with different shares of college graduates in the labor force. OLS estimates show a large positive relationship between the share of college graduates in a city and individual wages, over and above the private return to education. A key issue in this comparison is the presence of unobservable individual characteristics, such as ability, that may raise wages and be correlated with college share. I use a confidential version of the National Longitudinal Survey of Youth (NLSY) to estimate a model of non-random selection of workers among cities. By observing the same individual over time, I can control for differences in unobserved ability across individuals and differences in the return to skills across cities. I then investigate the hypothesis that the correlation between college share and wages is due to unobservable city-specific shocks that may raise wages and attract more highly educated workers to different cities. To control for this source of potential bias, I turn to Census data and use two instrumental variables: the lagged city demographic structure and the presence of a land--grant college. The results from Census data are remarkably consistent with those based on the NLSY sample. A percentage point increase in the supply of college graduates raises high school drop-outs' wages by 1.9%, high school graduates' wages by 1.6%, and college graduates wages by 0.4%. The effect is larger for less educated groups, as predicted by a conventional demand and supply model. But even for college graduates, an increase in the supply of college graduates increases wages, as predicted by a model that includes conventional demand and supply factors as well as spillovers.
Handle: RePEc:nbr:nberwo:9108
Template-Type: ReDIF-Paper 1.0
Title: Entrepreneurship
Classification-JEL: J4
Author-Name: Edward P. Lazear
Author-Person: pla64
Note: CF LS
Number: 9109
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9109
File-URL: http://www.nber.org/papers/w9109.pdf
File-Format: application/pdf
Publication-Status: published as Lazear, Edward P. "Balanced Skills And Entrepreneurship," American Economic Review, 2004, v94(2,May), 208-211. also: Edward P. Lazear. "Entrepreneurship," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 649-680, October 2005.
Abstract: The theory proposed below is that entrepreneurs are jacks-of-all-trades who may not excel in any one skill, but are competent in many. A coherent model of the choice to become an entrepreneur is presented. The primary implication is that individuals with balanced skills should be more likely than others to become entrepreneurs. The model provides implications for the proportion of entrepreneurs by occupation, by income and yields a number of predictions for the distribution of income by entrepreneurial status. Using a data set of Stanford alumni, the predictions are tested and found to hold. In particular, by far the most important determinant of entrepreneurship is having background in a large number of different roles. Further, income distribution predictions, e.g., that there are a disproportionate number of entrepreneurs in the upper tail of the distribution, are borne out.
Handle: RePEc:nbr:nberwo:9109
Template-Type: ReDIF-Paper 1.0
Title: Importing Equality? The Impact of Globalization on Gender Discrimination
Classification-JEL: J3; J7
Author-Name: Sandra E. Black
Author-Person: pbl92
Author-Name: Elizabeth Brainerd
Author-Person: pbr406
Note: ITI LS
Number: 9110
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9110
File-URL: http://www.nber.org/papers/w9110.pdf
File-Format: application/pdf
Publication-Status: published as Sandra E. Black & Elizabeth Brainerd, 2004. "Importing equality? The impact of globalization on gender discrimination," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 57(4), pages 540-559, July.
Abstract: While researchers have long held that discrimination cannot endure in an increasingly competitive environment, there has been little work testing this dynamic process. This paper tests the hypothesis (based on Becker 1957) that increased competition resulting from globalization in the 1980s forced employers to reduce costly discrimination against women. The empirical strategy exploits differences in market structure across industries to identify the impact of trade on the gender wage gap: because concentrated industries face little competitive pressure to reduce discrimination, an increase in competition from increased trade should lead to a reduction in the gender wage gap. We compare the change in the residual gender wage gap between 1976 and 1993 in concentrated versus competitive manufacturing industries, using the latter as a control for changes in the gender wage gap that are unrelated to competitive pressures. We find that increased competition through trade did contribute to the relative improvement in female wages in concentrated relative to competitive industries, suggesting that, at least in this sense, trade may benefit women by reducing firms' ability to discriminate.
Handle: RePEc:nbr:nberwo:9110
Template-Type: ReDIF-Paper 1.0
Title: Understanding Mutual Fund and Hedge Fund Styles Using Return Based Style Analysis
Classification-JEL: G10; G14
Author-Name: Arik Ben Dor
Author-Name: Ravi Jagannathan
Author-Person: pja91
Note: AP
Number: 9111
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9111
File-URL: http://www.nber.org/papers/w9111.pdf
File-Format: application/pdf
Publication-Status: published as Dor, Arik Ben, Ravi Jagannathan, and Iwan Meier. "Understanding Mutual Fund and Hedge Fund Styles Using Return-Based Style Analysis." Journal of Investment Management 1, 1 (1st Quarter 2003): 94-134.
Abstract: We provide an introduction to the use of return based style analysis of Sharpe (1992) in practice. We demonstrate the importance of selecting the right style benchmarks and how the use of inappropriate style benchmarks may lead to wrong conclusions. When style analysis is applied to sector oriented funds such as healthcare, precious metals, energy, technology, etc., the set of benchmarks should include sector or industry indexes. Following Glosten and Jagannathan (1994), Fung and Hsieh (2001), and Agarwal and Naik (2001), we show how to analyze the investment style of hedge fund managers by including the returns on selected option based strategies as style benchmarks. In the examples we consider, return based style analysis provides insights not available through commonly used 'peer' evaluation alone.
Handle: RePEc:nbr:nberwo:9111
Template-Type: ReDIF-Paper 1.0
Title: From Sectoral to Functional Urban Specialization
Classification-JEL: R30; L23
Author-Name: Gilles Duranton
Author-Person: pdu48
Author-Name: Diego Puga
Author-Person: ppu2
Note: ITI
Number: 9112
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9112
File-URL: http://www.nber.org/papers/w9112.pdf
File-Format: application/pdf
Publication-Status: published as Duranton, Gilles and Diego Puga. "From Sectoral To Functional Urban Specialisation," Journal of Urban Economics, 2005, v57(2,Mar), 343-370.
Abstract: Striking evidence is presented of a previously unremarked transformation of urban structure from mainly sectoral to mainly functional specialization. We offer an explanation showing that this transformation is inextricably interrelated with changes in firms' organization. A greater variety of business services for headquarters and of sector-specific intermediates for production plants within a city reduces costs, while congestion increases with city size. A fall in the costs of remote management leads to a transformation of the equilibrium urban and industrial structure. Cities shift from specializing by sector -- with integrated headquarters and plants -- to specializing mainly by function -- with headquarters and business services clustered in larger cities, and plants clustered in smaller cities.
Handle: RePEc:nbr:nberwo:9112
Template-Type: ReDIF-Paper 1.0
Title: Market Size Matters
Classification-JEL: L11; L16
Author-Name: Jeffrey R. Campbell
Author-Person: pca89
Author-Name: Hugo A. Hopenhayn
Author-Person: pho217
Note: IO
Number: 9113
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9113
File-URL: http://www.nber.org/papers/w9113.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, Jeffrey R. and Hugo A. Hopenhayn. "Market Size Matters," Journal of Industrial Economics, 2005, v53(1,Mar), 1-25.
Abstract: This paper characterizes the effects of market size on the size distribution of establishments for thirteen retail trade industries across 225 U.S. cities. In nearly every industry we examine, establishments are larger in larger cities, and in four industries the dispersion of establishment sizes depends on market size. Models of competition in which individual producers' markups do not depend on the number of producers are inconsistent with these observations. Models in which competition is tougher in larger markets can reproduce the positive effect of market size on establishments' average size.
Handle: RePEc:nbr:nberwo:9113
Template-Type: ReDIF-Paper 1.0
Title: The Political Economy of Intellectual Property Treaties
Classification-JEL: F1; L5
Author-Name: Suzanne Scotchmer
Author-Person: psc49
Note: ITI LE PR
Number: 9114
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9114
File-URL: http://www.nber.org/papers/w9114.pdf
File-Format: application/pdf
Publication-Status: published as Scotchmer, Suzanne. "The Political Economy of Intellectual Property Treaties." Journal of Law, Economics, and Organization, October 2004, 20(2): 415-37
Publication-Status: published as Proceedings, Conference on Technology, Productivity, and Public Policy, Federal Reserve Bank of San Francisco, November 7-8, 2003.
Publication-Status: published as Suzanne Scotchmer, 2003. "The political economy of intellectual property treaties," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
Abstract: Intellectual property treaties have two main types of provisions: national treatment of foreign inventors, and harmonization of protections. I address the positive question of when countries would want to treat foreign inventors the same as domestic inventors, and how their incentive to do so depends on reciprocity. I also investigate an equilibrium in which regional policy makers choose IP policies that serve regional interests, conditional on each other's policies. I compare these policies with a notion of what is optimal, and argue that harmonization will involve stronger IP protection than independent choices. Harmonization can either enhance or reduce global welfare. Levels of public and private R&D spending will be lower than if each country took account of the uncompensated externalities that its R&D spending confers on other countries. The more extensive protection engendered by attempts at harmonization are a partial remedy.
Handle: RePEc:nbr:nberwo:9114
Template-Type: ReDIF-Paper 1.0
Title: International Joint Ventures and the Boundaries of the Firm
Classification-JEL: F23; L23
Author-Name: Mihir A. Desai
Author-Name: C. Fritz Foley
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: CF IO ITI PE
Number: 9115
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9115
File-URL: http://www.nber.org/papers/w9115.pdf
File-Format: application/pdf
Publication-Status: published as Desai, Mihir A., C. Fritz Foley and James R. Hines, Jr. "The Costs Of Shared Ownership: Evidence From International Joint Ventures," Journal of Financial Economics, 2004, v73(2,Aug), 323-374.
Abstract: This paper analyzes the determinants of partial ownership of the foreign affiliates of U.S. multinational firms and, in particular, why partial ownership has declined markedly over the last 20 years. The evidence indicates that whole ownership is most common when firms coordinate integrated production activities across different locations, transfer technology, and benefit from worldwide tax planning. Since operations and ownership levels are jointly determined, it is necessary to use the liberalization of ownership restrictions by host countries and the imposition of joint venture tax penalties in the U.S. Tax Reform Act of 1986 as instruments for ownership levels in order to identify these effects. Firms responded to these regulatory and tax changes by expanding the volume of their intrafirm trade as well as the extent of whole ownership; four percent greater subsequent sole ownership of affiliates is associated with three percent higher intrafirm trade volumes. The implied complementarity of whole ownership and intrafirm trade suggests that reduced costs of coordinating global operations, together with regulatory and tax changes, gave rise to the sharply declining propensity of American firms to organize their foreign operations as joint ventures over the last two decades. The forces of globalization appear to have increased the desire of multinationals to structure many transactions inside firms rather than through exchanges involving other parties.
Handle: RePEc:nbr:nberwo:9115
Template-Type: ReDIF-Paper 1.0
Title: Sharpening Sharpe Ratios
Classification-JEL: G0; G1
Author-Name: William Goetzmann
Author-Person: pgo59
Author-Name: Jonathan Ingersoll
Author-Name: Matthew I. Spiegel
Author-Name: Ivo Welch
Author-Person: pwe95
Note: AP
Number: 9116
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9116
File-URL: http://www.nber.org/papers/w9116.pdf
File-Format: application/pdf
Abstract: It is now well known that the Sharpe ratio and other related reward-to-risk measures may be manipulated with option-like strategies. In this paper we derive the general conditions for achieving the maximum expected Sharpe ratio. We derive static rules for achieving the maximum Sharpe ratio with two or more options, as well as a continuum of derivative contracts. The optimal strategy rules for increasing the Sharpe ratio. Our results have implications for performance measurement in any setting in which managers may use derivative contracts. In a performance measurement setting, we suggest that the distribution of high Sharpe ratio managers should be compared with that of the optimal Sharpe ratio strategy. This has particular application in the hedge fund industry where use of derivatives is unconstrained and manager compensation itself induces a non-linear payoff. The shape of the optimal Sharpe ratio leads to further conjectures. Expected returns being held constant, high Sharpe ratio strategies are, by definition, strategies that generate regular modest profits punctunated by occasional crashes. Our evidence suggests that the 'peso problem' may be ubiquitous in any investment management industry that rewards high Sharpe ratio managers.
Handle: RePEc:nbr:nberwo:9116
Template-Type: ReDIF-Paper 1.0
Title: When Economic Reform Goes Wrong: Cashews in Mozambique
Classification-JEL: O10; 050
Author-Name: Margaret McMillan
Author-Person: pmc26
Author-Name: Dani Rodrik
Author-Person: pro60
Author-Name: Karen Horn Welch
Note: ITI
Number: 9117
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9117
File-URL: http://www.nber.org/papers/w9117.pdf
File-Format: application/pdf
Publication-Status: published as McMillan, Margaret, Dani Rodrik and Karen Welch. “When Economic Reform Goes Wrong: Cashew in Mozambique." Brookings Trade Forum 2003.
Abstract: Mozambique liberalized its cashew sector in the early 1990s in response to pressure from the World Bank. Opponents of the reform have argued that the policy did little to benefit poor cashew farmers while bankrupting factories in urban areas. Using a welfare-theoretic framework, we analyze the available evidence and provide an accounting of the distributional and efficiency consequences of the reform. We estimate that the direct benefits from reducing restrictions on raw cashew exports were of the order $6.6 million annually, or about 0.14% of Mozambique GDP. However, these benefits were largely offset by the costs of unemployment in the urban areas. The net gain to farmers was probably no greater than $5.3 million, or $5.30 per year for the average cashew-growing household. Inadequate attention to economic structure and to political economy seems to account for these disappointing outcomes.
Handle: RePEc:nbr:nberwo:9117
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics
Classification-JEL: F31; F32
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: EFG IFM
Number: 9118
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9118
File-URL: http://www.nber.org/papers/w9118.pdf
File-Format: application/pdf
Publication-Status: published as Obstfeld, Maurice, 2002. "Exchange Rates and Adjustment: Perspectives from the New Open- Economy Macroeconomics," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(S1), pages 23-46, December.
Abstract: The New Open Economy Macroeconomics has allowed economists to tackle classical problems with new tools, while also generating new ideas and questions. In their attempts to make the new models capture empirical regularities, researchers have entertained a variety of assumptions about the international pricing of goods, notably, models of pricing to market and destination-currency pricing of exports. Some of the resulting models imply that exchange-rate changes lack international expenditure-switching effects, and they thus appear to call for a radical rethinking of the role of exchange rates in international adjustment. This paper argues that the recent resurgence of exchange-rate pessimism stems from oversimplified modeling strategies rather than from evidence. Like earlier episodes starting with the extreme 'elasticity pessimism' of the early postwar era, it is based on a misinterpretation of the empirical record.
Handle: RePEc:nbr:nberwo:9118
Template-Type: ReDIF-Paper 1.0
Title: The Declining Effects of OSHA Inspections on Manufacturing Injuries: 1979 to 1998
Classification-JEL: J28
Author-Name: Wayne B. Gray
Author-Person: pgr111
Author-Name: John Mendeloff
Note: LS PR
Number: 9119
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9119
File-URL: http://www.nber.org/papers/w9119.pdf
File-Format: application/pdf
Publication-Status: published as Gray, Wayne B. and John M. Mendeloff. "The Declining Effects Of OSHA Inspections On Manufacturing Injuries, 1979 To 1998," Industrial and Labor Relations Review, 2004, v57(4,Jul), 571-587.
Abstract: This study compares the impact of OSHA inspections on manufacturing industries using data from three time periods: 1979-85, 1987-91, and 1992-98. We find substantial declines in the impact of OSHA inspections since 1979-85. In the earliest period we estimate that having an OSHA inspection that imposed a penalty reduces injuries by about 15%; in the later periods it falls to 8% in 1987-91 and to 1% (and statistically insignificant) in 1992-98. Testing for different effects by inspection type, employment size, and industry, we find differences across size classes, but these cannot explain the overall decline. In fact, we find reductions in OSHA's impact over time for nearly all subgroups we examine, so shifts across subgroups cannot explain the whole decline. We examine various other hypotheses concerning the declining impact, but in the end we are not able to provide a clear explanation for the decline.
Handle: RePEc:nbr:nberwo:9119
Template-Type: ReDIF-Paper 1.0
Title: The Link Between Aggregate and Micro Productivity Growth: Evidence from Retail Trade
Classification-JEL: D24; J24
Author-Name: Lucia Foster
Author-Person: pfo74
Author-Name: John Haltiwanger
Author-Person: pha231
Author-Name: C.J. Krizan
Author-Person: pkr69
Note: EFG PR
Number: 9120
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9120
File-URL: http://www.nber.org/papers/w9120.pdf
File-Format: application/pdf
Abstract: Understanding the nature and magnitude of resource reallocation, particularly as it relates to productivity growth, is important both because it affects how we model and interpret aggregate productivity dynamics, and also because market structure and institutions may affect the reallocation's magnitude and efficiency. Most evidence to date on the connection between reallocation and productivity dynamics for the U.S. and other countries comes from a single industry: manufacturing. Building upon a unique establishment-level data set of U.S. retail trade businesses, we provide some of the first evidence on the connection between reallocation and productivity dynamics in a non-manufacturing sector. Retail trade is a particularly appropriate subject for such a study since this large industry lies at the heart of many recent technological advances, such as E-commerce and advanced inventory controls. Our results show that virtually all of the productivity growth in the U.S. retail trade sector over the 1990s is accounted for by more productive entering establishments displacing much less productive exiting establishments. Interestingly, much of the between-establishment reallocation is a within, rather than between-firm phenomenon.
Handle: RePEc:nbr:nberwo:9120
Template-Type: ReDIF-Paper 1.0
Title: Knowledge Creation and Control in Organizations
Classification-JEL: O31; L22
Author-Name: Diego Puga
Author-Person: ppu2
Author-Name: Daniel Trefler
Author-Person: ptr44
Note: PR IO
Number: 9121
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9121
File-URL: http://www.nber.org/papers/w9121.pdf
File-Format: application/pdf
Abstract: The incremental innovations that underly much of modern economic growth typically involve changes to one or more components of a complex product. This creates a tension. On the one hand, a principal would like an agent to contribute innovative components. On the other hand, ironing out incompatibilities between interdependent components can be a drain on the principal's energies. The principal can conserve her energies by tightly controlling the innovation process, but this may inadvertently stifle the agent's incentive to innovate. We show precisely how this tension between creating knowledge and controlling knowledge shapes organizational forms. The novel concepts introduced are illustrated with case studies of the flat panel cathode ray tube industry and Boeing's recent location decisions.
Handle: RePEc:nbr:nberwo:9121
Template-Type: ReDIF-Paper 1.0
Title: Foreign Entry into U.S. Manufacturing by Takeovers and the Creation of New Firms
Classification-JEL: F21; F23
Author-Name: Robert E. Lipsey
Author-Person: pli259
Author-Name: Zadia M. Feliciano
Author-Person: pfe586
Note: ITI
Number: 9122
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9122
File-URL: http://www.nber.org/papers/w9122.pdf
File-Format: application/pdf
Publication-Status: published as Zadia M Feliciano & Robert E Lipsey, 2017. "Foreign Entry into US Manufacturing by Takeovers and the Creation of New Firms," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 43(1), pages 1-16, January.
Abstract: Using U.S. Bureau of Economic Analysis data for individual foreign acquisitions and new establishments in the U.S from 1988 to 1998, and aggregate data for 1980 to 1998, we find that acquisitions and establishments of new firms tend to occur in periods of high U.S. growth and take place mainly in industries in which the investing country has some comparative advantage in exporting. New establishments are largely in industries of U.S. comparative disadvantage, and the relation of U.S. comparative advantage to takeovers is also negative, but never significant. High U.S. stock prices, industry profitability, and industry growth discourage takeovers. High U.S interest rates and high investing country growth and currency values encourage takeovers. Direct investments in acquisitions and new establishments thus tend to flow in the same direction as trade. They originate in countries with comparative advantages in particular industries and flow to industries of U.S. comparative disadvantage.
Handle: RePEc:nbr:nberwo:9122
Template-Type: ReDIF-Paper 1.0
Title: Careers and Canvases: The Rise of the Market for Modern Art in the Nineteenth Century
Author-Name: David W. Galenson
Author-Name: Robert Jensen
Note: IO LS
Number: 9123
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9123
File-URL: http://www.nber.org/papers/w9123.pdf
File-Format: application/pdf
Abstract: This paper reexamines the process by which a market for a new product modern painting emerged in Paris in the nineteenth century. Contrary to the accepted account, in which the monopoly of the official Salon was replaced by a competitive market operated by private dealers, we find that the Salon was in fact initially replaced by a series of smaller group exhibitions organized by artists. The Impressionists were thus leaders not only in creating modern art, but also in developing its markets. Our reinterpretation of this episode yields a new understanding of the interactions between artists and markets in the late nineteenth and early twentieth centuries, and for the first time highlights specific ways in which artists' behavior was affected by the structure of art markets during the first half century of the modern era.
Handle: RePEc:nbr:nberwo:9123
Template-Type: ReDIF-Paper 1.0
Title: Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth
Classification-JEL: O11; E30
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Simon Johnson
Author-Person: pjo44
Author-Name: James Robinson
Author-Person: pro179
Author-Name: Yunyong Thaicharoen
Author-Person: pth100
Note: EFG
Number: 9124
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9124
File-URL: http://www.nber.org/papers/w9124.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron, Simon Johnson, James Robinson and Yunyong Thaicharoen. "Institutional Causes, Macroeconomic Symptoms: Volatility, Crises And Growth," Journal of Monetary Economics, 2003, v50(1,Jan), 49-123.
Abstract: Countries that have pursued distortionary macroeconomic policies, including high inflation, large budget deficits and misaligned exchange rates, appear to have suffered more macroeconomic volatility and also grown more slowly during the postwar period. Does this reflect the causal effect of these macroeconomic policies on economic outcomes? One reason to suspect that the answer may be no is that countries pursuing poor macroeconomic policies also have weak 'institutions,' including political institutions that do not constrain politicians and political elites, ineffective enforcement of property rights for investors, widespread corruption, and a high degree of political instability. This paper documents that countries that inherited more 'extractive' instit utions from their colonial past were more likely to experience high volatility a nd economic crises during the postwar period. More specifically, societies where European colonists faced high mortality rates more than 100 years ago are much more volatile and prone to crises. Based on our previous work, we interpret this relationship as due to the causal effect of institutions on economic outcomes: Europeans did not settle and were more likely to set up extractive institutions in areas where they faced high mortality. Once we control for the effect of institutions, macroeconomic policies appear to have only a minor impact on volatility and crises. This suggests that distortionary macroeconomic policies are more likely to be symptoms of underlying institutional problems rather than the main causes of economic volatility, and also that the effects of institutional differences on volatility do not appear to be primarily mediated by any of the standard macroeconomic variables. Instead, it appears that weak institutions cause volatility through a number of microeconomic, as well as macroeconomic, channels.
Handle: RePEc:nbr:nberwo:9124
Template-Type: ReDIF-Paper 1.0
Title: Optimal Pollution Abatement - Whose Benefits Matter, and How Much?
Classification-JEL: Q28; L51
Author-Name: Wayne B. Gray
Author-Person: pgr111
Author-Name: Ronald J. Shadbegian
Author-Person: psh911
Note: LS ED EEE
Number: 9125
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9125
File-URL: http://www.nber.org/papers/w9125.pdf
File-Format: application/pdf
Publication-Status: published as Gray, Wayne B. and R. J. Ronald J. Shadbegian. "Optimal' Pollution Abatement - Whose Benefits Matter, And How Much?," Journal of Environmental Economics and Management, 2004, v47(3,May), 510-534.
Abstract: We examine measures of environmental regulatory activity (inspections and enforcement actions) and levels of air and water pollution at approximately 300 U.S. pulp and paper mills, using data for 1985-1997. We find that levels of air and water pollution emissions are affected both by the benefits from pollution abatement and by the characteristics of the people exposed to the pollution. The results suggest substantial differences in the weights assigned to different types of people: the benefits received by out-of-state people seem to count only half as much as benefits received in-state, although their weight increases if the bordering state's Congressional delegation is strongly pro-environment. Some variables are also associated with greater regulatory activity being directed towards the plant, but those results are less consistent with our hypotheses than the pollution emissions results. One set of results was consistently contrary to expectations: plants with more nonwhites nearby emit less pollution. Some of our results might be due to endogenous sorting of people based on pollution levels, but an attempt to examine this using the local population turnover rate found evidence of sorting for only one of four pollutants.
Handle: RePEc:nbr:nberwo:9125
Template-Type: ReDIF-Paper 1.0
Title: Does Confidential Proxy Voting Matter?
Classification-JEL: G34; K22
Author-Name: Roberta Romano
Note: CF
Number: 9126
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9126
File-URL: http://www.nber.org/papers/w9126.pdf
File-Format: application/pdf
Publication-Status: published as Romano, Roberta. "Does Confidential Proxy Voting Matter?" The Journal of Legal Studies, vol. 32 (June 2003).
Abstract: Confidential voting in corporate proxies is a principal recommendation in activist institutional investors' guidelines for corporate governance reforms. This paper examines the impact of the adoption of confidential voting on proposal outcomes through a panel data set of shareholder and management proposals submitted from 1986-98 to 130 firms that adopted confidential voting in those years. Institutional investors promoting confidential voting maintain that private sector institutions have conflicts of interest that prevent them from voting against management even though to do so would maximize the value of their shares; they contend that anonymous ballots will enable such investors to vote their true interest, and thereby anticipate reduced support for management proposals and increased support for shareholder proposals. The paper finds, contrary to confidential voting advocates' expectations, that adoption of confidential voting has no significant effect on voting outcomes. Voting outcomes are best explained by proposal type; neither institutional nor insider ownership, nor prior performance, significantly affect the level of support a proposal receives. Moreover, the conflict of interest hypothesis is not supported in the data, as private institutional holdings post-adoption of the voting reform do not affect the support level for proposals. Confidential voting also does not affect firms' stock performance. The results suggest that institutional investor initiatives directed at confidential voting are not a fruitful allocation of investors' resources
Handle: RePEc:nbr:nberwo:9126
Template-Type: ReDIF-Paper 1.0
Title: Has the Business Cycle Changed and Why?
Classification-JEL: E3
Author-Name: James H. Stock
Author-Person: pst148
Author-Name: Mark W. Watson
Author-Person: pwa582
Note: EFG ME
Number: 9127
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9127
File-URL: http://www.nber.org/papers/w9127.pdf
File-Format: application/pdf
Publication-Status: published as Has the Business Cycle Changed and Why?, James H. Stock, Mark W. Watson. in NBER Macroeconomics Annual 2002, Volume 17, Gertler and Rogoff. 2003
Abstract: From 1960-1983, the standard deviation of annual growth rates in real GDP in the United States was 2.7%. From 1984-2001, the corresponding standard deviation was 1.6%. This paper investigates this large drop in the cyclical volatility OF real economic.activity. The paper has two objectives. The first is to provide a comprehensive characterization of the decline in volatility using a large number of U.S. economic time series and a variety of methods designed to describe time-varying time series processes. In so doing, the paper reviews the literature on the moderation and attempts to resolve some of its disagreements and discrepancies. The second objective is to provide new evidence on the quantitative importance of various explanations for this 'great moderation.' Taken together, we estimate that the moderation in volatility is attributable to a combination of improved policy (20-30%), identifiable good luck in the form of productivity and commodity price shocks (20-30%), and other unknown forms of good luck that manifest themselves as smaller reduced-form forecast errors (40-60%).
Handle: RePEc:nbr:nberwo:9127
Template-Type: ReDIF-Paper 1.0
Title: Wealth Portfolios in the UK and the US
Author-Name: James Banks
Author-Person: pba509
Author-Name: Richard Blundell
Author-Person: pbl81
Author-Name: James P. Smith
Author-Person: psm28
Note: AG
Number: 9128
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9128
File-URL: http://www.nber.org/papers/w9128.pdf
File-Format: application/pdf
Publication-Status: published as James Banks & Richard Blundell & James Smith, 2004. "Wealth Portfolios in the United Kingdom and the United States," NBER Chapters, in: Perspectives on the Economics of Aging, pages 205-246 National Bureau of Economic Research, Inc.
Abstract: In this paper, we attempt to explain differences between the US and UK household wealth distributions, with an emphasis on the quite different porfolios held in stock and housing equities in the two countries. As a proportion of their total wealth, British households hold relatively small amounts of financial assets - including equities in stock - compared to American households. In contrast, British households appear to move into home ownership at relatively young ages and a large fraction of their household wealth is concentrated in houseing. Finally, the age gradient in home equity appears to be much steeper in the UK while US households exhibit a steeper age gradient in stock equity. We argue that the higher price housing price volatility in the UK combined with much younger entry into home ownership there are important factors accounting for the relatively small participation of young British householders in the stock market. We show it is important to acknowledge the dual role of housing - providing both wealth and consumption services - in understanding wealth accumulation differences between the US and the UK. Institutional differences, particularly in housing markets, that affect the demand and supply of housing services, turn out to be important in generating portfolio differences between the two countries. In particular, these differences in housing price risk imply steeper life-cycle accumulations in housing and less steep accumulation in stock equity over the life cycle in the UK.
Handle: RePEc:nbr:nberwo:9128
Template-Type: ReDIF-Paper 1.0
Title: Feasible Globalizations
Classification-JEL: F0
Author-Name: Dani Rodrik
Author-Person: pro60
Note: IFM ITI
Number: 9129
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9129
File-URL: http://www.nber.org/papers/w9129.pdf
File-Format: application/pdf
Publication-Status: published as Della Giusta, Marina, Uma S. Kambhampati, and Robert Hunter Wade (eds.) Critical Perspectives on Globalization, Globalization of the World Economy series, vol. 17. An Elgar Reference Collection. Cheltenham, U.K. and Northampton, Mass.: Elgar, 2006.
Abstract: The nation-state system, democratic politics, and full economic integration are mutually incompatible. Of the three, at most two can be had together. The Bretton Woods/GATT regime was successful because its architects subjugated international economic integration to the needs and demands of national economic management and democratic politics. A renewed 'Bretton-Woods compromise' would preserve some limits on integration, while crafting better global rules to handle the integration that can be achieved. Among 'feasible glablization,' the most promising is a multilaterally negotiated visa scheme that allows expanded (but temporary) entry into the advanced nations of a mix of skilled and unskilled workers from developing nations. Such a scheme would likely create income gains that are larger than all of the items on the WTO negotiating agenda taken together, even if it resulted in a relatively small increase in cross-border labor flows.
Handle: RePEc:nbr:nberwo:9129
Template-Type: ReDIF-Paper 1.0
Title: Modeling Health Insurance Expansions: Effects of Alternate Approaches
Classification-JEL: I1; H0
Author-Name: Dahlia K. Remler
Author-Name: Joshua Graff Zivin
Author-Person: pgr314
Author-Name: Sherry A. Glied
Note: EH PE
Number: 9130
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9130
File-URL: http://www.nber.org/papers/w9130.pdf
File-Format: application/pdf
Publication-Status: published as Remler, Dahlia, Joshua Graff Zivin, and Sherry Glied. “Modeling Health Insurance Expansions: Effect of Alternate Approaches." Journal of Policy Analysis and Management 23, 2 (Spring 2004): 291-314.
Abstract: Estimates of the costs and consequences of many types of public policy proposals play an important role in the development and adoption of particular policy programs. Estimates of the same, or similar, policies that employ different modeling approaches can yield widely divergent results. Such divergence often undermines effective policy-making. These problems are particularly prominent for health insurance expansion programs. Concern focuses on predictions of the numbers of individuals that will be insured and the costs of the proposals. Several different simulation modeling approaches are used to predict these effects, making the predictions difficult to compare. In this paper, we do the following: (1) We categorize and describe the different approaches used; (2) we explain the conceptual and theoretical relationships between the methods; (3) we demonstrate empirically an example of the (quite restrictive) conditions under which all approaches can yield quantitatively identical predictions; and (4) we empirically demonstrate conditions under which the approaches diverge and the quantitative extent of that divergence. All modeling approaches implicitly make assumptions about functional form that impose restrictions on unobservable heterogeneity. Those assumptions can dramatically affect the quantitative predictions made.
Handle: RePEc:nbr:nberwo:9130
Template-Type: ReDIF-Paper 1.0
Title: Investor Behavior and the Purchase of Company Stock in 401(k) Plans - The Importance of Plan Design
Classification-JEL: G11; J30
Author-Name: Nellie Liang
Author-Name: Scott Weisbenner
Note: CF PE
Number: 9131
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9131
File-URL: http://www.nber.org/papers/w9131.pdf
File-Format: application/pdf
Abstract: Using panel data for nearly 1,000 companies during 1991 to 2000, this paper documents that the average share of participant's discretionary 401(k) contributions in company stock was almost 20 percent, and then relates this share to plan design features and firm financial characteristics. We find that the number of investment alternatives offered, n, and whether the company requires some of the match to be in company stock are key factors of the share of total contributions in company stock. We cannot reject the hypothesis that participants invest 1/n of their contributions in company stock. In addition, participants do not offset an employer match in company stock with a smaller share of their own contributions to company stock, contrary to efficient diversification. Workers also appear to view other plan restrictions as providing cues about the desirability of purchasing company stock. Thus, plan design is very important in determining the share of 401(k) assets in company stock.
Handle: RePEc:nbr:nberwo:9131
Template-Type: ReDIF-Paper 1.0
Title: Optimal Long-Run Fiscal Policy: Constraints, Preferences and the Resolution of Uncertainty
Classification-JEL: E62; H62
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Kevin A. Hassett
Author-Person: pha378
Note: EFG PE
Number: 9132
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9132
File-URL: http://www.nber.org/papers/w9132.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. & Hassett, Kevin, 2007. "Optimal long-run fiscal policy: Constraints, preferences and the resolution of uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 31(5), pages 1451-1472, May.
Abstract: We construct a computational dynamic stochastic overlapping generations general equilibrium model with uncertain lifetimes and explore the impact of policy stickiness (specifically, a major reform will preclude future reforms for a generation) on optimal long-run fiscal policy. Under such circumstances, entitlement reforms exhaust a valuable option to move in the future. We explore the conditions under which the gain to waiting is large enough to induce optimizing policymakers to delay reforming a suboptimal system. We also allow for the uncertainty to have ARCH characteristics and explore the impact of time-varying uncertainty on the optimality of delayed policy action.
Handle: RePEc:nbr:nberwo:9132
Template-Type: ReDIF-Paper 1.0
Title: The Measured Black-White Wage Gap Among Women is Too Small
Classification-JEL: J3; J7
Author-Name: Derek Neal
Note: LS
Number: 9133
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9133
File-URL: http://www.nber.org/papers/w9133.pdf
File-Format: application/pdf
Publication-Status: published as Neal, Derek. "The Measured Black-White Wage Gap Among Women Is Too Small," Journal of Political Economy, 2004, v112(2,Part2), S1-S28.
Abstract: Taken as a whole, the literature on black-white wage inequality suggests that racial gaps in potential wages are much larger among men than women, and further that one can accurately assess black-white gaps in potential wages among women without accounting for black-white differences in patterns of female labor supply. This paper challenges both pieces of this conventional wisdom. I provide several estimates of the black-white gap in potential wages for the year 1990 using data from the National Longitudinal Survey of Youth (NLSY), a panel data set that includes persons born between 1957 and 1964. I exploit data on wages and income sources for years before and after 1990 to develop imputation methods that allow me to adjust measures of the black-white wage gap among women for racial differences in selection patterns. Among young adult employed women in 1990, the Census, Current Population Surveys, and NLSY data yield median log wage gaps of -.11, -16, and -.18 respectively. Based on several different imputation procedures, I estimate that the median black-white gap in log potential wages among women in the NLSY is approximately -.25.
Handle: RePEc:nbr:nberwo:9133
Template-Type: ReDIF-Paper 1.0
Title: In Search of the Holy Grail: Policy Convergence, Experimentation, and Economic Performance
Classification-JEL: O10; O40
Author-Name: Sharun Mukand
Author-Person: pmu142
Author-Name: Dani Rodrik
Author-Person: pro60
Note: IFM
Number: 9134
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9134
File-URL: http://www.nber.org/papers/w9134.pdf
File-Format: application/pdf
Publication-Status: published as Mukand, Sharun W. and Dani Rodrik. "In Search Of The Holy Grail: Policy Convergence, Experimentation, And Economic Performance," American Economic Review, 2005, v95(1,Mar), 374-383.
Abstract: We consider a model of policy choice in which appropriate policies depend on a country's own circumstances, but the presence of a successful leader generates an informational externality and results in too little 'policy experimentation.' Corrupt governments are reined in while honest governments are disciplined inefficiently. Our model yields distinct predictions about the patterns of policy imitation, corruption, and economic performance as a function of a country''s location vis-……-vis successful leaders. In particular, it predicts a U-shaped pattern in economic performance as we move away from the leader in the relevant space of characteristics: close neighbors should do very well, distant countries moderately well on average with considerable variance, and intermediate countries worst of all. An empirical test with the experience of post-socialist countries provides supportive results.
Handle: RePEc:nbr:nberwo:9134
Template-Type: ReDIF-Paper 1.0
Title: '3rd of tha Month': Do Social Security Recipients Smooth Consumption Between Checks?
Classification-JEL: E21; H55
Author-Name: Melvin Stephens Jr.
Author-Person: pst400
Note: AG LS PE
Number: 9135
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9135
File-URL: http://www.nber.org/papers/w9135.pdf
File-Format: application/pdf
Publication-Status: published as Stephens Jr., Melvin. "`3rd of tha Month': Do Social Security Recipients Smooth Consumption Between Checks?" The American Economic Review 93, 1 (March 2003): 406-422.
Abstract: This paper examines the response of consumption expenditures to the monthly receipt of Social Security checks. Since the amount and arrival date of these checks are known to the recipients, the basic Life-Cycle/Permanent Income Hypothesis (LCPIH) predicts that consumption should not respond to the receipt of these checks. Using daily diary data from the Consumer Expenditure Survey, this paper finds evidence that both the dollar amount and probability of expenditures increase immediately following the receipt of this check. Most relevant to testing the LCPIH, categories of instantaneous consumption expenditure such as food away from home increase on the check arrival date. The response is found primarily amongst households for whom Social Security is the primary source of income. However, the magnitude of the estimated responses are relatively small and do not suggest that the utility losses are large from this non-smoothing behavior.
Handle: RePEc:nbr:nberwo:9135
Template-Type: ReDIF-Paper 1.0
Title: Tax Distortions and Global Climate Policy
Classification-JEL: H2; Q2
Author-Name: Mustafa H. Babiker
Author-Name: Gilbert E. Metcalf
Author-Name: John Reilly
Author-Person: pre355
Note: ED PE
Number: 9136
Creation-Date: 2002-08
Order-URL: http://www.nber.org/papers/w9136
File-URL: http://www.nber.org/papers/w9136.pdf
File-Format: application/pdf
Publication-Status: published as Babiker, Mustafa H., Gilbert E. Metcalf and John Reilly. "Tax Distortions And Global Climate Policy," Journal of Environmental Economics and Management, 2003, v46(2,Sep), 269-287.
Abstract: We consider the efficiency implications of policies to reduce global carbon emissions in a world with pre-existing tax distortions. We first note that the weak double-dividend, the proposition that the welfare improvement from a tax reform where environmental taxes are used to lower distorting taxes must be greater than the welfare improvement from a reform where the environmental taxes are returned in a lump sum fashion, need not hold in a world with multiple distortions. We then present a large-scale computable general equilibrium model of the world economy with distortionary taxation. We use this model to evaluate a number of policies to reduce carbon emissions. We find that the weak double dividend is not obtained in a number of European countries. Results also demonstrate the point that the interplay between carbon policies and pre-existing taxes can differ markedly across countries. Thus one must be cautious in extrapolating the results from a country specific analysis to other countries.
Handle: RePEc:nbr:nberwo:9136
Template-Type: ReDIF-Paper 1.0
Title: Banking Panics and the Origin of Central Banking
Classification-JEL: E5; G2
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: Lixin Huang
Author-Person: phu108
Note: CF ME
Number: 9137
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9137
File-URL: http://www.nber.org/papers/w9137.pdf
File-Format: application/pdf
Publication-Status: published as Altig, David and Bruce Smith (eds.) Evolution and Procedures in Central Banking. Cambridge University Press, 2003.
Abstract: Gorton and Huang (2001) argue that private coalitions of banks can act as central banks, issuing private money and providing deposit insurance during times of panic. This lender-of-last-resort role depends upon banking panics occurring threat of liquidation makes the private bank coalition incentive compatible, inducing banks to monitor each other. But, despite the evolution of private bank coalitions, government central banks and government deposit insurance schemes historically replaced the private bank coalitions. In this paper we ask why this transition from private arrangements to public arrangements occurred. We survey the historical and international evidence on panics, suggesting that Gorton and Huang (2001) are consistent with the evidence. Then, we extend Gorton and Huang (2001) to show the welfare improvement brought about by a government central bank replacing private bank coalitions as lender-of-last-resort. In particular, panics, while necessary for private coalitions to function, are costly because they disrupt the use of bank deposits as a medium of exchange. With government deposit insurance, panics do not occur, but the government must monitor banks. Such monitoring by the government is not as effective as private bank coalitions. We provide conditions under which the government can avoid the costs associated with panics by implementing deposit insurance and thereby raise social welfare.
Handle: RePEc:nbr:nberwo:9137
Template-Type: ReDIF-Paper 1.0
Title: Bank-Based or Market-Based Financial Systems: Which is Better?
Classification-JEL: G0; K2
Author-Name: Ross Levine
Author-Person: ple61
Note: CF IFM
Number: 9138
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9138
File-URL: http://www.nber.org/papers/w9138.pdf
File-Format: application/pdf
Publication-Status: published as Levine, Ross. "Bank-based Or Market-based Financial Systems: Which Is Better?," Journal of Financial Intermediation, 2002, v11(4,Oct), 398-428.
Abstract: For over a century, economists and policy makers have debated the relative merits of bank-based versus market-based financial systems. Recent research, however, argues that classifying countries as bank-based or market is not a very fruitful way to distinguish financial systems. This paper represents the first broad, cross-country examination of which view of financial structure is more consistent with the data. The results indicate that although overall financial development is robustly linked with economic growth, there is no support for either the bank-based or market-based view.
Handle: RePEc:nbr:nberwo:9138
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Changes in Drug Utilization on Labor Supply and Per Capita Output
Classification-JEL: J2; O3
Author-Name: Frank R. Lichtenberg
Author-Person: pli76
Note: EH PR
Number: 9139
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9139
File-URL: http://www.nber.org/papers/w9139.pdf
File-Format: application/pdf
Abstract: We hypothesize that pharmaceutical-embodied technical progress increases per capita output via its effect on labor supply (the employment rate and hours worked per employed person). We examine the effect of changes in both the average quantity and average vintage (FDA approval year) of drugs consumed on labor supply, using longitudinal, condition-level data. The estimates indicate that conditions for which there were above-average increases in utilization of prescriptions during 1996-1998 tended to have above-average reductions in the probability of missed work days. The estimated value to employers of the reduction in missed work days appears to exceed the employer's increase in drug cost. The estimates are also consistent with the hypothesis that an increase in a condition's mean drug vintage reduces the probability that people with that condition will experience activity and work limitations, and reduces their average number of restricted-activity days. The estimates imply that activity limitations decline at the rate of about one percent per year of drug vintage, and that the rate of pharmaceutical-embodied technical progress with respect to activity limitations is about 18% per year. Estimates of the cost of the increase in drug vintage necessary to achieve reductions in activity limitations indicate that increases in drug vintage tend to be very 'cost-effective.'
Handle: RePEc:nbr:nberwo:9139
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Subjective Survival on Retirement and Social Security Claiming
Classification-JEL: J26; J14
Author-Name: Michael D. Hurd
Author-Person: phu137
Author-Name: James P. Smith
Author-Person: psm28
Author-Name: Julie M. Zissimopoulos
Author-Person: pzi53
Note: AG LS
Number: 9140
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9140
File-URL: http://www.nber.org/papers/w9140.pdf
File-Format: application/pdf
Publication-Status: published as Hurd, Michael D., James P. Smith and Julie M. Zissimopoulos. "The Effects Of Subjective Survival On Retirement And Social Security Claiming," Journal of Applied Econometrics, 2004, v19(6,Spec), 761-775.
Abstract: According to the life-cycle model, mortality risk will influence both retirement and the desire to annuitize wealth. We estimate the effect of subjective survival probabilities on retirement and on the claiming of Social Security benefits because delayed claiming is equivalent to the purchase of additional Social Security annuities. We find that those with very low subjective probabilities of survival retire earlier and claim earlier than those with higher subjective probabilities, but the effects are not large. The great majority of workers claim as soon as they are eligible.
Handle: RePEc:nbr:nberwo:9140
Template-Type: ReDIF-Paper 1.0
Title: The Impact and Inefficiency of the Corporate Income Tax: Evidence from State Organizational Form Data
Classification-JEL: H25; L22
Author-Name: Austan Goolsbee
Author-Person: pgo49
Note: PE
Number: 9141
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9141
File-URL: http://www.nber.org/papers/w9141.pdf
File-Format: application/pdf
Publication-Status: published as Goolsbee, Austan. "The Impact Of The Corporate Income Tax: Evidence From State Organizational Form Data," Journal of Public Economics, 2004, v88(11,Sep), 2283-2299.
Abstract: By double taxing the income of corporate firms but not unincorporated firms, taxes can play an important role in a firm's choice of organizational form. The sensitivity of the organizational form decision to tax rates can also be used to approximate the efficiency cost of the corporate income tax. This paper uses new cross-sectional data on organizational form across states compiled in the Census of Retail Trade to estimate this sensitivity. The results document a significant impact of the relative taxation of corporate to personal income on the share of economic activity that is done by corporations including sales, employment, and the number of firms. The impacts are substantially larger than those found in the previous empirical literature based on time-series data.
Handle: RePEc:nbr:nberwo:9141
Template-Type: ReDIF-Paper 1.0
Title: Expected Bequests and Their Distribution
Classification-JEL: J14; E21
Author-Name: Michael Hurd
Author-Person: phu137
Author-Name: James P. Smith
Author-Person: psm28
Note: AG
Number: 9142
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9142
File-URL: http://www.nber.org/papers/w9142.pdf
File-Format: application/pdf
Abstract: Based on a sample of actual bequests that is population-representative and on the subjective probability of bequests, we estimate the distribution of bequests that the older population will make. We find that the distribution is highly skewed, so that the typical baby-boom person will receive a very modest inheritance. This is partly due to the skewed distribution of wealth and partly due to the tendency of the wealthy to have fewer children. But it is also due to anticipated dissaving: we estimate that households in the age band 70-74 will bequeath just 39% of their wealth, consuming the rest before they die.
Handle: RePEc:nbr:nberwo:9142
Template-Type: ReDIF-Paper 1.0
Title: Spurious Regressions in Financial Economics?
Classification-JEL: G10; G12
Author-Name: Wayne E. Ferson
Author-Person: pfe32
Author-Name: Sergei Sarkissian
Author-Person: psa127
Author-Name: Timothy Simin
Author-Person: psi273
Note: AP
Number: 9143
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9143
File-URL: http://www.nber.org/papers/w9143.pdf
File-Format: application/pdf
Publication-Status: published as Ferson, Wayne, Timothy Simin, and Sergei Sarkissian. "Spurious regressions in Financial Economics?" Journal of Finance 58 (August 2003): 1393-1414.
Abstract: Even though stock returns are not highly autocorrelated, there is a spurious regression bias in predictive regressions for stock returns related to the classic studies of Yule (1926) and Granger and Newbold (1974). Data mining for predictor variables interacts with spurious regression bias. The two effects reinforce each other, because more highly persistent series are more likely to be found significant in the search for predictor variables. Our simulations suggest that many of the regressions in the literature, based on individual predictor variables, may be spurious
Handle: RePEc:nbr:nberwo:9143
Template-Type: ReDIF-Paper 1.0
Title: Household Demand for Employer-Based Health Insurance
Author-Name: Jean Marie Abraham
Author-Name: William B. Vogt
Author-Person: pvo14
Author-Name: Martin Gaynor
Author-Person: pga1
Note: EH
Number: 9144
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9144
File-URL: http://www.nber.org/papers/w9144.pdf
File-Format: application/pdf
Publication-Status: published as Abraham, Jean Marie, William B. Vogt, William B., and Martin S. Gaynor. "How Do Households Choose Their Employer-Bases Health Insurance?" Inquiry 43, 4 (Winter 2006-2007): 315-32.
Abstract: We use the 1996 Medical Expenditure Panel Survey to estimate a model of household demand for employer-based health insurance, explicitly investigating differences in behavior between households with two potential sources of coverage and those with one source. Own and cross-price elasticities are estimated for three types of health plans, including exclusive provider organizations, any provider organizations, and mixed provider organizations. We find that the premium, family size, income, and wealth significantly affect demand. Our elasticity estimates reveal an overall, small behavioral response to changes in price with respect to health plan switching and take-up. Finally, we discuss the implications of our findings with respect to employer benefit design.
Handle: RePEc:nbr:nberwo:9144
Template-Type: ReDIF-Paper 1.0
Title: Using Heteroscedasticity to Estimate the Returns to Education
Classification-JEL: C30; I20
Author-Name: Vincent Hogan
Author-Person: pho276
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: PE ED
Number: 9145
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9145
File-URL: http://www.nber.org/papers/w9145.pdf
File-Format: application/pdf
Abstract: We apply a new estimator to the measurement of the economic returns to education. We control for endogenous education, unobserved ability and measurement error using only the natural heteroscedasticty of wages and education attainment. Our prefered estimate, 6.07%, is closer to the OLS estimate but smaller (and more precise) than the estimates typically reported by studies that use IV. Our results indicate that the biases generated by unobserved ability and measurement error tend to cancel each other out as suggested by Griliches (1977). We also present Monte Carlo evidence to show that the finite sample bias our estimator is small.
Handle: RePEc:nbr:nberwo:9145
Template-Type: ReDIF-Paper 1.0
Title: The Illiquidity Puzzle: Theory and Evidence from Private Equity
Classification-JEL: G24; G32
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: Antoinetter Schoar
Author-Person: psc180
Note: CF
Number: 9146
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9146
File-URL: http://www.nber.org/papers/w9146.pdf
File-Format: application/pdf
Publication-Status: published as Lerner, Josh and Antoinette Schoar. "The Illiquidity Puzzle: Theory And Evidence From Private Equity," Journal of Financial Economics, 2004, v72(1,Apr), 3-40.
Abstract: This paper presents a theory of liquidity where we explicitly model the liquidity of the security as a choice variable, which enables the manager raising the funds to screen for 'deep pocket' investors, i.e. these that have a low likelihood of a liquidity shock. By choosing the degree of illiquidity of the security, the manager can influence the type of investors the firm will attract. The benefit of liquid investors is that they reduce the manager's cost of capital for future fund raising. If inside investors have fewer information asymmetries about the quality of the manager than the outside market, more liquid investors protect the manager from having to return to the outside market, where he would face higher cost of capital due to asymmetric information problems. We test the predictions of our model in the context of the private equity industry. Consistent with the theory, we find that transfer restrictions on investors are less common in later funds organized by the same private equity firm, where information problems are presumably less severe. Contracts involving the close-knit California venture capital community - where information on the relative performance of funds are more readily ascertained - are less likely to employ many of these provisions as well. Also, private equity partnerships whose investment focus is in industries with longer investment cycles display more transfer constraints. For example, funds focusing on the pharmaceutical industry have more constraints, while those specializing in computing and Internet investments have fewer constraints. Finally, we investigate whether the identity of the investors that invest in a private equity fund is related to the transferability of the stakes. We find that transferability constraints are less prevalent when private equity funds have limited partners that are known to have few liquidity shocks, for example endowments, foundations, and other investors with long-term commitments to private equity.
Handle: RePEc:nbr:nberwo:9146
Template-Type: ReDIF-Paper 1.0
Title: Crises in the Global Economy from Tulips to Today: Contagion and Consequences
Classification-JEL: G15; N20
Author-Name: Larry Neal
Author-Person: pne240
Author-Name: Marc Weidenmier
Author-Person: pwe14
Note: DAE IFM
Number: 9147
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9147
File-URL: http://www.nber.org/papers/w9147.pdf
File-Format: application/pdf
Publication-Status: published as Bordo, Michael D., Alan M. Taylor, and Jeffrey G. Williamson (eds.) Globalization in Historical Perspective. Chicago and London: University of Chicago Press, 2003.
Abstract: This paper examines the historical record of the financial crises that have often accompanied surges of globalization in the past. The issue of contagion, the spread of financial turbulence from the crisis center to its trading partners, is confronted with historical and statistical evidence on the causes and consequences of well-known crises. In general, contagion seems often confused with prior interdependence, and crises are less widespread and shorter in duration than anecdotal evidence would indicate. Special attention is given to the gold standard period of 1880-1913, which we find useful to divide into the initial period of deflation, 1880-1896, and the following period of mild inflation, 1897-1913. We find evidence of changes in the pattern of 'contagion' from core to periphery countries between the two periods, but in both periods apparent contagions can more readily be interpreted as responses to common shocks. Lessons for the present period can only be tentative, but the similarities in learning experiences are striking.
Handle: RePEc:nbr:nberwo:9147
Template-Type: ReDIF-Paper 1.0
Title: Health Insurance Coverage and the Disability Insurance Application Decision
Classification-JEL: H3; I1
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Jeffrey Kubik
Note: EH LS PE
Number: 9148
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9148
File-URL: http://www.nber.org/papers/w9148.pdf
File-Format: application/pdf
Publication-Status: published as J GRUBER & J KUBIK, 2005. "Health insurance coverage and the disability insurance application decision," Journal of Public Economics, .
Abstract: We investigate the effect of health insurance coverage on the decision of individuals to apply for Disability Insurance (DI). Those who qualify for DI receive public insurance under Medicare, but only after a two-year waiting period. This raises concerns that many disabled are going uninsured while they wait for their Medicare coverage. Moreover, the combination of this waiting period and the uncertainty about application acceptance may deter those with health insurance on their jobs, but no alternative source of coverage, from leaving work to apply for DI. Data from the Health and Retirement Survey show that, in fact, uninsurance does not rise during the waiting period for DI benefits; reductions in own employer coverage are small, and are offset by increases in other sources of insurance. Correspondingly, we find that imperfect insurance coverage does deter DI application. Those who have an alternative source of insurance coverage (coverage from a spouse's employer or retiree coverage), are 26 to 74% more likely to apply for DI than those without such an alternative. Thus, limiting this waiting period would not increase the insurance coverage of the disabled in the U.S., but it would significantly increase applications to the DI program.
Handle: RePEc:nbr:nberwo:9148
Template-Type: ReDIF-Paper 1.0
Title: The New York School vs. the School of Paris: Who Really Made the Most Important Art After World War II?
Classification-JEL: K40; K42
Author-Name: David Galenson
Note: LS
Number: 9149
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9149
File-URL: http://www.nber.org/papers/w9149.pdf
File-Format: application/pdf
Abstract: American historians of modern art routinely assume that after World War II New York replaced Paris as the center of the western art world. An analysis of the illustrations in French textbooks shows that French art scholars disagree: they rate Jean Dubuffet as the most important painter of the era, ahead of Jackson Pollock, and they consider Yves Klein's anthropometries of 1960 as the greatest contribution of a single year, in front of Andy Warhol's innovations in Pop Art. Yet the French texts also show that the French artists' practices and conceptions of art paralleled those of the Americans. Thus while French and American scholars disagree over the relative importance of their nations' artists, there is no disagreement that the most important art of the 1950s was produced by experimental seekers, and that of the 60s by conceptual finders.
Handle: RePEc:nbr:nberwo:9149
Template-Type: ReDIF-Paper 1.0
Title: The Injustice of Inequality
Classification-JEL: L1; L4
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: EFG LE
Number: 9150
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9150
File-URL: http://www.nber.org/papers/w9150.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward & Scheinkman, Jose & Shleifer, Andrei, 2003. "The injustice of inequality," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 199-222, January.
Abstract: In many countries, the operation of legal, political and regulatory institutions is subverted by the wealthy and the politically powerful for their own benefit. This subversion takes the form of corruption, intimidation, and other forms of influence. We present a model of such institutional subversion focusing specifically on courts and of the effects of inequality in economic and political resources on the magnitude of subversion. We then use the model to analyze the consequences of institutional subversion for the law and order environment in the country, as well as for capital accumulation and growth. We illustrate the model with historical evidence from Gilded Age United States and the transition economies of the 1990s. We also present some cross-country evidence consistent with the basic prediction of the model.
Handle: RePEc:nbr:nberwo:9150
Template-Type: ReDIF-Paper 1.0
Title: Do Mergers Lead to Monopoly in the Long Run? Results from the Dominant Firm Model
Classification-JEL: H22; Q48
Author-Name: Gautam Gowrisankaran
Author-Name: Thomas J. Holmes
Author-Person: pho45
Note: IO
Number: 9151
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9151
File-URL: http://www.nber.org/papers/w9151.pdf
File-Format: application/pdf
Publication-Status: published as Gowrisankaran, Gautam and Thomas J. Holmes. "Mergers And The Evolution Of Industry Concentration: Results From The Dominant-Firm Model," Rand Journal of Economics, 2004, v35(3,Autumn), 561-582.
Abstract: Will an industry with no antitrust policy converge to monopoly, competition, or somewhere in between? We analyze this question using a dynamic dominant firm model with rational agents, endogenous mergers, and constant returns to scale production. We find that perfect competition and monopoly are always steady states of this model, and that there may be other steady states with a dominant firm and a fringe co-existing. Mergers are likely only when supply is inelastic or demand is elastic, suggesting that the ability of a dominant firm to raise price, through monopolization is limited. Additionally, as the discount factor increases, it becomes harder to monopolize the industry, because the dominant firm cannot commit to not raising prices in the future.
Handle: RePEc:nbr:nberwo:9151
Template-Type: ReDIF-Paper 1.0
Title: Estimates from a Consumer Demand System: Implications for the Incidence of Environmental Taxes
Author-Name: Sarah E. West
Author-Person: pwe92
Author-Name: Roberton C. Williams III
Author-Person: pwi38
Note: PE
Number: 9152
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9152
File-URL: http://www.nber.org/papers/w9152.pdf
File-Format: application/pdf
Publication-Status: published as West, Sarah E. & Williams, R.C.Roberton III, 2004. "Estimates from a consumer demand system: implications for the incidence of environmental taxes," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 535-558, May.
Abstract: Most studies suggest that environmental taxes are regressive, and thus are unattractive policy options. We consider the distributional effects of a gasoline tax increase using three welfare measures and under three scenarios for gas tax revenue use. To incorporate behavioral responses we use Consumer Expenditure Survey data to estimate a consumer demand system that includes gasoline, other goods, and leisure. We find that the gas tax is regressive, but that returning the revenue through a lump-sum transfer more than offsets this, yielding a net increase in progressivity. We also find that ignoring behavioral changes in distributional calculations overstates both the overall burden of the tax and its regressivity.
Handle: RePEc:nbr:nberwo:9152
Template-Type: ReDIF-Paper 1.0
Title: The Social Multiplier
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Bruce I. Sacerdote
Author-Name: Jose A. Scheinkman
Author-Person: psc26
Note: LE LS PE
Number: 9153
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9153
File-URL: http://www.nber.org/papers/w9153.pdf
File-Format: application/pdf
Publication-Status: published as Edward L. Glaeser & Bruce I. Sacerdote & Jose A. Scheinkman, 2003. "The Social Multiplier," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 345-353, 04/05.
Abstract: In many cases, aggregate data is used to make inferences about individual level behavior. If there are social interactions in which one person's actions influence his neighbor's incentives or information, then these inferences are inappropriate. The presence of positive social interactions, or strategic complementarities, implies the existence of a social multiplier where aggregate relationships will overstate individual elasticities. We present a brief model and then estimate the size of the social multiplier in three areas: the impact of education on wages, the impact of demographics on crime and group membership among Dartmouth roommates. In all three areas there appears to be a significant social multiplier.
Handle: RePEc:nbr:nberwo:9153
Template-Type: ReDIF-Paper 1.0
Title: International Reserve Holdings with Sovereign Risk and Costly Tax Collection
Classification-JEL: F15; F32
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Nancy P. Marion
Author-Person: pma1464
Note: IFM
Number: 9154
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9154
File-URL: http://www.nber.org/papers/w9154.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua and Nancy Marion. "International Reserve Holdings With Sovereign Risk And Costly Tax Collection," Economic Journal, 2004, v114(497,Jul), 569-591.
Abstract: This paper analyzes the international reserve-holding behavior of developing countries. It shows that political-economy considerations modify the optimal reserve level determined by efficiency criteria. A country characterized by volatile output, inelastic demand for fiscal outlays, high tax collection costs and sovereign risk will want to accumulate international reserves as well as external debt. Efficiency considerations imply that reserves are optimal when the benefits they provide for intertemporal consumption and distortion smoothing equal the costs of acquiring them. However, a greater chance of opportunistic behavior by future policy makers reduces the demand for international reserves and increases external borrowing. Political corruption also reduces optimal reserve holdings. We provide some evidence to support these findings. Consequently, the debt-to-reserves ratio may be less useful as a vulnerability indicator. A version of the Lucas Critique suggests that if a high debt-to-reserves ratio is a symptom of opportunistic behavior, a policy recommendation to increase international reserve holdings may be welfare-reducing.
Handle: RePEc:nbr:nberwo:9154
Template-Type: ReDIF-Paper 1.0
Title: The Welfare Implications of Increasing Disability Insurance Benefit Generosity
Classification-JEL: H21; H22
Author-Name: John Bound
Author-Person: pbo406
Author-Name: Julie Berry Cullen
Author-Person: pcu44
Author-Name: Austin Nichols
Author-Name: Lucie Schmidt
Author-Person: psc90
Note: AG LS PE
Number: 9155
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9155
File-URL: http://www.nber.org/papers/w9155.pdf
File-Format: application/pdf
Publication-Status: published as Bound, John, Julie Berry Cullen, Austin Nichols and Lucie Schmidt. "The Welfare Implications Of Increasing Disability Insurance Benefit Generosity," Journal of Public Economics, 2004, v88(12,Dec), 2487-2514.
Abstract: The focus on efficiency costs in the empirical literature on Disability Insurance (DI) provides a misleading view of the adequacy of payment levels. In order to evaluate whether workers are over- or under-insured through the social insurance program, we develop a framework that allows us to simulate the benefits as well as the costs associated with marginal changes in payment generosity from a representative cross-sectional sample of the population. Under the assumption that individuals are reasonably risk averse, our simulations suggest the typical worker would value increased benefits somewhat above the average costs of providing them. However, we find that benefit increases tend to lower average utility when we average across all individuals in our sample, particularly at high levels of risk aversion. This counterintuitive finding arises because some lower income DI-insured workers face replacement rates that are near or above one. For such individuals, a benefit increase would represent transfers from an even lower income state of the world in which they are not on DI to one in which they are, a transfer that would not be beneficial even if there were no behavioral distortions associated with the provision of DI benefits.
Handle: RePEc:nbr:nberwo:9155
Template-Type: ReDIF-Paper 1.0
Title: The Market for Corporate Law
Classification-JEL: G30; G38
Author-Name: Oren Bar-Gill
Author-Name: Michal Barzuza
Author-Name: Lucian Bebchuk
Author-Person: pbe72
Note: CF LE
Number: 9156
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9156
File-URL: http://www.nber.org/papers/w9156.pdf
File-Format: application/pdf
Publication-Status: published as Oren Bar-Gill & Michal Barzuza & Lucian Bebchuk, 2006. "The Market for Corporate Law," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(1), pages 134-160, March.
Abstract: This paper develops a model of the competition among states in providing corporate law rules. The analysis provides a full characterization of the equilibrium in this market. Competition among states is shown to produce optimal rules with respect to issues that do not have a substantial effect on managers' private benefits but not with respect to issues (such as takeover regulation) that substantially affect these private benefits. We analyze why a Dominant state such as Delaware can emerge, the prices that the dominant state will set and the profits it will make. We also analyze the roles played by legal infrastructure, network externalities, and the rules governing incorporations. The results of the model are consistent with, and can explain, existing empirical evidence; they also indicate that the performance of state competition cannot be evaluated on the basis of how incorporation in Delaware in the prevailing market equilibrium affects shareholder wealth.
Handle: RePEc:nbr:nberwo:9156
Template-Type: ReDIF-Paper 1.0
Title: Does Managerial 'Outsourcing' Reduce Expense Preference Behavior? A Comparison of Adopters and Non-Adopters of Contract-Management in US Hospitals
Classification-JEL: D21; I11
Author-Name: Kathleen Carey
Author-Name: Avi Dor
Note: EH
Number: 9157
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9157
File-URL: http://www.nber.org/papers/w9157.pdf
File-Format: application/pdf
Abstract: This paper explores potential realization of gains by hospitals that are managed on a day-to-day basis by external organizations under formal contracts. It draws from the incentives literature, which postulates that managers of firms where ownership is separated from control will employ an input mix that deviates from cost minimization. While this status applies to hospitals generally, we hypothesize that specialized managerial expertise, coupled with the threat of non-renewal, will improve efficiency in hospitals that opt for contract. Secondary data obtained from the AHA Annual Surveys (1991-1998) are applied to examine the distribution of expense preference' parameters for all contract management adopters both pre- and post-adoption. These are contrasted with two control groups of hospitals drawn from the same years using propensity score methods. Results reveal allocative inefficiency among both adoption and control groups but a significantly lower change in the expense preference parameter pre- and post-adoption associated with a staffing. This suggests that changes in incentive contracts are one important strategy hospitals are using to cope with competitive pressures.
Handle: RePEc:nbr:nberwo:9157
Template-Type: ReDIF-Paper 1.0
Title: Liquidity, Efficiency and Bank Bailouts
Classification-JEL: G21; E58
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: Lixin Huang
Author-Person: phu108
Note: CF
Number: 9158
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9158
File-URL: http://www.nber.org/papers/w9158.pdf
File-Format: application/pdf
Publication-Status: published as Gorton, Gary and Lixin Huang. "Liquidity, Efficiency, And Bank Bailouts," American Economic Review, 2004, v94(3,Jun), 455-483.
Abstract: Why do governments bailout banking systems in distress? We argue that the government can efficiently provide liquidity. We present a general equilibrium model in which not all assets can be used to purchase all other assets at every date. At some dates agents want to sell projects or securities. The only buyers are agents who have previously opportunistically invested in otherwise dominated assets because only these ( liquid') assets can be used to purchase the projects or securities. The market price of the projects or securities sold depends on the supply of liquidity, which is determined in general equilibrium. The supply of liquidity is not perfectly elastic so asset prices can deviate from efficient market' prices, that is, the conditional expectation of the asset payoff. While private liquidity provision is socially beneficial since it allows valuable reallocations, it is also socially costly since liquidity suppliers could have made more efficient investments ex ante. As a result, there is a potential role for the government to supply liquidity by issuing government securities, backed by tax revenue. Government bailouts of banking systems are an example of such public liquidity provision.
Handle: RePEc:nbr:nberwo:9158
Template-Type: ReDIF-Paper 1.0
Title: What Fundamentals Drive World Migration?
Classification-JEL: F22; J1
Author-Name: Timothy J. Hatton
Author-Person: pha305
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI
Number: 9159
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9159
File-URL: http://www.nber.org/papers/w9159.pdf
File-Format: application/pdf
Publication-Status: published as Borjas, G. and J. Crips (eds.) POVERTY, INTERNATIONAL MIGRATION AND ASYLUM. Hampshire, UK: Palgrave-Macmillan for WIDER: 2005.
Abstract: OECD governments note rising immigration with alarm and grapple with policies aimed at selecting certain migrants and keeping out others. Economists appear to be well armed to advise governments since they are responsible for an impressive literature that examines the characteristics of individual immigrants, their absorption and the consequences of their migration on both sending and receiving regions. Economists are, however, much less well armed to speak to the determinants of the world migrations that give rise to public alarm. This paper offers a quantitative assessment of the economic and demographic fundamentals that have driven and are driving world migration, across different historical epochs and around the world. The paper is organized around three questions: How do the standard theories of migration perform when confronted with evidence drawn from more than a century of world migration experience? How do inequality and poverty influence world migration? Is it useful to distinguish between migration pressure and migration ex-post, or between the potential demand for visas and the actual use of them?
Handle: RePEc:nbr:nberwo:9159
Template-Type: ReDIF-Paper 1.0
Title: A Brazilian Debt-Crisis
Classification-JEL: F3
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Note: IFM
Number: 9160
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9160
File-URL: http://www.nber.org/papers/w9160.pdf
File-Format: application/pdf
Abstract: We develop a stylised model of multiple equilibria, with country risk spreads at the focus of the analysis. Fears that the country default on its debt triggers a reversal in the direction of inflows of international financial capital raise interest-rate spreads and thus the cost of servicing the public debt. The analytical framework is standard: creditors observe the output of borrowing only at a cost.
Handle: RePEc:nbr:nberwo:9160
Template-Type: ReDIF-Paper 1.0
Title: Winners and Losers Over Two Centuries of Globalization
Classification-JEL: F0; N0
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI
Number: 9161
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9161
File-URL: http://www.nber.org/papers/w9161.pdf
File-Format: application/pdf
Publication-Status: published as WIDER PERSPECTIVES ON GLOBAL DEVELOPMENT. Hampshire, UK: Palgrave Macmillan, 2005.
Abstract: The world has seen two globalization booms over the past two centuries, and one bust. The first global century ended with World War I and the second started at the end of World War II, while the years in between were ones of anti-global backlash. This lecture reports what we know about the winners and losers during the two global centuries, including aspects almost always ignored in modern debate how prices of consumption goods on the expenditure side are affected, and how the economic position of the poor is influenced. It also reports two responses of the winners to the losers' complaints. Some concessions to the losers took the form of anti-global policy manifested by immigration restriction in the high-wage countries and trade restriction pretty much everywhere. Some concessions to the losers were also manifested by a race towards the top' whereby legislation strengthened losers' safety nets and increased their sense of political participation. The lecture concludes with four lessons of history and an agenda for international economists, including more attention to the impact of globalization on commodity price structure, the causes of protection, the impact of world migration on poverty eradication, and the role of political participation in the whole process.
Handle: RePEc:nbr:nberwo:9161
Template-Type: ReDIF-Paper 1.0
Title: Vertical Networks and US Auto Parts Exports: Is Japan Different?
Classification-JEL: F12; F13
Author-Name: Keith Head
Author-Name: John Ries
Author-Person: pri96
Author-Name: Barbara J. Spencer
Author-Person: psp2
Note: ITI
Number: 9162
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9162
File-URL: http://www.nber.org/papers/w9162.pdf
File-Format: application/pdf
Publication-Status: published as Keith Head & John Ries & Barbara J. Spencer, 2004. "Vertical Networks and US Auto Parts Exports: Is Japan Different?," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 13(1), pages 37-67, 03.
Abstract: This paper develops a model in which upstream network insiders' conduct relationship specific investment that induces the downstream firm to transact within networks. The scale of destination-country production and part-specific measures of the importance of network relationships and engineering costs are used to explain the pattern of U.S. auto parts exports. Our results support the prediction that large scale promotes relationship-specific investment and reduces imports. Also, while Japan is a large parts importer, the composition of its imports is shifted away from parts where vertical keiretsu are prominent. Nations hosting U.S.-owned automakers import more U.S. parts.
Handle: RePEc:nbr:nberwo:9162
Template-Type: ReDIF-Paper 1.0
Title: Towards a Theory of Current Accounts
Classification-JEL: F21; F32
Author-Name: Jaume Ventura
Author-Person: pve110
Note: IFM
Number: 9163
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9163
File-URL: http://www.nber.org/papers/w9163.pdf
File-Format: application/pdf
Publication-Status: published as Jaume Ventura, 2003. "Towards a Theory of Current Accounts," The World Economy, Blackwell Publishing, vol. 26(4), pages 483-512, 04.
Abstract: The current accounts data of industrial countries exhibits some strong patterns that are inconsistent with the intertemporal approach to the current account. This is the basic model that international economists have been using for more than two decades to think about current account issues. This paper shows that it is possible to go a long way towards reconciling the theory and the data by introducing two additional features to the basic model: investment risk and adjustment costs to investment. Moreover, these extensions generate new and unexpected theoretical predictions that receive substantial support in the data. The overall message is therefore positive: with a couple of reasonable modifications, the intertemporal approach to the current account provides a fairly good description of the industrial country data.
Handle: RePEc:nbr:nberwo:9163
Template-Type: ReDIF-Paper 1.0
Title: International Financial Integration and Economic Growth
Classification-JEL: F3; O4
Author-Name: Hali J. Edison
Author-Person: ped1
Author-Name: Ross Levine
Author-Person: ple61
Author-Name: Luca Ricci
Author-Person: pri55
Author-Name: Torsten Slok
Note: IFM
Number: 9164
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9164
File-URL: http://www.nber.org/papers/w9164.pdf
File-Format: application/pdf
Publication-Status: published as Edison, Hali J. & Levine, Ross & Ricci, Luca & Slok, Torsten, 2002. "International financial integration and economic growth," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 749-776, November.
Abstract: This paper uses new data and new econometric techniques to investigate the impact of international financial integration on economic growth and also to assess whether this relationship depends on the level of economic development, financial development, legal system development, government corruption, and macroeconomic policies. Using a wide array of measures of international financial integration on 57 countries and an assortment of statistical methodologies, we are unable to reject the null hypothesis that international financial integration does not accelerate economic growth even when controlling for particular economic, financial, institutional, and policy characteristics.
Handle: RePEc:nbr:nberwo:9164
Template-Type: ReDIF-Paper 1.0
Title: Are Politicians Really Paid Like Bureaucrats?
Classification-JEL: J2; H7
Author-Name: Rafael Di Tella
Author-Person: pdi128
Author-Name: Raymond Fisman
Author-Person: pfi257
Note: PE
Number: 9165
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9165
File-URL: http://www.nber.org/papers/w9165.pdf
File-Format: application/pdf
Publication-Status: published as Di Tella, Rafael & Fisman, Raymond, 2004. "Are Politicians Really Paid Like Bureaucrats?," Journal of Law & Economics, University of Chicago Press, vol. 47(2), pages 477-513, October.
Abstract: We provide the first empirical analysis of gubernatorial pay. Using US data for 1950-90 we document, contrary to widespread assumptions, substantial variation in the wages of politicians, both across states and over time. Gubernatorial wages respond to changes in state income per capita and taxes, after controlling for state and time fixed effects. The economic effects seem large: governors receive a 1 percent pay cut for each ten percent increase in per capita tax payments and a 4.5 percent increase in pay for each ten percent increase in income per capita in their states. There is strong evidence that the tax elasticity reflects a form of reward-for-performanc.' The evidence on the income elasticity of pay is less conclusive, but is suggestive of rent extraction' motives. Lastly, we find that democratic institutions seem to play an important role in shaping pay. For example, voter-initiatives and the presence of significant political opposition lead to large reductions in the income elasticity of pay, and to large increases (at least double) in the tax elasticities of pay, relative to the elasticities that are observed when these democratic institutions are weaker.
Handle: RePEc:nbr:nberwo:9165
Template-Type: ReDIF-Paper 1.0
Title: The Role of Economic Policy in Social Security Reform: Perspectives from the President's Commission
Classification-JEL: H6; H3
Author-Name: John F. Cogan
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Note: AG PE
Number: 9166
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9166
File-URL: http://www.nber.org/papers/w9166.pdf
File-Format: application/pdf
Publication-Status: published as Cogan, John F. and Olivia S. Mitchell. "Perspectives From The President's Commission On Social Security Reform," Journal of Economic Perspectives, 2003, v17(2,Spring), 149-172.
Abstract: Recently we were asked to serve on the President's Commission to Strengthen Social Security (CSSS) along with 14 other members drawn equally from both major political parties. The Commission's charge was to provide recommendations to modernize the Social Security system, restore its fiscal soundness, and develop a workable system of Personal Retirement Accounts. This paper explains how the Commission arrived at some of its recommendations and the role that economics played in contributing to these recommendations. We describe the key institutional constraints confronting efforts to reform Social Security and how these constraints influenced Commission decisions. We also illustrate how economics research influenced the Commission's analysis of how to structure personal accounts, ways to enhance traditional Social Security program finances, and means of measuring the extent of financial progress achieved through reform.
Handle: RePEc:nbr:nberwo:9166
Template-Type: ReDIF-Paper 1.0
Title: Did Blue Cross and Blue Shield Suffer from Adverse Selection? Evidence from the 1950s
Classification-JEL: I11; N72
Author-Name: Melissa A. Thomasson
Author-Person: pth24
Note: DAE EH
Number: 9167
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9167
File-URL: http://www.nber.org/papers/w9167.pdf
File-Format: application/pdf
Publication-Status: published as Thomasson, Melissa A. "Early Evidence Of An Adverse Selection Death Spiral? The Case Of Blue Cross And Blue Shield," Explorations in Economic History, 2004, v41(4,Oct), 313-328.
Abstract: This paper uses a unique data set from 1957 to examine whether or not Blue Cross and Blue Shield suffered from an adverse selection death spiral after for-profit commercial insurance companies entered the market for health insurance. Results suggest that moving to experience rating may have helped the Blues counteract adverse selection in the group health insurance market. Adverse selection posed a greater problem for the Blues in the market for individual health insurance, possibly because of differences in the way the Blues screened potential enrollees relative to commercial insurance companies.
Handle: RePEc:nbr:nberwo:9167
Template-Type: ReDIF-Paper 1.0
Title: Welfare Programs and Labor Supply
Classification-JEL: I13; J2
Author-Name: Robert Moffitt
Author-Person: pmo48
Note: LS PE
Number: 9168
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9168
File-URL: http://www.nber.org/papers/w9168.pdf
File-Format: application/pdf
Publication-Status: published as Moffitt, Robert A., 2002. "Welfare programs and labor supply," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 34, pages 2393-2430 Elsevier.
Abstract: The labor supply and other work incentive effects of welfare programs have long been a central concern in economic research. Work has also been an increasing focus of policy reforms in the U.S., culminating with a number of major policy changes in the 1990s whose intent was to increase employment and earnings levels of welfare recipients and other disadvantaged individuals. This paper reviews the economic research on this topic, covering both the theoretical models that have been developed as well as the empirical findings from econometric studies of the effects of existing welfare programs on labor supply.
Handle: RePEc:nbr:nberwo:9168
Template-Type: ReDIF-Paper 1.0
Title: The Gains from Trade with Monopolistic Competition: Specification, Estimation, and Mis-Specification
Classification-JEL: F12; F13
Author-Name: Huiwen Lai
Author-Name: Daniel Trefler
Author-Person: ptr44
Note: ITI
Number: 9169
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9169
File-URL: http://www.nber.org/papers/w9169.pdf
File-Format: application/pdf
Abstract: The difficulty of incorporating general equilibrium price effects into econometric estimating equations has deterred most researchers from econometrically estimating the welfare gains from trade liberalization. Using a paired-down CES monopolistic competition example, we show that this difficulty has been greatly exaggerated. Along the way, we estimate indeed precisely estimate large welfare gains from trade liberalization as measured by compensating variation. Unlike calibration methods, econometric methods allow researchers to isolate the violence done by the model to the data. We find that the CES monopolistic competition model horribly mis-specifies behavioural price elasticities and general equilibrium price feedbacks. The model as conceived is therefore of limited value for analysing the effects of trade liberalization. We report a number of specification issues that should point the way to better theoretical modeling.
Handle: RePEc:nbr:nberwo:9169
Template-Type: ReDIF-Paper 1.0
Title: Survival of the Best Fit: Competition from Low Wage Countries and the (Uneven) Growth of US Manufacturing Plants
Classification-JEL: F11; F14
Author-Name: Andrew B. Bernard
Author-Name: J. Bradford Jensen
Author-Person: pje75
Author-Name: Peter K. Schott
Author-Person: psc98
Note: ITI
Number: 9170
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9170
File-URL: http://www.nber.org/papers/w9170.pdf
File-Format: application/pdf
Publication-Status: published as Bernard, Andrew, J. Bradford Jensen and Peter K. Schott. 2006. Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of US Manufacturing Plants. Journal of International Economics 68:219-237
Abstract: We examine the relationship between import competition from low wage countries and the reallocation of US manufacturing from 1977 to 1997. Both employment and output growth are slower for plants that face higher levels of low wage import competition in their industry. As a result, US manufacturing is reallocated over time towards industries that are more capital and skill intensive. Differential growth is driven by a combination of increased plant failure rates and slower growth of surviving plants. Within industries, low wage import competition has the strongest effects on the least capital and skill intensive plants. Surviving plants that switch industries move into more capital and skill intensive sectors when they face low wage competition.
Handle: RePEc:nbr:nberwo:9170
Template-Type: ReDIF-Paper 1.0
Title: The Political Economy of Hatred
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Note: LE
Number: 9171
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9171
File-URL: http://www.nber.org/papers/w9171.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. "The Political Economy Of Hatred," Quarterly Journal of Economics, 2005, v120(1,Feb), 45-86.
Abstract: What determines the intensity and objects of hatred? Hatred forms when people believe that out-groups are responsible for past and future crimes, but the reality of past crimes has little to do with the level of hatred. Instead, hatred is the result of an equilibrium where politicians supply stories of past atrocities in order to discredit the opposition and consumers listen to them. The supply of hatred is a function of the degree to which minorities gain or lose from particular party platforms, and as such, groups that are particularly poor or rich are likely to be hated. Strong constitutions that limit the policy space and ban specific anti-minority policies will limit hate. The demand for hatred falls if consumers interact regularly with the hated group, unless their interactions are primarily abusive. The power of hatred is so strong that opponents of hatred motivate their supporters by hating the haters.
Handle: RePEc:nbr:nberwo:9171
Template-Type: ReDIF-Paper 1.0
Title: Catholic Schools and Bad Behavior: A Propensity Score Matching Analysis
Classification-JEL: I2; J13
Author-Name: H. Naci Mocan
Author-Person: pmo270
Author-Name: Erdal Tekin
Author-Person: pte12
Note: CH ED
Number: 9172
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9172
File-URL: http://www.nber.org/papers/w9172.pdf
File-Format: application/pdf
Publication-Status: published as Mocan Naci H. & Tekin Erdal, 2006. "Catholic Schools and Bad Behavior: A Propensity Score Matching Analysis," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-36, May.
Abstract: Although there is a sizeable literature on the effect of private school attendance on academic student outcomes, the number of studies that investigate the impact of school sector on non-academic outcomes is limited. Using a rich data set, we analyze the impact of Catholic school attendance on the likelihood that teenagers use or sell drugs, commit property crime, have sex, join gangs, attempt suicide, and run away from home. We employ propensity score matching methods to control for the endogeneity of school choice. Catholic school attendance reduces the propensity to use cocaine and to have sex for female students. However, it increases the propensity to use and sell drugs for male students.
Handle: RePEc:nbr:nberwo:9172
Template-Type: ReDIF-Paper 1.0
Title: A Renaissance Instrument to Support Nonprofits: The Sale of Private Chapels in Florentine Churches
Classification-JEL: L31; D82
Author-Name: Jonathan Katz Nelson
Author-Name: Richard J. Zeckhauser
Author-Person: pze7
Note: PE
Number: 9173
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9173
File-URL: http://www.nber.org/papers/w9173.pdf
File-Format: application/pdf
Publication-Status: published as A Renaissance Instrument to Support Nonprofits. The Sale of Private Chapels in Florentine Churches , Jonathan Katz. Nelson, Richard J. Zeckhauser. in The Governance of Not-for-Profit Organizations, Glaeser. 2003
Abstract: Catholic churches in Renaissance Florence supported themselves overwhelmingly from the contributions of wealthy citizens. The sale of private chapels within churches to individuals was a significant source of church funds, and facilitated a church construction boom. Chapel sales offered three benefits to churches: prices were usually far above cost; donor/purchasers purchased masses and other tie-in services; and they added to the magnificence of the church because donors were required to decorate chapels expensively. Donors purchased chapels for two primary reasons: to facilitate services for themselves and their families, such as masses and church burials, that would speed their departure from Purgatory; and to gain status in the community. Chapels were private property within churches, but were only occasionally used directly by their owners. The expense of chapels and their decorations made them an ideal signal for wealth, particularly since sumptuary laws limited most displays of wealth. To overcome the contributions free-rider problem, these churches sold private benefits not readily available elsewhere, namely status and salvation.
Handle: RePEc:nbr:nberwo:9173
Template-Type: ReDIF-Paper 1.0
Title: Coordination, Fair Treatment and Inflation Persistence
Classification-JEL: E31; E3
Author-Name: John C. Driscoll
Author-Person: pdr1
Author-Name: Steinar Holden
Note: ME
Number: 9174
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9174
File-URL: http://www.nber.org/papers/w9174.pdf
File-Format: application/pdf
Abstract: Most wage-contracting models with rational expectations fail to replicate the persistence in inflation observed in the data. We argue that coordination problems and multiple equilibria are the keys to explaining inflation persistence. We develop a wage-contracting model in which workers are concerned about being treated fairly. This model generates a continuum of equilibria (consistent with a range for the rate of unemployment), where workers want to match the wage set by other workers. If workers' expectations are based on the past behavior of wage growth, these beliefs will be self-fulfilling and thus rational. Based on quarterly U.S. data over the period 1955-2000, we find evidence that inflation is more persistent between unemployment rates of 4.7 and 6.5 percent, than outside these bounds, as predicted by our model.
Handle: RePEc:nbr:nberwo:9174
Template-Type: ReDIF-Paper 1.0
Title: Efficient Patent Pools
Classification-JEL: K11; L41
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: Jean Tirole
Author-Person: pti33
Note: CF PR
Number: 9175
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9175
File-URL: http://www.nber.org/papers/w9175.pdf
File-Format: application/pdf
Publication-Status: published as Lerner, Josh and Jean Tirole. "Efficient Patent Pools," American Economic Review, 2004, v94(3,Jun), 691-711.
Abstract: The paper builds a tractable model of a patent pool, an agreement among patent owners to license a set of their patents to one another or to third parties. It first provides a necessary and suñcient condition for a patent pool to enhance welfare. It shows that requiring pool members to be able to independently license patents matters if and only if the pool is otherwise welfare reducing, a property that allows the antitrust authorities to use this requirement to screen out unattractive pools. The paper then undertakes a number of extensions. It evaluates the external test' according to which patents with substitutes should not be included in a pool; analyzes the welfare implications of the reduction in the members' incentives to invent around or challenge the validity of each other's patents; looks at the rationale for the (common) provision of automatic assignment of future related patents to the pool; and, last, studies the intellectual property owners' incentives to form a pool or to cross-license when they themselves are users of the patents in the pool.
Handle: RePEc:nbr:nberwo:9175
Template-Type: ReDIF-Paper 1.0
Title: Real Shock, Monetary Aftershock: The San Francisco Earthquake and the Panic of 1907
Classification-JEL: E32; E58
Author-Name: Kerry A. Odell
Author-Name: Marc D. Weidenmier
Author-Person: pwe14
Note: DAE ME
Number: 9176
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9176
File-URL: http://www.nber.org/papers/w9176.pdf
File-Format: application/pdf
Publication-Status: published as Odell, Kerry A. and Marc D. Weidenmier. "Real Shock, Monetary Aftershock: The 1906 San Francisco Earthquake And The Panic Of 1907," Journal of Economic History, 2004, v64(4,Dec), 1002-1027.
Abstract: Economists have long studied the relationship between the real and monetary sectors. We examine the macroeconomic effects of the 1906 San Francisco earthquake, a shock that immediately reduced United States. GNP by 1.5-1.8 percentage points. The quake's impact manifested itself in gold flows, as British insurance companies paid their San Francisco claims out of home funds in the fall of 1906. The capital outflow prompted the Bank of England to raise interest rates and discriminate against American finance bills. British bank policy pushed the US into recession and set the stage for the 1907 financial crisis. The 1907 panic led to the formation of the National Monetary Commission whose proposals recommended the creation of the Federal Reserve. In this study, we identify the San Francisco earthquake as the shock that triggered the chain of events that culminated in the panic of 1907.
Handle: RePEc:nbr:nberwo:9176
Template-Type: ReDIF-Paper 1.0
Title: Large Portfolio Losses
Author-Name: Amir Dembo
Author-Name: Jean-Deominique Deuschel
Author-Name: Darrell Duffie
Author-Person: pdu341
Note: AP
Number: 9177
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9177
File-URL: http://www.nber.org/papers/w9177.pdf
File-Format: application/pdf
Publication-Status: published as Dembo, Amir, Jean-Dominique Deuschel and Darrell Duffie. "Large Portfolio Losses," Finance and Stochastics, 2004, v8(1), 3-16.
Abstract: This paper provide a large-deviations approximation of the tail distribution of total financial losses on a portfolio consisting of many positions. Applications include the total default losses on a bank portfolio, or the total claims against an insurer. The results may be useful in allocating exposure limits, and in allocating risk capital across different lines of business. Assuming that, for a given total loss, the distress caused by the loss is larger if the loss occurs within a smaller time period, we provide a large-deviations estimate of the likelihood that there will exist a sub-period of the future planning period during which a total loss of the critical severity occurs. Under conditions, this calculation is reduced to the calculation of the likelihood of the same sized loss over a fixed initial time interval whose length is a property of the portfolio and the critical loss level.
Handle: RePEc:nbr:nberwo:9177
Template-Type: ReDIF-Paper 1.0
Title: Bond Risk Premia
Classification-JEL: G1; E4
Author-Name: John H. Cochrane
Author-Person: pco57
Author-Name: Monika Piazzesi
Author-Person: ppi37
Note: AP EFG ME
Number: 9178
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9178
File-URL: http://www.nber.org/papers/w9178.pdf
File-Format: application/pdf
Publication-Status: published as Cochrane, John H. and Monika Piazzesi. "Bond Risk Premia," American Economic Review, 2005, v95(1,Mar), 138-160.
Abstract: This paper studies time variation in expected excess bond returns. We run regressions of annual excess returns on forward rates. We find that a single factor predicts 1-year excess returns on 1-5 year maturity bonds with an R2 up to 43%. The single factor is a tent-shaped linear function of forward rates. The return forecasting factor has a clear business cycle correlation: Expected returns are high in bad times, and low in good times, and the return-forecasting factor forecasts long-run output growth. The return-forecasting factor also forecasts stock returns, suggesting a common time-varying premium for real interest rate risk. The return forecasting factor is poorly related to level, slope, and curvature movements in bond yields. Therefore, it represents a source of yield curve movement not captured by most term structure models. Though the return-forecasting factor accounts for more than 99% of the time-variation in expected excess bond returns, we find additional, very small factors that forecast equally small differences between long term bond returns, and hence statistically reject a one-factor model for expected returns.
Handle: RePEc:nbr:nberwo:9178
Template-Type: ReDIF-Paper 1.0
Title: How to Protect Future Generations Using Tax Base Restrictions
Classification-JEL: H0; H2
Author-Name: Antonio Rangel
Author-Person: pra69
Note: PE
Number: 9179
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9179
File-URL: http://www.nber.org/papers/w9179.pdf
File-Format: application/pdf
Publication-Status: published as Rangel, Antonio. "How To Protect Future Generations Using Tax-Base Restrictions," American Economic Review, 2005, v95(1,Mar), 314-346.
Abstract: This paper studies constitutional restrictions on the tax base that protect future generations from expropriation and improve the optimality of investment in Intergenerational Public Goods (IPGs). The choice of the tax base matters because it affects how intergenerational (IG) spillovers are capitalized into assets that are owned by current generations, and thus the IG politics. We show that with an income tax base, present generations expropriate future generations and produce inefficiently low levels of IPGs. By contrast, with a land tax base, IG expropriation using debt is impossible, the level of investment in IPGs is higher and, for some types of IPGs, Pareto optimal.
Handle: RePEc:nbr:nberwo:9179
Template-Type: ReDIF-Paper 1.0
Title: Changing Labor Market Opportunities for Women and the Quality of Teachers 1957-1992
Classification-JEL: I20; J24
Author-Name: Sean P. Corcoran
Author-Person: pco81
Author-Name: William N. Evans
Author-Person: pev28
Author-Name: Robert S. Schwab
Note: CH ED
Number: 9180
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9180
File-URL: http://www.nber.org/papers/w9180.pdf
File-Format: application/pdf
Publication-Status: published as Corcoran, Sean P., William N. Evans and Robert M. Schwab. "Changing Labor-Market Opportunities For Women And The Quality Of Teachers, 1957-2000," American Economic Review, 2004, v94(2,May), 230-235.
Abstract: School officials and policy makers have grown increasingly concerned about their ability to attract and retain talented teachers. A number of authors have shown that in recent years the brightest students at least those with the highest verbal and math scores on standardized tests are less likely to enter teaching. In addition, it is frequently claimed that the ability of schools to attract these top students has been steadily declining for years. There is, however, surprisingly little evidence measuring the extent to which this popular proposition is true. We have good reason to suspect that the quality of those entering teaching has fallen over time. Teaching has remained a predominately female profession for years; at the same time, the employment opportunities for talented women outside of teaching have soared. In this paper, we combine data from four longitudinal surveys of high school graduates spanning the years 1957-1992 to examine how the propensity for talented women to enter teaching has changed over time. We find that while the quality of the average new female teacher has fallen only slightly over this period, the likelihood that a female from the top of her high school class will eventually enter teaching has fallen dramatically from 1964 to 1992 by our estimation, from almost 20% to under 4%.
Handle: RePEc:nbr:nberwo:9180
Template-Type: ReDIF-Paper 1.0
Title: Why Did the Tariff-Growth Correlation Reverse After 1950?
Classification-JEL: F1; N7
Author-Name: Michael A. Clemens
Author-Person: pcl20
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI
Number: 9181
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9181
File-URL: http://www.nber.org/papers/w9181.pdf
File-Format: application/pdf
Publication-Status: published as Clemens, Michael A. and Jeffrey G. Williamson. "Why Did The Tariff-Growth Correlation Change After 1950?," Journal of Economic Growth, 2004, v9(1,Mar), 5-46.
Abstract: This paper uses a new database to establish a key finding: high tariffs were associated with fast growth before World War II, while associated with slow growth thereafter. The paper offers some explanations for the sign switch by controlling for novel measures of the changing world economic environment. Rejecting alternative explanations based on changing export market growth or transportation cost declines, it shows how the oft-quoted Sachs-Warner result might be turned on its head in a world environment characterized by a moderately higher level of generalized tariff protection. We confirm the spirit of recent findings by Rodrik and Rodr¡guez that postwar tariffs need not be negatively correlated with growth in an unconditional fashion. Just a 4% increase in average tariff rates among trading partners might suffice to reverse any negative relationship between an average country's tariffs and its growth. An increase in own tariffs after 1970 hurt or at least didn't help growth, but it would have helped growth in a world where average trading partners' tariffs were moderately higher. The world environment matters. Leader-country reaction to big world events matters.
Handle: RePEc:nbr:nberwo:9181
Template-Type: ReDIF-Paper 1.0
Title: Path Dependence and the Origins of Cotton Textile Manufacturing in New England
Classification-JEL: N6; N4
Author-Name: Joshua L. Rosenbloom
Author-Person: pro664
Note: DAE ITI
Number: 9182
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9182
File-URL: http://www.nber.org/papers/w9182.pdf
File-Format: application/pdf
Abstract: During the first half of of the nineteenth century the United States emerged as a major producer of cotton textiles. This paper argues that the expansion of domestic textile production is best understood as a path- dependent process that was initiated by the proetction provided by the Embargo Act of 1807 and the War of 1812. This intial period of protected ended abruptly in 1815 with the conclusion of the war and the resumption of British imports, but the political climate had been irreversibly changed by the temporary expansion of the industry. After 1815 nascent manufacturers sought to protect the investments they had made by lobbying Congress. Their efforts had an important impact on the provisions concerning cotton textiles in the tariff bill of 1816, and during the 1820s manufacturers won increasingly strong protection, culminating in the passage of the Tariff of Abominations' in 1828.
Handle: RePEc:nbr:nberwo:9182
Template-Type: ReDIF-Paper 1.0
Title: The Social Security Early Entitlement Age in a Structural Model of Retirement and Wealth
Classification-JEL: H55; J26
Author-Name: Alan L. Gustman
Author-Person: pgu327
Author-Name: Thomas L. Steinmeier
Note: AG LS PE
Number: 9183
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9183
File-URL: http://www.nber.org/papers/w9183.pdf
File-Format: application/pdf
Publication-Status: published as Gustman, Alan L. and Thomas L. Steinmeier. "The Social Security Early Entitlement Age in a Structural Model of Retirement and Wealth." Journal of Public Economics 89, 2-3 (February 2005): 441-63.
Abstract: This paper specifies and estimates a structural life cycle model of retirement and wealth that explains the peaks in retirement both at ages 62 and at 65. Our estimates suggest that leisure and time preference are widely distributed among the population, with a bimodal distribution of time preference. Discount rates are either very low or very high. Those with high discount rates find the actuarial adjustments in Social Security benefits, which use a 3 percent real interest rate, to be inadequate. Once they reach age 62, the benefit accrual profile declines with age. This is the major explanation for the spike in retirement activity at 62. Liquidity constraints from inability to borrow on Social Security and pension benefits add to this effect. Simulations with the model suggest that raising the Social Security early entitlement age from age 62 to 64 will shift about three fifths of the bunching of retirements at age 62 to age 64. The bunching amounts to about 8 percent of the population, so raising the Social Security early age of entitlement will cause about 5 percent of the population to delay their retirement, implying a substantial effect on the Social Security system and its finances.
Handle: RePEc:nbr:nberwo:9183
Template-Type: ReDIF-Paper 1.0
Title: Decomposing Wage Inequality Change Using General Equilibrium Models
Classification-JEL: J3; D5
Author-Name: Lisandro Abrego
Author-Name: John Whalley
Author-Person: pwh8
Note: ITI LS
Number: 9184
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9184
File-URL: http://www.nber.org/papers/w9184.pdf
File-Format: application/pdf
Abstract: This paper presents ex post decomposition analysis of wage inequality change using multi-sector general equilibrium models. The analytical structure used is a specific- factors model of trade, which we calibrate to UK data for the two years 1979 and 1975. We first calibrate our general equilibrium trade model to observations on wage inequality, trade, production and consumption spanning these years, capturing the separate influences of trade, technology and demographics on inequality. Between these years wage inequality changed, but multiple changes in exogenous variables occurred (world prices, technology, endowments). We use calibration techniques to determine parameter values consistent with both the equilibria and the changes in exogenous variables contributing to the wage inequality change being decomposed. We then compute counterfactual equilibria in which only some of the changes in exogenous variables are present to allow us to assess what portion of the observed change is attributable to the various contributing factors. Our findings are that the roles of trade and factor-biased technological change are relatively larger than in earlier literature. We also find that changes in factor endowments to offset increased inequality generated by trade and skilled-biased technological changes, a feature that seems to have gone relatively unnoticed in earlier literature.
Handle: RePEc:nbr:nberwo:9184
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Education on Medical Technology Adoption: Are the More Educated More Likely to Use New Drugs
Classification-JEL: I12; I21
Author-Name: Adriana Lleras-Muney
Author-Person: pll45
Author-Name: Frank R. Lichtenberg
Author-Person: pli76
Note: EH
Number: 9185
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9185
File-URL: http://www.nber.org/papers/w9185.pdf
File-Format: application/pdf
Publication-Status: published as Lleras-Muney, Adriana and Frank Lichtenberg. “The Effect Of Education On Medical Technology Adoption: Are The More Educated More Likely To Use New Drugs?" Annales d’Economie et Statistique in memory of Zvi Griliches 79/80 (2006).
Abstract: There is a large body of work that documents a strong, positive correlation between education and measures of health, but little is known about the mechanisms by which education might affect health. One possibility is that more educated individuals are more likely to adopt new medical technologies. We investigate this theory by asking whether more educated people are more likely to use newer drugs, while controlling for other individual characteristics, such as income and insurance status. Using the 1997 MEPS, we find that more highly educated people are more likely to use drugs more recently approved by the FDA. We find that education only matters for individuals who repeatedly purchase drugs for a given condition, suggesting that the more educated are better able to learn from experience.
Handle: RePEc:nbr:nberwo:9185
Template-Type: ReDIF-Paper 1.0
Title: Why World Redistribution Fails
Classification-JEL: F35; H21
Author-Name: Wojciech Kopczuk
Author-Person: pko20
Author-Name: Joel Slemrod
Author-Person: psl10
Author-Name: Shlomo Yitzhaki
Author-Person: pyi12
Note: PE
Number: 9186
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9186
File-URL: http://www.nber.org/papers/w9186.pdf
File-Format: application/pdf
Publication-Status: published as Wojciech Kopczuk, Joel Slemrod, and Shlomo Yitzhaki . "The Limitations of Decentralized World Redistribution: An Optimal Taxation Approach", European Economic Review, Volume: 49, Issue: 4 (May 2005) Pages: 1051-1079
Abstract: An optimal linear world income tax that maximizes a border-neutral social welfare function provides a drastic reduction in world consumption inequality, dropping the Gini coefficient from 0.69 to 0.25. In contrast an optimal decentralized (i.e., within countries) redistribution has miniscule effect on world income inequality. Thus, the traditional public finance concern about the excess burden of redistribution cannot explain why there is so little world redistribution. Actual foreign aid is vastly lower than the transfers under the simulated world income tax, suggesting that countries such as the United States either place a much lower value on the welfare of foreigners or else expect that a very significant fraction of cross-border transfers is wasted. The product of the welfare weight and one minus the share of transfers that are wasted constitutes an implied weight that the United States assigns to foreigners. We calculate that value to be as low as 1/2000 of the value put on the welfare of an American, suggesting that U.S. policy implicitly assumes either that essentially all transfers are wasted or places essentially no value on the welfare of the citizens of the poorest countries.
Handle: RePEc:nbr:nberwo:9186
Template-Type: ReDIF-Paper 1.0
Title: Trust in Public Finance
Classification-JEL: H10; P10
Author-Name: Joel Slemrod
Author-Person: psl10
Note: EFG PE
Number: 9187
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9187
File-URL: http://www.nber.org/papers/w9187.pdf
File-Format: application/pdf
Publication-Status: published as Cnossen, Sijbren and Hans-Werner Sinn (eds.) Public finance and public policy in the new century, CESifo Seminar Series. Cambridge and London: MIT Press, 2003.
Abstract: Using data on trust and trustworthiness from the 1990 wave of the World Values Survey, I first investigate a model of the extent of tax cheating and the size of government that recognizes the interdependence of the two. The results reveal that tax cheating is lower in countries that exhibit more (not-government-related) trustworthiness. However, holding that constant, tax cheating becomes more acceptable as government grows. All in all, there is some weak evidence that the strong positive cross-country correlation between the size of government and tax cheating masks the fact that big government induces tax cheating while, at the same time, tax cheating constrains big government. I then add to the structural model an equation determining the level of prosperity, allowing prosperity to depend, inter alia, on the level of government and on trust in others. I find some evidence that both prosperity and government involvement are higher in more trusting societies. Moreover, holding these measures of trust constant, the association of government size with prosperity is positive until a level of government spending somewhere between 31% and 38% of GDP, after which its marginal effect is negative. Thus, although a trusting citizenry allows larger government, the tax burden this entails erodes the rule obedience taxpayers exhibit toward government.
Handle: RePEc:nbr:nberwo:9187
Template-Type: ReDIF-Paper 1.0
Title: The Trick is to Live: Is the Estate Tax Social Security for the Rich?
Classification-JEL: H2
Author-Name: Wojciech Kopczuk
Author-Person: pko20
Note: PE
Number: 9188
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9188
File-URL: http://www.nber.org/papers/w9188.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, 2003, 111(6), 1318-1341.
Abstract: Because estate tax liability usually depends on how long one lives, it implicitly provides annuity income. In the absence of annuity markets, lump-sum estate taxation may be used to achieve the first-best solution for individuals with a sufficiently strong bequest motive. Calculations of the annuity embedded in the U.S. estate tax show that people with $10 million of assets may be effectively receiving more than $100,000 a year financed at actuarially fair rates by their tax payments. According to my calibrations, the insurance effect reduces the marginal cost of funds (MCF) for the estate tax by as much as 30% and the resulting MCF is within the range of estimates for the marginal cost of funds for the income tax.
Handle: RePEc:nbr:nberwo:9188
Template-Type: ReDIF-Paper 1.0
Title: Storable Votes
Classification-JEL: D72; F15
Author-Name: Alessandra Casella
Author-Person: pca496
Note: IFM PE
Number: 9189
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9189
File-URL: http://www.nber.org/papers/w9189.pdf
File-Format: application/pdf
Publication-Status: published as Casella, Alessandra. "Storable Votes," Games and Economic Behavior, 2005, v51(2,May), 391-419.
Abstract: Motivated by the need for more flexible decision-making mechanisms in the European Union, the paper proposes a simple but novel voting scheme for binary decisions taken by committees that meet regularly over time. At each meeting, committee members are allowed to store their vote for future use; the decision is then taken according to the majority of votes cast. The possibility of shifting votes intertemporally allows agents to concentrate their votes when preferences are more intense, and although the scheme will not in general achieve full efficiency, making votes storable typically leads to ex ante welfare gains. The analysis in the paper suggests that the result will hold if one of the following conditions is satisfied: (i) the number of voters is above a minimum threshold; (ii) preferences are not too polarized; (iii) the horizon is long enough.
Handle: RePEc:nbr:nberwo:9189
Template-Type: ReDIF-Paper 1.0
Title: Sargent-Wallace Meets Krugman-Flood-Garber, or: Why Sovereign Debt Swaps Don't Avert Macroeconomic Crises
Classification-JEL: F34; F36
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Kenneth M. Kletzer
Author-Name: Brian Pinto
Note: IFM
Number: 9190
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9190
File-URL: http://www.nber.org/papers/w9190.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua, Kenneth M. Kletzer and Brian Pinto. "Sargent-Wallace Meets Krugman-Flood-Garber, Or: Why Sovereign Debt Swaps Do To Avert Macroeconomic Crises," Economic Journal, 2005, v115(503,Apr), 343-367.
Abstract: This paper argues that the frequent failure of the debt swaps is not an accident. Instead, it follows from fundamental forces driven by the market's assessment of the scarcity of fiscal revenue relative to the demand for fiscal outlays. It follows from the observation that arbitrage forces systematically impact prices in asset markets. Ignoring these price adjustments would lead to too optimistic an assessment of the gains from swaps or buybacks. A by-product of our paper is to highlight the perils of financial engineering that ignores the intertemporal constraints imposed by fiscal fundamentals. As a country approaches the range of partial default (either on domestic or external debt), swaps may not provide the expected breathing room and could even bring the crisis forward. Our methodology combines three independent themes: exchange rate crises as the manifestation of excessive monetary injections [Krugman-Flood-Garber], the fiscal theory of inflation [Sargent-Wallace (1981)], and sovereign debt. The integrated framework derives devaluation and external debt repudiation as part of a public-finance optimizing problem. We shows that under conditions similar to those which prevailed in Russia and Argentina prior to their meltdown, swaps are not just neutral, but could actually make the situation worse and even trigger a speculative attack. An unsettlingly clear implication of the model is that there may be very few options left once public debt reaches levels regarded as unsustainable in relation to fiscal fundamentals. Dollarization only makes matters worse, and pushes the debt write-down option to the fore.
Handle: RePEc:nbr:nberwo:9190
Template-Type: ReDIF-Paper 1.0
Title: Vertical Integration and Distance to Frontier
Classification-JEL: L22; O31
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Fabrizio Zilibotti
Author-Person: pzi3
Note: EFG
Number: 9191
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9191
File-URL: http://www.nber.org/papers/w9191.pdf
File-Format: application/pdf
Publication-Status: published as Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2003. "Vertical Integration and Distance to Frontier," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 630-638, 04/05.
Abstract: We construct a model where the equilibrium organization of firms changes as an economy approaches the world technology frontier. In vertically integrated firms, owners (managers) have to spend time both on production and innovation activities, and this creates managerial overload, and discourages innovation. Outsourcing of some production activities mitigates the managerial overload, but creates a holdup problem, causing some of the rents of the owners to be dissipated to the supplier. Far from the technology frontier, imitation activities are more important, and vertical integration is preferred. Closer to the frontier, the value of innovation increases, encouraging outsourcing.
Handle: RePEc:nbr:nberwo:9191
Template-Type: ReDIF-Paper 1.0
Title: Modest Policy Interventions
Classification-JEL: E52; E47
Author-Name: Eric M. Leeper
Author-Person: ple3
Author-Name: Tao Zha
Author-Person: pzh80
Note: EFG
Number: 9192
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9192
File-URL: http://www.nber.org/papers/w9192.pdf
File-Format: application/pdf
Publication-Status: published as Leeper, Eric M. and Tao Zha. "Modest Policy Interventions," Journal of Monetary Economics, 2003, v50(8,Nov), 1673-1700.
Abstract: We present a framework for computing and evaluating linear projections of macro variables conditional on hypothetical paths of monetary policy. A modest policy intervention is a change in policy that does not significantly shift agents' beliefs about policy regime and does not generate quantitatively important expectations-formation effects of the kind Lucas (1976) emphasizes. The framework is applied to an econometric model of U.S. postwar monetary policy behavior. It finds that a rich class of interventions routinely considered by the Federal Reserve are modest and their impacts can be reliably forecasted by an accurately identified linear model. Moreover, modest interventions can matter: they may shift the projected paths and probability distributions of macro variables in economically meaningful ways.
Handle: RePEc:nbr:nberwo:9192
Template-Type: ReDIF-Paper 1.0
Title: Abortion Legalization and Adolescent Substance Use
Classification-JEL: I12; J13
Author-Name: Kerwin Kofi Charles
Author-Name: Melvin Stephens Jr.
Author-Person: pst400
Note: EH
Number: 9193
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9193
File-URL: http://www.nber.org/papers/w9193.pdf
File-Format: application/pdf
Publication-Status: published as Charles, Kerwin Kofi and Melvin Stephens Jr. “Abortion Legalization and Adolescent Substance." Journal of Law and Economics 49, 2 (October 2006): 481-505.
Abstract: We assess whether in utero exposure to legalized abortion in the early 1970's affected individuals' propensities to use controlled substances as adolescents. We exploit the fact that some states legalized abortion before national legalization in 1973 to compare differences in substance use for adolescents across birth cohorts in different states. We find that persons exposed to early legalization were, on average, much less likely to use controlled substances. We also assess how substance use varies with state level birth rates and abortion ratios. Overall, our results suggest that legalization lowered substance use because of the selective use of abortion by relatively disadvantaged women.
Handle: RePEc:nbr:nberwo:9193
Template-Type: ReDIF-Paper 1.0
Title: Flexibility and Job Creation: Lessons for Germany
Classification-JEL: L5; J3
Author-Name: James J. Heckman
Note: EFG LS PR
Number: 9194
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9194
File-URL: http://www.nber.org/papers/w9194.pdf
File-Format: application/pdf
Publication-Status: published as Aghion, Philippe (ed.) Knowledge, information, and expectations in modern macroeconomics: In honor of Edmund S. Phelps. Princeton and Oxford: Princeton University Press, 2003.
Abstract: This paper examines the performance of the German economy and the role of the regulation and welfare state policies in affecting its performance. While the German economy is still strong, incentives in place are likely to impair future German competitiveness and productivity.
Handle: RePEc:nbr:nberwo:9194
Template-Type: ReDIF-Paper 1.0
Title: Understanding Individual Account Guarantees
Classification-JEL: G2; H4
Author-Name: Marie-Eve Lachance
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Note: AG PE
Number: 9195
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9195
File-URL: http://www.nber.org/papers/w9195.pdf
File-Format: application/pdf
Publication-Status: published as Lachance, Marie-Eve & Olivia S. Mitchell. “Understanding Individual Account Guarantees." American Economic Review Papers and Proceedings 93, 2 (May 2003): 257-260.
Abstract: Demographic aging renders workers vulnerable to the inherent uncertainty of unfunded social security systems. This realization has set off a global wave of social security reforms, and numerous countries have now set up Individual Accounts (IA) plans in response. Strengths of IAs are that participants gain ownership in their accounts, and they also may diversify their pension investments; additionally, they produce a capitalized, funded system that enhances old-age economic security. While IAs reduce the risk participants face due to unfunded social security systems, participants holding capital market investments in IAs are exposed to fluctuations in the value of their pension assets. Concern over market volatility has prompted some to emphasize the need for guarantees' of pension accumulations. This paper offers a way to think about guarantees in the context of a social security reform that includes Individual Accounts. When a pension guarantee has economic value to participants, it will have economic costs. We illustrate how these costs can be important and vary significantly with time horizon, investment mix, and guarantee design. Our findings indicate that plan designers and budget analysts would do well to recognize such costs and identify how they can be financed.
Handle: RePEc:nbr:nberwo:9195
Template-Type: ReDIF-Paper 1.0
Title: Precautionary Saving and Consumption Fluctuations
Classification-JEL: E21; D91
Author-Name: Jonathan Parker
Author-Person: ppa21
Author-Name: Bruce Preston
Author-Person: ppr134
Note: EFG ME
Number: 9196
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9196
File-URL: http://www.nber.org/papers/w9196.pdf
File-Format: application/pdf
Publication-Status: published as Parker, Jonathan A. and Bruce Preston. "Precautionary Saving And Consumption Fluctuations," American Economic Review, 2005, v95(4,Sep), 1119-1143.
Abstract: This paper uses data on the expenditures of households to explain movements in the average growth rate of consumption in the U.S. from the beginning of 1982 to the end of 1997. We propose and implement a decomposition of consumption growth into series representing four proximate causes. These are new information, and three causes of predictable consumption growth: intertemporal substitution, changes in the preferences for consumption, and incomplete markets for consumption insurance. Incomplete markets for trading consumption in future states leads to statistically significant and countercyclical movements in expected consumption growth. The economic importance of precautionary saving rivals that of the real interest rate, but the relative importance of each source of movement in the volatility of consumption is not precisely measured.
Handle: RePEc:nbr:nberwo:9196
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Income on Mortality: Evidence from the Social Security Notch
Classification-JEL: I12; H55
Author-Name: Stephen E. Snyder
Author-Name: William N. Evans
Author-Person: pev28
Note: AG EH
Number: 9197
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9197
File-URL: http://www.nber.org/papers/w9197.pdf
File-Format: application/pdf
Publication-Status: published as Snyder, Stephen E. and William N. Evans. "The Effect Of Income On Mortality: Evidence From The Social Security Notch," Review of Economics and Statistics, 2006, v88(3,Aug), 482-495.
Abstract: There is widespread and longstanding agreement that life expectancy and income are positively correlated. However, it has proven much more difficult to establish a causal relationship since income and health are jointly determined. We use a major change in the Social Security law as exogenous variation in income to examine the impact of income on mortality in an elderly population. The legislation created a notch' in Social Security benefits based upon date of birth; those born before January 1, 1917 generally receive higher benefits than those born afterwards. We compare mortality rates after age 65 for males born in the second half of 1916 and the first half of 1917. Data from restricted-use versions of the National Mortality Detail File combined with Census data allows us to count all deaths among elderly Americans between 1979 and 1993. We find that the higher income group has a statistically significantly higher mortality rate, contradicting the previous literature. We also find that the younger cohort responded to lower incomes by increasing post-retirement work effort. These results suggest that moderate employment has beneficial health effects for the elderly.
Handle: RePEc:nbr:nberwo:9197
Template-Type: ReDIF-Paper 1.0
Title: The Social and Economic Impact of Native American Casinos
Classification-JEL: L83; R58
Author-Name: William N. Evans
Author-Person: pev28
Author-Name: Julie H. Topoleski
Note: PE
Number: 9198
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9198
File-URL: http://www.nber.org/papers/w9198.pdf
File-Format: application/pdf
Abstract: In the late 1980s, a series of legal rulings favorable to tribes and the subsequent passage of the Indian Gaming Regulatory Act of 1988 legalized gaming operations on reservations in many states. Today, there are over 310 gaming operations run by more than 200 of the nations' 556 federally-recognized tribes. Of these operations, about 220 are Las Vegas' style casinos with slot machines and/or table games. We use a simple difference-in-difference framework where we compare economic outcomes before and after tribes open casinos to outcomes over the same period for tribes that do not adopt or are prohibited from adopting gaming. Four years after tribes open casinos, employment has increased by 26 percent, and tribal population has increased by about 12 percent, resulting in an increase in employment to population ratios of five percentage points or about 12 percent. The fraction of adults who work but are poor has declined by 14 percent. Tribal gaming operations seem to have both positive and negative spillovers in the surrounding communities. In counties where an Indian-owned casino opens, we find that jobs per adult increase by about five percent of the median value. Given the size of tribes relative to their counties, most of this growth in employment is due to growth in non-Native American employment. The increase in economic activity appears to have some health benefits in that four or more years after a casino opens, mortality has fallen by 2 percent in a county with a casino and an amount half that in counties near a casino. Casinos do, however, come at some cost. Four years after a casino opens, bankruptcy rates, violent crime, and auto thefts and larceny are up 10 percent in counties with a casino.
Handle: RePEc:nbr:nberwo:9198
Template-Type: ReDIF-Paper 1.0
Title: Integration of Unemployment Insurance with Retirement Insurance
Author-Name: Joseph Stiglitz
Author-Name: Jungyoll Yun
Note: LS PE
Number: 9199
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9199
File-URL: http://www.nber.org/papers/w9199.pdf
File-Format: application/pdf
Publication-Status: published as Stiglitz, Joseph E. and Jungyoll Yun. "Integration Of Unemployment Insurance With Retirement Insurance," Journal of Public Economics, 2005, v89(11-12,Dec), 2037-2067.
Abstract: This paper analyzes a social insurance system that integrates unemployment insurance with a pension program through an individual account, allowing workers to borrow against their future wage income to finance consumption during an unemployment episode and thus improving their search incentives while reducing risks. This paper identifies factors which determine the optimal degree of integration. A fully integrated system is one in which no reliance is placed at all on a separate tax-funded unemployment insurance program. We show that when the duration of unemployment is very short compared to the period of employment or retirement, the optimal system involves an exclusive reliance on pension-funded self-insurance. This system imposes a negligible risk burden for workers while avoiding attenuating search incentives. We also argue that a joint integration of several social insurance programs with a pension program through an individual account is desirable unless the risks are perfectly correlated to each other.
Handle: RePEc:nbr:nberwo:9199
Template-Type: ReDIF-Paper 1.0
Title: Do Trust and Trustworthiness Pay Off?
Classification-JEL: J30; H40
Author-Name: Joel Slemrod
Author-Person: psl10
Author-Name: Peter Katuscak
Note: PE
Number: 9200
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9200
File-URL: http://www.nber.org/papers/w9200.pdf
File-Format: application/pdf
Publication-Status: published as Slemrod, Joel and Peter Katuscak. "Do Trust and Trustworthiness Pay Off?," Journal of Human Resources, 2005, v40(3,Summer), 621-646.
Abstract: Are individuals who trust others better off than those who do not? Do trustworthy people prosper more than untrustworthy ones? We first pose these questions in a search model where individuals face repeated choices between trusting (initiating an investment transaction) and not trusting, and between being trustworthy (not stealing the investment) and cheating. We then derive predictions for the relationship between observed individual behavior, aggregate attitudes, and individual prosperity. Finally, we evaluate these predictions empirically using household-level data for eighteen (mostly developed) countries from the World Values Survey. We find that, on average, a trusting attitude has a positive impact on income, while trustworthiness has a negative impact on income. In addition, we find evidence of complementarity between these two attitudes and the aggregate levels of the complementary attitudes. Most strikingly, the payoff to being trustworthy depends positively on the aggregate amount of trust in a given country.
Handle: RePEc:nbr:nberwo:9200
Template-Type: ReDIF-Paper 1.0
Title: Is Trade Good or Bad for the Environment? Sorting Out the Causality
Classification-JEL: Q2; F1
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: ED ITI
Number: 9201
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9201
File-URL: http://www.nber.org/papers/w9201.pdf
File-Format: application/pdf
Publication-Status: published as Jeffrey A. Frankel & Andrew K. Rose, 2005. "Is Trade Good or Bad for the Environment? Sorting Out the Causality," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 85-91, October.
Abstract: What is the effect of trade on a country's environment, for a given level of GDP? Some have observed an apparent positive correlation between openness to trade and measures of environmental quality. But this could be due to endogeneity of trade, rather than causality. This paper uses exogenous determinants of trade geographical variables from the gravity model as instruments to isolate the effect of openness. The finding is that trade may indeed have a beneficial effect on three measures of air pollution. Statistical significance is lacking for Particulate Matter, but is moderate for NO2, and high for SO2. Results for broader environmental measures are not as encouraging, but one can at least say that there is little evidence that trade has the detrimental effect on the environment that the race-to-the-bottom theory would lead one to expect. The larger effect appears to come via income itself: our results generally support the environmental Kuznets curve, which says that growth harms the environment at low levels of income and helps at high levels, and to support the proposition that openness to trade accelerates the growth process.
Handle: RePEc:nbr:nberwo:9201
Template-Type: ReDIF-Paper 1.0
Title: Does Income Inequality Lead to Consumption Inequality? Evidence and Theory
Classification-JEL: E21; D91
Author-Name: Dirk Krueger
Author-Person: pkr7
Author-Name: Fabrizio Perri
Author-Person: ppe52
Note: EFG LS
Number: 9202
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9202
File-URL: http://www.nber.org/papers/w9202.pdf
File-Format: application/pdf
Publication-Status: published as Krueger, Dirk and Fabrizio Perri. "Does Income Inequality Lead To Consumption Inequality? Evidence And Theory," Review of Economic Studies, 2006, v73(1,Jan), 163-193.
Abstract: This paper first documents the evolution of the cross-sectional income and consumption distribution in the US in the past 25 years. Using data from the Consumer Expenditure Survey we find that a rising income inequality has not been accompanied by a corresponding rise in consumption inequality. Over the period from 1972 to 1998 the standard deviation of the log of after-tax labor income has increased by 20% while the standard deviation of log consumption has increased less than 2%. Furthermore income inequality has increased both between and within education groups while consumption inequality has increased between education groups but mildly declined within groups. We then argue that these empirical findings are consistent with the hypothesis that an increase in income volatility has been an important cause of the increase in income inequality, but at the same time has lead to an endogenous development of credit markets, allowing households to better smooth their consumption against idiosyncratic income fluctuations. We develop a consumption model in which the sharing of income risk is limited by imperfect enforcement of credit contracts and in which the development of financial markets depends on the volatility of the individual income process. This model is shown to be quantitatively consistent with the joint evolution of income and consumption inequality in US, while other commonly used consumption models are not.
Handle: RePEc:nbr:nberwo:9202
Template-Type: ReDIF-Paper 1.0
Title: The Role for Discretionary Fiscal Policy in a Low Interest Rate Environment
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: EFG ME PE
Number: 9203
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9203
File-URL: http://www.nber.org/papers/w9203.pdf
File-Format: application/pdf
Publication-Status: published as Martin Feldstein, 2002. "Commentary : Is there a role for discretionary fiscal policy?," Proceedings, Federal Reserve Bank of Kansas City, pages 151-162.
Abstract: Although there is now widespread agreement in the economics profession that discretionary counter-cyclical'fiscal policy has not contributed to economic stability and may have actually been destabilizing at particular times in the past, there is one important condition when discretionary fiscal policy can play a constructive role: in a sustained downturn when aggregate demand and interest rates are low and when prices are falling or may soon be falling. This short note begins by summarizing the general case against using fiscal policy for stabilization. It next considers the argument for using a hyperexpansive' monetary policy to reduce the risk that a low rate of inflation will lead to a deflationary situation in which monetary policy becomes ineffective. Such a policy would increase the risk of asset price bubbles and of a misaligned exchange rate. Discretionary fiscal policy provides an alternative way to stimulate the economy when aggregate demand and interest rates are low and when prices are falling or may soon be falling. A stimulus can be achieved without increasing budget deficits if the fiscal policy acts by providing an incentive for increased private spending. Specific examples for the U.S. and Japan are considered.
Handle: RePEc:nbr:nberwo:9203
Template-Type: ReDIF-Paper 1.0
Title: FDI Contribution to Capital Flows and Investment in Capacity
Classification-JEL: F2; F3
Author-Name: Assaf Razin
Author-Person: pra388
Note: ITI
Number: 9204
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9204
File-URL: http://www.nber.org/papers/w9204.pdf
File-Format: application/pdf
Abstract: The paper surveys a theory of FDI, which captures a unique feature: hands-on management standards, that enable investors to react in real time to a changing economic environment. Equipped with superior managerial skills, foreign direct investors are able to outbid portfolio investors for the top productivity firms in a particular industry in which they have specialized in the source country. Consequently, FDI investors would make investment, both larger, and of higher quality (namely, with large rates of returns), than the domestic investors. The theory can explain both two-way FDI flows among developed countries, and one-way FDI flows from developed to developing countries. Gains to the host country from FDI stem from the informational value of FDI. The predictions of the theory are consistent with evidence from panel data: larger FDI coefficients in the domestic investment and output growth regressions relative to the portfolio equity flow and international loan coefficients, reflect a more significant role for FDI in the domestic investment process than other types of capital inflows.
Handle: RePEc:nbr:nberwo:9204
Template-Type: ReDIF-Paper 1.0
Title: What is the Tradeoff Between Smaller Classes and Teacher Quality?
Classification-JEL: I2; H4
Author-Name: Christopher Jepsen
Author-Person: pje18
Author-Name: Steven Rivkin
Author-Person: pri265
Note: ED
Number: 9205
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9205
File-URL: http://www.nber.org/papers/w9205.pdf
File-Format: application/pdf
Abstract: This paper investigates the effects of California's class size reduction program on teacher quality and student achievement in an effort to gain a comprehensive understanding of the impact of a large-scale decrease in class size. It uses year-to-year differences in class size generated by natural variation in enrollment and the state's class size reduction program to identify both the direct effects of class size reduction and accompanying changes in teacher quality. The results show that, all else equal, smaller classes raise third-grade mathematics and reading achievement, particularly for lower-income students. However, the expansion of the teaching force required to staff the additional classrooms appears to have led to a deterioration in average teacher quality in schools serving a predominantly black student body. This deterioration partially or, in some cases, fully offset the benefits of smaller classes, demonstrating the importance of considering all implications of any policy change.
Handle: RePEc:nbr:nberwo:9205
Template-Type: ReDIF-Paper 1.0
Title: Competition, Payer, and Hospital Quality
Classification-JEL: I11; L1
Author-Name: Gautam Gowrisankaran
Author-Name: Robert Town
Author-Person: pto430
Note: EH PR
Number: 9206
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9206
File-URL: http://www.nber.org/papers/w9206.pdf
File-Format: application/pdf
Publication-Status: published as Gowrisankaran, Gautam and Robert J. Town. “Competition, Payers and Hospital Quality.” Health Services Research 38 (2003): 1403 – 22.
Abstract: The objective of this study is to estimate the effects of competition for both Medicare and HMO patients on the quality decisions of hospitals in Southern California. We use discharge data from the State of California for the period 1989-1993. The outcome variables are the risk-adjusted hospital mortality rates for pneumonia (estimated by the authors) and acute myocardial infarction (reported by the state of California). Measures of competition are constructed for each hospital and payer type. The competition measures are formulated to mitigate the possibility of endogeneity bias. The study finds that increases in the degree of competition for HMO patients decrease risk-adjusted hospital mortality rates. Conversely, increases in competition for Medicare enrollees are associated with increases in risk-adjusted mortality rates for hospitals. In conjunction with previous research, the estimates indicate that increasing competition for HMO patients appears to reduce prices and save lives and hence appears to improve welfare. However, increases in competition for Medicare appear to reduce quality and may reduce welfare. Increasing competition has little net effect on hospital quality for our sample.
Handle: RePEc:nbr:nberwo:9206
Template-Type: ReDIF-Paper 1.0
Title: Household Leverage and the Deductibility of Home Mortgage Interest: Evidence from UK House Purchasers
Classification-JEL: H2
Author-Name: Patric H. Hendershott
Author-Name: Gwilyn Pryce
Author-Name: Michael White
Note: PE
Number: 9207
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9207
File-URL: http://www.nber.org/papers/w9207.pdf
File-Format: application/pdf
Abstract: During the last quarter century, mortgage interest deductibility has been gradually phased out. In 1974 a ceiling was set on the size of the mortgage eligible for interest deductibility (œ30,000 since 1983) and, beginning in 1993, the maximum rate at which interest under that ceiling could be deducted was reduced in four steps to zero in 1999. The combination of these changes gives a rich array of different debt tax penalties for different households in different years. We analyze over 117,000 loans originated in the UK during the 1988-91 and 1995-98 periods to finance home purchases. We first estimate a logit to predict whether a household's loan exceeds the œ30,000 ceiling. These predicted probabilities are then employed to construct debt tax penalty variables that are used to explain household LTVs on loans to finance home purchases. The penalty variables depend on the predicted probability of having a loan that exceeds the ceiling, the market mortgage rate, and exogenous household specific tax rates. From these results we compute estimates of the impact of removing deductibility on initial LTVs in the UK and on the weighted average cost of capital for owner-occupied housing. Removal of deductibility is estimated to reduce initial LTVs, which mitigates the rise in the weighted average cost of capital, by about 30 percent, with the reduction varying with household age, loan size (above or below the œ30,000 limit) and tax bracket.
Handle: RePEc:nbr:nberwo:9207
Template-Type: ReDIF-Paper 1.0
Title: Can Free Entry be Inefficient? Fixed Commissions and Social Waste in the Real Estate Industry
Classification-JEL: J0; J4
Author-Name: Chang-Tai Hsieh
Author-Name: Enrico Moretti
Author-Person: pmo392
Note: EFG IO
Number: 9208
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9208
File-URL: http://www.nber.org/papers/w9208.pdf
File-Format: application/pdf
Publication-Status: published as Hsieh, Chang-Tai and Enrico Moretti. "Can Free Entry Be Inefficient? Fixed Commissions And Social Waste In The Real Estate Industry," Journal of Political Economy, 2003, v111(5,Oct), 1076-1122.
Abstract: Real estate agents in the US typically charge a 6 percent commission, regardless of the price of the house sold. As a consequence, the commission fee from selling a house will differ dramatically across cities depending on the average price of housing, although the effort necessary to match buyers and sellers may not be that different. We use a simple economic model and cross-city data to measure the effect of the fixed commission rate on market entry by real-estate agents. We show that if the commission rate does not vary and if there are low barriers to entry to the real-estate brokerage business, the entry of real-estate agents into cities with high housing prices is socially inefficient. Consistent with our model, we find that when the average price of land in a city increases, (1) the fraction of real-estate brokers in a city increases; (2) the productivity of an average real-estate agent (houses sold per hour worked) falls; and (3) the real wage of a typical real-estate agent remains unchanged. We can not completely rule out the alternative explanation that these results reflect unmeasured differences in the quality of broker services. However, we present evidence that as the average price of housing in a city increases, there is only a small increase in the amount of time a buyer spends searching for a house, and the average time a house for sale stays on the market falls.
Handle: RePEc:nbr:nberwo:9208
Template-Type: ReDIF-Paper 1.0
Title: Networks or Neighborhoods? Correlations in the Use of Publicly-Funded Maternity Care in California
Classification-JEL: I18; I38
Author-Name: Anna Aizer
Author-Person: pai9
Author-Name: Janet Currie
Author-Person: pcu13
Note: CH EH
Number: 9209
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9209
File-URL: http://www.nber.org/papers/w9209.pdf
File-Format: application/pdf
Publication-Status: published as Aizer, Anna and Janet Currie. "Networks Or Neighborhoods? Correlations In The Use Of Publicly-Funded Maternity Care In California," Journal of Public Economics, 2004, v88(12,Dec), 2573-2585.
Abstract: This study focuses on network effects' in the utilization of publicly funded prenatal care using Vital Statistics data from California for 1989 to 2000. Networks are defined using 5-digit zipcodes and a woman's racial or ethnic group. Like others, we find evidence that the use of public programs is highly correlated within groups defined using race/ethnicity and neighborhoods. These correlations persist even when we control for many unobserved characteristics by including zipcode-year fixed effects, and when we focus on the interaction between own group behavior and measures of the potential for contacts with other members of the group ( contact availability'). However, the richness of our data allows us to go further and to conduct several tests of one hypothesis about networks: That the estimated effects represent information sharing within groups. The results cast doubt on the idea that the observed correlations can be interpreted as evidence of information sharing, and point instead to differences in the behavior of the institutions serving different groups of low-income women as the primary explanation for group-level differences in the take-up of this important public program.
Handle: RePEc:nbr:nberwo:9209
Template-Type: ReDIF-Paper 1.0
Title: The Effects of a Baby Boom on Stock Prices and Capital Accumulation in the Presence of Social Security
Classification-JEL: E22
Author-Name: Andrew B. Abel
Author-Person: pab10
Note: AG AP EFG PE
Number: 9210
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9210
File-URL: http://www.nber.org/papers/w9210.pdf
File-Format: application/pdf
Publication-Status: published as Abel, Andrew B. "The Effects Of A Baby Boom On Stock Prices And Capital Accumulation In The Presence Of Social Security," Econometrica, 2003, v71(2,Mar), 551-578.
Abstract: Is the stock market boom a result of the baby boom? This paper develops an overlapping generations model in which a baby boom is modeled as a high realization of a random birth rate, and the price of capital is determined endogenously by a convex cost of adjustment. A baby boom increases national saving and investment and thus causes an increase in the price of capital. The price of capital is mean-reverting so the initial increase in the price of capital is followed by a decrease. Social Security can potentially affect national saving and investment, though in the long run, it does not affect the price of capital.
Handle: RePEc:nbr:nberwo:9210
Template-Type: ReDIF-Paper 1.0
Title: A Brazilian Debt-Crisis Model
Classification-JEL: F1
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Note: IFM
Number: 9211
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9211
File-URL: http://www.nber.org/papers/w9211.pdf
File-Format: application/pdf
Abstract: We develop a model that captures important features of debt crises of the Brazilian type. Its applicability to Brazil lies in the fact that (1) in Brazil the macro fundamentals were sound (e.g., a primary surplus, a relatively low debt/GDP ratio, etc.); and (2) in the Brazilian case the trigger appears to be the forthcoming elections, with an expected regime change.
Handle: RePEc:nbr:nberwo:9211
Template-Type: ReDIF-Paper 1.0
Title: University Research, Industrial R&D, and the Anchor Tenant Hypothesis
Classification-JEL: O3; R3
Author-Name: Ajay Agrawal
Author-Person: pag38
Author-Name: Iain M. Cockburn
Author-Person: pco166
Note: PR
Number: 9212
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9212
File-URL: http://www.nber.org/papers/w9212.pdf
File-Format: application/pdf
Abstract: We examine geographic concentration, agglomeration, and co-location of university research and industrial R&D in three technological areas: medical imaging, neural networks, and signal processing. Using data on scientific publications and patents as indicators of university research and industrial R&D, we find strong evidence of geographic concentration in both activities at the level of MSAs. While evidence for agglomeration (in the sense of excess' concentration relative to the size of MSAs and the size distribution of research labs) of research in these fields is mixed, we do find strong evidence of co-location of upstream and downstream activity. We view such co-located vertically connected activities as constituents of a local innovation system,' and these appear to vary markedly in their ability to convert local academic research into local commercial innovation. We develop and test the hypothesis that the presence of a large, local, R&D-intensive firm an anchor tenant' enhances the productivity of local innovation systems by making local university research more likely to be absorbed by and to stimulate local industrial R&D. Presence of anchor tenant firms may be an important factor in stimulating both the demand and supply sides of local markets for innovation and may be an important channel for transmission of spillovers. While our empirical results are preliminary, they indicate that anchor tenant technology firms may be an economically important aspect of the institutional structure of local economies.
Handle: RePEc:nbr:nberwo:9212
Template-Type: ReDIF-Paper 1.0
Title: Orphans in Africa
Classification-JEL: I1; D1
Author-Name: Anne Case
Author-Person: pca108
Author-Name: Christina Paxson
Author-Person: ppa335
Author-Name: Joseph Ableidinger
Note: AG CH
Number: 9213
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9213
File-URL: http://www.nber.org/papers/w9213.pdf
File-Format: application/pdf
Publication-Status: published as Case, Anne, Christina Paxson and Joseph Ableidinger. “Orphans in Africa: Parental Death, Poverty and School Enrollment.” Demography 41, 3 (2004): 483-508.
Abstract: We examine the impact of orphanage on the living arrangements and school enrollment of children in Sub-Saharan Africa, using data from 19 Demographic and Health Surveys (DHS) conducted in 10 countries between 1992 and 2000. We find that orphans in Africa on average live in poorer households than non-orphans, and are significantly less likely than non-orphans to be enrolled in school. However, orphans' lower school enrollment is not explained by their poverty: orphans are equally less likely to be enrolled in school relative both to non-orphans as a group and to the non-orphans with whom they live. Consistent with the predictions of Hamilton's Rule, we find that outcomes for orphans depend largely on the degree of relatedness of the orphan to the household head. Children living in households headed by non-parental relatives fare systematically worse than those living with parental heads, and those living in households headed by nonrelatives fare worse still. Much of the gap between the schooling of orphans and non-orphans is explained by the greater tendency of orphans to live with more distant relatives or unrelated caregivers.
Handle: RePEc:nbr:nberwo:9213
Template-Type: ReDIF-Paper 1.0
Title: Valuing and Pricing Retail Leases with Renewal and Overage Options
Classification-JEL: G0; G3
Author-Name: Patric H. Hendershott
Author-Name: Charles W.R. Ward
Note: AP
Number: 9214
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9214
File-URL: http://www.nber.org/papers/w9214.pdf
File-Format: application/pdf
Publication-Status: published as Hendershott, Patric H. and Charles W. R. Ward. "Valuing And Pricing Retail Leases With Renewal And Overage Options," Journal of Real Estate Finance and Economics, 2003, v26(2-3,Mar), 223-240.
Abstract: We consider retail leases with landlord overages options, with tenant renewal options, with both and with neither. We illustrate how the ratio of initial expected sales to the sales threshold can be manipulated to equate the value of the landlord overage options to that of the tenant renewal option at the same initial rent. As a result, not only are the values of the dual option overage plus renewal lease and no option leases are equal, but the cumulative distributions of potential IRRs on the two leases are nearly identical, suggesting that these leases are equally attractive to risk-adverse investors and thus that the same risky discount rate can be used in valuing the leases. The analysis is carried out in a risk-neutral framework, and sensitivity of the results to interest rate uncertainty, real sales volatility and growth, and the required risk premium on retail real estate is shown. The appropriate risky discount rate for the overage lease is calculated to be 75 to 160 basis points greater than that for the renewal lease.
Handle: RePEc:nbr:nberwo:9214
Template-Type: ReDIF-Paper 1.0
Title: Insurance, Self-Protection, and the Economics of Terrorism
Classification-JEL: H0
Author-Name: Darius Lakdawalla
Author-Person: pla295
Author-Name: George Zanjani
Note: EH PE
Number: 9215
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9215
File-URL: http://www.nber.org/papers/w9215.pdf
File-Format: application/pdf
Publication-Status: published as Lakdawalla, Darius and George Zanjani. "Insurance, Self-Protection, And The Economics Of Terrorism," Journal of Public Economics, 2005, v89(9-10,Sep), 1891-1905.
Abstract: This paper investigates the rationale for government intervention in the market for terrorism insurance, focusing on the externalities associated with self-protection. Self-protection by one target encourages terrorists to substitute towards less fortified targets. Investments in self- protection thus have negative external effects in the presence of rational terrorists. Government subsidies for terror insurance can discourage self-protection and limit the inefficiencies associated with these and other types of negative externalities. They may also serve as a complement to a policy of publicly provided protection.
Handle: RePEc:nbr:nberwo:9215
Template-Type: ReDIF-Paper 1.0
Title: Get High and Get Stupid: The Effect of Alcohol and Marijuana Use on Teen Sexual Behavior
Classification-JEL: I0; J13
Author-Name: Michael Grossman
Author-Person: pgr107
Author-Name: Robert Kaestner
Author-Person: pka42
Author-Name: Sara Markowitz
Author-Person: pma138
Note: CH EH
Number: 9216
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9216
File-URL: http://www.nber.org/papers/w9216.pdf
File-Format: application/pdf
Publication-Status: published as Michael Grossman & Robert Kaestner & Sara Markowitz, 2004. "Get High and Get Stupid: The Effect of Alcohol and Marijuana Use on Teen Sexual Behavior," Review of Economics of the Household, Springer, vol. 2(4), pages 413-441, 09.
Abstract: Numerous studies have documented a strong correlation between substance use and teen sexual behavior, and this empirical relationship has given rise to a widespread belief that substance use causes teens to engage in risky sex. This causal link is often used by advocates to justify policies targeted at reducing substance use. Here, we argue that previous research has not produced sufficient evidence to substantiate a causal relationship between substance use and teen sexual behavior. Accordingly, we attempt to estimate causal effects using two complementary research approaches. Our findings suggest that substance use is not causally related to teen sexual behavior, although we cannot definitively rule out that possibility.
Handle: RePEc:nbr:nberwo:9216
Template-Type: ReDIF-Paper 1.0
Title: The Time Series of the Cross Section of Asset Prices
Classification-JEL: G1
Author-Name: Lior Menzly
Author-Name: Tano Santos
Author-Name: Pietro Veronesi
Note: AP
Number: 9217
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9217
File-URL: http://www.nber.org/papers/w9217.pdf
File-Format: application/pdf
Abstract: In this paper we propose a general equilibrium model that successfully reproduces the historical experience of the cross section of US stock prices as well as the realized history of the market portfolio. The model achieves this while addressing traditional concerns in the asset pricing literature: A high equity premium and volatility of returns, the long horizon predictability, and a low volatility of the risk free rate. The model combines a rich payoff structure with a habit persistence discount factor, which allows us to identify the effect on prices of idiosyncratic cash flow shocks versus business cycle components.
Handle: RePEc:nbr:nberwo:9217
Template-Type: ReDIF-Paper 1.0
Title: Consistent Expectations, Rational Expectations, Multiple-Solution Indeterminacies, and Least-Squares Learnability
Classification-JEL: C32; E00
Author-Name: Bennett T. McCallum
Note: EFG ME
Number: 9218
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9218
File-URL: http://www.nber.org/papers/w9218.pdf
File-Format: application/pdf
Publication-Status: published as Minford, Patrick (ed.) Money Matters: Essays in Honour of Alan Walters. Edward Elgar Publishing, 2004.
Abstract: After some historical discussion of the rational expectations (RE) solution procedures of John Muth, Alan Walters, and Robert Lucas, this paper considers the relevance for actual economies of issues stemming from the existence of multiple RE equilibria. In all linear models, the minimum state variable (MSV) solution as defined by the author (JME, 1983) is unique by construction. While it might be argued that the MSV solution warrants special status as the bubble-free solution, the focus in this paper is on its adaptive, least-squares learnability by individual agents, as discussed extensively in important recent publications by George Evans and Seppo Honkapohja. Although the MSV solution is learnable and the main alternatives are not, in most standard models, Evans and Honkapohja have stressed an example in which the opposite is true. The present paper shows, however, that parameter values yielding that result are such that the model is not well formulated, in a specified sense (one that avoids implausible discontinuities). More generally, analysis of a pair of prominent univariate specifications, featured by Evans and Honkapohja, shows that the MSV solution is invariably learnable in these structures, if they are well formulated.
Handle: RePEc:nbr:nberwo:9218
Template-Type: ReDIF-Paper 1.0
Title: Boom-Bust Cycles in Middle Income Countries: Facts and Explanation
Classification-JEL: E32; E44
Author-Name: Aaron Tornell
Author-Person: pto157
Author-Name: Frank Westermann
Author-Person: pwe84
Note: IFM
Number: 9219
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9219
File-URL: http://www.nber.org/papers/w9219.pdf
File-Format: application/pdf
Publication-Status: published as Aaron Tornell & Frank Westermann, 2002. "Boom-Bust Cycles in Middle Income Countries: Facts and Explanation," IMF Staff Papers, Palgrave Macmillan, vol. 49(Special i), pages 111-155.
Abstract: In this paper we characterize empirically the comovements of macro variables typically observed in middle income countries, as well as the boom-bust cycle' that has been observed during the last two decades. We find that many countries that have liberalized their financial markets, have witnessed the development of lending booms. Most of the time the boom gradually decelerates. But sometimes the boom ends in twin currency and banking crises, and is followed by a protracted credit crunch that outlives a short-lived recession. We also find that during lending booms there is a real appreciation and the nontradables (N) sector grows faster than the tradables (T) sector. Meanwhile, the opposite is true in the aftermath of crisis. We argue that these comovements are generated by the interaction of two characteristics of financing typical of middle income countries: risky currency mismatch and asymmetric financing opportunities across the N- and T-sectors.
Handle: RePEc:nbr:nberwo:9219
Template-Type: ReDIF-Paper 1.0
Title: Optimal Fiscal and Monetary Policy Under Sticky Prices
Classification-JEL: E52; E61
Author-Name: Stephanie Schmitt-Grohe
Author-Person: psc44
Author-Name: Martin Uribe
Note: EFG
Number: 9220
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9220
File-URL: http://www.nber.org/papers/w9220.pdf
File-Format: application/pdf
Publication-Status: published as Schmitt-Grohe, Stephanie, and Martin Uribe. "Optimal Fiscal and Monetary Policy under Sticky Prices." Journal of Economic Theory, February 2004, 114(2): 198-230
Publication-Status: published as Proceedings, Federal Reserve Bank of San Francisco, June 16, 2001
Publication-Status: published as Martin Uribe & Stephanie Schmitt-Grohe, 2001. "Optimal fiscal and monetary policy under sticky prices," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
Abstract: This paper studies optimal .scal and monetary policy under sticky product prices. The theoretical framework is a stochastic production economy without capital. The government finances an exogenous stream of purchases by levying distortionary income taxes, printing money, and issuing one-period nominally risk-free bonds. The main findings of the paper are: First, for a miniscule degree of price stickiness (i.e., many times below available empirical estimates)the optimal volatility of in.ation is near zero. This result stands in stark contrast with the high volatility of inflation implied by the Ramsey allocation when prices are flexible. The finding is in line with a recent body of work on optimal monetary policy under nominal rigidities that ignores the role of optimal fiscal policy. Second, even small deviations from full price flexibility induce near random walk behavior in government debt and tax rates, as in economies with real non-state-contingent debt only. Finally, sluggish price adjustment raises the average nominal interest rate above the one called for by the Friedman rule.
Handle: RePEc:nbr:nberwo:9220
Template-Type: ReDIF-Paper 1.0
Title: A Fiscal Theory of Sovereign Risk
Classification-JEL: E6; F41
Author-Name: Martin Uribe
Note: EFG IFM
Number: 9221
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9221
File-URL: http://www.nber.org/papers/w9221.pdf
File-Format: application/pdf
Publication-Status: published as Uribe, Martin. “A Fiscal Theory of Sovereign Risk." Journal of Monetary Economics 53 (November 2006): 1857-1875.
Abstract: This paper presents a fiscal theory of sovereign risk and default. Under certain monetary-fiscal regimes, the risk of default, and thus the emergence of sovereign risk premia, are inevitable. The paper characterizes the equilibrium processes of the sovereign risk premium and the default rate under a number of alternative monetary policy arrangements. Under some of the policy environments considered, the expected default rate and the sovereign risk premium are zero although the government defaults regularly. Under other monetary regimes the default rate and the sovereign risk premium are serially correlated and therefore forecastable. Environments are characterized under which delaying default is counterproductive.
Handle: RePEc:nbr:nberwo:9221
Template-Type: ReDIF-Paper 1.0
Title: A Survey of Behavioral Finance
Classification-JEL: G11; G12
Author-Name: Nicholas Barberis
Author-Name: Richard Thaler
Note: AP CF
Number: 9222
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9222
File-URL: http://www.nber.org/papers/w9222.pdf
File-Format: application/pdf
Publication-Status: published as Barberis, Nicholas & Thaler, Richard, 2003. "A survey of behavioral finance," 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 18, pages 1053-1128 Elsevier.
Abstract: Behavioral finance argues that some financial phenomena can plausibly be understood using models in which some agents are not fully rational. The field has two building blocks: limits to arbitrage, which argues that it can be difficult for rational traders to undo the dislocations caused by less rational traders; and psychology, which catalogues the kinds of deviations from full rationality we might expect to see. We discuss these two topics, and then present a number of behavioral finance applications: to the aggregate stock market, to the cross-section of average returns, to individual trading behavior, and to corporate finance. We close by assessing progress in the field and speculating about its future course.
Handle: RePEc:nbr:nberwo:9222
Template-Type: ReDIF-Paper 1.0
Title: Borders and Growth
Classification-JEL: F1; O5
Author-Name: Enrico Spolaore
Author-Person: psp27
Author-Name: Romain Wacziarg
Author-Person: pwa67
Note: IFM
Number: 9223
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9223
File-URL: http://www.nber.org/papers/w9223.pdf
File-Format: application/pdf
Publication-Status: published as Enrico Spolaore & Romain Wacziarg, 2005. "Borders and Growth," Journal of Economic Growth, Springer, vol. 10(4), pages 331-386, December.
Abstract: This paper presents a framework to understand and measure the effects of political borders on economic growth and per capita income levels. We present a model providing a theoretical foundation to estimate empirically the effects of political borders on growth. In our model, political integration between two countries results in a positive country size effect and a negative effect through reduced openness vis-…-vis the rest of the world. We estimate the growth effects that would have resulted from the hypothetical removal of national borders between pairs of adjacent countries. We also identify country pairs where political integration would have been mutually beneficial.
Handle: RePEc:nbr:nberwo:9223
Template-Type: ReDIF-Paper 1.0
Title: Chains of Ownership, Regional Tax Competition, and Foreign Direct Investment
Classification-JEL: H87; H25
Author-Name: Mihir A. Desai
Author-Name: C. Fritz Foley
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: ITI PE
Number: 9224
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9224
File-URL: http://www.nber.org/papers/w9224.pdf
File-Format: application/pdf
Publication-Status: published as Herrmann, Heinz and Robert Lipsey (eds.) Foreign Direct Investment in the Real and Financial Sector of Industrial Countries. Springer Verlag: Heidelberg, 2003.
Abstract: This paper considers the effect of taxation on the location of foreign direct investment (FDI) and taxable income reported by multinational firms with particular attention to the regional dynamics of tax competition and the role of chains of ownership. Confidential affiliate-level data are used to compare the investment and income-reporting behavior of American-owned foreign affiliates across ownership forms and regions. Ten percent higher tax rates are associated with 5.0 percent lower FDI, controlling for parent company and observable aspects of local economies, and 0.9 percent lower returns on assets, controlling for parent company and level of FDI. Tax effects are particularly strong within Europe, where ten percent higher tax rates are associated with 7.7 percent lower FDI and 1.7 percent lower returns on assets. Indirectly owned foreign affiliates also exhibit strong tax effects, ten percent higher tax rates being associated with 12.0 percent lower FDI and 1.4 percent lower returns on assets. American firms finance a growing fraction of their foreign operations indirectly through chains of ownership, which now account for more than 30 percent of aggregate foreign assets and sales. Ownership chains are particularly concentrated among European affiliates. Since multinational firms from countries other than the United States face tax environments similar to those faced by indirectly owned affiliates of American companies, these results suggest a greater sensitivity of FDI to taxes for non-American firms. The results also suggest that European economic integration may have the effect of intensifying tax competition between European jurisdictions.
Handle: RePEc:nbr:nberwo:9224
Template-Type: ReDIF-Paper 1.0
Title: Why Do Employers Pay For College?
Classification-JEL: I2; J2
Author-Name: Peter Cappelli
Note: LS
Number: 9225
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9225
File-URL: http://www.nber.org/papers/w9225.pdf
File-Format: application/pdf
Publication-Status: published as Cappelli, Peter. “Why Do Employers Pay for College?” Journal of Econometrics 121, 1-2 (August 2004): 213-241.
Abstract: Employers routinely provide financial support for their employees who pursue post-secondary education despite the fact that it represents perhaps the classic example of a general skill' that costs the employer money and raises the market wages of employees who possess it. The analysis below examines why employers provide such support, and the results suggest that employees do not pay for tuition assistance through below market or training wages, the typical arrangement for funding general skills training. Instead, tuition assistance appears to select better quality employees who stay on the job longer, at least in part to keep making use of that benefit.
Handle: RePEc:nbr:nberwo:9225
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Progressive Income Taxation on Job Turnover
Classification-JEL: H3
Author-Name: William M. Gentry
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Note: LS PE
Number: 9226
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9226
File-URL: http://www.nber.org/papers/w9226.pdf
File-Format: application/pdf
Publication-Status: published as Gentry, William M. and R. Glenn Hubbard. "The Effects Of Progressive Income Taxation On Job Turnover," Journal of Public Economics, 2004, v88(11,Sep), 2301-2322.
Abstract: We examine whether the level of the income tax rate and the convexity of the income tax schedule affect job mobility, as measured by moving to a better job. While the predicted effect of the level of the tax rate is ambiguous, we predict that an increase in the convexity of the tax schedule decreases job search activity by taxing away some of the benefits of a successful job search. Using data from the Panel Study of Income Dynamics, we estimate that both higher tax rates and increased tax rate progressivity decrease the probability that a head of household will move to a better job during the coming year. Our estimates imply that a five-percentage-point reduction in the marginal tax rate increases the average probability of moving to a better job by 0.79 percentage points (a 8.0 percent increase in the turnover propensity) and that a onestandard- deviation in our measure of tax progressivity would increase this probability by 0.86 percentage points (a 8.7 percent increase in the turnover propensity).
Handle: RePEc:nbr:nberwo:9226
Template-Type: ReDIF-Paper 1.0
Title: Slavery and the Intergenerational Transmission of Human Capital
Classification-JEL: J0; N0
Author-Name: Bruce Sacerdote
Note: DAE LS
Number: 9227
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9227
File-URL: http://www.nber.org/papers/w9227.pdf
File-Format: application/pdf
Publication-Status: published as Sacerdote, Bruce. "Slavery and the Intergenerational Transmission of Human Capital." The Review of Economics and Statistics 87, 2 (May 2005).
Abstract: How much do sins visited upon one generation harm that generation's future sons, daughters, grandsons and granddaughters? I study this question by comparing outcomes for former slaves and their children and grandchildren to outcomes for free blacks (pre-1865), and their children and grandchildren. The outcome measures include literacy, whether a child attends school, whether a child lives in a female headed household, and two measures of adult occupation. Using a variety of different comparisons, (e.g. within versus across regions) I find that it took roughly two generations for the descendants of slaves to catch up' to the descendants of free black men and women. This finding is consistent with modern estimates and interpretations of father-son correlations in income and socioeconomic status. The data used are from the 1880 and 1920 1 percent (IPUMS) samples, a 100 percent sample of the 1880 Census and a smaller data set in which I link families in the 1920 IPUMS back to the father's family in a 100% sample of the 1880 Census. These latter data sets are derived from an electronic version of the 1880 Census recently compiled and released by the Mormon Church with assistance from the Minnesota Population Center.
Handle: RePEc:nbr:nberwo:9227
Template-Type: ReDIF-Paper 1.0
Title: Financial Aid Packages and College Enrollment Decisions: An Econometric Case Study
Classification-JEL: I2
Author-Name: David M. Linsenmeier
Author-Name: Harvey S. Rosen
Author-Person: pro55
Author-Name: Cecilia Elena Rouse
Note: CH LS PE ED
Number: 9228
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9228
File-URL: http://www.nber.org/papers/w9228.pdf
File-Format: application/pdf
Publication-Status: published as Linsenmeier, David, Harvey S. Rosen and Cecilia Rouse. "Financial Aid Packages and College Enrollment Decisions: An Econometric Case Study." Review of Economics and Statistics (February 2006).
Abstract: We study the effects of a change in financial aid policy introduced by a Northeastern university in 1998. Prior to that time, the university's financial aid packages for low-income students consisted of grants, loans, and campus jobs. After the change, the entire loan portion of the package for low-income students was replaced with grants. We find the program increased the likelihood of matriculation by low-income students by about 3 percentage points, although the effect is not statistically significant. The effect among low-income minority students was between 8 and 10 percentage points and statistically significant at the 10 percent level.
Handle: RePEc:nbr:nberwo:9228
Template-Type: ReDIF-Paper 1.0
Title: "Napsterizing" Pharmaceuticals: Access, Innovation, and Consumer Welfare
Classification-JEL: O31; O34
Author-Name: James W. Hughes
Author-Name: Michael J. Moore
Author-Person: pmo284
Author-Name: Edward A. Snyder
Note: EH
Number: 9229
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9229
File-URL: http://www.nber.org/papers/w9229.pdf
File-Format: application/pdf
Abstract: We analyze the effects on consumers of an extreme policy experiment -- Napsterizing' pharmaceuticals -- whereby all patent rights on branded prescription drugs are eliminated for both existing and future prescription drugs without compensation to the patent holders. The question of whether this policy maximizes consumer welfare cannot be resolved on an a priori basis due to an obvious tradeoff: While accelerating generic entry will yield substantial gains in consumer surplus associated with greater access to the current stock of pharmaceuticals, future consumers will be harmed by reducing the flow of new pharmaceuticals to the market. Our estimates of the consumer surpluses at stake are based on the stylized facts concerning how generic entry has affected prices, outputs, and market shares. We find that providing greater access to the current stock of prescription drugs yields large benefits to existing consumers. However, realizing those benefits has a substantially greater cost in terms of lost consumer benefits from reductions in the flow of new drugs. Specifically, the model yields the result that for every dollar in consumer benefit realized from providing greater access to the current stock, future consumers would be harmed at a rate of three dollars in present value terms from reduced future innovation. We obtain this result even accounting for the stylized fact that after generic entry branded drugs continue to earn significant price premia over generic products and hence recognizing that Napsterizing does not completely eliminate the incentives to innovate.
Handle: RePEc:nbr:nberwo:9229
Template-Type: ReDIF-Paper 1.0
Title: Suppressing Asset Price Inflation: The Confederate Experience, 1861-1865
Classification-JEL: E52; N21
Author-Name: Marc D. Weidenmier
Author-Person: pwe14
Author-Name: Richard C.K. Burdekin
Author-Person: pbu17
Note: DAE
Number: 9230
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9230
File-URL: http://www.nber.org/papers/w9230.pdf
File-Format: application/pdf
Publication-Status: published as Richard C. K. Burdekin & Marc D. Weidenmier, 2003. "Suppressing Asset Price Inflation: The Confederate Experience, 1861--1865," Economic Inquiry, Oxford University Press, vol. 41(3), pages 420-432, July.
Abstract: Confederate monetary reforms encouraged holders of Treasury notes to exchange these notes for bonds by imposing deadlines on their convertibility. We show that Confederate funding acts aimed at precipitating the conversion of currency into bonds did temporarily suppress currency depreciation. These acts also triggered upsurges in commodity prices, however, as note holders rushed to spend the currency before their exchange rights were reduced. Asset price stabilization policies seem to have increased the velocity of circulation and counterproductively channeled inflationary pressures into other areas of the economy.
Handle: RePEc:nbr:nberwo:9230
Template-Type: ReDIF-Paper 1.0
Title: The Timing of Childbearing among Heterogeneous Women in Dynamic General Equilibrium
Classification-JEL: J13; J24
Author-Name: Charles H. Mullin
Author-Name: Ping Wang
Author-Person: pwa22
Note: EH
Number: 9231
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9231
File-URL: http://www.nber.org/papers/w9231.pdf
File-Format: application/pdf
Abstract: We develop a tractable framework with a fully specified dynamic process of demographic and labor decisions over an individual female's life span to determine the timing of childbearing. Fertility affects women's behavior through three channels: its tradeoff with leisure, its interactions with human capital investment, and its cost in terms of lost market productivity. Instead of numerically solving a discrete-time version of the model, we propose an alternative solution technique that provides analytic, closed-form solutions for the continuous-time dynamic optimization problem with (discrete) time-line variables. The analytic results indicate that (i) increased impatience has an ambiguous effect on childbearing timing; (ii) the age at first birth rises at an increasing rate with the productivity loss from children; and (iii) women of greater ability have births at later ages and are more sensitive to parameter changes. Calibration exercises suggest that focusing on the median female's response to changes in the preference, cost, and technology parameters fails to capture their important distributional effects.
Handle: RePEc:nbr:nberwo:9231
Template-Type: ReDIF-Paper 1.0
Title: Gary Becker's Contributions to Family and Household Economics
Classification-JEL: D1
Author-Name: Robert A. Pollak
Author-Person: ppo36
Note: LS
Number: 9232
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9232
File-URL: http://www.nber.org/papers/w9232.pdf
File-Format: application/pdf
Publication-Status: published as Robert Pollak, 2003. "Gary Becker's Contributions to Family and Household Economics," Review of Economics of the Household, Springer, vol. 1(1), pages 111-141, January.
Abstract: Gary Becker's influence on the economics of the family has been pervasive. His ideas have dominated research in the economics of the family, shaping the tools we use, the questions we ask, and the answers we give. The foundational assumptions of Becker's economic approach to the family -- maximizing behavior and equilibrium -- as well as such primary auxiliary assumptions as household production and interdependent preferences, are now widely accepted not only by economists but also by family sociologists, demographers, and others who study the family. Yet the interesting and provocative implications of Becker's economic approach to the family do not follow from the foundational assumptions or from the primary auxiliary assumptions. Instead they depend on contested auxiliary assumptions to which neoclassical economics has no commitment and which lack empirical support. This paper discusses the crucial role of auxiliary assumptions in Becker's analysis of the family, first in the context of preferences, then in the context of household production, and finally in the context of family or household collective choice.
Handle: RePEc:nbr:nberwo:9232
Template-Type: ReDIF-Paper 1.0
Title: A New World Order: Explaining the Emergence of the Classical Gold Standard
Classification-JEL: N10; F33
Author-Name: Christopher M. Meissner
Author-Person: pme45
Note: DAE IFM
Number: 9233
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9233
File-URL: http://www.nber.org/papers/w9233.pdf
File-Format: application/pdf
Publication-Status: published as Meissner, Christopher M. "A New World Order: Explaining The International Diffusion Of The Gold Standard, 1870-1913," Journal of International Economics, 2005, v66(2,Jul), 385-406.
Abstract: The classical gold standard only gradually became an international monetary regime after 1870. This paper provides a cross-country analysis of why countries adopted when they did. I use duration analysis to show that network externalities operating through trade channels help explain the pattern of diffusion of the gold standard. Countries adopted the gold standard sooner when they had a large share of trade with other gold countries relative to GDP. The quality of the financial system also played a role. Support is found for the idea that a weak gold backing for paper currency emissions, possibly because of an unsustainable fiscal position or an un-sound banking system, delayed adoption. A large public debt burden also led to a later transition. Data are also consistent with the idea that nations adopted the gold standard earlier to lower the costs of borrowing on international capital markets. I find no evidence that the level of exchange rate volatility or agricultural interests mattered for the timing of adoption.
Handle: RePEc:nbr:nberwo:9233
Template-Type: ReDIF-Paper 1.0
Title: Marrying Your Mom: Preference Transmission and Women's Labor and Education Choices
Classification-JEL: J12; I20
Author-Name: Raquel Fernandez
Author-Person: pfe17
Author-Name: Alessandra Fogli
Author-Person: pfo48
Author-Name: Claudia Olivetti
Author-Person: pol63
Note: EFG LS ED
Number: 9234
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9234
File-URL: http://www.nber.org/papers/w9234.pdf
File-Format: application/pdf
Abstract: This paper argues that the evolution of male preferences contributed to the dramatic increase in the proportion of working and educated women in the population over time. Male preferences evolved because some men experienced a different family model one in which their mother was skilled and/or worked. These men, we hypothesize, were more inclined to marry women who themselves were skilled or worked. Our model endogenizes the evolution of preferences in a dynamic setting and examines how it affected women's education and labor choices. We present empirical evidence based on GSS data that favors our transmission mechanism. We show that men whose mothers were more educated or worked are more likely to marry similar women themselves.
Handle: RePEc:nbr:nberwo:9234
Template-Type: ReDIF-Paper 1.0
Title: Short-Run Money Demand
Classification-JEL: E41
Author-Name: Laurence Ball
Author-Person: pba605
Note: EFG ME
Number: 9235
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9235
File-URL: http://www.nber.org/papers/w9235.pdf
File-Format: application/pdf
Publication-Status: published as Ball, Laurence, 2012. "Short-run money demand," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 622-633.
Abstract: The paper estimates a long-run demand function for M1, using U.S. data for 1959-1993. This paper interprets deviations from this long-run relation with Goldfeld's partial adjustment model. A key innovation is the choice of the interest rate in the money demand function. Most previous work uses a short-term market rate, but this paper uses the average return on near monies' close substitutes for M1 such as savings accounts and money market mutual funds. This approach yields a predicted path of M1 velocity that closely matches the data. The volatility of velocity after 1980 is explained by volatility in the returns on near monies.
Handle: RePEc:nbr:nberwo:9235
Template-Type: ReDIF-Paper 1.0
Title: Food Insecurity and Public Assistance
Classification-JEL: I38; J61
Author-Name: George J. Borjas
Author-Person: pbo44
Note: LS PE
Number: 9236
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9236
File-URL: http://www.nber.org/papers/w9236.pdf
File-Format: application/pdf
Publication-Status: published as Borjas, George J. "Food Insecurity And Public Assistance," Journal of Public Economics, 2004, v88(7-8,Jul), 1421-1443.
Abstract: This paper examines if welfare programs reduce the probability that vulnerable household experience food deprivation because of financial constraints. Although the 1996 welfare reform legislation specifically limited the eligibility of immigrant households to receive assistance, many states chose to protect their immigrant populations by offering state-funded aid to these groups. I exploit these changes in eligibility rules to examine the link between food insecurity and public assistance. The evidence indicates that a 10 percentage point cut in the fraction of the population that receives public assistance increases the fraction of food-insecure households by about 5 percentage points.
Handle: RePEc:nbr:nberwo:9236
Template-Type: ReDIF-Paper 1.0
Title: People's Opium? Religion and Economic Attitudes
Classification-JEL: A1; E0
Author-Name: Luigi Guiso
Author-Person: pgu58
Author-Name: Paola Sapienza
Author-Person: psa155
Author-Name: Luigi Zingales
Note: CF
Number: 9237
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9237
File-URL: http://www.nber.org/papers/w9237.pdf
File-Format: application/pdf
Publication-Status: published as Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2003. "People's opium? Religion and economic attitudes," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 225-282, January.
Abstract: Since Max Weber, there has been an active debate on the impact of religion on people's economic attitudes. Much of the existing evidence, however, is based on cross-country studies in which this impact is confounded by differences in other institutional factors. We use the World Values Surveys to identify the relationship between intensity of religious beliefs and economic attitudes, controlling for country fixed effects. We study several economic attitudes toward cooperation, the government, working women, legal rules, thriftiness, and the market economy. We also distinguish across religious denominations, differentiating on whether a religion is dominant in a country. We find that on average, religious beliefs are associated with good' economic attitudes, where good' is defined as conducive to higher per capita income and growth. Yet religious people tend to be more racist and less favorable with respect to working women. These effects differ across religious denominations. Overall, we find that Christian religions are more positively associated with attitudes conducive to economic growth.
Handle: RePEc:nbr:nberwo:9237
Template-Type: ReDIF-Paper 1.0
Title: Access to Physician Services: Does Supplemental Insurance Matter? Evidence from France
Classification-JEL: I11; I18
Author-Name: Thomas C. Buchmueller
Author-Person: pbu179
Author-Name: Agnès Couffinhal
Author-Name: Michel Grignon
Author-Person: pgr140
Author-Name: Marc Perronin
Note: EH
Number: 9238
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9238
File-URL: http://www.nber.org/papers/w9238.pdf
File-Format: application/pdf
Publication-Status: published as Thomas C. Buchmueller & Agnès Couffinhal & Michel Grignon & Marc Perronnin, 2004. "Access to physician services: does supplemental insurance matter? Evidence from France," Health Economics, John Wiley & Sons, Ltd., vol. 13(7), pages 669-687.
Abstract: In France, public health insurance is universal but incomplete, with private payments accounting for roughly 25 percent of all spending. As a result, most people have supplemental private health insurance. We investigate the effects of such insurance on the utilization of physician services using data from the 1998 Enquˆte Sant‚ Protection Sociale, a nationally representative survey of the French population. Our results indicate that insurance has a strong and significant effect on the utilization of physician services. Individuals with supplemental coverage have substantially more physician visits than those without. In a context where patients are free to choose their provider, we find no evidence that adults with supplemental insurance are more likely to visit a specialist than a general practitioner.
Handle: RePEc:nbr:nberwo:9238
Template-Type: ReDIF-Paper 1.0
Title: Political Ideology and Endogenous Trade Policy: An Empirical Investigation
Classification-JEL: F10; F11
Author-Name: Pushan Dutt
Author-Person: pdu81
Author-Name: Devashish Mitra
Author-Person: pmi161
Note: ITI
Number: 9239
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9239
File-URL: http://www.nber.org/papers/w9239.pdf
File-Format: application/pdf
Publication-Status: published as Dutt, Pushan and Devashish Mitra. "Endogenous Trade Policy Through Majority Voting: An Empirical Investigation," Journal of International Economics, October 2002, 58(1): 107-133
Publication-Status: published as Dutt, Pushan and Devashish Mitra. "Political Ideology and Endogenous Trade Policy: An Empirical Investigation." The Review of Economics and Statistics, February 2005, 87(1): 59-72.
Abstract: In this paper, we empirically investigate how government ideology affects trade policy. The prediction of a partisan, ideology-based model (within a two-sector, two-factor Heckscher-Ohlin framework) is that left-wing governments will adopt more protectionist trade policies in capital rich countries, but adopt more pro-trade policies in labor rich economies than right-wing ones. The data strongly support this prediction in a very robust fashion. There is some evidence, that this relationship may hold better in democracies than in dictatorships though the magnitude of the partisan effect seems stronger in dictatorships.
Handle: RePEc:nbr:nberwo:9239
Template-Type: ReDIF-Paper 1.0
Title: Decomposing the Twin-peaks in the World Distribution of Output-per-worker
Classification-JEL: O33; O41
Author-Name: Paul Beaudry
Author-Person: pbe35
Author-Name: Fabrice Collard
Author-Person: pco44
Author-Name: David A. Green
Author-Person: pgr285
Note: LS PR
Number: 9240
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9240
File-URL: http://www.nber.org/papers/w9240.pdf
File-Format: application/pdf
Abstract: This papers examines changes in the distribution of per-worker-output across countries over the period 1960-98, with a particular focus on identifying the forces behind the hollowing out of the middle of the distribution and the associated emergence of a twin-peaks phenomenon. The main finding of the paper is that most of the change in shape of the world distribution of income between 1960-1998 can be accounted for by changes in the parameters driving the growth process. In particular, we show that role of physical capital investment and population growth in affecting output growth has increased substantially over the period and that this increase can account for all the hollowing-out of the distribution. In contrast, we do not find that changes in the distribution of variables played much of a role, nor do we find any significant effects coming through non-linear convergence mechanisms or increased importance of education. Our results suggest that research aimed at understanding changes in the world distribution of income should focus on explaining why the social returns to physical capital accumulation where so high over the period 1978-98. The paper ends by discussing elements that help understand this phenomena.
Handle: RePEc:nbr:nberwo:9240
Template-Type: ReDIF-Paper 1.0
Title: The Persistence of Emerging Market Equity Flows
Classification-JEL: G15; F21
Author-Name: Jessica Tjornhom Donohue
Author-Name: Kenneth A. Froot
Author-Person: pfr60
Note: AP IFM ITI
Number: 9241
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9241
File-URL: http://www.nber.org/papers/w9241.pdf
File-Format: application/pdf
Publication-Status: published as Froot, Kenneth A. & Tjornhom Donohue, Jessica, 2002. "The persistence of emerging market equity flows," Emerging Markets Review, Elsevier, vol. 3(4), pages 338-364, December.
Abstract: The portfolio flows of institutional investors have been found to be highly persistent across countries and individual investment funds. This paper investigates the source of this persistence in emerging market equities. We employ the decomposition methodology of Froot and Tjornhom (2002), which decomposes the persistence of flows into four components: (i) own-country, own-fund persistence (which might arise from informed trading within each country by individual funds); (ii) own-country, cross-fund persistence (which might arise from asynchronicities across funds); (iii) cross-country, own-fund persistence (which might arise from asynchonicities within a fund) and (iv) cross-country, cross-fund persistence (which might arise from other reaction lags such as contagion across both countries and funds). We find evidence that all four components are positive in emerging markets. Our results differ from those in developed countries, in that we attribute approximately 10%-20% of total persistence to cross-country effects (iii) and (iv). These findings are consistent with stories of contagion, which suggest that demand shifts move predictably from one country to another. They cannot easily be explained by informed trading alone or by wealth effects.
Handle: RePEc:nbr:nberwo:9241
Template-Type: ReDIF-Paper 1.0
Title: International Migration, Self-Selection, and the Distribution of Wages: Evidence from Mexico and the United States
Classification-JEL: F2; J0
Author-Name: Daniel Chiquiar
Author-Name: Gordon H. Hanson
Author-Person: pha80
Note: ITI LS
Number: 9242
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9242
File-URL: http://www.nber.org/papers/w9242.pdf
File-Format: application/pdf
Publication-Status: published as Daniel Chiquiar & Gordon H. Hanson, 2005. "International Migration, Self-Selection, and the Distribution of Wages: Evidence from Mexico and the United States," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 239-281, April.
Abstract: In this paper, we use data from the Mexico and U.S. population censuses to examine who migrates from Mexico to the United States and how the skills and economic performance of these individuals compare to those who remain in Mexico. We test Borjas' negative-selection hypothesis that in poor countries the individuals with the strongest incentive to migrate to rich countries are those with relatively low skill levels. We find that 1) Mexican immigrants, while much less educated than U.S. natives, are on average more educated than residents of Mexico, and 2) were Mexican immigrants in the United States to be paid according to current skill prices in Mexico they would tend to occupy the middle and upper portions of Mexico's wage distribution. These results are inconsistent with the negative-selection hypothesis and suggest, instead, that in terms of observable skills there is intermediate or positive selection of immigrants from Mexico. The results also suggest that migration abroad may raise wage inequality in Mexico.
Handle: RePEc:nbr:nberwo:9242
Template-Type: ReDIF-Paper 1.0
Title: Frictions and Tax-Motivated Hedging: An Empirical Exploration of Publicly-Traded Exchangeable Securities
Classification-JEL: H2
Author-Name: William Gentry
Author-Name: David M. Schizer
Note: AP PE
Number: 9243
Creation-Date: 2002-09
Order-URL: http://www.nber.org/papers/w9243
File-URL: http://www.nber.org/papers/w9243.pdf
File-Format: application/pdf
Publication-Status: published as Gentry, William M. and David M. Schizer. "Frictions And Tax-Motivated Hedging: An Empirical Exploration Of Publicly-Traded Exchangeable Securities," National Tax Journal, 2003, v56(1,Supp), 167-195.
Abstract: As financial engineering becomes more sophisticated, taxing income from capital becomes increasingly difficult. A crucial issue for tax policymakers, then, is the ease or difficulty of implementing tax-advantaged transactions We offer the first empirical study of a high profile strategy known as tax-free hedging,' which offers economic benefits of a sale without triggering tax. We explore one method of hedging, in which the taxpayer issues publicly-traded exchangeable securities, known by acronyms such as DECS and PHONES. We focus on such offerings between 1992 and 2001, identifying 61 transactions that account for $24 billion in proceeds. Using these publicly-available data, we offer empirical evidence about various frictions that might discourage taxpayers from hedging with exchangeable securities. In so doing, we shed light on why taxpayers might prefer to hedge through private over-the-counter' transactions with derivatives dealers. The main reason is that an offering of exchangeable securities is announced in advance and implemented all at once, triggering an almost four percent decline in the underlying stock price before the hedge is implemented.
Handle: RePEc:nbr:nberwo:9243
Template-Type: ReDIF-Paper 1.0
Title: I Did What Last Night?!!! Adolescent Risky Sexual Behaviors and Substance Use
Classification-JEL: I0; J13
Author-Name: Michael Grossman
Author-Person: pgr107
Author-Name: Sara Markowitz
Author-Person: pma138
Note: CH EH
Number: 9244
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9244
File-URL: http://www.nber.org/papers/w9244.pdf
File-Format: application/pdf
Publication-Status: published as Grossman, Michael and Sara Markowitz. "I Did What Last Night? Adolescent Risky Sexual Behaviors And Substance Use," Eastern Economic Journal, 2005, v31(3,Summer), 383-405.
Abstract: This purpose of this paper is to examine the causal impact of substance use on risky sexual behaviors by teenagers. Risky sexual behaviors, which include unprotected sex and multiple partners, are highly correlated with alcohol and illicit drug use, although the nature of the causal relationship is in question. This study uses two-stage least squares and reduced form models to examine the relationship between substance use and sexual behaviors by gender. Data come from the Youth Risk Behavior Surveys. Result show that alcohol use does not increase the likelihood of having sex or of having multiple partners, although alcohol use does lower the probability of using birth control and condoms among sexually active teens.
Handle: RePEc:nbr:nberwo:9244
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Cigarette Excise Taxes on Smoking Before, During and After Pregnancy
Classification-JEL: I18; H23
Author-Name: Greg Coleman
Author-Name: Michael Grossman
Author-Person: pgr107
Author-Name: Ted Joyce
Author-Person: pjo112
Note: CH EH
Number: 9245
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9245
File-URL: http://www.nber.org/papers/w9245.pdf
File-Format: application/pdf
Publication-Status: published as Colman, Greg & Grossman, Michael & Joyce, Ted, 2003. "The effect of cigarette excise taxes on smoking before, during and after pregnancy," Journal of Health Economics, Elsevier, vol. 22(6), pages 1053-1072, November.
Abstract: Recent analyses suggest that cigarette excise taxes lower prenatal smoking. It is unclear, however, whether the association between taxes and prenatal smoking represents a decline among women of reproductive age or a particular response by pregnant women. We address this question directly with an analysis of quit and relapse behavior during and after pregnancy. We find that the price elasticity of prenatal quitting and postpartum relapse is close to one in absolute value. We conclude that direct financial incentives to stop smoking during and after pregnancy should be considered.
Handle: RePEc:nbr:nberwo:9245
Template-Type: ReDIF-Paper 1.0
Title: Information Content of Equity Analyst Reports
Classification-JEL: G11; G14
Author-Name: Paul Asquith
Author-Name: Michael B. Mikhail
Author-Name: Andrea S. Au
Note: AP CF
Number: 9246
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9246
File-URL: http://www.nber.org/papers/w9246.pdf
File-Format: application/pdf
Publication-Status: published as Asquith, Paul, Michael B. Mikhail and Andrea S. Au. "Information Content Of Equity Analyst Reports," Journal of Financial Economics, 2005, v75(2,Feb), 245-282.
Abstract: This paper investigates the market reaction to the information released in security analyst reports. It shows that the market reacts significantly and positively to changes in recommendation levels, earnings forecasts, and price targets. While changes in price targets and earnings forecasts both provide information to the market, revisions in price targets have a larger and more significant impact than comparable revisions in earnings forecasts. The text of the report is also a significant source of information as it provides the justifications supporting an analyst's summary opinion. When all of this information is considered simultaneously, some of it, notably the earnings forecasts, is subsumed. The results further show that analysts correctly predict price targets slightly over 50% of the time. Finally, the valuation methodology used does not seem to be correlated with either the market's reaction or the analyst's accuracy.
Handle: RePEc:nbr:nberwo:9246
Template-Type: ReDIF-Paper 1.0
Title: An Economic Analysis of Adult Obesity: Results from the Behavioral Risk Factor Surveillance System
Classification-JEL: I12; I18
Author-Name: Shin-Yi Chou
Author-Name: Michael Grossman
Author-Person: pgr107
Author-Name: Henry Saffer
Author-Person: psa935
Note: EH
Number: 9247
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9247
File-URL: http://www.nber.org/papers/w9247.pdf
File-Format: application/pdf
Publication-Status: published as Chou, Shin-Yi & Grossman, Michael & Saffer, Henry, 2004. "An economic analysis of adult obesity: results from the Behavioral Risk Factor Surveillance System," Journal of Health Economics, Elsevier, vol. 23(3), pages 565-587, May.
Abstract: Since the late 1970s, the number of obese adults in the United States has grown by over 50 percent. This paper examines the factors that may be responsible for this rapidly increasing prevalence rate. To study the determinants of adult obesity and related outcomes, we employ micro-level data from the 1984-1999 Behavioral Risk Factor Surveillance System. These repeated cross sections are augmented with state level measures pertaining to the per capita number of fast- food restaurants, the per capita number of full-service restaurants, the price of a meal in each type of restaurant, the price of food consumed at home, the price of cigarettes, clean indoor air laws, and hours of work per week and hourly wage rates by age, gender, race, years of formal schooling completed, and marital status. Our main results are that these variables have the expected effects on obesity and explain a substantial amount of its trend. These findings control for individual-level measures of household income, years of formal schooling completed, and marital status.
Handle: RePEc:nbr:nberwo:9247
Template-Type: ReDIF-Paper 1.0
Title: Optimal Drug Policy in Low-Income Neighborhoods
Classification-JEL: D60; J60
Author-Name: Sheng-Wen Chang
Author-Name: N. Edward Coulson
Author-Person: pco379
Author-Name: Ping Wang
Author-Person: pwa22
Note: EH
Number: 9248
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9248
File-URL: http://www.nber.org/papers/w9248.pdf
File-Format: application/pdf
Publication-Status: published as SHENG-WEN CHANG & N. EDWARD COULSON & PING WANG, 2016. "Optimal Drug Policy in Low-Income Neighborhoods," Journal of Public Economic Theory, vol 18(5), pages 726-751.
Abstract: Part of the debate over the control of drug activity in cities is concerned with the effectiveness of implementing demand- versus supply-side drug policies. This paper is motivated by the relative lack of research providing formal economic underpinning for the implementation of either policy. We construct a simple model of drug activity, in which the drug price and the distribution of population in a community are determined according to a career choice rule and a predetermined drug demand. Three potential government objectives are considered. We find that both demand- and supply-side policies have theoretical support under different community conditions. While the demand-side policy discourages active drug sellers, the supply-side policy has an additional drug-dealing replacement effect on inducing potential entry of drug dealers. In low-income neighborhoods, demand-side policy is more effective if the drug problem is more sever or if the government objective is to deter dealer entry or to promote community's aggregate income rather than minimizing active drug selling.
Handle: RePEc:nbr:nberwo:9248
Template-Type: ReDIF-Paper 1.0
Title: Rational Addiction, Peer Externalities and Long Run Effects of Public Policy
Classification-JEL: D91; H20
Author-Name: Donald S. Kenkel
Author-Person: pke44
Author-Name: Robert R. Reed III
Author-Person: pre88
Author-Name: Ping Wang
Author-Person: pwa22
Note: EH
Number: 9249
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9249
File-URL: http://www.nber.org/papers/w9249.pdf
File-Format: application/pdf
Abstract: The main purpose of this research is to understand the patterns of consumption of addictive goods, their economic and welfare consequences for society and the long-run effect of tax policy in a dynamic general equilibrium model of rational addiction. In contrast to prior research, we allow individuals to make their consumption decisions simultaneous with savings and labor supply. When addictive goods have a stronger habit formation effect (an addiction effect'), individuals choose to save less due to the anticipated adverse health consequences of addiction (a detrimental health effect'). This is particularly important since total savings pins down future productivity in the economy. We also consider the role of peer influence in the choice of addiction and find that more peer pressure' raises addictive consumption, lowers savings and reduces productivity. In light of the various distortions associated with addiction, we conclude by studying the long-run effects of an excise tax on addictive goods. Our calibration exercises suggest that incorporating capital formation and peer effects in a model of rational addiction are crucial for the design of public policy. In particular, accounting for peer externalities increases the optimal sin tax rate by more than 50 percent.
Handle: RePEc:nbr:nberwo:9249
Template-Type: ReDIF-Paper 1.0
Title: The Role of Company Stock in Defined Contribution Plans
Classification-JEL: G2; G3
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: Stephen P. Utkus
Note: AG LS
Number: 9250
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9250
File-URL: http://www.nber.org/papers/w9250.pdf
File-Format: application/pdf
Publication-Status: published as Mitchell, Olivia S. and Kent Smetters (eds.) The Pension Challenge: Risk Transfers and Retirement Income Security. Oxford, UK: Oxford University Press, 2003.
Abstract: This paper explores the risks and benefits of holding company stock in employer-sponsored defined contribution (DC) retirement plans. We address three questions: (1) What is the role and function of company stock in such plans? (2) Who might be affected by enhanced portfolio diversification in such plans? and (3) What mechanisms exist, or might be developed, to enhance portfolio diversification if more diversification were deemed useful? Firms offer company stock within DC plans in an effort to enhance economic performance, though evidence is mixed on productivity gains from stock ownership. We demonstrate that concentrated stock positions arise most often in larger firms' DC plans where sponsors direct employer contributions and restrict diversification. Stock concentration also arises because participants systematically underestimate the risk of employer stock and over-rely on its past performance in making investment decisions. In a retirement system with concentrated stock positions, there will always be some participants who forfeit DC plan savings to firm bankruptcy. Encouraging plan diversification mitigates this risk, but it could also induce some companies to redirect plan contributions to other forms of stock compensation or to replace stock contributions with cash compensation. We conclude by describing policy tools that might be used to encourage diversification and discuss conditions for their effective implementation.
Handle: RePEc:nbr:nberwo:9250
Template-Type: ReDIF-Paper 1.0
Title: Financial Market Runs
Classification-JEL: G2; G1
Author-Name: Antonio E. Bernardo
Author-Name: Ivo Welch
Author-Person: pwe95
Note: AP CF
Number: 9251
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9251
File-URL: http://www.nber.org/papers/w9251.pdf
File-Format: application/pdf
Publication-Status: published as Bernardo, Antonio and Ivo Welch. "Liquidity and Financial Market Runs." Quarterly Journal of Economics 119-1 (February 2004): 135-158.
Abstract: Our paper offers a minimalist model of a run on a financial market. The prime ingredient is that each risk-neutral investor fears having to liquidate after a run, but before prices can recover back to fundamental values. During the urn, only the risk-averse market-making sector is willing to absorb shares. To avoid having to possibly liquidate shares at the marginal post-run price in which case the market-making sector will already hold a lot of share inventory and thus be more reluctant to absorb additional shares all investors may prefer selling their shares into the market today at the average run price, thereby causing the run itself. Consequently, stock prices are low and risk is allocated inefficiently. Liquidity runs and crises are not caused by liquidity shocks per se, but by the fear of future liquidity shocks.
Handle: RePEc:nbr:nberwo:9251
Template-Type: ReDIF-Paper 1.0
Title: Firm-Specific Resources, Financial-Market Development and the Growth of U.S. Multinationals
Classification-JEL: F1
Author-Name: Susan Feinberg
Author-Name: Gordon Phillips
Author-Person: pph31
Note: CF ITI
Number: 9252
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9252
File-URL: http://www.nber.org/papers/w9252.pdf
File-Format: application/pdf
Abstract: We study the resource allocation decisions of U.S. multinational corporations (MNCs). We examine how established MNCs grow across countries and how firm-specific resources and host country financial-market development influence MNC growth. We find evidence of intra-firm trade-offs to growth in MNCs that have limited organizational capital and high R&D, and MNCs with low external and internal financing. In countries with less developed capital markets, we find significant within-MNC trade-offs to growth between affiliates and their U.S. parents. These trade-offs diminish over time as local capital markets develop. Our evidence indicates that access to financing and organizational capital are important resources for MNC affiliate growth.
Handle: RePEc:nbr:nberwo:9252
Template-Type: ReDIF-Paper 1.0
Title: Corporate Demand for Liquidity
Classification-JEL: G31; G32
Author-Name: Heitor Almeida
Author-Name: Murillo Campello
Author-Person: pca164
Author-Name: Michael S. Weisbach
Note: CF
Number: 9253
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9253
File-URL: http://www.nber.org/papers/w9253.pdf
File-Format: application/pdf
Abstract: This paper proposes a theory of corporate liquidity demand and provides new evidence on corporate cash policies. Firms have access to valuable investment opportunities, but potentially cannot fund them with the use of external finance. Firms that are financially unconstrained can undertake all positive NPV projects regardless of their cash position, so their cash positions are irrelevant. In contrast, firms facing financial constraints have an optimal cash position determined by the value of today's investments relative to the expected value of future investments. The model predicts that constrained firms will save a positive fraction of incremental cash flows, while unconstrained firms will not. We also consider the impact of Jensen (1986) style overinvestment on the model's equilibrium, and derive conditions under which overinvestment affects corporate cash policies. We test the model's implications on a large sample of publicly-traded manufacturing firms over the 1981-2000 period, and find that firms classified as financially constrained save a positive fraction of their cash flows, while firms classified as unconstrained do not. Moreover, constrained firms save a higher fraction of cash inflows during recessions. These results are robust to the use of alternative proxies for financial constraints, and to several changes in the empirical specification. We also find weak evidence consistent with our agency-based model of corporate liquidity.
Handle: RePEc:nbr:nberwo:9253
Template-Type: ReDIF-Paper 1.0
Title: The Labour Market in the New Information Economy
Classification-JEL: J22; J24
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS PR
Number: 9254
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9254
File-URL: http://www.nber.org/papers/w9254.pdf
File-Format: application/pdf
Publication-Status: published as Richard B. Freeman, 2002. "The Labour Market in the New Information Economy," Oxford Review of Economic Policy, Oxford University Press, vol. 18(3), pages 288-305.
Abstract: The extension of information and communication technologies to economic activity is changing the labour market in important ways. This article shows that computerization and use of the Internet are associated with greater hours worked as well as higher wages; that IT occupations are rapidly increasing their share of employment; that job search and recruitment are moving rapidly to the Web, with consequences for matching employers and employees; and possibly most important of all, that trade unions have begun to use the Internet as a tool for servicing members and carrying their message to the public, raising the possibility of a major change in the nature of the union movement.
Handle: RePEc:nbr:nberwo:9254
Template-Type: ReDIF-Paper 1.0
Title: The Role of Information in Driving FDI: Theory and Evidence
Classification-JEL: F0
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Ashoka Mody
Author-Name: Efraim Sadka
Author-Person: psa492
Note: IFM ITI
Number: 9255
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9255
File-URL: http://www.nber.org/papers/w9255.pdf
File-Format: application/pdf
Abstract: We develop a simple information-based model of FDI flows in which the abundance of intangible' capital in the source countries, which generates expertise in cream-skimming investment projects in the host countries and enhances FDI flows. Corporate transparency in the host countries, on the other hand, diminishes the value of this expertise and thereby reduces the flow of FDI. Empirical evidence (from a sample of 12 source countries and 45 host countries over the 1980s and 1990s) which is analyzed in a gravity equation model provides some support to our theoretical hypotheses. The gains from FDI in the host country in our model are reflected in a more e.cient size of stock of domestic capital and its allocation across firms. These gains depend crucially (and inversely) on the degree of competition among FDI investors.
Handle: RePEc:nbr:nberwo:9255
Template-Type: ReDIF-Paper 1.0
Title: Redistribution and Insurance: Mandatory Annuitization with Mortality Heterogeneity
Classification-JEL: D91; H55
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Note: AG PE
Number: 9256
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9256
File-URL: http://www.nber.org/papers/w9256.pdf
File-Format: application/pdf
Publication-Status: published as Brown, Jeffrey R. "Redistribution And Insurance: Mandatory Annuitization With Mortality Heterogeneity," Journal of Risk and Insurance, 2003, v70(1,Mar), 17-41.
Abstract: This paper examines the distributional implications of mandatory longevity insurance when there is mortality heterogeneity in the population. Previous research has demonstrated the significant financial redistribution that occurs under alternative annuity programs in the presence of differential mortality across groups. This paper embeds that analysis into a life cycle framework that allows for an examination of distributional effects on a utility-adjusted basis. It finds that the degree of redistribution that occurs from the introduction of a mandatory annuity program is substantially lower on a utility-adjusted basis than when evaluated on a purely financial basis. In a simple life-cycle model with no bequests, complete annuitization is welfare enhancing even for those individuals with much higher-than-average expected mortality rates, so long as administrative costs are sufficiently low. These findings have implications for policy toward annuitization, particularly as part of a reformed Social Security system.
Handle: RePEc:nbr:nberwo:9256
Template-Type: ReDIF-Paper 1.0
Title: The Great Exchange Rate Debate After Argentina
Classification-JEL: F3; F4
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM
Number: 9257
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9257
File-URL: http://www.nber.org/papers/w9257.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian. "The Great Exchange Rate Debate After Argentina," North American Journal of Economics and Finance, 2002, v13(3,Dec), 237-252.
Abstract: In this paper I discuss in what way, if any, the collapse of Argentina's experience with a currency board has affected the policy debate on the appropriate exchange rate regime in emerging and transition countries. More specifically, I deal with three issues: (1) I discuss some important aspects of the Argentine experience. (2) I provide a comparative evaluation of economic performance under strict dollarization. And (3), I analyze emerging countries' experiences with flexible exchange rates, including the issue of fear of floating.'
Handle: RePEc:nbr:nberwo:9257
Template-Type: ReDIF-Paper 1.0
Title: Redistribution Policy: A European Model
Classification-JEL: F2; H7
Author-Name: Alessandra Casella
Author-Person: pca496
Note: ITI
Number: 9258
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9258
File-URL: http://www.nber.org/papers/w9258.pdf
File-Format: application/pdf
Publication-Status: published as Casella, Alessandra. "Redistribution Policy: A European Model," Journal of Public Economics, 2005, v89(7,Jul), 1305-1331.
Abstract: Following the rationale for regional redistribution programs described in the official documents of the European Union, this paper studies a very simple multi-country model built around two regions: a core and a periphery. Technological spill-overs link firms' productivity in each of the two regions, and each country's territory falls partly in the core and partly in the periphery, but the exact shares vary across countries. We find that, in line with the EU view, the efficient regional allocation requires both national and international transfers. If migration is fully free across all borders, then optimal redistribution policy results from countries' uncoordinated policies, obviating the need for a central agency. But if countries have the option of setting even imperfect border barriers, then efficiency is likely to require coordination on both barriers and international transfers (both of which will be set optimally at positive levels). The need for coordination increases as the Union increases in size.
Handle: RePEc:nbr:nberwo:9258
Template-Type: ReDIF-Paper 1.0
Title: Factor Endowments, Inequality, and Paths of Development Among New World Economics
Classification-JEL: N10
Author-Name: Stanley L. Engerman
Author-Name: Kenneth L. Sokoloff
Note: DAE EFG
Number: 9259
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9259
File-URL: http://www.nber.org/papers/w9259.pdf
File-Format: application/pdf
Publication-Status: published as Stanley L. Engerman & Kenneth Lee Sokoloff, 2002. "Factor Endowments, Inequality, and Paths of Development among New World Economies," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
Abstract: Whereas traditional explanations of differences in long-run paths of development across the Americas generally point to the significance of differences in national heritage or religion, we highlight the relevance of stark contrasts in the degree of inequality in wealth, human capital, and political power in accounting for how fundamental economic institutions evolved over time. We argue, moreover, that the roots of these disparities in the extent of inequality lay in differences in the initial factor endowments (dating back to the era of European colonization). We document -- through comparative studies of suffrage, public land, and schooling policies -- systematic patterns by which societies in the Americas that began with more extreme inequality or heterogeneity in the population were more likely to develop institutional structures that greatly advantaged members of elite classes (and disadvantaging the bulk of the population) by providing them with more political influence and access to economic opportunities. The clear implication is that institutions should not be presumed to be exogenous; economists need to learn more about where they come from to understand their relation to economic development. Our findings not only contribute to our knowledge of why extreme differences in the extent of inequality across New World economies have persisted for centuries, but also to the study of processes of long-run economic growth past and present.
Handle: RePEc:nbr:nberwo:9259
Template-Type: ReDIF-Paper 1.0
Title: Transparency and International Investor Behavior
Classification-JEL: F30; D80
Author-Name: R. Gaston Gelos
Author-Person: pge1
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: IFM ITI
Number: 9260
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9260
File-URL: http://www.nber.org/papers/w9260.pdf
File-Format: application/pdf
Abstract: Does country transparency affect international portfolio investment? We examine this and related questions using some new measures of transparency and a unique micro dataset on international portfolio holdings. We distinguish between government and corporate transparency. There is clear evidence that international funds invest systematically less in less transparent countries. On the other hand, herding among funds tends to be more prevalent in less transparent countries. There is also some evidence that during crises, funds flee non-transparent countries by a greater amount.
Handle: RePEc:nbr:nberwo:9260
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rates and Casualties During the First World War
Classification-JEL: N1; E4
Author-Name: George J. Hall
Author-Person: pha118
Note: EFG IFM PE
Number: 9261
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9261
File-URL: http://www.nber.org/papers/w9261.pdf
File-Format: application/pdf
Publication-Status: published as Hall, George J. "Exchange Rates And Casualties During The First World War," Journal of Monetary Economics, 2004, v51(8,Nov), 1711-1742.
Abstract: I estimate two factor models of Swiss exchange rates during the FirstWorldWar. I have data for five of the primary belligerents: Britain, France, Italy, Germany, and Austria-Hungary. At the outbreak of the war, these nations suspended convertibility of their currencies into gold with the promise that after the war each would restore convertibility at the old par. However, once convertibility was suspended, the value of each currency depended on the outcome of the war. I decompose exchange rate movements into a common trend, a common factor, and country-specific factors. Movements in the common trend are consistent with the quantity theory of money. The common factor contains information on contemporaries' expectations about the war's resolution. Innovations to this common factor are correlated with time series on soldiers killed, wounded, and taken prisoner.
Handle: RePEc:nbr:nberwo:9261
Template-Type: ReDIF-Paper 1.0
Title: Determinants of Real House Price Dynamics
Classification-JEL: G12; R31
Author-Name: Dennis R. Capozza
Author-Name: Patric H. Hendershott
Author-Name: Charlotte Mack
Author-Name: Christopher J. Mayer
Author-Person: pma212
Note: PE
Number: 9262
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9262
File-URL: http://www.nber.org/papers/w9262.pdf
File-Format: application/pdf
Abstract: We explore the dynamics of real house prices by estimating serial correlation and mean reversion coefficients from a panel data set of 62 metro areas from 1979-1995. The serial correlation and reversion parameters are then shown to vary cross sectionally with city size, real income growth, population growth, and real construction costs. Serial correlation is higher in metro areas with higher real income, population growth and real construction costs. Mean reversion is greater in large metro areas and faster-growing cities with lower construction costs. Empirically, substantial overshooting of prices can occur in high real construction cost areas, which have high serial correlation and low mean reversion, such as the coastal cities of Boston, New York, San Francisco, Los Angeles and San Diego.
Handle: RePEc:nbr:nberwo:9262
Template-Type: ReDIF-Paper 1.0
Title: How Important are Classroom Peer Effects? Evidence from Boston's Metco Program
Classification-JEL: I2; J7
Author-Name: Joshua D. Angrist
Author-Person: pan29
Author-Name: Kevin Lang
Author-Person: pla83
Note: CH LS ED
Number: 9263
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9263
File-URL: http://www.nber.org/papers/w9263.pdf
File-Format: application/pdf
Publication-Status: published as Angrist, Joshua D. and Kevin Lang. "Does School Integration Generate Peer Effects? Evidence From Boston's Metco Program," American Economic Review, 2004, v94(5,Dec), 1613-1634.
Abstract: Most integration programs transfer students between schools within districts. In this paper, we study the impact of Metco, a long-running desegregation program that sends mostly black students out of the Boston public school district to attend schools in more affluent suburban districts. We focus on the impact of Metco on the students in one of the largest Metco-receiving districts. In the 2000 school year, Metco increased the proportion black in this district from about 7.5 percent to almost 12.5 percent. Because Metco students have substantially lower test scores than local students, this inflow generates a significant decline in scores, with an especially marked effect on the lower quantiles. The overall decline is due to a composition effect, however, since OLS estimates show no impact on average scores in the sample of all non-Metco students. On the other hand, OLS and fixed effects estimates show some evidence of an effect on the scores of minority 3rd graders in reading and language. Instrumental variables estimates for 3rd graders are imprecise but generally in line with OLS. Further analysis shows the negative effects on 3rd graders to be clearly present only for girls. Given the highly localized nature of these results, we conclude that any peer effects from Metco are modest and short-lived.
Handle: RePEc:nbr:nberwo:9263
Template-Type: ReDIF-Paper 1.0
Title: What is the Price of Hubris? Using Takeover Battles to Infer Overpayments and Synergies
Author-Name: Pekka Hietala
Author-Name: Steven N. Kaplan
Author-Name: David T. Robinson
Author-Person: pro347
Note: AP CF
Number: 9264
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9264
File-URL: http://www.nber.org/papers/w9264.pdf
File-Format: application/pdf
Publication-Status: published as Pekka Hietala & Steven N. Kaplan & David T. Robinson, 2003. "What is the Price of Hubris? Using Takeover Battles to Infer Overpayments and Synergies," Financial Management, Financial Management Association, vol. 32(3), Fall.
Abstract: We present a framework for determining the information that can be extracted from stock prices around takeover contests. In only two types of cases is it theoretically possible to use stock price movements to infer bidder overpayment and relative synergies. The takeover contest for Paramount in 1994 illustrates one of these generic cases. We estimate that Viacom, the winning' bidder, overpaid for Paramount by more than $2 billion. This occurred despite the fact that Viacom's CEO owned roughly 3/4 of Viacom. These results are consistent with managerial overconfidence and/or large private benefits, but not with the traditional agency-based incentive problem.
Handle: RePEc:nbr:nberwo:9264
Template-Type: ReDIF-Paper 1.0
Title: Short and Long Run Decompositions of OECD Wage Inequality Changes
Classification-JEL: F16; J31
Author-Name: T. Huw Edwards
Author-Person: ped19
Author-Name: John Whalley
Author-Person: pwh8
Note: ITI LS
Number: 9265
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9265
File-URL: http://www.nber.org/papers/w9265.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Terence Huw and John Whalley. "Short- and Long-Run Decompositions of UK Wage Inequality Changes." Bulletin of Economic Research 59, 1 (January 2007): 1-24.
Abstract: This paper focuses on the causes of increased wage inequality in OECD countries in recent years and its decomposition into the component factors of trade surges in low wage products and technological change that has preoccupied the trade and wages literature. It argues that the length of production run and degree of fixity of factors is crucial in such analyses. In particular, if the observed wage inequality response to price and technology shocks reflects a short-run response in which factors and output have not adjustedfully across industries, then decomposition analysis of the causes of the observed increases in inequality is substantially altered relative to a long-run factors mobile world. This conclusion applies both when one type of labour has mobility costs and in the Ricardo-Viner case where there is an additional, sectorally immobile factor. Furthermore, only small departures from the fully mobile model can greatly change decompositions. This finding is important because most data used in earlier work are interpreted as reflective of a long-run full mobility response, when this may not be the case. Incorrect conclusions as to how trade surges and technology contribute to wage inequality can be easily drawn, if the data are in fact generated by a short-run adjustment process.
Handle: RePEc:nbr:nberwo:9265
Template-Type: ReDIF-Paper 1.0
Title: The High Demand for International Reserves in the Far East: What's Going On?
Classification-JEL: F31; F32
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Nancy Marion
Author-Person: pma1464
Note: IFM
Number: 9266
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9266
File-URL: http://www.nber.org/papers/w9266.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua, and Nancy P. Marion. "The high demand for international reserves in the Far East: What is going on?" Journal of the Japanese and International Economies, September 2003, 17(3): 370-400.
Publication-Status: published as Joshua Aizenman & Nancy P. Marion, 2002. "The high demand for international reserves in the Far East: what's going on?," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
Abstract: This paper explores econometric and theoretical interpretations for the relatively high demand for international reserves by countries in the Far East and the relatively low demand by some other developing countries. Using a sample of about 125 developing countries, we show that reserve holdings over the 1980-1996 period seem to be the predictable outcome of a few key factors, such as the size of international transactions, their volatility, the exchange-rate arrangement, and political considerations. The estimating equation does a good job of predicting reserve holdings in Asia before the 1997 financial crisis. After the crisis, the estimating equation significantly under-predicts the reserve holdings of several key Far East countries, as one might expect from the Lucas Critique. This under-prediction is consistent with models explaining reserve demand in developing countries. Specifically, we show that sovereign risk and costly tax collection to cover fiscal liabilities lead to a relatively large precautionary demand for international reserves. In the aftermath of a crisis, countries that have to deal with higher perceived sovereign risk and higher fiscal liabilities (both funded and unfunded) will opt to increase their demand for reserves. The models also help us understand why some developing countries do not hold large precautionary reserve balances in the aftermath of crises. Countries with high discount rates, political instability or political corruption find it optimal to hold smaller precautionary balances. We also show that models that incorporate loss aversion predict a relatively large demand for international reserves. Hence, if a crisis increases the volatility of shocks and/or loss aversion, it will greatly increase the demand for international reserves. Consequently, we conclude that the puzzling' pattern in international reserve holdings is reasonably explained by the extended models described in this paper.
Handle: RePEc:nbr:nberwo:9266
Template-Type: ReDIF-Paper 1.0
Title: Decomposing Productivity Growth in the U.S. Computer Industry
Classification-JEL: D24; O33
Author-Name: Hyunbae Chun
Author-Person: pch115
Author-Name: M. Ishaq Nadiri
Note: PR
Number: 9267
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9267
File-URL: http://www.nber.org/papers/w9267.pdf
File-Format: application/pdf
Publication-Status: published as Hyunbae Chun & M. Ishaq Nadiri, 2008. "Decomposing Productivity Growth in the U.S. Computer Industry," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 174-180, November.
Abstract: In this paper, we examine the sources of the productivity growth in the U.S. computer industry from 1978 to 1999. We estimate a joint production model of output quantity and quality that distinguishes two types of technological changes: process and product innovations. Based on the estimation results, we decompose total factor productivity (TFP) growth rate into the contributions of process and product innovations and scale economies. The results show that product innovation associated with better quality accounts for about 30 percent of the TFP growth in the computer industry. Furthermore, we find that the TFP acceleration in the computer industry in the late 1990s is mainly derived from a rapid increase in product innovation.
Handle: RePEc:nbr:nberwo:9267
Template-Type: ReDIF-Paper 1.0
Title: Asset Allocation and Asset Location: Household Evidence from the Survey of Consumer Finances
Classification-JEL: H2; G2
Author-Name: Daniel Bergstresser
Author-Person: pbe639
Author-Name: James Poterba
Author-Person: ppo19
Note: PE
Number: 9268
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9268
File-URL: http://www.nber.org/papers/w9268.pdf
File-Format: application/pdf
Publication-Status: published as Bergstresser, Daniel and James Poterba. "Asset Allocation And Asset Location: Household Evidence From The Survey Of Consumer Finances," Journal of Public Economics, 2004, v88(9-10,Aug), 1893-1915.
Abstract: The rapid growth of assets in self-directed tax-deferred retirement accounts has generated a new set of financial decisions for many households. In addition to deciding which assets to hold, households with substantial assets in both taxable and tax-deferred accounts must decide where to hold them. This paper uses data from the Survey of Consumer Finances to assess how many households have enough assets in both taxable and tax-deferred accounts to face significant asset location choices. It also investigates the asset location decisions these households make. In 1998, 45 percent of households had at least some assets in a tax-deferred account, and more than ten million households had at least $25,000 in both a taxable and a tax-deferred account. Many households hold equities in their tax-deferred accounts but not in their taxable accounts, while also holding taxable bonds in their taxable accounts. Most of these households could reduce their taxes by relocating heavily-taxed fixed income assets to their tax-deferred account. Asset allocation inside and outside tax-deferred accounts is quite similar, with about seventy percent of assets in each location invested in equity securities. For nearly three quarters of the households that hold apparently tax-inefficient portfolios, a shift of less than $10,000 in financial assets can move their portfolio to a tax-efficient allocation. Asset location decisions within IRAs appear to be sensitive to marginal tax rates; we do not find evidence for such sensitivity in other tax-deferred accounts.
Handle: RePEc:nbr:nberwo:9268
Template-Type: ReDIF-Paper 1.0
Title: Competition and Innovation: An Inverted U Relationship
Classification-JEL: O1; L1
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Nicholas Bloom
Author-Person: pbl55
Author-Name: Richard Blundell
Author-Person: pbl81
Author-Name: Rachel Griffith
Author-Person: pgr70
Author-Name: Peter Howitt
Author-Person: pho22
Note: EFG PR
Number: 9269
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9269
File-URL: http://www.nber.org/papers/w9269.pdf
File-Format: application/pdf
Publication-Status: published as Aghion, Philippe, Nick Bloom, Richard Blundell, Rachel Griffith and Peter Howitt. "Competition And Innovation: An Inverted-U Relationship," Quarterly Journal of Economics, 2005, v120(2,May), 701-728.
Abstract: This paper investigates the relationship between product market competition (PMC) and innovation. A growth model is developed in which competition may increase the incremental profit from innovating; on the other hand, competition may also reduce innovation incentives for laggards. There are four key predictions. First, the relationship between product market competition (PMC) and innovation is an inverted U-shape. Second, the equilibrium degree of technological neck-and-neckness' among firms should decrease with PMC. Third, the higher the average degree of neck-and-neckness' in an industry, the steeper the inverted-U relationship. Fourth, firms may innovate more if subject to higher debt-pressure, especially at lower levels of PMC. We confront these predictions with data on UK firms' patenting activity at the US patenting office. They are found to accord well with observed behavior.
Handle: RePEc:nbr:nberwo:9269
Template-Type: ReDIF-Paper 1.0
Title: Closing Small Open Economy Models
Classification-JEL: F41
Author-Name: Stephanie Schmitt-Grohe
Author-Person: psc44
Author-Name: Martin Uribe
Note: EFG
Number: 9270
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9270
File-URL: http://www.nber.org/papers/w9270.pdf
File-Format: application/pdf
Publication-Status: published as Schmitt-Grohe, Stephanie & Uribe, Martin, 2003. "Closing small open economy models," Journal of International Economics, Elsevier, vol. 61(1), pages 163-185, October.
Abstract: The small open economy model with incomplete asset markets features a steady state that depends on initial conditions and equilibrium dynamics that possess a random walk component. A number of modifications to the standard model have been proposed to induce stationarity. This paper presents a quantitative comparison of these alternative approaches. Five different specifications are considered: (1) A model with an endogenous discount factor (Uzawa-type preferences); (2) A model with a debt-elastic interest-rate premium; (3) A model with convex portfolio adjustment costs; (4) A model with complete asset markets; and (5) A model without stationarity-inducing features. The main finding of the paper is that all models deliver virtually identical dynamics at business-cycle frequencies, as measured by unconditional second moments and impulse response functions. The only noticeable difference among the alternative specifications is that the complete-asset-market model induces smoother consumption dynamics.
Handle: RePEc:nbr:nberwo:9270
Template-Type: ReDIF-Paper 1.0
Title: Federal Terrorism Risk Insurance
Classification-JEL: G2; G18
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Author-Name: Randall S. Kroszner
Author-Name: Brian H. Jenn
Note: PE
Number: 9271
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9271
File-URL: http://www.nber.org/papers/w9271.pdf
File-Format: application/pdf
Publication-Status: published as Brown, Jeffrey R., Randall S. Kroszner and Brian H. Jenn. "Federal Terrorism Risk Insurance," National Tax Journal, 2002, v55(3,Sep), 647-657.
Abstract: The terrorist attacks of September 11, 2001 represented a loss for commercial property & casualty insurers that was both unprecedented and unanticipated. After sustaining this record capital loss, the availability of adequate private insurance coverage against future terrorist attacks came into question. Concern over the potential adverse consequences of the lack of availability of insurance against terrorist incidents led to calls for federal intervention in insurance markets. This paper discusses the economic rationale for and against federal intervention in the market, and concludes that the benefits from establishing a temporary transition program, during which the private sector can build capacity and adapt to a dramatically changed environment for terrorism risk, may provide benefits to the economy that exceed the direct and indirect costs.
Handle: RePEc:nbr:nberwo:9271
Template-Type: ReDIF-Paper 1.0
Title: Information Technology Externalities: Empirical Evidence from 42 U.S. Industries
Classification-JEL: D24; O47
Author-Name: Sung-Bae Mun
Author-Name: M. Ishaq Nadiri
Note: EFG PR
Number: 9272
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9272
File-URL: http://www.nber.org/papers/w9272.pdf
File-Format: application/pdf
Abstract: Using interindustry transaction in input-output tables, we examine Information Technology (IT) externalities in U.S. private industries over the period 1984-2000. Our empirical results show that computerization of an industry's customer and supplier industries reduces both labor and material costs of the industry. Moreover, cost savings driven by supplier industries are larger than those driven by customer industries. We also find that industries in the services sector enjoy more benefits from IT spillovers than industries in other sectors because of their high IT capital intensity and composition of interindustry transaction. Decomposition of total factor productivity (TFP) suggests that IT externalities can explain considerable parts of TFP growth, although possible mismeasurement of output in services industries leads to exacerbated technical changes of services industries.
Handle: RePEc:nbr:nberwo:9272
Template-Type: ReDIF-Paper 1.0
Title: Do We Really Know that the WTO Increases Trade?
Classification-JEL: F13; F15
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: ITI
Number: 9273
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9273
File-URL: http://www.nber.org/papers/w9273.pdf
File-Format: application/pdf
Publication-Status: published as Rose, Andrew K. "Do We Really Know That The WTO Increases Trade?," American Economic Review, 2004, v94(1,Mar), 98-114.
Abstract: This paper estimates the effect on international trade of multilateral trade agreements: the World Trade Organization (WTO), its predecessor the Generalized Agreement on Tariffs and Trade (GATT), and the Generalized System of Preferences (GSP) extended from rich countries to developing countries. I use a standard gravity' model of bilateral merchandise trade and a large panel data set covering over fifty years and 175 countries. An extensive search reveals little evidence that countries joining or belonging to the GATT/WTO have different trade patterns than outsiders. The GSP does seem to have a strong effect, and is associated with an approximate doubling of trade.
Handle: RePEc:nbr:nberwo:9273
Template-Type: ReDIF-Paper 1.0
Title: The Evolution of Economic Understanding and Postwar Stabilization Policy
Classification-JEL: E60; E50
Author-Name: Christina D. Romer
Author-Person: pro407
Author-Name: David H. Romer
Author-Person: pro406
Note: DAE EFG ME
Number: 9274
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9274
File-URL: http://www.nber.org/papers/w9274.pdf
File-Format: application/pdf
Publication-Status: published as Christina D. Romer & David H. Romer, 2002. "The evolution of economic understanding and postwar stabilization policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 11-78.
Abstract: There have been large changes in the conduct of aggregate demand policy in the United States over the past fifty years. This paper shows that these changes in policy have resulted largely from changes in policymakers' beliefs about the functioning of the economy and the effects of policy. We document the changes in beliefs using contemporaneous discussions of the economy and policy by monetary and fiscal policymakers and, for the period since the late 1960s, using the Federal Reserve's internal forecasts. We find that policymakers' understanding of the economy has not exhibited steady improvement. Instead, the evidence reveals an evolution from a fairly crude but basically sound worldview in the 1950s, to a more sophisticated but deeply flawed model in the 1960s, to uncertainty and fluctuating beliefs in the 1970s, and finally to the modern worldview of the 1980s and 1990s. We establish a link between policymakers' beliefs and aggregate demand policy by examining narrative evidence on the motivation for key policy choices. We also compare monetary policymakers' choices with the implications of a modern estimated policy rule and show that the main differences are consistent with the changes in beliefs that we observe.
Handle: RePEc:nbr:nberwo:9274
Template-Type: ReDIF-Paper 1.0
Title: Mutual Fund Flows and Performance in Rational Markets
Author-Name: Jonathan B. Berk
Author-Name: Richard C. Green
Note: AP
Number: 9275
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9275
File-URL: http://www.nber.org/papers/w9275.pdf
File-Format: application/pdf
Publication-Status: published as Berk, Jonathan B. and Richard C. Green. "Mutual Fund Flows and Performance in Rational Markets." Journal of Political Economy 112 (2004), 1269-1295.
Abstract: We develop a simple rational model of active portfolio management that provides a natural benchmark against which to evaluate observed relationship between returns and fund flows. We show that many effects widely regarded as anomalous are consistent with this simple explanation. In the model, investments with active managers do not outperform passive benchmarks because of the competitive market for capital provision, combined with decreasing returns to scale in active portfolio management. Consequently, past performance cannot be used to predict future returns, or to infer the average skill level of active managers. The lack of persistence in active manager returns does not imply that differential ability across managers is nonexistent or unrewarded, that gathering information about performance is socially wasteful, or that chasing performance is pointless. A strong relationship between past performance and the ow of funds exists in our model, indeed this is the market mechanism that ensures that no predictability in performance exists. Calibrating the model to the fund flows and survivorship rates, we find these features of the data are consistent with the vast majority (80%) of active managers having at least enough skill to make back their fees.
Handle: RePEc:nbr:nberwo:9275
Template-Type: ReDIF-Paper 1.0
Title: Still Fettered After All These Years
Author-Name: Barry Eichengreen
Author-Person: pei2
Note: DAE EFG IFM ME
Number: 9276
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9276
File-URL: http://www.nber.org/papers/w9276.pdf
File-Format: application/pdf
Abstract: The last decade has seen an outpouring of scholarship on the economics of the Great Depression. If there is anything approaching a consensus, it is a synthetic view which admits a role both for monetary policy mistakes and for the international monetary and financial system in transmitting those destabilizing impulses to the rest of the world. It explains the speed and extent of the subsequent decline in terms of both banking crises and the collapse of the gold standard, which conspired in placing deflationary pressure to different degrees on different countries. And, it explains the eventual recovery in terms of the abandonment of the gold standard, which facilitated the pursuit of stabilizing monetary policies, but also in terms of the restoration of stability to banking and financial systems, something that occurred at different times in different countries. One way of understanding the veneer of disputation on this consensus is that different elements dominated in different countries. For the United States, there is no denying the role of monetary policy mistakes in the onset of the Depression, whereas for other countries international monetary instability played the most important part.
Handle: RePEc:nbr:nberwo:9276
Template-Type: ReDIF-Paper 1.0
Title: Anomalies and Market Efficiency
Classification-JEL: F2; N1
Author-Name: G. William Schwert
Author-Person: psc116
Note: AP
Number: 9277
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9277
File-URL: http://www.nber.org/papers/w9277.pdf
File-Format: application/pdf
Publication-Status: published as Schwert, G. William, 2003. "Anomalies and market efficiency," 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 15, pages 939-974 Elsevier.
Abstract: Anomalies are empirical results that seem to be inconsistent with maintained theories of asset-pricing behavior. They indicate either market inefficiency (profit opportunities) or inadequacies in the underlying asset-pricing model. The evidence in this paper shows that the size effect, the value effect, the weekend effect, and the dividend yield effect seem to have weakened or disappeared after the papers that highlighted them were published. At about the same time, practitioners began investment vehicles that implemented the strategies implied by some of these academic papers. The small-firm turn-of-the-year effect became weaker in the years after it was first documented in the academic literature, although there is some evidence that it still exists. Interestingly, however, it does not seem to exist in the portfolio returns of practitioners who focus on small-capitalization firms. All of these findings raise the possibility that anomalies are more apparent than real. The notoriety associated with the findings of unusual evidence tempts authors to further investigate puzzling anomalies and later to try to explain them. But even if the anomalies existed in the sample period in which they were first identified, the activities of practitioners who implement strategies to take advantage of anomalous behavior can cause the anomalies to disappear (as research findings cause the market to become more efficient).
Handle: RePEc:nbr:nberwo:9277
Template-Type: ReDIF-Paper 1.0
Title: The Stability and Growth Pact as an Impediment to Privatizing Social Security
Classification-JEL: H0
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Note: PE
Number: 9278
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9278
File-URL: http://www.nber.org/papers/w9278.pdf
File-Format: application/pdf
Abstract: The aging of the population shakes the confidence in the economic viability of pay-as-you-go social security systems. We demonstrate how in a political-economy framework the shaken cofidence leads to the downsizing of the social security-system, and to the emergence of supplemental individual retirement programs. Lifting the Stability-Pact type ceiling on fiscal deficits is shown to facilitate the transition from a national to a private pension system, through an endogenously determined shift in the median voter.
Handle: RePEc:nbr:nberwo:9278
Template-Type: ReDIF-Paper 1.0
Title: Mergers as Reallocation
Classification-JEL: O3; L2
Author-Name: Boyan Jovanovic
Author-Name: Peter L. Rousseau
Author-Person: pro64
Note: DAE EFG PR
Number: 9279
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9279
File-URL: http://www.nber.org/papers/w9279.pdf
File-Format: application/pdf
Publication-Status: published as Boyan Jovanovic & Peter L. Rousseau, 2008. "Mergers as Reallocation," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 765-776, 07.
Abstract: We argue that takeovers have played a major role in speeding up the diffusion of new technology. The role that they play is similar to that of entry and exit of firms. We focus on and compare two periods: 1890-1930 during which electricity and the internal combustion engine spread through the U.S. economy, and 1971-2001 . the Information Age.
Handle: RePEc:nbr:nberwo:9279
Template-Type: ReDIF-Paper 1.0
Title: Does Medicare Benefit the Poor? New Answers to an Old Question
Classification-JEL: I1
Author-Name: Jay Bhattacharya
Author-Name: Darius Lakdawalla
Author-Person: pla295
Note: EH
Number: 9280
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9280
File-URL: http://www.nber.org/papers/w9280.pdf
File-Format: application/pdf
Publication-Status: published as Bhattacharya, Jay and Darius Lakdawalla. "Does Medicare Benefit The Poor?," Journal of Public Economics, 2006, v90(1-2,Jan), 277-292.
Abstract: Previous research has found that Medicare benefits flow primarily to the most economically advantaged groups and that the financial returns to Medicare are consequently higher for the rich than for the poor. Taking a different approach, we find very different results. According to the Medicare Current Beneficiary Survey, the poorest groups receive the most benefits at any given age. In fact, the advantage of the poor in benefit receipt is so great that it easily overcomes their higher death rates. This leads to the result that the financial returns to Medicare are actually much higher for poorer groups in the population and that Medicare is a highly progressive public program. These new results appear to owe themselves to our measurement of socioeconomic status at the individual level, in contrast to the aggregated measures used by previous research.
Handle: RePEc:nbr:nberwo:9280
Template-Type: ReDIF-Paper 1.0
Title: Is Health Insurance Affordable for the Uninsured?
Classification-JEL: I1
Author-Name: M. Kate Bundorf
Author-Name: Mark V. Pauly
Note: EH
Number: 9281
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9281
File-URL: http://www.nber.org/papers/w9281.pdf
File-Format: application/pdf
Publication-Status: published as Bundorf, M. Kate and Mark V. Pauly. "Is Health Insurance Affordable for the Uninsured?" Journal of Health Economics 25, 4 (July 2006): 650-673 .
Abstract: In this paper, we investigate the meaning of affordability' in the context of health insurance. Assessing the relationship between the affordability of coverage and the large number of uninsured in the U.S. is important for understanding the barriers to purchasing coverage for the uninsured and evaluating the role of policy in reducing this number. We propose several definitions of affordability and examine the implications of alternative definitions on estimates of the proportion of currently uninsured who are unable to afford coverage. We find that, depending on the definition, health insurance was affordable to between one-quarter and three-quarters of the uninsured in 2000.
Handle: RePEc:nbr:nberwo:9281
Template-Type: ReDIF-Paper 1.0
Title: After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies
Classification-JEL: P26
Author-Name: Karla Hoff
Author-Person: pho255
Author-Name: Joseph E. Stiglitz
Note: LE
Number: 9282
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9282
File-URL: http://www.nber.org/papers/w9282.pdf
File-Format: application/pdf
Publication-Status: published as Hoff, Karla and Joseph E. Stiglitz. "After The Big Bang? Obstacles To The Emergence Of The Rule Of Law In Post-Communist Societies," American Economic Review, 2004, v94(3,Jun), 753-763.
Abstract: When Russia launched mass privatization, it was widely believed that it would create a powerful constituency for the rule of law. That didn't happen. We present a dynamic equilibrium model of the political demand for the rule of law and show that beneficiaries of mass privatization may fail to demand the rule of law even if it is the Pareto efficient rule of the game.' The reason is that uncertainty about the legal regime can lead to asset stripping, and stripping can give agents an interest in prolonging the absence of the rule of law.
Handle: RePEc:nbr:nberwo:9282
Template-Type: ReDIF-Paper 1.0
Title: Prices vs. Quantities vs. Tradable Quantities
Classification-JEL: L51; D81
Author-Name: Roberton Williams
Author-Person: pwi38
Note: ED PE EEE
Number: 9283
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9283
File-URL: http://www.nber.org/papers/w9283.pdf
File-Format: application/pdf
Abstract: This paper extends Weitzman's (1974) seminal paper comparing price and quantity instruments for regulation to consider a third option: tradable quantity regulations, such as tradable permits. Contrary to what prior work has suggested, fixed quantities may be more efficient than tradable quantities if the regulated goods are not perfect substitutes, even when trading ratios are based on the ratio of expected marginal benefits between goods, not simply one-for-one. Indeed, when benefits are independent across goods, or when the goods are complements, tradable quantities are never the most efficient instrument. This theory is applied to dynamic pollution problems, and suggests that permit banking should be allowed for stock pollutants, but not for flow pollutants. These results indicate that many regulations, including the current sulfur dioxide trading program and proposed greenhouse gas regulations, are inefficient.
Handle: RePEc:nbr:nberwo:9283
Template-Type: ReDIF-Paper 1.0
Title: The Benefits of the Home Mortgage Interest Deduction
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Jesse M. Shapiro
Author-Person: psh70
Note: EFG PE
Number: 9284
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9284
File-URL: http://www.nber.org/papers/w9284.pdf
File-Format: application/pdf
Publication-Status: published as The Benefits of the Home Mortgage Interest Deduction, Edward L. Glaeser, Jesse M. Shapiro. in Tax Policy and the Economy, Volume 17, Poterba. 2003
Abstract: The home mortgage interest deduction creates incentives to buy more housing and to become a homeowner, and the case for the deduction rests on social benefits from housing consumption and homeownership. There is little evidence suggesting large externalities from the level of housing consumption, but there appear to be externalities from homeownership. Externalities from living around homeowners are far too small to justify the deduction. Externalities from homeownership are larger, but the home mortgage interest deduction is a particularly poor instrument for encouraging homeownership since it is targeted at the wealthy, who are almost always homeowners. The irrelevance of the deduction is supported by the time series which shows that the ownership subsidy moves with inflation and has changed significantly between 1960 and today, but the homeownership rate has been essentially constant.
Handle: RePEc:nbr:nberwo:9284
Template-Type: ReDIF-Paper 1.0
Title: A Gravity Model of Sovereign Lending: Trade, Default and Credit
Classification-JEL: F15; F33
Author-Name: Andrew K. Rose
Author-Person: pro71
Author-Name: Mark M. Spiegel
Author-Person: psp18
Note: IFM
Number: 9285
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9285
File-URL: http://www.nber.org/papers/w9285.pdf
File-Format: application/pdf
Publication-Status: published as Andrew K. Rose & Mark M. Spiegel, 2004. "A Gravity Model of Sovereign Lending: Trade, Default, and Credit," IMF Staff Papers, Palgrave Macmillan, vol. 51(s1), pages 50-63, June.
Abstract: One reason why countries service their external debts is the fear that default might lead to shrinkage of international trade. If so, then creditors should systematically lend more to countries with which they share closer trade links. We develop a simple theoretical model to capture this intuition, then test and corroborate this idea.
Handle: RePEc:nbr:nberwo:9285
Template-Type: ReDIF-Paper 1.0
Title: Margin Calls, Trading Costs, and Asset Prices in Emerging Markets: The Finanical Mechanics of the 'Sudden Stop' Phenomenon
Classification-JEL: F41; F32
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Author-Name: Katherine A. Smith
Author-Person: psm108
Note: IFM
Number: 9286
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9286
File-URL: http://www.nber.org/papers/w9286.pdf
File-Format: application/pdf
Abstract: A central feature of emerging markets crises is the Sudden Stop' phenomenon characterized by large reversals of capital inflows and current accounts, deep recessions, and collapses in asset prices. This paper proposes an open-economy asset-pricing model with financial frictions that yields predictions in line with these observations. Margin requirements and information costs distort asset trading between a small open economy and foreign securities firms. If the economy's debt-equity ratio is low, standard productivity shocks cause normal recessions with smooth current-account adjustments. If the ratio is high, the same productivity shocks trigger margin calls forcing domestic agents to firesell equity to foreign traders who are slow to adjust their portfolios. This sets off a Fisherian asset-price deflation and subsequent rounds of margin calls. A current account reversal and a collapse in consumption occur if the fire-sale of assets cannot prevent a sharp increase in net foreign asset holdings.
Handle: RePEc:nbr:nberwo:9286
Template-Type: ReDIF-Paper 1.0
Title: Digital Dispersion: An Industrial and Geographic Census of Commerical Internet Use
Classification-JEL: L63; L86
Author-Name: Chris Forman
Author-Name: Avi Goldfarb
Author-Person: pgo53
Author-Name: Shane Greenstein
Author-Person: pgr134
Note: IO PR
Number: 9287
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9287
File-URL: http://www.nber.org/papers/w9287.pdf
File-Format: application/pdf
Publication-Status: published as Wildman, Steve and Lorrie Cranor (eds.) Rethinking Rights and Regulations: Institutional Responses to New Communication Technologies. Cambridge: MIT Press, 2003.
Abstract: Our study provides the first census of the dispersion of Internet technology to commercial establishments in the United States. We distinguish between participation, that is, use of the Internet because it is necessary for all business (e.g., email and browsing) and enhancement, that is, adoption of Internet technology to enhance computing processes for competitive advantage (e.g., electronic commerce). Employing the Harte Hanks Market Intelligence Survey, we examine adoption of the Internet at 86,879 commercial establishments with 100 or more employees at the end of 2000. Using routine statistical methods, we focus on answering questions about economy-wide outcomes: Which industries had the highest and lowest rates of participation and enhancement? Which cities, states and industries had a typical experience and which did not? We arrive at three conclusions. First, participation and enhancement display contrasting patterns of dispersion. In a majority of industries participation has approached saturation levels, while enhancement occurs at lower rates and with dispersion reflecting long standing industrial differences in use of computing. Second, the creation and use of the Internet does not eliminate the importance of geography. Leading areas are widespread, whereas laggards are more common in smaller urban areas and some rural areas. However, the distribution of industries across geographic regions explains much of the difference in rates of adoption of the Internet in different areas. Third, commercial Internet use is quite dispersed, more so than previous studies show.
Handle: RePEc:nbr:nberwo:9287
Template-Type: ReDIF-Paper 1.0
Title: Financial Globalization and Emerging Markets: With or Without Crash?
Classification-JEL: F3; F4
Author-Name: Philippe Martin
Author-Person: pma588
Author-Name: Helene Rey
Author-Person: pre8
Note: IFM
Number: 9288
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9288
File-URL: http://www.nber.org/papers/w9288.pdf
File-Format: application/pdf
Abstract: We analyze the impact of financial globalization on asset prices, investment and the possibility of crashes driven by self-fulfilling expectations in emerging markets. In a two-country model with one emerging market (intermediate income level) and one industrialized country (high income level), we show that liberalization of capital flows increases asset prices, investment and income in the emerging market. However, for intermediate levels of international financial transaction costs, we find that pessimistic expectations can be self-fulfilling, leading to a financial crash. The crash is accompanied by capital flight, a drop in income and investment below the financial autarky level and more market incompleteness. We show that emerging markets are more prone to financial crashes simply because they have a lower income level and not because of the existence of market failures (moral hazard or credit constraints), bad monetary policies or exchange rate regimes.
Handle: RePEc:nbr:nberwo:9288
Template-Type: ReDIF-Paper 1.0
Title: Employee Stock Options, Corporate Taxes and Debt Policy
Classification-JEL: H2
Author-Name: John R. Graham
Author-Name: Mark H. Lang
Author-Name: Douglas A. Shackelford
Author-Person: psh631
Note: PE
Number: 9289
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9289
File-URL: http://www.nber.org/papers/w9289.pdf
File-Format: application/pdf
Publication-Status: published as Graham, John R., Mark H. Lang and Douglas A. Shackelford. "Employee Stock Options, Corporate Taxes, And Debt Policy," Journal of Finance, 2004, v59(4,Aug), 1585-1618.
Abstract: We find that employee stock option deductions lead to large aggregate tax savings for Nasdaq 100 and S&P 100 firms and also affect corporate marginal tax rates. For Nasdaq firms, the median marginal tax rate is 31 percent when option deductions are ignored but falls to 5 percent when one accounts for the deductions. For S&P firms, however, option deductions do not affect marginal tax rates to a large degree. In the spirit of DeAngelo and Masulis (1980), option deductions are important nondebt tax shields that can affect corporate policies. We find evidence consistent with option deductions substituting for interest deductions in corporate capital structure decisions. This evidence explains in part why some firms appear to be underlevered.
Handle: RePEc:nbr:nberwo:9289
Template-Type: ReDIF-Paper 1.0
Title: Agglomeration, Integration and Tax Harmonization
Classification-JEL: H00; H87
Author-Name: Richard E. Baldwin
Author-Person: pba124
Author-Name: Paul Krugman
Author-Person: pkr10
Note: ITI PE
Number: 9290
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9290
File-URL: http://www.nber.org/papers/w9290.pdf
File-Format: application/pdf
Publication-Status: published as Baldwin, Richard E. & Krugman, Paul, 2004. "Agglomeration, integration and tax harmonisation," European Economic Review, Elsevier, vol. 48(1), pages 1-23, February.
Publication-Status: published as Richard Baldwin & Paul Krugman, 2001. "Agglomeration, integration and tax harmonization," European Business Review, vol 13(3).
Abstract: We show that agglomeration forces can reverse standard international-tax-competition results. Closer integration may result first in a race to the top' and then a race to the bottom, a result that is consistent with recent empirical work showing that the tax gap between rich and poor nations follows a bell-shaped path (Devereux, Griffith and Klemm 2002). Moreover, split-the-difference tax harmonization can make both nations worse off. This may help explain why tax harmonisation which is Pareto improving in the standard model is so difficult in the real world. The key theoretical insight is that agglomeration forces create quasi-rents that can be taxed without inducing delocation. This suggests that the tax game is something subtler than a race to the bottom. Advanced 'core' nations may act like limit-pricing monopolists toward less advanced 'periphery' countries. Since agglomeration rents are a bell-shaped function of the level of integration, the equilibrium tax gap in our tax game is also bell shaped.
Handle: RePEc:nbr:nberwo:9290
Template-Type: ReDIF-Paper 1.0
Title: The Role of Output Stabilization in the Conduct of Monetary Policy
Classification-JEL: E5
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: EFG ME
Number: 9291
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9291
File-URL: http://www.nber.org/papers/w9291.pdf
File-Format: application/pdf
Publication-Status: published as Mishkin, F. S. "The Role Of Output Stabilization In The Conduct Of Monetary Policy," International Finance, 2002, v5(2,Summer), 213-227.
Abstract: This paper examines the role of output stabilization in the conduct of monetary policy. It argues that activist monetary policy in which the monetary authorities focus on output fluctuations in the setting of their policy instrument and in policy statements is likely to produce worse outcomes for output and inflation fluctuations, both because it will lead to suboptimal monetary policy, but also because it complicates monetary authorities' communication strategy and can weaken the credibility of the central bank. In contrast, conducting monetary policy with a flexible inflation target rule is likely to produce better outcomes. A flexible inflation target rule also allows the monetary authorities to effectively communicate to the public that they do care about output fluctuations, but makes it less likely that they will be encouraged to try to exploit the short-run tradeoff between output and inflation.
Handle: RePEc:nbr:nberwo:9291
Template-Type: ReDIF-Paper 1.0
Title: Financial Globalization and Real Regionalization
Classification-JEL: F36; F41
Author-Name: Jonathan Heathcote
Author-Person: phe1
Author-Name: Fabrizio Perri
Author-Person: ppe52
Note: EFG IFM
Number: 9292
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9292
File-URL: http://www.nber.org/papers/w9292.pdf
File-Format: application/pdf
Publication-Status: published as Heathcote, Jonathan and Fabrizio Perri. "Financial Globalization And Real Regionalization," Journal of Economic Theory, 2004, v119(1,Nov), 207-243.
Abstract: Over the period 1972-1986, the correlations of GDP, employment and investment between the United States and an aggregate of Europe, Canada and Japan were respectively 0.76, 0.66, and 0.63. For the period 1986 to 2000 the same correlations were much lower: 0.26, 0.03 and -0.07 (real regionalization). At the same time, U.S. international asset trade has significantly increased. For example, between 1972 and 1999, United States gross FDI and equity assets in the same group of countries rose from 4 to 23 percent of the U.S. capital stock (financial globalization). We document that the correlation of real shocks between the U.S. and the rest of the world has declined. We then present a model in which international financial market integration occurs endogenously in response to less correlated shocks. Financial integration further reduces the international correlations in GDP and factor supplies. We find that both less correlated shocks and endogenous financial market development are needed to account for all the changes in the international business cycle.
Handle: RePEc:nbr:nberwo:9292
Template-Type: ReDIF-Paper 1.0
Title: Home and Host Country Effects of FDI
Classification-JEL: F21; F23
Author-Name: Robert E. Lipsey
Author-Person: pli259
Note: ITI
Number: 9293
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9293
File-URL: http://www.nber.org/papers/w9293.pdf
File-Format: application/pdf
Publication-Status: published as Baldwin, Robert E. and L. Alan Winters (eds.) Challenges to Globalization. Chicago: University of Chicago Press, 2004.
Abstract: Fears that production abroad would cause home country exports and employment to fall have not been confirmed by evidence. Multinational operations have led to a shift by parent firms in the United States toward more capital- intensive and skill- intensive domestic production. However, that type of reallocation does not appear to have taken place in Japan or Sweden. Within host countries, foreign- owned firms almost always pay higher wages than domestically- owned firms. It is not always the case that they cause wages in locally- owned firms to rise, but their presence does generally raise wage levels in host countries. Foreign firms generally have higher productivity than local firms, but the evidence for spillovers to local firms' productivity is mixed. It seems to depend on host country policies and environments and on the technological levels of industries and of host- country firms. The same mixture of impacts applies to host- country growth in general. The impact of FDI in promoting the growth of host country exports and linkages to the outside world is clearer. The major role of FDI in the transformation of host economies from being exporters of raw materials and foods to being exporters of manufactures, and in some cases relatively high- tech manufactures, is also evident in some cases. Much of the impact is from the transfer of knowledge of world markets and of ways of fitting into worldwide production networks, not visible in standard productivity measurements.
Handle: RePEc:nbr:nberwo:9293
Template-Type: ReDIF-Paper 1.0
Title: Real Exchange Rate Targeting and Macroeconomic Instability
Classification-JEL: F41
Author-Name: Martin Uribe
Note: EFG IFM
Number: 9294
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9294
File-URL: http://www.nber.org/papers/w9294.pdf
File-Format: application/pdf
Publication-Status: published as Uribe, Martin. "Real Exchange Rate Targeting And Macroeconomic Instability," Journal of International Economics, 2003, v59(1,Jan), 137-159.
Abstract: Using an optimizing model of a small open economy, this paper studies the macroeconomic effects of PPP rules whereby the government increases the devaluation rate when the real exchange rate defined as the price of tradables in terms of nontradables is below its long-run level and reduces the devaluation rate when the real exchange rate is above its long-run level. The paper shows that the mere existence of such a rule can generate aggregate fluctuations due to self-fulfilling revisions in expectations. The result is shown to obtain in both flexible- and sticky-price environments.
Handle: RePEc:nbr:nberwo:9294
Template-Type: ReDIF-Paper 1.0
Title: Media Bias
Classification-JEL: D23; L82
Author-Name: Sendhil Mullainathan
Author-Person: pmu103
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: CF
Number: 9295
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9295
File-URL: http://www.nber.org/papers/w9295.pdf
File-Format: application/pdf
Publication-Status: published as Sendhil Mullainathan & Andrei Shleifer, 2005. "The Market for News," American Economic Review, American Economic Association, vol. 95(4), pages 1031-1053, September.
Abstract: There are two different types of media bias. One bias, which we refer to as ideology, reflects a news outlet's desire to affect reader opinions in a particular direction. The second bias, which we refer to as spin, reflects the outlet's attempt to simply create a memorable story. We examine competition among media outlets in the presence of these biases. Whereas competition can eliminate the effect of ideological bias, it actually exaggerates the incentive to spin stories.
Handle: RePEc:nbr:nberwo:9295
Template-Type: ReDIF-Paper 1.0
Title: China's Investment in Human Capital
Author-Name: James J. Heckman
Note: LS
Number: 9296
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9296
File-URL: http://www.nber.org/papers/w9296.pdf
File-Format: application/pdf
Publication-Status: published as Heckman, James J. "China's Human Capital Investment," China Economic Review 16(1): 50-70, March 2005
Publication-Status: published as Heckman, James J. "China's Investment in Human Capital," Economic Development and Cultural Change 51(4): 795-804, July 2003
Abstract: This paper discusses evidence on human capital investment in China. Policies through the mid 1990s favor physical investment over schooling.
Handle: RePEc:nbr:nberwo:9296
Template-Type: ReDIF-Paper 1.0
Title: Financial Crises and Reform of the International Financial System
Classification-JEL: E5; E6
Author-Name: Stanley Fischer
Note: EFG IFM ME
Number: 9297
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9297
File-URL: http://www.nber.org/papers/w9297.pdf
File-Format: application/pdf
Publication-Status: published as Stanley Fischer, 2003. "Financial crises and reform of the international financial system," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 139(1), pages 1-37, March.
Publication-Status: published as Gray, H. Peter and John R. Dilyard (eds.) Globalization and Economic and Financial Instability The Globalization of the World Economy series, vol. 16. An Elgar Reference Collection. Cheltenham, U.K. and Northampton, MA: Elgar, 2005.
Abstract: Between December 1994 and March 1999, Mexico, Thailand, Indonesia, Korea, Malaysia, Russia and Brazil experienced major financial crises which were associated with massive recessions and extreme movements of exchange rates. Similar crises have threatened Turkey and Argentina (2000 and 2001) and most recently Brazil (again). This article discusses the reform of the international financial system with a focus on the role of the IMF - reforms directed at crisis prevention, and those intended to improve the responses to crises. The article concludes with an appraisal of what has been achieved, and what remains to be done to make the international financial system safer.
Handle: RePEc:nbr:nberwo:9297
Template-Type: ReDIF-Paper 1.0
Title: Sources of Bias and Solutions to Bias in the CPI
Classification-JEL: C43; D12
Author-Name: Jerry Hausman
Author-Person: pha893
Note: PR
Number: 9298
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9298
File-URL: http://www.nber.org/papers/w9298.pdf
File-Format: application/pdf
Publication-Status: published as Hausman, Jerry. "Sources Of Bias And Solutions To Bias In The Consumer Price Index," Journal of Economic Perspectives, 2003, v17(1,Winter), 23-44.
Abstract: Four sources of bias in the Consumer Prices Index (CPI) have been identified. The most discussed is substitution bias, which creates a second order bias in the CPI. Three other changes besides prices changes create first order effects on a correctly measured cost of living index (COLI). (1) Introduction of new goods creates a first order effect of new good bias' (2) Quality changes in existing goods will lead to quality' bias, which has first order effects (3) Shifts in shopping patterns to lower priced stores can create first order outlet bias'. I explain in this paper that a pure price' based approach of surveying prices to estimate a COLI cannot succeed in solving the 3 problems of first order bias. Neither the BLS nor the recent report C. Schultze and C. Mackie, eds., At What Price (AWP, 2002), recognizes that to solve these problems, which have been long known, both quantity and price data are necessary. I discuss economic and econometric approaches to measuring the first order bias effects as well as the availability of scanner data that would permit implementation of the techniques. Lastly, I review recent research that demonstrates that these sources of bias are large in relation to measured inflation in the CPI.
Handle: RePEc:nbr:nberwo:9298
Template-Type: ReDIF-Paper 1.0
Title: Health Insurance on the Internet and the Economics of Search
Classification-JEL: D83; G22
Author-Name: Mark V. Pauly
Author-Name: Bradley Herring
Author-Person: phe204
Author-Name: David Song
Note: EH
Number: 9299
Creation-Date: 2002-10
Order-URL: http://www.nber.org/papers/w9299
File-URL: http://www.nber.org/papers/w9299.pdf
File-Format: application/pdf
Abstract: This paper explores the level and dispersion of premiums paid for individual health insurance by comparing asking price' data posted on an electronic insurance exchange with survey data on premiums actually paid in the period just before the advent of electronic exchanges. The primary theoretical question is whether the pattern of differences between asking prices and transactions prices can be explained using a simple search theory. We hypothesize, following suggestions of Stigler and Rothschild, that higher risks who expect to pay higher premiums for a given policy will engage in more intensive search than lower risks, given the same distribution of asking prices. As a result, for a given distribution of asking prices, the dispersion of premiums actually paid (transactions prices) will be smaller for higher risks. Therefore, the introduction of an electronic exchange should have a larger potential influence on the dispersion and level of premiums paid for lower risks than for higher risks. We find evidence consistent with each of these hypotheses.
Handle: RePEc:nbr:nberwo:9299
Template-Type: ReDIF-Paper 1.0
Title: Outsourcing versus FDI in Industry Equilibrium
Classification-JEL: F12; F23
Author-Name: Gene M. Grossman
Author-Person: pgr21
Author-Name: Elhanan Helpman
Author-Person: phe205
Note: IO ITI PR
Number: 9300
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9300
File-URL: http://www.nber.org/papers/w9300.pdf
File-Format: application/pdf
Publication-Status: published as Gene M. Grossman & Elhanan Helpman, 2003. "Outsourcing Versus FDI in Industry Equilibrium," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 317-327, 04/05.
Abstract: We study the determinants of the extent of outsourcing and of direct foreign investment in an industry in which producers need specialized components. Potential suppliers must make a relationship-specific investment in order to serve each prospective customer. Such investments are governed by imperfect contracts. A final-good producer can manufacture components for itself, but the per-unit cost is higher than for specialized suppliers. We consider how the size of the cost differential, the extent of contractual incompleteness, the size of the industry, and the relative wage rate affect the organization of industry production.
Handle: RePEc:nbr:nberwo:9300
Template-Type: ReDIF-Paper 1.0
Title: Stochastic Taxation and Asset Pricing in Dynamic General Equilibrium
Classification-JEL: G1; H2
Author-Name: Clemens Sialm
Author-Person: psi59
Note: AP PE
Number: 9301
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9301
File-URL: http://www.nber.org/papers/w9301.pdf
File-Format: application/pdf
Publication-Status: published as Sialm, Clemens. "Stochastic Taxation And Asset Pricing In Dynamic General Equilibrium," Journal of Economic Dynamics and Control, 2006, v30(3,Mar), 511-540.
Abstract: Tax rates have fluctuated considerably since federal income taxes were introduced in the United States in 1913. This paper analyzes the effects of stochastic taxation on asset prices in a dynamic general equilibrium model. Stochastic taxation affects the after-tax returns of both risky and safe assets. Whenever taxes change, bond and equity prices adjust to clear the asset markets. These price adjustments affect assets with long durations, such as equities and long-term bonds, more than short-term assets. Under plausible conditions, investors require higher term and equity premia as compensation for the risk introduced by tax changes.
Handle: RePEc:nbr:nberwo:9301
Template-Type: ReDIF-Paper 1.0
Title: The "Arms Race" on American Roads: The Effect of Heavy Vehicles on Traffic Safety and the Failure of Liability Rules
Classification-JEL: R4; K1
Author-Name: Michelle J. White
Author-Person: pwh52
Note: LE PE
Number: 9302
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9302
File-URL: http://www.nber.org/papers/w9302.pdf
File-Format: application/pdf
Publication-Status: published as White, Michele J. "The 'Arms Race' On American Roads: The Effects Of Sport Utility Vehicles and Pickup Trucks On Traffic Safety," Journal of Law and Economics, 2004, v47(2,Oct), 333-355.
Abstract: Drivers have been running an 'arms race' on American roads by buying increasingly heavy vehicles such as SUVs, vans and light trucks. Families view large vehicles as providing better protection to their own occupants if a crash occurs, but these vehicles pose an increased danger to occupants of smaller vehicles and to pedestrians and bicyclists. This paper measures both the beneficial internal effect and the negative external effect of heavier vehicles. The main result is that when drivers replace cars with light trucks, 3,700 additional crashes per year involving fatalities of smaller vehicle occupants, pedestrians and bicyclists occur, while only 1,400 crashes involving fatalities of light truck occupants are avoided, i.e., the ratio of negative external effects to positive internal effects is 2« to 1. The paper argues that none of the existing traffic laws or institutions forces drivers of heavy vehicles to take account of their negative external effects.
Handle: RePEc:nbr:nberwo:9302
Template-Type: ReDIF-Paper 1.0
Title: The Dual Effects of Intellectual Property Regulations: Within- and Between- Patent Competition in the US Pharmaceuticals Industry
Classification-JEL: I1; L1
Author-Name: Frank R. Lichtenberg
Author-Person: pli76
Author-Name: Tomas J. Philipson
Author-Person: pph37
Note: EH PR
Number: 9303
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9303
File-URL: http://www.nber.org/papers/w9303.pdf
File-Format: application/pdf
Publication-Status: published as Litchenberg, Frank R. and Tomas Philipson. “The Dual Effects of Intellectual Property Regulations: Within- and Between-Patent Competition in The US Pharmaceuticals Industry." Journal of Law & Economics 45 (2002): 643-672.
Abstract: A patent only protects an innovator from others producing the same product, but it does not protect him from others producing better products under new patents. Therefore, one may divide up the source of competition facing an innovator into within-patent competition, which results from production of the same product, and betweenpatent competition, which results from production of products on other patents. Previous theoretical and empirical micro -based analyses have emphasized the effects of intellectual property regulations on within -patent competition by showing how protecting innovative returns from imitators raises R&D incentives. However, between-patent competition affects innovative returns, particularly through creative destruction in the many high-tech industries that seem central to overall economic progress. This suggests that a fuller understanding of IP-regulations take into account its effects on between-patent competition. We find that the total effects of intellectual property regulations depend heavily on whether these unexplored effects are present. We attempt to estimate the relative magnitudes of the two sources of competition in limiting innovative returns in the U.S. pharmaceuticals market. In this market within -patent competition from so-called generic producers has been analyzed relatively more compared to competition between-patents through so called therapeutic competition. We estimate that between-patent competition, most of which occurs while a drug is under patent, costs the innovator at least as much as within-patent competition, which cannot occur until a drug is off patent. The reduction in the present discounted value of the innovator's return from between-patent competition appears to be at least as large as the reduction from competition within -patents, and may be much larger.
Handle: RePEc:nbr:nberwo:9303
Template-Type: ReDIF-Paper 1.0
Title: Bubbles and Capital Flows
Classification-JEL: F15; F36
Author-Name: Jaume Ventura
Author-Person: pve110
Note: IFM
Number: 9304
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9304
File-URL: http://www.nber.org/papers/w9304.pdf
File-Format: application/pdf
Publication-Status: published as Jaume Ventura, 2012. "Bubbles and capital flows," Journal of Economic Theory, vol 147(2), pages 738-758.
Abstract: This paper presents a stylized model of international trade and asset price bubbles. Its central insight is that bubbles tend to appear and expand in countries where productivity is low relative to the rest of the world. These bubbles absorb local savings, eliminating inefficient investments and liberating resources that are in part used to invest in high productivity countries. Through this channel, bubbles act as substitute for international capital flows, improving the international allocation of investment and reducing rate-of-return differentials across countries. This view of asset price bubbles has important implications for the way we think about economic growth and fluctuations. It also provides a simple account of some real world phenomenae that have been difficult to model before, such as the recurrence and depth of financial crises or their puzzling tendency to propagate across countries.
Handle: RePEc:nbr:nberwo:9304
Template-Type: ReDIF-Paper 1.0
Title: Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development
Classification-JEL: O1; O4
Author-Name: Dani Rodrik
Author-Person: pro60
Author-Name: Arvind Subramanian
Author-Person: psu108
Author-Name: Francesco Trebbi
Author-Person: ptr40
Note: ITI
Number: 9305
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9305
File-URL: http://www.nber.org/papers/w9305.pdf
File-Format: application/pdf
Publication-Status: published as Rodrik, Dani, Arvind Subramanian and Francesco Trebbi. "Institutions Rule: The Primacy Of Institutions Over Geography And Integration In Economic Development," Journal of Economic Growth, 2004, v9(2,Jun), 131-165.
Abstract: We estimate the respective contributions of institutions, geography, and trade in determining income levels around the world, using recently developed instruments for institutions and trade. Our results indicate that the quality of institutions trumps' everything else. Once institutions are controlled for, measures of geography have at best weak direct effects on incomes, although they have a strong indirect effect by influencing the quality of institutions. Similarly, once institutions are controlled for, trade is almost always insignificant, and often enters the income equation with the wrong' (i.e., negative) sign, although trade too has a positive effect on institutional quality. We relate our results to recent literature, and where differences exist, trace their origins to choices on samples, specification, and instrumentation.
Handle: RePEc:nbr:nberwo:9305
Template-Type: ReDIF-Paper 1.0
Title: Is There a Role for Discretionary Fiscal Policy?
Classification-JEL: E62; H62
Author-Name: Alan Auerbach
Author-Person: pau33
Note: EFG PE
Number: 9306
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9306
File-URL: http://www.nber.org/papers/w9306.pdf
File-Format: application/pdf
Publication-Status: published as Alan J. Auerbach, 2002. "Is there a role for discretionary fiscal policy?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 109-150.
Abstract: This paper reviews the state of discretionary fiscal policy. Among its findings are: (1) In recent years, U.S. discretionary fiscal policy appears to have become more active in response to both cyclical conditions and a simple measure of budget balance. (2) Considerable uncertainty remains about how large an impact discretionary fiscal policy has on output. (3) There is little evidence that discretionary fiscal policy has played an important stabilization role during recent decades. (4) Budgetary pressure may weaken the efficacy of expansionary fiscal policy. Conversely, contractionary fiscal policy might have a salutary effect on output. This possibility may be relevant for understanding the impact of fiscal policy in the 1990s, although the mechanism is unclear. (5) The automatic stabilizers embedded in the fiscal system have experienced little net change since the 1960s and have contributed to cushioning cyclical fluctuations. But the tax system has many attributes that weaken its potential role as an automatic stabilizer, particularly with respect to investment. (6) The government's reported fiscal position, to which fiscal policy appears responsive, represents a very poor measure of underlying fiscal balance.
Handle: RePEc:nbr:nberwo:9306
Template-Type: ReDIF-Paper 1.0
Title: Accountability , Ability and Disability: Gaming the System
Classification-JEL: I2
Author-Name: David N. Figlio
Author-Person: pfi57
Author-Name: Lawrence S. Getzler
Note: CH PE
Number: 9307
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9307
File-URL: http://www.nber.org/papers/w9307.pdf
File-Format: application/pdf
Publication-Status: published as Gronberg, T. (ed.) Advances in Microeconomics. Elsevier, 2006.
Abstract: The past several years have been marked by a general trend towards increased high-stakes testing for students and schools and test-based school accountability systems. There are many potential school responses to testing programs. This paper investigates the potential that schools respond by gaming the system through reshaping the test pool. Using student-level panel data from six large counties in Florida, we study whether the introduction of the Florida Comprehensive Assessment Test in 1996 led schools to reclassify students as disabled and therefore ineligible to contribute to the school's aggregate test scores. Employing student-level fixed effect models and a series of secular trends as controls, we find that schools tend to reclassify low income and previously low performing students as disabled at significantly higher rates following the introduction of the testing regime. Moreover, these behaviors are concentrated among the low income schools most likely to be on the margin of failing the state's accountability system.
Handle: RePEc:nbr:nberwo:9307
Template-Type: ReDIF-Paper 1.0
Title: Did the 2001 Tax Rebate Stimulate Spending? Evidence from Taxpayer Surveys
Classification-JEL: E21; H31
Author-Name: Matthew D. Shapiro
Author-Person: psh144
Author-Name: Joel Slemrod
Author-Person: psl10
Note: EFG PE
Number: 9308
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9308
File-URL: http://www.nber.org/papers/w9308.pdf
File-Format: application/pdf
Publication-Status: published as Did the 2001 Tax Rebate Stimulate Spending? Evidence from Taxpayer Surveys, Matthew D. Shapiro, Joel Slemrod. in Tax Policy and the Economy, Volume 17, Poterba. 2003
Publication-Status: published as Matthew D. Shapiro & Joel Slemrod, 2003. "Did the 2001 Tax Rebate Stimulate Spending? Evidence from Taxpayer Surveys," Tax Policy and the Economy, vol 17(), pages 83-109.
Abstract: In 2001, many households received rebate checks as advanced payments of the benefit of the new, 10 percent federal income tax bracket. A survey conducted at the time the rebates were mailed finds that few households said that the rebate led them mostly to increase spending. A follow-up survey in 2002, as well as a similar survey conducted after the attacks of 9/11, also indicates low spending rates. This paper investigates the robustness of these survey responses and assesses whether such surveys are useful for policy evaluation. It also draws lessons from the surveys for macroeconomic analysis of the tax rebate.
Handle: RePEc:nbr:nberwo:9308
Template-Type: ReDIF-Paper 1.0
Title: The Corporate Governance Role of the Media
Classification-JEL: G30
Author-Name: Alexander Dyck
Author-Person: pdy5
Author-Name: Luigi Zingales
Note: CF
Number: 9309
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9309
File-URL: http://www.nber.org/papers/w9309.pdf
File-Format: application/pdf
Publication-Status: published as Dyck, Alexander, Natalya Volchkova, and Luigi Zingales. "The Corporate Governance Role of the Media: Evidence from Russia." Journal of Finance 63, 3 (June 2008): 1093-1135.
Abstract: In this paper we discuss the role of the media in pressuring corporate managers and directors to behave in ways that are 'socially acceptable'. Sometimes this coincides with shareholders' value maximization, others not. We provide both anecdotal and systematic evidence that media affect companies' policy toward the environment and the amount of corporate resources that are diverted to the sole advantage of controlling shareholders. Our results have important consequences for the focus of the corporate governance debate and for the feasibility of reforms aimed at improving corporate governance around the world.
Handle: RePEc:nbr:nberwo:9309
Template-Type: ReDIF-Paper 1.0
Title: Who Goes to College? Differential Enrollment by Race and Family Background
Classification-JEL: I2; J0
Author-Name: Sandra E. Black
Author-Person: pbl92
Author-Name: Amir Sufi
Author-Person: psu303
Note: LS ED
Number: 9310
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9310
File-URL: http://www.nber.org/papers/w9310.pdf
File-Format: application/pdf
Abstract: While trends in college enrollment for blacks and whites have been the subject of study for a number of years, little attention has been paid to the variation in college enrollment by socioeconomic status (SES). It is well documented that, controlling for family background, blacks are more likely to enroll in college than whites. This relationship is somewhat deceptive, however. Upon closer examination, we find that blacks are more likely to enroll in college than their white counterparts only among low-SES individuals. Among high SES individuals, this pattern is reversed. We also find that this relationship is strongest in the 1970s and appears to disappear over time; by the 1990s, blacks are no more likely to attend college than whites at any end of the SES distribution. This paper first documents this phenomenon and then attempts to understand what is driving these differences across the distribution of family background characteristics and why the relationship is changing over time. Although they have a significant impact on college enrollment behavior, tuition costs and local labor markets explain very little of racial differences in college entry. We do uncover different responses to tuition and labor markets by individuals from different ends of the SES distribution, an important consideration for policies targeted at improving college enrollment for low-SES individuals.
Handle: RePEc:nbr:nberwo:9310
Template-Type: ReDIF-Paper 1.0
Title: Technological Development and Medical Productivity: The Diffusion of Angioplasty in New York State
Classification-JEL: I1; O3
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Robert S. Huckman
Author-Person: phu90
Note: EH
Number: 9311
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9311
File-URL: http://www.nber.org/papers/w9311.pdf
File-Format: application/pdf
Publication-Status: published as Cutler, David M. & Huckman, Robert S., 2003. "Technological development and medical productivity: the diffusion of angioplasty in New York state," Journal of Health Economics, Elsevier, vol. 22(2), pages 187-217, March.
Abstract: A puzzling feature of many medical innovations is that they simultaneously appear to reduce unit costs and increase total costs. We consider this phenomenon by examining the diffusion of percutaneous transluminal coronary angioplasty (PTCA) -- a treatment for coronary artery disease -- over the past two decades. We find that growth in the use of PTCA led to higher total costs despite its lower unit cost. Over the two decades following PTCA's introduction, however, we find that the magnitude of this increase was reduced by between 10% and 20% due to the substitution of PTCA for CABG. In addition, the increased use of PTCA appears to be a productivity improvement. PTCAs that substitute for CABG cost less and have the same or better outcomes, while PTCAs that replace medical management appear to improve health by enough to justify the cost.
Handle: RePEc:nbr:nberwo:9311
Template-Type: ReDIF-Paper 1.0
Title: The Flight-to-Liquidity Premium in U.S. Treasury Bond Prices
Author-Name: Francis A. Longstaff
Author-Person: plo283
Note: AP
Number: 9312
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9312
File-URL: http://www.nber.org/papers/w9312.pdf
File-Format: application/pdf
Publication-Status: published as Longstaff, Francis A. "The Flight-to-Liquidity Premium in U.S. Treasury Bond Prices." Journal of Business 77, 3 (July 2004): 511-26.
Abstract: We examine whether there is a flight-to-liquidity premium in Treasury bond prices by comparing them with prices of bonds issued by Refcorp, a U.S. Government agency, which are guaranteed by the Treasury. We find a large liquidity premium in Treasury bonds, which can be more than fifteen percent of the value of some Treasury bonds. This liquidity premium is related to changes in consumer confidence, the amount of Treasury debt available to investors, and flows into equity and money market mutual funds. This suggests that the popularity of Treasury bonds directly a.ects their value.
Handle: RePEc:nbr:nberwo:9312
Template-Type: ReDIF-Paper 1.0
Title: The Wage Structure and the Sorting of Workers into the Public Sector
Classification-JEL: J3; J4
Author-Name: George J. Borjas
Author-Person: pbo44
Note: LS PE
Number: 9313
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9313
File-URL: http://www.nber.org/papers/w9313.pdf
File-Format: application/pdf
Abstract: This paper uses data from the U.S. Decennial Census and the Current Population Surveys to document the differential shifts that occurred in the wage structures of the public and privatesectors between 1960 and 2000. The wage gap between the typical public sector worker and a comparable private sector worker was relatively constant for men during this period, but declined substantially for women. Equally important, wage dispersion in the public sector was increasing relative to wage dispersion in the private sector prior to 1970, at the time when public sector employment was rising rapidly. Since 1970, however, there has been a significant relative compression of the wage distribution in the public sector. The different evolutions of the wage structures in the two sectors are an important determinant of the sorting of workers across sectors. As a result of the relative wage compression, the public sector found it increasingly more difficult to attract and retain high-skill workers
Handle: RePEc:nbr:nberwo:9313
Template-Type: ReDIF-Paper 1.0
Title: The Correlation of Wealth Across Generations
Classification-JEL: J62; J12
Author-Name: Kerwin Kofi Charles
Author-Name: Erik Hurst
Author-Person: phu87
Note: LS
Number: 9314
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9314
File-URL: http://www.nber.org/papers/w9314.pdf
File-Format: application/pdf
Publication-Status: published as Charles, Kerwin Kofi and Erik Hurst. "The Correlation Of Wealth Across Generations," Journal of Political Economy, 2003, v111(6,Dec), 1155-1182.
Abstract: This paper examines the similarity in wealth between parents and their children, and explores alternative explanations for this relationship. We find that the age-adjusted elasticity of child wealth with respect to parental wealth is 0.37, before the transfer of bequests. Lifetime income and ownership of particular assets, both of which exhibit strong intergeneration similarity, jointly explain nearly two-thirds of the wealth elasticity. Education, past parental transfers, and expected future bequests account for little of the remaining elasticity. Using new experimental evidence, we assess the importance of risk tolerance. The risk tolerance measures vary as theory would predict with the ownership of risky assets, and are highly correlated between parents and children. However, they explain little of the intergenerational correlation in the propensity to own different assets, suggesting that children's savings propensities are determined by mimicking their parents' behavior, or the inheritance of preferences not related to risk tolerance. Additionally, these risk tolerance measures explain only a small part of the remaining intergenerational wealth elasticity.
Handle: RePEc:nbr:nberwo:9314
Template-Type: ReDIF-Paper 1.0
Title: Credibility and Policy Convergence: Evidence from U.S. House Roll Call Voting Records
Classification-JEL: H0; K0
Author-Name: David S. Lee
Author-Name: Enrico Moretti
Author-Person: pmo392
Author-Name: Matthew J. Butler
Note: PE
Number: 9315
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9315
File-URL: http://www.nber.org/papers/w9315.pdf
File-Format: application/pdf
Abstract: Traditional models of politician behavior predict complete or partial policy convergence, whereby electoral competition compels partisan politicians to choose positions more moderate than their most-preferred policies. Alternatively, if politicians cannot overcome the inability to make binding pre-commitments to policies, the expected result is complete policy divergence. By exploiting a regression discontinuity (RD) design inherent in the Congressional electoral system, this paper empirically tests the strong predictions of the complete divergence hypothesis against the alternative of partial convergence within the context of Representatives' roll call voting behavior in the U.S. House (1946-1994). The RD design implies that which party wins a district seat is quasi-randomly assigned among elections that turn out to be 'close'. We use this variation to examine if Representatives' roll call voting patterns do not respond to large exogenous changes in the probability of winning the election, the strong prediction of complete policy divergence. The evidence is more consistent with full divergence and less consistent with partial convergence, suggestive that the difficulty of establishing credible commitments to policies is an important real-world phenomenon.
Handle: RePEc:nbr:nberwo:9315
Template-Type: ReDIF-Paper 1.0
Title: Human Capital Spillovers in Manufacturing: Evidence from Plant-Level Production Functions
Classification-JEL: J0; I2
Author-Name: Enrico Moretti
Author-Person: pmo392
Note: PR
Number: 9316
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9316
File-URL: http://www.nber.org/papers/w9316.pdf
File-Format: application/pdf
Publication-Status: published as Moretti, Enrico. "Workers' Education, Spillovers, And Productivity: Evidence From Plant-Level Production Functions," American Economic Review, 2004, v94(3,Jun), 656-690.
Abstract: I assess the magnitude of human capital spillovers in US cities by estimating plant-level production functions. I use a unique firm worker matched dataset, obtained by combining the Census of Manufacturers with the Census of Population. After controlling for a plant's own human capital, plant fixed effects, and industry specific and state specific transitory shocks, I find that the output of plants located in cities that experience large increases in the share of college graduates rises more than the output of smaller plants located in cities that experience small increases in the share of college graduates. Several specification tests indicate that the estimated effect is unlikely to be completely spurious. First, within a city, spillovers between plants that rarely interact are zero, while spillovers between plants that often interact are significant. Second, density of physical capital in a city outside a plant has no effect on a plant's productivity. Third, most of the estimated spillover comes from high-tech plants. For low-tech plants, the spillover is virtually zero. The estimated productivity differences between cities with high and low levels of human capital match remarkably well differences in labor costs between cities and high and low level of human capital. Consistent with a model that includes both standard general equilibrium forces and spillovers, the productivity gains generated by human capital spillover are offset by increased labor costs.
Handle: RePEc:nbr:nberwo:9316
Template-Type: ReDIF-Paper 1.0
Title: Health and Retirement: Do Changes in Health Affect Retirement Expectations?
Classification-JEL: J2; I1
Author-Name: Kathleen McGarry
Author-Person: pmc264
Note: AG
Number: 9317
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9317
File-URL: http://www.nber.org/papers/w9317.pdf
File-Format: application/pdf
Publication-Status: published as McGarry, Kathleen. "Health and Retirement: Do Changes in Health Affect Retirement Expectations?" Journal of Human Resources XXXIX 3 (2004):624-648.
Abstract: The choice of a retirement date is one of the most important decisions facing older workers. It is a decision that will affect their economic well-being for the remainder of their lives. One of the factors that undoubtedly impacts this choice is the worker's health. However, the many studies examining the realtionship between health and retirement have failed to reach agreement on the relative importance of health in comparison to financial variables. Efforts to do so have been hampered by the difficulty of correctly measuring health status. Much of the concern centers on the fear that subjective reports of health are biased by individuals using poor health as a justification for early retirement. This paper takes advantage of a unique measure of labor force attachment, the subjective probability of continued work, to re-examine the role of health and changes in health status By focusing exclusively on workers I eliminate the concern about justification bias among retired individuals and find that subjective reports of health do have important effects on retirement, effects that are arguably stronger than those of the financial variables. The effects of subjective health remain large even when more objective measures of health, such as disease conditions, are included in the model. I also find that changes in retirement expectations are driven to a much greater degree by changes in health than by changes in income or wealth.
Handle: RePEc:nbr:nberwo:9317
Template-Type: ReDIF-Paper 1.0
Title: The Rise and Fall of World Trade, 1870-1939
Classification-JEL: F02; F10
Author-Name: Antoni Estevadeordal
Author-Name: Brian Frantz
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: ITI
Number: 9318
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9318
File-URL: http://www.nber.org/papers/w9318.pdf
File-Format: application/pdf
Publication-Status: published as Antoni Estevadeordal & Brian Frantz & Alan M. Taylor, 2003. "The Rise And Fall Of World Trade, 1870-1939," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 359-407, May.
Abstract: Measured by the ratio of trade to output, the period 1870 1913 marked the birth of the first era of trade globalization and the period 1914 39 its death. What caused the boom and bust? We use an augmented gravity model to examine the gold standard, tariffs, and transport costs as determinants of trade. Until 1913 the rise of the gold standard and the fall in transport costs were the main trade-creating forces. As of 1929 the reversal was driven by higher transport costs. In the 1930s, the final collapse of the gold standard drove trade volumes even lower.
Handle: RePEc:nbr:nberwo:9318
Template-Type: ReDIF-Paper 1.0
Title: Food for Thought: The Effects of School Accountability Plans on School Nutrition
Classification-JEL: I2
Author-Name: David N. Figlio
Author-Person: pfi57
Author-Name: Joshua Winicki
Note: CH ED
Number: 9319
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9319
File-URL: http://www.nber.org/papers/w9319.pdf
File-Format: application/pdf
Publication-Status: published as Figlio, David N. and Joshua Winicki. "Food For Thought: The Effects Of School Accountability Plans On School Nutrition," Journal of Public Economics, 2005, v89(2-3,Feb), 381-394.
Abstract: School accountability systems based on high-stakes testing of students have become ubiquitous in the United States, and are now federal policy as well. This paper identifies a previously-unresearched method through which schools faced with potential sanctions may 'game the system' in order to have higher aggregate student test scores than might otherwise be warranted. There exists a well-established link between nutrition and short-term cognitive functioning. Hence, we investigate whether school districts exploit this relationship by strategically altering school nutrition menus during testing periods in an apparent attempt to artificially increase student test scores. Using detailed daily school nutrition data from a random sample of Virginia school districts, we find that school districts having schools faced with potential sanctions under Virginia's Standards of Learning (SOL) accountability system apparently respond by substantially increasing calories in their menus on testing days, while those without such immediate pressure do not change their menus. Suggestive evidence indicates that the school districts who do this the most experience the largest increases in pass rates.
Handle: RePEc:nbr:nberwo:9319
Template-Type: ReDIF-Paper 1.0
Title: Customer Anger at Price Increases, Time Variation in the Frequency of Price Changes and Monetary Policy
Classification-JEL: E3; E4
Author-Name: Julio J. Rotemberg
Author-Person: pro30
Note: EFG ME
Number: 9320
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9320
File-URL: http://www.nber.org/papers/w9320.pdf
File-Format: application/pdf
Publication-Status: published as Rotemberg, Julio J. "Customer Anger At Price Increases In The Frequency Of Price Adjustment And Monetary Policy," Journal of Monetary Economics, 2005, v52(4,May), 829-852.
Abstract: While much evidence suggests tha price rigidity is due to a concern with the reaction of customers, price increases do not seem to be typically associated with drastic reduction in purchases. To explain this apparent inconsistency, this paper develops a model where consumers care about the fairness of prices and react negatively only when they become convinced that prices are unfair. This leads to price rigidity, though the implications of the model are not identical to those of existing models of costly price adjustment. In particular, the frequency of price adjustment ought to depend on economy-wide variables observed by consumers. As I show, this has implications for the effects of monetary policy. It can, in particular, explain why inflation does not fall immediately after a monetary tightening.
Handle: RePEc:nbr:nberwo:9320
Template-Type: ReDIF-Paper 1.0
Title: Asset Price Inflation and Monetary Policy
Classification-JEL: E5; E6
Author-Name: Anna J. Schwartz
Note: ME
Number: 9321
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9321
File-URL: http://www.nber.org/papers/w9321.pdf
File-Format: application/pdf
Publication-Status: published as Schwartz, Anna J. " Asset Price Inflation and Monetary Policy." Atlantic Economic Journal 31, 1 (March 2003) 1-14.
Abstract: It is crucial that central banks and regulatory authorities be aware of effects of asset price inflation on the stability of the financial system. Lending activity based on asset collateral during the boom is hazardous to the health of lenders when the boom collapses. One way that authorities can curb the distortion of lenders' portfolios during asset price booms is to have in place capital requirements that increase with the growth of credit extensions collateralized by assets whose prices have escalated. If financial institutions avoid this pitfall, their soundness will not be impaired when assets backing loans fall in value. Rather than trying to gauge the effects of asset prices on core inflation, central banks may be better advised to be alert to the weakening of financial balance sheets in the aftermath of a fall in value of asset collateral backing loans.
Handle: RePEc:nbr:nberwo:9321
Template-Type: ReDIF-Paper 1.0
Title: How Country and Safety-Net Characteristics Affect Bank Risk-Shifting
Classification-JEL: G21; G28
Author-Name: Armen Hovakimian
Author-Name: Edward J. Kane
Author-Person: pka853
Author-Name: Luc Laeven
Author-Person: pla174
Note: CF
Number: 9322
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9322
File-URL: http://www.nber.org/papers/w9322.pdf
File-Format: application/pdf
Publication-Status: published as Hovakimian, Armen, Edward J. Kane and Luc Laeven. "How Country And Safety-Net Characteristics Affect Bank Risk-Shifting," Journal of Financial Services Research, 2003, v23(3,Jun), 177-204.
Abstract: Risk-shifting occurs when creditors or guarantors are exposed to loss without receiving adequate compensation. This paper seeks to measure and compare how well authorities in 56 countries controlled bank risk shifting during the 1990s. Although significant risk shifting occurs on average, substantial variation exists in the effectiveness of risk control across countries. We find that the tendency for explicit deposit insurance to exacerbate risk shifting is tempered by incorporating loss-control features such as risk-sensitive premiums, coverage limits, and coinsurance. Introducing explicit deposit insurance has had adverse effects in environments that are low in political and economic freedom and high in corruption.
Handle: RePEc:nbr:nberwo:9322
Template-Type: ReDIF-Paper 1.0
Title: Bank Regulation and Supervision: What Works Best?
Classification-JEL: G38; G21
Author-Name: James R. Barth
Author-Person: pba1477
Author-Name: Gerard Caprio, Jr.
Author-Person: pca519
Author-Name: Ross Levine
Author-Person: ple61
Note: CF IFM
Number: 9323
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9323
File-URL: http://www.nber.org/papers/w9323.pdf
File-Format: application/pdf
Publication-Status: published as Barth, James R. & Caprio, Gerard Jr. & Levine, Ross, 2004. "Bank regulation and supervision: what works best?," Journal of Financial Intermediation, Elsevier, vol. 13(2), pages 205-248, April.
Abstract: This paper uses our new database on bank regulation and supervision in 107 countries to assess the relationship between specific regulatory and supervisory practices and banking-sector development, efficiency, and fragility. The paper examines: (i) regulatory restrictions on bank activities and the mixing of banking and commerce; (ii) regulations on domestic and foreign bank entry; (iii) regulations on capital adequacy; (iv) deposit insurance system design features; (v) supervisory power, independence, and resources, (vi) loan classification stringency, provisioning standards, and diversification guidelines; (vii) regulations fostering information disclosure and private-sector monitoring of banks; and (viii) government ownership. The results, albeit tentative, raise a cautionary flag regarding government policies that rely excessively on direct government supervision and regulation of bank activities. The findings instead suggest that policies that rely on guidelines that (1) force accurate information disclosure, (2) empower private-sector corporate control of banks, and (3) foster incentives for private agents to exert corporate control work best to promote bank development, performance and stability.
Handle: RePEc:nbr:nberwo:9323
Template-Type: ReDIF-Paper 1.0
Title: Institutional Efficiency, Monitoring Costs, and the Investment Share of FDI
Classification-JEL: F21; F23
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Mark M. Spiegel
Author-Person: psp18
Note: ITI
Number: 9324
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9324
File-URL: http://www.nber.org/papers/w9324.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua and Mark M. Spiegel. "Institutional Efficiency, Monitoring Costs And The Investment Share Of FDI," Review of International Economics, 2006, v14(4,Sep), 683-697.
Abstract: This paper models and tests the implications of costly enforcement of property rights on the pattern of foreign direct investment (FDI). We posit that domestic agents have a comparative advantage over foreign agents in overcoming some of the obstacles associated with corruption and weak institutions. We model these circumstances in a principal-agent framework with costly ex-post monitoring and enforcement of an ex-ante labor contract. Ex-post monitoring and enforcement costs are assumed to be lower for domestic entrepreneurs than for foreign ones, but foreign producers enjoy a countervailing productivity advantage. Under these asymmetries, multinationals pay higher wages than domestic producers, in line with the insight of efficiency wages and with the evidence about the multinationals wage premium.' FDI is also more sensitive to increases in enforcement costs. We then test this prediction for a cross section of developing countries. We use Mauro's (2001) index of economic corruption as an indicator of the strength of property right enforcement within a given country. We compare corruption levels for a large cross section of countries in 1989 to subsequent FDI flows from 1990 to 1999. We find that corruption is negatively associated with the ratio of subsequent foreign direct investment flows to both gross fixed capital formation and to private investment. This finding is true for both simple cross-sections and for cross-sections weighted by country size.
Handle: RePEc:nbr:nberwo:9324
Template-Type: ReDIF-Paper 1.0
Title: Why Have Health Expenditures as a Share fo GDP Risen So Much?
Classification-JEL: I1; O40
Author-Name: Charles I. Jones
Author-Person: pjo24
Note: EFG EH
Number: 9325
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9325
File-URL: http://www.nber.org/papers/w9325.pdf
File-Format: application/pdf
Abstract: Aggregate health expenditures as a share of GDP have risen in the United States from about 5 percent in 1960 to nearly 14 percent in recent years. Why? This paper explores a simple explanation based on technological progress. Medical advances allow diseases to be cured today, at a cost, that could not be cured at any price in the past. When this technological progress is combined with a Medicare- like transfer program to pay the health expenses of the elderly, the model is able to reproduce the basic facts of recent U.S. experience, including the large increase in the health expenditure share, a rise in life expectancy, and an increase in the size of health-related transfer payments as a share of GDP.
Handle: RePEc:nbr:nberwo:9325
Template-Type: ReDIF-Paper 1.0
Title: Globalization, Trade, and Development: Some Lessons From History
Classification-JEL: F02; F10
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE ITI
Number: 9326
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9326
File-URL: http://www.nber.org/papers/w9326.pdf
File-Format: application/pdf
Publication-Status: published as Devlin, R. and A. Estevadeordal. (eds.) Bridges for Development: Policies and Institutions for Trade and Integration. Washington, D.C.: Inter-American Development Bank, 2003.
Abstract: Recent research in international economic history has opened up new lines of enquiry on the origins of globalization, as well as its causes and consequences. Such findings have the potential to inform contemporary debates and this paper considers what lessons this body of historical work has for our current understanding of the linkages between trade and development.
Handle: RePEc:nbr:nberwo:9326
Template-Type: ReDIF-Paper 1.0
Title: Horses and Rabbits? Optimal Dynamic Capital Structure from Shareholder and Manager Perspectives
Classification-JEL: G32; G33
Author-Name: Nengjiu Ju
Author-Name: Robert Parrino
Author-Name: Allen M. Poteshman
Author-Name: Michael S. Weisbach
Note: CF
Number: 9327
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9327
File-URL: http://www.nber.org/papers/w9327.pdf
File-Format: application/pdf
Publication-Status: published as Ju, Nengjiu, Robert Parrino, and Allen Poteshman and Michael Steen Weisbach. “Horses and Rabbits? Optimal Dynamic Capital Structure from Shareholders’ and Managers’ Perspectives." Journal of Financial and Quantitative Analysis 40 (June 2005): 259-281.
Abstract: This paper examines optimal capital structure choice using a dynamic capital structure model that is calibrated to reflect actual firm characteristics. The model uses contingent-claim methods to value interest tax shields, allows for reorganization in bankruptcy, and maintains a long-run target debt/equity ratio by refinancing maturing debt. Using this model we calculate optimal capital structures in a realistic representation of the traditional tradeoff' model. In contrast to previous research, the resulting optimal capital structures do not imply that firms tend to use too little leverage in practice. We also estimate the costs borne by a firm whose capital structure deviates from its optimal, target' debt/equity ratio. The costs of moderate deviations are relatively small, suggesting that a policy of adjusting leverage only when it deviates substantially from a target debt/equity ratio is likely to be reasonable for most firms.
Handle: RePEc:nbr:nberwo:9327
Template-Type: ReDIF-Paper 1.0
Title: The Value of Information in International Trade: Gains to Outsourcing through Hong Kong
Classification-JEL: F1; D8
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Author-Name: Gordon H. Hanson
Author-Person: pha80
Author-Name: Songhua Lin
Note: ITI PR
Number: 9328
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9328
File-URL: http://www.nber.org/papers/w9328.pdf
File-Format: application/pdf
Publication-Status: published as Robert Feenstra & Gordon Hanson & Songhua Lin. 2004. "The Value of Information in International Trade: Gains to Outsourcing through Hong Kong," Advances in Economic Analysis & Policy, Berkeley Electronic Press, vol. 4(1), page 1071
Abstract: In this paper, we estimate the benefits to countries that purchase goods from China of having access to intermediary services provided by Hong Kong. Traders in Hong Kong supply information on markets and producers in China, which provides welfare gains to foreign firms using these services. During the 1990s, Hong Kong intermediated about half of the goods that China exported to the rest of the world. Our results suggests that gains to intermediary services provided by Hong Kong equal 16% of the value of goods that China exports to other countries through Hong Kong, and range between 10% and 21% of this export value for various manufacturing goods and across different years.
Handle: RePEc:nbr:nberwo:9328
Template-Type: ReDIF-Paper 1.0
Title: Addiction and Cue-Conditioned Cognitive Processes
Classification-JEL: D0; D1
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Author-Name: Antonio Rangel
Author-Person: pra69
Note: EH
Number: 9329
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9329
File-URL: http://www.nber.org/papers/w9329.pdf
File-Format: application/pdf
Abstract: We propose an economic theory of addiction based on the premise that cognitive mechanisms such as attention affect behavior independently of preferences. We argue that the theory is consistent with foundational evidence (e.g. from neurosciencee and psychology) concerning the nature of decision-making and addiction. The model is analytically tractable, and it accounts for a broad range of stylized facts concerning addiction. It also generates a plausible qualitative mapping from the characteristics of substances into consumption patterns, thereby providing a basis for empirical tests. Finally, the theory provides a clear standard for evaluating social welfare, and it has a number of striking policy implications.
Handle: RePEc:nbr:nberwo:9329
Template-Type: ReDIF-Paper 1.0
Title: State Lotteries and Consumer Behavior
Classification-JEL: D1; H1
Author-Name: Melissa Schettini Kearney
Note: CH
Number: 9330
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9330
File-URL: http://www.nber.org/papers/w9330.pdf
File-Format: application/pdf
Publication-Status: published as Kearney, Melissa Schettini. "State Lotteries And Consumer Behavior," Journal of Public Economics, 2005, v89(11-12,Dec), 2269-2299.
Abstract: Despite considerable controversy surrounding the use of state lotteries as a means of public finance, little is known about their consumer consequences. This project investigates two central questions about lotteries. First, do state lotteries primarily crowd out other forms of gambling, or do they crowd out non-gambling consumption? Second, does consumer demand for lottery games respond to expected returns, as maximizing behavior predicts, or do consumers appear to be misinformed about the risks and returns of lottery gambles? Analyses of multiple sources of micro-level gambling data demonstrate that lottery spending does not substitute for other forms of gambling. Household consumption data suggest that household lottery gambling crowds out approximately $38 per month, or two percent, of other household consumption, with larger proportional reductions among low-income households. Demand for lottery products responds positively to the expected value of the gamble, controlling for other moments of the gamble and product characteristics; this suggests that consumers of lottery products are not simply uninformed, but are perhaps making fully-informed purchases.
Handle: RePEc:nbr:nberwo:9330
Template-Type: ReDIF-Paper 1.0
Title: Borrowing Costs and the Demand for Equity Over the Life Cycle
Classification-JEL: D91; G11
Author-Name: Steven J. Davis
Author-Person: pda15
Author-Name: Felix Kubler
Author-Person: pku6
Author-Name: Paul Willen
Author-Person: pwi457
Note: AP EFG
Number: 9331
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9331
File-URL: http://www.nber.org/papers/w9331.pdf
File-Format: application/pdf
Publication-Status: published as Davis, Steven J., Felix Kubler and Paul Willen. "Borrowing Costs And The Demand For Equity Over The Life Cycle," Review of Economics and Statistics, 2006, v88(2,May), 348-362.
Abstract: We analyze consumption and portfolio behavior in a life-cycle model with realistic borrowing costs and income processes. We show that even a small wedge between borrowing costs and the risk-free return dramatically shrinks the demand for equity. When the cost of borrowing equals or exceeds the expected return on equity the relevant case according to the data households hold little or no equity during much of the life cycle. The model also implies that the correlation between consumption growth and equity returns is low at all ages, and that risk aversion estimates based on the standard excess return formulation of the consumption Euler Equation are greatly upward biased. The demand for equity in the model is non-monotonic in borrowing costs and risk aversion, and the standard deviation of marginal utility growth is an order of magnitude smaller than the Sharpe ratio.
Handle: RePEc:nbr:nberwo:9331
Template-Type: ReDIF-Paper 1.0
Title: Trade Openness, Investment Instability and Terms-of-Trade Volatility
Classification-JEL: F1; F3
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Author-Name: Tarek Coury
Note: IFM ITI
Number: 9332
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9332
File-URL: http://www.nber.org/papers/w9332.pdf
File-Format: application/pdf
Publication-Status: published as Razin, Assaf & Sadka, Efraim & Coury, Tarek, 2003. "Trade openness, investment instability and terms-of-trade volatility," Journal of International Economics, Elsevier, vol. 61(2), pages 285-306, December.
Abstract: In the presence of economies of scale in the investment technology, trade openness may have non-conventional effects on the level of investment, its cyclical behavior, and the volatility of the terms of trade. Trade openness may lead to boom-bust cycles of investment supported by self-fulfilling expectations. The economy may oscillate between 'optimistic' expectations, 'good' terms-of-trade and investment boom to 'pessimistic' expectations, 'bad' terms-of-trade and investment bust. We also suggest that the likelihood of such oscillations is higher for developing than for developed economies, because the former may typically incur higher setup costs of investment. This phenomenon may help to explain the excessive volatility of the terms of trade of developing countries, relative to industrial countries.
Handle: RePEc:nbr:nberwo:9332
Template-Type: ReDIF-Paper 1.0
Title: Historical Perspectives on Financial Development and Economic Growth
Classification-JEL: E44; G10
Author-Name: Peter L. Rousseau
Author-Person: pro64
Note: DAE EFG ME
Number: 9333
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9333
File-URL: http://www.nber.org/papers/w9333.pdf
File-Format: application/pdf
Publication-Status: published as Peter L. Rousseau, 2003. "Historical perspectives on financial development and economic growth," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 81-106.
Abstract: This paper uses standard tools of empirical macro economics to examine how well the existing historical time series support a role for financial factors in real sector activity in four economies that experienced what are widely considered to be 'financial revolutions' over the past 400 years. The evidence presented for the Dutch Republic (1600-1794), England (1700-1850), the United States (1790-1850), and Japan (1880-1913) suggests that the emergence of financial instruments, institutions, and markets played a central role in promoting trade, commerce, and industrialization. Cross- section regressions with a wider set of countries for the post-1850 period offer additional support for the Schumpeterian view of finance in growth. Though limitations of the available data argue for a cautious interpretation, the findings are consistent with the traditional and more descriptive analyses of these events in the economic history literature, and with results obtained for the post-1960 period by modern macro economists.
Handle: RePEc:nbr:nberwo:9333
Template-Type: ReDIF-Paper 1.0
Title: Why Europe Should Love Tax Competition - and the U.S. Even More So
Classification-JEL: D72; F02
Author-Name: Eckhard Janeba
Author-Person: pja312
Author-Name: Guttorm Schjelderup
Note: PE
Number: 9334
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9334
File-URL: http://www.nber.org/papers/w9334.pdf
File-Format: application/pdf
Abstract: Is global competition for mobile capital harmful (less public goods) or beneficial (less government waste)? This paper combines both aspects within a generalized version of the comparative public finance model (Persson, Roland and Tabellini, 2000) by introducing multiple countries and endogenous tax bases. We consider the role of political institutions and compare parliamentary democracies (Europe) and presidential-congressional systems (USA) to show that increasing tax competition is likely to improve voter welfare, even if public good supply decreases because rents to politicians also fall. The conditions for voter welfare to improve are less stringent under the presidential-congressional system than under parliamentary democracies. Increasing tax competition lowers voter welfare if the only benefit to politicians is to divert resources from the government budget and the future is valued highly.
Handle: RePEc:nbr:nberwo:9334
Template-Type: ReDIF-Paper 1.0
Title: Minimum Asset Requirements
Classification-JEL: G28; K13
Author-Name: Steven Shavell
Author-Person: psh42
Note: LE
Number: 9335
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9335
File-URL: http://www.nber.org/papers/w9335.pdf
File-Format: application/pdf
Publication-Status: published as Shavell, Steven. "Minimum Asset Requirements And Compulsory Liability Insurances As Solutions To The Judgment-Proof Problem," Rand Journal of Economics, 2005, v36(1,Spring), 63-77.
Abstract: Requirements that parties have assets of at least a minimum level in order to participate in an activity are frequently imposed. A principal rationale for minimum asset requirements is considered in this article potential injurers have stronger incentives to prevent harm, or not to engage in harmful activities, provided that they have at least the required level of assets at stake if they are sued for causing harm. The optimal minimum asset requirement generally reflects a tradeoff between this advantage and the disadvantage that some parties with assets below a required level ought to engage in the activity (because the benefits they would obtain exceed the expected harm they would cause). Additionally, it is emphasized that minimum asset requirements are socially desirable only when the victims of harm are not customers of firms. When victims of harm are customers of firms, minimum asset requirements are socially undesirable.
Handle: RePEc:nbr:nberwo:9335
Template-Type: ReDIF-Paper 1.0
Title: Shooting Down the More Guns, Less Crime Hypothesis
Classification-JEL: H0; K0
Author-Name: Ian Ayres
Author-Person: pay38
Author-Name: John J. Donohue III
Author-Person: pdo40
Note: LE
Number: 9336
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9336
File-URL: http://www.nber.org/papers/w9336.pdf
File-Format: application/pdf
Publication-Status: published as Ayres, Ian and John J. Donohue III. "Shooting Down the More Guns, Less Crime Hypothesis." 55 Stanford Law Review 1193 (2003).
Abstract: John Lott and David Mustard have used regression analysis to argue forcefully that 'shall-issue' laws (which give citizens an unimpeded right to secure permits for concealed weapons) reduce violent crime. While certain facially plausible statistical models appear to generate this conclusion, more refined analyses of more recent state and county data undermine the more guns, less crime hypothesis. The most robust finding on the state data is that certain property crimes rise with passage of shall- issue laws, although the absence of any clear theory as to why this would be the case tends to undercut any strong conclusions. Estimating more statistically preferred disaggregated models on more complete county data, we show that in most states shall- issue laws have been associated with more crime and that the apparent stimulus to crime tends to be especially strong for those states that adopted in the last decade. While there are substantial concerns about model reliability and robustness, we present estimates based on disaggregated county data models that on net the passage of the law in 24 jurisdictions has increased the annual cost of crime slightly -- somewhere on the order of half a billion dollars. We also provide an illustration of how our jurisdiction-specific regression model has the capacity to generate more nuanced assessments concerning which states might profit from or be harmed by a particular legal intervention.
Handle: RePEc:nbr:nberwo:9336
Template-Type: ReDIF-Paper 1.0
Title: IS-LM-BP in the Pampas
Classification-JEL: E0; F0
Author-Name: Luis Felipe Cespedes
Author-Person: pce53
Author-Name: Roberto Chang
Author-Person: pch80
Author-Name: Andres Velasco
Note: IFM
Number: 9337
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9337
File-URL: http://www.nber.org/papers/w9337.pdf
File-Format: application/pdf
Publication-Status: published as Luis Felipe Céspedes & Roberto Chang & Andrés Velasco, 2003. "IS-LM-BP in the Pampas," IMF Staff Papers, vol 50(S1), pages 143-156.
Abstract: Emerging markets (sometimes endowed with fertile pampas) have limited access to world capital markets and suffer from original sin: they cannot borrow in their own currency. Does this mean that monetary and exchange rate policy has non-standard effects in such countries? We develop a simple IS-LM-BP model with balance sheet effects to study that question. Our answer: it all depends.
Handle: RePEc:nbr:nberwo:9337
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Welfare Benefits on Single Motherhood and Headship of Young Women: Evidence from the Census
Classification-JEL: I3; J1
Author-Name: Francine D. Blau
Author-Person: pbl16
Author-Name: Lawrence M. Kahn
Author-Person: pka63
Author-Name: Jane Waldfogel
Note: CH LS
Number: 9338
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9338
File-URL: http://www.nber.org/papers/w9338.pdf
File-Format: application/pdf
Publication-Status: published as Blau, Francine, Lawrence M. Kahn and Jane Waldfogel. “The Impact of Welfare Benefits on Single Motherhood and Headship of Young Women: Evidence from the Census." Journal of Human Resources (Spring 2004).
Abstract: This paper uses data from the 1970, 1980 and 1990 Censuses to investigate the impact of welfare benefits across Metropolitan Statistical Areas (MSAs) on the incidence of single motherhood and headship for young women. A contribution of the paper is the inclusion of both MSA fixed effects and MSA-specific time trends to account for fixed and trending unmeasured factors that could influence both welfare benefit levels and family formation. In such a model, we find no effect of welfare benefits on single motherhood for whites or blacks, and a positive effect of welfare benefits on single headship only for blacks.
Handle: RePEc:nbr:nberwo:9338
Template-Type: ReDIF-Paper 1.0
Title: Economic Insecurity and the Globalization of Production
Classification-JEL: F2; J3
Author-Name: Kenneth Scheve
Author-Name: Matthew Slaughter
Note: ITI
Number: 9339
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9339
File-URL: http://www.nber.org/papers/w9339.pdf
File-Format: application/pdf
Publication-Status: published as Scheve, Kenneth F. and Matthew Slaughter. “Economic Insecurity and the Globalization of Production." American Journal of Political Science 48, 4 (2004).
Abstract: A common claim in debates about globalization is that economic integration increases worker insecurity. Although this idea is central to both political and academic debates about international economic integration, the theoretical basis of the claim is often not clear. There is also no empirical research that has directly tested the relationship. In this paper, we argue that economic insecurity among workers may be related to riskier employment and/or wage outcomes, and that foreign direct investment may be a key factor contributing to this increased risk by making labor demands more elastic. We present new empirical evidence, based on the analysis of panel data from Great Britain collected from 1991-1999, that FDI activity in the industries in which individuals work is positively correlated with individual perceptions of economic insecurity. This relationship holds in yearly cross-sections, in a panel accounting for individual-specific effects, and in a dynamic panel model also accounting for individual-specific effects.
Handle: RePEc:nbr:nberwo:9339
Template-Type: ReDIF-Paper 1.0
Title: Personal Bankruptcy and the Level of Entrepreneurial Activity
Classification-JEL: E6; K2
Author-Name: Wei Fan
Author-Name: Michelle J. White
Author-Person: pwh52
Note: CF LE
Number: 9340
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9340
File-URL: http://www.nber.org/papers/w9340.pdf
File-Format: application/pdf
Publication-Status: published as Fan, Wei and Michelle J. White. "Personal Bankruptcy And The Level Of Entrepreneurial Activity," Journal of Law and Economics, 2003, v46(2,Oct), 545-567.
Abstract: The U.S. personal bankruptcy system functions as a bankruptcy system for small businesses as well as consumers, because debts of non-corporate firms are personal liabilities of the firms' owners. If the firm fails, the owner has an incentive to file for bankruptcy, since both business debts and the owner's personal debts will be discharged. In bankruptcy, the owner must give up assets above a fixed exemption level. Because exemption levels are set by the states, they vary widely. We show that higher bankruptcy exemption levels benefit potential entrepreneurs who are risk averse by providing partial wealth insurance and therefore the probability of owning a business increases as the exemption level rises. We test this prediction and find that the probability of households owning businesses is 35% higher if they live in states with unlimited rather than low exemptions. We also find that the probability of starting a business and the probability of owning a corporate rather than non-corporate business are higher for households that live in high exemption states.
Handle: RePEc:nbr:nberwo:9340
Template-Type: ReDIF-Paper 1.0
Title: The Own-Price of Money and a New Channel of Monetary Transmission
Classification-JEL: E32; E51
Author-Name: Michael T. Belongia
Author-Name: Peter N. Ireland
Author-Person: pir1
Note: ME
Number: 9341
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9341
File-URL: http://www.nber.org/papers/w9341.pdf
File-Format: application/pdf
Publication-Status: published as Belongia, Michael T. and Peter N. Ireland. "The Own-Price Of Money and The Channels Of Monetary Transmission," Journal of Money, Credit and Banking, 2006, v38(2,Mar), 429-445.
Abstract: Traditionally, the effects of monetary policy actions on output are thought to be transmitted via monetary or credit channels. Real business cycle theory, by contrast, highlights the role of real price changes as a source of revisions in spending and production decisions. Motivated by the desire to focus on the effects of price changes in the monetary transmission mechanism, this paper incorporates a direct measure of the real own-price of money into an estimated vector autoregression and a calibrated real business cycle model. Consistent with this new view of the monetary transmission mechanism, both approaches reveal that movements in the own-price of money are strongly related to movements in output.
Handle: RePEc:nbr:nberwo:9341
Template-Type: ReDIF-Paper 1.0
Title: Why Measure Inequality?
Classification-JEL: D31; D63
Author-Name: Louis Kaplow
Author-Person: pka44
Note: LE PE
Number: 9342
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9342
File-URL: http://www.nber.org/papers/w9342.pdf
File-Format: application/pdf
Publication-Status: published as Louis Kaplow, 2005. "Why measure inequality?," Journal of Economic Inequality, Springer, vol. 3(1), pages 65-79, April.
Abstract: A large body of literature is devoted to the measurement of income inequality, yet little attention is given to the question, Why measure inequality? However, the reasons for measurement bear importantly on whether and how measurement should be done. Upon examination, normative measures are found to be of questionable value. Descriptive measures, by contrast, may be useful, but the appropriate measure depends on the field of application rather than on general, a priori principles of the sort that are emphasized in the existing measurement literature. Measures of poverty are also considered, and similar conclusions are reached.
Handle: RePEc:nbr:nberwo:9342
Template-Type: ReDIF-Paper 1.0
Title: Cross-Border Trading as a Mechanism for Capital Flight: ADRs and the Argentine Crisis
Classification-JEL: F32; F36
Author-Name: Sebastian Auguste
Author-Name: Kathryn M.E. Dominguez
Author-Person: pdo227
Author-Name: Herman Kamil
Author-Name: Linda L. Tesar
Author-Person: pte111
Note: IFM
Number: 9343
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9343
File-URL: http://www.nber.org/papers/w9343.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, 53, 2006, 1259-1295
Abstract: This paper examines the surprising performance of the Argentine stock market in the midst of the country's most recent financial crisis and the role played by ADRs in Argentine capital flight. Although Argentine investors were subject to capital controls, they were able to purchase stocks with associated ADRs for pesos in Argentina, convert them into ADRs, re-sell them in New York for dollars and deposit the dollar proceeds in U.S. bank accounts. In the paper we show that: (1) ADR discounts went as high as 60% (indicating that Argentine investors were willing to pay significant amounts in order to legally move their funds abroad), (2) the market anticipated (correctly) a 40% devaluation, (3) local market factors in Argentina became more important in pricing peso denominated stocks with associated ADRs, while the same stocks in New York were mainly priced based on global factors, (4) capital outflow using the ADR market was substantial (our estimate is between $835 million and $3.4 billion)
Handle: RePEc:nbr:nberwo:9343
Template-Type: ReDIF-Paper 1.0
Title: Pricing the Global Industry Portfolios
Classification-JEL: G12; F3
Author-Name: Stefano Cavaglia
Author-Name: Robert J. Hodrick
Author-Person: pho115
Author-Name: Moroz Vadim
Author-Name: Xiaoyan Zhang
Author-Person: pzh588
Note: AP IFM
Number: 9344
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9344
File-URL: http://www.nber.org/papers/w9344.pdf
File-Format: application/pdf
Abstract: We investigate the ability of several international asset pricing models to price the returns on 36 FTSE global industry portfolios. The models are the international capital asset pricing model (ICAPM) the ICAPM with exchange risks, and global two-factor and three-factor Fama-French (1996, 1998) models. We apply the methodology of Hansen and Jagannathan (1997). While all of the models can correctly price the basic assets, exchange risks are unimportant and only the global three-factor Fama-French model passes a robustness check which requires the models to also price portfolios sorted by book-to-market ratio.
Handle: RePEc:nbr:nberwo:9344
Template-Type: ReDIF-Paper 1.0
Title: Sovereign Risk, Credibility and the Gold Standard: 1870-1913 versus 1925-31
Classification-JEL: F2; F33
Author-Name: Maurice Obstfeld
Author-Person: pob13
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE EFG IFM
Number: 9345
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9345
File-URL: http://www.nber.org/papers/w9345.pdf
File-Format: application/pdf
Publication-Status: published as Obstfeld, Maurice and Alan M. Taylor. "Sovereign Risk, Credibility And The Gold Standard: 1870-1913 Versus 1925-31," Economic Journal, 2003, v113(487,Apr), 241-275.
Abstract: What determines sovereign risk? We study the London bondmarket from the 1870s to the 1930s. Our findings support conventional wisdom concerning the low credibility of the interwar gold standard. Before 1914 gold standard adherence effectively signalled credibility and shaved 40 to 60 basis points from country borrowing spreads. In the 1920s, however, simply resuming prewar gold parities was insufficient to secure such benefits. Countries that devalued before resumption were treated favorably, and markets scrutinized other signals. Public debt and British Empire membership were important determinants of spreads after World War One, but not before.
Handle: RePEc:nbr:nberwo:9345
Template-Type: ReDIF-Paper 1.0
Title: The Link Between Public and Private Insurance and HIV-Related Mortality
Classification-JEL: I0
Author-Name: Jay Bhattacharya
Author-Name: Dana Goldman
Author-Person: pgo681
Author-Name: Neeraj Sood
Author-Person: pso62
Note: EH
Number: 9346
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9346
File-URL: http://www.nber.org/papers/w9346.pdf
File-Format: application/pdf
Publication-Status: published as Bhattacharya, Jayanta & Goldman, Dana & Sood, Neeraj, 2003. "The link between public and private insurance and HIV-related mortality," Journal of Health Economics, Elsevier, vol. 22(6), pages 1105-1122, November.
Abstract: As policymakers consider expanding insurance coverage for HIV+ individuals, it is useful to ask if insurance has any affect on health outcomes; and, if so, whether public insurance is as efficacious as private insurance in preventing premature deaths among HIV+ patients. Using data from a nationally representative cohort of HIV-infected persons receiving regular medical care, we estimate the impact of different types of insurance on mortality in this population. We find that ignoring observed and unobserved health status leads one to conclude (misleadingly) that insurance may not be protective for HIV patients. After accounting for observed and unobserved heterogeneity, insurance does protect against premature death, but private insurance is more effective than public coverage. The better outcomes associated with private insurance are attributable to the more restrictive prescription drug policies of Medicaid.
Handle: RePEc:nbr:nberwo:9346
Template-Type: ReDIF-Paper 1.0
Title: Do WTO Members have More Liberal Trade Policy?
Classification-JEL: F13; F15
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: ITI
Number: 9347
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9347
File-URL: http://www.nber.org/papers/w9347.pdf
File-Format: application/pdf
Publication-Status: published as Rose, Andrew K., 2004. "Do WTO members have more liberal trade policy?," Journal of International Economics, Elsevier, vol. 63(2), pages 209-235, July.
Abstract: This paper uses 68 measures of trade policy and trade liberalization to ask if membership in theWorld Trade Organization (WTO) and its predecessor the General Agreement on Tariffs and Trade (GATT) is associated with more liberal trade policy. Almost no measures of trade policy are significantly correlated with GATT/WTO membership. Trade liberalizations, when they occur, usually lag GATT entry by many years, and the GATT/WTO often admits countries that are closed and remain closed for years. The exception to the negative rule is that WTO members tend to have slightly more freedom as judged by the Heritage Foundation's index of economic freedom.
Handle: RePEc:nbr:nberwo:9347
Template-Type: ReDIF-Paper 1.0
Title: One Simple Test of Samuelson's Dictum for the Stock Market
Classification-JEL: G14
Author-Name: Jeeman Jung
Author-Name: Robert J. Shiller
Author-Person: psh69
Note: AP EFG ME
Number: 9348
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9348
File-URL: http://www.nber.org/papers/w9348.pdf
File-Format: application/pdf
Publication-Status: published as Jung, Jeeman and Robert J. Shiller. "Samuelson's Dictum And The Stock Market," Economic Inquiry, v43(2,Apr), 2005, 201-228.
Abstract: Samuelson (1998) offered the dictum that the stock market is 'micro efficient' but 'macro inefficient.' That is, the efficient markets hypothesis works much better for individual stocks than it does for the aggregate stock market. In this paper, we present one simple test, based both on regressions and on a simple scatter diagram that vividly illustrates that there is some truth to Samuelson's dictum. The data comprise all U.S. firms on the CRSP tape that have survived since 1926.
Handle: RePEc:nbr:nberwo:9348
Template-Type: ReDIF-Paper 1.0
Title: Temporary Shocks and Unavoidable Transistions to a High-Unemployment Regime
Classification-JEL: D50; C62
Author-Name: Wouter J. DenHaan
Author-Person: pde12
Note: EFG
Number: 9349
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9349
File-URL: http://www.nber.org/papers/w9349.pdf
File-Format: application/pdf
Abstract: This paper develops a model with multiple steady states (low tax and low unemployment versus high tax and high unemployment) in which equilibrium selection is not conditioned on a sunspot variable. Instead, large temporary shocks initiate unavoidable transitions from one steady state to another. Tax policies have huge effects in some cases. In particular, it is possible that the transition to the high-unemployment steady state after a negative shock can be avoided if the government borrows to finance unemployment benefits, and in some cases it is even possible that a credible permanent tax cut would force the economy out of the high-unemployment steady state. The model is used to explain the high European unemployment rates in the 80's and 90's. The paper argues that the increase in unemployment during the 70's played a key role because it led to an increase in the obligation to pay unemployment benefits. The implied tax burden was so big that the transition to the highunemployment regime was the unique equilibrium outcome.
Handle: RePEc:nbr:nberwo:9349
Template-Type: ReDIF-Paper 1.0
Title: Determinants of Drug Injection Behavior: Economic Factors, HIV Injection Risk and Needle Exchange Programs
Classification-JEL: D12; I12
Author-Name: Jeff DeSimone
Author-Person: pde214
Note: EH
Number: 9350
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9350
File-URL: http://www.nber.org/papers/w9350.pdf
File-Format: application/pdf
Publication-Status: published as DeSimone, Jeff. "Needle Exchange Programs and Drug Injection Behavior," Journal of Policy Analysis and Management, 2005, v24(3,Summer), 559-577.
Abstract: This study examines the effects of local cocaine and heroin prices, AIDS rates, and needle exchange programs on drug injection and needle sharing by adult male arrestees in 24 large U.S. cities during 1989 1995. Regressions that control for personal characteristics including income, fixed city and year effects, and city-specific trends indicate that needle exchange programs decrease both injection and sharing. Increases in previous year AIDS prevalence reduce injection by both sharers and non-sharers, leaving the proportion of injectors who share unchanged. Higher cocaine prices lead to less cocaine injection and more sharing, but heroin prices do not effect injection or sharing.
Handle: RePEc:nbr:nberwo:9350
Template-Type: ReDIF-Paper 1.0
Title: Pharmaceutical-embodied technical progress, longevity, and quality of life: drugs as "equipment for your health"
Classification-JEL: I12; L65
Author-Name: Frank R. Lichtenberg
Author-Person: pli76
Author-Name: Suchin Virabhak
Note: EH PR
Number: 9351
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9351
File-URL: http://www.nber.org/papers/w9351.pdf
File-Format: application/pdf
Publication-Status: published as Frank R. Lichtenberg & Suchin Virabhak, 2007. "Pharmaceutical-embodied technical progress, longevity, and quality of life: drugs as 'Equipment for Your Health'," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 371-392.
Abstract: Several econometric studies have concluded that technical progress embodied in equipment is a major source of manufacturing productivity growth. Other research has suggested that, over the long run, growth in the U.S. economy's 'health output' has been at least as large as the growth in non-health goods and services. One important input in the production of health pharmaceuticals is even more R&D- intensive than equipment. In this paper we test the pharmaceutical-embodied technical progress hypothesis the hypothesis that newer drugs increase the length and quality of life and estimate the rate of progress. To do this, we estimate health production functions, in which the dependent variables are various indicators of post-treatment health status (such as survival, perceived health status, and presence of physical or cognitive limitations), and the regressors include drug vintage (the year in which the FDA first approved a drug's active ingredient(s)) and indicators of pre-treatment health status. We estimate these relationships using extremely disaggregated prescription- level cross-sectional data derived primarily from the 1997 Medical Expenditure Panel Survey. We find that people who used newer drugs had better post-treatment health than people using older drugs for the same condition, controlling for pre-treatment health, age, sex, race, marital status, education, income, and insurance coverage: they were more likely to survive, their perceived health status was higher, and they experienced fewer activity, social, and physical limitations. The estimated cost of the increase in vintage required to keep a person alive is lower than some estimates of the value of remaining alive for one month. One estimate of the cost of preventing an activity limitation is $1745, and the annual rate of technical progress with respect to activity limitations is 8.4%. People consuming newer drugs tend to experience greater increases (or smaller declines) in physical ability than people consuming older drugs. Most of the health measures indicate that the effect of drug vintage on health is higher for people with low initial health than it is for people with high initial health. Therefore in contrast to equipment-embodied technical progress economic inequality, pharmaceutical-embodied technical progress has a tendency to reduce inequality as well as promote economic growth, broadly defined.
Handle: RePEc:nbr:nberwo:9351
Template-Type: ReDIF-Paper 1.0
Title: Why Do Consumer Prices React less than Import Prices to Exchange Rates?
Classification-JEL: F4
Author-Name: Philippe Bacchetta
Author-Person: pba111
Author-Name: Eric van Wincoop
Author-Person: pva387
Note: IFM ITI
Number: 9352
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9352
File-URL: http://www.nber.org/papers/w9352.pdf
File-Format: application/pdf
Publication-Status: published as Philippe Bacchetta & Eric van Wincoop, 2003. "Why Do Consumer Prices React Less Than Import Prices to Exchange Rates?," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 662-670, 04/05.
Abstract: It is well known that the extent of pass-through of exchange rate changes to consumer prices is much lower than to import prices. One explanation is local distribution costs. Here we consider an alternative, complementary, explanation based on the optimal pricing strategies of firms. We consider a model where foreign exporting firms sell intermediate goods to domestic firms. Domestic firms assemble the imported intermediate goods and sell final goods to consumers. When domestic firms face significant competition from other domestic final goods producing sectors (e.g., the non-traded goods sector) we show that they prefer to price in domestic currency, while exporting firms tend to price in the exporter's currency. In that case the pass-through to import prices is complete, while the pass-through to consumer prices is zero.
Handle: RePEc:nbr:nberwo:9352
Template-Type: ReDIF-Paper 1.0
Title: Debt Policy, Corporate Taxes, and Discount Rates
Classification-JEL: G0; G1
Author-Name: Mark Grinblatt
Author-Person: pgr231
Author-Name: Jun Liu
Note: AP
Number: 9353
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9353
File-URL: http://www.nber.org/papers/w9353.pdf
File-Format: application/pdf
Publication-Status: published as Grinblatt, Mark & Liu, Jun, 2008. "Debt policy, corporate taxes, and discount rates," Journal of Economic Theory, Elsevier, vol. 141(1), pages 225-254, July.
Abstract: This paper studies the valuation of assets with debt tax shields when debt policy is a general time-dependent function of the asset's unlevered cash flows, value, and history. In a continuous-time setting, it shows that the value of a project's debt tax shield satisfies a partial differential equation, which simplifies to an easily solved ordinary differential equation for most plausible debt policies. A large class of cases exhibits closed-form solutions for the value of a levered asset, the value of its tax shield, and the appropriate tax-adjusted cost of capital for discounting unlevered cash flows.
Handle: RePEc:nbr:nberwo:9353
Template-Type: ReDIF-Paper 1.0
Title: Educational Vouchers and Cream Skimming
Classification-JEL: I2; H42
Author-Name: Dennis Epple
Author-Person: pep21
Author-Name: Richard Romano
Author-Person: pro223
Note: CH PE ED
Number: 9354
Creation-Date: 2002-11
Order-URL: http://www.nber.org/papers/w9354
File-URL: http://www.nber.org/papers/w9354.pdf
File-Format: application/pdf
Publication-Status: published as Dennis Epple & Richard Romano, 2008. "Educational Vouchers And Cream Skimming," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1395-1435, November.
Abstract: Epple and Romano (1998) show equilibrium provision of education by public and private schools has the latter skim off the wealthiest and most-able students, and flat-rate vouchers lead to further cream skimming. Here we study voucher design that would inject private-school competition and increase technical efficiencies without cream skimming. Conditioning vouchers on student ability without restriction on participating schools' policies fails to effect significantly cream skimming. However, by adding conditions like tuition constraints such as vouchers can reap the benefits of school competition without increased stratification. This can be accomplished while allowing voluntary participation in the voucher system and without tax increases.
Handle: RePEc:nbr:nberwo:9354
Template-Type: ReDIF-Paper 1.0
Title: The Credit Channel in Middle Income Countries
Classification-JEL: E32; F32
Author-Name: Aaron Tornell
Author-Person: pto157
Author-Name: Frank Westermann
Author-Person: pwe84
Note: IFM ME
Number: 9355
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9355
File-URL: http://www.nber.org/papers/w9355.pdf
File-Format: application/pdf
Publication-Status: published as Tornell, Aaron and Frank Westermann. "Boom-Bust Cycles In Middle Income Countries," International Monetary Fund Staff Papers, 2002, v49(Spec), 111-155.
Abstract: Credit market conditions play a key role in propagating shocks in middle income countries (MICs). In particular, shocks to the spread between domestic and international interest rates have a strong effect on GDP, and an even stronger effect on domestic credit. This strong credit channel is associated with a sharp sectorial asymmetry: the output of the bank-dependent nontradables (N) sector reacts more strongly than tradables (T) output. This asymmetry, in turn, is associated with a strong reaction of the real exchange rate --the relative price between N and T goods. We present a model that reconciles these facts and leads to a well specified estimation framework. From the equilibrium we derive structural VARs that allow us to identify shocks to credit market conditions and trace their effects on the economy. We estimate these structural VARs for a group of MICs and find evidence of a strong credit channel. We argue that at the heart of the MIC credit channel are a deep asymmetry in financing opportunities across N and T sectors, and a severe currency mismatch. This makes movements in the real exchange rate the driving element in the amplification of shocks. Finally, we show that the model's key assumptions are consistent with evidence gleaned from both firm level and aggregate data.
Handle: RePEc:nbr:nberwo:9355
Template-Type: ReDIF-Paper 1.0
Title: Paycheck Receipt and the Timing of Consumption
Classification-JEL: D91; E21
Author-Name: Melvin Stephens Jr.
Author-Person: pst400
Note: EFG LS
Number: 9356
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9356
File-URL: http://www.nber.org/papers/w9356.pdf
File-Format: application/pdf
Abstract: This paper examines the consumption response to monthly paycheck receipt. Since the amount and arrival date of paychecks are known in advance, the receipt of a paycheck does not coincide with the receipt of new information. Under the basic rational expectations Life-Cycle/Permanent Income Hypothesis, household consumption should not respond to paycheck arrival. Using data from the United Kingdom's Family Expenditure Survey, this paper finds that household consumption is excessively sensitive to paycheck receipt. The results cannot be explained by any underlying monthly expenditure fluctuations common to all households. The presence of liquidity constraints as measured by wealth can account for the excess sensitivity results although the availability of credit cards cannot.
Handle: RePEc:nbr:nberwo:9356
Template-Type: ReDIF-Paper 1.0
Title: Deaths Rise in Good Economic Times: Evidence From the OECD
Classification-JEL: E32; J2
Author-Name: Ulf-G. Gerdtham
Author-Name: Christopher J. Ruhm
Author-Person: pru7
Note: CH EH
Number: 9357
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9357
File-URL: http://www.nber.org/papers/w9357.pdf
File-Format: application/pdf
Publication-Status: published as Gerdtham, Ulf-G. & Ruhm, Christopher J., 2006. "Deaths rise in good economic times: Evidence from the OECD," Economics and Human Biology, Elsevier, vol. 4(3), pages 298-316, December.
Abstract: This study uses aggregate data for 23 OECD countries over the 1960-1997 period to examine the relationship between macroeconomic conditions and fatalities. The main finding is that total mortality and deaths from several common causes increase when labor markets strengthen. For instance, controlling for year effects, location fixed effects, country-specific time trends and demographic characteristics, a one percentage point decrease in the national unemployment rate is associated with a 0.4 percent rise in total mortality and 0.4, 1.1, 1.8, 2.1 and 0.8 percent increases in deaths from cardiovascular disease, influenza/pneumonia, liver disease, motor vehicle fatalities and other accidents. These results are consistent with the findings of other recent research and cast doubt on the hypothesis that economic downturns have negative effects on physical health.
Handle: RePEc:nbr:nberwo:9357
Template-Type: ReDIF-Paper 1.0
Title: An Evaluation of Instrumental Variable Strategies for Estimating the Effects of Catholic Schools
Classification-JEL: I2; C2
Author-Name: Joseph G. Altonji
Author-Person: pal266
Author-Name: Todd E. Elder
Author-Person: pel109
Author-Name: Christopher R. Taber
Note: CH ED
Number: 9358
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9358
File-URL: http://www.nber.org/papers/w9358.pdf
File-Format: application/pdf
Publication-Status: published as Altonji, Joseph G., Todd E. Elder and Christopher R. Taber. "An Evaluation Of Instrumental Variables Strategies For Estimating The Effects Of Catholic Schooling," Journal of Human Resources, 2005, v40(4,Fall), 791-821.
Abstract: Several previous studies have relied on religious affiliation and the proximity to Catholic schools as exogenous sources of variation for identifying the effect of Catholic schooling on a wide variety of outcomes. Using three separate approaches, we examine the validity of these instrumental variables. We find that none of the candidate instruments is a useful source of identification of the Catholic school effect, at least in currently available data sets
Handle: RePEc:nbr:nberwo:9358
Template-Type: ReDIF-Paper 1.0
Title: Judging Fund Managers by the Company They Keep
Classification-JEL: G1
Author-Name: Randolph Cohen
Author-Name: Joshua Coval
Author-Name: Lubos Pastor
Author-Person: ppa276
Note: AP
Number: 9359
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9359
File-URL: http://www.nber.org/papers/w9359.pdf
File-Format: application/pdf
Publication-Status: published as Randolph B. Cohen & Joshua D. Coval & Lubos Pástor, 2005. "Judging Fund Managers by the Company They Keep," Journal of Finance, American Finance Association, vol. 60(3), pages 1057-1096, 06.
Abstract: We develop a performance evaluation approach in which a fund manager's skill is judged by the extent to which his investment decisions resemble the decisions of managers with distinguished performance records. The proposed performance measures are estimated more precisely than standard measures, because they use historical returns and holdings of many funds to evaluate the performance of a single fund. According to one of our measures, funds with significantly positive ability considerably outnumber funds with significantly negative ability at the end of our sample. Simulations demonstrate that our measures are particularly useful in ranking managers. In an application that relies on such ranking, we find only weak persistence in the performance of U.S. equity funds after accounting for momentum in stock returns.
Handle: RePEc:nbr:nberwo:9359
Template-Type: ReDIF-Paper 1.0
Title: Mother's Education and the Intergenerational Transmission of Human Capital: Evidence from College Openings and Longitudinal Data
Classification-JEL: I1; I2
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Enrico Moretti
Author-Person: pmo392
Note: CH LS ED
Number: 9360
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9360
File-URL: http://www.nber.org/papers/w9360.pdf
File-Format: application/pdf
Publication-Status: published as Currie, Janet and Enrico Moretti. "Mother's Education and the Intergenerational Transmission of Human Capital: Evidence from College Openings." Quarterly Journal of Economics VCXVIII, 4 (November 2003): 1495-1532.
Abstract: We estimate the effect of maternal education on birth outcomes using data from the Vital Statistics Natality files for 1970 to 1999. We also assess the importance of four potential channels through which maternal education may improve birth outcomes: use of prenatal care, smoking behavior, marriage, and fertility. In an effort to account for unobserved characteristics of women that could induce spurious correlation, we pursue two distinct empirical strategies. First, we construct panel data by linking women in different years of the Vital Statistics records and examine the effects of changes in education on changes in birth outcomes. Second, we have compiled a new data set on openings of two and four year colleges between 1940 and 1990. We use data about the availability of colleges in the woman's county in her 17th year as an instrument for maternal education Our findings using the two approaches are similar. Higher maternal education improves infant health, as measured by birthweight and gestational age. It also increases the probability that a new mother is married, reduces parity, increases use of prenatal care, and reduces smoking, suggesting that these are important pathways for the ultimate effect on health.
Handle: RePEc:nbr:nberwo:9360
Template-Type: ReDIF-Paper 1.0
Title: The Economic Consequences of a War in Iraq
Classification-JEL: H56
Author-Name: William D. Nordhaus
Author-Person: pno115
Note: EFG PE
Number: 9361
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9361
File-URL: http://www.nber.org/papers/w9361.pdf
File-Format: application/pdf
Abstract: Much has been written about the national-security aspects of a potential conflict with Iraq, but there are no studies of the cost. A review of several past wars indicates that nations historically have consistently underestimated the cost of military conflicts. This study reviews the potential costs of a conflict including the postwar expenses that might be required for occupation, humanitarian assistance, reconstruction, nation-building along with the implications for oil markets and macroeconomic activity. It considers two potential scenarios that span the potential outcomes, ranging from a short and relatively conflict-free case to protracted conflict with difficult and expensive postwar reconstruction and occupation. The estimates of the cost to the United States over the decade following hostilities range from $100 billion to $1.9 trillion.
Handle: RePEc:nbr:nberwo:9361
Template-Type: ReDIF-Paper 1.0
Title: Explaining the Flood of Asbestos Litigation: Consolidation, Bifurcation, and Bouquet Trials
Classification-JEL: K1; K4
Author-Name: Michelle J. White
Author-Person: pwh52
Note: LE
Number: 9362
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9362
File-URL: http://www.nber.org/papers/w9362.pdf
File-Format: application/pdf
Abstract: The number of asbestos personal injury claims filed each year is in the hundreds of thousands and has been increasing rather than decreasing over time, even though asbestos stopped being used in the early 1970's. Eighty firms have filed for bankruptcy due to asbestos liabilities including 30 filings since the beginning of 2000. This paper examines why asbestos claims are increasing over time. Because large numbers of asbestos claims are filed in particular courts, judges in these courts have adopted procedural innovations intended to clear their dockets by encouraging mass settlements. These innovations cause trial outcomes to change in plaintiffs' favor. As a result, the innovations make the asbestos crisis worse by giving plaintiffs' lawyers an incentive to file large numbers of additional claims in the same courts. The paper uses a new dataset of asbestos trials to test the hypothesis that three important procedural innovations--consolidated trials, bifurcation, and bouquet trials--favor plaintiffs and therefore encourage the filing of additional claims. I find that bifurcation and bouquet trials nearly triple plaintiffs' expected return from trial, while consolidations of up to seven lawsuits raise plaintiffs' expected return from trial by one- third to one-half.
Handle: RePEc:nbr:nberwo:9362
Template-Type: ReDIF-Paper 1.0
Title: The Scope of Open Source Licensing
Classification-JEL: O3; K3
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: Jean Tirole
Author-Person: pti33
Note: CF IO PR
Number: 9363
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9363
File-URL: http://www.nber.org/papers/w9363.pdf
File-Format: application/pdf
Publication-Status: published as Josh Lerner, 2005. "The Scope of Open Source Licensing," Journal of Law, Economics and Organization, Oxford University Press, vol. 21(1), pages 20-56, April.
Abstract: This paper is an initial exploration of the determinants of open source license choice. It first enumerates the various considerations that should figure into the licensor's choice of contractual terms, in particular highlighting how the decision is shaped not just by the preferences of the licensor itself, but also by that of the community of developers. The paper then presents an empirical analysis of the determinants of license choice using the Source Forge database, a compilation of nearly 40,000 open source projects. Projects geared toward end-users tend to have restrictive licenses, while those oriented toward developers are less likely to do so. Projects that are designed to run on commercial operating systems and those geared towards the Internet are less likely to have restrictive licenses. Finally, projects that are likely to be attractive to consumers such as games are more likely to have restrictive licenses. A more tentative conclusion based on a much smaller sample is that projects that involve software developed in a corporate setting are likely to have more restrictive licenses. These findings are broadly consistent with theoretical predictions.
Handle: RePEc:nbr:nberwo:9363
Template-Type: ReDIF-Paper 1.0
Title: Asset Prices and Business Cycles with Costly External Finance
Author-Name: Joao Gomes
Author-Person: pgo15
Author-Name: Amir Yaron
Author-Person: pya156
Author-Name: Lu Zhang
Author-Person: pzh29
Note: AP EFG
Number: 9364
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9364
File-URL: http://www.nber.org/papers/w9364.pdf
File-Format: application/pdf
Publication-Status: published as Gomes, Joao F., Amir Yaron and Lu Zhang. "Asset Prices And Business Cycles With Costly External Finance," Review of Economic Dynamics, 2003, v6(3,Oct), 767-788.
Abstract: This paper asks whether the asset pricing fluctuations induced by the presence of costly external finance are empirically plausible. To accomplish this, we incorporate costly external finance into a dynamic stochastic general equilibrium model and explore its implications for the properties of the returns on key financial assets, such as stocks, bonds and risky loans. We find that the mean and volatility of the equity premium, although small, are significantly higher than those in comparable adjustment cost models. However, we also show that these results require a procyclical financing premium, a property that seems at odds with the data.
Handle: RePEc:nbr:nberwo:9364
Template-Type: ReDIF-Paper 1.0
Title: Asset Pricing Implications of Firms' Financing Constraints
Author-Name: Joao Gomes
Author-Person: pgo15
Author-Name: Amir Yaron
Author-Person: pya156
Author-Name: Lu Zhang
Author-Person: pzh29
Note: AP
Number: 9365
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9365
File-URL: http://www.nber.org/papers/w9365.pdf
File-Format: application/pdf
Publication-Status: published as Gomes, Joao F., Amir Yaron and Lu Zhang. "Asset Pricing Implications Of Firms' Financing Constraints," Review of Financial Studies, 2006, v19(4,Winter), 1321-1356.
Abstract: We incorporate costly external finance in an investment-based asset pricing model and investigate whether financing frictions are quantitatively important for pricing a cross-section of expected returns. We show that common assumptions about the nature of the financing frictions are captured by a simple financing cost' function, equal to the product of the financing premium and the amount of external finance. This approach provides a tractable framework for empirical analysis. Using GMM, we estimate a pricing kernel that incorporates the effects of financing constraints on investment behavior. The key ingredients in this pricing kernel depend not only on fundamentals', such as profits and investment, but also on the financing variables, such as default premium and the amount of external financing. Our findings, however, suggest that the role played by financing frictions is fairly negligible, unless the premium on external funds is procyclical, a property not evident in the data and not satisfied by most models of costly external finance.
Handle: RePEc:nbr:nberwo:9365
Template-Type: ReDIF-Paper 1.0
Title: Human Capital and Earnings Distribution Dynamics
Classification-JEL: D3; J24
Author-Name: Mark Hugget
Author-Person: phu6
Author-Name: Gustavo Ventura
Author-Person: pve11
Author-Name: Amir Yaron
Author-Person: pya156
Note: AP EFG
Number: 9366
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9366
File-URL: http://www.nber.org/papers/w9366.pdf
File-Format: application/pdf
Publication-Status: published as Huggett, Mark & Ventura, Gustavo & Yaron, Amir, 2006. "Human capital and earnings distribution dynamics," Journal of Monetary Economics, Elsevier, vol. 53(2), pages 265-290, March.
Abstract: Mean earnings and measures of earnings dispersion and skewness all increase in US data over most of the working life-cycle for a typical cohort as the cohort ages. We show that a benchmark human capital model can replicate these properties from the right distribution of initial human capital and learning ability. These distributions have the property that learning ability must differ across agents and that learning ability and initial human capital are positively correlated.
Handle: RePEc:nbr:nberwo:9366
Template-Type: ReDIF-Paper 1.0
Title: The Deteriorating Fiscal Situation and an Aging Population
Classification-JEL: E6; H5
Author-Name: Robert Dekle
Author-Person: pde414
Note: EFG PE
Number: 9367
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9367
File-URL: http://www.nber.org/papers/w9367.pdf
File-Format: application/pdf
Publication-Status: published as Blomstrom, Magnus et al. (eds.) Structural impediments to growth in Japan NBER Conference Report series. Chicago and London: University of Chicago Press, 2003.
Publication-Status: published as The Deteriorating Fiscal Situation and an Aging Population, Robert Dekle. in Structural Impediments to Growth in Japan, Blomstrom, Corbett, Hayashi, and Kashyap. 2003
Abstract: Japan's deteriorating fiscal situation has attracted international attention. I assess what current Japanese government policies mean for the future of public debt and the economy in general, given the inevitable aging of the population. I review how Japan got into this current fiscal mess, and then perform an analysis of some debt dynamics. With unchanged fiscal policies, Japan's public debt will rise to between 260% and 380% of GDP in 2030, and to between 700% and 1300% in 2040 -- clearly unsustainable levels. For the debt to be sustainable, significant increases in taxes, or cuts in government spending are necessary.
Handle: RePEc:nbr:nberwo:9367
Template-Type: ReDIF-Paper 1.0
Title: Financial Sector Profitability and Double-Gearing
Classification-JEL: G28; G21
Author-Name: Mitsuhiro Fukao
Author-Person: pfu58
Note: CF ME
Number: 9368
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9368
File-URL: http://www.nber.org/papers/w9368.pdf
File-Format: application/pdf
Publication-Status: published as Financial Sector Profitability and Double-Gearing, Mitsuhiro Fukao. in Structural Impediments to Growth in Japan, Blomstrom, Corbett, Hayashi, and Kashyap. 2003
Abstract: In this paper, I show that Japan will not be able to have a viable banking sector without stopping deflation. The banking industry has not shown a profit since fiscal 1993 (ended March 1994) if one excludes capital gains from stock and real estate portfolios. I quantify the financial condition of the sector and show that interest margins have been too low to cover the increase in loan losses brought about by the weak economy. Banks cannot raise margins for several reasons: competition with subsidized government sponsored financial institutions (GFIs); intense political pressure, backed by the Financial Services Agency (FSA), to make new loans to small and medium companies; and deflation-weakened borrowers. I expect that the Japanese government will have to nationalize most of the banking sector by 2005. Capital injections will not solve the problems. Established Japanese life insurance companies are also troubled because they over-promised the amount that they could pay. This can be corrected through a reorganization where the promised interest rates are cut. But this is complicated because Japanese banks and life insurance companies are providing each other capital a practice called double-gearing. Weakened banks ask insurance companies to provide equity capital and subordinated loans. In return, the mutual life insurers ask banks to subscribe their surplus notes (similar to non-voting redeemable preferred shares) and subordinated debt. The risks of double-gearing are analyzed.
Handle: RePEc:nbr:nberwo:9368
Template-Type: ReDIF-Paper 1.0
Title: Debt Relief: What Do the Markets Think?
Author-Name: Serkan Arslanalp
Author-Name: Peter Blair Henry
Author-Person: phe166
Note: CF IFM
Number: 9369
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9369
File-URL: http://www.nber.org/papers/w9369.pdf
File-Format: application/pdf
Abstract: The stock market appreciates by an average of 60 percent in real dollar terms when countries announce debt relief agreements under the Brady Plan. In contrast, there is no significant increase in market value for a control group of countries that do not sign agreements. The results persist after controlling for IMF agreements, trade liberalizations, capital account liberalizations, and privatization programs. The stock market revaluations forecast higher future net resource transfers and GDP growth. While markets respond favorably to debt relief in the Brady countries, there is no evidence to suggest that current debt relief efforts for the Highly-Indebted Poor Countries (HIPCs) will achieve similar results.
Handle: RePEc:nbr:nberwo:9369
Template-Type: ReDIF-Paper 1.0
Title: Time Consistency and Free-Riding in a Monetary Union
Classification-JEL: F3; F31
Author-Name: V. V. Chari
Author-Person: pch40
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Note: EFG IFM ME
Number: 9370
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9370
File-URL: http://www.nber.org/papers/w9370.pdf
File-Format: application/pdf
Publication-Status: published as Varadarajan V. Chari & Patrick J. Kehoe, 2008. "Time Inconsistency and Free-Riding in a Monetary Union," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(7), pages 1329-1356, October.
Abstract: We analyze the setting of monetary and nonmonetary policies in monetary unions. We show that in these unions a time inconsistency problem in monetary policy leads to a novel type of free- rider problem in the setting of nonmonetary policies, such as labor market policy, fiscal policy, and bank regulation. The free-rider problem leads the union's members to pursue lax nonmonetary policies that induce the monetary authority to generate high inflation. The free-rider problem can be mitigated by imposing constraints on the nonmonetary policies, like unionwide rules on labor market policy, debt constraints on members' fiscal policy, and unionwide regulation of banks. When there is no time inconsistency problem, there is no free-rider problem, and constraints on nonmonetary policies are unnecessary and possibly harmful.
Handle: RePEc:nbr:nberwo:9370
Template-Type: ReDIF-Paper 1.0
Title: Corporate Governance and Control
Classification-JEL: G32; G34
Author-Name: Patrick Bolton
Author-Person: pbo544
Author-Name: Marco Becht
Author-Name: Alisa Röell
Note: CF
Number: 9371
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9371
File-URL: http://www.nber.org/papers/w9371.pdf
File-Format: application/pdf
Publication-Status: published as Becht, Marco & Bolton, Patrick & Roell, Ailsa, 2003. "Corporate governance and control," 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 1, pages 1-109 Elsevier.
Abstract: Corporate governance is concerned with the resolution of collective action problems among dispersed investors and the reconciliation of conflicts of interest between various corporate claimholders. In this survey we review the theoretical and empirical research on the main mechanisms of corporate control, discuss the main legal and regulatory institutions in different countries, and examine the comparative corporate governance literature. A fundamental dilemma of corporate governance emerges from this overview: regulation of large shareholder intervention may provide better protection to small shareholders; but such regulations may increase managerial discretion and scope for abuse.
Handle: RePEc:nbr:nberwo:9371
Template-Type: ReDIF-Paper 1.0
Title: PPP Strikes Back: Aggregation and the Real Exchange Rate
Classification-JEL: F36; F41
Author-Name: Jean Imbs
Author-Person: pim10
Author-Name: Haroon Mumtaz
Author-Name: Morton O. Ravn
Author-Person: pra16
Author-Name: Helene Rey
Author-Person: pre8
Note: IFM
Number: 9372
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9372
File-URL: http://www.nber.org/papers/w9372.pdf
File-Format: application/pdf
Publication-Status: published as Jean Imbs & Haroon Mumtaz & Morten Ravn & Hélène Rey, 2005. "PPP Strikes Back: Aggregation and the Real Exchange Rate," The Quarterly Journal of Economics, MIT Press, vol. 120(1), pages 1-43, January.
Abstract: We show the importance of a dynamic aggregation bias in accounting for the PPP puzzle. We prove that established time series and panel methods substantially exaggerate the persistence of real exchange rates because of heterogeneity in the dynamics of disaggregated relative prices. When heterogeneity is properly taken into account, estimates of the real exchange rate half-life fall dramatically, to little more than one year, or significantly below Rogoff's consensus view' of three to five years. We show corrected estimates are consistent with plausible nominal rigidities, thus, arguably, solving the puzzle. We also explain why traded goods prices account for the bulk of the persistence and volatility of the real exchange rate. The reason is that traded goods prices display dynamics that are more heterogeneous than non-traded ones.
Handle: RePEc:nbr:nberwo:9372
Template-Type: ReDIF-Paper 1.0
Title: Capital, Interest, and Aggregate Intertemporal Substitution
Classification-JEL: E21; H30
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Note: EFG ME PE
Number: 9373
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9373
File-URL: http://www.nber.org/papers/w9373.pdf
File-Format: application/pdf
Abstract: Financial economics research has suggested that expected returns are not the same across assets, and that their movements over time are not simply described or explained. I argue that this suggestion has implications for the study of substitution over time --namely that 'the' interest rate in aggregate theory is not the promised yield on a Treasury Bill or Bond, but should be measured as the expected return on a representative piece of capital. Furthermore, tax policy changes can be used to distinguish intertemporal preferences (a.k.a., the supply of savings) from the demand for capital, and to distinguish Fisherian from non-Fisherian interpretations of consumption-interest rate comovements. I so measure the interest rate using U.S. national accounts data, and find consumption growth to be both interest elastic and forecastable with tax and interest rate variables. In other words, standard proxies for 'the intertemporal marginal rate of substitution' and for 'the marginal product of capital' move together, once we allow for taxes, even though both fail to be significantly correlated with any particular financial asset's return
Handle: RePEc:nbr:nberwo:9373
Template-Type: ReDIF-Paper 1.0
Title: Capital Tax Incidence: First Impressions from the Time Series
Classification-JEL: H22; E22
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Note: EFG PE
Number: 9374
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9374
File-URL: http://www.nber.org/papers/w9374.pdf
File-Format: application/pdf
Abstract: Aggregate time series data are used to calculate the incidence of capital taxes. Part of the analysis is borrowed from the literature on sales tax incidence, comparing pre-tax interest rates with tax rates. The other part compares tax rates with after-tax interest rates, which are measured separately and independently from pre-tax interest rates. I find a positive correlation between capital tax rates and pre-tax interest rates, and little correlation between after-tax interest rates and tax rates, but both of these findings seem to derive in part from the effect of the business cycle on tax rate measures, as opposed to a shifting of capital taxes. The empirical findings are consistent with significant capital tax shifting in the long run, little shifting in the short run, and clearly rule out over-shifting.
Handle: RePEc:nbr:nberwo:9374
Template-Type: ReDIF-Paper 1.0
Title: What Measure of Inflation Should a Central Bank Target?
Classification-JEL: E5
Author-Name: N. Gregory Mankiw
Author-Name: Ricardo Reis
Author-Person: pre73
Note: EFG ME
Number: 9375
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9375
File-URL: http://www.nber.org/papers/w9375.pdf
File-Format: application/pdf
Publication-Status: published as N. Gregory Mankiw & Ricardo Reis, 2003. "What Measure of Inflation Should a Central Bank Target?," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1058-1086, 09.
Abstract: This paper assumes that a central bank commits itself to maintaining an inflation target and then asks what measure of the inflation rate the central bank should use if it wants to maximize economic stability. The paper first formalizes this problem and examines its microeconomic foundations. It then shows how the weight of a sector in the stability price index depends on the sector's characteristics, including size, cyclical sensitivity, sluggishness of price adjustment, and magnitude of sectoral shocks. When a numerical illustration of the problem is calibrated to U.S. data, one tentative conclusion is that a central bank that wants to achieve maximum stability of economic activity should use a price index that gives substantial weight to the level of nominal wages.
Handle: RePEc:nbr:nberwo:9375
Template-Type: ReDIF-Paper 1.0
Title: High Frequency Contagion of Currency Crises in Asia
Classification-JEL: F31; G12
Author-Name: Takatoshi Ito
Author-Name: Yuko Hashimoto
Note: IFM ITI
Number: 9376
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9376
File-URL: http://www.nber.org/papers/w9376.pdf
File-Format: application/pdf
Publication-Status: published as Ito, Takatoshi and Yuko Hashimoto. "High-Frequency Contagion Of Currency Crises In Asia," Asian Economic Journal, 2005, v19(4,Dec), 357-381.
Abstract: Using daily data during the period of Asian Currency Crises, this paper examines high-frequency contagion effects among Asian six countries. By identifying the origin' (of exchange rate depreciation, or decline in stock prices) and the affected' (currencies, or stock prices) in spillover relationship, Indonesia and Korea are found to be the two main origin countries, affecting exchange rates and stock prices of other countries. Evidence of high-frequency crisis spillover from Thailand to other countries was weak at best. A positive relationship between trade link indices and the contagion coefficients is found, implying that the bilateral trade linkage is an important factor for currency market participants to expect which currency should be affected within days of an original a shock in the exchange rate of a particular country.
Handle: RePEc:nbr:nberwo:9376
Template-Type: ReDIF-Paper 1.0
Title: Why Not a Political Coase Theorem? Social Conflict, Commitment and Politics
Classification-JEL: H2; N10
Author-Name: Daron Acemoglu
Author-Person: pac16
Note: EFG
Number: 9377
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9377
File-URL: http://www.nber.org/papers/w9377.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron. "Why Not A Political Coase Theorem? Social Conflict, Commitment, And Politics," Journal of Comparative Economics, 2003, v31(4,Dec), 620-652.
Abstract: Do societies choose inefficient policies and institutions, in contrast to what would be suggested by a reasoning extending the Coase Theorem to politics? Do societies choose inefficient policies and institutions because of differences in the beliefs and ideologies of their peoples or leaders? Or are inefficiencies in politics and economics the outcome of social and distributional conflicts? This paper discusses these various approaches to political economy, and develops the argument that there are strong empirical and theoretical grounds for believing that inefficient policies and institutions are prevalent, and that they are chosen because they serve the interests of politicians or social groups holding political power, at the expense of the society at large. At the center of the theoretical case are the commitment problems inherent in politics: parties holding political power cannot make commitments to bind their future actions because there is no outside agency with the coercive capacity to enforce such arrangements.
Handle: RePEc:nbr:nberwo:9377
Template-Type: ReDIF-Paper 1.0
Title: The Rise of Europe: Atlantic Trade, Institutional Change and Economic Growth
Classification-JEL: O10; F10
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Simon Johnson
Author-Person: pjo44
Author-Name: James Robinson
Author-Person: pro179
Note: EFG ITI
Number: 9378
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9378
File-URL: http://www.nber.org/papers/w9378.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron, Simon Johnson and James Robinson. "The Rise Of Europe: Atlantic Trade, Institutional Change, And Economic Growth," American Economic Review, 2005, v95(2,May), 546-579.
Abstract: This paper documents that the Rise of (Western) Europe between 1500 and 1850 is largely accounted for by the growth of European nations with access to the Atlantic, and especially by those nations that engaged in colonialism and long distance oceanic trade. Moreover, Atlantic ports grew much faster than other West European cities, including Mediterranean ports. Atlantic trade and colonialism affected Europe both directly, and indirectly by inducing institutional changes. In particular, the growth of New World, African, and Asian trade after 1500 strengthened new segments of the commercial bourgeoisie, and enabled these groups to demand, obtain, and sustain changes in institutions to protect their property rights. Furthermore, the most significant institutional changes and consequently the most substantial economic gains occurred in nations where existing institutions placed some checks on the monarchy and particularly limited its control of overseas trading activities, thus enabling new merchants in these countries to benefit from Atlantic trade. Therefore, the Rise of Europe was largely the result of capitalist development driven by the interaction of late medieval institutions and the economic opportunities offered by Atlantic trade.'
Handle: RePEc:nbr:nberwo:9378
Template-Type: ReDIF-Paper 1.0
Title: Law and Finance: Why Does Legal Origin Matter?
Classification-JEL: G2; K2
Author-Name: Thorsten Beck
Author-Person: pbe266
Author-Name: Asli Demirguc-Kunt
Author-Person: pde226
Author-Name: Ross Levine
Author-Person: ple61
Note: IFM LE
Number: 9379
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9379
File-URL: http://www.nber.org/papers/w9379.pdf
File-Format: application/pdf
Publication-Status: published as Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Law and finance: why does legal origin matter?," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 653-675, December.
Abstract: New research suggests that cross-country differences in legal origin help explain differences in financial development. This paper empirically assesses two theories of why legal origin influences financial development. First, the political' channel stresses that (i) legal traditions differ in the priority they give to the rights of individual investors vis-…-vis the state and (ii) this has repercussions for the development of property rights and financial markets. Second, the adaptability' channel holds that (i) legal traditions differ in their ability to adjust to changing commercial circumstances and (ii) legal systems that adapt quickly to minimize the gap between the contracting needs of the economy and the legal system's capabilities will foster financial development more effectively than would more rigid legal traditions. We use historical comparisons and cross-country regressions to assess the validity of these two channels. We find that legal origin matters for financial development because legal traditions differ in their ability to adapt efficiently to evolving economic conditions.
Handle: RePEc:nbr:nberwo:9379
Template-Type: ReDIF-Paper 1.0
Title: Does the Evidence Favor State Competition in Corporate Law?
Classification-JEL: G30; G38
Author-Name: Lucian Bebchuk
Author-Person: pbe72
Author-Name: Alma Cohen
Author-Person: pco678
Author-Name: Allen Ferrell
Note: CF LE
Number: 9380
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9380
File-URL: http://www.nber.org/papers/w9380.pdf
File-Format: application/pdf
Publication-Status: published as Bebchuk, Lucian, Alma Cohen and Allen Ferrell. "Does the Evidence Favor State Competition in Corporate Law?" California Law Review 90, 6 (Dec., 2002): 1775-1821.
Abstract: In the ongoing debate on state competition over corporate charters, supporters of state competition have long claimed that the empirical evidence clearly supports their view. This paper suggests that the body of empirical evidence on which supporters of state competition have relied does not warrant this claim. The paper first demonstrates that reported findings of a positive correlation between incorporation in Delaware and increased shareholder wealth are not robust and, furthermore, do not establish causation. The paper then shows that, even if Delaware incorporation were found to cause an increase in shareholder value, this finding would not imply that state competition is working well; benefits to incorporating in the dominant state would likely exist in a race-toward-the bottom' equilibrium in which state competition provided undesirable incentives. Third, the analysis shows that empirical claims that state competition rewards moderation in the provision of antitakeover protections are not well grounded. Finally, we endorse a new approach to the empirical study of the subject that is based on analyzing the determinants of companies' choices of state of incorporation. Recent work based on this approach indicates that, contrary to the beliefs of state competition supporters, states that amass antitakeover statutes are more successful in the incorporation market.
Handle: RePEc:nbr:nberwo:9380
Template-Type: ReDIF-Paper 1.0
Title: Speculative Growth
Classification-JEL: D0; D9
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Mohamad L. Hammour
Note: EFG
Number: 9381
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9381
File-URL: http://www.nber.org/papers/w9381.pdf
File-Format: application/pdf
Publication-Status: published as Caballero, Ricardo J., E. Farhi and M. Hammour. “Speculative Growth: Hints from the US Economy." American Economic Review 96, 4 (September 2006): 1159-1192.
Abstract: We propose a framework for understanding recurrent historical episodes of vigorous economic expansion accompanied by extreme asset valuations, as exhibited by Japan in the 1980's and the U.S. in the 1990's. We interpret this phenomenon as a high-valuation equilibrium with a low effective cost of capital based on optimism about the future availability of funds for investment. The key to the sustainability of such equilibrium is feedback from increased growth to an increase in the supply of funding. We show that such feedback arises naturally when the expansion is concentrated in a new economy' sector and when it is supported by sustained financial surpluses-both of which would constitute an integral part, as cause and consequence, of a speculative growth' equilibrium. The high-valuation equilibrium we analyze may take the form of a stock market bubble. In contrast to classic bubbles on non-productive assets, the bubbles in our model encourage real investments, boost long run savings, and may appear in dynamically efficient economies.
Handle: RePEc:nbr:nberwo:9381
Template-Type: ReDIF-Paper 1.0
Title: Consumption over the Life Cycle: Facts from Consumer Expenditure Survey Data
Classification-JEL: D12; D91
Author-Name: Jesus Fernandez-Villaverde
Author-Person: pfe14
Author-Name: Dirk Krueger
Author-Person: pkr7
Note: EFG
Number: 9382
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9382
File-URL: http://www.nber.org/papers/w9382.pdf
File-Format: application/pdf
Publication-Status: published as Jesus Fernández-Villaverde & Dirk Krueger, 2007. "Consumption over the Life Cycle: Facts from Consumer Expenditure Survey Data," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 552-565, 06.
Abstract: This paper uses a seminonparametric model and Consumer Expenditure Survey data to estimate life cycle profiles of consumption, controlling for demographics, cohort and time e.ects. In addition to documenting profiles for total and nondurable consumption, we devote special attention to the age expenditure pattern for consumer durables. We find hump-shaped paths over the life cycle for total, for nondurable and for durable expenditures. Changes in household size account for roughly half of these humps. The other half remains unaccounted for by the standard complete markets life cycle model. Our results imply that households do not smooth consumption over their lifetimes. This is especially true for services from consumer durables. Bootstrap simulations suggest that our empirical estimates are tight and sensitivity analysis indicates that the computed profiles are robust to a large number of different specifications.
Handle: RePEc:nbr:nberwo:9382
Template-Type: ReDIF-Paper 1.0
Title: Interpretable Asset Markets?
Author-Name: Ravi Bansal
Author-Person: pba818
Author-Name: Varoujan Khatachtrian
Author-Name: Amir Yaron
Author-Person: pya156
Note: AP
Number: 9383
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9383
File-URL: http://www.nber.org/papers/w9383.pdf
File-Format: application/pdf
Publication-Status: published as Bansal, Ravi & Khatchatrian, Varoujan & Yaron, Amir, 2005. "Interpretable asset markets?," European Economic Review, Elsevier, vol. 49(3), pages 531-560, April.
Abstract: In this paper we show that measures of economic uncertainty (conditional volatility of consumption) predict and are predicted by valuation ratios at long horizons. Further we document that asset valuations drop as economic uncertainty rises that is, financial markets dislike economic uncertainty. Moreover, future earnings growth rates are sharply predicted by current price-earnings ratios. It seems that much of the variation in asset prices can be attributed to fluctuations in economic uncertainty and expected cash-flow growth. This empirical evidence is consistent with the implications of existing parametric general equilibrium models. Hence, the channels of fluctuating economic uncertainty and expected growth seem important for interpreting asset markets.
Handle: RePEc:nbr:nberwo:9383
Template-Type: ReDIF-Paper 1.0
Title: Sorting Out Japan's Financial Crisis
Classification-JEL: G28; G21
Author-Name: Anil K. Kashyap
Author-Person: pka35
Note: CF EFG ME
Number: 9384
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9384
File-URL: http://www.nber.org/papers/w9384.pdf
File-Format: application/pdf
Publication-Status: published as Kashyap, Anil K. "Sorting Out Japan's Financial Crisis," FRB Chicago - Economic Perspectives, 2004, v26(4,4th-Qtr), 42-55.
Abstract: This paper makes three contributions. First, I report information on the size of the Japanese financial crisis. Drawing principally on work by Fukao (2003) and Doi and Hoshi (2003) I estimate that the current taxpayer liability for losses incurred but yet to be recognized is likely to be at least 24% of GDP. Second, I explain why it has been so difficult to end the crisis. Third, I sketch the likely ingredients of what will be required to successfully resolve the crisis. The overarching principle is that Japan's banks, insurance companies, and government financial agencies all suffer different problems and require different solutions. But all three sectors are connected, and a failure to tackle concurrently the problems of all three promises to doom any reform plan.
Handle: RePEc:nbr:nberwo:9384
Template-Type: ReDIF-Paper 1.0
Title: Paying for the FILP
Classification-JEL: G2; G3
Author-Name: Takero Doi
Author-Person: pdo15
Author-Name: Takeo Hoshi
Author-Person: pho107
Note: CF EFG
Number: 9385
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9385
File-URL: http://www.nber.org/papers/w9385.pdf
File-Format: application/pdf
Publication-Status: published as Paying for the FILP, Takero Doi, Takeo Hoshi. in Structural Impediments to Growth in Japan, Blomstrom, Corbett, Hayashi, and Kashyap. 2003
Abstract: This paper examines the financial health of the Fiscal Investment and Loan Program (FILP) as of the end of March 2001. We study the financial conditions of FILP recipients, which include public corporations and local governments. We find many are de facto insolvent. Our estimates suggest as much as 75% of the FILP loans are bad. The expected losses are estimated to be about ?75 trillion (over 15% of GDP). We also studied the effects of the FILP reform of April 2001, which tries to introduce market discipline in allocation of FILP funds. No significant changes in financial flow are detected, yet. The financial market seems to differentiate the newly introduced FILP agency bonds, which are supposed to without government guarantee, from government guaranteed bonds. It is too early to tell, however, whether the financial market will become an effective monitor of FILP agencies.
Handle: RePEc:nbr:nberwo:9385
Template-Type: ReDIF-Paper 1.0
Title: An International Perspective of Japan's Corporate Groups and their Prospects
Classification-JEL: G3; I2
Author-Name: Yishay Yafeh
Note: CF EFG
Number: 9386
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9386
File-URL: http://www.nber.org/papers/w9386.pdf
File-Format: application/pdf
Publication-Status: published as Yishay Yafeh, 2003. "An International Perspective of Corporate Groups and Their Prospects," NBER Chapters, in: Structural Impediments to Growth in Japan, pages 259-284 National Bureau of Economic Research, Inc.
Abstract: This paper reviews the literature on corporate groups in Japan and elsewhere, and offers a comparison of Japan's corporate groups with groups in other developed and developing countries. It then proceeds to examine the evolution of corporate groups in Japan since the mid-1970s. The main conclusions that emerge are that: 1. Empirical evidence on the economic roles of corporate groups in Japan is limited. 2. Japanese groups are, in some respects, quite similar to groups in other countries, but their risk and return characteristics differ substantially. 3. There is little to suggest that over the past thirty years groups have had a major impact on Japan's industrial structure. In view of these findings, and because there is no evidence that Japanese groups (unlike those in some other countries) enjoy any particular political clout, it is unlikely that corporate groups will constitute an impediment to structural change in Japan.
Handle: RePEc:nbr:nberwo:9386
Template-Type: ReDIF-Paper 1.0
Title: U.S. Imports, Exports, and Tariff Data, 1989-2001
Classification-JEL: F1
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Author-Name: John Romalis
Author-Name: Peter K. Schott
Author-Person: psc98
Note: ITI
Number: 9387
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9387
File-URL: http://www.nber.org/papers/w9387.pdf
File-Format: application/pdf
Abstract: This paper describes the updating of the NBER trade dataset, which now provides U.S. import and export values to the year 2001, disaggregated by Harmonized System (HS), Standard International Trade Classification (SITC), and the U.S. Standard Industrial Classification (SIC) categories. In addition, U.S. tariff data at the HS level have been added for the years 1989-2001. Earlier CD-ROMs distributed by the NBER described data on U.S. imports and exports from 1972-1994, and these values have been slightly modified for 1989-1994 and then updated to 2001. Together with the earlier data, there are now 30 years of disaggregate U.S. trade data available to researchers.
Handle: RePEc:nbr:nberwo:9387
Template-Type: ReDIF-Paper 1.0
Title: How Well Do Banks Manage Their Reserves?
Classification-JEL: G21; D80
Author-Name: Eduardo Jallath-Coria
Author-Name: Tridas Mukhopadhyay
Author-Name: Amir Yaron
Author-Person: pya156
Note: AP ME
Number: 9388
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9388
File-URL: http://www.nber.org/papers/w9388.pdf
File-Format: application/pdf
Publication-Status: published as Jallath, Eduardo, Tridas Mukophdyay, and Amir Yaron. "How Well Do Banks Manage Their Reserves?" Journal of Money Credit and Banking 37, 4 (2005): 623-644.
Abstract: In this paper we investigate how well banks manage their reserves. The optimal policy takes into account expected foregone interest on excess reserves and penalty costs for going below required reserves. Using a unique panel data-set on daily clearing house settlements of a cross-section of Mexican banks we estimate the deposit uncertainty banks face, and in turn their optimal reserve behavior. The most important variables for forecasting the deposit uncertainty are the interbank fund-transfers of the day, certain calendar dates, and the interest differential between the money market rate and the discount rate - a measure reflecting the bank's opportunity cost of money holdings. For most banks the model's prediction accord relatively well with the observed reserve behavior of banks. The model produces reserves costs that are significantly smaller relative to the case when reserves are set via simple rule of thumb. Furthermore, alternative motives for holding reserves (such as liquidity and reputation effects) do not seem to be the explanation for why certain banks hold relatively large reserves.
Handle: RePEc:nbr:nberwo:9388
Template-Type: ReDIF-Paper 1.0
Title: The Effect of High School Matriculation Awards: Evidence from Randomized Trials
Classification-JEL: I21; I28
Author-Name: Joshua D. Angrist
Author-Person: pan29
Author-Name: Victor Lavy
Author-Person: pla111
Note: CH LS ED
Number: 9389
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9389
File-URL: http://www.nber.org/papers/w9389.pdf
File-Format: application/pdf
Publication-Status: published as Angrist, Josh D. and Victor Lavy. “The Effect of High-Stakes High School Achievement Awards: Evidence from a Group-Randomized Trial." American Economic Review (September 2009).
Abstract: In Israel, as in many other countries, a high school matriculation certificate is required by universities and some jobs. In spite of the certificate's value, Israeli society is marked by vast differences in matriculation rates by region and socioeconomic status. We attempted to increase the likelihood of matriculation among low-achieving students by offering substantial cash incentives in two demonstration programs. As a theoretical matter, cash incentives may be helpful if low-achieving students reduce investment in schooling because of high discount rates, part-time work, or face peer pressure not to study. A small pilot program selected individual students within schools for treatment, with treatment status determined by previous test scores and a partially randomized cutoff for low socioeconomic status. In a larger follow-up program, entire schools were randomly selected for treatment and the program operated with the cooperation of principals and teachers. The results suggest the Achievement Awards program that randomized treatment at the school level raised matriculation rates, while the student-based program did not.
Handle: RePEc:nbr:nberwo:9389
Template-Type: ReDIF-Paper 1.0
Title: Endogenous Money or Sticky Prices?
Classification-JEL: E31; E32
Author-Name: Peter N. Ireland
Author-Person: pir1
Note: ME
Number: 9390
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9390
File-URL: http://www.nber.org/papers/w9390.pdf
File-Format: application/pdf
Publication-Status: published as Ireland, Peter N. "Endogenous Money Or Sticky Prices?," Journal of Monetary Economics, 2003, v50(8,Nov), 1623-1648.
Abstract: What explains the correlations between nominal and real variables in the postwar US data? Are these correlations indicative of significant nominal price rigidity? Or do they simply reflect the particular way that monetary policymakers react to developments in the real economy? To answer these questions, this paper uses maximum likelihood to estimate a model of endogenous money. This model allows, but does not require, nominal prices to be sticky. The results show that nominal price rigidity, over and above endogenous money, plays a role in accounting for key features of the data.
Handle: RePEc:nbr:nberwo:9390
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Dynamics, Learning and Misperception
Classification-JEL: E4; F31
Author-Name: Pierre-Olivier Gourinchas
Author-Person: pgo28
Author-Name: Aaron Tornell
Author-Person: pto157
Note: EFG IFM
Number: 9391
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9391
File-URL: http://www.nber.org/papers/w9391.pdf
File-Format: application/pdf
Publication-Status: published as Gourinchas, Pierre-Olivier and Aaron Tornell. "Exchange Rate Puzzles and Distorted Beliefs." Journal of International Economics 64, 2 (December 2004): 303-333.
Abstract: We propose a new explanation for the forward-premium and the delayed-overshooting puzzles. Both puzzles arise from a systematic under-reaction of short-term interest rate forecasts to current innovations. Accordingly, the forward premium is always a biased predictor of future depreciation; the bias can be so severe as to lead to negative coeffcients in the 'Fama' regression; delayed overshooting may or may not occur depending upon the persistence of interest rate innovations and the degree of under-reaction; lastly, for G-7 countries against the U.S., these puzzles can be rationalized for values of the model's parameters that match empirical estimates
Handle: RePEc:nbr:nberwo:9391
Template-Type: ReDIF-Paper 1.0
Title: Mutual Fund Performance with Learning Across Funds
Classification-JEL: G11; G12
Author-Name: Christopher S. Jones
Author-Person: pjo36
Author-Name: Jay Shanken
Author-Person: psh114
Note: AP
Number: 9392
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9392
File-URL: http://www.nber.org/papers/w9392.pdf
File-Format: application/pdf
Publication-Status: published as Jones, Christopher S. and Jay Shanken. "Mutual Fund Performance With Learning Across Funds," Journal of Financial Economics, 2005, v78(3,Dec), 507-552.
Abstract: This paper is based on the premise that knowledge about the alphas of one set of funds will influence an investor's beliefs about other funds. This will be true insofar as an investor's expectation about the performance of a fund is partly a belief about the abilities of mutual fund managers as a group and, more generally, a belief about the degree to which financial markets are efficient. We develop a simple framework for incorporating this prior dependence' and find that it can have a substantial impact on the cross-section of posterior beliefs about fund performance as well as asset allocation. Under independence, the maximum posterior mean alpha increases without bound as the number of funds increases and 'extremely large' estimates are randomly observed. This is true even when fund managers have no skill. In contrast, with prior dependence, investors aggregate information across funds to form a general belief about the potential for abnormal performance. Each fund's alpha estimate is shrunk toward the aggregate estimate, mitigating extreme views. An additional implication is that restricting the estimation to surviving funds, a common practice in this literature, imparts an upward bias to the average fund alpha.
Handle: RePEc:nbr:nberwo:9392
Template-Type: ReDIF-Paper 1.0
Title: Empirical Exchange Rate Models of the Nineties: Are Any Fit to Survive?
Classification-JEL: F31; F47
Author-Name: Yin-Wong Cheung
Author-Person: pch261
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: Antonio Garcia Pascual
Author-Person: pga242
Note: IFM
Number: 9393
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9393
File-URL: http://www.nber.org/papers/w9393.pdf
File-Format: application/pdf
Publication-Status: published as Cheung, Yin-Wong, Menzie D. Chinn and Antonio Garcia Pascual. "Empirical Exchange Rate Models Of The Nineties: Are Any Fit To Survive?," Journal of International Money and Finance, 2005, v24(7,Nov), 1150-1175.
Abstract: Previous assessments of nominal exchange rate determination have focused upon a narrow set of models typically of the 1970's vintage. The canonical papers in this literature are by Meese and Rogoff (1983, 1988), who examined monetary and portfolio balance models. Succeeding works by Mark (1995) and Chinn and Meese (1995) focused on similar models. In this paper we re-assess exchange rate prediction using a wider set of models that have been proposed in the last decade: interest rate parity, productivity based models, and behavioral equilibrium exchange rate' models. The performance of these models is compared against a benchmark model the Dornbusch-Frankel sticky price monetary model. The models are estimated in error correction and first-difference specifications. Rather than estimating the cointegrating vector over the entire sample and treating it as part of the ex ante information set as is commonly done in the literature, we recursively update the cointegrating vector, thereby generating true ex ante forecasts. We examine model performance at various forecast horizons (1 quarter, 4 quarters, 20 quarters) using differing metrics (mean squared error, direction of change), as well as the consistency' test of Cheung and Chinn (1998). No model consistently outperforms a random walk, by a mean squared error measure; however, along a direction-of-change dimension, certain structural models do outperform a random walk with statistical significance. Moreover, one finds that these forecasts are cointegrated with the actual values of exchange rates, although in a large number of cases, the elasticity of the forecasts with respect to the actual values is different from unity. Overall, model/specification/currency combinations that work well in one period will not necessarily work well in another period.
Handle: RePEc:nbr:nberwo:9393
Template-Type: ReDIF-Paper 1.0
Title: Health Insurance and Households' Precautionary Behaviors - An Unusual Natural Experiment
Classification-JEL: D1; H4
Author-Name: Shin-Yi Chou
Author-Name: Jin-Tan Liu
Author-Person: pli620
Author-Name: James K. Hammitt
Author-Person: pha652
Note: EH
Number: 9394
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9394
File-URL: http://www.nber.org/papers/w9394.pdf
File-Format: application/pdf
Publication-Status: published as Chou, Shin-Yi, Jin-Tan Liu and James K. Hammitt. "National Health Insurance And Precautionary Saving: Evidence From Taiwan," Journal of Public Economics, 2003, v87(9-10,Sep), 1873-1894.
Abstract: By reducing risk of large out-of-pocket medical expenses, comprehensive social health insurance may reduce households' motivation to engage in precautionary behaviors such as saving, procurement of private insurance, and spousal labor-force participation. We use the natural experiment provided by the 1995 introduction of National Health Insurance in Taiwan to examine these effects, using pre-existing differences in access to health insurance (tied to the household head's and spouse's joint employment status) to identify the effects of increasing insurance coverage. We find that comprehensive health insurance has a statistically significant and large effect on household savings and purchase of private accident insurance, but no significant effect on spousal employment.
Handle: RePEc:nbr:nberwo:9394
Template-Type: ReDIF-Paper 1.0
Title: Changes over time in union relative wage effects in the UK and the US revisited
Classification-JEL: J3; J5
Author-Name: David Blanchflower
Author-Person: pbl22
Author-Name: Alex Bryson
Author-Person: pbr105
Note: LS
Number: 9395
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9395
File-URL: http://www.nber.org/papers/w9395.pdf
File-Format: application/pdf
Publication-Status: published as Addison, John and Claus Schnabel (eds.) International Handbook of Trade Unions. Edward Elgar, 2003.
Abstract: This paper examines the impact of trade unions in the US and the UK and elsewhere. In both the US and the UK, despite declining membership numbers, unions are able to raise wages substantially over the equivalent non-union wage. Unions in other countries, such as Australia, Austria, Brazil, Canada, Chile, Cyprus, Denmark, Japan, New Zealand, Norway, Portugal and Spain, are also able to raise wages by significant amounts. In countries where union wage settlements frequently spill over into the non-union sector (e.g. France, Germany, Italy, the Netherlands and Sweden) there is no significant union wage differential. The estimates from the seventeen countries we examined averages out at 12 per cent. Time series evidence from both the US and the UK suggests three interesting findings. First, the union differential in the US is higher on average than that found in the UK (18 per cent compared with 10 per cent). Second, the union wage premium in both countries was untrended in the years up to the mid-1990s. Third, in both countries the wage premium has fallen in the boom years since 1994/95. It is too early to tell whether the onset of a downturn in 2002 will cause the differential to rise again or whether there is a trend change in the impact of unions. It is our view that most likely what has happened is that the tightening of the labor market has resulted in a temporary decline in the size of the union wage premium. Time will tell whether the current loosening of the labor market, that is occurring in both countries, will return the union wage premium to its long run values of 10 per cent in the case of the UK and 18 per cent in the case of the US. On the basis of past experience it seems likely that they will.
Handle: RePEc:nbr:nberwo:9395
Template-Type: ReDIF-Paper 1.0
Title: Changes in the Value of Life: 1940-1980
Classification-JEL: J17; J28
Author-Name: Dora L. Costa
Author-Person: pco358
Author-Name: Matthew E. Kahn
Author-Person: pka41
Note: AG DAE EH
Number: 9396
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9396
File-URL: http://www.nber.org/papers/w9396.pdf
File-Format: application/pdf
Publication-Status: published as Dora L. Costa & Matthew E. Kahn, 2004. "Changes in the Value of Life, 1940--1980," Journal of Risk and Uncertainty, Springer, vol. 29(2), pages 159-180, 09.
Abstract: We present the first nation wide value of life estimates for the United States at more than one point in time. Our estimates are for every ten years between 1940 and 1980, a period when declines in fatal accident rates were historically unprecedented. Our estimated elasticity of value of life with respect to per capita GNP is 1.5 to 1.7. We illustrate the importance of rising value of life for policy evaluation by examining the benefits of improved longevity since 1900, showing that the current marginal increase in longevity is more valuable than the large increase in the first half of the twentieth century.
Handle: RePEc:nbr:nberwo:9396
Template-Type: ReDIF-Paper 1.0
Title: Volatility, employment and the patterns of FDI in emerging markets
Classification-JEL: F21; F23
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: ITI
Number: 9397
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9397
File-URL: http://www.nber.org/papers/w9397.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua, 2003. "Volatility, employment and the patterns of FDI in emerging markets," Journal of Development Economics, Elsevier, vol. 72(2), pages 585-601, December.
Abstract: The purpose of this paper is to explore the implications of the deepening presence of multinationals in emerging markets on the cost of macroeconomic volatility there. We find that macroeconomic volatility has a potentially large impact on employment and investment decisions of multinationals producing intermediate inputs in developing countries. This is the case even for risk neutral multinationals, as their profit function is non-linear due to price and productivity effects. For industries with costly capacity, the multinationals would tend to invest in the more stable emerging markets. Higher volatility of productivity shocks in an emerging market producing the intermediate inputs reduces the multinationals' expected profits. High enough instability in such a market would induce the multinationals to diversify intermediate inputs production, investing in several emerging markets. This effect is stronger in lower margin industries. We identify circumstances where this diversification is costly to emerging markets. Such a diversification increases the responsiveness of the multinationals' employment in each country to productivity shocks, channeling the average employment from the more to the less volatile location, and reducing the multinationals' total expected employment in emerging markets.
Handle: RePEc:nbr:nberwo:9397
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate, Equity Prices and Capital Flows
Classification-JEL: F3; F31
Author-Name: Harald Hau
Author-Person: pha313
Author-Name: Helene Rey
Author-Person: pre8
Note: IFM
Number: 9398
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9398
File-URL: http://www.nber.org/papers/w9398.pdf
File-Format: application/pdf
Publication-Status: published as Hau, Harald and Helene Rey. "Can Portfolio Rebalancing Explain The Dynamics Of Equity Returns, Equity Flows, And Exchange Rates?," American Economic Review, 2004, v94(2,May), 126-133.
Publication-Status: published as Harald Hau & Hélène Rey, 2006. "Exchange Rates, Equity Prices, and Capital Flows," Review of Financial Studies, Oxford University Press for Society for Financial Studies, (Spring 2006) 19 (1): 273-317.
Abstract: We develop an equilibrium model in which exchange rates, stock prices and capital flows are jointly determined under incomplete forex risk trading. Incomplete hedging of forex risk, documented for U.S. global mutual funds, has three important implications: 1) exchange rates are almost as volatile as equity prices when the forex liquidity supply is not infinitely price elastic; 2) higher returns in the home equity market relative to the foreign equity market are associated with a home currency depreciation; 3) net equity flows into the foreign market are positively correlated with a foreign currency appreciation. The model predictions are strongly supported at daily, monthly and quarterly frequencies for 17 OECD countries vis-…-vis the U.S. Moreover, correlations are strongest after 1990 and for countries with higher market capitalization relative to GDP, suggesting that the observed exchange rate dynamics is indeed related to equity market development.
Handle: RePEc:nbr:nberwo:9398
Template-Type: ReDIF-Paper 1.0
Title: Welfare Reform and Changes in the Economic Well-Being of Children
Classification-JEL: I3
Author-Name: Neil G. Bennett
Author-Name: Hsien-Hen Lu
Author-Name: Younghwan Song
Note: CH EH
Number: 9399
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9399
File-URL: http://www.nber.org/papers/w9399.pdf
File-Format: application/pdf
Publication-Status: published as Bennett, Neil G., Hsien-Hen Lu, and Younghwan Song. "Welfare Reform and Changes in the Economic Well-Being of Children." Population Research and Policy Review 23, 5-6 (Special Issue October-December 2004): 671-99.
Abstract: Since the implementation of the Temporary Assistance for Needy Families program in late-1996, welfare rolls have declined by more than half. This paper explores whether improvements in the economic well-being of children have accompanied this dramatic reduction in welfare participation. Further, we examine the degree to which the success or failure of welfare reform has been shared equally among families of varying educational background. We analyze data from the March Current Population Surveys over the years 1988 through 2001. Specifically, we link data for families with children who are interviewed in adjacent years and determine whether their economic circumstances either improved or deteriorated. We use two alternative approaches to address this general issue: a variety of regression models and a difference-in-differences methodology. These approaches provide consistent answers. In a bivariate framework TANF is associated with higher incomes; but this association becomes insignificant in the presence of business cycle controls. We also determine that children who were poor at an initial time period benefit differently, depending on their parents' educational attainment level. Poor children with parents who do not have a high school degree are significantly worse off in the TANF era, relative to the era prior to welfare reform, than are their more educated counterparts.
Handle: RePEc:nbr:nberwo:9399
Template-Type: ReDIF-Paper 1.0
Title: The Consequences of Merit Aid
Classification-JEL: I22; J24
Author-Name: Susan Dynarski
Author-Person: pdy1
Note: CH ED PE
Number: 9400
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9400
File-URL: http://www.nber.org/papers/w9400.pdf
File-Format: application/pdf
Abstract: Since the early Nineties, a dozen states have established broad-based merit aid programs. The typical program waives tuition and fees at public colleges and universities in one's home state. Unlike traditional merit programs, such as the National Merit Scholarship, this aid requires relatively modest academic performance and provide scholarships to hundreds of thousands of students. This paper examines how merit aid programs in seven states have affected an array of schooling decisions, paying particular attention to how the effects have varied by race and ethnicity. I find that the new programs typically increase the attendance probability of college-age youth by five to seven percentage points. The merit programs also shift students toward four-year schools and away from two-year schools. The Georgia HOPE Scholarship, which has been found to widen racial gaps in college attendance (Dynarski, 2000) is atypical in its distributional impact, with the other state's programs tending to have a more positive effect on the college attendance rate of Blacks and Hispanics. I attribute HOPE's unique distributional effect to its relatively stringent academic requirements and a recently-eliminated provision that channeled the most generous scholarships to higher-income students.
Handle: RePEc:nbr:nberwo:9400
Template-Type: ReDIF-Paper 1.0
Title: Closed Jaguar, Open Dragon: Comparing Tariffs in Latin America and Asia before World War II
Classification-JEL: F1; N7
Author-Name: Michael A. Clemens
Author-Person: pcl20
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI
Number: 9401
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9401
File-URL: http://www.nber.org/papers/w9401.pdf
File-Format: application/pdf
Publication-Status: published as Michael A. Clemens and Jeffrey G. Williamson (2011), “Why were Latin America’s tariffs so much higher than Asia’s before 1950?”, Journal of Iberian and Latin American Economic History, 30 (1): 12–39.
Abstract: Despite an enormous literature that has analyzed the comparative experiences of Latin America and Asia in post-World War II trade policy, almost no attention has been paid to the comparative experience prior to the wars. Even a cursory look at the best available empirical evidence reveals tremendous contrasts between the two regions. Latin America had the highest tariff barriers on earth before 1914; Asia had the lowest. Protected Latin America's belle ‚poque also boasted some of the most explosive growth performance on earth, while Asia registered some of the worst. What brought the two regions to the opposite ends of the tariff policy spectrum? And why are these quantum differences in economic performance so at odds with postwar conventional wisdom? We begin by describing a novel tariff database we have constructed from largely original sources. We explore the impact of colonial rule and unequal treaties' on Asian tariffs, as well as the impact of geography and political economy on Latin American tariffs. Limits to tariff policy autonomy explain one third of the vast difference between the two regions' tariffs before 1914; differences in the extent and structure of internal markets as well as the world tariff environment explain much of the rest. We conclude with an agenda for the future.
Handle: RePEc:nbr:nberwo:9401
Template-Type: ReDIF-Paper 1.0
Title: Optimal Monetary Policy
Classification-JEL: E5
Author-Name: Aubhik Khan
Author-Person: pkh5
Author-Name: Robert G. King
Author-Person: pki21
Author-Name: Alexander L. Wolman
Author-Person: pwo18
Note: EFG
Number: 9402
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9402
File-URL: http://www.nber.org/papers/w9402.pdf
File-Format: application/pdf
Publication-Status: published as Aubhik Khan & Robert G. King & Alexander L. Wolman, 2003. "Optimal Monetary Policy," Review of Economic Studies, Blackwell Publishing, vol. 70(4), pages 825-860, October.
Abstract: Optimal monetary policy maximizes the welfare of a representative agent, given frictions in the economic environment. Constructing a model with two sets of frictions -- costly price adjustment by imperfectly competitive firms and costly exchange of wealth for goods -- we find optimal monetary policy is governed by two familiar principles. First, the average level of the nominal interest rate should be sufficiently low, as suggested by Milton Friedman, that there should be deflation on average. Yet, the Keynesian frictions imply that the optimal nominal interest rate is positive. Second, as various shocks occur to the real and monetary sectors, the price level should be largely stabilized, as suggested by Irving Fisher, albeit around a deflationary trend path. Since expected inflation is roughly constant through time, the nominal interest rate must therefore vary with the Fisherian determinants of the real interest rate. Although the monetary authority has substantial leverage over real activity in our model economy, it chooses real allocations that closely resemble those which would occur if prices were flexible. In our benchmark model, there is some tendency for the monetary authority to smooth nominal and real interest rates.
Handle: RePEc:nbr:nberwo:9402
Template-Type: ReDIF-Paper 1.0
Title: Managerial Incentives and the International Organization of Production
Classification-JEL: L22; F23
Author-Name: Elhanan Helpman
Author-Person: phe205
Author-Name: Gene M. Grossman
Author-Person: pgr21
Note: ITI PR
Number: 9403
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9403
File-URL: http://www.nber.org/papers/w9403.pdf
File-Format: application/pdf
Publication-Status: published as Grossman, Gene M. & Helpman, Elhanan, 2004. "Managerial incentives and the international organization of production," Journal of International Economics, Elsevier, vol. 63(2), pages 237-262, July.
Abstract: We develop a model in which the heterogeneous firms in an industry choose their modes of organization and the location of their subsidiaries or suppliers. We assume that the principals of a firm are constrained in the nature of the contracts they can write with suppliers or employees. Our main result concerns the sorting of firms with different productivity levels into different organizational forms. We use the model to examine the implications of falling trade costs for the relevant prevalence of outsourcing and foreign direct investment.
Handle: RePEc:nbr:nberwo:9403
Template-Type: ReDIF-Paper 1.0
Title: Retirement and the Stock Market Bubble
Classification-JEL: J26; J14
Author-Name: Alan L. Gustman
Author-Person: pgu327
Author-Name: Thomas L. Steinmeier
Note: AG LS
Number: 9404
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9404
File-URL: http://www.nber.org/papers/w9404.pdf
File-Format: application/pdf
Abstract: This paper specifies and estimates a structural dynamic stochastic model of the way individuals make retirement and saving choices in an uncertain world, and applies that model to analyze the effects of the stock market bubble on retirement behavior. The model includes individual variation both in retirement preferences and in time preferences. Estimates are based on information covering the period 1992 through 2000 from the Health and Retirement Study (HRS), a panel survey of retirement age respondents and their spouses. The extraordinary returns in the stock market in the late 1990's, which more than doubled stock prices and unexpectedly increased the value of a mixed portfolio by nearly 60 percent, increased retirement for the HRS sample of workers by over 3 percentage points by the turn of the century and would have decreased the average retirement age by about a quarter of a year if it had not been interrupted. The subsequent decline in the market, which very nearly wiped out the gains that had been made during the preceding surge, effectively neutralized the effect of the preceding stock market gains on retirement. The effects of the bubble were to increase retirement as long as the bubble continued, but any continuing effects of the bubble after its end will probably be minimal.
Handle: RePEc:nbr:nberwo:9404
Template-Type: ReDIF-Paper 1.0
Title: The Effect of the State Children's Health Insurance Program on Health Insurance Coverage
Classification-JEL: I1
Author-Name: Anthony T. LoSasso
Author-Person: plo241
Author-Name: Thomas C. Buchmueller
Author-Person: pbu179
Note: EH PE
Number: 9405
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9405
File-URL: http://www.nber.org/papers/w9405.pdf
File-Format: application/pdf
Publication-Status: published as Lo Sasso, Anthony T. & Buchmueller, Thomas C., 2004. "The effect of the state children's health insurance program on health insurance coverage," Journal of Health Economics, Elsevier, vol. 23(5), pages 1059-1082, September.
Abstract: This paper presents the first national estimates of the effects of the SCHIP expansions on insurance coverage. Using CPS data on insurance coverage during the years 1996 through 2000, we estimate two-stage least squares regressions of insurance coverage. We find that SCHIP had a small, but statistically significant positive effect on insurance coverage. Our regression results imply that between 4% and 10% of children meeting income eligibility standards for the new program gained public insurance. While low, these estimates indicate that states were more successful in enrolling children in SCHIP than they were with prior Medicaid expansions focused on children just above the poverty line. Crowd-out of private health insurance was estimated to be in line with estimates for the Medicaid expansions of the early 1990s, between 18% and 50%.
Handle: RePEc:nbr:nberwo:9405
Template-Type: ReDIF-Paper 1.0
Title: Welfare Reform and Non-Marital Fertility in the 1990s: Evidence from Birth Records
Classification-JEL: I3; J1
Author-Name: Theodore Joyce
Author-Person: pjo112
Author-Name: Robert Kaestner
Author-Person: pka42
Author-Name: Sanders Korenman
Note: CH EH PE
Number: 9406
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9406
File-URL: http://www.nber.org/papers/w9406.pdf
File-Format: application/pdf
Publication-Status: published as Ted Joyce & Robert Kaestner & Sanders Korenman, 2003. "Welfare Reform and Non-Marital Fertility in the 1990s: Evidence from Birth Records," Advances in Economic Analysis & Policy, Berkeley Electronic Press, vol. 3(1), pages 1108-1108.
Abstract: The 1996 Personal Responsibility Work Opportunity Reconciliation Act dramatically altered the economic incentive to bear children out-of-wedlock for economically disadvantaged women or couples most likely to avail themselves of welfare programs. We use data from vital statistics and a difference-in-differences research design to investigate whether state and federal welfare reform in the 1990s reduced rates of non-marital childbearing among women aged 19 to 39 at highest risk of welfare use, relative to women at lower risk. We find little consistent evidence for an effect of welfare reform on non-marital childbearing. This finding is similar to the literature that found little or mixed evidence for an effect of AFDC benefits. If anything, federal welfare reform has been associated with a small positive effect of two to three percent for white and black women ages 19 to 39.
Handle: RePEc:nbr:nberwo:9406
Template-Type: ReDIF-Paper 1.0
Title: Social Security Programs and Retirement Around the World: Micro Estimation
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: David A. Wise
Author-Person: pwi45
Note: AG LS PE
Number: 9407
Creation-Date: 2002-12
Order-URL: http://www.nber.org/papers/w9407
File-URL: http://www.nber.org/papers/w9407.pdf
File-Format: application/pdf
Publication-Status: published as Introduction and Summary, Jonathan Gruber, David A. Wise. in Social Security Programs and Retirement around the World: Micro-Estimation, Gruber and Wise. 2004
Abstract: This is the introduction to and summary of the second stage of a international research project to study the relationship between social security provisions and retirement. The project relies on the analyses of a large group of economists in 12 countries who conduct the analysis for each of their countries. In the first stage we documented the enormous disincentives for continued work at older ages in many countries. The introduction to the first volume from the project concluded with a striking graph showing a strong relationship across countries between social security program incentives to retire and the proportion of older persons out of the labor force. The results in this volume show the large magnitude of these effects. Across 12 countries with very different social security programs and labor market institutions, the results consistently show that program incentives accord strongly with retirement decisions. The magnitude is illustrated by the simulations reported in each country paper. Considering the average across all countries, a reform that delays benefit eligibility by three years would likely reduce the proportion of men 56 to 65 out of the labor force between 23 and 36 percent, perhaps closer to 36 percent in the long run. On the other hand, an illustrative common reform'-- with early retirement at age 60, normal retirement age 65, and actuarial reduction in benefits between 65 and 60--has very disparate effects across the countries, depending on the provisions of the current program in each country. There is a strong correspondence between the simulation results and a priori expectations. The results leave little doubt that social security incentives have a strong effect on retirement decisions. And the estimates show that the effect is similar in countries with very different cultural histories, labor market institutions, and other social characteristics. While countries may differ in many respects, the employees in all countries react similarly to social security retirement incentives. The simulated effects of illustrative reforms reported in the country papers make clear that changes in the provisions of social security programs would have very large effects on the labor force participation of older employees.
Handle: RePEc:nbr:nberwo:9407