*This is a revision of the June 2003 version.
Handle: RePEc:nbr:nberwo:9778
Template-Type: ReDIF-Paper 1.0
Title: Phasing Into Retirement
Classification-JEL: J1; J2
Author-Name: Steven G. Allen
Author-Person: pal6
Author-Name: Robert L. Clark
Author-Name: Linda S. Ghent
Note: AG LS
Number: 9779
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9779
File-URL: http://www.nber.org/papers/w9779.pdf
File-Format: application/pdf
Publication-Status: published as Allen, Steven G., Robert L. Clark and Linda S. Ghent. "Phasing Into Retirement," Industrial and Labor Relations Review, 2004, v58(1,Oct), 112-127.
Abstract: Employers have been launching phased retirement programs to help workers navigate the transition from work to retirement more effectively. This paper examines the experience of the phased retirement system for tenured faculty in the University of North Carolina system. After phased retirement was introduced, there was a sizable increase in the overall separation rate in the system. A multinomial logit model of the retirement decision as a function of pension incentives, employee performance, demographics, and campus characteristics is developed. The key empirical result is that the odds of entering phased retirement are strongly and inversely related to employee performance, as measured by recent pay increases.
Handle: RePEc:nbr:nberwo:9779
Template-Type: ReDIF-Paper 1.0
Title: Measuring Success of Advanced Technology Program Participation Using Archival Data
Classification-JEL: O31; O38
Author-Name: Lynne G. Zucker
Author-Person: pzu2
Author-Name: Michael R. Darby
Note: PR
Number: 9780
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9780
File-URL: http://www.nber.org/papers/w9780.pdf
File-Format: application/pdf
Abstract: This paper examines the value of collecting archival data to evaluate the Advanced Technology Program's (ATP) impact on participants' short- and long-term business success. We use two types of indicators of business success: patenting activity which can be tracked for all participants, and financial market data which is extensive for public firms but limited for start-up and other private firms to receipt of venture capital, membership in joint ventures and strategic alliances, and going public in issuing stock. We compare effects of program design differences, primarily joint venture versus single participant projects, on changes in the rate of patenting before and after participation in ATP. The discussion of patent archives serves to document data for later analyses; discussion of other data sources is intended both to guide other researchers and to inform administrative decisions about collecting similar archival data as part of routine assessment activity. We find that patenting rates generally increase after ATP participation under a number of different program and participant variations. Joint venture participants consistently show increases in patenting after beginning ATP participation, while results vary with definitions for single participants. We also demonstrate that it is possible to identify the timing and amounts of receipt of venture capital by private firms participating in ATP.
Handle: RePEc:nbr:nberwo:9780
Template-Type: ReDIF-Paper 1.0
Title: Welfare Reform, Labor Supply, and Health Insurance in the Immigrant Population
Classification-JEL: I18; I38
Author-Name: George J. Borjas
Author-Person: pbo44
Note: EH LS
Number: 9781
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9781
File-URL: http://www.nber.org/papers/w9781.pdf
File-Format: application/pdf
Publication-Status: published as Borjas, George J., 2003. "Welfare reform, labor supply, and health insurance in the immigrant population," Journal of Health Economics, Elsevier, vol. 22(6), pages 933-958, November.
Abstract: Although the 1996 welfare reform legislation 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 the welfare cutbacks and health insurance coverage in the immigrant population. The data reveal that the cutbacks in the Medicaid program did not reduce health insurance coverage rates among targeted immigrants. The immigrants responded by increasing their labor supply, thereby raising the probability of being covered by employer-sponsored health insurance.
Handle: RePEc:nbr:nberwo:9781
Template-Type: ReDIF-Paper 1.0
Title: The Married Widow: Marriage Penalties Matter!
Classification-JEL: H2; H3
Author-Name: Michael Baker
Author-Person: pba400
Author-Name: Emily Hanna
Author-Name: Jasmin Kantarevic
Author-Person: pka392
Note: AG LS PR
Number: 9782
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9782
File-URL: http://www.nber.org/papers/w9782.pdf
File-Format: application/pdf
Publication-Status: published as Michael Baker & Emily Hanna & Jasmin Kantarevic, 2004. "The Married Widow: Marriage Penalties Matter!," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 634-664, 06.
Abstract: Marriage penalties are a controversial feature of many government policies. Empirical evidence of their behavioral effects is quite mixed. This is surprising because economic theory predicts that they should have an impact on the headship decision. We investigate the removal of marriage penalties from the surviving spouse pensions of the Canadian public pension system in the 1980s. These reforms provide a simple and transparent source of identification. Our results indicate that marriage penalties can have large and persistent effects on marriage decisions. We also present evidence suggesting that it is individuals with characteristics correlated with greater wealth who respond to the penalties.
Handle: RePEc:nbr:nberwo:9782
Template-Type: ReDIF-Paper 1.0
Title: House Prices and Consumer Welfare
Classification-JEL: E31; D6
Author-Name: Patrick Bajari
Author-Name: C. Lanier Benkard
Author-Name: John Krainer
Author-Person: pkr64
Note: EFG IO
Number: 9783
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9783
File-URL: http://www.nber.org/papers/w9783.pdf
File-Format: application/pdf
Publication-Status: published as Bajari, Patrick, C. Lanier Benkard and John Krainer. "House Prices And Consumer Welfare," Journal of Urban Economics, 2005, v58(3,Nov), 474-487.
Abstract: We develop a new approach to measuring changes in consumer welfare due to changes in the price of owner-occupied housing. In our approach, an agent's welfare adjustment is defined as the transfer required to keep expected discounted utility constant given a change in current home prices. We demonstrate that, up to a first-order approximation, there is no aggregate change in welfare due to price increases in the existing housing stock. This follows from a simple market clearing condition where capital gains experienced by sellers are exactly offset by welfare losses to buyers. Welfare losses can occur, however, from price increases in new construction and renovations. We show that this result holds (approximately) even in a model that accounts for changes in consumption and investment plans prompted by current price changes. We estimate the welfare cost of house price appreciation to be an average of $127 per household per year over the 1984-1998 period.
Handle: RePEc:nbr:nberwo:9783
Template-Type: ReDIF-Paper 1.0
Title: The Trouble with Stock Options
Classification-JEL: J0; J3
Author-Name: Brian J. Hall
Author-Name: Kevin J. Murphy
Author-Person: pmu108
Note: CF LS PE
Number: 9784
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9784
File-URL: http://www.nber.org/papers/w9784.pdf
File-Format: application/pdf
Publication-Status: published as Hall, Brian J. and Kevin J. Murphy. "The Trouble With Stock Options," Journal of Economic Perspectives, 2003, v17(3,Summer), 49-70.
Abstract: The trouble with options is that too many options are granted to too many people. Most options are granted below the top-executive level, and options are often an inefficient way to attract, retain and motivate executives and (especially) lower-level employees. Why, then, are options so prevalent? We discuss several explanations including changes in corporate governance, reporting requirements, taxes, the bull market and managerial rent-seeking. We also offer an alternative hypothesis that we believe explains the over-use of options and several apparent puzzles: boards and managers falsely perceive stock options to be inexpensive because of accounting and cash-flow considerations.
Handle: RePEc:nbr:nberwo:9784
Template-Type: ReDIF-Paper 1.0
Title: The Optimal Taxation of Unskilled Labor with Job Search and Social Assistance
Classification-JEL: H2; J2
Author-Name: Jan Boone
Author-Name: Lans Bovenberg
Author-Person: pbo45
Note: LS PE
Number: 9785
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9785
File-URL: http://www.nber.org/papers/w9785.pdf
File-Format: application/pdf
Publication-Status: published as Boone, Jan and Lans Bovenberg. "The Optimal Taxation Of Unskilled Labor With Job Search And Social Assistance," Journal of Public Economics, 2004, v88(11,Sep), 2227-2258.
Abstract: In order to explore the optimal taxation of low-skilled labor, we extend the standard model of optimal non-linear income taxation in the presence of quasi-linear preferences in leisure by allowing for involuntary unemployment, job search and an exogenous welfare benefit. In trading off low-skilled employment against work effort of higher skilled workers, the government balances distortions on the search margin with those on work effort. Higher welfare benefits typically reduce taxes paid by low-skilled workers and raise marginal tax rates throughout the skill distribution.
Handle: RePEc:nbr:nberwo:9785
Template-Type: ReDIF-Paper 1.0
Title: Government Finance in the Wake of Currency Crises
Classification-JEL: F31
Author-Name: Craig Burnside
Author-Person: pbu20
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Sergio Rebelo
Note: EFG IFM ME PE
Number: 9786
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9786
File-URL: http://www.nber.org/papers/w9786.pdf
File-Format: application/pdf
Publication-Status: published as Burnside, Craig, Martin Eichenbaum and Sergio Rebelo. "Government Finance In The Wake Of Currency Crises," Journal of Monetary Economics, 2006, v53(3,Apr), 401-440.
Abstract: This paper addresses two questions: (i) how do governments actually pay for the fiscal costs associated with currency crises; and (ii) what are the implications of different financing methods for post-crisis rates of inflation and depreciation? We study these questions using a general equilibrium model in which a currency crisis is triggered by prospective government deficits. We then use our model in conjunction with fiscal data to interpret government financing in the wake of three recent currency crises: Korea (1997), Mexico (1994) and Turkey (2001).
Handle: RePEc:nbr:nberwo:9786
Template-Type: ReDIF-Paper 1.0
Title: Short-Run Pain, Long-Run Gain: The Effects of Financial Liberalization
Classification-JEL: F30; F32
Author-Name: Graciela Kaminsky
Author-Person: pka84
Author-Name: Sergio Schmukler
Author-Person: psc64
Note: AP IFM
Number: 9787
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9787
File-URL: http://www.nber.org/papers/w9787.pdf
File-Format: application/pdf
Publication-Status: published as Graciela Laura Kaminsky & Sergio L. Schmukler, 2008. "Short-Run Pain, Long-Run Gain: Financial Liberalization and Stock Market Cycles," Review of Finance, Oxford University Press for European Finance Association, vol. 12(2), pages 253-292.
Abstract: We examine the short- and long-run effects of financial liberalization on capital markets. To do so, we construct a new comprehensive chronology of financial liberalization in 28 mature and emerging economies since 1973. We also construct an algorithm to identify booms and busts in stock market prices. Our results indicate that financial liberalization is followed by more pronounced boom-bust cycles in the short run. However, financial liberalization leads to more stable markets in the long run. Finally, we analyze the sequencing of liberalization and institutional reforms to understand the contrasting short- and long-run effects of liberalization.
Handle: RePEc:nbr:nberwo:9787
Template-Type: ReDIF-Paper 1.0
Title: From Cradle to Grave? The Lasting Impact of Childhood Health and Circumstance
Classification-JEL: I1; D1
Author-Name: Anne Case
Author-Person: pca108
Author-Name: Angela Fertig
Author-Name: Christina Paxson
Author-Person: ppa335
Note: CH EH LS
Number: 9788
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9788
File-URL: http://www.nber.org/papers/w9788.pdf
File-Format: application/pdf
Publication-Status: published as Case, Anne, Angela Fertig and Christina Paxson. "The Lasting Impact Of Childhood Health And Circumstances," Journal of Health Economics, 2005, v24(2,Mar), 365-389.
Abstract: We quantify the lasting effects of childhood health and economic circumstances on adult health and earnings, using data from a birth cohort that has been followed from birth into middle age. We find, controlling for parents' incomes, educations and social status, that children who experience poor health have significantly lower educational attainment, and significantly poorer health and lower earnings on average as adults. Childhood factors appear to operate largely through their effects on educational attainment and initial adult health. Taken together with earlier findings that poorer children enter adulthood in worse health and with less education than wealthier children, these results indicate that a key determinant of health in adulthood is economic status in childhood rather than economic status in adulthood. Overall, our findings suggest more attention be paid to health as a potential mechanism through which intergenerational transmission of poverty takes place: cohort members born into poorer families experienced poorer childhood health, lower investments in human capital and poorer health in early adulthood, all of which are associated with lower earnings in middle age -- the years in which they themselves become parents.
Handle: RePEc:nbr:nberwo:9788
Template-Type: ReDIF-Paper 1.0
Title: Product Choice and Product Switching
Classification-JEL: I1; D1
Author-Name: Andrew B. Bernard
Author-Name: Peter K. Schott
Author-Person: psc98
Author-Name: Stephen Redding
Author-Person: pre64
Note: IO
Number: 9789
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9789
File-URL: http://www.nber.org/papers/w9789.pdf
File-Format: application/pdf
Abstract: This paper develops a model of endogenous product selection by firms. The theory is motivated by new evidence we present on the importance of product switching by U.S. manufacturers. Two-thirds of continuing firms change their product mix every five years, and product switches involve more than 40% of firm output and almost half of existing products. The theoretical model incorporates heterogeneous firms, heterogeneous products, and ongoing entry and exit. In equilibrium, firm productivity is correlated with product fixed costs, with the most productive firms choosing to make the products with the highest fixed costs. Changes in market structure result in systematic patterns of firm entry/exit and product switching.
Handle: RePEc:nbr:nberwo:9789
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Physician Intervention and Tobacco Control Policies on Average Daily Cigarette Consumption Among Adult Smokers
Classification-JEL: I1
Author-Name: John A. Tauras
Author-Person: pta136
Author-Name: Lan Liang
Note: EH
Number: 9790
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9790
File-URL: http://www.nber.org/papers/w9790.pdf
File-Format: application/pdf
Abstract: Physicians' advice to stop smoking has been found to increase smoking cessation rates in controlled clinical trials. However, these finding may not be applicable under real world conditions. This paper investigates the impact of physicians' advice and tobacco control policies on conditional cigarette demand among adults employing non-experimental data. Because the data is non-experimental, the variable reflect physician advice to stop smoking and cigarette consumption are likely to be endogenous. We implement a three stage least squares regression technique designed to take account the joint determination of physician advice and cigarette smoking. The results from these models imply that smokers that received advice from their physician to quit smoking will decrease their average daily consumption by between 5-6 cigarettes per day as compared to smoker who do not receive advice. This result implies that physicians' advice is effective in curtailing smoking in real world settings. Other policies that were found to decrease average smoking by smokers include: the real price of cigarettes and clean indoor air laws.
Handle: RePEc:nbr:nberwo:9790
Template-Type: ReDIF-Paper 1.0
Title: How to Tell if a Money Manager Knows More?
Classification-JEL: G0
Author-Name: Sergey Iskoz
Author-Name: Jiang Wang
Note: AP
Number: 9791
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9791
File-URL: http://www.nber.org/papers/w9791.pdf
File-Format: application/pdf
Abstract: In this paper, we develop a methodology to identify money managers who have private information about future asset returns. The methodology does not rely on a specific risk model, such as the Sharpe ratio, CAPM, or APT. Instead, it relies on the observation that returns generated by managers with private information cannot be replicated by those without it. Using managers' trading records, we develop distribution-free tests that can identify such managers. We show that our approach is general with regard to the nature of private information the managers may have, and with regard to the trading strategies they may follow.
Handle: RePEc:nbr:nberwo:9791
Template-Type: ReDIF-Paper 1.0
Title: Committee Structure and the Success of Connected Lending in Nineteenth Century New England Banks
Classification-JEL: D71; D72
Author-Name: Christopher Meissner
Author-Person: pme45
Note: DAE ME
Number: 9792
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9792
File-URL: http://www.nber.org/papers/w9792.pdf
File-Format: application/pdf
Publication-Status: published as Meissner, Christopher M. "Voting Rules And The Success Of Connected Lending In 19th Century New England Banks," Explorations in Economic History, 2005, v42(4,Oct), 509-528.
Abstract: Early nineteenth century New England banking exhibited high levels of lending to directors and their associates (i.e., connected lending). Today many think this arrangement can lead to inefficiency and financial fragility. This paper explores the decision making processes inside these banks and argues that connected lending was viable when many people were involved in loan decisions. The committees used to vote on the approval of loans are the focus. Banks that required more votes for a given committee size prevented the approval of loans with private gains and social costs. The historical data are consistent with the idea that higher levels of consensus in the loan committees raised the return on assets.
Handle: RePEc:nbr:nberwo:9792
Template-Type: ReDIF-Paper 1.0
Title: ". . . and six hundred thousand men were dead."
Classification-JEL: D74
Author-Name: Herschel I. Grossman
Note: EFG
Number: 9793
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9793
File-URL: http://www.nber.org/papers/w9793.pdf
File-Format: application/pdf
Abstract: The dispute that resulted in the secession of eleven Southern states from the Union and the ensuing Civil War proximately concerned the geographical expansion of slavery, but ultimately bore on the existence of the institution of slavery itself. This paper asks why in 1861 after seventy years of artful compromises over slavery civil conflict became unavoidable. The paper seeks an answer that goes beyond a description of the breakdown of compromises based on existing constitutional arrangements and that explains why attempts to negotiate a new constitutional compromise failed. Combining theoretical and historical analysis the paper concludes that in the years leading up to 1861 the outcome of the dispute over slavery had become too important to both Northern and Southern interests, relative to the expected costs of civil conflict, to be settled peacefully.
Handle: RePEc:nbr:nberwo:9793
Template-Type: ReDIF-Paper 1.0
Title: Distributional Disputes and Civil Conflict
Classification-JEL: D74
Author-Name: Herschel I. Grossman
Note: EFG
Number: 9794
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9794
File-URL: http://www.nber.org/papers/w9794.pdf
File-Format: application/pdf
Publication-Status: published as Herschel Grossman, 2003. "Distributional Disputes and Civil Conflict," Latin American Journal of Economics-formerly Cuadernos de EconomÃa, Instituto de EconomÃa. Pontificia Universidad Católica de Chile., vol. 40(121), pages 608-616.
Abstract: Some polities are able to use constitutionally prescribed political processes to settle distributional disputes, whereas in other polities distributional disputes result in civil conflict. Theoretical analysis reveals that the following properties help to make it possible to design a self-enforcing constitution that can settle recurring distributional disputes between social classes without civil conflict: *Neither social class has a big advantage in civil conflict. *The expected incremental costs of civil conflict are large relative to aggregate appropriable economic rents. *Both social classes are greatly concerned about the future consequences of their current actions. Theoretical analysis also reveals that a self-enforcing constitution can require limitations on the prerogatives of winners of constitutional contests such that on average the distribution of appropriable economic rents under the constitution is not too favorable to one social class or the other and such that the outcome of a constitutional contest does not matter too much for the current distribution of economic rents.
Handle: RePEc:nbr:nberwo:9794
Template-Type: ReDIF-Paper 1.0
Title: The Dominance of Retail Stores
Classification-JEL: D40; D44
Author-Name: Alexandre Ziegler
Author-Name: Edward P. Lazear
Author-Person: pla64
Note: IO
Number: 9795
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9795
File-URL: http://www.nber.org/papers/w9795.pdf
File-Format: application/pdf
Abstract: Most items are sold to consumers by retail stores. Stores have two features that distinguish them from auctions. First, the price is posted and a consumer who values the good at more than the posted price is sold the good. Second, the sale takes place as soon as the consumer decides to buy. In contrast, auctions have prices that are determined ex post and the potential consumer must wait until the auction is held to buy the good. Consequently, auctions result in false trading', where buyers sometimes pass up other valuable opportunities while waiting for the auction to occur or instead make undesired duplicate purchases. Retail stores dominate auctions when the good is perishable and/or becomes obsolete quickly, when the market is thin, and when close substitutes for the good are plentiful. These predictions are consistent with a number of observed phenomena.
Handle: RePEc:nbr:nberwo:9795
Template-Type: ReDIF-Paper 1.0
Title: Disagreement about Inflation Expectations
Classification-JEL: E3; D8
Author-Name: N. Gregory Mankiw
Author-Name: Ricardo Reis
Author-Person: pre73
Author-Name: Justin Wolfers
Author-Person: pwo9
Note: EFG ME
Number: 9796
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9796
File-URL: http://www.nber.org/papers/w9796.pdf
File-Format: application/pdf
Publication-Status: published as Disagreement about Inflation Expectations, N. Gregory Mankiw, Ricardo Reis, Justin Wolfers. in NBER Macroeconomics Annual 2003, Volume 18, Gertler and Rogoff. 2004
Abstract: Analyzing 50 years of inflation expectations data from several sources, we document substantial disagreement among both consumers and professional economists about expected future inflation. Moreover, this disagreement shows substantial variation through time, moving with inflation, the absolute value of the change in inflation, and relative price variability. We argue that a satisfactory model of economic dynamics must speak to these important business cycle moments. Noting that most macroeconomic models do not endogenously generate disagreement, we show that a simple sticky-information' model broadly matches many of these facts. Moreover, the sticky-information model is consistent with other observed departures of inflation expectations from full rationality, including autocorrelated forecast errors and insufficient sensitivity to recent macroeconomic news.
Handle: RePEc:nbr:nberwo:9796
Template-Type: ReDIF-Paper 1.0
Title: Outcome Versus Service Based Payment in Health Care: Lessons from African Traditional Healers
Classification-JEL: I1; D8
Author-Name: Kenneth Leonard
Author-Person: ple2
Author-Name: Joshua Graff Zivin
Author-Person: pgr314
Note: EH
Number: 9797
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9797
File-URL: http://www.nber.org/papers/w9797.pdf
File-Format: application/pdf
Publication-Status: published as Kenneth L. Leonard & Joshua Graff Zivin, 2005. "Outcome versus service based payments in health care: lessons from African traditional healers," Health Economics, John Wiley & Sons, Ltd., vol. 14(6), pages 575-593.
Abstract: We compare the more common physician compensation method of fee-for-service to the less common payment-for-outcomes method. This paper combines an investigation of the theoretical properties of both of these payment regimes with a unique data set from rural Cameroon in which patients can choose between outcome and service based payments. We show that consideration of the role of patient effort in the production of health leads to important differences in the performance of these contracts. Theory and empirical evidence show that when illnesses require (or are responsive to) large amounts of both patient and practitioner effort, outcome based payment schemes are superior to effort based schemes. The traditional healer -- a practitioner who offers health services on an outcome-contingent basis -- is advanced as an important example of how patient effort can be better understood and tapped in health care.
Handle: RePEc:nbr:nberwo:9797
Template-Type: ReDIF-Paper 1.0
Title: "Will Social Security Be There For You?": How Americans Perceive Their Benefits
Classification-JEL: H55; D84
Author-Name: Jeff Dominitz
Author-Name: Charles F. Manski
Author-Person: pma111
Author-Name: Jordan Heinz
Note: PE
Number: 9798
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9798
File-URL: http://www.nber.org/papers/w9798.pdf
File-Format: application/pdf
Abstract: Americans 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. We find clear and striking evidence of substantial uncertainty and heterogeneity of beliefs about the long-term existence of the Social Security system and about the level of benefits provided should the system survive.
Handle: RePEc:nbr:nberwo:9798
Template-Type: ReDIF-Paper 1.0
Title: The Practice and Proscription of Affirmative Action in Higher Education:An Equilibrium Analysis
Classification-JEL: I20; I28
Author-Name: Dennis Epple
Author-Person: pep21
Author-Name: Richard Romano
Author-Person: pro223
Author-Name: Holger Sieg
Note: CH ED
Number: 9799
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9799
File-URL: http://www.nber.org/papers/w9799.pdf
File-Format: application/pdf
Abstract: The paper examines the practice of affirmative action and consequences of its proscription on the admission and tuition policies of institutions of higher education in a general equilibrium. Colleges are differentiated ex ante by endowments and compete for students that differ by race, household income, and academic qualification. Colleges maximize a quality index that is increasing in mean academic score of students, educational resources per student, an income-diversity measure, and a racial-diversity measure. The pool of potential nonwhite students has distribution of income and academic score with lower means than that of whites. In benchmark equilibrium, colleges may condition admission and tuition on race. In a computational model calibrated using estimates from related research, equilibrium has colleges offer tuition discounts and admission preference to nonwhites to promote racial diversity. Equilibrium entails a quality hierarchy of colleges, so the model predicts practices and characteristics of colleges along the hierarchy. Proscription of affirmative action requires that admission and tuition policies are race blind. Colleges then use the informational content about race in income and academic score in reformulating their optimal policies. Admission and tuition policies are substantially modified in equilibrium of the computational model, and both races are significantly affected. Representation of nonwhites falls significantly in all colleges. The drop is particularly pronounced in the top third of the quality hierarchy of colleges.
Handle: RePEc:nbr:nberwo:9799
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Impact of Minimum Wages: Evidence from Latin America
Classification-JEL: R1; R3
Author-Name: William F. Maloney
Author-Person: pma705
Author-Name: Jairo Nunez Mendez
Note: LS
Number: 9800
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9800
File-URL: http://www.nber.org/papers/w9800.pdf
File-Format: application/pdf
Publication-Status: published as Measuring the Impact of Minimum Wages. Evidence from Latin America, William Maloney, Jairo Mendez. in Law and Employment: Lessons from Latin America and the Caribbean, Heckman and Pagés. 2004
Abstract: This paper first provides an overview of the levels of minimum wages in Latin America and their true impact on the distribution of wages using both numerical measures and kernel density plots. It identifies numeraire' effects higher in the wage distribution and lighthouse' or reference effects in the unregulated or informal' sector. The final section then employs panel employment data from Colombia, a country where minimum wages seem high and very binding, to quantify the effects of an increase on wages and employment. The evidence suggests that in the Latin American context, the minimum wage has impacts beyond those usually contemplated in the advanced country literature.
Handle: RePEc:nbr:nberwo:9800
Template-Type: ReDIF-Paper 1.0
Title: Chasing the Smokestack: Strategic Policymaking With Multiple Instruments
Classification-JEL: R1; R3
Author-Name: Per G. Fredriksson
Author-Name: John A. List
Author-Person: pli176
Author-Name: Daniel L. Millimet
Author-Person: pmi3
Note: PE EEE
Number: 9801
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9801
File-URL: http://www.nber.org/papers/w9801.pdf
File-Format: application/pdf
Publication-Status: published as Fredriksson, Per G., John A. List and Daniel L. Millimet. "Chasing The Smokestack: Strategic Policymaking With Multiple Instruments," Regional Science and Urban Economics, 2004, v34(4,Jul, 387-410.
Abstract: Empirical evidence suggesting that a considerable amount of horizontal strategic interaction exists amongst governments is important in light of recent devolutionary trends of many important public programs. The empirical approach in these studies typically relies on estimating reaction functions in a uni-dimensional policy framework, where a nonzero slope estimate is interpreted as evidence in support of strategic interactions. While this framework is a useful representation within certain contexts, it is potentially too restrictive; for example, in models of resource competition, localities may use multiple instruments in their recruiting pursuits, leading to potential strategic interactions across policy instruments. In this study, we first develop a simple theoretic construct that includes resource competition in a world of three-dimensional policy choice. The model suggests that while a zero-sloped reaction function may exist for any particular policy, this does not necessarily imply the absence of strategic interactions. We examine the implications of the model empirically using US state-level panel data over the period 1977-1994. The results suggest that important cross-policy strategic interactions exist, lending support in favor of the multi-dimensional framework, and indicate that uni-dimensional frameworks may present lower bound estimates of the degree of strategic interaction.
Handle: RePEc:nbr:nberwo:9801
Template-Type: ReDIF-Paper 1.0
Title: Incentives in Markets, Firms and Governments
Classification-JEL: D23; L22
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Michael Kremer
Author-Person: pkr20
Author-Name: Atif Mian
Author-Person: pmi415
Note: EFG LS
Number: 9802
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9802
File-URL: http://www.nber.org/papers/w9802.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron, Michael Kremer, and Atif Mian. "Incentives in Markets, Firms and Governments." Journal of Law, Economics and Organizations(December 2007).
Abstract: Most government expenditure is on goods that yield primarily private benefits, such as education, pensions, and healthcare. We argue that markets are most advantageous in areas where high-powered incentives are desirable, but in areas where high-powered incentives stimulate unproductive signalling effort, firms, or even government, may have a comparative advantage. Firms may be able to weaken incentives and improve efficiency by obscuring information about individual workers' contribution to output, and thus reducing their willingness to signal through a moral-hazard-in-teams reasoing. However, firms themselves may be unable to commit to not providing greater compensation to employees who distort their effots to improve observed performance. Government organizations, on the other hand, often have to flatter wage schedules, thereby naturally weakening the power of incentives. We suggest that there are also endogenous reasons for why governments, even when they are run by self-interested politicians, may be able to commit to lower powered incentives than firms, because government operation makes yardstick comparisons, which increase the power of incentives, more difficult.
Handle: RePEc:nbr:nberwo:9802
Template-Type: ReDIF-Paper 1.0
Title: Did Expanding Medicaid Affect Welfare Participation?
Classification-JEL: I38; I18
Author-Name: John C. Ham
Author-Person: pha1028
Author-Name: Lara D. Shore-Sheppard
Author-Person: psh71
Note: EH CH
Number: 9803
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9803
File-URL: http://www.nber.org/papers/w9803.pdf
File-Format: application/pdf
Publication-Status: published as John C. Ham & Lara D. Shore-Sheppard, 2005. "Did expanding Medicaid affect welfare participation?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(3), pages 452-470, April.
Abstract: Using data from the 1988-1996 Current Population Surveys (CPS), we re-examine the evidence presented in Yelowitz (1995) showing that expansions in Medicaid eligibility for children were associated with increased labor force participation and reduced participation in Aid to Families with Dependent Children (AFDC) among single mothers. We find that Yelowitz's results were the result of two factors. First, he imposed a strong restriction on the parameter estimates that is not predicted by theory and is rejected in the CPS data. Second, he used only one of the two income tests that families must pass to be eligible for AFDC, resulting in higher imputed AFDC breakeven income levels for larger families. Once these problems are addressed, the Medicaid income limits have no significant effect on AFDC participation. The AFDC income limits, however, are significantly related to welfare and labor force participation in both his original sample and the entire 1988-1996 sample.
Handle: RePEc:nbr:nberwo:9803
Template-Type: ReDIF-Paper 1.0
Title: Addressing the Natural Resource Curse: An Illustration from Nigeria
Classification-JEL: O1; O4
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Author-Name: Arvind Subramanian
Author-Person: psu108
Note: EFG
Number: 9804
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9804
File-URL: http://www.nber.org/papers/w9804.pdf
File-Format: application/pdf
Publication-Status: published as Xavier Sala-i-Martin & Arvind Subramanian, 2013. "Addressing the Natural Resource Curse: An Illustration from Nigeria," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 22(4), pages 570-615, August.
Abstract: Some natural resources -- oil and minerals in particular -- exert a negative and nonlinear impact on growth via their deleterious impact on institutional quality. We show this result to be very robust. The Nigerian experience provides telling confirmation of this aspect of natural resources. Waste and corruption from oil rather than Dutch disease has been responsible for its poor long run economic performance. We propose a solution for addressing this resource curse which involves directly distributing the oil revenues to the public. Even with all the difficulties of corruption and inefficiency that will no doubt plague its actual implementation, our proposal will, at the least, be vastly superior to the status quo. At best, however, it could fundamentally improve the quality of public institutions and, as a result, transform economics and politics in Nigeria.
Handle: RePEc:nbr:nberwo:9804
Template-Type: ReDIF-Paper 1.0
Title: Social Learning and Coordination in High-Stakes Games: Evidence from Friend or Foe
Classification-JEL: H41; K42
Author-Name: Felix Oberholzer-Gee
Author-Name: Joel Waldfogel
Author-Person: pwa46
Author-Name: Matthew White
Note: IO LE
Number: 9805
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9805
File-URL: http://www.nber.org/papers/w9805.pdf
File-Format: application/pdf
Abstract: We analyze the behavior of game-show contestants who play a one-shot game called Friend or Foe. While it is a weakly dominant strategy not to cooperate, almost half the contestants on the show choose to play friend.' Remarkably, the behavior of contestants remains unchanged even when stakes are very high, ranging from $200 to more than $10,000. We conclude that the frequent cooperation observed in one-shot social dilemma games is not an artefact of the low stakes typically used in laboratory experiments. Strategic decisions on Friend or Foe change markedly if players can observe previous episodes. We show that these contestants play friend' if they have reason to expect their opponent to play friend,' and they play foe' otherwise. The observed decisions are consistent with recent fairness theories that characterize individuals as conditional cooperators. Using information about past play, some groups (e.g., pairs of women) manage to stabilize cooperation in this high-stakes environment. For most others, improved coordination implies a drastic decline in monetary winnings. Prior to playing the social dilemma game, contestants produce' their endowment by answering trivia questions. We find some evidence for reciprocal behavior: Players who produce fewer correct answers for their team are more likely to cooperate in the social dilemma game.
Handle: RePEc:nbr:nberwo:9805
Template-Type: ReDIF-Paper 1.0
Title: Transparency, Risk Management and International Financial Fragility
Classification-JEL: F3; G1
Author-Name: Mario Draghi
Author-Name: Francesco Giavazzi
Author-Person: pgi18
Author-Name: Robert C. Merton
Author-Person: pme203
Note: IFM
Number: 9806
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9806
File-URL: http://www.nber.org/papers/w9806.pdf
File-Format: application/pdf
Publication-Status: published as Draghi, Mario, Francesco Giavazzi, and Robert C. Merton. Transparency, risk management and international financial fragility Geneva Reports on the World Economy, vol. 4. Geneva: International Center for Monetary and Banking Studies and London: Centre for Economic Policy Research, 2004.
Abstract: Discussions of financial risk often fail to distinguish between risks that are consciously borne and those that are not. To understand the breeding conditions for financial crises the prime focus of concern should not be simply on large risk-taking per se, but on the unintended, or unanticipated accumulation of large risks by individuals, institutions or governments, often through the lack of knowledge or understanding of the risks by stakeholders and overseers of those entities. This paper analyses specific situations in which significant unanticipated and unintended financial risks are accumulated. It focuses, in particular, on the implicit guarantees that governments extend to banks and other financial institutions, which may result in the accumulation, often unconscious from the viewpoint of the government, of unanticipated risks in the balance sheet of the public sector. The paper also discusses how risk exposures can be measured, hedged and transferred through the use of derivatives, swap contracts, and other contractual agreements with specific reference to emerging markets.
Handle: RePEc:nbr:nberwo:9806
Template-Type: ReDIF-Paper 1.0
Title: Private Equity Performance: Returns, Persistence and Capital
Classification-JEL: G12; G24
Author-Name: Steven Kaplan
Author-Name: Antoinette Schoar
Author-Person: psc180
Note: CF
Number: 9807
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9807
File-URL: http://www.nber.org/papers/w9807.pdf
File-Format: application/pdf
Publication-Status: published as Kaplan, Steven and Antoinette Schoar. “Private Equity Performance: Returns, Persistence and Capital Flows." Journal of Finance 60 (August 2005).
Abstract: This paper investigates the performance of private equity partnerships using a data set of individual fund returns collected by Venture Economics. Over the sample period, average fund returns net of fees approximately equal the S\&P 500 although there is a large degree of heterogeneity. Returns persist strongly across funds raised by individual private equity partnerships. Better performing funds are more likely to raise follow-on funds and raise larger funds than funds that perform poorly. This relationship is concave so that top performing funds do not grow proportionally as much as the average fund. Finally, market entry in private equity is cyclical. Funds (and partnerships) started in boom times are less likely to raise follow-on funds, suggesting that these funds subsequently perform worse. Several of these results differ markedly from those for mutual funds.
Handle: RePEc:nbr:nberwo:9807
Template-Type: ReDIF-Paper 1.0
Title: The Mirage of Exchange Rate Regimes for Emerging Market Countries
Classification-JEL: F3; F4
Author-Name: Guillermo Calvo
Author-Person: pca694
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: IFM ME
Number: 9808
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9808
File-URL: http://www.nber.org/papers/w9808.pdf
File-Format: application/pdf
Publication-Status: published as Calvo, Guillermo A. and Frederic S. Mishkin. "The Mirage Of Exchange Rate Regimes For Emerging Market Countries," Journal of Economic Perspectives, 2003, v17(4,Fall), 99-118.
Abstract: This paper argues that much of the debate on choosing an exchange rate regime misses the boat. It begins by discussing the standard theory of choice between exchange rate regimes, and then explores the weaknesses in this theory, especially when it is applied to emerging market economies. It then discusses a range of institutional traits that might predispose a country to favor either fixed or floating rates, and then turns to the converse question of whether the choice of exchange rate regime may favor the development of certain desirable institutional traits. The conclusion from the analysis is that the choice of exchange rate regime is likely to be of second order importance to the development of good fiscal, financial, and monetary institutions in producing macroeconomic success in emerging market countries. This suggests that less attention should be focused on the general question whether a floating or a fixed exchange rate is preferable, and more on these deeper institutional arrangements. A focus on institutional reforms rather than on the exchange rate regime may encourage emerging market countries to be healthier and less prone to the crises that we have seen in recent years.
Handle: RePEc:nbr:nberwo:9808
Template-Type: ReDIF-Paper 1.0
Title: Choosing (and reneging on) exchange rate regimes
Classification-JEL: F3
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Alexander Wagner
Author-Person: pwa151
Note: EFG IFM ME
Number: 9809
Creation-Date: 2003-06
Order-URL: http://www.nber.org/papers/w9809
File-URL: http://www.nber.org/papers/w9809.pdf
File-Format: application/pdf
Publication-Status: published as Alberto Alesina & Alexander F. Wagner, 2006. "Choosing (and Reneging on) Exchange Rate Regimes," Journal of the European Economic Association, MIT Press, vol. 4(4), pages 770-799, 06.
Abstract: We use data on announced and actual exchange rate arrangements to ask which countries follow de facto regimes different from their de iure ones, that is, do not do what they say. Our results suggest that countries with poor institutional quality have difficulty in maintaining pegging and abandon it more often. In contrast, countries with relatively good institutions display fear of floating, i.e. they manage more than announced, perhaps to signal their differences from those countries incapable of maintaining promises of monetary stability.
Handle: RePEc:nbr:nberwo:9809
Template-Type: ReDIF-Paper 1.0
Title: Bankruptcy Policy Reform and Total Factor Productivity Dynamics in Korea
Classification-JEL: K0; L1
Author-Name: Youngjae Lim
Author-Name: Chin Hee Hahn
Note: CF PR
Number: 9810
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9810
File-URL: http://www.nber.org/papers/w9810.pdf
File-Format: application/pdf
Publication-Status: published as Ito, Takatoshi and Andrew K. Rose (eds.) Growth and productivity in East Asia NBER--East Asia Seminar on Economics, vol. 13. Chicago and London: University of Chicago Press, 2004.
Publication-Status: published as Bankruptcy Policy Reform and Total Factor Productivity Dynamics in Korea: Evidence from Microdata, Youngjae Lim, Chin Hee Hahn. in Growth and Productivity in East Asia, Ito and Rose. 2004
Abstract: Using the firm level panel data, obtained from the period between during , this study shows that the failing firms, accepted in the court-administered rehabilitation procedures after the post-crisis bankruptcy reform in Korea, had experienced less persistent problems in the pre-bankruptcy Total-Factor-Productivity (TFP) performances than those before the reform. The most crucial element of the post-crisis reform in the post-crisis court-administered bankruptcy system is the implementation of an economic efficiency criterion, whereas the pre-reform system benefited failing firms deemed as having high social value and prospects for rehabilitation. The new system removes the possibilities for interested parties to oppose the exit of the firms without economic values. Then, to get an idea of how the bankruptcy policy reform would affect the performance of aggregate TFP, we assess the role of the creative destruction process of entry and exit in total factor productivity growth utilizing plant level panel data in the Korean manufacturing sector during the 1990-98 period. For this purpose, we document the plant entry and exit rates, examine the dynamic relationship between plant turnovers and plant productivity, and quantify the contribution from entry and exit to productivity growth. We conclude that, for sustained total factor productivity growth, it is important to establish policy or institutional environment where efficient businesses succeed and inefficient businesses fail.
Handle: RePEc:nbr:nberwo:9810
Template-Type: ReDIF-Paper 1.0
Title: The Marginal Propensity to Spend on Adult Children
Classification-JEL: D10; D3
Author-Name: Joseph G. Altonji
Author-Person: pal266
Author-Name: Ernesto Villanueva
Author-Person: pvi42
Note: CH
Number: 9811
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9811
File-URL: http://www.nber.org/papers/w9811.pdf
File-Format: application/pdf
Publication-Status: published as Altonji Joseph G & Villanueva Ernesto, 2007. "The Marginal Propensity to Spend on Adult Children," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-52, February.
Abstract: We examine how much of an extra dollar of parental lifetime resources will ultimately be passed on to adult children in the form of inter vivos transfers and bequests. We infer bequests from the stock of wealth late in life. We use mortality rates and age specific estimates of the response of transfers and wealth to permanent income to compute the expected present discounted values of these responses to permanent income. Our estimates imply that parents pass on between 2 and 3 cents out of an extra dollar of expected lifetime resources in bequests and about 2 cents in transfers. The estimates increase with parental income and are smaller for nonwhites. They imply that about 15 percent of the effect of parental income on lifetime resources of adult children is through transfers and bequests and about 85 percent is through the intergenerational correlation in earnings, although these estimates are sensitive to assumptions about the intergenerational earnings correlation, taxes, and the number of children. We compare our estimates to the implications of alternative computable benchmark models of savings behavior in order to assess the likely importance of intended bequests for the wealth/income relationship.
Handle: RePEc:nbr:nberwo:9811
Template-Type: ReDIF-Paper 1.0
Title: Insurance and the Utilization of Medical Services
Classification-JEL: I1
Author-Name: Jonathan Meer
Author-Person: pme529
Author-Name: Harvey S. Rosen
Author-Person: pro55
Note: EH PE
Number: 9812
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9812
File-URL: http://www.nber.org/papers/w9812.pdf
File-Format: application/pdf
Publication-Status: published as Meer, Jonathan and Harvey S. Rosen. "Insurance and the Utilization of Medical Services." Social Science & Medicine 58, 9 (May 2004): 1623-1632.
Abstract: Most data sets indicate a positive correlation between having health insurance and utilizing health care services. Yet the direction of causality is not at all clear. If we ob-serve a positive correlation between the utilization of health care services and insurance status, we do not know if this is because people who anticipate poor health buy more in-surance (or take jobs with generous medical coverage), or because insurance lowers the cost of health care, increasing the quantity demanded. While a few attempts have been made to implement an instrumental variables (IV) strategy to deal with endogeneity, the instruments chosen have not been entirely convinc-ing. In this paper we revisit the IV estimation of the reduced form relationships between insurance and health care utilization taking advantage of what we argue is a good instru-ment - the individual's self-employment status. Our main finding is that a positive and statistically significant effect of insurance continues to obtain even after instrumenting. Indeed, instrumental variables estimates of the impact of insurance on utilization of a variety of health care services are larger than their non-instrumented counterparts. The validity of this exercise depends on the extent to which self-employment status is a suitable instrument. To argue this case, we analyze panel data on transitions from wage-earning into self-employment and show that individuals who select into self-employment do not differ systematically from those who remain wage-earners with re-spect to either the utilization of health care or health status. While this finding does not prove that self-employment status is an appropriate instrument, it is encouraging that there appear to be no underlying differences that might lead to self-employment per se affecting health services utilization.
Handle: RePEc:nbr:nberwo:9812
Template-Type: ReDIF-Paper 1.0
Title: Executive Compensation as an Agency Problem
Classification-JEL: D23; G32
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Jesse M. Fried
Note: CF LS
Number: 9813
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9813
File-URL: http://www.nber.org/papers/w9813.pdf
File-Format: application/pdf
Publication-Status: published as Bebchuk, Lucian Arye and Jesse M. Fried. "Executive Compensation As An Agency Problem," Journal of Economic Perspectives, 2003, v17(3,Summer), 71-92.
Abstract: This paper provides an overview of the main theoretical elements and empirical underpinnings of a managerial power' approach to executive compensation. Under this approach, the design of executive compensation is viewed not only as an instrument for addressing the agency problem between managers and shareholders but also as part of the agency problem itself. Boards of publicly traded companies with dispersed ownership, we argue, cannot be expected to bargain at arm's length with managers. As a result, managers wield substantial influence over their own pay arrangements, and they have an interest in reducing the saliency of the amount of their pay and the extent to which that pay is de-coupled from managers' performance. We show that the managerial power approach can explain many features of the executive compensation landscape, including ones that many researchers have long viewed as puzzling. Among other things, we discuss option plan design, stealth compensation, executive loans, payments to departing executives, retirement benefits, the use of compensation consultants, and the observed relationship between CEO power and pay. We also explain how managerial influence might lead to substantially inefficient arrangements that produce weak or even perverse incentives.
Handle: RePEc:nbr:nberwo:9813
Template-Type: ReDIF-Paper 1.0
Title: The Case for Open-Market Purchases in a Liquidity Trap
Classification-JEL: E43; E52
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: EFG ME PE
Number: 9814
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9814
File-URL: http://www.nber.org/papers/w9814.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. and Maurice Obstfeld. "The Case For Open-Market Purchases In A Liquidity Trap," American Economic Review, 2005, v95(1,Mar), 110-137. Alan Auerbach & Maurice Obstfeld. "The case for open-market purchases in a liquidity trap," Proceedings, Federal Reserve Bank of San Francisco, issue March 2003.
Abstract: Prevalent thinking about liquidity traps suggests that the perfect substitutability of money and bonds at a zero short-term nominal interest rate renders open-market operations ineffective for achieving macroeconomic stabilization goals. We show that even were this the case, there remains a powerful argument for large-scale open market operations as a fiscal policy tool. As we also demonstrate, however, this same reasoning implies that open-market operations will be beneficial for stabilization as well even when the economy is expected to remain mired in a liquidity trap for some time. Thus, the microeconomic fiscal benefits of open-market operations in a liquidity trap go hand in hand with standard macroeconomic objectives. Motivated by Japan's recent economic experience, we use a dynamic general-equilibrium model to assess the welfare impact of open-market operations for an economy in Japan's predicament. We argue Japan can achieve a substantial welfare improvement through large open-market purchases of domestic government debt.
Handle: RePEc:nbr:nberwo:9814
Template-Type: ReDIF-Paper 1.0
Title: Causing Problems? The WTO Review of Causation and Injury Attribution in U.S. Section 201 Cases
Classification-JEL: F1; K2
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: ITI
Number: 9815
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9815
File-URL: http://www.nber.org/papers/w9815.pdf
File-Format: application/pdf
Publication-Status: published as Irwin, Douglas A., 2003. "Causing problems? The WTO review of causation and injury attribution in US Section 201 cases," World Trade Review, Cambridge University Press, vol. 2(03), pages 297-325, November.
Abstract: U.S. safeguard actions have run into problems with the WTO's Panel and Appellate Body reviews for failing to ensure that injury caused by non-import factors is not attributed to imports. This paper reviews the subtle legal and economic differences between U.S. trade law (Section 201) and the WTO's Agreement on Safeguards on the non-attribution issue. The paper then resurrects the Kelly (1988) method of attributing injury to various factors as a potential method by which the ITC can ensure that future decisions conform with the Safeguards Agreement. The method is shown to yield results that are consistent with recent ITC safeguard decisions.
Handle: RePEc:nbr:nberwo:9815
Template-Type: ReDIF-Paper 1.0
Title: Entrepreneurial Spawning: Public Corporations and the Genesis of New Ventures, 1986-1999
Classification-JEL: G2; L2
Author-Name: Paul Gompers
Author-Person: pgo301
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: David Scharfstein
Author-Person: psc177
Note: CF
Number: 9816
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9816
File-URL: http://www.nber.org/papers/w9816.pdf
File-Format: application/pdf
Publication-Status: published as Gompers, Paul, Josh Lerner and David Scharfstein. "Entrepreneurial Spawning: Public Corporations and the Formation of New Ventures, 1986-1999." Journal of Finance 60, 2 (April 2005): 577-614.
Publication-Status: published as Auerswald, Philip E. and Ant Bozkaya (eds.) Financing Entrepreneurship. Cheltenham, United Kingdom: Edward Elgar, 2008.
Abstract: This paper examines the factors that lead to the creation of venture capital backed start-ups, a process we term entrepreneurial spawning.' We contrast two alternative views of the spawning process. In one view, employees of established firms are trained and conditioned to be entrepreneurs by being exposed to the entrepreneurial process and by working in a network of entrepreneurs and venture capitalists. Alternatively, individuals become entrepreneurs because the large bureaucratic companies for which they work are reluctant to fund their entrepreneurial ideas. Controlling for a firm's size, patent portfolio and industry, we find that the most prolific spawning firms were public companies located in Silicon Valley and Massachusetts that were themselves once venture capital backed. Less diversified firms are also more likely to spawn new firms. Spawning levels for these firms rise as their sales growth declines. Firms based in Silicon Valley and Massachusetts and originally backed by venture capitalists are more likely to spawn firms only peripherally related to their core businesses. Overall, these findings appear to be more consistent with the view that entrepreneurial learning and networks are important factors in the creation of venture capital backed firms.
Handle: RePEc:nbr:nberwo:9816
Template-Type: ReDIF-Paper 1.0
Title: Stock Market Cycles, Financial Liberalization and Volatility
Classification-JEL: F30; C22
Author-Name: Sebastian Edwards
Author-Person: ped3
Author-Name: Javier Gomez Biscarri
Author-Name: Fernando Perez de Gracia
Note: IFM AP
Number: 9817
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9817
File-URL: http://www.nber.org/papers/w9817.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian & Biscarri, Javier Gomez & Perez de Gracia, Fernando, 2003. "Stock market cycles, financial liberalization and volatility," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 925-955, December.
Abstract: In this paper we analyze the behavior of stock markets in six emerging countries. More specifically, we describe the bull and bear cycles of four Latin American and two Asian countries, comparing their characteristics during both phases and the degree of concordance of bullish periods. We divide our sample in two subperiods in order to account for differences induced by the financial liberalization processes that these countries went through in the early 1990's. We find that cycles in emerging countries tend to have shorter duration and larger amplitude and volatility than in developed countries. However, after financial liberalization Latin American stock markets have behaved more similarly to stock markets in developed countries whereas Asian countries have become more dissimilar. Concordance of cycles across markets has increased significantly over time, especially for Latin American countries after liberalization.
Handle: RePEc:nbr:nberwo:9817
Template-Type: ReDIF-Paper 1.0
Title: The Determinants of Participation in a Social Program: Evidence from a Prototypical Job Training Program
Classification-JEL: J24
Author-Name: James J. Heckman
Author-Name: Jeffrey A. Smith
Author-Person: psm73
Note: ED LS PE
Number: 9818
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9818
File-URL: http://www.nber.org/papers/w9818.pdf
File-Format: application/pdf
Publication-Status: published as James J. Heckman & Jeffrey A. Smith, 2004. "The Determinants of Participation in a Social Program: Evidence from a Prototypical Job Training Program," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 243-298, April.
Abstract: This paper decomposes the participation process of a prototypical program into eligibility, awareness, application, acceptance and enrollment. With this decomposition, we determine the sources of unequal participation for different groups, and demonstrate that variables often have very different effects at different stages in the participation process. Our analysis shows that personal choices substantially affect participation and that awareness of program eligibility is a major source of variation in participation.
Handle: RePEc:nbr:nberwo:9818
Template-Type: ReDIF-Paper 1.0
Title: What Happens After a Technology Shock?
Classification-JEL: C1; E3
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Robert Vigfusson
Author-Person: pvi18
Note: EFG LS
Number: 9819
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9819
File-URL: http://www.nber.org/papers/w9819.pdf
File-Format: application/pdf
Abstract: We provide empirical evidence that a positive shock to technology drives per capita hours worked, consumption, investment, average productivity and output up. This evidence contrasts sharply with the results reported in a large and growing literature that argues, on the basis of aggregate data, that per capita hours worked fall after a positive technology shock. We argue that the difference in results primarily reflects specification error in the way that the literature models the low-frequency component of hours worked.
Handle: RePEc:nbr:nberwo:9819
Template-Type: ReDIF-Paper 1.0
Title: Strict Dollarization and Economic Performance: An Empirical Investigation
Classification-JEL: F30; F31
Author-Name: Sebastian Edwards
Author-Person: ped3
Author-Name: I. Igal Magendzo
Note: IFM
Number: 9820
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9820
File-URL: http://www.nber.org/papers/w9820.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian and I. Igal Magendzo. "Dollarization And Economic Performance: What Do We Really Know?" International Journal of Finance and Economics 8(4): 351-363, October 2003
Publication-Status: published as Edwards, Sebastian and I. Igal Magendzo. "Strict Dollarization and Economic Performance: An Empirical Investigation," Journal of Money, Credit and Banking, 38(1): 269-282, February 2006
Abstract: In this paper we analyze the macroeconomic record of 'strictly dollarized' economies. In particular we investigate whether dollarized countries have historically exhibited faster growth and lower volatility than countries with a domestic currency. We analyze this issue by using a treatment regression analysis that estimates jointly the probability of being a dollarized country, and outcome equations. Our analysis indicates that the probability of being a dollarized country depends on regional, geographical, political and structural variables. Our results also suggest GDP per capita growth has not been statistically different in dollarized and in non-dollarized ones. We also find that volatility has been significantly higher in dollarized than in non-dollarized economies. These results are robust to the estimation technique, and to the sample used.
Handle: RePEc:nbr:nberwo:9820
Template-Type: ReDIF-Paper 1.0
Title: Broken Down by Work and Sex: How Our Health Declines
Classification-JEL: I1
Author-Name: Anne C. Case
Author-Person: pca108
Author-Name: Angus Deaton
Author-Person: pde30
Note: AG EH
Number: 9821
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9821
File-URL: http://www.nber.org/papers/w9821.pdf
File-Format: application/pdf
Publication-Status: published as Broken Down by Work and Sex: How Our Health Declines, Anne Case, Angus S. Deaton. in Analyses in the Economics of Aging, Wise. 2005
Abstract: Self-reported health status (SRHS) is an imperfect measure of non-fatal health, but allows examination of how health status varies over the life course. Although women have lower mortality than men, they report worse health status up to age 65. The SRHS of both men and women deteriorates with age. There are strong gradients, so that at age 20, men in the bottom quartile already report worse health than do men in the top quartile at age 50. In the bottom quartile of income, SRHS declines more rapidly with age, but only until retirement age. These facts motivate a study of the role of work, particularly manual work, in health decline with age. The Grossman capital-stock model of health assumes a technology in which money and time can effect complete health repair. As a result, declines in health status are driven, not by the rate of deterioration of the health stock, but by the rate of increase of the rate of deterioration. We argue that such a technology is implausible, and we show that people in manual occupations have worse SRHS and more rapidly declining SRHS, even with a comprehensive set of controls for income and education. We also find that much of the differences in SRHS across the income distribution is driven by health-related absence from the labor-force, which is a mechanism running from health to income, not the reverse.
Handle: RePEc:nbr:nberwo:9821
Template-Type: ReDIF-Paper 1.0
Title: Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)
Classification-JEL: O1
Author-Name: Angus Deaton
Author-Person: pde30
Note: EFG
Number: 9822
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9822
File-URL: http://www.nber.org/papers/w9822.pdf
File-Format: application/pdf
Publication-Status: published as Angus Deaton, 2005. "Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 1-19, 04.
Abstract: The extent to which growth reduces global poverty has been disputed for 30 years. Although there is better data than ever before, controversies are not resolved. A major problem is that consumption measured from household surveys, which is used to measure poverty, grows less rapidly than consumption measured in national accounts, in the world as a whole, and in large countries, particularly India, China, and the US. In consequence, measured poverty has fallen less rapidly than appears warranted by measured growth in poor countries. One plausible cause is that richer households are less likely to participate in surveys. But growth in the national accounts is also upwardly biased, and consumption in the national accounts contains large and rapidly growing items that are not consumed by the poor and not included in surveys. So it is possible for consumption of the poor to grow less rapidly than national consumption, without any increase in measured inequality. Current statistical procedures in poor countries understate the rate of global poverty reduction, and overstate growth in the world.
Handle: RePEc:nbr:nberwo:9822
Template-Type: ReDIF-Paper 1.0
Title: Trade, Growth and the Environment
Classification-JEL: Q0; F1
Author-Name: Brian R. Copeland
Author-Person: pco51
Author-Name: M. Scott Taylor
Author-Person: pta60
Note: ITI EEE
Number: 9823
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9823
File-URL: http://www.nber.org/papers/w9823.pdf
File-Format: application/pdf
Publication-Status: published as Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 7-71, March.
Abstract: For the last ten years environmentalists and the trade policy community have engaged in a heated debate over the environmental consequences of liberalized trade. The debate was originally fueled by negotiations over the North American Free Trade Agreement and the Uruguay round of GATT negotiations, both of which occurred at a time when concerns over global warming, species extinction and industrial pollution were rising. Recently it has been intensified by the creation of the World Trade Organization (WTO) and proposals for future rounds of trade negotiations. The debate has often been unproductive. It has been hampered by the lack of a common language and also suffered from little recourse to economic theory and empirical evidence. The purpose of this essay is set out what we currently know about the environmental consequences of economic growth and international trade. We critically review both theory and empirical work to answer three basic questions. What do we know about the relationship between international trade, economic growth and the environment? How can this evidence help us evaluate ongoing policy debates? Where do we go from here?
Handle: RePEc:nbr:nberwo:9823
Template-Type: ReDIF-Paper 1.0
Title: Guns, Drugs and Juvenile Crime: Evidence from a Panel of Siblings and Twins
Classification-JEL: H0; K4
Author-Name: H. Naci Mocan
Author-Person: pmo270
Author-Name: Erdal Tekin
Author-Person: pte12
Note: CH
Number: 9824
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9824
File-URL: http://www.nber.org/papers/w9824.pdf
File-Format: application/pdf
Publication-Status: published as Mocan, H Naci & Tekin, Erdal, 2006. "Guns and Juvenile Crime," Journal of Law & Economics, University of Chicago Press, vol. 49(2), pages 507-31, October.
Abstract: Using a nationally-representative panel data set of U.S. high school students (AddHealth data) that contains a relatively large sample of siblings and twins, the paper investigates the impacts of gun availability at home and individual drug use on robbery, burglary, theft and damaging property for juveniles. Using a variety of fixed-effects models that exploit variations over time, the results show that gun availability at home increases the propensity to committing robbery, burglary and theft by about two percentage points for juveniles but has no impact on damaging property. It is unlikely that gun availability is merely a measure of the unobserved home environment because gun availability does not influence other risky or bad behaviors of juveniles. The results show that having access to guns increases the probability of being cut or stabbed by someone and of someone pulling a knife or gun on the juvenile. Estimates obtained from models that exploit variations over time and between siblings and twins indicate that the median impact of cocaine use on the propensity to commit various types of crimes is 23 percentage points. The impact of using inhalants or other drugs is an increase in the propensity to commit crime by 14 and 18 percentage points, respectively.
Handle: RePEc:nbr:nberwo:9824
Template-Type: ReDIF-Paper 1.0
Title: Grilichesian Breakthroughs: Inventions of Methods of Inventing and Firm Entry in Nanotechnology
Classification-JEL: O31; L63
Author-Name: Michael R. Darby
Author-Name: Lynne G. Zucker
Author-Person: pzu2
Note: PR
Number: 9825
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9825
File-URL: http://www.nber.org/papers/w9825.pdf
File-Format: application/pdf
Publication-Status: published as Grilichesian Breakthroughs: Inventions of Methods of Inventing and Firm Entry in Nanotechnology, Michael L. Darby, Lynne G. Zucker. in Contributions in Memory of Zvi Griliches, Mairesse and Trajtenberg. 2010
Publication-Status: published as Michael DARBY & Lynne G. ZUCKER, 2005. "Grilichesian Breakthroughs: Inventions of Methods of Inventing and Firm Entry in Nanotechnology," Annales d'Economie et de Statistique, ENSAE, issue 79-80, pages 143-164.
Abstract: Metamorphic progress (productivity growth much faster than average) is often driven by Grilichesian inventions of methods of inventing. For hybrid seed corn, the enabling invention was double-cross hybridization yielding highly productive seed corn that was not self-propagating. Biotechnology stemmed from recombinant DNA. Scanning probe microscopy is a key enabling discovery for nanotechnology. Nanotech publishing and patenting has grown phenomenally. Over half of nanotech authors are in the U.S. and 58 percent of those are in ten metropolitan areas. Like biotechnology, we find that firms enter nanotechnology where and when scientists are publishing breakthrough academic articles. A high average education level is also important, but the past level of venture-capital activity in a region is not. Breakthroughs in nanoscale science and engineering appear frequently to be transferred to industrial application with the active participation of discovering academic scientists. The need for top scientists' involvement provided important appropriability for biotechnology inventions, and a similar process appears to have started in nanotechnology.
Handle: RePEc:nbr:nberwo:9825
Template-Type: ReDIF-Paper 1.0
Title: What Do People Buy When They Don't Buy Health Insurance And What Does that Say about Why They are Uninsured?
Classification-JEL: Z1
Author-Name: Helen Levy
Author-Person: ple728
Author-Name: Thomas DeLeire
Author-Person: pde167
Note: EH
Number: 9826
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9826
File-URL: http://www.nber.org/papers/w9826.pdf
File-Format: application/pdf
Publication-Status: published as Helen Levy & Thomas DeLeire, 2008. "What Do People Buy When They Don't Buy Health Insurance and What Does That Say about Why They are Uninsured?," INQUIRY: The Journal of Health Care Organization, Provision, and Financing, vol 45(4), pages 365-379.
Abstract: Using data from the 1994 through 1998 Consumer Expenditure Surveys, we compare household spending on 16 different goods (food at home, food away from home, housing, transportation, alcohol and tobacco, interest, furniture and appliances, home maintenance, clothing, utilities, medical care, health insurance, entertainment, personal care, education, and other) for insured versus uninsured households, controlling for total expenditures and demographic characteristics. The analysis shows that the uninsured in the lowest quartile of the distribution of total expenditures spend more on housing, food at home, alcohol and tobacco, and education than do the insured. In contrast, households in the top quartile of the distribution of total expenditures spend more on transportation and furniture and appliances than do comparable insured households. These results are consistent with the idea that poor uninsured households face higher housing prices than do poor insured households. Further research is necessary to determine whether high housing prices can help explain why some households do not have insurance.
Handle: RePEc:nbr:nberwo:9826
Template-Type: ReDIF-Paper 1.0
Title: Aggregation and Insurance Mortality Estimation
Classification-JEL: I1; J1
Author-Name: William H. Dow
Author-Person: pdo236
Author-Name: Kristine A. Gonzalez
Author-Name: Luis Rosero-Bixby
Note: EH
Number: 9827
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9827
File-URL: http://www.nber.org/papers/w9827.pdf
File-Format: application/pdf
Abstract: One goal of government health insurance programs is to improve health, yet little is known empirically about how important such government interventions can be in explaining health transitions. We analyze the child mortality effects of a major health insurance expansion in Costa Rica. In contrast to previous work in this area that has used aggregated ecological designs, we exploit census data to estimate individual-level models. Theoretical and empirical econometric results indicate that aggregation can introduce substantial upward biases in the insurance effects. Overall we find a statistically significant but quite small effect of health insurance on child mortality in Costa Rica.
Handle: RePEc:nbr:nberwo:9827
Template-Type: ReDIF-Paper 1.0
Title: Sudden Stops, the Real Exchange Rate, and Fiscal Sustainability: Argentina's Lessons
Classification-JEL: F34; F41
Author-Name: Guillermo A. Calvo
Author-Person: pca694
Author-Name: Alejandro Izquierdo
Author-Person: piz6
Author-Name: Ernesto Talvi
Note: IFM
Number: 9828
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9828
File-URL: http://www.nber.org/papers/w9828.pdf
File-Format: application/pdf
Publication-Status: published as Alexander V., Mélitz J., von Furstenberg G.M. (eds.) Monetary Unions and Hard Pegs. Oxford, UK: Oxford University Press, June 3, 2004. p. 151-182
Publication-Status: published as Calvo, Guillermo. Emerging Capital Markets in Turmoil: Bad Luck or Bad Policy? Cambridge, MA: MIT Press, 2005. p. 143-180
Publication-Status: published as Guillermo A. Calvo & Alejandro Izquierdo & Ernesto Talvi, 2006. "Sudden Stops and Phoenix Miracles in Emerging Markets," American Economic Review, American Economic Association, vol. 96(2), pages 405-410, May.
Abstract: We offer an alternative explanation for the fall of Argentina's Convertibility Program based on the country's vulnerability to Sudden Stops in capital flows. Sudden Stops are typically accompanied by a substantial increase in the real exchange rate that breaks havoc in countries that are heavily dollarized in their liabilities, turning otherwise sustainable fiscal and corporate sector positions into unsustainable ones. In particular, we stress that the required change in relative prices is larger the more closed an economy is in terms of its supply of tradable goods. By contrasting Argentina's performance relative to other Latin American countries that were also subject to the Sudden Stop triggered by the Russian crisis of 1998, we identify key vulnerability indicators that separated Argentina from its piers. We also provide an explanation for the political maelstrom that ensued after the Sudden Stop, based on a War of Attrition argument related to the wealth redistribution conflict triggered by the Sudden Stop and fiscal collapse. This framework also provides elements to rationalize the banking crisis that accompanied the fall of Convertibility.
Handle: RePEc:nbr:nberwo:9828
Template-Type: ReDIF-Paper 1.0
Title: Are More Data Always Better for Factor Analysis?
Classification-JEL: E37; E47
Author-Name: Jean Boivin
Author-Person: pbo43
Author-Name: Serena Ng
Author-Person: png6
Note: ME
Number: 9829
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9829
File-URL: http://www.nber.org/papers/w9829.pdf
File-Format: application/pdf
Publication-Status: published as Boivin, Jean and Serena Ng. "Are More Data Always Better For Factor Analysis?," Journal of Econometrics, 2006, v132(1,May), 169-194.
Abstract: Factors estimated from large macroeconomic panels are being used in an increasing number of applications. However, little is known about how the size and the composition of the data affect the factor estimates. In this paper, we question whether it is possible to use more series to extract the factors, and yet the resulting factors are less useful for forecasting, and the answer is yes. Such a problem tends to arise when the idiosyncratic errors are cross-correlated. It can also arise if forecasting power is provided by a factor that is dominant in a small dataset but is a dominated factor in a larger dataset. In a real time forecasting exercise, we find that factors extracted from as few as 40 pre-screened series often yield satisfactory or even better results than using all 147 series. Weighting the data by their properties when constructing the factors also lead to improved forecasts. Our simulation analysis is unique in that special attention is paid to cross-correlated idiosyncratic errors, and we also allow the factors to have stronger loadings on some groups of series than others. It thus allows us to better understand the properties of the principal components estimator in empirical applications.
Handle: RePEc:nbr:nberwo:9829
Template-Type: ReDIF-Paper 1.0
Title: Trade Reforms and Wage Inequiality in Colombia
Classification-JEL: F10; F13
Author-Name: Orazio Attanasio
Author-Person: pat7
Author-Name: Pinelopi Goldberg
Author-Person: pgo1
Author-Name: Nina Pavcnik
Author-Person: ppa511
Note: ITI LS
Number: 9830
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9830
File-URL: http://www.nber.org/papers/w9830.pdf
File-Format: application/pdf
Publication-Status: published as Attanasio, Orazio & Goldberg, Pinelopi K. & Pavcnik, Nina, 2004. "Trade reforms and wage inequality in Colombia," Journal of Development Economics, Elsevier, vol. 74(2), pages 331-366, August.
Abstract: We investigate the effects of the drastic tariff reductions of the 1980s and 1990s in Colombia on the wage distribution. We identify three main channels through which the wage distribution was affected: increasing returns to college education, changes in industry wages that hurt sectors with initially lower wages and a higher fraction of unskilled workers, and shifts of the labor force towards the informal sector that typically pays lower wages and offers no benefits. Our results suggest that trade policy played a role in each of the above cases. The increase in the skill premium was primarily driven by skilled-biased technological change; however, our evidence suggests, that this change may have been in part motivated by the tariff reductions and the increased foreign competition to which the trade reform exposed domestic producers. With respect to industry wages, we find that wage premiums decreased by more in sectors that experienced larger tariff cuts. Finally, we find some evidence that the increase in the size of the informal sector is related to increased foreign competition sectors with larger tariff cuts and more trade exposure, as measured by the size their imports, experience a greater increase in informality, though this effect is concentrated in the years prior to the labor market reform. Nevertheless, increasing returns to education, and changes in industry premiums and informality alone cannot fully explain the increase in wage inequality we observe over this period. This suggests that overall the effect of the trade reforms on the wage distribution may have been small.
Handle: RePEc:nbr:nberwo:9830
Template-Type: ReDIF-Paper 1.0
Title: Chip Shots: Association Between the State Children's Health Insurance Programs and Immunization Coverage and Delivery
Classification-JEL: I18
Author-Name: Ted Joyce
Author-Person: pjo112
Author-Name: Andrew Racine
Note: CH EH
Number: 9831
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9831
File-URL: http://www.nber.org/papers/w9831.pdf
File-Format: application/pdf
Publication-Status: published as Joyce, T, and A. Racine. “CHIP Shots: Association between the State Children’s Health Insurance Program and Immunization Rates.” Pediatrics 115, 5 (2005): e526-e534.
Abstract: By age two a child who is up to date for immunizations will have received up to 19 shots delivered over eight visits at a market cost of $525 dollars for the vaccines alone, a far more expensive and demanding regimen that the 8 shots received in 1987. In recognition of the potential importance of health insurance to immunization coverage rates, the State Children's Health Insurance Program (SCHIP) mandated that all plans cover the cost and administration of childhood vaccines. We use data from the recently released National Immunization Survey for the years 1995 to 2001 to test whether SCHIP was associated with differential changes among poor and near-poor children relative to their non-poor counterparts in either age-appropriate immunization rates or in the proportion of vaccines delivered by private providers. We show that the probability that a child was up to date for the varicella vaccine increased between 7 and 16 percentage points more among poor and near-poor relative to non-poor children after implementation of SCHIP. The increase was greater among children from urban areas, among Hispanics and among those from states with the highest rates of uninsured children prior to SCHIP than among children nationally. We found small to inconsequential changes for other vaccines. We also found that the probability that a poor or near-poor child obtained all vaccines at a private provider fell relative to the same probability among non-poor children over the study period. SCHIP appears to have affected the uptake of a recently introduced vaccine, which suggests that insurance coverage may be important for the rapid adoption of the latest and increasingly more expensive agents such as the pneumococcal conjugate vaccine.
Handle: RePEc:nbr:nberwo:9831
Template-Type: ReDIF-Paper 1.0
Title: Do Flexible Durable Goods Prices Undermine Sticky Price Models?
Classification-JEL: E21; E30
Author-Name: Robert Barsky
Author-Person: pba670
Author-Name: Christopher L. House
Author-Person: pho56
Author-Name: Miles Kimball
Author-Person: pki97
Note: EFG ME
Number: 9832
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9832
File-URL: http://www.nber.org/papers/w9832.pdf
File-Format: application/pdf
Abstract: Multi-sector sticky price models have surprising implications when durable goods have flexible prices. While in actual data the production of virtually all durables exhibits strong negative responses to monetary contractions, in dynamic general equilibrium models a monetary contraction causes the output of flexibly priced durables to expand. Indeed, in the polar case in which only nondurables have sticky prices, the negative comovement of durable and nondurable production exactly offsets and the behavior of aggregate output mimics that of a model with fully flexible prices. While this neutrality' result is special, the comovement problem' -- the perverse response of flexibly priced durables to monetary policy shocks -- is highly robust. When some durables prices are flexible and others sticky, the comovement problem still applies strongly to the subset of durables with flexible prices. We argue that new housing construction might be best characterized as a flexible price industry for which the comovement problem is relevant. The underlying reason for the comovement problem is the combination of a naturally high intertemporal elasticity of substitution for the purchases of durables and temporarily low marginal costs associated with economic contractions.
Handle: RePEc:nbr:nberwo:9832
Template-Type: ReDIF-Paper 1.0
Title: Why Are Drugs More Profitable Than Vaccines?
Classification-JEL: O31; L11
Author-Name: Michael Kremer
Author-Person: pkr20
Author-Name: Christopher M. Snyder
Author-Person: psn35
Note: EH IO
Number: 9833
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9833
File-URL: http://www.nber.org/papers/w9833.pdf
File-Format: application/pdf
Abstract: In a simple representative consumer model, vaccines and drug treatments yield the same revenue for a pharmaceutical manufacturer, implying that the firm would have the same incentive to develop either ceteris paribus. We provide more realistic models in which the revenue equivalence breaks down for two reasons. First, drug treatments are sold after the firm has learned who has contracted the disease; in the case of heterogeneous consumers who vary with respect to the probability of contracting the disease, there is less asymmetric information to prevent the firm from extracting consumer surplus with drug treatments than with vaccines. We prove that, due to this aspect of pharmaceutical pricing, the ratio of drug-treatment to vaccine revenue can be arbitrarily high; we calculate that the ratio is about two to one for empirical distributions of HIV risk. The second reason for the breakdown of revenue equivalence is that vaccines are more likely to interfere with the spread of the disease than are drug treatments, thus reducing demand for the product. By embedding an economic model within a standard dynamic epidemiological model, we show that the steady-state flow of revenue is greater for drug treatments than for vaccines.
Handle: RePEc:nbr:nberwo:9833
Template-Type: ReDIF-Paper 1.0
Title: Asset Prices and Exchange Rates
Classification-JEL: F31; F36
Author-Name: Anna Pavlova
Author-Person: ppa810
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: AP IFM
Number: 9834
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9834
File-URL: http://www.nber.org/papers/w9834.pdf
File-Format: application/pdf
Publication-Status: published as Anna Pavlova & Roberto Rigobon, 2007. "Asset Prices and Exchange Rates," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 20(4), pages 1139-1180.
Abstract: This paper develops a simple two-country, two-good model, in which the real exchange rate, stock and bond prices are jointly determined. The model predicts that stock market prices are correlated internationally even though their dividend processes are independent, providing a theoretical argument in favor of financial contagion. The foreign exchange market serves as a propagation channel from one stock market to the other. The model identifies interconnections between stock, bond and foreign exchange markets and characterizes their joint dynamics as a three-factor model. Contemporaneous responses of each market to changes in the factors are shown to have unambiguous signs. These implications enjoy strong empirical support. Estimation of various versions of the model reveals that most of the signs predicted by the model indeed obtain in the data, and the point estimates are in line with the implications of our theory. Furthermore, the uncovered interest rate parity relationship has a risk premium in our model, shown to be volatile. We also derive agents? portfolio holdings and identify economic environments under which they exhibit a home bias, and demonstrate that an international CAPM obtaining in our model has two additional factors.
Handle: RePEc:nbr:nberwo:9834
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy and Sectoral Shocks: Did the FED react properly to the High-Tech Crisis?
Classification-JEL: E43; E44
Author-Name: Claudio Raddatz
Author-Person: pra328
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: IFM ME
Number: 9835
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9835
File-URL: http://www.nber.org/papers/w9835.pdf
File-Format: application/pdf
Abstract: This paper presents an identification strategy that allows us to study both the sectoral effects of monetary policy and the role that monetary policy plays in the transmission of sectoral shocks. We apply our methodology to the case of the U.S. and find some significant differences in the sectorial responses to monetary policy. We also find that monetary policy is a significant source of sectoral transfers. In particular, a shock to Equipment and Software investment, which we naturally identify with the High-tech crises, induces a response by the monetary authority that generates a temporary boom in Residential Investment and Durable Consumption but has almost no effect on the high-tech sector. Finally, we perform an exercise evaluating what the model predicts regarding the automatic and a more aggressive monetary policy response to a shock similar to the one that hit the U.S. in early 2001. We find that the actual drop in interest rates we have observed is in line with the predictions of the model.
Handle: RePEc:nbr:nberwo:9835
Template-Type: ReDIF-Paper 1.0
Title: Bidding Rings and the Winner's Curse: The Case of Federal Offshore Oil and Gas Lease Auctions
Classification-JEL: C7; D4
Author-Name: Ken Hendricks
Author-Name: Robert Porter
Author-Person: ppo97
Author-Name: Guofu Tan
Author-Person: pta677
Note: IO
Number: 9836
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9836
File-URL: http://www.nber.org/papers/w9836.pdf
File-Format: application/pdf
Publication-Status: published as Hendricks, Ken, Robert Porter, and Guofu Tan. “Bidding Rings and the Winner’s Curse." RAND Journal of Economics 39, 4 (Winter 2008): 1018-1041.
Abstract: This paper extends the theory of legal cartels to affiliated private value and common value environments, and applies the theory to explain joint bidding patterns in U.S. federal government offshore oil and gas lease auctions. We show that efficient collusion is always possible in private value environments, but may not be in common value environments. In the latter case, fear of the winner's curse can cause bidders not to bid, which leads to inefficient trade. Buyers with high signals may be better off if no one colludes. The bid data is consistent with oil and gas leases being common value assets, and with the prediction that the winner's curse can prevent rings from forming on marginal tracts.
Handle: RePEc:nbr:nberwo:9836
Template-Type: ReDIF-Paper 1.0
Title: Multiple-Solution Indeterminacies in Monetary Policy Analysis
Classification-JEL: E3; E5
Author-Name: Bennett T. McCallum
Note: EFG ME
Number: 9837
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9837
File-URL: http://www.nber.org/papers/w9837.pdf
File-Format: application/pdf
Publication-Status: published as McCallum, Bennett T. "Multiple-Solution Indeterminacies In Monetary Policy Analysis," Journal of Monetary Economics, 2003, v50(5,Jul), 1153-1175.
Abstract: This paper discusses four current topics in monetary policy analysis, each of which hinges on the possibility of multiple solutions in rational expectations (RE) models. In three of these cases--involving inflation forecast targeting, the zero-lower bound deflation trap, and the fiscal theory of the price level--analysis based on E-stability and adaptive learnability of the solutions suggests that only one of them is a viable equilibrium candidate. Thus the dangers alleged to prevail, in these cases, are not ones with which actual policymakers need to be concerned. In the case of the Taylor principle, by contrast, policy behavior that violates the principle is genuinely undesirable, since all of the RE equilibria fail to be learnable.
Handle: RePEc:nbr:nberwo:9837
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy in Economies with Little or No Money
Classification-JEL: E3; E4
Author-Name: Bennett T. McCallum
Note: EFG ME
Number: 9838
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9838
File-URL: http://www.nber.org/papers/w9838.pdf
File-Format: application/pdf
Publication-Status: published as Bennett T. McCallum, 2004. "Monetary Policy In Economies With Little Or No Money," Pacific Economic Review, Blackwell Publishing, vol. 9(2), pages 81-92, 06.
Abstract: The paper's arguments include: (1) Medium-of-exchange money will not disappear in the foreseeable future, although the quantity of base money may continue to decline. (2) In economies with very little money (e.g., no currency but bank settlement balances at the central bank), monetary policy will be conducted much as at present by activist adjustment of overnight interest rates. Operating procedures will be different, however, with payment of interest on reserves likely to become the norm. (3) In economies without any money there can be no monetary policy. The relevant notion of a general price level concerns some index of prices in terms of a medium of account. The liabilities of some official entity might serve as the medium of account, but there could be viable rivals if policy is poor. (4) A broad commodity-bundle monetary standard could be viable, even with a redemption medium, and there is scope for quantitative analysis of the properties of such a system. (5) The number of distinct national currencies may decline sharply, with the emergence of a small number of currency areas and floating exchange rates across these areas.
Handle: RePEc:nbr:nberwo:9838
Template-Type: ReDIF-Paper 1.0
Title: Regime-Switching and the Estimation of Multifractal Processes
Classification-JEL: G0; C5
Author-Name: Laurent Calvet
Author-Person: pca582
Author-Name: Adlai Fisher
Author-Person: pfi214
Note: EFG
Number: 9839
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9839
File-URL: http://www.nber.org/papers/w9839.pdf
File-Format: application/pdf
Publication-Status: published as Calvet, Laurent E. and Adlai J. Fisher. "How To Forecast Long-Run Volatility: Regime Switching And The Estimation Of Multifractal Processes," Journal of Financial Econometrics, 2004, v2(1,Winter), 49-83.
Abstract: We propose a discrete-time stochastic volatility model in which regime switching serves three purposes. First, changes in regimes capture low frequency variations, which is their traditional role. Second, they specify intermediate frequency dynamics that are usually assigned to smooth autoregressive processes. Finally, high frequency switches generate substantial outliers. Thus, a single mechanism captures three important features of the data that are typically addressed as distinct phenomena in the literature. Maximum likelihood estimation is developed and shown to perform well in finite sample. We estimate on exchange rate data a version of the process with four parameters and more than a thousand states. The estimated model compares favorably to earlier specifications both in- and out-of-sample. Multifractal forecasts slightly improve on GARCH(1,1) at daily and weekly intervals, and provide considerable gains in accuracy at horizons of 10 to 50 days.
Handle: RePEc:nbr:nberwo:9839
Template-Type: ReDIF-Paper 1.0
Title: Financial Innovation, Market Participation and Asset Prices
Classification-JEL: D52; E44
Author-Name: Laurent Calvet
Author-Person: pca582
Author-Name: Martin Gonzalez-Eiras
Author-Person: pgo720
Author-Name: Paolo Sodini
Author-Person: pso124
Note: AP EFG
Number: 9840
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9840
File-URL: http://www.nber.org/papers/w9840.pdf
File-Format: application/pdf
Publication-Status: published as Calvet, Laurent, Martin Gonzalez-Eiras and Paolo Sodini. "Financial Innovation, Market Participation, And Asset Prices," Journal of Financial and Quantitative Analysis, 2004, v39(3,Sep), 431-459.
Abstract: This paper investigates the pricing effects of financial innovation in an economy with endogenous participation and heterogeneous income risks. The introduction of non-redundant assets endogenously modifies the participation set, reduces the covariance between dividends and participants' consumption and thus leads to lower risk premia. In multisector economies, financial innovation spreads across markets through the diversified portfolio of new entrants, and has rich effects on the cross-section of expected returns. The price changes can also lead some investors to leave the markets and give rise to non-degenerate forms of participation turnover. The model is consistent with several features of financial markets over the past few decades: substantial innovation; higher participation; significant turnover in investor composition; improved risk management practices; a slight increase in interest rates; and a reduction in risk premia.
Handle: RePEc:nbr:nberwo:9840
Template-Type: ReDIF-Paper 1.0
Title: How "Original Sin" was Overcome: The Evolution of External Debt Denominated in Domestic Currencies in the United States and the British Dominions
Classification-JEL: N20; F33
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Christopher Meissner
Author-Person: pme45
Author-Name: Angela Redish
Author-Person: pre9
Note: DAE IFM
Number: 9841
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9841
File-URL: http://www.nber.org/papers/w9841.pdf
File-Format: application/pdf
Publication-Status: published as Eichengreen, Barry and Ricardo Haussmann (eds.) Other People’s Money. Chicago: University of Chicago Press, 2004.
Abstract: This paper examines the historical origins of "Original Sin" or why countries are unable to issue long term debt domestically or borrow abroad in terms of the domestic currency. We conduct an historical case study for a group of countries that had largely overcome the problem of Original Sin by the third quarter of the twentieth century. The group consists of several former colonies of Great Britain: the United States, Canada, Australia, New Zealand and South Africa. We trace out their debt history relating the currency to the place of issue, exploring the residency of those holding local and foreign currency debt and looking at the maturity of domestic debt in the nineteenth and twentieth centuries. We find that sound fiscal institutions, high credibility of the monetary regime and good financial development are not sufficient to completely break free from Original Sin. Conversely, poor performance in these policy realms is not, for the most part, a necessary condition for Original Sin. The factor we emphasize for the common movements across the five countries is the role of shocks such as wars, massive economic disruption and the emergence of global markets. The differences in evolution between the U.S. and the Dominions we attribute to differences in size, the traits of a key currency, which the U.S. possessed and the others did not, and to membership in the British Empire. The important role of major shocks suggests that the establishment of a bond market involved significant start-up costs, while the role of scale suggests that network externalities and liquidity were pivotal in the existence of overseas markets in domestic currency debt.
Handle: RePEc:nbr:nberwo:9841
Template-Type: ReDIF-Paper 1.0
Title: Public Goods and the Distribution of Income
Classification-JEL: D31; H21
Author-Name: Louis Kaplow
Author-Person: pka44
Note: LE PE
Number: 9842
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9842
File-URL: http://www.nber.org/papers/w9842.pdf
File-Format: application/pdf
Publication-Status: published as Kaplow, Louis. "Public Goods And The Distribution Of Income," European Economic Review, 2006, v50(7,Oct), 1627-1660.
Abstract: This article addresses conceptual issues concerning the distributive incidence of public goods. Solutions depend on the specific purposes for asking the question of distributive incidence notably, assessing the extent to which various public goods should be provided, determining how the provision of public goods affects the desirability of income redistribution, and providing a meaningful description of the distribution of well-being. In the course of the analysis, a simple and intuitive version of the benefit principle of taxation (qualitatively different from those commonly advanced in pertinent literatures) is presented, and some of the problems confronting empirical attempts to measure the distributive incidence of public goods are resolved.
Handle: RePEc:nbr:nberwo:9842
Template-Type: ReDIF-Paper 1.0
Title: Addressing the Transfer-Pricing Problem in an Origin-Basis X Tax
Classification-JEL: H20; H25
Author-Name: David F. Bradford
Note: PE
Number: 9843
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9843
File-URL: http://www.nber.org/papers/w9843.pdf
File-Format: application/pdf
Publication-Status: published as Bradford, David F. "Addressing The Transfer-Pricing Problem In An Origin-Basis X Tax," International Tax and Public Finance, 2003, v10(5,Sep), 591-610.
Abstract: In a previous paper I described how the tax design called the X Tax would facilitate an international tax system free of many of the complexities and avoidance opportunities plaguing the existing international tax regime and also have neutrality properties generally deemed desirable. A choice must, however, be made between two basic treatments of transborder business transactions --the origin and destination principles. The destination-principle approach sidesteps the need to identify arm's length terms of transborder transactions between related business entities -- the transfer-pricing problem. This serious problem remains in the origin-principle approach, which, however, presents fewer challenges of monitoring the flow of goods and services across borders, obviates what I call the tourism problem' whereby people can reduce their taxes by consuming in a low-tax jurisdiction and, arguably most important, avoids transition effects associated with introduction of the tax and subsequent tax rate changes that occur in the destination approach. In this paper I explore possible special rules for transborder transactions between related parties in an origin-based system to eliminate the transfer-pricing problem.
Handle: RePEc:nbr:nberwo:9843
Template-Type: ReDIF-Paper 1.0
Title: Bidding for Industrial Plants: Does Winning a 'Million Dollar Plant' Increase Welfare?
Classification-JEL: R0; R3
Author-Name: Michael Greenstone
Author-Person: pgr38
Author-Name: Enrico Moretti
Author-Person: pmo392
Note: PE
Number: 9844
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9844
File-URL: http://www.nber.org/papers/w9844.pdf
File-Format: application/pdf
Abstract: Increasingly, local governments compete by offering substantial subsidies to industrial plants to locate within their jurisdictions. This paper uses a novel research design to examine the consequences of successfully bidding for a plant on county-level labor earnings, property values, and public finances. Each issue of the corporate real estate journal Site Selection includes an article titled The Million Dollar Plant that describes how a large plant decided where to locate. These articles report the county where the plant chose to locate (i.e., the 'winner'), as well as the one or two runner-up counties (i.e., the 'losers'). The losers are counties that have survived a long selection process, but narrowly lost the competition. We use these revealed rankings of profit-maximizing firms to form a counterfactual for what would have happened in the winner counties in the absence of the plant opening. We find that a plant opening is associated with a 1.5% trend break in labor earnings in the new plant's industry in winning counties (relative to losing ones) after the opening of the plant (relative to the period before the opening). Property values may provide a summary measure of the net change in welfare, because the costs and benefits of attracting a plant should be capitalized into the price of land. We find a positive, relative trend break of 1.1% in property values. Further, we fail to find any deterioration in local governments' financial position. Overall, the results undermine the popular view that the provision of local subsidies to attract large industrial plants reduces local residents' welfare.
Handle: RePEc:nbr:nberwo:9844
Template-Type: ReDIF-Paper 1.0
Title: Is the Social Security Trust Fund Worth Anything?
Classification-JEL: H5; H6
Author-Name: Kent Smetters
Author-Person: psm21
Note: AG PE
Number: 9845
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9845
File-URL: http://www.nber.org/papers/w9845.pdf
File-Format: application/pdf
Publication-Status: published as Smetters, Kent. "Is The Social Security Trust Fund A Store Of Value?," American Economic Review, 2004, v94(2,May), 176-181.
Abstract: With over $1 trillion in assets, the U.S. Social Security trust fund is the largest pension reserve in the world, and potentially a model for other developed countries facing future financing problems. But are those assets actually worth anything?' This question has generated a heated debate in the U.S. as policymakers debate options for Social Security reform, with the understanding that the characterization of the trust fund influences these decisions. Some observers claim that the trust fund is not worth anything while others argue that it is valuable. However, different reasons are given for the same position. This paper provides a unified conceptual framework for thinking rigorously about the assets accumulated in the trust fund. Multiple perspectives of the trust fund are identified and are summarized under two categories: (I) storage technology arguments and (II) ownership arguments. Storage technology arguments focuses on whether the trust fund surpluses actually reduce the level of debt held by the public or, alternatively, are used to hide' smaller on-budget surpluses. Ownership arguments focus on property rights, i.e., how trust fund credits should be allocated regardless of whether they reduce the debt held by the public. Only the storage technology argument can be empirically tested, as we do herein. We find that there is no empirical evidence supporting the claim that trust fund assets have reduced the level of debt held by the public. In fact, the evidence suggests just the opposite: trust fund assets have probably increased the level of debt held by the public. Moreover, the adoption of a unified budget' framework in the late 1960s appears to play a statistically significant role in this result. We show how this counterintuitive result can be explained by a simple split the dollar game' where competition between two political parties exploits the ignorance of voters who don't understand that the government's reported budget surplus actually includes the off-budget' Social Security surplus. To be sure based on a limited annual time series (1949 2002) and so the results should be interpreted with caution. But the empirical tests are, if anything, biased toward finding a reduction in the level of debt held by the public, and not the increase that we find.
Handle: RePEc:nbr:nberwo:9845
Template-Type: ReDIF-Paper 1.0
Title: New Data, New doubts: A Comment on Burnside and Dollar's "Aid, Policies, and Growth" (2000)
Classification-JEL: F35; O40
Author-Name: William Easterly
Author-Person: pea1
Author-Name: Ross Levine
Author-Person: ple61
Author-Name: David Roodman
Note: IFM ITI
Number: 9846
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9846
File-URL: http://www.nber.org/papers/w9846.pdf
File-Format: application/pdf
Publication-Status: published as Easterly, William, R. Levine and D. Roodman. “New data, new doubts: A Comment on Burnside and Dollar’s 'Aid, Policies, and Growth' (2000)." American Economic Review 94, 3 (June 2004): 774-780.
Abstract: The Burnside and Dollar (2000, AER) finding that aid raises growth in a good policy environment has had an important influence on policy and academic debates. We conduct a data gathering exercise that updates their data from 1970 -93 to 1970 -97, as well as filling in missing data for the original period 1970 -93. We find that the Burnside and Dollar (2002, AER) finding is not robust to the use of this additional data.
Handle: RePEc:nbr:nberwo:9846
Template-Type: ReDIF-Paper 1.0
Title: Quality and Employers' Choice of Health Plan
Classification-JEL: I11
Author-Name: Michael Chernew
Author-Name: Gautam Gowrisankaran
Author-Name: Catherine McLaughlin
Author-Name: Teresa Gibson
Note: EH
Number: 9847
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9847
File-URL: http://www.nber.org/papers/w9847.pdf
File-Format: application/pdf
Publication-Status: published as Chernew, Michael, Gautam Gowrisankaran, Catherine McLaughlin and Teresa Gibson. “Quality and Employers' Choice of Health Plan." Journal of Health Economics 23 (2004): 471–92.
Abstract: We seek to understand the relationship between employer decisions regarding which health plans firms choose to offer to their employees and the performance of those plans. We measure performance using data from the Health Plan Employer Data Information Set (HEDIS) and the Consumer Assessment of Health Plan Survey (CAHPS). We use a unique data set that lists the Health Maintenance Organizations (HMOs) available to, and offered by, large employers across markets in the year 2000, and examine the relationship between plan offerings, performance measures and other plan characteristics. We estimate two sets of specifications that differ in whether they model plan choice as a function of absolute plan performance or plan performance relative to competitors. We find that employers are more likely to offer plans with strong absolute and relative HEDIS and CAHPS performance measures. Our results are consistent with the view that large employers are responsive to the interests of their employees.
Handle: RePEc:nbr:nberwo:9847
Template-Type: ReDIF-Paper 1.0
Title: Understanding Trend and Cycle in Asset Values: Reevaluating the Wealth Effect on Consumption
Classification-JEL: G12; E21
Author-Name: Martin Lettau
Author-Person: ple572
Author-Name: Sydney Ludvigson
Author-Person: plu153
Note: EFG AP
Number: 9848
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9848
File-URL: http://www.nber.org/papers/w9848.pdf
File-Format: application/pdf
Publication-Status: published as Lettau, Martin and Sydney C. Ludvigson. "Understanding Trend And Cycle In Asset Values: Reevaluating The Wealth Effect On Consumption," American Economic Review, 2004, v94(1,Mar), 276-299.
Abstract: Both textbook economics and common sense teach us that the value of household wealth should be related to consumer spending. At the same time, movements in asset values often seem disassociated with important movements in consumer spending, as episodes such as the 1987 stock market crash and the contraction in equity values that occurred in the fall of 1998 suggest. An important first step in understanding the consumption-wealth linkage is determining how closely the two variables are actually correlated, and whether there exist important movements in asset values that are not associated with changes in consumption. This paper provides evidence that a surprisingly small fraction of the variation in household net worth is related to variation in aggregate consumer spending. We use empirical techniques that allow us to quantify the relative importance of permanent and transitory innovations in the variation of consumer spending and wealth and find that transitory shocks dominate post-war variation in wealth, while permanent shocks dominate variation in aggregate consumption. Although transitory innovations are found to have little influence on consumer spending, they have long-lasting effects on wealth , exhibiting a half-life of a little over two years. The findings suggest that most macro models which make no allowance for transitory variation in wealth that is orthogonal to consumption are likely to misstate both the timing and magnitude of the consumption-wealth linkage.
Handle: RePEc:nbr:nberwo:9848
Template-Type: ReDIF-Paper 1.0
Title: Enriching a Theory of Wage and Promotion Dynamics Inside Firms
Classification-JEL: J3
Author-Name: Robert Gibbons
Author-Person: pgi283
Author-Name: Michael Waldman
Author-Person: pwa40
Note: LS
Number: 9849
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9849
File-URL: http://www.nber.org/papers/w9849.pdf
File-Format: application/pdf
Publication-Status: published as Gibbons, Robert and Michael Waldman. "Enriching A Theory Of Wage and Promotion Dynamics Inside Firms," Journal of Labor Economics, 2006, v24(1,Jan), 59-108.
Abstract: In previous work we showed that a model that integrates job assignment, human-capital acquisition, and learning can explain several empirical findings concerning wage and promotion dynamics inside firms. In this paper we extend that model in two ways. First, we incorporate schooling into the model and derive a number of testable implications that we then compare with the available empirical evidence. Second, and more important, we show that introducing task-specific' human capital allows us to produce cohort effects (i.e., the finding that a cohort that enters a firm at a low wage will continue to earn below-average wages years later). We argue that task-specific human capital is a realistic concept and may have many important implications. We also discuss limitations of our (extended) approach.
Handle: RePEc:nbr:nberwo:9849
Template-Type: ReDIF-Paper 1.0
Title: Who Benefits from Labor Market Regulations? Chile 1960-1998
Classification-JEL: E24; J23
Author-Name: Claudio Montenegro
Author-Name: Carmen Pages
Author-Person: ppa299
Note: LS
Number: 9850
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9850
File-URL: http://www.nber.org/papers/w9850.pdf
File-Format: application/pdf
Publication-Status: published as Montenegro, Claudio, and Carmen Pages. "Who Benefits from Labor Market Regulations? Chile 1960-1998." in Labor Markets and Institutions, edition 1, volume 8, chapter 4, p. 77-114, edited by Jorge Restrepo, Andrea Tokman R. and Norman Loayza, Central Bank of Chile
Publication-Status: published as Who Benefits from Labor Market Regulations? Chile, 1960-1998, Claudio E. Montenegro, Carmen Pagés. in Law and Employment: Lessons from Latin America and the Caribbean, Heckman and Pagés. 2004
Abstract: Economists have examined the impact of labor market regulations on the level of employment. However, there are many reasons to suspect that the impact of regulations differs across types of workers. In this paper we take advantage of the unusual large variance in labor policy in Chile to exa mine how different labor market regulations affect the distribution of employment and the employment rates across age, gender and skill levels. To this effect, we use a sample of repeated cross-section household surveys spanning the period 1960-1998 and measures of the evolution of job security provisions and minimum wages across time. Our results suggest large distribution effects. We find that employment security provisions and minimum wages reduce the share of youth and unskilled employment as well as their employment rates. We also find large effects on the distribution of employment between women and men.
Handle: RePEc:nbr:nberwo:9850
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Changes in State SSI Supplements on Pre-Retirement Labor Supply
Classification-JEL: I3; J2
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Elizabeth T. Powers
Note: AG LS
Number: 9851
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9851
File-URL: http://www.nber.org/papers/w9851.pdf
File-Format: application/pdf
Publication-Status: published as Public Finance Review, Vol. 33, no. 1 (January 2005): 3-35
Abstract: Because the Supplemental Security Income (SSI) program is means-tested, with both income limits and asset limits, those on the margin of eligibility for the elderly component of the program face incentives to reduce labor supply (or earnings) prior to becoming eligible. Our past research relying on cross-state variation in SSI benefits found evidence consistent with the predicted negative labor supply effects. However, a reliance on cross-state variation necessitated reliance on less-than-ideal control samples. In contrast, this paper uses CPS data covering a 22-year period, which permit identification of the effects of SSI from within-state, time-series variation in SSI benefits, using a better control sample. The evidence points consistently to negative effects of more generous SSI payments on the labor supply of likely SSI participants aged 62-64. The implied elasticities of labor supply with respect to benefits, for those with a high probability of SSI participation, are generally in the range of 0.2 to 0.3, looking at both employment and hours of work.
Handle: RePEc:nbr:nberwo:9851
Template-Type: ReDIF-Paper 1.0
Title: The Value of a Statistical Life and the Coefficient of Relative Risk Aversion
Classification-JEL: D80; G11
Author-Name: Louis Kaplow
Author-Person: pka44
Note: EH LS AP PE
Number: 9852
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9852
File-URL: http://www.nber.org/papers/w9852.pdf
File-Format: application/pdf
Publication-Status: published as Kaplow, Louis. "The Value Of A Statistical Life And The Coefficient Of Relative Risk Aversion," Journal of Risk and Uncertainty, 2005, v31(1,Jul), 23-34.
Abstract: Individuals' risk preferences are estimated and employed in a variety of settings, notably including choices in financial, labor, and product markets. Recent work, especially in financial economics, provides estimates of individuals' coefficients of relative risk aversion (CRRA's) in excess of one, and often significantly higher. However, it can be shown that high CRRA's imply equally high values for the income elasticity of the value of a statistical life. Yet estimates of this elasticity, derived from labor and product markets, are in the range of 0.5 to 0.6. Furthermore, it turns out that even a CRRA below one is difficult to reconcile with these elasticity estimates. Thus, there appears to be an important (additional) anomaly involving individuals' risk-taking behavior in different market settings.
Handle: RePEc:nbr:nberwo:9852
Template-Type: ReDIF-Paper 1.0
Title: Beauty in the Classroom: Professors' Pulchritude and Putative Pedagogical Productivity
Classification-JEL: J7; I2
Author-Name: Daniel Hamermesh
Author-Person: pha78
Author-Name: Amy M. Parker
Note: LS
Number: 9853
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9853
File-URL: http://www.nber.org/papers/w9853.pdf
File-Format: application/pdf
Publication-Status: published as "Beauty in the Classroom: Instructors' Pulchritude and Putative Pedagogical Productivity" Hamermesh, Daniel S.; Parker, Amy; Economics of Education Review, August 2005, v. 24, iss. 4, pp. 369-76
Abstract: Adjusted for many other determinants, beauty affects earnings; but does it lead directly to the differences in productivity that we believe generate earnings differences? We take a large sample of student instructional ratings for a group of university professors, acquire six independent measures of their beauty and a number of other descriptors of them and their classes. Instructors who are viewed as better looking receive higher instructional ratings, with the impact of a move from the 10th to the 90th percentile of beauty being substantial. This impact exists within university departments and even within particular courses, and is larger for male than for female instructors. Disentangling whether this outcome represents productivity or discrimination is, as with the issue generally, probably impossible.
Handle: RePEc:nbr:nberwo:9853
Template-Type: ReDIF-Paper 1.0
Title: After the War Boom: Reconversion on the U.S. Pacific Coast, 1943-49
Classification-JEL: N4; N6
Author-Name: Paul W. Rhode
Author-Person: prh14
Note: DAE
Number: 9854
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9854
File-URL: http://www.nber.org/papers/w9854.pdf
File-Format: application/pdf
Abstract: During the Second World War, the American Pacific Coast experienced a tremendous economic boom fueled by disproportionately large flows of military spending. Even before the conflict's end, fears spread that the region's postwar economy would not provide sufficient jobs for its greatly enlarged labor force. Responsible authorities predicted one million workers one-quarter of the labor force would be unemployed one year after demobilization. But the conversion experience over the 1945-49 period proved far easily than anticipated, a finding which this paper attributes to strong home market effects' highlighted in the new Economic Geography literature. Based on an empirical investigation of the long-run relationship between manufacturing production and the size of the Pacific region's market, this study finds support for the views that the region's economic structure could support multiple equilibria and that the transitory shock of military spending during World War II helped push the Pacific Coast economy from a low-level' equilibrium to a higher-level' equilibrium consistent with the same fundamentals.
Handle: RePEc:nbr:nberwo:9854
Template-Type: ReDIF-Paper 1.0
Title: Tax Credits and the Use of Medical Care
Classification-JEL: I1; H2
Author-Name: Michael Smart
Author-Person: psm6
Author-Name: Mark Stabile
Author-Person: pst179
Note: EH PE
Number: 9855
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9855
File-URL: http://www.nber.org/papers/w9855.pdf
File-Format: application/pdf
Publication-Status: published as Smart, Michael and Mark Stabile. "Tax Credits, Insurance, And The Use Of Medical Care," Canadian Journal of Economics, 2005, v38(2,May), 345-365.
Abstract: Several recent proposals have advocated using the income tax system to collect user fees to help fund the health care system. While there is a considerable amount of research investigating both how individuals respond to tax incentives for employer provided health insurance and on the effects of user fees payable at the point of service on the use of health care services, there is limited evidence on how individuals respond to tax incentives when these are not realized until taxes are paid. This paper uses existing exemptions in the Canadian tax code that allow individuals to deduct the cost of health care or health insurance from their taxable income in order to identify the tax price elasticity of demand for health care when price changes are realized at the end of the tax year. Our results suggest that despite not realizing the tax benefit at the time of purchase, individuals are quite responsive to changes in the tax price of health care. Our elasticity estimates for a wide range of health care products are well within the range of traditional price elasticity estimates, including in particular our estimates for prescription drugs. We also find some evidence that suggests individuals trade off risk sharing through traditional insurance companies with risk sharing through the tax code. That is, as the tax price of health care decreases, individuals spend more on health care, but spend less on health insurance.
Handle: RePEc:nbr:nberwo:9855
Template-Type: ReDIF-Paper 1.0
Title: Literary Life Cycles: The Careers of Modern American Poets
Classification-JEL: J0; J4
Author-Name: David W. Galenson
Note: LS
Number: 9856
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9856
File-URL: http://www.nber.org/papers/w9856.pdf
File-Format: application/pdf
Publication-Status: published as David W Galenson, 2005. "Literary Life Cycles," Historical Methods: A Journal of Quantitative and Interdisciplinary History, vol 38(2), pages 45-60.
Abstract: This paper examines the careers of eleven leading American poets of the past century. Using the frequency with which poems are reprinted in anthologies as a measure of their importance, quantitative analysis reveals that among these poets there were two distinctly different life cycles: one group produced their most important work early in their careers, in their 20s and 30s, while the other group produced their most important work considerably later, in their 40s, 50s, and even 60s. These different career patterns appear to reflect differences in the nature of their poetry. The conceptual poets, including E. E. Cummings, T. S. Eliot, and Ezra Pound, arrived early and suddenly at a technically sophisticated poetry based on imagination and study of literary history, whereas Robert Frost, Robert Lowell, William Carlos Williams and the other experimental poets arrived later and more gradually at a poetry rooted in real speech and observation.
Handle: RePEc:nbr:nberwo:9856
Template-Type: ReDIF-Paper 1.0
Title: The Decline and Rise of Interstate Migration in the United States: Evidence from the IPUMS, 1850-1990
Classification-JEL: N3; J6
Author-Name: Joshua L. Rosenbloom
Author-Person: pro664
Author-Name: William A. Sundstrom
Note: LS
Number: 9857
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9857
File-URL: http://www.nber.org/papers/w9857.pdf
File-Format: application/pdf
Publication-Status: published as Field, Alexander J. (ed.) Research in economic history. Volume 22. Amsterdam and San Diego: Elsevier, JAI, 2004.
Abstract: We examine evidence on trends in interstate migration over the past 150 years, using data from the Integrated Public Use Microdata Series of the U.S. Census (IPUMS). Two measures of migration are calculated. The first considers an individual to have moved if she is residing in a state different from her state of birth. The second considers a family to have moved if it is residing in a state different from the state of birth of one of its young children. The latter measure allows us estimate the timing of moves more accurately. Our results suggest that overall migration propensities have followed a U-shaped trend since 1850, falling until around 1900 and then rising until around 1970. We examine variation in the propensity to make an interstate move by age, sex, race, nativity, region of origin, family structure, and education. Counterfactuals based on probit estimates of the propensity to migrate suggest that the rise in migration of families since 1900 is largely attributable to increased educational attainment. The decline of interstate migration in the late nineteenth century remains to be explained.
Handle: RePEc:nbr:nberwo:9857
Template-Type: ReDIF-Paper 1.0
Title: Stock Prices and IPO Waves
Classification-JEL: G12
Author-Name: Lubos Pastor
Author-Person: ppa276
Author-Name: Pietro Veronesi
Note: AP
Number: 9858
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9858
File-URL: http://www.nber.org/papers/w9858.pdf
File-Format: application/pdf
Abstract: We develop a model of stock valuation and optimal IPO timing when investment opportunities are time-varying. IPO waves in our model are caused by declines in expected returns, increases in expected profitability, or increases in prior uncertainty about average profitability. The model predicts that IPO waves are preceded by high market returns, followed by low market returns, and accompanied by high stock prices. These as well as other predictions are supported empirically. Stock prices at the peak of the recent bubble', which was associated with an IPO wave, are consistent with plausible parameter values in our rational valuation model.
Handle: RePEc:nbr:nberwo:9858
Template-Type: ReDIF-Paper 1.0
Title: Understanding Changes in International Business Cycle Dynamics
Classification-JEL: E3
Author-Name: James H. Stock
Author-Person: pst148
Author-Name: Mark W. Watson
Author-Person: pwa582
Note: EFG ME
Number: 9859
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9859
File-URL: http://www.nber.org/papers/w9859.pdf
File-Format: application/pdf
Publication-Status: published as James H. Stock & Mark W. Watson, 2005. "Understanding Changes In International Business Cycle Dynamics," Journal of the European Economic Association, MIT Press, vol. 3(5), pages 968-1006, 09.
Abstract: The volatility of economic activity in most G7 economies has moderated over the past forty years. Also, despite large increases in trade and openness, G7 business cycles have not become more synchronized. After documenting these twin facts, we interpret G7 output data using a structural VAR that separately identifies common international shocks, the domestic effects of spillovers from foreign idiosyncratic shocks, and the effects of domestic idiosyncratic shocks. This analysis suggests that, with the exception of Japan, the widespread reduction in volatility is in large part associated with a reduction in the magnitude of the common international shocks. Had the common international shocks in the 1980s and 1990s been as large as they were in the 1960s and 1970s, G7 business cycles would have been substantially more volatile and more highly synchronized than they actually were.
Handle: RePEc:nbr:nberwo:9859
Template-Type: ReDIF-Paper 1.0
Title: Why didn't France follow the British Stabilization after World War One?
Classification-JEL: E63; M4
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Pierre-Cyrille Hautcoeur
Author-Person: pha108
Note: DAE IFM ME
Number: 9860
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9860
File-URL: http://www.nber.org/papers/w9860.pdf
File-Format: application/pdf
Abstract: We show that the size of the public debt, the budget deficit and the monetary overhang made it impossible for France to stabilize its price level and return to the pre-war parity immediately after World War I, even on the anti-keynesian assumption that a stabilization would not have had any negative effects on real income. The reason for the immediate postwar inflation then was not mismanaged policy but a wise choice in the French context. Nevertheless, a stabilization at a devalued franc which would have been substantially higher than the rate achieved by Poincar‚‚ in 1926 was historically possible in early 1924, and it would likely have benefited not only France but the entire international monetary system.
Handle: RePEc:nbr:nberwo:9860
Template-Type: ReDIF-Paper 1.0
Title: Evaluating Portfolio Policies: A Duality Approach
Classification-JEL: G11; C63
Author-Name: Martin B. Haugh
Author-Name: Leonid Kogan
Author-Person: pko698
Author-Name: Jiang Wang
Note: AP
Number: 9861
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9861
File-URL: http://www.nber.org/papers/w9861.pdf
File-Format: application/pdf
Publication-Status: published as Haugh, M., Kogan, L., and J. Wang. “Evaluating Portfolio Policies: A Duality Approach." Operations Research 54 (2004): 405-418.
Abstract: The performance of a given portfolio policy can in principle be evaluated by comparing its expected utility with that of the optimal policy. Unfortunately, the optimal policy is usually not computable in which case a direct comparison is impossible. In this paper we solve this problem by using the given portfolio policy to construct an upper bound on the unknown maximum expected utility. This construction is based on a dual formulation of the portfolio optimization problem. When the upper bound is close to the expected utility achieved by the given portfolio policy, the potential utility loss of this policy is guaranteed to be small. Our algorithm can be used to evaluate portfolio policies in models with incomplete markets and position constraints. We illustrate our methodology by analyzing the static and myopic policies in markets with return predictability and constraints on short sales and borrowing.
Handle: RePEc:nbr:nberwo:9861
Template-Type: ReDIF-Paper 1.0
Title: Anticipated Ramsey Reforms and the Uniform Taxation Principle: the Role of International Financial Markets
Classification-JEL: F41; E52
Author-Name: Stephanie Schmitt-Grohe
Author-Person: psc44
Author-Name: Martin Uribe
Note: PE
Number: 9862
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9862
File-URL: http://www.nber.org/papers/w9862.pdf
File-Format: application/pdf
Abstract: This paper studies the role of asset-market completeness for the properties of optimal policy. A suitable framework for this purpose is the small open economy with complete international asset markets. For in this environment changes in policy represent country-specific risk diversifiable in world markets. Our main finding is that the fundamental public finance principle whereby when taxes on all final goods are available, it is optimal to tax final goods uniformly fails to obtain. In general, uniform taxation is optimal because it amounts to a nondistorting tax on fixed factors of production. In the open economy this principle fails because when households can insure against the risk of a policy reform, initial private asset holdings are contingent on actual policy and thus no longer represent an inelastically supplied source of income. Two further differences between optimal policy in the closed and open economies with complete markets are: (a) In the open economy, optimal consumption and income tax rates are unchanged in response to government purchases shocks. By contrast, in the closed economy tax rates do respond to innovations in public spending. (b) In the open economy, the Friedman rule is optimal only if the Ramsey planner has access to consumption taxes. In the absence of consumption taxes, deviations from the Friedman rule are large. On the other hand, in the closed economy, the availability of either consumption or income taxes suffices to render the Friedman rule optimal.
Handle: RePEc:nbr:nberwo:9862
Template-Type: ReDIF-Paper 1.0
Title: Market Evidence of Misperceived Prices and Mistaken Mortality Risks
Classification-JEL: D8
Author-Name: Jay Bhattacharya
Author-Name: Dana Goldman
Author-Person: pgo681
Author-Name: Neeraj Sood
Author-Person: pso62
Note: AG EH
Number: 9863
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9863
File-URL: http://www.nber.org/papers/w9863.pdf
File-Format: application/pdf
Publication-Status: published as Bhattacharya, Jay & Goldman, Dana & Sood, Neeraj, 2009. "Market evidence of misperceived mortality risk," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 451-462, October.
Abstract: We construct and implement a test of rational consumer behavior in a highstakes financial market. In particular, we test whether consumers make systematic mistakes in perceiving their mortality risks. We implement this test using data from secondary life insurance markets where consumers with a lifethreatening illness sell their life insurance policies to firms in return for an up-front payment. We compare predictions from two models: one with consumers who correctly perceive their mortality risk, and one with consumers who are misguided about their life expectancy, and find that our data are most consistent with the predictions made by the second model.
Handle: RePEc:nbr:nberwo:9863
Template-Type: ReDIF-Paper 1.0
Title: Explaining Sudden Stops, Growth Collapse and BOP Crises: The Case of Distortionary Output Taxes
Classification-JEL: F3; F4
Author-Name: Guillermo A. Calvo
Author-Person: pca694
Note: IFM
Number: 9864
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9864
File-URL: http://www.nber.org/papers/w9864.pdf
File-Format: application/pdf
Publication-Status: published as Calvo, Guillermo. Emerging Capital Markets in Turmoil: Bad Luck or Bad Policy? Cambridge, MA: MIT Press, 2005.
Abstract: The paper discusses a model in which growth is a negative function of fiscal burden. Moreover, growth discontinuously switches from high to low as fiscal burden reaches a critical level. Growth collapse is associated with a Sudden Stop of capital inflows, real depreciation and a drop in output (driven by a fall in the output of nontradables)-all of which have occurred during recent financial crises in Emerging Markets. The monetary version of the model is employed to show that BOP crises could be a result of fiscal distortions. In particular, it is further argued that BOP crisis could be a justifiable central bank response to growth collapse, although realistic circumstances may make this response highly ineffective. An important policy implication of the model is that in order to avoid Sudden Stop crises, policymakers should aim at improving fiscal institutions. Lowering the fiscal deficit is highly effective in the medium term
Handle: RePEc:nbr:nberwo:9864
Template-Type: ReDIF-Paper 1.0
Title: The Economic Tragedy of the XXth Century: Growth in Africa
Classification-JEL: O1
Author-Name: Elsa V. Artadi
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Note: EFG
Number: 9865
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9865
File-URL: http://www.nber.org/papers/w9865.pdf
File-Format: application/pdf
Abstract: The dismal growth performance of Africa is the worst economic tragedy of the XXth century. We document the evolution of per capita GDP for the continent as a whole and for subset of countries south of the Sahara desert. We document the worsening of various income inequality indexes and we estimate poverty rates and headcounts. We then analyze some of the central robust determinants of economic growth reported by Sala-i-Martin, Doppelhofer and Miller (2003) and project the annual growth rates Africa would have enjoyed if these key determinants had taken OECD rather than African values. Expensive investment goods, low levels of education, poor health, adverse geography, closed economies, too much public expenditure and too many military conflicts are seen as key explanations of the economic tragedy.
Handle: RePEc:nbr:nberwo:9865
Template-Type: ReDIF-Paper 1.0
Title: A New Measure of Monetary Shocks: Derivation and Implications
Classification-JEL: E52; E58
Author-Name: Christina D. Romer
Author-Person: pro407
Author-Name: David H. Romer
Author-Person: pro406
Note: EFG DAE ME
Number: 9866
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9866
File-URL: http://www.nber.org/papers/w9866.pdf
File-Format: application/pdf
Publication-Status: published as Romer, Christina D. and David H. Romer. "A New Measure Of Monetary Shocks: Derivation And Implications," American Economic Review, 2004, v94(4,Sep), 1055-1084.
Abstract: Conventional measures of monetary policy, such as the federal funds rate, are surely influenced by forces other than monetary policy. More importantly, central banks adjust policy in response to a wide range of information about future economic developments. As a result, estimates of the effects of monetary policy derived using conventional measures will tend to be biased. To address this problem, we develop a new measure of monetary policy shocks in the United States for the period 1969 to 1996 that is relatively free of endogenous and anticipatory movements. The derivation of the new measure has two key elements. First, to address the problem of forward-looking behavior, we control for the Federal Reserve's forecasts of output and inflation prepared for scheduled FOMC meetings. We remove from our measure policy actions that are a systematic response to the Federal Reserve's anticipations of future developments. Second, to address the problem of endogeneity and to ensure that the forecasts capture the main information the Federal Reserve had at the times decisions were made, we consider only changes in the Federal Reserve's intentions for the federal funds rate around scheduled FOMC meetings. This series on intended changes is derived using information on the expected funds rate from the records of the Open Market Manager and information on intentions from the narrative records of FOMC meetings. The series covers the entire period for which forecasts are available, including times when the Federal Reserve was not exclusively targeting the funds rate. Estimates of the effects of monetary policy obtained using the new measure indicate that policy has large, relatively rapid, and statistically significant effects on both output and inflation. We find that the effects using the new measure are substantially stronger and quicker than those using prior measures. This suggests that previous measures of policy shocks are significantly contaminated by forward-looking Federal Reserve behavior and endogeneity.
Handle: RePEc:nbr:nberwo:9866
Template-Type: ReDIF-Paper 1.0
Title: Flexible Exchange Rates as Shock Absorbers
Classification-JEL: F30; F32
Author-Name: Sebastian Edwards
Author-Person: ped3
Author-Name: Eduardo Levy Yeyati
Author-Person: ple99
Note: EFG IFM ITI
Number: 9867
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9867
File-URL: http://www.nber.org/papers/w9867.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian and Eduardo Levy Yeyati. "Flexible Exchange Rates As Shock Absorbers," European Economic Review, 2005, v49(8,Nov), 2079-2105.
Abstract: In this paper we analyze empirically the effect of terms of trade shocks on economic performance under alternative exchange rate regimes. We are particularly interested in investigating whether terms of trade disturbances have a smaller effect on growth in countries with a flexible exchange rate regime, than in countries with a more rigid exchange rate arrangement. We also analyze whether negative and positive terms of trade shocks have asymmetric effects on growth, and whether the magnitude of these asymmetries depends on the exchange rate regime. We find evidence suggesting that terms of trade shocks get amplified in countries that have more rigid exchange rate regimes. We also find evidence of an asymmetric response to terms of trade shocks: the output response is larger for negative than for positive shocks. Finally, we find evidence supporting the view that, after controlling for other factors, countries with more flexible exchange rate regimes grow faster than countries with fixed exchange rates.
Handle: RePEc:nbr:nberwo:9867
Template-Type: ReDIF-Paper 1.0
Title: Did American Welfare Capitalists Breach their Implicit Contracts? Preliminary Findings from Company-level Data, 1920-1940
Classification-JEL: N32; N82
Author-Name: Chiaki Moriguchi
Author-Person: pmo419
Note: DAE LS
Number: 9868
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9868
File-URL: http://www.nber.org/papers/w9868.pdf
File-Format: application/pdf
Publication-Status: published as Moriguchi, Chiaki. "Implicit Contracts, The Great Depression, And Institutional Change: A Comparative Analysis Of U.S. And Japanese Employment Relations, 1920-1940," Journal of Economic History, 2003, v63(3,Sep), 625-665.
Abstract: It has been claimed that American employers' experiments in private welfare capitalism collapsed during the Great Depression and were subsequently replaced by the welfare state and industrial unionism. However, recent studies reveal considerable differences among firms, adding complex nuances to a simple story of discontinuation. Characterizing private welfare capitalism as a set of personnel practices that constituted an implicit contract equilibrium, this paper compiles data of fourteen manufacturing firms and tests the implications of implicit contract theory. It finds that the repudiation of implicit contracts was positively correlated with the severity of the depression experienced by a firm and negatively correlated with the effectiveness of internal enforcement mechanisms. It also shows that a firm with more repudiation experienced greater change in labor-management relations under the New Deal regime. A comparative case study complements the findings by providing quantitative evidence.
Handle: RePEc:nbr:nberwo:9868
Template-Type: ReDIF-Paper 1.0
Title: Why the Welfare State Looks Like a Free Lunch
Classification-JEL: H0; N4
Author-Name: Peter H. Lindert
Author-Person: pli466
Note: DAE
Number: 9869
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9869
File-URL: http://www.nber.org/papers/w9869.pdf
File-Format: application/pdf
Abstract: The econometric consensus on the effects of social spending confirms a puzzle we confront in the raw data: There is no clear net GDP cost of high tax-based social spending on GDP, despite a tradition of assuming that such costs are large. The paper offers five keys to this free lunch puzzle. First, the costly forms of transfers usually imagined have not been practiced by real-world welfare states. Second, better tests confirm that the usually imagined costs would be felt only if policy had strayed out of sample, away from any actual historical experience. Third, the tax strategies of high-budget welfare states are more pro-growth and less progressive than has been realized. Fourth, the work disincentives of social transfers are so designed as to shield GDP from much reduction if any. Finally, we return to some positive growth and well-being benefits of the high social transfers, and suggest how democratic cost control relates to budget size.
Handle: RePEc:nbr:nberwo:9869
Template-Type: ReDIF-Paper 1.0
Title: Who Gets Health Care?
Classification-JEL: I1; I11
Author-Name: Robert W. Fogel
Author-Name: Chulhee Lee
Author-Person: ple383
Note: EH
Number: 9870
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9870
File-URL: http://www.nber.org/papers/w9870.pdf
File-Format: application/pdf
Abstract: Around the world, as in the United States, concern is growing about who gets health care. Individuals from different socioeconomic backgrounds face distressingly different prospects of living a healthy life. Disparities in various measures of health between the privileged and the deprived still remain wide, despite the long-term tendency toward a healthier society. Some investigators believe the shift in the health care system in industrial countries from the principle of universal access to a more market-oriented system may be one cause of the growing disparities; rising income inequality is another potential culprit. Policy makers worldwide speak of more efficiently delivering essential' health care---but disagree on what counts as essential and on the optimal mix of private and government components of service. After reviewing the economic and epidemiological literature on disparities in health and health care systems, the question of how to define essential' health care is considered. The paper concludes with a discussion of the policy implications of the analysis.
Handle: RePEc:nbr:nberwo:9870
Template-Type: ReDIF-Paper 1.0
Title: Entry Deterrence in Hospital Procedure Markets: A Simple Model of Learning-By-Doing
Classification-JEL: L1; I2
Author-Name: Leemore S. Dafny
Note: EH
Number: 9871
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9871
File-URL: http://www.nber.org/papers/w9871.pdf
File-Format: application/pdf
Abstract: This paper examines the strategic behavior of hospitals in one of their primary output markets: inpatient surgical procedures. High levels of learning-by-doing in surgical fields may act as a barrier to entry. I investigate whether incumbent hospitals facing prospective entry in a procedure market manipulate their procedure volumes to produce such a barrier. I derive straightforward empirical tests from a model of patient demand, procedure quality, and differentiated product competition. Using hospital data on electrophysiological studies, an invasive cardiac procedure, I find evidence of entry-deterring investment in procedure volume. These findings suggest that competitive motivations may play a role in treatment decisions.
Handle: RePEc:nbr:nberwo:9871
Template-Type: ReDIF-Paper 1.0
Title: Heckscher-Ohlin Theory and Individual Attitudes Towards Globalization
Classification-JEL: F1; F2
Author-Name: Kevin O'Rourke
Author-Person: por7
Note: ITI
Number: 9872
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9872
File-URL: http://www.nber.org/papers/w9872.pdf
File-Format: application/pdf
Publication-Status: published as Findlay, R., R. Henriksson, H. Lindgren and M. Lundahl (eds.) Eli Heckscher, International Trade, and Economic History. MIT Press, 2006.
Abstract: The aim of the paper is to see whether individuals' attitudes towards globalization are consistent with the predictions of Heckscher-Ohlin theory. The theory predicts that the impact of being skilled or unskilled on attitudes towards trade and immigration should depend on a country's skill endowments, with the skilled being less anti-trade and anti-immigration in more skill-abundant countries (here taken to be richer countries) than in more unskilled-labour-abundant countries (here taken to be poorer countries). These predictions are confirmed, using survey data for 24 countries. Being high-skilled is associated with more pro-globalization attitudes in rich countries; while in some of the very poorest countries in the sample being high-skilled has a negative (if statistically insignificant) impact on pro-globalization sentiment. More generally, an interaction term between skills and GDP per capita has a negative impact in regressions explaining anti-globalization sentiment. Furthermore, individuals view protectionism and anti-immigrant policies as complements rather than as substitutes, which is what simple Heckscher-Ohlin theory predicts.
Handle: RePEc:nbr:nberwo:9872
Template-Type: ReDIF-Paper 1.0
Title: Are Emily and Greg More Employable than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination
Classification-JEL: J7; J71
Author-Name: Marianne Bertrand
Author-Person: pbe697
Author-Name: Sendhil Mullainathan
Author-Person: pmu103
Note: LS
Number: 9873
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9873
File-URL: http://www.nber.org/papers/w9873.pdf
File-Format: application/pdf
Publication-Status: published as Bertrand, Marianne and Sendhil Mullainathan. "Are Emily And Greg More Employable Than Lakisha And Jamal? A Field Experiment On Labor Market Discrimination," American Economic Review, 2004, v94(4,Sep), 991-1013.
Abstract: We perform a field experiment to measure racial discrimination in the labor market. We respond with fictitious resumes to help-wanted ads in Boston and Chicago newspapers. To manipulate perception of race, each resume is assigned either a very African American sounding name or a very White sounding name. The results show significant discrimination against African-American names: White names receive 50 percent more callbacks for interviews. We also find that race affects the benefits of a better resume. For White names, a higher quality resume elicits 30 percent more callbacks whereas for African Americans, it elicits a far smaller increase. Applicants living in better neighborhoods receive more callbacks but, interestingly, this effect does not differ by race. The amount of discrimination is uniform across occupations and industries. Federal contractors and employers who list Equal Opportunity Employer' in their ad discriminate as much as other employers. We find little evidence that our results are driven by employers inferring something other than race, such as social class, from the names. These results suggest that racial discrimination is still a prominent feature of the labor market.
Handle: RePEc:nbr:nberwo:9873
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Price Regulation on the Launch Delay of New Drugs - Evidence from Twenty-Five Major Markets in the 1990s
Classification-JEL: F14; I18
Author-Name: Patricia M. Danzon
Author-Person: pda291
Author-Name: Y. Richard Wang
Author-Name: Liang Wang
Author-Person: pwa357
Note: EH IO
Number: 9874
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9874
File-URL: http://www.nber.org/papers/w9874.pdf
File-Format: application/pdf
Publication-Status: published as Patricia M. Danzon & Y. Richard Wang & Liang Wang, 2005. "The impact of price regulation on the launch delay of new drugs-evidence from twenty-five major markets in the 1990s," Health Economics, John Wiley & Sons, Ltd., vol. 14(3), pages 269-292.
Abstract: This study analyzes the effect of pharmaceutical price regulation on delays in new drug launches. Because low price in one market may 'spill-over' to others, though parallel trade and external referencing, manufacturers may rationally prefer longer delay or non-launch to accepting a low price. We use a Cox proportional hazard model to analyze the launch experience in 25 major markets of 85 new chemical entities (NCEs) launched in the UK or US between 1994 and 1998. There are 1,167 observed launches, or about 55% of the maximum. The US leads with 73 launches, followed by Germany (66) and the UK (64). Only 13 NCEs launched in Japan, 26 in Portugal and 28 in New Zealand. Countries with fewer launches also have longer average launch lags. The launch hazard is positively related to expected price and to expected volume, controlling for income per capita. The originator firm(s) characteristics, specifically, launch in home country and global experience, also significantly reduce launch delay. Within the EU, likely parallel export countries have the most negative effects. Our results suggest that countries with lower expected prices or smaller expected market size experience longer delays in new drug access, controlling for per capita income and other country and firm characteristics.
Handle: RePEc:nbr:nberwo:9874
Template-Type: ReDIF-Paper 1.0
Title: When Do Central Bank Interventions Influence Intra-Daily and Longer-Term Exchange Rate Movements?
Classification-JEL: F31; G14
Author-Name: Kathryn M.E. Dominguez
Author-Person: pdo227
Note: IFM AP
Number: 9875
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9875
File-URL: http://www.nber.org/papers/w9875.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Money and Finance, 25, 2006, 1051-1071.
Abstract: This paper examines dollar interventions by the G3 governments since 1989, and the reasons that trader reactions to these interventions might differ over time and across central banks. Market microstructure theory provides a framework for understanding the process by which sterilized central bank interventions are observed and interpreted by traders, and how this process, in turn, might influence exchange rates. Using intra-daily and daily exchange rate and intervention data, the paper analyzes the influence of interventions on exchange rate volatility, finding evidence of both within day and daily impact effects, but little evidence that interventions increase longer-term volatility.
Handle: RePEc:nbr:nberwo:9875
Template-Type: ReDIF-Paper 1.0
Title: Peer Effects and Alcohol Use Among College Students
Classification-JEL: I12; I20
Author-Name: Michael Kremer
Author-Person: pkr20
Author-Name: Dan M. Levy
Note: ED CH
Number: 9876
Creation-Date: 2003-07
Order-URL: http://www.nber.org/papers/w9876
File-URL: http://www.nber.org/papers/w9876.pdf
File-Format: application/pdf
Publication-Status: published as Kremer, Michael and Dan Levy. "Peer Effects and Alcohol Use Among College Students." Journal of Economic Perspectives 22, 3 (Summer 2008): 189-206.
Abstract: This paper examines a natural experiment in which students at a large state university were randomly assigned roommates through a lottery system. We find that on average, males assigned to roommates who reported drinking in the year prior to entering college had one quarter-point lower GPA than those assigned to non-drinking roommates. The 10th percentile of their college GPA is half a point lower than among males assigned non-drinking roommates. For males who themselves drank frequently prior to college, assignment to a roommate who drank frequently prior to college reduces GPA by two-thirds of a point. Since students who drink frequently are particularly influenced by frequent-drinking roommates, substance-free housing programs could potentially lower average GPA by segregating drinkers. The effect of initial assignment to a drinking roommate persists and possibly even grows over time. In contrast, students' college GPA is not influenced by roommates' high school grades, admission test scores, or family background. Females' GPAs are not affected by roommates' drinking prior to college. Overall, these findings are more consistent with models in which peers change preferences than models in which they change endowments.
Handle: RePEc:nbr:nberwo:9876
Template-Type: ReDIF-Paper 1.0
Title: Selection Bias, Comparative Advantage and Heterogeneous Returns to Education
Classification-JEL: C31
Author-Name: James J. Heckman
Author-Name: Xuesong Li
Note: ED LS CH
Number: 9877
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9877
File-URL: http://www.nber.org/papers/w9877.pdf
File-Format: application/pdf
Publication-Status: published as Heckman, James J. and Xuesong Li. "Selection Bias, Comparative Advantage And Heterogeneous Returns To Education: Evidence From China In 2000," Pacific Economic Review, 2004, v9(3,Oct), 155-171.
Abstract: This paper uses newly available Chinese micro data to estimate the return to college education for late 20th century China when allowing for heterogeneous returns among individuals selecting into schooling based on these differences. We use recently developed semiparametric methods to identify the parameters of interest. We demonstrate that heterogeneity among people in returns to schooling is substantial. People sort into schooling on the basis of the principle of comparative advantage, which we document to be an empirically important phenomenon in modern Chinese labor markets. Standard least squares or instrumental variable methods do not properly account for this sorting. Using new methods that do, we estimate the effect on earnings of sending a randomly selected person to college is a 43% increase in lifetime earnings (nearly 11% annually) in 2000 for young people in urban areas of six provinces of China. The effect of college on those who go is 13%. Our evidence, and simple least squares evidence, suggests that after 20-plus years of economic reform with market orientation, the return to education has increased substantially in China, compared to the returns measured in the 1980's and the early 1990's.
Handle: RePEc:nbr:nberwo:9877
Template-Type: ReDIF-Paper 1.0
Title: Analyzing the Determinants of the Matching Public School Teachers to Jobs: Estimating Compensating Differentials in Imperfect Labor Markets
Classification-JEL: I2; J2
Author-Name: Donald Boyd
Author-Name: Hamilton Lankford
Author-Name: Susanna Loeb
Author-Name: James Wyckoff
Author-Person: pwy10
Note: ED LS
Number: 9878
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9878
File-URL: http://www.nber.org/papers/w9878.pdf
File-Format: application/pdf
Abstract: Although there is growing recognition of the contribution of teachers to students' educational outcomes, there are large gaps in our understanding of how teacher labor markets function. Most research on teacher labor markets use models developed for the private sector. However, markets for public school teachers differ in fundamental ways from those in the private sector. Collective bargaining and public decision making processes set teacher salaries. Thus it is unlikely that wages adjust quickly to equilibrate the supply and demand for worker and job attributes. The objective of this paper is to develop and estimate a model that more accurately characterizes the institutional features of teacher labor markets. The approach is based on a game-theoretic two-sided matching model and the estimation strategy employs the method of simulated moments. With this combination, we are able to estimate how factors affect the choices of individual teachers and hiring authorities, as well as how these choices interact to determine the equilibrium allocation of teachers across jobs. Even though this paper focuses on worker-job match within teacher labor markets, many of the issues raised and the empirical framework employed are relevant in other settings where wages are set administratively or, more generally, do not clear the pertinent markets for job and worker attributes.
Handle: RePEc:nbr:nberwo:9878
Template-Type: ReDIF-Paper 1.0
Title: Trade Reforms, Labor Regulations and Labor-Demand Elasticities: Empirical Evidence from India
Classification-JEL: F1; J3
Author-Name: Rana Hasan
Author-Person: pha1040
Author-Name: Devashish Mitra
Author-Person: pmi161
Author-Name: K.V. Ramaswamy
Note: ITI LS
Number: 9879
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9879
File-URL: http://www.nber.org/papers/w9879.pdf
File-Format: application/pdf
Publication-Status: published as Rana Hasan & Devashish Mitra & K.V Ramaswamy, 2007. "Trade Reforms, Labor Regulations, and Labor-Demand Elasticities: Empirical Evidence from India," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 466-481, 02.
Abstract: Using industry-level data disaggregated by states, this paper finds a positive impact of trade liberalization on labor-demand elasticities in the Indian manufacturing sector. These elasticities turn out to be negatively related to protection levels that vary across industries and over time. Furthermore, we find that these elasticities are not only higher for Indian states with more flexible labor regulations, they are also impacted to a larger degree by trade reforms. Finally, we find that after the reforms, volatility in productivity and output gets translated into larger wage and employment volatility, theoretically a possible consequence of larger labor-demand elasticities.
Handle: RePEc:nbr:nberwo:9879
Template-Type: ReDIF-Paper 1.0
Title: Financial Integration: A New Methodology and an Illustration
Classification-JEL: G14
Author-Name: Robert P. Flood
Author-Person: pfl25
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: IFM
Number: 9880
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9880
File-URL: http://www.nber.org/papers/w9880.pdf
File-Format: application/pdf
Publication-Status: published as Robert P. Flood & Andrew K. Rose, 2005. "Financial Integration: A New Methodology And An Illustration," Journal of the European Economic Association, MIT Press, vol. 3(6), pages 1349-1359, December.
Abstract: This paper develops a simple new methodology to test for asset integration and applies it within and between American stock markets. Our technique is tightly based on a general intertemporal asset-pricing model, and relies on estimating and comparing expected risk-free rates across assets. Expected risk-free rates are allowed to vary freely over time, constrained only by the fact that they are equal across (risk-adjusted) assets. Assets are allowed to have general risk characteristics, and are constrained only by a factor model of covariances over short time periods. The technique is undemanding in terms of both data and estimation. We find that expected risk-free rates vary dramatically over time, unlike short interest rates. Further, the S&P 500 market seems to be well integrated, and the NASDAQ is generally (but not always) integrated. However, the NASDAQ is poorly integrated with the S&P 500.
Handle: RePEc:nbr:nberwo:9880
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Schooling and Ability on Achievement Test Scores
Classification-JEL: C35; C15
Author-Name: Karsten Hansen
Author-Name: James J. Heckman
Author-Name: Kathleen J. Mullen
Author-Person: pmu207
Note: ED PE CH
Number: 9881
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9881
File-URL: http://www.nber.org/papers/w9881.pdf
File-Format: application/pdf
Publication-Status: published as Hansen, Karsten T. & Heckman, James J. & Mullen, K.J.Kathleen J., 2004. "The effect of schooling and ability on achievement test scores," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 39-98.
Abstract: This paper develops two methods for estimating the effect of schooling on achievement test scores that control for the endogeneity of schooling by postulating that both schooling and test scores are generated by a common unobserved latent ability. These methods are applied to data on schooling and test scores. Estimates from the two methods are in close agreement. We find that the effects of schooling on test scores are roughly linear across schooling levels. The effects of schooling on measured test scores are slightly larger for lower latent ability levels. We find that schooling increases the AFQT score on average between 2 and 4 percentage points, roughly twice as large as the effect claimed by Herrnstein and Murray (1994) but in agreement with estimates produced by Neal and Johnson (1996) andWinship and Korenman (1997). We extend the previous literature by estimating the impact of schooling on measured test scores at various quantiles of the latent ability distribution.
Handle: RePEc:nbr:nberwo:9881
Template-Type: ReDIF-Paper 1.0
Title: What Works in Securities Law?
Classification-JEL: G15; G18
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 LE
Number: 9882
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9882
File-URL: http://www.nber.org/papers/w9882.pdf
File-Format: application/pdf
Publication-Status: published as Rafael Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2006. "What Works in Securities Laws?," Journal of Finance, American Finance Association, vol. 61(1), pages 1-32, 02.
Abstract: We examine the effect of securities laws on stock market development in 49 countries. We find almost no evidence that public enforcement benefits stock markets, and strong evidence that laws facilitating private enforcement through disclosure and liability rules benefit stock markets.
Handle: RePEc:nbr:nberwo:9882
Template-Type: ReDIF-Paper 1.0
Title: Fees and Surcharging in automatic teller machine networks: Non-bank ATM providers versus large banks
Classification-JEL: L1; G2
Author-Name: Elizabeth W. Croft
Author-Name: Barbara J. Spencer
Author-Person: psp2
Note: IO
Number: 9883
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9883
File-URL: http://www.nber.org/papers/w9883.pdf
File-Format: application/pdf
Abstract: This paper develops a spacial model of ATM networks to explore the implications for banks and non-banks of interchange fees, foreign fees and surcharges applied to transactions by customers at other than an own-bank ATM. Surcharging raises the price (foreign fee plus surcharge) paid by customers above the joint profit-maximizing level achieved by setting the interchange fee at marginal cost and not surcharging. Similar size banks would agree not to surcharge, but such an agreement is typically not possible between a bank and a non-bank. A high cost of teller transactions modifies the tendency towards high ATM fees.
Handle: RePEc:nbr:nberwo:9883
Template-Type: ReDIF-Paper 1.0
Title: Imperfect Knowledge, Inflation Expectations, and Monetary Policy
Classification-JEL: E52
Author-Name: Athanasios Orphanides
Author-Name: John C. Williams
Author-Person: pwi23
Note: ME
Number: 9884
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9884
File-URL: http://www.nber.org/papers/w9884.pdf
File-Format: application/pdf
Publication-Status: published as Orphanides, Athanasios and John C. Williams. "Inflation Scares And Forecast-Based Monetary Policy," Review of Economic Dynamics, 2005, v8(2,Apr), 498-527.
Publication-Status: published as Imperfect Knowledge, Inflation Expectations, and Monetary Policy, Athanasios Orphanides, John Williams. in The Inflation-Targeting Debate, Bernanke and Woodford. 2005
Abstract: This paper investigates the role that imperfect knowledge about the structure of the economy plays in the formation of expectations, macroeconomic dynamics, and the efficient formulation of monetary policy. Economic agents rely on an adaptive learning technology to form expectations and to update continuously their beliefs regarding the dynamic structure of the economy based on incoming data. The process of perpetual learning introduces an additional layer of dynamic interaction between monetary policy and economic outcomes. We find that policies that would be efficient under rational expectations can perform poorly when knowledge is imperfect. In particular, policies that fail to maintain tight control over inflation are prone to episodes in which the public's expectations of inflation become uncoupled from the policy objective and stagflation results, in a pattern similar to that experienced in the United States during the 1970s. Our results highlight the value of effective communication of a central bank's inflation objective and of continued vigilance against inflation in anchoring inflation expectations and fostering macroeconomic stability.
Handle: RePEc:nbr:nberwo:9884
Template-Type: ReDIF-Paper 1.0
Title: You Only Die Once: Managing Discrete Interdependent Risks
Classification-JEL: C72; D80
Author-Name: Geoffrey Heal
Author-Person: phe40
Author-Name: Howard Kunreuther
Number: 9885
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9885
File-URL: http://www.nber.org/papers/w9885.pdf
File-Format: application/pdf
Publication-Status: published as Richardson, H.W., P. Gordon and J.E. Moore II (eds.) The Economic Impacts of Terrorist Attacks. Cheltenham, UK: Edward Elgar, 2005.
Abstract: This paper extends our earlier analysis of interdependent security issues to a general class of problems involving discrete interdependent risks with heterogeneous agents. There is a threat of an event that can only happen once, and the risk depends on actions taken by others. Any agent's incentive to invest in managing the risk depends on the actions of others. Security problems at airlines and in computer networks come into this category, as do problems of risk management in organizations facing the possibility of bankruptcy, and individuals' choices about whether to be vaccinated against an infectious disease. Surprisingly the framework also covers certain aspects of investment in R&D. Here we characterize Nash equilibria with heterogeneous agents and give conditions for tipping and cascading of equilibria.
Handle: RePEc:nbr:nberwo:9885
Template-Type: ReDIF-Paper 1.0
Title: Cities, Regions and the Decline of Transport Costs
Classification-JEL: R12; R14
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Janet E. Kohlhase
Author-Person: pko405
Note: EFG
Number: 9886
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9886
File-URL: http://www.nber.org/papers/w9886.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. and J.E. Kohlhase. 2004. “Cities, Regions and the Decline of Transport Costs." Papers in Regional Science 83(1): 197-228.
Publication-Status: published as Edward Glaeser & Janet Kohlhase, 2003. "Cities, regions and the decline of transport costs," Economics of Governance, Springer, vol. 83(1), pages 197-228, October.
Abstract: The theoretical framework of urban and regional economics is built on transportation costs for manufactured goods. But over the twentieth century, the costs of moving these goods have declined by over 90% in real terms, and there is little reason to doubt that this decline will continue. Moreover, technological change has eliminated the importance of fixed infrastructure transport (rail and water) that played a critical role in creating natural urban centres. In this article, we document this decline and explore several simple implications of a world where it is essentially free to move goods, but expensive to move people. We find empirical support for these implications.
Handle: RePEc:nbr:nberwo:9886
Template-Type: ReDIF-Paper 1.0
Title: Six Challenges in Designing Equity-Based Pay
Classification-JEL: J0; J3
Author-Name: Brian J. Hall
Note: CF LS
Number: 9887
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9887
File-URL: http://www.nber.org/papers/w9887.pdf
File-Format: application/pdf
Publication-Status: published as Brian J. Hall, 2003. "Six Challenges In Designing Equity-Based Pay," Journal of Applied Corporate Finance, Morgan Stanley, vol. 15(3), pages 21-33.
Abstract: This paper analyzes why the primary goal of the equity-pay explosion--creating long-run ownership incentives for top executives--has often been difficult to achieve in practice. More generally, I describe six challenges in the design of equity-based pay plans and discuss potential solutions. The six challenges involve: 1. mismatched time horizons; 2. gaming; 3. the value-cost wedge'; 4. the leverage-fragility tradeoff; 5. aligning risk-taking incentives; and 6. avoiding excessive compensation. The paper also discussed the merits of stock versus options and concludes that restricted stock is often a superior form of compensation.
Handle: RePEc:nbr:nberwo:9887
Template-Type: ReDIF-Paper 1.0
Title: Incentive-Compatible Guaranteed Renewable Health Insurance
Classification-JEL: G22; I10
Author-Name: Bradley Herring
Author-Person: phe204
Author-Name: Mark Pauly
Note: EH
Number: 9888
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9888
File-URL: http://www.nber.org/papers/w9888.pdf
File-Format: application/pdf
Publication-Status: published as Herring, Bradley and Mark V. Pauly. "Incentive-Compatible Guaranteed Renewable Health Insurance Premiums," Journal of Health Economics, 2006, v25(3,May), 395-417.
Abstract: Multi-period theoretical models of renewable insurance display front-loaded premium schedules that both cover lifetime total claims of low-risk and high-risk individuals and provide an incentive for those who remain low-risk to continue to purchase the policy. In practice, however, an age profile of premiums that decreases with age might result in relatively high premiums for younger individuals which they may consider unaffordable. In this paper, we use medical expenditure data to estimate an optimal competitive age-based premium schedule for a benchmark renewable health insurance policy. We find that the amount of prepayment by younger individuals that would be necessary to cover future claims is mitigated by three factors: high-risk individuals will either recover or die, low-risk expected expense increases with age, and the likelihood of developing a high-risk condition increases with age. Although medical cost growth over time increases the amount of prepayment necessary, the resulting optimal premium path generally increases with age. We also find that actual premium paths exhibited by purchasers of individual insurance with guaranteed renewability is close to the optimal schedule we estimate. Finally, we examine consumers' gain in expected utility associated with the guaranteed renewability feature.
Handle: RePEc:nbr:nberwo:9888
Template-Type: ReDIF-Paper 1.0
Title: Are Structural Estimates of Auction Models Reasonable? Evidence from Experimental Data
Classification-JEL: L0; C5
Author-Name: Patrick Bajari
Author-Name: Ali Hortacsu
Note: IO
Number: 9889
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9889
File-URL: http://www.nber.org/papers/w9889.pdf
File-Format: application/pdf
Publication-Status: published as Bajari, Patrick and Ali Hortacsu. "Are Structural Estimates of Auction Models Reasonable? Evidence from Experimental Data." Journal of Political Economy 113, 4 (2005): 703-741.
Abstract: Recently, economists have developed methods for structural estimation of auction models. Many researchers object to these methods because they find the rationality assumptions used in these models to be implausible. In this paper, we explore whether structural auction models can generate reasonable estimates of bidders' private information. Using bid data from auction experiments, we estimate four alternative structural models of bidding in first-price sealed-bid auctions: 1) risk neutral Bayes-Nash, 2) risk averse Bayes-Nash, 3) a model of learning and 4) a quantal response model of bidding. For each model, we compare the estimated valuations and the valuations assigned to bidders in the experiments. We find that a slight modification of Guerre, Perrigne and Vuong's (2000) procedure for estimating the risk neutral Bayes-Nash model to allow for bidder asymmetries generates quite reasonable estimates of the structural parameters.
Handle: RePEc:nbr:nberwo:9889
Template-Type: ReDIF-Paper 1.0
Title: Regulations, Market Structure, Institutions, and the Cost of Financial Intermediation
Classification-JEL: G21; G28
Author-Name: Asli Demirguc-Kunt
Author-Person: pde226
Author-Name: Luc Laeven
Author-Person: pla174
Author-Name: Ross Levine
Author-Person: ple61
Note: IFM
Number: 9890
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9890
File-URL: http://www.nber.org/papers/w9890.pdf
File-Format: application/pdf
Publication-Status: published as Demirgüç-Kunt, Asli, Luc Laeven, and Ross Levine. "Regulations, Market Structure, Institutions, and the Cost of Financial Intermediation." Journal of Money, Credit and Banking 36(3): 593-622, June 2004
Publication-Status: published as Asli Demirgüç-Kunt & Luc Laeven & Ross Levine, 2004. "Regulations, market structure, institutions, and the cost of financial intermediation," Proceedings, Federal Reserve Bank of Cleveland, pages 593-626.
Abstract: This paper examines the impact of bank regulations, market structure, and national institutions on bank net interest margins and overhead costs using data on over 1,400 banks across 72 countries while controlling for bank-specific characteristics. The data indicate that tighter regulations on bank entry and bank activities boost the cost of financial intermediation. Inflation also exerts a robust, positive impact on bank margins and overhead costs. While concentration is positively associated with net interest margins, this relationship breaks down when controlling for regulatory impediments to competition and inflation. Furthermore, bank regulations become insignificant when controlling for national indicators of economic freedom or property rights protection, while these institutional indicators robustly explain cross-bank net interest margins and overhead expenditures. Thus, bank regulations cannot be viewed in isolation; they reflect broad, national approaches to private property and competition.
Handle: RePEc:nbr:nberwo:9890
Template-Type: ReDIF-Paper 1.0
Title: Estimating Housing Demand with an Application to Explaining Racial Segregation in Cities
Classification-JEL: R0; C5
Author-Name: Patrick Bajari
Author-Name: Matthew E. Kahn
Author-Person: pka41
Note: IO
Number: 9891
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9891
File-URL: http://www.nber.org/papers/w9891.pdf
File-Format: application/pdf
Publication-Status: published as Bajari, Patrick and Matthew E. Kahn. "Estimating Housing Demand With An Application To Explaining Racial Segregation In Cities," Journal of Business and Economic Statistics, 2005, v23(1,Jan), 20-33.
Abstract: We present a three-stage estimation procedure to recover willingness to pay for housing attributes. In the first stage, we estimate a non-parametric hedonic home price function. Second, we recover each consumer's taste parameters for product characteristics using first order conditions for utility maximization. Finally, we estimate the distribution of household tastes as a function of household demographics. As an application of our methods, we compare alternative explanations for why blacks choose to live in center cities while whites suburbanize.
Handle: RePEc:nbr:nberwo:9891
Template-Type: ReDIF-Paper 1.0
Title: Utility Evaluation of Risk in Retirement Saving Accounts
Classification-JEL: I0; H0
Author-Name: James Poterba
Author-Person: ppo19
Author-Name: Joshua Rauh
Author-Name: Steven Venti
Author-Name: David Wise
Author-Person: pwi45
Note: AG AP
Number: 9892
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9892
File-URL: http://www.nber.org/papers/w9892.pdf
File-Format: application/pdf
Publication-Status: published as Utility Evaluation of Risk in Retirement Saving Accounts, James M. Poterba, Joshua Rauh, Steven F. Venti. in Analyses in the Economics of Aging, Wise. 2005
Abstract: The shift from defined benefit to defined contribution plans in the United States has drawn new attention to the effect of participants' asset allocation decisions on their financial resources for retirement. This paper develops a stochastic simulation algorithm to evaluate the effect of holding a broadly diversified portfolio of common stocks, or a portfolio of index bonds, on the distribution of 401(k) account balances at retirement. We compare the alternative distributions of retirement wealth both by showing the empirical distribution of potential wealth values, and by computing the expected utility of these outcomes under standard assumptions about the structure of household preferences. Our analysis highlights the critical role of other sources of wealth, such as Social Security, defined benefit pension annuities, and saving outside retirement plans in determining the expected utility cost of holding equities in the retirement account. Our findings also demonstrate the importance of the equity premium in affecting investors' utility from different retirement asset allocations. Viewed from the beginning of a working career, and given the historical pattern of returns on stocks and bonds, a household that does not have extremely high risk aversion would achieve a higher expected utility by holding a portfolio of stocks rather than bonds.
Handle: RePEc:nbr:nberwo:9892
Template-Type: ReDIF-Paper 1.0
Title: Inventory Information
Classification-JEL: G12; G14
Author-Name: H. Henry Cao
Author-Person: pca855
Author-Name: Richard K. Lyons
Author-Person: ply9
Author-Name: Martin D.D. Evans
Author-Person: pev5
Note: AP
Number: 9893
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9893
File-URL: http://www.nber.org/papers/w9893.pdf
File-Format: application/pdf
Publication-Status: published as H. Henry Cao & Martin D. Evans & Richard K. Lyons, 2006. "Inventory Information," Journal of Business, University of Chicago Press, vol. 79(1), pages 325-364, January.
Abstract: In a market with symmetric information about fundamentals, can information-based trade still arise? Consider bond and FX markets, where private information about nominal cash flows is generally absent, but participants are convinced that superior information exists. We analyze a class of asymmetric information - inventory information - that is unrelated to fundamentals, but still forecasts future price (by forecasting future discount factors). Empirical work based on the analysis shows that inventory information in FX does indeed forecast discount factors, and does so over both short and long horizons. The immediate price impact of shocks to inventory information is large, roughly 50 percent of that from public information shocks (the latter being the whole story under symmetric information). Within about 30 minutes the transitory effect dies out, and prices reflect a permanent effect from inventory information that ranges between 15 and 30 percent of that from public information.
Handle: RePEc:nbr:nberwo:9893
Template-Type: ReDIF-Paper 1.0
Title: Investor Rationality: Evidence from UK Property Capitalization Rates
Classification-JEL: G12
Author-Name: Patric H. Hendershott
Author-Name: Bryan D. MacGregor
Note: PE
Number: 9894
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9894
File-URL: http://www.nber.org/papers/w9894.pdf
File-Format: application/pdf
Publication-Status: published as Hendershott, Patric H. and Bryan D. MacGregor. "Investor Rationality: An Analysis Of NCREIF Commercial Property Data," Journal of Real Estate Research, 2005, v27(4,Oct/Dec), 445-471.
Abstract: Recent analyses have suggested the irrationality of investors in Australian and U.S. office properties. More specifically, investors have failed to raise capitalization rates sufficiently at rental cyclical peaks to account for the obvious mean reversion in real rents and thus have significantly overvalued properties. In this paper we analyze the determination of UK office and retail capitalization rates and provide evidence that these rates reflect rational expectations of mean reversion in future real cash flows. Moreover, these rates are linked to capitalization rates (dividend/price ratio) and expected dividend earnings growth as expected.
Handle: RePEc:nbr:nberwo:9894
Template-Type: ReDIF-Paper 1.0
Title: Simulation and Estimation of Nonaddative Hedonic Models
Classification-JEL: C51
Author-Name: James J. Heckman
Author-Name: Rosa Matzkin
Author-Person: pma1417
Author-Name: Lars Nesheim
Author-Person: pne123
Note: IO LS PR PE
Number: 9895
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9895
File-URL: http://www.nber.org/papers/w9895.pdf
File-Format: application/pdf
Publication-Status: published as Kehoe, T., T.N. Srinivasan, J. Whalley (eds.) Frontiers in Applied General Equilibrium Modeling. Cambridge University Press, 2004.
Abstract: Making use of restrictions imposed by equilibrium, theoretical progress has been made on the nonparametric and semiparametric estimation and identification of scalar additive hedonic models (Ekeland, Heckman, and Nesheim, 2002) and scalar nonadditive hedonic models (Heckman, Matzkin, and Nesheim, 2002). However, little is known about the practical aspects of estimating such models or of the characteristics of equilibrium in such models. This paper presents computational and analytical results that fill some of these gaps. We simulate and estimate examples of equilibrium in the additive hedonic models and provide evidence on the performance of several estimation techniques. We also simulate examples of equilibria in nonadditive models and provide evidence on the performance of the nonadditive estimation techniques developed in Heckman, Matzkin, and Nesheim (2002).
Handle: RePEc:nbr:nberwo:9895
Template-Type: ReDIF-Paper 1.0
Title: What, Me Vote?
Classification-JEL: D1; J0
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS PE
Number: 9896
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9896
File-URL: http://www.nber.org/papers/w9896.pdf
File-Format: application/pdf
Publication-Status: published as Neckerman, Kathryn (ed.) Social Inequality, Vol 1. New York: Russell Sage Foundation, 2004.
Abstract: This paper examines the pattern of change in turnout in elections and in the rate of voting of different socioeconomic groups in the US. It shows that while the changing education and income structure of the population and changes in laws and regulations that make it easier to register and to vote should have raised turnout, the proportion of the voting age population that votes has fallen. This is partly due to the increased proportion of voting age persons who are ineligible to vote, but it is hard to pin down the magnitude of that effect due to problems with data. It also finds that turnout has become much more unequal by age, education, and income.
Handle: RePEc:nbr:nberwo:9896
Template-Type: ReDIF-Paper 1.0
Title: Healthy, Wealthy, and Knowing Where to Live: Predicted Trajectories of Health, Wealth and Living Arrangements Among the Oldest Old
Classification-JEL: I0
Author-Name: Florian Heiss
Author-Person: phe378
Author-Name: Michael Hurd
Author-Person: phu137
Author-Name: Axel Borsch-Supan
Note: AG
Number: 9897
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9897
File-URL: http://www.nber.org/papers/w9897.pdf
File-Format: application/pdf
Abstract: Health, wealth and where one lives are important, if not the three most important material living conditions. There are many mechanisms that suggest that living arrangements and well-being derived from health and economic status are closely related. This paper investigates the joint evolution of the three conditions, using a microeconometric approach similar to what is known as vector autoregressions' (VAR) in the macroeconomics literature.
Handle: RePEc:nbr:nberwo:9897
Template-Type: ReDIF-Paper 1.0
Title: Missing Aggregate Dynamics: On the Slow Convergence of Lumpy Adjustment Models
Classification-JEL: C22; C43
Author-Name: David Berger
Author-Person: pbe977
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Eduardo Engel
Author-Person: pen3
Note: EFG LS PR
Number: 9898
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9898
File-URL: http://www.nber.org/papers/w9898.pdf
File-Format: application/pdf
Abstract: The estimated persistence of macro aggregates involving lumpy microeconomic adjustment is biased downward when inferred from VAR estimates. The extent of this “missing persistence bias” decreases with the level of aggregation, yet convergence is very slow. Paradoxically, while idiosyncratic shocks smooth away microeconomic non-convexities and are often used to justify approximating aggregate dynamics with linear models, their presence exacerbates the bias. We propose a method to estimate the true speed of adjustment and illustrate its effectiveness via simulations and applications to real data. The missing persistence bias is relevant for macroeconomists on many grounds. First, when calibrating or estimating models via simulation based methods, macroeconomists should pay attention to the number of agents used in simulations for otherwise they are likely to obtain systematic biases in their parameter estimates. Second, results purporting to find persistence measures that vary systematically with levels of aggregation should be examined with care since the differential speeds may disappear when using estimation methods robust to the missing persistence bias. To illustrate the latter, we show that the difference in the speed with which inflation responds to sectoral and aggregate shocks (Boivin et al 2009; Mackoviak et al 2009) disappears once we correct for the missing persistence bias.
Handle: RePEc:nbr:nberwo:9898
Template-Type: ReDIF-Paper 1.0
Title: Changing Economic Geography and Vertical Linkages in Japan
Classification-JEL: R12; R34
Author-Name: Eiichi Tomiura
Author-Person: pto219
Note: ITI
Number: 9899
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9899
File-URL: http://www.nber.org/papers/w9899.pdf
File-Format: application/pdf
Publication-Status: published as Tomiura, Eiichi. "Changing Economic Geography And Vertical Linkages In Japan," Journal of the Japanese and International Economies, 2003, v17(4,Dec), 561-581.
Abstract: In Japan, the manufacturing has become geographically dispersed in the 1990s, when the import share has risen after the historic exchange rate appreciation. As is consistent with the interpretation that import penetration undermines regional input-output linkages, our regressions detect the significant decline of industrial concentrations previously established near output absorbers, especially in industries with high import share growths. This paper also finds that local knowledge spillovers and immobile specialized labor affect regional growth. Thus, while regional demand of tradable outputs matters less, regional supply of inputs, especially non-tradable inputs, remains critical for manufacturing locations.
Handle: RePEc:nbr:nberwo:9899
Template-Type: ReDIF-Paper 1.0
Title: Does Exchange Rate Risk Matter for Welfare?
Classification-JEL: F41; O31; B31
Author-Name: Paul R. Bergin
Author-Person: pbe249
Author-Name: Ivan Tchakarov
Note: CF CF CF IFM
Number: 9900
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9900
File-URL: http://www.nber.org/papers/w9900.pdf
File-Format: application/pdf
Abstract: Volatility in exchange rates is a prominent feature of open economies, a fact which has motivated elaborate attempts in many countries at exchange rate management. This paper analyzes quantitatively the welfare effects of exchange rate risk in a general two-country environment. It finds that the effects of uncertainty tend to be small for the types of simplified cases considered in past literature. But it identifies other cases, not considered previously, in which these effects can be significantly larger. These include habit persistence, where agents are more sensitive to risk, and also incomplete asset market structures which allow for asymmetries between countries. The latter case suggests that countries which are hosts to an international reserve currency, such as the U.S. or members of the euro zone, may accrue
Handle: RePEc:nbr:nberwo:9900
Template-Type: ReDIF-Paper 1.0
Title: A Pound of Flesh or Just Proxy? Using Twin Differences to Estimate the Effect of Birth Weight on Life Chances
Classification-JEL: I12
Author-Name: Dalton Conley
Author-Name: Kate Strully
Author-Name: Neil G. Bennett
Note: EH
Number: 9901
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9901
File-URL: http://www.nber.org/papers/w9901.pdf
File-Format: application/pdf
Publication-Status: published as Conley, D. and K. Strully. 2006. “Low Birth Weight and Infant Mortality: A Twin Difference Approach.” Economics and Human Biology.
Abstract: Recent research into the implications of low birth weight may be plagued by unobserved variable bias. It is unclear whether the later-life consequences found to be associated with low birth weight are a true effect of poundage' at birth, or whether this association results from underlying factors related to birth weight such as genetics, gestational age, pregnancy-related behavior, or prenatal environment. In this study, we employ twin comparisons to rule out such unobserved factors and to isolate more precise effects of birth weight on infant mortality. Using data from the 1995-1997 Matched Multiple Birth Database and deducing zygosity based on the sex ratio of twin births, we examine the effects of birth weight for both fraternal and identical twins on both neonatal and post-neonatal mortality. Results suggest that in the neonatal period, low birth weight may partially be acting as a proxy for underlying genetic conditions, but in the post-neonatal period birth weight per se increases the risk of mortality. Thus, it appears that after an initial weeding-out' period in which the more severe ailments associated with genetics may be behind birth weight effects, poundage' itself has a significant impact on life chances net of genes and other pregnancy-specific health or social conditions.
Handle: RePEc:nbr:nberwo:9901
Template-Type: ReDIF-Paper 1.0
Title: Household Saving in Germany: Results of the first SAVE study
Classification-JEL: D1
Author-Name: Axel Borsch-Supan
Author-Name: Lothar Essig
Note: AG
Number: 9902
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9902
File-URL: http://www.nber.org/papers/w9902.pdf
File-Format: application/pdf
Publication-Status: published as Wise, David A. (ed.) Analyses in the Economics of Aging. Chicago: University of Chicago Press, 2005.
Publication-Status: published as Household Saving in Germany: Results of the First SAVE Study, Axel H. Boersch-Supan, Lothar Essig. in Analyses in the Economics of Aging, Wise. 2005
Abstract: Germany is an interesting country to study saving among older households since nearly everyone - whether in the middle income bracket or richer - saves substantial amounts in old age. Only households in the lowest quarter of the income distribution spend more between the ages of 60 and 75 than they save. Our paper exploits newly collected data, the first wave of the so-called SAVE panel, specifically collected to understand economic, psychological and sociological determinants of saving. Overall, we find extraordinarily stable savings patterns. More than 40% of German households save regularly a fixed amount. About 25% of German households plan their savings and have a clearly defined savings target in mind. Most of German household saving is in the form of contractual saving, such as saving plans, whole life insurance and building society contracts. This makes the flow of saving rather unresponsive to economic fluctuations, such as income shocks. Most households prefer to cut consumption if ends do not meet. In particular the elderly do not like to use credit cards, and they eschew debt. We suspect large cohort differences and will study them once further waves of the SAVE panel will become available.
Handle: RePEc:nbr:nberwo:9902
Template-Type: ReDIF-Paper 1.0
Title: Procuring Knowledge
Classification-JEL: O31; O38
Author-Name: Stephen M. Maurer
Author-Name: Suzanne Scotchmer
Author-Person: psc49
Note: PR
Number: 9903
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9903
File-URL: http://www.nber.org/papers/w9903.pdf
File-Format: application/pdf
Publication-Status: published as Libecap, Gary (ed.) Intellectual Property and Entrepreneurship, Volume 15. JAI Press, 2004.
Abstract: There is growing public interest in alternatives to intellectual property including, but not limited to, prizes and government grants. We argue that there is no single best mechanism for supporting research. Rather, mechanisms can only be compared within specific creative environments. We collect various historical and contemporary examples of alternative incentives, and relate them to models of the creative process. We give an explanation for why federally funded R&D has moved from an intramural activity to largely a grant process. Finally, we observe that much research is supported by a hybrid system of public and private sponsorship, and explain why this makes sense in some circumstances.
Handle: RePEc:nbr:nberwo:9903
Template-Type: ReDIF-Paper 1.0
Title: The Economics of 'Acting White'
Classification-JEL: D8; J0
Author-Name: David Austen-Smith
Author-Name: Roland G. Fryer
Author-Person: pfr43
Note: LS
Number: 9904
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9904
File-URL: http://www.nber.org/papers/w9904.pdf
File-Format: application/pdf
Publication-Status: published as Fryer, R. and D. Austen-Smith. “An Economic Analysis of ‘Acting White’." The Quarterly Journal of Economics (May 2005).
Abstract: This paper formalizes a sociological phenomenon entitled 'acting white'. The key idea is that individuals face a tension between signaling their type to the outside labor market and signaling their type to a peer group: signals that induce high wages can be signals that induce peer rejection. We prove three basic results: (1) there exists no equilibria in which all types of individuals adopt distinct educational investment levels; (2) when individuals are not too patient, all equilibria satisfying a standard refinement involve a binary partition of the type space in which all types accepted by the group pool on a common low education level and all types rejected by the group separate at distinctly higher levels of education with correspondingly higher wages; and (3) when individuals are very patient, there is an increase in the variation of education levels within the group and an increase in the variance of types deemed acceptable by the group. The more those involved discount the future, the more salient peer pressure becomes and the more homogenous groups become.
Handle: RePEc:nbr:nberwo:9904
Template-Type: ReDIF-Paper 1.0
Title: Optimal Monetary and Fiscal Policy: A Linear Quadratic Approach
Classification-JEL: E52; E61
Author-Name: Pierpaolo Benigno
Author-Person: pbe203
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG ME
Number: 9905
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9905
File-URL: http://www.nber.org/papers/w9905.pdf
File-Format: application/pdf
Publication-Status: published as P. Benigno & M. Woodford, 2003. "Optimal monetary and fiscal policy: a linear-quadratic approach," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
Publication-Status: published as Optimal Monetary and Fiscal Policy: A Linear-Quadratic Approach, Pierpaolo Benigno, Michael Woodford. in NBER Macroeconomics Annual 2003, Volume 18, Gertler and Rogoff. 2004
Abstract: We propose an integrated treatment of the problems of optimal monetary and fiscal policy, for an economy in which prices are sticky and the only available sources of government revenue are distorting taxes. Our linear-quadratic approach allows us to nest both conventional analyses of optimal monetary stabilization policy and analyses of optimal tax-smoothing as special cases of our more general framework. We show how a linear-quadratic policy problem can be derived which yields a correct linear approximation to the optimal policy rules from the point of view of the maximization of expected discounted utility in a dynamic stochastic general-equilibrium model. Finally, we derive targeting rules through which the monetary and fiscal authorities may implement the optimal equilibrium.
Handle: RePEc:nbr:nberwo:9905
Template-Type: ReDIF-Paper 1.0
Title: On the Hidden Links Between Financial and Trade Opening
Classification-JEL: F15; F21
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: IFM ITI
Number: 9906
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9906
File-URL: http://www.nber.org/papers/w9906.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua, 2008. "On the hidden links between financial and trade opening," Journal of International Money and Finance, Elsevier, vol. 27(3), pages 372-386, April.
Abstract: This paper investigates the association between commercial and financial openness of developing countries. The data suggest that, controlling for GDP/Capita changes and allowing for country specific effects, increase in a developing country's (exports + imports)/GDP is associated with a highly significant increase in financial openness [measured by (gross private capital inflows + gross private outflows)/GDP]. I outline a model accounting for some of the endogenous linkages between financial and trade openness. I show that developing countries, characterized by high costs of tax collection and enforcement, opt to use financial repression as an implicit tax on savings. The resultant financial repression provides the impetus for capital flight. A frequent mechanism facilitating illicit capital movements is to over invoice imports and under invoice exports with the scale of these activities being proportional to the commercial openness of the economy. This linkage is subject to costly control by the fiscal authorities, where curtailing illicit capital flows requires spending resources on monitoring and enforcement of existing capital controls. The effectiveness of capital controls would increase with the resources spent on monitoring and enforcement per one dollar of international trade. Under these circumstances, greater commercial openness increases the effective cost of enforcing financial repression, thereby reducing the usefulness of financial repression as an implicit tax. This in turn implies that financial reforms tend to be the by-product of greater trade integration.
Handle: RePEc:nbr:nberwo:9906
Template-Type: ReDIF-Paper 1.0
Title: Parental Medicaid Expansions and Health Insurance Coverage
Classification-JEL: I1; I3
Author-Name: Anna Aizer
Author-Person: pai9
Author-Name: Jeffrey Grogger
Author-Person: pgr125
Note: EH CH
Number: 9907
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9907
File-URL: http://www.nber.org/papers/w9907.pdf
File-Format: application/pdf
Abstract: During the 1990s many states extended Medicaid eligibility to low-income parents who were not receiving welfare. We evaluate the effects of those expansions on health insurance coverage. To account for unobservable differences between expansion states and non-expansion states that may be correlated with both policy decisions and insurance coverage, we employ a within-state difference-in-difference technique that makes use of data only from expansion states. We find that the parental eligibility expansions increased Medicaid coverage of mothers with only small effects on private coverage. The expansions also increased the coverage of children, presumably by raising the benefit to the family of applying for coverage. We find substantial racial and ethnic differences in the effects of the expansions. As a result, the expansions help reduce racial and ethnic gaps in insurance coverage, particularly for adults.
Handle: RePEc:nbr:nberwo:9907
Template-Type: ReDIF-Paper 1.0
Title: Debt Intolerance
Classification-JEL: F3; F31
Author-Name: Carmen M. Reinhart
Author-Person: pre33
Author-Name: Kenneth S. Rogoff
Author-Person: pro164
Author-Name: Miguel A. Savastano
Note: IFM
Number: 9908
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9908
File-URL: http://www.nber.org/papers/w9908.pdf
File-Format: application/pdf
Publication-Status: published as Reinhart, Carmen M., Kenneth S. Rogoff and Miguel A. Savastano. "Debt Intolerance," Brookings Papers on Economic Activity, 34, 2003-1 (2003): 1-74.
Abstract: This paper introduces the concept of debt intolerance,' which manifests itself in the extreme duress many emerging markets experience at debt levels that would seem manageable by advanced country standards. We argue that safe' external debt-to-GNP thresholds for debt intolerant countries are low, perhaps as low as 15 percent in some cases. These thresholds depend on a country's default and inflation history. Debt intolerance is linked to the phenomenon of serial default that has plagued many countries over the past two centuries. Understanding and measuring debt intolerance is fundamental to assess the problems of debt sustainability, debt restructuring, capital market integration, and the scope for international lending to ameliorate crises. Our goal is to make a first pass at quantifying debt intolerance, including delineating debtors' clubs and regions of vulnerability, on the basis on a history of credit events going back to the 1820s for over 100 countries.
Handle: RePEc:nbr:nberwo:9908
Template-Type: ReDIF-Paper 1.0
Title: How Do Patent Laws Influence Innovation? Evidence from Nineteenth-Century World Fairs
Classification-JEL: L0; O3
Author-Name: Petra Moser
Author-Person: pmo257
Note: DAE
Number: 9909
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9909
File-URL: http://www.nber.org/papers/w9909.pdf
File-Format: application/pdf
Publication-Status: published as Moser, Petra. "How Do Patent Laws Influence Innovation? Evidence From Nineteenth-Century World's Fair," American Economic Review, 2005, v95(4,Sep), 1214-1236.
Abstract: This paper introduces a new internationally comparable data set that permits an empirical investigation of the effects of patent law on innovation. The data have been constructed from the catalogues of two 19th century world fairs: the Crystal Palace Exhibition in London, 1851, and the Centennial Exhibition in Philadelphia, 1876. They include innovations that were not patented, as well as those that were, and innovations from countries both with and without patent laws. I find no evidence that patent laws increased levels of innovative activity but strong evidence that patent systems influenced the distribution of innovative activity across industries. Inventors in countries without patent laws concentrated in industries where secrecy was effective relative to patents, e.g., food processing and scientific instruments. These results suggest that introducing strong and effective patent laws in countries without patents may have stronger effects on changing the direction of innovative activity than on raising the number of innovations.
Handle: RePEc:nbr:nberwo:9909
Template-Type: ReDIF-Paper 1.0
Title: Identification and Estimation of Hedonic Models
Classification-JEL: C31
Author-Name: Ivar Ekeland
Author-Name: James J. Heckman
Author-Name: Lars P. Nesheim
Author-Person: pne123
Note: LS PR
Number: 9910
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9910
File-URL: http://www.nber.org/papers/w9910.pdf
File-Format: application/pdf
Publication-Status: published as Ekeland, Ivar, James J. Heckman and Lars Nesheim. "Identification And Estimation Of Hedonic Models," Journal of Political Economy, 2004, v112(2,Part2), S60-S109.
Abstract: This paper considers the identification and estimation of hedonic models. We establish that in an additive version of the hedonic model, technology and preferences are generically identified up to affine transformations from data on demand and supply in a single hedonic market. For a very general parametric structure, preferences and technology are fully identified. This is true under a strong assumption of statistical independence of the error term. It is also true under the weaker assumption of mean independence of the error term. Much of the confusion in the empirical literature that claims that hedonic models estimated on data from a single market are fundamentally underidentified is based on linearizations that do not use all of the information in the model. The exact economic model that justifies widely used linear approximations has strange properties so the approximation is doubly poor. A semiparametric estimation method is proposed that is valid when a statistical independence assumption is valid. Alternatively, under the weaker condition of mean independence instrumental variables estimators can be applied to identify technology and preference parameters from a single market. They are justified by nonlinearities that are generic features of equilibrium in hedonic models.
Handle: RePEc:nbr:nberwo:9910
Template-Type: ReDIF-Paper 1.0
Title: The Pricing of Job Characteristics When Markets Do Not Clear: Theory and Implications
Classification-JEL: J3; J2
Author-Name: Kevin Lang
Author-Person: pla83
Author-Name: Sumon Majumdar
Note: LS
Number: 9911
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9911
File-URL: http://www.nber.org/papers/w9911.pdf
File-Format: application/pdf
Publication-Status: published as Lang, Kavin and Sumon Majumdar. "The Pricing Of Job Characteristics When Markets Do Not Clear: Theory And Policy Implications," International Economic Review, 2004, v45(4,Nov), 1111-1128.
Abstract: This paper examines nonsequential search when jobs vary with respect to nonpecuniary characteristics. In the presence of frictions in the labor market, the equilibrium job distribution need not show evidence of compensating wage differentials. The model also generates several pervasive features of labor markets: unemployment and vacancies, apparent discrimination, and market segmentation. When workers are homogeneous, restrictions on the range of job offers decrease welfare and cannot reduce unemployment. However, when workers have heterogeneous preferences, such restrictions may lower unemployment and can even lead to a Pareto-improvement in welfare. We consider the impact of policies banning discrimination, regulating working-conditions and imposing a minimum wage.
Handle: RePEc:nbr:nberwo:9911
Template-Type: ReDIF-Paper 1.0
Title: The Role of Consumer Knowledge of Insurance Benefits in the Demand for Preventative Health
Classification-JEL: I1
Author-Name: Stephen T. Parente
Author-Name: David Salkever
Author-Person: psa1313
Author-Name: Joan DaVanzo
Note: EH
Number: 9912
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9912
File-URL: http://www.nber.org/papers/w9912.pdf
File-Format: application/pdf
Publication-Status: published as Stephen T. Parente & David S. Salkever & Joan DaVanzo, 2005. "The role of consumer knowledge of insurance benefits in the demand for preventive health care among the elderly," Health Economics, John Wiley & Sons, Ltd., vol. 14(1), pages 25-38.
Abstract: In 1992, the United States Centers for Medicare and Medicaid Services (CMS) introduced new insurance coverage for two preventive services influenza vaccinations and mammograms. Economists typically assume transactions occur with perfect information and foresight. As a test of the value of information, we estimate the effect of consumer knowledge of these benefits on their demand. Treating knowledge as endogenous in a two-part model of demand, we find that consumer knowledge has a substantial positive effect on the use of preventive services. Our findings suggest that strategies to educate the insured Medicare population about coverage of preventive services may have substantial social value.
Handle: RePEc:nbr:nberwo:9912
Template-Type: ReDIF-Paper 1.0
Title: Pension Reform in Germany: The Impact on Retirement Decisions
Classification-JEL: I0
Author-Name: Axel Borsch-Supan
Author-Name: Barbara Berkel
Note: AG PE
Number: 9913
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9913
File-URL: http://www.nber.org/papers/w9913.pdf
File-Format: application/pdf
Publication-Status: published as Berkel, Barbara and Axel Borsch-Supan. "Pension Reform in Germany: The Impact on Retirement Decisions." FinanzArchiv 60, 3 (2004): 393-421.
Abstract: The financing problems beleaguering the public pension system have again shifted the spotlight onto the retirement age. This paper examines the impact of various reform options on the actual retirement choices of older workers. The paper focuses in particular on the long-term implications of the changes implemented in pension legislation since 1992 and the reform options discussed by the German Social Security Reform Commission installed in 2002, the so called R?rup Commission'. Our simulations show that the early-retirement pension adjustment factors introduced by the 1992 pension reform will, in the long term, raise the average effective age of retirement for men by somewhat less than two years. The across-the-board two-year increase in all the relevant age limits proposed by the R?rup Commission' would raise the effective average age of retirement of men by about eight months. If the actuarial adjustment factor is increased from 3.6% to 6% per year, the effective average retirement age rises by almost two years. The effects are considerably weaker for women.
Handle: RePEc:nbr:nberwo:9913
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Macroeconomic News on Beliefs and Preferences: Evidence from the Options Market
Classification-JEL: G0; G1
Author-Name: Alessandro Beber
Author-Person: pbe677
Author-Name: Michael W. Brandt
Note: AP
Number: 9914
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9914
File-URL: http://www.nber.org/papers/w9914.pdf
File-Format: application/pdf
Publication-Status: published as Beber, Alessandro and Michael W. Brandt. "The Effect of Macroeconomic News on Beliefs and Preferences: Evidence from the Options Market." Journal of Monetary Economics 53 (2006): 1997-2039.
Abstract: We examine the effect of regularly scheduled macroeconomic announcements on the beliefs and preferences of participants in the U.S. Treasury market by comparing the option-implied state-price density (SPD) of bond prices shortly before and after the announcements. We find that the announcements reduce the uncertainty implicit in the second moment of the SPD regardless of the content of the news. The changes in the higher-order moments, in contrast, depend on whether the news is good or bad for economic prospects. Using a standard model for interest rates to disentangle changes in beliefs and changes in preferences, we demonstrate that our results are consistent with time-varying risk aversion in the spirit of habit formation.
Handle: RePEc:nbr:nberwo:9914
Template-Type: ReDIF-Paper 1.0
Title: Disentangling Volatility from Jumps
Classification-JEL: G12; C22
Author-Name: Yacine Ait-Sahalia
Author-Person: pai23
Note: AP
Number: 9915
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9915
File-URL: http://www.nber.org/papers/w9915.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Financial Economics, 2004, vol. 74, pp. 487-528
Abstract: Realistic models for financial asset prices used in portfolio choice, option pricing or risk management include both a continuous Brownian and a jump components. This paper studies our ability to distinguish one from the other. I find that, surprisingly, it is possible to perfectly disentangle Brownian noise from jumps. This is true even if, unlike the usual Poisson jumps, the jump process exhibits an infinite number of small jumps in any finite time interval, which ought to be harder to distinguish from Brownian noise, itself made up of many small moves.
Handle: RePEc:nbr:nberwo:9915
Template-Type: ReDIF-Paper 1.0
Title: Capital Tax Incidence: Fisherian Impressions from the Time Series
Classification-JEL: E21; H30
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Note: PE
Number: 9916
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9916
File-URL: http://www.nber.org/papers/w9916.pdf
File-Format: application/pdf
Abstract: This paper accepts for the sake of argument the hypothesis that much of the time series correlation between tax and profit rates is spurious, and shows how nonetheless time series for profit rates, tax rates, and consumption can be organized, compared and interpreted using Fisher's (1930) theory of consumption in order to understand the incidence of capital taxes. Capital taxation is associated with a wedge between anticipated aggregate consumption growth and capital rental rates, suggesting that in one way or another capital owner behavior adjusts in the direction needed for some passing' of the capital tax. Conversely, most of the medium and low frequency deviations between anticipated aggregate consumption growth and capital rental rates are associated with capital taxation, as implied by aggregate time-separable Fisherian consumption theories in which time preference, non-tax capital market distortions, aggregation biases, and other determinants of aggregate consumption growth vary little over time.
Handle: RePEc:nbr:nberwo:9916
Template-Type: ReDIF-Paper 1.0
Title: Passive Decisions and Potent Defaults
Classification-JEL: D1
Author-Name: James Choi
Author-Name: David Laibson
Author-Person: pla164
Author-Name: Brigitte Madrian
Author-Person: pma384
Author-Name: Andrew Metrick
Author-Person: pme99
Note: EFG AG PE
Number: 9917
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9917
File-URL: http://www.nber.org/papers/w9917.pdf
File-Format: application/pdf
Publication-Status: published as Passive Decisions and Potent Defaults, James J. Choi, David Laibson, Brigitte C. Madrian, Andrew Metrick. in Analyses in the Economics of Aging, Wise. 2005
Abstract: Default options have an enormous impact on household choices.' Defaults matter because opting out of a default is costly and these costs change over time, generating an option value of waiting. In addition, people have a tendency to procrastinate. We develop a theory of optimal defaults based on these considerations. We find that it is sometimes optimal to set extreme defaults, which are far away from the mean optimal savings rate. A default that is far away from a consumer's optimal savings rate may make that consumer better off since such a bad' default will lead procrastinating consumers to more quickly opt out of the default. We calibrate our model and use it to calculate optimal defaults for employees at four different companies. Our work suggests that optimal defaults are likely to be at one of three savings rates: the minimum savings rate (i.e., 0%), the match threshold (typically 5% or 6%), or the maximal savings rate.
Handle: RePEc:nbr:nberwo:9917
Template-Type: ReDIF-Paper 1.0
Title: Mothers' and Fathers' Labor Supply in Fragile Families: The Role of Child Health
Classification-JEL: J22; I12
Author-Name: Hope Corman
Author-Name: Nancy E. Reichman
Author-Name: Kelly Noonan
Note: EH LS CH
Number: 9918
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9918
File-URL: http://www.nber.org/papers/w9918.pdf
File-Format: application/pdf
Publication-Status: published as Corman, Hope, Kelly Noonan and Nancy Reichman. "Mothers' Labor Supply in Fragile Families: The Role of Child Health." Eastern Economics Journal 31, 4(Fall 2005): 601-616.
Publication-Status: published as Noonan, K., Reichman, N., Corman H. 2005. New Fathers’ Labor Supply: Does Child Health Matter? Social Science Quarterly 86(5): 1399–1417(19).
Abstract: We estimate the effect of poor child health on the labor supply of mothers and fathers post welfare reform, using a national sample of mostly unwed parents and their children-a group at high risk of living in poverty. We account for the potential endogeneity of child health and find that having a young child in poor health reduces the mother's probability of working, the mother's hours of work, and the father's hours of work. These results suggest that children's health problems may diminish their parents' capacity to invest in their health.
Handle: RePEc:nbr:nberwo:9918
Template-Type: ReDIF-Paper 1.0
Title: Adverse Selection and the Challenges to Stand-Alone Prescription Drug Insurance
Classification-JEL: G22; I18
Author-Name: Mark V. Pauly
Author-Name: Yuhui Zeng
Note: EH PE
Number: 9919
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9919
File-URL: http://www.nber.org/papers/w9919.pdf
File-Format: application/pdf
Publication-Status: published as Pauly, Mark V. and Yuhui Zeng. "Adverse Selection And The Challenges To Stand-Alone Prescription Drug Insurance," Forum for Health Economics and Policy, 2004, v7, Article 3.
Publication-Status: published as Adverse Selection and the Challenges to Stand-Alone Prescription Drug Insurance, Mark V. Pauly, Yuhui Zeng. in Frontiers in Health Policy Research, Volume 7, Cutler and Garber. 2004
Abstract: This paper investigates a possible predictor of adverse selection problems in unsubsidized stand-alone' prescription drug insurance: the persistence of an individual's high spending over multiple years. Using MEDSTAT claims data and data from the Medicare Survey of Current Beneficiaries, we find that persistence is much higher for outpatient drug expenses than for other categories of medical expenses. We then use these estimates to develop a simple and intuitive model of adverse selection in competitive insurance markets and show that this high relative persistence makes it unlikely that unsubsidized drug insurance can be offered for sale, even with premiums partially risk adjusted, without a probable adverse selection death spiral. We show that this outcome can be avoided if drug coverage is bundled with other coverage, and briefly discuss the need either for comprehensive coverage or generous subsidies if adverse selection is to be avoided in private and Medicare insurance markets.
Handle: RePEc:nbr:nberwo:9919
Template-Type: ReDIF-Paper 1.0
Title: The Case for Auctioning Countermeasures in the WTO
Classification-JEL: F1
Author-Name: Kyle Bagwell
Author-Person: pba409
Author-Name: Petros C. Mavroidis
Author-Name: Robert W. Staiger
Author-Person: pst85
Note: ITI
Number: 9920
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9920
File-URL: http://www.nber.org/papers/w9920.pdf
File-Format: application/pdf
Abstract: A prominent problem with the WTO dispute settlement procedures is the practical difficulty faced by small and developing countries in finding the capacity to effectively retaliate against trading partners that are in violation of their WTO commitments. In light of this problem, Mexico has proposed that retaliation rights be made tradeable.' We offer a first formal analysis of the possibility that retaliation rights within the WTO system be allocated through auctions. We show that the auctions exhibit externalities among bidders, and we characterize equilibrium bidder behavior under alternative auction formats. A key feature of auction format is whether the country in violation of its WTO commitments is prevented from bidding to retire the right of retaliation: if so, then the possibility of auction failure' arises, in which no bids are made despite positive valuation by the bidders; if not, then auction failure is precluded, and indeed the right of retaliation is always retired. We also evaluate these different auction formats from normative (revenue, efficiency) standpoints.
Handle: RePEc:nbr:nberwo:9920
Template-Type: ReDIF-Paper 1.0
Title: Bank Concentration and Crises
Classification-JEL: G21; G28
Author-Name: Thorsten Beck
Author-Person: pbe266
Author-Name: Asli Demirguc-Kunt
Author-Person: pde226
Author-Name: Ross Levine
Author-Person: ple61
Note: IFM ME AP
Number: 9921
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9921
File-URL: http://www.nber.org/papers/w9921.pdf
File-Format: application/pdf
Publication-Status: published as Beck, Thorsten, Asli Demirguc-Kunt and Ross Levine. "Bank Concentration, Competition, And Crises: First Results," Journal of Banking and Finance, 2006, v30(5,May), 1581-1603.
Abstract: Motivated by public policy debates about bank consolidation and conflicting theoretical predictions about the relationship between the market structure of the banking industry and bank fragility, this paper studies the impact of bank concentration, bank regulations, and national institutions on the likelihood of suffering a systemic banking crisis. Using data on 70 countries from 1980 to 1997, we find that crises are less likely in economies with (i) more concentrated banking systems, (ii) fewer regulatory restrictions on bank competition and activities, and (iii) national institutions that encourage competition.
Handle: RePEc:nbr:nberwo:9921
Template-Type: ReDIF-Paper 1.0
Title: On the Efficiency of Competitive Electricity Markets With Time-Invariant Retail Prices
Classification-JEL: L9; L8
Author-Name: Severin Borenstein
Author-Person: pbo78
Author-Name: Stephen P. Holland
Author-Person: pho374
Note: IO EEE
Number: 9922
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9922
File-URL: http://www.nber.org/papers/w9922.pdf
File-Format: application/pdf
Publication-Status: published as Borenstein, Severin and Stephen Holland. "On The Efficiency Of Competitive Electricity Markets With Time-Invariant Retail Prices," Rand Journal of Economics, 2005, v36(3,Autumn), 469-493.
Abstract: The standard economic model of efficient competitive markets relies on the ability of sellers to charge prices that vary as their costs change. Yet, there is no restructured electricity market in which most retail customers can be charged realtime prices (RTP), prices that can change as frequently as wholesale costs. We analyze the impact of having some share of customers on time-invariant pricing in competitive electricity markets. Not only does time-invariant pricing in competitive markets lead to outcomes (prices and investment) that are not first-best, it even fails to achieve the second-best optimum given the constraint of time-invariant pricing. We then show that attempts to correct the level of investment through taxes or subsidies on electricity or capacity are unlikely to succeed, because these interventions create new inefficiencies. In contrast, increasing the share of customers on RTP is likely to improve efficiency, though surprisingly, it does not necessarily reduce capacity investment, and it is likely to harm customers that are already on RTP.
Handle: RePEc:nbr:nberwo:9922
Template-Type: ReDIF-Paper 1.0
Title: Capital Deepening in American Manufacturing, 1850-1880
Classification-JEL: N61
Author-Name: Jeremy Atack
Author-Person: pat28
Author-Name: Fred Bateman
Author-Name: Robert A. Margo
Author-Person: pma319
Note: DAE
Number: 9923
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9923
File-URL: http://www.nber.org/papers/w9923.pdf
File-Format: application/pdf
Publication-Status: published as Atack, Jeremy, Fred Bateman and Robert A. Margo. "Capital Deepening And The Rise Of The Factory: The American Experience During The Nineteenth Century," Economic History Review, 2005, v58(3,Aug), 586-595.
Abstract: We use establishment-level data to study capital deepening -- increases in the capital-output ratio -- in American manufacturing from 1850 to 1880. In nominal terms, the aggregate capital-output ratio in our samples rose by 30 percent from 1850 to 1880. Growth in real terms was considerably greater -- 70 percent -- because prices of capital goods declined relative to output prices. Cross-sectional regressions suggest that capital deepening was especially importnat in the larger firms and was positively associated with the diffusion of steam-powered machinery. However, even after accounting for shifts over time in such factors, much of the capital deepening remains to be explained. Although capital deepening implies a fall in the average product of capital it does not necessarily imply that rates of return were declining. However, we find strong evidence that returns did decline. We also show that returns were decreasing in firm size, although the data are not sufficiently informative to tell us why it was so.
Handle: RePEc:nbr:nberwo:9923
Template-Type: ReDIF-Paper 1.0
Title: A New Approach to the Valuation of Intangible Capital
Classification-JEL: D24; E22
Author-Name: Jason G. Cummins
Author-Person: pcu10
Note: EFG PR
Number: 9924
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9924
File-URL: http://www.nber.org/papers/w9924.pdf
File-Format: application/pdf
Publication-Status: published as A New Approach to the Valuation of Intangible Capital, Jason G. Cummins. in Measuring Capital in the New Economy, Corrado, Haltiwanger, and Sichel. 2005
Abstract: In this paper, I argue that intangible capital is not a distinct input to production like physical capital or labor but rather it is the glue that creates value from other inputs. This perspective naturally leads to an empirical model in which intangible capital is defined in terms of adjustment costs. Estimates of these adjustment costs using firm-level panel data suggest that there are no appreciable intangibles associated with R&D and advertising whereas information technology creates intangibles with a 70% annual rate of return a sizable figure that is nevertheless much smaller than reported in previous studies. As a bridge to previous research, I show that much larger estimates can be obtained by using ordinary least squares, which ignores the possibility that the value of the .rm and its investment policy are simultaneously determined. Larger estimates can also be obtained by ignoring the possibility that the stock market overstates the value of intangible-intensive companies.
Handle: RePEc:nbr:nberwo:9924
Template-Type: ReDIF-Paper 1.0
Title: Price Elasticity of Demand for Term Life Insurance and Adverse Selection
Classification-JEL: D1; D8
Author-Name: Mark V. Pauly
Author-Name: Kate H. Withers
Author-Name: Krupa Subramanian-Viswana
Author-Name: Jean Lemaire
Author-Name: John C. Hershey
Note: EH
Number: 9925
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9925
File-URL: http://www.nber.org/papers/w9925.pdf
File-Format: application/pdf
Abstract: This paper provides an empirical estimate of price' and risk' elasticities of demand for term life insurance for those who purchase some insurance. It finds that the elasticity with respect to changes in premiums is generally higher than the elasticity with respect to changes in risk. It also finds that the elasticity, in the range of -0.3 to -0.5, is sufficiently low that adverse selection in term life insurance is unlikely to lead to a death spiral and may not even lead to measured effects of adverse selection on total purchases.
Handle: RePEc:nbr:nberwo:9925
Template-Type: ReDIF-Paper 1.0
Title: How Should We Measure Consumer Confidence (Sentiment)? Evidence from the Michigan Survey of Consumers
Classification-JEL: D1; D8
Author-Name: Jeff Dominitz
Author-Name: Charles F. Manski
Author-Person: pma111
Note: EFG
Number: 9926
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9926
File-URL: http://www.nber.org/papers/w9926.pdf
File-Format: application/pdf
Publication-Status: published as Jeff Dominitz & Charles F. Manski, 2004. "How Should We Measure Consumer Confidence?," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 51-66, Spring.
Abstract: The Michigan Index of Consumer Sentiment (ICS) and other indices of consumer confidence are prominent in public discourse on the economy but have little presence in modern economic research. The sparsity of modern research follows an earlier period when economists scrutinized in some depth the methods and data used to produce consumer confidence indices. The literature to date has focused on the predictive power of the survey data used to form the indices; there has been very little study of their micro foundations. This paper analyzes the responses to eight expectations questions that have appeared on the Michigan Survey of Consumers in the period June 2002 through May 2003. Four questions elicit micro and macroeconomic expectations in the traditional qualitative manner; two are components of the ICS. Four questions use a percent chance' format to elicit subjective probabilities of micro and macroeconomic events; versions of these questions have previously appeared in the Survey of Economic Expectations.
Handle: RePEc:nbr:nberwo:9926
Template-Type: ReDIF-Paper 1.0
Title: Uncovering the Risk-Return Relation in the Stock Market
Classification-JEL: G1
Author-Name: Hui Guo
Author-Name: Robert F. Whitelaw
Note: AP
Number: 9927
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9927
File-URL: http://www.nber.org/papers/w9927.pdf
File-Format: application/pdf
Publication-Status: published as Guo, Hui and Robert F. Whitelaw. "Uncovering The Risk-Return Relation In The Stock Market," Journal of Finance, 2006, v61(3,Jun), 1433-1463.
Abstract: There is an ongoing debate in the literature about the apparent weak or negative relation between risk (conditional variance) and return (expected returns) in the aggregate stock market. We develop and estimate an empirical model based on the ICAPM to investigate this relation. Our primary innovation is to model and identify empirically the two components of expected returns--the risk component and the component due to the desire to hedge changes in investment opportunities. We also explicitly model the effect of shocks to expected returns on ex post returns and use implied volatility from traded options to increase estimation efficiency. As a result, the coefficient of relative risk aversion is estimated more precisely, and we find it to be positive and reasonable in magnitude. Although volatility risk is priced, as theory dictates, it contributes only a small amount to the time-variation in expected returns. Expected returns are driven primarily by the desire to hedge changes in investment opportunities. It is the omission of this hedge component that is responsible for the contradictory and counter-intuitive results in the existing literature.
Handle: RePEc:nbr:nberwo:9927
Template-Type: ReDIF-Paper 1.0
Title: Importing Technology
Classification-JEL: E22; E23
Author-Name: Francesco Caselli
Author-Person: pca205
Author-Name: Daniel Wilson
Author-Person: pwi26
Note: EFG ITI PR
Number: 9928
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9928
File-URL: http://www.nber.org/papers/w9928.pdf
File-Format: application/pdf
Publication-Status: published as Caselli, Francesco, and Daniel J. Wilson. "Importing Technology," Journal of Monetary Economics 51(1): 1-32, January 2004
Publication-Status: published as Francesco Caselli & Daniel Wilson, 2002. "Importing technology," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
Abstract: We look at disaggregated imports of various types of equipment to make inferences on cross-country differences in the composition of equipment investment. We make three contributions. First, we document strikingly large differences in investment composition. Second, we explain these differences as being based on each equipment type's degree of complementarity with other factors whose abundance differs across countries. Third, we show that the composition of capital has the potential to account for some of the large observed differences in TFP across countries.
Handle: RePEc:nbr:nberwo:9928
Template-Type: ReDIF-Paper 1.0
Title: Monetary Discretion, Pricing Complementarity and Dynamic Multiple Equilibria
Classification-JEL: E5; E61
Author-Name: Robert G. King
Author-Person: pki21
Author-Name: Alexander L. Wolman
Author-Person: pwo18
Note: EFG ME
Number: 9929
Creation-Date: 2003-08
Order-URL: http://www.nber.org/papers/w9929
File-URL: http://www.nber.org/papers/w9929.pdf
File-Format: application/pdf
Publication-Status: published as King, Robert G. and Alexander L. Wolman. "Monetary Discretion, Pricing Complementarity, and Dynamic Multiple Equilibria," Quarterly Journal of Economics 119(4): 1513-1553, November 2004
Publication-Status: published as R. King & A. Wolman, 2003. "Monetary discretion, pricing complementarity and dynamic multiple equilibria," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
Abstract: In a plain-vanilla New Keynesian model with two-period staggered price-setting, discretionary monetary policy leads to multiple equilibria. Complementarity between the pricing decisions of forward-looking firms underlies the multiplicity, which is intrinsically dynamic in nature. At each point in time, the discretionary monetary authority optimally accommodates the level of predetermined prices when setting the money supply because it is concerned solely about real activity. Hence, if other firms set a high price in the current period, an individual firm will optimally choose a high price because it knows that the monetary authority next period will accommodate with a high money supply. Under commitment, the mechanism generating complementarity is absent: the monetary authority commits not to respond to future predetermined prices. We compute a traditional inflation bias equilibrium, in which price-setters are optimistic, rationally expecting small adjustments by other firms. But there is another steady-state equilibrium in which price setters are pessimistic and inflation is much higher. Further, we find that there are multiple equilibria at a point in time, not just in steady states. In a stochastic setting with equilibrium selection each period determined by an i.i.d. sunspot, there is greater inflation bias on average than if price-setters were always optimistic. The sunspot realization also has real effects: periods of higher than average inflation are accompanied by low output. Thus, increased real volatility may be an additional cost of discretion in monetary policy.
Handle: RePEc:nbr:nberwo:9929
Template-Type: ReDIF-Paper 1.0
Title: Does the Source of Capital Affect Capital Structure?
Classification-JEL: G3
Author-Name: Michael Faulkender
Author-Name: Mitchell A. Petersen
Author-Person: ppe42
Note: CF
Number: 9930
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9930
File-URL: http://www.nber.org/papers/w9930.pdf
File-Format: application/pdf
Publication-Status: published as Faulkender, Michael, and Mitchell A. Petersen. "Does the Source of Capital Affect Capital Structure?" Proceedings, Federal Reserve Bank of Chicago, May 2003, pages 200-215
Publication-Status: published as Faulkender, Michael, and Mitchell A. Petersen. "Does the Source of Capital Affect Capital Structure?" Review of Financial Studies 19(1): 45-79, Spring 2006
Abstract: Empirical examinations of capital structure have led some to conclude that firms are under-levered. Implicit in this argument and much of the empirical work on leverage is the assumption that the availability of incremental capital depends solely on the risk of the firm's cash flows and characteristics of the firm. However, the same market frictions that make capital structure relevant suggest that firms may be rationed by lenders, leading some firms to appear to be under-levered relative to unconstrained firms. We examine this theory, arguing that the same characteristics that may be associated with firms being rationed by the debt markets are also associated with financial intermediaries, opposed to bond markets, being the source of a firm's debt capital. We find that firms have significantly different leverage ratios based on whether they have access to public bond markets as measured by the firm having a debt rating. Although firms with a debt rating are fundamentally different, these differences do not explain our findings. Even after controlling for the firm characteristics previously found to determine observed capital structure and the possible endogeneity of having a bond rating, we find that firms which are able to raise debt from public markets have 40 percent more debt.
Handle: RePEc:nbr:nberwo:9930
Template-Type: ReDIF-Paper 1.0
Title: Micro-Foundations of Urban Agglomeration Economies
Classification-JEL: R12; R13
Author-Name: Giles Duranton
Author-Person: pdu48
Author-Name: Diego Puga
Author-Person: ppu2
Note: ITI
Number: 9931
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9931
File-URL: http://www.nber.org/papers/w9931.pdf
File-Format: application/pdf
Publication-Status: published as Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117 Elsevier.
Abstract: This handbook chapter studies the theoretical micro-foundations of urban agglomeration economies. We distinguish three types of micro-foundations, based on sharing, matching, and learning mechanisms. For each of these three categories, we develop one or more core models in detail and discuss the literature in relation to those models. This allows us to give a precise characterisation of some of the main theoretical underpinnings of urban agglomeration economies, to discuss modelling issues that arise when working with these tools, and to compare different sources of agglomeration economies in terms of the aggregate urban outcomes they produce as well as in terms of their normative implications.
Handle: RePEc:nbr:nberwo:9931
Template-Type: ReDIF-Paper 1.0
Title: Tough Policies, Incredible Policies?
Classification-JEL: E0; F0
Author-Name: Andres Velasco
Author-Name: Alejandro Neut
Note: IFM
Number: 9932
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9932
File-URL: http://www.nber.org/papers/w9932.pdf
File-Format: application/pdf
Abstract: We revisit the question of what determines the credibility of macroeconomic policies here, of promises to repay public debt. Almost all thinking on the issue has focused on governments' strategic decision to default (or erode the value of outstanding debt via inflation/devaluation). But sometimes governments default not because they want to, but because they cannot avoid it: adverse shocks leave them no option. We build a model in which default/devaluation can occur deliberately (for strategic reasons) or unavoidably. If such unavoidable fiscal crises a) have pecuniary costs and b) occur with possible probability, much conventional wisdom on the determinantes of credibility need no longer hold. For instance, appointing a conservative policymaker or denominating public debt in foreign currency may reduce, not increase, credibility.
Handle: RePEc:nbr:nberwo:9932
Template-Type: ReDIF-Paper 1.0
Title: Becoming Oldest-Old: Evidence from Historical U.S. Data
Classification-JEL: I12; J11
Author-Name: Dora L. Costa
Author-Person: pco358
Author-Name: Joanna Lahey
Author-Person: pla533
Note: IFM
Number: 9933
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9933
File-URL: http://www.nber.org/papers/w9933.pdf
File-Format: application/pdf
Publication-Status: published as Costa, Dora L. and Joanna Lahey. "Becoming Oldest-Old: Evidence from Historial US Data." Genus 61, 1 (2005): 125-6.
Abstract: We argue that the environment determines life span, using historical data to show that such indicators of environmental insults in early childhood and young adulthood as quarter of birth, residence, occupation, wealth, and the incidence of specific infectious diseases affected older age mortality. Consistent with improvements in early life factors, we find that the effect of quarter of birth on older age mortality has diminished over the twentieth century and that the declining impact of quarter of birth explains 16 to 17 percent of the difference in ten year mortality rates of Americans age 60-79 in 1900 and in 1960-1980. We estimate that at least one-fifth of the increase between 1900 and 1999 in the probability of a 65 year old surviving to age 85 may be attributable to early life conditions. We also present suggestive evidence on the mortality trajectory of the oldest old in the first half of the twentieth century that implies that the shape of the mortality trajectory, though not its level, has remained constant.
Handle: RePEc:nbr:nberwo:9933
Template-Type: ReDIF-Paper 1.0
Title: Unbundling Institutions
Classification-JEL: E44; G18
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Simon Johnson
Author-Person: pjo44
Note: CF LS
Number: 9934
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9934
File-URL: http://www.nber.org/papers/w9934.pdf
File-Format: application/pdf
Publication-Status: published as Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 949-995, October.
Abstract: This paper evaluates the importance of property rights institutions', which protect citizens against expropriation by the government and powerful elites, and contracting institutions', which enable private contracts between citizens. We exploit exogenous variation in both types of institutions driven by colonial history, and document strong first-stage relationships between property rights institutions and the determinants of European colonization (settler mortality and population density before colonization), and between contracting institutions and the identity of the colonizing power. Using this instrumental variables strategy, we find that property rights institutions have a first-order effect on long-run economic growth, investment, and financial development. Contracting institutions appear to matter only for the form of financial intermediation. A possible interpretation for this pattern is that individuals often find ways of altering the terms of their formal and informal contracts to avoid the adverse effects of contracting institutions but are unable to do so against the risk of expropriation.
Handle: RePEc:nbr:nberwo:9934
Template-Type: ReDIF-Paper 1.0
Title: The Reappearing Masterpiece: Ranking American Artists and Art Works of the Late Twentieth Century
Classification-JEL: J0; J4
Author-Name: David W. Galenson
Note: LS
Number: 9935
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9935
File-URL: http://www.nber.org/papers/w9935.pdf
File-Format: application/pdf
Publication-Status: published as Galenson, David W. "The Reappearing Masterpiece: Ranking American Artists and Art Works of the Late Twentieth Century." Historical Methods: A Journal of Quantitative and Interdisciplinary History 38, 4 (Fall 2005): 178-188.
Abstract: A survey of the illustrations in textbooks of modern art produces the startling finding that art scholars consider Robert Smithson's Spiral Jetty to be the most important individual work made by an American artist during the past 150 years. More generally, quantifying the evidence of the textbooks reveals the source of the pluralism,' or stylistic incoherence, of American art since the late 1960s. A persistently high demand for artistic innovation has produced a regime in which conceptual approaches have predominated. The art world has consequently been flooded by a series of new ideas, usually embodied in individual works, generally made by young artists who have failed to make more than one significant contribution in their careers. The dramatic and monumental Spiral Jetty, made in 1970 by a young artist who was killed soon thereafter while in the process of making his art, has become a symbol for the art of this era.
Handle: RePEc:nbr:nberwo:9935
Template-Type: ReDIF-Paper 1.0
Title: On the Duration of Trade
Classification-JEL: F14; F19
Author-Name: Tibor Besedes
Author-Person: pbe180
Author-Name: Thomas J. Prusa
Author-Person: ppr249
Note: ITI
Number: 9936
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9936
File-URL: http://www.nber.org/papers/w9936.pdf
File-Format: application/pdf
Publication-Status: published as Besedes, Tibor and Thomas J. Prusa. "Ins, Outs, And The Duration Of Trade," Canadian Journal of Economics, 2006, v39(1,Feb), 266-295.
Abstract: This paper employs survival analysis to study the duration of US imports. We find that the median duration of exporting a product to the US is very short, on the order to two to four years. Our results also indicate that there is negative duration dependence meaning that if a country is able to survive in the exporting market for the first few years it will face a very small probability of failure and will export the product for a long period of time. This result holds across countries and industries. We find that our results are not only robust to aggregation but are strengthened by aggregation. That is, as we aggregate from product level trade data to SITC industry level trade data the estimated survival increases. We rank countries by their survival experience and show that our rankings are strongly correlated with the rankings in Feenstra and Rose (2002), implying that product cycle followers also experience particularly short duration.
Handle: RePEc:nbr:nberwo:9936
Template-Type: ReDIF-Paper 1.0
Title: The Magnitude and Nature of Risk Selection in Employer-Sponsored Health Plans
Classification-JEL: I11
Author-Name: Sean Nicholson
Author-Person: pni108
Author-Name: Kate Bundorf
Author-Name: Rebecca M. Stein
Author-Name: Daniel Polsky
Note: EH
Number: 9937
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9937
File-URL: http://www.nber.org/papers/w9937.pdf
File-Format: application/pdf
Publication-Status: published as Nicholson, Sean, Daniel Polsky, Kate Bundorf, and Rebecca Stein. “The Magnitude and Nature of Risk Selection in Employer-Sponsored Health Plans." Health Services Research 39, 6 Part 1 (2004): 1817-1838.
Abstract: Most existing studies of risk selection in the employer-sponsored health insurance market are case studies of a single employer or of an employer coalition in a single market. We examine risk selection in the employer-sponsored market by applying a switcher' methodology to a national, panel data set of enrollees in employer-sponsored health plans. We find that people who switched from a non-HMO to an HMO plan used 11 percent fewer medical services in the period prior to switching than people who remained in the non-HMO plan, and that this relatively low use persists once they enroll in an HMO. Furthermore, people who switch from an HMO to a non-HMO plan used 18 percent more medical services in the period prior to switching than those who remained in an HMO plan. HMOs would most likely continue to experience favorable risk selection if employers adjusted health plan payments based on enrollees' gender and age because the selection appears to occur based on enrollee characteristics that are difficult to observe such as preferences for medical care and health status.
Handle: RePEc:nbr:nberwo:9937
Template-Type: ReDIF-Paper 1.0
Title: The Causes and Consequences of Distinctively Black Names
Classification-JEL: J0; J7
Author-Name: Roland G. Fryer
Author-Person: pfr43
Author-Name: Steven D. Levitt
Author-Person: ple59
Note: LS LE
Number: 9938
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9938
File-URL: http://www.nber.org/papers/w9938.pdf
File-Format: application/pdf
Publication-Status: published as Roland G. Fryer & Steven D. Levitt, 2004. "The Causes and Consequences of Distinctively Black Names," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 767-805, August.
Abstract: In the 1960's, Blacks and Whites chose relatively similar first names for their children. Over a short period of time in the early 1970's, that pattern changed dramatically with most Blacks (particularly those living in racially isolated neighborhoods) adopting increasingly distinctive names, but a subset of Blacks actually moving toward more assimilating names. The patterns in the data appear most consistent with a model in which the rise of the Black Power movement influenced how Blacks perceived their identities. Among Blacks born in the last two decades, names provide a strong signal of socio-economic status, which was not previously the case. We find, however, no negative causal impact of having a distinctively Black name on life outcomes. Although that result is seemingly in conflict with previous audit studies involving resumes, we argue that the two sets of findings can be reconciled.
Handle: RePEc:nbr:nberwo:9938
Template-Type: ReDIF-Paper 1.0
Title: Optimal Inflation Targeting Rules
Classification-JEL: E52; E61
Author-Name: Marc P. Giannoni
Author-Person: pgi36
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG ME
Number: 9939
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9939
File-URL: http://www.nber.org/papers/w9939.pdf
File-Format: application/pdf
Publication-Status: published as Optimal Inflation-Targeting Rules , Marc Giannoni, Michael Woodford. in The Inflation-Targeting Debate, Bernanke and Woodford. 2005
Abstract: This paper characterizes optimal monetary policy for a range of alternative economic models in terms of a flexible inflation targeting rule, with a target criterion that depends on the model specification. It shows which forecast horizons should matter, and which variables besides inflation should be taken into account, for each specification. The likely quantitative significance of the various factors considered in the general discussion is then assessed by estimating a small, structural model of the U.S. monetary transmission mechanism with explicit optimizing foundations. An optimal policy rule is computed for the estimated model, and shown to correspond to a multi-stage inflation-forecast targeting procedure. The degree to which actual U.S. policy over the past two decades has conformed to the optimal target criteria is then considered.
Handle: RePEc:nbr:nberwo:9939
Template-Type: ReDIF-Paper 1.0
Title: The Terms of Trade and Economic Growth in the Periphery 1870-1938
Classification-JEL: F1; N10
Author-Name: Christopher Blattman
Author-Person: pbl37
Author-Name: Jason Hwang
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI
Number: 9940
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9940
File-URL: http://www.nber.org/papers/w9940.pdf
File-Format: application/pdf
Abstract: The contending fundamental determinants of growth -- institutions, geography and culture --exhibit far more persistence than do the growth rates they are supposed to explain. So, what exogenous shocks might account for the variance around those persistent fundamentals? The terms of trade seems to be one good place to look. Using a panel data base for 35 countries, this paper estimates the impact of terms of trade volatility and secular change between 1870 and 1938. We find that volatility was much more important than secular change. Additionally, both effects were asymmetric between core and periphery, findings that speak directly to the terms of trade debates that have raged since Prebisch and Singer wrote more than 50 years ago.
Handle: RePEc:nbr:nberwo:9940
Template-Type: ReDIF-Paper 1.0
Title: Changes in the Process of Aging During the Twentieth Century: Findings and Procedures of the Early Indicators Project
Classification-JEL: I10; I12
Author-Name: Robert W. Fogel
Note: AG DAE
Number: 9941
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9941
File-URL: http://www.nber.org/papers/w9941.pdf
File-Format: application/pdf
Publication-Status: published as In "Aging, Health, and Public Policy," ed. L.J. Waite, Population and Development Review 30, 2004. p. 19-47
Abstract: The program project Early Indicators of Later Work Levels, Disease and Death investigates how socioeconomic and environmental factors in early life can shape health and work levels in later life. Project researchers have approached this problem by creating a life-cycle sample that permits a longitudinal study of the aging of Union Army veterans, the first cohort to reach age 65 during the twentieth century. Comparing Union Army data with data from NHANES and NHIS has shown that age-specific prevalence rates of specific chronic diseases and disabilities were much higher in the century before World War II among both young and old than today. Moreover, the number of comorbidities at each age has fallen sharply. Also, the average age at onset of chronic diseases was more than a decade later at the end of the twentieth century than at the beginning. The implications of these findings for several issues in health economics are discussed.
Handle: RePEc:nbr:nberwo:9941
Template-Type: ReDIF-Paper 1.0
Title: Does Information Undermine Brand? Information Intermediary Use and Preference for Branded Web Retailers
Classification-JEL: F1; N10
Author-Name: Joel Waldfogel
Author-Person: pwa46
Author-Name: Lu Chen
Note: IO LE
Number: 9942
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9942
File-URL: http://www.nber.org/papers/w9942.pdf
File-Format: application/pdf
Publication-Status: published as Waldfogel, Joel and Lu Chen. “Does Information Undermine Brand? Information Intermediary Use and Preference for Branded Web Retailers.” Journal of Industrial Economics (December 2006).
Abstract: Investments in brand provide one method for vendors to become known and convince potential customers that vendors will deliver as promised. Alternatively, third-party information on retailers' existence, as well as whether they tend to keep their commitments can serve a similar function and may undermine investments in brand. This study uses a 13-month panel dataset on 1998-99 Internet shopping behavior and use of information intermediaries by over 30,000 households to examine whether information use undermines brand. We find that individuals who take up using price comparison sites reduce their shopping at a broad group of branded retailers by about a tenth. Users of pure price comparison sites, such as DealTime and mySimon, also reduce their Amazon by about a tenth, while individuals using BizRate, which provides both price comparison and vendor reliability information, reduce their Amazon shopping by a fifth. The results have possible implications for both firm strategy and the evolution of market structure. If information weakens the pull of brand, then Internet retailing may grow less concentrated over time.
Handle: RePEc:nbr:nberwo:9942
Template-Type: ReDIF-Paper 1.0
Title: The Aftermath of Hamilton's "Report on Manufactures"
Classification-JEL: F1; N7
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: DAE ITI
Number: 9943
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9943
File-URL: http://www.nber.org/papers/w9943.pdf
File-Format: application/pdf
Publication-Status: published as Irwin, Douglas A. "The Aftermath of Hamilton's 'Report on Manufacture'." The Journal of Economic History 64 (2004): 800-821.
Abstract: Alexander Hamilton's Report on Manufactures (1791) is a classic document in the history of U.S. economic policy, but its fate in Congress is not well known. It is commonly believed that the report was never implemented. Although Hamilton's proposals for bounties (subsidies) failed to receive support, virtually every tariff recommendation put forward in the report was adopted by Congress in early 1792. These tariffs were not highly protectionist duties because Hamilton feared discouraging imports, which were the critical tax base on which he planned to fund the public debt. Indeed, because Hamilton's policy toward manufacturing was one of encouragement and not protection, those interests shifted their political support from the Federalists to the Jeffersonian Republicans during the 1790s.
Handle: RePEc:nbr:nberwo:9943
Template-Type: ReDIF-Paper 1.0
Title: Trade Disruptions and America's Early Industrialization
Classification-JEL: F1; N7
Author-Name: Douglas A. Irwin
Author-Person: pir25
Author-Name: Joseph H. Davis
Note: DAE ITI
Number: 9944
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9944
File-URL: http://www.nber.org/papers/w9944.pdf
File-Format: application/pdf
Abstract: Between 1807 and 1815, U.S. imports of manufactured goods were severely cut by Jefferson's trade embargo, subsequent non-importation measures, and the War of 1812. These disruptions are commonly believed to have spurred early U.S. industrialization by promoting the growth of nascent domestic manufacturers. This paper uses a newly available series on U.S. industrial production to investigate how this protection from foreign competition affected domestic manufacturing. On balance, the trade disruptions did not decisively accelerate U.S. industrialization as trend growth in industrial production was little changed over this period. However, the disruptions may have played a limited role in shifting resources from trade-dependent industries (such as shipbuilding) to domestic infant industries (such as cotton textiles).
Handle: RePEc:nbr:nberwo:9944
Template-Type: ReDIF-Paper 1.0
Title: Incomplete Contracts and the Product Cycle
Classification-JEL: D23; F12
Author-Name: Pol Antràs
Author-Person: pan181
Note: ITI
Number: 9945
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9945
File-URL: http://www.nber.org/papers/w9945.pdf
File-Format: application/pdf
Publication-Status: published as Pol Antràs, 2005. "Incomplete Contracts and the Product Cycle," American Economic Review, American Economic Association, vol. 95(4), pages 1054-1073, September.
Abstract: The incomplete nature of contracts governing international transactions limits the extent to which the production process can be fragmented across borders. In a dynamic, general-equilibrium Ricardian model of North-South trade, the incompleteness of international contracts is shown to lead to the emergence of product cycles. Because of contractual frictions, goods are initially manufactured in the North, where product development takes place. As the good matures and becomes more standardized, the manufacturing stage of production is shifted to the South to benefit from lower wages. Following the property-rights approach to the theory of the firm, the same force that creates product cycles, i.e., incomplete contracts, opens the door to a parallel analysis of the determinants of the mode of organization. The model gives rise to a new version of the product cycle in which manufacturing is shifted to the South first within firm boundaries, and only at a later stage to independent firms in the South. Relative to a world with only arm's length transacting, allowing for intrafirm production transfer by multinational firms is shown to accelerate the shift of production towards the South, while having an ambiguous effect on relative wages. The model delivers macroeconomic implications that complement the work of Krugman (1979), as well as microeconomic implications consistent with the findings of the empirical literature on the product cycle.
Handle: RePEc:nbr:nberwo:9945
Template-Type: ReDIF-Paper 1.0
Title: Partial Adjustment without Apology
Classification-JEL: E1; E2
Author-Name: Robert G. King
Author-Person: pki21
Author-Name: Julia K. Thomas
Author-Person: pth42
Note: EFG
Number: 9946
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9946
File-URL: http://www.nber.org/papers/w9946.pdf
File-Format: application/pdf
Publication-Status: published as Robert G. King & Julia K. Thomas, 2006. "Partial Adjustment Without Apology," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 779-809, 08.
Abstract: Many kinds of economic behavior appear to be governed by discrete and occasional individual choices. Despite this, econometric partial adjustment models perform relatively well at the aggregate level. Analyzing the classic employment adjustment problem, we show how discrete and occasional microeconomic adjustment is well described by a new form of partial adjustment model that aggregates the actions of a large number of heterogeneous producers. We begin by describing a basic model of discrete and occasional adjustment at the micro level, where production units are essentially restricted to either operate with a fixed number of workers or shut down. We show that this simple model is observationally equivalent at the market level to the standard rational expectations partial adjustment model. We then construct a related, but more realistic, model that incorporates the idea that increases or decreases in the size of an establishment's workforce are subject to fixed adjustment costs. In the market equilibrium of this model, employment responses to aggregate disturbances include changes both in employment selected by individual establishments and in the measure of establishments actively undertaking adjustment. Yet the model retains a partial adjustment flavor in its aggregate responses. Moreover, in contrast to existing models of discrete adjustment, our generalized partial adjustment model is sufficiently tractable to allow extension to general equilibrium.
Handle: RePEc:nbr:nberwo:9946
Template-Type: ReDIF-Paper 1.0
Title: Trade Policy and Industrial Sector Responses: Using Evolutionary Models to Interpret the Evidence
Classification-JEL: F1; L1
Author-Name: Erkan Erdem
Author-Name: James Tybout
Note: ITI PR
Number: 9947
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9947
File-URL: http://www.nber.org/papers/w9947.pdf
File-Format: application/pdf
Publication-Status: published as Collins, S. and D. Rodrik (eds.) Brookings Trade Forum 2003. Washington, D.C.: The Brookings Institution, 2004.
Abstract: Firm- and plant-level empirical studies typically find that trade liberalization squeezes price-cost margins among import-competing firms, that this heightened competitive pressure induces productivity gains among these same firms, and that further efficiency gains come from market share reallocations. Using a computable industrial evolution model to simulate the dynamic effects of import competition, we demonstrate what types of managerial behavior, long-term transition paths and welfare effects are consistent with this set of stylized facts.
Handle: RePEc:nbr:nberwo:9947
Template-Type: ReDIF-Paper 1.0
Title: Official Interventions and Occasional Violations of Uncovered Interest Party in the Dollar-DM Market
Classification-JEL: F3
Author-Name: Nelson Mark
Author-Person: pma186
Author-Name: Young-Kyu Moh
Note: IFM
Number: 9948
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9948
File-URL: http://www.nber.org/papers/w9948.pdf
File-Format: application/pdf
Publication-Status: published as Mark, Nelson and Y.K. Moh. “Official Interventions and Occasional Violations of Uncovered Interest Parity in the Dollar-DM Market." Journal of Empirical Finance 14 (September 2007): 499-522.
Abstract: This paper presents a model of exchange rate determination in which the forward premium anomaly emerges as the result of unanticipated central bank interventions in the foreign exchange market. Deviations from uncovered interest parity (UIP) therefore represent neither unexploited profit opportunities nor compensation for bearing risk. In simulations, the model generates a forward premium anomaly and matches several other notable features of US-German data. Additional empirical support is obtained from an analysis of Fed and Bundesbank interventions in the dollar--DM market where it is found that the forward premium anomaly intensifies during those times when a central bank intervenes.
Handle: RePEc:nbr:nberwo:9948
Template-Type: ReDIF-Paper 1.0
Title: Propping and Tunneling
Classification-JEL: G33; P12
Author-Name: Eric Friedman
Author-Name: Simon Johnson
Author-Person: pjo44
Author-Name: Todd Mitton
Note: CF
Number: 9949
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9949
File-URL: http://www.nber.org/papers/w9949.pdf
File-Format: application/pdf
Publication-Status: published as Friedman, Eric, Simon Johnson and Todd Mitton. "Propping And Tunneling," Journal of Comparative Economics, 2003, v31(4,Dec), 732-750.
Abstract: In countries with weak legal systems, there is a great deal of tunnelling by the entrepreneurs who control publicly traded firms. However, under some conditions entrepreneurs prop up their firms, i.e., they use their private funds to benefit minority shareholders. We provide evidence and a model that explains propping. In particular, we suggest that issuing debt can credibly commit an entrepreneur to propping, even though creditors can never take possession of any underlying collateral. This helps to explain why emerging markets with weak institutions sometimes grow rapidly and why they are also subject to frequent economic and financial crises.
Handle: RePEc:nbr:nberwo:9949
Template-Type: ReDIF-Paper 1.0
Title: Gone But Not Forgotten: Labor Flows, Knowledge Spillovers, and Enduring Social Capital
Classification-JEL: F22; O31
Author-Name: Ajay Agrawal
Author-Person: pag38
Author-Name: Iain Cockburn
Author-Person: pco166
Author-Name: John McHale
Author-Person: pmc145
Note: LS PR
Number: 9950
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9950
File-URL: http://www.nber.org/papers/w9950.pdf
File-Format: application/pdf
Publication-Status: published as Agrawal, A., I. Cockburn and J. McHale. "Gone But Not Forgotten: Labor Flows, Knowledge Spillovers and Enduring Social Capital." Journal of Economic Geography 6, 5 (2006): 571-591.
Abstract: It is well known that patent citations occur disproportionately between patents issued to inventors living in the same location, which has been taken as evidence of geographically localized knowledge spillovers. In this study, we find that patent citations also occur disproportionately often in locations where the cited inventor was living prior to being issued the patent in question, which we interpret as evidence of a significant role played by social capital in promoting knowledge spillovers. We first develop a model of purposeful investments in social capital by co-located inventors that incorporates the effect of expected mobility. Using patent and citation data, we then test two hypotheses motivated by the model. First, we find strong evidence in support of the enduring social capital hypothesis; social ties that facilitate knowledge transfer persist even after formerly co-located individuals are separated. Consistent with the model, we find that individuals with higher ex ante mobility are somewhat less likely to invest in location-specific social relationships, but the pattern of spillovers implied by patent citations is consistent with them investing in those social relationships that survive subsequent geographic separation. Second, we find strong evidence that the social ties associated with co-location are particularly important for facilitating knowledge spillovers across technology fields or communities of practice where alternative mechanisms for transferring knowledge are more costly.
Handle: RePEc:nbr:nberwo:9950
Template-Type: ReDIF-Paper 1.0
Title: Capital Investments and Stock Returns
Classification-JEL: G1; G3
Author-Name: Sheridan Titman
Author-Person: pti51
Author-Name: K.C. John Wei
Author-Name: Feixue Xie
Author-Person: pxi55
Note: CF
Number: 9951
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9951
File-URL: http://www.nber.org/papers/w9951.pdf
File-Format: application/pdf
Publication-Status: published as Titman, Sheridan, K. C. John Wei and Feixue Xie. "Capital Investments And Stock Returns," Journal of Financial and Quantitative Analysis, 2004, v39(4,Dec), 677-700.
Abstract: Firms that substantially increase capital investments subsequently achieve negative benchmark-adjusted returns. The negative abnormal capital investment/return relation is shown to be stronger for firms that have greater investment discretion, i.e., firms with higher cash flows and lower debt ratios, and is shown to be significant only in time periods when hostile takeovers were less prevalent. These observations are consistent with the hypothesis that investors tend to underreact to the empire building implications of increased investment expenditures. Although firms that increase capital investments tend to have high past returns and often issue equity, the negative abnormal capital investment/return relation is independent of the previously documented long-term return reversal and secondary equity issue anomalies.
Handle: RePEc:nbr:nberwo:9951
Template-Type: ReDIF-Paper 1.0
Title: The Relationships between Mental Health and Substance Abuse Treatment and Juvenile Crime
Classification-JEL: I0; K4
Author-Name: Alison Evans Cuellar
Author-Name: Sara Markowitz
Author-Person: pma138
Author-Name: Anne M. Libby
Note: EH CH
Number: 9952
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9952
File-URL: http://www.nber.org/papers/w9952.pdf
File-Format: application/pdf
Abstract: The purpose of this paper is to examine the effectiveness of mental health and substance abuse treatment in reducing crimes committed by juveniles. The observed high correlations between crime, substance abuse and poor mental health suggests that factors which reduce substance abuse and improve mental health may also be effective in reducing criminal activities. This paper uses detention data in conjunction with substance abuse and mental health treatment data for youth enrolled in the Colorado state foster care program. We analyze the impact of treatment in delaying or preventing this group of at-risk youth from engaging in criminal behavior. Results show a negative effect, i.e., longer duration before detention, for youth who receive treatment and for youth in areas with high treatment rates.
Handle: RePEc:nbr:nberwo:9952
Template-Type: ReDIF-Paper 1.0
Title: The Draw of Home: How Teachers' Preferences for Proximity Disadvantage Urban Schools
Classification-JEL: I2; J2
Author-Name: Donald Boyd
Author-Name: Hamilton Lankford
Author-Name: Susanna Loeb
Note: ED
Number: 9953
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9953
File-URL: http://www.nber.org/papers/w9953.pdf
File-Format: application/pdf
Publication-Status: published as Boyd, Donald, Hamilton Lankford, Susanna Loeb, and James Wyckoff. "The Draw of Home: How Teachers' Preferences for Proximity Disadvantage Urban Schools." Journal of Policy Analysis and Management 24, 1 (Winter 2005): 113-32.
Abstract: This paper explores a little understood aspect of labor markets, their spatial geography. Using data from New York State, we find teacher labor markets to be geographically very small. Teachers express preferences to teach close to where they grew up and, controlling for proximity, they prefer areas with characteristics similar to their hometown. We discuss implications of these preferences for the successful recruitment of teachers, including the potential benefits of local recruiting and training. We also discuss implications for the modeling of teacher labor markets, including the possible biases that arise in estimates of compensating differentials when distance is omitted from the analyses. This study contributes to the literature on the geography of labor markets more generally by employing data on residential location during childhood instead of current residence, which may be endogenous to job choice.
Handle: RePEc:nbr:nberwo:9953
Template-Type: ReDIF-Paper 1.0
Title: Child Care in Poor Communities: Early Learning Effects of Type, Quality, and Stability
Classification-JEL: I0; I2
Author-Name: Susanna Loeb
Author-Name: Bruce Fuller
Author-Name: Sharon Lynn Kagan
Author-Name: Bidemi Carrol
Author-Name: Judith Carroll
Note: ED CH
Number: 9954
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9954
File-URL: http://www.nber.org/papers/w9954.pdf
File-Format: application/pdf
Publication-Status: published as Loeb, Susanna Bruce Fuller, Sharon Lynn Kagan, and Bidemi Abioseh Carrol. “Child Care in Poor Communities: Early Learning Effects of Type, Quality and Stability." Child Development (January/February 2004).
Abstract: Young children in poor communities are spending more hours in non-parental care due to policy reforms and expansion of early childhood programs. Studies show positive effects of high-quality center-based care on children's cognitive growth. Yet we know little about the effects of center care typically available in poor communities or the effects of home-based care. Using a sample of children age 12 to 42 months when their mothers entered welfare-to-work programs, this paper finds positive cognitive effects for children in center care. Children also display stronger cognitive growth when caregivers are more sensitive and responsive, and stronger social development when providers have education beyond high school. Children in family child care homes show more behavioral problems but no cognitive differences.
Handle: RePEc:nbr:nberwo:9954
Template-Type: ReDIF-Paper 1.0
Title: Advance Directives and Medical Treatment at the End of Life
Classification-JEL: I1; L5
Author-Name: Daniel Kessler
Author-Name: Mark B. McClellan
Note: AG EH
Number: 9955
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9955
File-URL: http://www.nber.org/papers/w9955.pdf
File-Format: application/pdf
Publication-Status: published as Kessler, Daniel P. and Mark B. McClellan. “Advance Directives and Medical Treatment at the End of Life,” Journal of Health Economics 23, 1 (January 2004): 111-127.
Abstract: To assess the consequences of advance medical directives -- which explicitly specify a patient's preferences for one or more specific types of medical treatment in the event of a loss of competence we analyze the medical care of elderly Medicare beneficiaries who died between 1985-1995. We compare the care of patients from states that adopted laws enhancing incentives for compliance with advance directives and laws requiring the appointment of a health care surrogate in the absence of an advance directive to the care of patients from states that did not. We report three key findings. First, laws enhancing incentives for compliance significantly reduce the probability of dying in an acute care hospital. Second, laws requiring the appointment of a surrogate significantly increase the probability of receiving acute care in the last month of life, but decrease the probability of receiving nonacute care. Third, neither type of law leads to any savings in medical expenditures.
Handle: RePEc:nbr:nberwo:9955
Template-Type: ReDIF-Paper 1.0
Title: Banks' Advantage in Hedging Liquidity Risk: Theory and Evidence from the Commercial Paper Market
Classification-JEL: G2
Author-Name: Evan Gatev
Author-Name: Philip E. Strahan
Note: CF
Number: 9956
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9956
File-URL: http://www.nber.org/papers/w9956.pdf
File-Format: application/pdf
Publication-Status: published as Gatev, Evan and Philip E. Strahan. "Banks' Advantage In Hedging Liquidity Risk: Theory and Evidence From The Commercial Paper Market," Journal of Finance, 2006, v61(2,Apr), 867-892.
Abstract: This paper argues that banks have a unique ability to hedge against market-wide liquidity shocks. Deposit inflows provide funding for loan demand shocks that follow declines in market liquidity. Consequently, one dimension of bank specialness' is that banks can insure firms against systematic declines in market liquidity at lower cost than other financial institutions. We provide supporting empirical evidence from the commercial paper (CP) market. When market liquidity dries up and CP spreads increase, banks experience funding inflows. These flows allow banks to meet increased loan demand from borrowers drawing funds from pre-existing commercial paper backup lines, without running down their holdings of liquid assets. Moreover, the supply of cheap funds is sufficiently large so that pricing on new lines of credit actually falls as market spreads widen.
Handle: RePEc:nbr:nberwo:9956
Template-Type: ReDIF-Paper 1.0
Title: Private Information and its Effect on Market Equilibrium: New Evidence from Long-Term Care Insurance
Classification-JEL: D82; G22
Author-Name: Amy Finkelstein
Author-Person: pfi264
Author-Name: Kathleen McGarry
Author-Person: pmc264
Note: AG EH PE
Number: 9957
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9957
File-URL: http://www.nber.org/papers/w9957.pdf
File-Format: application/pdf
Publication-Status: published as Finkelstein, Amy and Kathleen McGarry. "Private Information and its Effect on Market Equilibrium: Evidence From the Long-Term Care Insurance Market." The American Economic Review 96, 4 (2005): 938-958.
Abstract: This paper examines the standard test for asymmetric information in insurance markets: that its presence will result in a positive correlation between insurance coverage and risk occurrence. We show empirically that while there is no evidence of this positive correlation in the long-term care insurance market, asymmetric information still exists. We use individuals' subjective assessments of the chance they will enter a nursing home, together with the insurance companies' own assessment, to show that individuals do have private information about their risk type. Moreover, this private information is positively correlated with insurance coverage. We reconcile this direct evidence of asymmetric information with the lack of a positive correlation between insurance coverage and risk occurrence by demonstrating the existence of other unobserved characteristics that are positively related to coverage and negatively related to risk occurrence. Specifically, we find that more cautious individuals are both more likely to have long-term care insurance and less likely to enter a nursing home. Our results demonstrate that insurance markets may suffer from asymmetric information, and its negative efficiency consequences, even if those with more insurance are not higher risk. The results also suggest an alternative approach to testing for asymmetric information in insurance markets.
Handle: RePEc:nbr:nberwo:9957
Template-Type: ReDIF-Paper 1.0
Title: The "Virtues" of the Past: Education in the First Hundred Years of the New Republic
Classification-JEL: N3; I2
Author-Name: Claudia Goldin
Author-Person: pgo601
Author-Name: Lawrence F. Katz
Author-Person: pka266
Note: ED DAE LS CH
Number: 9958
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9958
File-URL: http://www.nber.org/papers/w9958.pdf
File-Format: application/pdf
Abstract: By the mid-nineteenth century school enrollment rates in the United States exceeded those of any other nation in the world and by the early twentieth century the United States had accomplished mass education at all levels. No country was able to close the gap until the last quarter of the twentieth century. For much of its history U.S. education was spurred by a set of 'virtues,' the most important of which were public provision by small fiscally independent districts, public funding, secular control, gender neutrality, open access, a forgiving system, and an academic curriculum. The outcomes of the virtues were an enormous diffusion of educational institutions and the early spread of mass education. America borrowed its educational institutions from Europe but added to them in ways that served to enhance competition and openness. The virtues of long ago need not be the virtues of today, and they also need not have been virtuous in all places and at all times in the past. In this essay we explore the historical origins of these virtues and find that almost all were in place in the period before the American Civil War.
Handle: RePEc:nbr:nberwo:9958
Template-Type: ReDIF-Paper 1.0
Title: Housing Collateral, Consumption Insurance and Risk Premia: An Empirical Perpective
Classification-JEL: G1
Author-Name: Hanno Lustig
Author-Person: plu17
Author-Name: Stijn Van Nieuwerburgh
Author-Person: pva368
Note: AP
Number: 9959
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9959
File-URL: http://www.nber.org/papers/w9959.pdf
File-Format: application/pdf
Publication-Status: published as Hanno N. Lustig & Stijn G. Van Nieuwerburgh, 2005. "Housing Collateral, Consumption Insurance, and Risk Premia: An Empirical Perspective," Journal of Finance, American Finance Association, vol. 60(3), pages 1167-1219, 06.
Abstract: In a model with housing collateral, the ratio of housing wealth to human wealth shifts the conditional distribution of asset prices and consumption growth. A decrease in house prices reduces the collateral value of housing, increases household exposure to idiosyncratic risk, and increases the conditional market price of risk. Using aggregate data for the US, we find that a decrease in the ratio of housing wealth to human wealth predicts higher returns on stocks. Conditional on this ratio, the covariance of returns with aggregate risk factors explains eighty percent of the cross-sectional variation in annual size and book-to-market portfolio returns. A data appendix for this paper is available.
Handle: RePEc:nbr:nberwo:9959
Template-Type: ReDIF-Paper 1.0
Title: The Unique Minimum State Variable RE Solution is E-Stable in All Well Formulated Linear Models
Classification-JEL: E00; C6
Author-Name: Bennett T. McCallum
Note: EFG ME
Number: 9960
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9960
File-URL: http://www.nber.org/papers/w9960.pdf
File-Format: application/pdf
Publication-Status: published as McCallum, Bennett T. "On The Relationship Between Determinate And CSV Solutions In Linear Re Models," Economics Letters, 2004, v84(1,Jul), 55-60.
Abstract: This paper explores the relationship between the closely linked concepts of E-stability and least-squares learnability, featured in recent work by Evans and Honkapohja (1999, 2001), and the minimum-state-variable (MSV) solution defined by McCallum (1983) and used by many researchers for rational expectations (RE) analysis. It is shown that the MSV solution, which is unique by construction, is E-stable--and therefore LS learnable when nonexplosive--in all linear RE models that satisfy conditions for being well formulated.' The latter property involves two requirements. The first is that values of the model's parameters are restricted so as to avoid any infinite discontinuity, of the steady state values of endogenous variables, in response to small changes in these parameters. (It is expressed in terms of the eigenvalues of a matrix that is the sum of those attached to the one-period-ahead and one-period-lagged values of the endogenous variables in a first-order vector formulation of the model.) The second, which is needed infrequently, is that the parameters are restricted to prevent any infinite discontinuities in the MSV response coefficients.
Handle: RePEc:nbr:nberwo:9960
Template-Type: ReDIF-Paper 1.0
Title: Is the Fiscal Theory of the Price Level Learnable?
Classification-JEL: E5; E6
Author-Name: Bennett T. McCallum
Note: EFG ME
Number: 9961
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9961
File-URL: http://www.nber.org/papers/w9961.pdf
File-Format: application/pdf
Publication-Status: published as Scottish Journal of Political Economy, Vol. 50, no. 5 (November 2003): 634-649
Abstract: This paper presents a prototype model for development of the fiscal theory of the price level.' In this simple setting, the fiscal theory's distinctiveness relies upon adoption of a bubble solution, rather than the rational-expectations fundamentals solution. The paper then shows that the fiscal solution is not adaptively learnable, by agents who estimate coefficients relevant for forecasting on the basis of available data, whereas the orthodox monetarist' solution exists and is learnable. Finally, it is argued that similar results should be expected to apply in models that are more general in various dimensions.
Handle: RePEc:nbr:nberwo:9961
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Identity and the Endogeneity of Race
Classification-JEL: N3; J7
Author-Name: Howard Bodenhorn
Author-Person: pbo547
Author-Name: Christopher S. Ruebeck
Author-Person: pru128
Note: DAE
Number: 9962
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9962
File-URL: http://www.nber.org/papers/w9962.pdf
File-Format: application/pdf
Abstract: Economic and social theorists have modeled race and ethnicity as a form of personal identity produced in recognition of the costliness of adopting and maintaining a specific identity. These models of racial and ethnic identity recognize that race and ethnicity is potentially endogenous because racial and ethnic identities are fluid. We look at the free African-American population in the mid-nineteenth century to investigate the costs and benefits of adopting alternative racial identities. We model the choice as an extensive-form game, where whites choose to accept or reject a separate mulatto identity and mixed race individuals then choose whether or not to adopt that mulatto identity. Adopting a mulatto identity generates pecuniary gains, but imposes psychic costs. Our empirical results imply that race is contextual and that there was a large pecuniary benefit to adopting a mixed-race identity.
Handle: RePEc:nbr:nberwo:9962
Template-Type: ReDIF-Paper 1.0
Title: Does Marijuana Use Impair Human Capital Formation?
Classification-JEL: I12; I20
Author-Name: Rosalie Liccardo Pacula
Author-Person: ppa1299
Author-Name: Karen E. Ross
Author-Name: Jeanne Ringel
Note: EH CH
Number: 9963
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9963
File-URL: http://www.nber.org/papers/w9963.pdf
File-Format: application/pdf
Abstract: In this paper we examine the relationship between marijuana use and human capital formation by examining performance on standardized tests among a nationally representative sample of youths from the National Education Longitudinal Survey. We find that much of the negative association between cross-sectional measures of marijuana use and cognitive ability appears to be attenuated by individual differences in school attachment and general deviance. However, difference-in-difference estimates examining changes in test scores across 10th and 12th grade reveal that marijuana use remains statistically associated with a 15% reduction in performance on standardized math tests.
Handle: RePEc:nbr:nberwo:9963
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Length of the School Year on Student Performance and Earnings: Evidence from the German Short School Year
Classification-JEL: J24; J31
Author-Name: Jorn-Steffen Pischke
Author-Person: ppi29
Note: LS
Number: 9964
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9964
File-URL: http://www.nber.org/papers/w9964.pdf
File-Format: application/pdf
Publication-Status: published as "The Impact of Length of the School Year on Student Performance and Earnings: Evidence from the German Short School Years," Economic Journal 117 (2007), 1216-1242.
Abstract: This paper investigates how changing the length of the school year, leaving the basic curriculum unchanged, affects learning and subsequent earnings. I use variation introduced by the West-German short school years in 1966-67, which exposed some students to a total of about two thirds of a year less of schooling while enrolled. I show that the short school years led indeed to shorter schooling for affected students. Using comparisons across cohorts, states, and secondary school tracks, I find that the short school years increased grade repetition in primary school, but had no adverse effect on the number of students attending the highest secondary school track or earnings later in life.
Handle: RePEc:nbr:nberwo:9964
Template-Type: ReDIF-Paper 1.0
Title: Scale and Scope Economies in the Global Advertising and Marketing Services Business
Classification-JEL: L1; L2
Author-Name: Alvin J. Silk
Author-Name: Ernst R. Berndt
Note: IO ITI
Number: 9965
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9965
File-URL: http://www.nber.org/papers/w9965.pdf
File-Format: application/pdf
Abstract: We assess size and scope-related economies in the global advertising and marketing services business. A translog cost function is employed wherein a firm's costs vary according to its scale and two dimensions of the scope of its operations. Parameters of the model are estimated via three stage least squares using annual data for 1989-2001 for an unbalanced panel consisting of the eight largest firms in this industry. A firm's total variable costs are affected by its scale, scope (mix of services and markets served), and by the interaction of the two dimensions of scope. The latter effect suggests that economies of coordination may accompany the strategy of jointly offering advertising and marketing services globally. Estimates indicate that the industry's long-run cost function is subject to very slight economies of scale. Diseconomies of scale accompany growth in volume obtained by extending either breadth of service offerings or market coverage. A small cost advantage, typically of one to two percent, is uniformly associated with joint production of services for the domestic and overseas markets, as compared to splitting up the firm into smaller stand-alone entities. Scope economies of a similar magnitude arise consistently from the joint production of advertising and marketing services.
Handle: RePEc:nbr:nberwo:9965
Template-Type: ReDIF-Paper 1.0
Title: Price Indexes for Microsoft's Personal Computer Software Products
Classification-JEL: D4; E3
Author-Name: Jaison R. Abel
Author-Person: pab107
Author-Name: Ernst R. Berndt
Author-Name: Alan G. White
Author-Person: pwh19
Note: PR
Number: 9966
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9966
File-URL: http://www.nber.org/papers/w9966.pdf
File-Format: application/pdf
Publication-Status: published as Berndt, Ernst R. and Charles M. Hulten, (eds.) Hard-to-Measure Goods and Services: Essays in Honor of Zvi Griliches, National Bureau of Economic Research, Studies in Income and Wealth, Vol. 67. Chicago: University of Chicago Press for the National Bureau of Economic Research, 2007.
Publication-Status: published as Price Indexes for Microsoft, Jaison R. Abel, Ernst R. Berndt, Alan G. White. in Hard-to-Measure Goods and Services: Essays in Honor of Zvi Griliches, Berndt and Hulten. 2007
Abstract: Using a unique and comprehensive data source, we measure price changes for Microsoft's desktop personal computer software products during the time period July 1993 through June 2001. This paper contributes to a relatively small literature on price measurement of pre-packaged software by incorporating important channels of distribution, such as volume licensing and Original Equipment Manufacturer, as well as changes in product form, such as upgrades and integrated productivity suites, into matched-model price indexes. Although there are differences over time periods and across products, we find that the prices of Microsoft's desktop operating systems and applications have generally been falling over this time period.
Handle: RePEc:nbr:nberwo:9966
Template-Type: ReDIF-Paper 1.0
Title: Wage Determination and Employment Fluctuations
Classification-JEL: E24
Author-Name: Robert E. Hall
Note: EFG LS
Number: 9967
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9967
File-URL: http://www.nber.org/papers/w9967.pdf
File-Format: application/pdf
Publication-Status: published as Hall, Robert E. "Employment Fluctuations With Equilibrium Wage Stickiness," American Economic Review, 2005, v95(1,Mar), 50-65.
Abstract: Following a recession, the aggregate labor market is slack employment remains below normal and recruiting efforts of employers, as measured by vacancies, are low. A model of matching frictions explains the qualitative responses of the labor market to adverse shocks, but requires implausibly large shocks to account for the magnitude of observed fluctuations. The incorporation of wage-setting frictions vastly increases the sensitivity of the model to driving forces. I develop a new model of wage friction. The friction arises in an economic equilibrium and satisfies the condition that no worker-employer pair has an unexploited opportunity for mutual improvement. The wage friction neither interferes with the efficient formation of employment matches nor causes inefficient job loss. Thus it provides an answer to the fundamental criticism previously directed at sticky-wage models of fluctuations.
Handle: RePEc:nbr:nberwo:9967
Template-Type: ReDIF-Paper 1.0
Title: Optimal Monetary Policy in a Liquidity Trap
Classification-JEL: E52
Author-Name: Gauti B. Eggertsson
Author-Person: peg7
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG ME
Number: 9968
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9968
File-URL: http://www.nber.org/papers/w9968.pdf
File-Format: application/pdf
Publication-Status: published as Eggertsson, Gauti B. and Michael Woodford. "The Zero Bound On Interest Rates And Optimal Monetary Policy," Brookings Papers on Economic Activity 34, 2003-1 (2003): 139-235.
Abstract: We consider the consequences for monetary policy of the zero floor for nominal interest rates. The zero bound can be a significant constraint on the ability of a central bank to combat deflation. We show, in the context of an intertemporal equilibrium model, that open-market operations, even of unconventional' types, are ineffective if they do not change expectations about the future conduct of policy; in this sense, a liquidity trap' is possible. Nonetheless, a credible commitment to the right sort of history-dependent policy can largely mitigate the distortions created by the zero bound. In our model, optimal policy involves a commitment to adjust interest rates so as to achieve a time-varying price-level target, when this is consistent with the zero bound. We also discuss ways in which other central-bank actions, while irrelevant apart from their effects on expectations, may help to make credible a central bank's commitment to its target, and consider implications for the policy options currently available for overcoming deflation in Japan.
Handle: RePEc:nbr:nberwo:9968
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy in an Uncertain Environment
Classification-JEL: E5
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: ME
Number: 9969
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9969
File-URL: http://www.nber.org/papers/w9969.pdf
File-Format: application/pdf
Publication-Status: published as Martin Feldstein, 2003. "Monetary policy in an uncertain environment," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 373-382.
Abstract: This paper discusses the nature of the uncertainty faced by central banks and considers three approaches to dealing with uncertainty(1) formal optimization models and robust rules based on such models; (2) informal rules like the Taylor rule and inflation targeting; and (3) a case by case approach based on an informal Bayesian logic. The latter case requires considering the asymmetric nature of the risks that the central bank often faces.
Handle: RePEc:nbr:nberwo:9969
Template-Type: ReDIF-Paper 1.0
Title: The Cost of Business Cycles Under Endogenous Growth
Classification-JEL: E32; D92
Author-Name: Gadi Barlevy
Author-Person: pba129
Note: EFG
Number: 9970
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9970
File-URL: http://www.nber.org/papers/w9970.pdf
File-Format: application/pdf
Publication-Status: published as Barlevy, Gadi. "The Cost Of Business Cycles Under Endogenous Growth," American Economic Review, 2004, v94(4,Sep), 964-990.
Abstract: In his famous monograph, Lucas (1987) put forth an argument that the welfare gains from reducing the volatility of aggregate consumption are negligible. Subsequent work that revisited Lucas' calculation continued to find only small benefits from reducing the volatility of consumption, further reinforcing the perception that business cycles don't matter. This paper argues instead that fluctuations can affect welfare by affecting the growth rate of consumption. I present an argument for why fluctuations can reduce growth starting from a given initial consumption, which could imply substantial welfare effects as Lucas (1987) already observed in his calculation. Empirical evidence and calibration exercises suggest that the welfare effects are likely to be substantial, about two orders of magnitude greater than Lucas' original estimates.
Handle: RePEc:nbr:nberwo:9970
Template-Type: ReDIF-Paper 1.0
Title: An Essay on the Revived Bretton Woods System
Classification-JEL: F02; F32
Author-Name: Michael P. Dooley
Author-Person: pdo13
Author-Name: David Folkerts-Landau
Author-Name: Peter Garber
Author-Person: pga124
Note: IFM
Number: 9971
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9971
File-URL: http://www.nber.org/papers/w9971.pdf
File-Format: application/pdf
Publication-Status: published as Dooley, Michael P., David Folkerts-Landau and Peter Garber. "The Revived Bretton Woods System," International Journal of Finance and Economics 9(4): 307-313, October 2004
Publication-Status: published as Michael Dooley & David Folkerts-Landau & Peter Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
Abstract: The economic emergence of a fixed exchange rate periphery in Asia has reestablished the United States as the center country in the Bretton Woods international monetary system. We argue that the normal evolution of the international monetary system involves the emergence of a periphery for which the development strategy is export-led growth supported by undervalued exchange rates, capital controls and official capital outflows in the form of accumulation of reserve asset claims on the center country. The success of this strategy in fostering economic growth allows the periphery to graduate to the center. Financial liberalization, in turn, requires floating exchange rates among the center countries. But there is a line of countries waiting to follow the Europe of the 1950s/60s and Asia today sufficient to keep the system intact for the foreseeable future.
Handle: RePEc:nbr:nberwo:9971
Template-Type: ReDIF-Paper 1.0
Title: How Do Hospitals Respond to Price Changes?
Classification-JEL: H0; I0
Author-Name: Leemore S. Dafny
Note: AG EH
Number: 9972
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9972
File-URL: http://www.nber.org/papers/w9972.pdf
File-Format: application/pdf
Publication-Status: published as Dafny, Leemore S. "How Do Hospitals Respond to Price Changes?" American Economic Review 95, 5 (December 2005): 1525-1547.
Abstract: This paper investigates whether hospitals respond in profit-maximizing ways to changes in diagnosis-specific prices determined by Medicare's Prospective Payment System and other public and private insurers. Previous studies have been unable to isolate this response because changes in reimbursement amounts (prices) are typically endogenous: they are adjusted to reflect changes in hospital costs. I exploit an exogenous 1988 policy change that generated large price changes for 43 percent of all Medicare admissions. I find that hospitals responded to these price changes by upcoding' patients to diagnosis codes associated with large reimbursement increases, garnering $330-$425 million in extra reimbursement annually. This response was particularly strong among for-profit hospitals. With the important exception of elective diagnoses, I find little evidence that hospitals increased the intensity of care in diagnoses subject to price increases, where intensity is measured by total costs, length of stay, number of surgical procedures, and number of intensive-care-unit days. Neither did hospitals increase the volume of patients admitted to more remunerative diagnoses, notwithstanding the strong a priori expectation that such a response should prevail in fixed-price settings. Taken together, these findings suggest that, for the most part, hospitals do not alter their treatment or admissions policies based on diagnosis-specific prices; however they employ sophisticated coding strategies in order to maximize total reimbursement. The results also suggest that models of quality competition among hospitals may be inappropriate at the level of specific diagnoses ( products').
Handle: RePEc:nbr:nberwo:9972
Template-Type: ReDIF-Paper 1.0
Title: What Effect do Unions Have on Wages Now and Would 'What Do Unions Do' Be Surprised?
Classification-JEL: J5
Author-Name: David G. Blanchflower
Author-Person: pbl22
Author-Name: Alex Bryson
Author-Person: pbr105
Note: LS
Number: 9973
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9973
File-URL: http://www.nber.org/papers/w9973.pdf
File-Format: application/pdf
Publication-Status: published as Blanchflower, David and Alex Bryson. "What effect do unions have on wages now and would Freeman and Medoff be surprised?" Journal of Labor Research 25, 3 (Summer 2004): 383-414.
Publication-Status: published as Bennett, James T. and Bruce E. Kaufman (eds.) What Do Unions Do?: The Evidence Twenty Years Later. 2004.
Abstract: We explore the various claims made by Freeman and Medoff (FM) in their famous book What do unions do? about the impact of unions on wages and update them with new and better data. The main findings are as follows. 1) Private sector union wage premium is lower today than it was in the 1970s. 2) The union wage premium is counter-cyclical. 3) There is evidence of a secular decline in the private sector union wage premium. 4) There remains big variation in the premium across workers. 5) There is big variation in industry-level union wage premia. 6) State level union wage premia vary less than occupation and industry level premia. 7) Union workers remain better able than non-union workers to resist employer efforts to reduce wages when market conditions are unfavorable. 8) There has been a decline in the unadjusted wage gap relative to the regression-adjusted wage gap. 9) Public sector wage effects are large and similar to those in the private sector.
Handle: RePEc:nbr:nberwo:9973
Template-Type: ReDIF-Paper 1.0
Title: The Conditional CAPM does not Explain Asset-Pricing Anamolies
Classification-JEL: G12
Author-Name: Jonathan Lewellen
Author-Name: Stefan Nagel
Author-Person: pna176
Note: AP
Number: 9974
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9974
File-URL: http://www.nber.org/papers/w9974.pdf
File-Format: application/pdf
Publication-Status: published as Lewellen, Jonathan & Nagel, Stefan, 2006. "The conditional CAPM does not explain asset-pricing anomalies," Journal of Financial Economics, Elsevier, vol. 82(2), pages 289-314, November.
Abstract: Recent studies suggest that the conditional CAPM might hold, period-by-period, and that time-varying betas can explain the failures of the simple, unconditional CAPM. We argue, however, that significant departures from the unconditional CAPM would require implausibly large time-variation in betas and expected returns. Thus, the conditional CAPM is unlikely to explain asset-pricing anomalies like book-to-market and momentum. We test this conjecture empirically by directly estimating conditional alphas and betas from short-window regressions (avoiding the need to specify conditioning information). The tests show, consistent with our analytical results, that the conditional CAPM performs nearly as poorly as the unconditional CAPM.
Handle: RePEc:nbr:nberwo:9974
Template-Type: ReDIF-Paper 1.0
Title: International Adverse Selection in Life Insurance and Annuities
Classification-JEL: G2; J1
Author-Name: David McCarthy
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Note: AG
Number: 9975
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9975
File-URL: http://www.nber.org/papers/w9975.pdf
File-Format: application/pdf
Abstract: This paper evaluates the extent of adverse selection in life insurance and annuities in international markets, for both group and individual products. We also compare results with prior analyses of adverse selection in international annuity markets, focusing on the US, the UK, and Japan. Our results help assess the extent to which life insurers can hedge mortality exposure by writing both life insurance and annuities, and they may be used to determine a normal range for adverse selection in international insurance markets.
Handle: RePEc:nbr:nberwo:9975
Template-Type: ReDIF-Paper 1.0
Title: The Consumption Response to Predictable Changes in Discretionary Income: Evidence from the Repayment of Vehicle Loans
Classification-JEL: D91
Author-Name: Melvin Stephens Jr.
Author-Person: pst400
Note: EFG
Number: 9976
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9976
File-URL: http://www.nber.org/papers/w9976.pdf
File-Format: application/pdf
Publication-Status: published as Stephens Jr., Melvin. "The Consumption Response to Predictable Changes in Discretionary Income: Evidence from the Repayment of Vehicle Loans." The Review of Economics and Statistics 90, 2 (May 2008): 241-252.
Abstract: Whether households smooth' consumption in response to predictable changes in income is an open and contentious question. This paper examines the consumption reaction to predictable increases in discretionary income following the final payment of a vehicle loan. Using data from the Consumer Expenditure Survey, the results show that a 10 percent increase in discretionary income due to a loan repayment leads to a 2 to 3.5 percent increase in non-durable consumption. Additional analysis suggests that these findings may be explained by the presence of borrowing constraints.
Handle: RePEc:nbr:nberwo:9976
Template-Type: ReDIF-Paper 1.0
Title: Unemployment Risk and Compensating Differential in Late-Nineteenth Century New Jersey Manufacturing
Classification-JEL: N31; J33
Author-Name: Susan Averett
Author-Person: pav31
Author-Name: Howard Bodenhorn
Author-Person: pbo547
Author-Name: Justas Staisiunas
Note: DAE
Number: 9977
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9977
File-URL: http://www.nber.org/papers/w9977.pdf
File-Format: application/pdf
Publication-Status: published as Averett, Susan, Howard Bodenhorn and Justas Staisiunas. "Unemployment Risk And Compensating Differentials In New Jersey Manufacturing," Economic Inquiry, 2005, v43(4,Oct), 734-749.
Abstract: In this paper we test for the existence of compensating differentials for unemployment risk in an era before unemployment insurance. Using information gathered from manufacturing worker surveys conducted during the 1880s in New Jersey, we find that workers who faced higher probabilities of predictable unemployment spells received a small compensating differential. Low-skill laborers and operatives were partially compensated for unemployment risks; skilled craftsmen were not. Although workers were not fully compensated for the unemployment risks they accepted, the results are of interest because most previous writers, dating back to Adam Smith, doubted the existence of compensating differentials in manufacturing. Differentials are typically believed to arise in employments with pronounced seasonal components, such as agriculture and construction.
Handle: RePEc:nbr:nberwo:9977
Template-Type: ReDIF-Paper 1.0
Title: Lessons from Patents: Using Patents To Measure Technological Change in Environmental Models
Classification-JEL: Q33; Q30
Author-Name: David Popp
Note: PR EEE
Number: 9978
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9978
File-URL: http://www.nber.org/papers/w9978.pdf
File-Format: application/pdf
Publication-Status: published as Popp, David. "Lessons From Patents: Using Patents To Measure Technological Change In Environmental Models," Ecological Economics, 2005, v54(2,Aug), 209-226.
Abstract: When studying solutions to long-term environmental problems such as climate change, it is important to consider the role that technological change may play. Nonetheless, to date few economic models of climate change explicitly model the link between policy and technological change. There is a growing body of evidence that the incentives offered by prices and environmental regulations have a strong influence on both the creation and adoption of new technologies. In several recent papers, I have used patent data to examine the links between environmental policy and technological change. In addition, I have used the results of this research to calibrate the ENTICE model (for Endogenous Technological change) of climate change, which links energy-related R&D to changes in the price of carbon. Drawing on my experiences from empirical studies on innovation and from modeling the climate change problem, in this paper I review some of the key lessons from recent empirical work using patents to study environmental innovation and diffusion, and discuss its implications for modeling climate change policy. I conclude by offering suggestions for future research.
Handle: RePEc:nbr:nberwo:9978
Template-Type: ReDIF-Paper 1.0
Title: How did Location Affect Adoption of the Commercial Internet? Global Village, Urban Density, and Industry Composition
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: 9979
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9979
File-URL: http://www.nber.org/papers/w9979.pdf
File-Format: application/pdf
Publication-Status: published as Forman, Chris, Avi Goldfarb and Shane Greenstein. "How Did Location Affect Adoption Of The Commercial Internet? Global Village vs. Urban Leadership," Journal of Urban Economics, 2005, v58(3,Nov), 389-420.
Abstract: The authors test opposing theories on how urban locations influenced the diffusion of Internet technology. They find evidence that, controlling for industry, participation in the Internet is more likely in rural areas than in urban areas. Nevertheless, talk of the dissolution of cities is premature. Frontier Internet technologies appear more often at establishments in urban areas, even with industry controls. Major urban areas also contain many establishments from information technology-intensive industries, whose presence could reinforce the concentration of frontier Internet technologies in these areas. However, information technology-intensive industries are numerous and widespread. Hence, so is the use of frontier technology.
Handle: RePEc:nbr:nberwo:9979
Template-Type: ReDIF-Paper 1.0
Title: Hedonic Price Indexes with Unobserved Product Characteristics, and Application to PC's
Classification-JEL: E3; C1
Author-Name: C. Lanier Benkard
Author-Name: Patrick Bajari
Note: IO PR
Number: 9980
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9980
File-URL: http://www.nber.org/papers/w9980.pdf
File-Format: application/pdf
Publication-Status: published as Benkard, C. Lenair and Patrick Bajari. "Hedonic Price Indexes With Unobserved Product Characteristics," Journal of Business and Economic Statistics, 2005, v23(1,Jan), 61-75.
Abstract: We show that hedonic price indexes may be biased when not all product characteristics are observed. We derive two primary sources of bias. The first is a classical selection problem that arises due to changes over time in the values of unobserved characteristics. The second comes from changes in the implicit prices of unobserved characteristics. Next, we show that the bias can be corrected for under fairly general assumptions using extensions of factor analysis methods. We test our methods empirically using a new comprehensive monthly data set for desktop personal computer systems. For this data we find that the standard hedonic index has a slight upward bias of approximately 1.4\% per year. We also find that omitting an important characteristic (CPU benchmark) causes a large bias in the index with standard methods, but that this bias is essentially eliminated when the proposed correction is applied.
Handle: RePEc:nbr:nberwo:9980
Template-Type: ReDIF-Paper 1.0
Title: Inflation Targeting in the United States?
Classification-JEL: E3; E4
Author-Name: Marvin Goodfriend
Author-Person: pgo19
Note: ME
Number: 9981
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9981
File-URL: http://www.nber.org/papers/w9981.pdf
File-Format: application/pdf
Publication-Status: published as Inflation Targeting in the United States?, Marvin Goodfriend. in The Inflation-Targeting Debate, Bernanke and Woodford. 2005
Abstract: The paper begins by tracing the origins of the case for inflation targeting in postwar US monetary history. It describes five aspects of inflation targeting practiced implicitly by the Greenspan Fed. It argues that (1) low long run inflation should be an explicit priority for monetary policy, (2) as a practical matter it is not desirable for the Fed to vary its short run inflation target (3) strict inflation targeting can be regarded as effcient constrained countercyclical stabilization policy. Finally, the paper suggests that the Fed publicly acknowledge its implicit priority for low long run inflation, that Congress recognize that priority, and that in return representatives of the FOMC consider participating in a monetary policy forum to better inform the public and congressional oversight committees about current monetary policy.
Handle: RePEc:nbr:nberwo:9981
Template-Type: ReDIF-Paper 1.0
Title: An Experimental Study of Storable Votes
Classification-JEL: H1; C9
Author-Name: Alessandra Casella
Author-Person: pca496
Author-Name: Andrew Gelman
Author-Name: Thomas R. Palfrey
Author-Person: ppa1164
Note: PE
Number: 9982
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9982
File-URL: http://www.nber.org/papers/w9982.pdf
File-Format: application/pdf
Publication-Status: published as Casella, Alessandra & Gelman, Andrew & Palfrey, Thomas R., 2006. "An experimental study of storable votes," Games and Economic Behavior, Elsevier, vol. 57(1), pages 123-154, October.
Abstract: The storable votes mechanism is a method of voting for committees that meet periodically to consider a series of binary decisions. Each member is allocated a fixed budget of votes to be cast as desired over the multiple decisions. Voters are induced to spend more votes on those decisions that matter to them most, shifting the ex ante probability of winning away from decisions they value less and towards decisions they value more, typically generating welfare gains over standard majority voting with non-storable votes. The equilibrium strategies have a very intuitive feature---the number of votes cast must be monotonic in the voter's intensity of preferences---but are otherwise difficult to calculate, raising questions of practical implementation. In our experiments, realized efficiency levels were remarkably close to theoretical equilibrium predictions, while subjects adopted monotonic but off-equilibrium strategies. We are lead to conclude that concerns about the complexity of the game may have limited practical relevance.
Handle: RePEc:nbr:nberwo:9982
Template-Type: ReDIF-Paper 1.0
Title: Generational Accounting in Korea
Classification-JEL: H22; H55
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Young Jun Chun
Note: AG PE
Number: 9983
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9983
File-URL: http://www.nber.org/papers/w9983.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. and Young Jun Chun. "Generational Accounting In Korea," Journal of the Japanese and International Economies, 2006, v20(2,Jun), 234-268.
Abstract: This paper reassesses the long-term fiscal position of Korea using Generational Accounting, modified to reflect the special features of the Korean fiscal situation, such as prospective changes in public pension benefit profiles and social welfare expenditures due to the maturing of public pensions, increasing demand for social welfare expenditures, and population aging. Our findings suggest that unless policy toward existing generations is substantially altered, future generations will face an excessively heavy fiscal burden. For reasonable growth and interest rate assumptions, the difference between 2000 newborns and those born after 2000 ranges from 60% to 120%. We also find that a substantial part of the fiscal burden on the future generations is explained by the long-run budgetary imbalance of public pensions and Medical Insurance.
Handle: RePEc:nbr:nberwo:9983
Template-Type: ReDIF-Paper 1.0
Title: Monetary Transmission in the Euro Area: Does the Interest Rate Channel Explain it All?
Classification-JEL: E52; E20
Author-Name: Ignazio Angeloni
Author-Person: pan228
Author-Name: Anil K. Kashyap
Author-Person: pka35
Author-Name: Benoit Mojon
Author-Person: pmo43
Author-Name: Daniele Terlizzese
Author-Person: pte106
Note: EFG ME
Number: 9984
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9984
File-URL: http://www.nber.org/papers/w9984.pdf
File-Format: application/pdf
Publication-Status: published as Angeloni, Ignazio, Anil K. Kashyap, Benoit Mojon and Daniele Terlizzese. "The Output Composition Puzzle: A Difference In The Monetary Transmission Mechanism In The Euro Area And The United States," Journal of Money, Credit and Banking, 2003, v35(6,Dec), 1265-1306.
Publication-Status: published as Imperfect Knowledge, Inflation Expectations, and Monetary Policy, Athanasios Orphanides, John Williams. in The Inflation-Targeting Debate, Bernanke and Woodford. 2005
Abstract: Drawing on recent Eurosystem research that uses a range of econometric techniques and a number of new data sets, we propose a comprehensive description of how monetary policy affects the euro area economy. We focus mainly on three questions: (1) what are the stylized facts concerning the transmission of monetary policy for the area as a whole and for individual countries? (2) can the classic' interest rate channel (IRC) alone, without capital market imperfections, explain these facts? (3) if not, is the bank lending channel a likely candidate to complete the story? We find plausible euro-area wide monetary policy responses for prices and output that are similar to those generally reported for the U.S. However, investment (relative to consumption) seems to play a larger role in euro area monetary policy transmission than in the U.S. We cannot reject the hypothesis that the IRC completely characterizes transmission in a few countries, and estimate it to be substantial in almost all. Where the IRC is not dominant, there is normally some direct evidence supporting the presence of a bank lending channel (or other financial transmission channel). The cases where financial effects appear important can be further split according to whether they primarily relate to consumption or investment.
Handle: RePEc:nbr:nberwo:9984
Template-Type: ReDIF-Paper 1.0
Title: The Output Composition Puzzle: A Difference in the Monetary Transmission Mechanism in the Euro Area and U.S.
Classification-JEL: E21; E22
Author-Name: Ignazio Angeloni
Author-Person: pan228
Author-Name: Anil K. Kashyap
Author-Person: pka35
Author-Name: Benoit Mojon
Author-Person: pmo43
Author-Name: Daniele Terlizzese
Author-Person: pte106
Note: EFG ME
Number: 9985
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9985
File-URL: http://www.nber.org/papers/w9985.pdf
File-Format: application/pdf
Publication-Status: published as Angeloni, Ignazio, Anil K. Kashyap, Benoit Mojon and Daniele Terlizzese. "The Output Composition Puzzle: A Difference In The Monetary Transmission Mechanism In The Euro Area And The United States," Journal of Money, Credit and Banking, 2003, v35(6,Dec), 1265-1306.
Abstract: We revisit recent evidence on how monetary policy affects output and prices in the U.S. and in the euro area. The response patterns to a shift in monetary policy are similar in most respects, but differ noticeably as to the composition of output changes. In the euro area investment is the predominant driver of output changes, while in the U.S. consumption shifts are significantly more important. We dub this difference the output composition puzzle and explore its implications and several potential explanations for it. While the evidence seems to point at differences in consumption responses, rather than investment, as the proximate cause for this fact, the source of the consumption difference remains a puzzle.
Handle: RePEc:nbr:nberwo:9985
Template-Type: ReDIF-Paper 1.0
Title: Demand and Pricing in Electricity Markets: Evidence from San Diego During California's Energy Crisis
Classification-JEL: D1; L5
Author-Name: Peter C. Reiss
Author-Name: Matthew W. White
Note: IO EEE
Number: 9986
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9986
File-URL: http://www.nber.org/papers/w9986.pdf
File-Format: application/pdf
Abstract: We study the electricity consumption of San Diego-area households following a series of price changes and related events during California's energy crisis in 2000-01. The analysis uses a five-year panel of disaggregate billing and weather data for a random sample of 70,000 households. In contrast to prior work, these data allow us to proceed without behavioral assumptions regarding a consumer's knowledge of energy prices. We find that after a rapid price increase in summer 2000, consumption fell substantially over about 60 days, averaging 12% per household; consumption then rebounded to within 3% of pre-crisis levels after a price cap was imposed. Under the price cap public appeals for energy conservation and a remunerative voluntary conservation program had significant, but transitory, effects. Further, a large share of households reduced electricity consumption substantially (over 10%) but saved small monetary amounts ($10 or less). Overall, the results indicate consumers may be far more responsive to pecuniary and non-pecuniary incentives for altering their energy use than is commonly believed.
Handle: RePEc:nbr:nberwo:9986
Template-Type: ReDIF-Paper 1.0
Title: Can a Work Organization Have an Attitude Problem? The Impact of Workplaces on Employee Attitudes and Economic Outcomes
Classification-JEL: J0; J2
Author-Name: Ann Bartel
Author-Name: Richard Freeman
Author-Person: pfr23
Author-Name: Casey Ichniowski
Author-Name: Morris M. Kleiner
Note: LS
Number: 9987
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9987
File-URL: http://www.nber.org/papers/w9987.pdf
File-Format: application/pdf
Abstract: Using the employee opinion survey responses from several thousand employees working in 193 branches of a major U.S. bank, we consider whether there is a distinctive workplace component to employee attitudes despite the common set of corporate human resource management practices that cover all the branches. Several different empirical tests consistently point to the existence of a systematic branch-specific component to employee attitudes. "Branch effects" can also explain why a significant positive cross-sectional correlation between branch-level employee attitudes and branch sales performance is not observed in longitudinal fixed-effects sales models. The results of our empirical tests concerning the determinants of employee attitudes and the determinants of branch sales are consistent with an interpretation that workplace-specific factors lead to better outcomes for both employees and the bank, and that these factors are more likely to be some aspect of the branches' internal operations rather than some characteristic of the external market of the branch.
Handle: RePEc:nbr:nberwo:9987
Template-Type: ReDIF-Paper 1.0
Title: A New Method of Estimating Risk Aversion
Classification-JEL: D8; G12
Author-Name: Raj Chetty
Author-Person: pch161
Note: AP PE
Number: 9988
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9988
File-URL: http://www.nber.org/papers/w9988.pdf
File-Format: application/pdf
Publication-Status: published as Raj Chetty, 2006. "A New Method of Estimating Risk Aversion," American Economic Review, American Economic Association, vol. 96(5), pages 1821-1834, December.
Abstract: This paper develops a method of estimating the coefficient of relative risk aversion (g) from data on labor supply. The main result is that existing estimates of labor supply elasticities place a tight bound on g, without any assumptions beyond those of expected utility theory. It is shown that the curvature of the utility function is directly related to the ratio of the income elasticity of labor supply to the wage elasticity, holding fixed the degree of complementarity between consumption and leisure. The degree of complementarity can in turn be inferred from data on consumption choices when employment is stochastic. Using a large set of existing estimates of wage and income elasticities, I find a mean estimate of g = 1. I also give a calibration argument showing that a positive uncompensated wage elasticity, as found in most studies of labor supply, implies g < 1.25. The estimate of g changes by at most 0.25 over the range of plausible values for the complementarity parameter.
Handle: RePEc:nbr:nberwo:9988
Template-Type: ReDIF-Paper 1.0
Title: Institutional and Non-Institutional Explanations of Economic Differences
Classification-JEL: N10
Author-Name: Stanley L. Engerman
Author-Name: Kenneth L. Sokoloff
Note: DAE
Number: 9989
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9989
File-URL: http://www.nber.org/papers/w9989.pdf
File-Format: application/pdf
Publication-Status: published as Menard, Claude and Mary M. Shirley. Handbook of New Institutional Economics. Dordrecht and New York: Springer, 2005.
Abstract: Although we cannot conceive of processes of economic growth that do not involve institutional change, in this essay we outline some reasons why one should be cautious about grounding a theory of growth on institutions. We emphasize how very different institutional structures have often been found to be reasonable substitutes for each other, both in dissimilar as well as similar contexts. The historical record, therefore, does not seem to support the notion that any particular institution, narrowly defined, is indispensable for growth. Moreover, we discuss how the evidence that there are systematic patterns to the ways institutions evolve undercuts the idea that exogenous change in institutions is what powers growth. Institutions matter, but our thinking of how they matter should recognize that they are profoundly influenced by the political and economic environment, and that if any aspect of institutions is crucial for growth, it is that institutions change over time as circumstances change.
Handle: RePEc:nbr:nberwo:9989
Template-Type: ReDIF-Paper 1.0
Title: Corruption in Cities: Graft and Politics in American Cities at the Turn of the Twentieth Century
Classification-JEL: H7; N4
Author-Name: Rebecca Menes
Note: DAE
Number: 9990
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9990
File-URL: http://www.nber.org/papers/w9990.pdf
File-Format: application/pdf
Abstract: The essay is an exploration of corruption as practiced by city politicians in the United States at the turn of the twentieth century. Corruption is generally considered to be bad for the performance of governments and for the growth and development of economies, but American cities grew rapidly and were, as far as tangible evidence suggests, relatively well governed. I propose the answer to this conundrum lies in the exact types of graft which were possible. Skimming from city contracts and manipulating local real estate markets encouraged politicians to pursue growth enhancing policies. Many of the most damaging forms of government interference - closing borders and pursuing input-substituting policies - are not possible in cities. Patronage politics made corruption more likely by insulating politicians from (some) voter wrath, but the ability of the tax base to depart the city provided some constraints on rent-extraction. The city Boss did not want to kill the goose that laid the golden eggs. The analysis of urban graft is based on contemporary reports, especially the very detailed reports in Shame of the Cities' by Lincoln Steffens. The analysis also answers other important questions raised by the experience of Progressive Era cities: Why did businessmen back reform? And why did machine politics rise, and fall, between 1890 and 1930?
Handle: RePEc:nbr:nberwo:9990
Template-Type: ReDIF-Paper 1.0
Title: Are Faculty Critical? Their Role in University-Industry Licensing
Classification-JEL: J0; O31
Author-Name: Jerry G. Thursby
Author-Person: pth25
Author-Name: Marie C. Thursby
Author-Person: pth283
Note: PR
Number: 9991
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9991
File-URL: http://www.nber.org/papers/w9991.pdf
File-Format: application/pdf
Publication-Status: published as Jerry G. Thursby & Marie C. Thursby, 2004. "Are Faculty Critical? Their Role in University-Industry Licensing," Contemporary Economic Policy, Western Economic Association International, vol. 22(2), pages 162-178, 04.
Abstract: Understanding the nature of the involvement of faculty in university licensing is im-portant for understanding how technology is transferred through licensing as well as more controversial issues, such as the need for university licensing. Using data from a survey of firms that actively license-in from universities we explore the importance of faculty in the licensing and development of inventions, as well as how and why they are used and how the use of faculty relates to characteristics of firms. In particular we find that the use of faculty through sponsored research in lieu of a license is closely related to the amount of basic research conducted by firms whereas the use of faculty within the terms of a license is related to the prevalence of personal contacts between industry R&D researchers and university faculty.
Handle: RePEc:nbr:nberwo:9991
Template-Type: ReDIF-Paper 1.0
Title: What Do Unions Do ... to Voting?
Classification-JEL: J0; J5
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: AP
Number: 9992
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9992
File-URL: http://www.nber.org/papers/w9992.pdf
File-Format: application/pdf
Abstract: This paper uses data from four different data sets to examine the union impact on the turnout of members and their support for union-preferred candidates. It rejects the claim that the union share of the electorate rose massively in the 1990s. It finds that union members are about 12 percentage points more likely to vote than non-union members and nonunion persons in union households are modestly more likely to vote than persons in nonunion households, but shows that most of the higher rate of turnout of unionists is due to socioeconomic factors that differentiate union members from others. With respect to voting preferences, union members are more likely to vote for a Democrat for the House or Presidency than demographically comparable nonunion voters, largely because union members have attitudes and voting inclinations favorable to the Democrats and to liberalism prior to a given campaign. Finally, the study identifies a sizable group of nonunion persons with pro-union attitudes that unions could potentially influence to maintain the union impact on elections even with declines in union density.
Handle: RePEc:nbr:nberwo:9992
Template-Type: ReDIF-Paper 1.0
Title: On the Welfare Consequences of the Increase in Inequality in the United States
Classification-JEL: D12; D31
Author-Name: Dirk Krueger
Author-Person: pkr7
Author-Name: Fabrizio Perri
Author-Person: ppe52
Note: EFG
Number: 9993
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9993
File-URL: http://www.nber.org/papers/w9993.pdf
File-Format: application/pdf
Publication-Status: published as On the Welfare Consequences of the Increase in Inequality in the United States, Dirk Krueger, Fabrizio Perri. in NBER Macroeconomics Annual 2003, Volume 18, Gertler and Rogoff. 2004
Abstract: We investigate the welfare consequences of the stark increase in wage and earnings inequality in the US over the last 30 years. Our data stems from the Consumer Expenditure Survey, which is the only US data set that contains information on wages, hours worked, earnings and consumption for the same cross section of US households. We first document that, while the cross-sectional variation in wages and disposable earnings has significantly increased, the overall dispersion in consumption has not significantly changed. We also show that households at the bottom of the consumption distribution have increased their working hours to a larger extent than the rest of the population. In order to assess the magnitude and the incidence of the welfare consquences of these trends we stimate stochastic processes for earnings, consumption and leisure that are consistent with observed cross-sectional variability (both within and between education groups) and with household mobility patterns. In a standard lifetime utility framework, using consumption and leisure processes, as opposed to earnings processes, results in fairly robust estimates of these consequences. We find that about 60 percent of US households face welfare losses and that the size of these losses ranges from one to six percent of lifetime consumption for different groups.
Handle: RePEc:nbr:nberwo:9993
Template-Type: ReDIF-Paper 1.0
Title: Are Mental Health Insurance Mandates Effective? Evidence from Suicides
Classification-JEL: I0; K0
Author-Name: Jonathan Klick
Author-Name: Sara Markowitz
Author-Person: pma138
Note: EH
Number: 9994
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9994
File-URL: http://www.nber.org/papers/w9994.pdf
File-Format: application/pdf
Publication-Status: published as Jonathan Klick & Sara Markowitz, 2006. "Are mental health insurance mandates effective? Evidence from suicides," Health Economics, John Wiley & Sons, Ltd., vol. 15(1), pages 83-97.
Abstract: Many states have passed laws mandating insurance companies to provide or offer some form of mental health benefits. These laws presumably lower the price of obtaining mental health services for many adults, and as a result, might improve health outcomes. This paper analyzes the effectiveness of mental health insurance mandates by examining the influence of mandates on adult suicides, which are strongly correlated with mental illness. Data on completed suicides in each state for the period 1981-2000 are analyzed. Ordinary least squares and two-stage least squares results show that mental health mandates are not effective in reducing suicide rates.
Handle: RePEc:nbr:nberwo:9994
Template-Type: ReDIF-Paper 1.0
Title: Appearing and Disappearing Dividends: The Link to Catering Incentives
Classification-JEL: G35
Author-Name: Malcolm Baker
Author-Person: pba735
Author-Name: Jeffrey Wurgler
Author-Person: pwu8
Note: CF
Number: 9995
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9995
File-URL: http://www.nber.org/papers/w9995.pdf
File-Format: application/pdf
Publication-Status: published as Baker, Malcolm and Jeffrey Wurgler. "Appearing And Disappearing Dividends: The Link To Catering Incentives," Journal of Financial Economics, 2004, v73(2,Aug), 271-288.
Abstract: We document a close link between fluctuations in the propensity to pay dividends and catering incentives. First, we use the methodology of Fama and French (2001) to identify a total of four distinct trends in the propensity to pay dividends between 1963 and 2000. Second, we show that each of these trends lines up with a corresponding fluctuation in catering incentives: The propensity to pay increases when a proxy for the stock market dividend premium is positive and decreases when it is negative. The lone disconnect is attributable to Nixon-era controls.
Handle: RePEc:nbr:nberwo:9995
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Offering Health Plan Choice within Employment-Based Purchasing Groups
Classification-JEL: I1
Author-Name: M. Kate Bundorf
Note: EH
Number: 9996
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9996
File-URL: http://www.nber.org/papers/w9996.pdf
File-Format: application/pdf
Publication-Status: published as M. Kate Bundorf, 2010. "The Effects of Offering Health Plan Choice Within Employment-Based Purchasing Groups," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(1), pages 105-127.
Abstract: Over the last two decades, employers have increasingly offered workers a choice of health plans. The availability of choice has the potentially beneficial effects of lowering the cost and increasing the quality of health care through greater competition among health plans for enrollees as well as allowing consumers to enroll in the type of coverage that most closely matches their preferences. On the other hand, concerns about the potential for adverse selection within employment-based purchasing in response to the availability of choice exist. In this paper, I examine the effects of offering choice in employment-based purchasing groups on access to and the cost of employer-sponsored coverage. I find that greater availability of choice was associated with a reduction in the premium of employer-sponsored coverage and an increase in the proportion of workers covered by the plans offered by employers. However, most of the premium reductions were due to a shift from family to single coverage within employment-based purchasing groups and a reduction in the generosity of the plans in which employees were enrolled. The results are not consistent with the availability of choice leading to lower premiums through greater competition among plans for workers.
Handle: RePEc:nbr:nberwo:9996
Template-Type: ReDIF-Paper 1.0
Title: Individual Preferences, Monetary Gambles and the Equity Premium
Classification-JEL: D1; D8
Author-Name: Nicholas Barberis
Author-Name: Ming Huang
Author-Person: phu425
Author-Name: Richard Thaler
Note: LS AP
Number: 9997
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9997
File-URL: http://www.nber.org/papers/w9997.pdf
File-Format: application/pdf
Publication-Status: published as Barberis, N., Huang, M. and R. Thaler. “Individual Preferences, Monetary Gambles, and Stock Market Participation: A Case for Narrow Framing.” American Economic Review 96 (2006): 1069-1090.
Abstract: We argue that narrow framing, whereby an agent who is offered a new gamble evaluates that gamble in isolation, separately from other risks she already faces, may be a more important feature of decision-making under risk than previously realized. To demonstrate this, we present evidence on typical attitudes to independent monetary gambles with both large and small stakes and show that across a wide range of utility functions, including all expected utility and many non-expected utility specifications, the only ones that can easily capture these attitudes are precisely those exhibiting narrow framing. Our analysis also makes predictions about the kinds of preferences that might be able to address the stock market participation and equity premium puzzles. We illustrate these predictions in simple portfolio choice and equilibrium settings.
Handle: RePEc:nbr:nberwo:9997
Template-Type: ReDIF-Paper 1.0
Title: Relative Wage Variation and Industry Location
Classification-JEL: F11; F14
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: 9998
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9998
File-URL: http://www.nber.org/papers/w9998.pdf
File-Format: application/pdf
Publication-Status: published as Bernard, Andrew B., Stephen Redding, Peter K. Schott, and Helen Simpson. "Relative Wage Variation and Industry Location in the United Kingdom." Oxford Bulletin of Economics and Statistics 70, 4 (August 2008): 431-459.
Abstract: Relative wages vary considerably across regions of the United Kingdom, with skill-abundant regions exhibiting lower skill premia than skill-scarce regions. This paper shows that the location of economic activity is correlated with the variation in relative wages. U.K. regions with low skill premia produce different sets of manufacturing industries than regions with high skill premia. Relative wages are also linked to subsequent economic development: over time, increases in the employment share of skill-intensive industries are greater in regions with lower initial skill premia. Both results suggest firms adjust production across and within regions in response to relative wage differences.
Handle: RePEc:nbr:nberwo:9998
Template-Type: ReDIF-Paper 1.0
Title: Retirement and the Evolution of Pension Structure
Classification-JEL: J14; J26
Author-Name: Leora Friedberg
Author-Name: Anthony Webb
Author-Person: pwe498
Note: AG LS
Number: 9999
Creation-Date: 2003-09
Order-URL: http://www.nber.org/papers/w9999
File-URL: http://www.nber.org/papers/w9999.pdf
File-Format: application/pdf
Publication-Status: published as Friedberg, Leora and Anthony Webb. "Retirement and the Evolution of Pension Structure." Journal of Human Resources 40, 2 (Spring 2005): 281-308.
Abstract: Defined benefit pension plans have become considerably less common since the early 1980s, while defined contribution plans have spread. Previous research showed that defined benefit plans, with sharp incentives encouraging retirement after a certain point, contributed to the striking postwar decline in American retirement ages. In this paper we find that the absence of age-related incentives in defined contribution plans leads workers to retire almost two years later on average, compared to workers with defined benefit plans. Thus, the evolution of pension structure can help explain recent increases in employment among people in their 60s, after decades of decline.
Handle: RePEc:nbr:nberwo:9999