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Template-Type: ReDIF-Paper 1.0
Title: Should Exact Index Numbers Have Standard Errors? Theory and Application to Asian Growth
Classification-JEL: C43; O53
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Author-Name: Marshall B. Reinsdorf
Note: ITI
Number: 10197
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10197
File-URL: http://www.nber.org/papers/w10197.pdf
File-Format: application/pdf
Publication-Status: published as Should Exact Index Numbers Have Standard Errors? Theory and Application to Asian Growth, Robert C. Feenstra, Marshall B. Reinsdorf. in Hard-to-Measure Goods and Services: Essays in Honor of Zvi Griliches, Berndt and Hulten. 2007
Abstract: In this paper we derive the standard error of a price index when both prices and tastes or technology are treated as stochastic. Changing tastes or technology are a reason for the weights in the price index to be treated as stochastic, which can interact with the stochastic prices themselves. We derive results for the constant elasticity of substitution expenditure function (with Sato-Vartia price index), and also the translog function (with Törnqvist price index), which proves to be more general and easier to implement. In our application to Asian growth, we construct standard errors on the total factor productivity (TFP) estimates of Hsieh (2002) for Singapore. We find that TFP growth is insignificantly different from zero in any year, but cumulative TFP over fifteen years is indeed positive.
Handle: RePEc:nbr:nberwo:10197
Template-Type: ReDIF-Paper 1.0
Title: Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm
Classification-JEL: F14; L23
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Author-Name: Gordon H. Hanson
Author-Person: pha80
Note: ITI
Number: 10198
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10198
File-URL: http://www.nber.org/papers/w10198.pdf
File-Format: application/pdf
Publication-Status: published as Feenstra, Robert C. and Gordon H. Hanson. "Ownership And Control Of Outsourcing To China: Estimating The Property-Rights Theory Of The Firm," Quarterly Journal of Economics, 2005, v120(2,May), 729-761.
Abstract: In this paper, we develop a simple model of international outsourcing and apply it to processing trade in China. We observe China's processing exports broken down by who owns the plant and by who controls the inputs the plant processes. Multinational firms engaged in export processing in China tend to split factory ownership and input control with managers in China: the most common outcome is to have foreign factory ownership but Chinese control over input purchases. To account for this organizational arrangement, we appeal to a property-rights model of the firm. Multinational firms and the Chinese factory managers with whom they contract divide the surplus associated with export processing by Nash bargaining. Investments in input search, production, and marketing are partially relationship specific. In our benchmarks estimates, this relationship specificity is lowest in southern coastal provinces, where export markets are thickest, and highest in interior and northern provinces. The probability contracts are enforced has a similar pattern and is the lowest along the southern coast and the highest in the north.
Handle: RePEc:nbr:nberwo:10198
Template-Type: ReDIF-Paper 1.0
Title: Age Variations in Workers' Value of Statistical Life
Classification-JEL: J17; I12
Author-Name: Joseph E. Aldy
Author-Person: pal158
Author-Name: W. Kip Viscusi
Author-Person: pvi69
Note: EH LS LE
Number: 10199
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10199
File-URL: http://www.nber.org/papers/w10199.pdf
File-Format: application/pdf
Abstract: This paper develops a life-cycle model in which workers choose both consumption levels and job fatality risks, implying that the effect of age on the value of life is ambiguous. The empirical analysis of this relationship uses novel, age-dependent fatal and nonfatal risk variables. Workers' value of statistical life exhibits an inverted U-shaped relationship over workers' life cycle based on hedonic wage model estimates, age-specific hedonic wage estimates, and a minimum distance estimator. The value of statistical life for a 60-year old ranges from $2.5 million to $3.0 million -- less than half the value for 30 to 40-year olds.
Handle: RePEc:nbr:nberwo:10199
Template-Type: ReDIF-Paper 1.0
Title: Wealth Destruction on a Massive Scale? A Study of Acquiring-Firm Returns in the Recent Merger Wave
Classification-JEL: G31; G32
Author-Name: Sara B. Moeller
Author-Name: Frederik P. Schlingemann
Author-Person: psc684
Author-Name: Rene M. Stulz
Note: CF AP
Number: 10200
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10200
File-URL: http://www.nber.org/papers/w10200.pdf
File-Format: application/pdf
Publication-Status: published as Sara B. Moeller & Frederik P. Schlingemann & René M. Stulz, 2005. "Wealth Destruction on a Massive Scale? A Study of Acquiring-Firm Returns in the Recent Merger Wave," Journal of Finance, American Finance Association, vol. 60(2), pages 757-782, 04.
Abstract: Acquiring-firm shareholders lost 12 cents at the announcement of acquisitions for every dollar spent on acquisitions for a total loss of $240 billion from 1998 through 2001, whereas they lost $7 billion in all of the 1980s, or 1.6 cents per dollar spent. Though the announcement losses to acquiring-firm shareholders in the 1980s are more than offset by gains to acquired-firm shareholders, the losses of bidders exceed the gains of targets from 1998 through 2001 by $134 billion. The 1998-2001 aggregate dollar loss of acquiring-firm shareholders is so large because of a small number of acquisition announcements by firms with extremely high valuations. Without these announcements, the wealth of acquiring-firm shareholders would have increased. The large losses are consistent with the existence of negative synergies from the acquisitions, but the size of the losses in relation to the consideration paid for the acquisitions is large enough that part of the losses most likely results from investors reassessing the standalone value of the bidders. Firms that announce acquisitions with large dollar losses perform poorly afterwards.
Handle: RePEc:nbr:nberwo:10200
Template-Type: ReDIF-Paper 1.0
Title: The Dynamics of Work and Debt
Classification-JEL: E21; E24
Author-Name: Jeffrey R. Campbell
Author-Person: pca89
Author-Name: Zvi Hercowitz
Author-Person: phe121
Note: EFG
Number: 10201
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10201
File-URL: http://www.nber.org/papers/w10201.pdf
File-Format: application/pdf
Abstract: This paper characterizes the labor supply and borrowing of a household facing collateral requirements that limit its debt and compel it to accumulate equity in its durable goods stock. The household's discount rate exceeds the market rate of interest, so it would otherwise finance increased current consumption by borrowing against future wages. Collateral constraints generate a positive comovement between the household's debt, the stock of durable goods and labor supply following wage or interest rate shocks---as the household's labor supply adjusts to finance downpayments on new durable good purchases and the subsequent debt repayment. Increasing the speed of debt repayment amplifies these movements.
Handle: RePEc:nbr:nberwo:10201
Template-Type: ReDIF-Paper 1.0
Title: Benchmarking the Returns to Venture
Classification-JEL: G24; G12
Author-Name: Susan E. Woodward
Author-Name: Robert E. Hall
Note: AP
Number: 10202
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10202
File-URL: http://www.nber.org/papers/w10202.pdf
File-Format: application/pdf
Abstract: We describe a new index of the current and historical returns to venture-type capital. The conceptual basis for the index is the value of a continuously reinvested value-weighted portfolio of all venture-backed and similar pre-public companies. It provides a metric for private equity comparable to the S&P 500 for public equity. We build the index from valuations revealed in episodic transactions in the companies' shares - private placements of new rounds of equity funding, IPOs, acquisitions, and liquidations. Our approach to dealing with the episodic nature of the data is similar to the one used in constructing indexes of real-estate value from transaction data for individual properties. We have extended earlier sources of data to deal with selection bias - we tracked down unfavorable valuations that were less likely to be reported in the earlier data. We also use econometric techniques to handle the remaining selection bias. The resulting index has important uses in marking venture portfolios to market and in assessing the performance of venture investments.
Handle: RePEc:nbr:nberwo:10202
Template-Type: ReDIF-Paper 1.0
Title: Psychology and the Market
Classification-JEL: H0; H8
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Note: LE AP PE
Number: 10203
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10203
File-URL: http://www.nber.org/papers/w10203.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. "Psychology And The Market," American Economic Review, 2004, v94(2,May), 408-413.
Abstract: Prospect theory, loss aversion, mental accounts, hyperbolic discounting, cues, and the endowment effect can all be seen as examples of situationalism -- the view that people isolate decisions and overweight immediate aspects of the situation relative to longer term concerns. But outside of the laboratory, emotionally-powerful situational factors -- frames, social influence, mental accounts -- are almost always endogenous and often the result of self-interested entrepreneurs. As such, laboratory work and, indeed, psychology more generally, gives us little guidance as to market outcomes. Economics provides a stronger basis for understanding the supply of emotionally-relevant situational variables. Paradoxically situationalism actually increases the relative importance of economics.
Handle: RePEc:nbr:nberwo:10203
Template-Type: ReDIF-Paper 1.0
Title: Managed Care, Drug Benefits and Mortality: An Analysis of the Elderly
Classification-JEL: I11; I12
Author-Name: Gautam Gowrisankaran
Author-Name: Robert J. Town
Author-Person: pto430
Note: EH AG
Number: 10204
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10204
File-URL: http://www.nber.org/papers/w10204.pdf
File-Format: application/pdf
Publication-Status: published as Gowrisankaran Gautam & Town Robert & Barrette Eric, 2011. "Managed Care, Drug Benefits and Mortality: An Analysis of the Elderly," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(2), pages 1-32, January.
Abstract: We seek to investigate whether managed health care can affect mortality, and if so, through which mechanisms. We estimate the impact of Medicare+Choice (M+C), Medicare's managed care program, on elderly mortality, using a county-level panel from 1993 to 2000. We control for endogenous M+C penetration rates with county fixed effects and instrumental variables. We construct instruments using the identification created by the fact that M+C payment rates are based on 3 to 8 year lagged fee-for-service (FFS) costs in the county. We find that enrollment in managed care without prescription drug coverage significantly increases mortality while enrollment in managed care with drug coverage has no significant impact, both relative to FFS. The impact of managed care penetration on mortality from heart disease appears to follow a similar pattern. The estimates suggest that a 10-percentage point increase in M+C non-drug coverage would cause 51,000 additional deaths among the aged population in 2000.
Handle: RePEc:nbr:nberwo:10204
Template-Type: ReDIF-Paper 1.0
Title: Foreign Lobbies and US Trade Policy
Classification-JEL: D72; D78
Author-Name: Kishore Gawande
Author-Person: pga113
Author-Name: Pravin Krishna
Author-Person: pkr50
Author-Name: Michael J. Robbins
Note: ITI
Number: 10205
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10205
File-URL: http://www.nber.org/papers/w10205.pdf
File-Format: application/pdf
Publication-Status: published as Gawande, Kishore, Pravin Krishna and Michael J. Robbins. "Foreign Lobbies And U.S. Trade Policy," Review of Economics and Statistics, 2006, v88(3,Aug), 563-571.
Abstract: In popular discussion much has been made recently of the susceptibility of government policies to lobbying by foreigners. The general presumption has also been that such interactions have a deleterious effect on the home economy. However, it can be argued that, in a trade policy context, bending policy in a direction that would suit foreigners may not in fact be harmful: If the policy outcome absent any lobbying by foreigners is characterized by welfare-reducing trade barriers, lobbying by foreigners may result in reductions in such barriers and raise consumer surplus (and possibly improve welfare). Using a new data set on foreign political activity in the US, this paper investigates the relationship between trade protection and lobbying activity empirically. The approach taken in this paper is primarily a structural one. To model the role of foreign and domestic lobbies in determining trade policy, we develop first a theoretical framework building on the well-known work of Grossman and Helpman (1994); the econometric work that follows is very closely linked to the theory. Our analysis of the data suggests that foreign lobbying activity has significant impact on trade policy - and in the predicted direction: Tariffs and non-tariff barriers (NTBs) are both found to be negatively related with foreign lobbying activity. We consider also extended specifications in which we include a large number of additional explanatory variables that have been suggested in the literature as determinants of trade policy (but that emerge from outside of the theoretical structure described above) and confirm the robustness of our findings in this setting.
Handle: RePEc:nbr:nberwo:10205
Template-Type: ReDIF-Paper 1.0
Title: Does the Length of Maternity Leave Affect Maternal Health?
Classification-JEL: I1
Author-Name: Pinka Chatterji
Author-Person: pch732
Author-Name: Sara Markowitz
Author-Person: pma138
Note: EH
Number: 10206
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10206
File-URL: http://www.nber.org/papers/w10206.pdf
File-Format: application/pdf
Publication-Status: published as Chatterji, Pinka and Sara Markowitz. "Does The Length Of Maternity Leave Affect Maternal Health?," Southern Economic Journal, 2005, v72(1,Jul), 16-41.
Abstract: The objective of this paper is to investigate the impact of the length of maternity leave on maternal health in a sample of working mothers. Two measures of depression and a measure of overall health are used to represent maternal health. Ordinary Least Squares models provide baseline estimates, and instrumental variables models account for the potential endogeneity of the return-to-work decision. The findings suggest that returning to work later may reduce the number or frequency of depressive symptoms, but the length of time before returning to work is not associated with a lower probability of being a likely case of clinical depression. Similarly, there is little evidence that longer maternity leave impacts physical and mental health as measured by frequent outpatient visits during the first six months after childbirth.
Handle: RePEc:nbr:nberwo:10206
Template-Type: ReDIF-Paper 1.0
Title: Does the WTO Make Trade More Stable?
Classification-JEL: F13
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: ITI
Number: 10207
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10207
File-URL: http://www.nber.org/papers/w10207.pdf
File-Format: application/pdf
Publication-Status: published as Rose, Andrew K. "Does The WTO Make Trade More Stable?," Open Economies Review, 2005, v16(1,Jan), 7-22.
Abstract: I examine the hypothesis that membership in the World Trade Organization (WTO) and its predecessor the General Agreement on Tariffs and Trade (GATT) has increased the stability and predictability of trade flows. I use a large data set covering annual bilateral trade flows between over 175 countries between 1950 and 1999, and estimate the effect of GATT/WTO membership on the coefficient of variation in trade computed over 25-year samples, controlling for a number of factors. I also use a comparable multilateral data set. There is little evidence that membership in the GATT/WTO has a significant dampening effect on trade volatility.
Handle: RePEc:nbr:nberwo:10207
Template-Type: ReDIF-Paper 1.0
Title: Exporting and Performance of Plants: Evidence from Korean Manufacturing
Classification-JEL: F1; O1
Author-Name: Chin Hee Hahn
Note: ITI
Number: 10208
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10208
File-URL: http://www.nber.org/papers/w10208.pdf
File-Format: application/pdf
Publication-Status: published as Ito, Takatoshi and ANdrew K. Rose (eds.) International Trade in East Asia NBER-East Asia Seminar on Economics, vol. 14. Chicago and London: University of Chicago Press, 2005.
Publication-Status: published as Exporting and Performance of Plants: Evidence on Korea , Chin Hee Hahn. in International Trade in East Asia, Ito and Rose. 2005
Abstract: This study examines the relationship between exporting and various performance measures including total factor productivity, using the annual plant-level panel data on Korean manufacturing sector during the period of 1990 to 1998. The two key questions examined are whether exporting improves productivity (learning) and/or whether more productive plants export (self-selection). This study provides evidence supporting both self-selection and learning-by-exporting effects, with both effects being more pronounced at around the time of entry into and exit from the export market. Thus, positive and robust cross-sectional correlation between exporting and total factor productivity is accounted for by both selection and learning effects. These results are in contrast with Aw, Chung, and Roberts (2000) who do not find any strong evidence of self-selection or learning in Korea. Similar effects are observed when shipments or employment is considered as a performance measure. Overall, this study suggests that the benefits from exporting have been realized not only through resource reallocation channel but also TFP channel in Korea.
Handle: RePEc:nbr:nberwo:10208
Template-Type: ReDIF-Paper 1.0
Title: Physical and Human Capital Deepening and New Trade Patterns in Japan
Classification-JEL: C23; F14
Author-Name: Keiko Ito
Author-Person: pit9
Author-Name: Kyoji Fukao
Author-Person: pfu14
Note: ITI
Number: 10209
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10209
File-URL: http://www.nber.org/papers/w10209.pdf
File-Format: application/pdf
Publication-Status: published as Physical and Human Capital Deepening and New Trade Patterns in Japan, Keiko Ito, Kyoji Fukao. in International Trade in East Asia, Ito and Rose. 2005
Abstract: This paper investigates the deepening of the international division of labor and its effect on factor intensities in Japan, mainly focusing on the manufacturing sector. In the first half of the paper, we analyze the factor contents of trade and find that Japan's factor content net-exports of capital and non-production labor grew rapidly while net-exports of production workers fell by a large amount during the period from 1980-2000. Interestingly, the decline in the factor content of net-exports of production workers was almost entirely caused by Japan's trade with China and Hong Kong. According to our decomposition analysis, however, most of the macro-economic change in the capital-labor ratio and the change in the skilled-labor ratio is attributable to a within-industry'shift rather than a between-industry' shift. Although we clearly see a drastic increase in VIIT and outsourcing to foreign countries, particularly to Asian countries, our empirical analysis provides only weak evidence that the deepening international division of labor contributes to changes in factor intensities in each industry. Our results suggest that specialization in the export of skilled-labor-intensive products may have contributed to the increase in the relative demand for skilled (professional, technical, managerial, and administrative) labor within industry. However, our results suggest that changes in trade patterns (specialization in capital-intensive production) cannot explain the rapid growth of capital-labor ratios in Japan.
Handle: RePEc:nbr:nberwo:10209
Template-Type: ReDIF-Paper 1.0
Title: Robust Aggregate Implications of Stochastic Discount Factor Volatility
Classification-JEL: E21; G12
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Note: EFG AP
Number: 10210
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10210
File-URL: http://www.nber.org/papers/w10210.pdf
File-Format: application/pdf
Abstract: The stochastic discount factor seems volatile, but is this observation of any consequence for aggregate analysis of consumption, capital accumulation, output, etc.? I amend the standard frictionless model of aggregate consumption and capital accumulation with time-varying subjective probability adjustments, and obtain four implications for aggregate economic analysis. First, subjective probability adjustments add volatility to the stochastic discount factor, and can rationalize any pattern of asset prices satisfying no-arbitrage, even while capital accumulation is efficient. Second, despite its flexibility in pricing assets, the model implies that, in expected value, the intertemporal marginal rate of transformation is equal to the intertemporal marginal rate of substitution, and there is a simple, stable, and familiar relation between consumption growth and capital's return. Third, the expected returns on assets in small net aggregate supply are weakly (and sometimes negatively) correlated with capital's expected return, and are thereby poor predictors of aggregate consumption growth. Fourth, when it comes to assets in small net aggregate supply, capital gains reflect time varying risk premia, and returns can predict aggregate consumption growth better when the capital gain component of those returns is ignored. All four implications are consistent with empirical results reported here, and in the previous literature documenting stochastic discount factor volatility. Several recent theories of stochastic discount factor volatility can, from the aggregate point of view, be interpreted as special cases of subjective probability adjusted CCAPM.
Handle: RePEc:nbr:nberwo:10210
Template-Type: ReDIF-Paper 1.0
Title: Consumption Commitments, Unemployment Durations, and Local Risk Aversion
Classification-JEL: D8; E21
Author-Name: Raj Chetty
Author-Person: pch161
Note: EFG LS AP PE
Number: 10211
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10211
File-URL: http://www.nber.org/papers/w10211.pdf
File-Format: application/pdf
Publication-Status: published as Raj Chetty & Adam Szeidl, 2007. "Consumption Commitments and Risk Preferences," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 831-877, 05.
Abstract: Studies of risk preference have empirically established two regularities that are inconsistent with the canonical expected utility model: (1) risk aversion over small gambles greatly exceeds risk aversion over larger stakes and (2) insurance buyers play the lottery. This paper characterizes risk preferences both theoretically and empirically in a world with two consumption goods, one of which involves a commitment in that an adjustment cost must be paid when the good is sold. In this model, utility over wealth is more curved locally than globally: individuals are more risk averse with respect to moderate-scale income fluctuations than they are to large income fluctuations. Commitments also create a gambling motive. The empirical importance of commitments is tested using the labor-supply method of estimating risk aversion of Chetty (2003a). Global curvature is imputed using existing labor supply elasticities, and variations in unemployment insurance laws are used to estimate local curvature in a dynamic job search model. Commitments significantly change preferences over wealth: The local coefficient of relative risk aversion is an order of magnitude larger than the global one. Implications for a broad set of questions such as optimal social insurance policies and portfolio choice are discussed.
Handle: RePEc:nbr:nberwo:10211
Template-Type: ReDIF-Paper 1.0
Title: Innovation and Diffusion
Classification-JEL: O3; L1
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Note: PR
Number: 10212
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10212
File-URL: http://www.nber.org/papers/w10212.pdf
File-Format: application/pdf
Publication-Status: published as Fagerberg, Jan, David C. Mowery, Richard R. Nelson. The Oxford handbook of innovation. Oxford and New York: Oxford University Press, 2005.
Abstract: The contribution made by innovation and new technologies to economic growth and welfare is largely determined by the rate and manner by which innovations diffuse throughout the relevant population, but this topic has been a somewhat neglected one in the economics of innovation. This chapter, written for a handbook on innovation, provides a historical and comparative perspective on diffusion that looks at the broad determinants of diffusion, economic, social, and institutional, viewed from a microeconomic perspective. A framework for thinking about these determinants is presented along with a brief nontechnical review of modeling strategies used in different social scientific literatures. It concludes with a discussion of gaps in our understanding and potential future research questions.
Handle: RePEc:nbr:nberwo:10212
Template-Type: ReDIF-Paper 1.0
Title: A Portrait of the Artist as a Young or Old Innovator: Measuring the Careers of Modern Novelists
Classification-JEL: J0; J4
Author-Name: David W. Galenson
Note: LS
Number: 10213
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10213
File-URL: http://www.nber.org/papers/w10213.pdf
File-Format: application/pdf
Publication-Status: published as Galenson, David W. "A Portrait of the Artist as a Young or Old Innovator: Measuring the Careers of Modern Novelists." Historical Methods: A Journal of Quantitative and Interdisciplinary History 39, 2 (Spring 2006): 51-72.
Abstract: Some important novelists have written a great novel early in their careers and have produced lesser works thereafter, whereas others have improved their work gradually over long periods and have made their major contributions late in their lives. Which of these patterns a novelist follows appears to be systematically related to the nature of his work. Conceptual writers typically have specific goals for their books, and produce novels that emphasize plot; experimental writers' intentions are often uncertain, and their novels more often stress characterization. By examining the careers of twelve important modern novelists, this paper demonstrates that conceptual novelists - including Herman Melville, F. Scott Fitzgerald, and Ernest Hemingway - are generally those who have declined after writing landmark early novels, while in contrast experimental novelists - including Charles Dickens, Mark Twain, Virginia Woolf - have typically arrived at their most important work later in their careers. As is the case for modern painting and poetry, the ranks of great modern novelists have included both conceptual young geniuses and experimental old masters.
Handle: RePEc:nbr:nberwo:10213
Template-Type: ReDIF-Paper 1.0
Title: Family Cap Provisions and Changes in Births and Abortions
Classification-JEL: J1
Author-Name: Ted Joyce
Author-Person: pjo112
Author-Name: Robert Kaestner
Author-Person: pka42
Author-Name: Sanders Korenman
Author-Name: Stanley Henshaw
Note: EH PE CH
Number: 10214
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10214
File-URL: http://www.nber.org/papers/w10214.pdf
File-Format: application/pdf
Publication-Status: published as Joyce, T., Kaestner, R., Korenman, S., and S. Henshaw. “ Family Cap Provisions and Changes in Births and Abortions.” Population Research and Policy Review 23 (2004): 475-511.
Abstract: As part of welfare reform efforts in the 1990s, twenty-three states implemented family caps, provisions that deny or reduce cash assistance to welfare recipients who have additional births. We use birth and abortion records from 24 states to estimate effects of family caps on birth and abortion rates. We use age, marital status and completed schooling to identify women at high risk for use of public assistance, and parity (number of previous live births) to identify those most directly affected by the family cap. In family cap states, birth rates fell more and abortion rates rose more among high-risk women with at least one previous live birth compared to similar childless women, consistent with an effect of the family cap. However, this parity-specific pattern of births and abortions also occurred in states that implemented welfare reform with no family cap. Thus, the effects of welfare reform may have differed between mothers and childless women, but there is little evidence of an independent effect of the family cap.
Handle: RePEc:nbr:nberwo:10214
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Job Security Regulations on Labor Market Flexibility: Evidence from the Colombian Labor Market Reform
Classification-JEL: J41; J63
Author-Name: Adriana Kugler
Author-Person: pku361
Note: LS
Number: 10215
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10215
File-URL: http://www.nber.org/papers/w10215.pdf
File-Format: application/pdf
Publication-Status: published as Heckman,James J. and Carmen Pagés (eds.) Law and Employment: Lessons from Latin America and the Caribbean. Chicago: The University of Chicago Press, 2004.
Publication-Status: published as The Effect of Job Security Regulations on Labor Market Flexibility. Evidence from the Colombian Labor Market Reform, Adriana D. Kugler. in Law and Employment: Lessons from Latin America and the Caribbean, Heckman and Pagés. 2004
Abstract: Job security provisions are widely believed to reduce dismissals and hiring. In addition, in developing countries job security is believed to reduce compliance with labor regulations and to increase informal activity. Reductions in dismissal costs are, thus, often advocated as a way to increase labor market flexibility and to increase compliance with labor regulations. This paper analyzes the impact of a substantial reduction in dismissal costs introduced by the Colombian Labor Market Reform of 1990. A theoretical model illustrates the effect of dismissal costs when there is a noncompliant sector. The model shows the direct effect of a reduction in dismissal costs on increased turnover as well as the second order effects on wages and on the composition of the compliant and noncompliant sectors. Using microdata from the Colombian National Household Surveys, I exploit the temporal variability in dismissal costs together with the variability in coverage between formal and informal workers (who are not covered and were, thus, not directly affected by the reform). The differences-in-differences results indicate increased separations and accessions for formal workers relative to informal workers after the reform. Moreover, the increase in worker turnover was greatest among younger workers, more educated workers, and workers employed in larger firms who are most likely to have been affected by the reform. The estimates, together with the steady-state conditions of the model, suggest the reform contributed to 10% of the reduction in unemployment during the period of study.
Handle: RePEc:nbr:nberwo:10215
Template-Type: ReDIF-Paper 1.0
Title: The Absent-Minded Consumer
Classification-JEL: D9; E2
Author-Name: John Ameriks
Author-Person: pam72
Author-Name: Andrew Caplin
Author-Person: pca77
Author-Name: John Leahy
Author-Person: ple189
Note: EFG
Number: 10216
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10216
File-URL: http://www.nber.org/papers/w10216.pdf
File-Format: application/pdf
Abstract: We present evidence that many households have only a vague notion of what they are spending on various consumption items. We then develop a life-cycle model that captures this absent-mindedness'. The model generates precautionary spending, whereby absent-minded agents tend to consume more than attentive ones. The model also predicts fluctuations over time in the level of attention, and thereby sheds new light on the sharp reduction in consumption both at retirement, and in cyclical downturns. Finally, we find patterns of attention in the data that are consistent with those predicted by the model.
Handle: RePEc:nbr:nberwo:10216
Template-Type: ReDIF-Paper 1.0
Title: Is Debt Relief Efficient?
Classification-JEL: F3; F4
Author-Name: Serkan Arslanalp
Author-Name: Peter Blair Henry
Author-Person: phe166
Note: IFM
Number: 10217
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10217
File-URL: http://www.nber.org/papers/w10217.pdf
File-Format: application/pdf
Publication-Status: published as Serkan Arslanalp & Peter Blair Henry, 2005. "Is Debt Relief Efficient?," Journal of Finance, American Finance Association, vol. 60(2), pages 1017-1051, 04.
Abstract: When Less Developed Countries (LDCs) announce debt relief agreements under the Brady Plan, their stock markets appreciate by an average of 60 percent in real dollar terms a $42 billion increase in shareholder value. In contrast, there is no significant stock market increase for a control group of LDCs that do not sign Brady agreements. The results persist after controlling for IMF programs, trade liberalizations, capital account liberalizations, and privatization programs. The stock market appreciations successfully forecast higher future net resource transfers, investment and growth. Creditors also benefit from the Brady Plan. Controlling for other factors, stock prices of US commercial banks with significant LDC loan exposure rise by 35 percent a $13 billion increase in shareholder value. The results suggest that debt relief can generate large efficiency gains when the borrower suffers from debt overhang.
Handle: RePEc:nbr:nberwo:10217
Template-Type: ReDIF-Paper 1.0
Title: Aggregate Short Interest and Market Valuations
Classification-JEL: G12; G14
Author-Name: Owen A. Lamont
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: AP
Number: 10218
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10218
File-URL: http://www.nber.org/papers/w10218.pdf
File-Format: application/pdf
Publication-Status: published as Lamont, Owen A. and Jeremy C. Stein. "Aggregate Short Interest And Market Valuations," American Economic Review, 2004, v94(2,May), 29-32.
Abstract: We examine some basic data on the evolution of aggregate short interest, both during the dot-com era, and at other times in history. Total short interest moves in a countercyclical fashion. For example, short interest in NASDAQ stocks actually declines as the NASDAQ index approaches its peak. Moreover, this decline does not seem to reflect a substitution away from outright short-selling and towards put options, as the ratio of put-to-call volume displays the same countercyclical tendency. The evidence suggests that: i) arbitrageurs are reluctant to bet against aggregate mispricings; and ii) short-selling does not play a particularly helpful role in stabilizing the overall stock market.
Handle: RePEc:nbr:nberwo:10218
Template-Type: ReDIF-Paper 1.0
Title: How Large are the Classification Errors in the Social Security Disability Award Process?
Classification-JEL: H3
Author-Name: Hugo Benitez-Silva
Author-Name: Moshe Buchinsky
Author-Person: pbu314
Author-Name: John Rust
Author-Person: pru5
Note: AG LS PE
Number: 10219
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10219
File-URL: http://www.nber.org/papers/w10219.pdf
File-Format: application/pdf
Abstract: This paper presents an audit' of the multistage application and appeal process that the U.S. Social Security Administration (SSA) uses to determine eligibility for disability benefits from the Disability Insurance (DI) and Supplemental Security Income (SSI) programs. We study a subset of individuals from the Health and Retirement Study (HRS) who applied for DI or SSI benefits between 1992 and 1996. We compare the SSA's ultimate award decision (i.e. after allowing for appeals) to the applicant's self-reported disability status. We use these data to estimate classification error rates under the hypothesis that applicants' self-reported disability status and the SSA's ultimate award decision are noisy but unbiased indicators of, a latent true disability status' indicator. We find that approximately 20% of SSI/DI applicants who are ultimately awarded benefits are not disabled, and that 60% of applicants who were denied benefits are disabled. Our analysis also yields insights into the patterns of self-selection induced by varying delays and award probabilities at various levels of the application and appeal process. We construct an optimal statistical screening rule using a subset of objective health indicators that the SSA uses in making award decisions that results in significantly lower classification error rates than does SSA's current award process.
Handle: RePEc:nbr:nberwo:10219
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach
Classification-JEL: E3; E4
Author-Name: Ben S. Bernanke
Author-Person: pbe55
Author-Name: Jean Boivin
Author-Person: pbo43
Author-Name: Piotr Eliasz
Note: ME
Number: 10220
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10220
File-URL: http://www.nber.org/papers/w10220.pdf
File-Format: application/pdf
Publication-Status: published as Bernanke, Ben S., Jean Boivin and Piotr Eliasz. "Measuring The Effects Of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach," Quarterly Journal of Economics, 2005, v120(1,Feb), 387-422.
Abstract: Structural vector autoregressions (VARs) are widely used to trace out the effect of monetary policy innovations on the economy. However, the sparse information sets typically used in these empirical models lead to at least two potential problems with the results. First, to the extent that central banks and the private sector have information not reflected in the VAR, the measurement of policy innovations is likely to be contaminated. A second problem is that impulse responses can be observed only for the included variables, which generally constitute only a small subset of the variables that the researcher and policymaker care about. In this paper we investigate one potential solution to this limited information problem, which combines the standard structural VAR analysis with recent developments in factor analysis for large data sets. We find that the information that our factor-augmented VAR (FAVAR) methodology exploits is indeed important to properly identify the monetary transmission mechanism. Overall, our results provide a comprehensive and coherent picture of the effect of monetary policy on the economy.
Handle: RePEc:nbr:nberwo:10220
Template-Type: ReDIF-Paper 1.0
Title: Compensating Employees Below the Executive Ranks: A Comparison of Options, Restricted Stock, and Cash
Classification-JEL: J31; J33
Author-Name: Paul Oyer
Author-Person: poy2
Author-Name: Scott Schaefer
Note: CF LS LE
Number: 10221
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10221
File-URL: http://www.nber.org/papers/w10221.pdf
File-Format: application/pdf
Abstract: Using a detailed data set of employee stock option grants, we compare observed stock-option-based pay plans to hypothetical cash-only or restricted-stock-based plans. We make a variety of assumptions regarding the possible benefits of options relative to cash or stock, and then use observed option grants to make inferences regarding firms' decisions to issue options to lower-level employees. If the favorable accounting treatment is the sole reason underlying firms' choices of options over cash-only compensation, then we estimate that the median firm in our data set incurs $0.64 in real costs in order to increase reported pre-tax income by $1. This figure is several times larger than the willingness-to-pay for earnings reported by Erickson, Hanlon, and Maydew (2002), who study firms that (allegedly) commit fraud in order to boost earnings. If, on the other hand, firms' option-granting decisions are driven by economic-profit maximization then observed stock option grants are most consistent with explanations involving attraction and retention of employees.
Handle: RePEc:nbr:nberwo:10221
Template-Type: ReDIF-Paper 1.0
Title: Why Do Some Firms Give Stock Options to All Employees?: An Empirical Examination of Alternative Theories
Classification-JEL: J31; J33
Author-Name: Paul Oyer
Author-Person: poy2
Author-Name: Scott Schaefer
Note: CF LE LS
Number: 10222
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10222
File-URL: http://www.nber.org/papers/w10222.pdf
File-Format: application/pdf
Publication-Status: published as Oyer, Paul & Schaefer, Scott, 2005. "Why do some firms give stock options to all employees?: An empirical examination of alternative theories," Journal of Financial Economics, Elsevier, vol. 76(1), pages 99-133, April.
Abstract: Many firms issue stock options to all employees. We consider three potential economic justifications for this practice: providing incentives to employees, inducing employees to sort, and helping firms retain employees. We gather data on firms' stock option grants to middle managers from three distinct sources, and use two methods to assess which theories appear to explain observed granting behavior. First, we directly calibrate models of incentives, sorting and retention, and ask whether observed magnitudes of option grants are consistent with each potential explanation. Second, we conduct a cross-sectional regression analysis of firms' option-granting choices. We reject an incentives-based explanation for broad-based stock option plans, and conclude that sorting and retention explanations appear consistent with the data.
Handle: RePEc:nbr:nberwo:10222
Template-Type: ReDIF-Paper 1.0
Title: The New New Financial Thing: The Sources of Innovation Before and After State Street
Classification-JEL: G2; O3
Author-Name: Josh Lerner
Author-Person: ple60
Note: CF PR
Number: 10223
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10223
File-URL: http://www.nber.org/papers/w10223.pdf
File-Format: application/pdf
Publication-Status: published as Lerner, Josh. "The New New Financial Thing: The Original Of Financial Innovations," Journal of Financial Economics, 2006, v79(2,Feb), 223-255.
Abstract: This paper examines the sources of financial innovations between 1990 and 2002, using Wall Street Journal articles as indicators of innovations. No evidence suggests that larger firms are particularly innovative; in many specifications, there is a disproportionate representation of smaller firms among the innovators. Less profitable firms and those with stronger academic ties also innovate more. The elasticity of innovation with respect to size appears to have increased sharply since the State Street decision that greatly accelerated the rate of financial patenting. I conclude by exploring how the origins of financial patents resemble or differ from those of innovations.
Handle: RePEc:nbr:nberwo:10223
Template-Type: ReDIF-Paper 1.0
Title: Private Benefits and Cross-Listings in the United States
Classification-JEL: G3; F3
Author-Name: Evangelos Benos
Author-Name: Michael S. Weisbach
Note: CF
Number: 10224
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10224
File-URL: http://www.nber.org/papers/w10224.pdf
File-Format: application/pdf
Publication-Status: published as Benos, Evangelos and Michael S. Weisbach. "Private Benefits And Cross-Listings In The United States," Emerging Markets Review, 2004, v5(2,Jun), 217-240.
Abstract: In this paper, we review the literature on private benefits and cross-listings in the United States. We first discuss the alternative approaches used to measure private benefits. We survey recent evidence documenting cross-country differences in the levels of private benefits obtained by corporate managers, as well as the country-specific factors associated with high and low private benefits. We then explain how, by cross-listing its stock in a market with high disclosure and regulatory standards such as the United States, a firm can commit to a relatively low level of private benefits in the future. We discuss the circumstances under which managers would choose to cross-list their stocks in the United States, when such a cross-listing has important implications for managers' private benefits. Finally, we survey recent empirical work that tests empirical implications of this bonding view of cross-listings. Overall, this evidence provides a compelling case that the desire to protect shareholders' rights so as to facilitate access to equity markets is one of a number of reasons why firms choose to cross-list their stocks in the United States.
Handle: RePEc:nbr:nberwo:10224
Template-Type: ReDIF-Paper 1.0
Title: World Markets for Raising New Capital
Classification-JEL: G3; F3
Author-Name: Brian J. Henderson
Author-Name: Narasimhan Jegadeesh
Author-Name: Michael S. Weisbach
Note: CF IFM
Number: 10225
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10225
File-URL: http://www.nber.org/papers/w10225.pdf
File-Format: application/pdf
Publication-Status: published as Henderson, Brian J. & Jegadeesh, Narasimhan & Weisbach, Michael S., 2006. "World markets for raising new capital," Journal of Financial Economics, Elsevier, vol. 82(1), pages 63-101, October.
Abstract: Financial markets are increasingly integrated globally. We examine the extent to which firms from different countries rely on alternative sources of capital, the locations where they raise capital, and the factors that affect these choices. During the 1990-2001 period, firms raised about $25.9 trillion of new capital, including $4.7 trillion from abroad. International debt issuances are substantially more common than equity, accounting for over 90% of the international security issues, and about 20% of all public debt issues. In contrast, international equity issues account for about 4.4% of all international security issues, and about 6% of all equity issues during our sample period. Market timing considerations appear to be very important in security issuance decisions. Firms all around the world are more likely to issue equity prior to periods of low market returns. Most of the cross-border equity is issued in the U.S. and the U.K., and these issues tend to occur in 'hot' markets and prior to relatively low market returns. Finally, firms issue more debt when interest rates are lower, and issue debt overseas when interest rates in the place of issue are lower than they are at home.
Handle: RePEc:nbr:nberwo:10225
Template-Type: ReDIF-Paper 1.0
Title: Interpersonal Effects in Consumption: Evidence from the Automobile Purchases of Neighbors
Classification-JEL: D1; D8
Author-Name: Mark Grinblatt
Author-Person: pgr231
Author-Name: Matti Keloharju
Author-Person: pke264
Author-Name: Seppo Ikaheimo
Note: AP
Number: 10226
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10226
File-URL: http://www.nber.org/papers/w10226.pdf
File-Format: application/pdf
Abstract: This study analyzes the automobile purchase behavior of all residents of two Finnish provinces over several years. It finds that a consumer's purchases are strongly influenced by the purchases of his neighbors, particularly purchases in the recent past and by neighbors who are geographically most proximate. There is little evidence that emotional biases, like envy or an urge to conform, lie behind the interpersonal influence in automobile consumption. The most reasonable alternative explanation for these findings is some form of information sharing among neighbors.
Handle: RePEc:nbr:nberwo:10226
Template-Type: ReDIF-Paper 1.0
Title: What Happens When Child Care Inspections and Complaints Are Made Available on the Internet?
Classification-JEL: D8; I3; J13
Author-Name: Ann Dryden Witte
Author-Name: Magaly Queralt
Note: CH
Number: 10227
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10227
File-URL: http://www.nber.org/papers/w10227.pdf
File-Format: application/pdf
Abstract: We provide substantial evidence that placing child care provider inspection and complaint reports on the Internet changed the behavior of child care inspectors and improved the quality of child care received by low-income children. We believe that these results were forthcoming in part because: (1) the media widely reported the availability of this information on the Web, (2) the information was easy to locate and use and (3) the inspector's name and contact information appeared on the first page of the reports. To be more specific, we find that, after child care provider inspection and complaint reports are made available on the Internet: (1) inspectors produce significantly more inspection reports and (2) inspectors become significantly more likely to provide mixed reviews of centers in the course of their routine inspections, finding that centers sometimes meet minimum standards and other times fail to do so. Controlling for time trends and other unobserved policy and economic changes, we also find that, after inspection reports are made available on the Internet, there is a significant improvement in classroom environment and center management at centers serving low-income children with child care subsidies. While the magnitude of the improvement in terms of observational assessment scores (i.e., 2.82 points, or « of a standard deviation) is moderate, it is comparable in size to improvements often achieved by more expensive approaches to improve classroom environment or the curriculum.
Handle: RePEc:nbr:nberwo:10227
Template-Type: ReDIF-Paper 1.0
Title: Employees' Investment Decisions about Company Stock
Classification-JEL: E2; G1
Author-Name: James J. Choi
Author-Name: David Laibson
Author-Person: pla164
Author-Name: Brigitte Madrian
Author-Person: pma384
Author-Name: Andrew Metrick
Author-Person: pme99
Note: AP AG
Number: 10228
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10228
File-URL: http://www.nber.org/papers/w10228.pdf
File-Format: application/pdf
Publication-Status: published as Mitchell, Olivia S. and Stephen P. Utkus (eds.) Pension Design and Structure: New Lessons from Behavioral Finance. Oxford: Oxford University Press, 2004.
Abstract: We study the relationship between past returns on a company's stock and the level of investment in that stock by the participants in that company's 401(k) plan. Using data on 94,191 plan participants, we analyze several different decision points: the initial fraction of savings allocated to company stock, the changes in this fraction, and the reallocations of portfolio holdings across different asset classes. Like Benartzi (2001), we find that high past returns on company stock induce participants to allocate more of their contributions to company stock. We also find, however, that high returns on company stock have the opposite effect on reallocations of portfolio holdings, with high returns leading to shifts away from company stock and into other forms of equity. Overall, for company stock decisions, participants in our sample appear to be momentum investors when making contribution decisions and contrarian investors when making trading decisions.
Handle: RePEc:nbr:nberwo:10228
Template-Type: ReDIF-Paper 1.0
Title: Some Simple Analytics of School Quality
Classification-JEL: J3; H4
Author-Name: Eric A. Hanushek
Author-Person: pha97
Note: ED LS PE CH
Number: 10229
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10229
File-URL: http://www.nber.org/papers/w10229.pdf
File-Format: application/pdf
Abstract: Most empirical analyses of human capital have concentrated solely on the quantity of schooling attained by individuals, ignoring quality differences. This focus contrasts sharply with policy considerations that almost exclusively consider school quality issues. This paper presents basic evidence about the impact of school quality on individual earnings and on economic growth. The calculations emphasize how benefits relate to both the magnitude and the speed of quality improvements. It then considers alternative school reform policies focused on improvements in teacher quality, identifying how much change is required. Finally, teacher bonus policies are put into the context of potential benefits.
Handle: RePEc:nbr:nberwo:10229
Template-Type: ReDIF-Paper 1.0
Title: Helping the Poor to Help Themselves: Debt Relief or Aid
Classification-JEL: F3; F4
Author-Name: Serkan Arslanalp
Author-Name: Peter Blair Henry
Author-Person: phe166
Note: IFM
Number: 10230
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10230
File-URL: http://www.nber.org/papers/w10230.pdf
File-Format: application/pdf
Publication-Status: published as Jochnick, Chris and Fraser A. Preston (eds.) Sovereign Debt at the Crossroads. Oxford University Press, 2006.
Abstract: Debt relief is unlikely to stimulate investment and growth in the world's highly indebted poor countries (HIPCs). This is because the HIPCs do not suffer from debt overhang. The principal obstacle to investment and growth in the world's poorest countries is a lack of basic economic institutions that provide the foundation for profitable economic activity. If the goal is to help poor countries build the institutions that best suit their development needs, then the energy and resources currently devoted to the HIPC initiative could be more effectively employed as direct foreign aid.
Handle: RePEc:nbr:nberwo:10230
Template-Type: ReDIF-Paper 1.0
Title: Efficiency with Endogenous Population Growth
Classification-JEL: D1; D6
Author-Name: Mikhail Golosov
Author-Person: pgo200
Author-Name: Larry E. Jones
Author-Person: pjo88
Author-Name: Michele Tertilt
Author-Person: pte114
Note: EFG
Number: 10231
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10231
File-URL: http://www.nber.org/papers/w10231.pdf
File-Format: application/pdf
Publication-Status: published as Mikhail Golosov & Larry E. Jones & Michèle Tertilt, 2007. "Efficiency with Endogenous Population Growth," Econometrica, Econometric Society, vol. 75(4), pages 1039-1071, 07.
Abstract: In this paper, we generalize the notion of Pareto-efficiency to make it applicable to environments with endogenous populations. Two efficiency concepts are proposed, P-efficiency and A-efficiency. The two concepts differ in how they treat people who are not born. We show how these concepts relate to the notion of Pareto-efficiency when fertility is exogenous. We then prove versions of the first welfare theorem assuming that decision making is efficient within the dynasty. Finally, we give two sets of sufficient conditions for non-cooperative equilibria of family decision problems to be efficient. These include the Barro and Becker model as a special case.
Handle: RePEc:nbr:nberwo:10231
Template-Type: ReDIF-Paper 1.0
Title: On the Desirability of Fiscal Constraints in a Monetary Union
Classification-JEL: F3; F4
Author-Name: V.V. Chari
Author-Person: pch40
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Note: EFG IFM
Number: 10232
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10232
File-URL: http://www.nber.org/papers/w10232.pdf
File-Format: application/pdf
Abstract: The desirability of fiscal constraints in monetary unions depends critically on whether the monetary authority can commit to follow its policies. If it can commit, then debt constraints can only impose costs. If it cannot commit, then fiscal policy has a free-rider problem, and debt constraints may be desirable. This type of free-rider problem is new and arises only because of a time inconsistency problem.
Handle: RePEc:nbr:nberwo:10232
Template-Type: ReDIF-Paper 1.0
Title: Market Reactions to Export Subsidies
Classification-JEL: F12; F13
Author-Name: Mihir A. Desai
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: ITI AP PE
Number: 10233
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10233
File-URL: http://www.nber.org/papers/w10233.pdf
File-Format: application/pdf
Publication-Status: published as Desai, Mihir A. & Hines Jr., James R., 2008. "Market reactions to export subsidies," Journal of International Economics, Elsevier, vol. 74(2), pages 459-474, March.
Abstract: This paper analyzes the economic impact of export subsidies by investigating stock price reactions to a critical event in 1997. On November 18, 1997, the European Union announced its intention to file a complaint before the World Trade Organization (WTO), arguing that the United States provided American exporters illegal subsidies by permitting them to use Foreign Sales Corporations to exempt a fraction of export profits from taxation. Share prices of American exporters fell sharply on this news, and its implication that the WTO might force the United States to eliminate the subsidy. The share price declines were largest for exporters whose tax situations made the threatened export subsidy particularly valuable. Share prices of exporters with high profit margins also declined markedly on November 18, 1997, suggesting that the export subsidies were most valuable to firms earning market rents. This last evidence is consistent with strategic trade models in which export subsidies improve the competitive positions of firms in imperfectly competitive markets.
Handle: RePEc:nbr:nberwo:10233
Template-Type: ReDIF-Paper 1.0
Title: Population and Regulation
Classification-JEL: H11; K10
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: EFG IO PE
Number: 10234
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10234
File-URL: http://www.nber.org/papers/w10234.pdf
File-Format: application/pdf
Abstract: We present a model of efficient regulation along the lines of Demsetz (1967). In this model, setting up and running regulatory institutions takes a fixed cost, and therefore jurisdictions with larger populations affected by a given regulation are more likely to have them. Consistent with the model, we find that higher population U.S. states have more pages of legislation and adopt particular laws earlier in their history. We also find that specific types of regulation, including the regulation of entry, the regulation of labor, and the military draft are more extensive in countries with larger populations. Overall, the data show that population is an empirically important determinant of regulation.
Handle: RePEc:nbr:nberwo:10234
Template-Type: ReDIF-Paper 1.0
Title: The Geography of Stock Market Participation: The Influence of Communities and Local Firms
Classification-JEL: G0; G11
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Author-Name: Zoran Ivkovich
Author-Name: Paul A. Smith
Author-Name: Scott Weisbenner
Note: AP PE
Number: 10235
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10235
File-URL: http://www.nber.org/papers/w10235.pdf
File-Format: application/pdf
Abstract: This paper is the first to investigate the importance of geography in explaining equity market participation. We provide evidence to support two distinct local area effects. The first is a community ownership effect, that is, individuals are influenced by the investment behavior of members of their community. Specifically, a ten percentage-point increase in equity market participation of the members of one's community makes it two percentage points more likely that the individual will invest in stocks. We find further evidence that the influence of community members is strongest for less financially sophisticated households and strongest within peer groups' as defined by age and income categories. The second is that proximity to publicly-traded firms also increases equity market participation. In particular, the presence of publicly-traded firms within 50 miles and the share of U.S. market value headquartered within the community are significantly correlated with equity ownership of individuals. These results are quite robust, holding up in the presence of a wide range of individual and community controls, instrumental variables estimation, the inclusion of individual fixed effects, and specification checks to rule out that the relations are driven solely by ownership of the stock of one's employer.
Handle: RePEc:nbr:nberwo:10235
Template-Type: ReDIF-Paper 1.0
Title: Financial Development and Growth in the Short and Long Run
Classification-JEL: G10; O15
Author-Name: Raymond Fisman
Author-Person: pfi257
Author-Name: Inessa Love
Author-Person: plo223
Note: CF EFG
Number: 10236
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10236
File-URL: http://www.nber.org/papers/w10236.pdf
File-Format: application/pdf
Publication-Status: published as Fisman, Raymond and Inessa Love. "FINANCIAL DEVELOPMENT AND INTERSECTORAL ALLOCATION: A NEW APPROACH." Journal of Finance, 2005.
Abstract: We analyze the relationship between financial development and inter-industry resource allocation in the short- and long-run. We suggest that in the long-run, economies with high rates of financial development will devote relatively more resources to industries with a 'natural' reliance on outside finance due to a comparative advantage in these industries. By contrast, in the short-run we argue that financial development facilitates the reallocation of resources to industries with good growth opportunities, regardless of their reliance on outside finance. To test these predictions, we use a measure of industry-level 'technological' financial dependence based on the earlier work of Rajan and Zingales (1998), and develop new proxies for shocks to (short run) industry growth opportunities. We find differential effects of these measures on industry growth and composition in countries with different levels of financial development. We obtain results that are consistent with financially developed economies specializing in 'financially dependent' industries in the long-run, and allocating resources to industries with high growth opportunities in the short-run.
Handle: RePEc:nbr:nberwo:10236
Template-Type: ReDIF-Paper 1.0
Title: Knowledge Management, Innovation, and Productivity: A Firm Level Exploration Based on French Manufacturing CIS3 Data
Classification-JEL: C35; L60
Author-Name: Elisabeth Kremp
Author-Person: pkr237
Author-Name: Jacques Mairesse
Author-Person: pma712
Note: PR
Number: 10237
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10237
File-URL: http://www.nber.org/papers/w10237.pdf
File-Format: application/pdf
Abstract: In modern knowledge driven economies, firms are increasingly aware that individual and collective knowledge is a major factor of economic performance. The larger the firms and the stronger their connection with technology intensive industries, the more are they likely to set up knowledge management (KM) policies, such as promoting a culture of information and knowledge sharing (C), motivating employees and executives to remain with the firm (R), forging alliances and partnerships for knowledge acquisition (A), implementing written knowledge management rules (W). The French 1998-2000 Community Innovation Survey (CIS3) has surveyed the use of these four knowledge management policies for a representative sample of manufacturing firms. The micro econometric analysis of the survey tends to confirm that knowledge management indeed contributes significantly to firm innovative performance and to its productivity. The impacts of adoption of the four surveyed KM practices on firm innovative and productivity performance are not completely accounted by firm size, industry, research & development (R&D) efforts or other factors, but persist to a sizeable extent after controlling for all these factors.
Handle: RePEc:nbr:nberwo:10237
Template-Type: ReDIF-Paper 1.0
Title: Investment Prices and Exchange Rates: Some Basic Facts
Classification-JEL: F41
Author-Name: Ariel Burstein
Author-Name: Joao C. Neves
Author-Name: Sergio Rebelo
Note: EFG IFM
Number: 10238
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10238
File-URL: http://www.nber.org/papers/w10238.pdf
File-Format: application/pdf
Publication-Status: published as Ariel T. Burstein & João C. Neves & Sergio Rebelo, 2004. "Investment Prices and Exchange Rates: Some Basic Facts," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 302-309, 04/05.
Abstract: This paper documents four basic facts about investment goods and investment prices. First, investment has a very significant nontradable component in the form of construction services. Second, distributions services (wholesaling, retailing, and transportation) are much less important for investment than for consumption. Third, the import content of investment is much larger than that of consumption. Finally, in the aftermath of three large devaluations, the rate of exchange rate pass-through is, perhaps not surprisingly, highest for imported equipment and lowest for construction services.
Handle: RePEc:nbr:nberwo:10238
Template-Type: ReDIF-Paper 1.0
Title: Is it is or is it Ain't my Obligation? Regional Debt in Monetary Unions
Classification-JEL: E61; E63
Author-Name: Russell Cooper
Author-Name: Hubert Kempf
Author-Person: pke25
Author-Name: Dan Peled
Author-Person: ppe182
Note: EFG
Number: 10239
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10239
File-URL: http://www.nber.org/papers/w10239.pdf
File-Format: application/pdf
Publication-Status: published as Russell Cooper & Hubert Kempf & Dan Peled, 2008. "Is It Is Or Is It Ain'T My Obligation? Regional Debt In A Fiscal Federation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1469-1504, November.
Abstract: This paper studies the implications of the circulation of interest bearing regional debt in a monetary union. Does the circulation of this debt have the same monetary implications as the printing of money by a central government? Or are the obligations of this debt simply backed by future taxation with no inflationary consequences? We argue here that both outcomes can arise in equilibrium. In the model economy we consider there are multiple equilibria which reflect the perceptions of agents regarding the manner in which the debt obligations will be met. In one equilibrium, termed Ricardian, the future obligations are met with taxation by a regional government while in the other, termed Monetization, the central bank is induced to print money to finance the region's obligations. The multiplicity of equilibria reflects a commitment problem of the central bank. A key indicator of the selected equilibrium is the distribution of the holdings of the regional debt. We use the model to assess the impact of policy measures, such as fiscal restrictions, within a monetary union.
Handle: RePEc:nbr:nberwo:10239
Template-Type: ReDIF-Paper 1.0
Title: Incentives vs. Control: An Analysis of U.S. Dual-Class Companies
Classification-JEL: G3
Author-Name: Paul A. Gompers
Author-Person: pgo301
Author-Name: Joy Ishii
Author-Name: Andrew Metrick
Author-Person: pme99
Note: CF AP
Number: 10240
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10240
File-URL: http://www.nber.org/papers/w10240.pdf
File-Format: application/pdf
Abstract: Dual-class common stock allows for the separation of voting rights and cash flow rights across the different classes of equity. We construct a large sample of dual-class firms in the United States and analyze the relationships of insider's cash flow rights and voting rights with firm value, performance, and investment behavior. We find that relationship of firm value to cash flow rights is positive and concave and the relationship to voting rights is negative and convex. Identical quadratic relationships are found for the respective ownership variables with sales growth, capital expenditures, and the combination of R&D and advertising. Our evidence is consistent with an entrenchment effect of voting control that leads managers to underinvest and an incentive effect of cash flow ownership that induces managers to pursue more aggressive strategies.
Handle: RePEc:nbr:nberwo:10240
Template-Type: ReDIF-Paper 1.0
Title: Bureaucrats or Politicians?
Classification-JEL: H0; H1
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Guido Tabellini
Author-Person: pta37
Note: EFG PE
Number: 10241
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10241
File-URL: http://www.nber.org/papers/w10241.pdf
File-Format: application/pdf
Publication-Status: published as “Bureaucrats or Politicians? Part I: A Single Policy Task,” American Economic Review, March 2007, 97: 169-79 "Bureaucrats or Politicians? Part II: Multiple Policy Tasks,” Journal of Public Economics, April 2008, 92, 426-447
Abstract: Policies are typically chosen by politicians and bureaucrats. This paper investigates the e fficiency criteria for allocating policy tasks to elected policymakers (politicians) or non elected bureaucrats. Politicians are more efficient for tasks that do not involve too much specific technical ability relative to effort; there is uncertainty about ex post preferences of the public and flexibility is valuable; time inconsistency is not an issue; small but powerful vested interests do not have large stakes in the policy outcome; effective decisions over policies require taking into account policy complementarities and compensating the losers. We then compare this benchmark with the case in which politicians choose when to delegate and we show that the two generally differ.
Handle: RePEc:nbr:nberwo:10241
Template-Type: ReDIF-Paper 1.0
Title: How Financial Aid Affects Persistence
Classification-JEL: I2
Author-Name: Eric Bettinger
Author-Person: pbe413
Note: ED
Number: 10242
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10242
File-URL: http://www.nber.org/papers/w10242.pdf
File-Format: application/pdf
Publication-Status: published as Hoxby, Caroline M. College choices: The economics of where to go, when to go, and how to pay for it, NBER Conference Report series. Chicago and London: University of Chicago Press, 2004.
Publication-Status: published as How Financial Aid Affects Persistence, Eric Bettinger. in College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, Hoxby. 2004
Abstract: The Pell Grant program is the largest means-tested financial assistance available to postsecondary students across the United States, yet researchers have only limited evidence on the causal effects of these grants. This paper examines the effect of Pell grants on student persistence after the first year. The paper uses unique, student-level data from all public colleges in Ohio. The data include detailed financial data which allow me to identify small discontinuities in the Pell grant formula. I exploit these discontinuities to identify the causal effects of the voucher. The results based on discontinuity approaches suggest that Pell grants reduce college drop-out behavior. The results in this paper support other evidence that find a relationship between need-based aid and college completion (e.g. Dynarski 2002, Turner and Bound 2002).
Handle: RePEc:nbr:nberwo:10242
Template-Type: ReDIF-Paper 1.0
Title: The Labor Market Effects of the 1960s Riots
Classification-JEL: J0; R0
Author-Name: William J. Collins
Author-Person: pco315
Author-Name: Robert A. Margo
Author-Person: pma319
Note: DAE LS
Number: 10243
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10243
File-URL: http://www.nber.org/papers/w10243.pdf
File-Format: application/pdf
Publication-Status: published as Gale, W. and J. Pack (eds.) Brookings-Wharton Papers on Urban Affairs 2004. Washington, DC: Brookings Institution, 2004.
Publication-Status: published as William J. (William Joseph) Collins & Robert A. (Robert Andrew) Margo, 2004. "The Labor Market Effects of the 1960s Riots," Brookings-Wharton Papers on Urban Affairs, vol 2004(1), pages 1-46.
Abstract: Between 1964 and 1971, hundreds of riots erupted in American cities, resulting in large numbers of injuries, deaths, and arrests, as well as in considerable property damage concentrated in predominantly black neighborhoods. There have been few studies of an econometric nature that examine the impact of the riots on the economic status of African Americans, or on the cities in which the riots took. We present two complementary empirical analyses. The first uses aggregate, city-level data on income, employment, unemployment, and the area's racial composition from the published volumes of the federal censuses. We estimate the riot effect' by both ordinary least squares and two-stage least squares. The second uses individual-level census data from the Integrated Public Use Microdata Series. The findings suggest that the riots had negative effects on blacks' income and employment that were economically significant and that may have been larger in the long run (1960-1980) than in the short run (1960-1970). We view these findings as suggestive rather than definitive for two reasons. First, the data are not detailed enough to identify the precise mechanisms at work. Second, the wave of riots may have had negative spillover effects to cities that did not experience severe riots; if so, we would tend to underestimate the riots' overall effect.
Handle: RePEc:nbr:nberwo:10243
Template-Type: ReDIF-Paper 1.0
Title: Fooling Ourselves: Evaluating the Globalization and Growth Debate
Classification-JEL: F1
Author-Name: Juan Carlos Hallak
Author-Person: pha474
Author-Name: James Levinsohn
Author-Person: ple386
Note: ITI
Number: 10244
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10244
File-URL: http://www.nber.org/papers/w10244.pdf
File-Format: application/pdf
Publication-Status: published as Zedillo, E. (ed.) The Future of Globalization: Explorations in Light of Recent Turbulence. London and New York: Routledge, 2008.
Abstract: This paper evaluates how much of the economics profession has evaluated the evidence on the relationship between international trade and economic growth. The paper highlights the basic approaches to the trade and growth question that the literature has adopted. The case is made that more attention needs to be paid to the mechanisms by which trade impacts growth and that future research should move away from a focus on outcomes and look instead at these mechanisms.
Handle: RePEc:nbr:nberwo:10244
Template-Type: ReDIF-Paper 1.0
Title: A Scapegoat Model of Exchange Rate Fluctuations
Classification-JEL: F3; G1
Author-Name: Philippe Bacchetta
Author-Person: pba111
Author-Name: Eric van Wincoop
Author-Person: pva387
Note: IFM
Number: 10245
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10245
File-URL: http://www.nber.org/papers/w10245.pdf
File-Format: application/pdf
Publication-Status: published as Bacchetta, Philippe and Eric Van Wincoop. "A Scapegoat Model Of Exchange-Rate Fluctuations," American Economic Review, 2004, v94(2,May), 114-118.
Abstract: While empirical evidence finds only a weak relationship between nominal exchange rates and macroeconomic fundamentals, forex markets participants often attribute exchange rate movements to a macroeconomic variable. The variables that matter, however, appear to change over time and some variable is typically taken as a scapegoat. For example, the current dollar weakness appears to be caused almost exclusively by the large current account deficit, while its previous strength was explained mainly by growth differentials. In this paper, we propose an explanation of this phenomenon in a simple monetary model of the exchange rate with noisy rational expectations, where investors have heterogeneous information on some structural parameter of the economy. In this context, there may be rational confusion about the true source of exchange rate fluctuations, so that if an unobservable variable affects the exchange rate, investors may attribute this movement to some current macroeconomic fundamental. We show that this effect applies only to variables with large imbalances. The model thus implies that the impact of macroeconomic variables on the exchange rate changes over time.
Handle: RePEc:nbr:nberwo:10245
Template-Type: ReDIF-Paper 1.0
Title: Financial Development and the Instability of Open Economies
Classification-JEL: E6; P5
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Philippe Bacchetta
Author-Person: pba111
Author-Name: Abhijit Banerjee
Note: EFG IFM
Number: 10246
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10246
File-URL: http://www.nber.org/papers/w10246.pdf
File-Format: application/pdf
Publication-Status: published as Aghion, Philippe, Philippe Bacchetta and Abhijit Banerjee. "Financial Development And The Instability Of Open Economies," Journal of Monetary Economics, 2004, v51(6,Sep), 1077-1106.
Abstract: This paper introduces a framework for analyzing the role of financial factors as a source of instability in small open economies. Our basic model is a dynamic open economy model with a tradeable good produced with capital and a country-specific factor. We also assume that firms face credit constraints, with the constraint being tighter at a lower level of financial development. A basic implication of this model is that economies at an intermediate level of financial development are more unstable than either very developed or very underdeveloped economies. This is true both in the sense that temporary shocks have large and persistent effects and also in the sense that these economies can exhibit cycles. Thus, countries that are going through a phase of financial development may become more unstable in the short run. Similarly, full capital account liberalization may destabilize the economy in economies at an intermediate level of financial development: phases of growth with capital inflows are followed by collapse with capital outflows. On the other hand, foreign direct investment does not destabilize.
Handle: RePEc:nbr:nberwo:10246
Template-Type: ReDIF-Paper 1.0
Title: How Well Do Parents With Young Children Combine Work and Family Life
Classification-JEL: J2; I0
Author-Name: Christopher J. Ruhm
Author-Person: pru7
Note: CH
Number: 10247
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10247
File-URL: http://www.nber.org/papers/w10247.pdf
File-Format: application/pdf
Abstract: This study examines trends in labor force involvement, household structure, and some activities that may complicate the efforts of parents with young children to balance work and family life. Next I consider whether employer policies mitigate or exacerbate these difficulties and, since the policies adopted in the United States diverge dramatically from those in many other industrialized countries, provide some international comparisons before speculating on possible sources and effects of the differences.
Handle: RePEc:nbr:nberwo:10247
Template-Type: ReDIF-Paper 1.0
Title: Persuasion in Politics
Classification-JEL: D72; D78
Author-Name: Kevin Murphy
Author-Person: pmu108
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: EFG
Number: 10248
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10248
File-URL: http://www.nber.org/papers/w10248.pdf
File-Format: application/pdf
Publication-Status: published as Murphy, Kevin M. and Andrei Shleifer. "Persuasion In Politics," American Economic Review, 2004, v94(2,May), 435-439.
Abstract: We present a model of the creation of social networks, such as political parties, trade unions, religious coalitions, or political action committees, through discussion and mutual persuasion among their members. The key idea is that people are influenced by those inside their network, but not by those outside. Once created, networks can be rented out' to politicians who seek votes and support for their initiatives and ideas, which may have little to do with network members' core beliefs. In this framework, political competition does not lead to convergence of party platforms to the views of the median voter. Rather, parties separate their messages and try to isolate their members to prevent personal influence from those in the opposition.
Handle: RePEc:nbr:nberwo:10248
Template-Type: ReDIF-Paper 1.0
Title: National Sovereignty in an Interdependent World
Classification-JEL: F1
Author-Name: Kyle Bagwell
Author-Person: pba409
Author-Name: Robert W. Staiger
Author-Person: pst85
Note: ITI
Number: 10249
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10249
File-URL: http://www.nber.org/papers/w10249.pdf
File-Format: application/pdf
Abstract: What are the sovereign rights of nations in an interdependent world, and to what extent do these rights stand in the way of achieving important international objectives? These two questions rest at the heart of contemporary debate over the role and design of international institutions as well as growing tension between globalization and the preservation of national sovereignty. In this paper, we propose answers to these two questions. We do so by first developing formal definitions of national sovereignty that capture features of sovereignty emphasized in the political science literature. We then utilize these definitions to describe the degree and nature of national sovereignty possessed by governments in a benchmark (Nash) world in which there exist no international agreements of any kind. And with national sovereignty characterized in this benchmark world, we then evaluate the extent to which national sovereignty is compromised by international agreements with specific design features. In this way, we delineate the degree of tension between national sovereignty and international objectives and describe how that tension can be minimized and in principle at times even eliminated through careful institutional design.
Handle: RePEc:nbr:nberwo:10249
Template-Type: ReDIF-Paper 1.0
Title: Tight Clothing: How the MFA Affects Asian Apparel Exports
Classification-JEL: F1; F13
Author-Name: Carolyn L. Evans
Author-Name: James Harrigan
Author-Person: pha151
Note: ITI
Number: 10250
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10250
File-URL: http://www.nber.org/papers/w10250.pdf
File-Format: application/pdf
Publication-Status: published as Tight Clothing. How the MFA Affects Asian Apparel Exports, Carolyn Evans, James Harrigan. in International Trade in East Asia, Ito and Rose. 2005
Abstract: International trade in apparel and textiles is regulated by a system of bilateral tariffs and quotas known as the Multifiber Arrangement or MFA. Using a time series of detailed product-level data from the United States on the quotas and tariffs that comprise the MFA, we analyze how the MFA affects the sources and prices of US apparel imports, with a particular focus on the effects on East Asian exporters during the 1990s. We show that while a large fraction of US apparel is imported under binding quotas, there are many quotas that remain unfilled. We also show that binding quotas substantially raise import prices, suggesting both quality upgrading and rent capture by exporters. In contrast, tariffs reduce import prices. Lastly, we argue that the substantial shift of US apparel imports away from Asia in favor of Mexico and the Caribbean during the 1990s is only partly due to discriminatory trade policy: the other reason is an increasing demand for timely delivery that gives a competitive advantage to nearby exporters.
Handle: RePEc:nbr:nberwo:10250
Template-Type: ReDIF-Paper 1.0
Title: Air Pollution and Infant Health: What Can We Learn From California's Recent Experience
Classification-JEL: I18
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Matthew Neidell
Author-Person: pne362
Note: EH CH EEE
Number: 10251
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10251
File-URL: http://www.nber.org/papers/w10251.pdf
File-Format: application/pdf
Publication-Status: published as Currie, Janet and Matthew Neidell. "Air Pollution And Infant Health: What Can We Learn From California's Recent Experience?," Quarterly Journal of Economics, 2005, v120(3,Aug), 1003-1030.
Abstract: We examine the impact of air pollution on infant death in California over the 1990s. Our work offers several innovations: First, many previous studies examine populations subject to far greater levels of pollution. In contrast, the experience of California in the 1990s is clearly relevant to current debates over the regulation of pollution. Second, many studies examine a few routinely monitored pollutants in isolation, generally because of data limitations. We examine four criteria' pollutants in a common framework. Third, we develop an identification strategy based on within zip code variation in pollution levels that controls for potentially important unobserved characteristics of high pollution areas. Fourth, we use rich individual-level data to investigate effects of pollution on infant mortality, fetal deaths, low birth weight and prematurity in a common framework. We find that the reductions in carbon monoxide (CO) and particulates (PM10) over the 1990s in California saved over 1,000 infant lives. However, we find little consistent evidence of pollution effects on fetal deaths, low birth weight or short gestation.
Handle: RePEc:nbr:nberwo:10251
Template-Type: ReDIF-Paper 1.0
Title: A Search for Multiple Equilibria in Urban Industrial Structure
Classification-JEL: D5; J1
Author-Name: Donald R. Davis
Author-Person: pda33
Author-Name: David E. Weinstein
Author-Person: pwe34
Note: IO PE
Number: 10252
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10252
File-URL: http://www.nber.org/papers/w10252.pdf
File-Format: application/pdf
Publication-Status: published as Donald R. Davis & David E. Weinstein, 2008. "A Search For Multiple Equilibria In Urban Industrial Structure," Journal of Regional Science, Blackwell Publishing, vol. 48(1), pages 29-65.
Abstract: Theories featuring multiple equilibria are now widespread across many fields of economics. Yet little empirical work has asked if such multiple equilibria are salient features of real economies. We examine this in the context of the Allied bombing of Japanese cities and industries in WWII. We develop a new empirical test for multiple equilibria and apply it to data for 114 Japanese cities in eight manufacturing industries. The data provide no support for the existence of multiple equilibria. In the aftermath even of immense shocks, a city typically recovers not only its population and its share of aggregate manufacturing, but even the specific industries it had before.
Handle: RePEc:nbr:nberwo:10252
Template-Type: ReDIF-Paper 1.0
Title: Optimal Simple and Implementable Monetary and Fiscal Rules
Classification-JEL: E52; E61
Author-Name: Stephanie Schmitt-Grohe
Author-Person: psc44
Author-Name: Martin Uribe
Note: ME
Number: 10253
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10253
File-URL: http://www.nber.org/papers/w10253.pdf
File-Format: application/pdf
Publication-Status: published as Schmitt-Grohe, Stephanie and Martin Uribe. "Optimal Simple and Implementable Monetary and Fiscal Rules." Journal of Monetary Economics 54, 6 (September 2007): 1702-25.
Abstract: The goal of this paper is to compute optimal monetary and fiscal policy rules in a real business cycle model augmented with sticky prices, a demand for money, taxation, and stochastic government consumption. We consider simple policy rules whereby the nominal interest rate is set as a function of output and inflation, and taxes are set as a function of total government liabilities. We require policy to be implementable in the sense that it guarantees uniqueness of equilibrium. We do away with a number of empirically unrealistic assumptions typically maintained in the related literature that are used to justify the computation of welfare using linear methods. Instead, we implement a second-order accurate solution to the model. Our main findings are: First, the size of the inflation coefficient in the interest-rate rule plays a minor role for welfare. It matters only insofar as it affects the determinacy of equilibrium. Second, optimal monetary policy features a muted response to output. More importantly, interest rate rules that feature a positive response of the nominal interest rate to output can lead to significant welfare losses. Third, the optimal fiscal policy is passive. However, the welfare losses associated with the adoption of an active fiscal stance are negligible.
Handle: RePEc:nbr:nberwo:10253
Template-Type: ReDIF-Paper 1.0
Title: The Response of Hours to a Technology Shock: Evidence Based on Direct Measures of Technology
Classification-JEL: E24; E32
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Robert Vigfusson
Author-Person: pvi18
Note: EFG
Number: 10254
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10254
File-URL: http://www.nber.org/papers/w10254.pdf
File-Format: application/pdf
Publication-Status: published as Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2004. "The Response of Hours to a Technology Shock: Evidence Based on Direct Measures of Technology," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 381-395, 04/05.
Abstract: We investigate what happens to hours worked after a positive shock to technology, using the aggregate technology series computed in Basu, Fernald and Kimball (1999). We conclude that hours worked rise after such a shock.
Handle: RePEc:nbr:nberwo:10254
Template-Type: ReDIF-Paper 1.0
Title: The Great Depression and the Friedman-Schwartz Hypothesis
Classification-JEL: E31; E40
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Roberto Motto
Author-Name: Massimo Rostagno
Author-Person: pro107
Note: EFG ME
Number: 10255
Creation-Date: 2004-01
Order-URL: http://www.nber.org/papers/w10255
File-URL: http://www.nber.org/papers/w10255.pdf
File-Format: application/pdf
Publication-Status: published as Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2003. "The Great Depression and the Friedman-Schwartz hypothesis," Proceedings, Federal Reserve Bank of Cleveland, pages 1119-1215.
Publication-Status: published as Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2003. "The Great Depression and the Friedman-Schwartz Hypothesis," Journal of Money, Credit, and Banking, vol 35(6b), pages 1119-1197.
Abstract: We evaluate the Friedman-Schwartz hypothesis that a more accommodative monetary policy could have greatly reduced the severity of the Great Depression. To do this, we first estimate a dynamic, general equilibrium model using data from the 1920s and 1930s. Although the model includes eight shocks, the story it tells about the Great Depression turns out to be a simple and familiar one. The contraction phase was primarily a consequence of a shock that induced a shift away from privately intermediated liabilities, such as demand deposits and liabilities that resemble equity, and towards currency. The slowness of the recovery from the Depression was due to a shock that increased the market power of workers. We identify a monetary base rule which responds only to the money demand shocks in the model. We solve the model with this counterfactual monetary policy rule. We then simulate the dynamic response of this model to all the estimated shocks. Based on the model analysis, we conclude that if the counterfactual policy rule had been in place in the 1930s, the Great Depression would have been relatively mild.
Handle: RePEc:nbr:nberwo:10255
Template-Type: ReDIF-Paper 1.0
Title: Market Culture: How Norms Governing Exploding Offers Affect Market Performance
Classification-JEL: I0; J0
Author-Name: Muriel Niederle
Author-Person: pni95
Author-Name: Alvin E. Roth
Author-Person: pro40
Note: IO LS
Number: 10256
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10256
File-URL: http://www.nber.org/papers/w10256.pdf
File-Format: application/pdf
Publication-Status: published as Niederle, Muriel and Alvin E. Roth. “Market Culture: How Rules Governing Exploding Offers Affect Market Performance." American Economic Journal: Microeconomics 1, 2 (August 2009): 199-219.
Abstract: Many markets have organizations that influence or try to establish norms concerning when offers can be made, accepted and rejected. Examining a dozen previously studied markets suggests that markets in which transactions are made far in advance are markets in which it is acceptable for firms to make exploding offers, and unacceptable for workers to renege on commitments they make, however early. But this evidence is only suggestive, because the markets differ in many ways other than norms concerning offers. Laboratory experiments allow us to isolate the effects of exploding offers and binding acceptances. In a simple environment, in which uncertainty about applicants' quality is resolved over time, we find inefficient early contracting when firms can make exploding offers and applicants' acceptances are binding. Relaxing either of these two conditions causes matching to take place later, when more information about applicants' qualities is available, and consequently results in higher efficiency and fewer blocking pairs. This suggests that elements of market culture may play an important role in influencing market performance.
Handle: RePEc:nbr:nberwo:10256
Template-Type: ReDIF-Paper 1.0
Title: Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations
Classification-JEL: D84; D91
Author-Name: Steven Haider
Author-Person: pha224
Author-Name: Melvin Stephens Jr.
Author-Person: pst400
Note: EFG AG LS
Number: 10257
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10257
File-URL: http://www.nber.org/papers/w10257.pdf
File-Format: application/pdf
Publication-Status: published as Steven J Haider & Melvin Stephens, 2007. "Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 247-264, 03.
Abstract: Previous research finds a systematic decrease in consumption at retirement, a finding that is inconsistent with the Life-Cycle/Permanent Income Hypothesis if retirement is an expected event. In this paper, we use workers' subjective beliefs about their retirement dates as an instrument for retirement. After demonstrating that subjective retirement expectations are strong predictors of subsequent retirement decisions, we still find a retirement consumption decline for workers who retire when expected. However, our estimates of this consumption fall are about a third less than those found when we instead rely on the instrumental variables strategy used in prior studies. Finally, we examine a number of hypotheses that have been put forward to explain the retirement consumption decline. We find little empirical support for these explanations in our data.
Handle: RePEc:nbr:nberwo:10257
Template-Type: ReDIF-Paper 1.0
Title: R&D Investments with Competitive Interactions
Classification-JEL: G31; O32
Author-Name: Kristian R. Miltersen
Author-Name: Eduardo S. Schwartz
Note: IO PR AP
Number: 10258
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10258
File-URL: http://www.nber.org/papers/w10258.pdf
File-Format: application/pdf
Publication-Status: published as Miltersen, Kristian and Eduardo Schwartz. "R&D Investments With Competitive Interactions," Review of Finance, 2004, v8(3), 355-401.
Abstract: In this article we develop a model to analyze patent-protected R&D investment projects when there is (imperfect) competition in the development and marketing of the resulting product. The competitive interactions that occur substantially complicate the solution of the problem since the decision maker has to take into account not only the factors that affect her/his own decisions, but also the factors that affect the decisions of the other investors. The real options framework utilized to deal with investments under uncertainty is extended to incorporate the game theoretic concepts required to deal with these interactions. Implementation of the model shows that competition in R&D, in general, not only increases production and reduces prices, but also shortens the time of developing the product and increases the probability of a successful development. These benefits to society are countered by increased total investment costs in R&D and lower aggregate value of the R&D investment projects.
Handle: RePEc:nbr:nberwo:10258
Template-Type: ReDIF-Paper 1.0
Title: Why Are Most Funds Open-End? Competition and the Limits of Arbitrage
Classification-JEL: G12; G20
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: CF AP
Number: 10259
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10259
File-URL: http://www.nber.org/papers/w10259.pdf
File-Format: application/pdf
Publication-Status: published as Stein, Jeremy C. "Why Are Most Funds Open-end? Competition And The Limits Of Arbitrage," Quarterly Journal of Economics, 2005, v120(1,Feb), 247-272.
Abstract: The majority of asset-management intermediaries (e.g., mutual funds, hedge funds) are structured on an open-end basis, even though it appears that the open-end form can be a serious impediment to arbitrage. I argue that the equilibrium degree of open-ending in an economy can be excessive from the point of view of investors. When funds compete for investors' dollars, they may engage in a counterproductive race towards the open-end form, even though this form leaves them ill-suited to undertaking certain types of arbitrage trades. One implication of the analysis is that, even absent short-sales constraints or other frictions, economically large mispricings can coexist with rational, competitive arbitrageurs who earn small excess returns.
Handle: RePEc:nbr:nberwo:10259
Template-Type: ReDIF-Paper 1.0
Title: Are Americans Saving "Optimally" for Retirement?
Classification-JEL: H31; E21
Author-Name: John Karl Scholz
Author-Name: Ananth Seshadri
Author-Person: pse72
Author-Name: Surachai Khitatrakun
Note: AG PE
Number: 10260
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10260
File-URL: http://www.nber.org/papers/w10260.pdf
File-Format: application/pdf
Publication-Status: published as Scholz, John Karl, Ananth Seshadri and Surachai Khitatrakun. "Are Americans Saving 'Optimally' For Retirement?," Journal of Political Economy, 2006, v114(4,Aug), 607-643.
Abstract: This paper examines the degree to which Americans are saving optimally for retirement. Our standard for assessing optimality comes from a life-cycle model that incorporates uncertain lifetimes, uninsurable earnings and medical expenses, progressive taxation, government transfers, and pension and social security benefit functions derived from rich household data. We solve every household''s decision problem from death to starting age and then use the decision rules in conjunction with earnings histories to make predictions about wealth in 1992. Ours is the first study to compare, household by household, wealth predictions that arise from a life-cycle model that incorporates earnings histories for a nationally representative sample. The results, based on data from the Health and Retirement Study, are striking we find that the model is capable of accounting for more than 80 percent of the 1992 cross-sectional variation in wealth. Fewer than 20 percent of households have less wealth than their optimal targets, and the wealth deficit of those who are undersaving is generally small.
Handle: RePEc:nbr:nberwo:10260
Template-Type: ReDIF-Paper 1.0
Title: Deep Habits
Classification-JEL: D10; D12
Author-Name: Morten Ravn
Author-Person: pra16
Author-Name: Stephanie Schmitt-Grohe
Author-Person: psc44
Author-Name: Martin Uribe
Note: EFG IO
Number: 10261
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10261
Publication-Status: published as Ravn, Morten, Stephenaie Schmitt-Grohe and Martin Uribe. "Deep Habits," Review of Economic Studies, 2006, v73(1,Jan), 195-218.
Abstract: This paper generalizes the standard habit formation model to an environment in which agents form habits over individual varieties of goods as opposed to over a composite consumption good. We refer to this preference specification as `deep habit formation'. Under deep habits, the demand function faced by individual producers depends on past sales. This feature is typically assumed ad-hoc in customer market and brand switching cost models. A central result of the paper is that deep habits give rise to countercyclical markups, which is in line with the empirical evidence. This result is important because ad-hoc formulations of customer-market and switching-cost models have been criticized for implying procyclical and hence counterfactual markup movements. The paper also provides econometric estimates of the parameters pertaining to the deep habit model.
Handle: RePEc:nbr:nberwo:10261
Template-Type: ReDIF-Paper 1.0
Title: What do Aggregate Consumption Euler Equations Say about the Capital Income Tax Burden?
Classification-JEL: E21; H30
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Note: EFG PE
Number: 10262
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10262
File-URL: http://www.nber.org/papers/w10262.pdf
File-Format: application/pdf
Publication-Status: published as Mulligan, Casey B. "What Do Aggregate Consumption Euler Equations Say About The Capital-Income Tax Burden?," American Economic Review, 2004, v94(2,May), 166-170.
Abstract: Aggregate consumption Euler equations fit financial asset return data poorly. But they fit the return on the capital stock well, which leads us to three empirical findings relating to the capital income tax burden. First, capital taxation drives a wedge between consumption growth and the expected pre-tax capital return. Second, capital taxation is the major distortion in the capital market, in the sense that most of the medium and long run deviations between expected consumption growth and the expected pre-tax capital return are associated with capital taxation. Third, consumption growth appears to be pretty elastic to the after-tax capital return (i.e., capital is elastically supplied), even while it appears inelastic to returns on various financial assets. Capital income taxes are passed on through reduced capital accumulation, or higher markups, or some combination.
Handle: RePEc:nbr:nberwo:10262
Template-Type: ReDIF-Paper 1.0
Title: Inflation Illusion and Stock Prices
Classification-JEL: G12; G14
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Tuomo Vuolteenaho
Note: EFG ME AP
Number: 10263
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10263
File-URL: http://www.nber.org/papers/w10263.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, John Y. and Tuomo Vuolteenaho. "Inflation Illusion And Stock Prices," American Economic Review, 2004, v94(2,May), 19-23.
Abstract: We empirically decompose the S&P 500's dividend yield into (1) a rational forecast of long-run real dividend growth, (2) the subjectively expected risk premium, and (3) residual mispricing attributed to the market's forecast of dividend growth deviating from the rational forecast. Modigliani and Cohn's (1979) hypothesis and the persistent use of the Fed model' by Wall Street suggest that the stock market incorrectly extrapolates past nominal growth rates without taking into account the impact of time-varying inflation. Consistent with the Modigliani-Cohn hypothesis, we find that the level of inflation explains almost 80% of the time-series variation in stock-market mispricing.
Handle: RePEc:nbr:nberwo:10263
Template-Type: ReDIF-Paper 1.0
Title: Investor Behavior in the Option Market
Classification-JEL: G1
Author-Name: Josef Lakonishok
Author-Name: Inmoo Lee
Author-Name: Allen M. Poteshman
Note: AP
Number: 10264
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10264
File-URL: http://www.nber.org/papers/w10264.pdf
File-Format: application/pdf
Abstract: This paper investigates the behavior of investors in the equity option market using a unique and detailed dataset of open interest and volume for all contracts listed on the Chicago Board Options Exchange over the 1990 through 2001 period. We document major stylized facts about the option market activity of three types of non-market maker investors over this time period and also investigate how their trading changed during the stock market bubble of the late 1990s and early 2000. Our key findings are: (1) non-market maker investors have about four times more long call than long put open interest, (2) these investors have more short than long open interest in both calls and puts, (3) each type of investor purchases more calls to open brand new positions when the return on underlying stocks are higher over horizons ranging from one week to two years into the past, (4) the least sophisticated group of investors substantially increased their purchases of calls on growth but not value stocks during the stock market bubble of the late 1990s and early 2000, and (5) none of the investor groups significantly increased their purchases of puts during the bubble period in order to overcome short sales constraints in the stock market.
Handle: RePEc:nbr:nberwo:10264
Template-Type: ReDIF-Paper 1.0
Title: Does Illiquidity Alter Child Labor and Schooling Decisions? Evidence from Household Responses to Anticipated Cash Transfers in South Africa
Classification-JEL: J22; J82
Author-Name: Eric V. Edmonds
Author-Person: ped27
Note: CH
Number: 10265
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10265
File-URL: http://www.nber.org/papers/w10265.pdf
File-Format: application/pdf
Abstract: This study considers the response of child labor supply and schooling attendance to anticipated social pension income in South Africa. For black households in South Africa, the social pension is large, highly anticipated, and shared across generations. Moreover, pension benefits are largely determined by age in South Africa's extremely poor black population, and this study uses the age discontinuity in the pension benefit formula for identification. The South African social pension thus presents an unusually clean test of the applicability of the Life-Cycle/Permanent Income model to child labor and schooling decisions in developing countries. In the present case, the data support the theory that liquidity constraints contribute to high levels of child labor. When households become eligible for the social pension in South Africa, the resulting increase in household non-labor income is associated with a sizeable decline in child labor and increases in schooling. Changes in child labor and schooling are largest among pensioners with little formal education. This finding suggests that the current emphasis in development policy of addressing child labor by attacking labor demand may be misdirected.
Handle: RePEc:nbr:nberwo:10265
Template-Type: ReDIF-Paper 1.0
Title: Life-Cycle Consumption and the Age-Adjusted Value of Life
Classification-JEL: J17; I12
Author-Name: Thomas J. Kniesner
Author-Person: pkn21
Author-Name: James P. Ziliak
Author-Person: pzi120
Author-Name: W. Kip Viscusi
Author-Person: pvi69
Note: EH LE
Number: 10266
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10266
File-URL: http://www.nber.org/papers/w10266.pdf
File-Format: application/pdf
Publication-Status: published as Kniesner, Thomas, W. Kip Viscusi, and James Ziliak. 2006. "Life-Cycle Consumption and the Age-Adjusted Value of Life," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 5(1), pages 1524-1524
Abstract: Our research examines empirically the age pattern of the implicit value of life revealed from workers' differential wages and job safety pairings. Although aging reduces the number of years of life expectancy, aging can affect the value of life through an effect on planned life-cycle consumption. The elderly could, a priori, have the highest implicit value of life if there is a life-cycle plan to defer consumption until old age. We find that largely due to the age pattern of consumption, which is non-constant, the implicit value of life rises and falls over the lifetime in a way that the value for the elderly is higher than the average over all ages or for the young. There are important policy implications of our empirical results. Because there may be age-specific benefits of programs to save statistical lives, instead of valuing the lives of the elderly at less than the young, policymakers should more correctly value the lives of the elderly at as much as twice the young because of relatively greater consumption lost when accidental death occurs.
Handle: RePEc:nbr:nberwo:10266
Template-Type: ReDIF-Paper 1.0
Title: Accounting for Exchange Rate Variability in Present-Value Models When the Discount Factor is Near One
Classification-JEL: F31; G12
Author-Name: Charles Engel
Author-Person: pen14
Author-Name: Kenneth D. West
Author-Person: pwe16
Note: IFM AP
Number: 10267
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10267
File-URL: http://www.nber.org/papers/w10267.pdf
File-Format: application/pdf
Publication-Status: published as Engel, Charles and Kenneth D. West. "Accounting For Exchange-Rate Variability In Present-Value Models When Discount Factor Is Nearly 1," American Economic Review, 2004, v94(2,May), 119-125.
Abstract: Nominal exchange rates in low-inflation advanced countries are nearly random walks. Engel and West (2003a) offer an explanation for this in the context of models in which the exchange rate is determined as the discounted sum of current and expected future fundamentals. Engel and West show that if the fundamentals are I(1), then as the discount factor approaches one, the exchange rate becomes indistinguishable from a random walk. An alternative explanation for the random-walk behavior of exchange rates is that there are some unobserved variables that drive exchange rates that follow near random walks. This paper takes the approach that both explanations are possible. We are able to measure how much of exchange-rate variation could be accounted for by the Engel-West explanation, despite the fact that we do not observe the information set of financial markets. We find that the observable fundamentals (money, income, prices, interest rates) may account for about 40 percent of the variance of changes in exchange rates under the assumption of discount factors near unity.
Handle: RePEc:nbr:nberwo:10267
Template-Type: ReDIF-Paper 1.0
Title: Deflation and Depression: Is There and Empirical Link?
Classification-JEL: E5; E52
Author-Name: Andrew Atkeson
Author-Person: pat52
Author-Name: Patrick Kehoe
Author-Person: pke4
Note: EFG ME
Number: 10268
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10268
File-URL: http://www.nber.org/papers/w10268.pdf
File-Format: application/pdf
Publication-Status: published as Atkeson, Andrew and Patrick J. Kehoe. "Deflation And Depression: Is There An Empirical Link?," American Economic Review, 2004, v94(2,May), 99-103.
Abstract: Are deflation and depression empirically linked? No, concludes a broad historical study of inflation and real output growth rates. Deflation and depression do seem to have been linked during the 1930s. But in the rest of the data for 17 countries and more than 100 years, there is virtually no evidence of such a link.
Handle: RePEc:nbr:nberwo:10268
Template-Type: ReDIF-Paper 1.0
Title: Does Competition Destroy Ethical Behavior?
Classification-JEL: D41; L31
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: CF IO LS LE
Number: 10269
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10269
File-URL: http://www.nber.org/papers/w10269.pdf
File-Format: application/pdf
Publication-Status: published as Shleifer, Andrei. "Does Competition Destroy Ethical Behavior?," American Economic Review, 2004, v94(2,May), 414-418.
Abstract: Explanations of unethical behavior often neglect the role of competition, as opposed to greed, in assuring its spread. Using the examples of child labor, corruption, excessive' executive pay, corporate earnings manipulation, and commercial activities by universities, this paper clarifies the role of competition in promoting censured conduct. When unethical behavior cuts costs, competition drives down prices and entrepreneurs' incomes, and thereby reduces their willingness to pay for ethical conduct. Nonetheless, I suggest that competition might be good for ethical behavior in the long run, because it promotes growth and raises incomes. Higher incomes raise the willingness to pay for ethical behavior, but may also change what people believe to be ethical for the better.
Handle: RePEc:nbr:nberwo:10269
Template-Type: ReDIF-Paper 1.0
Title: The Declining Equity Premium: What Role Does Macroeconomic Risk Play?
Classification-JEL: G12
Author-Name: Martin Lettau
Author-Person: ple572
Author-Name: Sydney C. Ludvigson
Author-Person: plu153
Author-Name: Jessica A. Wachter
Author-Person: pwa346
Note: AP
Number: 10270
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10270
File-URL: http://www.nber.org/papers/w10270.pdf
File-Format: application/pdf
Publication-Status: published as Lettau, Martin, Sydney C. Ludvigson, and Jessica A. Wachter. "The Declining Equity Premium: What Role Does Macroeconomic Risk Play?" Review of Financial Studies 21(4): 1653-1687, July 2008
Publication-Status: published as Martin Lettau & Sydney Ludvigson & Jessica Wachter, 2005. "The declining equity premium: what role does macroeconomic risk play?," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
Abstract: Aggregate stock prices, relative to virtually any indicator of fundamental value, soared to unprecedented levels in the 1990s. Even today, after the market declines since 2000, they remain well above historical norms. Why? We consider one particular explanation: a fall in macroeconomic risk, or the volatility of the aggregate economy. We estimate a two-state regime switching model for the volatility and mean of consumption growth, and find evidence of a shift to substantially lower consumption volatility at the beginning of the 1990s. We then show that there is a strong and statistically robust correlation between low macroeconomic volatility and high asset prices: the estimated posterior probability of being in a low volatility state explains 30 to 60 percent of the post-war variation in the log price-dividend ratio, depending on the measure of consumption analyzed. Next, we study a rational asset pricing model with regime switches in both the mean and standard deviation of consumption growth, where the probabilities of a regime change are calibrated to match estimates from post-war data. Plausible parameterizations of the model are found to account for a significant fraction of the run-up in asset valuation ratios observed in the late 1990s.
Handle: RePEc:nbr:nberwo:10270
Template-Type: ReDIF-Paper 1.0
Title: Does Copyright Piracy Pay? The Effects of U.S. International Copyright Laws on the Market for Books, 1790-1920
Classification-JEL: K0; N0
Author-Name: B. Zorina Khan
Note: DAE LE PR
Number: 10271
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10271
File-URL: http://www.nber.org/papers/w10271.pdf
File-Format: application/pdf
Abstract: Does the lack of international copyrights benefit or harm developing countries? I examine the effects of U.S. copyright piracy during a period when the U.S. was itself a developing country. U.S. statutes since 1790 protected the copyrights of American citizens, but until 1891 deemed the works of foreign citizens to be in the public domain. In 1891, the laws were changed to allow foreigners to obtain copyright protection in the United States if certain conditions were met. Thus, this episode in American history provides us with a convenient way of investigating the consequences of international copyright piracy. My analysis is based on copyright registrations, information on authors, book titles and prices, financial data from the accounts of a major publishing company, and lawsuits regarding copyright questions. These data are used to investigate the welfare effects of widespread infringement of foreign works on American publishers, writers, and the public. The results suggest that the United States benefited from piracy and that the choice of copyright regime was endogenous to the level of economic development.
Handle: RePEc:nbr:nberwo:10271
Template-Type: ReDIF-Paper 1.0
Title: Chaotic Interest Rate Rules: Expanded Version
Classification-JEL: E52; E31
Author-Name: Jess Benhabib
Author-Person: pbe53
Author-Name: Stephanie Schmitt-Grohe
Author-Person: psc44
Author-Name: Martin Uribe
Note: EFG ME
Number: 10272
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10272
File-URL: http://www.nber.org/papers/w10272.pdf
File-Format: application/pdf
Publication-Status: published as Jess Benhabib & Stephanie Schmitt-Grohé & Martín Uribe, 2002. "Chaotic Interest-Rate Rules," American Economic Review, vol 92(2), pages 72-78.
Abstract: A growing empirical and theoretical literature argues in favor of specifying monetary policy in the form of Taylor-type interest rate feedback rules. That is, rules whereby the nominal interest rate is set as an increasing function of inflation with a slope greater than one around an intended inflation target. This paper shows that such rules can easily lead to chaotic dynamics. The result is obtained for feedback rules that depend on contemporaneous or expected future inflation. The existence of chaotic dynamics is established analytically and numerically in the context of calibrated economies. The battery of fiscal policies that has recently been advocated for avoiding global indeterminacy induced by Taylor-type interest-rate rules (such as liquidity traps) are shown to be unlikely to provide a remedy for the complex dynamics characterized in this paper.
Handle: RePEc:nbr:nberwo:10272
Template-Type: ReDIF-Paper 1.0
Title: Reported Incomes and Marginal Tax Rates, 1960-2000: Evidence and Policy Implications
Classification-JEL: H3
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE
Number: 10273
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10273
File-URL: http://www.nber.org/papers/w10273.pdf
File-Format: application/pdf
Publication-Status: published as Reported Incomes and Marginal Tax Rates, 1960–2000: Evidence and Policy Implications, Emmanuel Saez. in Tax Policy and the Economy, Volume 18, Poterba. 2004
Abstract: This paper use income tax return data from 1960 to 2000 to analyze the link between reported incomes and marginal tax rates. Only the top 1% incomes show evidence of behavioral responses to taxation. The data displays striking heterogeneity in the size of responses to tax changes overtime, with no response either short-term or long-term for the very large Kennedy top rate cuts in the early1960s, and striking evidence of responses, at least in the short-term, to the tax changes since the 1980s. The 1980s tax cuts generated a surge in business income reported by high income individual taxpayers due to a shift away from the corporate sector, and the disappearance of business losses for tax avoidance. The Tax Reform Act of 1986 and the recent 1993 tax increase generated large short-term responses of wages and salaries reported by top income earners, most likely due to re-timing in compensation to take advantage of the tax changes. However, it is unlikely that the extraordinary trend upward of the shares of total wages accruing to top wage income earners, which started in the 1970s and accelerated in the 1980s and especially the late 1990s, can be explained solely by the evolution of marginal tax rates.
Handle: RePEc:nbr:nberwo:10273
Template-Type: ReDIF-Paper 1.0
Title: Single Mothers Working at Night: Standard Work, Child Care Subsidies, and Implications for Welfare Reform
Classification-JEL: J13; I38
Author-Name: Erdal Tekin
Author-Person: pte12
Note: LS PE
Number: 10274
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10274
File-URL: http://www.nber.org/papers/w10274.pdf
File-Format: application/pdf
Publication-Status: published as Erdal Tekin, 2007. "Single Mothers Working At Night: Standard Work And Child Care Subsidies," Economic Inquiry, Western Economic Association International, vol. 45(2), pages 233-250, 04.
Abstract: Using a data set from the post welfare reform environment (the 1999 National Survey of America's Families), this paper investigates the impact of child care subsidies on the standard work (i.e., work performed during the traditional work hours of 8 a.m. and 6 p.m. through Monday and Friday) decision of single mothers and tests whether this impact differs between welfare recipients and nonrecipients. The econometric strategy accounts for sample selection into the labor force and the potential endogeneity of child care subsidy receipt and welfare participation. Results suggest that child care subsidies are associated with a 6 percentage point increase in the probability of single mothers working at standard jobs. When the impact of subsidies is allowed to differ between welfare recipients and non-recipients, results indicate that welfare recipients are 14 percentage points more likely to work at standard jobs than others when they are offered a child care subsidy. Among non-recipients, child care subsidies increase standard work probability by only 1 percentage point. These results underscore the importance of child care subsidies helping low-income parents, especially welfare recipients, find jobs with conventional or standard schedules and lend support to the current practice of states' giving priority to welfare recipients for child care subsidies. Results are found to be robust to numerous specification checks.
Handle: RePEc:nbr:nberwo:10274
Template-Type: ReDIF-Paper 1.0
Title: Tax-Motivated Trading by Individual Investors
Classification-JEL: H24; H31
Author-Name: Zoran Ivkovich
Author-Name: James Poterba
Author-Person: ppo19
Author-Name: Scott Weisbenner
Note: PE
Number: 10275
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10275
File-URL: http://www.nber.org/papers/w10275.pdf
File-Format: application/pdf
Publication-Status: published as Zoran Ivković & James Poterba & Scott Weisbenner, 2005. "Tax-Motivated Trading by Individual Investors," American Economic Review, American Economic Association, vol. 95(5), pages 1605-1630, December.
Abstract: We use data on the stock trades of a large number of individual investors to study how tax incentives affect the realization of capital gains and losses. We compare investors' realizations in their taxable and tax-deferred accounts, which allows us to identify tax-motivated trading. We reach three conclusions. First, we find a strong lock-in effect for capital gains in taxable accounts relative to tax-deferred accounts. The capital gains lock-in effect is stronger for large than for small transactions, and it intensifies at longer holding periods. Second, we find tax-loss selling throughout the calendar year, though it is most pronounced in December, particularly if the investor has realized capital gains elsewhere in the portfolio during the year. Third, we observe substantial heterogeneity in individual investors' propensity to trade. Controlling for this heterogeneity, however, does not alter the relationship between a stock's past performance and the realization decision.
Handle: RePEc:nbr:nberwo:10275
Template-Type: ReDIF-Paper 1.0
Title: Thirty Years of Current Account Imbalances, Current Account Reversals and Sudden Stops
Classification-JEL: F30; F32
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM
Number: 10276
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10276
File-URL: http://www.nber.org/papers/w10276.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian. "Financial Openness, Sudden Stops, And Current-Account Reversals," American Economic Review, 2004, v94(2,May), 59-64.
Abstract: In this paper I analyze the anatomy of current account adjustments in the world economy during the last three decades. The main findings may be summarized as follows: (a) Major reversals in current account deficits have tended to be associated to sudden stops' of capital inflows. (b) The probability of a country experiencing a reversal is captured by a small number of variables that include the (lagged) current account to GDP ratio, the external debt to GDP ratio, the level of international reserves, domestic credit creation, and debt services. (c) Current account reversals have had a negative effect on real growth that goes beyond their direct effect on investments. (d) There is persuasive evidence indicating that the negative effect of current account reversals on growth will depend on the country's degree of openness. More open countries will suffer less in terms of lower growth than countries with a lower degree of openness. (e) I was unable to find evidence supporting the hypothesis that countries with a higher degree of dollarization are more severely affected by current account reversals than countries with a lower degree of dollarization. And, (f) the empirical analysis suggests that countries with more flexible exchange rate regimes are able to accommodate the shocks stemming from a reversal better than countries with more rigid exchange rate regime.
Handle: RePEc:nbr:nberwo:10276
Template-Type: ReDIF-Paper 1.0
Title: Financial Openness, Sudden Stops and Current Account Reversals
Classification-JEL: F30; F32
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM
Number: 10277
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10277
File-URL: http://www.nber.org/papers/w10277.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian. "Financial Openness, Sudden Stops, And Current-Account Reversals," American Economic Review, 2004, v94(2,May), 59-64.
Abstract: In this paper I use a panel data set to investigate the mechanics of sudden stops of capital inflows and current account reversals. I am particularly interested in four questions: (a) What is the relationship between sudden stops and current account reversals? (b) To what extent does financial openness affect the probability of a country being subject to a current account reversal? In other words, do restrictions on capital mobility reduce the probability of such occurrences? (C) Does openness -- both trade openness and financial openness -- play a role in determining the effect of current account reversals on economic performance (i.e. GDP growth)? And, (d) does the exchange rate regime affect the intensity with which reversals affect real activity? The empirical analysis shows that sudden stops and current account reversals have been closely related. The econometric analysis suggests that restricting capital mobility does not reduce the probability of experiencing a reversal. Current account reversals, in turn, have had a negative effect on real growth that goes beyond their direct effect on investment. The regression analysis indicates that the negative effects of current account reversals on growth will depend on the country's degree of trade openness: More open countries will suffer less in terms of lower growth relative to trend than countries with a lower degree of trade openness. On the other hand, the degree of financial openness does not appear to be related to the intensity with which reversals affect real economic performance. The empirical analysis also suggests that countries with more flexible exchange rate regimes are able to accommodate better shocks stemming from a reversal than countries with more rigid exchange rate regimes.
Handle: RePEc:nbr:nberwo:10277
Template-Type: ReDIF-Paper 1.0
Title: Demand Estimation with Heterogeneous Consumers and Unobserved Product Characteristics: A Hedonic Approach
Classification-JEL: L0; D0
Author-Name: C. Lanier Benkard
Author-Name: Patrick Bajari
Note: IO PR
Number: 10278
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10278
File-URL: http://www.nber.org/papers/w10278.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 study the identification and estimation of Gorman-Lancaster style hedonic models of demand for differentiated products for the case when one product characteristic is not observed. Our identification and estimation strategy is a two-step approach in the spirit of Rosen (1974). Relative to Rosen's approach, we generalize the first stage estimation to allow for a single dimensional unobserved product characteristic, and also allow the hedonic pricing function to have a general, non-additive structure. In the second stage, if the product space is continuous and the functional form of utility is known then there exists an inversion between the consumer's choices and her preference parameters. This inversion can be used to recover the distribution of random coefficients nonparametrically. For the more common case when the set of products is finite, we use the revealed preference conditions from the hedonic model to develop a Gibbs sampling estimator for the distribution of random coefficients. We apply our methods to estimating personal computer demand.
Handle: RePEc:nbr:nberwo:10278
Template-Type: ReDIF-Paper 1.0
Title: Cross-country Conversion Factors for Sectoral Productivity Comparisons
Classification-JEL: D24; F14
Author-Name: Johannes Van Biesebroeck
Author-Person: pva139
Note: PR
Number: 10279
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10279
File-URL: http://www.nber.org/papers/w10279.pdf
File-Format: application/pdf
Publication-Status: published as Johannes Van Biesebroeck, 2009. "Disaggregate productivity comparisons: sectoral convergence in OECD countries," Journal of Productivity Analysis, Springer, vol. 32(2), pages 63-79, October.
Abstract: International comparisons of the level of labor or total factor productivity have used exchange rates or purchasing power parity (PPP) to make output and capital comparable across countries. Recent evidence suggests that aggregate PPP holds rather well in the long run, making it a good basis for comparison. At the same time, sectoral deviations from PPP are very persistent, raising the need for disaggregate price measures to make disaggregate productivity comparisons. Sectoral differences in the importance of nontradables make it even more important to work with sectoral prices when country-comparisons are made at the sectoral level. Mapping prices from household expenditure surveys into the industrial classification of sectors and adjusting for taxes and international trade, I obtain a sector-specific PPP measure. The few previous studies that used sectoral prices only had conversion factors available for a single year. With price data for 1985, 1990, 1993, and 1996, I am the first to test whether the constructed conversion factors adequately capture differential changes in relative prices between countries. For some industries--Agriculture, Mining, and less sophisticated manufacturing sectors--the indices prove adequate. For most other industries, aggregate PPP is a superior currency conversion factor.
Handle: RePEc:nbr:nberwo:10279
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy and the Volatility of Real Exchange Rates in New Zealand
Classification-JEL: E52; F31
Author-Name: Kenneth D. West
Author-Person: pwe16
Note: EFG IFM ME
Number: 10280
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10280
File-URL: http://www.nber.org/papers/w10280.pdf
File-Format: application/pdf
Publication-Status: published as Kenneth West, 2003. "Monetary policy and the volatility of real exchange rates in New Zealand," New Zealand Economic Papers, Taylor and Francis Journals, vol. 37(2), pages 175-196.
Abstract: The relationship between interest rates and exchange rates is puzzling and poorly understood. But under some standard assumptions, interest rates can be adjusted to smooth real exchange rate movements at the possible price of increased volatility in other variables. In New Zealand, estimates made under some generous suppositions about what monetary policy is able to accomplish suggest that decreasing real exchange rate volatility by about 25% would require increasing output volatility by about 10-15%, inflation volatility by about 0-15% and interest rate volatility by about 15-40%.
Handle: RePEc:nbr:nberwo:10280
Template-Type: ReDIF-Paper 1.0
Title: The Demand for Sons: Evidence from Divorce, Fertility, and Shotgun Marriage
Classification-JEL: D1
Author-Name: Gordon B. Dahl
Author-Person: pda455
Author-Name: Enrico Moretti
Author-Person: pmo392
Note: LS CH
Number: 10281
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10281
File-URL: http://www.nber.org/papers/w10281.pdf
File-Format: application/pdf
Publication-Status: published as Dahl, Gordon B. and Enrico Moretti. “The Demand for Sons.” Review of Economic Studies 75, 4 (October 2008): 1085-1120.
Abstract: This paper shows how parental preferences for sons versus daughters affect divorce, child custody, marriage, shotgun marriage when the sex of the child is known before birth, and fertility stopping rules. We document that parents with girls are significantly more likely to be divorced, that divorced fathers are more likely to have custody of their sons, and that women with only girls are substantially more likely to have never been married. Perhaps the most striking evidence comes from the analysis of shotgun marriages. Among those who have an ultrasound test during their pregnancy, mothers carrying a boy are more likely to be married at delivery. When we turn to fertility, we find that in families with at least two children, the probability of having another child is higher for all-girl families than all-boy families. This preference for sons seems to be largely driven by fathers, with men reporting they would rather have a boy by more than a two to one margin. In the final part of the paper, we compare the effects for the U.S. to five developing countries.
Handle: RePEc:nbr:nberwo:10281
Template-Type: ReDIF-Paper 1.0
Title: Social Security and Unsecured Debt
Classification-JEL: E2; E6
Author-Name: Erik Hurst
Author-Person: phu87
Author-Name: Paul Willen
Author-Person: pwi457
Note: AP PE
Number: 10282
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10282
File-URL: http://www.nber.org/papers/w10282.pdf
File-Format: application/pdf
Publication-Status: published as Hurst, Erik & Willen, Paul, 2007. "Social security and unsecured debt," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1273-1297, August.
Abstract: Most young households simultaneously hold both unsecured debt on which they pay an average of 10 percent interest and social security wealth on which they earn less than 2 percent. We document this fact using data from the Panel Study of Income Dynamics. We then consider a life-cycle model with optimizing and rule-of-thumb' households and explore ways to reduce this inefficiency. We show that both allowing households to use social security wealth to pay off debt and exempting young households from social security contributions (but in both cases requiring higher contributions later later in life) leads to increases in welfare for both types of households and significant increases in consumption and saving, and reductions in debt, for optimizing households.
Handle: RePEc:nbr:nberwo:10282
Template-Type: ReDIF-Paper 1.0
Title: Equilibrium Policy Experiments and the Evaluation of Social Programs
Classification-JEL: J2; I38
Author-Name: Jeremy Lise
Author-Person: pli167
Author-Name: Shannon Seitz
Author-Person: pse14
Author-Name: Jeffrey Smith
Author-Person: psm73
Note: LS PE
Number: 10283
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10283
File-URL: http://www.nber.org/papers/w10283.pdf
File-Format: application/pdf
Abstract: This paper makes three primary contributions. First, we demonstrate the usefulness of general equilibrium models as tools with which to draw policy implications for policies implemented in practice only as small-scale social experiments. Second, we illustrate the usefulness of social experiments as a tool to evaluate equilibrium models. In particular, we calibrate our model using only data on an experimental control group and from general data sets, and then use it to predict (in partial equilibrium) the outcomes experienced by an experimental treatment group. We find that it predicts these outcomes remarkably well. Third, we apply our methodology to the evaluation of the Canadian Self-Sufficiency Project (SSP), a policy providing generous financial incentives for Income Assistance (IA) recipients to obtain stable employment. This policy is similar to many other policies designed to 'make work pay' currently under debate or in place in the US, the UK and elsewhere. Our results reveal several important feedback effects associated with the SSP policy; taken together, these feedback effects reverse the cost-benefit conclusions implied by the partial equilibrium experimental evaluation.
Handle: RePEc:nbr:nberwo:10283
Template-Type: ReDIF-Paper 1.0
Title: Capital Controls: Mud in the Wheels of Market Discipline
Classification-JEL: F3; F15
Author-Name: Kristin J. Forbes
Author-Person: pfo1
Note: IFM
Number: 10284
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10284
File-URL: http://www.nber.org/papers/w10284.pdf
File-Format: application/pdf
Publication-Status: published as Borio, Claudio, et al (eds.) Market discipline across countries and industries. Cambridge and London: MIT Press, 2004.
Abstract: Widespread support for capital account liberalization in emerging markets has recently shifted to skepticism and even support for capital controls in certain circumstances. This sea-change in attitudes has been bolstered by the inconclusive macroeconomic evidence on the benefits of capital account liberalization. There are several compelling reasons why it is difficult to measure the aggregate impact of capital controls in very different countries. Instead, a new and more promising approach is more detailed microeconomic studies of how capital controls have generated specific distortions in individual countries. Several recent papers have used this approach and examined very different aspects of capital controls from their impact on crony capitalism in Malaysia and on financing constraints in Chile, to their impact on US multinational behavior and the efficiency of stock market pricing. Each of these diverse studies finds a consistent result: capital controls have significant economic costs and lead to a misallocation of resources. This new microeconomic evidence suggests that capital controls are not just sand', but rather mud in the wheels' of market discipline.
Handle: RePEc:nbr:nberwo:10284
Template-Type: ReDIF-Paper 1.0
Title: ENTICE-BR: The Effects of Backstop Technology R&D on Climate Policy Models
Classification-JEL: O33; O41
Author-Name: David Popp
Note: PR EEE
Number: 10285
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10285
File-URL: http://www.nber.org/papers/w10285.pdf
File-Format: application/pdf
Publication-Status: published as Popp, David. "ENTICE-BR: The Effects Of Backstop Technology R&D On Climate Policy Models," Energy Economics, 2006, v28(2,Mar), 188-202.
Abstract: Recent attempts to endogenize technology in climate policy models have produced mixed results. Models including alternative technologies find large gains from induced technological change. However, technological progress in these models comes through learning-by-doing, which ignores the potential opportunity costs of technological change. Models using R&D spending as the driver of technological change address this. However, these models typically include only a single representative energy technology, substitution across technologies is not possible. This paper addresses these shortcomings by including policy-induced energy R&D in a model with a backstop energy technology. I show that, while induced technological change is important, larger welfare gains come from simply adding an alternative technology to the model. As in models with a single technology, opportunity costs of research limit the role induced innovation can play. Moreover, since the backstop technology improves welfare even without climate policy, accurate policy analysis depends on a carefully constructed baseline simulation.
Handle: RePEc:nbr:nberwo:10285
Template-Type: ReDIF-Paper 1.0
Title: Self-Employment: More may not be better
Classification-JEL: J4
Author-Name: David G. Blanchflower
Author-Person: pbl22
Note: LS
Number: 10286
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10286
File-URL: http://www.nber.org/papers/w10286.pdf
File-Format: application/pdf
Publication-Status: published as Blanchflower, David G. "Self-employment: more may not be better." Swedish Economic Policy Review 11, 2 (Fall 2004): 15-74.
Abstract: I present information on self-employment from seventy countries. Self-employment rates are generally down across the OECD. The main exceptions are the UK, and New Zealand. The probability of being self-employed across the OECD is higher for men and for older workers compared with younger workers. In Europe the probabilities are lower the more educated an individual is, while the opposite is true in the US. Some groups of immigrants have higher rates of self-employment than the indigenous population, others do not. Capital constraints appear to bind especially tightly in the US for firms owned by minorities and women: the low rates of self-employment of blacks and Hispanics in the US appears in part to be driven by liquidity constraints. There is evidence that liquidity constraints bite in other countries including the UK, Finland, Australia, Canada and Sweden. It does seem likely that people have an unrealistically rosy view of what it is like to be running their own business rather than staying with the comparative security of being an employee. A surprisingly high proportion of employees say they would prefer to be self-employed. Despite the fact that very high proportions of employees say they would like to set up their own business the reality is something else. The evidence presented her suggests that people may well be able to judge what is in their own best interests - that is why they remain as employees. The self-employed work under a lot of pressure, report that they find their work stressful and that they come home from work exhausted. Further, they report being constantly under strain, that they lose sleep over worry and place more weight on work than they do on leisure. However, they are especially likely to say they have control over their lives as well as being highly satisfied with their lives.
Handle: RePEc:nbr:nberwo:10286
Template-Type: ReDIF-Paper 1.0
Title: Mandatory Unbundling and Irreversible Investment in Telecom Networks
Classification-JEL: L0
Author-Name: Robert S. Pindyck
Author-Person: ppi130
Note: IO
Number: 10287
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10287
File-URL: http://www.nber.org/papers/w10287.pdf
File-Format: application/pdf
Publication-Status: published as Robert S. Pindyck, 2007. "Mandatory Unbundling and Irreversible Investment in Telecom Networks," Review of Network Economics, Concept Economics, vol. 6(3), pages 274-298, September.
Abstract: This paper addresses the impact on investment incentives of the network sharing arrangements mandated by the Telecommunications Act of 1996, with a focus on the implications of irreversible investment. Although the goal is to promote competition, the sharing rules now in place reduce incentives to build new networks or upgrade existing ones. Such investments are irreversible -- they involve sunk costs. The basic framework adopted by regulators allows entrants to utilize such facilities at prices reflecting what it would cost a new, efficient, large-scale network to be built. Such sharing opportunities are extensive, covering virtually the entire suite of network services provided, and extremely flexible, as the entrant can rent facilities in small increments for short duration, with no long-term contracts required. Because the entrant does not bear the sunk costs, this leads to an asymmetric allocation of risk and return that is not properly accounted for in the pricing of network services, which creates a significant investment disincentive.
Handle: RePEc:nbr:nberwo:10287
Template-Type: ReDIF-Paper 1.0
Title: Legal Regime and Business's Organizational Choice: A Comparison of France and the United States
Classification-JEL: K2; N4
Author-Name: Naomi R. Lamoreaux
Author-Name: Jean-Laurent Rosenthal
Note: DAE
Number: 10288
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10288
File-URL: http://www.nber.org/papers/w10288.pdf
File-Format: application/pdf
Publication-Status: published as Lamoreaux, Naomi R., and Jean-Laurent Rosenthal. 2005. "Legal Regime and Business's Organizational Choice: A Comparison of France and the United States During the Era of Industrialization," American Law and Economics Review, 7(1), 28-61.
Abstract: In a recent series of articles, Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert W. Vishny have argued that countries whose legal systems are based on civil law (especially of French origin) have systematically weaker environments for business than those whose legal systems are based on Anglo-American common law. This paper addresses that argument by exploring the responsiveness of French and U.S. law to the needs of business enterprises during the nineteenth century, when both countries were undergoing industrialization. We find that contracting environment in the U.S. was in fact neither freer nor more flexible than that in France during this critical period. Not only did U.S. law offer enterprises a more limited menu of organizational choices, but business people in the U.S. had much less ability to adapt the basic forms to meet their needs than their French counterparts. Nor is there any evidence that American law evolved more readily in response to economic change than French law. In both nations, major changes in the rules governing organizational forms required the passage of new statutes, and governmental institutions do not seem to have worked any more expeditiously in the U.S. than in France to improve the menu of choices. To the contrary, it was not until the late twentieth century that U.S. business obtained much the same degree of contractual freedom that their French counterparts had long taken for granted.
Handle: RePEc:nbr:nberwo:10288
Template-Type: ReDIF-Paper 1.0
Title: NAFTA and Mexico's Less-Than-Stellar Performance
Classification-JEL: E20; E44
Author-Name: Aaron Tornell
Author-Person: pto157
Author-Name: Frank Westermann
Author-Person: pwe84
Author-Name: Lorenza Martinez
Note: IFM
Number: 10289
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10289
File-URL: http://www.nber.org/papers/w10289.pdf
File-Format: application/pdf
Abstract: Mexico, a prominent liberalizer, failed to attain stellar gross domestic product (GDP) growth in the 1990s, and since 2001 its GDP and exports have stagnated. In this paper we argue that the lack of spectacular growth in Mexico cannot be blamed on either the North American Free Trade Agreement (NAFTA) or the other reforms that were implemented, but on the lack of further judicial and structural reform after 1995. In fact, the benefits of liberalization can be seen in the extraordinary growth of exports and foreign domestic investment (FDI). The key to the Mexican puzzle lies in Mexico's response to crisis: a deterioration in contract enforceability and an increase in nonperforming loans. As a result, the credit crunch in Mexico has been far deeper and far more protracted than in the typical developing country. The credit crunch has hit the nontradables sector especially hard and has generated bottlenecks, which have blocked growth in the tradables sector and have contributed to the recent fall in exports.
Handle: RePEc:nbr:nberwo:10289
Template-Type: ReDIF-Paper 1.0
Title: Monetary and Fiscal Remedies for Deflation
Classification-JEL: E43; E52
Author-Name: Alan Auerbach
Author-Person: pau33
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: EFG IFM ME PE
Number: 10290
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10290
File-URL: http://www.nber.org/papers/w10290.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. and Maurice Obstfeld. "Monetary And Fiscal Remedies For Deflation," American Economic Review, 2004, v94(2,May), 71-75.
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. In an earlier paper, we showed that this reasoning does not hold, that open-market operations can provide substantial macroeconomic benefits and facilitate the use of powerful fiscal policy tools even in a liquidity trap. In this paper, we consider an alternative approach that has been suggested for use in a liquidity trap, a scheduled increase in consumption tax rates. We find that such a policy could, indeed, increase short-run consumption, but would be less effective at increasing welfare or accelerating a country's exit from a liquidity trap. Though a variant of this tax policy might induce exit from a liquidity trap, the impact of welfare is negative in this case as well. We also argue that this alternative tax-rate-based approach is subject to more severe credibility problems than the monetary policy approach explored in our original paper.
Handle: RePEc:nbr:nberwo:10290
Template-Type: ReDIF-Paper 1.0
Title: How Much Equity Does the Government Hold?
Classification-JEL: H20; G12
Author-Name: Alan J. Auerbach
Author-Person: pau33
Note: CF PE
Number: 10291
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10291
File-URL: http://www.nber.org/papers/w10291.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. "How Much Equity Does The Government Hold?," American Economic Review, 2004, v94(2,May), 155-160.
Abstract: A central point in the recent debate about Social Security in the United States has been the extent to which the federal government should take significant positions in the equity market. But, as this paper shows, the government already has a much more significant, if implicit position in the U.S. equity market through its claim to future tax revenues. Using estimates of the sensitivity of federal tax revenues to stock market returns, I calculate the implicit equity position of the federal government, defined as the equity position that would be as sensitive to the stock market as the present value of federal revenues. Although standard errors are large, point estimates indicate that the implicit federal equity position exceeds the size of the stock market itself, a result that is consistent with the fact that revenues from all sources, not just taxes on corporate source income, are responsive to stock market returns.
Handle: RePEc:nbr:nberwo:10291
Template-Type: ReDIF-Paper 1.0
Title: Subsidy Agreements
Classification-JEL: F1
Author-Name: Kyle Bagwell
Author-Person: pba409
Author-Name: Robert W. Staiger
Author-Person: pst85
Note: ITI
Number: 10292
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10292
File-URL: http://www.nber.org/papers/w10292.pdf
File-Format: application/pdf
Abstract: International disputes over subsidies are increasingly disrupting the world trading system. The creation of the WTO was nearly prevented by disputes in the Uruguay Round of GATT negotiations over the issue of negotiating disciplines on agricultural subsidies, an issue which continues to plague the ongoing Doha Round of WTO negotiations. Ongoing disputes over subsidies that violate existing WTO rules have led to the largest amount of authorized retaliation in GATT/WTO history. Yet the international rules that govern subsidies have received little attention in the form of systematic economic analysis. In this paper we provide a first formal analysis of the international rules that govern the use of subsidies to domestic production (as distinct from export subsidies). Our analysis highlights the impact of the new disciplines on subsidies that were added to GATT rules with the creation of the WTO. Our results suggest that, although GATT subsidy rules were typically viewed as weak and inadequate while the WTO subsidy rules are seen as representing a significant strengthening of multilateral disciplines on subsidies, the key changes introduced by the WTO subsidy rules may ultimately do more harm than good to the multilateral trading system, by undermining the ability of tariff negotiations to serve as the mechanism for expanding market access to more efficient levels.
Handle: RePEc:nbr:nberwo:10292
Template-Type: ReDIF-Paper 1.0
Title: The Positive Link Between Financial Liberalization, Growth and Crises
Classification-JEL: E20; E44
Author-Name: Aaron Tornell
Author-Person: pto157
Author-Name: Frank Westermann
Author-Person: pwe84
Author-Name: Lorenza Martinez
Note: IFM
Number: 10293
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10293
File-URL: http://www.nber.org/papers/w10293.pdf
File-Format: application/pdf
Abstract: There is no agreement regarding the growth-enhancing effects of financial liberalization, mainly because it is associated with risky international bank flows, lending booms, and crises. In this paper we make the case for liberalization despite the occurrence of crises. We show that in developing countries trade liberalization has typically been followed by financial liberalization, which has indeed led to financial fragility and a greater incidence of crises. However, financial liberalization also has led to higher GDP growth. In fact, the fastest-growing countries are typically those that have experienced boom-bust cycles. That is, there is a positive link between GDP growth and the bumpiness of credit, which is captured by the negative skewness --not by the variance-- of credit growth. To substantiate our interpretation of the data we present a model that shows why in countries with severe credit market imperfections, liberalization leads to higher growth and, as a by-product, to financial fragility. Thus, occasional crises need not forestall growth and may even be a necessary component of a developing country's growth experience. Finally, our analysis indicates that foreign direct investment does not obviate the need for risky international bank flows, as the latter are the only source of financing for most firms in the nontradables sector.
Handle: RePEc:nbr:nberwo:10293
Template-Type: ReDIF-Paper 1.0
Title: Aggregate Supply and Potential Output
Classification-JEL: E1; E12
Author-Name: Assaf Razin
Author-Person: pra388
Note: IFM ME
Number: 10294
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10294
File-URL: http://www.nber.org/papers/w10294.pdf
File-Format: application/pdf
Abstract: The New-Keynesian aggregate supply derives from micro-foundations an inflation-dynamics model very much like the tradition in the monetary literature. Inflation is primarily affected by: (i) economic slack; (ii) expectations; (iii) supply shocks; and (iv) inflation persistence. This paper extends the New Keynesian aggregate supply relationship to include also fluctuations in potential output, as an additional determinant of the relationship. Implications for monetary rules and to the estimation of the Phillips curve are pointed out.
Handle: RePEc:nbr:nberwo:10294
Template-Type: ReDIF-Paper 1.0
Title: How Do Banks Set Interest Rates?
Classification-JEL: E44; E51
Author-Name: Leonardo Gambacorta
Author-Person: pga68
Note: ME
Number: 10295
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10295
File-URL: http://www.nber.org/papers/w10295.pdf
File-Format: application/pdf
Publication-Status: published as Gambacorta, Leonardo, 2008. "How do banks set interest rates?," European Economic Review, Elsevier, vol. 52(5), pages 792-819, July.
Abstract: The aim of this paper is to study cross-sectional differences in banks interest rates. It adds to the existing literature in two ways. First, it analyzes in a systematic way both micro and macroeconomic factors that influence the price setting behavior of banks. Second, by using banks' prices (rather than quantities) it provides an alternative way to disentangle loan supply from loan demand shift in the bank lending channel' literature. The results, derived from a sample of Italian banks, suggest that heterogeneity in the banking rates pass-through exists only in the short run. Consistently with the literature for Italy, interest rates on shortterm lending of liquid and well-capitalized banks react less to a monetary policy shock. Also banks with a high proportion of long-term lending tend to change their prices less. Heterogeneity in the pass-through on the interest rate on current accounts depends mainly on banks' liability structure. Bank's size is never relevant.
Handle: RePEc:nbr:nberwo:10295
Template-Type: ReDIF-Paper 1.0
Title: Serial Default and the "Paradox" of Rich to Poor Capital Flows
Classification-JEL: F21; F32
Author-Name: Carmen M. Reinhart
Author-Person: pre33
Author-Name: Kenneth S. Rogoff
Author-Person: pro164
Note: EFG IFM
Number: 10296
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10296
File-URL: http://www.nber.org/papers/w10296.pdf
File-Format: application/pdf
Publication-Status: published as Reinhart, Carmen M. and Kenneth S. Rogoff. "Serial Default And The 'Paradox' Of Risk-To-Poor Capital Flows," American Economic Review, 2004, v94(2,May), 53-58.
Abstract: Lucas (1990) argued that it was a paradox that more capital does not flow from rich countries to poor countries. He rejected the standard explanation of expropriation risk and argued that paucity of capital flows to poor countries must instead be rooted in externalities in human capital formation favoring further investment in already capital rich countries. In this paper, we review the various explanations offered for this paradox.' There is no doubt that there are many reasons why capital does not flow from rich to poor nations yet the evidence we present suggests some explanations are more relevant than others. In particular, as long as the odds of non repayment are as high as 65 percent for some low income countries, credit risk seems like a far more compelling reason for the paucity of rich-poor capital flows. The true paradox may not be that too little capital flows from the wealthy to the poor nations, but that too much capital (especially debt) is channeled to debt intolerant serial defaulters.
Handle: RePEc:nbr:nberwo:10296
Template-Type: ReDIF-Paper 1.0
Title: Dynamics of Labor Demand: Evidence from Plant-level Observations and Aggregate Implications
Classification-JEL: E24; J23
Author-Name: Russel W. Cooper
Author-Name: John C. Haltiwanger
Author-Person: pha231
Author-Name: Jonathan Willis
Author-Person: pwi160
Note: EFG LS PR
Number: 10297
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10297
File-URL: http://www.nber.org/papers/w10297.pdf
File-Format: application/pdf
Publication-Status: published as Cooper, Russell & Haltiwanger, John & Willis, Jonathan L., 2015. "Dynamics of labor demand: Evidence from plant-level observations and aggregate implications," Research in Economics, Elsevier, vol. 69(1), pages 37-50.
Abstract: This paper studies the dynamics of labor demand at the plant and aggregate levels. The correlation of hours and employment growth is negative at the plant level and positive in aggregate time series. Further, hours and employment growth are about equally volatile at the plant level while hours growth is much less volatile than employment growth in the aggregate data. Given these differences, we specify and estimate the parameters of a plant-level dynamic optimization problem using simulated method of moments to match plant-level observations. Our findings indicate that non-convex adjustment costs are critical for explaining plant-level moments on hours and employment. Aggregation generates time series implications which are broadly consistent with observation. Further, we find that a model with quadratic adjustment costs alone can also broadly match the aggregate facts.
Handle: RePEc:nbr:nberwo:10297
Template-Type: ReDIF-Paper 1.0
Title: Interest Rates and Initial Public Offerings
Classification-JEL: E4; G3
Author-Name: Boyan Jovanovic
Author-Name: Peter L. Rousseau
Author-Person: pro64
Note: CF EFG ME
Number: 10298
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10298
File-URL: http://www.nber.org/papers/w10298.pdf
File-Format: application/pdf
Abstract: We study the relation between IPO investment and the rate of interest. We model the IPO timing decision and show that the implied relation between interest rates and investment is non-monotonic, and the data support the implication. At low rates of interest firms delay their IPOs. This happens because during the pre-IPO period the firm forgoes earnings that do not matter as much at low interest rates. The 1950's and early 1960's, especially, were periods of very low real interest rates, and IPO investment was low, with firms delaying their IPOs significantly. A qualitative difference seems to exist between investment of IPO-ing firms and the investment of incumbent firms which is decreasing in the interest rate, as neoclassical theory predicts.
Handle: RePEc:nbr:nberwo:10298
Template-Type: ReDIF-Paper 1.0
Title: The Best of Times, the Worst of Times: Health and Nutrition in Pre-Columbian America
Classification-JEL: N0
Author-Name: Richard H. Steckel
Author-Person: pst352
Note: DAE
Number: 10299
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10299
File-URL: http://www.nber.org/papers/w10299.pdf
File-Format: application/pdf
Abstract: Lack of evidence has been the major obstacle to understanding trends and differences in human welfare over the millennia. This paper explains and applies methods that are obscure to most academics and essentially unknown to the general public. A millennial perspective is best obtained from skeletal remains, which depict not only childhood health conditions but also processes of degeneration that accompany aging and strenuous physical effort. Compiled into an index of health, data from 23 localities as part of a large collaborative project on the Western Hemisphere reveal diverse health conditions for the pre-Columbian population. For reasons not yet understood populations moved over time into less healthy ecological environments. The analysis has implications for understanding environmental determinants of health, the pattern of European conquest, pre-contact population size, investigating human adaptation to climate change, and discovering prime movers of very long-term economic growth.
Handle: RePEc:nbr:nberwo:10299
Template-Type: ReDIF-Paper 1.0
Title: Market Integration and Economic Development: A Long-run Comparison
Classification-JEL: O1; O4
Author-Name: Wolfgang Keller
Author-Person: pke8
Author-Name: Carol H. Shiue
Note: ITI PR
Number: 10300
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10300
File-URL: http://www.nber.org/papers/w10300.pdf
File-Format: application/pdf
Publication-Status: published as Wolfgang Keller & Carol H. Shiue, 2007. "Market Integration and Economic Development: A Long-run Comparison," Review of Development Economics, Blackwell Publishing, vol. 11(1), pages 107-123, 02.
Abstract: How much of China's recent economic performance can be attributed to market-oriented reforms introduced in the last two decades? A long-run perspective may be important for understanding the process of economic development occurring today. This paper compares the integration of rice markets in China today and 270 years ago. In the 18th century, transport technology was non-mechanized, but markets were close to being free markets. We distinguish local harvest and weather from aggregate sources of price variation in a historical sample and in a similarly constructed contemporary sample. Findings indicate the degree of market integration in the 1720s is a very good predictor of per capita income in the 1990s. Moreover, the current pattern of interregional income in China is strongly linked to persistent geographic factors that were already apparent several centuries ago, well before the enactment of modern reform programs.
Handle: RePEc:nbr:nberwo:10300
Template-Type: ReDIF-Paper 1.0
Title: Did Dividends Increase Immediately After the 2003 Reduction in Tax Rates?
Classification-JEL: H24; G35
Author-Name: Jennifer L. Blouin
Author-Name: Jana Smith Raedy
Author-Name: Douglas A. Shackelford
Author-Person: psh631
Note: PE EFG
Number: 10301
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10301
File-URL: http://www.nber.org/papers/w10301.pdf
File-Format: application/pdf
Abstract: The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduces the maximum statutory personal tax rate on dividends from 38.1 percent to 15 percent. This study analyzes dividend declarations in the quarter following passage. Aggregate dividends rose by 9 percent when boards of directors first met following enactment. Consistent with the dividend changes being tax-motivated, they are increasing in the percentage of the firm held by individuals. Dividend changes also increased with insider ownership, consistent with managers acting in their own interests. However, these results are limited primarily to firms that made large, special dividends. We find little evidence of an increase in regular, quarterly dividend payments.
Handle: RePEc:nbr:nberwo:10301
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Latin American Art: Creativity Patterns and Rates of Return
Classification-JEL: J24; O54
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: AP
Number: 10302
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10302
File-URL: http://www.nber.org/papers/w10302.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian. “The Economics of Latin American Art: Creativity Patterns and Rates of Return.” Economia 4, 2 (Spring 2004): 1-35.
Abstract: In this paper I use a large data set to analyze two aspects of the Latin American arts: (1) the nature of artistic creative process, and (2) Latin American art as an investment. I use data on auctions to understand the relation between artists' age and the value of their work. The analysis on creativity suggests that Latin American artists have followed very different patterns from that followed by U.S. artists. There is strong evidence suggesting that American artists born after 1920 did their best work at an earlier age than their older colleagues; exactly the opposite is true for the case of Latin America. Indeed, the results reported in this paper suggest that Latin American artists born after 1920 did their best work at a significantly older age than their colleagues from earlier cohorts. The analysis of art as an investment is based on the estimation of hedonic price indexes, and indicates that Latin American art has had a relatively high rate of return indeed much higher than that of other type of paintings. The results also indicate that returns on Latin American art have a very low degree of correlation that is, a very low beta relative to an international portfolio comprised of equities. This means that adding Latin American art will lower the overall risk of an international portfolio.
Handle: RePEc:nbr:nberwo:10302
Template-Type: ReDIF-Paper 1.0
Title: Robustness of Productivity Estimates
Classification-JEL: D24; C13
Author-Name: Johannes Van Biesebroeck
Author-Person: pva139
Note: PR
Number: 10303
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10303
File-URL: http://www.nber.org/papers/w10303.pdf
File-Format: application/pdf
Publication-Status: published as Van Biesebroeck, Johannes. "Robustness of Productivity Estimates." Journal of Industrial Economics 55, 3 (September 2005): 529-69.
Abstract: Researchers interested in estimating productivity can choose from an array of methodologies, each with its strengths and weaknesses. Many methodologies are not very robust to measurement error in inputs. This is particularly troublesome, because fundamentally the objective of productivity measurement is to identify output differences that cannot be explained by input differences. Two other sources of error are misspecifications in the deterministic portion of the production technology and erroneous assumptions on the evolution of unobserved productivity. Techniques to control for the endogeneity of productivity in the firm's input choice decision risk exacerbating these problems. I compare the robustness of five widely used techniques: (a) index numbers, (b) data envelopment analysis, and three parametric methods: (c) instrumental variables estimation, (d) stochastic frontiers, and (e) semiparametric estimation. The sensitivity of each method to a variety of measurement and specification errors is evaluated using Monte Carlo simulations.
Handle: RePEc:nbr:nberwo:10303
Template-Type: ReDIF-Paper 1.0
Title: Does "Aggregation Bias" Explain the PPP Puzzle?
Classification-JEL: F31; C22
Author-Name: Shiu-Sheng Chen
Author-Person: pch275
Author-Name: Charles Engel
Author-Person: pen14
Note: ITI IFM
Number: 10304
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10304
File-URL: http://www.nber.org/papers/w10304.pdf
File-Format: application/pdf
Publication-Status: published as Chen, Shiu-Sheng and Charles Engel. "Does' Aggregation Bias' Explain The PPP Puzzle?," Pacific Economic Review, 2005, v10(1,Feb), 49-72.
Abstract: Recently, Imbs et. al. (2002) have claimed that much of the purchasing power parity puzzle can be explained by aggregation bias'. This paper re-examines aggregation bias. First, it clarifies the meaning of aggregation bias and its applicability to the PPP puzzle. Second, the size of the bias' is shown to be much smaller than the simulations in Imbs et. al. (2002) suggest, if we rule out explosive roots in the simulations. Third, we show that the presence of non-persistent measurement error especially in the Imbs et. al. (2002) data can make price series appear less persistent than they really are. Finally, it is now standard to recognize that small-sample bias plagues estimates of speeds of convergence of PPP. After correcting small sample bias by methods proposed by Kilian (1998) and by So and Shin (1999), the half-life estimates indicate that heterogeneity and aggregation bias do not help to solve the PPP puzzle.
Handle: RePEc:nbr:nberwo:10304
Template-Type: ReDIF-Paper 1.0
Title: Personal Accounts and Family Retirement
Classification-JEL: H55; J26
Author-Name: Alan L. Gustman
Author-Person: pgu327
Author-Name: Thomas L. Steinmeier
Note: AG LS PE
Number: 10305
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10305
File-URL: http://www.nber.org/papers/w10305.pdf
File-Format: application/pdf
Publication-Status: published as Alan L. Gustman and Thomas L. Steinmeier. "Projecting Behavioral Responses to the Next Generation of Retirement Policies". Research in Labor Economics, Vol. 28, 2008, pp. 141-196.
Abstract: This paper constructs a model of retirement and saving by two earner couples. The model includes three dimensions of behavior: the joint determination of retirement and saving; heterogeneity in time preference; and the interdependence of retirement decisions of husbands and wives. Estimation is based on panel data from the Health and Retirement Study covering the period 1992 to 2000. When husbands postpone their retirement so they can retire together with their typically younger wives, the spike in retirement at age 62 is smeared to later ages. Thus retirements differ between one and two earner families. We find both an asymmetry in which husbands prefer their wife to be retired before they retire, and a clear distaste of many husbands to retiring when their wives are in poor health, while the wives are willing to stay at home with sickly husbands. We simulate a system of personal Social Security accounts based on a 10.6 percent contribution rate over the lifetime. One version allows individuals to make lump sum withdrawals at retirement instead of annuitizing. This program would increase the retirement rates of husbands at age 62 by about 15 percentage points compared to the current system. Adding a lump sum option, by itself, would increase retirements at 62 by about 6 percentage points.
Handle: RePEc:nbr:nberwo:10305
Template-Type: ReDIF-Paper 1.0
Title: Rearranging the Family? Income Support and Elderly Living Arrangements in a Low Income Country
Classification-JEL: J12; H55
Author-Name: Eric Edmonds
Author-Person: ped27
Author-Name: Kristin Mammen
Author-Name: Douglas L. Miller
Author-Person: pmi179
Note: CH
Number: 10306
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10306
File-URL: http://www.nber.org/papers/w10306.pdf
File-Format: application/pdf
Publication-Status: published as Edmonds, Eric, K. Mammen and D. Miller. "Rearranging the Family? Household Composition Responses to Large Pension Receipts." The Journal of Human Resources 40, 1 (Winter 2005): 186-207.
Abstract: Despite the importance of living arrangements for well-being and production, the effect of changes in household income on living arrangements is not well understood. This study overcomes the identification problems that have limited the study of the link between income and living arrangements by exploiting a discontinuity in the benefit formula for the social pension in South Africa. In contrast to the findings of the existing literature from wealthier populations, we find no evidence that pension income is used to maintain the independence of black elders in South Africa. Rather, potential beneficiaries alter their household structure. Prime working age women depart, and we observe an increase in children under 5 and young women of child-bearing age. These shifts in co-residence patterns are consistent with a setting where prime age women have comparative advantage in work away from extended family relative to younger women. The additional income from old age support may induce a change in living arrangements to exploit this advantage.
Handle: RePEc:nbr:nberwo:10306
Template-Type: ReDIF-Paper 1.0
Title: Consumption vs. Expenditure
Classification-JEL: E2; J1
Author-Name: Mark Aguiar
Author-Person: pag57
Author-Name: Erik Hurst
Author-Person: phu87
Note: EFG
Number: 10307
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10307
File-URL: http://www.nber.org/papers/w10307.pdf
File-Format: application/pdf
Publication-Status: published as Aguiar, Mark and Erik Hurst. “Consumption vs Expenditure.” Journal of Political Economy 113, 5 (October 2005): 919-948.
Abstract: Standard tests of the permanent income hypothesis (PIH) using data on nondurables typically equate expenditures with consumption. However, as noted by Becker (1965), consumption is the output of a home production' function that uses both expenditure and time as inputs. With this in mind, we revisit the retirement consumption puzzle by documenting that the dramatic decline in expenditures at the time of retirement is matched by an equally dramatic rise in time spent on home production. The innovation of our paper is that we empirically disentangle changes in actual consumption from changes in expenditures. To do so, we use a novel data set which collects detailed food diaries for a large cross-section of U.S. households. We show that despite the decline in food expenditures, neither the quantity nor the quality of food intake deteriorates with retirement status. However, unemployed households experience a decline in consumption commensurate to the impact of job displacement on permanent income. Taken together, the results on retirement and unemployment highlight how direct measures of consumption distinguish between anticipated and unanticipated shocks to income, while using expenditure alone obscures this difference and leads to false rejections of the PIH.
Handle: RePEc:nbr:nberwo:10307
Template-Type: ReDIF-Paper 1.0
Title: Asbestos and the Future of Mass Torts
Classification-JEL: K13; K41
Author-Name: Michelle J. White
Author-Person: pwh52
Note: LE
Number: 10308
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10308
File-URL: http://www.nber.org/papers/w10308.pdf
File-Format: application/pdf
Publication-Status: published as White, Michelle J. "Asbestos and the Future of Mass Torts." Journal of Economic Perspectives 18, 2 (Spring 2004): 183-204.
Abstract: Asbestos was once referred to as a miracle mineral' for its ability to withstand heat and it was used in thousands of products. But exposure to asbestos causes cancer and other diseases. As of the beginning of 2001, 600,000 individuals had filed lawsuits for asbestos-related diseases against more than 6,000 defendants. 85 firms have filed for bankruptcy due to asbestos liabilities and several insurers have failed or are in financial distress. More than $54 billion has been spent on the litigation higher than any other mass tort. Estimates of the eventual cost of asbestos litigation range from $200 to $265 billion. The paper examines the history of asbestos regulation and asbestos liability and argues that it was liability rather than regulation that eventually caused producers to eliminate asbestos from most products by the late 1970s. But despite the disappearance of asbestos products from the marketplace, asbestos litigation continued to grow. Plaintiffs' lawyers used forum-shopping to select the most favorable state courts techniques for mass processing of claims, and substituted new defendants when old ones went bankrupt. Because representing asbestos victims was extremely profitable, lawyers had an incentive to seek out large numbers of additional plaintiffs, including many claimants who were not harmed by asbestos exposure. The paper contrasts asbestos litigation to other mass torts involving personal injury and concludes that asbestos was unique in a number of ways, so that future mass torts are unlikely to be as big. However new legal innovations developed for asbestos are likely to make future mass torts larger and more expensive. I explore two mechanisms-- bankruptcies and class action settlements--that the legal system has developed to resolve mass torts and show that neither has worked for asbestos litigation. The first, bankruptcy by individual asbestos defendants, exacerbates the litigation by spreading it to non-bankrupt defendants. The second, a class action settlement, is impractical for asbestos litigation because of the large number of defendants. As a result, Congressional legislation is needed and the paper discusses the compensation fund approach that Congress is currently considering.
Handle: RePEc:nbr:nberwo:10308
Template-Type: ReDIF-Paper 1.0
Title: Technology Shocks in the New Keynesian Model
Classification-JEL: E32
Author-Name: Peter N. Ireland
Author-Person: pir1
Note: EFG
Number: 10309
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10309
File-URL: http://www.nber.org/papers/w10309.pdf
File-Format: application/pdf
Publication-Status: published as Peter N. Ireland, 2004. "Technology Shocks in the New Keynesian Model," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 923-936, 01.
Abstract: In the New Keynesian model, preference, cost-push, and monetary shocks all compete with the real business cycle model's technology shock in driving aggregate fluctuations. A version of this model, estimated via maximum likelihood, points to these other shocks as being more important for explaining the behavior of output, inflation, and interest rates in the postwar United States data. These results weaken the links between the current generation of New Keynesian models and the real business cycle models from which they were originally derived. They also suggest that Federal Reserve officials have often faced difficult trade-offs in conducting monetary policy.
Handle: RePEc:nbr:nberwo:10309
Template-Type: ReDIF-Paper 1.0
Title: The Economic Future of Europe
Classification-JEL: E6; I3
Author-Name: Olivier Blanchard
Author-Person: pbl2
Note: EFG
Number: 10310
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10310
File-URL: http://www.nber.org/papers/w10310.pdf
File-Format: application/pdf
Publication-Status: published as Blanchard, Olivier. "The Economic Future Of Europe," Journal of Economic Perspectives, 2004, v18(4,Fall), 3-26.
Abstract: After three years of near stagnation, the mood in Europe is definitely gloomy. Many doubt that the European model has a future. In this paper, I argue that things are not so bad, and there is room for optimism. Over the last thirty years, productivity growth has been much higher in Europe than in the United States. Productivity levels are roughly similar in the European Union and in the United States today. The main difference is that Europe has used some of the increase in productivity to increase leisure rather than income, while the U.S. has done the opposite. Turning to the present, a deep and wide ranging reform process is taking place. This reform process is driven by reforms in financial and product markets. Reforms in those markets are in turn putting pressure for reform in the labor market. Reform in the labor market will eventually take place, but not overnight and not without political tensions. These tensions have dominated and will continue to dominate the news; but they are a symptom of change, not a reflection of immobility.
Handle: RePEc:nbr:nberwo:10310
Template-Type: ReDIF-Paper 1.0
Title: Changes in the Disparities in Chronic Disease during the Course of the Twentieth Century
Classification-JEL: I1; J1
Author-Name: Robert W. Fogel
Note: DAE AG EH
Number: 10311
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10311
File-URL: http://www.nber.org/papers/w10311.pdf
File-Format: application/pdf
Abstract: Longitudinal studies support the proposition that the extent and severity of chronic conditions in middle and late ages are to a large extent the outcome of environmental insults at early ages, including in utero. Data from the Early Indicators program project undertaken at the Center for Population Economics suggest that the range of differences in exposure to disease has narrowed greatly over the course of the twentieth century, that age-specific prevalence rates of chronic diseases were much lower at the end of the twentieth century than they were at the beginning of the last century or during the last half of the nineteenth century, and that there has been a significant delay in the onset of chronic diseases over the course of the twentieth century. These trends appear to be related to changes in levels of environmental hazards and in body size. These findings have led investigators to posit a synergism between technological and physiological improvements. This synergism has contributed to reductions in inequality in real income, body size, and life expectancy during the twentieth century.
Handle: RePEc:nbr:nberwo:10311
Template-Type: ReDIF-Paper 1.0
Title: Opportunities, Race, and Urban Location: The Influence of John Kain
Classification-JEL: R2; J7
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Eric A. Hanushek
Author-Person: pha97
Author-Name: John M. Quigley
Author-Person: pqu1
Note: LE PE
Number: 10312
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10312
File-URL: http://www.nber.org/papers/w10312.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L., Eric A. Hanushek and John M. Quigley. "Opportunities, Race, And Urban Location: The Influence Of John Kain," Journal of Urban Economics, 2004, v56(1,Jul), 70-79.
Abstract: Today, no economist studying the spatial economy of urban areas would ignore the effects of race on housing markets and labor market opportunities, but this was not always the case. Through what can be seen as a consistent and integrated research plan, John Kain developed many central ideas of urban economics but, more importantly, legitimized and encouraged scholarly consideration of the geography of racial opportunities. His provocative (and prescient) study of the linkage between housing segregation and the labor market opportunities of Blacks was a natural outgrowth of his prior work on employment decentralization and housing constraints on Black households. His more recent program of research on school outcomes employing detailed administrative data was an extension of the same empirical interest in how the economic opportunities of minority households vary with location. This paper identifies the influence of John Kain's ideas on different areas of research and suggests that his scientific work was thoroughly interrelated.
Handle: RePEc:nbr:nberwo:10312
Template-Type: ReDIF-Paper 1.0
Title: Ethnic Diversity and Economic Performance
Classification-JEL: D0; H0
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Eliana La Ferrara
Author-Person: pla68
Note: EFG PE
Number: 10313
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10313
File-URL: http://www.nber.org/papers/w10313.pdf
File-Format: application/pdf
Publication-Status: published as Alesina, Alberto and Eliana La Ferrara. "Ethnic Diversity Economic Performance," Journal of Economic Literature, 2005, v43(3,Sep), 762-800.
Abstract: We survey and assess the literature on the positive and negative effects of ethnic diversity on economic policies and outcomes. Our focus is on both focus both cities in developed countries (the US) and villages in developing countries. We also consider the endogenous formation of political jurisdictions and we highlight several open issues in need of further research.
Handle: RePEc:nbr:nberwo:10313
Template-Type: ReDIF-Paper 1.0
Title: Globalization and the Gains from Variety
Classification-JEL: F1; E3
Author-Name: Christian Broda
Author-Name: David E. Weinstein
Author-Person: pwe34
Note: ITI
Number: 10314
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10314
File-URL: http://www.nber.org/papers/w10314.pdf
File-Format: application/pdf
Publication-Status: published as Broda, Christian and David E. Weinstein. "Globalization And The Gains From Variety," Quarterly Journal of Economics, 2006, v121(2,May), 541-585.
Abstract: Since the seminal work of Krugman (1979), product variety has played a central role in models of trade and growth. In spite of the general use of love-of-variety models, there has been no systematic study of how the import of new varieties has contributed to national welfare gains in the United States. In this paper we show that the unmeasured growth in product variety from US imports has been an important source of gains from trade over the last three decades (1972-2001). Using extremely disaggregated data, we show that the number of imported product varieties has increased by a factor of four. We also estimate the elasticities of substitution for each available category at the same level of aggregation, and describe their behavior across time and SITC-5 industries. Using these estimates we develop an exact price index and find that the upward bias in the conventional import price index is approximately 1.2 percent per year. The magnitude of this bias suggests that the welfare gains from variety growth in imports alone are 2.8 percent of GDP.
Handle: RePEc:nbr:nberwo:10314
Template-Type: ReDIF-Paper 1.0
Title: Putting Computerized Instruction to the Test: A Randomized Evaluation of a "Scientifically-based" Reading Program
Classification-JEL: I2
Author-Name: Cecilia E. Rouse
Author-Name: Alan B. Krueger
Author-Person: pkr63
Note: CH ED
Number: 10315
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10315
File-URL: http://www.nber.org/papers/w10315.pdf
File-Format: application/pdf
Publication-Status: published as Rouse, Cecilia Elena and Alan B. Krueger. "Putting Computerized Instruction To The Test: A Randomized Evaluation Of A 'scientifically Based' Reading Program," Economics of Education Review, 2004, v23(4,Aug), 323-338.
Abstract: Although schools across the country are investing heavily in computers in the classroom, there is surprisingly little evidence that they actually improve student achievement. In this paper we present results from a randomized study of a well-defined use of computers in schools: a popular instructional computer program, known as Fast ForWord, which is designed to improve language and reading skills. We assess the impact of the program using four different measures of language and reading ability. Our estimates suggest that while use of the computer program may improve some aspects of students' language skills, it does not appear that these gains translate into a broader measure of language acquisition or into actual reading skills.
Handle: RePEc:nbr:nberwo:10315
Template-Type: ReDIF-Paper 1.0
Title: Why do Americans Work so Much More than Europeans?
Classification-JEL: E6; H3
Author-Name: Edward C. Prescott
Author-Person: ppr10
Note: AG EFG PE
Number: 10316
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10316
File-URL: http://www.nber.org/papers/w10316.pdf
File-Format: application/pdf
Publication-Status: published as Prescott, Edward C. "Why Do Americans Work So Much More Than Europeans?," FRB Minneaplis - Quarterly Review, 2004, v28(1,Jul), 2-14.
Abstract: Americans now work 50 percent more than do the Germans, French, and Italians. This was not the case in the early 1970s when the Western Europeans worked more than Americans. In this paper, I examine the role of taxes in accounting for the differences in labor supply across time and across countries, in particular, the effect of the marginal tax rate on labor income. The population of countries considered is that of the G-7 countries, which are the major advanced industrial countries. The surprising finding is that this marginal tax rate accounts for the predominance of the differences at points in time and the large change in relative labor supply over time with the exception of the Italian labor supply in the early 1970s. This finding has important implications for policy, in particular for making social security programs solvent.
Handle: RePEc:nbr:nberwo:10316
Template-Type: ReDIF-Paper 1.0
Title: International Trade and Child Labor: Cross-Country Evidence
Classification-JEL: F14; F15
Author-Name: Eric Edmonds
Author-Person: ped27
Author-Name: Nina Pavcnik
Author-Person: ppa511
Note: CH ITI LS
Number: 10317
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10317
File-URL: http://www.nber.org/papers/w10317.pdf
File-Format: application/pdf
Publication-Status: published as Edmonds, Eric V. and Nina Pavcnik. "International Trade And Child Labor: Cross-Country Evidence," Journal of International Economics, 2006, v68(1,Jan), 115-140.
Abstract: We explore the relationship between greater exposure to trade (as measured by openness) and child labor in a cross country setting. Our methodology accounts for the fact that trade flows are endogenous to child labor (and labor standards more generally) by examining the relationship between child labor and variation in trade based on geography. We find that countries that trade more have less child labor. At the cross-country means, the data suggest an openness elasticity of child labor of -0.7. For low-income countries, the elasticity of child labor with respect to trade with high income countries is -0.9. However, these relationships appear to be largely attributable to the positive association between trade and income. When we control for the endogeneity of trade and for cross-country income differences, the openness elasticity of child labor at cross-country means is much smaller (-0.1) and statistically insignificant. We consistently find a negative but statistically insignificant association between openness and child labor conditional on cross-country income differences when we split the sample into different country groups, consider only trade between high and low income countries, or focus on exports of unskilled-labor intensive products from low income countries. Thus, the cross-country data do not substantiate assertions that trade per se plays a significant role in perpetuating the high levels of child labor that pervade low-income countries.
Handle: RePEc:nbr:nberwo:10317
Template-Type: ReDIF-Paper 1.0
Title: Is the Invisible Hand Discerning or Indiscriminate? Investment and Stock Prices in the Aftermath of Capital Account Liberalizations
Classification-JEL: F3; F4
Author-Name: Anusha Chari
Author-Person: pch288
Author-Name: Peter Blair Henry
Author-Person: phe166
Note: CF IFM
Number: 10318
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10318
File-URL: http://www.nber.org/papers/w10318.pdf
File-Format: application/pdf
Abstract: We confront the two opposing views of capital account liberalization in developing countries with a new firm-level dataset on investment, stock prices, and sales. In the three-year period following liberalizations, the growth rate of the typical firm's capital stock exceeds its pre-liberalization mean by an average of 5.4 percentage points. The return to capital rises in the post-liberalization period, suggesting that the investment boom does not constitute a wasteful binge. In the cross section, changes in investment are significantly correlated with the signals about fundamentals embedded in the stock price changes that occur upon liberalization. Panel data estimations show that a 1-percentage point increase in a firm's expected future cash flow predicts a 4.1-percentage point increase in its investment; the country-specific shock to the cost of capital predicts a 2.3-percentage point increase in investment; firm-specific changes in risk premia do not affect investment.
Handle: RePEc:nbr:nberwo:10318
Template-Type: ReDIF-Paper 1.0
Title: Surviving the U.S. Import Market: The Role of Product Differentiation
Classification-JEL: F1
Author-Name: Tibor Besedes
Author-Person: pbe180
Author-Name: Thomas J. Prusa
Author-Person: ppr249
Note: ITI
Number: 10319
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10319
File-URL: http://www.nber.org/papers/w10319.pdf
File-Format: application/pdf
Abstract: We examine the extent that product differentiation affects the duration of US import trade relationships. Applying nonparametric and semiparametric techniques to highly disaggregated product-level data we estimate that the hazard rate is at least 18 percent higher for homogenous goods than for differentiated products. Put another way, the median survival time for trade relationships involving differentiated products is five years as compared to two years for homogenous products. We find that our results are not only highly robust but often are strengthened under alternative specifications. For instance, if we define trade relationships using industry-level rather than product-level data we find that the hazard rate is 30-35 percent higher for homogenous goods than for differentiated products. We also find that the survival ranking across product types holds across individual industries. We show that dropping the smallest trade relationships further accentuates the differences among product types. We also control for the possible measurement error in measuring spell lengths and the role of multiple spell relationships and find that in all cases the differences among products types are greater than in our benchmark analysis.
Handle: RePEc:nbr:nberwo:10319
Template-Type: ReDIF-Paper 1.0
Title: Household vs. Personal Accounts of the U.S. Labor Market, 1965-2000
Classification-JEL: J22; J12
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Author-Name: Yona Rubinstein
Author-Person: pru68
Note: LS PE
Number: 10320
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10320
File-URL: http://www.nber.org/papers/w10320.pdf
File-Format: application/pdf
Abstract: The empirical labor supply literature includes some simple aggregate studies, and some individual-level studies explicitly accounting for heterogeneity and the discrete choice, but sometimes leaving open the ultimately aggregate questions that motivated the study. As a middle ground, we construct household-based measures of labor supply by within-household aggregating answers to the usual weeks and hours worked questionnaire items. Household (H) measures are substantially different than the more familiar person (P) measures: H employment rates are relatively higher, with little trend, and relatively little fluctuations. From the H point of view, essentially all aggregate hours trends and fluctuations can be attributed to changes on the intensive' margin and not the extensive' margin a characterization that is opposite of that derived from P measures. The cross-H distribution of hours is richer, and less spiked, than the cross-P distribution. Labor supply is more wage elastic from an H point of view.
Handle: RePEc:nbr:nberwo:10320
Template-Type: ReDIF-Paper 1.0
Title: Taxation and Corporate Payout Policy
Classification-JEL: H24; H32
Author-Name: James Poterba
Author-Person: ppo19
Note: CF PE
Number: 10321
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10321
File-URL: http://www.nber.org/papers/w10321.pdf
File-Format: application/pdf
Publication-Status: published as Poterba, James. "Taxation And Corporate Payout Policy," American Economic Review, 2004, v94(2,May), 171-175.
Abstract: This paper presents new evidence on how corporate payout policy responds to the differential between the tax burden on dividend income and that on accruing capital gains. It describes the construction of weighted average marginal tax rate series for the period since 1929, and it suggests that the enactment of the Job Growth of Taxpayer Relief Reconciliation Act of 2003 should raise the after-tax value of dividends relative to capital gains by more than five percentage points. The impact of this change on payout depends on the elasticity of dividend payments with respect to the after-tax value of dividend income relative to capital gains. Time series estimates suggest an elasticity of more than three, and imply that the recent tax reform could ultimately increase dividends by almost twenty percent.
Handle: RePEc:nbr:nberwo:10321
Template-Type: ReDIF-Paper 1.0
Title: The (Un)changing Geographical Distribution of Housing Tax Benefits: 1980 to 2000
Classification-JEL: H20; R38
Author-Name: Todd Sinai
Author-Person: psi354
Author-Name: Joseph Gyourko
Author-Person: pgy3
Note: PE
Number: 10322
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10322
File-URL: http://www.nber.org/papers/w10322.pdf
File-Format: application/pdf
Publication-Status: published as Poterba, James (ed.) Tax Policy and the Economy Volume 18. Cambridge: MIT Press, 2004.
Publication-Status: published as Todd Sinai & Joseph Gyourko, 2004. "The (Un)changing Geographical Distribution of Housing Tax Benefits: 1980-2000," Tax Policy and the Economy, vol 18, pages 175-208.
Abstract: Even though the top marginal income tax rate has fallen substantially and the tax code has become less progressive since 1979, the tax benefit to homeowners was virtually unchanged between 1979-1989, and then rose substantially between 1989-1999. Using tract-level data from the 1980, 1990, and 2000 censuses, we estimate how the income tax-related benefits to owner-occupiers are distributed spatially across the United States. Geographically, gross program benefits have been and remain very spatially targeted. At the metropolitan area level, tax benefits are spatially targeted, with a spatial skewness that is increasing over time. In 1979, owners in the top 20 highest subsidy areas received from 2.7 to 8.0 times the subsidy reaped by owners in the bottom 20 areas. By 1999, owners in the top 20 areas received from 3.4 to 17.1 times more benefits than owners in any of the 20 lowest recipient areas. Despite the increasing skewness, the top subsidy recipient areas tend to persist over time. In particular, the very high benefit per owner areas are heavily concentrated in California and the New York City to Boston corridor, with California owners alone receiving between 19 and 22 percent of the national aggregate gross benefits. While tax rates are somewhat higher in these places, it is high and rising house prices which appear most responsible for the large and increasing skewness in the spatial distribution of benefits.
Handle: RePEc:nbr:nberwo:10322
Template-Type: ReDIF-Paper 1.0
Title: Market Power versus Efficiency Effects of Mergers and Research Joint Ventures: Evidence from the Semiconductor Industry
Classification-JEL: L13; L49
Author-Name: Ralph Siebert
Author-Person: psi281
Author-Name: Klaus Gugler
Author-Person: pgu570
Note: IO PR
Number: 10323
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10323
File-URL: http://www.nber.org/papers/w10323.pdf
File-Format: application/pdf
Publication-Status: published as Klaus Gugler & Ralph Siebert, 2007. "Market Power versus Efficiency Effects of Mergers and Research Joint Ventures: Evidence from the Semiconductor Industry," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 645-659, 08.
Abstract: Merger control authorities may approve a merger based on a so-called 'efficiency defence'. An important aspect in clearing mergers is that the efficiencies need to be merger-specific. Joint ventures, and in particular research joint ventures (RJVs), may achieve comparable efficiencies possibly without the anti-competitive (market power) effects of mergers. We present evidence for the semiconductor industry that RJVs indeed represent viable alternatives to mergers. We empirically account for the endogenous formation of mergers and RJVs.
Handle: RePEc:nbr:nberwo:10323
Template-Type: ReDIF-Paper 1.0
Title: The Illusion of Sustainability
Classification-JEL: I1; I3
Author-Name: Michael Kremer
Author-Person: pkr20
Author-Name: Edward Miguel
Author-Person: pmi499
Note: EFG EH PE
Number: 10324
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10324
File-URL: http://www.nber.org/papers/w10324.pdf
File-Format: application/pdf
Publication-Status: published as Kremer, Michael and Edward Miguel. “The Illusion of Sustainability.” Quarterly Journal of Economics 122, 3 (2007): 1007-1065. [re-printed in Reinventing Foreign Aid, (ed.) William Easterly, MIT Press]
Abstract: The history of foreign development assistance is one of movement away from addressing immediate needs and toward focusing on the underlying causes of poverty. A recent manifestation is the move towards sustainability,' which stresses community mobilization, education, and cost-recovery. This stands in contrast to the traditional economic analysis of development projects, with its focus on providing public goods and correcting externalities. We examine evidence from randomized evaluations on strategies for combating intestinal worms, which affect one in four people worldwide. Providing medicine to treat worms was extremely cost effective, although medicine must be provided twice per year indefinitely to keep children worm-free. An effort to promote sustainability by educating Kenyan schoolchildren on worm prevention was ineffective, and a mobilization' intervention from psychology failed to boost deworming drug take-up. Take-up was highly sensitive to drug cost: a small increase in cost led to an 80 percent reduction in take-up (relative to free treatment). The results suggest that, in the context we examine, the pursuit of sustainability may be an illusion, and that in the short-run, at least, external subsidies will remain necessary.
Handle: RePEc:nbr:nberwo:10324
Template-Type: ReDIF-Paper 1.0
Title: Production Function and Wage Equation Estimation with Heterogeneous Labor: Evidence from a New Matched Employer-Employee Data Set
Classification-JEL: J7; J3
Author-Name: Judith K. Hellerstein
Author-Person: phe270
Author-Name: David Neumark
Author-Person: pne16
Note: LS PR
Number: 10325
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10325
File-URL: http://www.nber.org/papers/w10325.pdf
File-Format: application/pdf
Publication-Status: published as Hulten, Charles and Ernst Berndt (eds.) Hard-to-Measure Goods and Services: Essays in Memory of Zvi Griliches. Chicago: University of Chicago Press, 2007.
Publication-Status: published as Production Function and Wage Equation Estimation with Heterogeneous Labor: Evidence from a New Matched Employer-Employee Data Set, Judith K. Hellerstein, David Neumark. in Hard-to-Measure Goods and Services: Essays in Honor of Zvi Griliches, Berndt and Hulten. 2007
Abstract: In this paper, we first describe the 1990 DEED, the most recently constructed matched employer-employee data set for the United States that contains detailed demographic information on workers (most notably, information on education). We then use the data from manufacturing establishments in the 1990 DEED to update and expand on previous findings, using a more limited data set, regarding the measurement of the labor input and theories of wage determination. We find that the productivity of women is less than that of men, but not by enough to fully explain the gap in wages, a result that is consistent with wage discrimination against women. In contrast, we find no evidence of wage discrimination against blacks. We estimate that both the wage and productivity profiles are rising but concave to the origin (consistent with profiles quadratic in age), but the estimated relative wage profile is steeper than the relative productivity profile, consistent with models of deferred wages. We find a productivity premium for marriage equal to that of the wage premium, and a productivity premium for education that somewhat exceeds the wage premium. Exploring the sensitivity of these results, we also find that different specifications of production functions do not have any qualitative effects on the these results. Finally, the results indicate that the returns to productive inputs (capital, materials, labor quality) as well as the residual variance are virtually unaffected by the choice of the construction of the labor quality input.
Handle: RePEc:nbr:nberwo:10325
Template-Type: ReDIF-Paper 1.0
Title: The Consequences of Rigid Wages in Search Models
Classification-JEL: E24; E32
Author-Name: Robert Shimer
Author-Person: psh9
Note: EFG
Number: 10326
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10326
File-URL: http://www.nber.org/papers/w10326.pdf
File-Format: application/pdf
Publication-Status: published as Robert Shimer, 2004. "The Consequences of Rigid Wages in Search Models," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 469-479, 04/05.
Abstract: The standard theory of equilibrium unemployment, the Mortensen-Pissarides search and matching model, cannot explain the magnitude of the business cycle fluctuations in two of its central elements, unemployment and vacancies. Modifying the model to make the present value of wages unresponsive to current labor market conditions amplifies fluctuations in unemployment and vacancies by an order of magnitude, significantly improving the performance of the model. Despite this, the welfare consequences of such rigid wages is negligible.
Handle: RePEc:nbr:nberwo:10326
Template-Type: ReDIF-Paper 1.0
Title: Flight to Quality, Flight to Liquidity, and the Pricing of Risk
Classification-JEL: G1; G2
Author-Name: Dimitri Vayanos
Author-Person: pva498
Note: AP
Number: 10327
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10327
File-URL: http://www.nber.org/papers/w10327.pdf
File-Format: application/pdf
Abstract: We propose a dynamic equilibrium model of a multi-asset market with stochastic volatility and transaction costs. Our key assumption is that investors are fund managers, subject to withdrawals when fund performance falls below a threshold. This generates a preference for liquidity that is time-varying and increasing with volatility. We show that during volatile times, assets' liquidity premia increase, investors become more risk averse, assets become more negatively correlated with volatility, assets' pairwise correlations can increase, and illiquid assets' market betas increase. Moreover, an unconditional CAPM can understate the risk of illiquid assets because these assets become riskier when investors are the most risk averse.
Handle: RePEc:nbr:nberwo:10327
Template-Type: ReDIF-Paper 1.0
Title: The Expanding Pharmaceutical Arsenal in the War on Cancer
Classification-JEL: I12; J1
Author-Name: Frank R. Lichtenberg
Author-Person: pli76
Note: EH PR
Number: 10328
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10328
File-URL: http://www.nber.org/papers/w10328.pdf
File-Format: application/pdf
Abstract: Only about one third of the approximately 80 drugs currently used to treat cancer had been approved when the war on cancer was declared in 1971. We assess the contribution of pharmaceutical innovation to the increase in cancer survival rates in a differences in differences' framework, by estimating models of cancer mortality rates using longitudinal, annual, cancer-site-level data based on records of 2.1 million people diagnosed with cancer during the period 1975-1995. We control for fixed cancer site effects, fixed year effects, incidence, stage distribution of diagnosed patients, mean age at diagnosis, and surgery and radiation treatment rates. Cancers for which the stock of drugs increased more rapidly tended to have greater increases in survival rates. The increase in the stock of drugs accounted for about 50-60% of the increase in age-adjusted survival rates in the first 6 years after diagnosis. New cancer drugs increased the life expectancy of people diagnosed with cancer by about one year from 1975 to 1995. The estimated cost to achieve the additional year of life per person diagnosed with cancer below $3000 is well below recent estimates of the value of a statistical life-year. Since the lifetime risk of being diagnosed with cancer is about 40%, the estimates imply that new cancer drugs accounted for 10.7% of the overall increase in U.S. life expectancy at birth.
Handle: RePEc:nbr:nberwo:10328
Template-Type: ReDIF-Paper 1.0
Title: Good versus Bad Deflation: Lessons from the Gold Standard Era
Classification-JEL: E3; N20
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: John Landon Lane
Author-Person: pla84
Author-Name: Angela Redish
Author-Person: pre9
Note: DAE ME
Number: 10329
Creation-Date: 2004-02
Order-URL: http://www.nber.org/papers/w10329
File-URL: http://www.nber.org/papers/w10329.pdf
File-Format: application/pdf
Abstract: Deflation has had a bad rap, largely based on the experience of the 1930's when deflation was synonymous with depression. Recent experience with declining prices in Japan and China together with the concern over deflation in Europe and the United States has led to renewed attention to the topic of deflation. In this paper we focus our attention on the deflation experience of the United States, the United Kingdom, and Germany in the late nineteenth century during a period characterized by low deflation, rapid productivity growth, positive output growth, and where many nations had a credible nominal anchor based on gold: circumstances which have resonance with the world of today. We identify aggregate supply, aggregate demand, and money supply shocks using a structural panel vector autoregression. We then use historical decompositions to investigate the impact that these structural shocks had on output and prices. Our findings are that the deflation of the late nineteenth century reflected both positive aggregate supply shocks and negative money supply shocks. However, the negative money supply shocks had little effect on output. This we posit is because the aggregate supply curve was very steep in the short run during this period. This contrasts greatly with the deflation experience during the Great Depression. Thus our empirical evidence suggests that deflation in the nineteenth century was primarily good.
Handle: RePEc:nbr:nberwo:10329
Template-Type: ReDIF-Paper 1.0
Title: Empirical Estimates for Environmental Policy Making in a Second-Best Setting
Classification-JEL: H21; H23
Author-Name: Sarah E. West
Author-Person: pwe92
Author-Name: Roberton C. Williams
Author-Person: pwi38
Note: PE EEE
Number: 10330
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10330
File-URL: http://www.nber.org/papers/w10330.pdf
File-Format: application/pdf
Abstract: This study estimates parameters necessary to calculate the optimal second-best gasoline tax, most notably the cross-price elasticity between gasoline and leisure. Prior work indicates that in a second-best setting with distortionary income taxes, both the cost of environmental regulation and the optimal environmental tax rate depend crucially on the cross-price elasticity between a polluting good and leisure. However, no prior study on second-best environmental regulation has estimated this elasticity. Using household data, we find that gasoline is a relative complement to leisure, and thus that the optimal gasoline tax is significantly higher than marginal damages the opposite of the result suggested by the prior literature. Following this approach to estimate cross-price elasticities with leisure for other major polluting goods could strongly influence estimates of optimal environmental taxes.
Handle: RePEc:nbr:nberwo:10330
Template-Type: ReDIF-Paper 1.0
Title: The Long Road to the Fast Track: Career and Family
Classification-JEL: J0; N3
Author-Name: Claudia Goldin
Author-Person: pgo601
Note: DAE LS
Number: 10331
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10331
File-URL: http://www.nber.org/papers/w10331.pdf
File-Format: application/pdf
Publication-Status: published as Goldin, Claudia. “The Long Road to the Fast Track: Career and Family.” The Annals of the American Academy of Political and Social Science 596 (November 2004): 20-35.
Abstract: The career and family outcomes of college graduate women suggest that the twentieth century contained five distinct cohorts.' Each cohort made choices concerning career and family subject to different constraints. The first cohort, graduating college from the beginning of the twentieth century to the close of World War I, had either family or career.' The second, graduating college from around 1920 to the end of World War II, had job then family.' The third cohort the college graduate mothers of the baby boom' graduated college from around 1946 to the mid-1960s and had family then job.' The fourth cohort graduated college from the late 1960s to the late 1970s. Using the NLS Young Women I demonstrate that 13 to 18 percent achieved career then family' by age 40. The objective of the fifth cohort, graduating from around 1980 to 1990, has been career and family,' and 21 to 28 percent (using the NLS Youth) have realized that goal by age 40. I trace the demographic and labor force experiences of these five cohorts of college graduates and discuss why career and family' outcomes changed over time.
Handle: RePEc:nbr:nberwo:10331
Template-Type: ReDIF-Paper 1.0
Title: The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates & Exchange Rates in Center Countries
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: 10332
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10332
File-URL: http://www.nber.org/papers/w10332.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 (John Wiley & Sons Ltd.) 9(4): 307-313, October 2004
Abstract: In this paper we explore some implications of the revived' Bretton Woods system for exchange market intervention and reserve management in periphery countries. Financial policies in these countries are seen as a component of a more general portfolio management policy in which the formation of an efficient domestic capital stock is a key objective. Because intervention in financial markets is an important part of their development strategy, intervention in exchange and financial markets has, and we argue will continue to be, large and persistent enough to generate predictable deviations of exchange rates and relative yields in industrial country financial markets from normal cyclical patterns. We argue that management of the currency composition of international reserves by emerging market governments and central banks is unlikely to alter these conclusions.
Handle: RePEc:nbr:nberwo:10332
Template-Type: ReDIF-Paper 1.0
Title: Are Policy Platforms Capitalized into Equity Prices? Evidence from the Bush/Gore 2000 Presidential Election
Classification-JEL: D7; H0
Author-Name: Brian Knight
Author-Person: pkn7
Note: AP PE
Number: 10333
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10333
File-URL: http://www.nber.org/papers/w10333.pdf
File-Format: application/pdf
Publication-Status: published as Knight, Brian. "Are Policy Platforms Capitalized Into Equity Prices? Evidence From The Bush/Gore 2000 Presidential Election," Journal of Public Economics, 2006, v90(4-5,May), 751-773.
Abstract: This paper tests for the capitalization of policy platforms into equity prices using a sample of 70 firms favored under Bush or Gore platforms during the 2000 U.S. Presidential Election. Two sources of daily data during the six months leading up to the election are incorporated: firm-specific equity returns and the probability of a Bush victory as implied by prices from the Iowa electronic market. For this group of politically-sensitive firms, the daily baseline estimates demonstrate that platforms are capitalized into equity prices: under a Bush administration, relative to a counterfactual Gore administration, Bush-favored firms are worth 3 percent more and Gore-favored firms are worth 6 percent less, implying a statistically significant differential return of 9 percent. The most sensitive sectors include tobacco, worth 13 percent more under a favorable Bush administration, Microsoft competitors, worth 15 percent less under an unfavorable Bush administration, and alternative energy companies, worth 16 percent less under an unfavorable Bush administration. A corresponding analysis of campaign contributions, which allows for heterogeneity in the importance of policy platforms to the firms, supports the baseline estimates. These results are then compared with results from a more traditional event study based upon the Florida recount.
Handle: RePEc:nbr:nberwo:10333
Template-Type: ReDIF-Paper 1.0
Title: Coordination vs. Differentiation in a Standards War: 56K Modems
Classification-JEL: L15; L63
Author-Name: Angelique Augereau
Author-Name: Shane Greenstein
Author-Person: pgr134
Author-Name: Marc Rysman
Author-Person: pry6
Note: IO PR
Number: 10334
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10334
File-URL: http://www.nber.org/papers/w10334.pdf
File-Format: application/pdf
Publication-Status: published as Augereau, Angelique, Shane Greenstein and Marc Rysman. "Coordination versus Differentiation in a Standards War: 56K Modems." Rand Journal of Economics 34,4 (2006): 889-911.
Abstract: 56K modems were introduced under two competing incompatible standards. We show the importance of competition between Internet Service Providers in the adoption process. We show that ISPs were less likely to adopt the technology that more competitors adopted. This result is particularly striking given that industry participants expected coordination on one standard or the other. We speculate about the role of ISP differentiation in preventing the market form achieving standardization until a government organization intervened.
Handle: RePEc:nbr:nberwo:10334
Template-Type: ReDIF-Paper 1.0
Title: From the Valley to the Summit: The Quiet Revolution that Transformed Women's Work
Classification-JEL: J0; N3
Author-Name: Claudia Goldin
Author-Person: pgo601
Note: DAE LS
Number: 10335
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10335
File-URL: http://www.nber.org/papers/w10335.pdf
File-Format: application/pdf
Publication-Status: published as Goldin, Claudia. "The Quiet Revolution That Transformed Women's Employment, Education, And Family," American Economic Review, 2006, v96(2,May), 1-21.
Abstract: Meaningful discussions about women at the top' can take place today only because a quiet revolution occurred about thirty years ago. The transformation was startlingly rapid and was accomplished by the unwitting foot soldiers of an upheaval that transformed the workforce. It can be seen in a number of social and economic indicators. Sharp breaks are apparent in data on labor market expectations, college graduation rates, professional degrees, labor force participation rates, and the age at first marriage. Turning points are also evident in most of the series for college majors and occupations. Inflection or break points in almost all of these series occur from the late 1960s to the early 1970s and for cohorts born during the 1940s. Whatever the precise reasons for change, a great divide in college-graduate women's lives and employment occurred about 35 years ago. Previously, women who reached the peaks often made solo climbs and symbolized that women, contrary to conventional wisdom, could achieve greatness. But real change demanded a march by the masses from the valley to the summit.' That march began with cohorts born in the late 1940s.
Handle: RePEc:nbr:nberwo:10335
Template-Type: ReDIF-Paper 1.0
Title: A Risk Management Approach to Emerging Market's Sovereign Debt Sustainability with an Application to Brazilian Data
Classification-JEL: F3
Author-Name: Marcio Garcia
Author-Person: pga111
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: IFM
Number: 10336
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10336
File-URL: http://www.nber.org/papers/w10336.pdf
File-Format: application/pdf
Publication-Status: published as Giavazzi, Francesco, Ilan Goldfajn, and Santiago Herrera (eds.) Inflation Targeting, Debt, and the Brazilian Experience: 1999 to 2003. Cambridge ,MA: MIT Press, 2005.
Abstract: In this paper we study the question of debt sustainability from a risk management perspective. The debt accumulation equation for any country involves variables that are stochastic and closely intertwined. When these aspects are taken into consideration the notion of debt sustainability is expanded to studying the stochastic properties of the debt dynamics. We illustrate the methodology by studying the Brazilian case. We find that even though the debt could be sustainable in the absence of risk, there are paths in which it is clearly unsustainable. Furthermore, we show that properties of the debt dynamics are closely related to the spreads on sovereign dollar denominated debt.
Handle: RePEc:nbr:nberwo:10336
Template-Type: ReDIF-Paper 1.0
Title: Capital Controls, Liberalizations, and Foreign Direct Investement
Classification-JEL: F21; F23
Author-Name: Mihir A. Desai
Author-Name: C. Fritz Foley
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: CF IFM ITI
Number: 10337
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10337
File-URL: http://www.nber.org/papers/w10337.pdf
File-Format: application/pdf
Publication-Status: published as Desai, Mihir A., C. Fritz Foley and James R. Hines, Jr. "Capital Controls, Liberalizations, And Foreign Direct Investment," Review of Financial Studies, 2006, v19(4,Winter), 1433-1464.
Abstract: Affiliate-level evidence indicates that American multinational firms circumvent capital controls by adjusting their reported intrafirm trade, affiliate profitability, and dividend repatriations. As a result, the reported profit impact of local capital controls is comparable to the effect of 24 percent higher corporate tax rates, and affiliates located in countries imposing capital controls are 9.8 percent more likely than other affiliates to remit dividends to parent companies. Multinational affiliates located in countries with capital controls face 5.4 percent higher interest rates on local borrowing than do affiliates of the same parent borrowing locally in countries without capital controls. Together, the costliness of avoidance and higher interest rates raise the cost of capital, significantly reducing the level of foreign direct investment. American affiliates are 13-16 percent smaller in countries with capital controls than they are in comparable countries without capital controls. These effects are reversed when countries liberalize their capital account restrictions.
Handle: RePEc:nbr:nberwo:10337
Template-Type: ReDIF-Paper 1.0
Title: What Really Happened to Consumption Inequality in the US?
Classification-JEL: E21; E26
Author-Name: Orazio Attanasio
Author-Person: pat7
Author-Name: Erich Battistin
Author-Person: pba163
Author-Name: Hidehiko Ichimura
Author-Person: pic1
Note: EFG
Number: 10338
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10338
File-URL: http://www.nber.org/papers/w10338.pdf
File-Format: application/pdf
Abstract: This paper considers data quality issues for the analysis of consumption inequality exploiting two complementary datasets from the Consumer Expenditure Survey for the United States. The Interview sample follows survey households over four calendar quarters and consists of retrospectively collected information about monthly expenditures on durable and non-durable goods. The Diary sample interviews household for two consecutive weeks and includes detailed information about frequently purchased items (food, personal cares and household supplies). Most reliable information from each sample is exploited to derive a correction for the measurement error affecting observed measures of consumption inequality in the two surveys. We find that consumption inequality, as measured by the standard deviation of log non-durable consumption, has increased by roughly 5% points during the 1990s.
Handle: RePEc:nbr:nberwo:10338
Template-Type: ReDIF-Paper 1.0
Title: Who Bears the Burden of Social Insurance?
Classification-JEL: J0; H0
Author-Name: Kohei Komamura
Author-Name: Atsuhiro Yamada
Note: AG LS PE
Number: 10339
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10339
File-URL: http://www.nber.org/papers/w10339.pdf
File-Format: application/pdf
Publication-Status: published as Komamura, Kohei and Atsuhiro Yamada. "Who Bears The Burden Of Social Insurance? Evidence From Japanese Health And Long-Term Care Insurance Data," Journal of the Japanese and International Economies, 2004, v18(4,Dec), 565-581.
Abstract: Using the society-managed health insurance data, which is cross-sectional time-series and covers 1,670 health insurance societies for seven years (FY1995-2001), we found for the first time in Japan that the majority of the employer's contribution to health insurance is shifting back onto the employees in the form of wage reduction. On the other hand, we cannot find such evidence for the contribution to long-term care insurance using a two-year (FY2000-01) panel data set.
Handle: RePEc:nbr:nberwo:10339
Template-Type: ReDIF-Paper 1.0
Title: Unlocking Housing Equity in Japan
Classification-JEL: G11; G23
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: John Piggott
Author-Person: ppi34
Note: AG
Number: 10340
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10340
File-URL: http://www.nber.org/papers/w10340.pdf
File-Format: application/pdf
Publication-Status: published as Mitchell, Olivia S. and John Piggott. "Unlocking Housing Equity In Japan," Journal of the Japanese and International Economies, 2004, v18(4,Dec), 466-505.
Abstract: Prior literature on asset patterns among the elderly often overlooks housing wealth as a determinant of retiree wealth, particularly in the Japanese context. Yet releasing equity in housing may be a natural mechanism to boost consumption, reduce public pension liability, and mitigate the demand for long-term care facilities in Japan. Our study evaluates what might be needed to implement reverse mortgages (RMs) in this country. Policies could include exempting RMs from capital gains tax and transactions tax, along with mechanisms to make annuity income flows nontaxable, along with interest rate accruals for RMs. In addition, housing market reforms to enhance information flows would be needed, particularly regarding new and existing housing trades, which could permit the securitization of housing loans and lines of credit. Other improvements in capital markets could also help, including the establishment of reinsurance mechanisms to help lenders offer these reverse mortgages while having some protection against crossover risk. In the Japanese case, demand for RMs will be dampened by declining residential housing values as well as low interest rates and long life expectancies. Nevertheless, we conclude that RMs might be a good way to finance elderly consumption in Japan, particularly against the backdrop of governmental financial stringencies.
Handle: RePEc:nbr:nberwo:10340
Template-Type: ReDIF-Paper 1.0
Title: Minimum Asset Requirements and Compulsory Liability Insurance As Solutions to the Judgment-Proof Problem
Classification-JEL: D00; K13
Author-Name: Steven Shavell
Author-Person: psh42
Note: LE
Number: 10341
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10341
File-URL: http://www.nber.org/papers/w10341.pdf
File-Format: application/pdf
Publication-Status: published as Shavell, Steven. "Minimum Asset Requirements And Compulsory Liability Insurances As Solutions To The Judgment-Proof Problem," Rand Journal of Economics, 2005, v36(1,Spring), 63-77.
Abstract: Minimum asset and liability insurance requirements must often be met in order for parties to participate in potentially harmful activities. Such financial responsibility requirements may improve parties' decisions whether to engage in harmful activities and, if so, their efforts to reduce risk. However, the requirements may undesirably prevent some parties with low assets from engaging in activities. Liability insurance requirements tend to improve parties' incentives to reduce risk when insurers can observe levels of care, but dilute incentives to reduce risk when insurers cannot observe levels of care. In the latter case, compulsory liability insurance may be inferior to minimum asset requirements.
Handle: RePEc:nbr:nberwo:10341
Template-Type: ReDIF-Paper 1.0
Title: The European Union: A Politically Incorrect View
Classification-JEL: E0; H0
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Roberto Perotti
Author-Person: ppe66
Note: EFG ME PE
Number: 10342
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10342
File-URL: http://www.nber.org/papers/w10342.pdf
File-Format: application/pdf
Publication-Status: published as Alesina, Alberto and Roberto Perotti. "The European Union: A Politically Incorrect View," Journal of Economic Perspectives, 2004, v18(4,Fall), 27-48.
Abstract: In this paper, we present our view of the recent evolution of European integration. We first briefly describe the main features of the institution and decision making process in the European Union, with particular attention to the debate between federalists and super nationalists. We then identify two key issues in the process of European integration: 1) an emphasis on institutional balance' based on a complex web of institutions with overlapping jurisdiction; 2) A conflict between a dirigiste versus a more laissez faire approach to government. We argue that the first problem leads to a lack of clarity in the allocation of powers between European institutions, confusion in the allocation of prerogatives between national governments and EU institutions, and lack of transparency and accountability. This dirigiste culture produces verbose rhetoric, which moves the European policy debate in the wrong direction. We then study how these problems play out in four important areas: employment policies, culture and scientific research, foreign and defense policies, and fiscal policy. Finally, we study the implications of the recently proposed European Constitution as a potential solution of these two problems.
Handle: RePEc:nbr:nberwo:10342
Template-Type: ReDIF-Paper 1.0
Title: Portfolio Diversification and City Agglomeration
Classification-JEL: G11; G14
Author-Name: William N. Goetzmann
Author-Person: pgo59
Author-Name: Massimo Massa
Author-Name: Andrei Simonov
Author-Person: psi556
Note: AP
Number: 10343
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10343
File-URL: http://www.nber.org/papers/w10343.pdf
File-Format: application/pdf
Abstract: We relate the degree of investor portfolio focus to the broader urban economic context of the household. Using a detailed panel of investors in Sweden over the period 1995 to 2000, we find that the level of investor diversification, as measured by number of stocks in the portfolio and by the average correlation among holdings, is partially explained by city industrial characteristics. We find that rural portfolios are more diversified than urban portfolios and that portfolio diversification is characterized by factors associated with urban growth. We consider a number of theories to explain investor focus, including behavioral biases, real and perceived informational advantage, local social competition and hedging of non-tradable risk. We find little evidence to support social and hedging motives to explain the lack of portfolio diversification, and some evidence in favor of perceived informational advantage in an urban setting. We attribute this evidence as support for the broader 'knowledge spillover' processes documented in the recent urban economics literature. Portfolio effects may be added to the list of factors that define and differentiate urbanism.
Handle: RePEc:nbr:nberwo:10343
Template-Type: ReDIF-Paper 1.0
Title: Dissecting Trade: Firms, Industries, and Export Destinations
Classification-JEL: F1; L1
Author-Name: Jonathan Eaton
Author-Person: pea5
Author-Name: Samuel Kortum
Author-Person: pko74
Author-Name: Francis Kramarz
Author-Person: pkr29
Note: IFM ITI
Number: 10344
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10344
File-URL: http://www.nber.org/papers/w10344.pdf
File-Format: application/pdf
Publication-Status: published as Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2004. "Dissecting Trade: Firms, Industries, and Export Destinations," American Economic Review, American Economic Association, vol. 94(2), pages 150-154, May.
Abstract: We examine entry across 113 national markets in 16 different industries using a comprehensive data set of French manufacturing firms. The data are unique in indicating how much each firm exports to each destination. Looking across all manufacturers: (1) Firms differ substantially in export participation, with most selling only at home; (2) The number of firms selling to multiple markets falls off with the number of destinations with an elasticity of -2.5; (3) Decomposing French exports to each destination into the size of the market and French share, variation in market share translates nearly completely into firm entry while about 60 percent of the variation in market size is reflected in firm entry. Looking within each of 16 industries we find little variation in these patterns. We propose that any successful model of trade and market structure must confront these facts.
Handle: RePEc:nbr:nberwo:10344
Template-Type: ReDIF-Paper 1.0
Title: Time-Inconsistency and Welfare
Classification-JEL: I1; H2
Author-Name: Jay Bhattacharya
Author-Name: Darius Lakdawalla
Author-Person: pla295
Note: EH
Number: 10345
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10345
File-URL: http://www.nber.org/papers/w10345.pdf
File-Format: application/pdf
Abstract: Self-control devices, such as rehabilitation programs, group commitment, and informal fines, can make time-inconsistent smokers better off. Health economists have used this result to argue in favor of cigarette taxes that restrain smoking. However, taxes alone are not Pareto-improving overall, because they benefit today's smoker at the expense of her future selves, who have less demand for self-control. We suggest an alternative class of taxation policies that provide selfcontrol and benefit a smoker at every point in life. Smokers could be allowed to purchase smoking licenses' when they start to smoke, and in exchange commit their future selves to face compensated cigarette taxes. We show that this scheme which could be made voluntary improves the welfare of current and future smokers, generates positive revenue for the government, and can be made incentive-compatible. Similar schemes can also be envisioned to address problems of timeinconsistency in other contexts.
Handle: RePEc:nbr:nberwo:10345
Template-Type: ReDIF-Paper 1.0
Title: Technological Innovations and Endogenous Changes in U.S. Legal Institutions, 1790-1920
Classification-JEL: N4; O3
Author-Name: B. Zorina Khan
Note: DAE LE
Number: 10346
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10346
File-URL: http://www.nber.org/papers/w10346.pdf
File-Format: application/pdf
Abstract: Recent scholarship highlights the importance of institutions to the processes of economic growth, but the precise nature of their relationship bears further examination. This paper considers how the evolution of legal institutions has contributed to, and in turn been affected by, major technological innovations. The first section of the paper examines the U.S. intellectual property system. Patent and copyright laws, and their interpretation and enforcement by the federal judiciary, certainly influenced the course of technical and cultural change, but it is clear that they did not develop independently of the state of technology and of the economy. Both the statutes and their interpretations altered in response to the introduction and diffusion of new technologies. The second section explores in more detail the impact of some of these technological innovations -- including steamboats, railroads, telegraphy, medical technologies, and automobiles -- on the common law, regulation and insurance. Such technological advances often led to institutional bottlenecks, which then required accommodations in legal rules and their enforcement. Although the common law had some capability for economizing on legal adjustment costs through 'adjudication by analogy', the socio-economic changes wrought by major innovations ultimately produced more fundamental change in legal institutions, such as shifts in the relative importance of state and federal policies, and in the degree of reliance on regulation by bureaucracy. In sum, the historical record of the evolution of legal rules and standards in the United States indicates a remarkable degree of flexibility as such institutions responded to changing economic circumstances.
Handle: RePEc:nbr:nberwo:10346
Template-Type: ReDIF-Paper 1.0
Title: On the Distributional Consequences of Child Labor Legislation
Classification-JEL: I28; J22
Author-Name: Dirk Krueger
Author-Person: pkr7
Author-Name: Jessica Tjornhom Donohue
Note: EFG LS CH
Number: 10347
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10347
File-URL: http://www.nber.org/papers/w10347.pdf
File-Format: application/pdf
Publication-Status: published as Dirk Krueger & Jessica Tjornhom Donohue, 2005. "On The Distributional Consequences Of Child Labor Legislation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 785-815, 08.
Abstract: In this paper we construct a dynamic heterogeneous agent general equilibrium model to quantify the effects of child labor legislation on human capital accumulation and the distribution of wealth and welfare. Crucial model elements include a human capital externality in the market sector, an informal home production sector in which child labor laws cannot be enforced, uninsurable idiosyncratic income risk, borrowing constraints, and endogenous wage and interest rate determination in general equilibrium. We calibrate the model to US data around 1880 and find that the welfare consequences for individual households of a transition to policies that restrict child labor or provide tax-financed free education depend crucially on the main source of a households' income. Whereas households with significant financial asset holdings unambiguously lose from any government intervention, high-wage workers benefit most from a ban on child labor, while low-wage workers benefit most from free education. Based on a utilitarian social welfare function, the introduction of free education results in substantial welfare gains, in the order of 3% of consumption, mainly because it leads to higher human capital accumulation. A child labor ban, in contrast, induces (small) welfare losses because it reduces income opportunities for poor families without being effective in stimulating education attainment.
Handle: RePEc:nbr:nberwo:10347
Template-Type: ReDIF-Paper 1.0
Title: Transaction Structures in the Developing World
Classification-JEL: F3; G2
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: Antoinette Schoar
Author-Person: psc180
Note: CF
Number: 10348
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10348
File-URL: http://www.nber.org/papers/w10348.pdf
File-Format: application/pdf
Abstract: While variations in public securities markets across nations have attracted increasing scrutiny, private financings have received little attention. But in developing nations, the bulk of financings are private ones. This paper analyzes 210 private equity transactions in developing countries. We find that unlike in the U.S., where convertible preferred securities are ubiquitous, in developing nations a much broader array of securities are employed and private equity investors often have fewer contractual protections. The choice of security appears to be driven by the legal and economic circumstances of the nation and the private equity group. Investments in common law nations are structured similar to those in the U.S., being less likely to employ common stock or straight debt, and more likely to use preferred stock with a variety of covenants. By way of contrast, in nations where the rule of law is less established, private equity groups are likely to use common stock and own the majority of the firm's equity if the investment encounters difficulties. Private equity groups based in the U.S. and U.K. rely more on preferred securities but also adapt transactions to local conditions. These contractual differences appear to have real consequences: larger transactions with higher valuations are seen in common law countries. These findings suggest that the structure of a country's legal system affects private contracts and cannot easily be undone by (bi-lateral) private solutions.
Handle: RePEc:nbr:nberwo:10348
Template-Type: ReDIF-Paper 1.0
Title: Do Foreign Students Crowd Out Native Students from Graduate Programs?
Classification-JEL: I2
Author-Name: George J. Borjas
Author-Person: pbo44
Note: ED LS
Number: 10349
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10349
File-URL: http://www.nber.org/papers/w10349.pdf
File-Format: application/pdf
Publication-Status: published as Stephan, Paula E. and Ronald G. Ehrenberg (eds.) Science and the University (Science and Technology in Society). University of Wisconsin Press, 2007.
Abstract: This paper examines how the growth in the number of foreign students enrolled in graduate programs affects native enrollment in those programs. Although there is little evidence of a crowdout effect for the typical native student, the impact of foreign students on native educational outcomes differs dramatically across ethnic groups, and is particularly adverse for white native men. There is a strong negative correlation between increases in the number of foreign students enrolled at a particular university and the number of white native men in that university's graduate program. This crowdout effect is strongest at the most elite institutions.
Handle: RePEc:nbr:nberwo:10349
Template-Type: ReDIF-Paper 1.0
Title: Co-Worker Complemetarity and the Stability of Top Management Teams
Classification-JEL: J44; J63
Author-Name: Rachel M. Hayes
Author-Name: Paul Oyer
Author-Person: poy2
Author-Name: Scott Schaefer
Note: LS LE
Number: 10350
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10350
File-URL: http://www.nber.org/papers/w10350.pdf
File-Format: application/pdf
Publication-Status: published as Hayes, Rachel M., Paul Oyer and Scott Schaefer. "Coworker Complementarity Of The Stability Of Top-Management Teams," Journal of Law, Economics and Organization, 2006, v22(1,Apr), 184-212.
Abstract: We investigate the hypothesis that complementarities across co-workers (which may arise from matching or investments in specific skills) affect the value of employment relationships between senior executives and firms. We analyze the changes in the composition of top management teams when a key member of the team (the CEO) departs. Our empirical analysis establishes several facts that are consistent with co-worker complementarity being an important determinant of management team stability.
Handle: RePEc:nbr:nberwo:10350
Template-Type: ReDIF-Paper 1.0
Title: Business Cycle Accounting
Classification-JEL: E1; E12
Author-Name: V.V. Chari
Author-Person: pch40
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Author-Name: Ellen McGrattan
Author-Person: pmc46
Note: EFG
Number: 10351
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10351
File-URL: http://www.nber.org/papers/w10351.pdf
File-Format: application/pdf
Publication-Status: published as V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2007. "Business Cycle Accounting," Econometrica, Econometric Society, vol. 75(3), pages 781-836, 05.
Abstract: We propose a simple method to help researchers develop quantitative models of economic fluctuations. The method rests on the insight that many models are equivalent to a prototype growth model with time-varying wedges which resemble productivity, labor and investment taxes, and government consumption. Wedges corresponding to these variables -- effciency, labor, investment, and government consumption wedges -- are measured and then fed back into the model in order to assess the fraction of various fluctuations they account for. Applying this method to U.S. data for the Great Depression and the 1982 recession reveals that the effciency and labor wedges together account for essentially all of the fluctuations; the investment wedge plays a decidedly tertiary role, and the government consumption wedge, none. Analyses of the entire postwar period and alternative model specifications support these results. Models with frictions manifested primarily as investment wedges are thus not promising for the study of business cycles.
Handle: RePEc:nbr:nberwo:10351
Template-Type: ReDIF-Paper 1.0
Title: Fibonacci and the Financial Revolution
Classification-JEL: B10; B31
Author-Name: William N. Goetzmann
Author-Person: pgo59
Note: AP
Number: 10352
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10352
File-URL: http://www.nber.org/papers/w10352.pdf
File-Format: application/pdf
Publication-Status: published as Goetzmann, William N. and K. Geert Rouwenhorst (eds.) The Origins of Value: The Financial Innovations That Created Modern Capital Markets. Oxford and New York: Oxford University Press, 2005.
Abstract: This paper examines the contribution of Leonardo of Pisa [Fibonacci] to the history of financial mathematics. Evidence in Leonardo's Liber Abaci (1202) suggests that he was the first to develop present value analysis for comparing the economic value of alternative contractual cash flows. He also developed a general method for expressing investment returns, and solved a wide range of complex interest rate problems. The paper argues that his advances in the mathematics of finance were stimulated by the commercial revolution in the Mediterranean during his lifetime, and in turn, his discoveries significantly influenced the evolution of capitalist enterprise and public finance in Europe in the centuries that followed. Fibonacci's discount rates were more culturally influential than his famous series.
Handle: RePEc:nbr:nberwo:10352
Template-Type: ReDIF-Paper 1.0
Title: Port Efficiency, Maritime Transport Costs and Bilateral Trade
Classification-JEL: F1; L41
Author-Name: Ximena Clark
Author-Name: David Dollar
Author-Person: pdo54
Author-Name: Alejandro Micco
Note: ITI
Number: 10353
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10353
File-URL: http://www.nber.org/papers/w10353.pdf
File-Format: application/pdf
Publication-Status: published as Clark, Ximena, David Dollar and Alejandro Micco. "Port Efficiency, Maritime Transport Costs, And Bilateral Trade," Journal of Development Economics, 2004, v75(2,Dec), 417-450.
Abstract: Recent literature has emphasized the importance of transport costs and infrastructure in explaining trade, access to markets, and increases in per capita income. For most Latin American countries, transport costs are a greater barrier to U.S. markets than import tariffs. We investigate the determinants of shipping costs to the U.S. with a large database of more than 300,000 observations per year on shipments of products aggregated at six-digit HS level from different ports around the world. Distance volumes and product characteristics matter. In addition, we find that ports efficiency is an important determinant of shipping costs. Improving port efficiency from the 25th to the 75th percentile reduces shipping costs by 12 percent. (Bad ports are equivalent to being 60% farther away from markets for the average country.) Inefficient ports also increase handling costs, which are one of the components of shipping costs. Reductions in country inefficiencies associated to transport costs from the 25th to 75th percentiles imply an increase in bilateral trade of around 25 percent. Finally, we try to explain variations in port efficiency and find that they are linked to excessive regulation, the prevalence of organized crime, and the general condition of the country's infrastructure.
Handle: RePEc:nbr:nberwo:10353
Template-Type: ReDIF-Paper 1.0
Title: Interest Rates and Backward-Bending Investment
Classification-JEL: D83; D92
Author-Name: Raj Chetty
Author-Person: pch161
Note: EFG ME PE
Number: 10354
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10354
File-URL: http://www.nber.org/papers/w10354.pdf
File-Format: application/pdf
Publication-Status: published as Chetty, Raj. “Interest Rates and Backward-Bending Investment.” Review of Economic Studies 74, 1 (2007): 67-91.
Abstract: This paper studies the effect of interest rates on investment in an environment where firms make irreversible investments and learn over time. In this setting, changes in the interest rate affect both the cost of capital and the cost of delaying investment. These two forces combine to generate an aggregate investment demand curve that is always a backward-bending function of the interest rate. At low rates, increasing the interest rate stimulates investment by raising the cost of delay. Existing evidence supports the hypothesis that firms change the time at which they invest in response to changes in interest rates. The model also generates a rich set of additional predictions that can be tested empirically.
Handle: RePEc:nbr:nberwo:10354
Template-Type: ReDIF-Paper 1.0
Title: Equity Style Returns and Institutional Investor Flows
Classification-JEL: G12; G14
Author-Name: Kenneth A. Froot
Author-Person: pfr60
Author-Name: Melvyn Teo
Note: AP
Number: 10355
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10355
File-URL: http://www.nber.org/papers/w10355.pdf
File-Format: application/pdf
Publication-Status: published as Froot, Kenneth A. and Melvyn Teo. “Style Investing and Institutional Investors.” Journal of Financial and Quantitative Analysis 43, 4 (December 2008): 883-906.
Abstract: This paper explores institutional investor trades in stocks grouped by style and the relationship of these trades with equity market returns. It aggregates transactions drawn from a large universe of approximately $6 trillion of institutional funds. To analyze style behavior, we assign equities to deciles in each of five style dimensions: size, value/growth, cyclical/defensive, sector, and country. We find, first, strong evidence that investors organize and trade stocks across style-driven lines. This appears true for groupings both strongly and weakly related to fundamentals (e.g., industry or country groupings versus size or value/growth deciles). Second, the positive linkage between flows and returns emerges at daily frequencies, yet becomes even more important at lower frequencies. We show that quarterly decile flows and returns are even more strongly positively correlated than are daily flows and returns. However, as the horizon increases beyond a year, we find that the flow/return correlation declines. Third, style flows and returns are important components of individual stock expected returns. We find that nearby style inflows and returns positively forecast future returns while distant style inflows and returns forecast negatively. Fourth, we find strong correlations between style flows and temporary components of return. This suggests that behavioral theories may play a role in explaining the popularity and price impact of flow-related trading.
Handle: RePEc:nbr:nberwo:10355
Template-Type: ReDIF-Paper 1.0
Title: How Well Can the New Open Economy Macroeconomics Explain the Exchange Rate and Current Account?
Classification-JEL: F41
Author-Name: Paul R. Bergin
Author-Person: pbe249
Note: IFM
Number: 10356
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10356
File-URL: http://www.nber.org/papers/w10356.pdf
File-Format: application/pdf
Publication-Status: published as Bergin, Paul R., 2006. "How well can the New Open Economy Macroeconomics explain the exchange rate and current account?," Journal of International Money and Finance, Elsevier, vol. 25(5), pages 675-701, August.
Abstract: This paper advances the new open economy macroeconomic (NOEM) literature in an empirical direction, estimating and testing a two-country model. Fit to U.S and G-7 data, the model performs moderately well for the exchange rate and current account. Results offer guidance for future theoretical work. Parameter estimates lend support to some common assumptions in the theoretical literature, such as local currency pricing and risk sharing. Estimates are found for key parameters commonly calibrated in the theoretical literature, such as the elasticity of substitution between home and foreign composite goods, and the response of a country risk premium to the net foreign asset position. Results also indicate that deviations from interest rate parity are not closely related to monetary policy shocks, as recently hypothesized. Further, results suggest that inserting explicit interest rate parity shocks into a NOEM model may be more helpful in explaining movements in the current account than the exchange rate.
Handle: RePEc:nbr:nberwo:10356
Template-Type: ReDIF-Paper 1.0
Title: Tax Policy and Education Policy: Collision or Coordination? A Case Study of the 529 and Coverdell Saving Incentives
Classification-JEL: I22; H21
Author-Name: Susan M. Dynarski
Author-Person: pdy1
Note: ED PE CH
Number: 10357
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10357
File-URL: http://www.nber.org/papers/w10357.pdf
File-Format: application/pdf
Publication-Status: published as Dynarski, Susan M. “Tax Policy and Education Policy: Coordination or Collision?” Tax Policy and the Economy 18 (2004).
Publication-Status: published as Tax Policy and Education Policy: Collision or Coordination? A Case Study of the 529 and Coverdell Saving Incentives, Susan Dynarski. in Tax Policy and the Economy, Volume 18, Poterba. 2004
Abstract: 529 saving plans and Coverdell Educational Savings Accounts are marketed as attractive vehicles for college savings. The main finding of this paper is that college savings plans can actually harm some families. The joint treatment by the income tax code and financial aid system of college savings creates tax rates that exceed 100 percent for those families on the margin of receiving additional financial aid. Since even families with incomes above $100,000 receive need-based aid, the impact of these very high taxes is quite broad. I find that an aid-marginal family with funds in a Coverdell is worse off than if it did not save at all. Simulations show that $1,000 of pretax income placed in a Coverdell for a newborn and left to accumulate until college will face income and aid taxes that consume all of the principal, all of the earnings and an additional several hundred dollars. This perverse outcome is the product of poor coordination between the income tax code and the financial aid system.
Handle: RePEc:nbr:nberwo:10357
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Financial Development on Convergence: Theory and Evidence
Classification-JEL: N1
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Peter Howitt
Author-Person: pho22
Author-Name: David Mayer-Foulkes
Author-Person: pma494
Note: EFG
Number: 10358
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10358
File-URL: http://www.nber.org/papers/w10358.pdf
File-Format: application/pdf
Publication-Status: published as Aghion, Philippe, Peter Howitt and David Mayer-Foulkes. "The Effect Of Financial Development On Convergence: Theory And Evidence," Quarterly Journal of Economics, 2005, v120(1,Feb), 173-222.
Abstract: We introduce imperfect creditor protection in a multi-country version of Schumpeterian growth theory with technology transfer. The theory predicts that the growth rate of any country with more than some critical level of financial development will converge to the growth rate of the world technology frontier, and that all other countries will have a strictly lower long-run growth rate. The theory also predicts that in a country that converges to the frontier growth rate, financial development has a positive but eventually vanishing effect on steady-state per-capita GDP relative to the frontier. We present cross-country evidence supporting these two implications. In particular, we find a significant and sizeable effect of an interaction term between initial per-capita GDP (relative to the United States) and a financial intermediation measure in an otherwise standard growth regression, implying that the likelihood of converging to the U.S. growth rate increases with financial development. We also find that, as predicted by the theory, the direct effect of financial intermediation in this regression is not significantly different from zero. These findings are robust to alternative conditioning sets, estimation procedures and measures of financial development.
Handle: RePEc:nbr:nberwo:10358
Template-Type: ReDIF-Paper 1.0
Title: Interpreting the Predictions of Prediction Markets
Classification-JEL: D84; G10
Author-Name: Charles F. Manski
Author-Person: pma111
Number: 10359
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10359
File-URL: http://www.nber.org/papers/w10359.pdf
File-Format: application/pdf
Publication-Status: published as Manski, Charles F. "Interpreting the Predictions of Prediction Markets." Economics Letters 91, 3 (June 2006): 425-29.
Abstract: Participants in prediction markets such as the Iowa Electronic Markets trade all-or-nothing contracts that pay a dollar if and only if specified future events occur. Researchers engaged in empirical study of prediction markets have argued broadly that equilibrium prices of the contracts traded are market probabilities' that the specified events will occur. This paper shows that if traders are risk-neutral price takers with heterogenous beliefs, the price of a contract in a prediction market reveals nothing about the dispersion of traders' beliefs and partially identifies the central tendency of beliefs. Most persons have beliefs higher than price when price is above 0.5, and most have beliefs lower than price when price is below 0.5. The mean belief of traders lies in an interval whose midpoint is the equilibrium price. These findings persist even if traders use price data to revise their beliefs in plausible ways.
Handle: RePEc:nbr:nberwo:10359
Template-Type: ReDIF-Paper 1.0
Title: Productivity Growth and Disinflation in Chile
Classification-JEL: E31; E52
Author-Name: Jose De Gregorio
Author-Person: pde80
Note: IFM
Number: 10360
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10360
File-URL: http://www.nber.org/papers/w10360.pdf
File-Format: application/pdf
Abstract: This paper analyzes the role productivity growth had on disinflation in Chile during the 1990s. It argues that productivity growth was key in avoiding the output costs of stabilization in a highly indexed economy. Disinflation from the early 1990s through 1998 was costless. Among the many external and domestic factors that contributed to good macroeconomic performance, which combined simultaneously very high rates of growth and declining inflation, productivity stands high. The simulations presented in this paper illustrate this point.
Handle: RePEc:nbr:nberwo:10360
Template-Type: ReDIF-Paper 1.0
Title: Subjective Outcomes in Economics
Classification-JEL: J00; I00
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Note: LS
Number: 10361
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10361
File-URL: http://www.nber.org/papers/w10361.pdf
File-Format: application/pdf
Publication-Status: published as "Subjective Outcomes in Economics" Hamermesh, Daniel S.; Southern Economic Journal, July 2004, v. 71, iss. 1, pp. 2-11
Abstract: This study examines the various uses of subjective outcomes as a focus of interest for economists. It outlines the possible channels by which economists can usefully add to what are already massive literatures on such outcomes in the other social sciences. Generally we contribute little if we merely engage in fancier empirical work and still less if we describe subjective outcomes by other subjective outcomes. Our biggest contributions can be in adducing economic theories that allow a better understanding of objective behavior using subjective outcomes, or of the determinants of subjective outcomes; or in understanding subjective outcomes, such as expectations, that underlie objective economic behavior.
Handle: RePEc:nbr:nberwo:10361
Template-Type: ReDIF-Paper 1.0
Title: Monetary and Fiscal Policy Switching
Classification-JEL: E4; E5
Author-Name: Troy Davig
Author-Person: pda131
Author-Name: Eric M. Leeper
Author-Person: ple3
Author-Name: Hess Chung
Author-Person: pch957
Note: EFG
Number: 10362
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10362
File-URL: http://www.nber.org/papers/w10362.pdf
File-Format: application/pdf
Publication-Status: published as Hess Chung & Troy Davig & Eric M. Leeper, 2007. "Monetary and Fiscal Policy Switching," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 809-842, 06.
Abstract: A growing body of evidence finds that policy reaction functions vary substantially over different periods in the United States. This paper explores how moving to an environment in which monetary and fiscal regimes evolve according to a Markov process can change the impacts of policy shocks. In one regime monetary policy follows the Taylor principle and taxes rise strongly with debt; in another regime the Taylor principle fails to hold and taxes are exogenous. An example shows that a unique bounded non-Ricardian equilibrium exists in this environment. A computational model illustrates that because agents' decision rules embed the probability that policies will change in the future, monetary and tax shocks always produce wealth effects. When it is possible that fiscal policy will be unresponsive to debt at times, active monetary policy (like a Taylor rule) in one regime is not sufficient to insulate the economy against tax shocks in that regime and it can have the unintended consequence of amplifying and propagating the aggregate demand effects of tax shocks. The paper also considers the implications of policy switching for two empirical issues.
Handle: RePEc:nbr:nberwo:10362
Template-Type: ReDIF-Paper 1.0
Title: The Dynamics of Seller Reputation: Theory and Evidence from eBay
Classification-JEL: D44; L15
Author-Name: Luis Cabral
Author-Person: pca193
Author-Name: Ali Hortacsu
Note: IO
Number: 10363
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10363
File-URL: http://www.nber.org/papers/w10363.pdf
File-Format: application/pdf
Publication-Status: published as LUÍS CABRAL & ALI HORTAÇSU, 2010. "THE DYNAMICS OF SELLER REPUTATION: EVIDENCE FROM EBAY," The Journal of Industrial Economics, vol 58(1), pages 54-78.
Abstract: We propose a basic theoretical model of eBay's reputation mechanism, derive a series of implications and empirically test their validity. Our theoretical model features both adverse selection and moral hazard. We show that when a seller receives a negative rating for the first time his reputation decreases and so does his effort level. This implies a decline in sales and price; and an increase in the rate of arrival of subsequent negative feedback. Our model also suggests that sellers with worse records are more likely to exit (and possibly re-enter under a new identity), whereas better sellers have more to gain from buying a reputation' by building up a record of favorable feedback through purchases rather than sales. Our empirical evidence, based on a panel data set of seller feedback histories and cross-sectional data on transaction prices collected from eBay is broadly consistent with all of these predictions. An important conclusion of our results is that eBay's reputation system gives way to strategic responses from both buyers and sellers.
Handle: RePEc:nbr:nberwo:10363
Template-Type: ReDIF-Paper 1.0
Title: Labor Productivity in Britain and America During the Nineteenth Century
Classification-JEL: N10; N30
Author-Name: Stephen N. Broadberry
Author-Person: pbr127
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: DAE ITI
Number: 10364
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10364
File-URL: http://www.nber.org/papers/w10364.pdf
File-Format: application/pdf
Publication-Status: published as Broadberry, Stephen D. and Douglas A. Irwin. "Labor Productivity In The United States And The United Kingdom During The Nineteenth Century," Explorations in Economic History, 2006, v43(2,Apr), 257-279.
Abstract: A number of writers have recently questioned whether labor productivity or per capita incomes were ever higher in the United Kingdom than in the United States. We show that although the United States already had a substantial labor productivity lead in industry as early as 1840, especially in manufacturing, labor productivity was broadly equal in the two countries in agriculture, while the United Kingdom was ahead in services. Hence aggregate labor productivity was higher in the United Kingdom, particularly since the United States had a larger share of the labor force in low value-added agriculture. U.S. overtaking occurred decisively only during the 1890s, as labor productivity pulled ahead in services and the share of agricultural employment declined substantially. Labor force participation was lower in the United States, so that the United Kingdom's labor productivity advantage in the mid-nineteenth century translated into a larger per capita income lead.
Handle: RePEc:nbr:nberwo:10364
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Nearly Universal Insurance Coverage on Health Care Utilization and Health: Evidence from Medicare
Classification-JEL: I12; I18
Author-Name: David Card
Author-Person: pca271
Author-Name: Carlos Dobkin
Author-Person: pdo220
Author-Name: Nicole Maestas
Note: EH
Number: 10365
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10365
File-URL: http://www.nber.org/papers/w10365.pdf
File-Format: application/pdf
Publication-Status: published as Card, David, Carlos Dobkin and Nicole Maestas."The Impact of Nearly Universal Insurance Coverage on Health Care: Evidence from Medicare." American Economic Review 98, 5 (December 2008): 2242–58.
Abstract: We use the increases in health insurance coverage at age 65 generated by the rules of the Medicare program to evaluate the effects of health insurance coverage on health related behaviors and outcomes. The rise in overall coverage at age 65 is accompanied by a narrowing of disparities across race and education groups. Groups with bigger increases in coverage at 65 experience bigger reductions in the probability of delaying or not receiving medical care, and bigger increases in the probability of routine doctor visits. Hospital discharge records also show large increases in admission rates at age 65, especially for elective procedures like bypass surgery and joint replacement. The rises in hospitalization are bigger for whites than blacks, and for residents of areas with higher rates of insurance coverage prior to age 65, suggesting that the gains arise because of the relative generosity of Medicare, rather than the availability of insurance coverage. Finally, there are small impacts of reaching age 65 on self-reported health, with the largest gains among the groups that experience the largest gains in insurance coverage. In contrast we find no evidence of a shift in the rate of growth of mortality rates at age 65.
Handle: RePEc:nbr:nberwo:10365
Template-Type: ReDIF-Paper 1.0
Title: Would the Elimination of Affirmative Action Affect Highly Qualified Minority Applicants? Evidence from California and Texas
Classification-JEL: I28; J78
Author-Name: David Card
Author-Person: pca271
Author-Name: Alan B. Krueger
Author-Person: pkr63
Note: CH ED LS PE
Number: 10366
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10366
File-URL: http://www.nber.org/papers/w10366.pdf
File-Format: application/pdf
Publication-Status: published as David Card & Alan B. Krueger, 2005. "Would the elimination of affirmative action affect highly qualified minority applicants? Evidence from California and Texas," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(3), pages 416-434, April.
Abstract: Between 1996 and 1998 California and Texas eliminated the use of affirmative action in college and university admissions. At the states' elite public universities admission rates of black and Hispanic students fell by 30-50 percent and minority representation in the entering freshman classes declined. In this paper we ask whether the elimination of affirmative action caused any change in the college application behavior of minority students in the two states. A particular concern is that highly qualified minorities - who were not directly affected by the policy change - would be dissuaded from applying to elite public schools, either because of the decline in campus diversity or because of uncertainty about their admission prospects. We use information from SAT-takers in the two states to compare the fractions of minority students who sent their test scores to selective state institutions before and after the elimination of affirmative action. We find no change in the SAT-sending behavior of highly qualified black or Hispanic students in either state.
Handle: RePEc:nbr:nberwo:10366
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Structural Reforms on Productivity and Profitability Enhancing Reallocation: Evidence from Colombia
Classification-JEL: O14; O40
Author-Name: Marcela Eslava
Author-Person: pes57
Author-Name: John Haltiwanger
Author-Person: pha231
Author-Name: Adriana Kugler
Author-Person: pku361
Author-Name: Maurice Kugler
Author-Person: pku86
Note: EFG PR
Number: 10367
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10367
File-URL: http://www.nber.org/papers/w10367.pdf
File-Format: application/pdf
Publication-Status: published as Eslava, Marcela & Haltiwanger, John & Kugler, Adriana & Kugler, Maurice, 2004. "The effects of structural reforms on productivity and profitability enhancing reallocation: evidence from Colombia," Journal of Development Economics, Elsevier, vol. 75(2), pages 333-371, December.
Abstract: In the U.S., some sectoral evidence suggests that growth is driven mainly by productivity enhancing reallocation. In countries with greater barriers to entry and imperfect competition, the reallocation process may be inefficient. Therefore, for developing countries, an open question is whether reallocation is productivity enhancing. Using a unique plant-level longitudinal dataset for Colombia for the period 1982-1998 we examine the interaction between market allocation, productivity and profitability. Given the important trade, labor and financial market oriented reforms in Colombia in 1990, we explore whether and how the contribution of reallocation changed. Our data include plant-level quantities and prices. Using plant prices, we propose a sequential methodology to estimate productivity and demand shocks. First, with plant-level physical output data, we estimate total factor productivity (TFP) using downstream demand to instrument for inputs. Then, with plant-level price data, we estimate demand shocks and mark-ups in the inverse-demand equation, using TFP to instrument for output. We characterize the evolution of TFP and demand shock distributions. Market reforms are associated with rising overall productivity that is driven by reallocation away from low- and towards high-productivity businesses; and, the allocation of activity across businesses is less driven by demand factors.
Handle: RePEc:nbr:nberwo:10367
Template-Type: ReDIF-Paper 1.0
Title: Three Strikes and You're Out: Reply to Cooper and Willis
Classification-JEL: E2; J2
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Eduardo M.R.A. Engel
Author-Person: pen3
Note: EFG LS
Number: 10368
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10368
File-URL: http://www.nber.org/papers/w10368.pdf
File-Format: application/pdf
Publication-Status: published as Caballero, Ricardo and Eduardo Engel. “Three Strikes and You’re Out: Reply to Cooper and Willis.” American Economic Review 94, 4 (September 2004): 1238–1244.
Abstract: Cooper and Willis (2003) is the latest in a sequence of criticisms of our methodology for estimating aggregate nonlinearities when microeconomic adjustment is lumpy. Their case is based on reproducing' our main findings using artificial data generated by a model where microeconomic agents face quadratic adjustment costs. That is, they supposedly find our results where they should not be found. The three claims on which they base their case are incorrect. Their mistakes range from misinterpreting their own simulation results to failing to understand the context in which our procedures should be applied. They also claim that our approach assumes that employment decisions depend on the gap between the target and current level of unemployment. That is incorrect as well, since the gap approach' has been derived formally from at least as sophisticated microeconomic models as the one they present. On a more positive note, the correct interpretation of Cooper and Willis's results shows that our procedures are surprisingly robust to significant departures from the assumptions made in our original derivations.
Handle: RePEc:nbr:nberwo:10368
Template-Type: ReDIF-Paper 1.0
Title: Shape Up or Ship Out: The Effects of Remediation on Students at Four-Year Colleges
Classification-JEL: I2; H4
Author-Name: Eric Bettinger
Author-Person: pbe413
Author-Name: Bridget Terry Long
Author-Person: plo320
Note: ED
Number: 10369
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10369
File-URL: http://www.nber.org/papers/w10369.pdf
File-Format: application/pdf
Abstract: Remediation is an important part of American higher education with approximately one-third of students requiring remedial or developmental courses. However, at an annual cost of over $1 billion for public colleges alone, policymakers have become critical of the practice. Despite the growing debate and the thousands of under prepared students who enter college each year, there is almost no research on the impact of remediation on student outcomes. This project addresses this critical issue by examining the effect of math remediation using a unique dataset of approximately 8,600 students at nonselective, four-year colleges. To account for selection issues, the paper uses variation in remediation placement policies across institutions and the importance of proximity in college choice. The results suggest that placement (the "intention to treat") increases the likelihood that students drop out or transfer to a lower-level college in comparison to similar, non-remediated students. The early timing of these outcomes implies that remediation may serve as a mechanism to re-sort students across schools. The results are mixed among students who actually complete the courses (the "treatment on the treated" effect). After accounting for selection, remediated students are less likely to dropout suggesting that the courses may increase persistence. However, they take longer to complete their degrees and are slightly more likely to transfer to lower-level colleges.
Handle: RePEc:nbr:nberwo:10369
Template-Type: ReDIF-Paper 1.0
Title: Do College Instructors Matter? The Effects of Adjuncts and Graduate Assistants on Students' Interests and Success
Classification-JEL: I2; H4
Author-Name: Eric Bettinger
Author-Person: pbe413
Author-Name: Bridget Terry Long
Author-Person: plo320
Note: ED
Number: 10370
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10370
File-URL: http://www.nber.org/papers/w10370.pdf
File-Format: application/pdf
Abstract: One of the most pronounced trends in higher education over the last decade has been the increased reliance on instructors outside of the traditional full-time, Ph.D.-trained model. Nearly 43 percent of all teaching faculty were part-time in 1998, and at selective colleges, graduate assistant instructors teach over 35 percent of introductory courses. Critics argue that these alternative instructors, with less education and engagement within a university, are causing the quality of education to deteriorate and may affect student interest in a subject. However, little research exists to document these claims. This paper attempts to fill this void using a unique dataset of students at public, four-year colleges in Ohio. The paper quantifies how adjunct and graduate assistant instructors affect the likelihood of enrollment and success in subsequent courses. Because students with alternative instructors may differ systematically from other students, the paper uses two empirical strategies: course fixed effects and a value-added instructor model. The results suggest that adjunct and graduate assistant instructors generally reduce subsequent interest in a subject relative to full-time faculty members, but the effects are small and differ by discipline. Adjuncts and graduate assistants negatively affect students in the humanities while positively affecting students in some of the technical and professional fields.
Handle: RePEc:nbr:nberwo:10370
Template-Type: ReDIF-Paper 1.0
Title: Inequality, Technology, and the Social Contract
Classification-JEL: D31; O33
Author-Name: Roland Benabou
Author-Person: pbe27
Note: EFG PE
Number: 10371
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10371
File-URL: http://www.nber.org/papers/w10371.pdf
File-Format: application/pdf
Publication-Status: published as Benabou, Roland, 2005. "Inequality, Technology and the Social Contract," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 25, pages 1595-1638 Elsevier.
Abstract: The distribution of human capital and income lies at the center of a nexus of forces that shape a country's economic, institutional and technological structure. I develop here a unified model to analyze these interactions and their growth consequences. Five main issues are addressed. First, I identify the key factors that make both European-style "welfare state" and US-style "laissez-faire" social contracts sustainable.; I also compare the growth rates of these two politico-economic steady states, which are no Pareto-rankable. Second, I examine how technological evolutions affect the set of redistributive institutions that can be durably sustained, showing in particular how skill-biased technical change may cause the welfare state to unravel. Third, I model the endogenous determination of technology or organizational form that results from firms' tailoring the flexibility of their production processes to the distribution of workers' skills. The greater is human capital heterogeneity, the more flexible and wage-disequalizing is the equilibrium technology. Moreover, firms' choices tend to generate excessive flexibility, resulting in suboptimal growth or even self-sustaining technology-inequality traps. Fourth, I examine how institutions also shape the course of technology; thus, a world-wide shift in the technology frontier results in different evolutions of production processes and skill premia across countries with different social contracts. Finally, I ask what joint configurations of technology, inequality and redistributive policy are feasible in the long run, when all three are endogenous. I show in particular how the diffusion of technology leads to the exporting' of inequality across borders; and how this, in turn, generates spillovers between social contracts that make it more difficult for nations to maintain distinct institutions and social structures.
Handle: RePEc:nbr:nberwo:10371
Template-Type: ReDIF-Paper 1.0
Title: Dynamic Portfolio Selection by Augmenting the Asset Space
Classification-JEL: G0; G1
Author-Name: Michael W. Brandt
Author-Name: Pedro Santa-Clara
Author-Person: psa1486
Note: AP
Number: 10372
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10372
File-URL: http://www.nber.org/papers/w10372.pdf
File-Format: application/pdf
Publication-Status: published as Brandt, Michael W. and Pedro Santa-Clara. "Dynamic Portfolio Selection By Augmenting The Asset Space," Journal of Finance, 2006, v61(5,Oct), 2187-2217.
Abstract: We present a novel approach to dynamic portfolio selection that is no more difficult to implement than the static Markowitz model. The idea is to expand the asset space to include simple (mechanically) managed portfolios and compute the optimal static portfolio in this extended asset space. The intuition is that a static choice among managed portfolios is equivalent to a dynamic strategy. We consider managed portfolios of two types: "conditional" and "timing" portfolios. Conditional portfolios are constructed along the lines of Hansen and Richard (1987). For each variable that affects the distribution of returns and for each basis asset, we include a portfolio that invests in the basis asset an amount proportional to the level of the conditioning variable. Timing portfolios invest in each basis asset for a single period and therefore mimic strategies that buy and sell the asset through time. We apply our method to a problem of dynamic asset allocation across stocks, bonds, and cash using the predictive ability of four conditioning variables.
Handle: RePEc:nbr:nberwo:10372
Template-Type: ReDIF-Paper 1.0
Title: A Meta-Analysis of the Effect of Common Currencies on International Trade
Classification-JEL: F34
Author-Name: Andrew Rose
Author-Person: pro71
Note: IFM ITI
Number: 10373
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10373
File-URL: http://www.nber.org/papers/w10373.pdf
File-Format: application/pdf
Publication-Status: published as Rose, Andrew and T. D. Stanley. "A Meta-Analysis Of The Effect Of Common Currencies On International Trade," Journal of Economic Surveys, 2005, v19(3,Jul), 347-365.
Abstract: Thirty-four recent studies have investigated the effect of currency union on trade, resulting in 754 point estimates of the effect. This paper is a quantitative attempt to summarize the current state of debate; meta-analysis is used to combine the disparate estimates. The chief findings are that: a) the hypothesis that there is no effect of currency union on trade can be rejected at standard significance levels; b) the combined estimate implies that a bilateral currency union increase trade by between 30% and 90%; and c) the estimates are heterogeneous and not consistently tied to most features of the studies.
Handle: RePEc:nbr:nberwo:10373
Template-Type: ReDIF-Paper 1.0
Title: Pay or Pray? The Impact of Charitable Subsidies on Religious Attendance
Classification-JEL: H2
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: PE
Number: 10374
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10374
File-URL: http://www.nber.org/papers/w10374.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan. "Pay Or Pray? The Impact Of Charitable Subsidies On Religious Attendance," Journal of Public Economics, 2004, v88(12,Dec), 2635-2655.
Abstract: The economic argument for subsidizing charitable giving relies on the positive externalities of charitable activities, particularly from the religious institutions that are the largest recipients of giving. But the net external effects of subsidies to religious giving will also depend on a potentially important indirect effect as well: impacts on religious participation. Religious participation can be either a complement to, or a substitute with, the level of charitable giving. Understanding these spillover effects of charitable giving may be quite important, given the existing observational literature that suggests that religiosity is a major determinant of well-being among Americans. In this paper I investigate the impact of charitable subsidies on a measure of religious participation, attendance at religious services. I do so by using data over three decades from the General Social Survey, as well as confirming the impact of such subsidies on religious giving using the Consumer Expenditure Survey. I find strong evidence that religious giving and religious attendance are substitutes: larger subsidies to charitable giving lead to more religious giving, but less religious attendance, with an implied elasticity of attendance with respect to religious giving of -0.92. These results have important implications for the debate over charitable subsidies. They also serve to validate economic models of religious participation.
Handle: RePEc:nbr:nberwo:10374
Template-Type: ReDIF-Paper 1.0
Title: Government Gains from Self-Restraint: A Bargaining Theory of Inefficient Redistribution
Classification-JEL: D7; F13
Author-Name: Allan Drazen
Author-Person: pdr25
Author-Name: Nuno Limão
Author-Person: pli22
Note: EFG PE
Number: 10375
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10375
File-URL: http://www.nber.org/papers/w10375.pdf
File-Format: application/pdf
Abstract: We present a bargaining model of the interaction between a government and interest groups in which, unlike most existing models, neither side is assumed to have all the bargaining power. The government finds it optimal to constrain itself in the use of transfer policies to improve its bargaining position. In a model of redistribution to lobbies, the government finds it optimal to cap the size of lump-sum transfers it makes below the unconstrained equilibrium level. With a binding cap on efficient subsidies in place, less efficient subsidies will be used for redistribution even when they serve no economic function. Analogously, if it must choose either efficient or inefficient transfers, it may find it optimal to forego use of the former if its bargaining power relative to the lobby is sufficiently low. Even if the lobby can bargain over the type of redistribution policy with the government, the inefficient policy may still be used in equilibrium. If policymakers are elected, rational fully informed voters may choose a candidate who implements the inefficient policy over one who would implement the efficient policy and may prefer the candidate with the lower weight on voter welfare We thus offer an alternative theory that explains why governments may optimally choose to restrict efficient lump-sum transfers to interest groups and replace them with relatively less efficient transfers.
Handle: RePEc:nbr:nberwo:10375
Template-Type: ReDIF-Paper 1.0
Title: From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition
Classification-JEL: O4; O5
Author-Name: Dani Rodrik
Author-Person: pro60
Author-Name: Arvind Subramanian
Author-Person: psu108
Note: EFG IFM
Number: 10376
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10376
File-URL: http://www.nber.org/papers/w10376.pdf
File-Format: application/pdf
Publication-Status: published as Dani Rodrik & Arvind Subramanian, 2004. "From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition," IMF Working Papers, vol 04(77).
Publication-Status: published as Dani Rodrik & Arvind Subramanian, 2005. "From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 193-228, September.
Abstract: Most conventional accounts of India's recent economic performance associate the pick-up in economic growth with the liberalization of 1991. This paper demonstrates that the transition to high growth occured around 1980, a full decade before economic liberalization. We investigate a number of hypotheses about the causes of this growth favorable external environment, fiscal stimulus, trade liberalization, internal liberalization, the green revolution, public investment and find them wanting. We argue that growth was triggered by an attitudinal shift on the part of the national government towards a pro-business (as opposed to pro-liberalization) approach. We provide some evidence that is consistent with this argument. We also find that registered manufacturing built up in previous decades played an important role in influencing the pattern of growth across the Indian states.
Handle: RePEc:nbr:nberwo:10376
Template-Type: ReDIF-Paper 1.0
Title: Transaction Prices and Managed Care Discounting for Selected Medical Technologies: A Bargaining Approach
Classification-JEL: J11
Author-Name: Avi Dor
Author-Name: Michael Grossman
Author-Person: pgr107
Author-Name: Siran M.Koroukian
Note: EH
Number: 10377
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10377
File-URL: http://www.nber.org/papers/w10377.pdf
File-Format: application/pdf
Publication-Status: published as Dor, Avi, Michael Grossman and Siran M. Koroukian. “Hospital Transaction Prices and Managed-Care Discounting for Selected Medical Technologies.” American Economic Review 94, 2 (May 2004): 352-356.
Abstract: It is generally assumed that managed care has been successful at capturing discounts from medical providers, but the implications have been a matter of debate. Critics argue that managed care organizations attain savings by reducing intensity of services, while others have argued that savings are 'real' and are a consequence of discounts per unit of care. To address this, we obtain separate transaction prices for hospital episodes (treatment) and for the narrowly defined surgical procedure, using the example of heart bypass surgery. Both sets of prices were drawn from a database of insurance claims of self-insured firms that offer a menu of insurance options. We use a Nash-Bargaining framework to obtain price discounts by type of insurance. Adjusting for product and patient heterogeneity, the per-procedure prices yield the anticipated pattern of discounts: Relative to traditional fee for service, point-of-service HMOs exhibited the largest discounts followed by Preferred-Provider-Organizations (18 and 12 percent, respectively). While reductions in intensity of services are not directly observable from the data, combining the results from the per-procedure and per-episode analysis yields a range of intensity reduction of 20-6 percent, with a corresponding per-unit price discount of 4-18 percent for the entire episode. We conclude that a large share cost savings by managed care organizations are due to per-unit price reductions.
Handle: RePEc:nbr:nberwo:10377
Template-Type: ReDIF-Paper 1.0
Title: Inappropriate Pooling of Wealthy and Poor Countries in Empirical FDI Studies
Classification-JEL: F2; O4
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: Miao Wang
Note: ITI
Number: 10378
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10378
File-URL: http://www.nber.org/papers/w10378.pdf
File-Format: application/pdf
Publication-Status: published as Moran, T., E. Graham and M. Blomstrom (eds.) Does Foreign Direct Investment Promote Development? Washington, DC: Institute for International Economics, 2005.
Abstract: This paper examines the question of whether less-developed countries' (LDCs') experiences with foreign direct investment (FDI) systematically different from those of developed countries (DCs). We do this by examining three types of empirical FDI studies that typically do not distinguish between LDCs and DCs in their analysis. First, we find that the underlying factors that determine the location of FDI activity across countries vary systematically across LDCs and DCs in a way that is not captured by current empirical models of FDI. Second, the effect of FDI on economic growth is one that is only supported for LDCs in the aggregate data, not DCs. Third, the evidence suggests that FDI is much less likely to crowd out (more likely to crowd in) domestic investment for LDCs than DCs.
Handle: RePEc:nbr:nberwo:10378
Template-Type: ReDIF-Paper 1.0
Title: A New Micro Model of Exchange Rate Dynamics
Classification-JEL: F3; F4
Author-Name: Martin D.D. Evans
Author-Person: pev5
Author-Name: Richard K. Lyons
Author-Person: ply9
Note: IFM
Number: 10379
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10379
File-URL: http://www.nber.org/papers/w10379.pdf
File-Format: application/pdf
Publication-Status: published as Evans, Martin D. D. and Richard K. Lyons. "Meese-Rogoff Redux: Micro-Based Exchange-Rate Forecasting," American Economic Review, 2005, v95(2,May), 405-414.
Abstract: We address the exchange rate determination puzzle by examining how information is aggregated in a dynamic general equilibrium (DGE) setting. Unlike other DGE macro models, which enrich either preference structures or production structures, our model enriches the information structure. The model departs from microstructure-style modeling by identifying the real activities where dispersed information originates, as well as the technology by which information is subsequently aggregated and impounded. Results relevant to the determination puzzle include: (1) persistent gaps between exchange rates and macro fundamentals, (2) excess volatility relative to macro fundamentals, (3) exchange rate movements without macro news, (4) little or no exchange rate movement when macro news occurs, and (5) a structural-economic rationale for why transaction flows perform well in accounting for monthly exchange rate changes, whereas macro variables perform poorly. Though past micro analysis has made progress on results (1) through (3), results (4) and (5) are new. Excess volatility arises in our model for a new reason: rational exchange rate errors feed back into the fundamentals that the exchange rate is trying to track.
Handle: RePEc:nbr:nberwo:10379
Template-Type: ReDIF-Paper 1.0
Title: Entry Regulation as a Barrier to Entrepreneurship
Classification-JEL: L1; G3
Author-Name: Leora Klapper
Author-Person: pkl66
Author-Name: Luc Laeven
Author-Person: pla174
Author-Name: Raghuram Rajan
Author-Person: pra149
Note: CF
Number: 10380
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10380
File-URL: http://www.nber.org/papers/w10380.pdf
File-Format: application/pdf
Publication-Status: published as Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2006. "Entry regulation as a barrier to entrepreneurship," Journal of Financial Economics, Elsevier, vol. 82(3), pages 591-629, December.
Abstract: Using a comprehensive database of European firms, we study the effect of market entry regulations on the creation of new limited-liability firms, the average size of entrants, and the growth of incumbent firms. We find that costly regulations hamper the creation of new firms, especially in industries that should naturally have high entry. These regulations also force new entrants to be larger and cause incumbent firms in naturally high-entry industries to grow more slowly. Our results hold even when we correct for the availability of financing, the degree of protection of intellectual property, and labor regulations.
Handle: RePEc:nbr:nberwo:10380
Template-Type: ReDIF-Paper 1.0
Title: Mortality Risk and Educational Attainment of Black and White Men
Classification-JEL: J1; J7
Author-Name: Li Gan
Author-Person: pga94
Author-Name: Guan Gong
Note: AG
Number: 10381
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10381
File-URL: http://www.nber.org/papers/w10381.pdf
File-Format: application/pdf
Abstract: This paper investigates to what extent the differences in education between black and white men can be explained by the differences in their mortality risks. A dynamic optimal stopping-point life cycle model is examined, in which group-level mortality risk plays an important role in determining individual-level mortality risk, health expenditure,and the amount of schooling. The model is calibrated to quantify the effect of mortality risks on schooling by taking the black and white male population as the respective reference groups for black men and white men. We find that the impact of mortality risk on schooling explains more than two-thirds of the empirical education differences between black and white males. This conclusion is robust to a set of plausible parameter values.
Handle: RePEc:nbr:nberwo:10381
Template-Type: ReDIF-Paper 1.0
Title: Employer-Sponsored Disability Insurance: Where are the Gaps in Coverage?
Classification-JEL: I10; J32
Author-Name: Helen Levy
Author-Person: ple728
Note: EH LS PE
Number: 10382
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10382
File-URL: http://www.nber.org/papers/w10382.pdf
File-Format: application/pdf
Abstract: I use data from the Current Population Surveys and Employee Benefits Surveys to analyze employer-sponsored disability insurance coverage. There does not appear to be a systematic trend from 1980 to 2000 in the fraction of workers with coverage. Disability insurance coverage rates are lower than health insurance coverage rates; low-skill, low-wage, low-tenure, part-time and small establishment workers are all less likely to have either of these fringe benefits. Public policy debates about workers without health insurance fail to consider an important economic risk these workers face in the event of an illness or injury: the risk of lost wages.
Handle: RePEc:nbr:nberwo:10382
Template-Type: ReDIF-Paper 1.0
Title: Nominal Wage Rigidities in Mexico: Evidence from Social Security Records
Classification-JEL: J31; J33
Author-Name: Sara G. Castellanos
Author-Name: Rodrigo Garcia-Verdu
Author-Person: pga102
Author-Name: David S. Kaplan
Author-Person: pka253
Note: LS
Number: 10383
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10383
File-URL: http://www.nber.org/papers/w10383.pdf
File-Format: application/pdf
Publication-Status: published as Castellanos, Sara G., Rodrigo Garcia-Verdu and David S. Kaplan. "Nominal Wage Rigidities In Mexico: Evidence From Social Security Records," Journal of Development Economics, 2004, v75(2,Dec), 507-533.
Abstract: This paper analyses the existence and extent of downward nominal wage rigidities in the Mexican labor market using data from the administrative records of the Mexican Social Security Institute (IMSS). This longitudinal, firm-level dataset allows us to track workers employed with the same firm, observe their wage profiles and calculate the nominal-wage changes they experience over time. Based on the estimated density functions of nominal wage changes and other moments of the distribution, we are able to calculate several standard tests of nominal wage rigidity that have been proposed in the literature. Furthermore, we extend these tests to take into account the presence of minimum wage laws that may affect the distribution of nominal wage changes. The densities and tests calculated using these date are similar to those obtained using administrative data from other countries, and constitute a significant improvement over the measures of nominal wage rigidities obtained from household survey data. We find considerably more wage rigidity than previous estimates obtained for Mexico using data from the National Urban Employment Survey suggest. Furthermore, we find evidence that the extent of nominal wage rigidities has been falling over time. We also document the importance of minimum wages in the Mexican labor market, as evidenced by the large fraction of minimum wage earners and the widespread indexation of wage changes to the minimum wage increases.
Handle: RePEc:nbr:nberwo:10383
Template-Type: ReDIF-Paper 1.0
Title: Tracking the Source of the Decline in GDP Volatility: An Analysis of the Automobile Industry
Classification-JEL: E2; E3
Author-Name: Valerie A. Ramey
Author-Person: pra154
Author-Name: Daniel J. Vine
Note: EFG
Number: 10384
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10384
File-URL: http://www.nber.org/papers/w10384.pdf
File-Format: application/pdf
Abstract: Recent papers by Kim and Nelson (1999) and McConnell and Perez-Quiros (2000) uncover a dramatic decline in the volatility of U.S. GDP growth beginning in 1984. Determining whether the source is good luck, good policy or better inventory management has since developed into an active area of research. This paper seeks to shed light on the source of the decline in volatility by studying the behavior of the U.S. automobile industry, where the changes in volatility have mirrored those of the aggregate data. We find that changes in the relative volatility of sales and output, which have been interpreted by some as evidence of improved inventory management, are in fact the result of changes in the process driving automobile sales. We first show that the autocorrelation of sales dropped during the 1980s, and that the behavior of interest rates may be the force behind the change in sales persistence. A simulation of the assembly plants' cost function illustrates that the persistence of sales is a key determinant of output volatility. A comparison of the ways in which assembly plants scheduled production in the 1990s relative to the 1970s supports the intuition of the simulation.
Handle: RePEc:nbr:nberwo:10384
Template-Type: ReDIF-Paper 1.0
Title: Legislative Representation, Bargaining Power, and the Distribution of Federal Funds: Evidence from the U.S. Senate
Classification-JEL: D7; H7
Author-Name: Brian Knight
Author-Person: pkn7
Note: PE
Number: 10385
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10385
File-URL: http://www.nber.org/papers/w10385.pdf
File-Format: application/pdf
Publication-Status: published as Knight, Brian. "Legislative Representation, Bargaining Power, and the Distribution of Federal Funds: Evidence from the U.S. Senate." Economic Journal 118, 532 (October 2008): 1785-1803.
Abstract: While representation in the U.S. House is based upon state population, each state has an equal number (two) of U.S. Senators. Thus, relative to the state delegations in the U.S. House, small population states are provided disproportionate bargaining power in the U.S. Senate. This paper provides new evidence on the role of this small state bargaining power in the distribution of federal funds using data on projects earmarked in appropriations bills between 1995 and 2003. Relative to earmarks secured in House appropriations bills, Senate earmarks exhibit a small state advantage that is both economically and statistically significant. The paper also examines two theoretically-motivated channels through which this small state advantage operates: increased proposal power through appropriations committee representation and the lower cost of securing votes due to smaller federal tax shares. Taken together, these two channels explain over 80 percent of the measured small state bias. Finally, a welfare analysis demonstrates the inefficiency of hte measured small state bias.
Handle: RePEc:nbr:nberwo:10385
Template-Type: ReDIF-Paper 1.0
Title: Consumer Demand for Health Information on the Internet
Classification-JEL: I1; D83
Author-Name: M. Kate Bundorf
Author-Name: Laurence Baker
Author-Name: Sara Singer
Author-Name: Todd Wagner
Note: EH PR
Number: 10386
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10386
File-URL: http://www.nber.org/papers/w10386.pdf
File-Format: application/pdf
Abstract: The challenges consumers face in acquiring and using information are a defining feature of health care markets. In this paper, we examine demand for health information on the Internet. We find that individuals in poor health are more likely than those in better health to use the Internet to search for health information and to communicate with others about health and health care. We also find that individuals facing a higher price to obtain information from health care professionals are more likely to turn to the Internet for health information. Our findings indicate that demand for consumer health information depends on the expected benefits of information and the price of information substitutes.
Handle: RePEc:nbr:nberwo:10386
Template-Type: ReDIF-Paper 1.0
Title: Business Cycles in Emerging Economies: The Role of Interest Rates
Classification-JEL: E32; F32
Author-Name: Pablo A. Neumeyer
Author-Name: Fabrizio Perri
Author-Person: ppe52
Note: EFG
Number: 10387
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10387
File-URL: http://www.nber.org/papers/w10387.pdf
File-Format: application/pdf
Publication-Status: published as Neumeyer, Pablo A. and Fabrizio Perri. "Business Cycles In Emerging Economies: The Role Of Interest Rates," Journal of Monetary Economics, 2005, v52(2,Mar), 345-380.
Abstract: We find that in a sample of emerging economies business cycles are more volatile than in developed ones, real interest rates are countercyclical and lead the cycle, consumption is more volatile than output and net exports are strongly countercyclical. We present a model of a small open economy, where the real interest rate is decomposed in an international rate and a country risk component. Country risk is affected by fundamental shocks but, through the presence of working capital, also amplifies the effects of those shocks. The model generates business cycles consistent with Argentine data. Eliminating country risk lowers Argentine output volatility by 27% while stabilizing international rates lowers it by less than 3%.
Handle: RePEc:nbr:nberwo:10387
Template-Type: ReDIF-Paper 1.0
Title: An Empirical Analysis of the Economic Impact of Federal Terrorism Reinsurance
Classification-JEL: G14; G22
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Author-Name: J. David Cummins
Author-Person: pcu15
Author-Name: Christopher M. Lewis
Author-Name: Ran Wei
Note: PE
Number: 10388
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10388
File-URL: http://www.nber.org/papers/w10388.pdf
File-Format: application/pdf
Publication-Status: published as Brown, Jeffrey R. & Cummins, J. David & Lewis, Christopher M. & Wei, Ran, 2004. "An empirical analysis of the economic impact of federal terrorism reinsurance," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 861-898, July.
Abstract: This paper examines the role of the federal government in the market for terrorism reinsurance. We investigate the stock price response of affected industries to a sequence of thirteen events culminating in the enactment of the Terrorism Risk Insurance Act (TRIA) of 2002. In the industries most likely to be affected by TRIA banking, construction, insurance, real estate investment trusts, transportation, and public utilities the stock price effect was primarily negative. The Act was at best value-neutral for property-casualty insurers because it eliminated the option not to offer terrorism insurance. The negative response of the other industries may be attributable to the Act's impeding more efficient private market solutions, failing to address nuclear, chemical, and biological hazards, and reducing market expectations of federal assistance following future terrorist attacks.
Handle: RePEc:nbr:nberwo:10388
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Dominance and Inflation Targeting: Lessons from Brazil
Classification-JEL: E5; F4
Author-Name: Olivier Blanchard
Author-Person: pbl2
Note: EFG IFM ME
Number: 10389
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10389
File-URL: http://www.nber.org/papers/w10389.pdf
File-Format: application/pdf
Publication-Status: published as Giavezzi, Francesco, Ilan Goldfajn and Santiago Herrera (eds.) Inflation Targeting, Debt, and the Brazilian Experience, 1999 to 2003. Cambridge: MIT Press, 2005.
Abstract: A standard proposition in open-economy macroeconomics is that a central-bank-engineered increase in the real interest rate makes domestic government debt more attractive and leads to a real appreciation. If, however, the increase in the real interest rate also increases the probability of default on the debt, the effect may be instead to make domestic government debt less attractive, and to lead to a real depreciation. That outcome is more likely the higher the initial level of debt, the higher the proportion of foreign-currency-denominated debt, and the higher the price of risk. Under that outcome, inflation targeting can clearly have perverse effects: An increase in the real interest in response to higher inflation leads to a real depreciation. The real depreciation leads in turn to a further increase in inflation. In this case, fiscal policy, not monetary policy, is the right instrument to decrease inflation. This paper argues that this is the situation the Brazilian economy found itself in in 2002 and 2003. It presents a model of the interaction between the interest rate, the exchange rate, and the probability of default, in a high-debt high-risk-aversion economy such as Brazil during that period. It then estimates the model, using Brazilian data. It concludes that, in 2002, the level and the composition of public debt in Brazil, and the general level of risk aversion in world financial markets, were indeed such as to imply perverse effects of the interest rate on the exchange rate and on inflation.
Handle: RePEc:nbr:nberwo:10389
Template-Type: ReDIF-Paper 1.0
Title: Inflation Targeting and Debt: Lessons from Brazil
Classification-JEL: E4; E6
Author-Name: Carlo A. Favero
Author-Person: pfa12
Author-Name: Francesco Giavazzi
Author-Person: pgi18
Note: IFM
Number: 10390
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10390
File-URL: http://www.nber.org/papers/w10390.pdf
File-Format: application/pdf
Publication-Status: published as Giavezzi, Francesco, Ilan Goldfajn and Santiago Herrera (eds.) Inflation Targeting, Debt, and the Brazilian Experience, 1999 to 2003. Cambridge: MIT Press, 2005.
Abstract: Studying the recent experience of Brazil the paper explains how default risk is at the centre of the mechanism through which an emerging market central bank that targets inflation might lose control of inflation--in other words of the mechanism through which the economy might move from a regime of 'monetary dominance' to one of 'fiscal dominance'. The literature, from Sargent and Wallace (1981) to the modern fiscal theory of the price level has discussed how an unsustainable fiscal policy may hinder the effectiveness of monetary policy, to the point that an increase in interest rates can have a perverse effect on inflation. We show that the presence of default risk reinforces the possibility that a vicious circle might arise, making the fiscal constraint on monetary policy more stringent.
Handle: RePEc:nbr:nberwo:10390
Template-Type: ReDIF-Paper 1.0
Title: Transparency of Information and Coordination in Economies with Investment Complementarities
Classification-JEL: D6; D8
Author-Name: George-Marios Angeletos
Author-Person: pan143
Author-Name: Alessandro Pavan
Author-Person: ppa367
Note: EFG
Number: 10391
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10391
File-URL: http://www.nber.org/papers/w10391.pdf
File-Format: application/pdf
Publication-Status: published as Angeletos, George-Marios and Alessandro Pavan. "Transparency Of Information And Coordination In Economies With Investment Complementarities," American Economic Review, 2004, v94(2,May), 91-98.
Abstract: How do public and private information affect equilibrium allocations and social welfare in economies with investment complementarities? And what is the optimal transparency in the information conveyed, for example, by economic statistics, policy announcements, or news in the media? We first consider an environment where the complementarities are weak so that the equilibrium is unique no matter the structure of information. An increase in the precision of public information may have the perverse effect of increasing aggregate volatility. Nevertheless, as long as there is no value to lotteries, welfare unambiguously increases with an increase in either the relative or the absolute precision of public information. Hence, full transparency is optimal. This is because more transparency facilitates more effective coordination, which is valuable from a social perspective. On the other hand, when complementarities are strong enough that multiple equilibria are possible, more transparency permits the market to coordinate more effectively on either the bad or the good equilibrium. In this case, constructive ambiguity becomes optimal if there is a high risk that more transparency will lead to coordination failures.
Handle: RePEc:nbr:nberwo:10391
Template-Type: ReDIF-Paper 1.0
Title: Rule-of-Thumb Consumers and the Design of Interest Rate Rules
Classification-JEL: E32; E52
Author-Name: Jordi Gali
Author-Person: pga43
Author-Name: J. David Lopez-Salido
Author-Person: plo26
Author-Name: Javier Valles
Author-Person: pva889
Note: EFG ME
Number: 10392
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10392
File-URL: http://www.nber.org/papers/w10392.pdf
File-Format: application/pdf
Publication-Status: published as Gali, Jordi, J. David Lopez-Salido and Javier Valles. "Rule-of-Thumb Consumers And The Design Of Interest Rate Rules," Journal of Money, Credit and Banking, 2004, v36(4,Aug), 739-763.
Abstract: We introduce rule-of-thumb consumers in an otherwise standard dynamic sticky price model, and show how their presence can change dramatically the properties of widely used interest rate rules. In particular, the existence of a unique equilibrium is no longer guaranteed by an interest rate rule that satisfies the so called Taylor principle. Our findings call for caution when using estimates of interest rate rules in order to assess the merits of monetary policy in specific historical periods.
Handle: RePEc:nbr:nberwo:10392
Template-Type: ReDIF-Paper 1.0
Title: Monetary Sovereignty, Exchange Rates, and Capital Controls: The Trilemma in the Interwar period
Classification-JEL: F33; F41
Author-Name: Maurice Obstfeld
Author-Person: pob13
Author-Name: Jay C. Shambaugh
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: IFM ME
Number: 10393
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10393
File-URL: http://www.nber.org/papers/w10393.pdf
File-Format: application/pdf
Publication-Status: published as Obstfeld, Maurice, Jay C. Shambaugh and Alan M. Taylor. "Monetary Sovereignty, Exchange Rates, and Capital Controls: The Trilemma in the Interwar Period." IMF Staff Papers 51 (2004): 75-108.
Abstract: The interwar period was marked by the end of the classical gold standard regime and new levels of macroeconomic disorder in the world economy. The interwar disorder often is linked to policies inconsistent with the constraint of the open-economy trilemma the inability of policymakers simultaneously to pursue a fixed exchange rate, open capital markets, and autonomous monetary policy. The first two objectives were linchpins of the pre-1914 order. As increasingly democratic polities faced pressures to engage in domestic macroeconomic management, however, either currency pegs or freedom of capital movements had to yield. This historical analytic narrative is compelling with significant ramifications for today's world, if true but empirically controversial. We apply theory and empirics to the interwar data and find strong support for the logic of the trilemma. Thus, an inability to pursue consistent policies in a rapidly changing political and economic environment appears central to an understanding of the interwar crises, and the same constraints still apply today.
Handle: RePEc:nbr:nberwo:10393
Template-Type: ReDIF-Paper 1.0
Title: Public Debt Management in Brazil
Classification-JEL: E63; H63
Author-Name: Francesco Giavazzi
Author-Person: pgi18
Author-Name: Alessandro Missale
Author-Person: pmi118
Note: IFM
Number: 10394
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10394
File-URL: http://www.nber.org/papers/w10394.pdf
File-Format: application/pdf
Publication-Status: published as Giavezzi, Francesco, Ilan Goldfajn and Santiago Herrera (eds.) Inflation Targeting, Debt, and the Brazilian Experience, 1999 to 2003. Cambridge: MIT Press, 2005.
Abstract: This paper derives the optimal composition of the Brazilian public debt by looking at the relative impact of the risk and cost of alternative debt instruments on the probability of missing the stabilization target. This allows to price risk against the expected cost of debt service and thus to find the optimal combination along the trade off between cost and risk minimization. The optimal debt structure is a function of the expected return differentials between debt instruments, of the conditional variance of debt returns and of their covariances with output growth, inflation, exchange-rate depreciation and the Selic rate. We estimate the relevant covariances by: i) exploiting the daily survey of expectations; ii) simulating a small structural model of the Brazilian economy under different shocks; iii) estimating the unanticipated components of the relevant variables with forecasting regressions. The empirical evidence suggests that a large share of the Brazilian debt should be indexed to the price level. Fixed-rate bonds should be preferred to Selic indexed bonds, while the share of dollar denominated (and indexed) bonds should be further reduced from the current high level.his paper derives the optimal composition of the Brazilian public debt by looking at the relative impact of the risk and cost of alternative debt instruments on the probability of missing the stabilization target. This allows to price risk against the expected cost of debt service and thus to find the optimal combination along the trade off between cost and risk minimization. The optimal debt structure is a function of the expected return differentials between debt instruments, of the conditional variance of debt returns and of their covariances with output growth, inflation, exchange-rate depreciation and the Selic rate. We estimate the relevant covariances by: i) exploiting the daily survey of expectations; ii) simulating a small structural model of the Brazilian economy under different shocks; iii) estimating the unanticipated components of the relevant variables with forecasting regressions. The empirical evidence suggests that a large share of the Brazilian debt should be indexed to the price level. Fixed-rate bonds should be preferred to Selic indexed bonds, while the share of dollar denominated (and indexed) bonds should be further reduced from the current high level.
Handle: RePEc:nbr:nberwo:10394
Template-Type: ReDIF-Paper 1.0
Title: Valuing Assets in Retirement Saving Accounts
Classification-JEL: H24
Author-Name: James Poterba
Author-Person: ppo19
Note: AG AP PE
Number: 10395
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10395
File-URL: http://www.nber.org/papers/w10395.pdf
File-Format: application/pdf
Publication-Status: published as Poterba, James. "Valuing Assets In Retirement Saving Accounts," National Tax Journal, 2004, v57(2,Jun), 489-512.
Abstract: Many studies compare household balances in tax-deferred retirement accounts such as 401(k) plans with financial assets held outside these accounts, but these different asset components are not directly comparable. Taxes and in some cases penalties are due when assets are withdrawn from some retirement saving plans. These factors imply that a dollar held inside a retirement account may be less valuable in supporting retirement income than a dollar held in a similar asset outside these accounts. This is particularly important for households that are considering withdrawing assets from the tax-deferred accounts in the near future. For households with long deferral horizons, the opportunity for tax-free compound returns in retirement accounts can permit a dollar inside such an account to support more retirement consumption than a dollar outside such accounts, even though the account principal will be taxed on distribution. This paper illustrates the potential differences in the retirement support value of a dollar of invested in a bond, or in corporate stock, inside and outside tax-deferred accounts. It draws on a range of data sources to calibrate the value of the tax burden, and the benefit of compound growth, for assets held in retirement accounts, and describes the differences in relative valuation for households of different ages.
Handle: RePEc:nbr:nberwo:10395
Template-Type: ReDIF-Paper 1.0
Title: The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility
Classification-JEL: F33; F41
Author-Name: Maurice Obstfeld
Author-Person: pob13
Author-Name: Jay C. Shambaugh
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE IFM
Number: 10396
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10396
File-URL: http://www.nber.org/papers/w10396.pdf
File-Format: application/pdf
Publication-Status: published as Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2005. "The Trilemma in History: Tradeoffs Among Exchange Rates, Monetary Policies, and Capital Mobility," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 423-438, December.
Abstract: The exchange-rate regime is often seen as constrained by the monetary policy trilemma, which imposes a stark tradeoff among exchange stability, monetary independence, and capital market openness. Yet the trilemma has not gone without challenge. Some (e.g., Calvo and Reinhart 2001, 2002) argue that under the modern float there could be limited monetary autonomy. Others (e.g., Bordo and Flandreau 2003), that even under the classical gold standard domestic monetary autonomy was considerable. This paper studies the coherence of international interest rates over more than 130 years. The constraints implied by the trilemma are largely borne out by history.
Handle: RePEc:nbr:nberwo:10396
Template-Type: ReDIF-Paper 1.0
Title: Agreeing Now to Agree Later: Contracts that Rule Out but do not Rule In
Classification-JEL: D8; D23
Author-Name: Oliver Hart
Author-Person: pha222
Author-Name: John Moore
Author-Person: pmo265
Note: CF
Number: 10397
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10397
File-URL: http://www.nber.org/papers/w10397.pdf
File-Format: application/pdf
Abstract: We view a contract as a list of outcomes. Ex ante, the parties commit not to consider outcomes not on the list, i.e., these are ruled out'. Ex post, they freely bargain over outcomes on the list, i.e., the contract specifies no mechanism to structure their choice; in this sense outcomes on the list are not ruled in'. A loose' contract (long list) maximizes flexibility but may interfere with ex ante investment incentives. When these incentives are important enough, the parties may write a tight' contract (short list), even though this leads to ex post inefficiency.
Handle: RePEc:nbr:nberwo:10397
Template-Type: ReDIF-Paper 1.0
Title: Microeconomic Flexibility in Latin America
Classification-JEL: E2; J2
Author-Name: Ricardo J. Caballlero
Author-Person: pca44
Author-Name: Eduardo Engel
Author-Person: pen3
Author-Name: Alejandro Micco
Note: EFG LS
Number: 10398
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10398
File-URL: http://www.nber.org/papers/w10398.pdf
File-Format: application/pdf
Publication-Status: published as Caballero G., Ricardo, Eduardo Engel G., and Alejandro Micco A., 2004. "Microeconomic Flexibility in Latin America," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 7(2), pages 5-26, August
Publication-Status: published as Caballero, Ricardo, Eduardo Engel, and Alejandro Micco, 2005. "Microeconomic Flexibility in Latin America." In Labor Markets and Institutions, edition 1, volume 8, Central Banking, Analysis, and Economic Policies Book Series, Jorge Restrepo, Andrea Tokman R., Norman Loayza (Series Editor), and Klaus Schmidt-Hebbel, chapter 10, pages 329-366, Central Bank of Chile.
Abstract: We characterize the degree of microeconomic inflexibility in several Latin American economies and find that Brazil, Chile and Colombia are more flexible than Mexico and Venezuela. The difference in flexibility among these economies is mainly explained by the behavior of large establishments, which adjust more promptly in the more flexible economies, especially when accumulated shocks are substantial. We also study the path of flexibility in Chile and show that it declined in the aftermath of the Asian crisis. This decline can account for a substantial fraction of the large decline in TFP-growth in Chile since 1997 (from 3.1 percent per year for the preceding decade, to about 0.3 percent after that). Moreover, if it were to persist, it could permanently shave off almost half of a percent from Chile's structural rate of growth.
Handle: RePEc:nbr:nberwo:10398
Template-Type: ReDIF-Paper 1.0
Title: Top Wealth Shares in the United States: 1916-2000: Evidence from Estate Tax Returns
Classification-JEL: H2; N3
Author-Name: Wojciech Kopczuk
Author-Person: pko20
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: EFG LS PE
Number: 10399
Creation-Date: 2004-03
Order-URL: http://www.nber.org/papers/w10399
File-URL: http://www.nber.org/papers/w10399.pdf
File-Format: application/pdf
Publication-Status: published as National Tax Journal, 2004, 57(2, part 2), 445-488.
Abstract: This paper presents new homogeneous series on top wealth shares from 1916 to 2000 in the United States using estate tax return data. Top wealth shares were very high at the beginning of the period but have been hit sharply by the Great Depression, the New Deal, and World War II shocks. Those shocks have had permanent effects. Following a decline in the 1970s, top wealth shares recovered in the early 1980s, but they are still much lower in 2000 than in the early decades of the century. Most of the changes we document are concentrated among the very top wealth holders with much smaller movements for groups below the top 0.1%. Consistent with the Survey of Consumer Finances results, top wealth shares estimated from Estate Tax Returns display no significant increase since 1995. Evidence from the Forbes 400 richest Americans suggests that only the super-rich have experienced significant gains relative to the average over the last decade. Our results are consistent with the decreased importance of capital income at the top of the income distribution documented by Piketty and Saez (2003) and suggest that the rentier class of the early century is not yet reconstituted. The most plausible explanations for the facts are perhaps the development of progressive income and estate taxation which has dramatically impaired the ability of large wealth holders to maintain their fortunes, and the democratization of stock ownership which now spreads stock market gains and losses much more widely than in the past.
Handle: RePEc:nbr:nberwo:10399
Template-Type: ReDIF-Paper 1.0
Title: The Institutions of Monetary Policy
Classification-JEL: E0; G0
Author-Name: Mervyn King
Note: EFG IFM ME PE
Number: 10400
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10400
File-URL: http://www.nber.org/papers/w10400.pdf
File-Format: application/pdf
Publication-Status: published as King, Mervyn. "The Institutions Of Monetary Policy," American Economic Review, 2004, v94(2,May), 1-13.
Abstract: I argue that it is useful to think about the optimal design of monetary institutions using the insights from the theory of incomplete contracts. The core of the monetary policy problem is the uncertainty about future social decisions resulting from the impossibility and the undesirability of committing our successors to any given monetary policy strategy. The impossibility stems from the observation that collective decisions cannot be enforced so that it is impossible to commit to future collective decisions. The undesirability reflects the fact that we cannot articulate all possible future states of the world. Monetary institutions expand the possibility frontier of the technology of collective decisions by raising the costs of making inefficient deviationsng from pre-announced paths. Institutions also become repositories of experience and knowledge to facilitate learning about the economic environment and communication to society as a whole. I illustrate the importance of institutional design for the operation of monetary policy by reference to three case studies: the collapse of exchange rate regimes in Brazil and the United Kingdom; currency arrangements in Iraq and their reform after the 2003 war; and the relationship between central banks and governments when the zero constraint on nominal interest rates is binding.
Handle: RePEc:nbr:nberwo:10400
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Value of a Statistical Life: The Importance of Omitted Variables and Publication Bias
Classification-JEL: J17; H43
Author-Name: Orley Ashenfelter
Author-Person: pas9
Author-Name: Michael Greenstone
Author-Person: pgr38
Note: EH LE LS
Number: 10401
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10401
File-URL: http://www.nber.org/papers/w10401.pdf
File-Format: application/pdf
Publication-Status: published as Ashenfelter, Orley and Michael Greenstone. "Estimating The Value Of A Statistical Life: The Importance Of Omitted Variables And Publication Bias," American Economic Review, 2004, v94(2,May), 454-460.
Abstract: In this paper we show that omitted variables and publication bias lead to severely biased estimates of the value of a statistical life. Although our empirical results are obtained in the context of a study of choices about road safety, we suspect that the same issues plague the estimation of monetary trade-offs regarding safety in other contexts.
Handle: RePEc:nbr:nberwo:10401
Template-Type: ReDIF-Paper 1.0
Title: What Explains the Stock Market's Reaction to Federal Reserve Policy?
Classification-JEL: E44; G12
Author-Name: Ben S. Bernanke
Author-Person: pbe55
Author-Name: Kenneth N. Kuttner
Author-Person: pku75
Note: ME
Number: 10402
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10402
File-URL: http://www.nber.org/papers/w10402.pdf
File-Format: application/pdf
Publication-Status: published as Bernanke, Ben S., and Kenneth N. Kuttner. "What Explains the Stock Market's Reaction to Federal Reserve Policy?" Journal of Finance 60(3): 1221-1257, June 2005
Publication-Status: published as Ben Bernanke & Kenneth N. Kuttner, 2003. "What explains the stock market's reaction to Federal Reserve policy?," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
Publication-Status: published as Bernanke, Ben S., and Kenneth N. Kuttner. "What Explains the Stock Market's Reaction to Federal Reserve Policy?" FEDS Working Paper 2004-16, Board of Governors of the Federal Reserve System
Abstract: This paper analyzes the impact of changes in monetary policy on equity prices, with the objectives both of measuring the average reaction of the stock market and also of understanding the economic sources of that reaction. We find that, on average, a hypothetical unanticipated 25-basis-point cut in the federal funds rate target is associated with about a one percent increase in broad stock indexes. Adapting a methodology due to Campbell (1991) and Campbell and Ammer (1993), we find that the effects of unanticipated monetary policy actions on expected excess returns account for the largest part of the response of stock prices.
Handle: RePEc:nbr:nberwo:10402
Template-Type: ReDIF-Paper 1.0
Title: Incentives in Corporations: Evidence from the American Whaling Industry
Classification-JEL: N5; L2
Author-Name: Eric Hilt
Author-Person: phi104
Note: DAE
Number: 10403
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10403
File-URL: http://www.nber.org/papers/w10403.pdf
File-Format: application/pdf
Publication-Status: published as Hilt, Eric. "Incentives In Corporations: Evidence From The American Whaling Industry," Journal of Law and Economics, 2006, v49(1,Apr), 197-227.
Abstract: In the 1830s, when whaling was a prosperous American industry, a number of whaling corporations were chartered. All of them were short-lived. This paper analyzes the failure of corporations in American whaling, and argues that the corporate form was unable to create the incentives requisite for success in the industry. Most nineteenth-century whaling ventures were owned by a small number of local investors, and were configured to provide powerful incentives for their managers. The effect of the corporate form on productivity is analyzed using a newly-collected panel dataset of 874 whaling voyages. Many whaling corporations were managed by individuals who had previously (or would subsequently) manage ventures with the usual ownership structure. Using an individual-fixed-effects framework, a strong negative effect of the corporate form on productivity is identified.
Handle: RePEc:nbr:nberwo:10403
Template-Type: ReDIF-Paper 1.0
Title: Timeliness, Trade and Agglomeration
Classification-JEL: F1; L0
Author-Name: James Harrigan
Author-Person: pha151
Author-Name: Anthony J. Venables
Author-Person: pve7
Note: ITI
Number: 10404
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10404
File-URL: http://www.nber.org/papers/w10404.pdf
File-Format: application/pdf
Publication-Status: published as Harrigan, James and Anthony J. Venables. “Timeliness and Agglomeration.” Journal of Urban Economics 59 (March 2006): 300-316.
Abstract: An important element of the cost of distance is time taken in delivering final and intermediate goods. We argue that time costs are qualitatively different from direct monetary costs such as freight charges. The difference arises because of uncertainty. Unsynchronised deliveries can disrupt production, and delivery time can force producers to order components before demand and cost uncertainties are resolved. Using several related models we show that this generates hitherto unexplored incentives for clustering. If final assembly takes place in two locations and component production has increasing returns to scale, then component production will tend to cluster around just one of the assembly plants.
Handle: RePEc:nbr:nberwo:10404
Template-Type: ReDIF-Paper 1.0
Title: Mergers and the Composition of International Commerce
Classification-JEL: F12; F13
Author-Name: Volker Nocke
Author-Person: pno17
Author-Name: Stephen Yeaple
Author-Person: pye37
Note: ITI
Number: 10405
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10405
File-URL: http://www.nber.org/papers/w10405.pdf
File-Format: application/pdf
Abstract: In this paper, we develop a novel theory of cross-border mergers and acquisitions. Firms can choose between different modes of foreign market access: exporting, greenfield FDI, and cross-border M&A. Our theory is based on three key ideas. First is heterogeneity in firms' capabilities. Second, these capabilities differ in their degree of international mobility. Third, capabilities are traded in a merger market. We address two questions: (1) what are the characteristics of firms that choose the various modes of foreign market access, and (2) how does the composition of international commerce vary across industries and countries? We show that the degree to which firms differ in their mobile and non-mobile capabilities plays a crucial role for the composition of international commerce: depending on whether firms differ in their mobile or immobile capabilities, cross-border mergers may involve the most or the least efficient active firms. A similar dichotomy obtains when analyzing the effects of country and industry characteristics on the distribution of firms' efficiencies.
Handle: RePEc:nbr:nberwo:10405
Template-Type: ReDIF-Paper 1.0
Title: New Forecasts of the Equity Premium
Classification-JEL: G12; G14
Author-Name: Christopher Polk
Author-Person: ppo238
Author-Name: Samuel Thompson
Author-Name: Tuomo Vuolteenaho
Note: AP
Number: 10406
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10406
File-URL: http://www.nber.org/papers/w10406.pdf
File-Format: application/pdf
Publication-Status: published as Polk, Christopher, Samuel Thompson and Tuojmo Vuolteenaho. "Cross-Sectional Forecasts Of The Equity Premium," Journal of Financial Economics, 2006, v81(1,Jul), 101-147.
Abstract: If investors are myopic mean-variance optimizers, a stock's expected return is linearly related to its beta in the cross section. The slope of the relation is the cross-sectional price of risk, which should equal the expected equity premium. We use this simple observation to forecast the equity-premium time series with the cross-sectional price of risk. We also introduce novel statistical methods for testing stock-return predictability based on endogenous variables whose shocks are potentially correlated with return shocks. Our empirical tests show that the cross-sectional price of risk (1) is strongly correlated with the market's yield measures and (2) predicts equity-premium realizations especially in the first half of our 1927-2002 sample.
Handle: RePEc:nbr:nberwo:10406
Template-Type: ReDIF-Paper 1.0
Title: On the Undesirability of Commodity Taxation Even When Income Taxation is Not Optimal
Classification-JEL: H21; H24
Author-Name: Louis Kaplow
Author-Person: pka44
Note: PE
Number: 10407
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10407
File-URL: http://www.nber.org/papers/w10407.pdf
File-Format: application/pdf
Publication-Status: published as Kaplow, Louis. "On The Undesirability Of Commodity Taxation Even When Income Taxation Is Not Optimal," Journal of Public Economics, 2006, v90(6-7,Aug), 1235-1250.
Abstract: An important result due to Atkinson and Stiglitz (1976) is that differential commodity taxation is not optimal in the presence of an optimal nonlinear income tax (given weak separability of utility between labor and all consumption goods). This article demonstrates that their conclusion holds regardless of whether the income tax is optimal. In particular, given any commodity tax and income tax system, differential commodity taxation can be eliminated in a manner that results in a Pareto improvement. Also, differential commodity taxation can be proportionally reduced so as to generate a Pareto improvement. In addition, for commodity tax reforms that do not eliminate or proportionally reduce differential taxation, a simple efficiency condition is offered for determining whether a Pareto improvement is possible.
Handle: RePEc:nbr:nberwo:10407
Template-Type: ReDIF-Paper 1.0
Title: Does the Market Value R&D Investment by European Firms? Evidence from a Panel of Manufacturing Firms in France, Germany, and Italy
Classification-JEL: H21; H24
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Author-Name: Raffaele Oriani
Note: IO PR
Number: 10408
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10408
File-URL: http://www.nber.org/papers/w10408.pdf
File-Format: application/pdf
Publication-Status: published as Hall, Bronwyn H. & Oriani, Raffaele, 2006. "Does the market value R&D investment by European firms? Evidence from a panel of manufacturing firms in France, Germany, and Italy," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 971-993, September.
Abstract: Several studies based on US and UK data have used market value as an indicator of the firm''s expected R&D performance. However, there exist no investigations for the continental countries in the European Union, partly because the analysis is complicated by data availability problems. In this paper we take a first step towards filling this gap using a newly constructed panel dataset of firms that are publicly traded in France, Germany, and Italy. Controlling for either permanent unobserved firm effects or sample selection due to the voluntary nature of R&D disclosure, we find that the relative shadow value of R&D in France and Germany is remarkably similar both to each other and to that in the US or the UK during the same period In contrast, we find that R&D in publicly traded Italian firms is not valued by financial markets on average. However, when we control for the presence of a single large shareholder, we find that both French and Italian firms have high R&D valuations when no single shareholder holds more than one third of the firm, but that R&D is essentially not valued in the other firms.
Handle: RePEc:nbr:nberwo:10408
Template-Type: ReDIF-Paper 1.0
Title: Asymmetric Social Interaction in Economics: Cigarette Smoking Among Young People in the United States, 1992-1999
Classification-JEL: I12
Author-Name: Jeffrey E. Harris
Author-Name: Beatriz Lopez-Valcarcel
Note: EH
Number: 10409
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10409
File-URL: http://www.nber.org/papers/w10409.pdf
File-Format: application/pdf
Abstract: We analyzed cigarette smoking among people aged 15 - 24 in approximately 90,000 households in the 1992 - 1999 U.S. Current Population Surveys. We modeled social influence as an informational externality, in which each young person's smoking informs her peers about its coolness.' The resulting family smoking game,' with each sibling's smoking endogenous, may have multiple equilibria. We found that the pro-smoking influence of a fellow smoker markedly exceeded the deterrent effect of a non-smoking peer. The phenomenon of asymmetric social influence has implications for financial markets, educational performance, criminal behavior, and other areas of inquiry where peer influence is important.
Handle: RePEc:nbr:nberwo:10409
Template-Type: ReDIF-Paper 1.0
Title: Heterogeneous Investors and their Changing Demand and Supply Schedules for Individual Common Stocks
Classification-JEL: G0
Author-Name: Jung-Wook Kim
Author-Name: Jason Lee
Author-Name: Randall K. Morck
Author-Person: pmo146
Note: AP CF
Number: 10410
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10410
File-URL: http://www.nber.org/papers/w10410.pdf
File-Format: application/pdf
Abstract: Using 550 million limit orders submitted in the Korea Stock Exchange, we estimate demand and supply elasticities of heterogeneous investor types and their changes around the Asian financial crisis. We find that domestic individuals have substantially more inelastic demand and supply curves than domestic institutions and foreign investors. The crisis permanently reduced price elasticities of domestic individuals by 50% but had no effect on those of foreign investors. Institutional changes restricting margin purchases, implemented after the crisis, seem particularly important in explaining the dramatic drop. Information heterogeneity, availability of close substitutes and arbitrage risk also explain time-series variations in elasticities.
Handle: RePEc:nbr:nberwo:10410
Template-Type: ReDIF-Paper 1.0
Title: Financial Claustrophobia: Asset Pricing in Illiquid Markets
Classification-JEL: G1
Author-Name: Francis A. Longstaff
Author-Person: plo283
Note: AP
Number: 10411
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10411
File-URL: http://www.nber.org/papers/w10411.pdf
File-Format: application/pdf
Abstract: There are many examples of markets where an agent who wants to get out of an investment position quickly may find himself trapped and forced to remain in that position because of a lack of liquidity. What are the asset-pricing implications when agents cannot always buy and sell assets immediately? We study this issue in a multi-asset exchange economy with heterogeneous agents. In this model, agents can trade initially, but then cannot trade again until after a trading blackout' period. The more liquid the market, the sooner agents can trade again. Faced with illiquidity, agents abandon diversification and choose highly polarized portfolios. Risky assets are held primarily by the less-patient short-horizon agents in the economy. Polarization causes the usual risk-return tradeo. to break down and an asset's price may have more to do with the demographics of who owns it than with the riskiness of its cash flows. Risky assets are generally more valuable in an illiquid market than in a liquid market. Market illiquidity can also have large effects on the equity premium.
Handle: RePEc:nbr:nberwo:10411
Template-Type: ReDIF-Paper 1.0
Title: A Rational Model of the Closed-End Fund Discount
Classification-JEL: G14
Author-Name: Jonathan Berk
Author-Name: Richard Stanton
Note: AP
Number: 10412
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10412
File-URL: http://www.nber.org/papers/w10412.pdf
File-Format: application/pdf
Abstract: The discount on closed-end funds is widely accepted as proof of investor irrationality. We show,however, that a parsimonious rational model can generate a discount that exhibits many of the characteristics observed in practice. The only required features of the model are that managers have (imperfectly observable) ability to generate excess returns; they sign long-term contracts guaranteeing them a fee each year equal to a fixed fraction of assets under management; and they can leave to earn more money elsewhere if they turn out to be good. With these assumptions, time-varying discounts are not an anomaly in a rational world with competitive investors -- they are required.
Handle: RePEc:nbr:nberwo:10412
Template-Type: ReDIF-Paper 1.0
Title: Conditional Betas
Classification-JEL: G12
Author-Name: Tano Santos
Author-Name: Pietro Veronesi
Note: AP
Number: 10413
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10413
File-URL: http://www.nber.org/papers/w10413.pdf
File-Format: application/pdf
Abstract: Empirical evidence shows that conditional market betas vary substantially over time. Yet, little is known about the source of this variation, either theoretically or empirically. Within a general equilibrium model with multiple assets and a time varying aggregate equity premium, we show that conditional betas depend on (a) the level of the aggregate premium itself; (b) the level of the firm's expected dividend growth; and (c) the firm's fundamental risk, that is, the one pertaining to the covariation of the firm's cash-flows with the aggregate economy. Especially when fundamental risk (c) is strong, the model predicts that market betas should display a large time variation, that their cross-sectional dispersion should be negatively related to the aggregate premium, and that investments in physical capital should be positively related to changes in betas. These predictions find considerable support in the data.
Handle: RePEc:nbr:nberwo:10413
Template-Type: ReDIF-Paper 1.0
Title: Home Care Reimbursement, Long-term Care Utilization, and Health Outcomes
Classification-JEL: I1
Author-Name: Robin McKnight
Note: AG EH
Number: 10414
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10414
File-URL: http://www.nber.org/papers/w10414.pdf
File-Format: application/pdf
Publication-Status: published as McKnight, Robin. "Home Care Reimbursement, Long-Term Care Utilization, And Health Outcomes," Journal of Public Economics, 2006, v90(1-2,Jan), 293-323.
Abstract: Long-term care currently comprises almost 10% of national health expenditures and is projected to rise rapidly over coming decades. A key, and relatively poorly understood, element of long-term care is home health care. I use a substantial change in Medicare reimbursement policy, which took the form of tightly binding average per-patient reimbursement caps, to address several questions about the market for home care. I find that the reimbursement change was associated with a large drop in the provision of home care. This drop was concentrated among unhealthy beneficiaries, which is consistent with the incentives for patient selection inherent in the per-patient caps. I find that the decline in home health utilization was not offset by increases in institutional long-term care or other medical care and that there were no associated adverse health consequences. However, approximately one-quarter of the decline in Medicare spending was offset by increases in out-of-pocket expenditures for home health care, with the offset concentrated in higher income populations. Despite the value of home health care implied by the out-of-pocket expenditures, I find that the welfare implications of the reimbursement change were ambiguous.
Handle: RePEc:nbr:nberwo:10414
Template-Type: ReDIF-Paper 1.0
Title: Phased-In Tax Cuts and Economic Activity
Classification-JEL: E62; E32
Author-Name: Christopher L. House
Author-Person: pho56
Author-Name: Matthew D. Shapiro
Author-Person: psh144
Note: EFG PE
Number: 10415
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10415
File-URL: http://www.nber.org/papers/w10415.pdf
File-Format: application/pdf
Publication-Status: published as Christopher L. House & Matthew D. Shapiro, 2006. "Phased-In Tax Cuts and Economic Activity," American Economic Review, American Economic Association, vol. 96(5), pages 1835-1849, December.
Abstract: Phased-in tax reductions are a common feature of tax legislation. This paper uses a dynamic general equilibrium model to quantify the effects of delaying tax cuts. According to the analysis of the model, the phased-in tax cuts of the 2001 tax law substantially reduced employment, output, and investment during the phase-in period. In contrast, the immediate tax cuts of the 2003 tax law provided significant incentives for immediate production and investment. The paper argues that the rules and accounting procedures used by Congress for formulating tax policy have a significant impact in shaping the details of tax policy and led to the phase-ins, sunsets, and temporary tax changes in both the 2001 and 2003 tax laws.
Handle: RePEc:nbr:nberwo:10415
Template-Type: ReDIF-Paper 1.0
Title: Benefits and Spillovers of Greater Competition in Europe: A Macroeconomic Assesment
Classification-JEL: C51; E31
Author-Name: Tamim Bayoumi
Author-Person: pba366
Author-Name: Douglas Laxton
Author-Person: pla306
Author-Name: Paolo Pesenti
Author-Person: ppe152
Note: EFG IFM
Number: 10416
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10416
File-URL: http://www.nber.org/papers/w10416.pdf
File-Format: application/pdf
Abstract: Using a general-equilibrium simulation model featuring nominal rigidities and monopolistic competition in product and labor markets, this paper estimates the macroeconomic benefits and international spillovers of an increase in competition. After calibrating the model to the euro area vs. the rest of the industrial world, the paper draws three conclusions. First, greater competition produces large effects on macroeconomic performance, as measured by standard indicators. In particular, we show that differences in competition can account for over half of the current gap in GDP per capita between the euro area and the US. Second, it may improve macroeconomic management by increasing the responsiveness of wages and prices to market conditions. Third, greater competition can generate positive spillovers to the rest of the world through its impact on the terms of trade.
Handle: RePEc:nbr:nberwo:10416
Template-Type: ReDIF-Paper 1.0
Title: Legal Institutions and Financial Development
Classification-JEL: K2; G2
Author-Name: Thorsten Beck
Author-Person: pbe266
Author-Name: Ross Levine
Author-Person: ple61
Note: IFM
Number: 10417
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10417
File-URL: http://www.nber.org/papers/w10417.pdf
File-Format: application/pdf
Publication-Status: published as Menard, Claude and Mary M. Shirley (eds.) Handbook for New Institutional Economics. Norwell MA: Kluwer Academic Publishers, 2005.
Abstract: Why do some countries have growth-enhancing financial systems, while others do not? Why have some countries developed the necessary investor protection laws and contract-enforcement mechanisms to support financial institutions and markets, while others have not? This paper reviews existing research on the role of legal institutions in shaping financial development.
Handle: RePEc:nbr:nberwo:10417
Template-Type: ReDIF-Paper 1.0
Title: Corporate Yield Spreads: Default Risk or Liquidity? New Evidence from the Credit-Default Swap Market
Classification-JEL: G1
Author-Name: Francis A. Longstaff
Author-Person: plo283
Author-Name: Sanjay Mithal
Author-Name: Eric Neis
Note: AP
Number: 10418
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10418
File-URL: http://www.nber.org/papers/w10418.pdf
File-Format: application/pdf
Publication-Status: published as Longstaff, Francis A., Sanjay Mithal and Eric Neis. "Corporate Yield Spreads: Default Risk Or Liquidity? New Evidence From The Credit Default Swap Market," Journal of Finance, 2005, v60(5,Oct), 2213-2253.
Abstract: We use the information in credit-default swaps to obtain direct measures of the size of the default and nondefault components in corporate spreads. We find that the majority of the corporate spread is due to default risk. This result holds for all rating categories and is robust to the definition of the riskless curve. We also find that the nondefault component is time varying and strongly related to measures of bond-specific illiquidity as well as to macroeconomic measures of bond-market liquidity.
Handle: RePEc:nbr:nberwo:10418
Template-Type: ReDIF-Paper 1.0
Title: 401(k) Matching Contributions in Company Stock: Costs and Benefits for Firms and Workers
Classification-JEL: G11; J30
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Author-Name: Nellie Liang
Author-Name: Scott Weisbenner
Note: AG CF LS PE
Number: 10419
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10419
File-URL: http://www.nber.org/papers/w10419.pdf
File-Format: application/pdf
Publication-Status: published as Brown, Jeffrey R., Nellie Liang and Scott Weisbenner. "401(k) Matching Contributions In Company Stock: Costs And Benefits For Firms And Workers," Journal of Public Economics, 2006, v90(6-7,Aug), 1315-1346.
Abstract: This paper examines why some employers provide matching contributions to 401(k) plans in company stock and explores the implications of match policy for employee retirement wealth. Unlike stock option grants to non-executives, a firm's decision to match in company stock does not appear to be strongly correlated with cash flow or with measures of the benefits of aligning incentives of employees and employers. Rather, we find evidence that firms are more likely to provide the match in company stock if firm risk is low (i.e. lower stock price volatility and lower bankruptcy risk) and employees are also covered by a defined benefit plan. These findings suggest that firms consider the retirement security of their workers in making the match decision, either because firms want to minimize the risk of violating their fiduciary responsibility or because employees more fully value company stock at companies with lower firm-specific risk. Evidence also indicates that firms may want to match in company stock to boost employee ownership, perhaps to help deter takeovers, or because of the tax advantages for dividends on the company stock match. Simulation results suggest that sufficiently risk-tolerant individuals actually prefer a 401(k) plan at a company with a company stock match to a plan at a company with an unrestricted match, unless the equity premium is reduced substantially.
Handle: RePEc:nbr:nberwo:10419
Template-Type: ReDIF-Paper 1.0
Title: Backward Stealing and Forward Manipulation in the WTO
Classification-JEL: F1
Author-Name: Kyle Bagwell
Author-Person: pba409
Author-Name: Robert W. Staiger
Author-Person: pst85
Note: ITI
Number: 10420
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10420
File-URL: http://www.nber.org/papers/w10420.pdf
File-Format: application/pdf
Publication-Status: published as Bagwell, Kyle & Staiger, Robert W., 2010. "Backward stealing and forward manipulation in the WTO," Journal of International Economics, Elsevier, vol. 82(1), pages 49-62, September.
Abstract: Motivated by the structure of WTO negotiations, we analyze a bargaining environment in which negotiations proceed bilaterally and sequentially under the most-favored-nation (MFN) principle. We identify backward-stealing and forward-manipulation problems that arise when governments bargain under the MFN principle in a sequential fashion. We show that these problems impede governments from achieving the multilateral efficiency frontier unless further rules of negotiation are imposed. We identify the WTO nullification-or-impairment and renegotiation provisions and its reciprocity norm as rules that are capable of providing solutions to these problems. In this way, we suggest that WTO rules can facilitate the negotiation of efficient multilateral trade agreements in a world in which the addition of new and economically significant countries to the world trading system is an ongoing process.
Handle: RePEc:nbr:nberwo:10420
Template-Type: ReDIF-Paper 1.0
Title: Employee Stock Purchase Plans
Classification-JEL: H2; J3
Author-Name: Gary V. Engelhardt
Author-Name: Brigitte C. Madrian
Author-Person: pma384
Note: AG CF LS PE
Number: 10421
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10421
File-URL: http://www.nber.org/papers/w10421.pdf
File-Format: application/pdf
Publication-Status: published as Engelhardt, Gary V. and Brigitte C. Madrian. "Employee Stock Purchase Plans," National Tax Journal, 2004, v57(2,Jun), 385-406.
Abstract: Employee stock purchase plans (ESPPs) are designed to promote employee stock ownership broadly within the firm and provide another tax-deferred vehicle for individual capital accumulation in addition to traditional pensions, 401(k)s, and stock options. We outline the individual and corporate tax treatment of ESPPs and the circumstances under which ESPPs will be preferred to cash compensation from a purely tax perspective. We then examine empirically ESPP participation using administrative data from 1997-2001 for a large health services company that employs approximately 30,000 people. The picture that emerges from the analysis of these data suggests that there is substantial non-participation in these plans even though all employees could increase gross compensation through participation. We discuss a number of potential explanations for non-participation.
Handle: RePEc:nbr:nberwo:10421
Template-Type: ReDIF-Paper 1.0
Title: Optimal Recursive Refinancing and the Valuation of Mortgage-Backed Securities
Classification-JEL: G1
Author-Name: Francis A. Longstaff
Author-Person: plo283
Note: CF AP
Number: 10422
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10422
File-URL: http://www.nber.org/papers/w10422.pdf
File-Format: application/pdf
Publication-Status: published as Longstaff, Francis A. "Borrower Credit And The Valuation Of Mortgage-Backed Securities," Real Estate Economics, 2005, v33(4,Winter), 619-661.
Abstract: We study the optimal recursive refinancing problem where a borrower minimizes his lifetime mortgage costs by repeatedly refinancing when rates drop sufficiently. Key factors affecting the optimal decision are the cost of refinancing and the possibility that the mortgagor may have to refinance at a premium rate because of his credit. The optimal recursive strategy often results in prepayment being delayed significantly relative to traditional models. Furthermore, mortgage values can exceed par by much more than the cost of refinancing. Applying the recursive model to an extensive sample of mortgage-backed security prices, we find that the implied credit spreads that match these prices closely parallel borrowers' actual spreads at the origination of the mortgage. These results suggest that optimal recursive models may provide a promising alternative to the reduced-form prepayment models widely used in practice.
Handle: RePEc:nbr:nberwo:10422
Template-Type: ReDIF-Paper 1.0
Title: The Nobel Memorial Prize for Robert F. Engle
Classification-JEL: A1
Author-Name: Francis X. Diebold
Author-Person: pdi1
Note: AP
Number: 10423
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10423
File-URL: http://www.nber.org/papers/w10423.pdf
File-Format: application/pdf
Publication-Status: published as Diebold, Francis S. "The Nobel Memorial Prize For Robert F. Engle," Scandinavian Journal of Economics, 2004, v106(2), 165-185.
Abstract: I review and interpret two of Robert Engle's most important contributions: the theory and application of cointegration, and the theory and application of dynamic volatility models. I treat the latter much more extensively, de-emphasizing technical aspects and focusing instead on the intuition, nuances and importance of the work.
Handle: RePEc:nbr:nberwo:10423
Template-Type: ReDIF-Paper 1.0
Title: How Much is Post-Acute Care Use Affected by Its Availability?
Classification-JEL: I11
Author-Name: Melinda Beeuwkes Buntin
Author-Name: Anita Datar Garten
Author-Name: Susan Paddock
Author-Name: Debra Saliba
Author-Name: Mark Totten
Author-Name: Jose J. Escarce
Note: EH
Number: 10424
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10424
File-URL: http://www.nber.org/papers/w10424.pdf
File-Format: application/pdf
Abstract: To assess the relative impact of clinical factors versus non-clinical factors such as post acute care (PAC) supply - in determining whether patients receive care from skilled nursing facilities (SNFs) or inpatient rehabilitation facilities (IRFs) after discharge from acute care. Medicare acute hospital, IRF and SNF claims provided data on PAC choices; predictors of site of PAC chosen were generated from Medicare claims, provider of services, enrollment file, and Area Resource File data. We used multinomial logit models to predict post-acute care use by elderly patients after hospitalizations for stroke, hip fractures, or lower extremity joint replacements. A file was constructed linking Medicare acute and post-acute utilization data for all sample patients hospitalized in 1999. PAC availability is a more powerful predictor of PAC use than the clinical characteristics in many of our models. The effects of distance to providers and supply of providers are particularly clear in the choice between IRF and SNF care. The farther away the nearest IRF is, and the closer the nearest SNF is, the less likely a patient is to go to an IRF. Similarly, the fewer IRFs, and the more SNFs, there are in the patient's area the less likely the patient is to go to an IRF. In addition, if the hospital from which the patient is discharged has a related IRF or a related SNF the patient is more likely to go there. We find that the availability of PAC is a major determinant of whether patients use such care and which type of PAC facility they use. Further research is needed in order to evaluate whether these findings indicate that a greater supply of PAC leads to both higher use of institutional care and better outcomes or whether it leads to unwarranted expenditures of resources and delays in returning patients to their homes.
Handle: RePEc:nbr:nberwo:10424
Template-Type: ReDIF-Paper 1.0
Title: Shame and Ostracism: Union Army Deserters Leave Home
Classification-JEL: Z13
Author-Name: Dora L. Costa
Author-Person: pco358
Author-Name: Matthew E. Kahn
Author-Person: pka41
Note: DAE
Number: 10425
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10425
File-URL: http://www.nber.org/papers/w10425.pdf
File-Format: application/pdf
Abstract: During the Civil War not all men served honorably and this was known by everyone in their communities. We study how shame and ostracism affect behavior by examining whether men who deserted from the Union Army, and who faced no legal sanctions once the war was over, returned home or whether they moved and re-invented themselves. We build a unique panel data set that provides us with a control group for deserters because we can identify men who deserted but then returned to fight with their companies. We find that, compared to non-deserters and returned deserters, deserters were more likely to move both out of state and further distances. This effect was stronger for deserters from pro-war communities. When deserters moved they were more likely to move to anti-war states than non-deserters. Our study provides a rare test of the empirical implications of emotion. While both shame and ostracism would push deserters out of their home community, we find no evidence that deserters faced economic sanctions.
Handle: RePEc:nbr:nberwo:10425
Template-Type: ReDIF-Paper 1.0
Title: International Trade and Cultural Identity
Classification-JEL: F02; F13
Author-Name: Eckhard Janeba
Author-Person: pja312
Note: ITI
Number: 10426
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10426
File-URL: http://www.nber.org/papers/w10426.pdf
File-Format: application/pdf
Abstract: Economists emphasize the benefits from free trade due to international specialization, but typically have a narrow measure of what matters to individuals. Critics of free trade, by contrast, focus on the pattern of consumption in society and the nature of goods being consumed, but often fail to take into account the gains from specialization. This paper develops a new framework to study the effects of trade liberalization on cultural identity, which emerges as the result of the interaction of individual consumption choices, similar to a network externality. In a Ricardian model of international trade the paper shows that (i) trade is not Pareto inferior to autarky if the free trade equilibrium is unique, (ii) trade is not Pareto superior to autarky if the world is culturally diverse under free trade, but can be if the world is culturally homogenous, (iii) and when multiple free trade equilibria exist everybody in a country can lose from free trade if that country is culturally homogenous under autarky. Consumers of imported cultural goods tend to gain, while consumers of exported cultural goods tend to lose from trade liberalization.
Handle: RePEc:nbr:nberwo:10426
Template-Type: ReDIF-Paper 1.0
Title: Hedonic Price Indexes for Personal Computer Operating Systems and Productivity Suites
Classification-JEL: D4; E3
Author-Name: Alan G. White
Author-Person: pwh19
Author-Name: Jaison R. Abel
Author-Person: pab107
Author-Name: Ernst R. Berndt
Author-Name: Cory W. Monroe
Note: PR
Number: 10427
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10427
File-URL: http://www.nber.org/papers/w10427.pdf
File-Format: application/pdf
Publication-Status: published as Alan G. WHITE & Jaison R. ABEL & Ernst R. BERNDT & Cory W. MONROE, 2005. "Hedonic Price Indexes for Personal Computer Operating Systems and Productivity Suites," Annales d'Economie et de Statistique, ENSAE, issue 79-80, pages 787-807.
Publication-Status: published as Hedonic Price Indexes for Personal Computer Operating Systems and Productivity Suites, Alan G. White, Jaison R. Abel, Ernst R. Berndt, Cory W. Monroe. in Contributions in Memory of Zvi Griliches, Mairesse and Trajtenberg. 2010
Abstract: Results of hedonic price regressions for personal computer operating systems and productivity suites advertised in PC World magazine by retail vendors during the time period 1984 to 2000 are reported. Among the quality attribute variables we use are new measures capturing the presence of network effects in personal computer operating systems, such as connectivity and compatibility, and product integration among components of productivity suites. Average annual growth rates of quality-adjusted prices of personal computer operating systems range from -15 to -18 percent, while those for productivity suites generally range between -13 and -16 percent. Price declines are generally greater in the latter half of the samples.
Handle: RePEc:nbr:nberwo:10427
Template-Type: ReDIF-Paper 1.0
Title: Quantile Regression under Misspecification, with an Application to the U.S. Wage Structure
Classification-JEL: J31; C13
Author-Name: Joshua Angrist
Author-Person: pan29
Author-Name: Victor Chernozhukov
Author-Person: pch864
Author-Name: Ivan Fernandez-Val
Author-Person: pfe104
Note: LS
Number: 10428
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10428
File-URL: http://www.nber.org/papers/w10428.pdf
File-Format: application/pdf
Publication-Status: published as Joshua Angrist & Victor Chernozhukov & Iván Fernández-Val, 2006. "Quantile Regression under Misspecification, with an Application to the U.S. Wage Structure," Econometrica, Econometric Society, vol. 74(2), pages 539-563, 03.
Abstract: Quantile regression(QR) fits a linear model for conditional quantiles, just as ordinary least squares (OLS) fits a linear model for conditional means. An attractive feature of OLS is that it gives the minimum mean square error linear approximation to the conditional expectation function even when the linear model is misspecified. Empirical research using quantile regression with discrete covariates suggests that QR may have a similar property, but the exact nature of the linear approximation has remained elusive. In this paper, we show that QR can be interpreted as minimizing a weighted mean-squared error loss function for specification error. The weighting function is an average density of the dependent variable near the true conditional quantile. The weighted least squares interpretation of QR is used to derive an omitted variables bias formula and a partial quantile correlation concept, similar to the relationship between partial correlation and OLS. We also derive general asymptotic results for QR processes allowing for misspecification of the conditional quantile function, extending earlier results from a single quantile to the entire process. The approximation properties of QR are illustrated through an analysis of the wage structure and residual inequality in US Census data for 1980, 1990, and 2000. The results suggest continued residual inequality growth in the 1990s, primarily in the upper half of the wage distribution and for college graduates.
Handle: RePEc:nbr:nberwo:10428
Template-Type: ReDIF-Paper 1.0
Title: Competition in Imperfect Markets: Does it Help California's Medicaid Mothers?
Classification-JEL: I11; I12
Author-Name: Anna Aizer
Author-Person: pai9
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Enrico Moretti
Author-Person: pmo392
Note: CH EH IO PE
Number: 10429
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10429
File-URL: http://www.nber.org/papers/w10429.pdf
File-Format: application/pdf
Abstract: Poor and uneducated patients may not know what health care is desirable and, if fully insured, have little incentive to minimize the costs of their care. Partly in response to these concerns, most states have moved a substantial portion of their Medicaid caseloads out of traditional competitive fee-for-service (FFS) care, and into mandatory managed care (MMC) plans that severely restrict the choice of provider. We use a unique longitudinal data base of California births in order to examine the impact of this policy on pregnant women and infants. California phased in MMC creating variation in the timing of MMC. We identify the effects of MMC using changes in the regime faced by individual mothers between births. Some counties adopted single-carrier plans, while others adopted regimes with at least two carriers. Hence, we also ask whether competition between at least two carriers improved MMC outcomes. We find that MMC reduced the quality of prenatal care and increased low birth weight, prematurity, and neonatal death. Our results suggest that the competitive FFS system provided better care than the new MMC system, and that requiring the participation of at least two plans did not improve matters.
Handle: RePEc:nbr:nberwo:10429
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Policy in the Aftermath of 9/11
Classification-JEL: E1; E6
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Jonas Fisher
Author-Person: pfi4
Note: EFG ME PE
Number: 10430
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10430
File-URL: http://www.nber.org/papers/w10430.pdf
File-Format: application/pdf
Publication-Status: published as Eichenbaum, Martin & Fisher, Jonas D M, 2005. "Fiscal Policy in the Aftermath of 9/11," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(1), pages 1-22, February.
Abstract: This paper investigates the nature of U.S. fiscal policy in the aftermath of 9/11. We argue that the recent dramatic fall in the government surplus and the large fall in tax rates cannot be accounted for by either the state of the U.S. economy as of 9/11 or as the typical response of fiscal policy to a large exogenous rise in military expenditures. Our evidence suggests that, had tax rates responded in the way they `normally' do to large exogenous changes in government spending, aggregate output would have been lower and the surplus would not have changed by much. The unusually large fall in tax rates had an expansionary impact on output and was the primary force underlying the large decline in the surplus. Our results do not bear directly on the question of whether the decline in tax rates and the decline in the surplus after 9/11 were desirable or not.
Handle: RePEc:nbr:nberwo:10430
Template-Type: ReDIF-Paper 1.0
Title: The Yield Curve, Recessions and the Credibility of the Monetary Regime: Long Run Evidence 1875-1997
Classification-JEL: E43; E42
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Joseph G. Haubrich
Author-Person: pha107
Note: DAE ME
Number: 10431
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10431
File-URL: http://www.nber.org/papers/w10431.pdf
File-Format: application/pdf
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875-1997. This predictability varies over time, however, particularly across different monetary regimes. In accord with our proposed theory, regimes with low credibility (high persistence of inflation) tend to have better predictability.
Handle: RePEc:nbr:nberwo:10431
Template-Type: ReDIF-Paper 1.0
Title: Hierarchies, Specialization, and the Utilization of Knowledge: Theory and Evidence from the Legal Services Industry
Classification-JEL: D23; K40
Author-Name: Luis Garicano
Author-Person: pga77
Author-Name: Thomas N. Hubbard
Note: IO
Number: 10432
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10432
File-URL: http://www.nber.org/papers/w10432.pdf
File-Format: application/pdf
Abstract: What role do hierarchies play with respect to the organization of production and what determines their structure? We develop an equilibrium model of hierarchical organization, then provide empirical evidence using confidential data on thousands of law offices from the 1992 Census of Services. The driving force in the model is increasing returns in the utilization of acquired knowledge. We show how the equilibrium assignment of individuals to hierarchical positions varies with the degree to which their human capital is field-specialized, then show how this equilibrium changes with the extent of the market. We find empirical evidence consistent with a central proposition of the model: the share of lawyers that work in hierarchies and the ratio of associates to partners increases as market size increases and lawyers field-specialize. Other results provide evidence against alternative interpretations that emphasize unobserved differences in the distribution of demand or 'firm size effects,' and lend additional support to the view that a role hierarchies play in legal services is to help exploit increasing returns associated with the utilization of human capital.
Handle: RePEc:nbr:nberwo:10432
Template-Type: ReDIF-Paper 1.0
Title: Schumpeterian Profits in the American Economy: Theory and Measurement
Classification-JEL: O30; O31
Author-Name: William D. Nordhaus
Author-Person: pno115
Note: EFG PR
Number: 10433
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10433
File-URL: http://www.nber.org/papers/w10433.pdf
File-Format: application/pdf
Abstract: The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able to appropriate the returns from innovative activity. We first show the underlying equations for Schumpeterian profits. We then estimate the value of these profits for the non-farm business economy. We conclude that only a minuscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.
Handle: RePEc:nbr:nberwo:10433
Template-Type: ReDIF-Paper 1.0
Title: Short Interest and Stock Returns
Classification-JEL: G12; G14
Author-Name: Paul Asquith
Author-Name: Parag A. Pathak
Author-Name: Jay R. Ritter
Author-Person: pri69
Note: CF AP
Number: 10434
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10434
File-URL: http://www.nber.org/papers/w10434.pdf
File-Format: application/pdf
Publication-Status: published as Asquith, Paul, Parag A. Pathak and Jay R. Ritter. "Short Interest, Institutional Ownership, And Stock Returns," Journal of Financial Economics, 2005, v78(2,Nov), 243-276.
Abstract: Using a longer time period and both NYSE-Amex and Nasdaq stocks, this paper examines short interest and stock returns in more detail than any previous study and finds that many documented patterns are not robust. While equally weighted high short interest portfolios generally underperform, value weighted portfolios do not. In addition, there is a negative correlation between market returns and short interest over our whole period. Finally, inferences from short time periods, such as 1988-1994 when the underperformance of high short interest stocks was exceptional or 1995-2002, when high short interest Nasdaq stocks did not underperform, are misleading.
Handle: RePEc:nbr:nberwo:10434
Template-Type: ReDIF-Paper 1.0
Title: Child Mental Health and Human Capital Accumulation: The Case of ADHD
Classification-JEL: I2; I1
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Mark Stabile
Author-Person: pst179
Note: ED EH CH
Number: 10435
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10435
File-URL: http://www.nber.org/papers/w10435.pdf
File-Format: application/pdf
Publication-Status: published as Currie, Janet & Stabile, Mark, 2006. "Child mental health and human capital accumulation: The case of ADHD," Journal of Health Economics, Elsevier, vol. 25(6), pages 1094-1118, November.
Abstract: One in five U.S. youngsters has a mental disorder, but we know little about the effects of these disorders on outcomes. We examine U.S. and Canadian children with symptoms of Attention Deficit Hyperactivity Disorder (ADHD), the most common child mental health problem. Our innovations include the use of large nationally representative samples of children, the use of questions administered to all children rather than focusing only on diagnosed cases, and the use of sibling fixed effects to control for omitted variables. We find large negative effects on test scores and schooling attainment suggesting that mental health conditions are a more important determinant of average outcomes than physical health conditions.
Handle: RePEc:nbr:nberwo:10435
Template-Type: ReDIF-Paper 1.0
Title: Information Diffusion Effects in Individual Investors' Common Stock Purchases: Covet Thy Neighbors' Investment Choices
Classification-JEL: D83; G11
Author-Name: Zoran Ivkovich
Author-Name: Scott Weisbenner
Note: AP
Number: 10436
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10436
File-URL: http://www.nber.org/papers/w10436.pdf
File-Format: application/pdf
Publication-Status: published as Ivković, Zoran and Scott Weisbenner. “Information Diffusion Effects in Individual Investors’ Common Stock Purchases: Covet Thy Neighbors’ Investment Choices.” Review of Financial Studies 20, 4 (2007): 1327-1357.
Abstract: Using data on stock purchases individual investors made through a discount broker from 1991 to 1996, we study information diffusion effects the relation between household investment choices and those made by their neighbors. A ten percentage point increase in neighbors' purchases of stocks from an industry is associated with a two percentage point increase in the household's own purchases of stocks from that industry, with the effect considerably larger for purchases of local stocks. The presence of information diffusion effects is robust to controls for potential inside information effects and to household fixed effects. Upon controlling for aggregate trading patterns, households' and neighbors' investment style preferences, and the industry composition of local firms, we attribute approximately one-third to one-half of the overall diffusion effect to word-of-mouth communication. Disentangling the overall diffusion effect suggests that the significant relation between our measures of information diffusion and subsequent industry-level returns appears to be driven by its word-of-mouth component.
Handle: RePEc:nbr:nberwo:10436
Template-Type: ReDIF-Paper 1.0
Title: Managed Care Discounting: Evidence from the MarketScan Database
Classification-JEL: I11
Author-Name: Avi Dor
Author-Name: Siran M. Koroukian
Author-Name: Michael Grossman
Author-Person: pgr107
Note: EH
Number: 10437
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10437
File-URL: http://www.nber.org/papers/w10437.pdf
File-Format: application/pdf
Publication-Status: published as Avi Dor & Siran M. Koroukian & Michael Grossman, 2004. "Managed Care Discounting: Evidence from the MarketScan Database," INQUIRY: The Journal of Health Care Organization, Provision, and Financing, vol 41(2), pages 159-169.
Abstract: The paper examines price discounting by health maintenance organizations and preferred provider organizations in markets for hospital services. Our empirical analysis focuses on transaction prices for angioplasty, which is a relatively common procedure, with well defined 'product' characteristics. After controlling for patient and procedure heterogeneity and market power we find that on average prices for PPOs are 8% lower than fee-for-service plans, followed by point-of-service HMOs who capture a 24% discount. Our results are in general agreement with earlier work that shows that managed care discounts are 'real', after accounting for process of care.
Handle: RePEc:nbr:nberwo:10437
Template-Type: ReDIF-Paper 1.0
Title: Which Countries Have State Religions?
Classification-JEL: O1; Z1
Author-Name: Robert J. Barro
Author-Person: pba251
Author-Name: Rachel M. McCleary
Note: EFG
Number: 10438
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10438
File-URL: http://www.nber.org/papers/w10438.pdf
File-Format: application/pdf
Publication-Status: published as Barro, Robert J. and Rachel M. McCleary. "Which Countries Have State Religions?," Quarterly Journal of Economics, 2005, v120(4,Nov), 1331-1370.
Abstract: For 188 independent countries in 2000, 72 had no state religion in the years 2000, 1970, and 1900; 58 had a state religion at all three dates; and 58 had some kind of transition. Among the 58 transitional countries, 12 had two transitions, 4 of which (former Soviet Republics in Asia) involved two forms of state religion. The probability of having a state religion in 2000 or 1970 depends strongly on the status of state religion in 1900 but much more so for countries that experienced no major change in political regime during the 20th century. Communist governments tend not to have state religion - only one Communist country (Somalia in 1970) had a state religion in the usual sense. However, a past history of Communism does not have much influence on the probability of state religion. Greater concentration of religious adherence is positively related to state religion, and most of this relation seems to reflect causation from religious concentration to state religion, rather than the reverse. Theoretically, state religion is more probable when the population adheres to a monotheistic religion. We find this effect for Muslim adherence, but the relationship is not robust. State religion is less likely in sub-Saharan Africa, possibly because of the intense competition for converts in this region among the major world religions. The probability of state religion does not differ significantly between former colonies and non-colonies but is higher for British colonies than for Spanish and Portuguese colonies. Variables that have little effect on the probability of state religion include per capita GDP, country size, and the extent of democracy, civil liberties, and the rule of law.
Handle: RePEc:nbr:nberwo:10438
Template-Type: ReDIF-Paper 1.0
Title: Political Pressure Deflection
Classification-JEL: D72; F13
Author-Name: James E. Anderson
Author-Person: pan2
Author-Name: Maurizio Zanardi
Author-Person: pza18
Note: ITI
Number: 10439
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10439
File-URL: http://www.nber.org/papers/w10439.pdf
File-Format: application/pdf
Publication-Status: published as James Anderson & Maurizio Zanardi, 2009. "Political pressure deflection," Public Choice, Springer, vol. 141(1), pages 129-150, October.
Abstract: Much economic policy is deliberately shifted away from direct political processes to administrative processes --- political pressure deflection. Pressure deflection poses a puzzle to standard political economy models which suggest that having policies to `sell' is valuable to politicians. The puzzle is solved here by showing that incumbents will favor pressure deflection since it can deter viability of a challenger, essentially like entry deterrence. U.S. trade policy since 1934 provides a prime example, especially antidumping law and its evolution.
Handle: RePEc:nbr:nberwo:10439
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Shenanigans, Targeted Federal Health Care Funds, and Patient Mortality
Classification-JEL: H0; I0
Author-Name: Katherine Baicker
Author-Name: Douglas Staiger
Author-Person: pst466
Note: EH PE
Number: 10440
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10440
File-URL: http://www.nber.org/papers/w10440.pdf
File-Format: application/pdf
Publication-Status: published as Baicker, Katherine and Douglas Staiger. "Fiscal Shenanigans, Targeted Federal Health Care Funds, And Patient Mortality," Quarterly Journal of Economics, 2005, v120(1,Feb), 345-386.
Abstract: The federal government spends billions of dollars each year on programs designed to increase the resources available to hospitals that serve the poor. This paper explores the intended and unintended effects of such targeted funds. First, how do these funds distort the behavior of state and local governments who wish to appropriate the funds for other uses? Second, to the extent that these funds do increase resources in the targeted hospitals, do patients benefit? We use the rapid and uneven growth in Medicaid Disproportionate Share Hospital (DSH) payments across states and hospitals to answer these questions. We identify states that were most able to appropriate DSH funds and show that, while DSH payments to public hospitals in these states were systematically diverted, DSH payments to other hospitals and in other states were not diverted. Additional resources that were made available to hospitals (rather than appropriated by the state) were associated with significant declines in infant and post-heart attack mortality. A range of evidence suggests that these improvements were due to better hospital care. Overall, our analysis implies that public subsidies can be an effective mechanism for improving medical care and outcomes for the poor, but that the impact is limited by the ability of state and local government to divert the targeted funds.
Handle: RePEc:nbr:nberwo:10440
Template-Type: ReDIF-Paper 1.0
Title: Financial-Sector FDI and Host Countries: New and Old Lessons
Classification-JEL: F3; F4
Author-Name: Linda Goldberg
Author-Person: pgo256
Note: ITI
Number: 10441
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10441
File-URL: http://www.nber.org/papers/w10441.pdf
File-Format: application/pdf
Publication-Status: published as Linda S. Goldberg, 2007. "Financial sector FDI and host countries: new and old lessons," Economic Policy Review, Federal Reserve Bank of New York, issue Mar, pages 1-17.
Abstract: Many of the lessons from foreign direct investment (FDI) research on manufacturing and extractive resource industries are applicable to financial-sector FDI. This paper reviews the main findings and policy themes of FDI research, with a primary focus on the host country implications of FDI for emerging market economies. Evidence on technology transfers, productivity spillovers, wage effects, macroeconomic growth, and fiscal and tax concerns are emphasized. Throughout this review, I stress that parallel findings often arise independently in the separate research programs that focus on general and financial-sector FDI. I also emphasize that some important differences between the results of FDI into these sectors are apparent, especially with respect to their implications for local institution building and business cycles. These differences, more so than the similarities, should be the focus of concentrated research efforts.
Handle: RePEc:nbr:nberwo:10441
Template-Type: ReDIF-Paper 1.0
Title: Factor Prices and Factor Substitution in U.S. Firms' Manufacturing Affiliates Abroad
Classification-JEL: F23; J23
Author-Name: Maria Borga
Author-Name: Robert E. Lipsey
Author-Person: pli259
Note: ITI
Number: 10442
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10442
File-URL: http://www.nber.org/papers/w10442.pdf
File-Format: application/pdf
Publication-Status: published as Maria Borga & Robert E. Lipsey, 2009. "Factor Prices, Factor Substitution and Exporting in US Manufacturing Affiliates Abroad," The World Economy, Blackwell Publishing, vol. 32(1), pages 30-48, 01.
Abstract: Using confidential individual firm data from the Bureau of Economic Analysis survey of U.S. firms' manufacturing operations abroad, we investigate the determinants of capital intensity in affiliate operations. Host country labor cost, the scale of host country production, and the capital intensity of the parent firm's production in the United States, are all significant influences. The parent's capital intensity is the strongest and most consistent determinant of affiliate capital intensity. Affiliates that export are more sensitive to these factors in their choice of factor proportions than affiliates that sell only in their host countries.
Handle: RePEc:nbr:nberwo:10442
Template-Type: ReDIF-Paper 1.0
Title: The Optimal Design of Unemployment Insurance and Employment Protection. A First Pass
Classification-JEL: D60; E62
Author-Name: Olivier Blanchard
Author-Person: pbl2
Author-Name: Jean Tirole
Author-Person: pti33
Note: EFG ME PE
Number: 10443
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10443
File-URL: http://www.nber.org/papers/w10443.pdf
File-Format: application/pdf
Abstract: Much of the policy discussion of labor market institutions has been at the margin, with proposals to tighten unemployment benefits, reduce employment protection, and so on. There has been little discussion however of what the ultimate goal and architecture should be. The paper focuses on characterizing this ultimate goal, the optimal architecture of labor market institutions. We start our analysis with a simple benchmark, with risk averse workers, risk neutral firms and random shocks to productivity. In this benchmark, we show that optimality requires both unemployment insurance and employment protection---in the form of layoff taxes; it also requires that layoff taxes be equal to unemployment benefits. We then explore the implications of four broad categories of deviations: limits on insurance, limits on layoff taxes, ex-post wage bargaining, and heterogeneity of firms or workers. We show how the architecture must be modified in each case. The scope for insurance may be more limited than in the benchmark; so may the scope for employment protection. The general principle remains however, namely the need to look at unemployment insurance and employment protection together, rather than in isolation.
Handle: RePEc:nbr:nberwo:10443
Template-Type: ReDIF-Paper 1.0
Title: Social Security and Trust Fund Management
Classification-JEL: H55; H23
Author-Name: Takashi Oshio
Note: AG PE
Number: 10444
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10444
File-URL: http://www.nber.org/papers/w10444.pdf
File-Format: application/pdf
Publication-Status: published as Oshio, Takashi. "Social Security And Trust Fund Management," Journal of the Japanese and International Economies, 2004, v18(4,Dec), 528-550.
Abstract: In this paper we investigate why and to what extent the government should have a social security trust fund, and how it should manage the fund in the face of demographic shocks, based on a simple overlapping-generations model. We show that, given an aging population, a trust fund in some form could achieve the (modified) golden rule or to offset the negative income effect of a PAYGO system. Besides, in a closed economy where factor-prices effects dominate, using the trust fund as a buffer for demographic shocks could lead to a widening of intergenerational inequality. We also the discuss policy implications of our analysis on the social security reform debate in Japan, including the fixed tax method and the use of the trust fund in the face of a rapidly aging population.
Handle: RePEc:nbr:nberwo:10444
Template-Type: ReDIF-Paper 1.0
Title: Access to Care, Provider Choice and Racial Disparities
Classification-JEL: I12; I18
Author-Name: Anna Aizer
Author-Person: pai9
Author-Name: Adriana Lleras-Muney
Author-Person: pll45
Author-Name: Mark Stabile
Author-Person: pst179
Note: EH CH
Number: 10445
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10445
File-URL: http://www.nber.org/papers/w10445.pdf
File-Format: application/pdf
Publication-Status: published as Aizer, Anna, Adriana Lleras-Muney and Mark Stabile. "Access To Care, Provider Choice, And The Infant Health Gradient," American Economic Review, 2005, v95(2,May), 248-252.
Abstract: This paper explores whether choice of provider explains any of the observed infant health gradients, and if so, why poor women choose different providers than their richer neighbors. We exploit an exogenous change in policy that occurred in California in the early 1990s that suddenly increased Medicaid payments to hospitals and which lead to a sharp change in where women with Medicaid delivered. To characterize the extent to which poor women responded to the increase in provider access, we calculate hospital segregation indices (which measure the extent to which Medicaid mothers delivered in separate hospitals than privately insured mothers residing in the same geographic area) both before and after the policy change for each market in California and show that it fell sharply after the policy change. Even though black mothers responded least to the increase in provider choice afforded by the policy change, they benefited the most from hospital desegregation in terms of reduced neonatal mortality and decreased incidence of very low birth weight. In contrast, other groups with lower initial neonatal mortality moved more and gained less in terms of improvements in birth outcomes.
Handle: RePEc:nbr:nberwo:10445
Template-Type: ReDIF-Paper 1.0
Title: Investment, Capacity, and Uncertainty: A Putty-Clay Approach
Classification-JEL: D24; E22
Author-Name: Simon Gilchrist
Author-Person: pgi28
Author-Name: John C. Williams
Author-Person: pwi23
Note: ME
Number: 10446
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10446
File-URL: http://www.nber.org/papers/w10446.pdf
File-Format: application/pdf
Publication-Status: published as Gilchrist, Simon and John C. Williams. "Investment, Capacity, And Uncertainty: A Putty-Clay Approach," Review of Economic Dynamics, 2005, v8(1,Jan), 1-27.
Abstract: We embed the microeconomic decisions associated with investment under uncertainty, capacity utilization, and machine replacement in a general equilibrium model based on putty-clay technology. In the presence of irreversible factor proportions, a mean-preserving spread in the productivity of investment raises aggregate investment, productivity, and output. Increases in uncertainty have important dynamic implications, causing sustained increases in investment and hours and a medium-term expansion in the growth rate of labor productivity.
Handle: RePEc:nbr:nberwo:10446
Template-Type: ReDIF-Paper 1.0
Title: A Jackknife Estimator for Tracking Error Variance of Optimal Portfolios Constructed Using Estimated Inputs1
Classification-JEL: G11; G12
Author-Name: Gopal K. Basak
Author-Name: Ravi Jagannathan
Author-Person: pja91
Author-Name: Tongshu Ma
Note: AP
Number: 10447
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10447
File-URL: http://www.nber.org/papers/w10447.pdf
File-Format: application/pdf
Abstract: We develop a jackknife estimator for the conditional variance of a minimum-tracking- error-variance portfolio constructed using estimated covariances. We empirically evaluate the performance of our estimator using an optimal portfolio of 200 stocks that has the lowest tracking error with respect to the S&P500 benchmark when three years of daily return data are used for estimating covariances. We find that our jackknife estimator provides more precise estimates and suffers less from in-sample optimism when compared to conventional estimators.
Handle: RePEc:nbr:nberwo:10447
Template-Type: ReDIF-Paper 1.0
Title: High-Frequency Contagion Between the Exchange Rates and Stock Prices
Classification-JEL: F31; G12
Author-Name: Yuko Hashimoto
Author-Name: Takatoshi Ito
Note: IFM AP
Number: 10448
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10448
File-URL: http://www.nber.org/papers/w10448.pdf
File-Format: application/pdf
Publication-Status: published as Dungey, Mardi and Demosthenes N.Tambakis (eds.) Identifying International Financial Contagion: Progress and Challenges CERF Finance and the Economy series. Oxford and New York: Oxford University Press, 2005.
Abstract: This paper analyzes the co-movement of the exchange rates and the stock prices from the viewpoint of contagion among the eight countries in the region during the period of Asian currency crisis, 1997-1999. Ito and Hashimoto (2002; NBER working paper) proposed a new definition of high-frequency contagion using daily exchange rate data. This paper extends the idea to include the stock market origins that are separately identified for the exchange rate and the stock price. Then contagion is defined not only among the exchange rates and stock prices separately, but also between an exchange rate and a stock price of the same country or of different countries. One of the motivations is the following observation. Hong Kong successfully defended the peg to the U.S. dollar throughout the Asian currency crisis period. However, the Hong Kong stock market was affected by the decline in currencies of neighboring countries most notably in October 1997. We use a friction model and a Tobit model to analyze the impact of a negative shock in one asset price to others. The difference between mildly-affected countries and severely-affected countries is analyzed; categories of large declines in the exchange rates (or stock prices) are made differentiated; and whether the stock prices were increasing or decreasing is distinguished. It is found, among others, that there was, in general the contagion between the exchange rates and stock prices; that the stock prices in Hong Kong were found to suffer from contagious effects from the decline in the Asian currencies; and that Indonesian, Korean and Thai currency depreciation and Hong Kong stock price declines had impacts on other currencies and stock prices in the region during the crisis period.
Handle: RePEc:nbr:nberwo:10448
Template-Type: ReDIF-Paper 1.0
Title: Investor Sentiment and the Cross-Section of Stock Returns
Classification-JEL: G12
Author-Name: Malcolm Baker
Author-Person: pba735
Author-Name: Jeffrey Wurgler
Author-Person: pwu8
Note: CF AP
Number: 10449
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10449
File-URL: http://www.nber.org/papers/w10449.pdf
File-Format: application/pdf
Publication-Status: published as Malcolm Baker & Jeffrey Wurgler, 2006. "Investor Sentiment and the Cross-Section of Stock Returns," Journal of Finance, American Finance Association, vol. 61(4), pages 1645-1680, 08.
Abstract: We examine how investor sentiment affects the cross-section of stock returns. Theory predicts that a broad wave of sentiment will disproportionately affect stocks whose valuations are highly subjective and are difficult to arbitrage. We test this prediction by studying how the cross-section of subsequent stock returns varies with proxies for beginning-of-period investor sentiment. When sentiment is low, subsequent returns are relatively high on smaller stocks, high volatility stocks, unprofitable stocks, non-dividend-paying stocks, extreme-growth stocks, and distressed stocks, consistent with an initial underpricing of these stocks. When sentiment is high, on the other hand, these patterns attenuate or fully reverse. The results are consistent with predictions and appear unlikely to reflect an alternative explanation based on compensation for systematic risk.
Handle: RePEc:nbr:nberwo:10449
Template-Type: ReDIF-Paper 1.0
Title: Estimating Dynamic Models of Imperfect Competition
Classification-JEL: L0; C5
Author-Name: Patrick Bajari
Author-Name: C. Lanier Benkard
Author-Name: Jonathan Levin
Author-Person: ple318
Note: IO PR
Number: 10450
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10450
File-URL: http://www.nber.org/papers/w10450.pdf
File-Format: application/pdf
Publication-Status: published as Patrick Bajari & C. Lanier Benkard & Jonathan Levin, 2007. "Estimating Dynamic Models of Imperfect Competition," Econometrica, Econometric Society, vol. 75(5), pages 1331-1370, 09.
Abstract: We describe a two-step algorithm for estimating dynamic games under the assumption that behavior is consistent with Markov Perfect Equilibrium. In the first step, the policy functions and the law of motion for the state variables are estimated. In the second step, the remaining structural parameters are estimated using the optimality conditions for equilibrium. The second step estimator is a simple simulated minimum distance estimator. The algorithm applies to a broad class of models, including I.O. models with both discrete and continuous controls such as the Ericson and Pakes (1995) model. We test the algorithm on a class of dynamic discrete choice models with normally distributed errors, and a class of dynamic oligopoly models similar to that of Pakes and McGuire (1994).
Handle: RePEc:nbr:nberwo:10450
Template-Type: ReDIF-Paper 1.0
Title: Constitutions, Corporations, and Corruption: American States and Constitutional Change
Classification-JEL: N0; N4
Author-Name: John Joseph Wallis
Note: DAE
Number: 10451
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10451
File-URL: http://www.nber.org/papers/w10451.pdf
File-Format: application/pdf
Publication-Status: published as Wallis, John Joseph. "Constitutions, Corporations, And Corruption: American States And Constitutional Change, 1842 To 1852," Journal of Economic History, 2005, v65(1,Mar), 211-256.
Abstract: During the 1840s, twelve American states adopted new constitutions. Eleven of the twelve states adopted new procedures for issuing government debt and for chartering corporations through general incorporation acts. These institutional innovations were American inventions, and today hard budget constraints and transparent corporate forms with secure stockholder rights are important institutional determinants of successful economies. This paper investigates how and why these two important institutional reforms occurred at precisely the same time. The link is the public finance implications of chartering corporations and investing in large infrastructure projects in finance and transportation. States borrowed almost $200 million between 1820 and 1840 to invest in canals, railroads, and banks. Electoral pressure to provide these important government investments was counter-balanced by the difficulty of providing geographically specific projects and paying for them with geographically widespread taxation. States responded with several innovative schemes for financing canals and banks in the 1820s and 1830s. Some schemes involved taxless finance:' construction of canals and banks used borrowed funds and privileges for private corporations so that current taxes did not rise, but required a contingent commitment by taxpayers to service bonds in case of the project's failure. Other schemes involved benefit taxation:' coordinating the tax costs of projects with the geographic benefits of canal and bank construction through the property tax. When a fiscal crisis hit states in the early 1840s, they responded by changing their constitutions, and thereby economic institutions, to eliminate the possibility of taxless finance in the future.
Handle: RePEc:nbr:nberwo:10451
Template-Type: ReDIF-Paper 1.0
Title: Does Prekindergarten Improve School Preparation and Performance?
Classification-JEL: J13; I20
Author-Name: Katherine A. Magnuson
Author-Name: Christopher J. Ruhm
Author-Person: pru7
Author-Name: Jane Waldfogel
Note: CH ED
Number: 10452
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10452
File-URL: http://www.nber.org/papers/w10452.pdf
File-Format: application/pdf
Publication-Status: published as Magnuson, Katherine A. & Ruhm, Christopher & Waldfogel, Jane, 2007. "Does prekindergarten improve school preparation and performance?," Economics of Education Review, Elsevier, vol. 26(1), pages 33-51, February.
Abstract: Prekindergarten programs are expanding rapidly, but to date, evidence on their effects is quite limited. Using rich data from Early Childhood Longitudinal Study, we estimate the effects of prekindergarten on children's school readiness. We find that prekindergarten increases reading and mathematics skills at school entry, but also increases behavioral problems and reduces self-control. Furthermore, the effects of prekindergarten on skills largely dissipate by the spring of first grade, although the behavioral effects do not. Finally, effects differ depending on children's family background and subsequent schooling, with the largest and most lasting academic gains for disadvantaged children and those attending schools with low levels of academic instruction.
Handle: RePEc:nbr:nberwo:10452
Template-Type: ReDIF-Paper 1.0
Title: R-Squared Around the World: New Theory and New Tests
Classification-JEL: G12; G14
Author-Name: Li Jin
Author-Name: Stewart C. Myers
Note: CF
Number: 10453
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10453
File-URL: http://www.nber.org/papers/w10453.pdf
File-Format: application/pdf
Publication-Status: published as Jin, Li and Stewart C. Myers. "R2 Around The World: New Theory And New Tests," Journal of Financial Economics, 2006, v79(2,Feb), 257-292.
Abstract: Morck, Yeung and Yu (MYY, 2000) show that R2 and other measures of stock market synchronicity are higher in countries with less developed financial systems and poorer corporate governance. MYY and Campbell, Lettau, Malkiel and Xu (2001) also find a secular decline in R2 in the United States over the last century. We develop a model that explains these results and generates additional testable hypotheses. The model shows how control rights and information affect the division of risk-bearing between inside managers and outside investors. Insiders capture part of the firm's operating cash flows. The limits to capture are based on outside investors' perception of the value of the firm. The firm is not completely transparent, however. Lack of transparency shifts firm-specific risk to insiders and reduces the amount of firm-specific risk absorbed by outside investors. Our model also predicts that opaque' stocks are more likely to crash, that is, to deliver large negative returns. Crashes occur when insiders have to absorb too much firm-specific bad news and decide to give up.' We test these predictions using stock returns from all major stock markets from 1990 to 2001. We find strong positive relationships between R2 and several measures of opaqueness. These measures also explain the frequency of large negative returns.
Handle: RePEc:nbr:nberwo:10453
Template-Type: ReDIF-Paper 1.0
Title: Consumption-Wealth Comovement of the Wrong Sign
Classification-JEL: E2; G1
Author-Name: James J. Choi
Author-Name: David Laibson
Author-Person: pla164
Author-Name: Brigitte C. Madrian
Author-Person: pma384
Author-Name: Andrew Metrick
Author-Person: pme99
Note: AP EFG
Number: 10454
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10454
File-URL: http://www.nber.org/papers/w10454.pdf
File-Format: application/pdf
Abstract: Economic theory predicts that an unexpected wealth windfall should increase consumption shortly after the windfall is received. We test this prediction using administrative records on over 40,000 401(k) accounts. Contrary to theory, we estimate a negative short-run marginal propensity to consume out of idiosyncratic 401(k) capital gains shocks. These results cannot be interpreted as standard intertemporal substitution, since the idiosyncratic returns that we study do not predict future returns. Instead, our findings imply that many investors are influenced by a positive feedback effect, through which higher recent returns encourage higher short-run saving. Like any other animal, 401(k) participants appear to increase behaviors that have been associated with high rewards in the past.
Handle: RePEc:nbr:nberwo:10454
Template-Type: ReDIF-Paper 1.0
Title: On the Efficacy of Reforms: Policy Tinkering, Institutional Change, and Entrepreneurship
Classification-JEL: O1; O4
Author-Name: Murat Iyigun
Author-Person: piy4
Author-Name: Dani Rodrik
Author-Person: pro60
Note: CF PE
Number: 10455
Creation-Date: 2004-04
Order-URL: http://www.nber.org/papers/w10455
File-URL: http://www.nber.org/papers/w10455.pdf
File-Format: application/pdf
Publication-Status: published as Eicher, Theo S. and Cecilia Garcia-Penalosa (eds.) Institutions, Development, and Economic Growth CESifo Seminar Series. Cambridge and London: Cambridge University Press, 2006.
Abstract: We analyze the interplay of policy reform and entrepreneurship in a model where investment decisions and policy outcomes are both subject to uncertainty. The production costs of non-traditional activities are unknown and can only be discovered by entrepreneurs who make sunk investments. The policy maker has access to two strategies: policy tinkering,' which corresponds to a new draw from a pre-existing policy regime, and institutional reform,' which corresponds to a draw from a different regime and imposes an adjustment cost on incumbent firms. Tinkering and institutional reform both have their respective advantages. Institutional reforms work best in settings where entrepreneurial activity is weak, while it is likely to produce disappointing outcomes where the cost discovery process is vibrant. We present cross-country evidence that strongly supports such a conditional relationship.
Handle: RePEc:nbr:nberwo:10455
Template-Type: ReDIF-Paper 1.0
Title: What Prompts Japan to Intervene in the Forex Market? A New Approach to a Reaction Function
Classification-JEL: F31; E58
Author-Name: Takatoshi Ito
Author-Name: Tomoyoshi Yabu
Author-Person: pya85
Note: IFM
Number: 10456
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10456
File-URL: http://www.nber.org/papers/w10456.pdf
File-Format: application/pdf
Publication-Status: published as Ito, Takatoshi & Yabu, Tomoyoshi, 2007. "What prompts Japan to intervene in the Forex market? A new approach to a reaction function," Journal of International Money and Finance, Elsevier, vol. 26(2), pages 193-212, March.
Abstract: This paper analyzes and estimates the reaction function of the Japanese monetary authorities in deciding when to intervene in the foreign exchange (forex) markets, using daily Japanese intervention data from April 1, 1991 to December 31, 2002. This paper is the first in estimating the reaction function of the monetary authorities in the forex market intervention with following new methods. First, a theoretical friction model is presented to describe the intervention as cost-minimizing behavior. Second, the ordered probit analysis, which is consistent with the theoretical model, was carried out to predict authorities' reaction function. The regime change from frequent, small-size intervention before June 1995 and infrequent, large-size intervention after June 1995 is established and estimations are conducted for two different regimes separately. Third, a noise-to-signal ratio is applied in selecting the optimal cutoff point in estimated ordered probit function to use the model for predicting interventions. Major findings are as follows: (1) There was a regime change in June 1995 from small-scale frequent interventions to large-scale infrequent interventions; (2) the first half of the sample period had lower friction costs than the second half of the sample period; (3) Judging from the model and data, the optimum cutoff was higher in the first half than the second half.
Handle: RePEc:nbr:nberwo:10456
Template-Type: ReDIF-Paper 1.0
Title: The Shape of Production Function and the Direction of Technical Change
Classification-JEL: O40; E10
Author-Name: Charles I. Jones
Author-Person: pjo24
Note: EFG PR
Number: 10457
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10457
File-URL: http://www.nber.org/papers/w10457.pdf
File-Format: application/pdf
Publication-Status: published as Jones, Charles I. "The Shape Of Production Functions And The Direction Of Technical Change," Quarterly Journal of Economics, 2005, v120(2,May), 517-549.
Abstract: This paper views the standard production function in macroeconomics as a reduced form and derives its properties from microfoundations. The shape of this production function is governed by the distribution of ideas. If that distribution is Pareto, then two results obtain: the global production function is Cobb-Douglas, and technical change in the long run is labor-augmenting. Kortum (1997) showed that Pareto distributions are necessary if search-based idea models are to exhibit steady-state growth. Here we show that this same assumption delivers the additional results about the shape of the production function and the direction of technical change.
Handle: RePEc:nbr:nberwo:10457
Template-Type: ReDIF-Paper 1.0
Title: A Model of Housing in the Presence of Adjustment Costs: A Structural Interpretation of Habit Persistence
Classification-JEL: E21; G12
Author-Name: Marjorie Flavin
Author-Name: Shinobu Nakagawa
Note: EFG
Number: 10458
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10458
File-URL: http://www.nber.org/papers/w10458.pdf
File-Format: application/pdf
Publication-Status: published as Flavin, Marjorie and Shinobu Nakagawa. "A Model of Housing in the Presence of Adjustment Costs: A Structural Interpretation of Habit Persistence." American Economic Review 98, 1 (March 2008): 474-95.
Abstract: The paper generalizes the Grossman and Laroque (1990) model of optimal consumption and portfolio allocation in the context in which a durable good (or house) subject to adjustment costs is both an argument of the utility function and a component of wealth. Because the Grossman and Laroque model abstracts completely from nondurable consumption, their analysis cannot address either a) the potential spillover effects of the adjustment costs of the durable good on the dynamics of nondurable consumption, or b) the implications for portfolio allocation of housing risk arising from variation in the relative price of housing. By introducing an endogenously determined but infrequently adjusted state variable, the housing model generates many of the implications of the habit persistence model, such as smooth nondurable consumption, state-dependent risk aversion, and a small elasticity of intertemporal substitution despite moderate risk aversion. Using a specification of the utility function which nests both the housing model and habit persistence, the Euler equation for nondurable consumption is estimated with household level data on food consumption and housing from the PSID. The habit persistence model (without housing effects) can be decisively rejected, while the housing model (without habit effects) is not rejected.
Handle: RePEc:nbr:nberwo:10458
Template-Type: ReDIF-Paper 1.0
Title: Child Care Subsidy Receipt, Employment, and Child Care Choices of Single Mothers
Classification-JEL: J13; I38
Author-Name: Erdal Tekin
Author-Person: pte12
Note: EH LS CH
Number: 10459
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10459
File-URL: http://www.nber.org/papers/w10459.pdf
File-Format: application/pdf
Publication-Status: published as Tekin, Erdal. "Child Care Subsidy Receipt, Employment, And Child Care Choices Of Single Mothers," Economics Letters, 2005, v89(1,Oct), 1-6.
Abstract: This paper examines the impact of actual subsidy receipt of single mothers on their joint employment and child care mode decisions in the post-welfare reform environment, which places a high priority on parental choice with the quality and type of care chosen. Results indicate that single mothers are highly responsive to child care subsidies by increasing their employment while moving from parental and relative care to center care in the process.
Handle: RePEc:nbr:nberwo:10459
Template-Type: ReDIF-Paper 1.0
Title: What Determines Corruption? International Evidence from Micro Data
Classification-JEL: H1; K4
Author-Name: Naci Mocan
Author-Person: pmo270
Note: EFG LE
Number: 10460
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10460
File-URL: http://www.nber.org/papers/w10460.pdf
File-Format: application/pdf
Publication-Status: published as Naci Mocan, 2008. "What Determines Corruption? International Evidence From Microdata," Economic Inquiry, Western Economic Association International, vol. 46(4), pages 493-510, October.
Abstract: This paper utilizes a micro-level data set from 49 countries to address three issues: What determines corruption at the individual level? What determines the perception of the extent of corruption in the country? Does corruption have a direct impact on growth when the quality of the institutions are controlled for? In addition, the paper creates a direct measure of corruption which portrays the extent of corruption as revealed byindividuals who live in those countries. The results show that both personal and country characteristics determine the risk of exposure to bribery. Examples are gender, wealth, education, marital status, the city size, the legal origin of the country, the existence of uninterrupted democracy, a war between 1960s and 1980s, and the strength of the institutions in the country (measured by the risk of expropriation). The second part of the paper shows that controlling for endogeneity of corruption and institutional quality, actual corruption in the country and the proportion of the bribes asked by various government agencies have no direct impact on corruption perception. On the other hand, an improvement in the quality of institutions lowers the perception of corruption. The final section of the paper shows that controlling for the quality of the institutions, corruption does not have a direct impact on growth. Keeping constant the geographical location of the country, the legal origin, religious composition, the presence of a war, the federal status, initial education and income as well as the extent of corruption in the country, a one-half standard deviation increase in the quality of institutions (e.g. from the level of Indonesia to the level of India), generates an additional 0.7 percentage point increase in the average annual per capita GDP growth.
Handle: RePEc:nbr:nberwo:10460
Template-Type: ReDIF-Paper 1.0
Title: Models for Anchoring and Acquiescence Bias in Consumption Data
Classification-JEL: C81; D12
Author-Name: Arthur van Soest
Author-Person: pva270
Author-Name: Michael Hurd
Author-Person: phu137
Note: AG
Number: 10461
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10461
File-URL: http://www.nber.org/papers/w10461.pdf
File-Format: application/pdf
Abstract: Item non-response in household survey data on economic variables such as income, assets or consumption is a well-known problem. Follow-up unfolding bracket questions have been used as a tool to collect partial information on respondents that do not answer an open-ended question. It is also known, however, that mistakes are made in answering such unfolding bracket questions. In this paper, we develop several limited dependent variable models to analyze two sources of mistakes, anchoring and acquiescence (or yeasaying), focusing on the first bracket question. We use the experimental module of the AHEAD 1995 data, where the sample is randomly split into respondents who get an open-ended question on the amount of total family consumption - with follow-up unfolding brackets (of the form: is consumption $X or more?) for those who answer immediately directed to unfolding brackets. In both cases, the entry point of the unfolding bracket sequence is randomized. We compare models in which the probability of a mistake depends on the deviation between the true consumption amount and the entry point amount $X and models in which it does not. We find that allowing for acquiescence bias substantially changes the conclusions on the selective nature of non-response to the open-ended question and on the distribution of consumption expenditures in the population. Once acquiescence bias is taken into account, anchoring in the first bracket question plays only a minor role.
Handle: RePEc:nbr:nberwo:10461
Template-Type: ReDIF-Paper 1.0
Title: A Test for Anchoring and Yea-Saying in Experimental Consumption Data
Classification-JEL: C81; D12
Author-Name: Arthur van Soest
Author-Person: pva270
Author-Name: Michael Hurd
Author-Person: phu137
Note: AG
Number: 10462
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10462
File-URL: http://www.nber.org/papers/w10462.pdf
File-Format: application/pdf
Publication-Status: published as van Soest, Arthur & Hurd, Michael, 2008. "A Test for Anchoring and Yea-Saying in Experimental Consumption Data," Journal of the American Statistical Association, American Statistical Association, vol. 103, pages 126-136, March.
Abstract: In the experimental module of the AHEAD 1995 data, the sample is randomly split into respondents who get an open-ended question on the amount of total family consumption - with follow-up unfolding brackets (of the form: is consumption $X or more?) for those who answer don't know' or refuse' - and respondents who are immediately directed to unfolding brackets. In both cases, the entry point of the unfolding bracket sequence is randomized. These data are used to develop a nonparametric test for whether people make mistakes in answering the first bracket question, allowing for any type of selection into answering the open-ended question or not. Two well-known types of mistakes are considered: anchoring and yea-saying (or acquiescence). While the literature provides ample evidence that the entry point in the first bracket question serves as an anchor for follow-up bracket questions, it is less clear whether the answers to the first bracket question are already affected by anchoring. We reject the joint hypothesis of no anchoring and no yea-saying at the entry point. Once yea-saying is taken into account
Handle: RePEc:nbr:nberwo:10462
Template-Type: ReDIF-Paper 1.0
Title: A Simple Model of Optimal Hate Crime Legislation
Classification-JEL: K14; K42
Author-Name: Li Gan
Author-Person: pga94
Author-Name: Roberton C. Williams III
Author-Person: pwi38
Author-Name: Thomas Wiseman
Author-Person: pwi274
Note: PE
Number: 10463
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10463
File-URL: http://www.nber.org/papers/w10463.pdf
File-Format: application/pdf
Publication-Status: published as Li Gan & Roberton C. Williams Iii & Thomas Wiseman, 2011. "A Simple Model Of Optimal Hate Crime Legislation," Economic Inquiry, Western Economic Association International, vol. 49(3), pages 674-684, 07.
Abstract: We present a simple model of the effects of hate crime legislation. It shows that even if the direct harm to victims of hate crime is the same as for other crimes, because of other differences in the effects it may still be optimal to exert more law-enforcement effort to deter or prevent hate crime. These differences also have previously unrecognized effects on the optimal level of effort by potential hate crime victims to avoid being victimized, thus affecting the efficiency of government policies that encourage or discourage such effort. We discuss the implications of these results for optimal hate-crime policy, as well as for policy toward other similar crimes, such as terrorism.
Handle: RePEc:nbr:nberwo:10463
Template-Type: ReDIF-Paper 1.0
Title: Death Spiral or Euthanasia? The Demise of Generous Group Health Insurance Coverage
Classification-JEL: I11; G22
Author-Name: Mark V. Pauly
Author-Name: Olivia Mitchell
Author-Person: pmi73
Author-Name: Yuhui Zeng
Note: EH
Number: 10464
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10464
File-URL: http://www.nber.org/papers/w10464.pdf
File-Format: application/pdf
Publication-Status: published as Mark V. Pauly & Olivia S. Mitchell & Yuhui Zeng, 2007. "Death Spiral or Euthanasia? The Demise of Generous Group Health Insurance Coverage," INQUIRY: The Journal of Health Care Organization, Provision, and Financing, vol 44(4), pages 412-427.
Abstract: Employers must determine which sorts of healthcare insurance plans to offer employees and also set employee premiums for each plan provided. Depending on how they structure the premiums that employees pay across different healthcare insurance plans, plan sponsors alter the incentives to choose one plan over another. If employees know they differ by risk level but premiums do not fully reflect these risk differences, this can give rise to a so-called "death spiral" due to adverse selection. In this paper use longitudinal information from a natural experiment in the management of health benefits for a large employer to explore the impact of moving from a fixed dollar contribution policy to a risk-adjusted employer contribution policy. Our results suggest that implementing a significant risk adjustment had no discernable effect on adverse selection against the most generous indemnity insurance policy. This stands in stark contrast to previous studies, which have tended to find large impacts. Further analysis suggests that previous studies which appeared to detect plans in the throes of a death spiral, may instead have been experiencing an inexorable movement away from a non-preferred product, one that would have been inefficient for almost all workers even in the absence of adverse selection.
Handle: RePEc:nbr:nberwo:10464
Template-Type: ReDIF-Paper 1.0
Title: Factor Substitution and Unobserved Factor Quality in Nursing Homes
Classification-JEL: I12; L1
Author-Name: John Cawley
Author-Person: pca6
Author-Name: David C. Grabowski
Author-Name: Richard A. Hirth
Note: EH
Number: 10465
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10465
File-URL: http://www.nber.org/papers/w10465.pdf
File-Format: application/pdf
Publication-Status: published as Cawley, John, David Grabowski, and Richard Hirth. "Factor Substitution in Nursing Homes." Journal of Health Economics, March 2006, 25(2): 234-247.
Abstract: This paper studies factor substitution in one important sector: the nursing home industry. Specifically, we measure the extent to which nursing homes substitute materials for labor when labor becomes relatively more expensive. From a policy perspective, factor substitution in this market is important because materials-intensive methods of care are associated with greater risks of morbidity and mortality among nursing home residents. Studying longitudinal data from 1991-1998 on nearly every nursing home in the United States, we use the method of instrumental variables (IV) to address the potential endogeneity of nursing home wages. The results from the IV models are consistent with the theory of factor substitution: higher nursing home wages are associated with lower staffing, greater use of materials (specifically, physical restraints), and a higher proportion of residents with pressure ulcers. A comparison of OLS and IV results suggests that empirical studies of factor substitution should take into account unobserved heterogeneity in factor quality.
Handle: RePEc:nbr:nberwo:10465
Template-Type: ReDIF-Paper 1.0
Title: Social Security and the Evolution of Elderly Poverty
Classification-JEL: I3; H3
Author-Name: Gary V. Engelhardt
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: AG PE
Number: 10466
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10466
File-URL: http://www.nber.org/papers/w10466.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan, David Card and John Quigley (eds.) Public Policy and the Income Distribution. New York: Russell Sage Foundation, 2006.
Abstract: We use data from the March 1968-2001 Current Population Surveys to document the evolution of elderly poverty over this time period, and to assess the causal role of the Social Security program in reducing poverty rates. We develop an instrumental variable approach that relies on the large increase in benefits for birth cohorts from 1885 through 1916, and the subsequent decline and flattening of real benefits growth due to the Social Securing 'notch', to estimate of Social Security on elderly poverty. Our findings suggest that over all elderly families the elasticity of poverty to benefits is roughly unitary. This suggests that reductions in Social Security benefits would significantly alter the poverty of the elderly.
Handle: RePEc:nbr:nberwo:10466
Template-Type: ReDIF-Paper 1.0
Title: Specialization and Regulation: The Rise of Professionals and the Emergence of Occupational Licensing Regulation
Classification-JEL: J4; K2
Author-Name: Marc T. Law
Author-Person: pla238
Author-Name: Sukkoo Kim
Note: EH DAE LS
Number: 10467
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10467
File-URL: http://www.nber.org/papers/w10467.pdf
File-Format: application/pdf
Publication-Status: published as Law, Marc T. and Sukkoo Kim. "Specialization And Regulation: The Rise Of Professionals And The Emergence Of Occupational Licensing Regulation," Journal of Economic History, 2005, v65(3,Sep), 723-756.
Abstract: This paper explores the origins and effects of occupational licensing regulation in late nineteenth and early twentieth century America. Was licensing regulation introduced to limit competition in the market for professional services at the expense of efficiency? Or was licensing adopted to reduce informational asymmetries about professional quality? To investigate these hypotheses, we analyze the determinants of licensing legislation and the effect of licensing on entry into eleven occupations. We also examine the impact of medical licensing laws on entry into the medical profession, physician earnings, mortality rates, and the incidence of medical malpractice. We believe that, at least for the Progressive Era, the evidence is more consistent with the asymmetric information hypothesis than the industry capture hypothesis.
Handle: RePEc:nbr:nberwo:10467
Template-Type: ReDIF-Paper 1.0
Title: Soft Information, Hard Sell: The Role of Soft Information in the Pricing of Intellectual Property
Classification-JEL: G12; L14
Author-Name: William N. Goetzmann
Author-Person: pgo59
Author-Name: Vicente Pons-Sanz
Author-Name: S. Abraham Ravid
Note: IO AP
Number: 10468
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10468
File-URL: http://www.nber.org/papers/w10468.pdf
File-Format: application/pdf
Abstract: There is a growing literature on the differential impact of soft' vs. hard' information on organizational structure and behavior. This study is an attempt to empirically quantify the value of soft information, using a data-base on the market for screenplays. Script quality is difficult to estimate without subjective evaluation. Therefore soft information should be an integral part of the pricing of these intellectual assets. In our empirical analysis, we find that hard information' (reputation) variables as well as soft information' proxies are priced. Screenplays with high soft information content are priced significantly lower than high concept' harder information'- type scripts. We also follow the screenplays to production, and find that buyers seem to be able to forecast the success of a script, paying more for screenplays resulting in more successful films. In other words, high concept' (harder information) screenplays sell for more and result in more successful movies.
Handle: RePEc:nbr:nberwo:10468
Template-Type: ReDIF-Paper 1.0
Title: Earnings Inequality and the Business Cycle
Classification-JEL: E3; J2
Author-Name: Gadi Barlevy
Author-Person: pba129
Author-Name: Daniel Tsiddon
Author-Person: pts32
Note: EFG LS
Number: 10469
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10469
File-URL: http://www.nber.org/papers/w10469.pdf
File-Format: application/pdf
Publication-Status: published as Barlevy, Gadi and Daniel Tsiddon. "Earnings Inequality And The Business Cycle," European Economic Review, 2006, v50(1,Jan), 55-89.
Abstract: Economists have long viewed recessions as contributing to increasing inequality. However, this conclusion is largely based on data from a period in which inequality was increasing over time. This paper examines the connection between long-run trends and cyclical variation in earnings inequality. We develop a model in which cyclical and trend inequality are related, and find that in our model, recessions tend to amplify long-run trends, i.e. they involve more rapidly increasing inequality more when long-run inequality is increasing, and more rapidly decreasing inequality when long-run inequality is decreasing. In support of this prediction, we present evidence that during the first half of the 20th Century when earnings inequality was generally declining, earnings disparities indeed appeared to fall more rapidly in downturns, at least among workers at the top of the earnings distribution.
Handle: RePEc:nbr:nberwo:10469
Template-Type: ReDIF-Paper 1.0
Title: Who Benefits from the Education Saving Incentives? Income, Educational Expectations, and the Value of the 529 and Coverdell
Classification-JEL: I22; H21
Author-Name: Susan M. Dynarski
Author-Person: pdy1
Note: ED CH
Number: 10470
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10470
File-URL: http://www.nber.org/papers/w10470.pdf
File-Format: application/pdf
Publication-Status: published as Dynarski, Susan. "Who Benefits From The Education Saving Incentives? Income, Educational Expectations And The Value Of The 529 And Overdell," National Tax Journal, 2004, v57(2,Jun), 359-383.
Abstract: This paper examines the incentives created by the 529 and Coverdell tax-advantaged savings accounts. I find that the advantages of the 529 and Coverdell rise sharply with income, for three reasons. First, those with the highest marginal tax rates benefit the most from sheltering income, gaining most in both absolute and relative terms. Second, the tax penalties that are assessed on families whose children do not use their Coverdell accounts to pay for college hit some families harder than others. Strikingly, those in the top two tax brackets benefit more from non-educational use of a Coverdell than those in the bottom bracket gain from its educational use. Finally, the college financial aid system reduces aid for those families that have any financial assets, including an ESA or 529. Since the highest-income families are unaffected by this aid tax, this further intensifies the positive correlation between income and the advantages of the tax-advantaged college savings accounts.
Handle: RePEc:nbr:nberwo:10470
Template-Type: ReDIF-Paper 1.0
Title: Corporate Tax Avoidance and High Powered Incentives
Classification-JEL: G30; H25
Author-Name: Mihir A. Desai
Author-Name: Dhammika Dharmapala
Author-Person: pdh6
Note: CF PE
Number: 10471
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10471
File-URL: http://www.nber.org/papers/w10471.pdf
File-Format: application/pdf
Publication-Status: published as Desai, Mihir A. and Dhammika Dharmapala. "Corporate Tax Avoidance And High-Powered Incentives," Journal of Financial Economics, 2006, v79(1,Jan), 145-179.
Abstract: This paper analyzes the links between corporate tax avoidance, the growth of high-powered incentives for managers, and the structure of corporate governance. We develop and test a simple model that highlights the role of complementarities between tax sheltering and managerial diversion in determining how high-powered incentives influence tax sheltering decisions. The model generates the testable hypothesis that firm governance characteristics determine how incentive compensation changes sheltering decisions. In order to test the model, we construct an empirical measure of corporate tax avoidance - the component of the book-tax gap not attributable to accounting accruals - and investigate the link between this measure of tax avoidance and incentive compensation. We find that, for the full sample of firms, increases in incentive compensation tend to reduce the level of tax sheltering, suggesting a complementary relationship between diversion and sheltering. As predicted by the model, the relationship between incentive compensation and tax sheltering is a function of a firm's corporate governance. Our results may help explain the growing cross-sectional variation among firms in their levels of tax avoidance, the undersheltering puzzle,' and why large book-tax gaps are associated with subsequent negative abnormal returns.
Handle: RePEc:nbr:nberwo:10471
Template-Type: ReDIF-Paper 1.0
Title: Reliability and Competitive Electricity Markets
Classification-JEL: L1; L9
Author-Name: Paul L. Joskow
Author-Person: pjo110
Author-Name: Jean Tirole
Author-Person: pti33
Note: IO
Number: 10472
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10472
File-URL: http://www.nber.org/papers/w10472.pdf
File-Format: application/pdf
Publication-Status: published as Joskow, Paul and Jean Tirole. "Reliability and Competitive Electricity Markets." RAND Journal of Economics 38, 1 (Spring 2007): 60-84.
Abstract: Despite all of the talk about deregulation' of the electricity sector, a large number of non-market mechanisms have been imposed on emerging competitive wholesale and retail markets. These mechanisms include spot market price caps, operating reserve requirements, non-price rationing protocols, and administrative protocols for managing system emergencies. Many of these mechanisms have been carried over from the old regime of regulated monopoly and continue to be justified as necessary responses to market imperfections of various kinds and engineering requirements dictated by the special physical attributes of electric power networks. This paper seeks to bridge the gap between economists focused on designing competitive market mechanisms and engineers focused on the physical attributes and engineering requirements they perceive as being needed for operating a reliable electric power system. The paper starts by deriving the optimal prices and investment program when there are price-insensitive retail consumers, and their load serving entities can choose any level of rationing they prefer contingent on real time prices. It then examines the assumptions required for a competitive wholesale and retail market to achieve this optimal price and investment program. The paper analyses the implications of relaxing several of these assumptions. First, it analyzes the interrelationships between regulator-imposed price caps, capacity obligations, and system operator procurement, dispatch and compensation arrangements. It goes on to explore the implications of potential network collapses, the concomitant need for operating reserve requirements and whether market prices will provide incentives for investments consistent with these reserve requirement.
Handle: RePEc:nbr:nberwo:10472
Template-Type: ReDIF-Paper 1.0
Title: Retail Electricity Competition
Classification-JEL: L1; L9
Author-Name: Paul L. Joskow
Author-Person: pjo110
Author-Name: Jean Tirole
Author-Person: pti33
Note: IO
Number: 10473
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10473
File-URL: http://www.nber.org/papers/w10473.pdf
File-Format: application/pdf
Publication-Status: published as Joskow, Paul and Jean Tirole. "Retail Electricity Competition." RAND Journal of Economics 37, 4 (Winter 2006): 799-815.
Abstract: We analyze a number of unstudied aspects of retail electricity competition. We first explore the implications of load profiling of consumers whose traditional meters do not allow for measurement of their real time consumption, when consumers are homogeneous up to a scaling factor. In general, the combination of retail competition and load profiling does not yield the second best prices given the non price responsiveness of consumers. Specifically, the competitive equilibrium does not support the Ramsey two-part tariff. By contrast, when consumers have real time meters and are billed based on real time prices and consumption, retail competition yields the Ramsey prices even when consumers can only partially respond to variations in real time prices. More complex consumer heterogeneity does not lead to adverse se1ection and competitive screening behavior unless consumers have real time meters and are not rational. We then examine the incentives competitive retailers have to install one of two types of advanced metering equipment. Competing retailers overinvest in real time meters compared to the Ramsey optimum, but the investment incentives are constrained optimal given load-profiling and retail competition. Finally effects of physical limitations on the ability of system operators to cut off individual customers. Competing retailers have no incentive to determine the aggregate value of non-interruption of consumers in the zones they serve instead to free ride on other retailers serving consumers in the same zones.
Handle: RePEc:nbr:nberwo:10473
Template-Type: ReDIF-Paper 1.0
Title: R&D Sourcing, Joint Ventures and Innovation: A Multiple Indicators Approach
Classification-JEL: O31; O32
Author-Name: James D. Adams
Author-Person: pad11
Author-Name: Mircea Marcu
Note: PR
Number: 10474
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10474
File-URL: http://www.nber.org/papers/w10474.pdf
File-Format: application/pdf
Abstract: This paper reexamines the limits of the firm in Research and Development (R&D). Using evidence drawn from industrial laboratories we study the causes and effects of R&D sourcing. We begin with the causes of sourcing, finding that Research Joint Ventures (RJVs), the option to purchase and acquire, and research with federal government contribute to sourced R&D. We then consider the effects of sourcing, RJVs, and the firm's internal research on innovation, as defined by patents and new products. Our results are that sourcing has little effect on innovation, but that RJVs and internal research increase innovation. This suggests specialization: cost saving is the primary motivation for sourcing, while innovation is the primary motivation for RJVs and internal research. Therefore, shared R&D comes in several varieties: R&D sourcing is not concerned with innovation, but consistent with their purpose, RJVs are instrumental in jointly commercializing the research of different firms.
Handle: RePEc:nbr:nberwo:10474
Template-Type: ReDIF-Paper 1.0
Title: Bank Supervision, Regulation, and Instability During the Great Depression
Classification-JEL: N2; E44
Author-Name: Kris James Mitchener
Note: DAE ME
Number: 10475
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10475
File-URL: http://www.nber.org/papers/w10475.pdf
File-Format: application/pdf
Publication-Status: published as Mitchener, Kris James. "Bank Supervision, Regulation, And Instability During The Great Depression," Journal of Economic History, 2005, v65(1,Mar), 152-185.
Abstract: Even after controlling for local economic conditions, differences in state bank supervision and regulation contribute toward explaining the large variation in state bank suspension rates across U.S. counties during the Great Depression. More stringent capital requirements lowered suspension rates while laws prohibiting branch banking and imposing high reserve requirements had the opposite effect. States that endowed bank supervisors with the authority to liquidate banks minimized contagion and credit-channel dislocations and experienced lower suspension rates. Those that gave their supervisors sole authority to issue bank charters and that granted their supervisors long terms strengthened the incentives for bank lobbyists to influence supervisory decisions and consequently experienced higher rates of suspension.
Handle: RePEc:nbr:nberwo:10475
Template-Type: ReDIF-Paper 1.0
Title: Can Portfolio Rebalancing Explain the Dynamics of Equity Returns, Equity Flows, and Exchange Rates?
Classification-JEL: F30; F31
Author-Name: Harald Hau
Author-Person: pha313
Author-Name: Helene Rey
Author-Person: pre8
Note: IFM AP
Number: 10476
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10476
File-URL: http://www.nber.org/papers/w10476.pdf
File-Format: application/pdf
Publication-Status: published as Hau, Harald and Helene Rey. "Can Portfolio Rebalancing Explain The Dynamics Of Equity Returns, Equity Flows, And Exchange Rates?," American Economic Review, 2004, v94(2,May), 126-133.
Abstract: We explore whether the pattern of international equity returns, equity portfolio flows, and exchange rate returns are consistent with the hypothesis that (unhedged) global investors rebalance their portfolio in order to limit their exchange rate exposure when there are (1) relative equity return and (2) exchange rate shocks. We also explore whether (3) equity flow shocks influence the exchange rates and relative equity prices. In the estimation of the VAR system we do not impose any causal ordering upon the primitive shocks, but instead identify the system based on theoretical priors about the contemporaneous conditional correlations between the three variables. International data for the five largest equity markets are consistent with a theory in which equity returns and portfolio rebalancing are an important source of exchange rate dynamics.
Handle: RePEc:nbr:nberwo:10476
Template-Type: ReDIF-Paper 1.0
Title: How Confident Can We Be in CGE-Based Assessments of Free Trade Agreements?
Classification-JEL: C15; C68
Author-Name: Thomas Hertel
Author-Person: phe190
Author-Name: David Hummels
Author-Person: phu100
Author-Name: Maros Ivanic
Author-Name: Roman Keeney
Author-Person: pke34
Note: ITI
Number: 10477
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10477
File-URL: http://www.nber.org/papers/w10477.pdf
File-Format: application/pdf
Publication-Status: published as Hertel, Thomas & Hummels, David & Ivanic, Maros & Keeney, Roman, 2007. "How confident can we be of CGE-based assessments of Free Trade Agreements?," Economic Modelling, Elsevier, vol. 24(4), pages 611-635, July.
Abstract: Computable General Equilibrium models, widely used for the analysis of Free Trade Agreements (FTAs) are often criticized for having poor econometric foundations. This paper improves the linkage between econometric estimates of key parameters and their usage in CGE analysis in order to better evaluate the likely outcome of a FTA for the Americas. Our econometric work focuses on estimation of the elasticity of substitution among imports from different countries, which is especially critical for evaluating the positive and normative outcomes of FTAs. We match the data in the econometric exercise to the policy experiment at hand. Then we sample from the distribution of parameter values given by our econometric estimates in order to generate a distribution of model results, from which we can construct confidence intervals. We conclude that there is great potential for combining econometric work with CGE-based policy analysis in order to produce a richer set of results that are likely to prove more satisfying to the sophisticated policy maker.
Handle: RePEc:nbr:nberwo:10477
Template-Type: ReDIF-Paper 1.0
Title: Education, Work, and Crime: A Human Capital Approach
Classification-JEL: J2; K4
Author-Name: Lance Lochner
Author-Person: plo31
Note: LS CH
Number: 10478
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10478
File-URL: http://www.nber.org/papers/w10478.pdf
File-Format: application/pdf
Publication-Status: published as Lochner, Lance. "Education, Work And Crime: A Human Capital Approach," International Economic Review, 2004, v45(3,Aug), 811-843.
Abstract: This paper develops a model of crime in which human capital increases the opportunity cost of crime from foregone work and expected costs associated with incarceration. Older, more intelligent, and more educated adults should commit fewer street (unskilled) crimes. White collar crimes decline less (or increase) with age and education. Predictions for age-crime and education-crime relationships receive broad empirical support in self-report data from the National Longitudinal Survey of Youth and arrest data from the Uniform Crime Reports. The effects of education, training, and wage subsidies, as well as enforcement policies on criminal behavior are discussed.
Handle: RePEc:nbr:nberwo:10478
Template-Type: ReDIF-Paper 1.0
Title: Bank Chartering and Political Corruption in Antebellum New York: Free Banking as Reform
Classification-JEL: N11; G21
Author-Name: Howard Bodenhorn
Author-Person: pbo547
Note: DAE
Number: 10479
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10479
File-URL: http://www.nber.org/papers/w10479.pdf
File-Format: application/pdf
Publication-Status: published as Howard Bodenhorn, 2006. "Bank Chartering and Political Corruption in Antebellum New York. Free Banking as Reform," NBER Chapters, in: Corruption and Reform: Lessons from America's Economic History, pages 231-258 National Bureau of Economic Research, Inc.
Abstract: One traditional and oft-repeated explanation of the political impetus behind free banking connects the rise of Jacksonian populism and a rejection of the privileges associated with corporate chartering. A second views free banking as an ill-informed inflationist, pro business response to the financial panic of 1837. This chapter argues that both explanations are lacking. Free banking was the progeny of the corruption associated with bank chartering and reflected social, political and economic backlashes against corruption dating to the late-1810s. Three strands of political thought -- Antimasonic egalitarianism, Jacksonian pragmatism, and pro-business American Whiggism -- converged in the 1830s and led to economic reform. Equality of treatment was the political watchword of the 1830s and free banking was but one manifestation of this broader impulse.
Handle: RePEc:nbr:nberwo:10479
Template-Type: ReDIF-Paper 1.0
Title: Trade Costs
Classification-JEL: F0
Author-Name: James E. Anderson
Author-Person: pan2
Author-Name: Eric van Wincoop
Author-Person: pva387
Note: ITI
Number: 10480
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10480
File-URL: http://www.nber.org/papers/w10480.pdf
File-Format: application/pdf
Publication-Status: published as Anderson, Jemes E. and Eric van Wincoop. "Trade Costs," Journal of Economic Literature, 2004, v42(3,Sep), 691-751.
Abstract: This paper surveys the measurement of trade costs --- what we know, and what we don't know but may usefully attempt to find out. Partial and incomplete data on direct measures of costs go together with inference on implicit costs from trade flows and prices. Total trade costs in rich countries are large. The ad valorem tax equivalent is about 170% when pushing the data very hard. Poor countries face even higher trade costs. There is a lot of variation across countries and across goods within countries, much of which makes economic sense. Theory looms large in our survey, providing interpretation and perspective on the one hand and suggesting improvements for the future on the other hand. Some new results are presented to apply and interpret gravity theory properly and to handle aggregation appropriately.
Handle: RePEc:nbr:nberwo:10480
Template-Type: ReDIF-Paper 1.0
Title: Institutions as the Fundamental Cause of Long-Run Growth
Classification-JEL: N11; N13
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Simon Johnson
Author-Person: pjo44
Author-Name: James Robinson
Author-Person: pro179
Note: EFG
Number: 10481
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10481
File-URL: http://www.nber.org/papers/w10481.pdf
File-Format: application/pdf
Publication-Status: published as Aghion, Philippe and Stephen Durlauf (eds.) Handbook of Economic Growth. North Pole: 2005.
Abstract: This paper develops the empirical and theoretical case that differences in economic institutions are the fundamental cause of differences in economic development. We first document the empirical importance of institutions by focusing on two 'quasi-natural experiments' in history, the division of Korea into two parts with very different economic institutions and the colonization of much of the world by European powers starting in the fifteenth century. We then develop the basic outline of a framework for thinking about why economic institutions differ across countries. Economic institutions determine the incentives of and the constraints on economic actors, and shape economic outcomes. As such, they are social decisions, chosen for their consequences. Because different groups and individuals typically benefit from different economic institutions, there is generally a conflict over these social choices, ultimately resolved in favor of groups with greater political power. The distribution of political power in society is in turn determined by political institutions and the distribution of resources. Political institutions allocate de jure political power, while groups with greater economic might typically possess greater de facto political power. We therefore view the appropriate theoretical framework as a dynamic one with political institutions and the distribution of resources as the state variables. These variables themselves change over time because prevailing economic institutions affect the distribution of resources, and because groups with de facto political power today strive to change political institutions in order to increase their de jure political power in the future. Economic institutions encouraging economic growth emerge when political institutions allocate power to groups with interests in broad-based property rights enforcement, when they create effective constraints on power-holders, and when there are relatively few rents to be captured by power-holders. We illustrate the assumptions, the workings and the implications of this framework using a number of historical examples.
Handle: RePEc:nbr:nberwo:10481
Template-Type: ReDIF-Paper 1.0
Title: Assessing the Economic Gains from Telecom Competition
Classification-JEL: L10
Author-Name: Richard N. Clarke
Author-Name: Kevin A. Hassett
Author-Person: pha378
Author-Name: Zoya Ivanova
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Note: IO
Number: 10482
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10482
File-URL: http://www.nber.org/papers/w10482.pdf
File-Format: application/pdf
Abstract: This paper develops and simulates a dynamic model of strategic telecom competition. The goal is to understand how regulatory policy, particularly relative to lease charges for local network elements, affects telecom competition, investment, retail prices, and consumer welfare. The model assumes two products, local voice service and data (broadband), and three types of players the regional Bell operating companies, referred to as incumbent local exchange carriers (ILECs), cable companies (Cables), and competitive local exchange carriers (CLECs). The game begins with a) ILECs established in each county with respect to the provision of local voice and data services and b) Cables established in roughly half of the counties with respect to the provision of data.There are one-time fixed costs of entering a county, product- and period-specific costs of operating in a county, and marginal costs of supplying each product. Economies of scope reduce the fixed entry and operating costs of supplying both products in a given county at a given point in time. Finally, in supplying telecom services in a given county, CLECs may enter by leasing ILEC infrastructure at specified access rates. The requirement that ILECs allow CLECs to lease their local network facilities was established in the Telecommunications Act of 1996 as part of a quid pro quo that promised ILECs entry into the long distance market. But the ILECs continue to contest the quid. The ILECs support their position by suggesting that leased access reduces telecom investment and output and raises telecom prices. Our model considers the entire range of options available to each of the players, but it reaches the opposite conclusion. Indeed, we find thatif UNE-P rates were set at the Supreme Court-approved total element long-run incremental cost (TELRIC) levels, telecom investment and employment outlays would increase by over one fifth in counties containing the majority of the U.S. population and by over 30 percent in counties containing almost a third of the population. The present value of telecom outlays over the next 5 and 20 years would rise by $71 billion and $155 billion, respectively. On average, the switch from actual to TELRIC UNE rates would lower local phone rates across the country's 3108 counties by $57 per year, generating annual total savings to consumers of $15 billion. Almost two fifths of the population would experience reductions in local phone rates of 20 percent or more. Over one fifth would experience rate reductions of 30 percent or more. These findings of price reductions are based on a fairly conservative parameterization of our model with respect to the specification of true ILEC and CLEC incremental long-run production costs.
Handle: RePEc:nbr:nberwo:10482
Template-Type: ReDIF-Paper 1.0
Title: A Comprehensive Look at the Empirical Performance of Equity Premium Prediction
Classification-JEL: G12; G14
Author-Name: Amit Goval
Author-Person: pgo419
Author-Name: Ivo Welch
Author-Person: pwe95
Note: CF AP
Number: 10483
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10483
File-URL: http://www.nber.org/papers/w10483.pdf
File-Format: application/pdf
Publication-Status: published as Ivo Welch & Amit Goyal, 2008. "A Comprehensive Look at The Empirical Performance of Equity Premium Prediction," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 21(4), pages 1455-1508, July.
Abstract: Given the historically high equity premium, is it now a good time to invest in the stock market? Economists have suggested a whole range of variables that investors could or should use to predict: dividend price ratios, dividend yields, earnings-price ratios, dividend payout ratios, net issuing ratios, book-market ratios, interest rates (in various guises), and consumption-based macroeconomic ratios (cay). The typical paper reports that the variable predicted well in an *in-sample* regression, implying forecasting ability. Our paper explores the *out-of-sample* performance of these variables, and finds that not a single one would have helped a real-world investor outpredicting the then-prevailing historical equity premium mean. Most would have outright hurt. Therefore, we find that, for all practical purposes, the equity premium has not been predictable, and any belief about whether the stock market is now too high or too low has to be based on theoretical prior, not on the empirically variables we have explored.
Handle: RePEc:nbr:nberwo:10483
Template-Type: ReDIF-Paper 1.0
Title: Finders Keepers: Forfeiture Laws, Policing Incentives, and Local Budgets
Classification-JEL: H0; H7
Author-Name: Katherine Baicker
Author-Name: Mireille Jacobson
Author-Person: pja574
Note: PE
Number: 10484
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10484
File-URL: http://www.nber.org/papers/w10484.pdf
File-Format: application/pdf
Publication-Status: published as Baicker, Katherine and Mireille Jacobson. "Finders Keepers: Forfeiture Laws, Policing, and Local Budgets." Journal of Public Economics 91, 11 (December 2007): 2113-2136.
Abstract: In order to encourage anti-drug policing, both the federal government and many state governments have enacted laws that allow police agencies to keep a substantial fraction of assets that they seize in drug arrests. By adjusting their own allocations to police budgets, however, county governments can effectively undermine these incentives, capturing the additional resources for other uses. We use a rich new data set on police seizures and county spending to explore the reactions of both local governments and police to the complex incentives generated by these laws. We find that local governments do indeed offset the seizures that police make by reducing their other allocations to policing, undermining the statutory incentive created by the laws. They are more likely to do so in times of fiscal distress. Police, in turn, respond to the real net incentives for seizures, once local offsets are taken into account, not simply the incentives set out in statute. When de facto policies allow police to keep the assets they seize, they seize more. These findings have strong implications for the effectiveness of using financial incentives to solve agency problems in the provision of public goods in a federal system: agents respond to incentives, but so do intervening governments, and the effectiveness of federal and state laws in influencing agents' behavior is limited by the ability of local governments to divert funds to other uses.
Handle: RePEc:nbr:nberwo:10484
Template-Type: ReDIF-Paper 1.0
Title: Social Capital
Classification-JEL: E26; O10
Author-Name: Steven N. Durlauf
Author-Person: pdu117
Author-Name: Marcel Fafchamps
Author-Person: pfa2
Note: EFG
Number: 10485
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10485
File-URL: http://www.nber.org/papers/w10485.pdf
File-Format: application/pdf
Publication-Status: published as Durlauf, Steven N. & Fafchamps, Marcel, 2005. "Social Capital," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 26, pages 1639-1699 Elsevier.
Abstract: This paper surveys research on social capital. We explore the concepts that motivate the social capital literature, efforts to formally model social capital using economic theory, the econometrics of social capital, and empirical studies of the role of social capital in various socioeconomic outcomes. While our focus is primarily on the place of social capital in economics, we do consider its broader social science context. We argue that while the social capital literature has produced many insights, a number of conceptual and statistical problems exist with the current use of social capital by social scientists. We propose some ways to strengthen the social capital literature.
Handle: RePEc:nbr:nberwo:10485
Template-Type: ReDIF-Paper 1.0
Title: Plan Design and 401(k) Savings Outcomes
Classification-JEL: J32; H55
Author-Name: James J. Choi
Author-Name: David Laibson
Author-Person: pla164
Author-Name: Brigitte C. Madrian
Author-Person: pma384
Note: CF EFG AG LS
Number: 10486
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10486
File-URL: http://www.nber.org/papers/w10486.pdf
File-Format: application/pdf
Publication-Status: published as Choi, James J., David Laibson and Brigitte C. Madrian. “Plan Design and 401(k) Savings Outcomes.” National Tax Journal 57 (June 2004): 275-298.
Abstract: We assess the impact of 401(k) plan design on four different 401(k) savings outcomes: participation in the 401(k) plan, the distribution of employee contribution rates, asset allocation, and cash distributions. We show that plan design can have an important effect on all of these savings outcomes. This suggests an important role for both employers in determining how to structure their 401(k) plans and government regulators in creating institutions that encourage or discourage particular aspects of 401(k) plan design.
Handle: RePEc:nbr:nberwo:10486
Template-Type: ReDIF-Paper 1.0
Title: Do Welfare Asset Limits Affect Household Saving? Evidence from Welfare Reform
Classification-JEL: E2; H2
Author-Name: Erik Hurst
Author-Person: phu87
Author-Name: James P. Ziliak
Author-Person: pzi120
Note: EFG AG PE
Number: 10487
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10487
File-URL: http://www.nber.org/papers/w10487.pdf
File-Format: application/pdf
Publication-Status: published as Hurst, Erik and James P. Ziliak. "Do Welfare Asset Limits Affect Household Saving?," Journal of Human Resources, 2006, v41(1,Winter), 46-71.
Abstract: In this paper, we use household-level data from the Panel Study of Income Dynamics to examine the impact of new saving incentives that were implemented as part of the overhaul of U.S. welfare policy during the mid-1990s on the saving of households at risk of entering welfare. The Temporary Assistance to Needy Families program devolved responsibility of program rules to the states, and many states have responded by relaxing liquid asset and vehicle-equity limits that determine program eligibility, and by introducing time limits on benefit receipt. According to the recent theoretical work and statements made by public officials, such policies are predicted to increase total savings for those households who have a large ex-ante probability of welfare receipt such as female-headed households with children. We follow a sample of female heads with children from 1994 to 2001 and find that in both absolute terms, and relative to comparison groups of male heads and female heads without children, there has been no impact of welfare policy changes on the saving of at-risk households.
Handle: RePEc:nbr:nberwo:10487
Template-Type: ReDIF-Paper 1.0
Title: The Take Up of Social Benefits
Classification-JEL: I38
Author-Name: Janet Currie
Author-Person: pcu13
Note: LS PE CH
Number: 10488
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10488
File-URL: http://www.nber.org/papers/w10488.pdf
File-Format: application/pdf
Abstract: This paper offers a review of recent literature regarding the take up of social programs in the U.S. and U.K. A few general conclusions are drawn: First, take up is enhanced by automatic or default enrollment and lowered by administrative barriers, although removing individual barriers does not necessarily have much effect, suggesting that one must address the whole bundle. Second, although it may be impossible to devise a definitive test of the stigma hypothesis', other, more concrete types of transactions costs are probably a good deal more important. Third, although people generally have means-tested programs in the United States in mind when they discuss take up, low take up is also a problem in many non means-tested social insurance programs and in other countries. Historically, economists have paid little attention to rules about eligibility, and virtually no attention to how these rules are enforced or made known to eligibles. Hence, the marginal return to new data about these features of programs is likely to be high in terms of understanding take up. In an era of social experiments, it might also prove useful to consider experimental manipulations of factors thought to influence take up.
Handle: RePEc:nbr:nberwo:10488
Template-Type: ReDIF-Paper 1.0
Title: The Role of Information in Medical Markets: An Analysis of Publicly Reported Outcomes in Cardiac Surgery
Classification-JEL: I1
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Robert S. Huckman
Author-Person: phu90
Author-Name: Mary Beth Landrum
Note: EH
Number: 10489
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10489
File-URL: http://www.nber.org/papers/w10489.pdf
File-Format: application/pdf
Publication-Status: published as Cutler, David M., Robert S. Huckman and Mary Beth Landrum. "The Role Of Information In Medical Markets: An Analysis Of Publicly Reported Outcomes In Cardiac Surgery," American Economic Review, 2004, v94(2,May), 342-346.
Abstract: During the past two decades, several public and private organizations have initiated programs to report publicly on the quality of medical care provided by specific hospitals and physicians. These programs have sparked broad debate among economists and policy makers concerning whether, and to what extent, they have improved or harmed medical productivity. We take advantage of a cross-sectional time series of different hospitals to address two fundamental questions about quality reporting. First, we examine whether report cards affect the distribution of patients across hospitals. Second, we determine whether report cards lead to improved medical quality among hospitals identified as particularly bad or good performers. Our data are from the longest-standing effort to measure and report health care quality the Cardiac Surgery Reporting System (CSRS) in New York State. Using data for 1991 through 1999, we find that CSRS affected both the volume of cases and future quality at hospitals identified as poor performers. Poor performing hospitals lost relatively healthy patients to competing facilities and experienced subsequent improvements in their performance as measured by risk-adjusted mortality.
Handle: RePEc:nbr:nberwo:10489
Template-Type: ReDIF-Paper 1.0
Title: On the (Ir)Relevence of Distribution and Labor Supply Distortion of Government Policy
Classification-JEL: D61; D62
Author-Name: Louis Kaplow
Author-Person: pka44
Note: LE PE EEE
Number: 10490
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10490
File-URL: http://www.nber.org/papers/w10490.pdf
File-Format: application/pdf
Publication-Status: published as Kaplow, Louis. "On The (Ir)Relevance Of Distribution and Labor Supply Distortion To Government Policy," Journal of Economic Perspectives, 2004, v18(4,Fall), 159-175.
Abstract: Should the assessment of government policies, such as the provision of public goods and the control of externalities, deviate from first-best principles to account for distributive effects and for the distortionary cost of labor income taxation? For example, is the optimal extent of public goods provision smaller than indicated by the Samuelson rule because finance is distortionary? Or should environmental regulations fail to internalize externalities fully if the incidence of the regulations is regressive? It is suggested that these questions are best addressed by considering distribution-neutral implementation, in which budget balance is achieved by choosing an adjustment to the income tax that offsets the distributive impact of the policy in question. In basic cases, both distribution and labor supply distortion are moot because the target policy and the tax adjustment produce offsetting effects on each. Thus, traditional first-best principles provide good benchmarks for policy analysis after all. Moreover, even when actual implementation will not be distribution neutral in aggregate, distribution-neutral policy analysis has many conceptual and practical virtues that render it quite useful to investigators.
Handle: RePEc:nbr:nberwo:10490
Template-Type: ReDIF-Paper 1.0
Title: The Tying of Lending and Equity Underwriting
Classification-JEL: G2
Author-Name: Steven Drucker
Author-Name: Manju Puri
Author-Person: ppu153
Note: CF
Number: 10491
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10491
File-URL: http://www.nber.org/papers/w10491.pdf
File-Format: application/pdf
Publication-Status: published as Steven Drucker & Manju Puri, 2004. "Tying knots: lending to win equity underwriting business," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 428-435.
Abstract: This article examines the practice of tying,' which occurs when an underwriter lends to an issuer around the time of a public securities offering. We examine whether there are efficiencies from tying lending and underwriting which lead to benefits for issuers and underwriters. We find evidence consistent with tying occurring for issues when there are informational economies of scope from combining lending and underwriting. Firms benefit from tying through lower financing costs, as tied issuers receive lower underwriter fees on seasoned equity offerings and discounted loan yield spreads. These financing costs are significantly reduced for non-investment grade issuers, where informational economies of scope from combining lending with underwriting are likely to be large. These results are robust to matching methodology developed by Heckman, Ichimura, and Todd (1997, 1998). For underwriters, tying helps build relationships that augment an underwriter's expected revenues by increasing the probability of receiving both current and future business. Both commercial banks and investment banks tie lending and underwriting and offer price discounts, albeit in different ways, with commercial banks discounting loan yield spreads and investment banks offering reduced underwriter spreads.
Handle: RePEc:nbr:nberwo:10491
Template-Type: ReDIF-Paper 1.0
Title: Moving Up or Moving Out? Anti-Sweatshop Activists and Labor Market Outcomes
Classification-JEL: F1; F2
Author-Name: Ann Harrison
Author-Person: pha441
Author-Name: Jason Scorse
Note: ITI LS
Number: 10492
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10492
File-URL: http://www.nber.org/papers/w10492.pdf
File-Format: application/pdf
Abstract: During the 1990s, human rights and anti-sweatshop activists increased their efforts to improve working conditions and raise wages for workers in developing countries. These campaigns took many different forms: direct pressure to change legislation in developing countries, pressure on firms, newspaper campaigns, and grassroots organizing. This paper analyzes the impact of two different types of interventions on labor market outcomes in Indonesian manufacturing: (1) direct US government pressure, which contributed to a doubling of the minimum wage and (2) anti-sweatshop campaigns. The combined effects of the minimum wage legislation and the anti-sweatshop campaigns led to a 50 percent increase in real wages and a 100 percent increase in nominal wages for unskilled workers at targeted plants. We then examine whether higher wages led firms to cut employment or relocate elsewhere. Although the higher minimum wage reduced employment for unskilled workers, anti-sweatshop activism targeted at textiles, apparel, and footwear plants did not. Plants targeted by activists were more likely to close, but those losses were offset by employment gains at surviving plants. The message is a mixed one: activism significantly improved wages for unskilled workers in sweatshop industries, but probably encouraged some plants to leave Indonesia.
Handle: RePEc:nbr:nberwo:10492
Template-Type: ReDIF-Paper 1.0
Title: The Economic Aftermath of the 1960s Riots: Evidence from Property Values
Classification-JEL: R0; N92
Author-Name: William J. Collins
Author-Person: pco315
Author-Name: Robert A. Margo
Author-Person: pma319
Note: DAE LS
Number: 10493
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10493
File-URL: http://www.nber.org/papers/w10493.pdf
File-Format: application/pdf
Publication-Status: published as Collins, Williams J. and Robert A. Margo. “The Economic Aftermath of the 1960s Riots in American Cities: Evidence from Property Values." Journal of Economic History 67, 4 (December 2007): 849 -883.
Abstract: In the 1960s numerous cities in the United States experienced violent, race-related civil disturbances. Although social scientists have long studied the causes of the riots, the consequences have received much less attention. This paper examines census data from 1950 to 1980 to measure the riots' impact on the value of central-city residential property, and especially on black-owned property. Both ordinary least squares and two-stage least squares estimates indicate that the riots depressed the median value of black-owned property between 1960 and 1970, with little or no rebound in the 1970s. Analysis of household-level data suggests that the racial gap in the value of property widened in riot-afflicted cities during the 1970s.
Handle: RePEc:nbr:nberwo:10493
Template-Type: ReDIF-Paper 1.0
Title: Are Perks Purely Managerial Excess?
Classification-JEL: G3; J3
Author-Name: Raghuram Rajan
Author-Person: pra149
Author-Name: Julie Wulf
Note: CF LS
Number: 10494
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10494
File-URL: http://www.nber.org/papers/w10494.pdf
File-Format: application/pdf
Publication-Status: published as Rajan, Raghuram G. and Julie Wulf. "Are Perks Purely Managerial Excess?," Journal of Financial Economics, 2006, v79(1,Jan), 1-33.
Abstract: A widespread view is that executive perks exemplify agency problems -- they are a route through which managers misappropriate a firm’s surplus. Accordingly, firms with high free cash flow, operating in industries with limited investment prospects, should offer more perks, and firms subject to more external monitoring should offer fewer perks. The evidence for agency as an explanation of perks is, at best, mixed. Perks are, however, offered in situations in which they enhance managerial productivity. While we cannot rule out the occasional aberration, and while we have little to say on the overall level of perks, our findings suggest that treating perks purely as managerial excess is incorrect.
Handle: RePEc:nbr:nberwo:10494
Template-Type: ReDIF-Paper 1.0
Title: Elements of a Theory of Design Limits to Optimal Policy
Classification-JEL: C52; E6
Author-Name: William A. Brock
Author-Person: pbr142
Author-Name: Steven N. Durlauf
Author-Person: pdu117
Note: EFG
Number: 10495
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10495
File-URL: http://www.nber.org/papers/w10495.pdf
File-Format: application/pdf
Publication-Status: published as William A. Brock & Steven N. Durlauf, 2004. "Elements of a Theory of Design Limits to Optimal Policy," Manchester School, University of Manchester, vol. 72(s1), pages 1-18, 09.
Abstract: This paper presents a framework for understanding the limits that exist in optimal policy design in dynamic contexts. We consider the design of policies in the context of dynamic linear models. Fundamental design limits exist for policy rules in such environments in the sense that any policy rule embodies tradeoffs between the magnitudes of different frequency-specific components of the variance. Hence policies that are effective in eliminating low frequency variance components of a state variable can only do so at the cost of exacerbating high frequency variance components, and vice versa. Examples of the implications of such tradeoffs are considered.
Handle: RePEc:nbr:nberwo:10495
Template-Type: ReDIF-Paper 1.0
Title: Endogenous Financial and Trade Openness
Classification-JEL: F15; F21
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Ilan Noy
Author-Person: pno49
Note: ITI
Number: 10496
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10496
File-URL: http://www.nber.org/papers/w10496.pdf
File-Format: application/pdf
Publication-Status: published as Joshua Aizenman & Ilan Noy, 2009. "Endogenous Financial and Trade Openness," Review of Development Economics, Blackwell Publishing, vol. 13(2), pages 175-189, 05.
Abstract: This paper studies the endogenous determination of financial and trade openness. First, we outline a theoretical framework leading to two-way feedbacks between the different modes of openness; next, we identify these feedbacks empirically. We find that one standard deviation increase in commercial openness is associated with a 9.5 percent increase in de-facto financial openness (% of GDP), controlling for political economy and macroeconomic factors. Similarly, increase in de-facto financial openness has powerful effects on future trade openness. De-jure restrictions on capital mobility have only a weak impact on de-facto financial openness, while de-jure restrictions on the current account have large adverse effect on commercial openness. Having established (Granger) causality, we investigate the relative magnitudes of these directions of causality using Geweke's (1982) decomposition methodology. We find that almost all of the linear feedback between trade and financial openness can be accounted for by G-causality from financial openness to trade openness (53%) and from trade to financial openness (34%). We conclude that in an era of rapidly growing trade integration countries cannot choose financial openness independently of their degree of openness to trade. Dealing with greater exposure to financial turbulence by imposing restrictions on financial flows will likely be ineffectual.
Handle: RePEc:nbr:nberwo:10496
Template-Type: ReDIF-Paper 1.0
Title: Global Imbalances and the Lessons of Bretton Woods
Classification-JEL: F3; N0
Author-Name: Barry Eichengreen
Author-Person: pei2
Note: DAE IFM
Number: 10497
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10497
File-URL: http://www.nber.org/papers/w10497.pdf
File-Format: application/pdf
Publication-Status: published as Eichengreen,Barry. 2005. "Global Imbalances and the Lessons of Bretton Woods." Federal Reserve Bank of San Francisco, FRBSF Economic Letter 2005-32, November 25, 2005
Publication-Status: published as Barry Eichengreen, 2006. "Global Imbalances and the Lessons of Bretton Woods," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262050846.
Publication-Status: published as Eichengreen, Barry. 2004. "Global Imbalances and the Lessons of Bretton Woods." Economie Internationale/International Economics 100(4): 39-50.
Publication-Status: published as Barry Eichengreen, 2005. "Global imbalances and the lessons of Bretton Woods," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
Abstract: An influential school of thought views the current international monetary and financial system as Bretton Woods reborn. Today, like 40 years ago, the international system is composed of a core, which has the exorbitant privilege of issuing the currency used as international reserves, and a periphery, which is committed to export-led growth based on the maintenance of an undervalued exchange rate. In the 1960s, the core was the United States and the periphery was Europe and Japan. Now, with the spread of globalization, there is a new periphery, Asia, but the same old core, the United States, with the same tendency to live beyond its means. This view suggests that the current pattern of international settlements can be maintained indefinitely. The United States can continue running current account deficits because the emerging markets of Asia and Latin America are happy to accumulate dollars. There is no reason why the dollar must fall, since there is no need for balance of payments adjustment; in particular, the Asian countries will resist the appreciation of their currencies against the greenback. I argue that this image of a new Bretton Woods System confuses the incentives that confronted individual countries under Bretton Woods with the incentives that confronted groups of countries. It imagines the existence of a cohesive bloc of countries called the periphery ready and able to act in their collective interest. I argue, to the contrary, that the countries of Asia constituting the new periphery are unlikely to be able to subordinate their individual interest to the collective interest. This image of the current system as Bretton Woods reborn also overlooks how the world has changed since the 1960s. This alternative reading of history and current circumstances suggests that even if there exists today something vaguely resembling the Bretton Woods System, it is not long for this world.
Handle: RePEc:nbr:nberwo:10497
Template-Type: ReDIF-Paper 1.0
Title: Intrahousehold Resource Allocation in Cote d'Ivoire: Social Norms, Separate Accounts and Consumption Choices
Classification-JEL: O12; D13
Author-Name: Esther Duflo
Author-Person: pdu166
Author-Name: Christopher Udry
Author-Person: pud2
Note: CH
Number: 10498
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10498
File-URL: http://www.nber.org/papers/w10498.pdf
File-Format: application/pdf
Abstract: We study resource allocation within households in Côte d'Ivoire. In Côte d'Ivoire, as in much of Africa, husbands and wives farm separate plots, and there is some specialization by gender in the crops that are grown. These different crops are differentially sensitive to particular kinds of rainfall shocks. We find that conditional on overall levels of expenditure, the composition of household expenditure is sensitive to the gender of the recipient of a rainfall shock. For example, rainfall shocks associated with high yields of women's crops shift expenditure towards food. Strong social norms constrain the use of profits from yam cultivation, which is carried out almost exclusively by men. In line with these norms, we find that rainfall-induced fluctuations in income from yams are transmitted to expenditures on education and food, not to expenditures on private goods (like alcohol and tobacco). We reject the hypothesis of complete insurance within households, even with respect to publicly observable weather shocks. Different sources of income are allocated to different uses depending upon both the identity of the income earner and upon the origin of the income.
Handle: RePEc:nbr:nberwo:10498
Template-Type: ReDIF-Paper 1.0
Title: Money, Sex, and Happiness: An Empirical Study
Classification-JEL: I1; J3
Author-Name: David G. Blanchflower
Author-Person: pbl22
Author-Name: Andrew J. Oswald
Note: EH LE
Number: 10499
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10499
File-URL: http://www.nber.org/papers/w10499.pdf
File-Format: application/pdf
Publication-Status: published as Blanchflower, David G. and Andrew J. Oswald. "Money, Sex And Happiness: An Empirical Study," Scandinavian Journal of Economics, 2004, v106(3), 393-415.
Abstract: This paper studies the links between income, sexual behavior and reported happiness. It uses recent data on a random sample of 16,000 adult Americans. The paper finds that sexual activity enters strongly positively in happiness equations. Greater income does not buy more sex, nor more sexual partners. The typical American has sexual intercourse 2-3 times a month. Married people have more sex than those who are single, divorced, widowed or separated. Sexual activity appears to have greater effects on the happiness of highly educated people than those with low levels of education. The happiness-maximizing number of sexual partners in the previous year is calculated to be 1. Highly educated females tend to have fewer sexual partners. Homosexuality has no statistically significant effect on happiness. Our conclusions are based on pooled cross-section equations in which it is not possible to correct for the endogeneity of sexual activity. The statistical results should be treated cautiously.
Handle: RePEc:nbr:nberwo:10499
Template-Type: ReDIF-Paper 1.0
Title: Optimal Unemployment Insurance When Income Effects are Large
Classification-JEL: C41; D8
Author-Name: Raj Chetty
Author-Person: pch161
Note: LS PE
Number: 10500
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10500
File-URL: http://www.nber.org/papers/w10500.pdf
File-Format: application/pdf
Abstract: Studies of the consumption-smoothing benefits of unemployment insurance (UI) have found that the optimal benefit level is very small, perhaps even 0, for conventional levels of risk aversion. In this paper, I derive a formula for the optimal benefit rate in terms of income and price elasticities of unemployment durations, directly inferring risk aversion for the unemployed from their behavioral responses to UI benefits. The optimal rate of social insurance is shown to depend positively on the size of the income elasticity and negatively on the size of the substitution elasticity. I estimate these elasticities using semi-parametric hazard models and variation in UI laws across states and over time. The estimates indicate that income effects account for 70% of the effect of UI on unemployment durations, and yield an optimal replacement rate around 50% of pre-unemployment wages. These results challenge the prevailing view that social safety nets provide minimal welfare gains at a large efficiency cost.
Handle: RePEc:nbr:nberwo:10500
Template-Type: ReDIF-Paper 1.0
Title: Market Structure and Productivity: A Concrete Example
Classification-JEL: L1; L6
Author-Name: Chad Syverson
Author-Person: psy13
Note: IO PR
Number: 10501
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10501
File-URL: http://www.nber.org/papers/w10501.pdf
File-Format: application/pdf
Publication-Status: published as Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
Abstract: Many studies have documented large and persistent productivity differences across producers, even within narrowly defined industries. This paper both extends and departs from the past literature, which focused on technological explanations for these differences, by proposing that demand-side features also play a role in creating the observed productivity variation. The specific mechanism investigated here is the effect of spatial substitutability in the product market. When producers are densely clustered in a market, it is easier for consumers to switch between suppliers (making the market in a certain sense more competitive). Relatively inefficient producers find it more difficult to operate profitably as a result. Substitutability increases truncate the productivity distribution from below, resulting in higher minimum and average productivity levels as well as less productivity dispersion. The paper presents a model that makes this process explicit and empirically tests it using data from U.S. ready-mixed concrete plants, taking advantage of geographic variation in substitutability created by the industry's high transport costs. The results support the model's predictions and appear robust. Markets with high demand density for ready-mixed concrete and thus high concrete plant densities have higher lower-bound and average productivity levels and exhibit less productivity dispersion among their producers.
Handle: RePEc:nbr:nberwo:10501
Template-Type: ReDIF-Paper 1.0
Title: Do Domestic Investors Have an Edge? The Trading Experience of Foreign Investors in Korea
Classification-JEL: F36; G12
Author-Name: Hyuk Choe
Author-Name: Bong-Chan Kho
Author-Name: Rene M. Stulz
Note: IFM AP
Number: 10502
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10502
File-URL: http://www.nber.org/papers/w10502.pdf
File-Format: application/pdf
Publication-Status: published as Hyuk Choe & Bong-Chan Kho & René M. Stulz, 2005. "Do Domestic Investors Have an Edge? The Trading Experience of Foreign Investors in Korea," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 18(3), pages 795-829.
Abstract: We investigate whether domestic investors have an edge over foreign investors in trading domestic stocks.Using Korean data, we show that foreign money managers pay more than domestic money managers when they buy and receive less when they sell for medium and large trades. The sample average daily trade-weighted disadvantage of foreign money managers is of 21 basis points for purchases and 16 basis points for sales. There is also some evidence that domestic individual investors have an edge over foreign investors. The explanation for these results is that prices move more against foreign investors than against domestic investors before trades.
Handle: RePEc:nbr:nberwo:10502
Template-Type: ReDIF-Paper 1.0
Title: Land of Addicts? An Empirical Investigation of Habit-Based Asset Pricing Behavior
Classification-JEL: G1
Author-Name: Xiaohong Chen
Author-Person: pch1746
Author-Name: Sydney C. Ludvigson
Author-Person: plu153
Note: AP
Number: 10503
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10503
File-URL: http://www.nber.org/papers/w10503.pdf
File-Format: application/pdf
Publication-Status: published as Xiaohong Chen & Sydney C. Ludvigson, 2009. "Land of addicts? an empirical investigation of habit-based asset pricing models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(7), pages 1057-1093.
Abstract: This paper studies the ability of a general class of habit-based asset pricing models to match the conditional moment restrictions implied by asset pricing theory. We treat the functional form of the habit as unknown, and to estimate it along with the rest of the model's finite dimensional parameters. Using quarterly data on consumption growth, assets returns and instruments, our empirical results indicate that the estimated habit function is nonlinear, the habit formation is better described as internal rather than external, and the estimated time-preference parameter and the power utility parameter are sensible. In addition, the estimated habit function generates a positive stochastic discount factor (SDF) proxy and performs well in explaining cross-sectional stock return data . We find that an internal habit SDF proxy can explain a cross-section of size and book-market sorted portfolio equity returns better than (i) the Fama and French (1993) three-factor model, (ii) Lettau and Ludvigson (2001) scaled consumption CAPM model, (iii) an external habit SDF proxy, (iv) the classic CAPM, and (v) the classic consumption CAPM.
Handle: RePEc:nbr:nberwo:10503
Template-Type: ReDIF-Paper 1.0
Title: Prediction Markets
Classification-JEL: D7; D8
Author-Name: Justin Wolfers
Author-Person: pwo9
Author-Name: Eric Zitzewitz
Author-Person: pzi23
Note: EFG
Number: 10504
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10504
File-URL: http://www.nber.org/papers/w10504.pdf
File-Format: application/pdf
Publication-Status: published as Justin Wolfers & Eric Zitzewitz, 2004. "Prediction Markets," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 107-126, Spring.
Abstract: We analyze the extent to which simple markets can be used to aggregate disperse information into efficient forecasts of uncertain future events. Drawing together data from a range of prediction contexts, we show that market-generated forecasts are typically fairly accurate, and that they outperform most moderately sophisticated benchmarks. Carefully designed contracts can yield insight into the market's expectations about probabilities, means and medians, and also uncertainty about these parameters. Moreover, conditional markets can effectively reveal the market's beliefs about regression coefficients, although we still have the usual problem of disentangling correlation from causation. We discuss a number of market design issues and highlight domains in which prediction markets are most likely to be useful.
Handle: RePEc:nbr:nberwo:10504
Template-Type: ReDIF-Paper 1.0
Title: How Much Does Household Collateral Constrain Regional Risk Sharing?
Classification-JEL: E2
Author-Name: Hanno Lustig
Author-Person: plu17
Author-Name: Stijn Van Nieuwerburgh
Author-Person: pva368
Note: EFG LS
Number: 10505
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10505
File-URL: http://www.nber.org/papers/w10505.pdf
File-Format: application/pdf
Publication-Status: published as Hanno Lustig & Stijn Van Nieuwerburgh. "How Much Does Household Collateral Constrain Regional Risk Sharing?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(2), pages 265-294, April 2010. "How Much Does Household Collateral Constrain Regional Risk Sharing?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
Abstract: We construct a new data set of consumption and income data for the largest US metropolitan areas, and we show that the covariance of regional consumption and income growth varies over time and in the cross-section. In times and regions where collateral is scarce, regional consumption growth is about twice as sensitive to income growth. Household-level borrowing frictions can explain this new stylized fact. When the value of housing relative to human wealth falls, loan collateral shrinks, borrowing (risk-sharing) declines, and the sensitivity of consumption to income increases. Our model aggregates heterogeneous, borrowing-constrained households into regions characterized by a common housing market. The resulting regional consumption patterns quantitatively match those in the data.
Handle: RePEc:nbr:nberwo:10505
Template-Type: ReDIF-Paper 1.0
Title: Simple Estimators for the Parameters of Discrete Dynamic Games (with Entry/Exit Samples)
Classification-JEL: L10; C51
Author-Name: Ariel Pakes
Author-Person: ppa20
Author-Name: Michael Ostrovsky
Author-Person: pos32
Author-Name: Steve Berry
Author-Person: pbe18
Note: IO PR
Number: 10506
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10506
File-URL: http://www.nber.org/papers/w10506.pdf
File-Format: application/pdf
Publication-Status: published as Pakes, Ariel, Michael Ostrovsky, and Steven Berry. “Simple Estimators for the Parameters of Discrete Dynamic Games, with Entry/Exit Examples.” RAND Journal of Economics 38, 2 (Summer 2007): 373-399.
Abstract: This paper considers the problem of estimating the distribution of payoffs in a discrete dynamic game, focusing on models where the goal is to learn about the distribution of firms' entry and exit costs. The idea is to begin with non parametric first stage estimates of entry and continuation values obtained by computing sample averages of the realized continuation values of entrants who do enter and incumbents who do continue. Under certain assumptions these values are linear functions of the parameters of the problem, and hence are not computationally burdensome to use. Attention is given to the small sample problem of estimation error in the non parametric estimates and this leads to a preference for use of particularly simple estimates of continuation values and moments.
Handle: RePEc:nbr:nberwo:10506
Template-Type: ReDIF-Paper 1.0
Title: The Path to the Top: Changes in the Attributes and Careers of Corporate Executives, 1980-2001
Classification-JEL: L2; M1
Author-Name: Peter Cappelli
Author-Name: Monika Hamori
Author-Person: pha348
Note: LS
Number: 10507
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10507
File-URL: http://www.nber.org/papers/w10507.pdf
File-Format: application/pdf
Abstract: The analyses below compare the career histories and personal characteristics of the executives in the top ranks of the world's largest and most stable business operations, the Fortune 100, between 1980 and 2001. To our knowledge, there have been no prior studies of contemporary changes in the experience or attributes of executives beyond CEOs. In 2001, these executives were younger, more likely to be women, and less likely to have been Ivy League educated. Most important, they got to the executive suite about four years faster than in 1980 and did so by holding fewer jobs on the way to the top. (In particular, women in 2001 got to their executive jobs faster than their male counterparts --there were no women executives in the Fortune 100 in 1980). Executives in 2001 also spent about five years less in their current organization and were more likely to be hired from the outside than in 1980. Interestingly, the most stable firms the 26 that were in the Fortune 100 in both periods had just as much lifetime employment among executives in 2001 as in 1980, although changes in other aspects of careers were similar. Overall, the path to the executive suite and the attributes of the individuals who get there appear to have changed even in the largest and most stable business operations.
Handle: RePEc:nbr:nberwo:10507
Template-Type: ReDIF-Paper 1.0
Title: Obesity as a Barrier to the Transition from Welfare to Work
Classification-JEL: I3; J0
Author-Name: John Cawley
Author-Person: pca6
Author-Name: Sheldon Danziger
Note: EH LS
Number: 10508
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10508
File-URL: http://www.nber.org/papers/w10508.pdf
File-Format: application/pdf
Publication-Status: published as Cawley, John, and Sheldon Danziger. "Morbid Obesity and the Transition From Welfare to Work." Journal of Policy Analysis and Management, Fall 2005, 24(4): 727-743.
Abstract: This paper utilizes a rich longitudinal data set -- the Women's Employment Study (WES) to investigate whether obesity, which is common among women of low socioeconomic status, is a barrier to employment and earnings for current and former welfare recipients. We find evidence that, among current and former welfare recipients, high body weight is a greater barrier to labor market success for white women than for African-American women. Among white women, we consistently find a negative correlation between weight and labor market outcomes such as employment, hours worked, and earnings. Among African American women, weight is not correlated with employment, hours worked, or earnings, but it is correlated with the percentage of months spent on welfare between interviews. We provide suggestive evidence that these differences between white and African-American women in the relationship between body weight and labor market outcomes are partly due to differential weight-based discrimination in employment.
Handle: RePEc:nbr:nberwo:10508
Template-Type: ReDIF-Paper 1.0
Title: Tax Effects on Work Activity, Industry Mix and Shadow Economy Size: Evidence from Rich-Country Comparisons
Classification-JEL: D13; H24
Author-Name: Steven J. Davis
Author-Person: pda15
Author-Name: Magnus Henrekson
Author-Person: phe60
Note: EFG LS PE
Number: 10509
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10509
File-URL: http://www.nber.org/papers/w10509.pdf
File-Format: application/pdf
Publication-Status: published as Gomez Salvador, R., A. Lamo, B. Petrongolo, M. Ward, and E. Wasmer (eds.) Labour Supply and Incentives to Work in Europe. Edward Elgar Press, 2005.
Abstract: Guided by a simple theory of task assignment and time allocation, we investigate the long run response to national differences in tax rates on labor income, payrolls and consumption. The theory implies that higher tax rates reduce work time in the market sector, increase the size of the shadow economy, alter the industry mix of market activity, and twist labor demand in a way that amplifies negative effects on market work and concentrates effects on the less skilled. We also describe conditions whereby cross-country OLS regressions yield unbiased estimates of the total effect of taxes, inclusive of indirect effects that work through government spending responses to tax revenues. Regressions on rich-country samples in the mid 1990s indicate that a unit standard deviation tax rate difference of 12.8 percentage points leads to 122 fewer market work hours per adult per year, a drop of 4.9 percentage points in the employment-population ratio, and a rise in the shadow economy equal to 3.8 percent of GDP. It also leads to 10 to 30 percent lower employment and value added shares in (a) retail trade and repairs, (b) eating, drinking and lodging, and (c) a broader industry group that includes wholesale and motor trade.
Handle: RePEc:nbr:nberwo:10509
Template-Type: ReDIF-Paper 1.0
Title: Trust and Bribery: The Role of the Quid Pro Quo and the Link with Crime
Classification-JEL: K4; O1
Author-Name: Jennifer Hunt
Author-Person: phu9
Note: LS PE
Number: 10510
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10510
File-URL: http://www.nber.org/papers/w10510.pdf
File-Format: application/pdf
Abstract: I study data on bribes actually paid by individuals to public officials, viewing the results through a theoretical lens that considers the implications of trust networks. A bond of trust may permit an implicit quid pro quo to substitute for a bribe, which reduces corruption. Appropriate networks are more easily established in small towns, by long-term residents of areas with many other long-term residents, and by individuals in regions with many residents their own age. I confirm that the prevalence of bribery is lower under these circumstances, using the International Crime Victim Surveys. I also find that older people, who have had time to develop a network, bribe less. These results highlight the uphill nature of the battle against corruption faced by policy-makers in rapidly urbanizing countries with high fertility. I show that victims of (other) crimes bribe all types of public officials more than non-victims, and argue that both their victimization and bribery stem from a distrustful environment.
Handle: RePEc:nbr:nberwo:10510
Template-Type: ReDIF-Paper 1.0
Title: The Role of Public Health Improvements in Health Advances: The 20th Century United States
Classification-JEL: H4; I1
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Grant Miller
Note: EH
Number: 10511
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10511
File-URL: http://www.nber.org/papers/w10511.pdf
File-Format: application/pdf
Publication-Status: published as Cutler, David M. and Grant Miller. "The Role of Public Health Improvements in Health Advances: The 20th Century United States." Demography 42, 1(February 2005): 1-22.
Abstract: Mortality rates in the US fell more rapidly during the late 19th and early 20th Centuries than any other period in American history. This decline coincided with an epidemiological transition and the disappearance of a mortality "penalty" associated with living in urban areas. There is little empirical evidence and much unresolved debate about what caused these improvements, however. This paper investigates the causal influence of clean water technologies - filtration and chlorination - on mortality in major cities during the early 20th Century. Plausibly exogenous variation in the timing and location of technology adoption is used to idetify these effects, and the validity of this identifying assumption is examined in detail. We find that clean water was responsible for nearly half of the total mortality reduction in major cities, three-quarters of the infant mortality reduction, and nearly two-thirds of the child mortality reduction. Rough calculations suggest that the social rate of return to these technologies was greater than 23 to 1 with a cost per life-year saved by clean water of about $500 in 2003 dollars. Implications for developing countries are briefly considered.
Handle: RePEc:nbr:nberwo:10511
Template-Type: ReDIF-Paper 1.0
Title: The Role of Immigration in Dealing with the Developed World's Demographic Transition
Classification-JEL: E62; H5
Author-Name: Hans Fehr
Author-Person: pfe183
Author-Name: Sabine Jokisch
Author-Name: Laurence Kotlikoff
Author-Person: pko44
Note: AG PE
Number: 10512
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10512
File-URL: http://www.nber.org/papers/w10512.pdf
File-Format: application/pdf
Publication-Status: published as Hans Fehr & Sabine Jokisch & Laurence J. Kotlikoff, 2004. "The Role of Immigration in Dealing with the Developed World's Demographic Transition," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(3), pages 296-, September.
Abstract: This paper and its companion study, Fehr, Jokisch, and Kotlikoff (2004), develop a three-region dynamic general equilibrium life-cycle model to analyze general and skill-specific immigration policy during the demographic transition. The three regions are the U.S., Japan, and the EU. Immigration is often offered as a solution to the remarkable again underway in the developed world. Absent an immediate and dramatic change in immigration, dependency ratios will roughly double over the next three decades placing fiscal institutions, in particular, and economies, in general, under enormous stress. Can immigration alleviate these stresses? The answer is unclear bacause a number of offsetting factors are at play. First, increased immigration raises the size of the labor force, but also lowers real wages. Hence, the increase in the taxable wage base due to immigration will be less than might otherwise be expected. Second, immigrants arrive with some capital and accumulate more capital as they age. This raises labor productivity and both payroll and income tax bases. Third, immigrants, like natives, require public goods and become eligible for government welfare, health care, and pension benefits. Fiscally speaking, how much one earns' from a new immigrant depends on the immigant's skill level, which, in turn, determines the immigrant's level of earnings. The reason is that taxes and transfer payments are, in general, collected and distributed on a progressive basis. Consequently, high-skilled immigrants deliver a larger bang for the buck when it comes to paying net taxes (taxes paid net of transfer payments received). Our model confirms this point. Nonetheless, its findings, even with respect to high-skilled immigration, which we investigate in detail in this paper, are not pretty. It shows that a significant expansion of immigration, whether across all skill groups or among particular skill groups, will do remarkably little to alter the major capital shortage, tax hikes, and reductions in real wages that can be expected along the demographic transition.
Handle: RePEc:nbr:nberwo:10512
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Education on Fertility and Child Mortality: Do Fathers Really Matter Less Than Mothers?
Classification-JEL: I12; I22
Author-Name: Lucia Breierova
Author-Name: Esther Duflo
Author-Person: pdu166
Note: ED CH
Number: 10513
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10513
File-URL: http://www.nber.org/papers/w10513.pdf
File-Format: application/pdf
Abstract: This paper takes advantage of a massive school construction program that took place in Indonesia between 1973 and 1978 to estimate the effect of education on fertility and child mortality. Time and region varying exposure to the school construction program generates instrumental variables for the average education in the household, and the difference in education between husband and wife. We show that female education is a stronger determinant of age at marriage and early fertility than male education. However, female and male education seem equally important factors in reducing child mortality. We suggest that the OLS estimate of the differential effect of women's and men's education may be biased by failure to take in to account assortative matching.
Handle: RePEc:nbr:nberwo:10513
Template-Type: ReDIF-Paper 1.0
Title: Measuring Self-Control
Classification-JEL: D1; D9
Author-Name: John Ameriks
Author-Person: pam72
Author-Name: Andrew Caplin
Author-Person: pca77
Author-Name: John Leahy
Author-Person: ple189
Author-Name: Tom Tyler
Note: EFG
Number: 10514
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10514
File-URL: http://www.nber.org/papers/w10514.pdf
File-Format: application/pdf
Publication-Status: published as Ameriks, John, Andrew Caplin, John Leahy, and Tom Tyler. "Measuring Self-Control Problems." American Economic Review 97, 3 (June 2007): 966-72.
Abstract: How significant are individual differences in self-control? Do these differences impact wealth accumulation? From where do they derive? Our survey-based measure of self-control provides insights into all three questions: 1.There are individual differences in self-control not only of a quantitative but also of a qualitative nature. In our sample, standard self-control problems of over-consumption are no more prevalent than are problems of under-consumption. 2.Standard self-control problems do impede wealth accumulation, particularly in liquid form. Problems of under-consumption have the opposite effects. 3.Self-control is linked to conscientiousness' much studied by psychologists. There is a related link with financial planning.
Handle: RePEc:nbr:nberwo:10514
Template-Type: ReDIF-Paper 1.0
Title: A Portrait of the Artist as a Very Young or Very Old Innovator: Creativity at the Extremes of the Life Cycle
Classification-JEL: J4
Author-Name: David W. Galenson
Note: LS
Number: 10515
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10515
File-URL: http://www.nber.org/papers/w10515.pdf
File-Format: application/pdf
Publication-Status: published as David Galenson, 2004. "A Portrait of the Artists as Young or Old Innovators," World Economics, World Economics, Economic & Financial Publishing, PO Box 69, Henley-on-Thames, Oxfordshire, United Kingdom, RG9 1GB, vol. 5(4), pages 175-188, October.
Abstract: Orson Wells made Citizen Kane, his greatest movie, when he was 25 years old; Frank Lloyd Wright designed Fallingwater, his most famous house, when he was 70. Contrasts as great as this raise the question of whether there is a general explanation of when in their lives great innovators are most creative. For each of seven artistic disciplines, this paper examines a major innovation made by a very young artist, and another made by an old one, with the goal of understanding the role of the artist's age and experience in the accomplishment. The analysis shows why youth was necessary for the innovations of such conceptual artists as F. Scott Fitzgerald, Arthur Rimbaud, Maya Lin, and Orson Welles, all of whom produced their masterpieces before the age of 30, and why extensive experience was necessary for the innovations of such experimental artists as Piet Mondrian, Elizabeth Bishop, Henrik Ibsen, and Frank Lloyd Wright, all of whom made major contributions after the age of 60. This paper demonstrates the generality of the distinction between conceptual and experimental innovators in artistic disciplines, and the value of the analysis in explaining the very different relationships between age and creativity for the two types of artist.
Handle: RePEc:nbr:nberwo:10515
Template-Type: ReDIF-Paper 1.0
Title: HIV Breakthroughs and Risk Sexual Behavior
Classification-JEL: I1
Author-Name: Dana Goldman
Author-Person: pgo681
Author-Name: Darius Lakdawalla
Author-Person: pla295
Author-Name: Neeraj Sood
Author-Person: pso62
Note: EH
Number: 10516
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10516
File-URL: http://www.nber.org/papers/w10516.pdf
File-Format: application/pdf
Publication-Status: published as Neeraj Sood & Dana Goldman, 2006. "HIV Breakthroughs and Risky Sexual Behavior," The Quarterly Journal of Economics, MIT Press, vol. 121(3), pages 1063-1102, 08.
Abstract: Recent breakthroughs in the treatment of HIV have coincided with an increase in infection rates and an eventual slowing of reductions in HIV mortality. These trends may be causally related, if treatment improves the health and functional status of HIV+ individuals and allows them to engage in more sexual risk-taking. We examine this hypothesis empirically using access to health insurance as an instrument for treatment status. We find that treatment results in more sexual risk-taking by HIV+ adults, and possibly more of other risky behaviors like drug abuse. This relationship implies that breakthroughs in treating an incurable disease like HIV can increase precautionary behavior by the uninfected and thus reduce welfare. We also show that, in the presence of this effect, treatment and prevention are social complements for incurable diseases, even though they are substitutes for curable ones. Finally, there is less under-provision of treatment for an incurable disease than a curable one, because of the negative externalities associated with treating an incurable disease.
Handle: RePEc:nbr:nberwo:10516
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Volatility and the Credit Channel in Emerging Markets: A Vertical Perspective
Classification-JEL: E0; E4
Author-Name: Ricardo Caballero
Author-Person: pca44
Author-Name: Arvind Krishnamurthy
Author-Person: pkr393
Note: EFG IFM
Number: 10517
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10517
File-URL: http://www.nber.org/papers/w10517.pdf
File-Format: application/pdf
Publication-Status: published as Ricardo Caballero & Arvind Krishnamurthy, 2005. "Exchange Rate Volatility and the Credit Channel in Emerging Markets: A Vertical Perspective," International Journal of Central Banking, International Journal of Central Banking, vol. 1(1), May.
Abstract: Firms in emerging markets are exposed to severe financial frictions and credit constraints, that are exacerbated by the sudden stop of capital inflows. Can monetary policy offset this external credit squeeze? We show that although this may be the case during moderate contractions (or in partial equilibrium), the expansionary effect of monetary policy vanishes during severe external crises. The exchange rate jumps to reduce the dollar value of domestic collateral until equilibrium in domestic financial markets is consistent with the external constraint. An expansionary monetary policy in this context raises the value of domestic collateral but it exacerbates the exchange rate depreciation (beyond the standard interest parity effect) and has little effect on aggregate activity. However there is a dynamic linkage between monetary policy and sudden stops. The anticipation of a dogged defense of the exchange rate worsens the consequences of sudden stops by distorting the private sector incentive to take precautions against these shocks. For similar general equilibrium reasons, dollarization of liabilities has limited impact during a sudden stop, but it has significant underinsurance consequences.
Handle: RePEc:nbr:nberwo:10517
Template-Type: ReDIF-Paper 1.0
Title: Speculative Growth: Hints from the US Economy
Classification-JEL: D0; D9
Author-Name: Ricardo Caballero
Author-Person: pca44
Author-Name: Emmanuel Farhi
Author-Person: pfa207
Author-Name: Mohamad L. Hammour
Note: EFG IFM
Number: 10518
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10518
File-URL: http://www.nber.org/papers/w10518.pdf
File-Format: application/pdf
Publication-Status: published as Caballero, Ricardo J., Emmanuel Farhi and Mohamad L. Hammour. "Speculative Growth: Hints From The U.S. Economy," American Economic Review, 2006, v96(4,Sep), 1159-1192.
Abstract: We propose a framework for understanding recurrent historical episodes of vigorous economic expansion accompanied by extreme asset valuations, as exhibited by the U.S. in the 1990s. We interpret this phenomenon as a high-valuation equilibrium with a low effective cost of capital based on optimism about the future availability of funds for investment. The key to the sustainability of such an equilibrium is feedback from increased growth to an increase in the supply of effective funding. We show that such feedback arises naturally when an expansion comes with technological progress in the capital producing sector, when fiscal rules generate sustained fiscal surpluses, when the rest of the world has lower expansion potential, and when financial constraints are relaxed by the expansion itself. Arguably, these ingredients were all simultaneously present in the U.S. during the 1990s. We also show that such expansions can be welfare improving but they can crash. The latter is more likely if bubbles develop along the expansionary path. These (rational) bubbles can emerge even when the interest rate exceeds the rate of growth of the economy.
Handle: RePEc:nbr:nberwo:10518
Template-Type: ReDIF-Paper 1.0
Title: Fear of Sudden Stops: Lessons from Australia and Chile
Classification-JEL: E44; E52
Author-Name: Ricardo Caballero
Author-Person: pca44
Author-Name: Kevin Cowan
Author-Person: pco175
Author-Name: Jonathan Kearns
Author-Person: pke53
Note: EFG IFM
Number: 10519
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10519
File-URL: http://www.nber.org/papers/w10519.pdf
File-Format: application/pdf
Publication-Status: published as Ricardo J. Caballero & Kevin Cowan & Jonathan Kearns, 2005. "Fear of Sudden Stops: Lessons From Australia and Chile," The Journal of Policy Reform, vol 8(4), pages 313-354.
Abstract: Latin American economies are exposed to substantial external vulnerability. Domestic imbalances and terms of trade shocks are often exacerbated by sudden stops of capital inflow. In this paper we explore ways of overcoming external vulnerability, drawing lessons from a detailed comparison of the response of Chile and Australia to recent external shocks and from Australia's historical experience. We argue that in order to understand sudden stops and the mechanisms to smooth them, it is useful to identify and then distinguish between two inter-related dimensions of investors' confidence: country-trust and currency-trust. Lack of country-trust is a more fundamental and serious problem behind sudden stops. But lack of currency-trust may both be a source of country-trust problems and weaken a country's ability to deal with sudden stops. We discuss steps to improve along these two dimensions of investors' confidence in the medium run, and policies to reduce the impact of country-trust and currency-trust weaknesses in the short run.
Handle: RePEc:nbr:nberwo:10519
Template-Type: ReDIF-Paper 1.0
Title: On the Empirics of Sudden Stops: The Relevance of Balance-Sheet Effects
Classification-JEL: F31; F32
Author-Name: Guillermo A. Calvo
Author-Person: pca694
Author-Name: Alejandro Izquierdo
Author-Person: piz6
Author-Name: Luis-Fernando Mejia
Author-Person: pme106
Note: IFM
Number: 10520
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10520
File-URL: http://www.nber.org/papers/w10520.pdf
File-Format: application/pdf
Publication-Status: published as Guillermo Calvo & Alejandro Izquierdo & Luis-Fernando Mejía, 2004. "On the empirics of Sudden Stops: the relevance of balance-sheet effects," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
Abstract: Using a sample of 32 developed and developing countries we analyze the empirical characteristics of sudden stops in capital flows and the relevance of balance sheet effects in the likelihood of their materialization. We find that large real exchange rate (RER) fluctuations coming hand in hand with Sudden Stops are basically an emerging market (EM) phenomenon. Sudden Stops seem to come in bunches, grouping together countries that are different in many respects. However, countries are similar in that they remain vulnerable to large RER fluctuations - be it because they could be forced to large adjustments in the absorption of tradable goods, and/or because the size of dollar liabilities in the banking system (i.e., domestic liability dollarization, or DLD) is high. Openness, understood as a large supply of tradable goods that reduces leverage over the current account deficit, coupled with DLD, are key determinants of the probability of Sudden Stops. The relationship between Openness and DLD in the determination of the probability of Sudden Stops is highly non-linear, implying that the interaction of high current account leverage and high dollarization may be a dangerous cocktail.
Handle: RePEc:nbr:nberwo:10520
Template-Type: ReDIF-Paper 1.0
Title: How Fast Do Personal Computers Depreciate? Concepts and New Estimates
Classification-JEL: O47
Author-Name: Mark E. Doms
Author-Person: pdo89
Author-Name: Wendy E. Dunn
Author-Name: Stephen D. Oliner
Author-Person: pol82
Author-Name: Daniel E. Sichel
Author-Person: psi394
Note: PE
Number: 10521
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10521
File-URL: http://www.nber.org/papers/w10521.pdf
File-Format: application/pdf
Publication-Status: published as How Fast Do Personal Computers Depreciate? Concepts and New Estimates, Mark E. Doms, Wendy F. Dunn, Stephen D. Oliner, Daniel E. Sichel. in Tax Policy and the Economy, Volume 18, Poterba. 2004
Abstract: This paper provides new estimates of depreciation rates for personal computers using an extensive database of prices of used PCs. Our results show that PCs lose roughly half their remaining value, on average, with each additional year of use. We decompose that decline into age-related depreciation and a revaluation effect, where the latter effect is driven by the steep ongoing drop in the constant-quality prices of newly-introduced PCs. Our results are directly applicable for measuring the depreciation of PCs in the National Income and Product Accounts (NIPAs) and were incorporated into the December 2003 comprehensive NIPA revision. Regarding tax policy, our estimates suggest that the current tax depreciation schedule for PCs closely tracks the actual loss of value in a zero-inflation environment. However, because the tax code is not indexed for inflation, the tax allowances would be too small in present value for inflation rates above the very low level now prevailing.
Handle: RePEc:nbr:nberwo:10521
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Adolescent Experience on Labor Market Outcomes: The Case of Height
Classification-JEL: J7; J3
Author-Name: Nicola Persico
Author-Person: ppe261
Author-Name: Andrew Postlewaite
Author-Name: Dan Silverman
Author-Person: psi181
Note: LS
Number: 10522
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10522
File-URL: http://www.nber.org/papers/w10522.pdf
File-Format: application/pdf
Publication-Status: published as Nicola Persico & Andrew Postlewaite & Dan Silverman, 2004. "The Effect of Adolescent Experience on Labor Market Outcomes: The Case of Height," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 1019-1053, October.
Abstract: Taller workers receive a wage premium. Net of differences in family background, the disparity is similar in magnitude to the race and gender gaps. We exploit variation in an individual's height over time to explore how height affects wages. Controlling for teen height essentially eliminates the effect of adult height on wages for white males. The teen height premium is not explained by differences in resources or endowments. The teen height premium is partly mediated through participation in high school sports and clubs. We estimate the monetary benefits of a medical treatment for children that increases height.
Handle: RePEc:nbr:nberwo:10522
Template-Type: ReDIF-Paper 1.0
Title: Firm Dynamics, Investment, and Debt Portfolio: Balance Sheet Effects of the Mexican Crisis of 1994
Classification-JEL: C51; E22
Author-Name: Sangeeta Pratap
Author-Name: Carlos Urrutia
Author-Person: pur2
Note: EFG
Number: 10523
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10523
File-URL: http://www.nber.org/papers/w10523.pdf
File-Format: application/pdf
Publication-Status: published as Pratap, Sangeeta and Carlos Urrutia. "Firm Dynamics, Investment And Debt Portfolio: Balance Sheet Effects Of The Mexican Crisis Of 1994," Journal of Development Economics, 2004, v75(2,Dec), 535-563.
Abstract: We build a partial equilibrium model of firm dynamics under exchange rate uncertainty. Firms face idiosyncratic productivity shocks and observe the current level of the real exchange rate each period. Given their current level of capital stock, firms make their export decisions and choose how much to invest. Investment is financed through one period loans from foreign lenders. The interest rate charged by each lender is set to satisfy an expected zero-profit condition. The model delivers a distribution of firms over productivity, capital stocks and debt portfolios, as well as an exit rule. We calibrate the model using data from a panel of Mexican firms, from 1989 to 2000, and analyze the effect of the 1994 crisis on these variables. As a result of the real exchange rate depreciation, the model predicts: (i) an increase in the debt burden, (ii) an increase in exports, and (iii) a large decline in investment. These real effects are consistent with the evidence for the Mexican crisis.
Handle: RePEc:nbr:nberwo:10523
Template-Type: ReDIF-Paper 1.0
Title: A Small Corner of Intertemporal Public Finance - New Developments in Monetary Economics: 2 Ghosts, 2 Eccentricities, A Fallacy, A Mirage and A Mythos
Classification-JEL: E0; E4
Author-Name: Willem Buiter
Author-Person: pbu137
Note: EFG ME PE
Number: 10524
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10524
File-URL: http://www.nber.org/papers/w10524.pdf
File-Format: application/pdf
Publication-Status: published as Buiter, Willem H. "New Developments In Monetary Economics: Two Ghosts, Two Eccentricities, A Fallacy, A Mirage And A Mythos," Economic Journal, 2005, v115(502,Mar), 1-31.
Abstract: Monetary theory and policy are part of intertemporal public finance. The lecture reviews some interesting recent developments. The two ghosts are the venerable liquidity trap and the Pigou effect or real balance effect. The eccentricities are negative nominal interest rates and the helicopter drop of base money - two unconventional policies for stimulating consumer demand even when nominal interest rates, short and long, present and future, are at their zero lower bounds. The fallacy is the so-called Fiscal Theory of the Price Level, a logically in-consistent theory of the link between the government budget and the general price level. The mirage is the prediction that financial deregulation and technical change in the payments and settlements technology (e-money etc.), will cause monetary policy to lose its capacity to influence even nominal economic variables. Mythos refers to the independent central bank.
Handle: RePEc:nbr:nberwo:10524
Template-Type: ReDIF-Paper 1.0
Title: The German Public Pension System: How it Was, How it Will Be
Classification-JEL: H0; H8
Author-Name: Axel Boersch-Supan
Author-Name: Christina B. Wilke
Note: AG PE
Number: 10525
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10525
File-URL: http://www.nber.org/papers/w10525.pdf
File-Format: application/pdf
Abstract: Germany still has a very generous public pay-as-you-go pension system. It is characterized by early effective retirement ages and very high effective replacement rates. Most workers receive virtually all of their retirement income from this public retirement insurance. Costs are almost 12 percent of GDP, more than 2.5 times as much as the U.S. Social Security System. The pressures exerted by population aging on this monolithic system, amplified by negative incentive effects, have induced a reform process that began in 1992 and is still ongoing. This process is the topic of this paper. It has two parts. Part A describes the German pension system as it has shaped the labor market until about the year 2000. Part B describes the three staged reform process that will convert the exemplary and monolithic Bismarckian public insurance system after the year 2000 into a complex multipillar system. The paper delivers an assessment in how far these reform steps will solve the pressing problems of a prototypical pay-as-you-go system of old age provision, hopefully with lessons for other countries with similar problems.
Handle: RePEc:nbr:nberwo:10525
Template-Type: ReDIF-Paper 1.0
Title: Firms' Histories and Their Capital Structures
Classification-JEL: G3
Author-Name: Ayla Kayhan
Author-Person: pka249
Author-Name: Sheridan Titman
Author-Person: pti51
Note: CF
Number: 10526
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10526
File-URL: http://www.nber.org/papers/w10526.pdf
File-Format: application/pdf
Publication-Status: published as Kayhan, Ayla & Titman, Sheridan, 2007. "Firms' histories and their capital structures," Journal of Financial Economics, Elsevier, vol. 83(1), pages 1-32, January.
Abstract: This paper examines how cash flows, investment expenditures and stock price histories affect corporate debt ratios. Consistent with earlier work, we find that these variables have a substantial influence on changes in capital structure. Specifically, stock price changes and financial deficits (i.e., the amount of external capital raised) have strong influences on capital structure changes, but in contrast to previous conclusions, we find that their effects are subsequently at least partially reversed. These results indicate that although a firm's history strongly influence their capital structures, that over time, financing choices tend to move firms towards target debt ratios that are consistent with the tradeoff theories of capital structure.
Handle: RePEc:nbr:nberwo:10526
Template-Type: ReDIF-Paper 1.0
Title: Consumption, Commitmants and Preferences for Risk
Classification-JEL: D21; D31
Author-Name: Andrew Postlewaite
Author-Name: Larry Samuelson
Author-Person: psa80
Author-Name: Dan Silverman
Author-Person: psi181
Note: EFG LS
Number: 10527
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10527
File-URL: http://www.nber.org/papers/w10527.pdf
File-Format: application/pdf
Abstract: We examine an economy in which the cost of consuming some goods can be reduced by making commitments to consumption levels independent of the state. For example, it is cheaper to produce housing services via owner-occupied than rented housing, but the transactions costs associated with the former prompt relatively inflexible housing consumption paths. We show that consumption commitments can cause risk-neutral consumers to care about risk, creating incentives to both insure risks and bunch uninsured risks together. For example, workers may prefer to avoid wage risk while bearing an unemployment risk that is concentrated in as few states as possible.
Handle: RePEc:nbr:nberwo:10527
Template-Type: ReDIF-Paper 1.0
Title: Identifying the Effects of the Americans with Disabilities Act Using State-Law Variation: Preliminary Evidence on Educational Participation Effects
Classification-JEL: I18; I21
Author-Name: Christine Jolls
Note: LS LE
Number: 10528
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10528
File-URL: http://www.nber.org/papers/w10528.pdf
File-Format: application/pdf
Publication-Status: published as Jolls, Christine. "Identifying The Effects Of The Americans With Disabilities Act Using State-Law Variation: Preliminary Evidence On Education Participation Effects," American Economic Review, 2004, v94(2,May), 447-453.
Abstract: The Americans with Disabilities Act of 1990 (ADA) broadly prohibits discrimination on the basis of disability in employment and other settings. Several empirical studies have suggested that employment levels of individuals with disabilities declined rather than increased after the ADA's passage. This paper provides a first look at whether lower disabled employment levels after the ADA might have resulted from increased participation in educational opportunities by individuals with disabilities as a rational response to the ADA's employment protections. The main empirical finding is that individuals with disabilities who were not employed in the years following legal innovation in the form of the ADA were more likely than their pre-ADA counterparts to give educational participation as their reason for not being employed. This preliminary evidence suggests the value of further study, with better education data, of the relationship between the ADA's enactment and disabled participation in educational opportunities.
Handle: RePEc:nbr:nberwo:10528
Template-Type: ReDIF-Paper 1.0
Title: International Migration in the Long-Run: Positive Selection, Negative Selection and Policy
Classification-JEL: F22; J1
Author-Name: Timothy J. Hatton
Author-Person: pha305
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: ITI LS
Number: 10529
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10529
File-URL: http://www.nber.org/papers/w10529.pdf
File-Format: application/pdf
Publication-Status: published as Foders, Federico and Rolf J. Langhammer (eds.) Labor Mobility and the World Economy. Berlin and New York: Springer, 2006.
Abstract: Most labor scarce overseas countries moved decisively to restrict their immigration during the first third of the 20th century. This autarchic retreat from unrestricted and even publicly-subsidized immigration in the first global century before World War I to the quotas and bans introduced afterwards was the result of a combination of factors: public hostility towards new immigrants of lower quality public assessment of the impact of those immigrants on a deteriorating labor market, political participation of those impacted, and, as a triggering mechanism, the sudden shocks to the labor market delivered by the 1890s depression, the Great War, postwar adjustment and the great depression. The paper documents the secular drift from very positive to much more negative immigrant selection which took place in the first global century after 1820 and in the second global century after 1950, and seeks explanations for it. It then explores the political economy of immigrant restriction in the past and seeks historical lessons for the present.
Handle: RePEc:nbr:nberwo:10529
Template-Type: ReDIF-Paper 1.0
Title: Bargaining in Legislatures: An Empirical Investigation
Classification-JEL: D7; H0
Author-Name: Brian Knight
Author-Person: pkn7
Note: PE
Number: 10530
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10530
File-URL: http://www.nber.org/papers/w10530.pdf
File-Format: application/pdf
Abstract: While the theoretical literature on non-cooperative legislative bargaining has grown voluminous, there is little empirical work attempting to test a key prediction in this literature: proposal power is valuable. This paper aims to fill this gap in the literature by investigating the role of proposal power in the allocation of transportation projects across U.S. Congressional districts in 1991 and 1998. The evidence supports the key qualitative prediction of the Baron and Ferejohn legislative bargaining model: members with proposal power, those sitting on the transportation authorization committee, secure more project spending for their districts than do other representatives. Support for the quantitative restrictions on the value of proposal power, which are more powerful than the qualitative restrictions, is more mixed. I then empirically address several alternative models of legislative behavior, including partisian models, informational roles for committees, models with appropriations committees, and theories of committees as preference outliers.
Handle: RePEc:nbr:nberwo:10530
Template-Type: ReDIF-Paper 1.0
Title: The Value of Phased Retirement
Classification-JEL: J2; J4
Author-Name: Steven G. Allen
Author-Person: pal6
Note: AG LS
Number: 10531
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10531
File-URL: http://www.nber.org/papers/w10531.pdf
File-Format: application/pdf
Publication-Status: published as Clark, Robert L. and Jennifer Ma. Recruitment, Retention and Retirement in Higher Education: Building and Managing the Faculty of the Future. Cheltenham, U.K. and Northampton, MA: Elgar, 2005.
Abstract: This paper examines how phased retirement plans in higher education create value for both the institution and individual faculty, based upon evidence from the Survey of Changes in Faculty Retirement Policies and an in-depth case study of the University of North Carolina system. Faculty benefit by receiving improved opportunities for part-time work and by having the ability to make a smoother transition to retirement. The policy is clearly of great value to the 25 to 35 percent of UNC faculty who opt for phased over full retirement. The biggest payoff to the university is an increase in the odds that low-performing faculty will start the retirement process earlier. Universities also anticipate increased flexibility in managing faculty employment and compensation; phased retirement is most likely to be observed on campuses where a high percentage of faculty has tenure.
Handle: RePEc:nbr:nberwo:10531
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Policy and Financial Depth
Classification-JEL: E44; E62
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Arvind Krishnamurthy
Author-Person: pkr393
Note: CF EFG IFM
Number: 10532
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10532
File-URL: http://www.nber.org/papers/w10532.pdf
File-Format: application/pdf
Abstract: Most economists and observers place the lack of fiscal discipline at the core of the recent Argentine crisis. This begs the question of how countries like Belgium or Italy (pre-Maastricht) could run large fiscal deficits and accumulate debts far beyond those of Argentina, without experiencing crises nearly as dramatic as that of Argentina? Why is it that Argentina cannot act like Belgium or Italy and pursue expansionary fiscal policy during downturns? We argue that advanced and emerging economies differ in their financial depth, and show that lack of financial depth constrains fiscal policy in a way that can overturn standard Keynesian fiscal policy prescriptions. We also provide empirical support for this viewpoint. Crowding out is systematically larger in emerging markets than in developed economies. More importantly, this difference is extreme during crises, when the crowding out coefficient exceeds one in emerging market economies.
Handle: RePEc:nbr:nberwo:10532
Template-Type: ReDIF-Paper 1.0
Title: Dealing with Destabilizing 'Market Discipline'
Classification-JEL: F33; F34
Author-Name: Daniel Cohen
Author-Person: pco389
Author-Name: Richard Portes
Author-Person: ppo132
Note: IFM
Number: 10533
Creation-Date: 2004-05
Order-URL: http://www.nber.org/papers/w10533
File-URL: http://www.nber.org/papers/w10533.pdf
File-Format: application/pdf
Abstract: If interest rates (country spreads) rise, debt can rapidly be subject to a snowball effect, which then becomes self-fulfilling with regard to the fundamentals themselves. This is a market imperfection, because we cannot be confident that the unaided market will choose the good equilibrium' over the bad equilibrium'. We see here a fundamental flaw in the process of market discipline. We propose a policy intervention to deal with this structural weakness in the mechanisms of international capital flows. This is based on a simple taxonomy that enables us to break down the origin of crises into three components: a crisis of confidence (spreads and currency crisis), a crisis of fundamentals (real growth rate), and a crisis of economic policy (primary deficit). The policy would seek to short-circuit confidence crises, partly by using IMF support to improve ex ante incentives.
Handle: RePEc:nbr:nberwo:10533
Template-Type: ReDIF-Paper 1.0
Title: International Reserves Management and Capital Mobility in a Volatile World: Policy Considerations and a Case Study of Korea
Classification-JEL: F15; F32
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Yeonho Lee
Author-Name: Yeongseop Rhee
Note: IFM ITI
Number: 10534
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10534
File-URL: http://www.nber.org/papers/w10534.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua & Lee, Yeonho & Rhee, Youngseop, 2007. "International reserves management and capital mobility in a volatile world: Policy considerations and a case study of Korea," Journal of the Japanese and International Economies, Elsevier, vol. 21(1), pages 1-15, March.
Abstract: This paper characterizes the precautionary demand for international reserves driven by the attempt to reduce the incidence of costly output decline induced by sudden reversal of short-term capital flows. It validates the main predictions of the precautionary approach by investigating changes in the patterns of international reserves in Korea in the aftermath of the 1997-8 crisis. This crisis provides an interesting case study, especially because of the rapid rise in Korea's financial integration in the aftermath of the East-Asian crisis, where foreigners' shareholding has increased to 40% of total Korean market capitalization. We show that the crisis led to structural change in the hoarding of international reserves, and that the Korean monetary authority gives much greater attention to a broader notion of 'hot money,' inclusive of short-term debt and foreigners' shareholding.
Handle: RePEc:nbr:nberwo:10534
Template-Type: ReDIF-Paper 1.0
Title: Building Relationships Early: Banks in Venture Capital
Classification-JEL: G2; L2
Author-Name: Thomas Hellman
Author-Name: Laura Lindsey
Author-Name: Manju Puri
Author-Person: ppu153
Note: CF
Number: 10535
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10535
File-URL: http://www.nber.org/papers/w10535.pdf
File-Format: application/pdf
Publication-Status: published as Hellmann, Thomas, Laura Lindsey and Manju Puri. “Building relationships early: Banks in venture capital.” Review of Financial Studies 21, 2(2008): 513-541.
Abstract: The importance of an investor's organizational structure is increasingly recognized in modern finance. This paper examines the role of banks in the US venture capital market. Theory suggests that unlike independent venture capital firms, banks can seek complementarities between their venture capital and lending activities. Our empirical analysis suggests that banks use their venture capital investments to build relationships for their lending activities. Banks target their venture investments to companies that are more likely to subsequently raise loans, and having made an investment as a venture capitalist increases a bank's likelihood of providing a loan. Companies may benefit from these relationships through more favorable loan pricing. The analysis suggests that banks are strategic investors in the venture capital market with investment patterns distinct from independent venture capitalists. It also provides a cautionary note for relying on banks for the development of a venture capital industry.
Handle: RePEc:nbr:nberwo:10535
Template-Type: ReDIF-Paper 1.0
Title: Mergers and Acquisitions in the Pharmaceutical and Biotech Industries
Classification-JEL: I11; G34
Author-Name: Patricia M. Danzon
Author-Person: pda291
Author-Name: Andrew Epstein
Author-Name: Sean Nicholson
Author-Person: pni108
Note: CF EH IO
Number: 10536
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10536
File-URL: http://www.nber.org/papers/w10536.pdf
File-Format: application/pdf
Publication-Status: published as Patricia M. Danzon & Andrew Epstein & Sean Nicholson, 2007. "Mergers and acquisitions in the pharmaceutical and biotech industries," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 307-328.
Abstract: This paper examines the determinants of M&A activity in the pharmaceutical-biotechnology industry and the effects of mergers using propensity scores to control for merger endogeneity. Among large firms, we find that mergers are a response to excess capacity due to anticipated patent expirations and gaps in a company's product pipeline. For small firms, mergers are primarily an exit strategy for firms in financial trouble, as indicated by low Tobin's q, few marketed products, and low cash-sales ratios. We find that it is important to control for a firm's prior propensity to merge. Firms with relatively high propensity scores experienced slower growth of sales, employees and R&D regardless of whether they actually merged, which is consistent with mergers being a response to distress. Controlling for a firm's merger propensity, large firms that merged experienced similar changes in enterprise value, sales, employees, and R&D relative to similar firms that did not merge. Merged firms had slower growth in operating profit in the third year following a merger. Thus mergers may be a response to trouble, but they are not an effective solution for large firms. Neither mergers nor propensity scores have any effect on subsequent growth in enterprise value. This confirms that market valuations on average yield unbiased predictions of the effects of mergers. Small firms that merged experienced slower R&D growth relative to similar firms that did not merge, suggesting that post-merger integration may divert cash from R&D.
Handle: RePEc:nbr:nberwo:10536
Template-Type: ReDIF-Paper 1.0
Title: Do Stock Price Bubbles Influence Corporate Investment?
Classification-JEL: E22; G31
Author-Name: Simon Gilchrist
Author-Person: pgi28
Author-Name: Charles P. Himmelberg
Author-Name: Gur Huberman
Author-Person: phu98
Note: CF ME AP
Number: 10537
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10537
File-URL: http://www.nber.org/papers/w10537.pdf
File-Format: application/pdf
Publication-Status: published as Gilchrist, Simon, Charles P. Himmelberg and Gur Huberman. "Do Stock Price Bubbles Influence Corporate Investment?," Journal of Monetary Economics, 2005, v52(4,May), 805-827.
Abstract: Building on recent developments in behavioral asset pricing, we develop a model in which dispersion of investor beliefs under short-selling constraints drives a firm's stock price above its fundamental value. Managers optimally respond to the stock market bubble by issuing new equity. The bubble reduces the user-cost of capital and increase real investment. Using the variance of analysts' earnings forecasts as a proxy for the dispersion of investor beliefs, we find strong empirical support for the model's key prediction that increases in dispersion cause increases in new equity issuance, Tobin's Q, and real investment.
Handle: RePEc:nbr:nberwo:10537
Template-Type: ReDIF-Paper 1.0
Title: The Globalization of the Software Industry: Perspectives and Opportunities for Developed and Developing Countries
Classification-JEL: O3; O5
Author-Name: Asish Arora
Author-Person: par15
Author-Name: Alfonso Gambardella
Note: ITI PR
Number: 10538
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10538
File-URL: http://www.nber.org/papers/w10538.pdf
File-Format: application/pdf
Publication-Status: published as The Globalization of the Software Industry: Perspectives and Opportunities for Developed and Developing Countries, Ashish Arora, Alfonso Gambardella. in Innovation Policy and the Economy, Volume 5, Jaffe, Lerner, and Stern. 2005
Abstract: The spectacular growth of the software industry in some non-G7 economies has aroused both interest and concern. This paper addresses two sets of inter-related issues. First, we explore the determinants of these successful stories. We then touch upon the broader question of what lessons, if any, can be drawn from for economic development more generally. Finally, examining the long term implications of offshoring of software, we conclude that it is unlikely to pose a long term threat to American technological leadership. Instead, the U.S. economy will broadly benefit from the growth of new software producing regions. The U.S. technological leadership rests in part upon the continued position of the U.S. as the primary destination for highly trained and skilled scientists and engineers from the world over. Though this is likely to persist for some time the increasing attractiveness of foreign emerging economy destinations is a long-term concern for continued U.S. technological leadership.
Handle: RePEc:nbr:nberwo:10538
Template-Type: ReDIF-Paper 1.0
Title: Political Budget Cycles in New versus Established Democracies
Classification-JEL: D72; E62
Author-Name: Adi Brender
Author-Name: Allan Drazen
Author-Person: pdr25
Note: EFG IFM
Number: 10539
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10539
File-URL: http://www.nber.org/papers/w10539.pdf
File-Format: application/pdf
Publication-Status: published as Brender, Adi and Allan Drazen. "Political Budget Cycles In New Versus Established Democracies," Journal of Monetary Economics, 2005, v52(7,Oct), 1271-1295.
Abstract: Like other recent studies, we find the existence of a political deficit cycle in a large cross-section of countries. However, we find that this result is driven by the experience of new democracies'. The strong budget cycle in those countries accounts for the finding of a budget cycle in larger samples that include these countries; when these countries are removed from the larger sample, so that only established' democracies remain, the political budget cycle disappears. The political deficit cycle in new democracies accounts for findings in both developed and less developed economies, for the finding that the cycle is stronger in weaker democracies, and for differences in the political cycle across governmental and electoral systems. Our findings may reconcile two contradictory views of pre-electoral manipulation, one arguing it is a useful instrument to gain voter support and a widespread empirical phenomenon, the other arguing that voters punish rather than reward fiscal manipulation.
Handle: RePEc:nbr:nberwo:10539
Template-Type: ReDIF-Paper 1.0
Title: International Trade and Macroeconomic Dynamics with Heterogeneous Firms
Classification-JEL: F12; F41
Author-Name: Fabio Ghironi
Author-Person: pgh2
Author-Name: Marc J. Melitz
Author-Person: pme260
Note: EFG IFM ITI
Number: 10540
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10540
File-URL: http://www.nber.org/papers/w10540.pdf
File-Format: application/pdf
Publication-Status: published as Ghironi, Fabio and Marc. J. Melitz. "International Trade And Macroeconomic Dynamics With Heterogeneous Firms," Quarterly Journal of Economics, 2005, v120(3,Aug), 865-915.
Abstract: We develop a stochastic, general equilibrium, two-country model of trade and macroeconomic dynamics. Productivity differs across individual, monopolistically competitive firms in each country. Firms face a sunk entry cost in the domestic market and both fixed and per-unit export costs. Only relatively more productive firms export. Exogenous shocks to aggregate productivity and entry or trade costs induce firms to enter and exit both their domestic and export markets, thus altering the composition of consumption baskets across countries over time. In a world of flexible prices, our model generates endogenously persistent deviations from PPP that would not exist absent our microeconomic structure with heterogeneous firms. It provides an endogenous, microfounded explanation for a Harrod-Balassa-Samuelson effect in response to aggregate productivity differentials and deregulation. Finally, the model successfully matches several moments of U.S. and international business cycles.
Handle: RePEc:nbr:nberwo:10540
Template-Type: ReDIF-Paper 1.0
Title: Incentive Effects of Social Assistance: A Regression Discontinuity Approach
Classification-JEL: H3; I3
Author-Name: Thomas Lemieux
Author-Person: ple92
Author-Name: Kevin Milligan
Author-Person: pmi14
Note: LS PE
Number: 10541
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10541
File-URL: http://www.nber.org/papers/w10541.pdf
File-Format: application/pdf
Publication-Status: published as Lemieux, Thomas & Milligan, Kevin, 2008. "Incentive effects of social assistance: A regression discontinuity approach," Journal of Econometrics, Elsevier, vol. 142(2), pages 807-828, February.
Abstract: We examine the incentive effects of transfer programs using a unique policy episode. Prior to 1989, social assistance recipients without children in Quebec who were under age 30 received benefits 60 percent lower than recipients older than 30. We use this sharp discontinuity in policy to estimate the effects of social assistance on various labour market outcomes and on living arrangements using a regression discontinuity approach. We find strong evidence that more generous social assistance benefits reduce employment, and more suggestive evidence that they affect marital status and living arrangements. The regression discontinuity estimates exhibit little sensitivity to the degree of flexibility in the specification, and perform very well when we control for unobserved heterogeneity using a first difference specification. Finally, we show that commonly used difference-in-difference estimators may perform poorly when control groups are inappropriately chosen.
Handle: RePEc:nbr:nberwo:10541
Template-Type: ReDIF-Paper 1.0
Title: How Much Do Medical Students Know About Physician Income?
Classification-JEL: J24; J44
Author-Name: Sean Nicholson
Author-Person: pni108
Note: EH LS
Number: 10542
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10542
File-URL: http://www.nber.org/papers/w10542.pdf
File-Format: application/pdf
Publication-Status: published as Nicholson, Sean. "How Much Do Medical Students Know About Physician Income?," Journal of Human Resources, 2005, v40(1,Winter), 100-114.
Abstract: Twenty-five cohorts of medical students were asked in their first and fourth year of school to estimate contemporaneous physician income in six different specialties. The students' income estimation errors varied systematically over time and cross-sectionally by specialty and type of student. The median student underestimated physician income by 15 percent, and the median absolute value of the estimation errors was 26 percent of actual income. Students were 35 percent more accurate when estimating market income in their fourth relative to their first year, which indicates medical students learn a considerable amount before choosing a specialty.
Handle: RePEc:nbr:nberwo:10542
Template-Type: ReDIF-Paper 1.0
Title: Earnings Manipulation and Managerial Investment Decisions: Evidence from Sponsored Pension Plans
Classification-JEL: M41; M52
Author-Name: Daniel Bergstresser
Author-Person: pbe639
Author-Name: Mihir A. Desai
Author-Name: Joshua Rauh
Note: CF LS AP PE
Number: 10543
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10543
File-URL: http://www.nber.org/papers/w10543.pdf
File-Format: application/pdf
Publication-Status: published as Bergstresser, Daniel, Mihir Desai and Joshua Rauh. "Earnings Manipulation, Pension Assumptions, And Managerial Investment Decisions," Quarterly Journal of Economics, 2006, v121(1,Feb), 157-195.
Abstract: Managers appear to manipulate firm earnings when they characterize pension assets to capital markets and alter investment decisions to justify, and capitalize on, these manipulations. We construct a measure of the sensitivity of reported earnings to the assumed long-term rate of return on pension assets. Managers are more aggressive with assumed long-term rates of return when their assumptions have a greater impact on reported earnings. Managers also increase assumed rates of return as they prepare to acquire other firms and as they exercise stock options, further confirming the opportunistic nature of these increases. Decisions about assumed rates of return, in turn, influence asset allocation within pension plans. Instrumental variables results suggest that a 25 basis point increase in the assumed rate of return is associated with a 5% increase in equity allocation. Taken together, these results suggest that earnings manipulation arising from managerial motivations influences significant managerial investment decisions.
Handle: RePEc:nbr:nberwo:10543
Template-Type: ReDIF-Paper 1.0
Title: Heterogeneous Productivity Response to Tariff Reduction: Evidence from Brazilian Manufacturing Firms
Classification-JEL: F1; L1
Author-Name: Adriana Schor
Note: ITI PR
Number: 10544
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10544
File-URL: http://www.nber.org/papers/w10544.pdf
File-Format: application/pdf
Publication-Status: published as Schor, Andriana. "Heterogeneous Productivity Response To Tariff Reduction: Evidence From Brazilian Manufacturing Firms," Journal of Development Economics, 2004, v75(2,Dec), 373-396.
Abstract: This paper studies the effects of trade liberalization on the evolution of firm productivity. The productivity of each firm was estimated using an unbalanced panel data of 4,484 Brazilian manufacturing firms from 1986 to 1998, following the procedure first proposed by Olley and Pakes (1996) and further developed by Levinsohn and Petrin (2003). First, the effect of nominal tariffs on firms' productivity levels is identified. After controlling for the endogeneity of nominal tariffs, the estimated coefficient for tariffs in the productivity equation turns out to be negative. Second, a measure of tariffs on inputs is added in the productivity equation. The coefficient associated with tariffs on inputs is also negative, and the inclusion of this new variable reduces the size of the estimated coefficient of nominal tariffs. Thus, it seems that, along with the increased competition, the new access to inputs that embody better foreign technology also contributes to productivity gains after trade liberalization. Third, it is shown that there is a huge degree of heterogeneity of responses to trade liberalization. The effect of the tariff reductions depends heavily on observed and unobserved characteristics of the firm.
Handle: RePEc:nbr:nberwo:10544
Template-Type: ReDIF-Paper 1.0
Title: Financial Constraints and Growth: Multinational and Local Firm Responses to Currency Crises
Classification-JEL: F23; F31
Author-Name: Mihir A. Desai
Author-Name: C. Fritz Foley
Author-Name: Kristin J. Forbes
Author-Person: pfo1
Note: IFM CF
Number: 10545
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10545
File-URL: http://www.nber.org/papers/w10545.pdf
File-Format: application/pdf
Publication-Status: published as With Mihir A. Desai and Kristin J. Forbes, “Financial Constraints and Growth: Multinational and Local Firm Responses to Currency Depreciations,” Review of Financial Studies, Vol. 21, No. 6, pp. 2857-2888, 2008.
Abstract: This paper studies the effects of financial constraints on firm growth by investigating if large depreciations differentially impact multinational affiliates and local firms in emerging markets. U.S. multinational affiliates increase sales, assets and investment significantly more than local firms during, and subsequent to, currency crises. The enhanced relative performance of multinationals is traced to their ability to use internal capital markets to capitalize on the competitiveness benefits of large depreciations. Investment specifications indicate that increases in leverage resulting from sharp depreciations constrain local firms from capitalizing on these investment opportunities, but do not constrain multinational affiliates. Multinational parents also infuse new capital in their affiliates after currency crises. These results indicate another role for foreign direct investment in emerging markets multinational affiliates expand economic activity during currency crises when local firms are most constrained.
Handle: RePEc:nbr:nberwo:10545
Template-Type: ReDIF-Paper 1.0
Title: Profit Neutrality in Licensing: The Boundary between Antitrust Law and Patent Law
Classification-JEL: K21; L12
Author-Name: Stephen M. Maurer
Author-Name: Suzanne Scotchmer
Author-Person: psc49
Note: LE PR
Number: 10546
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10546
File-URL: http://www.nber.org/papers/w10546.pdf
File-Format: application/pdf
Publication-Status: published as Maurer, S. and S. Scotchmer. "Profit Neutrality in Licensing: The Boundary Between Antitrust Law and Patent Law." American Law and Economics Review 8: 476-522. 2006.
Abstract: For over a century, courts and commentators have struggled to find principles that reconcile patent and antitrust law, especially as to patent licensing. We interpret case law and commentary to arrive at three unifying principles for acceptable terms of license. Profit neutrality' holds that patent rewards should not depend on the rightholder's ability to work the patent himself. Derived reward' holds that the patent holder's profits should be earned, if at all, from the social value created by the invention. Minimalism' holds that licensing contracts should not contain more restrictions than are necessary to achieve neutrality. We argue that these principles largely rationalize important decisions of the twentieth century. They also justify the Supreme Court's controversial General Electric decision, which holds that patentholders can set prices charged by their licensees.
Handle: RePEc:nbr:nberwo:10546
Template-Type: ReDIF-Paper 1.0
Title: Futures Prices as Risk-adjusted Forecasts of Monetary Policy
Classification-JEL: G0; G1
Author-Name: Monika Piazzesi
Author-Person: ppi37
Author-Name: Eric Swanson
Author-Person: psw16
Note: ME
Number: 10547
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10547
File-URL: http://www.nber.org/papers/w10547.pdf
File-Format: application/pdf
Publication-Status: published as Piazzesi, Monika, and Swanson, Eric T. "Futures Prices as Risk-adjusted Forecasts of Monetary Policy." Journal of Monetary Economics 55(4): 677-691, May 2008
Publication-Status: published as Monika Piazzesi & Eric Swanson, 2004. "Future prices as risk-adjusted forecasts of monetary policy," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
Abstract: Many researchers have used federal funds futures rates as measures of financial markets' expectations of future monetary policy. However, to the extent that federal funds futures reflect risk premia, these measures require some adjustment to account for these premia. In this paper, we document that excess returns on federal funds futures have been positive on average and strongly countercyclical. In particular, excess returns are surprisingly well predicted by macroeconomic indicators such as employment growth and financial business-cycle indicators such as Treasury yield spreads and corporate bond spreads. Excess returns on eurodollar futures display similar patterns. We document that simply ignoring these risk premia has important consequences for the expected future path of monetary policy. We also show that risk premia matter for some futures-based measures of monetary policy surprises used in the literature.
Handle: RePEc:nbr:nberwo:10547
Template-Type: ReDIF-Paper 1.0
Title: Stock Prices, News and Economic Fluctuations
Classification-JEL: E3
Author-Name: Paul Beaudry
Author-Person: pbe35
Author-Name: Franck Portier
Author-Person: ppo12
Note: EFG AP
Number: 10548
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10548
File-URL: http://www.nber.org/papers/w10548.pdf
File-Format: application/pdf
Publication-Status: published as Beaudry, Paul and Franck Portier. "Stock Prices, News, And Economic Fluctuations," American Economic Review, 2006, v96(4,Sep), 1293-1307.
Publication-Status: published as Stock Prices, News and Economic Fluctuations , Paul Beaudry, Franck Portier. in Enhancing Productivity (NBER-CEPR-TCER-Keio conference), Jorgenson, Hoshi, and Kuroda. 2005
Abstract: In this paper we show that the joint behavior of stock prices and TFP favors a view of business cycles driven largely by a shock that does not affect productivity in the short run -- and therefore does not look like a standard technology shock -- but affects productivity with substantial delay -- and therefore does not look like a monetary shock. One structural interpretation we suggest for this shock is that it represents news about future technological opportunities which is first captured in stock prices. We show that this shock causes a boom in consumption, investment and hours worked that precede productivity growth by a few years. Moreover, we show that this shock explains about 50\% of business cycle fluctuations.
Handle: RePEc:nbr:nberwo:10548
Template-Type: ReDIF-Paper 1.0
Title: Welfare Reform and Health
Classification-JEL: I3; I1
Author-Name: Marianne Bitler
Author-Person: pbi12
Author-Name: Jonah Gelbach
Author-Person: pge238
Author-Name: Hilary Hoynes
Author-Person: pho278
Note: EH PE
Number: 10549
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10549
File-URL: http://www.nber.org/papers/w10549.pdf
File-Format: application/pdf
Publication-Status: published as Bitler, Marianne P., Jonah B. Gelbach and Hilary W. Hoynes. "Welfare Reform and Health," Journal of Human Resources, 2005, v40(2,Spring), 309-334.
Abstract: We investigate the relationship between welfare reform and health insurance, health care utilization, and self-reported measures of health status for women aged 20-45, using nationally representative data from the Behavioral Risk Factor Surveillance System. We present estimates from both difference-in-difference models (applied to single women and single women with children) and difference-in-difference-in-difference models (using married women and single women without children as comparison groups). We find that welfare reform is associated with reductions in health insurance coverage and specific measures of health care utilization, as well as an increase in the likelihood of needing care but finding it unaffordable. We find no statistically significant effects of reform on health status. Overall, effects are somewhat larger for Hispanics compared to blacks and low educated women.
Handle: RePEc:nbr:nberwo:10549
Template-Type: ReDIF-Paper 1.0
Title: The Economic Implications of Corporate Financial Reporting
Classification-JEL: G35; G32
Author-Name: John R. Graham
Author-Name: Campbell R. Harvey
Author-Person: pha102
Author-Name: Shiva Rajgopal
Note: CF AP
Number: 10550
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10550
File-URL: http://www.nber.org/papers/w10550.pdf
File-Format: application/pdf
Publication-Status: published as Graham, John R., Campbell R. Harvey and Shiva Rajgopal. "The Economic Implications Of Corporate Financial Reporting," Journal of Accounting and Economics, 2005, v40(1-3,Dec), 3-73.
Abstract: We survey 401 financial executives, and conduct in-depth interviews with an additional 20, to determine the key factors that drive decisions related to reported earnings and voluntary disclosure. The majority of firms view earnings, especially EPS, as the key metric for outsiders, even more so than cash flows. Because of the severe market reaction to missing an earnings target, we find that firms are willing to sacrifice economic value in order to meet a short-run earnings target. The preference for smooth earnings is so strong that 78% of the surveyed executives would give up economic value in exchange for smooth earnings. We find that 55% of managers would avoid initiating a very positive NPV project if it meant falling short of the current quarter's consensus earnings. Missing an earnings target or reporting volatile earnings is thought to reduce the predictability of earnings, which in turn reduces stock price because investors and analysts hate uncertainty. We also find that managers make voluntary disclosures to reduce information risk associated with their stock but try to avoid setting a disclosure precedent that will be difficult to maintain. In general, management's views provide support for stock price motivations for earnings management and voluntary disclosure, but provide only modest evidence in support of other theories of these phenomena (such as debt, political cost and bonus plan based hypotheses).
Handle: RePEc:nbr:nberwo:10550
Template-Type: ReDIF-Paper 1.0
Title: "Success Taxes," Entrepreneurial Entry, and Innovation
Classification-JEL: H0; O1
Author-Name: William M. Gentry
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Note: PE
Number: 10551
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10551
File-URL: http://www.nber.org/papers/w10551.pdf
File-Format: application/pdf
Publication-Status: published as Jaffe, Adam, Josh Lerner, and Scott Stern (eds.) Innovation Policy and the Economy, Volume 5 (NBER Innovation Policy and the Economy). Cambridge, MA: The MIT Press, 2005.
Publication-Status: published as "Success Taxes," Entrepreneurial Entry, and Innovation, William M. Gentry, R. Glenn Hubbard. in Innovation Policy and the Economy, Volume 5, Jaffe, Lerner, and Stern. 2005
Abstract: Interest in the role of entrepreneurial entry in innovation raises the question of the extent to which tax policy encourages or discourages entry. We find that, while the level of the marginal tax rate has a negative effect in entrepreneurial entry, the progressivity of the tax also discourages entrepreneurship, and significantly so for some groups of households. These effects are principally traceable to the upside' or success' convexity of the household tax schedule. Prospective entrants from a priori innovative industries and occupations are no less affected by the considerations we examine than other prospective entrants. In terms of destination-based industry and occupation measures of innovative entrepreneurs, we find mixed evidence on whether innovative entrepreneurs differ from the general population; the results for entrepreneurs moving to innovative industries suggest that they may be unaffected by tax convexity but the possible endogeneity of this measure of innovative entrepreneurs confounds interpreting this specification. Using education as a measure of potential for innovation, we find that tax convexity discourages entry into self-employment for people of all educational backgrounds. Overall, we find little evidence that the tax effects are focused simply on the employment changes of less skilled or less promising potential entrants.
Handle: RePEc:nbr:nberwo:10551
Template-Type: ReDIF-Paper 1.0
Title: The Costs of Low Birth Weight
Classification-JEL: H51; I12
Author-Name: Douglas Almond
Author-Person: pal938
Author-Name: Kenneth Y. Chay
Author-Person: pch800
Author-Name: David S. Lee
Note: EH CH
Number: 10552
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10552
File-URL: http://www.nber.org/papers/w10552.pdf
File-Format: application/pdf
Publication-Status: published as Almond, Douglas, Kenneth Y. Chay and David S. Lee. "The Costs Of Low Birth Weight," Quarterly Journal of Economics, 2005, v120(3,Aug), 1031-1083.
Abstract: Birth weight has emerged as the leading indicator of infant health and welfare and the central focus of infant health policy. This is because low birth weight (LBW) infants experience severe health and developmental difficulties that can impose enormous costs on society. But would the prevention of LBW generate equally sizable cost savings and health improvements? Estimates of the return to LBW-prevention from cross-sectional associations may be biased by omitted variables that cannot be influenced by policy, such as genetic factors. To address this, we compare the hospital costs, health at birth, and infant mortality rates between heavier and lighter infants from all twin pairs born in the United States. We also examine the effect of maternal smoking during pregnancy the leading risk factor for LBW in the United States on health among singleton births after controlling for detailed background characteristics. Both analyses imply substantially smaller effects of LBW than previously thought, suggesting two possibilities: 1) existing estimates overstate the true costs and consequences of LBW by at least a factor of four and by as much as a factor of 20; or 2) different LBW-preventing interventions have different health and cost consequences, implying that policy efforts that presume a single return to reducing LBW will necessarily be suboptimal.
Handle: RePEc:nbr:nberwo:10552
Template-Type: ReDIF-Paper 1.0
Title: When Do Firms Hire Lobbyists? The Organization of Lobbying at the Federal Communications Commission
Classification-JEL: L5; K0
Author-Name: John M. de Figueiredo
Author-Name: James J. Kim
Note: IO LE
Number: 10553
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10553
File-URL: http://www.nber.org/papers/w10553.pdf
File-Format: application/pdf
Publication-Status: published as de Figueiredo, John M. and James J. Kim. "When Do Firms Hire Lobbyists? The Organization Of Lobbying At The Federal Communications Commission," Industrial and Corporate Change, 2004, v13(6,Dec), 883-900.
Abstract: This paper examines the explanatory power of transaction cost economics to explain vertical integration decisions for lobbying by firms. We examine 150 lobbying contacts at the Federal Communications Commission (FCC) on the issue of payphone compensation for dial-around calls. When firms lobby on topics that are highly firm-specific and prone to sensitive-information leakage, they are more likely to use employees to lobby the FCC. However, when topics arise that are more general to the industry and do not include sensitive information, firms are more likely to use outside counsel to lobby the FCC.
Handle: RePEc:nbr:nberwo:10553
Template-Type: ReDIF-Paper 1.0
Title: Where Do New US-Trained Science-Engineering PhDs come from?
Classification-JEL: J0; J4
Author-Name: Richard B. Freeman
Author-Person: pfr23
Author-Name: Emily Jin
Author-Name: Chia-Yu Shen
Note: ED LS
Number: 10554
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10554
File-URL: http://www.nber.org/papers/w10554.pdf
File-Format: application/pdf
Publication-Status: published as Ehrenberg, Ronald G. and Paula E. Stephan (eds.) Science and the University. Wisconsin: University of Wisconsin Press, 2007.
Abstract: This study shows that the demographic and institutional origins of new US trained science and engineering PhDs changed markedly between the late 1960s-1970s to the 1990s-early 2000s. In 1966, 71% of science and engineering PhD graduates were US-born males, 6% were US-born females, and 23% were foreign born. In 2000, 36% of the graduates were US-born males, 25% were US-born females, and 39% were foreign born. Between 1970 and 2000 most of the growth in PhDs was in less prestigious smaller doctorate programs. The undergraduate origins of bachelor's obtaining science and engineering PhDs changed only modestly among US colleges and universities while there was a huge growth in the number of foreign bachelor's graduates obtaining US PhDs.
Handle: RePEc:nbr:nberwo:10554
Template-Type: ReDIF-Paper 1.0
Title: Growth Effects of the Exchange-Rate Regime and the Capital-Account Openness in A Crisis-Prone World Market: A Nuanced View
Classification-JEL: F0; F4
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Yona Rubinstein
Author-Person: pru68
Note: IFM
Number: 10555
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10555
File-URL: http://www.nber.org/papers/w10555.pdf
File-Format: application/pdf
Abstract: It has been a remarkably difficult empirical task to identify clear-cut real effects of exchange-rate regimes on the open economy. Similarly, no definitive view emerges as to the aggregate effects of capital account liberalizations. The main hypothesis of the paper is that a direct and an indirect effect of balance-of-payments policies, geared toward exchange rate regimes and capital account openness, exert a confounding overall influence on output growth, in the presence of sudden-stop crises. A direct channel works through the trade and financial sectors, akin to the optimal currency area arguments. An indirect channel works through the probability of a sudden-stop crisis. The empirical analysis disentagles these conflicting effects and demonstrates that: (i) the balance-of-payments policies significantly affect the probability of crises, and the crisis probability, in turn, negatively affects output growth; (ii) controlling for the crisis probability in the growth equation, the direct effect of balance-of-payments policies is large. Domestic price crises (high inflation above a 20 percent threshold) affect growth only indirectly; through their positive effecton the probability of sudden-stop crises.
Handle: RePEc:nbr:nberwo:10555
Template-Type: ReDIF-Paper 1.0
Title: Shakeouts and Market Crashes
Classification-JEL: G0; L0
Author-Name: Alessandro Barbarino
Author-Person: pba703
Author-Name: Boyan Jovanovic
Note: AP EFG
Number: 10556
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10556
File-URL: http://www.nber.org/papers/w10556.pdf
File-Format: application/pdf
Publication-Status: published as Alessandro Barbarino & Boyan Jovanovic, 2007. "Shakeouts And Market Crashes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 385-420, 05.
Abstract: Stock-market crashes tend to follow run-ups in prices. These episodes look like bubbles that gradually inflate and then suddenly burst. We show that such bubbles can form in a Zeira-Rob type of model in which demand size is uncertain. Two conditions are sufficient for this to happen: A declining hazard rate in the prior distribution over market size and a positively sloped supply of capital to the industry. For the period 1971-2001 we fit the model to the Telecom sector.
Handle: RePEc:nbr:nberwo:10556
Template-Type: ReDIF-Paper 1.0
Title: The Green Solow Model
Classification-JEL: E1; O1
Author-Name: William A. Brock
Author-Person: pbr142
Author-Name: M. Scott Taylor
Author-Person: pta60
Note: EFG EEE
Number: 10557
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10557
File-URL: http://www.nber.org/papers/w10557.pdf
File-Format: application/pdf
Publication-Status: published as William Brock & M. Taylor, 2010. "The Green Solow model," Journal of Economic Growth, Springer, vol. 15(2), pages 127-153, June.
Abstract: We demonstrate that a key empirical finding in environmental economics - The Environmental Kuznets Curve - and the core model of modern macroeconomics - the Solow model - are intimately related. Once we amend the Solow model to incorporate technological progress in abatement, the EKC is a necessary by product of convergence to a sustainable growth path. Our amended model, which we dub the Green Solow', generates an EKC relationship between both the flow of pollution emissions and income per capita, and the stock of environmental quality and income per capita. The resulting EKC may be humped shaped or strictly declining. We explain why current methods for estimating an EKC are likely to fail whenever they fail to account for cross-country heterogeneity in either initial conditions or deep parameters. We then develop an alternative empirical method closely related to tests of income convergence employed in the macro literature. Preliminary tests of the model's predictions are investigated using data from OECD countries.
Handle: RePEc:nbr:nberwo:10557
Template-Type: ReDIF-Paper 1.0
Title: Conscription as Regulation
Classification-JEL: D72; D73
Author-Name: Casey Mulligan
Author-Person: pmu64
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: LS PE
Number: 10558
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10558
File-URL: http://www.nber.org/papers/w10558.pdf
File-Format: application/pdf
Publication-Status: published as Casey B. Mulligan, 2005. "Conscription as Regulation," American Law and Economics Review, Oxford University Press, vol. 7(1), pages 85-111.
Abstract: We examine the practice of military conscription around the world from the perspective of two standard theories, and a new one, which emphasizes the fixed cost of introducing and administering the draft as a deterrent to its use. We find that, holding the relative size of the military constant, higher population countries are more likely to use the draft. We also find that French legal origin countries, which we see as facing lower fixed and variable administrative costs, are more likely to draft than are common law countries. Conscription does not seem to be influenced by democracy, and is influenced by the deadweight costs of taxation only in countries with very large militaries. The results suggest that fixed costs of introducing and administering new regulations may be an important determinant of their use.
Handle: RePEc:nbr:nberwo:10558
Template-Type: ReDIF-Paper 1.0
Title: The Stock Market and Investment: Evidence from FDI Flows
Classification-JEL: G31
Author-Name: Malcolm Baker
Author-Person: pba735
Author-Name: C. Fritz Foley
Author-Name: Jeffrey Wurgler
Author-Person: pwu8
Note: AP IFM ITI
Number: 10559
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10559
File-URL: http://www.nber.org/papers/w10559.pdf
File-Format: application/pdf
Abstract: Foreign direct investment offers a rich laboratory in which to study the broader economic effects of securities market mispricing. We outline and test two mispricing-based theories of FDI. The cheap assets' or fire-sale theory views FDI inflows as the purchase of undervalued host country assets, while the cheap capital' theory views FDI outflows as a natural use of the relatively lowcost capital available to overvalued firms in the source country. The empirical results support the cheap capital view: FDI flows are unrelated to host country stock market valuations, as measured by the aggregate market-to-book-value ratio, but are strongly positively related to source country valuations and negatively related to future source country stock returns. The latter effects are most pronounced in the presence of capital account restrictions, suggesting that such restrictions limit cross-country arbitrage and thereby increase the potential for mispricing-driven FDI.
Handle: RePEc:nbr:nberwo:10559
Template-Type: ReDIF-Paper 1.0
Title: Growth Volatility and Financial Liberalization
Classification-JEL: E32; F30
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Campbell R. Harvey
Author-Person: pha102
Author-Name: Christian Lundblad
Author-Person: plu185
Note: AP EFG ITI
Number: 10560
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10560
File-URL: http://www.nber.org/papers/w10560.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Money and Finance, Vol. 25, no. 3 (April 2006): 379-403
Abstract: We examine the effects of both equity market liberalization and capital account openness on real consumption growth variability. We show that financial liberalization is mostly associated with lower consumption growth volatility. Our results are robust, surviving controls for business-cycle effects, economic and financial development, the quality of institutions, and other variables. Countries that have more open capital accounts experience a greater reduction in consumption growth volatility after equity market openings. The results hold for both total and idiosyncratic consumption growth volatility. We also find that financial liberalizations are associated with declines in the ratio of consumption growth volatility to GDP growth volatility, suggesting improved risk sharing. Our results are weaker for liberalizing emerging markets but we never observe an increase in real volatility. Moreover, we demonstrate significant differences in the volatility response depending on the size of the banking and government sectors and certain institutional factors.
Handle: RePEc:nbr:nberwo:10560
Template-Type: ReDIF-Paper 1.0
Title: When Do Living Wages Bite?
Classification-JEL: J2; J3
Author-Name: Scott Adams
Author-Person: pad22
Author-Name: David Neumark
Author-Person: pne16
Note: LS
Number: 10561
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10561
File-URL: http://www.nber.org/papers/w10561.pdf
File-Format: application/pdf
Publication-Status: published as Adams, Scott, and David Neumark. “When Do Living Wages Bite?” Industrial Relations (2005): 164-192.
Abstract: Many features of living wage laws may influence the strength of their effects on wages and employment of low-skill individuals. Echoing past research, business assistance living wage laws generate stronger wage increases and employment reductions than contractor-only laws. But broader enforcement or implementation and geographic concentration of living wage laws also appear to strengthen their effects. Finally, geographic concentration may be more significant than the distinction between business assistance and contractor-only living wage laws.
Handle: RePEc:nbr:nberwo:10561
Template-Type: ReDIF-Paper 1.0
Title: The Economic Effects of Living Wage Laws: A Provisional Review
Classification-JEL: J2; J3
Author-Name: Scott Adams
Author-Person: pad22
Author-Name: David Neumark
Author-Person: pne16
Note: LS
Number: 10562
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10562
File-URL: http://www.nber.org/papers/w10562.pdf
File-Format: application/pdf
Publication-Status: published as Adams, Scott and David Neumark. "Living Wage Effects: New And Improved Evidence," Economic Development Quarterly, 2005, v19(1,Feb), , 80-102.
Abstract: Nearly 100 cities and local governments in the United States passed living wage laws since the mid-1990s. The central goal of living wages is to reduce poverty, yet they may fail to do so because of disemployment effects. We summarize and critique the existing research on the effects of living wages on wages, employment, and family income, emphasizing common findings, points of disagreement, and important questions for future research. The evidence thus far points to wage increases as well as employment losses for the least-skilled although there is disagreement about the employment effects but on net some beneficial distributional effects. The evidence also points to efficiency wage-type effects of living wage laws that may offset some of the adverse impacts on employers.
Handle: RePEc:nbr:nberwo:10562
Template-Type: ReDIF-Paper 1.0
Title: The Real Effects of Investor Sentiment
Classification-JEL: E22; G31
Author-Name: Christopher Polk
Author-Person: ppo238
Author-Name: Paola Sapienza
Author-Person: psa155
Note: AP CF EFG
Number: 10563
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10563
File-URL: http://www.nber.org/papers/w10563.pdf
File-Format: application/pdf
Abstract: We study how stock market mispricing might influence individual firms' investment decisions. We find a positive relation between investment and a number of proxies for mispricing, controlling for investment opportunities and financial slack, suggesting that overpriced (underpriced) firms tend to overinvest (underinvest). Consistent with the predictions of our model, we find that investment is more sensitive to our mispricing proxies for firms with higher R&D intensity suggesting longer periods of information asymmetry and thus mispricing) or share turnover (suggesting that the firms' shareholders are short-term investors). We also find that firms with relatively high (low) investment subsequently have relatively low (high) stock returns, after controlling for investment opportunities and other characteristics linked to return predictability. These patterns are stronger for firms with higher R&D intensity or higher share turnover.
Handle: RePEc:nbr:nberwo:10563
Template-Type: ReDIF-Paper 1.0
Title: Further Tests of Abortion and Crime
Classification-JEL: K4
Author-Name: Ted Joyce
Author-Person: pjo112
Note: CH EH
Number: 10564
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10564
File-URL: http://www.nber.org/papers/w10564.pdf
File-Format: application/pdf
Abstract: The inverse relationship between abortion and crime has spurred new research and much controversy. If the relationship is causal, then polices that increased abortion have generated enormous external benefits from reduced crime. In previous papers, I argued that evidence for a casual relationship is weak and incomplete. In this paper, I conduct a number of new analyses intended to address criticisms of my earlier work. First, I examine closely the effects of changes in abortion rates between 1971 and 1974. Changes in abortion rates during this period were dramatic, varied widely by state, had a demonstrable effect on fertility, and were more plausibly exogenous than changes in the late 1970s and early 1980s. If abortion reduced crime, crime should have fallen sharply as these post-legalization cohorts reached their late teens and early 20s, the peak ages of criminal involvement. It did not. Second, I conduct separate estimates for whites and blacks because the effect of legalized abortion on crime should have been much larger for blacks than whites, since the effect of legalization of abortion on the fertility rates of blacks was much larger. There was little race difference in the reduction in crime. Finally, I compare changes in homicide rates before and after legalization of abortion, within states, by single year of age. The analysis of older adults is compelling because they were largely unaffected by the crack-cocaine epidemic, which was a potentially important confounding factor in earlier estimates. These analyses provide little evidence that legalized abortion reduced crime.
Handle: RePEc:nbr:nberwo:10564
Template-Type: ReDIF-Paper 1.0
Title: Globalization, Returns to Accumulationa and the World Distribution of Output
Classification-JEL: O33; O41
Author-Name: Paul Beaudry
Author-Person: pbe35
Author-Name: Fabrice Collard
Author-Person: pco44
Note: EFG ITI
Number: 10565
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10565
File-URL: http://www.nber.org/papers/w10565.pdf
File-Format: application/pdf
Publication-Status: published as Beaudry, Paul & Collard, Fabrice, 2006. "Globalization, returns to accumulation and the world distribution of output," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 879-909, July.
Abstract: This paper examines the extent to which the process of globalization can explain the observed widening in the cross--country distribution of output--per--worker. In particular examine whether the opening up of trade in a Hecksher--Ohlin type model of trade can explain the observed changes. On the theoretical front the model highlights that, when the labor market is subject to a holdup problem, then the opening up of trade can cause an increase in the dispersion of income across countries similar to that observed in the data due to the emergence of a discrepancy between the private and social returns to capital accumulation that favors capital abundant countries. On the empirical front, we document the relevance of the model by examining whether growth patterns, decomposition exercises and specialization patterns support the model's predictions. Overall we find that over 50% of the recently observed increase in income dispersion across countries can be accounted for by the mechanism exemplified by the model.
Handle: RePEc:nbr:nberwo:10565
Template-Type: ReDIF-Paper 1.0
Title: Growth Accelerations
Classification-JEL: O1; O5
Author-Name: Ricardo Hausmann
Author-Person: pha552
Author-Name: Lant Pritchett
Author-Person: ppr27
Author-Name: Dani Rodrik
Author-Person: pro60
Note: EFG ITI
Number: 10566
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10566
File-URL: http://www.nber.org/papers/w10566.pdf
File-Format: application/pdf
Publication-Status: published as Ricardo Hausmann & Lant Pritchett & Dani Rodrik, 2005. "Growth Accelerations," Journal of Economic Growth, Springer, vol. 10(4), pages 303-329, December.
Abstract: Unlike most cross-country growth analyses, we focus on turning points in growth performance. We look for instances of rapid acceleration in economic growth that are sustained for at least eight years and identify more than 80 such episodes since the 1950s. Growth accelerations tend to be correlated with increases in investment and trade, and with real exchange rate depreciations. Political-regime changes are statistically significant predictors of growth accelerations. External shocks tend to produce growth accelerations that eventually fizzle out, while economic reform is a statistically significant predictor of growth accelerations that are sustained. However, growth accelerations tend to be highly upredictable: the vast majority of growth accelerations are unrelated to standard determinants and most instances of economic reform do not produce growth accelerations.
Handle: RePEc:nbr:nberwo:10566
Template-Type: ReDIF-Paper 1.0
Title: SEC Regulation Fair Disclosure, Information, and the Cost of Capital
Classification-JEL: G10; G12
Author-Name: Armando Gomes
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: Leonardo Madureira
Note: AP CF IO
Number: 10567
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10567
File-URL: http://www.nber.org/papers/w10567.pdf
File-Format: application/pdf
Publication-Status: published as Gomes, Armando, Gary Gorton and Leonardo Madureira. "SEC Regulation FD, Information, and the Cost of Capital.” Journal of Corporate Finance 13, 2-3 (June 2007): 300-334.
Abstract: We empirically investigate the effects of the adoption of Regulation Fair Disclosure ( Reg FD') by the U.S. Securities and Exchange Commission in October 2000. This rule was intended to stop the practice of selective disclosure,' in which companies give material information only to a few analysts and institutional investors prior to disclosing it publicly. We find that the adoption of Reg FD caused a significant reallocation of information-producing resources, resulting in a welfare loss for small firms, which now face a higher cost of capital. The loss of the selective disclosure' channel for information flows could not be compensated for via other information transmission channels. This effect was more pronounced for firms communicating complex information and, consistent with the investor recognition hypothesis, for those losing analyst coverage. Moreover, we find no significant relationship of the different responses with litigation risks and agency costs. Our results suggest that Reg FD had unintended consequences and that information' in financial markets may be more complicated than current finance theory admits.
Handle: RePEc:nbr:nberwo:10567
Template-Type: ReDIF-Paper 1.0
Title: Do Institutions Cause Growth?
Classification-JEL: O11; O40
Author-Name: Edward L. Glaeser
Author-Person: pgl9
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: EFG
Number: 10568
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10568
File-URL: http://www.nber.org/papers/w10568.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L., Rafael La Porta, Florencio Lopez-de-Silanes and Andrei Shleifer. "Do Institutions Cause Growth?," Journal of Economic Growth, 2004, v9(3,Sep), 271-303.
Abstract: We revisit the debate over whether political institutions cause economic growth, or whether, alternatively, growth and human capital accumulation lead to institutional improvement. We find that most indicators of institutional quality used to establish the proposition that institutions cause growth are constructed to be conceptually unsuitable for that purpose. We also find that some of the instrumental variable techniques used in the literature are flawed. Basic OLS results, as well as a variety of additional evidence, suggest that a) human capital is a more basic source of growth than are the institutions, b) poor countries get out of poverty through good policies, often pursued by dictators, and c) subsequently improve their political institutions.
Handle: RePEc:nbr:nberwo:10568
Template-Type: ReDIF-Paper 1.0
Title: Productivity, Tradability, and the Long-Run Price Puzzle
Classification-JEL: F40; F43
Author-Name: Paul Bergin
Author-Person: pbe249
Author-Name: Reuven Glick
Author-Person: pgl13
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE ITI PR
Number: 10569
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10569
File-URL: http://www.nber.org/papers/w10569.pdf
File-Format: application/pdf
Publication-Status: published as Bergin, Paul R. & Glick, Reuven & Taylor, Alan M., 2006. "Productivity, tradability, and the long-run price puzzle," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 2041-2066, November.
Abstract: Long-run cross-country price data exhibit a puzzle. Today, richer countries exhibit higher price levels than poorer countries, a stylized fact usually attributed to the Balassa- Samuelson' effect. But looking back fifty years, or more, this effect virtually disappears from the data. What is often assumed to be a universal property is actually quite specific to recent times. What might explain this historical pattern? We adopt a framework where goods are differentiated by tradability and productivity. A model with monopolistic competition, a continuum-of-goods, and endogenous tradability allows for theory and history to be consistent for a wide range of underlying productivity shocks.
Handle: RePEc:nbr:nberwo:10569
Template-Type: ReDIF-Paper 1.0
Title: Search, Obfuscation, and Price Elasticities on the Internet
Classification-JEL: L8; D4
Author-Name: Glenn Ellison
Author-Person: pel10
Author-Name: Sara Fisher Ellison
Note: IO
Number: 10570
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10570
File-URL: http://www.nber.org/papers/w10570.pdf
File-Format: application/pdf
Publication-Status: published as Glenn Ellison & Sara Fisher Ellison, 2009. "Search, Obfuscation, and Price Elasticities on the Internet," Econometrica, Econometric Society, vol. 77(2), pages 427-452, 03.
Abstract: We examine the competition between a group of Internet retailers that operate in an environment where a price search engine plays a dominant role. We show that for some products in this environment, the easy price search makes demand tremendously price-sensitive. Retailers, though, engage in obfuscation---practices that frustrate consumer search or make it less damaging to firms---resulting in much less price sensitivity on other products. We discuss several models of obfuscation and examine its effects on demand and markups empirically. Observed markups are adequate to allow efficient online retailers to survive.
Handle: RePEc:nbr:nberwo:10570
Template-Type: ReDIF-Paper 1.0
Title: Conflicts of Interest, Information Provision, and Competition in Banking
Classification-JEL: G2; L1
Author-Name: Patrick Bolton
Author-Person: pbo544
Author-Name: Xavier Freixas
Author-Person: pfr190
Author-Name: Joel Shapiro
Author-Person: psh297
Note: CF IO
Number: 10571
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10571
File-URL: http://www.nber.org/papers/w10571.pdf
File-Format: application/pdf
Publication-Status: published as Bolton, Patrick & Freixas, Xavier & Shapiro, Joel, 2007. "Conflicts of interest, information provision, and competition in the financial services industry," Journal of Financial Economics, Elsevier, vol. 85(2), pages 297-330, August.
Abstract: In some markets, such as the market for drugs or for financial services, sellers have better information than buyers regarding the matching between the buyer's needs and the good's actual characteristics. Depending on the market structure, this may lead to conflicts of interest and/or the under-provision of information by the seller. This paper studies this issue in the market for financial services. The analysis presents a new model of competition between banks, as banks' price competition influences the ensuing incentives for truthful information revelation. We compare two different firm structures, specialized banking, where financial institutions provide a unique financial product, and one-stop banking, where a financial institution is able to provide several financial products which are horizontally differentiated. We show first that, although conflicts of interest may prevent information disclosure under monopoly, competition forces full information provision for sufficiently high reputation costs. Second, in the presence of market power, one-stop banks will use information strategically to increase product differentiation and therefore will always provide reliable information and charge higher prices than specialized banks, thus providing a new reason for the creation of one-stop banks. Finally, we show that, if independent financial advisers are able to provide reliable information, this increases product differentiation and therefore market power, so that it is in the interest of financial intermediaries to promote external independent financial advice.
Handle: RePEc:nbr:nberwo:10571
Template-Type: ReDIF-Paper 1.0
Title: Do Dividend Payments Respond to Taxes? Preliminary Evidence from the 2003 Dividend Tax Cut
Classification-JEL: G35; H2
Author-Name: Raj Chetty
Author-Person: pch161
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: CF PE
Number: 10572
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10572
File-URL: http://www.nber.org/papers/w10572.pdf
File-Format: application/pdf
Publication-Status: published as "Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut," Quarterly Journal of Economics 120(3): 791-833, 2005.
Abstract: The individual income tax burden on dividends was lowered sharply in 2003 from a maximum rate of 35% to 15%, creating a unique opportunity to analyze the effects of dividend taxes on dividend payments by U.S. corporations. This paper uses data from the Center for Research in Security Prices (CRSP) spanning 1980 to 2004-Q1 to analyze this issue. We find a sharp and widespread surge in dividend distributions following the tax cut, along several dimensions. First, the fraction of publicly traded firms paying dividends began to increase precisely in 2003 after having declined continuously for more than two decades. Nearly 150 firms have initiated dividend payments after the tax cut, adding more than $1.5 billion to aggregate quarterly dividends. Most of these firms initiated regular, recurrent payments rather than one-time special' distributions. Second, many firms that were already paying dividends prior to the reform raised regular dividend payments significantly after the tax cut. Third, special dividends also rose, but the magnitude of this effect is likely to be small relative to the increases in regular distributions in the long run. All three of these effects are significant among all company sizes, and are robust to controls for profits and other firm characteristics. The surge in regular dividend payments after the 2003 reform is unprecedented in recent years. The Tax Reform Act of 1986, which also reduced the top individual tax rate on dividends significantly, led to a temporary, concentrated rise in special dividend payments. However, the number of regular dividend payers did not rise much after the 1986 reform.
Handle: RePEc:nbr:nberwo:10572
Template-Type: ReDIF-Paper 1.0
Title: Asymmetric Cycles
Classification-JEL: E3
Author-Name: Boyan Jovanovic
Note: EFG PR
Number: 10573
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10573
File-URL: http://www.nber.org/papers/w10573.pdf
File-Format: application/pdf
Publication-Status: published as Jovanovic, Boyan. "Asymmetric Cycles," Review of Economic Studies, 2006, v73(1,Jan), 145-162.
Abstract: I estimate a model in which new technology entails random adjustment costs. Rapid adjustments may cause productivity slowdowns. These slowdowns last longer when retooling is costly. The model explains why growth-rate disasters are more likely than miracles, and why volatility of growth relates negatively to growth over time. I estimate the model, and the estimates have surprising implications. Firms seem to abandon technologies long before they are perfected current-practice TFP is 17 percent below best-practice.
Handle: RePEc:nbr:nberwo:10573
Template-Type: ReDIF-Paper 1.0
Title: Should We Fear Derivatives?
Classification-JEL: G1; G13
Author-Name: Rene M. Stulz
Note: CF AP
Number: 10574
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10574
File-URL: http://www.nber.org/papers/w10574.pdf
File-Format: application/pdf
Publication-Status: published as Stulz, Rene M. "Should We Fear Derivatives?," Journal of Economic Perspectives, 2004, v18(3,Summer), 173-192.
Abstract: This paper discusses the extent to which derivatives pose threats to firms and to the economy. After reviewing the derivatives markets and putting in perspective the various measures of the size of these markets, the paper shows who uses derivatives and why. The difficulties firms face in valuing derivatives portfolios are evaluated. Although academics pay much attention to no-arbitrage pricing results, the paper points out that there can be considerable subjectivity in the pricing of derivatives that do not have highly liquid markets. It is shown that the known risks of derivatives portfolios can generally be measured and managed well at the firm level. However, derivatives can create systemic risks when a market participant becomes excessively large relative to particular derivatives markets. Overall, the benefits of derivatives outweigh the potential threats.
Handle: RePEc:nbr:nberwo:10574
Template-Type: ReDIF-Paper 1.0
Title: Targeted Remedial Education for Under-Performing Teenagers: Costs and Benefits
Classification-JEL: I20; J24
Author-Name: Victor Lavy
Author-Person: pla111
Author-Name: Analia Schlosser
Author-Person: psc163
Note: ED LS CH
Number: 10575
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10575
File-URL: http://www.nber.org/papers/w10575.pdf
File-Format: application/pdf
Publication-Status: published as Lavy, Victor and Analia Schlosser. "Targeted Remedial Education For Underperforming Teenagers: Costs and Benefits," Journal of Labor Economics, 2005, v23(4,Oct), 839-874.
Abstract: There is renewed interest in ways to enhance secondary education, especially among disadvantaged students. This study evaluates the short-term effects of a remedial-education program that provided additional instruction to under-performing high-school students in Israel. The program targeted 10th twelfth graders who needed additional help to pass the matriculation exams. Using a comparison group of schools that enrolled in the program later and implementing a differences-in-differences estimation strategy, we found that the program raised the school mean matriculation rate by 3.3 percentage points. This gain reflects mainly an effect on targeted participants and the absence of externalities on their untreated peers. The program was found to be less cost-effective than two alternative interventions based on incentives for teachers and students.
Handle: RePEc:nbr:nberwo:10575
Template-Type: ReDIF-Paper 1.0
Title: Why Doesn't Asia Have Bigger Bond Markets?
Classification-JEL: I20; J24
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Pipat Luengnaruemitchai
Author-Person: plu124
Note: CF IFM
Number: 10576
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10576
File-URL: http://www.nber.org/papers/w10576.pdf
File-Format: application/pdf
Publication-Status: published as Barry Eichengreen & Pipat Luengnaruemitchai, 2006. "Why doesn’t Asia have bigger bond markets?," BIS Papers chapters, in: Bank for International Settlements (ed.), Asian bond markets: issues and prospects, volume 30, pages 40-77 Bank for International Settlements.
Abstract: Asia's underdeveloped bond markets and dependence on bank finance have been topics of concern since the crisis of 1997-8. In this paper we document that the slow development of Asian bond markets is a phenomenon with multiple dimensions. Larger country size, stronger institutions, less volatile exchange rates, and more competitive banking sectors tend to be positively associated with bond market capitalization. Asian countries' strong fiscal balances, while admirable on other grounds, have not been conducive to the growth of government bond markets. The results suggest that the region's structural characteristics and macroeconomic and financial policies account fully for differences in bond market development between Asia and the rest of the world. Once one controls for these characteristics and policies, in other words, there is no residual Asia effect.'
Handle: RePEc:nbr:nberwo:10576
Template-Type: ReDIF-Paper 1.0
Title: Why Barriers to Entry are Barriers to Understanding
Classification-JEL: L0; L1
Author-Name: Dennis W. Carlton
Author-Person: pca14
Note: IFM
Number: 10577
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10577
File-URL: http://www.nber.org/papers/w10577.pdf
File-Format: application/pdf
Publication-Status: published as Carlton, Dennis W. "Why Barriers To Entry Are Barriers To Understanding," American Economic Review, 2004, v94(2,May), 466-470.
Abstract: This paper discusses and criticizes the usual definitions of barriers to entry. The failure of the concept of barrier to entry to incorporate a time dimension means that it is a concept that is in need of additional embellishment in order to be useful in a practical problem or for antitrust or regulatory proceedings.
Handle: RePEc:nbr:nberwo:10577
Template-Type: ReDIF-Paper 1.0
Title: Education for Innovation: Entrepreneurial Breakthroughs vs. Corporate Incremental Improvements
Classification-JEL: O1
Author-Name: William J. Baumol
Author-Person: pba92
Note: IO
Number: 10578
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10578
File-URL: http://www.nber.org/papers/w10578.pdf
File-Format: application/pdf
Publication-Status: published as William J. Baumol, 2005. "Education for Innovation: Entrepreneurial Breakthroughs Versus Corporate Incremental Improvements," NBER Chapters, in: Innovation Policy and the Economy, Volume 5, pages 33-56 National Bureau of Economic Research, Inc.
Publication-Status: published as William J. Baumol, 2005. "Education for Innovation: Entrepreneurial Breakthroughs versus Corporate Incremental Improvements," Innovation Policy and the Economy, vol 5, pages 33-56.
Abstract: This paper explores the following hypotheses on the appropriate education for innovating entrepreneurship: a) breakthrough inventions are contributed disproportionately by independent inventors and entrepreneurs, while large firms focus on cumulative, incremental (and often invaluable) improvements; b) education for mastery of scientific knowledge and methods is enormously valuable for innovation and growth, but can impede heterodox thinking and imagination; c) large-firm R&D requires personnel who are highly educated in extant information and analytic methods, while successful independent entrepreneurs and inventors often lack such preparation; d) while procedures for teaching current knowledge and methods in science and engineering are effective, we know little about training for the critical task of breakthrough innovation.
Handle: RePEc:nbr:nberwo:10578
Template-Type: ReDIF-Paper 1.0
Title: Maximum Likelihood Estimation of Stochastic Volatility Models
Classification-JEL: G0
Author-Name: Yacine Ait-Sahalia
Author-Person: pai23
Author-Name: Robert Kimmel
Note: AP
Number: 10579
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10579
File-URL: http://www.nber.org/papers/w10579.pdf
File-Format: application/pdf
Publication-Status: published as Ait-Sahalia, Yacine and Robert Kimmel. "Maximum Likelihood Estimation of Stochastic Volatility Models." Journal of Financial Economics 83, 2 (February 2007): 413-52.
Abstract: We develop and implement a new method for maximum likelihood estimation in closed-form of stochastic volatility models. Using Monte Carlo simulations, we compare a full likelihood procedure, where an option price is inverted into the unobservable volatility state, to an approximate likelihood procedure where the volatility state is replaced by the implied volatility of a short dated at-the-money option. We find that the approximation results in a negligible loss of accuracy. We apply this method to market prices of index options for several stochastic volatility models, and compare the characteristics of the estimated models. The evidence for a general CEV model, which nests both the affine model of Heston (1993) and a GARCH model, suggests that the elasticity of variance of volatility lies between that assumed by the two nested models.
Handle: RePEc:nbr:nberwo:10579
Template-Type: ReDIF-Paper 1.0
Title: Until it's Over, Over There: The U.S. Economy in World War I
Classification-JEL: N1; N4
Author-Name: Hugh Rockoff
Author-Person: pro65
Note: DAE
Number: 10580
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10580
File-URL: http://www.nber.org/papers/w10580.pdf
File-Format: application/pdf
Publication-Status: published as Broadberry, Stephen and Mark Harrison (eds.) The Economics of World War I. Cambridge: Cambridge University Press, 2005.
Abstract: The process by which the US economy was mobilized during World War I was the subject of considerable criticism both at the time and since. Nevertheless, when viewed in the aggregate the degree of mobilization achieved during the short period of active US involvement was remarkable. The United States entered the war in 1917 having made only limited preparations. In 1918 the armed forces were expanded to include 2.9 million sailors, soldiers, and marines; 6 percent of the labor force in the 15 to 44 age bracket. Overall in 1918, one fifth or more of the nation's resources was devoted to the war effort. By the time the Armistice was signed in 1919 a profusion of new weapons was flowing from American factories. This essay describes how mobilization was achieved so quickly, including how it was financed, and some of the long-term consequences.
Handle: RePEc:nbr:nberwo:10580
Template-Type: ReDIF-Paper 1.0
Title: Was There a Nasdaq Bubble in the Late 1990s?
Classification-JEL: G0; G1
Author-Name: Lubos Pastor
Author-Person: ppa276
Author-Name: Pietro Veronesi
Note: AP
Number: 10581
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10581
File-URL: http://www.nber.org/papers/w10581.pdf
File-Format: application/pdf
Publication-Status: published as Pastor, Lubos and Pietro Veronesi. "Was There A Nasdaq Bubble In The Late 1990s?," Journal of Financial Economics, 2006, v81(1,Jul), 61-100.
Abstract: Not necessarily. The fundamental value of a firm increases with uncertainty about average future profitability, and this uncertainty was unusually high in the late 1990s. We calibrate a stock valuation model that includes this uncertainty, and show that the uncertainty needed to match the observed Nasdaq valuations at their peak is high but plausible. The high uncertainty might also explain the unusually high return volatility of Nasdaq stocks in the late 1990s. Uncertainty has the biggest effect on stock prices when the equity premium is low.
Handle: RePEc:nbr:nberwo:10581
Template-Type: ReDIF-Paper 1.0
Title: The Rise of U.S. Antidumping Actions in Historical Perspective
Classification-JEL: F1
Author-Name: Douglas Irwin
Author-Person: pir25
Note: DAE ITI
Number: 10582
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10582
File-URL: http://www.nber.org/papers/w10582.pdf
File-Format: application/pdf
Abstract: Empirical studies of antidumping activity focus almost exclusively on the period since 1980. This paper puts recent U.S. antidumping experience in historical context by studying the determinants of annual case filings over the past half century. The conventional view that few antidumping cases existed prior to 1980 is not correct, although most did not result in the imposition of duties. The increased number of cases in recent decades largely reflects petitions that target multiple source countries; the number of imported products involved has actually fallen since the mid 1980s. The annual number of antidumping cases is influenced by the unemployment rate, the exchange rate, import penetration (closely related to the decline in average tariffs), and changes in the antidumping law and its enforcement in the early 1980s.
Handle: RePEc:nbr:nberwo:10582
Template-Type: ReDIF-Paper 1.0
Title: Measuring Market Integration: Foreign Exchange Arbitrage and the Gold Standard, 1879-1913
Classification-JEL: N1; F3
Author-Name: Eugene Canjels
Author-Name: Gauri Prakash-Canjels
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE IFM
Number: 10583
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10583
File-URL: http://www.nber.org/papers/w10583.pdf
File-Format: application/pdf
Publication-Status: published as Eugene Canjels & Gauri Prakash-Canjels & Alan M. Taylor, 2004. "Measuring Market Integration: Foreign Exchange Arbitrage and the Gold Standard, 1879-1913," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 868-882, 05.
Abstract: A major question in the literature on the classical gold standard concerns the efficiency of international arbitrage. Authors have examined efficiency by looking at the spread of the gold points, gold point violations, the flow of gold, or by tests of various asset market criteria, including speculative efficiency and interest arbitrage. These studies have suffered from many limitations, both methodological and empirical. We offer a new methodology for measuring market integration based on nonlinear theoretical models and threshold autoregressions. We also compile a new, high-frequency series of continuous daily data from 1879 to 1913. We can derive reasonable econometric estimates of the implied gold points and price dynamics. The changes in these measures over time provide an insight into the evolution of market integration.
Handle: RePEc:nbr:nberwo:10583
Template-Type: ReDIF-Paper 1.0
Title: Slow Recoveries
Classification-JEL: D21; D24
Author-Name: Raphael Bergoeing
Author-Name: Norman Loayzaw
Author-Name: Andrea Repetto
Note: EFG PR
Number: 10584
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10584
File-URL: http://www.nber.org/papers/w10584.pdf
File-Format: application/pdf
Publication-Status: published as Bergoeing, Raphael & Loayza, Norman & Repetto, Andrea, 2004. "Slow recoveries," Journal of Development Economics, Elsevier, vol. 75(2), pages 473-506, December.
Abstract: Economies respond differently to aggregate shocks that reduce output. While some countries rapidly recover their pre-crisis trend, others stagnate. Recent studies provide empirical support for a link between aggregate growth and plant dynamics through its effect on productivity: the entry and exit of firms and the reallocation of resources from less to more efficient firms explain a relevant part of transitional productivity dynamics. In this paper we use a stochastic general equilibrium model with heterogeneous firms to study the effect on aggregate short-run growth of policies that distort the process of birth, growth and death of firms, as well as the reallocation of resources across economic units. Our findings show that indeed policies that alter plant dynamics can explain slow recoveries. We also find that output losses associated to delayed recoveries are large.
Handle: RePEc:nbr:nberwo:10584
Template-Type: ReDIF-Paper 1.0
Title: Trade Liberalization and Pollution Havens
Classification-JEL: Q56; F18
Author-Name: Josh Ederington
Author-Person: ped37
Author-Name: Arik Levinson
Author-Person: ple135
Author-Name: Jenny Minier
Author-Person: pmi170
Note: ITI EEE
Number: 10585
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10585
File-URL: http://www.nber.org/papers/w10585.pdf
File-Format: application/pdf
Publication-Status: published as Ederington Josh & Levinson Arik & Minier Jenny, 2004. "Trade Liberalization and Pollution Havens," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(2), pages 1-24, November.
Abstract: U.S. Presidential Executive Order 13141 commits the United States to a careful assessment and consideration of the environmental impacts of trade agreements.' The most direct mechanism through which trade liberalization would affect environmental quality in the U.S. is through changes in the composition of industries. Freer trade means greater specialization, increasing the concentration of polluting industries in some countries and decreasing it in others. Indeed, in this paper we predict a substantial reduction in U.S. pollution from 1978-94 due entirely to a shift in the composition of U.S. manufacturing toward cleaner industries. We then use annual industry-level data on imports to the U.S. to examine whether this compositional shift can be traced to the significant trade liberalization that occurred over the same time period; we conclude that no such connection exists. First, we find that a shift toward cleaner industries, similar to that observed in U.S. manufacturing, has also occurred among U.S. imports. Second, we find no evidence that pollution-intensive industries have been disproportionately affected by the tariff changes over that time period.
Handle: RePEc:nbr:nberwo:10585
Template-Type: ReDIF-Paper 1.0
Title: India's De-Industrialization Under British Rule: New Ideas, New Evidence
Classification-JEL: F1; N7
Author-Name: David Clingingsmith
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI
Number: 10586
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10586
File-URL: http://www.nber.org/papers/w10586.pdf
File-Format: application/pdf
Abstract: India was a major player in the world export market for textiles in the early 18th century, but by the middle of the 19th century it had lost all of its export market and much of its domestic market. Other local industries also suffered some decline, and India underwent secular de-industrialization as a consequence. While India produced about 25 percent of world industrial output in 1750, this figure fell to only 2 percent by 1900. We use an open, specific-factor model to organize our thinking about the relative role played by domestic and foreign forces in India's de-industrialization. The construction of new relative price evidence is central to our analysis. We document trends in the ratio of export to import prices (the external terms of trade) from 1800 to 1913, and that of tradable to non-tradable goods and own-wages in the tradable sectors going back to 1765. With this new relative price evidence in hand, we ask how much of the de-industrialization was due to local supply-side influences (such as the demise of the Mughal empire) and how much to world price shocks (such as world market integration and rapid productivity advance in European manufacturing), both of which had to deal with an offset the huge net transfer from India to Britain before 1815. Whether the Indian de-industrialization shocks and responses were big or small is then assessed by comparisons with other parts of the periphery.
Handle: RePEc:nbr:nberwo:10586
Template-Type: ReDIF-Paper 1.0
Title: The Costs of Entrenched Boards
Classification-JEL: G30; G34
Author-Name: Lucian Bebchuk
Author-Person: pbe72
Author-Name: Alma Cohen
Author-Person: pco678
Note: CF LE
Number: 10587
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10587
File-URL: http://www.nber.org/papers/w10587.pdf
File-Format: application/pdf
Publication-Status: published as Bebchuk, Lucian A. and Alma Cohen. "The Costs Of Entrenched Boards," Journal of Financial Economics, 2005, v78(2,Nov), 409-433.
Abstract: This paper investigates empirically how the value of publicly traded firms is overall affected by arrangements protecting management from removal. A majority of U.S. public companies have staggered boards that substantially insulate the board from removal via a hostile takeover or a proxy contest. We find that staggered boards are associated with an economically significant reduction in firm value (as measured by Tobin's Q). We also find evidence consistent with staggered boards' bringing about, and not merely reflecting, a lower firm value. Finally, the correlation with reduced firm value is stronger for staggered boards established in the corporate charter (which shareholders cannot amend) than for staggered boards established in the company's bylaws (which can be amended by shareholders).
Handle: RePEc:nbr:nberwo:10587
Template-Type: ReDIF-Paper 1.0
Title: The Timing, Intensity, and Composition of Interest Group Lobbying: An Analysis of Structural Policy Windows in the States
Classification-JEL: H1; H7
Author-Name: John M. de Figueiredo
Note: IO LE
Number: 10588
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10588
File-URL: http://www.nber.org/papers/w10588.pdf
File-Format: application/pdf
Abstract: This is the first paper to statistically examine the timing of interest group lobbying. It introduces a theoretical framework based on recurring structural policy windows' and argues that these types of windows should have a large effect on the intensity and timing of interest group activity. Using a new database of all lobbying expenditures in the U.S. states ranging up to 25 years, the paper shows interest group lobbying increases substantially during one of these structural windows in particular--the budgeting process. Spikes in lobbying during budgeting are driven primarily by business groups. Moreover, even groups relatively unaffected by budgets lobby more intensely during legislative budgeting, consistent with the theory that these interests are attempting to have legislators attach (de)regulatory riders to the budget bills. Overall, the paper demonstrates that these structural policy windows largely determine lobbying expenditures.
Handle: RePEc:nbr:nberwo:10588
Template-Type: ReDIF-Paper 1.0
Title: Preference Formation and the Rise of Women's Labor Force Participation: Evidence from WWII
Classification-JEL: J22; Z10
Author-Name: Raquel Fernandez
Author-Person: pfe17
Author-Name: Alessandra Fogli
Author-Person: pfo48
Author-Name: Claudia Olivetti
Author-Person: pol63
Note: EFG LS LE
Number: 10589
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10589
File-URL: http://www.nber.org/papers/w10589.pdf
File-Format: application/pdf
Abstract: This paper presents intergenerational evidence in favor of the hypothesis that a significant factor explaining the increase in female labor force participation over time was the growing presence of men who grew up with a different family model--one in which their mother worked. We use differences in mobilization rates of men across states during WWII as a source of exogenous variation in female labor supply. We show, in particular, that higher WWII male mobilization rates led to a higher fraction of women working not only for the generation directly affected by the war, but also for the next generation. These women were young enough to profit from the changed composition in the pool of men (i.e., from the fact that WWII created more men with mothers who worked). We also show that states in which the ratio of the average fertility of working relative to non-working women is greatest, have higher female labor supply twenty years later.
Handle: RePEc:nbr:nberwo:10589
Template-Type: ReDIF-Paper 1.0
Title: The Quality of Labor Relations and Unemployment
Classification-JEL: E24; J5
Author-Name: Olivier Blanchard
Author-Person: pbl2
Author-Name: Thomas Philippon
Author-Person: pph81
Note: EFG LS ME
Number: 10590
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10590
File-URL: http://www.nber.org/papers/w10590.pdf
File-Format: application/pdf
Abstract: In countries where wages are primarily set by collective bargaining, the effects on unemployment of changes in the economic environment depend crucially on the speed of learning of unions. This speed of learning is likely to depend in turn on the quality of the dialogue that unions have with firms, on what can more generally be called the quality of labor relations. In this paper, we examine the role this quality of labor relations has played in the evolution of unemployment across European countries over the last 30 years. We conclude that it has played an important role: Countries with worse labor relations have experienced higher unemployment. This conclusion remains even after controlling for labor institutions.
Handle: RePEc:nbr:nberwo:10590
Template-Type: ReDIF-Paper 1.0
Title: Does School Accountability Lead to Improved Student Performance?
Classification-JEL: H7; I2
Author-Name: Eric A. Hanushek
Author-Person: pha97
Author-Name: Margaret E. Raymond
Note: ED PE CH
Number: 10591
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10591
File-URL: http://www.nber.org/papers/w10591.pdf
File-Format: application/pdf
Publication-Status: published as Hanushek, Eric A. and Margaret F. Raymond. "Does School Accountability Lead To Improved Student Performance?," Journal of Policy Analysis and Management, 2005, v24(2,Spring), 297-327.
Abstract: The leading school reform policy in the United States revolves around strong accountability of schools with consequences for performance. The federal government's involvement through the No Child Left Behind Act of 2001 reinforces the prior movement of many states toward policies based on measured student achievement. Analysis of state achievement growth as measured by the National Assessment of Educational progress shows that accountability systems introduced during the 1990s had a clear positive impact on student achievement. This single policy instrument did not, however, also lead to any narrowing in the black-white achievement gap (though it did narrow the Hispanic-white achievement gap). Moreover, the balck-white gap appears to have been harmed over the decade by increasing minority concentrations in the schools. An additional issue surrounding stronger accountability has been a concern about unintended consequences related to such things as higher exclusion rates from testing, increased drop-out rates, and the like. Our analysis of special education placement rates, a frequently identified area of concern, does not show any responsiveness to the introduction of accountability systems.
Handle: RePEc:nbr:nberwo:10591
Template-Type: ReDIF-Paper 1.0
Title: Are Technology Improvements Contractionary?
Classification-JEL: E3; E2
Author-Name: Susanto Basu
Author-Person: pba274
Author-Name: John Fernald
Author-Person: pfe43
Author-Name: Miles Kimball
Author-Person: pki97
Note: EFG ME PR
Number: 10592
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10592
File-URL: http://www.nber.org/papers/w10592.pdf
File-Format: application/pdf
Publication-Status: published as Susanto Basu & John G. Fernald & Miles S. Kimball, 2006. "Are Technology Improvements Contractionary?," American Economic Review, American Economic Association, vol. 96(5), pages 1418-1448, December.
Abstract: Yes. We construct a measure of aggregate technology change, controlling for varying utilization of capital and labor, non-constant returns and imperfect competition, and aggregation effects. On impact, when technology improves, input use and non-residential investment fall sharply. Output changes little. With a lag of several years, inputs and investment return to normal and output rises strongly. We discuss what models could be consistent with this evidence. For example, standard one-sector real-business-cycle models are not, since they generally predict that technology improvements are expansionary, with inputs and (especially) output rising immediately. However, the evidence is consistent with simple sticky-price models, which predict the results we find: When technology improves, input use and investment demand generally fall in the short run, and output itself may also fall.
Handle: RePEc:nbr:nberwo:10592
Template-Type: ReDIF-Paper 1.0
Title: Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries
Classification-JEL: F13; F14
Author-Name: Pinelopi K. Goldberg
Author-Person: pgo1
Author-Name: Nina Pavcnik
Author-Person: ppa511
Note: ITI LS
Number: 10593
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10593
File-URL: http://www.nber.org/papers/w10593.pdf
File-Format: application/pdf
Publication-Status: published as Goldberg, Pinelope Koujianou and Nina Pavcnik. "Trade, Wages, And The Political Economy Of Trade Protection: Evidence From The Columbia Trade Reforms," Journal of International Economics, 2005, v66(1,May), 75-105.
Abstract: We review the empirical evidence on the relationship between Trade Liberalization, Inequality, and Poverty based on the analysis of micro data from several developing countries that underwent significant trade reforms in recent years. Despite many measurement and identification difficulties, and despite conflicting evidence on some issues, empirical work based on country case studies' has established certain patterns that seem common across countries and trade liberalization episodes, and may hence be informative as to how developing countries adjust to trade reform.
Handle: RePEc:nbr:nberwo:10593
Template-Type: ReDIF-Paper 1.0
Title: Product Variety and Demand Uncertainty
Classification-JEL: D4; D8
Author-Name: Dennis W. Carlton
Author-Person: pca14
Author-Name: James D. Dana
Author-Person: pda290
Note: IO
Number: 10594
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10594
File-URL: http://www.nber.org/papers/w10594.pdf
File-Format: application/pdf
Publication-Status: published as Carlton, Dennis W. and James D. Dana Jr. “Product Variety and Demand Uncertainty: Why Mark-ups Vary with Quality.” Journal of Industrial Economics (2008).
Abstract: We show that demand uncertainty leads to vertical product differentiation even when consumers are homogeneous. When a firm anticipates that its inventory or capacity may not be fully utilized, product variety can reduce its expected costs of excess capacity. When the firm offers a continuum of product varieties, the highest quality product has the highest profit margins but the lowest percentage margin, while the lowest quality product has the highest percentage margin but the lowest absolute margin. We derive these results in both a monopoly model and a variety of different competitive models. We conclude with a discussion of empirical predictions together with a brief discussion of supporting evidence available from marketing studies.
Handle: RePEc:nbr:nberwo:10594
Template-Type: ReDIF-Paper 1.0
Title: Facts and Fantasies about Commodity Futures
Classification-JEL: G13; G11
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: K. Geert Rouwenhorst
Author-Person: pro146
Note: AP
Number: 10595
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10595
File-URL: http://www.nber.org/papers/w10595.pdf
File-Format: application/pdf
Publication-Status: published as Gorton, Gary and K. Geert Rouwenhorst. "Facts And Fantasies About Commodity Futures," Financial Analysts Journal, 2006, v62(2,Mar/Apr), 47-68.
Abstract: We construct an equally-weighted index of commodity futures monthly returns over the period between July of 1959 and March of 2004 in order to study simple properties of commodity futures as an asset class. Fully-collateralized commodity futures have historically offered the same return and Sharpe ratio as equities. While the risk premium on commodity futures is essentially the same as equities, commodity futures returns are negatively correlated with equity returns and bond returns. The negative correlation between commodity futures and the other asset classes is due, in significant part, to different behavior over the business cycle. In addition, commodity futures are positively correlated with inflation, unexpected inflation, and changes in expected inflation.
Handle: RePEc:nbr:nberwo:10595
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Population Health on Foreign Direct Investment
Classification-JEL: I10; F21
Author-Name: Marcella Alsan
Author-Person: pal885
Author-Name: David E. Bloom
Author-Person: pbl79
Author-Name: David Canning
Author-Person: pca340
Note: EH ITI
Number: 10596
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10596
File-URL: http://www.nber.org/papers/w10596.pdf
File-Format: application/pdf
Publication-Status: published as Alsan, Marcela, David E. Bloom and David Canning. "The Effect of Population Health on Foreign Direct Investment Inflows to Low- and Middle-Income Countries." World Development 34, 4 (April 2006): 613-630.
Abstract: We conduct a panel data analysis of 74 countries over 1980 2000 to investigate whether population health affects foreign direct investment inflows. Our main finding is that health has a positive and significant effect on such inflows for low- and middle-income countries. This finding is consistent with the view that health is an integral component of human capital in developing countries.
Handle: RePEc:nbr:nberwo:10596
Template-Type: ReDIF-Paper 1.0
Title: Exotic Preferences for Macroeconomists
Classification-JEL: D81; D91
Author-Name: David Backus
Author-Person: pba242
Author-Name: Bryan Routledge
Author-Person: pro450
Author-Name: Stanley Zin
Author-Person: pzi46
Note: EFG AP
Number: 10597
Creation-Date: 2004-06
Order-URL: http://www.nber.org/papers/w10597
File-URL: http://www.nber.org/papers/w10597.pdf
File-Format: application/pdf
Publication-Status: published as Exotic Preferences for Macroeconomists, David K. Backus, Bryan R. Routledge, Stanley E. Zin. in NBER Macroeconomics Annual 2004, Volume 19, Gertler and Rogoff. 2005
Abstract: We provide a user's guide to exotic' preferences: nonlinear time aggregators, departures from expected utility, preferences over time with known and unknown probabilities, risk-sensitive and robust control, hyperbolic' discounting, and preferences over sets ( temptations'). We apply each to a number of classic problems in macroeconomics and finance, including consumption and saving, portfolio choice, asset pricing, and Pareto optimal allocations.
Handle: RePEc:nbr:nberwo:10597
Template-Type: ReDIF-Paper 1.0
Title: Economic Impacts of Unionization on Private Sector Employers: 1984-2001
Classification-JEL: J0; J2
Author-Name: John DiNardo
Author-Person: pdi178
Author-Name: David S. Lee
Note: LS
Number: 10598
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10598
File-URL: http://www.nber.org/papers/w10598.pdf
File-Format: application/pdf
Publication-Status: published as DiNardo, John and David S. Lee. “Economic Impacts of New Unionization on U.S. Private Sector Employers: 1984-2001." Quarterly Journal of Economics 119, 4 (2004): 1383-1442.
Abstract: Economic impacts of unionization on employers are difficult to estimate in the absence of large, representative data on establishments with union status information. Estimates are also confounded by selection bias, because unions could organize at highly profitable enterprises that are more likely to grow and pay higher wages. Using multiple establishment-level data sets that represent establishments that faced organizing drives in the U.S. during 1984-1999, this paper uses a regression discontinuity design to estimate the impact of unionization on business survival, employment, output, productivity, and wages. Essentially, outcomes for employers where unions barely won the election (e.g. by one vote) are compared to those where the unions barely lost. The analysis finds small impacts on all outcomes that we examine; estimates for wages are close to zero. The evidence suggests that at least in recent decades the legal mandate that requires the employer to bargain with a certified union has had little economic impact on employers, because unions have been somewhat unsuccessful at securing significant wage gains.
Handle: RePEc:nbr:nberwo:10598
Template-Type: ReDIF-Paper 1.0
Title: Dividend Policy, Agency Costs, and Earned Equity
Classification-JEL: G35; G32
Author-Name: Harry DeAngelo
Author-Name: Linda DeAngelo
Author-Name: Rene Stulz
Note: CF AP
Number: 10599
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10599
File-URL: http://www.nber.org/papers/w10599.pdf
File-Format: application/pdf
Publication-Status: published as DeAngelo, Harry, Linda DeAngelo and Rene Stulz. “Dividend policy and the earned/contributed capital mix: a test of the life-cycle theory.” Journal of Financial Economics 81, 2 (2006): 227-254.
Abstract: Why do firms pay dividends? If they didn't their asset and capital structures would eventually become untenable as the earnings of successful firms outstrip their investment opportunities. Had they not paid dividends, the 25 largest long-standing 2002 dividend payers would have cash holdings of $1.8 trillion (51% of total assets), up from $160 billion (6% of assets), and $1.2 trillion in excess of their collective $600 billion in long-term debt. Their dividend payments prevented significant agency problems since the retention of earnings would have given managers command over an additional $1.6 trillion without access to better investment opportunities and with no additional monitoring. This logic suggests that firms with relatively high amounts of earned equity (retained earnings) are especially likely to pay dividends. Consistent with this view, the fraction of publicly traded industrial firms that pays dividends is high when the ratio of earned equity to total equity (total assets) is high, and falls with declines in this ratio, becoming near zero when a firm has little or no earned equity. We observe a highly significant relation between the decision to pay dividends and the ratio of earned equity to total equity or total assets,controlling for firm size, profitability, growth, leverage, cash balances, and dividend history. In our regressions, earned equity has an economically more important impact than does profitability or growth. Our evidence is consistent with the hypothesis that firms pay dividends to mitigate agency problems.
Handle: RePEc:nbr:nberwo:10599
Template-Type: ReDIF-Paper 1.0
Title: The Impact of the Terms of Trade on Economic Development in the Periphery, 1870-1939: Volatility and Secular Change
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: 10600
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10600
File-URL: http://www.nber.org/papers/w10600.pdf
File-Format: application/pdf
Publication-Status: published as Blattman, Christopher, Jason Hwang and Jeffrey G. Williamson. “The Impact of the Terms of Trade on Economic Development in the Periphery, 1870-1939: Volatility and Secular Change.” Journal of Development Economics 82, 1 (January 2007): 156-179.
Abstract: Most countries in the periphery specialized in the export of just a handful of primary products for most of their history. Some of these commodities have been more volatile than others, and those with more volatile prices have grown slowly relative both to the industrial leaders and to other primary product exporters. This fact helps explain the growth puzzle noted by Easterly, Kremer, Pritchett and Summers more than a decade ago: that the contending fundamental determinants of growth institutions, geography and culture exhibit far more persistence than do the growth rates they are supposed to explain. Using a new panel database for 35 countries, this paper estimates the impact of terms of trade volatility and secular change on country performance between 1870 and 1939. Volatility was much more important for accumulation and growth than was 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. The paper also investigates one channel of impact, and finds that foreign capital inflows declined steeply where commodity prices were volatile.
Handle: RePEc:nbr:nberwo:10600
Template-Type: ReDIF-Paper 1.0
Title: Peace and War in Territorial Disputes
Classification-JEL: D74; H56
Author-Name: Herschel I. Grossman
Note: EFG
Number: 10601
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10601
File-URL: http://www.nber.org/papers/w10601.pdf
File-Format: application/pdf
Abstract: Why do sovereign states sometimes fail to settle territorial disputes peacefully? Also, why do even peaceful settlements of territorial disputes rarely call for the resulting border to be unfortified? This paper explores a class of answers to these questions that is based on the following premise: States can settle a territorial dispute peacefully only if (1) their payoffs from a peaceful settlement are larger than their expected payoffs from a default to war, and (2) their promises not to attack are credible. This premise directs the analysis to such factors as the advantage of attacking over both defending and counterattacking, the divisibility of the contested territory, the possibility of recurring war, the depreciation or obsolescence of fortifications, and inequality in the effectiveness of mobilized resources.
Handle: RePEc:nbr:nberwo:10601
Template-Type: ReDIF-Paper 1.0
Title: Managing Volatility and Crises: A Practitioner's Guide Overview
Classification-JEL: F15; F21
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Brian Pinto
Note: IFM
Number: 10602
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10602
File-URL: http://www.nber.org/papers/w10602.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman J. and B. Pinto (eds.) Managing Economic Volatility and Crises: A Practitioner's Guide. Cambridge: Cambridge University Press, 2005.
Abstract: This overview introduces and summarizes the findings of a practical volume on managing volatility and crises. The interest in these topics stems from the growing recognition that non-linearities tend to magnify the impact of economic volatility leading to large output and economic growth costs, especially in poor countries. In these circumstances, good times do not offset the negative impact of bad times, leading to permanent negative effects. Such asymmetry is often reinforced by incomplete markets, sovereign risk, divisive politics, inefficient taxation, procyclical fiscal policy and weak financial market institutions factors that are more problematic in developing countries. The same fundamental phenomena that make it difficult to cope with volatility also drive crises. Hence, the volume also focuses on the prevention and management of crises. It is a user-friendly compilation of empirical and policy results aimed at development policy practitioners divided into three modules: (i) the basics of volatility and its impact on growth and poverty; (ii) managing volatility along thematic lines, including financial sector and commodity price volatility; and (iii) management and prevention of macroeconomic crises, including a cross-country study, lessons from the debt defaults of the 1980s and 1990s and case studies on Argentina and Russia.
Handle: RePEc:nbr:nberwo:10602
Template-Type: ReDIF-Paper 1.0
Title: Learning on the Quick and Cheap: Gains from Trade Through Imported Expertise
Classification-JEL: F2; F23
Author-Name: James R. Markusen
Author-Person: pma528
Author-Name: Thomas F. Rutherford
Author-Person: pru142
Note: ITI
Number: 10603
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10603
File-URL: http://www.nber.org/papers/w10603.pdf
File-Format: application/pdf
Abstract: Gains from productivity and knowledge transmission arising from the presence of foreign firms has received a good deal of empirical attention, but micro-foundations for this mechanism are weak . Here we focus on production by foreign experts who may train domestic unskilled workers who work with them. Gains from training can in turn be decomposed into two types: (a) obtaining knowledge and skills at a lower cost than if they are self-taught at home, (b) producing domestic skilled workers earlier in time than if they the domestic economy had to rediscover the relevant knowledge through reinventing the wheel'. We develop a three-period model in which the economy initially has no skilled workers. Workers can withdraw from the labor force for two periods of self study and then produce as skilled workers in the third period. Alternatively, foreign experts can be hired in period 1 and domestic unskilled labor working with the experts become skilled in the second period. We analyze how production, training, and welfare depend on two important parameters: the cost of foreign experts and the learning (or absorptive') capacity of the domestic economy.
Handle: RePEc:nbr:nberwo:10603
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Presumed Consent Legislation on Cadaveric Organ Donation: A Cross Country Study
Classification-JEL: I18; J18
Author-Name: Alberto Abadie
Author-Person: pab7
Author-Name: Sebastien Gay
Author-Person: pga820
Note: EH
Number: 10604
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10604
File-URL: http://www.nber.org/papers/w10604.pdf
File-Format: application/pdf
Publication-Status: published as Abadie, Alberto & Gay, Sebastien, 2006. "The impact of presumed consent legislation on cadaveric organ donation: A cross-country study," Journal of Health Economics, Elsevier, vol. 25(4), pages 599-620, July.
Abstract: In the U.S., Great Britain, and in many other countries, the gap between the demand and the supply of human organs for transplantation is on the rise, despite the efforts of governments and health agencies to promote donor registration. In some countries of continental Europe, however, cadaveric organ procurement is based on the principle of presumed consent. Under presumed consent legislation, a deceased individual is classified as a potential donor in absence of explicit opposition to donation before death. This article analyzes the impact of presumed consent laws on donation rates. For this purpose, we construct a dataset on organ donation rates and potential factors affecting organ donation for 22 countries over a 10-year period. We find that while differences in other determinants of organ donation explain much of the variation in donation rates, after controlling for those determinants presumed consent legislation has a positive and sizeable effect on organ donation rates.
Handle: RePEc:nbr:nberwo:10604
Template-Type: ReDIF-Paper 1.0
Title: Exploring the Patent Explosion
Classification-JEL: O34; L10
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Note: IO PR
Number: 10605
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10605
File-URL: http://www.nber.org/papers/w10605.pdf
File-Format: application/pdf
Publication-Status: published as Bronwyn H. Hall, 2005. "Exploring the Patent Explosion," The Journal of Technology Transfer, Springer, vol. 30(2_2), pages 35-48, 01.
Abstract: This paper looks more closely at the sources of patent growth in the United States since 1984. It confirms that the increase is largely due to US patenters, with an earlier surge in Asia, and some increase in Europe. Growth has taken place in all technologies, but not in all industries, being concentrated in the electrical, electronics, computing, and scientific instruments industries. It then examines whether these patents are valued by the market. We know from survey evidence that patents in these industries are not usually considered important for appropriability, but are sometimes considered necessary to secure financing for entering the industry. I compare the market value of patents held by entrant firms to those held by incumbents (controlling for R&D). Using data on publicly traded firms 1980-1989, I find that in industries based on electrical and mechanical technologies the market value of entrants' patents is positive in the post-1984 period (after the patenting surge), but not before, when patents were relatively unimportant in these industries. Also, the value of patent rights in complex product industries (where each product relies on many patents held by a number of other firms) is much higher for entrants than incumbents in the post-1984 period. For discrete product industries (where each product relies on only a few patents, and where the importance of patents for appropriability has traditionally been higher), there is no difference between incumbents and entrants.
Handle: RePEc:nbr:nberwo:10605
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Growth from Better and Better Goods
Classification-JEL: O4
Author-Name: Mark Bils
Author-Person: pbi148
Note: EFG
Number: 10606
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10606
File-URL: http://www.nber.org/papers/w10606.pdf
File-Format: application/pdf
Abstract: Using micro CPI data, I show that much of inflation for durable goods since 1988 reflects, not increases in price for a given set of products, but rather shifts to a newer set of product models that display higher prices. I examine how these price differences should be divided between quality growth and price inflation based on how consumer spending responds to product substitutions. For all goods examined (cars, other vehicles, televisions, and other consumer electronics), buying shifts to the newer models despite their higher prices. This suggests that quality growth for durables has averaged at least 5.8% per year, more than double the rate implied by CPI measurement.
Handle: RePEc:nbr:nberwo:10606
Template-Type: ReDIF-Paper 1.0
Title: The Purchasing Power Parity Debate
Classification-JEL: F31; F41
Author-Name: Alan M. Taylor
Author-Person: pta46
Author-Name: Mark P. Taylor
Note: IFM ITI
Number: 10607
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10607
File-URL: http://www.nber.org/papers/w10607.pdf
File-Format: application/pdf
Publication-Status: published as Taylor, Alan M. and Mark P. Taylor. "The Purchasing Power Parity Debate," Journal of Economic Perspectives, 2004, v18(4,Fall), 135-158.
Abstract: Originally propounded by the sixteenth-century scholars of the University of Salamanca, the concept of purchasing power parity (PPP) was revived in the interwar period in the context of the debate concerning the appropriate level at which to re-establish international exchange rate parities. Broadly accepted as a long-run equilibrium condition in the post-war period, it was first advocated as a short-run equilibrium by many international economists in the first few years following the breakdown of the Bretton Woods system in the early 1970s and then increasingly came under attack on both theoretical and empirical grounds from the late 1970s to the mid 1990s. Accordingly, over the last three decades, a large literature has built up that examines how much the data deviated from theory, and the fruits of this research have provided a deeper understanding of how well PPP applies in both the short run and the long run. Since the mid 1990s, larger datasets and nonlinear econometric methods, in particular, have improved estimation. As deviations narrowed between real exchange rates and PPP, so did the gap narrow between theory and data, and some degree of confidence in long-run PPP began to emerge again. In this respect, the idea of long-run PPP now enjoys perhaps its strongest support in more than thirty years, a distinct reversion in economic thought.
Handle: RePEc:nbr:nberwo:10607
Template-Type: ReDIF-Paper 1.0
Title: Breakfast of Champions? The School Breakfast Program and the Nutrition of Children and Families
Classification-JEL: I12; I18
Author-Name: Jayanta Bhattacharya
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Steven Haider
Author-Person: pha224
Note: ED EH LS CH
Number: 10608
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10608
File-URL: http://www.nber.org/papers/w10608.pdf
File-Format: application/pdf
Publication-Status: published as Bhattacharya J, Currie J, and Haider S, “Breakfast of Champions? The Nutritional Effects of the School Breakfast Program,” Journal of Human Resources (2006) 41(3):445-466.
Abstract: We use the National Health and Nutritional Examination Survey (NHANES) III to examine the effect of the availability of the school breakfast program (SBP). Our work builds on previous research in four ways: First, we develop a transparent difference-in-differences strategy to account for unobserved differences between students with access to SBP and those without. Second, we examine serum measures of nutrient in addition to intakes based on dietary recall data. Third, we ask whether the SBP improves the diet by increasing/or decreasing the intake of nutrients relative to meaningful threshold levels. Fourth, we examine the effect of the SBP on other members of the family besides the school-aged child. We have three main findings. First, the SBP helps students build good eating habits: SBP increases scores on the healthy eating index, reduces the percentage of calories from fat, and reduces the probability of low fiber intake. Second, the SBP reduces the probability of serum micronutrient deficiencies in vitamin C, vitamin E, and folate, and it increases the probability that children meet USDA recommendations for potassium and iron intakes. Since we find no effect on total calories these results indicate that the program improves the quality of food consumed. Finally, in households with school-aged children, both preschool children and adults have healthier diets and consume less fat when the SBP is available. These results suggest that school nutrition programs may be an effective way to combat both nutritional deficiencies and excess consumption among children and their families.
Handle: RePEc:nbr:nberwo:10608
Template-Type: ReDIF-Paper 1.0
Title: How Elections Matter: Theory and Evidence from Environmental Policy
Classification-JEL: D72; H72
Author-Name: John A. List
Author-Person: pli176
Author-Name: Daniel M. Sturm
Author-Person: pst443
Note: PE EEE
Number: 10609
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10609
File-URL: http://www.nber.org/papers/w10609.pdf
File-Format: application/pdf
Publication-Status: published as John A List & Daniel M Sturm, 2006. "How Elections Matter: Theory and Evidence from Environmental Policy," The Quarterly Journal of Economics, MIT Press, vol. 121(4), pages 1249-1281, November.
Abstract: In this paper we explore to what extent secondary policy issues are influenced by electoral incentives. We develop a political agency model in which a politician decides on both a frontline policy issue, such as the level of public spending, and a secondary policy issue, such as environmental policy. The model shows under which conditions the incumbent finds it worthwhile to manipulate the secondary policy to attract additional votes to his platform. We test the predictions of the model using state-level panel data on Gubernatorial environmental policy choices over the years 1960-2000. In contrast to the popular view that choices on secondary policy instruments are largely determined by lobbying, we find strong effects of electoral incentives on environmental policy.
Handle: RePEc:nbr:nberwo:10609
Template-Type: ReDIF-Paper 1.0
Title: The Political Economy of Fair Housing Laws Prior to 1968
Classification-JEL: N0; R0
Author-Name: William J. Collins
Author-Person: pco315
Note: DAE
Number: 10610
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10610
File-URL: http://www.nber.org/papers/w10610.pdf
File-Format: application/pdf
Abstract: The confluence of the Great Migration and the Civil Rights Movement propelled the drive for fair-housing' legislation which attempted to curb overt discrimination in housing markets. This drive culminated in the passage of the federal Civil Rights Act of 1968. By that time, 57 percent of the U.S. population and 41 percent of the African-American population already resided in states with a fair-housing law. Despite laying the political and administrative groundwork for the federal Fair Housing Act of 1968, the origins and diffusion of these state laws have not received much attention from scholars, let alone been subject to statistical efforts to disentangle multiple influences. This paper uses hazard models to analyze the diffusion of fair-housing legislation to shed new light on the combination of economic and political forces that facilitated the laws' adoption. Ceteris paribus, outside the South, states with larger union memberships, more Jewish residents, and more NAACP members passed fair-housing laws sooner than others. The estimated effects are not undermined by including controls for a variety of competing factors and are supported by historical accounts of the legislative campaigns.
Handle: RePEc:nbr:nberwo:10610
Template-Type: ReDIF-Paper 1.0
Title: Liquidity Constraints and Housing Prices: Theory and Evidence from the VA Mortgage
Classification-JEL: D91; E21
Author-Name: Jacob L. Vigdor
Author-Person: pvi23
Note: PE
Number: 10611
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10611
File-URL: http://www.nber.org/papers/w10611.pdf
File-Format: application/pdf
Publication-Status: published as Vigdor, Jacob L. "Liquidity Constraints And Housing Prices: Theory And Evidence From The VA Mortgage Program," Journal of Public Economics, 2006, v90(8-9,Sep), 1579-1600.
Abstract: This paper employs a simple intertemporal model to show that presence of liquidity constraints can depress the price of a durable good below its net present rental value, regardless of the overall supply elasticity. The existence of price effects implies that the relaxation of liquidity constraints is not Pareto improving, and may in fact be regressive. Historical evidence, which exploits the fact that a clearly identifiable group, war veterans, enjoyed the most favored access to mortgage credit in the postwar era, supports the model. The results suggest that more recent mortgage market innovations have served primarily to increase prices rather than home ownership rates, and that such innovations have the potential to exacerbate socioeconomic disparities in ownership rates.
Handle: RePEc:nbr:nberwo:10611
Template-Type: ReDIF-Paper 1.0
Title: Targeting vs. Instrument Rules for Monetary Policy
Classification-JEL: E52; E58
Author-Name: Bennett T. McCallum
Author-Name: Edward Nelson
Author-Person: pne58
Note: EFG ME
Number: 10612
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10612
File-URL: http://www.nber.org/papers/w10612.pdf
File-Format: application/pdf
Publication-Status: published as McCallum, Bennett T. and Edward Nelson. "Targeting Versus Instrument Rules For Monetary Policy," FRB St. Louis - Review, 2005, v87(5,Sep/Oct), 597-611.
Abstract: Svensson (JEL, 2003) argues strongly that specific targeting rules first order optimality conditions for a specific objective function and model are normatively superior to instrument rules for the conduct of monetary policy. That argument is based largely upon four main objections to the latter plus a claim concerning the relative interest-instrument variability entailed by the two approaches. The present paper considers the four objections in turn, and advances arguments that contradict all of them. Then in the paper's analytical sections, it is demonstrated that the variability claim is incorrect, for a neo-canonical model and also for a variant with one-period-ahead plans used by Svensson, providing that the same decision-making errors are relevant under the two alternative approaches. Arguments relating to general targeting rules and actual central bank practice are also included.
Handle: RePEc:nbr:nberwo:10612
Template-Type: ReDIF-Paper 1.0
Title: The Evolution of Concentrated Ownership in India Broad patterns and a History of the Indian Software Industry
Classification-JEL: G34; N85
Author-Name: Tarun Khann
Author-Name: Krishna Palepu
Note: CF IO
Number: 10613
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10613
File-URL: http://www.nber.org/papers/w10613.pdf
File-Format: application/pdf
Publication-Status: published as Khanna, Tarun and Krishna G. Palepu. "Globalization and Convergence In Corporate Governance: Evidence From Infosys and The Indian Software Industry," Journal of International Business Studies, 2004, v35(6,Nov), 485-507.
Publication-Status: published as Tarun Khanna & Krishna Palepu, 2005. "The Evolution of Concentrated Ownership in India: Broad Patterns and a History of the Indian Software Industry," NBER Chapters, in: A History of Corporate Governance around the World: Family Business Groups to Professional Managers, pages 283-324 National Bureau of Economic Research, Inc.
Abstract: As in many countries (Canada, France, Germany, Japan, Italy, Sweden), concentrated ownership is a ubiquitous feature of the Indian private sector over the past seven decades. Yet, unlike in most countries, the identity of the primary families responsible for the concentrated ownership changes dramatically over time, perhaps even more than it does in the U.S. during the same time period. It does not appear that concentrated ownership in India is entirely associated with the ills that the literature has recently ascribed to concentrated ownership in emerging markets. If the concentrated owners are not exclusively, or even primarily, engaged in rent-seeking and entry-deterring behavior, concentrated ownership may not be inimical to competition. Indeed, as a response to competition, we argue that at least some Indian families the concentrated owners in question have consistently tried to use their business group structures to launch new ventures. In the process they have either failed hence the turnover in identity or reinvented themselves. Thus concentrated ownership is a result, rather than a cause, of inefficiencies in capital markets. Even in the low capital-intensity, relatively unregulated setting of the Indian software industry, we find that concentrated ownership persists in a privately successful and socially useful way. Since this setting is the least hospitable to the existence of concentrated ownership, we interpret our findings as a lower bound on the persistence of concentrated ownership in the economy at large.
Handle: RePEc:nbr:nberwo:10613
Template-Type: ReDIF-Paper 1.0
Title: Unbiased Estimation of the Half-Life to PPP Convergence in Panel Data
Classification-JEL: C32; F31
Author-Name: Chi-Young Choi
Author-Person: pch322
Author-Name: Nelson Mark
Author-Person: pma186
Author-Name: Donggyu Sul
Author-Person: psu42
Note: IFM
Number: 10614
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10614
File-URL: http://www.nber.org/papers/w10614.pdf
File-Format: application/pdf
Publication-Status: published as Choi, Chi-Young, Nelson C. Mark and Donggyu Sul. "Unbiased Estimation Of The Half-Life To PPP Convergence In Panel Data," Journal of Money, Credit and Banking, 2006, v38(4,Jun), 921-938.
Abstract: Three potential sources of bias present complications for estimating the half-life of purchasing power parity deviations from panel data. They are the bias associated with inapproiate aggregation across heterogeneous coefficients, time aggregation of commodity prices, and downward bias in estimation of dynamic lag coefficients. Each of these biases have been addressed individually in the literature. In this paper, we address all three biases in arriving at our estimates. Analyzing an annual panel data set of real exchange rates for 21 OECD countries from 1948 to 2002, our point estimate of the half-life is 5.5 years.
Handle: RePEc:nbr:nberwo:10614
Template-Type: ReDIF-Paper 1.0
Title: A Continuous-Time Agency Model of Optimal Contracting and Capital Structure
Classification-JEL: D82; G32
Author-Name: Peter M. DeMarzo
Author-Person: pde650
Author-Name: Yuliy Sannikov
Note: CF AP
Number: 10615
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10615
File-URL: http://www.nber.org/papers/w10615.pdf
File-Format: application/pdf
Abstract: We consider a principal-agent model in which the agent needs to raise capital from the principal to finance a project. Our model is based on DeMarzo and Fishman (2003), except that the agent's cash flows are given by a Brownian motion with drift in continuous time. The difficulty in writing an appropriate financial contract in this setting is that the agent can conceal and divert cash flows for his own consumption rather than pay back the principal. Alternatively, the agent may reduce the mean of cash flows by not putting in effort. To give the agent incentives to provide effort and repay the principal, a long-term contract specifies the agent's wage and can force termination of the project. Using techniques from stochastic calculus similar to Sannikov (2003), we characterize the optimal contract by a differential equation. We show that this contract is equivalent to the limiting case of a discrete time model with binomial cash flows. The optimal contract can be interpreted as a combination of equity, a credit line, and either long-term debt or a compensating balance requirement (i.e., a cash position). The project is terminated if the agent exhausts the credit line and defaults. Once the credit line is paid off, excess cash flows are used to pay dividends. The agent is compensated with equity alone. Unlike the discrete time setting, our differential equation for the continuous-time model allows us to compute contracts easily, as well as compute comparative statics. The model provides a simple dynamic theory of security design and optimal capital structure.
Handle: RePEc:nbr:nberwo:10615
Template-Type: ReDIF-Paper 1.0
Title: The Macroeconomy and the Yield Curve: A Dynamic Latent Factor Approach
Classification-JEL: G1; E4
Author-Name: Francis X. Diebold
Author-Person: pdi1
Author-Name: Glenn D. Rudebusch
Author-Person: pru10
Author-Name: S. Boragan Aruoba
Author-Person: par34
Note: EFG ME AP
Number: 10616
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10616
File-URL: http://www.nber.org/papers/w10616.pdf
File-Format: application/pdf
Publication-Status: published as Diebold, Francis S., Glenn D. Rudebusch and S. Borag'an Aruoba. "The Macroeconomy And The Yield Curve: A Dynamic Latent Factor Approach," Journal of Econometrics, 2006, v131(1-2,Mar-Apr), 309-338.
Abstract: We estimate a model that summarizes the yield curve using latent factors (specifically, level, slope, and curvature) and also includes observable macroeconomic variables (specifically, real activity, inflation, and the monetary policy instrument). Our goal is to provide a characterization of the dynamic interactions between the macroeconomy and the yield curve. We find strong evidence of the effects of macro variables on future movements in the yield curve and evidence for a reverse influence as well. We also relate our results to the expectations hypothesis.
Handle: RePEc:nbr:nberwo:10616
Template-Type: ReDIF-Paper 1.0
Title: Evaluating the Calvo Model of Sticky Prices
Classification-JEL: E0; E1
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Jonas D.M. Fisher
Author-Person: pfi4
Note: EFG ME
Number: 10617
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10617
File-URL: http://www.nber.org/papers/w10617.pdf
File-Format: application/pdf
Abstract: Can variants of the classic Calvo (1983) model of sticky prices account for the statistical behavior of post-war US inflation? We develop and test versions of the model for which the answer to this question is yes. We then investigate whether these models imply plausible degrees of inertia in price setting behavior by firms. We find that they do, but only if we depart from two auxiliary assumptions made in standard expositions of the Calvo model. These assumptions are that monopolistically competitive firms face a constant elasticity of demand and capital can be instantaneously reallocated after a shock. When we modify these assumptions our model is consistent with the view that firms re-optimize prices
Handle: RePEc:nbr:nberwo:10617
Template-Type: ReDIF-Paper 1.0
Title: Education, Redistribution, and the Threat of Brain Drain
Classification-JEL: F22; H2
Author-Name: Alexander Haupt
Author-Person: pha975
Author-Name: Eckhard Janeba
Author-Person: pja312
Note: ITI LS
Number: 10618
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10618
File-URL: http://www.nber.org/papers/w10618.pdf
File-Format: application/pdf
Publication-Status: published as Haupt, Alexander and Eckhard Janeba. "Education, Redistribution and the Threat of Brain Drain." International Tax and Public Finance 16, 1 (February 2009): 1-24.
Abstract: This paper analyzes the relationship between brain drain, human capital accumulation and individual net incomes in the presence of a redistributional tax policy, credit market constraints, administrative costs of tax collection, and lack of government commitment. We characterize how decreasing migration costs for skilled workers affect the time-consistent policies of a government that wants to shift resources from skilled to unskilled workers. In our main result we show that a decline in migration costs is Pareto improving when migration costs are high, but have ambiguous effects when these costs are low. Moreover, mobility costs and human capital accumulation are positively correlated.
Handle: RePEc:nbr:nberwo:10618
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Cocaine and Heroin Prices on Drug-Related Emergency Department Visits
Classification-JEL: I1
Author-Name: Dhaval Dave
Author-Person: pda245
Note: EH
Number: 10619
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10619
File-URL: http://www.nber.org/papers/w10619.pdf
File-Format: application/pdf
Publication-Status: published as Dave, Dhaval. "The Effect Of Cocaine And Heroin Price On Drug-Related Emergency Department Visits," Journal of Health Economics, 2006, v25(2,Mar), 311-333.
Abstract: This paper estimates the empirical relationship between the prices of cocaine and heroin and objective indicators of use. The set of outcomes is drug related hospital emergency department admissions where cocaine and heroin are cited, for 21 large U.S. metropolitan areas. These outcomes are superior to subjective self-reports, and are policy-relevant since they directly measure a large component of the health-care costs associated with heavy or chronic drug usage. Panel data methodology is used to identify the empirical link between drug prices and these indicators. Results indicate that health consequences associated with heavy or chronic drug use are negatively related to drug prices, an instrument of drug control policy. The elasticity of the probability of a cocaine mention with respect to own-price is estimated at -0.27, and the corresponding elasticity for the probability of a heroin mention is -0.15. The probability of any drug related episode, which captures polydrug usage, is also significantly negatively related to both cocaine and heroin prices. Cross-price effects are consistent with a complementary relationship between cocaine and heroin. Models indicate the presence of negative lagged price effects, confirming the strong addictive aspects of both drugs and the cumulative adverse effects of drug use on health.
Handle: RePEc:nbr:nberwo:10619
Template-Type: ReDIF-Paper 1.0
Title: The Design of Financial Systems: Towards a Synthesis of Function and Structure
Classification-JEL: G1; G2
Author-Name: Robert C. Merton
Author-Person: pme203
Author-Name: Zvi Bodie
Author-Person: pbo569
Note: EH
Number: 10620
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10620
File-URL: http://www.nber.org/papers/w10620.pdf
File-Format: application/pdf
Publication-Status: published as Merton, Robert C., and Zvi Bodie. "The Design of Financial Systems: Towards a Synthesis of Function and Structure." Journal of Investment Management 3, no. 1 (First Quarter 2005): 1-23.
Abstract: This paper proposes a functional approach to designing and managing the financial systems of countries, regions, firms, households, and other entities. It is a synthesis of the neoclassical, neo-institutional, and behavioral perspectives. Neoclassical theory is an ideal driver to link science and global practice in finance because its prescriptions are robust across time and geopolitical borders. By itself, however, neoclassical theory provides little prescription or prediction of the institutional structure of financial systems that is, the specific kinds of financial intermediaries, markets, and regulatory bodies that will or should evolve in response to underlying changes in technology, politics, demographics, and cultural norms. The neoclassical model therefore offers important, but incomplete, guidance to decision makers seeking to understand and manage the process of institutional change. In accomplishing this task, the neo-institutional and behavioral perspectives can be very useful. In this proposed synthesis of the three approaches, functional and structural finance (FSF), institutional structure is endogenous. When particular transaction costs or behavioral patterns produce large departures from the predictions of the ideal frictionless' neoclassical equilibrium for a given institutional structure, new institutions tend to develop that partially offset the resulting inefficiencies. In the longer run, after institutional structures have had time to fully develop, the predictions of the neoclassical model will be approximately valid for asset prices and resource allocations. Through a series of examples, the paper sets out the reasoning behind the FSF synthesis and illustrates its application.
Handle: RePEc:nbr:nberwo:10620
Template-Type: ReDIF-Paper 1.0
Title: The Wage Gains of African-American Women in the 1940s
Classification-JEL: J7; N3
Author-Name: Martha J. Bailey
Author-Person: pba669
Author-Name: William J. Collins
Author-Person: pco315
Note: DAE LS
Number: 10621
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10621
File-URL: http://www.nber.org/papers/w10621.pdf
File-Format: application/pdf
Publication-Status: published as Bailey, Martha J. & Collins, William J., 2006. "The Wage Gains of African-American Women in the 1940s," The Journal of Economic History, Cambridge University Press, vol. 66(03), pages 737-777, September.
Abstract: The weekly wage gap between black and white female workers narrowed by 15 percentage points during the 1940s. We employ a semi-parametric technique to decompose changes in the distribution of wages. We find that changes in worker characteristics (such as education, occupation and industry, and region of residence) can account for a significant portion of wage convergence between black and white women, but that changes in the wage structure, including large black-specific gains within regions, occupations, industries, and educational groups, made the largest contributions. The single most important contributing factor to the observed convergence was a sharp increase in the relative wages of service workers (where black workers were heavily concentrated) even as black women moved out of domestic service jobs.
Handle: RePEc:nbr:nberwo:10621
Template-Type: ReDIF-Paper 1.0
Title: Performance Pay and Teachers' Effort, Productivity and Grading Ethics
Classification-JEL: I21; J24
Author-Name: Victor Lavy
Author-Person: pla111
Note: ED LS
Number: 10622
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10622
File-URL: http://www.nber.org/papers/w10622.pdf
File-Format: application/pdf
Publication-Status: published as Lavy, Victor. "Performance Pay and Teachers' Effort, Productivity, and Grading Ethics." American Economic Review 99, 5 (2009): 1979-2011.
Abstract: Performance-related incentive pay for teachers is being introduced in many countries, but there is little evidence of its effects. This paper evaluates a rank-order tournament among teachers of English, Hebrew, and mathematics in Israel. Teachers were rewarded with cash bonuses for improving their students' performance on high-school matriculation exams. Two identification strategies were used to estimate the program effects, a regression discontinuity design and propensity score matching. The regression discontinuity method exploits both a natural experiment stemming from measurement error in the assignment variable and a sharp discontinuity in the assignment-to-treatment variable. The results suggest that performance incentives have a significant effect on directly affected students with some minor spillover effects on untreated subjects. The improvements appear to derive from changes in teaching methods, after-school teaching, and increased responsiveness to students' needs. No evidence found for teachers' manipulation of test scores. The program appears to have been more cost-effective than school-group cash bonuses or extra instruction time and is as effective as cash bonuses for students.
Handle: RePEc:nbr:nberwo:10622
Template-Type: ReDIF-Paper 1.0
Title: Sources for Financing Domestic Capital -- Is Foreign Saving a Viable Option for Developing Countries?
Classification-JEL: F15; F21
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Brian Pinto
Author-Name: Artur Radziwill
Note: ITI
Number: 10624
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10624
File-URL: http://www.nber.org/papers/w10624.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua & Pinto, Brian & Radziwill, Artur, 2007. "Sources for financing domestic capital - Is foreign saving a viable option for developing countries?," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 682-702, September.
Abstract: This paper proposes a new method for measuring the degree to which the domestic capital stock is self-financed. The main idea is to use the national accounts to construct a self-financing ratio, indicating what would have been the autarky stock of tangible capital supported by actual past domestic saving, relative to the actual stock of capital. We use the constructed measure of self-financing to evaluate the impact of the growing global financial integration on the sources of financing domestic capital stocks in developing countries. On average, 90% of the stock of capital in developing countries is self financed, and this fraction was surprisingly stable throughout the 1990s. The greater integration of financial markets has not changed the dispersion of self-financing rates, and the correlation between changes in de-facto financial integration and changes in self-financing ratios is statistically insignificant. There is no evidence of any growth bonus' associated with increasing the financing share of foreign savings. In fact, the evidence suggests the opposite: throughout the 1990s, countries with higher self-financing ratios grew significantly faster than countries with low self-financing ratios. This result persists even after controlling growth for the quality of institutions. We also find that higher volatility of the self-financing ratios is associated with lower growth rates, and that better institutions are associated with lower volatility of the self-financing ratios. These findings are consistent with the notion that financial integration may have facilitated diversification of assets and liabilities, but failed to offer new net sources of financing capital in developing countries.
Handle: RePEc:nbr:nberwo:10624
Template-Type: ReDIF-Paper 1.0
Title: R&D: A Small Contribution to Productivity Growth
Classification-JEL: O40; E10
Author-Name: Diego Comin
Author-Person: pco55
Note: PR
Number: 10625
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10625
File-URL: http://www.nber.org/papers/w10625.pdf
File-Format: application/pdf
Publication-Status: published as Comin, Diego. "R&D: A Small Contribution To Productivity Growth," Journal of Economic Growth, 2004, v9(4,Dec), 391-421.
Abstract: In this paper I evaluate the contribution of R&D investments to productivity growth. The basis for the analysis are the free entry condition and the fact that most R&D innovations are embodied. Free entry yields a relationship between the resources devoted to R&D and the growth rate of technology. Since innovators are small, this relationship is not directly affected by the size of R&D externalities, or the presence of aggregate diminishing returns in R&D after controlling for the growth rate of output and the interest rate. The embodiment of R&D-driven innovations bounds the size of the production externalities. The resulting contribution of R&D to productivity growth in the US is smaller than three to five tenths of one percentage point. This constitutes an upper bound for the case where innovators internalize the consequences of their R&D investments on the cost of conducting future innovations. From a normative perspective, this analysis implies that, if the innovation technology takes the form assumed in the literature, the actual US R&D intensity may be the socially optimal.
Handle: RePEc:nbr:nberwo:10625
Template-Type: ReDIF-Paper 1.0
Title: Direct Investment, Rising Real Wages and the Absorption of Excess Labor in the Periphery
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: 10626
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10626
File-URL: http://www.nber.org/papers/w10626.pdf
File-Format: application/pdf
Publication-Status: published as Michael Dooley & David Folkerts-Landau & Peter Garber, 2005. "Direct investment, rising real wages and the absorption of excess labor in the periphery," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
Publication-Status: published as Direct Investment, Rising Real Wages and the Absorption of Excess Labor in the Periphery, Michael P. Dooley, David Folkerts-Landau, Peter Garber. in G7 Current Account Imbalances: Sustainability and Adjustment, Clarida. 2007
Abstract: This paper sets out the political economy behind Asian governments' participation in a revived Bretton Woods System. The overriding problem for these governments is to rapidly integrate a large pool of underemployed labor into the industrial sector. The principal constraints are inefficient domestic resource and capital markets, and resistance to import penetration by labor in industrial countries. The system has evolved to overcome these constraints through export led growth and growth of foreign direct investment. Periphery governments' objectives for the scale and composition of gross trade in goods and financial assets may dominate more conventional concerns about international capital flows.
Handle: RePEc:nbr:nberwo:10626
Template-Type: ReDIF-Paper 1.0
Title: Using Investment Data to Assess the Importance of Price Mismeasurement
Classification-JEL: C6; D9
Author-Name: Diego Comin
Author-Person: pco55
Note: EFG
Number: 10627
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10627
File-URL: http://www.nber.org/papers/w10627.pdf
File-Format: application/pdf
Publication-Status: published as Comin, Diego A. "Using Investment Data To Access The Importance Of Price Mismeasurement." B.E. Journal of Macroeconomics, 2006, v6(1), Article 7.
Abstract: This paper presents a new approach to assess the role of price mismeasurement in the productivity slowdown. I invert the firm's investment decision to identify the embodied and disembodied components of productivity growth. With a Cobb-Douglas production function, output price mismeasurement only should affect the latter. Contrary to the mismeasurement hypothesis, I find that in the Post-War period, disembodied productivity grew faster in the hard-to-measure than in the non-manufacturing easy-to-measure sectors, and that disembodied productivity slowed down less in the hard-to-measure than in the easy-to-measure sectors since the 70's. These results hold a fortiori when capital and labor are complements.
Handle: RePEc:nbr:nberwo:10627
Template-Type: ReDIF-Paper 1.0
Title: Spending Less Time with the Family: The Decline of Family Ownership in the UK
Classification-JEL: G32
Author-Name: Julian Franks
Author-Name: Colin Mayer
Author-Person: pma206
Author-Name: Stefano Rossi
Note: CF
Number: 10628
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10628
File-URL: http://www.nber.org/papers/w10628.pdf
File-Format: application/pdf
Publication-Status: published as Julian Franks & Colin Mayer & Stefano Rossi, 2005. "Spending Less Time with the Family: The Decline of Family Ownership in the United Kingdom," NBER Chapters, in: A History of Corporate Governance around the World: Family Business Groups to Professional Managers, pages 581-612 National Bureau of Economic Research, Inc.
Abstract: Family ownership was rapidly diluted in the twentieth century in Britain. The main cause was equity issued in the process of making acquisitions. In the first half of the century, it occurred in the absence of minority investor protection and relied on directors of target firms protecting the interests of shareholders. Families were able to retain control by occupying a disproportionate number of seats on the boards of firms. However, in the absence of large stakes, the rise of hostile takeovers and institutional shareholders made it increasingly difficult for families to maintain control without challenge. Potential targets attempted to protect themselves through dual class shares and strategic share blocks but these were dismantled in response to opposition by institutional shareholders and the London Stock Exchange. The result was a regulated market in corporate control and a capital market that looked very different from its European counterparts. Thus, while acquisitions facilitated the growth of family controlled firms in the first half of the century, they also diluted their ownership and ultimately their control in the second half.
Handle: RePEc:nbr:nberwo:10628
Template-Type: ReDIF-Paper 1.0
Title: Unmasking the Pollution Haven Effect
Classification-JEL: F18; Q38
Author-Name: Arik Levinson
Author-Person: ple135
Author-Name: M. Scott Taylor
Author-Person: pta60
Note: ITI EEE
Number: 10629
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10629
File-URL: http://www.nber.org/papers/w10629.pdf
File-Format: application/pdf
Publication-Status: published as Arik Levinson & M. Scott Taylor, 2008. "Unmasking The Pollution Haven Effect," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 223-254, 02.
Abstract: This paper uses both theory and empirical work to examine the effect of environmental regulations on trade flows. We develop a simple economic model to demonstrate how unobserved heterogeneity, endogeneity and aggregation issues bias measurements of the relationship between regulatory costs and trade. We apply an estimating equation derived from the model to data on U.S. regulations and net trade flows among the U.S., Canada, and Mexico, for 130 manufacturing industries from 1977 to 1986. Our results indicate that industries whose abatement costs increased most experienced the largest increases in net imports. For the 20 industries hardest hit by regulation, the change in net imports we ascribe to the increase in regulatory costs amounts to more than half of the total increase in trade volume over the period.
Handle: RePEc:nbr:nberwo:10629
Template-Type: ReDIF-Paper 1.0
Title: Capital Income Taxation in the Globalized World
Classification-JEL: F3; H2
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Note: IFM PE
Number: 10630
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10630
File-URL: http://www.nber.org/papers/w10630.pdf
File-Format: application/pdf
Abstract: The behavior of taxes on capital income in the recent decades points to the notion that international tax competition that follows globalization of capital markets put strong downward pressures on the taxation of capital income; a race to the bottom. This behavior has been perhaps most pronounced in the EU-15 following the single market act of 1992. The 2004 enlargement of the EU with 10 new entrants put a strong downward pressure on capital income taxation for the EU-15 countries. Tax havens, and the inadequacy of cooperation among national tax authorities in the OECD in information exchanges, put binding ceilings on how much foreign-source capital income can be taxed. What then are the implications for the taxes on domestic-source capital income? The paper demonstrates that even if some enforcement of taxation on foreign-source capital income is feasible, a poor enforcement of international taxes would generate political processes that would reduce significantly the domestic-source capital income taxation.
Handle: RePEc:nbr:nberwo:10630
Template-Type: ReDIF-Paper 1.0
Title: The Source of Historical Economic Fluctuations: An Analysis using Long-Run Restrictions
Classification-JEL: E2; E3
Author-Name: Neville Francis
Author-Name: Valerie A. Ramey
Author-Person: pra154
Note: EFG ME
Number: 10631
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10631
File-URL: http://www.nber.org/papers/w10631.pdf
File-Format: application/pdf
Publication-Status: published as The Source of Historical Economic Fluctuations: An Analysis Using Long-Run Restrictions, Neville Francis, Valerie A. Ramey. in NBER International Seminar on Macroeconomics 2004, Clarida, Frankel, Giavazzi, and West. 2006
Abstract: This paper investigates the source of historical fluctuations in annual US data extending back to the late 19th century. Long-run identifying restrictions are used to decompose productivity, hours, and output into technology shocks and non-technology shocks. A variety of models with differing auxiliary assumptions are investigated. The preferred model suggests that the Great Depression was a period in which both types of shocks were very negative. On the other hand, our estimates support the microeconomic evidence of historically large positive technology shocks from 1934 to 1936. Finally, both types of shocks are responsible for the reduction in the variance of output in the post-WWII period.
Handle: RePEc:nbr:nberwo:10631
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Effects of Workloss on Productivity With Team Production
Classification-JEL: I10; J30
Author-Name: Sean Nicholson
Author-Person: pni108
Author-Name: Marc V. Pauly
Author-Name: Daniel Polsky
Author-Name: Claire Sharda
Author-Name: Helena Szrek
Note: LS PR
Number: 10632
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10632
File-URL: http://www.nber.org/papers/w10632.pdf
File-Format: application/pdf
Publication-Status: published as Sean Nicholson & Mark V. Pauly & Daniel Polsky & Claire Sharda & Helena Szrek & Marc L. Berger, 2006. "Measuring the effects of work loss on productivity with team production," Health Economics, John Wiley & Sons, Ltd., vol. 15(2), pages 111-123.
Abstract: Using data from a survey of 800 managers in 12 industries, we find empirical support for the hypothesis that the cost associated with missed work varies across jobs according to the ease with which a manager can find a perfect replacement for the absent worker, the extent to which the worker functions as part of a team, and the time sensitivity of the worker's output. We then estimate wage multipliers' for 35 different jobs, where the multiplier is defined as the cost to the firm of an absence as a proportion (often greater than one) of the absent worker's daily wage. The median multiplier is 1.28, which supports the view that the cost to the firm of missed work is often greater than the wage.
Handle: RePEc:nbr:nberwo:10632
Template-Type: ReDIF-Paper 1.0
Title: Are Migrants More Skilled than Non-Migrants? Repeat, Return and Same-Employer Migrants
Classification-JEL: J6
Author-Name: Jennifer Hunt
Author-Person: phu9
Note: LS
Number: 10633
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10633
File-URL: http://www.nber.org/papers/w10633.pdf
File-Format: application/pdf
Publication-Status: published as Hunt, Jennifer. "Are Migrants More Skilled Non-Migrants? Repeat, Return, And Same-Employer Migrants," Canadian Journal of Economics, 2004, v37(4,Nov), 830-849.
Abstract: I examine the determinants of inter-state migration of adults within western Germany, using the German Socio-Economic Panel from 1984-2000. I highlight the prevalence and distinctive characteristics of migrants who do not change employers. Same-employer migrants represent one fifth of all migrants higher education and pre-move wages than non-migrants. Conditional on age, same-employer migrants are therefore more skilled than non-migrants. By contrast, although other migrants have higher education than non-migrants, they do not have higher pre-move wages. Furthermore, they have in their ranks disproportionate numbers of the non-employed, unemployed and recently laid off. It therefore seems inappropriate to characterize them as more skilled than non-migrants. The results for same-employer migrants indicate that skilled workers have a low-cost migration avenue that has not been considered in the previous literature. I also analyze the relation between repeat and return migration and distinguish between short and long-distance migration. I confirm that long-distance migrants are more skilled than short-distance migrants, as predicted by theory, and I show that return migrants are a mix of successes and failures.
Handle: RePEc:nbr:nberwo:10633
Template-Type: ReDIF-Paper 1.0
Title: A New Look at Racial Profiling: Evidence from the Boston Police Department
Classification-JEL: K0; H0
Author-Name: Kate L. Antonovics
Author-Person: pan97
Author-Name: Brian G. Knight
Author-Person: pkn7
Note: PE
Number: 10634
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10634
File-URL: http://www.nber.org/papers/w10634.pdf
File-Format: application/pdf
Publication-Status: published as Kate Antonovics & Brian G Knight, 2009. "A New Look at Racial Profiling: Evidence from the Boston Police Department," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 163-177, 09.
Abstract: This paper provides new evidence on the role of preference-based versus statistical discrimination in racial profiling using a unique data set that includes the race of both the driver and the officer. We first generalize the model presented in Knowles, Persico and Todd (2001) and show that the fundamental insight that allows them to distinguish between statistical discrimination and preference-based discrimination depends on the specialized shapes of the best response functions in their model. Thus, the test that they employ is not robust to a range of alternative modeling assumptions. However, we also show that if statistical discrimination alone explains differences in the rate at which the vehicles of drivers of different races are searched, then search decisions should be independent of officer race. We then test this prediction using data from the Boston Police Department. Consistent with preference-based discrimination, our baseline results demonstrate that officers are more likely to conduct a search if the race of the officer differs from the race of the driver. We then investigate and rule out two alternative explanations for our findings: race-based informational asymmetries between officers and the assignment of officers to neighborhoods.
Handle: RePEc:nbr:nberwo:10634
Template-Type: ReDIF-Paper 1.0
Title: The Rise and Fall of the Widely Held Firm - A History of Corporate Ownership in Canada
Classification-JEL: G3
Author-Name: Randall Morck
Author-Person: pmo146
Author-Name: Michael Percy
Author-Name: Gloria Tian
Author-Name: Bernard Yeung
Note: CF
Number: 10635
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10635
File-URL: http://www.nber.org/papers/w10635.pdf
File-Format: application/pdf
Publication-Status: published as The Rise and Fall of the Widely Held Firm: A History of Corporate Ownership in Canada , Randall Morck, Michael Percy, Gloria Tian, Bernard Yeung. in A History of Corporate Governance around the World: Family Business Groups to Professional Managers, Morck. 2005
Abstract: A panel of corporate ownership data, stretching back to 1902, shows that the Canadian corporate sector began the century with a predominance of large pyramidal corporate groups controlled by wealthy families or individuals. By mid-century, widely held firms predominated. But, from the 1970s on, pyramidal groups controlled by wealthy families and individuals resurge, restoring a situation similar to that a century earlier. Institutional factors underlying this resurgence are shown to have antecedents deep in the country's colonial past.
Handle: RePEc:nbr:nberwo:10635
Template-Type: ReDIF-Paper 1.0
Title: Technology Shocks and Aggregate Fluctuations: How Well Does the RBS Model Fit Postwar U.S. Data?
Classification-JEL: E32
Author-Name: Jordi Gali
Author-Person: pga43
Author-Name: Pau Rabanal
Author-Person: pra28
Note: EFG ME
Number: 10636
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10636
File-URL: http://www.nber.org/papers/w10636.pdf
File-Format: application/pdf
Publication-Status: published as “Technology Shocks and Aggregate Fluctuations: How Well Does the RBC Model Fit Postwar U.S. Data?,” (with Pau Rabanal), NBER Macroeconomics Annual 2004, 225-288.
Publication-Status: published as Jordi Galí & Pau Rabanal, 2004. "Technology Shocks and Aggregate Fluctuations: How Well Does the RBC Model Fit Postwar U.S. Data?," IMF Working Papers, vol 04(234).
Abstract: Our answer: not so well. We reach that conclusion after reviewing recent research on the role of technology as a source of economic fluctuations. The bulk of the evidence suggests a limited role for aggregate technology shocks, pointing instead to demand factors as the main force behind the strong positive comovement between output and labor input measures.
Handle: RePEc:nbr:nberwo:10636
Template-Type: ReDIF-Paper 1.0
Title: Public Debt, Fiscal Solvency and Macroeconomic Uncertainty in Latin America: The Cases of Brazil, Colombia, Costa Rica, and Mexico
Classification-JEL: F0; F4
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Author-Name: P. Marcelo Oviedo
Note: PE
Number: 10637
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10637
File-URL: http://www.nber.org/papers/w10637.pdf
File-Format: application/pdf
Publication-Status: published as Enrique G. Mendoza & P. Marcelo Oviedo, 2009. "Public Debt, Fiscal Solvency and Macroeconomic Uncertainty in Latin America The Cases of Brazil, Colombia, Costa Rica and Mexico," Economia Mexicana NUEVA EPOCA, , vol. 0(2), pages 133-173, July-Dece.
Abstract: Ratios of public debt as a share of GDP in Brazil, Colombia, and Mexico were 10 percentage points higher on average during 1996-2002 than in the period 1990-1995. Costa Rica's debt ratio remained stable but at a high level near 50 percent. Is there reason to be concerned for the solvency of the public sector in these economies? We provide an answer to this question based on the quantitative predictions of a variant of the framework proposed by Mendoza and Oviedo (2004). This methodology yields forward-looking estimates of debt ratios consistent with fiscal solvency for a government that faces revenue uncertainty and can issue only non-state-contingent debt. In this environment, aversion to a collapse in outlays leads the government to respect a "natural debt limit" equal to the annuity value of the primary balance in a "fiscal crisis". A fiscl crisis occurs after a long sequence of adverse revenue shocks and public outlays adjust to a tolerable minimum. The debt limit also represents a credible commitment to be able to repay even in a fiscal crisis but is not, in general, the same as the sustainable debt, which is driven by the probabilistic dynamics of the primary balance. The results of a baseline scenario question the sustainability of current debt ratios in Brazil and Colombia, while those in Costa Rica and Mexico seem inside the limits consistent with fiscal solvency. In contrast, public debt ratios are found to be unsustainable in all four countries for plausible changes to lower average growth rates or higher real interest rates. Moreover, sustainable debt ratios fall sharply when default risk is taken into account.
Handle: RePEc:nbr:nberwo:10637
Template-Type: ReDIF-Paper 1.0
Title: Specialization, Factor Accumulation and Development
Classification-JEL: F1; F11
Author-Name: Doireann Fitzgerald
Author-Person: pfi76
Author-Name: Juan Carlos Hallak
Author-Person: pha474
Note: ITI
Number: 10638
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10638
File-URL: http://www.nber.org/papers/w10638.pdf
File-Format: application/pdf
Publication-Status: published as Fitzgerald, Doireann and Juan Carlos Hallak. "Specialization, Factor Accumulation And Development," Journal of International Economics, 2004, v64(2,Dec), 277-302.
Abstract: We estimate the effect of factor proportions on the pattern of manufacturing specialization in a cross-section of OECD countries, taking into account that factor accumulation responds to productivity. We show that the failure to control for productivity differences produces biased estimates. Our model explains 2/3 of the observed differences in the pattern of specialization between the poorest and richest OECD countries. However, because factor proportions and the pattern of specialization co-move in the development process, their strong empirical relationship is not sufficient to determine whether specialization is driven by factor proportions, or by other mechanisms also correlated with level of development.
Handle: RePEc:nbr:nberwo:10638
Template-Type: ReDIF-Paper 1.0
Title: Auctions with Resale When Private Values Are Uncertain: Theory and Empirical Evidence
Classification-JEL: L4; L7
Author-Name: Andreas Lange
Author-Person: pla289
Author-Name: John A. List
Author-Person: pli176
Author-Name: Michael K. Price
Author-Person: ppr89
Note: IO PE EEE
Number: 10639
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10639
File-URL: http://www.nber.org/papers/w10639.pdf
File-Format: application/pdf
Abstract: Auction theory is one of the richest areas of research in economics over the past three decades. Yet whether and to what extent the introduction of secondary resale markets influences bidding behavior in sealed bid first-price auctions remains under researched. This study begins by developing theory to explore auctions with resale when private values are uncertain. We put our theory to the test by examining both field data and experimental data from the lab. Our field data are from a unique data set that includes nearly 3,000 auctions (over 10,000 individual bids) for cutting rights of standing timber in British Columbia from 1996-2000. In comparing bidding patterns across agents who are likely to have resale opportunities with those who likely do not, we find evidence that is consistent with our theoretical predictions. Critical evaluation of the reduced-form bidding model, however, reveals that sharp tests of the theoretical predictions are not possible because several other differences may exist across these bidder types. We therefore use a laboratory experiment to examine if the resale opportunity by itself can have the predicted effect. We find that while it does have the predicted effect, a theoretical model based on risk-averse bidders explains the overall data patterns more accurately than a model based on risk-neutral bidders. More generally, the paper highlights the inferential power of combining naturally occurring data with laboratory data.
Handle: RePEc:nbr:nberwo:10639
Template-Type: ReDIF-Paper 1.0
Title: Scientific Teams and Institution Collaborations: Evidence from U.S. Universities, 1981-1999
Classification-JEL: L3; O3
Author-Name: James D. Adams
Author-Person: pad11
Note: PR
Number: 10640
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10640
File-URL: http://www.nber.org/papers/w10640.pdf
File-Format: application/pdf
Publication-Status: published as Adams, James D. & Black, Grant C. & Clemmons, J. Roger & Stephan, Paula E., 2005. "Scientific teams and institutional collaborations: Evidence from U.S. universities, 1981-1999," Research Policy, Elsevier, vol. 34(3), pages 259-285, April.
Abstract: This paper explores recent trends in the size of scientific teams and in institutional collaborations. The data derive from 2.4 million scientific papers written in 110 leading U.S. research universities over the period 1981-1999. We measure team size by the number of authors on a scientific paper. Using this measure we find that team size increases by 50 percent over the 19-year period. We supplement team size with measures of domestic and foreign institutional collaborations, which capture the geographic dispersion of team workers. The time series evidence suggests that the trend towards larger and more dispersed teams accelerates at the start of the 1990s. This acceleration suggests a sudden decline in the cost of collaboration, perhaps due to improvements in telecommunications. Using a panel of top university departments we find that private universities and departments whose scientists have earned prestigious awards participate in larger teams, as do departments that have larger amounts of federal funding. Placement of former graduate students is a key determinant of institutional collaborations, especially collaborations with firms and foreign scientific institutions. Finally, the evidence indicates that scientific influence increases with team size and institutional collaborations. Since increasing team size implies an increase in the division of labor, these results suggest that scientific productivity increases with the scientific division of labor.
Handle: RePEc:nbr:nberwo:10640
Template-Type: ReDIF-Paper 1.0
Title: The History and Politics of Corporate Ownership in Sweden
Classification-JEL: G3; N2
Author-Name: Peter Hogfeldt
Note: CF
Number: 10641
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10641
File-URL: http://www.nber.org/papers/w10641.pdf
File-Format: application/pdf
Publication-Status: published as Morck, Randall K. (ed.) A History of Corporate Governance around the World: Family Business Groups to Professional Managers A National Bureau of Economic Research Conference Report. Chicago and London: University of Chicago Press, 2005.
Publication-Status: published as The History and Politics of Corporate Ownership in Sweden, Peter Hogfeldt. in A History of Corporate Governance around the World: Family Business Groups to Professional Managers, Morck. 2005
Abstract: Not despite but because of persistent Social Democratic political influence since the Great Reversal in 1932 have a few families and banks controlled the largest listed firms in Sweden. The Social Democrats have de facto been the guarantor rather than the terminator of private capitalism since the political and corporate incumbencies have been united by strong common interests. Incumbent owners need the political support to legitimize that their corporate power rests on extensive use of dual-class shares and pyramiding. While the Social Democrats only get the necessary resources and indirect support for their social and economic policies from the private sector if the largest firms remain under Swedish control so that capital does not migrate. The extensive use of mechanisms to separate votes from capital however drives a significant wedge between the costs of internal and external capital that causes an enhanced (political) pecking order of financing where new external equity is strongly avoided. By not encouraging outsiders to create new firms and fortunes, and by not fully activating the primary equity markets, the heavy politicized system has redistributed incomes but not property rights and wealth. The result is an ageing economy with an unusually large proportion of very old and very large firms with well-defined owners in control. 31 of the 50 largest listed firms in 2000 were founded before 1914, only 8 in the post-war period and none after 1970.
Handle: RePEc:nbr:nberwo:10641
Template-Type: ReDIF-Paper 1.0
Title: Deflationary Bubbles
Classification-JEL: E0
Author-Name: Willem H. Buiter
Author-Person: pbu137
Author-Name: Anne C. Sibert
Author-Person: psi80
Note: EFG IFM ME
Number: 10642
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10642
File-URL: http://www.nber.org/papers/w10642.pdf
File-Format: application/pdf
Publication-Status: published as Buiter, Willem H. & Sibert, Anne C., 2007. "Deflationary Bubbles," Macroeconomic Dynamics, Cambridge University Press, vol. 11(04), pages 431-454, September.
Abstract: We analyse deflationary bubbles in a model where money is the only financial asset. We show that such bubbles are consistent with the household's transversality condition if and only if the nominal money stock is falling. Our results are in sharp contrast to those in several prominent contributions to the literature, where deflationary bubbles are ruled out by appealing to a non-standard transversality condition, originally due to Brock. This condition, which we dub the GABOR condition, states that the consumer must be indifferent between reducing his money holdings by one unit and leaving them unchanged and enjoying the discounted present value of the marginal utility of that unit of money forever. We show that the GABOR condition is not part of the necessary and sufficient conditions for household optimality nor is it sufficient to rule out deflationary bubbles. Moreover, it rules out Friedman's optimal quantity of money equilibrium and, when the nominal money stock is falling, it rules out deflationary bubbles that are consistent with household optimality. We also consider economies with real and nominal government debt and small open economies where private agents can lend to and borrow from abroad. In these cases, deflationary bubbles may be possible, even when the nominal money stock is rising. Their existence is shown to depend on the rules governing the issuance of government debt.
Handle: RePEc:nbr:nberwo:10642
Template-Type: ReDIF-Paper 1.0
Title: International Innovation and Diffusion of Air Pollution Control Technologies: The Effects of NOX and SO2 Regulation in the US, Japan, and Germany
Classification-JEL: O31; O33
Author-Name: David Popp
Note: PR EEE
Number: 10643
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10643
File-URL: http://www.nber.org/papers/w10643.pdf
File-Format: application/pdf
Publication-Status: published as Popp, David. "International Innovation And Diffusion Of Air Pollution Control Technologies: The Effects Of NOx And SO2 Regulation In The US, Japan, And Germany," Journal of Environmental Economics and Management, 2006, v51(1,Jan), 46-71.
Abstract: Using patent data from the United States, Japan, and Germany, this paper examines both the innovation and diffusion of air pollution control equipment. Whereas the United States was an early adopter of stringent sulfur dioxide (SO2) standards, both Japan and Germany introduced stringent nitrogen dioxide (NOX) standards much earlier than the US. Nonetheless, in both cases, tightened standards in the U.S. led to more domestic patenting, but not more foreign patenting. Overall, the data suggest that inventors respond to environmental regulatory pressure in their own country, but not to foreign environmental regulations. Moreover, any technology transfer that occurs appears to be indirect. Domestic innovation occurs even for technologies that have already experienced significant innovative activity abroad. Moreover, utilities in countries that adopt regulations later nonetheless purchase pollution abatement equipment from domestic firms. However, patent citation data from the U.S. show that earlier foreign patents are an important building block for NOX pollution control innovations in the U.S., suggesting that American inventors build on technological advances made in countries that adopted stringent regulation earlier.
Handle: RePEc:nbr:nberwo:10643
Template-Type: ReDIF-Paper 1.0
Title: Behavioral Finance in Corporate Governance - Independent Directors, Non-Executive Chairs, and the Importance of the Devil's Advocate
Classification-JEL: G3
Author-Name: Randall Morck
Author-Person: pmo146
Note: CF
Number: 10644
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10644
File-URL: http://www.nber.org/papers/w10644.pdf
File-Format: application/pdf
Publication-Status: published as Randall Morck, 2008. "Behavioral finance in corporate governance: economics and ethics of the devil’s advocate," Journal of Management and Governance, Springer, vol. 12(2), pages 179-200, May.
Abstract: The Common Law, parliamentary democracy, and academia all institutionalize dissent to check undue obedience to authority; and corporate governance reformers advocate the same in boardrooms. Many corporate governance disasters could often be averted if directors asked hard questions, demanded clear answers, and blew whistles. Work by Milgram suggests humans have an innate predisposition to obey authority. This excessive subservience of agent to principal, here dubbed a "type II agency problem", explains directors' eerie submission. Rational explanations are reviewed, but behavioral explanations appear more complete. Experimental work shows this predisposition disrupted by dissenting peers, conflicting authorities, and distant authorities. Thus, independent directors, chairs, and committees excluding CEOs might induce greater rationality and more considered ethics in corporate governance. Empirical evidence of this is scant - perhaps reflecting problems identifying genuinely independent directors.
Handle: RePEc:nbr:nberwo:10644
Template-Type: ReDIF-Paper 1.0
Title: Do the Rich Flee from High State Taxes? Evidence from Federal Estate Tax Returns
Classification-JEL: H23; H71
Author-Name: Jon Bakija
Author-Person: pba72
Author-Name: Joel Slemrod
Author-Person: psl10
Note: PE
Number: 10645
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10645
File-URL: http://www.nber.org/papers/w10645.pdf
File-Format: application/pdf
Abstract: This paper examines how changes in state tax policy affect the number of federal estate tax returns filed in each state, utilizing data on federal estate tax return filings by state and wealth class for 18 years between 1965 and 1998. Controlling for state- and wealth-class specific fixed effects, we find that high state inheritance and estate taxes and sales taxes have statistically significant, but modest, negative impacts on the number of federal estate tax returns filed in a state. High personal income tax and property tax burdens are also found to have negative effects, but these results are somewhat sensitive to alternative specifications. This evidence is consistent with the notion that wealthy elderly people change their real (or reported) state of residence to avoid high state taxes, although it could partly reflect other modes of tax avoidance as well. We discuss the implications for the debate over whether individual states should decouple' their estate taxes from federal law, which would retain the state tax even as the federal credit for such taxes is eliminated. Our results suggest that migration and other observationally equivalent avoidance activities in response to such a tax would cause revenue losses and deadweight losses, but that these would not be large relative to the revenue raised by the tax.
Handle: RePEc:nbr:nberwo:10645
Template-Type: ReDIF-Paper 1.0
Title: Can Inflation Targeting Work in Emerging Market Countries?
Classification-JEL: E5; F3
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: EFG IFM ME
Number: 10646
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10646
File-URL: http://www.nber.org/papers/w10646.pdf
File-Format: application/pdf
Publication-Status: published as Reinhart, Carmen, Carlos Vegh and Andres Velasco (eds.) A Festschrift for Guillermo Calvo. Cambridge, MA: MIT Press, 2008.
Abstract: This paper explores issues in emerging market countries to make inflation targeting work for them. It starts by outlining why emerging market economies are so different from advanced economies and then discuss why developing strong fiscal, financial and monetary institutions is so critical to the success of inflation targeting in emerging market countries. Then it discusses two emerging market countries which illustrate what it takes to make inflation targeting work well, Chile and Brazil. It then addresses a particularly complicated issue for central banks in emerging market countries who engage in inflation targeting: how they deal with exchange rate fluctuations. The next topic focuses on the IMF's role in promoting the success of inflation targeting in emerging market countries. The conclusion from this analysis is that inflation targeting is more complicated in emerging market countries and is thus not a panacea. However, inflation targeting done right can be a powerful tool to help promote macroeconomic stability in these countries.
Handle: RePEc:nbr:nberwo:10646
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Effects of a Time Limited Earnings Subsidy for Welfare Leavers
Classification-JEL: I38
Author-Name: David Card
Author-Person: pca271
Author-Name: Dean R. Hyslop
Author-Person: phy11
Note: LS PE
Number: 10647
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10647
File-URL: http://www.nber.org/papers/w10647.pdf
File-Format: application/pdf
Publication-Status: published as Card, David and Dean R. Hyslop. "Estimating The Effects Of A Time-Limited Earnings Subsidy For Welfare-Leavers," Econometrica, 2005, v73(6,Nov), 1723-1770.
Abstract: In the Self Sufficiency Program (SSP) welfare demonstration, members of a randomly assigned treatment group could receive a subsidy for full time work. The subsidy was available for three years, but only to people who began working full time within 12 months of random assignment. A simple optimizing model suggests that the eligibility rules created an 'establishment' incentive to find a job and leave welfare within a year of random assignment, and an 'entitlement' incentive to choose work over welfare once eligibility was established. Building on this insight, we develop an econometric model of welfare participation that allows us to separate the two effects and estimate the impact of the earnings subsidy on welfare entry and exit rates among those who achieved eligibility. The combination of the two incentives explains the time profile of the experimental impacts, which peaked 15 months after random assignment and faded relatively quickly. Our findings suggest that about half of the peak impact of SSP was attributable to the establishment incentive. Despite the extra work effort generated by SSP the program had no lasting impact on wages, and little or no long run effect on welfare participation.
Handle: RePEc:nbr:nberwo:10647
Template-Type: ReDIF-Paper 1.0
Title: Illicit Drug Use Among Arrestees and Drug Prices
Classification-JEL: I1
Author-Name: Dhaval Dave
Author-Person: pda245
Note: EH
Number: 10648
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10648
File-URL: http://www.nber.org/papers/w10648.pdf
File-Format: application/pdf
Publication-Status: published as Dave, Dhaval, 2008. "Illicit drug use among arrestees, prices and policy," Journal of Urban Economics, Elsevier, vol. 63(2), pages 694-714, March.
Abstract: Previous studies, by relying on nationally representative surveys, have overlooked the important fact that use of addictive substances is not uniformly distributed; subgroups of hardcore users account for most of the drug consumption. This study employs the Drug Use Forecasting system to analyze the demand for cocaine and heroin by arrestees, employing objective indicators of use based on urinalysis. The data are repeated city cross-sections, and panel data methodologies are employed to control for policy endogeneity. Cocaine and heroin prices have a negative effect on the probability of use even among this group of heavy users. Results indicate that subjective, self-reported measures of participation are likely to be under-reported impart bias to estimates of the price elasticity. The own-price cocaine participation elasticity is about 0.17, and the own-price heroin participation elasticity is about 0.09 for arrestees. This contemporaneous elasticity understates the full effect, and the long-run price elasticity is about twice the magnitude. Estimated cross-price elasticities indicate that cocaine and heroin are economic complements. While these findings show that higher penalties, enforcement, and supply reduction activities can discourage participation by heavy users, the elasticities are smaller in magnitude relative to the estimates in the prior literature.
Handle: RePEc:nbr:nberwo:10648
Template-Type: ReDIF-Paper 1.0
Title: China's Post Accession WTO Stance
Classification-JEL: F1; O53
Author-Name: Glenda Mallon
Author-Name: John Whalley
Author-Person: pwh8
Note: ITI
Number: 10649
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10649
File-URL: http://www.nber.org/papers/w10649.pdf
File-Format: application/pdf
Abstract: We discuss China's stance in the WTO post-accession, noting the many issues with implementation of China's accession terms by 2007. We evaluate how much benefit China can realistically receive from WTO membership given current problems with dumping actions against China and trade restrictions against textile and apparel exports. We discuss emerging WTO and non-WTO trade disputes involving China, and China's now extensive regional trade initiatives which raise issues of multilateral regional balance on China's trade policy strategy.
Handle: RePEc:nbr:nberwo:10649
Template-Type: ReDIF-Paper 1.0
Title: Do a Firm's Equity Returns Reflect the Risk of Its Pension Plan?
Classification-JEL: G14; G23
Author-Name: Li Jin
Author-Name: Robert Merton
Author-Person: pme203
Author-Name: Zvi Bobie
Note: AP
Number: 10650
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10650
File-URL: http://www.nber.org/papers/w10650.pdf
File-Format: application/pdf
Publication-Status: published as Jin, Li & Merton, Robert C. & Bodie, Zvi, 2006. "Do a firm's equity returns reflect the risk of its pension plan?," Journal of Financial Economics, Elsevier, vol. 81(1), pages 1-26, July.
Abstract: This paper examines the empirical question of whether systematic equity risk of U.S. firms as measured by beta from the Capital Asset Pricing Model reflects the risk of their pension plans. There are a number of reasons to suspect that it might not. Chief among them is the opaque set of accounting rules used to report pension assets, liabilities, and expenses. Pension plan assets and liabilities are off-balance sheet, and are often viewed as segregated from the rest of the firm, with its own trustees. Pension accounting rules are complicated. Furthermore, the role of Pension Benefit Guaranty Corporation further clouds the real relation between pension plan risk and firm equity risk. The empirical findings in this paper are consistent with the hypothesis that equity risk does reflect the risk of the firm's pension plan despite arcane accounting rules for pensions. This finding is consistent with informational efficiency of the capital markets. It also has implications for corporate finance practice in the determination of the cost of capital for capital budgeting. Standard procedure uses de-leveraged equity return betas to infer the cost of capital for operating assets. But the de-leveraged betas are not adjusted for the risk of the pension assets and liabilities. Failure to make this adjustment will typically bias upwards estimates of the discount rate for capital budgeting. The magnitude of the bias is shown here to be large for a number of well-known U.S. companies. This bias can result in positive net-present-value projects being rejected.
Handle: RePEc:nbr:nberwo:10650
Template-Type: ReDIF-Paper 1.0
Title: On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing
Classification-JEL: G1
Author-Name: Jacob Boudoukh
Author-Name: Roni Michaely
Author-Person: pmi132
Author-Name: Matthew Richardson
Author-Name: Michael Roberts
Author-Person: pro361
Note: AP
Number: 10651
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10651
File-URL: http://www.nber.org/papers/w10651.pdf
File-Format: application/pdf
Publication-Status: published as Jacob Boudoukh & Roni Michaely & Matthew Richardson & Michael R. Roberts, 2007. "On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing," Journal of Finance, American Finance Association, vol. 62(2), pages 877-915, 04.
Abstract: Previous research showed that the dividend price ratio process changed remarkably during the 1980's and 1990's, but that the total payout ratio (dividends plus repurchases over price) changed very little. We investigate implications of this difference for asset pricing models. In particular, the widely documented decline in the predictive power of dividends for excess stock returns in time series regressions in recent data is vastly overstated. Statistically and economically significant predictability is found at both short and long horizons when total payout yield is used instead of dividend yield. We also provide evidence that total payout yield has information in the cross-section for expected stock returns exceeding that of dividend yield and that the high minus low payout yield portfolio is a priced factor. The evidence throughout is shown to be robust to the method of measuring total payouts.
Handle: RePEc:nbr:nberwo:10651
Template-Type: ReDIF-Paper 1.0
Title: Modeling Inventories Over the Business Cycle
Classification-JEL: E2; E3
Author-Name: Aubhik Khan
Author-Person: pkh5
Author-Name: Julia K. Thomas
Author-Person: pth42
Note: EFG
Number: 10652
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10652
File-URL: http://www.nber.org/papers/w10652.pdf
File-Format: application/pdf
Abstract: We search for useful models of aggregate fluctuations with inventories. We focus exclusively on dynamic stochastic general equilibrium models that endogenously give rise to inventory investment and evaluate two leading candidates: the (S,s) model and the stockout avoidance model. Each model is examined under both technology shocks and preference shocks, and its performance gauged by its ability to explain the observed magnitude of inventories in the U.S. economy, alongside other empirical regularities such as the procyclicality of inventory investment and its positive correlation with sales. We find that the (S,s) model is far more consistent with the behavior of aggregate inventories in the postwar U.S. when aggregate fluctuations arise from technology, rather than preference, shocks. The converse is true for the stockout avoidance model. Overall, while the (S,s) model performs well with respect to the inventory facts and other business cycle regularities, the stockout avoidance model does not. There, the essential motive for stocks is insufficient to generate inventory holdings near the data without destroying the model's performance along other important margins. Finally, the stockout avoidance model appears incapable of sustaining inventories alongside capital. This suggests a fundamental problem in using reduced-form inventory models with stocks rationalized by this motive.
Handle: RePEc:nbr:nberwo:10652
Template-Type: ReDIF-Paper 1.0
Title: Sex Differences in Morbidity and Mortality
Classification-JEL: I0; J1
Author-Name: Anne C. Case
Author-Person: pca108
Author-Name: Christina Paxson
Author-Person: ppa335
Note: AG EH
Number: 10653
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10653
File-URL: http://www.nber.org/papers/w10653.pdf
File-Format: application/pdf
Publication-Status: published as Case, Anne C. and Christina Paxson. “Sex Differences in Morbidity and Mortality.” Demography 42, 2 (2005): 189-214.
Abstract: Women have worse self-rated health and more hospitalization episodes than men from early adolescence to late middle age, but are less likely to die at each age. We use 14 years of data from the U.S. National Health Interview Survey to examine this paradox. Our results indicate that the difference in self-assessed health between women and men can be entirely explained by differences in the distribution of the chronic conditions they face. Although on average women have worse self-rated health than men, women and men with the same chronic conditions have the same self-rated health. The results for hospital episodes are somewhat different. While the effect of poor health on hospital episodes is the same for men and women, men with respiratory cancer, cardiovascular disease, and bronchitis are more likely to experience hospital episodes than women who suffer from the same chronic conditions, implying that men may experience more severe forms of these conditions. The same is true for mortality. Although the effects of many chronic conditions on the probability of death are the same for women and men, men who report having cardiovascular disease and certain lung disorders are significantly more likely to die than women with these conditions. While some of the gender difference in mortality can be explained by differences in the distribution of chronic conditions, an equally large share can be attributed to the larger adverse effects of these conditions on male mortality. Is smoking the smoking gun? Conditions for which we find excess male hospitalizations and mortality are generally smoking-related.
Handle: RePEc:nbr:nberwo:10653
Template-Type: ReDIF-Paper 1.0
Title: Free Banking and Bank Entry in Nineteenth-Century New York
Classification-JEL: N21; N41
Author-Name: Howard Bodenhorn
Author-Person: pbo547
Note: DAE ME
Number: 10654
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10654
File-URL: http://www.nber.org/papers/w10654.pdf
File-Format: application/pdf
Publication-Status: published as Bodenhorn, Howard. "Free Banking and Bank Entry in Nineteenth-Century New York." Financial History Review 15 (2008): 175-201.
Abstract: Previous studies of entry under New York's free banking law of 1838 have generated conflicting results. This article shows that different measures of entry lead to different conclusions about the competitive effects of the law. Measured by the entry of new banks, New York's free banking law led to increased rates of entry relative to other states. Free banking did not, however, lead to significant increases in capital accumulation in the industry. This paradoxical outcome resulted from the regulatory features of free banking, especially the bond security feature, which reduced profitability and incentives to invest in banking.
Handle: RePEc:nbr:nberwo:10654
Template-Type: ReDIF-Paper 1.0
Title: Search-Theoretic Models of the Labor Market-A Survey
Classification-JEL: E2; J6
Author-Name: Richard Rogerson
Author-Person: pro53
Author-Name: Robert Shimer
Author-Person: psh9
Author-Name: Randall Wright
Author-Person: pwr2
Note: EFG LS
Number: 10655
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10655
File-URL: http://www.nber.org/papers/w10655.pdf
File-Format: application/pdf
Publication-Status: published as Rogerson, Richard, Robert Shimer and Randall Wright. "Search-Theoretic Models Of The Labor Market: A Survey," Journal of Economic Literature, 2005, v43(4,Dec), 959-988.
Abstract: We survey search-theoretic models of the labor market and discuss their usefulness for analyzing labor market dynamics, job turnover, and wages. We first examine single-agent models, showing how they can incorporate many interesting features and generate rich predictions. We then consider equilibrium models that endogenize several variables that are treated parametrically in single-agent models, including the arrival rate of job offers and the wage distribution. We survey alternative formulations of these models, emphasizing two key issues: how workers and firms meet, and how wages are determined. We emphasize throughout the implications of alternative assumptions for turnover, wage dispersion, and efficiency.
Handle: RePEc:nbr:nberwo:10655
Template-Type: ReDIF-Paper 1.0
Title: Minimum Wage Effects in the Longer Run
Classification-JEL: J2; J3
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Olena Nizalova
Note: LS
Number: 10656
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10656
File-URL: http://www.nber.org/papers/w10656.pdf
File-Format: application/pdf
Publication-Status: published as David Neumark & Olena Nizalova, 2007. "Minimum Wage Effects in the Longer Run," Journal of Human Resources, University of Wisconsin Press, vol. 42(2).
Abstract: Exposure to minimum wages at young ages may lead to longer-run effects. Among the possible adverse longer-run effects are decreased labor market experience and accumulation of tenure, lower current labor supply because of lower wages, and diminished training and skill acquisition. Beneficial longer-run effects could arise if minimum wages increase skill acquisition, or if short-term wage increases are long-lasting. We estimate the longer-run effects of minimum wages by using information on the minimum wage history that workers have faced since potentially entering the labor market. The evidence indicates that even as individuals reach their late 20's, they work less and earn less the longer they were exposed to a higher minimum wage, especially as a teenager. The adverse longer-run effects of facing high minimum wages as a teenager are stronger for blacks. From a policy perspective, these longer-run effects of minimum wages are likely more significant than the contemporaneous effects of minimum wages on youths that are the focus of most research and policy debate.
Handle: RePEc:nbr:nberwo:10656
Template-Type: ReDIF-Paper 1.0
Title: Economic and Political Liberalizations
Classification-JEL: P0; O1
Author-Name: Francesco Giavazzi
Author-Person: pgi18
Author-Name: Guido Tabellini
Author-Person: pta37
Note: IFM
Number: 10657
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10657
File-URL: http://www.nber.org/papers/w10657.pdf
File-Format: application/pdf
Publication-Status: published as Giavazzi, Francesco and Guido Tabellini. "Economic And Political Liberalizations," Journal of Monetary Economics, 2005, v52(7,Oct), 1297-1330.
Abstract: This paper studies empirically the effects of and the interactions amongst economic and political liberalizations. Economic liberalizations are measured by a widely used indicator that captures the scope of the market in the economy, and in particular of policies towards freer international trade (cf. Sachs and Werner 1995, Wacziarg and Welch 2003). Political liberalizations correspond to the event of becoming a democracy. Using a difference-in-difference estimation, we ask what are the effects of liberalizations on economic performance, on macroeconomic policy and on structural policies. The main results concern the quantitative relevance of the feedback and interaction effects between the two kinds of reforms. First, we find positive feedback effects between economic and political reforms. The timing of events indicates that causality is more likely to run from political to economic liberalizations, rather than viceversa, but we cannot rule out feedback effects in both directions. Second, the sequence of reforms matters. Countries that first liberalize and then become democracies do much better than countries that pursue the opposite sequence, in almost all dimensions.
Handle: RePEc:nbr:nberwo:10657
Template-Type: ReDIF-Paper 1.0
Title: Evaluating the Impact of the D.C. Tuition Assistance Grant Program
Classification-JEL: I2
Author-Name: Thomas Kane
Note: CH ED PE
Number: 10658
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10658
File-URL: http://www.nber.org/papers/w10658.pdf
File-Format: application/pdf
Publication-Status: published as Kane, Thomas. "Evaluating the Impact of the D.C. Tution Assistance Grant Program." Journal of Human Resources. University of Wisconsin Press, vol. 42(3). 2007.
Abstract: In the Fall of 2000, the D.C. Tuition Assistance Grant program dramatically changed the menu of college prices offered to residents of the District of Columbia. The program allowed residents of D.C. to attend public institutions in Maryland and Virginia and pay the same tuition as residents of those states. Between 1998 and 2000 (the first year of the program), the number of D.C. residents attending public institutions in Virginia and Maryland more than doubled. When public institutions in other states were included in subsequent years, the number of D.C. residents attending these institutions also nearly doubled. The increases were largest at non-selective public 4-year institutions in the mid-Atlantic states, particular predominantly black public institutions in Maryland and Virginia. College entry rates by D.C. residents also seemed to increase. The number of first-time federal financial aid applicants, the number of first-year college students receiving Pell Grants and the number of district residents reported as freshmen by colleges and universities nationwide all increased by 15 percent or more, while the number of graduates from D.C. public high schools remained flat.
Handle: RePEc:nbr:nberwo:10658
Template-Type: ReDIF-Paper 1.0
Title: Go Down Fighting: Short Sellers vs. Firms
Classification-JEL: G14
Author-Name: Owen Lamont
Note: AP CF
Number: 10659
Creation-Date: 2004-07
Order-URL: http://www.nber.org/papers/w10659
File-URL: http://www.nber.org/papers/w10659.pdf
File-Format: application/pdf
Publication-Status: published as O. A. Lamont, 2012. "Go Down Fighting: Short Sellers vs. Firms," Review of Asset Pricing Studies, vol 2(1), pages 1-30.
Abstract: I study battles between short sellers and firms. Firms use a variety of methods to impede short selling, including legal threats, investigations, lawsuits, and various technical actions intended to create a short squeeze. These actions create short sale constraints. Consistent with the hypothesis that short sale constraints allow stocks to be overpriced, firms taking anti-shorting actions have in the subsequent year very low abnormal returns of about -2 percent per month.
Handle: RePEc:nbr:nberwo:10659
Template-Type: ReDIF-Paper 1.0
Title: Five Puzzles in the Behavior of Productivity, Investment, and Innovation
Classification-JEL: O30; N10
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG PR
Number: 10660
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10660
File-URL: http://www.nber.org/papers/w10660.pdf
File-Format: application/pdf
Publication-Status: published as Lopez-Claros, Augusto and Xavier Sala-i-Martin (eds.) The Global Competitiveness Report 2003-04. New York and Oxford: Oxford University Press, 2004.
Abstract: (1) Whatever happened to the cyclical effect? Skeptics were justified on the basis of data through the end of 1999 in their claim that part of the post-1995 productivity growth revival reflected the normal cyclical correlation between productivity and output growth. In contrast data through mid-2003 reveal only a negligible cyclical effect for 1995-99 but rather a temporary bubble in 2002-03. (2) Why did productivity growth accelerate after 2000 when the ICT investment boom was collapsing? The most persuasive argument points to unusually savage corporate cost-cutting and hidden intangible investments in the late 1990s that provided productivity benefits after 2000. (3) The steady decline in the price of computer power implies steady technical progress, but then why did computers produce so little productivity growth before 1995 and so much afterwards? We draw an analogy to electricity, where miniaturization was the key step in making small electric motors practicable, and the internal combustion engine, where complementary investments, especially roads, were necessary to reap benefits. (4) What does the collapse of the investment boom imply about the future of innovation? First-rate inventions in the 1990s, notably the web and user-friendly business productivity software, are being followed by second-rate inventions in the current decade. (5) Finally, why did productivity growth slow down in Europe but accelerate in the U. S.? A consensus is emerging that U. S. institutions foster creative destruction and financial markets that welcome innovation, while Europe remains under the control of corporatist institutions that dampen competition and inhibit new entry. Further, Europe lacks a youth culture like that of the U. S. which fosters independence: U. S. teenagers work after school and college students must work to pay for much of their educational expense. There is a chasm of values across the Atlantic.
Handle: RePEc:nbr:nberwo:10660
Template-Type: ReDIF-Paper 1.0
Title: Why was Europe Left at the Station When America's Productivity Locomotive Departed?
Classification-JEL: N0; N10
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG PR
Number: 10661
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10661
File-URL: http://www.nber.org/papers/w10661.pdf
File-Format: application/pdf
Publication-Status: published as Gregory, Mary, Wiemer Salverda, and Ronald Schettkat (eds.) Services and Employment: Explaining the U.S.- European Gap. Princeton, NJ: Princeton University Press, 2007.
Abstract: After fifty years of catching up to the United States level of productivity, since 1995 Europe has been falling behind. The growth rate in output per hour over 1995-2003 in Europe was just half that in the United States, and this annual growth shortfall caused the level of European productivity to fall back from 94 percent of the United States level to 85 percent. Fully one-fifth of the European catch-up (from 44 to 94 percent) over the previous half-century has been lost over the period since 1995. Disaggregated studies of industrial sectors suggest that the main difference between Europe and the United States is in ICT-using industries like wholesale and retail trade and in securities trading. The contrast in retailing calls attention to regulatory barriers and land-use regulations in Europe that inhibit the development of the big box retailing formats that have created many of the productivity gains in the United States. For many decades, the United States and Europe have gone in opposite directions in the public policies relevant for metropolitan growth. The United States has promoted highly dispersed low-density metropolitan areas through its policies of building intra-urban highways, starving public transit, providing tax subsidies to home ownership, and allowing local governments to maintain low density by maintaining minimum residential lot sizes. Europeans have chosen different policies that encourage high-density residential living and retail precincts in the central city while inhibiting the exploitation of greenfield suburban and exurban sites suitable for modern big box retail developments. The middle part of the paper draws on recent writing by Phelps: economic dynamism is promoted by policies that promote competition and flexible equity finance and is retarded by corporatist institutions designed to protect incumbent producers and inhibit new entry. European cultural attributes inhibit the development of ambition and independence by teenagers and young adults, in contrast to their encouragement in the United States. While competition, corporatism, and culture may help to explain the differing transatlantic evolution of productivity growth, they reveal institutional flaws in both continents that are inbred and likely to persist. The final section of the paper identifies the roots of the favorable environment for innovation in the United States compared to Europe. Elements include an openly competitive system of private and public universities, government subsidies to universities through peer-reviewed research grants rather than unconditional subsidies for free undergraduate tuition, the world dominance of United States business schools and management consulting firms, strong United States patent protection, a flexible financial infrastructure making available venture capital finance to promising innovations, the benefits of a common language and free internal migration, and a welcoming environment for highly-skilled immigrants.
Handle: RePEc:nbr:nberwo:10661
Template-Type: ReDIF-Paper 1.0
Title: Two Centuries of Economic Growth: Europe Chasing the American Frontier
Classification-JEL: A1; N0
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG DAE PR
Number: 10662
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10662
File-URL: http://www.nber.org/papers/w10662.pdf
File-Format: application/pdf
Abstract: Starting from the same level of productivity and per-capita income as the United States in the mid-nineteenth century, Europe fell behind steadily to a level of barely half in 1950, and then began a rapid catch-up. While Europe's level of productivity has almost converged, its income per person has leveled off at about three-quarters of America's. How could Europe be so productive yet so poor? The simple answer is that hours per person in Europe have fallen drastically in the past 40 years, reflecting long vacations, high unemployment, and low labor force participation, and only about one-third of the Europe-America difference reflects voluntarily chosen leisure. The paper contains a welfare analysis of the difference and argues that conventional national income data overstate the advantage of America over Europe, and that Europe's welfare is about 8 percent below the American level rather than the 25 percent implied by a comparison of measured income per capita. A historical analysis traces Europe's falling behind after 1870 to American political unity, fostering large-scale material-intensive manufacturing and a set of marketing innovations to a set of additional advantages that would not have been possessed even if Europe had hypothetically created a United States of Europe in 1870. After 1913 the U. S. surged further ahead, due to its early exploitation of the great inventions of electricity and the internal combustion engine, while Europe was distracted by wars and interwar economic chaos. After 1950 Europe's catch up was achieved both by exploiting the great inventions 40 years late, and also by the gradual erosion of early American advantages. But after 1995 the gap began to widen again, a development that brings to the forefront fundamental American advantages in fostering and exploiting innovation.
Handle: RePEc:nbr:nberwo:10662
Template-Type: ReDIF-Paper 1.0
Title: The Economic Impacts of Climate Change: Evidence from Agricultural Profits and Random
Classification-JEL: Q50; Q12
Author-Name: Olivier Deschenes
Author-Person: pde468
Author-Name: Michael Greenstone
Author-Person: pgr38
Note: LS PR PE EEE
Number: 10663
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10663
File-URL: http://www.nber.org/papers/w10663.pdf
File-Format: application/pdf
Publication-Status: published as Deschenes, Olivier and M. Greenstone. "The Economic Impacts of Climate Change: Evidence from Agricultural Profits and Random Fluctuations in Weather." American Economic Review 97, 1 (March 2007): 354-385.
Abstract: This paper measures the economic impact of climate change on US agricultural land. We replicate the previous literature's implementation of the hedonic approach and find that it produces estimates of the effect of climate change that are very sensitive to decisions about the appropriate control variables, sample and weighting. We find estimates of the benchmark doubling of greenhouse gases on agricultural land values that range from a decline of $420 billion (1997$) to an increase of $265 billion, or 30% to 19%. Despite its theoretical appeal, the wide variability of these estimates suggests that the hedonic method may be unreliable in this setting. In light of the potential importance of climate change, this paper proposes a new strategy to determine its economic impact. We estimate the effect of weather on farm profits, conditional on county and state by year fixed effects, so the weather parameters are identified from the presumably random variation in weather across counties within states. The results suggest that the benchmark change in climate would reduce the value of agricultural land by $40 to $80 billion, or 3% to 6%, but the null of zero effect cannot be rejected. In contrast to the hedonic approach, these results are robust to changes in specification. Since farmers can engage in a more extensive set of adaptations in response to permanent climate changes, this estimate is likely downwards biased, relative to the preferred long run effect. Together the point estimates and sign of the likely bias contradict the popular view that climate change will have substantial negative welfare consequences for the US agricultural sector.
Handle: RePEc:nbr:nberwo:10663
Template-Type: ReDIF-Paper 1.0
Title: A Model of Forum Shopping, with Special Reference to Standard Setting Organizations
Classification-JEL: D71; D82
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: Jean Tirole
Author-Person: pti33
Note: CF PR
Number: 10664
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10664
File-URL: http://www.nber.org/papers/w10664.pdf
File-Format: application/pdf
Publication-Status: published as Lerner, Josh and Jean Tirole. "A Model of Forum Shopping." American Economic Review 96 (September 2006): 1091-1113.
Abstract: Owners of intellectual property or mere sponsors of an idea (e.g., authors, security issuers, sponsors of standards) often need to persuade potential buyers or adopters of the worth of their property or idea. To this purpose, they often resort to more or less independent certifiers. This paper analyzes the strategic choice of certifiers in rival and non-rival situations in a three-stage game. First, the owner/sponsor selects among potential certifiers. Certifiers differ in their degree of sympathy towards the owner/sponsor's interests relative to their concern for quality delivered to the users. Second, the certifier studies the offering and renders an opinion. The opinion consists of an endorsement (or lack thereof) and, possibly, some further demands for changes involving prices or offering characteristics. Third, the final users adopt or buy as a function of their perceived utility. In this context, the choice of certifier involves a basic trade-off: trying a tougher certifier reduces the probability of a positive opinion, but makes the users more likely to adopt the offering or willing to pay more for it in case of a positive opinion by the certifier. The paper first analyzes the sponsor's choices of certifier and design, as well as social preferences regarding these choices. More attractive standards lead to more friendly certification and fewer concessions to users. Regulation cannot improve on private choices in case of mildly attractive standards, and partial regulation reduces social welfare in case of attractive standards. Furthermore, the sponsor can costlessly delegate the design choice to the certifier when she can have her preferred choice of certifier, but must make more concessions to users than she would want to if the spectrum of certifiers is limited. The paper then extends the basic model to multiple categories of users, to the downstream presence of the sponsor, and to within-user-group network externalities. Finally, it studies strategic forum shopping by sponsors of competing standards.
Handle: RePEc:nbr:nberwo:10664
Template-Type: ReDIF-Paper 1.0
Title: An Empirical Model of Stock Analysts' Recommendations: Market Fundamentals, Conflicts of Interest, and Peer Effects
Classification-JEL: G3; L1
Author-Name: Patrick Bajari
Author-Name: John Krainer
Author-Person: pkr64
Note: IO
Number: 10665
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10665
File-URL: http://www.nber.org/papers/w10665.pdf
File-Format: application/pdf
Abstract: In this paper we develop an empirical model of equity analyst recommendations for firms in the NASDAQ 100 during 1998-2003. In the model we allow recommendations to depend on publicly observed information, measures of an analyst's beliefs about a stock's future earnings, investment banking activity, and peer group effects which determine industry norms. To address the reflection problem, we propose a new approach to identification and estimation of models with peer effects suggested by recent work on estimating games. Our empirical results suggest that recommendations depend most heavily on publicly observable information about the stocks and on industry norms. In most of our specifications, the existence of an investment banking deal does not have a statistically significant relationship with analysts' stock recommendations.
Handle: RePEc:nbr:nberwo:10665
Template-Type: ReDIF-Paper 1.0
Title: Good Principals or Good Peers? Parental Valuation of School Characteristics, Tiebout Equilibrium, and the Effects of Inter-district Competition
Classification-JEL: H7; I2
Author-Name: Jesse Rothstein
Author-Person: pro180
Note: ED CH
Number: 10666
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10666
File-URL: http://www.nber.org/papers/w10666.pdf
File-Format: application/pdf
Publication-Status: published as Rothstein, Jesse M. "Good Principals Or Good Peers? Parental Valuation Of School Characteristics, Tiebout Equilibrium, And The Incentive Effects Of Competition Among Jurisdictions," American Economic Review, 2006, v96(4,Sep), 1333-1350.
Abstract: School choice policies may improve productivity if parents choose well-run schools, but not if parents primarily choose schools for their peer groups. Theoretically, high income families cluster near preferred schools in housing market equilibrium; these need only be effective schools if effectiveness is highly valued. If it is, equilibrium effectiveness sorting' will be more complete in markets offering more residential choice. Although effectiveness is unobserved to the econometrician, I discuss observable implications of effectiveness sorting. I find no evidence of a choice effect on sorting, indicating a small role for effectiveness in preferences and suggesting caution about choice's productivity implications.
Handle: RePEc:nbr:nberwo:10666
Template-Type: ReDIF-Paper 1.0
Title: Neighbors as Negatives: Relative Earnings and Well-Being
Classification-JEL: D6; H0
Author-Name: Erzo F.P. Luttmer
Author-Person: plu27
Note: PE
Number: 10667
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10667
File-URL: http://www.nber.org/papers/w10667.pdf
File-Format: application/pdf
Publication-Status: published as Luttmer, Erzo F. P. "Neighbors As Negatives: Relative Earnings And Well-Being," Quarterly Journal of Economics, 2005, v120(3,Aug), 963-1002.
Abstract: This paper investigates whether individuals feel worse off when others around them earn more. In other words, do people care about relative position and does lagging behind the Joneses' diminish well-being? To answer this question, I match individual-level panel data containing a number of indicators of well-being to information about local average earnings. I find that, controlling for an individual's own income, higher earnings of neighbors are associated with lower levels of self-reported happiness. The data's panel nature and rich set of measures of well-being and behavior indicate that this association is not driven by selection or by changes in the way people define happiness. There is suggestive evidence that the negative effect of increases in neighbors' earnings on own well-being is most likely caused by interpersonal preferences people having utility functions that depend on relative consumption in addition to absolute consumption.
Handle: RePEc:nbr:nberwo:10667
Template-Type: ReDIF-Paper 1.0
Title: Comparative Advantage and Heterogeneous Firms
Classification-JEL: F11; F12
Author-Name: Andrew B. Bernard
Author-Name: Stephen Redding
Author-Person: pre64
Author-Name: Peter K. Schott
Author-Person: psc98
Note: ITI
Number: 10668
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10668
File-URL: http://www.nber.org/papers/w10668.pdf
File-Format: application/pdf
Publication-Status: published as Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2007. "Comparative Advantage and Heterogeneous Firms," Review of Economic Studies, Blackwell Publishing, vol. 74(1), pages 31-66, 01.
Abstract: This paper presents a model of international trade that features heterogeneous firms, relative endowment differences across countries, and consumer taste for variety. The paper demonstrates that firm reactions to trade liberalization generate endogenous Ricardian productivity responses at the industry level that magnify countries' comparative advantage. Focusing on the wide range of firm-level reactions to falling trade costs, the model also shows that, as trade costs fall, firms in comparative advantage industries are more likely to export, that relative firm size and the relative number of firms increases more in comparative advantage industries and that job turnover is higher in comparative advantage industries than in comparative disadvantage industries.
Handle: RePEc:nbr:nberwo:10668
Template-Type: ReDIF-Paper 1.0
Title: Health in an Age of Globalization
Classification-JEL: F1; I1
Author-Name: Angus Deaton
Author-Person: pde30
Note: EFG EH
Number: 10669
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10669
File-URL: http://www.nber.org/papers/w10669.pdf
File-Format: application/pdf
Publication-Status: published as Collins, Susan and Carol Graham (eds.) Brookings Trade Forum. Washington, DC: The Brookings Institution, 2004.
Abstract: Disease has traveled with goods and people since the earliest times. Armed globalization spread disease, to the extent of eliminating entire populations. The geography of disease shaped patterns of colonization and industrialization throughout the now poor world. Many see related threats to public health from current globalization. Multilateral and bilateral trade agreements do not always adequately represent the interests of poor countries, the General Agreement on Trade in Services may restrict the freedom of signatories to shape their own health delivery systems, and it remains unclear whether current arrangements for intellectual property rights are in the interests of citizens of poor countries with HIV/AIDS. However, to the extent that globalization promotes economic growth, population health may benefit, and there has been substantial reductions in poverty and in international inequalities in life-expectancy over the last 50 years. Although there is a strong inverse relationship between the poverty and life-expectancy in levels, gains in life expectancy have been only weakly correlated with growth rates and, in the last decade, the HIV/AIDS epidemic has widened international inequalities in life expectancy. The rapid transmission of health knowledge and therapies from one rich country to another has led to a swift convergence of adult mortality rates among the rich of the world, particularly men. Globalization would do much for global health if transmission from rich to poor countries could be accelerated.
Handle: RePEc:nbr:nberwo:10669
Template-Type: ReDIF-Paper 1.0
Title: Preschool, Day Care, and Afterschool Care: Who's Minding the Kids?
Classification-JEL: I21; I28
Author-Name: David Blau
Author-Person: pbl13
Author-Name: Janet Currie
Author-Person: pcu13
Note: ED LS CH
Number: 10670
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10670
File-URL: http://www.nber.org/papers/w10670.pdf
File-Format: application/pdf
Publication-Status: published as Blau, David & Currie, Janet, 2006. "Pre-School, Day Care, and After-School Care: Who's Minding the Kids?," Handbook of the Economics of Education, Elsevier.
Abstract: The majority of children in the U.S. and many other high-income nations are now cared for many hours per week by people who are neither their parents nor their school teachers. The role of such preschool and out of school care is potentially two-fold: First, child care makes it feasible for parents to be employed. Second, early intervention programs and after school programs aim to enhance child development, particularly among disadvantaged children. Corresponding to this distinction, the literature has two branches. The first focuses on the market for child care and analyzes factors affecting the supply, demand, and quality of care. The second focuses on child outcomes and asks whether certain types of programs can ameliorate the effects of early disadvantage. The primary goal of this review is to bring the two literatures together in order to suggest ways that both may be enhanced. Accordingly, we provide an overview of the number of children being cared for in different sorts of arrangements; describe theory and evidence about the nature of the private child care market; and discuss theory and evidence about government intervention in the market for child care. Our summary suggests that additional research is necessary to highlight the ways that government programs and market provided child care interact with each other.
Handle: RePEc:nbr:nberwo:10670
Template-Type: ReDIF-Paper 1.0
Title: Large Blocks of Stock: Prevalence, Size, and Measurement
Classification-JEL: G3
Author-Name: Jennifer Dlugosz
Author-Name: Rudiger Fahlenbrach
Author-Name: Paul Gompers
Author-Person: pgo301
Author-Name: Andrew Metrick
Author-Person: pme99
Note: CF AP
Number: 10671
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10671
File-URL: http://www.nber.org/papers/w10671.pdf
File-Format: application/pdf
Publication-Status: published as Dlugosz, Jennifer & Fahlenbrach, Rudiger & Gompers, Paul & Metrick, Andrew, 2006. "Large blocks of stock: Prevalence, size, and measurement," Journal of Corporate Finance, Elsevier, vol. 12(3), pages 594-618, June.
Abstract: Large blocks of stock play an important role in many studies of corporate governance and finance. Despite this important role, there is no standardized data set for these blocks, and the best available data source, Compact Disclosure, has many mistakes and biases. In this paper, we document these mistakes and show how to fix them. The mistakes and bias tend to increase with the level of reported blockholdings: in firms where Compact Disclosure reports that aggregate blockholdings are greater than 50 percent, these aggregate holdings are incorrect more than half the time and average holdings for these incorrect firms are overstated by almost 30 percentage points. We also demonstrate that our fixes are economically and statistically significant in an analysis of the relationship between firm value and outside blockholders.
Handle: RePEc:nbr:nberwo:10671
Template-Type: ReDIF-Paper 1.0
Title: What Does the Yield Curve Tell us about GDP Growth?
Classification-JEL: E4; E5
Author-Name: Andrew Ang
Author-Person: pan374
Author-Name: Monika Piazzesi
Author-Person: ppi37
Author-Name: Min Wei
Note: EFG ME AP
Number: 10672
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10672
File-URL: http://www.nber.org/papers/w10672.pdf
File-Format: application/pdf
Publication-Status: published as Ang, Andrew, Monika Piazzesi, and Min Wei. "What Does The Yield Curve Tell Us About GDP Growth?" Journal of Econometrics 131(1-2): 359-403, March-April 2006
Publication-Status: published as Andrew Ang & Monika Piazzesi & Min Wei, 2003. "What does the yield curve tell us about GDP growth?," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
Abstract: A lot, including a few things you may not expect. Previous studies find that the term spread forecasts GDP but these regressions are unconstrained and do not model regressor endogeneity. We build a dynamic model for GDP growth and yields that completely characterizes expectations of GDP. The model does not permit arbitrage. Contrary to previous findings, we predict that the short rate has more predictive power than any term spread. We confirm this finding by forecasting GDP out-of-sample. The model also recommends the use of lagged GDP and the longest maturity yield to measure slope. Greater efficiency enables the yield-curve model to produce superior out-of-sample GDP forecasts than unconstrained OLS regressions at all horizons.
Handle: RePEc:nbr:nberwo:10672
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Regime Durability and Performance in Developing Countries Versus Advanced Economies
Classification-JEL: F4
Author-Name: Aasim M. Husain
Author-Name: Ashoka Mody
Author-Name: Kenneth S. Rogoff
Author-Person: pro164
Note: EFG IFM ME
Number: 10673
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10673
File-URL: http://www.nber.org/papers/w10673.pdf
File-Format: application/pdf
Publication-Status: published as Husain, Aasim M., Ashoka Mody and Kenneth S. Rogoff. "Exchange Rate Regime Durability And Performance In Developing Versus Advanced Economies," Journal of Monetary Economics, 2005, v52(1,Jan), 35-64.
Abstract: Drawing on new data and advances in exchange rate regimes' classification, we find that countries appear to benefit by having increasingly flexible exchange rate systems as they become richer and more financially developed. For developing countries with little exposure to international capital markets, pegs are notable for their durability and relatively low inflation. In contrast, for advanced economies, floats are distinctly more durable and also appear to be associated with higher growth. For emerging markets, our results parallel the Baxter and Stockman classic exchange regime neutrality result, though pegs are the least durable and expose countries to higher risk of crisis.
Handle: RePEc:nbr:nberwo:10673
Template-Type: ReDIF-Paper 1.0
Title: Corruption in Indonesia
Classification-JEL: D2; D7
Author-Name: J. Vernon Henderson
Author-Person: phe30
Author-Name: Ari Kuncoro
Author-Person: pku258
Note: PE
Number: 10674
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10674
File-URL: http://www.nber.org/papers/w10674.pdf
File-Format: application/pdf
Abstract: Bribes by firms in Indonesia arise principally from regulations --licenses and levies --imposed by local government officials. Regulations generate direct revenues (fees) plus indirect revenues in the form of bribes. The expected value of the latter is capitalized into lower salaries needed by localities to compensate public officials. Localities in Indonesia are hampered by insufficient revenues from formal tax and transfer sources to pay competitive salaries plus fund demanded' levels of public services, because local tax rates are capped by the center and inter-governmental transfers are limited. Thus the direct and indirect revenues from local regulations are critical to local finances. The paper models and estimates the key aspects of corruption -- the relationship between bribes, time spent with local officials, and different forms of regulation. It models how inter-jurisdictional competition for firms limits the extent of local regulation and how greater sources of tax or inter-governmental revenues reduce the need for regulation and corruption. The paper estimates a large reduction in regulation in better funded localities. The findings are directly relevant to Indonesia where corruption is high and the country is in the throes of major decentralization and local democratization efforts.
Handle: RePEc:nbr:nberwo:10674
Template-Type: ReDIF-Paper 1.0
Title: Portfolio Concentration and the Performance of Individual Investors
Classification-JEL: D82; G11
Author-Name: Zoran Ivkovich
Author-Name: Clemens Sialm
Author-Person: psi59
Author-Name: Scott Weisbenner
Note: AP
Number: 10675
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10675
File-URL: http://www.nber.org/papers/w10675.pdf
File-Format: application/pdf
Publication-Status: published as Ivkovi?, Zoran & Sialm, Clemens & Weisbenner, Scott, 2008. "Portfolio Concentration and the Performance of Individual Investors," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 43(03), pages 613-655, September.
Abstract: Using data on the investments a large number of individual investors made through a discount broker from 1991 to 1996, we find that the stock trades by households with concentrated portfolios outperform those with diversified portfolios. While in general the stocks bought by individual investors significantly underperform the stocks they sell, the reverse is true for households whose holdings are concentrated in a few stocks. The excess return of concentrated relative to diversified portfolios is stronger for households with large account balances as well as for stocks not included in the S&P 500 Index and local stocks, potentially reflecting concentrated investors' successful exploitation of information asymmetries. This finding is very robust to alternative concentration measures and regression specifications, and to alternative explanations such as differences across concentrated and diversified investors in the portfolio turnover and access to inside information, suggesting that some of these concentrated households have superior information processing skills. Moreover, controlling for a household's average investment ability, the household's trades perform better as the household's portfolio includes fewer stocks. However, while concentrated household portfolios on average outperform diversified ones, their levels of total risk are larger and the Sharpe ratios of their stock portfolios are lower.
Handle: RePEc:nbr:nberwo:10675
Template-Type: ReDIF-Paper 1.0
Title: The X Tax in the World Economy
Classification-JEL: H20; H25
Author-Name: David F. Bradford
Note: ITI PE
Number: 10676
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10676
File-URL: http://www.nber.org/papers/w10676.pdf
File-Format: application/pdf
Abstract: This paper considers the treatment of multinational business in the system known as an X Tax. The focus is on the choice between origin and destination treatments of transborder transactions. The destination-principle approach sidesteps the transferpricing problem. It remains in the origin-principle approach, which, however, presents fewer challenges of monitoring imports, obviates the tourism problem' whereby people can reduce their taxes by consuming in a low-tax jurisdiction and avoids transition effects associated with introduction of the tax and subsequent tax rate changes. The paper suggests special rules for transborder transactions between related parties to deal with the transfer-pricing problem.
Handle: RePEc:nbr:nberwo:10676
Template-Type: ReDIF-Paper 1.0
Title: Detecting Medicare Abuse
Classification-JEL: I1; K0
Author-Name: David Becker
Author-Name: Daniel Kessler
Author-Name: Mark McClellan
Note: EH
Number: 10677
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10677
File-URL: http://www.nber.org/papers/w10677.pdf
File-Format: application/pdf
Publication-Status: published as Becker, David, Daniel Kessler and Mark McClellan. "Detecting Medicare Abuse," Journal of Health Economics, 2005, v24(1,Jan), 189-210.
Abstract: This paper identifies which types of patients and hospitals have abusive Medicare billings that are responsive to law enforcement. For a 20 percent random sample of elderly Medicare beneficiaries hospitalized from 1994-98 with one or more of six illnesses that are prone to abuse, we obtain longitudinal claims data linked with Social Security death records, hospital characteristics, and state/year-level anti-fraud enforcement efforts. We show that increased enforcement leads certain types of types of patients and hospitals to have lower billings, without adverse consequences for patients' health outcomes.
Handle: RePEc:nbr:nberwo:10677
Template-Type: ReDIF-Paper 1.0
Title: Do Gender Stereotypes Reduce Girls' Human Capital Outcomes? Evidence from a Natural Experiment
Classification-JEL: I21; J24
Author-Name: Victor Lavy
Author-Person: pla111
Note: ED LS CH
Number: 10678
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10678
File-URL: http://www.nber.org/papers/w10678.pdf
File-Format: application/pdf
Publication-Status: published as Lavy, Victor, 2008. "Do gender stereotypes reduce girls' or boys' human capital outcomes? Evidence from a natural experiment," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2083-2105, October.
Abstract: Schools and teachers are often said to be a source of stereotypes that harm girls. This paper tests for the existence of gender stereotyping and discrimination by public high-school teachers in Israel. It uses a natural experiment based on blind and non-blind scores that students receive on matriculation exams in their senior year. Using data on test results in several subjects in the humanities and sciences, I found, contrary to expectations, that male students face discrimination in each subject. These biases widen the female male achievement gap because girls outperform boys in all subjects, except English, and at all levels of the curriculum. The bias is evident in all segments of the ability and performance distribution and is robust to various individual controls. Several explanations based on differential behavior between boys and girls are not supported empirically. However, the size of the bias is very sensitive to teachers' characteristics, suggesting that the bias against male students is the result of teachers', and not students', behavior.
Handle: RePEc:nbr:nberwo:10678
Template-Type: ReDIF-Paper 1.0
Title: Credible Commitment to Optimal Escape from a Liquidity Trap: The Role of the Balance Sheet of an Independent Central Bank
Classification-JEL: E52; F31
Author-Name: Olivier Jeanne
Author-Person: pje59
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: EFG ME
Number: 10679
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10679
File-URL: http://www.nber.org/papers/w10679.pdf
File-Format: application/pdf
Publication-Status: published as Olivier Jeanne & Lars E. O. Svensson, 2007. "Credible Commitment to Optimal Escape from a Liquidity Trap: The Role of the Balance Sheet of an Independent Central Bank," American Economic Review, American Economic Association, vol. 97(1), pages 474-490, March.
Abstract: An independent central bank can manage its balance sheet and its capital so as to commit itself to a depreciation of its currency and an exchange-rate peg. This way, the central bank can implement the optimal escape from a liquidity trap, which involves a commitment to higher future inflation. This commitment mechanism works even though, realistically, the central bank cannot commit itself to a particular future money supply. It supports the feasibility of Svensson's Foolproof Way to escape from a liquidity trap.
Handle: RePEc:nbr:nberwo:10679
Template-Type: ReDIF-Paper 1.0
Title: Refugees, Asylum Seekers and Policy in Europe
Classification-JEL: F22; J1
Author-Name: Timothy J. Hatton
Author-Person: pha305
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI LS
Number: 10680
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10680
File-URL: http://www.nber.org/papers/w10680.pdf
File-Format: application/pdf
Publication-Status: published as F. Foders and R. J. Langhammer (eds.), LABOR MOBILITY AND THE WORLD ECONOMY (Heidelberg, Germany: Springer, 2006
Abstract: The number of refugees worldwide is now 12 million, up from 3 million in the early 1970s. And the number seeking asylum in the developed world increased tenfold, from about 50,000 per annum to half a million over the same period. Governments and international agencies have grappled with the twin problems of providing adequate humanitarian assistance in the Third World and avoiding floods of unwanted asylum seekers arriving on the doorsteps of the First World. This is an issue that is long on rhetoric, as newspaper reports testify, but surprisingly short on economic analysis. This paper draws on the recent literature, and ongoing research, to address a series of questions that are relevant to the debate. First, we examine the causes of refugee displacements and asylum flows, focusing on the effects of conflict, political upheaval and economic incentives to migrate. Second, we examine the evolution of policies towards asylum seekers and the effects of those policies, particularly in Europe. Finally, we ask whether greater international coordination could produce better outcomes for refugee-receiving countries and for the refugees themselves.
Handle: RePEc:nbr:nberwo:10680
Template-Type: ReDIF-Paper 1.0
Title: Federal Government Debt and Interest Rates
Classification-JEL: E0; H0
Author-Name: Eric M. Engen
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Note: CF EFG ME PE
Number: 10681
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10681
File-URL: http://www.nber.org/papers/w10681.pdf
File-Format: application/pdf
Publication-Status: published as Gertler, Mark and Kenneth Rogoff (eds.) NBER Macroeconomics Annual 2004, Volume 19. Cambridge and London: MIT Press, 2005.
Publication-Status: published as Federal Government Debt and Interest Rates, Eric M. Engen, R. Glenn Hubbard. in NBER Macroeconomics Annual 2004, Volume 19, Gertler and Rogoff. 2005
Abstract: Does government debt affect interest rates? Despite a substantial body of empirical analysis, the answer based on the past two decades of research is mixed. While many studies suggest, at most, a single-digit rise in the interest rate when government debt increases by one percent of GDP, others estimate either much larger effects or find no effect. Comparing results across studies is complicated by differences in economic models, definitions of econometric approaches, and sources of data. Using a standard set of data and a simple analytical framework, we reconsider and add to empirical evidence on the effect of federal government debt and interest rates. We begin by deriving analytically the effect of government debt on the real interest rate and find that an increase in government debt equivalent to one percent of GDP would be predicted to increase the real interest rate by about two to three basis points. While some existing studies estimate effects in this range, others find larger effects. In almost all cases, these larger estimates come from specifications relating federal deficits (as opposed to debt) and the level of interest rates or from specifications not controlling adequately for macroeconomic influences on interest rates that might be correlated with deficits. We present our own empirical analysis in two parts. First, we examine a variety of conventional reduced-form specifications linking interest rates and government debt and other variables. In particular, we provide estimates for three types of specifications to permit comparisons among different approaches taken in previous research; we estimate the effect of: an expected, or projected, measure of federal government debt on a forward-looking measure of the real interest rate; an expected, or projected, measure of federal government debt on a current measure of the real interest rate; and a current measure of federal government debt on a current measure of the real interest rate. Most of the statistically significant estimated effects are consistent with the prediction of the simple analytical calculation. Second, we provide evidence using vector autoregression analysis. In general, these results are similar to those found in our reduced-form econometric analysis and consistent with the analytical calculations. Taken together, the bulk of our empirical results suggest that an increase in federal government debt equivalent to one percent of GDP, all else equal, would be expected to increase the long-term real rate of interest by about three basis points, though one specification suggests a larger impact, while some estimates are not statistically significantly different from zero. By presenting a range of results with the same data, we illustrate the dependence of estimation on specification and definition differences.
Handle: RePEc:nbr:nberwo:10681
Template-Type: ReDIF-Paper 1.0
Title: Welfare Migration: Is the Net Fiscal Burden a Good Measure of Its Economic Impact on the Welfare of the Native Born Population?
Classification-JEL: F2; H3
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Note: LS PE
Number: 10682
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10682
File-URL: http://www.nber.org/papers/w10682.pdf
File-Format: application/pdf
Publication-Status: published as Assaf Razin & Efraim Sadka, 2004. "Welfare Migration: Is the Net Fiscal Burden a Good Measure of its Economic Impact on the Welfare of the Native-Born Population?," CESifo Economic Studies, CESifo, vol. 50(4), pages 709-716.
Abstract: Migration of young workers (as distinct from retirees), even when driven in by the generosity of the welfare state, slows down the trend of increasing dependency ratio. But, even though low-skill migration improves the dependency ratio, it nevertheless burdens the welfare state. Recent studies by Smith and Edmonston (1977), and Sinn et al (2003) comprehensively estimate the fiscal burden that low-skill migration imposes on the fiscal system. However an important message of this paper is that in an infinite-horizon set-up, one cannot fully grasp the implications of migration for the welfare state, just by looking at the net fiscal burden that migrants impose on the fiscal system. In an infinite-horizon, overlapping generations economy, this net burden, could change to net gain to the native born population.
Handle: RePEc:nbr:nberwo:10682
Template-Type: ReDIF-Paper 1.0
Title: Inequality Change in China and (Hukou) Labour Mobility Restrictions
Classification-JEL: J61; R23
Author-Name: John Whalley
Author-Person: pwh8
Author-Name: Shunming Zhang
Note: ITI
Number: 10683
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10683
File-URL: http://www.nber.org/papers/w10683.pdf
File-Format: application/pdf
Abstract: We analyze the Hukou system of permanent registration in China which many believe has supported growing relative inequality over the last 20 years by restraining labour migration both between the countryside and urban areas and between regions and cities. Our aim is to inject economic modelling into the debate on sources of inequality in China which thus far has been largely statistical. We first use a model with homogeneous labour in which wage inequality across various geographical divides in China is supported solely by quantity based migration restrictions (urban -- rural areas, rich -- poor regions, eastern coastal -- central and western (noncoastal) zones, eastern and central -- western development zones, eastern -- central -- western zones, more disaggregated 6 regional classifications, and an all 31 provincal classification). We calibrate this model to base case data and when we remove migration restrictions all wage and most income inequality disappears. Results from this model structure point to a significant role for Hukou restrictions in supporting inequality in China, and show how economic rather than statistical modelling can be used to decompose inequality change. We then modify the model to capture labour efficiency differences across regions, calibrating the modified model to estimates of both national and regional Gini coefficients. Removal of migration barriers is again inequality improving but now less so. Finally, we present a further model extension in which urban house price rises retard rural - urban migration. The impacts of removing of migration restrictions on inequality are smaller, but are still significant.
Handle: RePEc:nbr:nberwo:10683
Template-Type: ReDIF-Paper 1.0
Title: What is Discrimination? Gender in the American Economic Association
Classification-JEL: J71; A11
Author-Name: Stephen Donald
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Note: LS
Number: 10684
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10684
File-URL: http://www.nber.org/papers/w10684.pdf
File-Format: application/pdf
Publication-Status: published as "What Is Discrimination? Gender in the American Economic Association, 1935-2004" Donald, Stephen G.; Hamermesh, Daniel S.; American Economic Review, September 2006, v. 96, iss. 4, pp. 1283-92
Abstract: Measuring market discrimination is extremely difficult except in the increasingly rare case where physical output measures allow direct measurement of productivity. We illustrate this point with evidence on elections to offices of the American Economic Association. Using a new technique to infer the determinants of the chances of observing a particular outcome when there are K choices out of N possibilities, we find that female candidates have a much better than random chance of victory. This advantage can be interpreted either as reverse discrimination or as reflecting voters' beliefs that women are more productive than observationally identical men in this activity. If the former this finding could be explained by the behavior of an unchanging median voter whose gender preferences were not satisfied by the suppliers of candidates for office; but there was a clear structural change in voting behavior in the mid-1970s. The results suggest that it is not generally possible to claim that differences in rewards for different groups measure the extent of discrimination or even its direction.
Handle: RePEc:nbr:nberwo:10684
Template-Type: ReDIF-Paper 1.0
Title: Can Mutual Fund Managers Pick Stocks? Evidence from the Trades Prior to Earnings Announcements
Classification-JEL: G2
Author-Name: Malcolm Baker
Author-Person: pba735
Author-Name: Lubomir Litov
Author-Name: Jessica A. Wachter
Author-Person: pwa346
Author-Name: Jeffrey Wurgler
Author-Person: pwu8
Note: CF AP
Number: 10685
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10685
File-URL: http://www.nber.org/papers/w10685.pdf
File-Format: application/pdf
Publication-Status: published as Baker, Malcolm, Lubomir Litov, Jessica A. Wachter, and Jeffrey Wurgler, "Can mutual fund managers pick stocks? Evidence from their trades prior to earnings announcements", Journal of Financial and Quantitative Analysis, Volume 45 - Issue 05. (2010)
Abstract: We test whether fund managers have stock-picking skill by comparing their holdings and trades prior to earnings announcements with the returns realized at those events. This approach largely avoids the joint-hypothesis problem with long-horizon studies of fund performance. Consistent with skilled trading, we find that, on average, stocks that funds buy earn significantly higher returns at subsequent earnings announcements than stocks that they sell. Funds display persistence in our event return-based metrics, and those that do well tend to have a growth objective, large size, high turnover, and use incentive fees to motivate managers.
Handle: RePEc:nbr:nberwo:10685
Template-Type: ReDIF-Paper 1.0
Title: The Determinants of the Global Digital Divide: A Cross-Country Analysis of Computer and Internet Penetration
Classification-JEL: O30; L96
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: Robert Fairlie
Author-Person: pfa338
Note: IFM ITI
Number: 10686
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10686
File-URL: http://www.nber.org/papers/w10686.pdf
File-Format: application/pdf
Publication-Status: published as Menzie D. Chinn & Robert W. Fairlie, 2007. "The determinants of the global digital divide: a cross-country analysis of computer and internet penetration," Oxford Economic Papers, Oxford University Press, vol. 59(1), pages 16-44, January.
Abstract: To identify the determinants of cross-country disparities in personal computer and Internet penetration, we examine a panel of 161 countries over the 1999-2001 period. Our candidate variables include economic variables (income per capita, years of schooling, illiteracy, trade openness), demographic variables (youth and aged dependency ratios, urbanization rate), infrastructure indicators (telephone density, electricity consumption), telecommunications pricing measures, and regulatory quality. With the exception of trade openness and the telecom pricing measures, these variables enter in as statistically significant in most specifications for computer use. A similar pattern holds true for Internet use, except that telephone density and aged dependency matter less. The global digital divide is mainly but by no means entirely accounted for by income differentials. For computers, telephone density and regulatory quality are of second and third importance, while for the Internet, this ordering is reversed. The region-specific explanations for large disparities in computer and Internet penetration are generally very similar. Our results suggest that public investment in human capital, telecommunications infrastructure, and the regulatory infrastructure can mitigate the gap in PC and Internet use.
Handle: RePEc:nbr:nberwo:10686
Template-Type: ReDIF-Paper 1.0
Title: Law and Firms' Access to Finance
Classification-JEL: K4; G3
Author-Name: Thorsten Beck
Author-Person: pbe266
Author-Name: Asli Demirguc-Kunt
Author-Person: pde226
Author-Name: Ross Levine
Author-Person: ple61
Note: IFM
Number: 10687
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10687
File-URL: http://www.nber.org/papers/w10687.pdf
File-Format: application/pdf
Publication-Status: published as Thorsten Beck & Asli Demirguc-Kunt, 2005. "Law and Firms' Access to Finance," American Law and Economics Review, Oxford University Press, vol. 7(1), pages 211-252.
Abstract: This paper contributes to the literature on how a country's legal origin influences the operation of its financial system by using firm-level survey data on the obstacles that firms face in raising external finance. The paper assesses two channels through which legal origin may influence the financial system. It finds that the adaptability of a country's legal system is more important for explaining the obstacles that firms face in accessing external finance than the political independence of the judiciary.
Handle: RePEc:nbr:nberwo:10687
Template-Type: ReDIF-Paper 1.0
Title: Demand for Illicit Drugs by Pregnant Women
Classification-JEL: I18; K42
Author-Name: Hope Corman
Author-Name: Kelly Noonan
Author-Name: Nancy E. Reichman
Author-Name: Dhaval Dave
Author-Person: pda245
Note: EH CH
Number: 10688
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10688
File-URL: http://www.nber.org/papers/w10688.pdf
File-Format: application/pdf
Publication-Status: published as Lindgren, Bjorn and Michael Grossman (eds.) Advances in Health Economics, and Health Services Research 16, Economics of Substance Abuse. JAI Press, 2005.
Abstract: We use survey data that have been linked to medical records data and city-level drug prices to estimate the demand for illicit drugs among pregnant women. The prevalence of prenatal drug use based on post partum interviews was much lower than that based on evidence in the mothers' and babies' medical records. We found that a $10 increase in the retail price of a gram of pure cocaine decreases illicit drug use by 12 to 15%. The estimated price effects for heroin are lower than for cocaine and are less robust across alternative model specifications. This study provides the first estimates of the effects of drug prices on prenatal drug use and yields important information about the potential of drug enforcement as a tool for improving birth outcomes.
Handle: RePEc:nbr:nberwo:10688
Template-Type: ReDIF-Paper 1.0
Title: Weak and Semi-Strong Form Stock Return Predictability, Revisited
Classification-JEL: G0; G1
Author-Name: Wayne E. Ferson
Author-Person: pfe32
Author-Name: Andrea Heuson
Author-Name: Tie Su
Note: AP
Number: 10689
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10689
File-URL: http://www.nber.org/papers/w10689.pdf
File-Format: application/pdf
Publication-Status: published as Ferson, Wayne E., Andrea Heuson and Tie Su. "Weak and Semi-strong Form Stock Return Predictability Revisited." Management Science 51 (2005): 1582-1592.
Abstract: This paper makes indirect inference about the time-variation in expected stock returns by comparing unconditional sample variances to estimates of expected conditional variances. The evidence reveals more predictability as more information is used, and no evidence that predictability has diminished in recent years. Semi-strong form evidence suggests that time-variation in expected returns remains economically important.
Handle: RePEc:nbr:nberwo:10689
Template-Type: ReDIF-Paper 1.0
Title: Corporate Tax Evasion with Agency Costs
Classification-JEL: H25; H26
Author-Name: Keith J. Crocker
Author-Name: Joel Slemrod
Author-Person: psl10
Note: PE
Number: 10690
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10690
File-URL: http://www.nber.org/papers/w10690.pdf
File-Format: application/pdf
Publication-Status: published as Crocker, Keith J. and Joel Slemrod. "Corporate Tax Evasion With Agency Costs," Journal of Public Economics, 2005, v89(9-10,Sep), 1593-1610.
Abstract: This paper examines corporate tax evasion in the context of the contractual relationship between the shareholders of a firm and a tax manager who possesses private information regarding the extent of legally permissible reductions in taxable income, and who may also undertake illegal tax evasion. Using a costly state falsification framework, we characterize formally the optimal incentive compensation contract for the tax manager and, in particular, how the form of that contract changes in response to alternative enforcement policies imposed by the taxing authority. The optimal contract may adjust to offset, at least partially, the effect of sanctions against illegal evasion, and we find a new and policy-relevant non-equivalence result: penalties imposed on the tax manager are more effective in reducing evasion than are those imposed on shareholders.
Handle: RePEc:nbr:nberwo:10690
Template-Type: ReDIF-Paper 1.0
Title: Maternal Employment and Adolescent Development
Classification-JEL: I12; J13
Author-Name: Christopher J. Ruhm
Author-Person: pru7
Note: EH CH
Number: 10691
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10691
File-URL: http://www.nber.org/papers/w10691.pdf
File-Format: application/pdf
Publication-Status: published as Ruhm, Christopher J., 2008. "Maternal employment and adolescent development," Labour Economics, Elsevier, vol. 15(5), pages 958-983, October.
Abstract: This study investigates how maternal employment is related to the outcomes of 10 and 11 year olds after controlling for a wide variety of child, mother and family background characteristics. The results suggest that the mother's labor supply has deleterious effects on cognitive development, obesity and possibly risky behaviors such as smoking or drinking, while reducing behavior problems. These negative consequences are quite small for the average child, however, and usually restricted to relatively long maternal work hours. Less intensive employment is often associated with favorable outcomes and labor supply after the first three years typically has little effect. By contrast, large adverse consequences are frequently obtained for advantaged' adolescents, with negative impacts predicted even for limited amounts of maternal labor supply and for work during the child's fourth through ninth year.
Handle: RePEc:nbr:nberwo:10691
Template-Type: ReDIF-Paper 1.0
Title: Corporate Governance, Economic Entrenchment and Growth
Classification-JEL: G0; O1
Author-Name: Randall Morck
Author-Person: pmo146
Author-Name: Daniel Wolfenzon
Author-Name: Bernard Yeung
Note: CF
Number: 10692
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10692
File-URL: http://www.nber.org/papers/w10692.pdf
File-Format: application/pdf
Publication-Status: published as Morck, Randall, Daniel Wolfenzon and Bernard Yeung. "Corporate Governance, Economic Entrenchment, and Growth," Journal of Economic Literature, 2005, v43(3,Sep), 655-720.
Abstract: Around the world, large corporations usually have controlling owners, who are usually very wealthy families. Outside the U.S. and the U.K., pyramidal control structures, cross shareholding and super voting rights are common. Using these devices, a family can control corporations without making a commensurate capital investment. In many countries, such families end up controlling considerable proportions of their countries'' economies. Three points emerge. First, at the firm level, these ownership structures vest dominant control rights with families who often have little real capital invested creating agency and entrenchment problem simultaneously. In addition, controlling shareholders can divert corporate resources for private benefits using transactions within the pyramidal group. The result is a poor utilization of resources. At the economy level, extensive control of corporate assets by a few families distorts capital allocation and reduces the rate of innovation. The result is an economy-wide misallocation of resources, and slower economic growth. Second, political influence is plausibly related to what one controls, rather than what one owns. The controlling owners of pyramids thus have greatly amplified political influence relative to their actual wealth. They appear to influence the development of both public policy, such as property rights protection and enforcement, and institutions like capital markets. We denote this phenomenon economic entrenchment. Third, we conceive of a relationship between the distribution of corporate control and institutional development that generates and preserves economic entrenchment as one equilibrium; but not the only one. Based on the literature, we identify key determinants of economic entrenchment. We also identify many gaps where further work exploring the political economy importance of the distribution of corporate control is needed.
Handle: RePEc:nbr:nberwo:10692
Template-Type: ReDIF-Paper 1.0
Title: The Fiscal Burden of Korean Reunification: A Generational Accounting Approach
Classification-JEL: H22; H55
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Young Jun Chun
Author-Name: Ilho Yoo
Note: PE
Number: 10693
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10693
File-URL: http://www.nber.org/papers/w10693.pdf
File-Format: application/pdf
Publication-Status: published as Alan J. Auerbach & Young Jun Chun & Ilho Yoo, 2005. "The Fiscal Burden of Korean Reunification: A Generational Accounting Approach," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(1), pages 62-, March.
Abstract: This paper uses Generational Accounting to assess the fiscal impacts of Korean reunification. Our findings suggest that early reunification will result in a large increase in the fiscal burden for most current and future generations of South Koreans. The Korean reunification's fiscal impact appears much larger than that of German reunification, due to a wider gap in productivity between the two Koreas and North Korea's much larger share of the unified country's population. The projected large-scale fiscal burden on South Korea is attributable primarily to the rapid increase in social welfare expenditure for North Korean residents, rather than to the direct reconstruction cost of the North Korean economic system after the disintegration of its old economic regime.
Handle: RePEc:nbr:nberwo:10693
Template-Type: ReDIF-Paper 1.0
Title: Budget Windows, Sunsets, and Fiscal Control
Classification-JEL: H62; H50
Author-Name: Alan J. Auerbach
Author-Person: pau33
Note: EFG PE
Number: 10694
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10694
File-URL: http://www.nber.org/papers/w10694.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. "Budget Windows, Sunsets, And Fiscal Control," Journal of Public Economics, 2006, v90(1-2,Jan), 87-100.
Abstract: Governments around the world have struggled to find the right method of controlling public spending and budget deficits. In recent years, the United States has evaluated policy changes using a ten-year budget window. The use of a multi-year window is intended to capture the future effects of policies, the notion being that a budget window that is too short permits the shifting of costs beyond the window's endpoint. But a budget window that is too long includes future years for which current legislation is essentially meaningless, and gives credit to fiscal burdens shifted to those whom the budget rules are supposed to protect. This suggests that there may be an "optimal"budget window, and seeking to understand its properties is one of this paper's main objectives. Another objective is to understand a phenomenon that has grown in importance in U.S. legislation -- the "sunset." This paper argues that, with an appropriately designed budget window, the incentive to use sunsets to avoid budget restrictions will evaporate, so that temporary provisions can be taken at face value. The analysis also has implications for how to account for long-term term budget commitments.
Handle: RePEc:nbr:nberwo:10694
Template-Type: ReDIF-Paper 1.0
Title: Do Tenured and Tenure-Track Faculty Matter?
Classification-JEL: I2; J0
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Author-Name: Liang Zhang
Note: LS
Number: 10695
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10695
File-URL: http://www.nber.org/papers/w10695.pdf
File-Format: application/pdf
Publication-Status: published as Ehrenberg, Ronald G. and Liang Zhang. "Do Tenured and Tenure-Track Faculty Matter?," Journal of Human Resources, 2005, v40(3,Summer), 647-659.
Abstract: During the last two decades, there has been a significant growth in the share of faculty members at American colleges and universities that are employed in part-time or in full-time non tenure-track positions. Our study is the first to address whether the increased usage of such faculty adversely affects undergraduate students' graduation rates. Using institutional level panel data from the College Board and other sources, our econometric analyses suggest that the increased usage of these faculty types does adversely affect graduation rates of students at 4-year colleges, with the largest impact on students being felt at the public masters-level institutions.
Handle: RePEc:nbr:nberwo:10695
Template-Type: ReDIF-Paper 1.0
Title: Fixed Exchange Rates and Trade
Classification-JEL: F3
Author-Name: Michael W. Klein
Author-Person: pkl9
Author-Name: Jay C. Shambaugh
Note: IFM ITI
Number: 10696
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10696
File-URL: http://www.nber.org/papers/w10696.pdf
File-Format: application/pdf
Publication-Status: published as Klein, Michael W. & Shambaugh, Jay C., 2006. "Fixed exchange rates and trade," Journal of International Economics, Elsevier, vol. 70(2), pages 359-383, December.
Abstract: A classic argument for a fixed exchange rate is its promotion of trade. Empirical support for this, however, is mixed. While one branch of research consistently shows a small negative effect of exchange rate volatility on trade, another, more recent, branch presents evidence of a large positive impact of currency unions on trade. This paper helps resolve this disconnect. Our results, which use a new data-based classification of fixed exchange rate regimes, show a large, significant effect of a fixed exchange rate on bilateral trade between a base country and a country that pegs to it. Furthermore, the web of fixed exchange rates created when countries link to a common base also promotes trade, but only when these countries are part of a wider system, as during the Bretton Woods period. These results suggest an economically relevant role for exchange rate regimes in trade determination since a significant amount of world trade is conducted between countries with fixed exchange rates.
Handle: RePEc:nbr:nberwo:10696
Template-Type: ReDIF-Paper 1.0
Title: Overseas Assembly and Country Sourcing Choices
Classification-JEL: F1
Author-Name: Deborah L. Swenson
Author-Person: psw14
Note: ITI
Number: 10697
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10697
File-URL: http://www.nber.org/papers/w10697.pdf
File-Format: application/pdf
Publication-Status: published as Swenson, Deborah L. "Overseas Assembly And Country Sourcing Choices," Journal of International Economics, 2005, v66(1,May), 107-130.
Abstract: This paper studies the cross-country pattern of U.S. overseas assembly activities between 1980 and 2000 to examine how outsourcing decisions are affected by changes in country and competitor costs. A number of interesting regularities emerge. When a country's costs rise, the share of U.S. overseas assembly activities in that location decline. Conversely, a country's share of U.S. overseas assembly activities grows when competitor country costs increase. While own and competitor country costs affect overseas assembly in all countries, the magnitude of these effects is larger for developing countries than it is for developed countries. In many cases, the measured responses to cost changes appear to correspond with outsourcing theories that are based on search and customization costs.
Handle: RePEc:nbr:nberwo:10697
Template-Type: ReDIF-Paper 1.0
Title: Pairwise Kidney Exchange
Classification-JEL: C7
Author-Name: Alvin E. Roth
Author-Person: pro40
Author-Name: Tayfun Sonmez
Author-Name: M. Utku Unver
Author-Person: pun2
Note: EH
Number: 10698
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10698
File-URL: http://www.nber.org/papers/w10698.pdf
File-Format: application/pdf
Publication-Status: published as Roth, Alvin E., Tayfun Sonmez and M. Utku Unver. "Pairwise Kidney Exchange," Journal of Economic Theory 125(2): 151-188, December 2005
Abstract: In connection with an earlier paper on the exchange of live donor kidneys (Roth, Sonmez, and Unver 2004) the authors entered into discussions with New England transplant surgeons and their colleagues in the transplant community, aimed at implementing a Kidney Exchange program. In the course of those discussions it became clear that a likely first step will be to implement pairwise exchanges, between just two patient-donor pairs, as these are logistically simpler than exchanges involving more than two pairs. Furthermore, the experience of these surgeons suggests to them that patient and surgeon preferences over kidneys should be 0-1, i.e. that patients and surgeons should be indifferent among kidneys from healthy donors whose kidneys are compatible with the patient. This is because, in the United States, transplants of compatible live kidneys have about equal graft survival probabilities, regardless of the closeness of tissue types between patient and donor (unless there is a rare perfect match). In the present paper we show that, although the pairwise constraint eliminates some potential exchanges, there is a wide class of constrained-efficient mechanisms that are strategy-proof when patient-donor pairs and surgeons have 0-1 preferences. This class of mechanisms includes deterministic mechanisms that would accommodate the kinds of priority setting that organ banks currently use for the allocation of cadaver organs, as well as stochastic mechanisms that allow considerations of distributive justice to be addressed.
Handle: RePEc:nbr:nberwo:10698
Template-Type: ReDIF-Paper 1.0
Title: What Did the "Illegitimacy Bonus" Reward?
Classification-JEL: I3; J1
Author-Name: Sanders Korenman
Author-Name: Ted Joyce
Author-Person: pjo112
Author-Name: Robert Kaestner
Author-Person: pka42
Author-Name: Jennifer Walper
Note: EH CH
Number: 10699
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10699
File-URL: http://www.nber.org/papers/w10699.pdf
File-Format: application/pdf
Publication-Status: published as Korenman Sanders & Joyce Ted & Kaestner Robert & Walper Jennifer, 2006. "What Did the "Illegitimacy Bonus" Reward?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-36, April.
Abstract: The 'Illegitimacy Bonus,' part of 1996 welfare reform legislation, awarded $100 million in each of five years to the five states with the greatest reduction in the nonmarital birth ratio. Three states -- Alabama, Michigan, and Washington DC -- won bonuses four or more times each, claiming nearly 60% of award monies. However, in none of these three states was the decline in the nonmarital birth ratio linked to increases in proportions married, and only in Michigan was it linked to declines in nonmarital (relative to marital) fertility within demographic groups, behavioral changes that the Illegitimacy Bonus was presumably intended to reward. Shifts in the racial composition of births accounted for 1/3 (Michigan), 2/3 (DC) or all (Alabama) of the decline in the nonmarital birth ratio. The non-marital birth ratio fell most in DC, averaging 1.5 percentage points per year over the award period. However, the number of black children born in DC fell by nearly one half from 1991 to 2001. Changes in population composition alone primarily a decline in the number of black women aged 15 to 34 can account for the entire decline in the nonmarital birth ratio in DC between 1990 and 2000.
Handle: RePEc:nbr:nberwo:10699
Template-Type: ReDIF-Paper 1.0
Title: How Far to the Hospital? The Effect of Hospital Closures on Access to Care
Classification-JEL: I11; I12
Author-Name: Thomas C. Buchmueller
Author-Person: pbu179
Author-Name: Mireille Jacobson
Author-Person: pja574
Author-Name: Cheryl Wold
Note: EH
Number: 10700
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10700
File-URL: http://www.nber.org/papers/w10700.pdf
File-Format: application/pdf
Publication-Status: published as Buchmueller, Thomas C. & Jacobson, Mireille & Wold, Cheryl, 2006. "How far to the hospital?: The effect of hospital closures on access to care," Journal of Health Economics, Elsevier, vol. 25(4), pages 740-761, July.
Abstract: Do urban hospital closures affect health care access or health outcomes? We study closures in Los Angeles County between 1997 and 2003, through their effect on distance to the nearest hospital. We find that increased distance to the nearest hospital shifts regular care away from emergency rooms and outpatient clinics to doctor's offices. While most residents are otherwise unaffected by closures, lower-income residents report more difficulty accessing care, working age residents are less likely to receive HIV tests, and seniors less likely to receive flu shots. We also find some evidence that increased distance raises infant mortality rates and stronger evidence that it increases deaths from unintentional injuries and heart attacks.
Handle: RePEc:nbr:nberwo:10700
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Mandated State Education Spending on Total Local Resources
Classification-JEL: H0; H7
Author-Name: Katherine Baicker
Author-Name: Nora Gordon
Author-Person: pgo146
Note: ED PE
Number: 10701
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10701
File-URL: http://www.nber.org/papers/w10701.pdf
File-Format: application/pdf
Publication-Status: published as Baicker, Katherine and Nora Gordon. "The Effect Of State Education Finance Reform On Total Local Resources," Journal of Public Economics, 2006, v90(8-9,Sep), 1519-1535.
Abstract: Many states are under court-order to reduce local disparities in education spending. While a substantial body of literature suggests that these orders and the resulting school finance equalizations have increased the level and progressivity of state education spending, there is little evidence on the broader effects of such measures on the change in total resources available not only for schools, but for other local government programs as well. When states spend more on education, both state and local budget constraints change. We find that while mandated school finance equalizations increase both the level and progressivity of state spending on education, states finance the required increase in education spending in part by reducing their aid to localities for other programs. Local governments, in turn, respond to the increases in state taxation and spending by reducing both their own revenue-raising and their own spending on education and on other programs. Thus, while state education aid does increase total spending on education, it does so at the expense of drawing resources away from spending on programs like public welfare, highways, and hospitals. These findings provide insight into the effectiveness of using earmarked funds to achieve redistribution.
Handle: RePEc:nbr:nberwo:10701
Template-Type: ReDIF-Paper 1.0
Title: A Common Currency: Early U.S. Monetary Policy and the Transition to the Dollar
Classification-JEL: E44; N11
Author-Name: Peter L. Rousseau
Author-Person: pro64
Note: DAE IFM ME
Number: 10702
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10702
File-URL: http://www.nber.org/papers/w10702.pdf
File-Format: application/pdf
Publication-Status: published as Rousseau, Peter L., 2006. "A common currency: early US monetary policy and the transition to the dollar," Financial History Review, Cambridge University Press, vol. 13(01), pages 97-122, April.
Abstract: The transition of the U.S. money supply from the mixture of paper bills of credit, certificates, and foreign coins that circulated at various exchange rates with the British pound sterling during the colonial period to the unified dollar standard of the early national period was rapid and had far-reaching consequences. This paper documents the transition and highlights the importance of this standardization in bringing order to the nation's finances and in facilitating the accumulation and intermediation of capital. It describes how the struggle of the colonies to maintain viable substitutes for hard money set the stage for the financial leaders of the Federalist period, led by Alexander Hamilton, to settle upon the dollar, attach it to a convertible metallic base, and create a national Bank that issued notes denominated in the new monetary unit. It also presents recently-constructed estimates of the U.S. money stock for 1790-1820 and relates them to measures of the nation's early modernization.
Handle: RePEc:nbr:nberwo:10702
Template-Type: ReDIF-Paper 1.0
Title: Why Do Real and Nominal Inventory-Sales Ratios Have Different Trends
Classification-JEL: E22
Author-Name: Valerie A. Ramey
Author-Person: pra154
Author-Name: Daniel J. Vine
Note: EFG ME
Number: 10703
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10703
File-URL: http://www.nber.org/papers/w10703.pdf
File-Format: application/pdf
Publication-Status: published as Ramey, Valerie A. and Daniel J. Vine. "Why Do Real And Nominal Inventory-Sales Rations Have Different Trends?," Journal of Money, Credit and Banking, 2004, v36(5,Oct), 959-963.
Abstract: This note explains the diverging trends between real and nominal aggregate inventory-sales ratios. The combined effect of two features of the data explains the divergence. First, while aggregate sales include both goods and services, inventories include only goods. Second, there has been a strong secular decrease in the relative price of goods. The combination of these two factors causes the real and nominal aggregate inventory-sales ratios to have different trends.
Handle: RePEc:nbr:nberwo:10703
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy and Asset Prices: A Look Back at Past U.S. Stock Market Booms
Classification-JEL: E52; G12
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: David C. Wheelock
Note: DAE ME AP
Number: 10704
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10704
File-URL: http://www.nber.org/papers/w10704.pdf
File-Format: application/pdf
Publication-Status: published as Bordo, Michael D. and David C. Wheelock. "Monetary Policy And Asset Prices: A Look Back At Past U.S. Stock Market Booms," FRB St. Louis - Economic Review, 2004, v86(6,Nov/Dec), 19-44.
Abstract: This paper examines the economic environments in which past U.S. stock market booms occurred as a first step toward understanding how asset price booms come about and whether monetary policy should be used to defuse booms. We identify several episodes of sustained rapid rise in equity prices in the 19th and 20th Centuries, and then assess the growth of real output, productivity, the price level, money and credit stocks during each episode. Two booms stand out in terms of their length and rate of increase in market prices -- the booms of 1923-29 and 1994-2000. In general, we find that booms occurred in periods of rapid real growth and productivity advance, suggesting that booms are driven at least partly by fundamentals. We find no consistent relationship between inflation and stock market booms, though booms have typically occurred when money and credit growth were above average.
Handle: RePEc:nbr:nberwo:10704
Template-Type: ReDIF-Paper 1.0
Title: Abortion Legalization and Lifecycle Fertility
Classification-JEL: I1
Author-Name: Elizabeth Oltmans Ananat
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Phillip B. Levine
Author-Person: ple553
Note: EH CH
Number: 10705
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10705
File-URL: http://www.nber.org/papers/w10705.pdf
File-Format: application/pdf
Publication-Status: published as Ananat, Elizabeth Oltmans, Jonathan Gruber and Phillip Levine. “Abortion Legalization and Lifecycle Fertility." Journal of Human Resources 42, 2 (2007): 375-397.
Abstract: Previous research has convincingly shown that abortion legalization in the early 1970s led to a significant drop in fertility at that time. But this decline may have either represented a delay in births from a point where they were have represented a permanent reduction in fertility. We combine data from the 1970 U.S. Census and microdata from 1968 to 1999 Vital Statistics records to calculate lifetime fertility of women in the 1930s through 1960s birth cohorts. We examine whether those women who were born in early legalizing states and who passed through the early 1970s in their peak childbearing years had differential lifetime fertility patterns compared to women born in other states and in different birth cohorts. We consider the impact of abortion legalization on both the number of children ever born as well as the distribution of number of children ever born. Our results indicate that much of the reduction in fertility at the time abortion was legalized was permanent in that women did not have more subsequent births as a result. We also find that this result is largely attributable to an increase in the number of women who remained childless throughout their fertile years.
Handle: RePEc:nbr:nberwo:10705
Template-Type: ReDIF-Paper 1.0
Title: Interdependent Security: A General Model
Classification-JEL: C72; D80
Author-Name: Geoffrey Heal
Author-Person: phe40
Author-Name: Howard Kunreuther
Number: 10706
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10706
File-URL: http://www.nber.org/papers/w10706.pdf
File-Format: application/pdf
Abstract: In an interdependent world the risks faced by any one agent depend not only on its choices but also on those of all others. Expectations about others' choices will influence investments in risk-management, and the outcome can be sub-optimal investment all round. We model this as the Nash equilibrium of a game and give conditions for such a sub-optimal equilibrium to be tipped to an optimal one. We also characterize the smallest coalition to tip an equilibrium, the minimum critical coalition, and show that this is also the cheapest critical coalition, so that there is no less expensive way to move the system from the sub- optimal to the optimal equilibrium. We illustrate these results by reference to airline security, the control of infectious diseases via vaccination and investment in research and development.
Handle: RePEc:nbr:nberwo:10706
Template-Type: ReDIF-Paper 1.0
Title: Optimal Expectations
Classification-JEL: D1; D8
Author-Name: Markus K. Brunnermeier
Author-Person: pbr31
Author-Name: Jonathan A. Parker
Author-Person: ppa21
Note: EFG ME AP
Number: 10707
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10707
File-URL: http://www.nber.org/papers/w10707.pdf
File-Format: application/pdf
Publication-Status: published as Brunnermeier, Markus K. and Jonathan A. Parker. "Optimal Expectations," American Economic Review, 2005, v95(4,Sep), 1092-1118.
Abstract: This paper introduces a tractable, structural model of subjective beliefs. Forward-looking agents care about expected future utility flows, and hence have higher current felicity if they believe that better outcomes are more likely. On the other hand, biased expectations lead to poorer decisions and worse realized outcomes on average. Optimal expectations balance these forces by maximizing average felicity. A small bias in beliefs typically leads to first-order gains due to increased anticipatory utility and only to second-order costs due to distorted behavior. We show that in a portfolio choice problem, agents overestimate the return on their investment and exhibit a preference for skewness. In general equilibrium, agents' prior beliefs are endogenously heterogeneous. Finally, in a consumption-saving problem with stochastic income, agents are both overconfident and overoptimistic.
Handle: RePEc:nbr:nberwo:10707
Template-Type: ReDIF-Paper 1.0
Title: The Role and Functioning of Public-Interest Legal Organizations in the Enforcement of the Employment Laws
Classification-JEL: J78; K31
Author-Name: Christine Jolls
Note: LE LS
Number: 10708
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10708
File-URL: http://www.nber.org/papers/w10708.pdf
File-Format: application/pdf
Publication-Status: published as The Role and Functioning of Public-Interest Legal Organizations in the Enforcement of the Employment Laws, Christine Jolls. in Emerging Labor Market Institutions for the Twenty-First Century, Freeman, Hersch, and Mishel. 2005
Abstract: Many laws create important rights for today's employees, but the availability of legal representation for employees seeking to enforce those rights is uncertain. The goal of the present paper, part of the Emerging Labor Market Institutions for the 21st Century Project at the National Bureau of Economic Research, is to examine some of the distinctive public-interest legal organizations that exist to help to enforce the employment laws. The chapter focuses on two broad categories of such organizations: 'national issue organizations,' which are organizations that focus on one or more broad-based issues and are funded predominantly by private donations; and legal services organizations, which serve exclusively low-income individuals and are funded primarily by the government.
Handle: RePEc:nbr:nberwo:10708
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Malpractice Liability on the Delivery of Health Care
Classification-JEL: I1; K1
Author-Name: Katherine Baicker
Author-Name: Amitabh Chandra
Author-Person: pch893
Note: EH LE
Number: 10709
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10709
File-URL: http://www.nber.org/papers/w10709.pdf
File-Format: application/pdf
Publication-Status: published as Baicker, Katherine, and Amitabh Chandra. "The Effect Of Malpractice On The Delivery Of Health Care," Forum for Health Economics and Policy, 2005, v8, Article 4, (Berkeley Electronic Press)
Publication-Status: published as The Effect of Malpractice Liability on the Delivery of Health Care, Katherine Baicker, Amitabh Chandra. in Frontiers in Health Policy Research, Volume 8, Cutler and Garber. 2005
Abstract: The growth of medical malpractice liability costs has the potential to affect the delivery of health care in the U.S. along two dimensions. If growth in malpractice payments results in higher malpractice insurance premiums for physicians, these premiums may affect the size and composition of the physician workforce. The growth of potential losses from malpractice liability might also encourage physicians to practice 'defensive medicine.' We use rich new data to examine the relationship between the growth of malpractice costs and the delivery of health care along both of these dimensions. We pose three questions. First, are increases in payments responsible for increases in medical malpractice premiums? Second, do increases in malpractice liability drive physicians to close their practices or not move to areas with high payments? Third, do increases in malpractice liability change the way medicine is practiced by increasing the use of certain procedures? First, we find that increases in malpractice payments made on behalf of physicians do not seem to be the driving force behind increases in premiums. Second, increases in malpractice costs (both premiums overall and the subcomponent factors) do not seem to affect the overall size of the physician workforce, although they may deter marginal entry, increase marginal exit, and reduce the rural physician workforce. Third, there is little evidence of increased use of many treatments in response to malpractice liability at the state level, although there may be some increase in screening procedures such as mammography.
Handle: RePEc:nbr:nberwo:10709
Template-Type: ReDIF-Paper 1.0
Title: Merger Policy and Innovation: Must Enforcement Change to Account for Technological Change?
Classification-JEL: L4
Author-Name: Michael L. Katz
Author-Person: pka210
Author-Name: Howard A. Shelanski
Note: IO PR
Number: 10710
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10710
File-URL: http://www.nber.org/papers/w10710.pdf
File-Format: application/pdf
Publication-Status: published as Merger Policy and Innovation: Must Enforcement Change to Account for Technological Change?, Michael L. Katz, Howard A. Shelanski. in Innovation Policy and the Economy, Volume 5, Jaffe, Lerner, and Stern. 2005
Abstract: Merger policy is the most active area of U.S. antitrust policy. It is now widely believed that merger policy must move beyond its traditional focus on static efficiency to account for innovation and address dynamic efficiency. Innovation can fundamentally affect merger analysis in two ways. First, innovation can dramatically affect the relationship between the pre-merger marketplace and what is likely to happen if a proposed merger is consummated. Thus, innovation can fundamentally influence the appropriate analysis for addressing traditional, static efficiency concerns. Second, innovation can itself be an important dimension of market performance that is potentially affected by a merger. We explore how merger policy is meeting the challenges posed by innovation.
Handle: RePEc:nbr:nberwo:10710
Template-Type: ReDIF-Paper 1.0
Title: Borrowing Constraints, College Aid, and Intergenerational Mobility
Classification-JEL: H2; I2
Author-Name: Eric A. Hanushek
Author-Person: pha97
Author-Name: Charles Ka Yui Leung
Author-Name: Kuzey Yilmaz
Note: LS PE CH
Number: 10711
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10711
File-URL: http://www.nber.org/papers/w10711.pdf
File-Format: application/pdf
Publication-Status: published as Eric A. Hanushek & Charles Ka Yui Leung & Kuzey Yilmaz, 2014. "Borrowing Constraints, College Aid, and Intergenerational Mobility," Journal of Human Capital, University of Chicago Press, vol. 8(1), pages 1 - 41.
Abstract: The current level and form of subsidization of college education is often rationalized by appeal to capital constraints on individuals. Because borrowing against human capital is difficult, capital constraints can lead to nonoptimal outcomes unless government intervenes. We develop a simple dynamic general equilibrium model of the economy that permits us to explore the impact of alternative ways of subsidizing higher education. The key features of this model include endogenously determined bequests from parents that can be used to finance schooling, uncertainty in college completion related to differences in ability, and wage determination based upon the amount of schooling in the economy. Because policies toward college lead to large changes in schooling, it is very important to consider the general equilibrium effects on wages. Within this structure, we analyze tuition subsidies such as exist in most public colleges, alternative forms of need-based aid, income contingent loans, and merit-based aid. Each of these policies tends both to improve the efficiency of the economy while yielding more intergenerational mobility and greater income equality. But, the various policies have quite different implications for societal welfare, and the underlying subsidy patterns vary widely.
Handle: RePEc:nbr:nberwo:10711
Template-Type: ReDIF-Paper 1.0
Title: CPI Bias from Supercenters: Does the BLS Know that Wal-Mart Exists?
Classification-JEL: C43
Author-Name: Jerry Hausman
Author-Person: pha893
Author-Name: Ephraim Leibtag
Author-Person: ple514
Note: EFG PE
Number: 10712
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10712
File-URL: http://www.nber.org/papers/w10712.pdf
File-Format: application/pdf
Publication-Status: published as CPI Bias from Supercenters: Does the BLS Know that Wal-Mart Exists?, Jerry Hausman, Ephraim Leibtag. in Price Index Concepts and Measurement, Diewert, Greenlees, and Hulten. 2009
Abstract: Hausman (2003) discusses four sources of bias in the present calculation of the CPI. A pure price' index based approach of surveying prices as done by the BLS cannot succeed in solving the problems of bias. We discuss economic and econometric approaches to measuring the first order bias effects from outlet substitution bias. We demonstrate the use of scanner data that permits implementation of techniques that allow the problem to be solved. In contrast, the current BLS procedure does not treat correctly outlet substitution bias and acts as if Wal-Mart does not exist. Yet, Wal-Mart offers identical food items at an average price about 15%-25% lower than traditional supermarkets. The BLS links out' Wal-Mart's lower prices. We find that a more appropriate approach to the analysis is to let the choice to shop at Wal-Mart be considered as a new good' to consumers when Wal-Mart enters a geographic market. This approach leads to a continuously updated expenditure weighted average price calculation. We find a significant difference between our approach and the BLS approach. Our estimates are that the BLS CPI-U food at home inflation is too high by about 0.32 to 0.42 percentage points, which leads to an upward bias in the estimated inflation rate of about 15% per year.
Handle: RePEc:nbr:nberwo:10712
Template-Type: ReDIF-Paper 1.0
Title: Long-Term Consequences of Secondary School Vouchers: Evidence from Administrative Records in Colombia
Classification-JEL: I21; J13
Author-Name: Joshua Angrist
Author-Person: pan29
Author-Name: Eric Bettinger
Author-Person: pbe413
Author-Name: Michael Kremer
Author-Person: pkr20
Note: ED CH
Number: 10713
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10713
File-URL: http://www.nber.org/papers/w10713.pdf
File-Format: application/pdf
Publication-Status: published as Angrist, Joshua, Eric Bettinger and Michael Kremer. "Long-Term Educational Consequences Of Secondary School Vouchers: Evidence From Administrative Records In Colombia," American Economic Review, 2006, v96(3,Jun), 847-862.
Abstract: Colombia's PACES program provided over 125,000 poor children with vouchers that covered half the cost of private secondary school. The vouchers were renewable annually conditional on adequate academic progress. Since many vouchers were assigned by lottery, program effects can reliably be assessed by comparing lottery winners and losers. Estimates using administrative records suggest the PACES program increased secondary school completion rates by 15-20 percent. Correcting for the greater percentage of lottery winners taking college admissions tests, the program increased test scores by two-tenths of a standard deviation in the distribution of potential test scores. Boys, who have lower scores than girls in this population, show larger test score gains, especially in math.
Handle: RePEc:nbr:nberwo:10713
Template-Type: ReDIF-Paper 1.0
Title: Explaining the Evolution of Pension Structure and Job Tenure
Classification-JEL: J32; J63
Author-Name: Leora Friedberg
Author-Name: Michael Owyang
Author-Person: pow3
Note: AG LS
Number: 10714
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10714
File-URL: http://www.nber.org/papers/w10714.pdf
File-Format: application/pdf
Abstract: Current and expected job tenure have fallen significantly over the last two decades. Over the same period, traditional defined benefit pensions, designed to reward long tenure, have become steadily less common. This paper uses a contract-theoretic matching model with moral hazard to explain changes in pension structure and job tenure. In our model, a decline in the value of existing jobs relative to new jobs reduces expected match duration and thus the appeal of DB pensions. We show that this explanation is consistent with observed trends and suggests an additional consequence of technological change that has not been closely studied.
Handle: RePEc:nbr:nberwo:10714
Template-Type: ReDIF-Paper 1.0
Title: How Much Might Universal Health Insurance Reduce Socioeconomic Disparities in Health? A Comparison of the US and Canada
Classification-JEL: I1
Author-Name: Sandra L. Decker
Author-Name: Dahlia K. Remler
Note: EH
Number: 10715
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10715
File-URL: http://www.nber.org/papers/w10715.pdf
File-Format: application/pdf
Publication-Status: published as Decker, Sandra L. and Dahlia K. Remler. “How Much Does Universal Health Insurance Reduce Socioeconomic Disparities in Health? A Comparison of the US and Canada.” Applied Health Economics and Health Policy 3, 4 (2005): 205-216.
Abstract: A strong association between lower socioeconomic status (SES) and worse health-- the SES-health gradient-- has been documented in many countries, but little work has compared the size of the gradient across countries. We compare the size of the income gradient in self-reported health in the US and Canada. We find that being below median income raises the likelihood that a middle aged person is in poor or fair health by about 15 percentage points in the U.S., compared to less than 8 percentage points in Canada. We also find that the 7 percentage point gradient difference between the two countries is reduced by about 4 percentage points after age 65, the age at which the virtually all U.S. citizens receive basic health insurance through Medicare. Income disparities in the probability that an individual lacks a usual source of care are also significantly larger in the US than in Canada before the age of 65, but about the same after 65. Our results are therefore consistent with the availability of universal health insurance in the U.S, or at least some other difference that occurs around the age of 65 in one country but not the other, narrowing SES differences in health between the US and Canada.
Handle: RePEc:nbr:nberwo:10715
Template-Type: ReDIF-Paper 1.0
Title: Corporate Ownership in France: The Importance of History
Classification-JEL: B1
Author-Name: Antoin E. Murphy
Note: CF
Number: 10716
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10716
File-URL: http://www.nber.org/papers/w10716.pdf
File-Format: application/pdf
Publication-Status: published as Morck, Randall K. (ed.) A History of Corporate Governance around the World: Family Business Groups to Professional Managers A National Bureau of Economic Research Conference Report. Chicago and London: University of Chicago Press, 2005.
Publication-Status: published as Corporate Ownership in France: The Importance of History, Antoin Murphy. in A History of Corporate Governance around the World: Family Business Groups to Professional Managers, Morck. 2005
Abstract: This paper attempts to show the importance of history in influencing the structure of corporate ownership in France. The strong concentration of family ownership in France is traced to historical weaknesses in the money and capital markets that forced families to have recourse to self-financing. The weaknesses in the money and capital markets were greatly influenced by two eighteenth century financial traumas arising from John Law's Mississippi System (1716-20) and the financing of the French Revolution through the issue of the assignats in the 1790s.These financial traumas delayed significantly the emergence of banks and the capital market. Further historical factors influencing French corporate ownership were the changes in the inheritance law system at the start of the nineteenth century and, more recently, the emphasis on a pay-as-you-go pension system.
Handle: RePEc:nbr:nberwo:10716
Template-Type: ReDIF-Paper 1.0
Title: Transboundary Spillovers and Decentralization of Environmental Policies
Classification-JEL: Q5; H7
Author-Name: Hilary Sigman
Author-Person: psi55
Note: PE EEE
Number: 10717
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10717
File-URL: http://www.nber.org/papers/w10717.pdf
File-Format: application/pdf
Publication-Status: published as Sigman, Hilary. "Transboundary Spillovers And Decentralization Of Environmental Policies," Journal of Environmental Economics and Management, 2005, v50(1,Jul), 82-101.
Abstract: Most US federal environmental policies allow states to assume responsibility for implementation and enforcement of regulations; states with this responsibility are referred to as "authorized'' or having "primacy.'' Although such decentralization may have benefits, it may also have costs with pollution spillovers across states. This paper estimates these costs empirically by studying the free riding of states authorized under the Clean Water Act. The analysis examines water quality in rivers around the US and includes fixed effects for the location where water quality is monitored to address unobserved geographic heterogeneity. The estimated equations suggest that free riding gives rise to a 4% degradation of water quality downstream of authorized states, with an environmental cost downstream of $17 million annually.
Handle: RePEc:nbr:nberwo:10717
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Trade on Intraindustry Reallocation and Aggregate Industry Productivity: A Comment
Classification-JEL: H32; P16
Author-Name: Richard E. Baldwin
Author-Person: pba124
Author-Name: Frederic Robert-Nicoud
Author-Person: pro136
Note: ITI PR
Number: 10718
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10718
File-URL: http://www.nber.org/papers/w10718.pdf
File-Format: application/pdf
Abstract: Melitz (2003) demonstrates that greater trade openness raises industry productivity via a selection effect and via a production re-allocation effect. Our comment points out that the set-up assumed in the Melitz model displays a trade off between static and dynamic efficiency gains. That is, although freer trade improves industry productivity in a level sense, it harms it in a growth sense. To make this point as simply as possible, we introduce a slight modification to the model that endogenises the growth rate of industry productivity and we show that liberalisation slows growth.
Handle: RePEc:nbr:nberwo:10718
Template-Type: ReDIF-Paper 1.0
Title: Stock Market Trading and Market Conditions
Classification-JEL: G1
Author-Name: John M. Griffin
Author-Name: Federico Nardari
Author-Name: Rene M. Stulz
Note: CF AP
Number: 10719
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10719
File-URL: http://www.nber.org/papers/w10719.pdf
File-Format: application/pdf
Abstract: This paper investigates the dynamic relation between market-wide trading activity and returns in 46 markets. Many stock markets exhibit a strong positive relation between turnover and past returns. These findings stand up in the face of various controls for volatility, alternative definitions for turnover, and differing sample periods, and are present at both the weekly and daily frequency. However, the magnitude of this relation varies widely across markets. Several competing explanations are examined by linking cross-country variables to the magnitude of the relation. The relation between returns and turnover is stronger in countries with restrictions on short sales and where stocks are highly cross-correlated; it is also stronger among individual investors than among foreign or institutional investors. In developed economies, turnover follows past returns more strongly in the 1980s than in the 1990s. The evidence is consistent with models of costly stock market participation in which investors infer that their participation is more advantageous following higher stock returns.
Handle: RePEc:nbr:nberwo:10719
Template-Type: ReDIF-Paper 1.0
Title: The More the Merrier? The Effect of Family Composition on Children's Education
Classification-JEL: I2; J1
Author-Name: Sandra E. Black
Author-Person: pbl92
Author-Name: Paul G. Devereux
Author-Person: pde187
Author-Name: Kjell G. Salvanes
Author-Person: psa3
Note: ED LS CH
Number: 10720
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10720
File-URL: http://www.nber.org/papers/w10720.pdf
File-Format: application/pdf
Publication-Status: published as Black, Sandra E., Paul J. Devereux and Kjell G. Salvanes. "The More The Merrier? The Effect Of Family Size And Birth Order On Children's Education," Quarterly Journal of Economics, 2005, v120(2,May), 669-700.
Abstract: Among the perceived inputs in the production' of child quality is family size; there is an extensive theoretical literature that postulates a tradeoff between child quantity and quality within a family. However, there is little causal evidence that speaks to this theory. Our analysis is able to overcome many limitations of the previous literature by using a rich dataset that contains information on the entire population of Norway over an extended period of time and allows us to match adult children to their parents and siblings. In addition, we use exogenous variation in family size induced by the birth of twins to isolate causation. Like most previous studies, we find a negative correlation between family size and children's educational attainment. However, when we include indicators for birth order, the effect of family size becomes negligible. This finding is robust to the use of twin births as an instrument for family size. In addition, we find that birth order has a significant and large effect on children's education; children born later in the family obtain less education. These findings suggest the need to revisit economic models of fertility and child production', focusing not only on differences across families but differences within families as well.
Handle: RePEc:nbr:nberwo:10720
Template-Type: ReDIF-Paper 1.0
Title: Negotiating Free Trade
Classification-JEL: C78; F13
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Pol Antràs
Author-Person: pan181
Author-Name: Elhanan Helpman
Author-Person: phe205
Note: ITI
Number: 10721
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10721
File-URL: http://www.nber.org/papers/w10721.pdf
File-Format: application/pdf
Publication-Status: published as Aghion, Philippe & Antras, Pol & Helpman, Elhanan, 2007. "Negotiating free trade," Journal of International Economics, Elsevier, vol. 73(1), pages 1-30, September.
Abstract: We develop a dynamic bargaining model in which a leading country endogenously decides whether to sequentially negotiate free trade agreements with subsets of countries or engage in simultaneous multilateral bargaining with all countries at once. We show how the structure of coalition externalities shapes the choice between sequential and multilateral bargaining, and we identify circumstances in which the grand coalition is the equilibrium outcome, leading to worldwide free trade. A model of international trade is then used to illustrate equilibrium outcomes and how they depend on the structure of trade and protection. Global free trade is not achieved when the political-economy motive for protection is sufficiently large. Furthermore, the model generates both building bloc' and stumbling bloc' effects of preferential trade agreements. In particular, we describe an equilibrium in which global free trade is attained only when preferential trade agreements are permitted to form (a building bloc effect), and an equilibrium in which global free trade is attained only when preferential trade agreements are forbidden (a stumbling bloc effect). The analysis identifies conditions under which each of these outcomes emerges.
Handle: RePEc:nbr:nberwo:10721
Template-Type: ReDIF-Paper 1.0
Title: Robin Hood and His Not-So-Merry Plan: Capitalization and the Self-Destruction of Texas' School Finance Equalization Plan
Classification-JEL: H2; H24
Author-Name: Caroline M. Hoxby
Author-Person: pho46
Author-Name: Ilyana Kuziemko
Note: ED PE CH
Number: 10722
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10722
File-URL: http://www.nber.org/papers/w10722.pdf
File-Format: application/pdf
Abstract: School finance schemes control the allocation of $370 billion a year in the United States, but their economics are poorly understood. We examine an illuminating example: Texas' Robin Hood' scheme, which was enacted in 1994, allocates about $30 billion a year, and is currently collapsing and likely to be abandoned. We show that the collapse was predictable. Robin Hood's design causes substantial negative capitalization, shrinking its own tax base. It relies only slightly on relatively efficient (pseudo lump sum) redistibution and heavily on high marginal tax rates. Although Robin Hood reduced the spending gap between Texas' property-poor and property-rich districts by $500 per pupil, it destroyed about $27,000 per pupil in property wealth. The magnitude of this loss is important: if the state had efficiently confiscated the same wealth and invested it, it would generate sufficient annual income to make all Texas schools spend at a high leval. The Robin Hood scheme is stringent but not bizarre: other states' systdms share its features to some degree. We provide estimates of the effects of school finance system parameters, which policy makers could use to design systems that are more efficient and stable.
Handle: RePEc:nbr:nberwo:10722
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rates and Fundamentals
Classification-JEL: F31; G12
Author-Name: Charles Engel
Author-Person: pen14
Author-Name: Kenneth D. West
Author-Person: pwe16
Note: EFG IFM ME AP
Number: 10723
Creation-Date: 2004-08
Order-URL: http://www.nber.org/papers/w10723
File-URL: http://www.nber.org/papers/w10723.pdf
File-Format: application/pdf
Publication-Status: published as Engel, Charles, and Kenneth D. West. "Exchange Rates and Fundamentals." Proceedings, Federal Reserve Bank of San Francisco, March 1, 2003
Publication-Status: published as Engel, Charles, and Kenneth D. West. "Exchange Rates and Fundamentals." Journal of Political Economy 113(3): 485-517, June 2005
Abstract: We show analytically that in a rational expectations present value model, an asset price manifests near random walk behavior if fundamentals are I(1) and the factor for discounting future fundamentals is near one. We argue that this result helps explain the well known puzzle that fundamental variables such as relative money supplies, outputs, inflation and interest rates provide little help in predicting changes in floating exchange rates. As well, we show that the data do exhibit a related link suggested by standard models - that the exchange rate helps predict these fundamentals. The implication is that exchange rates and fundamentals are linked in a way that is broadly consistent with asset pricing models of the exchange rate.
Handle: RePEc:nbr:nberwo:10723
Template-Type: ReDIF-Paper 1.0
Title: Optimal Operational Monetary Policy in the Christiano-Eichenbaum-Evans Model of the U.S. Business Cycle
Classification-JEL: E52; E61
Author-Name: Stephanie Schmitt-Grohe
Author-Person: psc44
Author-Name: Martin Uribe
Note: EFG ME
Number: 10724
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10724
File-URL: http://www.nber.org/papers/w10724.pdf
File-Format: application/pdf
Abstract: This paper identifies optimal interest-rate rules within a rich, dynamic, general equilibrium model that has been shown to account well for observed aggregate dynamics in the postwar United States. We perform policy evaluations based on second-order accurate approximations to conditional and unconditional expected welfare. We require that interest-rate rules be operational, in the sense that they include as arguments only a few readily observable macroeconomic indicators and respect the zero bound on nominal interest rates. We find that the optimal operational monetary policy is a real-interest-rate targeting rule. That is, an interest-rate feedback rule featuring a unit inflation coefficient, a mute response to output, and no interest-rate smoothing. Contrary to existing studies, we find a significant degree of optimal inflation volatility. A key factor driving this result is the assumption of indexation to past inflation. Under indexation to long-run inflation the optimal inflation volatility is close to zero. Finally, we show that initial conditions matter for welfare rankings of policies.
Handle: RePEc:nbr:nberwo:10724
Template-Type: ReDIF-Paper 1.0
Title: Determinants of Business Cycle Comovement: A Robust Analysis
Classification-JEL: F33; F41
Author-Name: Marianne Baxter
Author-Person: pba102
Author-Name: Michael A. Kouparitsas
Author-Person: pko63
Note: EFG IFM
Number: 10725
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10725
File-URL: http://www.nber.org/papers/w10725.pdf
File-Format: application/pdf
Publication-Status: published as Baxter, Marianne and Michael A. Kouparitsas. "Determinants Of Business Cycle Comovement: A Robust Analysis," Journal of Monetary Economics, 2005, v52(1,Jan), 113-157.
Abstract: This paper investigates the determinants of business cycle comovement between countries. Our dataset includes over 100 countries, both developed and developing. We search for variables that are robust' in explaining comovement, using the approach of Leamer (1983). Variables considered are (i) bilateral trade between countries; (ii) total trade in each country; (iii) sectoral structure; (iv) similarity in export and import baskets; (v) factor endowments; and (vi) gravity variables. We find that bilateral trade is robust. However, two variables that the literature has argued are important for business cycles industrial structure and currency unions are found not to be robust.
Handle: RePEc:nbr:nberwo:10725
Template-Type: ReDIF-Paper 1.0
Title: Why Do Countries Matter So Much for Corporate Governance?
Classification-JEL: G15
Author-Name: Rene M. Stulz
Author-Name: Craig Doidge
Author-Name: Andrew Karolyi
Author-Person: pka329
Note: CF
Number: 10726
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10726
File-URL: http://www.nber.org/papers/w10726.pdf
File-Format: application/pdf
Publication-Status: published as Doidge, Craig & Andrew Karolyi, G. & Stulz, Rene M., 2007. "Why do countries matter so much for corporate governance?," Journal of Financial Economics, Elsevier, vol. 86(1), pages 1-39, October.
Abstract: This paper develops and tests a model of how country characteristics, such as legal protections for minority investors, and the level of economic and financial development, influence firms' costs and benefits in implementing measures to improve their own governance and transparency. The model focuses on an entrepreneur who needs to raise funds to finance the firm's investment opportunities and who decides whether or not to invest in better firm-level governance mechanisms to reduce agency costs. We show that, for a given level of country investor protection, the incentives to adopt better governance mechanisms at the firm level increase with a country's financial and economic development. When economic and financial development is poor, the incentives to improve firm-level governance are low because outside finance is expensive and the adoption of better governance mechanisms is expensive. Using firm-level data on international corporate governance and transparency ratings for a large sample of firms from around the world, we find evidence consistent with this prediction. Specifically, we show that (1) almost all of the variation in governance ratings across firms in less developed countries is attributable to country characteristics rather than firm characteristics typically used to explain governance choices, (2) firm characteristics explain more of the variation in governance ratings in more developed countries, and (3) access to global capital markets sharpens firm incentives for better governance, but decreases the importance of home-country legal protections of minority investors.
Handle: RePEc:nbr:nberwo:10726
Template-Type: ReDIF-Paper 1.0
Title: The US Current Account Deficit and Economic Development: Collateral for a Total Return Swap
Classification-JEL: F2; F32
Author-Name: Michael P. Dooley
Author-Person: pdo13
Author-Name: David Folkerts-Landau
Author-Name: Peter M. Garber
Author-Person: pga124
Note: IFM
Number: 10727
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10727
File-URL: http://www.nber.org/papers/w10727.pdf
File-Format: application/pdf
Abstract: We argue that a chronic US current account deficit is an integral and sustainable feature of a successful international monetary system. The US deficit supplies international collateral to the periphery. International collateral in turn supports two-way trade in financial assets that liberates capital formation in poor countries from inefficient domestic financial markets. The implicit international contract is analogous to a total return swap in domestic financial markets. Using market-determined collateral arrangements from these transactions we compute the collateral requirements consistent with recent foreign direct investment in China. The data are remarkably consistent with such calculations. The analysis helps explain why net capital flows from poor to rich countries and recent evidence that net outflows of capital are associated with relatively high growth rates in emerging markets. It also clarifies the role of the reserve currency in the system.
Handle: RePEc:nbr:nberwo:10727
Template-Type: ReDIF-Paper 1.0
Title: Technical Change and the Wage Structure During the Second Industrial Revolution: Evidence from the Merchant Marine, 1865-1912
Classification-JEL: J23; J31
Author-Name: Aimee Chin
Author-Person: pch902
Author-Name: Chinhui Juhn
Author-Person: pju42
Author-Name: Peter Thompson
Author-Person: pth1
Note: DAE LS
Number: 10728
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10728
File-URL: http://www.nber.org/papers/w10728.pdf
File-Format: application/pdf
Publication-Status: published as Chin, Aimee, Chinhui Juhn and Peter Thompson. "Technical Change And The Demand For Skills During The Second Industrial Revolution: Evidence From The Merchant Marine, 1891-1912," Review of Economics and Statistics, 2006, v88(3,Aug), 572-578.
Abstract: Using a large, individual-level wage data set, we examine the impact of a major technological innovation the steam engine on skill demand and the wage structure in the merchant shipping industry. We find that the technical change created a new demand for skilled workers, the engineers, while destroying demand for workers with skills relevant only to sail. It had a deskilling effect on production work able-bodied seamen (essentially, artisans) were replaced by unskilled engine room operatives. On the other hand, mates and able-bodied seamen employed on steam earned a premium relative to their counterparts on sail. A wholesale switch from sail to steam would increase the 90/10 wage ratio by 40%, with most of the rise in inequality coming from the creation of the engineer occupation.
Handle: RePEc:nbr:nberwo:10728
Template-Type: ReDIF-Paper 1.0
Title: Empire, Public Goods, and the Roosevelt Corollary
Classification-JEL: G15; F34
Author-Name: Kris James Mitchener
Author-Name: Marc D. Weidenmier
Author-Person: pwe14
Note: DAE
Number: 10729
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10729
File-URL: http://www.nber.org/papers/w10729.pdf
File-Format: application/pdf
Publication-Status: published as Mitchener, Kris James and Marc Weidenmier. "Empire, Public Goods, And The Roosevelt Corollary," Journal of Economic History, 2005, v65(3,Sep), 658-692.
Abstract: The Roosevelt Corollary to the Monroe Doctrine marked a turning point in American foreign policy. In 1904, President Roosevelt announced that, not only were European powers not welcome in the Americas, but that the U.S. had the right to intervene in the affairs of Central American and Caribbean countries that were unstable and did not pay their debts. We use this change in U.S. policy to test Kindleberger's hypothesis that a hegemon can provide public goods such as increased financial stability and peace. Using a newly assembled database of weekly sovereign debt prices, we find that the average sovereign debt price for countries under the U.S. 'sphere of influence' rose by 74% in the year following the announcement of the policy. With the dramatic rise in bond prices, the threat of European intervention to support bondholder claims in the Western Hemisphere waned, and the U.S. was able to exert its role as regional hegemon. We find some evidence that the Corollary spurred export growth and better fiscal management by reducing conflict in the region, but it appears that debt settlements were driven primarily by gunboat diplomacy and the threat of lost sovereignty.
Handle: RePEc:nbr:nberwo:10729
Template-Type: ReDIF-Paper 1.0
Title: Welfare vs. Market Access: The Implications of Tariff Structure for Tariff Reform
Classification-JEL: F13
Author-Name: James E. Anderson
Author-Person: pan2
Author-Name: J. Peter Neary
Author-Person: pne11
Note: ITI
Number: 10730
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10730
File-URL: http://www.nber.org/papers/w10730.pdf
File-Format: application/pdf
Publication-Status: published as Anderson, James E. & Neary, J. Peter, 2007. "Welfare versus market access: The implications of tariff structure for tariff reform," Journal of International Economics, Elsevier, vol. 71(1), pages 187-205, March.
Abstract: We show that the effects of tariff changes on welfare and import volume can be fully characterized by their effects on the generalized mean and variance of the tariff distribution. Using these tools, we derive new results for welfare- and market-access-improving tariff changes, which imply two 'cones of liberalization' in price space. Because welfare is negatively but import volume positively related to the generalized variance, the cones do not intersect, which poses a dilemma for trade policy reform. Finally, we show that generalized and trade-weighted moments are mutually proportional when the trade expenditure function is CES.
Handle: RePEc:nbr:nberwo:10730
Template-Type: ReDIF-Paper 1.0
Title: Defaultable Debt, Interest Rates and the Current Account
Classification-JEL: F4
Author-Name: Mark Aguiar
Author-Person: pag57
Author-Name: Gita Gopinath
Note: IFM
Number: 10731
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10731
File-URL: http://www.nber.org/papers/w10731.pdf
File-Format: application/pdf
Publication-Status: published as Aguiar, Mark, and Gita Gopinath. "Defaultable Debt, Interest Rates and the Current Account." Journal of International Economics 69(1): 64-83, June 2006
Publication-Status: published as Aguiar, Mark, and Gita Gopinath. "Defaultable Debt, Interest Rates and the Current Account." Proceedings, Federal Reserve Bank of San Francisco, June 5, 2004
Publication-Status: published as Mark Aguiar & Gita Gopinath, 2004. "Defaultable debt, interest rates and the current account," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
Abstract: World capital markets have experienced large scale sovereign defaults on a number of occasions, the most recent being Argentina's default in 2002. In this paper we develop a quantitative model of debt and default in a small open economy. We use this model to match four empirical regularities regarding emerging markets: defaults occur in equilibrium, interest rates are countercyclical, net exports are countercyclical, and interest rates and the current account are positively correlated. That is, emerging markets on average borrow more in good times and at lower interest rates as compared to slumps. Our ability to match these facts within the framework of an otherwise standard business cycle model with endogenous default relies on the importance of a stochastic trend in emerging markets.
Handle: RePEc:nbr:nberwo:10731
Template-Type: ReDIF-Paper 1.0
Title: Transition Dynamics in Vintage Capital Models: Explaining the Postwar Catch-Up of Germany and Japan
Classification-JEL: D24; E22
Author-Name: Simon Gilchrist
Author-Person: pgi28
Author-Name: John C. Williams
Author-Person: pwi23
Note: EFG ME
Number: 10732
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10732
File-URL: http://www.nber.org/papers/w10732.pdf
File-Format: application/pdf
Abstract: We consider a neoclassical interpretation of Germany and Japan's rapid postwar growth that relies on a catch-up mechanism through capital accumulation where technology is embodied in new capital goods. Using a putty-clay model of production and investment, we are able to capture many of the key empirical properties of Germany and Japan's postwar transitions, including persistently high but declining rates of labor and total-factor productivity growth, a U-shaped response of the capital-output ratio, rising rates of investment and employment, and moderate rates of return to capital.
Handle: RePEc:nbr:nberwo:10732
Template-Type: ReDIF-Paper 1.0
Title: Neoclassical Growth and the Adoption of Technologies
Classification-JEL: E13; O14
Author-Name: Diego Comin
Author-Person: pco55
Author-Name: Bart Hobijn
Author-Person: pho54
Note: EFG ME
Number: 10733
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10733
File-URL: http://www.nber.org/papers/w10733.pdf
File-Format: application/pdf
Abstract: We introduce a growth model of technology diffusion and endogenous Total Factor Productivity (TFP) levels both at the sector and aggregate level. At the aggregate, the model behaves as the Neoclassical growth model. Our goal is for this model to bridge the gap between the theoretical and empirical studies of technology adoption and economic growth. We bridge this gap in three important directions. First of all, we use our model to show how one unified theoretical framework is broadly consistent with the observed dynamics of both economic growth as well as of many different measures of technology adoption, like adoption rates, capital to output ratios, and output ratios. Secondly, we estimate our model using a broad range of technological adoption measures, covering 17 technologies and 21 industrialized countries over the past 180 years. This allows us to show how its predicted adoption patterns fit those observed in the data. Finally, we estimate the disparities in sectoral productivity levels as well as aggregate TFP that can be attributed to the differences in the range of technologies in use across countries. These disparities are almost completely determined by the quality of the worst technology in use, rather than by the quality of the newest technology that has just been adopted or by the number of technologies in use. Further, we find that the TFP component attributable to the range of technologies used is highly correlated with overall sectoral TFP differences across countries, though the variance is smaller.
Handle: RePEc:nbr:nberwo:10733
Template-Type: ReDIF-Paper 1.0
Title: Emerging Market Business Cycles: The Cycle is the Trend
Classification-JEL: F4
Author-Name: Mark Aguiar
Author-Person: pag57
Author-Name: Gita Gopinath
Note: EFG IFM
Number: 10734
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10734
File-URL: http://www.nber.org/papers/w10734.pdf
File-Format: application/pdf
Publication-Status: published as Mark Aguiar & Gita Gopinath, 2007. "Emerging Market Business Cycles: The Cycle Is the Trend," Journal of Political Economy, University of Chicago Press, vol. 115, pages 69-102.
Abstract: Business Cycles in emerging markets are characterized by strongly counter-cyclical current accounts, consumption volatility that exceeds income volatility and dramatic sudden stops' in capital inflows. These features contrast with developed small open economies and highlight the uniqueness of emerging markets. Nevertheless, we show that both qualitatively and quantitatively a standard dynamic stochastic small open economy model can account for the behavior of both types of markets. Motivated by the observed frequent policy regime switches in emerging markets, our underlying premise is that these economies are subject to substantial volatility in the trend growth rate relative to developed markets. Consequently, shocks to trend growth are the primary source of fluctuations in these markets rather than transitory fluctuations around a stable trend. When the parameters of the income process are structurally estimated using GMM for each type of economy, we find that the observed predominance of permanent shocks relative to transitory shocks for emerging markets and the reverse for developed markets explains differences in key features of their business cycles. Lastly, employing a VAR methodology to identify permanent shocks we find further support for the notion that the cycle is the trend' for emerging economies.
Handle: RePEc:nbr:nberwo:10734
Template-Type: ReDIF-Paper 1.0
Title: Labor Market Institutions, Wages, and Investment
Classification-JEL: E22; E24
Author-Name: Jorn-Steffen Pischke
Author-Person: ppi29
Note: LS
Number: 10735
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10735
File-URL: http://www.nber.org/papers/w10735.pdf
File-Format: application/pdf
Publication-Status: published as "Labor Market Institutions, Wages, and Investment: Review and Implications," CESifo Economic Studies 51, 1/2005, 47-75
Abstract: Labor market institutions, via their effect on the wage structure, affect the investment decisions of firms in labor markets with frictions. This observation helps explain rising wage inequality in the US, but a relatively stable wage structure in Europe in the 1980s. These different trends are the result of different investment decisions by firms for the jobs typically held by less skilled workers. Firms in Europe have more incentives to invest in less skilled workers, because minimum wages or union contracts mandate that relatively high wages have to be paid to these workers. I report some empirical evidence for investments in training and physical capital across the Atlantic, which is roughly in line with this theoretical reasoning.
Handle: RePEc:nbr:nberwo:10735
Template-Type: ReDIF-Paper 1.0
Title: The Social Costs of Gun Ownership
Classification-JEL: H21; I18
Author-Name: Phillip J. Cook
Author-Person: pco30
Author-Name: Jens Ludwig
Note: EH
Number: 10736
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10736
File-URL: http://www.nber.org/papers/w10736.pdf
File-Format: application/pdf
Publication-Status: published as Cook, Philip J. and Jens Ludwig. "The Social Costs Of Gun Ownership," Journal of Public Economics, 2006, v90(1-2,Jan), 379-391.
Abstract: This paper provides new estimates of the effect of household gun prevalence on homicide rates, and infers the marginal external cost of handgun ownership. The estimates utilize a superior proxy for gun prevalence, the percentage of suicides committed with a gun, which we validate. Using county- and state-level panels for 20 years, we estimate the elasticity of homicide with respect to gun prevalence as between +.1 and +.3. All of the effect of gun prevalence is on gun homicide rates. Under certain reasonable assumptions, the average annual marginal social cost of household gun ownership is in the range $100 to $600.
Handle: RePEc:nbr:nberwo:10736
Template-Type: ReDIF-Paper 1.0
Title: The Value of Life and the Rise in Health Spending
Classification-JEL: I1; E1
Author-Name: Robert E. Hall
Author-Name: Charles I. Jones
Author-Person: pjo24
Note: EFG AG EH PE
Number: 10737
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10737
File-URL: http://www.nber.org/papers/w10737.pdf
File-Format: application/pdf
Publication-Status: published as Hall, Robert E., and Charles I Jones. "The Value of Life and the Rise in Health Spending." The Quarterly Journal of Economics 122(1): 39-72, February 2007
Publication-Status: published as Hall, Robert E., and Charles I Jones. "The Value of Life and the Rise in Health Spending." Federal Reserve Bank of San Francisco, FRBSF Economic Letter 2006-02, February 24, 2006
Publication-Status: published as Robert E. Hall & Charles I. Jones, 2005. "The value of life and the rise in health spending," Proceedings, Federal Reserve Bank of San Francisco.
Abstract: Health care extends life. Over the past half century, Americans have spent a rising share of total economic resources on health and have enjoyed substantially longer lives as a result. Debate on health policy often focuses on limiting the growth of health spending. We investigate an issue central to this debate: can we understand the growth of health spending as the rational response to changing economic conditions---notably the growth of income per person? We estimate parameters of the technology that relates health spending to improved health, measured as increased longevity. We also estimate parameters of social preferences about longevity and the consumption of non-health goods and services. The story of rising health spending that emerges is that the diminishing marginal utility of non-health consumption combined with a rising value of life causes the nation to move up the marginal-cost schedule of life extension. The health share continues to grow as long as income grows. In projections based on our parameter estimates, the health share reaches 33 percent by the middle of the century.
Handle: RePEc:nbr:nberwo:10737
Template-Type: ReDIF-Paper 1.0
Title: How Does Cost-Sharing Affect Drug Purchases? Insurance Regimes in the Private Market for Prescription Drugs
Classification-JEL: I11; L11
Author-Name: Avi Dor
Author-Name: William Encinosa
Note: EH PR
Number: 10738
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10738
File-URL: http://www.nber.org/papers/w10738.pdf
File-Format: application/pdf
Publication-Status: published as Avi Dor & William Encinosa, 2010. "," Journal of Economics & Management Strategy, vol 19(3), pages 545-574.
Abstract: Insurance for prescription drugs is characterized by two types of cost-sharing: flat copayments and variable coinsurance. We develop a theoretical model to show that refill purchases of preventive drugs (compliance) are lower under coinsurance due to the consumer's exposure to variation in drug prices. Coinsurance creates countervailing incentives. Consumers who never comply under flat copayments might find it optimal to comply if they drew a relatively low price under coinsurance. In contrast, consumers who always comply under flat copayments might stop complying if they drew a relatively high price under coinsurance. Our theory shows the second effect dominates under certain distributional assumptions about health states. Empirically, we derive comparable models for compliance behavior in the two regimes. Using claims data from eight large firms, we focus our analysis on diabetes, a common chronic condition that leads to severe complications when not continuously treated with medications. Propensity score methods are used to create matched samples for the two insurance regimes. We find that when coinsurance and flat copayments have the same expected out-of-pocket of $9, at least 34% of patients under copayments would fully comply and refill their medication over the next 90 days, compared to only 24% under coinsurance. Similarly, under copayments, moving from the 25th percentile to the 75th percentile of cost sharing results in a significantly lower shift into the non-compliance state compared with coinsurance. Thus, the empirical results confirm the main theoretical predictions. This research is a substantial revision and extension of our earlier 2004 NBER working paper no. 10738.
Handle: RePEc:nbr:nberwo:10738
Template-Type: ReDIF-Paper 1.0
Title: The Dynamics of Criminal Behavior: Evidence from Weather Shocks
Classification-JEL: J2; K42
Author-Name: Brian Jacob
Author-Name: Lars Lefgren
Author-Person: ple392
Author-Name: Enrico Moretti
Author-Person: pmo392
Note: PE LS
Number: 10739
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10739
File-URL: http://www.nber.org/papers/w10739.pdf
File-Format: application/pdf
Publication-Status: published as Brian Jacob & Lars Lefgren & Enrico Moretti, 2007. "The Dynamics of Criminal Behavior: Evidence from Weather Shocks," Journal of Human Resources, University of Wisconsin Press, vol. 42(3).
Abstract: The persistence of criminal activity is well documented. While such serial correlation may be evidence of social interactions in the production of crime, it may also be due to the persistence of unobserved determinants of crime. Moreover, there are good reasons to believe that, particularly over a short time horizon, there may actually be a negative relationship between crime rates in a particular area due to displacement. In this paper, we exploit the correlation between weather and crime to examine the short-run dynamics of criminal behavior. Drawing on crime-level data from the FBI's National Incident-Based Reporting System, we construct a panel of weekly crime data for 116 jurisdictions. Using the plausibly exogenous variation in lagged crime rates due to unexpected weather shocks, we find that the strong positive serial correlation documented in OLS is reversed. A ten percent increase in violent crime in one week is associated with a 2.6 percent reduction in crime the following week. The corresponding reduction for property crime is 2.0 percent. Additional displacement appears to occur over a longer time horizon. Furthermore, the results do not appear to be driven by persistence in weather conditions over time or displacement of non-criminal economic activity. These findings suggest that the long-run impact of temporary crime prevention efforts may be smaller than the short-run effects.
Handle: RePEc:nbr:nberwo:10739
Template-Type: ReDIF-Paper 1.0
Title: Disaggregating Employment Protection: The Case of Disability Discrimination
Classification-JEL: I18; J18; J21
Author-Name: Christine Jolls
Author-Name: J.J. Prescott
Note: LS LE
Number: 10740
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10740
File-URL: http://www.nber.org/papers/w10740.pdf
File-Format: application/pdf
Abstract: Studies of the effects of employment protection frequently examine protective legislation as a whole. From a policy reform perspective, however, it is often critical to know which particular aspect of the legislation is responsible for its observed effects. The American with Disabilities Act (ADA), a 1990 federal law covering over 40 million Americans, is a clear case in point. Several empirical studies have suggested that the passage of the ADA reduced rather than increased employment opportunities for individuals with disabilities. To the extent this is true, it is crucial to credibly disentangle the different features of this complex and multi-faceted law. Separately evaluating the distinct aspects of the ADA is important not only for determining how the law might best be reformed if some aspects of it produce negative employment effects, but also for improving our understanding of the potential consequences of ADA-like provisions in race and other civil rights laws. This paper exploits state-level variation in pre-ADA legal regimes governing disability discrimination to separately estimate the employment effects of each of the ADA's two primary substantive provisions. We find strong evidence that the immediate post-enactment employment effects of the ADA are attributable to its requirement of "reasonable accommodations" for disabled employees rather than to its potential imposition of firing costs for such employees. Moreover, the pattern of the ADA's effects across states suggests, contrary to widely discussed prior findings based on national-level data, that declining disabled employment after the immediate post-ADA period reflects other factors rather than the ADA itself.
Handle: RePEc:nbr:nberwo:10740
Template-Type: ReDIF-Paper 1.0
Title: On the Timing of Innovation in Stochastic Schumpeterian Growth Models
Classification-JEL: E32; O3; D62
Author-Name: Gadi Barlevy
Author-Person: pba129
Note: EFG PR
Number: 10741
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10741
File-URL: http://www.nber.org/papers/w10741.pdf
File-Format: application/pdf
Abstract: Recent work has revived the Schumpeterian hypothesis that recessions facilitate innovation and growth. But a major source of productivity growth, research and development, is actually procyclical. This paper argues that while it is optimal to concentrate growth-enhancing activities in downturns, dynamic spillovers inherent to the R&D process lead private agents to concentrate too much of their R&D activity in booms, precisely when its social cost is highest. Thus, while previous literature has argued recessions promote growth and intertemporal substitution is a desirable consequence of fluctuations, in the case of R&D recessions discourage growth and intertemporal substitution proves to be a social liability.
Handle: RePEc:nbr:nberwo:10741
Template-Type: ReDIF-Paper 1.0
Title: Stealth Compensation Via Retirement Benefits
Classification-JEL: D23; G32; G34
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Jesse M. Fried
Note: CF LE
Number: 10742
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10742
File-URL: http://www.nber.org/papers/w10742.pdf
File-Format: application/pdf
Publication-Status: published as Bebchuk, Lucian Arye and Jesse Fried. “Stealth Compensation via Retirement Benefits.” 1 Berkeley Business Law Journal (2004): 291-326.
Abstract: This paper analyzes an important form of "stealth compensation" provided to managers of public companies. We show how boards have been able to camouflage large amount of executive compensation through the use of retirement benefits and payments. Our study highlights the significant role that camouflage and stealth compensation play in the design of compensation arrangements. Our study also highlights the significance of whether information about compensation arrangements is not merely publicly available but also communicated in a way that is transparent and accessible to outsiders.
Handle: RePEc:nbr:nberwo:10742
Template-Type: ReDIF-Paper 1.0
Title: Multi-Period Corporate Failure Prediction with Stochastic Covariates
Classification-JEL: C41; G33; E44
Author-Name: Darrell Duffie
Author-Person: pdu341
Author-Name: Ke Wang
Note: CF AP
Number: 10743
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10743
File-URL: http://www.nber.org/papers/w10743.pdf
File-Format: application/pdf
Publication-Status: published as Duffie, Darrell, Leandro Saita and Ke Wang. "Multi-Period Corporate Default Prediction with Stochastic Covariates,." Journal of Financial Economics 83 (2007): 635-665.
Abstract: We provide maximum likelihood estimators of term structures of conditional probabilities of bankruptcy over relatively long time horizons, incorporating the dynamics of firm-specific and macroeconomic covariates. We find evidence in the U.S. industrial machinery and instruments sector, based on over 28,000 firm-quarters of data spanning 1971 to 2001, of significant dependence of the level and shape of the term structure of conditional future bankruptcy probabilities on a firm's distance to default (a volatility-adjusted measure of leverage) and on U.S. personal income growth, among other covariates.Variation in a firm's distance to default has a greater relative effect on the term structure of future failure hazard rates than does a comparatively sized change in U.S. personal income growth, especially at dates more than a year into the future.
Handle: RePEc:nbr:nberwo:10743
Template-Type: ReDIF-Paper 1.0
Title: Effective Labor Regulation and Microeconomic Flexibility
Classification-JEL: E24; J23; J63; J64
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Kevin N. Cowan
Author-Person: pco175
Author-Name: Eduardo M.R.A. Engel
Author-Person: pen3
Author-Name: Alejandro Micco
Note: EFG LS PR
Number: 10744
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10744
File-URL: http://www.nber.org/papers/w10744.pdf
File-Format: application/pdf
Publication-Status: published as Caballero, Ricardo J. & Cowan, Kevin N. & Engel, Eduardo M.R.A. & Micco, Alejandro, 2013. "Effective labor regulation and microeconomic flexibility," Journal of Development Economics, Elsevier, vol. 101(C), pages 92-104.
Abstract: Microeconomic flexibility, by facilitating the process of creative-destruction, is at the core of economic growth in modern market economies. The main reason for why this process is not infinitely fast, is the presence of adjustment costs, some of them technological, other institutional. Chief among the latter is labor market regulation. While few economists would object to such a view, its empirical support is rather weak. In this paper we revisit this hypothesis and find strong evidence for it. We use a new sectoral panel for 60 countries and a methodology suitable for such a panel. We find that job security regulation clearly hampers the creative-destruction process, especially in countries where regulations are likely to be enforced. Moving from the 20th to the 80th percentile in job security, in countries with strong rule of law, cuts the annual speed of adjustment to shocks by a third while shaving off about one percent from annual productivity growth. The same movement has negligible effects in countries with weak rule of law.
Handle: RePEc:nbr:nberwo:10744
Template-Type: ReDIF-Paper 1.0
Title: Does the Impact of Managed Care on Substance Abuse Treatment Services Vary By Profit Status?
Classification-JEL: I1
Author-Name: Jody Sindelar
Author-Name: Todd Olmstead
Note: AG EH
Number: 10745
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10745
File-URL: http://www.nber.org/papers/w10745.pdf
File-Format: application/pdf
Publication-Status: published as Olmstead, T and JL Sindelar. "Does the impact of managed care on substance abuse treatment services vary by profit status?" Health Services Research 40(6 Pt 1) (December 2005): 1862–1882.
Abstract: We extend our previous research by determining whether, and how, the impact of managed care on substance abuse treatment (SAT) services differs by facility ownership. We use the 2000 National Survey of Substance Abuse Treatment Services that contains data on service offerings and other characteristics of 10,513 SAT facilities. For each group of for-profit, not-for-profit, and public facilities, we estimate the impact of managed care (MC) on the number and types of SAT services offered (i.e., indicators of the quality of care). We use IVs to account for possible endogeneity between facilities' involvement in MC and service offerings. We find substantial differences in the magnitude and direction of the impact of MC by facility ownership. On average, MC causes for-profits to offer approximately four (out of 26) additional services, causes publics to offer approximately four fewer services, and has no impact on the number of services offered by not-for-profits. Our findings raise concerns that managed care may reduce the quality of care provided by public SAT facilities by limiting the range of services offered. On the other hand, for-profit clinics are found to increase their range of services; the societal impact of this is unclear for several reasons.
Handle: RePEc:nbr:nberwo:10745
Template-Type: ReDIF-Paper 1.0
Title: Faster, Smaller, Cheaper: An Hedonic Price Analysis of PDAs
Classification-JEL: C43; L63; O30
Author-Name: Paul D. Chwelos
Author-Name: Ernst R. Berndt
Author-Name: Iain M. Cockburn
Author-Person: pco166
Note: PR
Number: 10746
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10746
File-URL: http://www.nber.org/papers/w10746.pdf
File-Format: application/pdf
Publication-Status: published as P. D. Chwelos & E. R. Berndt & I. M. Cockburn, 2008. "Faster, smaller, cheaper: an hedonic price analysis of PDAs," Applied Economics, Taylor and Francis Journals, vol. 40(22), pages 2839-2856.
Abstract: We compute quality-adjusted price indexes for Personal Digital Assistants (PDAs) for the period 1999-2004, using data on prices and characteristics of 203 models sold by 12 manufacturers. The PDA market is growing in size, it is technologically dynamic with very substantial changes in measured characteristics over time, and it has experienced rapid rates of product introduction. Hedonic regressions consistently show prices to be positively related to processor performance, RAM memory, permanent storage capacity, and battery life, as well as several measures of screen size and quality. Features such as networking, biometric identification, camera, and cellphone capability are also positively associated with price. Hedonic price indexes implied by these regressions decline at an AAGR of 21.1% to 25.6% per year during this period. A matched model price index computed from a subset of observations declines at 18.75% per year. Though these PDA rates of price decline are lower than have been estimated for desktop and laptop PCs, consumers in this "ultra-portable" segment of the computer market appear to have enjoyed substantial welfare gains over the past five years.
Handle: RePEc:nbr:nberwo:10746
Template-Type: ReDIF-Paper 1.0
Title: Targeting Rules vs. Instrument Rules for Monetary Policy: What is Wrong with McCallum and Nelson?
Classification-JEL: E42; E52; E58
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: ME
Number: 10747
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10747
File-URL: http://www.nber.org/papers/w10747.pdf
File-Format: application/pdf
Publication-Status: published as Svensson, Lars E. O. "Targeting Rules Versus Instrument Rules For Monetary Policy: What Is Wrong With McCallum And Nelson?," Federal Reserve Bank of St. Louis Review 87(5): 613-625, Sep/Oct 2005
Abstract: McCallum and Nelson's (2004) criticism of targeting rules for the analysis of monetary policy is rebutted. First, McCallum and Nelson's preference to study the robustness of simple monetary-policy rules is no reason at all to limit attention to simple instrument rules; simple targeting rules may have more desirable properties. Second, optimal targeting rules are a compact, robust, and structural description of goal-directed monetary policy, analogous to the compact, robust, and structural consumption Euler conditions in the theory of consumption. They express the very robust condition of equality of the marginal rates of substitution and transformation between the central bank's target variables. Third, under realistic information assumptions, the instrument-rule analogue to any targeting rule that McCallum and Nelson have proposed results in very large instrument-rate volatility and is also for other reasons inferior to a targeting rule.
Handle: RePEc:nbr:nberwo:10747
Template-Type: ReDIF-Paper 1.0
Title: Why Do Incumbent Senators Win? Evidence from a Dynamic Selection Model
Classification-JEL: H1; J2; C5
Author-Name: Gautam Gowrisankaran
Author-Name: Matthew F. Mitchell
Author-Person: pmi30
Author-Name: Andrea Moro
Author-Person: pmo78
Note: PE
Number: 10748
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10748
File-URL: http://www.nber.org/papers/w10748.pdf
File-Format: application/pdf
Abstract: Since 1914, incumbent U.S. senators running for reelection have won almost 80% of the time. We investigate why incumbents win so often. We allow for three potential explanations for the incumbency advantage: selection, tenure, and challenger quality, which are separately identified using histories of election outcomes following an open seat election. We specify a dynamic model of voter behavior that allows for these three effects, and structurally estimate the parameters of the model using U.S. Senate data. We find that tenure effects are negative or small. We also find that incumbents face weaker challengers than candidates running for open seats. If incumbents faced challengers as strong as candidates for open seats, the incumbency advantage would be cut in half.
Handle: RePEc:nbr:nberwo:10748
Template-Type: ReDIF-Paper 1.0
Title: Once Again, is Openness Good for Growth?
Classification-JEL: F10; F43; O40; C33
Author-Name: Ha Yan Lee
Author-Name: Luca Antonio Ricci
Author-Person: pri55
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: EFG IFM ITI
Number: 10749
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10749
File-URL: http://www.nber.org/papers/w10749.pdf
File-Format: application/pdf
Publication-Status: published as Lee, Ha Yan, Luca Antonio Ricci and Roberto Rigobon. "Once Again, Is Openness Good For Growth?," Journal of Development Economics, 2004, v75(2,Dec), 451-472.
Abstract: Rodriguez and Rodrik (2000) argue that the relation between openness and growth is still an open question. One of the main problems in the assessment of the effect is the endogeneity of the relation. In order to address this issue, this paper applies the identification through heteroskedasticity methodology to estimate the effect of openness on growth while properly controlling for the effect of growth on openness. The results suggest that openness would have a positive effect on growth, although small. This result stands, despite the equally robust effect from growth to openness.
Handle: RePEc:nbr:nberwo:10749
Template-Type: ReDIF-Paper 1.0
Title: Rule of Law, Democracy, Openness, and Income: Estimating the Interrelationships
Classification-JEL: F10; F43; O40; C33
Author-Name: Roberto Rigobon
Author-Person: pri12
Author-Name: Dani Rodrik
Author-Person: pro60
Note: EFG IFM ITI
Number: 10750
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10750
File-URL: http://www.nber.org/papers/w10750.pdf
File-Format: application/pdf
Publication-Status: published as Rigobon, Roberto and Dani Rodrik. "Rule of Law, Democracy, Openness, and Income: Estimating the Interrelationships." The Economics of Transition 13, 3 (2005): 533-64.
Abstract: We estimate the interrelationships among economic institutions, political institutions, openness, and income levels, using identification through heteroskedasticity (IH). We split our cross-national dataset into two sub-samples: (i) colonies versus non-colonies; and (ii) continents aligned on an East-West versus those aligned on a North-South axis. We exploit the difference in the structural variances in these two sub-samples to gain identification. We find that democracy and the rule of law are both good for economic performance, but the latter has a much stronger impact on incomes. Openness (trade/GDP) has a negative impact on income levels and democracy, but a positive effect on rule of law. Higher income produces greater openness and better institutions, but these effects are not very strong. Rule of law and democracy tend to be mutually reinforcing.
Handle: RePEc:nbr:nberwo:10750
Template-Type: ReDIF-Paper 1.0
Title: The Long-Run Volatility Puzzle of the Real Exchange Rate
Classification-JEL: F31; F41
Author-Name: Ricardo Hausmann
Author-Person: pha552
Author-Name: Ugo Panizza
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: IFM
Number: 10751
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10751
File-URL: http://www.nber.org/papers/w10751.pdf
File-Format: application/pdf
Publication-Status: published as Hausmann, Ricardo, Ugo Panizza and Roberto Rigobon. "The Long-Run Volatility Puzzle Of The Real Exchange Rate," Journal of International Money and Finance, 2006, v25(1,Feb), 93-124.
Abstract: This paper documents large cross-country differences in the long run volatility of the real exchange rate. In particular, it shows that the real exchange rate of developing countries is approximately three times more volatile than the real exchange rate in industrial countries. The paper tests whether this difference in volatility can be explained by the fact that developing countries face larger shocks (both real and nominal) and recurrent currency crises or by different elasticities to these shocks. It finds that the magnitude of the shocks and the differences in elasticities can only explain a small part of the difference in RER volatility between developing and industrial countries. Results from ARCH estimations confirm that there is a substantial difference in long term volatilities between these two sets of countries and indicate that there is also a much higher persistence of deviations of the variance of the RER from its long run value when the economy suffers shocks of various kinds.
Handle: RePEc:nbr:nberwo:10751
Template-Type: ReDIF-Paper 1.0
Title: High Performing Asian Economies
Classification-JEL: J11; I12; N3; O10; O53
Author-Name: Robert W. Fogel
Note: EFG
Number: 10752
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10752
File-URL: http://www.nber.org/papers/w10752.pdf
File-Format: application/pdf
Publication-Status: published as Dong, Xiao-Yuan, Shunfeng Song, and Xiaobo Zhang (eds.) China's Agricultural Development: Challenges and ProspectsChinese Economy Series. Aldershot, U.K. and Burlington, Vt: Ashgate, 2006.
Abstract: To American and European economists in 1945, the countries of Asia were unpromising candidates for high economic growth. In 1950 even the most prosperous of these countries had a per capita income less than 25 percent of that of the United States. Between the mid-1960s and the end of the twentieth century, however, many of the countries of South and Southeast Asia experienced vigorous economic growth, some with growth rates far exceeding the previous growth rates of the industrialized countries. Forecasts that the region's population growth would outstrip its capacity to feed itself, and that its economic growth would falter, proved to be incorrect. Growth rates will probably continue at high levels in Southeast Asia for at least another generation. This forecast is based on 4 factors: the trend toward rising labor force participation rates, the shift from low to high productivity sectors, continued increases in the educational level of the labor force, and other improvements in the quality of output that are at present not accurately measured in national income accounts.
Handle: RePEc:nbr:nberwo:10752
Template-Type: ReDIF-Paper 1.0
Title: Sovereign Debt and Repudiation: The Emerging-Market Debt Crisis in the U.S. States, 1839-1843
Classification-JEL: N2; N4; H1; H2; H3
Author-Name: John Joseph Wallis
Author-Name: Richard E. Sylla
Author-Name: Arthur Grinath III
Note: DAE
Number: 10753
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10753
File-URL: http://www.nber.org/papers/w10753.pdf
File-Format: application/pdf
Abstract: In 1841 and 1842, eight states and the Territory of Florida defaulted on their sovereign debts. Traditional histories of the default crisis have stressed the causal role of the depression that began with the Panic of 1837, unexpected revenue shortfalls from canal and bank investments as a result of the depression, and an unwillingness of states to raise tax rates. This paper shows that none of these stylized facts fits the experience of states at all well. The majority of state debts in default in 1842 were contracted after the Panic of 1837; most states did not expect canal investments to return substantial revenues by 1841 and so could not experience unexpected shortfalls in those revenues; and, finally, most states were willing to raise tax rates substantially. The relationship between land sales and land values explains much of the timing of state borrowing and the default experience of western and southern states. Pennsylvania and Maryland defaulted because they postponed the imposition of a state property tax until it was too late.
Handle: RePEc:nbr:nberwo:10753
Template-Type: ReDIF-Paper 1.0
Title: The Appeals Process and Adjudicator Incentives
Classification-JEL: D8; K41
Author-Name: Steven Shavell
Author-Person: psh42
Note: LE
Number: 10754
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10754
File-URL: http://www.nber.org/papers/w10754.pdf
File-Format: application/pdf
Publication-Status: published as Shavell, Steven. "The Appeals Process and Adjudicator Incentives." Journal of Legal Studies 35, 1 (January 2006): 1-29.
Abstract: The appeals process -- whereby litigants can have decisions of adjudicators reviewed by a higher authority -- is a general feature of formal legal systems (and of many private decisionmaking procedures). It leads to the making of better decisions, because it constitutes a threat to adjudicators whose decisions would deviate too much from socially desirable ones. Further, it yields this benefit without absorbing resources to the extent that adjudicators can anticipate when appeals would occur and would thus make decisions to forestall the actual occurrence of appeals.
Handle: RePEc:nbr:nberwo:10754
Template-Type: ReDIF-Paper 1.0
Title: Predatory Trading
Classification-JEL: G0; G1
Author-Name: Markus K. Brunnermeier
Author-Person: pbr31
Author-Name: Lasse Heje Pedersen
Author-Person: ppe174
Note: AP
Number: 10755
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10755
File-URL: http://www.nber.org/papers/w10755.pdf
File-Format: application/pdf
Publication-Status: published as Markus K. Brunnermeier & Lasse Heje Pedersen, 2005. "Predatory Trading," Journal of Finance, American Finance Association, vol. 60(4), pages 1825-1863, 08.
Abstract: This paper studies predatory trading: trading that induces and/or exploits other investors' need to reduce their positions. We show that if one trader needs to sell, others also sell and subsequently buy back the asset. This leads to price overshooting and a reduced liquidation value for the distressed trader. Hence, the market is illiquid when liquidity is most needed. Further, a trader profits from triggering another trader's crisis, and the crisis can spill over across traders and across markets.
Handle: RePEc:nbr:nberwo:10755
Template-Type: ReDIF-Paper 1.0
Title: Can Interest Rate Volatility be Extracted from the Cross Section of Bond Yields? An Investigation of Unspanned Stochastic Volatility
Classification-JEL: G1; C4
Author-Name: Pierre Collin-Dufresne
Author-Name: Christopher S. Jones
Author-Person: pjo36
Author-Name: Robert S. Goldstein
Note: AP
Number: 10756
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10756
File-URL: http://www.nber.org/papers/w10756.pdf
File-Format: application/pdf
Publication-Status: published as Collin-Dufresne, Pierre & Goldstein, Robert S. & Jones, Christopher S., 2009. "Can interest rate volatility be extracted from the cross section of bond yields?," Journal of Financial Economics, Elsevier, vol. 94(1), pages 47-66, October.
Abstract: Most affine models of the term structure with stochastic volatility (SV) predict that the variance of the short rate is simultaneously a linear combination of yields and the quadratic variation of the spot rate. However, we find empirically that the A1(3) SV model generates a time series for the variance state variable that is strongly negatively correlated with a GARCH estimate of the quadratic variation of the spot rate process. We then investigate affine models that exhibit "unspanned stochastic volatility (USV)." Of the models tested, only the A1(4) USV model is found to generate both realistic volatility estimates and a good cross-sectional fit. Our findings suggests that interest rate volatility cannot be extracted from the cross-section of bond prices. Separately, we propose an alternative to the canonical representation of affine models introduced by Dai and Singleton (2001). This representation has several advantages, including: (I) the state variables have simple physical interpretations such as level, slope and curvature, (ii) their dynamics remain affine and tractable, (iii) the model is econometrically identifiable, (iv) model-insensitive estimates of the state vector process implied from the term structure are readily available, and (v) it isolates those parameters which are not identifiable from bond prices alone if the model is specified to exhibit USV.
Handle: RePEc:nbr:nberwo:10756
Template-Type: ReDIF-Paper 1.0
Title: Socioeconomic Status and Medical Care Expenditures in Medicare Managed Care
Classification-JEL: I1
Author-Name: Kanika Kapur
Author-Person: pka399
Author-Name: Jeannette A. Rogowski
Author-Name: Vicki A. Freedman
Author-Name: Steven L. Wickstrom
Author-Name: John L. Adams
Author-Name: Jose J. Escarce
Note: EH
Number: 10757
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10757
File-URL: http://www.nber.org/papers/w10757.pdf
File-Format: application/pdf
Publication-Status: published as Kapur, Kanika, Jeannette A. Rogowski, Vicki A. Freedman, Steven L. Wickstrom, John L. Adams and Jose J. Escarce. "Socioeconomic Status and Medical Care Expenditures in Medicare Managed Care." Journal of Health Care for the Poor and Underserved 17, 4 (November 2006): 876-898.
Abstract: This study examined the effects of education, income, and wealth on medical care expenditures in two Medicare managed care plans. The study also sought to elucidate the pathways through which socioeconomic status (SES) affects expenditures, including preferences for health and medical care and ability to navigate the managed care system. We modeled the effect of SES on medical care expenditures using Generalized Linear Models, estimating separate models for each component of medical expenditures: inpatient, outpatient, physician, and other expenditures. We found that education, income, and wealth all affected medical care expenditures, although the effects of these variables differed across expenditure categories. Moreover, the effects of these SES variables were much smaller than the effects found in earlier studies of fee-for-service Medicare. The pathway variables also were associated with expenditures. Accounting for the pathways through which SES affects expenditures narrowed the effect of SES on expenditures; however, the change in the estimates was very small. Thus, although our measures of preferences and ability to navigate the system were associated with expenditures, they did not account for an appreciable share of the impact of SES on expenditures.
Handle: RePEc:nbr:nberwo:10757
Template-Type: ReDIF-Paper 1.0
Title: Patent Licensing and the Research University
Classification-JEL: I2; L3; O32
Author-Name: Richard A. Jensen
Author-Name: Marie C. Thursby
Author-Person: pth283
Note: ITI
Number: 10758
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10758
File-URL: http://www.nber.org/papers/w10758.pdf
File-Format: application/pdf
Abstract: We construct a dynamic model of university research that allows us to examine recent concerns that financial incentives associated with university patent licensing are detrimental to the traditional mission of US research universities. We assume a principal-agent framework in which the university administration is the principal and a faculty researcher is the agent. Whether or not the researcher remains in the university, and if so her choice of the amount of time to spend on basic and applied research, is complicated by the fact that she earns license income and prestige both inside and outside the university. Thus in contrast to usual principal agent models the participation constraint is endogenous. This, plus the fact that current research affects future knowledge stocks, allows us to show that it is far from obvious that licensing will damage basic research and education.
Handle: RePEc:nbr:nberwo:10758
Template-Type: ReDIF-Paper 1.0
Title: Explaining Diversities in Age-Specific Life Expectancies and Values of Life Saving: A Numerical Analysis
Classification-JEL: C6; D8; I1
Author-Name: Isaac Ehrlich
Author-Person: peh1
Author-Name: Yong Yin
Author-Person: pyi17
Note: EH
Number: 10759
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10759
File-URL: http://www.nber.org/papers/w10759.pdf
File-Format: application/pdf
Publication-Status: published as Ehrlich, Isaac and Yong Yin. "Explaining Diversities In Age-Specific Life Expectancies And Values Of Life Saving: A Numerical Analysis," Journal of Risk and Uncertainty, 2005, v31(2,Sep), 129-162.
Abstract: Little attempt has been made so far to quantify the extent to which individual willingness to spend on life protection may account for the observed trends and diversities in agespecific life expectancies across individuals and over time. We address these issues via calibrated simulations of a dynamic, life-cycle model of life protection in which life's end is a stochastic event, age-specific mortality risks are endogenous variables, and spending on life protection is set jointly with related insurance options: life insurance as well as annuities. A unique feature of our model is that it links age-specific mortality risks and implicit private values-of-life-saving (VLS) as "dual variables", and estimates them jointly. It also offers new insights about the concept and measurement of VLS. Life protection is estimated to have a non-negligible impact on age-specific life expectancies. It can account for significant portions of observed inequalities in life expectancies across population groups and over time, as well as for a wide range of empirical estimates of VLS produced via the conventional "willingness to pay" approach.
Handle: RePEc:nbr:nberwo:10759
Template-Type: ReDIF-Paper 1.0
Title: Optimal Fines and Auditing When Wealth is Costly to Observe
Author-Name: A. Mitchell Polinsky
Author-Person: ppo94
Note: LE
Number: 10760
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10760
File-URL: http://www.nber.org/papers/w10760.pdf
File-Format: application/pdf
Publication-Status: published as Polinsky, A. Mitchell. "Optimal Fines and Auditing When Wealth is Costly to Observe." International Review of Law and Economics 26(3): 323-335, September 2006
Abstract: This article studies optimal fines when an offender's wealth is private information that can be obtained by the enforcement authority only after a costly audit. I derive the optimal fine for the underlying offense, the optimal fine for misrepresenting one's wealth level, and the optimal audit probability. I demonstrate that the optimal fine for misrepresenting wealth equals the fine for the offense divided by the audit probability, and therefore generally exceeds the fine for the offense. The optimal audit probability is positive, increases as the cost of an audit declines, and equals unity if the cost is sufficiently low. If the optimal audit probability is less than unity, there are some individuals who are capable of paying the fine for the offense who misrepresent their wealth levels. I also show that the optimal fine for the offense results in underdeterrence due to the cost of auditing wealth levels.
Handle: RePEc:nbr:nberwo:10760
Template-Type: ReDIF-Paper 1.0
Title: The Optimal Use of Fines and Imprisonment When Wealth is Unobservable
Classification-JEL: D31; D62; H23; K14; K42
Author-Name: A. Mitchell Polinsky
Author-Person: ppo94
Note: LE
Number: 10761
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10761
File-URL: http://www.nber.org/papers/w10761.pdf
File-Format: application/pdf
Publication-Status: published as Polinsky, A. Mitchell. "The Optimal Use Of Fines And Imprisonment When Wealth Is Unobservable," Journal of Public Economics 90(4-5): 823-835, May 2006
Abstract: This article studies the optimal use of fines and imprisonment when an offender's level of wealth is private information that cannot be observed by the enforcement authority. In a model in which there are two levels of wealth, I derive the optimal mix of sanctions, including the imprisonment sentence imposed on offenders who do not pay the fine -- referred to as the "alternative" imprisonment sentence. Among other things, I demonstrate that if imprisonment sanctions are used, the optimal alternative imprisonment sentence is sufficiently high that high-wealth individuals prefer to pay a fine exceeding the wealth level of low-wealth individuals and bear a lower (possibly no) imprisonment sentence rather than to pretend to be low-wealth individuals. I also show that if the optimal enforcement system would rely exclusively on fines when wealth is observable, the inability to observe wealth is detrimental because higher fines then could not be levied on higher-wealth individuals. In this case, it may be desirable when wealth is unobservable to impose an imprisonment sentence on offenders who do not pay the fine -- who will be low-wealth offenders -- in order to induce high-wealth offenders to pay the fine. However, if the optimal enforcement system would employ both fines and imprisonment sentences when wealth is observable, the inability to observe wealth is not detrimental. In this case, the same sanctions would be chosen if wealth is unobservable and these sanctions lead high-wealth individuals to pay more than low-wealth individuals.
Handle: RePEc:nbr:nberwo:10761
Template-Type: ReDIF-Paper 1.0
Title: Effects of Child Health on Sources of Public Support
Classification-JEL: I38; I12
Author-Name: Nancy E. Reichman
Author-Name: Hope Corman
Author-Name: Kelly Noonan
Note: EH PE
Number: 10762
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10762
File-URL: http://www.nber.org/papers/w10762.pdf
File-Format: application/pdf
Publication-Status: published as Reichman, Nancy, Hope Corman and Kelly Noonan. “Effects of Child Health on Sources of Public Support.” Southern Economic Journal 73, 1 (July 2006): 136-156.
Abstract: We estimate the effects of having a child in poor health on the mother's receipt of both cash assistance and in-kind public support in the form of food, health care, and shelter. We control for a rich set of covariates, include state fixed effects, and test for the potential endogeneity of child health. Mothers with children in poor health are 5 percentage points (20%) more likely to rely on TANF and 16 percentage points more likely to rely on cash assistance (TANF and/or SSI) than those with healthy children. They are also more likely than those with healthy children to receive Medicaid and housing assistance, but not WIC or food stamps.
Handle: RePEc:nbr:nberwo:10762
Template-Type: ReDIF-Paper 1.0
Title: Will Job Testing Harm Minority Workers?
Classification-JEL: D63; D81; J15; J71
Author-Name: David H. Autor
Author-Person: pau9
Author-Name: David Scarborough
Note: LS
Number: 10763
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10763
File-URL: http://www.nber.org/papers/w10763.pdf
File-Format: application/pdf
Publication-Status: published as Autor, David and David Scarborough. "“Does Job Testing Harm Minority Workers? Evidence from Retail Establishments.” Quarterly Journal of Economics 123, 1 (November 2008): 219 – 277.
Abstract: Because minorities typically fare poorly on standardized tests, job testing is thought to pose an equity-efficiency trade-off: testing improves selection but reduces minority hiring. We develop a conceptual framework to assess when this tradeoff is likely to apply and evaluate the evidence for such a trade-off using data from a national retail firm whose 1,363 stores switched from informal to test-based worker screening over the course of on year. We document that testing yielded more productive hires at this firm -- raising median tenure by 10-plus percent. Consistent with prior research, minorities performed worse on the test. Yet, testing had no measurable impact on minority hiring, and productivity gains were uniformly large among minorities and non-minorities. These results suggest that job testing raised the precision of screening without introducing additional negative information about minority applicants, most plausibly because both the job test and the informal screen that preceded it were unbiased.
Handle: RePEc:nbr:nberwo:10763
Template-Type: ReDIF-Paper 1.0
Title: Shocks and Government Beliefs: The Rise and Fall of American Inflation
Classification-JEL: E5
Author-Name: Thomas Sargent
Author-Person: psa83
Author-Name: Noah Williams
Author-Person: pwi107
Author-Name: Tao Zha
Author-Person: pzh80
Note: EFG
Number: 10764
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10764
File-URL: http://www.nber.org/papers/w10764.pdf
File-Format: application/pdf
Publication-Status: published as Sargent, Thomas, Noah Williams and Tao Zha. "Shocks And Government Beliefs: The Rise And Fall Of American Inflation," American Economic Review, 2006, v96(4,Sep), 1193-1224.
Abstract: We use a Bayesian Markov Chain Monte Carlo algorithm to estimate a model that allows temporary gaps between a true expectational Phillips curve and the monetary authority's approximating non-expectational Phillips curve. A dynamic programming problem implies that the monetary authority's inflation target evolves as its estimated Phillips curve moves. Our estimates attribute the rise and fall of post WWII inflation in the US to an intricate interaction between the monetary authority's beliefs and economic shocks. Shocks in the 1970s altered the monetary authority's estimates and made it misperceive the tradeoff between inflation and unemployment. That caused a sharp rise in inflation in the 1970s. Our estimates say that policymakers updated their beliefs continuously. By the 1980s, their beliefs about the Phillips curve had changed enough to account for Volcker's conquest of US inflation in the early 1980s.
Handle: RePEc:nbr:nberwo:10764
Template-Type: ReDIF-Paper 1.0
Title: Technological Progress and Economic Transformation
Classification-JEL: D1; E1; J1; O3
Author-Name: Jeremy Greenwood
Author-Person: pgr12
Author-Name: Ananth Seshadri
Author-Person: pse72
Note: EFG
Number: 10765
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10765
File-URL: http://www.nber.org/papers/w10765.pdf
File-Format: application/pdf
Publication-Status: published as Greenwood, Jeremy & Seshadri, Ananth, 2005. "Technological Progress and Economic Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 19, pages 1225-1273 Elsevier.
Abstract: Growth theory can go a long way toward accounting for phenomena linked with U.S. economic development. Some examples are: (i) the secular decline in fertility between 1800 and 1980, (ii) the decline in agricultural employment and the rise in skill since 1800, (iii) the demise of child labor starting around 1900, (iv) the increase in female labor-force participation from 1900 to 1980, (v) the baby boom from 1936 to 1972. Growth theory models are presented to address all of these facts. The analysis emphasizes the role of technological progress as a catalyst for economic transformation.
Handle: RePEc:nbr:nberwo:10765
Template-Type: ReDIF-Paper 1.0
Title: Finance and Growth: Theory and Evidence
Classification-JEL: G0; O1
Author-Name: Ross Levine
Author-Person: ple61
Note: CF EFG IFM
Number: 10766
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10766
File-URL: http://www.nber.org/papers/w10766.pdf
File-Format: application/pdf
Publication-Status: published as Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934 Elsevier.
Abstract: This paper reviews, appraises, and critiques theoretical and empirical research on the connections between the operation of the financial system and economic growth. While subject to ample qualifications and countervailing views, the preponderance of evidence suggests that both financial intermediaries and markets matter for growth and that reverse causality alone is not driving this relationship. Furthermore, theory and evidence imply that better developed financial systems ease external financing constraints facing firms, which illuminates one mechanism through which financial development influences economic growth. The paper highlights many areas needing additional research.
Handle: RePEc:nbr:nberwo:10766
Template-Type: ReDIF-Paper 1.0
Title: Growth and Ideas
Classification-JEL: O40; E10
Author-Name: Charles I. Jones
Author-Person: pjo24
Note: EFG
Number: 10767
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10767
File-URL: http://www.nber.org/papers/w10767.pdf
File-Format: application/pdf
Publication-Status: published as Jones, Charles I., 2005. "Growth and Ideas," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 16, pages 1063-1111 Elsevier.
Abstract: Ideas are different from nearly all other economic goods in that they are nonrivalrous. This nonrivalry implies that production possibilities are likely to be characterized by increasing returns to scale, an insight that has profound implications for economic growth. The purpose of this chapter is to explore these implications.
Handle: RePEc:nbr:nberwo:10767
Template-Type: ReDIF-Paper 1.0
Title: The Impact of China on the Exports of Other Asian Countries
Classification-JEL: E5; F4
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Yeongseop Rhee
Author-Name: Hui Tong
Author-Person: pto159
Note: ITI
Number: 10768
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10768
File-URL: http://www.nber.org/papers/w10768.pdf
File-Format: application/pdf
Abstract: We analyze the impact of China's growth on the exports of other Asian countries. Our innovation is to distinguish the increase in China's demand for imports from its increased penetration of export markets. Using the gravity model, we disaggregate among commodity types and account for the endogeneity of Chinese exports. We confirm the tendency for China's exports to crowd out the exports of other Asian countries. But this effect is felt mainly in markets for consumer goods and hence by less-developed Asian countries, not in markets for capital goods or by the more advanced Asian economies for which machinery and equipment are a significant fraction of exports. At the same time, there has been a strong tendency for a rapidly growing China to suck in imports from its Asian neighbors. But this effect is mainly felt in markets for capital goods, where China's income elasticity of import demand is highest, and thus by the more advanced Asian economies. Hence, more and less developed Asian countries are being affected very differently by China's rise.
Handle: RePEc:nbr:nberwo:10768
Template-Type: ReDIF-Paper 1.0
Title: Social Networks and Trade Liberalization
Classification-JEL: A1
Author-Name: Manish Pandey
Author-Person: ppa287
Author-Name: John Whalley
Author-Person: pwh8
Note: ITI
Number: 10769
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10769
File-URL: http://www.nber.org/papers/w10769.pdf
File-Format: application/pdf
Publication-Status: published as Manish Pandey & John Whalley, 2009. "Social networks and trade liberalization," Applied Economics Letters, Taylor and Francis Journals, vol. 16(17), pages 1747-1749.
Abstract: We discuss how social considerations can affect the desirability of trade liberalization in a conventional small open economy model. We consider a representative family in which there are location specific network effects from interactions with other family members, such as joint consumption, joint emotional support, and coinsurance. The benefits an individual receives from the network they participate in are nonlinearly related to the number of family members located in urban and rural areas. Family members choose whether to locate in urban or rural areas and average and marginal network benefits differ. With differential network effects in urban and rural areas, in a model with traded urban and rural goods, free trade will no longer be the best policy. We show this through a numerical example, and suggest that the conventional economists case for free trade may need to be more nuanced once social considerations of this type are taken into account.
Handle: RePEc:nbr:nberwo:10769
Template-Type: ReDIF-Paper 1.0
Title: On the Industry Concentration of Actively Managed Equity Mutual Funds
Classification-JEL: G2
Author-Name: Marcin Kacperczyk
Author-Name: Clemens Sialm
Author-Person: psi59
Author-Name: Lu Zheng
Author-Person: pzh589
Note: CF AP
Number: 10770
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10770
File-URL: http://www.nber.org/papers/w10770.pdf
File-Format: application/pdf
Publication-Status: published as Marcin Kacperczyk & Clemens Sialm & Lu Zheng, 2005. "On the Industry Concentration of Actively Managed Equity Mutual Funds," Journal of Finance, American Finance Association, vol. 60(4), pages 1983-2011, 08.
Abstract: Mutual fund managers may decide to deviate from a well-diversified portfolio and concentrate their holdings in industries where they have informational advantages. In this paper, we study the relation between the industry concentration and the performance of actively managed U.S. mutual funds from 1984 to 1999. Our results indicate that, on average, more concentrated funds perform better after controlling for risk and style differences using various performance measures. This finding suggests that investment ability is more evident among managers who hold portfolios concentrated in a few industries.
Handle: RePEc:nbr:nberwo:10770
Template-Type: ReDIF-Paper 1.0
Title: The Pre-Producers
Classification-JEL: L0; G3
Author-Name: Boyan Jovanovic
Note: EFG PR
Number: 10771
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10771
File-URL: http://www.nber.org/papers/w10771.pdf
File-Format: application/pdf
Abstract: Until its sales of a product materialize, a firm is a "pre-producer" in the market for that product. That firm may may be a new start-up, or it may already sell other products. Firms that do not succeed in generating sales eventually become discouraged and move on to other activities. When this fate befalls a lot of firms, as it recently did in several IT-related businesses, the industry experiences a "shakeout." In the model that I will present, during the shakeout some firms switch to flatter, safer earnings. This switch raises earnings at the time of the shakeout but lowers them in the long run, and it therefore raises earnings-price ratios. This has happened on the Nasdaq since March, 2000 when the Nasdaq shakeout began.
Handle: RePEc:nbr:nberwo:10771
Template-Type: ReDIF-Paper 1.0
Title: Marriage and Divorce since World War II: Analyzing the Role of Technological Progress on the Formation of Households
Classification-JEL: E13; J12; J22; O11
Author-Name: Jeremy Greenwood
Author-Person: pgr12
Author-Name: Nezih Guner
Author-Person: pgu40
Note: EFG LS
Number: 10772
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10772
File-URL: http://www.nber.org/papers/w10772.pdf
File-Format: application/pdf
Publication-Status: published as Marriage and Divorce since World War II: Analyzing the Role of Technological Progress on the Formation of Households, Jeremy Greenwood, Nezih Guner. in NBER Macroeconomics Annual 2008, Volume 23, Acemoglu, Rogoff, and Woodford. 2009
Abstract: Since World War II there has been: (i) a rise in the fraction of time that married households allocate to market work, (ii) an increase in the rate of divorce, and (iii) a decline in the rate of marriage. What can explain this? It is argued here that technological progress in the household sector has saved on the need for labor at home. This makes it more feasible for singles to maintain their own home, and for married women to work. To address this question, a search model of marriage and divorce is developed. Household production benefits from labor-saving technological progress.
Handle: RePEc:nbr:nberwo:10772
Template-Type: ReDIF-Paper 1.0
Title: Do Acquirers With More Uncertain Growth Prospects Gain Less From Acquisitions?
Classification-JEL: G31; G32; G34
Author-Name: Sara B. Moeller
Author-Name: Frederik P. Schlingemann
Author-Person: psc684
Author-Name: Rene M. Stulz
Note: CF AP
Number: 10773
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10773
File-URL: http://www.nber.org/papers/w10773.pdf
File-Format: application/pdf
Publication-Status: published as Moeller, Sara B., Frederik P. Schlingemann and Rene M. Stulz. "Firm Size And The Gains From Acquisitions," Journal of Financial Economics, 2004, v73(2,Aug), 201-228
Abstract: Behavioral finance models imply that an increase in shares outstanding leads to a lower stock price for firms with greater diversity in opinion among investors. Information asymmetry models imply that share issues by firms with greater information asymmetries are accompanied by larger share price decreases. Valuation models predict a negative relation between uncertainty resolution and share prices. Acquisition announcements are used to investigate these predictions. We find acquirer abnormal returns for acquisitions of public firms paid for with equity (but not for acquisitions of private firms paid for with equity) are lower for firms with higher dispersion of analyst forecasts, larger change in dispersion of analyst forecasts, and higher idiosyncratic volatility. The opposite result holds for acquisitions of public firms paid for with cash for idiosyncratic volatility. We show that this evidence can best be explained by models that emphasize information asymmetries, but the behavioral models and valuation models explain part of the evidence.
Handle: RePEc:nbr:nberwo:10773
Template-Type: ReDIF-Paper 1.0
Title: Compatibility and Pricing with Indirect Network Effects: Evidence from ATMs
Classification-JEL: L1; L5; L8
Author-Name: Christopher R. Knittel
Author-Person: pkn5
Author-Name: Victor Stango
Author-Person: pst264
Note: PR
Number: 10774
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10774
File-URL: http://www.nber.org/papers/w10774.pdf
File-Format: application/pdf
Abstract: Incompatibility in markets with indirect network effects can affect prices if consumers value "mix and match" combinations of complementary network components. In this paper, we examine the effects of incompatibility using data from a classic market with indirect network effects: Automated Teller Machines (ATMs). Our sample covers a period during which higher ATM fees increased incompatibility between ATM cards (which are bundled with deposit accounts) and other banks' ATM machines. A series of hedonic regressions suggests that incompatibility strengthens the relationship between deposit account pricing and own ATMs, and weakens the relationship between deposit account pricing and competitors' ATMs. The effects of incompatibility are stronger in areas with high population density, suggesting that high travel costs increase both the strength of network effects and the importance of incompatibility in ATM markets.
Handle: RePEc:nbr:nberwo:10774
Template-Type: ReDIF-Paper 1.0
Title: Corruption and Reform: An Introduction
Classification-JEL: H1; N4; O1
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Claudia Goldin
Author-Person: pgo601
Note: LE DAE
Number: 10775
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10775
File-URL: http://www.nber.org/papers/w10775.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. and Claudia Goldin (eds.) Corruption and Reform: Lessons from America’s Economic History. Chicago: University of Chicago Press, 2006.
Publication-Status: published as Corruption and Reform: Introduction, Edward L. Glaeser, Claudia Goldin. in Corruption and Reform: Lessons from America's Economic History, Glaeser and Goldin. 2006
Abstract: The United States today, according to most studies, is among the least corrupt nations in the world. But America's past was checkered with political scandal and widespread corruption that would not seem unusual compared with the most corrupt developing nation today. We construct a "corruption and fraud index" using word counts from a large number of newspapers for 1815 to 1975, supplemented with other historical facts. The index reveals that America experienced a substantial decrease in corruption from 1870 to 1920, particularly from the late-1870s to the mid-1880s and again in the 1910s. At its peak in the 1870s the "corruption and fraud index" is about five times its level from the end of the Progressive Era to the 1970s. If the United States was once considerably more corrupt than it is today, then America's history should offer lessons about how to reduce corruption. How did America become a less corrupt polity, economy, and society? We review the findings and insights from a series of essays for a conference volume, Corruption and Reform: Lessons from America's History, for which this paper is the introduction that attempt to understand the remarkable evolution of corruption and reform in U.S. history.
Handle: RePEc:nbr:nberwo:10775
Template-Type: ReDIF-Paper 1.0
Title: When Can Changes in Expectations Cause Business Cycle Fluctuations in Neo-Classical Settings?
Classification-JEL: E3
Author-Name: Paul Beaudry
Author-Person: pbe35
Author-Name: Franck Portier
Author-Person: ppo12
Note: EFG
Number: 10776
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10776
File-URL: http://www.nber.org/papers/w10776.pdf
File-Format: application/pdf
Publication-Status: published as Beaudry, Paul & Portier, Franck, 2007. "When can changes in expectations cause business cycle fluctuations in neo-classical settings?," Journal of Economic Theory, Elsevier, vol. 135(1), pages 458-477, July.
Abstract: It is often argued that changes in expectation are an important driving force of the business cycle. However, it is well known that changes in expectations cannot generate positive co-movement between consumption, investment and employment in the most standard neo-classical business cycle models. This gives rise to the question of whether changes in expectation can cause business cycle fluctuations in neo-classical setting or whether such a phenomenon is inherently related to market imperfections. This paper offers a systematic exploration of this issue. Our finding is that expectation driven business cycle fluctuation can arise in neo-classical models when one allows for a sufficient rich description of the inter-sectorial production technology, however such a structure is rarely allowed in macro-models. In particular, the key characteristic which we isolate as giving rise to the possibility of Expectation Driven Business Cycles is that intermediate good producers exhibit cost complementarities (i.e., economies of scope) when supplying intermediate goods to different sectors of the economy.
Handle: RePEc:nbr:nberwo:10776
Template-Type: ReDIF-Paper 1.0
Title: Neighborhood Effects on Crime for Female and Male Youth: Evidence from a Randomized Housing Voucher Experiment
Classification-JEL: H43; I18; J23
Author-Name: Jeffrey R. Kling
Author-Person: pkl126
Author-Name: Jens Ludwig
Author-Name: Lawrence F. Katz
Author-Person: pka266
Note: PE CH
Number: 10777
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10777
File-URL: http://www.nber.org/papers/w10777.pdf
File-Format: application/pdf
Publication-Status: published as Revised and published in the Quarterly Journal of Economics 120:1 (February 2005), 87-130.
Abstract: The Moving to Opportunity (MTO) demonstration assigned housing vouchers via random lottery to public housing residents in five cities. We use the exogenous variation in residential locations generated by MTO to estimate neighborhood effects on youth crime and delinquency. The offer to relocate to lower-poverty areas reduces arrests among female youth for violent and property crimes, relative to a control group. For males the offer to relocate reduces arrests for violent crime, at least in the short run, but increases problem behaviors and property crime arrests. The gender difference in treatment effects seems to reflect differences in how male and female youths from disadvantaged backgrounds adapt and respond to similar new neighborhood environments.
Handle: RePEc:nbr:nberwo:10777
Template-Type: ReDIF-Paper 1.0
Title: Markets in China and Europe on the Eve of the Industrial Revolution
Classification-JEL: O1; N0; N7
Author-Name: Carol H. Shiue
Author-Name: Wolfgang Keller
Author-Person: pke8
Note: EFG DAE IFM ITI
Number: 10778
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10778
File-URL: http://www.nber.org/papers/w10778.pdf
File-Format: application/pdf
Publication-Status: published as Carol H. Shiue & Wolfgang Keller, 2007. "Markets in China and Europe on the Eve of the Industrial Revolution," American Economic Review, American Economic Association, vol. 97(4), pages 1189-1216, September.
Abstract: Prevailing views suggest the Industrial Revolution began in Europe because markets had gradually become more efficient and by the 18th century the scope of economic activity was far larger than in other parts of the world. This paper compares the actual performance of markets in Europe and China, two regions of the world that were relatively advanced in the pre-industrial period, but would start to industrialize about 150 years apart. The analysis covers economies that account for about two-fifths of the world's population in the mid-18th century, and it considers some three centuries of data. Our findings suggest that relative levels of market function in China and Europe were similar prior to the Industrial Revolution. Higher efficiency in Europe is seen only in the nineteenth century when industrialization was already underway. Moreover, these improvements occurred in a dramatic and sudden fashion, further casting doubt on an evolutionary view of market development. Rather than being a key condition for subsequent growth, gains in efficiency appeared simultaneously with the turning point of modern growth. We discuss the implications of these findings for a number of explanations for long-run growth and the Industrial Revolution.
Handle: RePEc:nbr:nberwo:10778
Template-Type: ReDIF-Paper 1.0
Title: Bulls, Bears, and Retirement Behavior
Classification-JEL: J14; J26
Author-Name: Courtney C. Coile
Author-Person: pco557
Author-Name: Phillip B. Levine
Author-Person: ple553
Note: AG LS
Number: 10779
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10779
File-URL: http://www.nber.org/papers/w10779.pdf
File-Format: application/pdf
Publication-Status: published as Courtney C. Coile & Phillip B. Levine, 2006. "Bulls, bears, and retirement behavior," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 59(3), pages 408-429, April.
Abstract: The historic boom and bust in the stock market over the past decade had the potential to significantly alter the retirement behavior of older workers. Previous research examining the impact of wealth shocks on labor supply supports the plausibility of this hypothesis. In this paper, we examine the relationship between stock market performance and retirement behavior using the Health and Retirement Study (HRS), Current Population Survey (CPS), and Survey of Consumer Finances (SCF). We first present a descriptive analysis of the wealth holdings of older households and simulate the labor supply response among stockholders necessary to generate observed patterns in retirement. We show that few households have substantial stock holdings and that they would have to be extremely responsive to market fluctuations to explain observed labor force patterns. We then exploit the unique pattern of boom and bust along with variation in stock exposure to generate a double quasi-experiment, comparing the retirement and labor force re-entry patterns over time of those more and less exposed to the market. Any difference in behavior that emerged during the boom should have reversed itself during the bust. We find no evidence that changes in the stock market drive aggregate trends in labor supply.
Handle: RePEc:nbr:nberwo:10779
Template-Type: ReDIF-Paper 1.0
Title: When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies
Classification-JEL: F41; E52; E62
Author-Name: Graciela L. Kaminsky
Author-Person: pka84
Author-Name: Carmen M. Reinhart
Author-Person: pre33
Author-Name: Carlos A. Vegh
Author-Person: pve34
Note: IFM
Number: 10780
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10780
File-URL: http://www.nber.org/papers/w10780.pdf
File-Format: application/pdf
Publication-Status: published as When It Rains, It Pours: Procyclical Capital Flows and Macroeconomic Policies, Graciela L. Kaminsky, Carmen M. Reinhart, Carlos A. Végh. in NBER Macroeconomics Annual 2004, Volume 19, Gertler and Rogoff. 2005
Abstract: Based on a sample of 104 countries, we document four key stylized facts regarding the interaction between capital flows, fiscal policy, and monetary policy. First, net capital inflows are procyclical (i.e., external borrowing increases in good times and falls in bad times) in most OECD and developing countries. Second, fiscal policy is procyclical (i.e., government spending increases in good times and falls in bad times) for the majority of developing countries. Third, for emerging markets, monetary policy appears to be procyclical (i.e., policy rates are lowered in good times and raised in bad times). Fourth, in developing countries - and particularly for emerging markets - periods of capital inflows are associated with expansionary macroeconomic policies and periods of capital outflows with contractionary macroeconomic policies. In such countries, therefore, when it rains, it does indeed pour.
Handle: RePEc:nbr:nberwo:10780
Template-Type: ReDIF-Paper 1.0
Title: Financing Consumption in an Aging Japan: The Role of Foreign Capital Inflows in Immigration
Classification-JEL: F2; F3; F4
Author-Name: Robert Dekle
Author-Person: pde414
Note: AG ITI
Number: 10781
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10781
File-URL: http://www.nber.org/papers/w10781.pdf
File-Format: application/pdf
Publication-Status: published as Dekle, Robert. "Financing Consumption In An Aging Japan: The Role Of Foreign Capital Inflows And Immigration," Journal of the Japanese and International Economies, 2004, v18(4,Dec), 506-527.
Abstract: We project the impact of demographic change on Japanese capital flows by simulating the impact of population aging on Japanese saving and investment rates. As aging depresses saving rates, in our baseline projections, we show that by 2015, foreign capital inflows will comprise about 15 percent of Japanese output. A distinguishing feature of this paper is that we compare the capital flows that occur without immigration to the capital inflows that would occur with immigration of 400,000 people annually. With the larger labor force from immigration and the larger induced capital accumulation, output will be 22 percent higher by 2020, and 50 percent higher by 2040. The higher output means that less capital needs to be imported; by 2015, Japan will be importing only 8 percent of its output.
Handle: RePEc:nbr:nberwo:10781
Template-Type: ReDIF-Paper 1.0
Title: Supply or Demand: Why is the Market for Long-Term Care Insurance So Small?
Classification-JEL: H0; I11; G22; J14
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Author-Name: Amy Finkelstein
Author-Person: pfi264
Note: AG EH PE
Number: 10782
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10782
File-URL: http://www.nber.org/papers/w10782.pdf
File-Format: application/pdf
Publication-Status: published as Brown, Jeffrey R. and Amy Finkelstein. "Why is the Market for Long-Term Care Insurance So Small?" Journal of Public Economics, Volume 91, Issue 10, November 2007, Pages 1967-1991
Abstract: Long-term care represents one of the largest uninsured financial risks facing the elderly in the United States. Whether the small size of this market is driven primarily by supply side market imperfections or by limitations to demand, however, is unresolved, largely due to the paucity of data about the structure of the private market. We provide what is to our knowledge the first empirical evidence on the pricing and benefit structure of long-term care insurance policies. We estimate that the typical policy purchased by a 65-year old has an average pricing load of about 18 percent and has a very limited benefit structure, covering only one-third of the expected present discounted value of long-term care expenditures. These findings are consistent with the presence of supply side market imperfections. However, we also find enormous gender differences in pricing -- typical loads are 44 cents on the dollar for men but better than actuarially fair for women -- that do not translate into differences in coverage. And, although purchased policies provide limited benefits, we demonstrate that more comprehensive policies are widely-available at similar loads, but are rarely purchased. These findings suggest that while supply-side market imperfections exist, they are not the primary cause of the small size of the private long-term care insurance market.
Handle: RePEc:nbr:nberwo:10782
Template-Type: ReDIF-Paper 1.0
Title: Working the System: Firm Learning and the Antidumping Process
Classification-JEL: F13
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Note: ITI
Number: 10783
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10783
File-URL: http://www.nber.org/papers/w10783.pdf
File-Format: application/pdf
Publication-Status: published as Blonigen, Bruce A. “Working the System: Firm Learning and the Antidumping Process.” European Journal of Political Economy, Vol. 22 (September 2006): 715-731.
Abstract: This paper takes the first systematic look at how prior experience by US firms in filing US AD petitions affects future AD filing activity and outcomes. Such prior experience may affect both the cost of filing petitions, as well as the likelihood of successful outcomes and dumping margin magnitudes. Statistical analysis of data on US AD cases finds that prior AD experience leads to greater filing activity and likelihood of affirmative decisions or suspension agreements, but significantly lower dumping margins. The latter result suggests that experience does not affect dumping margins as much as it lowers filing costs, leading to petitioning of weaker cases.
Handle: RePEc:nbr:nberwo:10783
Template-Type: ReDIF-Paper 1.0
Title: Household Expenditure and the Income Tax Rebates of 2001
Classification-JEL: E21; E62; H31
Author-Name: David S. Johnson
Author-Name: Jonathan A. Parker
Author-Person: ppa21
Author-Name: Nicholas S. Souleles
Author-Person: pso104
Note: EFG ME PE
Number: 10784
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10784
File-URL: http://www.nber.org/papers/w10784.pdf
File-Format: application/pdf
Publication-Status: published as David S. Johnson & Jonathan A. Parker & Nicholas S. Souleles, 2006. "Household Expenditure and the Income Tax Rebates of 2001," American Economic Review, American Economic Association, vol. 96(5), pages 1589-1610, December.
Abstract: Under the Economic Growth and Tax Relief Reconciliation Act of 2001, most U.S. taxpayers received a tax rebate between July and September, 2001. The week in which the rebate was mailed was based on the second-to-last digit of the taxpayer's Social Security number, a digit that is effectively randomly assigned. Using special questions about the rebates added to the Consumer Expenditure Survey, we exploit this historically unique experiment to measure the change in consumption expenditures caused by receipt of the rebate and to test the Permanent Income Hypothesis and related models. We find that households spent about 20-40 percent of their rebates on non-durable goods during the three-month period in which their rebates were received, and roughly another third of their rebates during the subsequent three-month period. The implied effects on aggregate consumption demand are significant. The estimated responses are largest for households with relatively low liquid wealth and low income, consistent with liquidity constraints.
Handle: RePEc:nbr:nberwo:10784
Template-Type: ReDIF-Paper 1.0
Title: The Comovement of Returns and Investment Within the Multinational Firm
Classification-JEL: F21; F23; F36; F42; G15
Author-Name: Mihir A. Desai
Author-Name: C. Fritz Foley
Note: CF PE
Number: 10785
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10785
File-URL: http://www.nber.org/papers/w10785.pdf
File-Format: application/pdf
Publication-Status: published as The Comovement of Returns and Investment within the Multinational Firm, Mihir A. Desai, C. Fritz Foley. in NBER International Seminar on Macroeconomics 2004, Clarida, Frankel, Giavazzi, and West. 2006
Abstract: Can financial integration, particularly the cross-border investments of multinational firms, help explain the synchronization of business cycles? This paper presents evidence on the comovement of returns and investment within U.S. multinational firms to address this question. These firms constitute significant fractions of economic output and investment in most large economies, suggesting that they could create significant economic linkages. Aggregate measures of rates of return and investment rates of U.S. multinational firms located in different countries are highly correlated across countries. Firm-level regressions demonstrate that rates of return and investment rates of affiliates are highly correlated with the rates of return and investment of the affiliate's parent and other affiliates within the same parent system, controlling for country and industry factors. The evidence on these interrelationships and the importance of multinationals to local economies suggests that global firms may be an important channel for transmitting economic shocks. This evidence also sheds light on asset pricing puzzles related to the diversification benefits provided by multinational firms.
Handle: RePEc:nbr:nberwo:10785
Template-Type: ReDIF-Paper 1.0
Title: Contingent Reserves Management: An Applied Framework
Classification-JEL: E2; E3; F3; F4; G0; C1
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Stavros Panageas
Author-Person: ppa250
Note: EFG IFM
Number: 10786
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10786
File-URL: http://www.nber.org/papers/w10786.pdf
File-Format: application/pdf
Publication-Status: published as Ricardo J. Caballero G. & Stavros Panageas, 2005. "Contingent Reserves Management: an Applied Framework," Journal EconomÃa Chilena (The Chilean Economy), Central Bank of Chile, vol. 8(2), pages 45-56, August.
Publication-Status: published as Caballero, Ricardo, and Stavros Panageas. 2006."Contingent Reserves Management: An Applied Framework." In "External Vulnerability and Preventive Policies," edition 1, volume 10, edited by Ricardo Caballero, César Calderón, Luis Felipe Céspedes, and Norman Loayza (Series Editor), Central Banking, Analysis, and Economic Policies Book Series, Central Bank of Chile, chapter 12, pages 399-420
Abstract: One of the most serious problems that a central bank in an emerging market economy can face, is the sudden reversal of capital inflows. Hoarding international reserves can be used to smooth the impact of such reversals, but these reserves are seldom sufficient and always expensive to hold. In this paper we argue that adding richer hedging instruments to the portfolios held by central banks can significantly improve the efficiency of the anti-sudden stop mechanism. We illustrate this point with a simple quantitative hedging model, where optimally used options and futures on the S&P100's implied volatility index (VIX), increases the expected reserves available during sudden stops by as much as 40 percent.
Handle: RePEc:nbr:nberwo:10786
Template-Type: ReDIF-Paper 1.0
Title: What Does the Public Know about Economic Policy, and How Does It Know It?
Classification-JEL: D70; E60
Author-Name: Alan S. Blinder
Author-Person: pbl41
Author-Name: Alan B. Krueger
Author-Person: pkr63
Note: EFG PE
Number: 10787
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10787
File-URL: http://www.nber.org/papers/w10787.pdf
File-Format: application/pdf
Publication-Status: published as Author-Name: Alan S. Blinder & Alan B. Krueger, 2004. "What Does the Public Know about Economic Policy, and How Does It Know It?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2004-1), pages 327-397.
Abstract: Public opinion influences politicians, and therefore influences public policy decisions. What are the roles of self-interest, knowledge, and ideology in public opinion formation? And how do people learn about economic issues? Using a new, specially-designed survey, we find that most respondents express a strong desire to be well informed on economic policy issues, and that television is their dominant source of information. On a variety of major policy issues (e.g., taxes, social security, health insurance), ideology is the most important determinant of public opinion, while measures of self-interest are the least important. Knowledge about the economy ranks somewhere in between.
Handle: RePEc:nbr:nberwo:10787
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries
Classification-JEL: H6
Author-Name: Silvia Ardagna
Author-Name: Francesco Caselli
Author-Person: pca205
Author-Name: Timothy Lane
Note: EFG PE
Number: 10788
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10788
File-URL: http://www.nber.org/papers/w10788.pdf
File-Format: application/pdf
Publication-Status: published as Ardagna, Silvia, Francesco Caselli, and Timothy Lane. "Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries." B.E. Journal of Macroeconomics: Topics in Macroeconomics 7, 1 (2007).
Abstract: We use a panel of 16 OECD countries over several decades to investigate the effects of government debts and deficits on long-term interest rates. In simple static specifications, a one-percentage-point increase in the primary deficit relative to GDP increases contemporaneous long-term interest rates by about 10 basis points. In a vector autoregression (VAR), the same shock leads to a cumulative increase of almost 150 basis points after 10 years. The effect of debt on interest rates is non-linear: only for countries with above-average levels of debt does an increase in debt affect the interest rate. World fiscal policy is also important: an increase in total OECD-government borrowing increases each country's interest rates. However, domestic fiscal policy continues to affect domestic interest rates even after controlling for worldwide debts and deficits.
Handle: RePEc:nbr:nberwo:10788
Template-Type: ReDIF-Paper 1.0
Title: Subjective Mortality Risk and Bequests
Classification-JEL: D91; C81
Author-Name: Li Gan
Author-Person: pga94
Author-Name: Guan Gong
Author-Name: Michael Hurd
Author-Person: phu137
Author-Name: Daniel McFadden
Note: AG
Number: 10789
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10789
File-URL: http://www.nber.org/papers/w10789.pdf
File-Format: application/pdf
Publication-Status: published as Gan, Li & Gong, Guan & Hurd, Michael & McFadden, Daniel, 2015. "Subjective mortality risk and bequests," Journal of Econometrics, Elsevier, vol. 188(2), pages 514-525.
Abstract: This paper investigates whether subjective expectations about future mortality affect consumption and bequests motives. We estimate a dynamic life-cycle model based on subjective survival rates and wealth from the panel dataset Asset and Health Dynamics among Oldest Old. We find that bequest motives are small on average, which indicates that most bequests are involuntary or accidental. Moreover, parameter estimates using subjective mortality risk perform better in predicting out-of-sample wealth levels than estimates using life table mortality risks, suggesting that decisions about consumption and saving are influenced more strongly by individual-level beliefs about mortality risk than by group level mortality risk.
Handle: RePEc:nbr:nberwo:10789
Template-Type: ReDIF-Paper 1.0
Title: Putting the Brakes on Sudden Stops: The Financial Frictions-Moral Hazard Tradeoff of Asset Price Guarantees
Classification-JEL: F41; F32; E44; D52
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Author-Name: Ceyhun Bora Durdu
Author-Person: pdu88
Note: IFM
Number: 10790
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10790
File-URL: http://www.nber.org/papers/w10790.pdf
File-Format: application/pdf
Publication-Status: published as Enrique G. Mendoza & Ceyhun Bora Durdu, 2004. "Putting the brakes on Sudden Stops: the financial frictions - moral hazard tradeoff of asset price guarantees," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
Abstract: The hypothesis that Sudden Stops to capital inflows in emerging economies may be caused by global capital market frictions, such as collateral constraints and trading costs, suggests that Sudden Stops could be prevented by offering price guarantees on the emerging-markets asset class. Providing these guarantees is a risky endeavor, however, because they introduce a moral-hazard-like incentive similar to those that are also viewed as a cause of emerging markets crises. This paper studies this financial frictions-moral hazard tradeoff using an equilibrium asset-pricing model in which margin constraints, trading costs, and ex-ante price guarantees interact in the determination of asset prices and macroeconomic dynamics. In the absence of guarantees, margin calls and trading costs create distortions that produce Sudden Stops driven by occasionally binding credit constraints and Irving Fisher's debt-deflation mechanism. Price guarantees contain the asset deflation by creating another distortion that props up the foreign investors' demand for emerging markets assets. Quantitative simulation analysis shows the strong interaction of these two distortions in driving the dynamics of asset prices, consumption and the current account. Price guarantees are found to be effective for containing Sudden Stops but at the cost of introducing potentially large distortions that could lead to 'overvaluation' of emerging markets assets.
Handle: RePEc:nbr:nberwo:10790
Template-Type: ReDIF-Paper 1.0
Title: The Rise of the Fourth Estate: How Newspapers Became Informative and Why It Mattered
Classification-JEL: H1; N4; O1
Author-Name: Matthew Gentzkow
Author-Person: pge43
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Claudia Goldin
Author-Person: pgo601
Note: DAE LE
Number: 10791
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10791
File-URL: http://www.nber.org/papers/w10791.pdf
File-Format: application/pdf
Publication-Status: published as The Rise of the Fourth Estate. How Newspapers Became Informative and Why It Mattered, Matthew Gentzkow, Edward L. Glaeser, Claudia Goldin. in Corruption and Reform: Lessons from America's Economic History, Glaeser and Goldin. 2006
Abstract: A free and informative press is widely agreed to be crucial to the democratic process today. But throughout much of the nineteenth century U.S. newspapers were often public relations tools funded by politicians, and newspaper independence was a rarity. The newspaper industry underwent fundamental changes between 1870 and 1920 as the press became more informative and less partisan. Whereas 11 percent of urban dailies were "independent" in 1870, 62 percent were in 1920. The rise of the informative press was the result of increased scale and competitiveness in the newspaper industry caused by technological progress in the newsprint and newspaper industries. We examine the press coverage surrounding two major political scandals -- Credit Mobilier in the early 1870s and Teapot Dome in the 1920s. The analysis demonstrates a sharp reduction in bias and charged language in the half century after 1870. From 1870 to 1920, when corruption appears to have declined significantly within the United States, the press became more informative, less partisan, and expanded its circulation considerably. It seems a reasonable hypothesis that the rise of the informative press was one of the reasons why the corruption of the Gilded Age was sharply reduced during the subsequent Progressive Era.
Handle: RePEc:nbr:nberwo:10791
Template-Type: ReDIF-Paper 1.0
Title: Designing Optimal Disability Insurance: A Case for Asset Testing
Classification-JEL: E6; H2; H3
Author-Name: Mikhail Golosov
Author-Person: pgo200
Author-Name: Aleh Tsyvinski
Note: PE
Number: 10792
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10792
File-URL: http://www.nber.org/papers/w10792.pdf
File-Format: application/pdf
Publication-Status: published as Golosov, Mikhail and Aleh Tsyvinski. "Designing Optimal Disability Insurance: A Case For Asset Testing," Journal of Political Economy, 2006, v114(2,Apr), 257-279.
Abstract: The paper analyzes an implementation of an optimal disability insurance system as a competitive equilibrium with taxes. The problem is modeled as a dynamic mechanism design problem in which disability is unobservable. We show that an asset-tested disability system in which a disability transfer is paid only if an agent has assets below a specified maximum implements the optimum. The logic behind the result is as follows: we show that an agent who falsely claims disability has higher savings than a truly disabled agent, and an asset test prevents false claimants from receiving disability. We also evaluate welfare benefits of asset testing. For a calibrated economy, we numerically compare the optimal system to the best system without asset testing. We find that gains of asset testing are significant and equal to about 0.65% of consumption.
Handle: RePEc:nbr:nberwo:10792
Template-Type: ReDIF-Paper 1.0
Title: New Goods and the Transition to a New Economy
Classification-JEL: E13; O11; O41
Author-Name: Jeremy Greenwood
Author-Person: pgr12
Author-Name: Gokce Uysal
Author-Person: puy1
Note: EFG DAE
Number: 10793
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10793
File-URL: http://www.nber.org/papers/w10793.pdf
File-Format: application/pdf
Publication-Status: published as Greenwood, Jeremy and Gokce Uysal. "New Goods And The Transition To A New Economy," Journal of Economic Growth, 2005, v10(2,Jun), 99-134.
Abstract: The U.S. went through a remarkable structural transformation between 1800 and 2000. In 1800 the majority of people worked in agriculture. Barely anyone did by 2000. What caused the rapid demise of agriculture in the economy? The analysis here concentrates on the development of new consumer goods associated with technological progress. The introduction of new goods into the framework lessens the need to rely on satiation points, subsistence levels of consumption, and the like. The analysis suggests that between 1800 and 2000 economic welfare grew by at least 1.5 percent a year, and maybe as much as 10 percent annually, the exact number depending upon the metric preferred.
Handle: RePEc:nbr:nberwo:10793
Template-Type: ReDIF-Paper 1.0
Title: Investor Sentiment Measures
Classification-JEL: G12; G14
Author-Name: Lily Qiu
Author-Person: pqi19
Author-Name: Ivo Welch
Author-Person: pwe95
Note: CF AP
Number: 10794
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10794
File-URL: http://www.nber.org/papers/w10794.pdf
File-Format: application/pdf
Abstract: This paper compares investor sentiment measures based on consumer confidence surveys with measures extracted from the closed-end fund discount (CEFD). Our evidence suggests that these two kinds of sentiment measures do not correlate well with one another. For a short 2 - 4 year period in which we have direct investor sentiment survey data from UBS/Gallup, only the consumer confidence correlates well with investor sentiment. Further, only the consumer confidence based measure can robustly explain the small-firm return spread and the return spread between stocks held disproportionately by retail investors and those held by institutional investors. Surprisingly, there is even a hint that the consumer confidence measure can explain closed-end fund IPO activity, while the CEFD cannot. In sum, our evidence supports the view that sentiment plays a role in financial markets, but that the CEFD may be the wrong measure of sentiment.
Handle: RePEc:nbr:nberwo:10794
Template-Type: ReDIF-Paper 1.0
Title: Anatomy of the Rise and Fall of a Price-Fixing Conspiracy: Auctions at Sotheby's and Christie's
Classification-JEL: D44; K21; L41
Author-Name: Orley Ashenfelter
Author-Person: pas9
Author-Name: Kathryn Graddy
Author-Person: pgr151
Note: IO LE
Number: 10795
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10795
File-URL: http://www.nber.org/papers/w10795.pdf
File-Format: application/pdf
Publication-Status: published as Ashenfelter, Orley and Kathryn Graddy. "Anatomy of the Rise and Fall of a Price-Fixing Conspiracy: Auctions at Sotheby's and Christies's." Journal of Competition Law & Economic 1, 1 (March 2005).
Abstract: The Sotheby's/Christie's price-fixing scandal that ended in the public trial of Alfred Taubman provides a unique window on a number of key economic and antitrust policy issues related to the use of the auction system. The trial provided detailed evidence as to how the price fixing worked, and the economic conditions under which it was started and began to fall apart. The outcome of the case also provides evidence on the novel auction process used to choose the lead counsel for the civil settlement. Finally, though buyers received the bulk of the damages, a straightforward application of the economic theory of auctions shows that it is unlikely that successful buyers as a group were injured.
Handle: RePEc:nbr:nberwo:10795
Template-Type: ReDIF-Paper 1.0
Title: The Changing Association Between Prenatal Participation in WIC and Birth Outcomes in New York City
Author-Name: Ted Joyce
Author-Person: pjo112
Author-Name: Diane Gibson
Author-Name: Silvie Colman
Note: EH CH
Number: 10796
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10796
File-URL: http://www.nber.org/papers/w10796.pdf
File-Format: application/pdf
Publication-Status: published as Joyce, T., Gibson, D. and S. Colman. “The Changing Association between Prenatal Participation in WIC and Birth Outcomes in New York City.” Journal of Policy Analysis and Management 24, 4 (2005): 663-685.
Abstract: We analyze the relationship between prenatal WIC participation and birth outcomes in New York City from 1988-2001. The analysis is unique for several reasons. First, we restrict the analysis to women on Medicaid and or WIC who have no previous live births and who initiate prenatal care within the first four months of pregnancy. Our goal is to lessen heterogeneity between WIC and non-WIC participants by limiting the sample to women who initiate prenatal care early and who have no experience with WIC from a previous pregnancy. Second, we focus on measures of fetal growth distinct from preterm birth, since there is little clinical support for a link between nutritional supplementation and premature delivery. Third, we analyze a large sub-sample of twin deliveries. Multifetal pregnancies increase the risk of anemia and fetal growth retardation and thus, may benefit more than singletons from nutritional supplementation. We find no relationship between prenatal WIC participation and measures of fetal growth except among a sub-sample of US-born Blacks between 1990-1992. A similarly sporadic pattern of association exists among US-born Black twins. Our finding that the modest association between WIC and fetal growth is limited to a specific racial and ethnic group during specific years and even specific ages suggests that the protective effect of prenatal WIC on adverse birth outcomes in New York City has been minimal.
Handle: RePEc:nbr:nberwo:10796
Template-Type: ReDIF-Paper 1.0
Title: The Performance of the Pivotal-Voter Model in Small-Scale Elections: Evidence from Texas Liquor Referenda
Classification-JEL: D7
Author-Name: Stephen Coate
Author-Person: pco66
Author-Name: Michael Conlin
Author-Name: Andrea Moro
Author-Person: pmo78
Note: PE
Number: 10797
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10797
File-URL: http://www.nber.org/papers/w10797.pdf
File-Format: application/pdf
Publication-Status: published as Stephen Coate & Michael Conlin & Andrea Moro, 2008. "The performance of pivotal-voter models in small-scale elections: Evidence from Texas liquor referenda," Journal of Public Economics, vol 92(3-4), pages 582-596.
Abstract: How well does the pivotal-voter model explain voter participation in small-scale elections? This paper explores this question using data from Texas liquor referenda. It first structurally estimates the parameters of a pivotal-voter model using the Texas data. It then uses the estimates to evaluate both the within and out-of-sample performance of the model. The analysis shows that the model is capable of predicting turnout in the data fairly well, but tends, on average, to predict closer electoral outcomes than are observed in the data. This difficulty allows the pivotal-voter model to be outperformed by a simple alternative model based on the idea of expressive voting.
Handle: RePEc:nbr:nberwo:10797
Template-Type: ReDIF-Paper 1.0
Title: Migration, Social Standards and Replacement Incomes: How to Protect Low-income Workers in the Industrialized Countries Against the Forces of Globalization and Market Integration
Classification-JEL: F15; F22; I38; H5; J61
Author-Name: Hans-Werner Sinn
Author-Person: psi146
Note: PE
Number: 10798
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10798
File-URL: http://www.nber.org/papers/w10798.pdf
File-Format: application/pdf
Publication-Status: published as Sinn, Hans-Werner. "Migration And Social Replacement Incomes: How To Protect Low-Income Workers In The Industrialized Countries Against The Forces Of Globalization And Market Integration," International Tax and Public Finance, 2005, v12(4,Aug), 375-393.
Abstract: This paper discusses how an industrialized country could defend the wages and social benefits of its unskilled workers against wage competition from immigrants. It shows that fixing social standards harms the workers and that fixing social replacement incomes implies migration into unemployment. Defending wages with replacement incomes brings about first-order efficiency losses that outweigh the budget cost to the government. By contrast, wage subsidies involve much smaller welfare losses. While the exclusion of migrants from a national replacement program does not improve the situation, the (temporary) exclusion of migrants from a national subsidy program makes it possible to avoid a distortion of the migration pattern.
Handle: RePEc:nbr:nberwo:10798
Template-Type: ReDIF-Paper 1.0
Title: Healthcare Markets, the Safety Net and Access to Care Among the Uninsured
Classification-JEL: I1
Author-Name: Carole Roan Gresenz
Author-Name: Jeanette A. Rogowski
Author-Name: Jose Escarce
Note: EH
Number: 10799
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10799
File-URL: http://www.nber.org/papers/w10799.pdf
File-Format: application/pdf
Abstract: We use nationally representative Medical Expenditure Panel Survey (MEPS) data linked with data from multiple secondary sources to study the relationship between access to care among the uninsured and the local healthcare market and safety net. We find that distances between the rural uninsured and safety net providers such as hospital emergency rooms, public hospitals, migrant health centers, public housing primary care programs, and community health centers are significantly associated with utilization of a variety of healthcare services. In urban areas, we find that the capacity of the safety net and the pervasiveness and competitiveness of managed care have a significant relationship with healthcare utilization. Our findings suggest that facilitating transport to safety net providers and increasing the number of such providers are likely to improve access to care among the rural uninsured. By contrast, policies oriented toward enhancing funding for the safety net and increasing the capacity of safety net providers are likely to be important to ensuring access among the urban uninsured.
Handle: RePEc:nbr:nberwo:10799
Template-Type: ReDIF-Paper 1.0
Title: Inequality, Nonhomothetic Preferences, and Trade: A Gravity Approach
Classification-JEL: F1
Author-Name: Muhammed Dalgin
Author-Name: Devashish Mitra
Author-Person: pmi161
Author-Name: Vitor Trindade
Author-Person: ptr67
Note: ITI
Number: 10800
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10800
File-URL: http://www.nber.org/papers/w10800.pdf
File-Format: application/pdf
Publication-Status: published as Muhammed Dalgin & Vitor Trindade & Devashish Mitra, 2008. "Inequality, Nonhomothetic Preferences, and Trade: A Gravity Approach," Southern Economic Journal, Southern Economic Association, vol. 74(3), pages 747-774, January.
Abstract: In this paper, we show that inequality is an important determinant of import demand, in that it augments the standard gravity model in a significant way. We interpret this result with the aid of a model in which tastes are nonhomothetic. Classification of products, based on the correlation between household budget shares in the US and income, into "luxuries" and "necessities," works very well in our analysis when we restrict the analysis to developed importing countries. While the imports of luxuries increase with the importing country's inequality, imports of necessities decrease with it. Furthermore, we find that an increase in the level of inequality in the importing country generally leads to an increase in imports from developed countries, and to a reduction in imports from low-income countries.
Handle: RePEc:nbr:nberwo:10800
Template-Type: ReDIF-Paper 1.0
Title: Transaction Costs: Valuation Disputes, Bi-Lateral Monopoly Bargaining and Third-Party Effects in Water Rights Exchanges. The Owens Valley Transfer to Los Angeles
Classification-JEL: N5; Q2
Author-Name: Gary D. Libecap
Author-Person: pli409
Note: DAE
Number: 10801
Creation-Date: 2004-09
Order-URL: http://www.nber.org/papers/w10801
File-URL: http://www.nber.org/papers/w10801.pdf
File-Format: application/pdf
Abstract: Between 1905 and 1934 over 869 farmers in Owens Valley, California sold their land and associated water rights to Los Angeles, 250 miles to the southwest. This agriculture-to-urban water transfer increased Los Angeles' water supply by over 4 times, making the subsequent dramatic growth of the semi-arid city possible, generating large economic returns. The exchange took water from a marginal agricultural area and transferred it via the Los Angeles Aqueduct. No other sources of water became available for the city until 1941 with the arrival of water from Hoover Dam via the California Aqueduct. The Owens Valley transfer was the first and last, large-scale voluntary market exchange of water from agriculture to urban. Despite gains to both parties from the re-allocation of water to higher-valued uses, the Owens Valley transfer serves today as a metaphor, cautioning any agricultural region against water sales to urban areas. In this paper I examine the bargaining involved in the Owens Valley water transfer to determine why it was so contentious and became so notorious. I focus on valuation disputes, bi-lateral monopoly, and third party effects. I also examine the impact of the transfer on Owens Valley and Los Angeles land owners. The results suggest gains to both groups. Broader conclusions for bargaining, when the aggregate gains from trade are enormous, but distribution very skewed, are drawn.
Handle: RePEc:nbr:nberwo:10801
Template-Type: ReDIF-Paper 1.0
Title: Jurisdictional Advantage
Classification-JEL: O1; R5; R3
Author-Name: Maryann Feldman
Author-Name: Roger Martin
Note: PR
Number: 10802
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10802
File-URL: http://www.nber.org/papers/w10802.pdf
File-Format: application/pdf
Publication-Status: published as Feldman, Maryann and Roger Martin. "Constructing Jurisdictional Advantage," Research Policy, 2005, v34(8,Oct), 1235-1249.
Publication-Status: published as Jurisdictional Advantage, Maryann Feldman, Roger Martin. in Innovation Policy and the Economy, Volume 5, Jaffe, Lerner, and Stern. 2005
Abstract: Our objective in this paper is to define jurisdictional advantage, the recognition that location is critical to firms' innovative success and that every location has unique assets that are not easily replicated. The purpose is to be normative and policy oriented. Drawing from the well-developed literature on corporate strategy, we consider analogies to cities in their search for competitive advantage. In contrast to the more passive term locational advantage, our use of the term jurisdiction denotes geographically-defined legal and political decision-making authority and coordination. Thus, jurisdictions may be constructed and managed to promote a coherent activity set. We review recent advances in our understanding of patterns of urban specialization and the composition of activities within cities, which suggest strategies that may generate economic growth as well as those strategies to avoid. This paper then considers the role of firms and their responsibility to jurisdictions in light of the net benefits received from place-specific externalities, and concludes by considering the challenges to implementing jurisdictional advantage.
Handle: RePEc:nbr:nberwo:10802
Template-Type: ReDIF-Paper 1.0
Title: A Revealed Preference Ranking of U.S. Colleges and Universities
Classification-JEL: I2; C11; C25
Author-Name: Christopher Avery
Author-Person: pav7
Author-Name: Mark Glickman
Author-Name: Caroline Hoxby
Author-Person: pho46
Author-Name: Andrew Metrick
Author-Person: pme99
Note: ED
Number: 10803
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10803
File-URL: http://www.nber.org/papers/w10803.pdf
File-Format: application/pdf
Publication-Status: published as Christopher N. Avery & Mark E. Glickman & Caroline M. Hoxby & Andrew Metrick, 2013. "A Revealed Preference Ranking of U.S. Colleges and Universities," The Quarterly Journal of Economics, Oxford University Press, vol. 128(1), pages 425-467.
Abstract: We show how to construct a ranking of U.S. undergraduate programs based on students' revealed preferences. We construct examples of national and regional rankings, using hand-collected data on 3,240 high- achieving students. Our statistical model extends models used for ranking players in tournaments, such as chess or tennis. When a student makes his matriculation decision among colleges that have admitted him, he chooses which college "wins" in head-to-head competition. The model exploits the information contained in thousands of these wins and losses. Our method produces a ranking that would be difficult for a college to manipulate. In contrast, it is easy to manipulate the matriculation rate and the admission rate, which are the common measures of preference that receive substantial weight in highly publicized college rating systems. If our ranking were used in place of these measures, the pressure on colleges to practice strategic admissions would be relieved.
Handle: RePEc:nbr:nberwo:10803
Template-Type: ReDIF-Paper 1.0
Title: Why Do Households Without Children Support Local Public Schools?
Classification-JEL: H4; H7; I2; R31
Author-Name: Christian A. L. Hilber
Author-Person: phi46
Author-Name: Christopher J. Mayer
Author-Person: pma212
Note: ED PE
Number: 10804
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10804
File-URL: http://www.nber.org/papers/w10804.pdf
File-Format: application/pdf
Publication-Status: published as Hilber, Christian and Christopher Mayer. "Why do households without children support local public schools? Linking house price capitalization to school spending." Journal of Urban Economics 65, 1 (January 2009): 74-90.
Abstract: While residents receive similar benefits from many local government programs, only about one-third of all households have children in public schools. We argue that capitalization of school spending into house prices can encourage residents to support spending on schools, even if the residents themselves will never have children in schools. We identify a proxy for the extent of capitalization-the supply of land available for new development-and show that in response to a plausibly exogenous spending shock in Massachusetts, towns with little undeveloped land have larger changes in house prices, but smaller changes in quantity (construction). Towns with little available land also spend more on schools. We extend these results using data from school districts in 46 states, showing that per pupil spending is positively related to the percentage of developed land. This positive correlation persists only in districts where the median resident is a homeowner and is stronger in districts with more elderly residents who do not use school services and have a shorter expected duration in their home. These findings support models in which house price capitalization encourages more efficient provision of public services and may explain why some elderly residents support school spending.
Handle: RePEc:nbr:nberwo:10804
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Expected Marginal Rate of Substitution: Exploiting Idiosyncratic Risk
Classification-JEL: G14
Author-Name: Robert P. Flood
Author-Person: pfl25
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: IFM AP
Number: 10805
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10805
File-URL: http://www.nber.org/papers/w10805.pdf
File-Format: application/pdf
Publication-Status: published as Flood, Robert and Andrew Rose. “Estimating the Expected Marginal Rate of Substitution: A Systematic Exploitation of Idiosyncratic Risk.” Journal of Monetary Economics 2005.
Abstract: This paper develops a simple but general methodology to estimate the expected intertemporal marginal rate of substitution or "EMRS", using only data on asset prices and returns. Our empirical strategy is general, and allows the EMRS to vary arbitrarily over time. A novel feature of our technique is that it relies upon exploiting idiosyncratic risk, since theory dictates that idiosyncratic shocks earn the EMRS. We apply our methodology to two different data sets: monthly data from 1994 through 2003, and daily data for 2003. Both data sets include assets from three different markets: the New York Stock Exchange, the NASDAQ, and the Toronto Stock Exchange. For both monthly and daily frequencies, we find plausible estimates of EMRS with considerable precision and time-series volatility. We then use these estimates to test for asset integration, both within and between stock markets. We find that all three markets seem to be internally integrated in the sense that different assets traded on a given market share the same EMRS. The technique is also powerful enough to reject integration between the three stock markets, and between stock and money markets.
Handle: RePEc:nbr:nberwo:10805
Template-Type: ReDIF-Paper 1.0
Title: Economic Effects of Regional Tax Havens
Classification-JEL: H87; F23; F21
Author-Name: Mihir A. Desai
Author-Name: C. Fritz Foley
Author-Name: James R. Hines
Author-Person: phi111
Note: CF IFM PE
Number: 10806
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10806
File-URL: http://www.nber.org/papers/w10806.pdf
File-Format: application/pdf
Abstract: How does the opportunity to use tax havens influence economic activity in nearby non-haven countries? Analysis of affiliate-level data indicates that American multinational firms use tax haven affiliates to reallocate taxable income away from high-tax jurisdictions and to defer home country taxes on foreign income. Ownership of tax haven affiliates is associated with reduced tax payments by nearby non-haven affiliates, the size of the effect being equivalent to a 20.8 percent tax rate reduction. The evidence also indicates that use of tax havens indirectly stimulates the growth of operations in non-haven countries in the same region. A one percent greater likelihood of establishing a tax haven affiliate is associated with 0.5 to 0.7 percent greater sales and investment growth by non-haven affiliates, implying a complementary relationship between haven and non-haven activity. The ability to avoid taxes by using tax haven affiliates therefore appears to facilitate economic activity in non-haven countries within regions.
Handle: RePEc:nbr:nberwo:10806
Template-Type: ReDIF-Paper 1.0
Title: CEO Overconfidence and Corporate Investment
Classification-JEL: G31; G32; D21; D23
Author-Name: Ulrike Malmendier
Author-Person: pma1397
Author-Name: Geoffrey Tate
Note: CF LS
Number: 10807
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10807
File-URL: http://www.nber.org/papers/w10807.pdf
File-Format: application/pdf
Publication-Status: published as Malmendier, Ulrike and Geoffrey Tate. "CEO Overconfidence and Corporate Investment," Journal of Finance, 2005, v60(6,Dec), 2261-2700.
Abstract: We argue that managerial overconfidence can account for corporate investment distortions. Overconfident managers overestimate the returns to their investment projects and view external funds as unduly costly. Thus, they overinvest when they have abundant internal funds, but curtail investment when they require external financing. We test the overconfidence hypothesis, using panel data on personal portfolio and corporate investment decisions of Forbes 500 CEOs. We classify CEOs as overconfident if they persistently fail to reduce their personal exposure to company-specific risk. We find that investment of overconfident CEOs is significantly more responsive to cash flow, particularly in equity-dependent firms.
Handle: RePEc:nbr:nberwo:10807
Template-Type: ReDIF-Paper 1.0
Title: Fear of Service Outsourcing: Is It Justified?
Classification-JEL: F1; F2
Author-Name: Mary Amiti
Author-Person: pam39
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: ITI LS
Number: 10808
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10808
File-URL: http://www.nber.org/papers/w10808.pdf
File-Format: application/pdf
Publication-Status: published as Amiti, Mary and Shang-Jin Wei. "Fear Of Service Outsourcing: Is It Justified?," Economic Policy, v20(42,Oct), 2005, 308-347.
Abstract: The recent media and political attention on service outsourcing from developed to developing countries gives the impression that outsourcing is exploding. As a result, workers in industrial countries are anxious about job losses. This paper aims to establish what are the hypes and what are the facts. The results show that although service outsourcing has been steadily increasing it is still very low, and that in the United States and many other industrial countries "insourcing" is greater than outsourcing. Using the United Kingdom as a case study, we find that job growth at a sectoral level is not negatively related to service outsourcing.
Handle: RePEc:nbr:nberwo:10808
Template-Type: ReDIF-Paper 1.0
Title: The Effect of College Curriculum on Earnings: Accounting for Non-Ignorable Non-Response Bias
Classification-JEL: J31; I21
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Author-Name: Stephen G. Donald
Note: ED LS
Number: 10809
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10809
File-URL: http://www.nber.org/papers/w10809.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Econometrics, 2008, 144, 479-491.
Abstract: We link information on the current earnings of college graduates from many cohorts to their high-school records, their detailed college records and their demographics to infer the impact of college major on earnings. We develop an estimator to handle the potential for non-response bias and identify non-response using an affinity measure -- the potential respondent's link to the organization conducting the survey. This technique is generally applicable for adjusting for unit non-response. In the model describing earnings, estimated using the identified (for non-response bias) selectivity adjustments, adjusted earnings differentials across college majors are less than half as large as unadjusted differentials and ten percent smaller than those that do not account for selective non-response.
Handle: RePEc:nbr:nberwo:10809
Template-Type: ReDIF-Paper 1.0
Title: Health Shocks and Couples' Labor Supply Decisions
Classification-JEL: J14; J26
Author-Name: Courtney C. Coile
Author-Person: pco557
Note: AG LS
Number: 10810
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10810
File-URL: http://www.nber.org/papers/w10810.pdf
File-Format: application/pdf
Abstract: Unexpected health events such as a heart attack or new cancer diagnosis are very common for workers in their 50s and 60s. These health shocks can result in a significant loss in family income if the worker reduces labor supply, but the family can also protect itself against this loss if the worker's spouse increases labor supply, generating an "added worker effect." In this paper, I examine the effect of health shocks on the labor supply of both spouses using the Health and Retirement Study (HRS). I find that shocks lead the affected worker to reduce labor supply dramatically, particularly if the shock is accompanied by a loss of functioning. I also find that the added worker effect is small for men and that there is no such effect for women. There is some evidence to suggest that families respond to health shocks in predictable ways depending on characteristics such as access to retiree health insurance. The study concludes that health shocks result in real financial losses for families and are an important source of financial risk for older households.
Handle: RePEc:nbr:nberwo:10810
Template-Type: ReDIF-Paper 1.0
Title: Testing a Roy Model with Productivity Spillovers: Evidence from the Treatment of Heart Attacks
Classification-JEL: I1; J0
Author-Name: Amitabh Chandra
Author-Person: pch893
Author-Name: Douglas Staiger
Author-Person: pst466
Note: EH
Number: 10811
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10811
File-URL: http://www.nber.org/papers/w10811.pdf
File-Format: application/pdf
Publication-Status: published as Chandra, Amitabh and Douglas Staiger. “Productivity Spillovers in Healthcare: Evidence from the Treatment of Heart Attacks.” Journal of Political Economy (February 2007): 103-140.
Abstract: Productivity spillovers are often cited as a reason for geographic specialization in production. A large literature in medicine documents specialization across areas in the use of surgical treatments, which is unrelated to patient outcomes. We show that a simple Roy model of patient treatment choice with productivity spillovers can generate these facts. Our model predicts that high-use areas will have higher returns to surgery, better outcomes among patients most appropriate for surgery, and worse outcomes among patients least appropriate for surgery. We find strong empirical support for these and other predictions of the model, and decisively reject alternative explanations commonly proposed to explain geographic variation in medical care.
Handle: RePEc:nbr:nberwo:10811
Template-Type: ReDIF-Paper 1.0
Title: Are Investors Naive About Incentives?
Classification-JEL: D14; D21; G24; G18
Author-Name: Ulrike Malmendier
Author-Person: pma1397
Author-Name: Devin Shanthikumar
Note: AP
Number: 10812
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10812
File-URL: http://www.nber.org/papers/w10812.pdf
File-Format: application/pdf
Publication-Status: published as Malmendier, Ulrike and Devin Shanthikumar. "Are Small Investors Naïve About Incentives?" Journal of Financial Economics 85, 2 (August 2007): 457-489.
Abstract: Traditional economic analysis of markets with asymmetric information assumes that uninformed agents account for the incentives of informed agents to distort information. We analyze whether investors in the stock market internalize such incentives. Stock recommendations of security analysts are likely to be biased upwards, particularly if the issuing analyst is affiliated with the underwriter of the recommended stock. Using the NYSE Trades and Quotations database, we find that large (institutional) traders account for the upward bias and exert no abnormal trade reaction to buy recommendations, and significant selling pressure in response to hold recommendations. Small (individual) traders do not account for the upward shift and exert significantly positive pressure for buys and zero pressure for hold recommendations. Moreover, large traders discount positive recommendations from affiliated analysts more than from unaffiliated analysts, while small traders do not distinguish between them. The naive trading behavior of small investors induces negative abnormal portfolio returns.
Handle: RePEc:nbr:nberwo:10812
Template-Type: ReDIF-Paper 1.0
Title: Who Makes Acquisitions? CEO Overconfidence and the Market's Reaction
Classification-JEL: G34; G14; G32; D80
Author-Name: Ulrike Malmendier
Author-Person: pma1397
Author-Name: Geoffrey Tate
Note: AP
Number: 10813
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10813
File-URL: http://www.nber.org/papers/w10813.pdf
File-Format: application/pdf
Publication-Status: published as Malmendier, Ulrike and Geoffrey Tate. "Who Makes Acquisitions? CEO Overconfidence and the Market’s Reaction." Journal of Financial Economics 89, 1 (July 2008): 20-43.
Abstract: Overconfident CEOs over-estimate their ability to generate returns. Thus, on the margin, they undertake mergers that destroy value. They also perceive outside finance to be over-priced. We classify CEOs as overconfident when, despite their under-diversification, they hold options on company stock until expiration. We find that these CEOs are more acquisitive on average, particularly via diversifying deals. The effects are largest in firms with abundant cash and untapped debt capacity. Using press coverage as "confident" or "optimistic" to measure overconfidence confirms these results. We also find that the market reacts significantly more negatively to takeover bids by overconfident managers.
Handle: RePEc:nbr:nberwo:10813
Template-Type: ReDIF-Paper 1.0
Title: Asset Pricing with Liquidity Risk
Classification-JEL: G0; G1; G12
Author-Name: Viral V. Acharya
Author-Person: pac33
Author-Name: Lasse Heje Pedersen
Author-Person: ppe174
Note: AP
Number: 10814
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10814
File-URL: http://www.nber.org/papers/w10814.pdf
File-Format: application/pdf
Publication-Status: published as Acharya, Viral V. and Lasse Heje Pedersen. "Asset Pricing With Liquidity Risk," Journal of Financial Economics, 2005, v77(2,Aug), 375-410.
Abstract: This paper solves explicitly an equilibrium asset pricing model with liquidity risk -- the risk arising from unpredictable changes in liquidity over time. In our liquidity-adjusted capital asset pricing model, a security's required return depends on its expected liquidity as well as on the covariances of its own return and liquidity with market return and market liquidity. In addition, the model shows how a negative shock to a security's liquidity, if it is persistent, results in low contemporaneous returns and high predicted future returns. The model provides a simple, unified framework for understanding the various channels through which liquidity risk may affect asset prices. Our empirical results shed light on the total and relative economic significance of these channels.
Handle: RePEc:nbr:nberwo:10814
Template-Type: ReDIF-Paper 1.0
Title: Efficiency of Thin and Thick Markets
Classification-JEL: J6; J4
Author-Name: Li Gan
Author-Person: pga94
Author-Name: Qi Li
Note: LS
Number: 10815
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10815
File-URL: http://www.nber.org/papers/w10815.pdf
File-Format: application/pdf
Publication-Status: published as Gan, Li & Li, Qi, 2016. "Efficiency of thin and thick markets," Journal of Econometrics, Elsevier, vol. 192(1), pages 40-54.
Abstract: In this paper, we propose a matching model to study the efficiency of thin and thick markets. Our model shows that the probabilities of matches in a thin market are significantly lower than those in a thick market. When applying our results to a job search model, it implies that, if the ratio of job candidates to job openings remains (roughly) a constant, the probability that a person can find a job is higher in a thick market than in a thin market. We apply our matching model to the U.S. academic market for new PhD economists. Consistent with the prediction of our model, a field of specialization with more job openings and more candidates has a higher probability of matching.
Handle: RePEc:nbr:nberwo:10815
Template-Type: ReDIF-Paper 1.0
Title: Over-the-Counter Markets
Classification-JEL: G0; G1
Author-Name: Darrell Duffie
Author-Person: pdu341
Author-Name: Nicolae Garleanu
Author-Name: Lasse Heje Pedersen
Author-Person: ppe174
Note: AP
Number: 10816
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10816
File-URL: http://www.nber.org/papers/w10816.pdf
File-Format: application/pdf
Publication-Status: published as Duffie, Darrell, Nicolae Garleanu and Lasse Heje Pedersen. "Over-the-Counter Markets," Econometrica, 2005, v73(6,Nov), 1815-1848.
Abstract: We study how intermediation and asset prices in over-the-counter markets are affected by illiquidity associated with search and bargaining. We compute explicitly the prices at which investors trade with each other as well as marketmakers' bid and ask prices in a dynamic model with strategic agents. Bid-ask spreads are lower if investors can more easily find other investors, or have easier access to multiple marketmakers. With a monopolistic marketmaker, bid-ask spreads are higher if investors have easier access to the marketmaker. We characterize endogenous search and welfare, and discuss empirical implications.
Handle: RePEc:nbr:nberwo:10816
Template-Type: ReDIF-Paper 1.0
Title: Global Demographic Change: Dimensions and Economic Significance
Classification-JEL: J11; O40
Author-Name: David E. Bloom
Author-Person: pbl79
Author-Name: David Canning
Author-Person: pca340
Note: AG LS
Number: 10817
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10817
File-URL: http://www.nber.org/papers/w10817.pdf
File-Format: application/pdf
Publication-Status: published as David E. Bloom & David Canning, 2004. "Global demographic change : dimensions and economic significance," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 9-56.
Abstract: Transitions from high mortality and fertility to low mortality and fertility can be beneficial to economies as large baby boom cohorts enter the workforce and save for retirement, while rising longevity has perhaps increased both the incentive to invest in education and to save for retirement. We present estimates of a model of economic growth that highlights the positive effects of demographic change during 1960-95. We also show how Ireland benefited from lower fertility in the form of higher labor supply per capita and how Taiwan benefited through increased savings rates. We emphasize, however, that the realization of the potential benefits associated with the demographic transition appears to be dependent on institutions and policies, requiring the productive employment of the potential workers and savings the transition generates. Economic projections based on an "accounting" approach that assumes constant age-specific behavior are likely to be seriously misleading.
Handle: RePEc:nbr:nberwo:10817
Template-Type: ReDIF-Paper 1.0
Title: Inflation Targeting and Japan: Why has the Bank of Japan not Adopted Inflation Targeting?
Classification-JEL: E42; E52; E58
Author-Name: Takatoshi Ito
Note: EH ME
Number: 10818
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10818
File-URL: http://www.nber.org/papers/w10818.pdf
File-Format: application/pdf
Publication-Status: published as Takatoshi Ito, 2004. "Inflation Targeting and Japan: Why has the Bank of Japan not Adopted Inflation Targeting?," RBA Annual Conference Volume, in: Christopher Kent & Simon Guttmann (ed.), The Future of Inflation Targeting Reserve Bank of Australia.
Abstract: The paper aims at explaining why the Bank of Japan has not adopted inflation targeting, despite calls for such a policy. Disclosed minutes of the Monetary Policy Meetings of the Bank of Japan, after March 1998, as well as Speeches by its members give clues to changing reasons against inflation targeting. Inflation targeting was not adopted in Japan in the early years (the first wave of interest in1999-2000) because the Board members were not sure about an appropriate price index, and a specific number for an appropriate inflation rate. A Bank of Japan study, completed in October 2000, did not give any clear answers. Inflation targeting was not adopted in later years (2001-2003), despite the inflation-targeting-like commitment strategy adopted in March 2001, because the Board members thought that conventional tools to increase the inflation rate were not available. As such, they thought that announcing a target with a positive inflation rate would damage confidence. In terms of introducing unconventional measures, the Bank of Japan worried about the transmission channels and the damage to its balance sheet. Towards the end of Governor Hayami fs term, the views against inflation targeting turned sharply negative, as news reports suggested that it may be linked to the new Governor fs appointment. Therefore, , why inflation targeting was not adopted, can be explained and understood from a political economy perspective.
Handle: RePEc:nbr:nberwo:10818
Template-Type: ReDIF-Paper 1.0
Title: Overestimating Self_Control: Evidence from the Health Club Industry
Classification-JEL: D12; D18; D21; D23; D91
Author-Name: Stefano DellaVigna
Author-Person: pde710
Author-Name: Ulrike Malmendier
Author-Person: pma1397
Note: LS
Number: 10819
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10819
File-URL: http://www.nber.org/papers/w10819.pdf
File-Format: application/pdf
Abstract: Experimental evidence suggests that people make time-inconsistent choices and display overconfidence about positive personal attributes. Do these features affect consumer behavior in the market? To address this question we use a new panel data set from three US health clubs with information on the contract choices and the day-to-day attendance decisions of 7,978 health club members over three years. Members who choose a contract with a flat monthly fee of over $70 attend on average 4.8 times per month. They pay a price per expected visit of more than $17, even though a $10-per-visit fee is also available. On average, these users forgo savings of $700 during their membership. We review many aspects of the consumer behavior, including the interval between last attendance and contract termination, the survival probability, and the correlation between different consumption choices. The empirical results are difficult to reconcile with the standard assumption of time-consistent preferences and rational expectations. A model of time-inconsistent agents with overconfidence about future patience explains the findings. The agents overestimate the future attendance and delay contract cancellation whenever renewal is automatic. Salesman pressure and overstimation of future efficiency are the leading alternative explanations.
Handle: RePEc:nbr:nberwo:10819
Template-Type: ReDIF-Paper 1.0
Title: Dynamic Trading Strategies and Portfolio Choice
Classification-JEL: G11; G12
Author-Name: Ravi Bansal
Author-Person: pba818
Author-Name: Magnus Dahlquist
Author-Name: Campbell R. Harvey
Author-Person: pha102
Note: AP
Number: 10820
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10820
File-URL: http://www.nber.org/papers/w10820.pdf
File-Format: application/pdf
Abstract: Traditional mean-variance efficient portfolios do not capture the potential wealth creation opportunities provided by predictability of asset returns. We propose a simple method for constructing optimally managed portfolios that exploits the possibility that asset returns are predictable. We implement these portfolios in both single and multi-period horizon settings. We compare alternative portfolio strategies which include both buy-and-hold and fixed weight portfolios. We find that managed portfolios can significantly improve the mean-variance trade-off, in particular, for investors with investment horizons of three to five years. Also, in contrast to popular advice, we show that the buy-and-hold strategy should be avoided.
Handle: RePEc:nbr:nberwo:10820
Template-Type: ReDIF-Paper 1.0
Title: Corruption in America
Classification-JEL: K4; O1; H0
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Raven Saks
Note: EFG LE
Number: 10821
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10821
File-URL: http://www.nber.org/papers/w10821.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. and Raven E. Saks. "Corruption In America," Journal of Public Economics, 2006, v90(6-7,Aug), 1053-1072.
Abstract: We use a data set of federal corruption convictions in the U.S. to investigate the causes and consequences of corruption. More educated states, and to a less degree richer states, have less corruption. This relationship holds even when we use historical factors like education in 1928 or Congregationalism in 1890, as instruments for the level of schooling today. The level of corruption is weakly correlated with the level of income inequality and racial fractionalization, and uncorrelated with the size of government. There is a weak negative relationship between corruption and employment and income growth. These results echo the cross-country findings, and support the view that the correlation between development and good political outcomes occurs because more education improves political institutions.
Handle: RePEc:nbr:nberwo:10821
Template-Type: ReDIF-Paper 1.0
Title: Assessing the Impacts of the Prescription Drug User Fee Acts (PDUFA) on the FDA Approval Process
Classification-JEL: I18; K23; L65
Author-Name: Ernst R. Berndt
Author-Name: Adrian H. B. Gottschalk
Author-Name: Tomas Philipson
Author-Person: pph37
Author-Name: Matthew W. Strobeck
Note: EH IO
Number: 10822
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10822
File-URL: http://www.nber.org/papers/w10822.pdf
File-Format: application/pdf
Publication-Status: published as Berndt, Ernst R., Adrian H. B. Gottschalk, Tomas Philipson and Matthew W. Strobeck. "Assessing The Impacts Of The Prescription Drug User Fee Acts (PDUFA) On The FDA Approval Process," Forum for Health Economics and Policy, 2005, v8, Article 2.
Publication-Status: published as Assessing the Impacts of the Prescription Drug User Fee Acts (PDUFA) on the FDA Approval Process, Ernst R. Berndt, Adrian H. B. Gottschalk, Tomas Philipson, Matthew W. Strobeck. in Frontiers in Health Policy Research, Volume 8, Cutler and Garber. 2005
Abstract: Congress enacted and renewed the Prescription Drug User Fee Acts (PDUFA) in 1992, and renewed it in 1997 and 2002, mandating FDA performance goals in reviewing and acting on drug applications within specified time periods. In turn, the FDA was permitted to levy user fees on drug sponsors submitting applications to the FDA. While PDUFA mandated action or review times, its ultimate impacts on actual final drug approval times are unknown. We model and quantify the impact of PDUFA-I and II on drug approval times, since these approval dates are the ones most directly related to new medicines becoming available to benefit patients. In assessing the impacts of PDUFA on drug approval times, it is noteworthy that approval times were trending downwards at 1.7% percent per year prior to implementation of PDUFA. Assuming continuation of that time trend, approval times post-PDUFA would have fallen even in the absence of PDUFA. Our principal finding is that PDUFA accelerated this downward trend so that instead of a counterfactual 6% reduction in approval times from 24.2 to 20.4 months in absence of these acts between 1991 and 2002, there was an observed decline of about 42%, from 24.2 to 14.2 months, following implementation of PDUFA. Thus, of the total observed decline in approval times between 1991 and 2002, approximately two-thirds can be attributed to PDUFA. However, much of this impact occurred in the initial years between 1992 and 1997 (PDUFA-I) rather than during the subsequent 1997-2002 time frame (PDUFA-II). We discuss implications of these findings and how future research might quantify the social value of the observed acceleration in the FDA drug approvals.
Handle: RePEc:nbr:nberwo:10822
Template-Type: ReDIF-Paper 1.0
Title: Pseudo Market Timing and Predictive Regressions
Classification-JEL: G12; G14; G32; C15
Author-Name: Malcolm P. Baker
Author-Person: pba735
Author-Name: Ryan Taliaferro
Author-Name: Jeffrey Wurgler
Author-Person: pwu8
Note: CF AP
Number: 10823
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10823
File-URL: http://www.nber.org/papers/w10823.pdf
File-Format: application/pdf
Abstract: A number of studies claim that aggregate managerial decision variables, such as aggregate equity issuance, have power to predict stock or bond market returns. Recent research argues that these results may be driven by an aggregate time-series version of Schultz's (2003) pseudo market timing bias. We use standard simulation techniques to estimate the size of the aggregate pseudo market timing bias for a variety of predictive regressions based on managerial decision variables. We find that the bias can explain only about one percent of the predictive power of the equity share in new issues, and that it is also much too small to overturn prior inferences about the predictive power of corporate investment plans, insider trading, dividend initiations, or the maturity of corporate debt issues.
Handle: RePEc:nbr:nberwo:10823
Template-Type: ReDIF-Paper 1.0
Title: Charging NOx Emitters for Health Damages: An Exploratory Analysis
Classification-JEL: Q5; H1
Author-Name: Denise Mauzerall
Author-Name: Babar Sultan
Author-Name: Namsoug Kim
Author-Name: David F. Bradford
Note: EH EEE
Number: 10824
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10824
File-URL: http://www.nber.org/papers/w10824.pdf
File-Format: application/pdf
Abstract: We present a proof-of-concept analysis of the measurement of the health damage of ozone (O3) produced from nitrogen oxides (NOx = NO NO2) emitted by individual large point sources in the eastern United States. We use a regional atmospheric model of the eastern United States, the Comprehensive Air Quality Model with Extensions (CAMx), to quantify the variable impact that a fixed quantity of NOx emitted from individual sources can have on the downwind concentration of surface O3, depending on temperature and local biogenic hydrocarbon emissions. We also examine the dependence of resulting ozone-related health damages on the size of the exposed population. The investigation is relevant to the increasingly widely used "cap and trade" approach to NOx regulation, which presumes that shifts of emissions over time and space, holding the total fixed over the course of the summer O3 season, will have minimal effect on the environmental outcome. By contrast, we show that a shift of a unit of NOx emissions from one place or time to another could result in large changes in the health effects due to ozone formation and exposure. We indicate how the type of modeling carried out here might be used to attach externality-correcting prices to emissions. Charging emitters fees that are commensurate with the damage caused by their NOx emissions would create an incentive for emitters to reduce emissions at times and in locations where they cause the largest damage.
Handle: RePEc:nbr:nberwo:10824
Template-Type: ReDIF-Paper 1.0
Title: Empirical Study of the Civil Justice System
Classification-JEL: K0
Author-Name: Daniel P. Kessler
Author-Name: Daniel L. Rubinfeld
Note: LE
Number: 10825
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10825
File-URL: http://www.nber.org/papers/w10825.pdf
File-Format: application/pdf
Publication-Status: published as Kessler, Daniel P. & Rubinfeld, Daniel L., 2007. "Empirical Study of the Civil Justice System," Handbook of Law and Economics, Elsevier.
Abstract: In this essay, we discuss empirical research on the economic effects of the civil justice system. We discuss research on the effects of three substantive bodies of law- contracts, torts, and property- and research on the effects of the litigation process. We begin with a review of studies of aggregate empirical trends and the important issues involving contracts and torts, both positive and normative. We survey some of the more interesting empirical issues, and we conclude with some suggestions for future work. Because studies involving property law are so divergent, there is no simple description of aggregates that adequately characterizes the subject. In its place, we offer an overview of a number of the most important issues of interest. We describe (selectively) the current state of empirical knowledge, and offer some suggestions for future research. The section on legal process builds on the previous substantive sections. With respect each of the steps, from violation to trial to appeal, we review some of the more important empirical contributions.
Handle: RePEc:nbr:nberwo:10825
Template-Type: ReDIF-Paper 1.0
Title: Reciprocated Unilateralism in Trade Reforms with Majority Voting
Classification-JEL: F1
Author-Name: Pravin Krishna
Author-Person: pkr50
Author-Name: Devashish Mitra
Author-Person: pmi161
Note: ITI
Number: 10826
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10826
File-URL: http://www.nber.org/papers/w10826.pdf
File-Format: application/pdf
Publication-Status: published as Krishna, Pravin, and Devashish Mitra. "Reciprocated Unilateralism in Trade Reforms with Majority Voting." Journal of Development Economics 85(1-2): 81-93, February 2008
Abstract: This paper shows how unilateral liberalization in one country can increase the voting support for reciprocal reduction in trade barriers in a partner country. When trade policies are determined simultaneously in the two countries, we show the possibility of multiple political equilibria - countries may both be protectionist or trade freely with each other. Starting with trade protection in both countries, a unilateral reform in one country is thus shown to bring about a free trade equilibrium (a self-enforcing state) that is consistent with majority voting in both countries.
Handle: RePEc:nbr:nberwo:10826
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy and the Currency Denomination of Debt: A Tale of Two Equilibria
Classification-JEL: E42; F41; F42
Author-Name: Andres Velasco
Author-Name: Roberto Chang
Author-Person: pch80
Note: IFM
Number: 10827
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10827
File-URL: http://www.nber.org/papers/w10827.pdf
File-Format: application/pdf
Publication-Status: published as Velasco, Andrés and Roberto Chang. “Monetary Policy and the Currency Denomination of Debt: A Tale of Two Equilibria.” Journal of International Economics 69 (2006): 150-175.
Abstract: Exchange rate policies depend on portfolio choices, and portfolio choices depend on anticipated exchange rate policies. This opens the door to multiple equilibria in policy regimes. We construct a model in which agents optimally choose to denominate their assets and liabilities either in domestic or in foreign currency. The monetary authority optimally chooses to float or to fix the currency, after portfolios have been chosen. We identify conditions under which both fixing and floating are equilibrium policies: if agents expect fixing and arrange their portfolios accordingly, the monetary authority validates that expectation; the same happens if agents initially expect floating. We also show that a flexible exchange rate Pareto-dominates a fixed one. It follows that social welfare would rise if the monetary authority could precommit to floating.
Handle: RePEc:nbr:nberwo:10827
Template-Type: ReDIF-Paper 1.0
Title: Accounting for Cross-Country Income Differences
Classification-JEL: E2; O1; O2; O3
Author-Name: Francesco Caselli
Author-Person: pca205
Note: EFG
Number: 10828
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10828
File-URL: http://www.nber.org/papers/w10828.pdf
File-Format: application/pdf
Publication-Status: published as Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741 Elsevier.
Abstract: Why are some countries so much richer than others? Development Accounting is a first-pass attempt at organizing the answer around two proximate determinants: factors of production and efficiency. It answers the question "how much of the cross-country income variance can be attributed to differences in (physical and human) capital, and how much to differences in the efficiency with which capital is used?" Hence, it does for the cross-section what growth accounting does in the time series. The current consensus is that efficiency is at least as important as capital in explaining income differences. I survey the data and the basic methods that lead to this consensus, and explore several extensions. I argue that some of these extensions may lead to a reconsideration of the evidence.
Handle: RePEc:nbr:nberwo:10828
Template-Type: ReDIF-Paper 1.0
Title: Can Central Bank Transparency Go Too Far?
Classification-JEL: E5
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: ME
Number: 10829
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10829
File-URL: http://www.nber.org/papers/w10829.pdf
File-Format: application/pdf
Publication-Status: published as Frederic S Mishkin, 2004. "Can Central Bank Transparency Go Too Far?," RBA Annual Conference Volume, in: Christopher Kent & Simon Guttmann (ed.), The Future of Inflation Targeting Reserve Bank of Australia.
Abstract: This paper asks the question: can central bank transparency go too far? Transparency is beneficial only when it serves to simplify communication with the public and helps generate support for central banks to conduct monetary policy optimally with an appropriate focus on long-run objectives. This paper argues that some suggestions for increased transparency, particularly a central bank announcement of its objective function or projections of the path of the policy interest rate, will complicate the communication process and weaken support for a central bank focus on long-run objectives. Transparency can indeed go too far. However, central banks can improve transparency in discussing that they do care about reducing output fluctuations . By describing procedures for how the path and horizon of inflation targets would be modified in the face of large shocks, by emphasizing that monetary policy will be just as vigilant in preventing inflation from falling too low as it is from preventing it from being too high, and by indicating that the central bank will pursue expansionary policies when output falls very far below potential, central banks can show that they do care about output fluctuations. These steps to improve transparency will increase support for the central bank's policies and independence, but avoid a focus on the short run that could interfere with the ability of the central bank to do its job effectively.
Handle: RePEc:nbr:nberwo:10829
Template-Type: ReDIF-Paper 1.0
Title: Export Variety and Country Productivity
Classification-JEL: F12; F14
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Author-Name: Hiau Looi Kee
Author-Person: pke71
Note: ITI PR
Number: 10830
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10830
File-URL: http://www.nber.org/papers/w10830.pdf
File-Format: application/pdf
Publication-Status: published as Feenstra, Robert C. and Hiau Looi Kee. “Export Variety and Country Productivity: Estimating the Monopolistic Competition Model with Endogenous Productivity.” Journal of International Economics (March 2008): 500-514.
Abstract: This paper provides evidence on monopolistic competition models with endogenous technology by studying the effects of sectoral export variety on country productivity. The effects are estimated in a translog GDP function system based on data for 34 countries from 1982 to 1997. Country productivity is constructed and export variety is shown to be significant. Instruments such as tariffs, transport costs, and distance are shown to affect country productivity through export variety, and only through this channel. Overall, while export variety accounts for only 2% of cross-country productivity differences, it explains 13% of within-country productivity growth. A 10% increase in the export variety of all industries leads to a 1.3% increase in country productivity, while a 10 percentage point increase in tariffs facing an exporting country leads to a 2% fall in country productivity.
Handle: RePEc:nbr:nberwo:10830
Template-Type: ReDIF-Paper 1.0
Title: Why Do Computers Depreciate?
Classification-JEL: C81; O33
Author-Name: Michael J. Geske
Author-Name: Valerie A. Ramey
Author-Person: pra154
Author-Name: Matthew D. Shapiro
Author-Person: psh144
Note: EFG PR
Number: 10831
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10831
File-URL: http://www.nber.org/papers/w10831.pdf
File-Format: application/pdf
Publication-Status: published as Berndt, Ernst and Charles Hulten (eds.) Hard to Measure Goods and Services: Essays in Honor of Zvi Griliches. Chicago: University of Chicago Press, 2007.
Publication-Status: published as Why Do Computers Depreciate? , Michael J. Geske, Valerie A. Ramey, Matthew D. Shapiro. in Hard-to-Measure Goods and Services: Essays in Honor of Zvi Griliches, Berndt and Hulten. 2007
Abstract: The value of installed computers falls rapidly and therefore computers have a very high user cost. The paper provides a complete account of the non-financial user cost of personal computers -- decomposing it into replacement cost change, obsolescence, instantaneous depreciation, and age-related depreciation. The paper uses data on the resale price of computers and a hedonic price index for new computers to achieve this decomposition. Once obsolescence is taken into account, age-related depreciation -- which is often identified as deterioration -- is estimated to be negligible. While the majority of the loss in value of used computers comes from declines in replacement cost, this paper shows the second most important source of decline in value is obsolescence. Obsolescence is accelerated by the decline in replacement cost of computers. Cheaper computing power drives developments in software and networks that make older computers less productive even though their original functionality remains intact.
Handle: RePEc:nbr:nberwo:10831
Template-Type: ReDIF-Paper 1.0
Title: Finance as a Barrier to Entry: Bank Competition and Industry Structure in Local U.S. Markets
Classification-JEL: G2
Author-Name: Nicola Cetorelli
Author-Person: pce70
Author-Name: Philip E. Strahan
Note: CF IO
Number: 10832
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10832
File-URL: http://www.nber.org/papers/w10832.pdf
File-Format: application/pdf
Publication-Status: published as Cetorelli, Nicola and Philip E. Strahan. "Finance As A Barrier To Entry: Bank Competition and Industry Structure In Local U.S. Markets," Journal of Finance, 2006, v61(1,Feb), 437-461.
Abstract: This paper tests how competition in local U.S. banking markets affects the market structure of non-financial sectors. Theory offers competing hypotheses about how competition ought to influence firm entry and access to bank credit by mature firms. The empirical evidence, however, strongly supports the idea that in markets with concentrated banking, potential entrants face greater difficulty gaining access to credit than in markets where banking is more competitive.
Handle: RePEc:nbr:nberwo:10832
Template-Type: ReDIF-Paper 1.0
Title: Deflation and Monetary Policy in a Historical Perspective: Remembering the Past or Being Condemned to Repeat It?
Classification-JEL: E31; N10
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Andrew Filardo
Author-Person: pfi266
Note: DAE ME
Number: 10833
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10833
File-URL: http://www.nber.org/papers/w10833.pdf
File-Format: application/pdf
Publication-Status: published as Bordo, Michael and Andrew Filardo. "Deflation And Monetary Policy In A Historical Perspective: Remembering The Past Or Being Condemned To Repeat It?," Economic Policy, 2005, v20(44,Oct), 799-844.
Abstract: What does the historical record tell us about how to conduct monetary policy in a deflationary environment? We present a broad cross-country historical study of deflation over the past two centuries in order to shed light on current policy challenges. We first review the theoretical literature on deflation. We then characterize deflation by distinguishing among the "good, the bad and the ugly" ones - considering both empirical determinants and historical narratives of each type. Emphasis is put on the linkages between the current inflation environment and that of the gold standard period. Particular attention is also put on what the historical record reveals about policies to escape undesirable deflation. In this regard we develop a policy typology based on the relative merits of interest rate and monetary instruments in combating different types of inflation/deflation behavior.
Handle: RePEc:nbr:nberwo:10833
Template-Type: ReDIF-Paper 1.0
Title: Keeping Capital Flowing: The Role of the IMF
Classification-JEL: F33; F34
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Ashoka Mody
Author-Name: Nienke Oomes
Note: IFM
Number: 10834
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10834
File-URL: http://www.nber.org/papers/w10834.pdf
File-Format: application/pdf
Publication-Status: published as Michael D. Bordo & Ashoka Mody & Nienke Oomes, 2004. "Keeping Capital Flowing: The Role of the IMF," International Finance, Blackwell Publishing, vol. 7(3), pages 421-450, December.
Abstract: In this paper, we examine the IMF's role in maintaining the access of emerging market economies to international capital markets. We find evidence that both macroeconomic aggregates and capital flows improve following the adoption of an IMF program, although they may initially deteriorate somewhat. Consistent with theoretical predictions and earlier empirical findings, we find that IMF programs are most successful in improving capital flows to countries with bad, but not very bad fundamentals. In such countries, IMF programs are also associated with improvements in the fundamentals themselves.
Handle: RePEc:nbr:nberwo:10834
Template-Type: ReDIF-Paper 1.0
Title: Strategic Extremism: Why Republicans and Democrats Divide on Religious Values
Classification-JEL: D72; D78; Z12
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Giacomo A. M. Ponzetto
Author-Person: ppo323
Author-Name: Jesse M. Shapiro
Author-Person: psh70
Note: EFG
Number: 10835
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10835
File-URL: http://www.nber.org/papers/w10835.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward I., Giacomo A. M. Ponzetto and Jesse M. Shapiro. "Strategic Extremism: Why Republicans And Democrats Divide On Religious Values," Quarterly Journal of Economics, 2005, v120(4,Nov), 1283-1330.
Abstract: Party platforms differ sharply from one another, especially on issues with religious content, such as abortion or gay marriage. Religious extremism in the U.S. appears to be strategically targeted to win elections, since party platforms diverge significantly, while policy outcomes like abortion rates are not affected by changes in the governing party. Given the high returns from attracting the median voter, why do vote-maximizing politicians veer off into extremism? In this paper, we find that strategic extremism depends on an important intensive margin where politicians want to induce their core constituents to vote (or make donations) and the ability to target political messages towards those core constituents. Our model predicts that the political relevance of religious issues is highest when around one-half of the voting population attends church regularly. Using data from across the world and within the U.S., we indeed find a non-monotonic relationship between religious extremism and religious attendance.
Handle: RePEc:nbr:nberwo:10835
Template-Type: ReDIF-Paper 1.0
Title: Trade, Tragedy, and the Commons
Classification-JEL: F1; Q2
Author-Name: Brian R. Copeland
Author-Person: pco51
Author-Name: M. Scott Taylor
Author-Person: pta60
Note: ITI
Number: 10836
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10836
File-URL: http://www.nber.org/papers/w10836.pdf
File-Format: application/pdf
Publication-Status: published as Copeland, Brian R. and M. Scott Taylor. "Trade, Tragedy, and the Commons." American Economic Review 99, 3 (June 2009): 725-49.
Abstract: We develop a theory of resource management where the degree to which countries escape the tragedy of the commons is endogenously determined and explicitly linked to changes in world prices and other possible effects of market integration. We show how changes in world prices can move some countries from de facto open access situations to ones where management replicates that of an unconstrained social planner. Not all countries can follow this path of institutional reform and we identify key country characteristics (mortality rates, resource growth rates, technology) to divide the world's set of resource rich countries into Hardin, Ostrom and Clark economies. Hardin economies are not able to manage their renewable resources at any world price, have zero rents and suffer from the tragedy of the commons. Ostrom economies exhibit de facto open access and zero rents for low resource prices, but can maintain a limited form of resource management at higher prices. Clark economies can implement fully efficient management and do so when resource prices are sufficiently high. The model shows heterogeneity in the success of resource management is to be expected, and neutral technological progress works to undermine the efficacy of property rights institutions.
Handle: RePEc:nbr:nberwo:10836
Template-Type: ReDIF-Paper 1.0
Title: Job Search and Impatience
Classification-JEL: A12; C41; C73; D90
Author-Name: Stefano DellaVigna
Author-Person: pde710
Author-Name: M. Daniele Paserman
Author-Person: ppa129
Note: LS
Number: 10837
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10837
File-URL: http://www.nber.org/papers/w10837.pdf
File-Format: application/pdf
Publication-Status: published as DellaVigna, Stefano and M. Daniele Paserman. "Job Search and Impatience," Journal of Labor Economics, 2005, v23(3,Jul), 527-588.
Abstract: How does impatience affect job search? More impatient workers search less intensively and set a lower reservation wage. The effect on the exit rate from unemployment is unclear. In this paper we show that, if agents have exponential time preferences, the reservation wage effect dominates for sufficiently patient individuals, so increases in impatience lead to higher exit rates. The opposite is true for agents with hyperbolic time preferences: more impatient workers search less and exit unemployment later. Using two large longitudinal data sets, we find that various measures of impatience are negatively correlated with search effort and the exit rate from unemployment, and are orthogonal to reservation wages. Overall, impatience has a large effect on job search outcomes in the direction predicted by the hyperbolic discounting model.
Handle: RePEc:nbr:nberwo:10837
Template-Type: ReDIF-Paper 1.0
Title: Inflation Stabilization and Welfare: The Case of a Distorted Steady State
Classification-JEL: D61; E52; E61
Author-Name: Pierpaolo Benigno
Author-Person: pbe203
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG ME
Number: 10838
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10838
File-URL: http://www.nber.org/papers/w10838.pdf
File-Format: application/pdf
Publication-Status: published as Pierpaolo Benigno & Michael Woodford, 2005. "Inflation Stabilization And Welfare: The Case Of A Distorted Steady State," Journal of the European Economic Association, MIT Press, vol. 3(6), pages 1185-1236, December.
Abstract: This paper considers the appropriate stabilization objectives for monetary policy in a microfounded model with staggered price-setting. Rotemberg and Woodford (1997) and Woodford (2002) have shown that under certain conditions, a local approximation to the expected utility of the representative household in a model of this kind is related inversely to the expected discounted value of a conventional quadratic loss function, in which each period's loss is a weighted average of squared deviations of inflation and an output gap measure from their optimal values (zero). However, those derivations rely on an assumption of the existence of an output or employment subsidy that offsets the distortion due to the market power of monopolistically-competitive price-setters, so that the steady state under a zero-inflation policy involves an efficient level of output. Here we show how to dispense with this unappealing assumption, so that a valid linear-quadratic approximation to the optimal policy problem is possible even when the steady state is distorted to an arbitrary extent (allowing for tax distortions as well as market power), and when, as a consequence, it is necessary to take account of the effects of stabilization policy on the average level of output. We again obtain a welfare-theoretic loss function that involves both inflation and an appropriately defined output gap, though the degree of distortion of the steady state affects both the weights on the two stabilization objectives and the definition of the welfare-relevant output gap. In the light of these results, we reconsider the conditions under which complete price stability is optimal, and find that they are more restrictive in the case of a distorted steady state. We also consider the conditions under which pure randomization of monetary policy can be welfare-improving, and find that this is possible in the case of a sufficiently distorted steady state, though the parameter values required are probably not empirically realistic.
Handle: RePEc:nbr:nberwo:10838
Template-Type: ReDIF-Paper 1.0
Title: Optimal Stabilization Policy When Wages and Prices are Sticky: The Case of a Distorted Steady State
Classification-JEL: E52; E61
Author-Name: Pierpaolo Benigno
Author-Person: pbe203
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG ME
Number: 10839
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10839
File-URL: http://www.nber.org/papers/w10839.pdf
File-Format: application/pdf
Publication-Status: published as Pierpaolo Benigno & Michael Woodford, 2005. "Optimal stabilization policy when wages and prices are sticky: the case of a distorted steady state," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 127-180.
Abstract: Erceg et al. (2000) show that when both wages and prices are sticky, maximization of expected utility is equivalent to minimizing a loss function with three terms, involving measures of the variability of wage inflation, price inflation and the output gap respectively. Here we generalize their analysis, most importantly by not assuming the existence of output and employment subsidies that eliminate the distortions resulting from market power in goods and labor markets, so that the equilibrium level of output under flexible wages and prices would not necessarily be optimal. We show that a quadratic loss function can still be justified that involves the same three terms, albeit with different relative weights and a different definition of the output gap. Many conclusions of Erceg et al. are thus found to apply more generally. However, we argue that in the presence of significant steady-state distortions, simple rules of the kind that they examine are likely to approximate optimal policy less closely than is suggested by their numerical results.
Handle: RePEc:nbr:nberwo:10839
Template-Type: ReDIF-Paper 1.0
Title: Optimal Monetary and Fiscal Policy in a Liquidity Trap
Classification-JEL: E52; E63
Author-Name: Gauti B. Eggertsson
Author-Person: peg7
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG ME
Number: 10840
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10840
File-URL: http://www.nber.org/papers/w10840.pdf
File-Format: application/pdf
Publication-Status: published as Eggertsson, Gauti B. and Michael Woodford. "Policy Options In A Liquidity Trap," American Economic Review, 2004, v94(2,May), 76-79.
Publication-Status: published as Optimal Monetary and Fiscal Policy in a Liquidity Trap, Gauti B. Eggertsson, Michael Woodford. in NBER International Seminar on Macroeconomics 2004, Clarida, Frankel, Giavazzi, and West. 2006
Abstract: In previous work (Eggertsson and Woodford, 2003), we characterized the optimal conduct of monetary policy when a real disturbance causes the natural rate of interest to be temporarily negative, so that the zero lower bound on nominal interest rates binds, and showed that commitment to a history-dependent policy rule can greatly increase welfare relative to the outcome under a purely forward-looking inflation target. Here we consider in addition optimal tax policy in response to such a disturbance, to determine the extent to which fiscal policy can help to mitigate the distortions resulting from the zero bound, and to consider whether a history-dependent monetary policy commitment continues to be important when fiscal policy is appropriately adjusted. We find that even in a model where complete tax smoothing would be optimal as long as the zero bound never binds, it is optimal to temporarily adjust tax rates in response to a binding zero bound; but when taxes have only a supply-side effect, the optimal policy requires that the tax rate be raised during the "trap", while committing to lower tax rates below their long-run level later. An optimal policy commitment is still history-dependent, in general, but the gains from departing from a strict inflation target are modest in the case that fiscal policy responds to the real disturbance in an appropriate way.
Handle: RePEc:nbr:nberwo:10840
Template-Type: ReDIF-Paper 1.0
Title: Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut
Classification-JEL: H3; G3
Author-Name: Raj Chetty
Author-Person: pch161
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE CF
Number: 10841
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10841
File-URL: http://www.nber.org/papers/w10841.pdf
File-Format: application/pdf
Publication-Status: published as "Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut," Quarterly Journal of Economics 120(3): 791-833, 2005.
Abstract: This paper analyzes the effects of dividend taxation on corporate behavior using the large tax cut on individual dividend income enacted in 2003. Using data spanning 1980 to 2004-Q2, we document a sharp and widespread surge in dividend payments following the tax cut, along several dimensions. First, an unprecedented number of firms initiated regular dividend payments after the reform. As a result, the number of publicly traded firms paying dividends, after having declined continuously for more than two decades, began to increase precisely in 2003. Second, many firms that were already paying dividends prior to the reform raised regular dividend payments significantly. Third, special dividends also rose. All of these effects are robust to introducing controls for profits and other firm characteristics. Additional evidence for specific groups of firms suggests that the tax cut induced increases in total payout rather than substitution between dividends and repurchases. The tax response was confined to firms with lower levels of forecasted growth, consistent with an improvement in capital allocation efficiency. The response to the tax cut was strongest in firms with strong principals whose tax incentives changed (presence of large taxable institutional owners or independent directors with large share holdings), and in firms where agents had stronger incentives to respond (large executive ownership and low levels of executive stock-options outstanding). These findings show that principal-agent issues play a central role in corporate responses to taxation.
Handle: RePEc:nbr:nberwo:10841
Template-Type: ReDIF-Paper 1.0
Title: The Measurement and Evolution of Health Inequality: Evidence from the U.S. Medicare Population
Classification-JEL: I1; I3; J7
Author-Name: Jonathan Skinner
Author-Person: psk23
Author-Name: Weiping Zhou
Note: AG EH
Number: 10842
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10842
File-URL: http://www.nber.org/papers/w10842.pdf
File-Format: application/pdf
Abstract: Has U.S. health care for the elderly become more equitable during the past several decades? When inequality is measured by Medicare expenditures, the answer is yes. During 1987-2001, low income households experienced an increase of 78 percent ($2624) in per capita expenditures, double the increase of 34 percent ($1214) in the highest income group. When inequality is measured by life expectancy, the answer is no. Survival for the lowest income decile grew by 0.2 years during the 1990s compared to 0.8 years in the highest income group. That the two measures deliver such discordant messages may reflect their intrinsic shortcomings; expenditures depend on preferences, health status, and prices, while outcomes are strongly affected by health behavior and past illness. We suggest a new approach to measuring inequality: the use of quality-based effective care measures. For these measures, efficacy is well proven and nearly all of the relevant population should be receiving it, regardless of health status or preferences. Using Medicare claims data matched to zip code income, we find greater use of mammography screening, diabetic eye exams, and the use of ââ blockers and reperfusion following heart attacks among higher income households, and these differences appear to be stable or growing slowly over time. In sum, the rapid relative growth in health care expenditures among low income elderly people has not translated into relative improvement either in survival or rates of effective care.
Handle: RePEc:nbr:nberwo:10842
Template-Type: ReDIF-Paper 1.0
Title: External Adjustment
Classification-JEL: F21; F32; F36; F41
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: EFG IFM
Number: 10843
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10843
File-URL: http://www.nber.org/papers/w10843.pdf
File-Format: application/pdf
Publication-Status: published as Maurico Obstfeld, 2004. "External adjustment," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 140(4), pages 541-568, December.
Abstract: Gross stocks of foreign assets have increased rapidly relative to national outputs since 1990, and the short-run capital gains and losses on those assets can amount to significant fractions of GDP. These fluctuations in asset values render the national income and product account measure of the current account balance increasingly inadequate as a summary of the change in a country's net foreign assets. Nonetheless, unusually large current account imbalances, especially deficits, should remain high on policymakers' list of concerns, even for the richer and less credit-constrained countries. Extreme imbalances signal the need for large and perhaps abrupt real exchange rate changes in the future, changes that might have undesired political and financial consequences given the incompleteness of domestic and international asset markets. Furthermore, of the two sources of the change in net foreign assets -- the current account and the capital gain on the net foreign asset position -- the former is better understood and more amenable to policy influence. Systematic government attempts to manipulate international asset values in order to change the net foreign asset position could have a destabilizing effect on market expectations.
Handle: RePEc:nbr:nberwo:10843
Template-Type: ReDIF-Paper 1.0
Title: Does Immigration Affect the Long-Term Educational Outcomes of Natives? Quasi-Experimental Evidence
Classification-JEL: I20; J24
Author-Name: Eric D. Gould
Author-Person: pgo104
Author-Name: Victor Lavy
Author-Person: pla111
Author-Name: M. Daniele Paserman
Author-Person: ppa129
Note: ED LS
Number: 10844
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10844
File-URL: http://www.nber.org/papers/w10844.pdf
File-Format: application/pdf
Publication-Status: published as EricD. Gould & Victor Lavy & M. DanielePaserman, 2009. "Does Immigration Affect the Long-Term Educational Outcomes of Natives? Quasi-Experimental Evidence," Economic Journal, Royal Economic Society, vol. 119(540), pages 1243-1269, October.
Abstract: This paper uses the mass migration wave to Israel in the 1990s to examine the impact of immigrant concentration in elementary school on the long-term academic outcomes of native students in high school. To identify the causal effect of immigrant children on their peers, we exploit random variation in the number of immigrants across grades within the same school. The results suggest that the overall presence of immigrants had essentially no effect on the quality of the high school attended by native Israelis and on dropout rates, and at most a mild negative effect on high school matriculation rates. However, when we break up the sample by parents' education and by ethnic origin, we find that disadvantaged children were more likely to have been adversely affected by a higher immigrant concentration in elementary school. Focusing on the impact of Ethiopian immigrants who are from a much lower socio-economic background, we find stronger evidence of adverse effects, especially for disadvantaged students and in classes where immigrant concentration was particularly high.
Handle: RePEc:nbr:nberwo:10844
Template-Type: ReDIF-Paper 1.0
Title: Dollar Shortages and Crises
Classification-JEL: G15; G28; F21; F32; F34
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Note: IFM
Number: 10845
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10845
File-URL: http://www.nber.org/papers/w10845.pdf
File-Format: application/pdf
Publication-Status: published as Raghuram G. Rajan & Ioannis Tokatlidis, 2005. "Dollar Shortages and Crises," International Journal of Central Banking, International Journal of Central Banking, vol. 1(2), September.
Abstract: Emerging markets do not handle adverse shocks well. In this paper, we lay out an argument about why emerging markets are so fragile, and why they may adopt contractual mechanisms -such as a dollarized banking system- that increase their fragility. We draw on this analysis to explain why dollarized economies may be prone to dollar shortages and twin crises. The model of crises described here differs in some important aspects from what is now termed the first, second, and third generation models of crises. We then examine how domestic policies, especially monetary policy, can mitigate the adverse effects of these crises. Finally, we consider the role, potentially constructive, that international financial institutions may undertake both in helping to prevent the crises and in helping to resolve them.
Handle: RePEc:nbr:nberwo:10845
Template-Type: ReDIF-Paper 1.0
Title: Quantitative Goals for Monetary Policy
Classification-JEL: E52
Author-Name: Antonio Fatas
Author-Person: pfa1
Author-Name: Ilian Mihov
Author-Person: pmi131
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: IFM ME
Number: 10846
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10846
File-URL: http://www.nber.org/papers/w10846.pdf
File-Format: application/pdf
Publication-Status: published as Antonio Fatás & Ilian Mihov & Andrew K. Rose, 2007. "Quantitative Goals for Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(5), pages 1163-1176, 08.
Abstract: We study empirically the macroeconomic effects of an explicit de jure quantitative goal for monetary policy. Quantitative goals take three forms: exchange rates, money growth rates, and inflation targets. We analyze the effects on inflation of both having a quantitative target, and of hitting a declared target; we also consider effects on output volatility. Our empirical work uses an annual data set covering 42 countries between 1960 and 2000, and takes account of other determinants of inflation (such as fiscal policy, the business cycle, and openness to international trade), and the endogeneity of the monetary policy regime. We find that both having and hitting quantitative targets for monetary policy is systematically and robustly associated with lower inflation. The exact form of the monetary target matters somewhat, but is less important than having some quantitative target. Successfully achieving a quantitative monetary goal is also associated with less volatile output.
Handle: RePEc:nbr:nberwo:10846
Template-Type: ReDIF-Paper 1.0
Title: Charles Kindleberger
Classification-JEL: G12; N2
Author-Name: Edward J. Kane
Author-Person: pka853
Note: CF
Number: 10847
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10847
File-URL: http://www.nber.org/papers/w10847.pdf
File-Format: application/pdf
Publication-Status: published as Kane, Edward J. "Charles Kindleberger: An Impressionist In A Minimalist World," Atlantic Economic Journal, v33(1,Mar), 2005, 35-42.
Abstract: Minimalist economists stubbornly resist Charles Kindleberger's characterization of investor expectations in a financial bubble as "irrational." This paper seeks to resolve the controversy by imbedding Kindleberger's well-researched, impressionistic theory of financial crises into an expanded, but still-minimalist model of rational expectations. Introducing the concepts of malicious disinformation and rational overpromotion creates an informational environment in which it is time-consuming and costly to distinguish fact from fiction. Rationality still requires that expectations and market fundamentals move together over long periods of time, but dishonorable overpromoters can earn substantial profits in the interim.
Handle: RePEc:nbr:nberwo:10847
Template-Type: ReDIF-Paper 1.0
Title: The Elusive Welfare Economics of Price Stability as a Monetary Policy Objective: Should New Keynesian Central Bankers Pursue Price Stability?
Classification-JEL: E3; E4; E5; E6
Author-Name: Willem H. Buiter
Author-Person: pbu137
Note: IFM ME
Number: 10848
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10848
File-URL: http://www.nber.org/papers/w10848.pdf
File-Format: application/pdf
Abstract: The paper studies the inflation rate associated with optimal monetary policy in a standard suite of DSGE models, when fiscal policy is either unrestricted optimal or restricted but supportive of monetary policy. Full nominal price flexibility, nominal prices set one period in advance and Calvo-style staggered overlapping price contracts with a variety of indexation rules for constrained price setters are considered. For all price setting models, optimal monetary policy implements the Bailey-Friedman Optimal Quantity of Money (OQM) rule: the pecuniary opportunity cost of holding money is equal to zero. There is an optimal inflation rate for producer prices in the Calvo model, given by the 'core inflation' process generated by the indexation rule of the constrained price setters. It is constant only if core inflation is constant. A zero rate of producer price inflation is necessary for optimality in the Calvo model, only if all of the following conditions hold. (1) There is no money or the nominal interest rate on money can be set freely. (2) The constrained price setters of the Calvo model implement an ill-posed, arbitrary price indexation rule, such as the lagged partial indexation rule used by Woodford to make a case for price stability. (3) The authorities use neither their tax instruments nor the nominal interest rate to validate the core inflation process. These results are global - they do not depend on linear approximations at a deterministic, zero-inflation steady state.
Handle: RePEc:nbr:nberwo:10848
Template-Type: ReDIF-Paper 1.0
Title: Globalization, Macroeconomic Performance, and the Exchange Rates of Emerging Economies
Classification-JEL: O11; O16; F34; F36
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: IFM
Number: 10849
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10849
File-URL: http://www.nber.org/papers/w10849.pdf
File-Format: application/pdf
Publication-Status: published as Obstfeld, Maurice. "Globalization, Macroeconomic Performance, and the Exchange Rates of Emerging Economies." Monetary and Economic Studies (Bank of Japan), December 2004.
Abstract: Among the developing countries of the world, those emerging markets that have sought some degree of integration into world finance are characterized by higher per capita incomes, higher long-run growth rates, and lower output and consumption volatility. These characteristics are more likely to be causes than effects of financial integration. The measurable gains from financial integration appear to be lower for emerging markets than for higher-income countries, and appear to have been limited by recent crises. One factor limiting the gains from financial integration is the difficulty emerging economies face in resolving the open-economy trilemma. Given their structural and institutional features, many emerging economies cannot live comfortably either with fixed or with freely floating exchange rates. Most recently, the exchange rates of several emerging countries display attempts at stabilization punctuated by high volatility in periods of market stress.
Handle: RePEc:nbr:nberwo:10849
Template-Type: ReDIF-Paper 1.0
Title: Do Stock Prices Really Reflect Fundamental Values? The Case of REITs
Classification-JEL: G0; G12
Author-Name: William M. Gentry
Author-Name: Charles M. Jones
Author-Name: Christopher J. Mayer
Author-Person: pma212
Note: AP
Number: 10850
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10850
File-URL: http://www.nber.org/papers/w10850.pdf
File-Format: application/pdf
Abstract: Real estate investment trust (REIT) stock prices deviate substantially from net asset values (NAV). Using REIT data since 1990, we find large positive excess returns to a strategy of buying stocks that trade at a discount to NAV, and shorting stocks trading at a premium to NAV. Estimated alphas from this strategy are between 0.9% and 1.8% per month, with little risk. Trading costs and short-sale constraints are not prohibitive and the results strengthen when we control for differences in liquidity or the extent of institutional ownership. We find that some variation in P/NAV makes sense, as premiums are positively related to recent and future NAV growth. However, there appears to be too much volatility in P/NAV, giving rise to potential profits from short-term mean reversion. The closed-end fund literature has some similar findings on stock price deviations from fundamental value, but compared to closed-end funds REITs are much larger and have much higher insider and institutional ownership. These differences suggest that REIT premiums and discounts reflect more than just small investor sentiment, which is a common explanation of why closed-end fund prices deviate from their fundamental value.
Handle: RePEc:nbr:nberwo:10850
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Population Aging on Financial Markets
Classification-JEL: G12; J11; J14
Author-Name: James Poterba
Author-Person: ppo19
Note: AG AP
Number: 10851
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10851
File-URL: http://www.nber.org/papers/w10851.pdf
File-Format: application/pdf
Publication-Status: published as Poterba, James M. "Impact Of Population Aging On Financial Markets In Developed Countries," FRB Kansas City - Economic Review 89(4): 43-53, 4th Qtr. 2004
Publication-Status: published as James M. Poterba, 2004. "The impact of population aging on financial markets," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 163-216.
Publication-Status: published as James M. Poterba, 2004. "The impact of population aging on financial markets," Proceedings, Federal Reserve Bank of Kansas City, issue Aug, pages 163-216.
Abstract: A number of financial market analysts have argued that the aging of the "Baby Boom" cohort contributed to the rise U.S. asset values during the 1990s, and that asset prices will decline when this group reaches retirement age and begins to draw down its wealth. This paper explores the importance of changing demographic structure for asset returns, asset prices, and the composition of household balance sheets in the United States. Standard models suggest that equilibrium returns on financial assets will vary in response to changes in population age structure. While the direction of the effect of demographic changes is not controversial, the quantitative importance of such changes for financial markets is open to debate. The paper presents several strands of empirical evidence that bear on this issue. First, it describes current age-specific patterns of asset holding in the United States, and finds that asset holdings rise sharply when households are in their 30s and 40s. Aside from the automatic decline in the value of defined benefit pension assets as households age, however, other financial assets decline only gradually during retirement. When these data are used to project asset demands in light of the future age structure of the U.S. population, they do not show a sharp decline in asset demand between 2020 and 2050. This finding calls into question the "asset market meltdown" view. Second, the paper considers the historical association between population age structure and real returns on Treasury bills, long-term government bonds, and corporate stock. The evidence suggests only modest effects, if any, of a changing demographic mix. Statistical tests based on the few effective degrees of freedom in the historical record of age structure and asset returns have limited power to detect such effects. There is a stronger historical correlation between asset levels, as measured for example by the price-dividend ratio, and summary measures of the population age structure. Once again, however, the results are sensitive to choices about econometric specification. These empirical findings provide modest support, at best, for the view that asset prices could decline as the share of households over the age of 65 increases.
Handle: RePEc:nbr:nberwo:10851
Template-Type: ReDIF-Paper 1.0
Title: The Cross-Section of Volatility and Expected Returns
Classification-JEL: G12; G13
Author-Name: Andrew Ang
Author-Person: pan374
Author-Name: Robert J. Hodrick
Author-Person: pho115
Author-Name: Yuhang Xing
Author-Person: pxi126
Author-Name: Xiaoyan Zhang
Author-Person: pzh588
Note: AP
Number: 10852
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10852
File-URL: http://www.nber.org/papers/w10852.pdf
File-Format: application/pdf
Publication-Status: published as Ang, Andrew, Robert J. Hodrick, Yuhang Xing and Xiaoyan Zhang. "The Cross-Section Of Volatility and Expected Returns," Journal of Finance, 2006, v61(1,Feb), 259-299.
Abstract: We examine the pricing of aggregate volatility risk in the cross-section of stock returns. Consistent with theory, we find that stocks with high sensitivities to innovations in aggregate volatility have low average returns. In addition, we find that stocks with high idiosyncratic volatility relative to the Fama and French (1993) model have abysmally low average returns. This phenomenon cannot be explained by exposure to aggregate volatility risk. Size, book-to-market, momentum, and liquidity effects cannot account for either the low average returns earned by stocks with high exposure to systematic volatility risk or for the low average returns of stocks with high idiosyncratic volatility.
Handle: RePEc:nbr:nberwo:10852
Template-Type: ReDIF-Paper 1.0
Title: The US Gender Pay Gap in the 1990s: Slowing Convergence
Classification-JEL: J16; J3; J7
Author-Name: Francine D. Blau
Author-Person: pbl16
Author-Name: Lawrence M. Kahn
Author-Person: pka63
Note: LS
Number: 10853
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10853
File-URL: http://www.nber.org/papers/w10853.pdf
File-Format: application/pdf
Publication-Status: published as Francine D. Blau & Lawrence M. Kahn, 2006. "The U.S. gender pay gap in the 1990s: slowing convergence," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 60(1), pages 45-66, October.
Abstract: We use data from the Michigan Panel Study of Income Dynamics (PSID) to study the slowdown in the convergence of female and male wages in the 1990s compared to the 1980s. We found that changes in human capital did not contribute to the trends, since women improved their relative human capital to a comparable extent in the 1980s and the 1990s. Occupational upgrading of women and deunionization explained a portion of the slower 1990s convergence since the positive effect of these factors on women's relative wage gains was larger in the 1980s. However, the largest factor accounting for the slowing of wage convergence was the trend in the "unexplained gap," which was sufficient to more than fully account for the slowdown in wage convergence in the 1990s. Factors that may have contributed to the slower narrowing of the unexplained gender pay gap include changes in labor force selectivity, changes in gender differences in unmeasured characteristics and labor market discrimination, and changes in the favorableness of supply and demand shifts. We find some evidence consistent with each of these factors suggesting that each may have played a role in explaining the observed trends.
Handle: RePEc:nbr:nberwo:10853
Template-Type: ReDIF-Paper 1.0
Title: Economic Growth and the Environment: A Review of Theory and Empirics
Classification-JEL: F1; Q2
Author-Name: William A. Brock
Author-Person: pbr142
Author-Name: M. Scott Taylor
Author-Person: pta60
Note: EFG EEE
Number: 10854
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10854
File-URL: http://www.nber.org/papers/w10854.pdf
File-Format: application/pdf
Publication-Status: published as Brock, William A. & Taylor, M. Scott, 2005. "Economic Growth and the Environment: A Review of Theory and Empirics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 28, pages 1749-1821 Elsevier.
Abstract: This paper reviews both theory and empirical work on economic growth and the environment. We develop four simple growth models to help us identify key features generating sustainable growth. We show how some combination of technological progress in abatement, intensified abatement, shifts in the composition of national output and induced innovation are necessary for sustainable growth, and then demonstrate how growth models employing any one of these mechanisms generate other potentially refutable predictions on abatement costs, pollution levels, or emission intensities.
Handle: RePEc:nbr:nberwo:10854
Template-Type: ReDIF-Paper 1.0
Title: Oil and the Macroeconomy Since the 1970s
Classification-JEL: E31; E32
Author-Name: Robert Barsky
Author-Person: pba670
Author-Name: Lutz Kilian
Author-Person: pki110
Note: EFG
Number: 10855
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10855
File-URL: http://www.nber.org/papers/w10855.pdf
File-Format: application/pdf
Publication-Status: published as Barsky, Robert B. and Lutz Kilian. "Oil and The Macroeconomy Since The 1970s," Journal of Economic Perspectives, 2004, v18(4,Fall), 115-134.
Abstract: Increases in oil prices have been held responsible for recessions, periods of excessive inflation, reduced productivity and lower economic growth. In this paper, we review the arguments supporting such views. First, we highlight some of the conceptual difficulties in assigning a central role to oil price shocks in explaining macroeconomic fluctuations, and we trace how the arguments of proponents of the oil view have evolved in response to these difficulties. Second, we challenge the notion that at least the major oil price movements can be viewed as exogenous with respect to the US macroeconomy. We examine critically the evidence that has led many economists to ascribe a central role to exogenous political events in modeling the oil market, and we provide arguments in favor of 'reverse causality' from macroeconomic variables to oil prices. Third, although none of the more recent oil price shocks has been associated with stagflation in the US economy, a major reason for the continued popularity of the oil shock hypothesis has been the perception that only oil price shocks are able to explain the US stagflation of the 1970s. We show that this is not the case.
Handle: RePEc:nbr:nberwo:10855
Template-Type: ReDIF-Paper 1.0
Title: Microstructure of the Yen/Dollar Foreign Exchange Market: Patterns of Intra-day Activity Revealed in the Electronic Broking System
Classification-JEL: F31; F33; G15
Author-Name: Takatoshi Ito
Author-Name: Yuko Hashimoto
Note: IFM AP
Number: 10856
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10856
File-URL: http://www.nber.org/papers/w10856.pdf
File-Format: application/pdf
Abstract: This paper establishes several intra-day patterns of the high-frequency exchange rate behavior, using the firm bid-ask quote, transaction of the EBS data set. First, the activity of quote and transactions is high in the beginning hours of the three major currency markets -- Tokyo, London, and New York and low during the Tokyo and London lunch hours and late afternoon in New York. Second, a new observation is obtained in that activity does not increase toward the end of business hours in the three major markets, even during the closing hours of New York on Friday. Third, an average bid-ask spread is narrow (wide), when quote and deal frequencies are high (low, respectively), except the beginning hour of Tokyo (GMT 0), when the bid-ask spread is wide despite high levels of activity.
Handle: RePEc:nbr:nberwo:10856
Template-Type: ReDIF-Paper 1.0
Title: Re-Assessing the U.S. Quality Adjustment to Computer Prices: The Role of Durability and Changing Software
Classification-JEL: D2; E3; L6
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Author-Name: Christopher R. Knittel
Author-Person: pkn5
Note: PR
Number: 10857
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10857
File-URL: http://www.nber.org/papers/w10857.pdf
File-Format: application/pdf
Publication-Status: published as Reassessing the US Quality Adjustment to Computer Prices: The Role of Durability and Changing Software, Robert C. Feenstra, Christopher R. Knittel. in Price Index Concepts and Measurement, Diewert, Greenlees, and Hulten. 2009
Abstract: In the second-half of the 1990s, the positive impact of information technology on productivity growth for the United States became apparent. The measurement of this productivity improvement depends on hedonic procedures adopted by the Bureau of Labor Statistics (BLS) and Bureau of Economic Analysis (BEA). In this paper we suggest a new reason why conventional hedonic methods may overstate the price decline of personal computers. We model computers as a durable good and suppose that software changes over time, which influences the efficiency of a computer. Anticipating future increases in software, purchasers may "overbuy" characteristics, in the sense that the purchased bundle of characteristics is not fully utilized in the first months or year that a computer is owned. In this case, we argue that hedonic procedures do not provide valid bounds on the true price of computer services at the time the machine is purchased with the concurrent level of software. To assess these theoretical results we estimate the model and find that before 2000 the hedonic price index constructed with BLS methods overstates the fall in computer prices. After 2000, however, the BLS hedonic index falls more slowly, reflecting the reduced marginal cost of acquiring (and therefore marginal benefit to users) of characteristics such as RAM, hard disk space or speed.
Handle: RePEc:nbr:nberwo:10857
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Corporate Tax Selfishness
Classification-JEL: H25; H26
Author-Name: Joel Slemrod
Author-Person: psl10
Note: PE
Number: 10858
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10858
File-URL: http://www.nber.org/papers/w10858.pdf
File-Format: application/pdf
Publication-Status: published as Slemrod, Joel. "The Economics Of Corporate Tax Selfishness," National Tax Journal, 2004, v57(4,Dec), 877-899.
Abstract: This paper offers an economics perspective on corporate tax noncompliance. It first reviews what is known about the extent and nature of corporate tax noncompliance and the resources devoted to enforcement. It then addresses the supply of corporate noncompliance -- the industrial organization of the tax shelter industry -- as well as the demand for corporate tax noncompliance, focusing on how the standard Allingham-Sandmo approach needs to be modified when applied to public corporations. It then discusses the implications of a supply-and-demand approach for the analysis of the incidence and efficiency cost of corporate income taxation, and the very justification for a separate tax on corporation income. Along the way it addresses policy proposals aimed at increased disclosure of corporate tax activities to both the IRS and to the public.
Handle: RePEc:nbr:nberwo:10858
Template-Type: ReDIF-Paper 1.0
Title: Poverty, Political Freedom, and the Roots of Terrorism
Classification-JEL: D74; K42; H56
Author-Name: Alberto Abadie
Author-Person: pab7
Note: LE PE
Number: 10859
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10859
File-URL: http://www.nber.org/papers/w10859.pdf
File-Format: application/pdf
Publication-Status: published as Abadie, Alberto. "Poverty, Political Freedom, And The Roots Of Terrorism," American Economic Review, 2005, v95(4,Sep), 50-56.
Abstract: This article provides an empirical investigation of the determinants of terrorism at the country level. In contrast with the previous literature on this subject, which focuses on transnational terrorism only, I use a new measure of terrorism that encompasses both domestic and transnational terrorism. In line with the results of some recent studies, this article shows that terrorist risk is not significantly higher for poorer countries, once the effects of other country-specific characteristics such as the level of political freedom are taken into account. Political freedom is shown to explain terrorism, but it does so in a non-monotonic way: countries in some intermediate range of political freedom are shown to be more prone to terrorism than countries with high levels of political freedom or countries with highly authoritarian regimes. This result suggests that, as experienced recently in Iraq and previously in Spain and Russia, transitions from an authoritarian regime to a democracy may be accompanied by temporary increases in terrorism. Finally, the results suggest that geographic factors are important to sustain terrorist activities.
Handle: RePEc:nbr:nberwo:10859
Template-Type: ReDIF-Paper 1.0
Title: Life-Cycle Asset Accumulation and Allocation in Canada
Classification-JEL: D31; E21; G11
Author-Name: Kevin Milligan
Author-Person: pmi14
Note: AG
Number: 10860
Creation-Date: 2004-10
Order-URL: http://www.nber.org/papers/w10860
File-URL: http://www.nber.org/papers/w10860.pdf
File-Format: application/pdf
Publication-Status: published as Milligan, Kevin. "Life-Cycle Asset Accumulation And Allocation In Canada," Canadian Journal of Economics, 2005, v38(3,Aug), 1057-1106.
Abstract: This paper documents the life-cycle patterns of household portfolios in Canada, and investigates several hypotheses about asset accumulation and allocation. Inferences are drawn from the 1999 Survey of Financial Security, with some comparisons to earlier wealth surveys from 1977 and 1984. I find cross-sectional evidence for asset decumulation at older ages when annuitized assets like pension wealth are included in the analysis. I also find that the portfolio share of financial assets increases sharply with age, while indicators of risk tolerance appear to decrease. This is consistent with families desiring more liquid and less risky assets as they age.
Handle: RePEc:nbr:nberwo:10860
Template-Type: ReDIF-Paper 1.0
Title: Compensating Wage Differentials and AIDS Risk
Classification-JEL: I11; J31
Author-Name: Jeff DeSimone
Author-Person: pde214
Author-Name: Edward J. Schumacher
Note: EH LS
Number: 10861
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10861
File-URL: http://www.nber.org/papers/w10861.pdf
File-Format: application/pdf
Abstract: We examine the effect of HIV/AIDS infection risks on the earnings of registered nurses (RNs) and other health care workers by combining data on metropolitan statistical area (MSA) AIDS prevalence rates with annual 1987 --2001 Current Population Survey (CPS) and quadrennial 1988 --2000 National Sample Survey of Registered Nurses (SRN) data. Holding constant wages of control groups that are likely not exposed to AIDS risks and group-specific MSA fixed effects, a 10 percent increase in the AIDS rate raises RN earnings by about 0.8 percent in post-1992 samples, when AIDS rates were falling but a more comprehensive categorization of AIDS was used by the CDC. AIDS wage differentials are much larger for RNs and non-nursing health practitioners than for other nursing and health care workers, suggesting that this differential represents compensation paid for job-related exposure to potentially HIV-infected blood.
Handle: RePEc:nbr:nberwo:10861
Template-Type: ReDIF-Paper 1.0
Title: Increases in Wealth among the Elderly in the Early 1990s: How Much is Due to Survey Design?
Classification-JEL: J14; C42; D91
Author-Name: Susann Rohwedder
Author-Person: pro270
Author-Name: Steven J. Haider
Author-Person: pha224
Author-Name: Michael Hurd
Author-Person: phu137
Note: AG
Number: 10862
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10862
File-URL: http://www.nber.org/papers/w10862.pdf
File-Format: application/pdf
Publication-Status: published as Susann Rohwedder & Steven J. Haider & Michael D. Hurd, 2006. "INCREASES IN WEALTH AMONG THE ELDERLY IN THE EARLY 1990s: HOW MUCH IS DUE TO SURVEY DESIGN?," Review of Income and Wealth, Blackwell Publishing, vol. 52(4), pages 509-524, December.
Abstract: The Asset and Health Dynamics Among the Oldest Old (AHEAD) study shows a large increase in reported total wealth between 1993 and 1995. Such an increase is not found in other US household surveys around that period. This paper examines one source of this difference. We find that in AHEAD 1993 ownership rates of stocks, CDs, bonds, and checking and saving accounts were under-reported, resulting in under-measurement of wealth in 1993, and a substantial increase in wealth from 1993 to 1995. The explanation for the under-reporting is a combination of question sequence and wording in the AHEAD survey instrument.
Handle: RePEc:nbr:nberwo:10862
Template-Type: ReDIF-Paper 1.0
Title: Behavioral Corporate Finance: A Survey
Classification-JEL: G30; G31; G32; G33
Author-Name: Malcolm Baker
Author-Person: pba735
Author-Name: Richard S. Ruback
Author-Name: Jeffrey Wurgler
Author-Person: pwu8
Note: CF
Number: 10863
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10863
File-URL: http://www.nber.org/papers/w10863.pdf
File-Format: application/pdf
Publication-Status: published as Eckbo, Espen (ed.) Handbook in Corporate Finance: Empirical Corporate Finance. North Holland: Elsevier, 2007.
Abstract: Research in behavioral corporate finance takes two distinct approaches. The first emphasizes that investors are less than fully rational. It views managerial financing and investment decisions as rational responses to securities market mispricing. The second approach emphasizes that managers are less than fully rational. It studies the effect of nonstandard preferences and judgmental biases on managerial decisions. This survey reviews the theory, empirical challenges, and current evidence pertaining to each approach. Overall, the behavioral approaches help to explain a number of important financing and investment patterns. The survey closes with a list of open questions.
Handle: RePEc:nbr:nberwo:10863
Template-Type: ReDIF-Paper 1.0
Title: Fixed Costs and FDI: The Conflicting Effects of Productivity Shocks
Classification-JEL: F15; F21; F37
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Yona Rubinstein
Author-Person: pru68
Author-Name: Efraim Sadka
Author-Person: psa492
Note: IFM ITI
Number: 10864
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10864
File-URL: http://www.nber.org/papers/w10864.pdf
File-Format: application/pdf
Abstract: The paper develops a model with lumpy setup costs of new investment, which govern the flows of FDI. Foreign investment decisions are two-fold: whether to export FDI and, if so, how much. The first decision is governed by total profitability considerations, whereas the second is governed by marginal profitability considerations. A positive productivity shock in the host country may, on the one hand, increases the volume of the desired FDI flows to the host country but, on the other hand, somewhat counter-intuitively, lowers the likelihood of the making new FDI flows by the source country, at all. Every country is potentially both a source for FDI flows to several host countries, and a host for FDI flows from several source countries. Thus, the model could generate two-way FDI flows, but not all source-host FDI flows get realized. We employ a sample of 24 OECD countries, over the period 1981-1998. We observe many pairs of countries with no FDI flows between them. Zero reported flows could indicate measurement errors, or true zeroes that are due to fixed costs (in situations where they dominate marginal productivity conditions). Empirical literature on the determinants of FDI flows which uses the Tobit procedure aims at a correction for measurement errors provides nevertheless biased estimates in the presence of fixed costs. By employing the Heckman selection procedure, we demonstrate how to get unbiased estimates of the fixed-costs effects on FDI flows. Controlling for the selection into source-host pairs of countries, and for time and country fixed effects, the paper sheds light on the importance of several covariates, such as income per capita, education, and financial risk ratings as key determinants of volume of FDI flows. While the coefficients of both the source- and host-country average years of schooling are positive and significant in the flow equation, the magnitude of the source country coefficient is more than twice that of the host country. That is, the richer the source country is relative to the host country, the larger are the FDI flows which occur between them.
Handle: RePEc:nbr:nberwo:10864
Template-Type: ReDIF-Paper 1.0
Title: An Equilibrium Model of Sorting in an Urban Housing Market
Classification-JEL: H0; J7; R0
Author-Name: Patrick Bayer
Author-Person: pba636
Author-Name: Robert McMillan
Author-Name: Kim Rueben
Author-Person: pru27
Note: PE
Number: 10865
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10865
File-URL: http://www.nber.org/papers/w10865.pdf
File-Format: application/pdf
Abstract: This paper introduces an equilibrium framework for analyzing residential sorting, designed to take advantage of newly available restricted-access Census microdata. The framework adds an equilibrium concept to the discrete choice framework developed by McFadden (1973, 1978), permitting a more flexible characterization of preferences than has been possible in previously estimated sorting models. Using data on nearly a quarter of a million households residing in the San Francisco Bay Area in 1990, our estimates provide a precise characterization of preferences for many housing and neighborhood attributes, showing how demand for these attributes varies with a household's income, race, education, and family structure. We use the equilibrium model in combination with these estimates to explore the effects of an increase in income inequality, the findings indicating that much of the increased spending power of the rich is absorbed by higher housing prices.
Handle: RePEc:nbr:nberwo:10865
Template-Type: ReDIF-Paper 1.0
Title: Estimating Real Production and Expenditures Across Nations: A Proposal for Improving the Penn World Tables
Classification-JEL: F41; O47
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Author-Name: Alan Heston
Author-Person: phe660
Author-Name: Marcel P. Timmer
Author-Person: pti9
Author-Name: Haiyan Deng
Note: ITI
Number: 10866
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10866
File-URL: http://www.nber.org/papers/w10866.pdf
File-Format: application/pdf
Publication-Status: published as Robert C Feenstra & Alan Heston & Marcel P Timmer & Haiyan Deng, 2009. "Estimating Real Production and Expenditures across Nations: A Proposal for Improving the Penn World Tables," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 201-212, October.
Abstract: In this paper we propose a new approach to international comparisons of real GDP measured from the output-side. The traditional Geary-Khamis system to measure real GDP from the expenditure-side is modified to include differences in the terms of trade between countries. It is shown that this system has a strictly positive solution under mild assumptions. On the basis of a set of domestic final output, import and export prices and values for 14 European countries and the U.S. it is shown that differences between real GDP measured from the expenditure and output-side can be substantial, especially for small open economies.
Handle: RePEc:nbr:nberwo:10866
Template-Type: ReDIF-Paper 1.0
Title: Theoretical Foundations of Buffer Stock Saving
Classification-JEL: D81; D91; E21
Author-Name: Christopher Carroll
Author-Person: pca45
Note: EFG
Number: 10867
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10867
File-URL: http://www.nber.org/papers/w10867.pdf
File-Format: application/pdf
Abstract: "Buffer-stock" versions of the dynamic stochastic optimizing model of saving are now standard in the consumption literature. This paper builds theoretical foundations for rigorous understanding of the main characteristics of buffer stock models, including the existence of a target level of wealth and the proposition that aggregate consumption growth equals aggregate income growth in a small open economy populated by buffer stock consumers.
Handle: RePEc:nbr:nberwo:10867
Template-Type: ReDIF-Paper 1.0
Title: Autopsy on an Empire: Understanding Mortality in Russia and the Former Soviet Union
Classification-JEL: I1; P0
Author-Name: Elizabeth Brainerd
Author-Person: pbr406
Author-Name: David M. Cutler
Author-Person: pcu64
Note: EH
Number: 10868
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10868
File-URL: http://www.nber.org/papers/w10868.pdf
File-Format: application/pdf
Publication-Status: published as Brainerd, Elizabeth and David M. Cutler. "Autopsy On An Empire: Understanding Mortality In Russia and The Former Soviet Union," Journal of Economic Perspectives, 2005, v19(1,Winter), 107-130.
Abstract: Male life expectancy at birth fell by over six years in Russia between 1989 and 1994. Many other countries of the former Soviet Union saw similar declines, and female life expectancy fell as well. Using cross-country and Russian household survey data, we assess six possible explanations for this upsurge in mortality. Most find little support in the data: the deterioration of the health care system, changes in diet and obesity, and material deprivation fail to explain the increase in mortality rates. The two factors that do appear to be important are alcohol consumption, especially as it relates to external causes of death (homicide, suicide, and accidents) and stress associated with a poor outlook for the future. However, a large residual remains to be explained.
Handle: RePEc:nbr:nberwo:10868
Template-Type: ReDIF-Paper 1.0
Title: The Unsustainable US Current Account Position Revisited
Classification-JEL: F21; F32; F36; F41
Author-Name: Maurice Obstfeld
Author-Person: pob13
Author-Name: Kenneth Rogoff
Author-Person: pro164
Note: EFG IFM ITI ME
Number: 10869
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10869
File-URL: http://www.nber.org/papers/w10869.pdf
File-Format: application/pdf
Publication-Status: published as Maurice Obstfeld & Kenneth Rogoff, 2005. "The unsustainable U.S. current account position revisited," Proceedings, Federal Reserve Bank of San Francisco.
Publication-Status: published as The Unsustainable US Current Account Position Revisited, Maurice Obstfeld, Kenneth Rogoff. in G7 Current Account Imbalances: Sustainability and Adjustment, Clarida. 2007
Abstract: We show that the when one takes into account the global equilibrium ramifications of an unwinding of the US current account deficit, currently estimated at 5.4% of GDP, the potential collapse of the dollar becomes considerably larger--more than 50% larger--than our previous estimates (Obstfeld and Rogoff 2000a). That global capital markets may have deepened (as emphasized by US Federal Reserve Chairman Alan Greenspan) does not affect significantly the extent of dollar decline in the wake of global current account adjustment. Rather, the dollar adjustment to global current account rebalancing depends more centrally on the level of goods-market integration. Whereas the dollar's decline may be benign as in the 1980s, we argue that the current conjuncture more closely parallels the early 1970s, when the Bretton Woods system collapsed. Finally, we use our model to dispel some common misconceptions about what kinds of shifts are needed to help close the US current account imbalance. Faster growth abroad helps only if it is relatively concentrated in nontradable goods; faster productivity growth in foreign tradable goods is more likely to exacerbate the US adjustment problem.
Handle: RePEc:nbr:nberwo:10869
Template-Type: ReDIF-Paper 1.0
Title: Policy Watch: Challenges for Terrorism Risk Insurance in the United States
Classification-JEL: H56; G22; G28
Author-Name: Howard Kunreuther
Author-Name: Erwann Michel-Kerjan
Author-Person: pmi64
Number: 10870
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10870
File-URL: http://www.nber.org/papers/w10870.pdf
File-Format: application/pdf
Publication-Status: published as Kunreuther, Howard and Erwann Michel-Kerjan. "Challenges For Terrorism Risk Insurance In The United States," Journal of Economic Perspectives, 2004, v18(4,Fall), 201-214.
Abstract: This paper examines the role that insurance has played in dealing with terrorism before and after September 11, 2001, by focusing on the distinctive challenges associated with terrorism as a catastrophic risk. The Terrorism Risk Insurance Act of 2002 (TRIA) was passed by the U.S. Congress in November 2002, establishing a national terrorism insurance program that provides up to $100 billion commercial coverage with a specific but temporary risk-sharing arrangement between the federal government and insurers. TRIA's three-year term ends December 31, 2005, so Congress soon has to determine whether it should be renewed, whether an alternative terrorism insurance program should be substituted for it, or whether insurance coverage is left solely in the hands of the private sector. As input into this process, the paper examines several alternatives and scenarios, and discusses their potential to create a sustainable terrorism insurance program in the Unites States.
Handle: RePEc:nbr:nberwo:10870
Template-Type: ReDIF-Paper 1.0
Title: Tiebout Sorting, Social Multipliers and the Demand for School Quality
Classification-JEL: I20; H41; R21
Author-Name: Patrick Bayer
Author-Person: pba636
Author-Name: Fernando Ferreira
Author-Person: pfe163
Author-Name: Robert McMillan
Note: ED
Number: 10871
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10871
File-URL: http://www.nber.org/papers/w10871.pdf
File-Format: application/pdf
Abstract: In many theoretical public finance models, school quality plays a central role as a determinant of household location choices and in turn, of neighborhood stratification. In contrast, the recent empirical literature has almost universally concluded that the direct effect of school quality on housing demand is weak, a conclusion that is robust across a variety of research designs. Using an equilibrium model of residential sorting, this paper closes the gap between these literatures, providing clear evidence that the full effect of school quality on residential sorting is significantly larger than the direct effect -- four times as great for education stratification, twice for income stratification. This is due to a strong social multiplier associated with heterogeneous preferences for peers and neighbors; initial changes in school quality set in motion a process of re-sorting on the basis of neighborhood characteristics that reinforces itself, giving rise to substantially larger stratification effects.
Handle: RePEc:nbr:nberwo:10871
Template-Type: ReDIF-Paper 1.0
Title: Acquiring Control in Emerging Markets: Evidence from the Stock Market
Classification-JEL: F3; G3
Author-Name: Anusha Chari
Author-Person: pch288
Author-Name: Paige P. Ouimet
Author-Name: Linda L. Tesar
Author-Person: pte111
Note: IFM AP
Number: 10872
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10872
File-URL: http://www.nber.org/papers/w10872.pdf
File-Format: application/pdf
Abstract: When firms from developed markets acquire firms in emerging markets, market-capitalization-weighted monthly joint returns show a statistically significant increase of 1.8%. Panel data estimations suggest that the value gains from cross-border M&A transactions stem from the transfer of majority control from emerging-market targets to developed market acquirers' joint returns range from 5.8% to 7.8% when majority control is acquired. Announcement returns for acquirer and target firms estimate the distribution of gains and show a statistically significant increase of 2.4% and 6.9%, respectively. The evidence suggests that the stock market anticipates significant value creation from cross-border transactions that involve emerging-market targets leading to substantial gains for shareholders of both acquirer and target firms.
Handle: RePEc:nbr:nberwo:10872
Template-Type: ReDIF-Paper 1.0
Title: From Home to Hospital: The Evolution of Childbirth in the United States, 1927-1940
Classification-JEL: I12; N32
Author-Name: Melissa A. Thomasson
Author-Person: pth24
Author-Name: Jaret Treber
Note: EH DAE
Number: 10873
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10873
File-URL: http://www.nber.org/papers/w10873.pdf
File-Format: application/pdf
Publication-Status: published as Thomasson, Melissa A. & Treber, Jaret, 2008. "From home to hospital: The evolution of childbirth in the United States, 1928-1940," Explorations in Economic History, Elsevier, vol. 45(1), pages 76-99, January.
Abstract: This paper examines the shift in childbirth from home to hospital that occurred in the United States in the early twentieth century. Using a panel of city-level data over the period 1927-1940, we examine the shift of childbirth from home to hospital and analyze the impact of medical care on maternal mortality. Results suggest that increased operative intervention on the part of physicians and a resultant greater risk of infection increased maternal mortality prior to the introduction of sulfa drugs in 1937. However, the introduction of sulfa enabled doctors to reduce maternal mortality by enabling them to do potentially life-saving procedures (such as cesareans) without the risk of subsequent infection. Regressions estimated separately by race suggest that the impact of medical care on maternal mortality differed for blacks and whites. Relative to whites, hospitals posed a greater risk for black mothers prior to the availability of sulfa drugs in 1937, and were less beneficial for them afterwards, suggesting that blacks may have received lower quality medical care.
Handle: RePEc:nbr:nberwo:10873
Template-Type: ReDIF-Paper 1.0
Title: Piracy on the High C's: Music Downloading, Sales Displacement, and Social Welfare in a Sample of College Students
Classification-JEL: L82
Author-Name: Rafael Rob
Author-Name: Joel Waldfogel
Author-Person: pwa46
Note: IO LE
Number: 10874
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10874
File-URL: http://www.nber.org/papers/w10874.pdf
File-Format: application/pdf
Publication-Status: published as Rob, Rafael and Joel Waldfogel. "Piracy On The High C's: Music Downloading, Sales Displacement, and Social Welfare In A Sample Of College Students," Journal of Law and Economics, 2006, v49(1,Apr), 29-62.
Abstract: Recording industry revenue has fallen sharply in the last three years, and some -- but not all -- observers attribute this to file sharing. We collect new data on albums obtained via purchase and downloading, as well as the consumers' valuations of these albums, among a sample of US college students in 2003. We provide new estimates of sales displacement induced by downloading using both OLS and an instrumental variables approach using access to broadband as a source of exogenous variation in downloading. Each album download reduces purchases by about 0.2 in our sample, although possibly much more. Our valuation data allow us to measure the effects of downloading on welfare as well as expenditure in a subsample of Penn undergraduates, and we find that downloading reduces their per capita expenditure (on hit albums released 1999-2003) from $126 to $100 but raises per capita consumer welfare by $70.
Handle: RePEc:nbr:nberwo:10874
Template-Type: ReDIF-Paper 1.0
Title: Standing on Academic Shoulders: Measuring Scientific Influence in Universities
Classification-JEL: L30; O30
Author-Name: James D. Adams
Author-Person: pad11
Author-Name: J. Roger Clemmons
Author-Name: Paula E. Stephan
Author-Person: pst458
Note: PR
Number: 10875
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10875
File-URL: http://www.nber.org/papers/w10875.pdf
File-Format: application/pdf
Publication-Status: published as James ADAMS & J. Roger CLEMMONS & Paula E. STEPHAN, 2005. "Standing on Academic Shoulders: Measuring Scientific Influence in Universities," Annales d'Economie et de Statistique, ENSAE, issue 79-80, pages 61-90.
Publication-Status: published as Standing on Academic Shoulders: Measuring Scientific Influence in Universities, James D. Adams, J. Roger Clemmons, Paula E. Stephan. in Contributions in Memory of Zvi Griliches, Mairesse and Trajtenberg. 2010
Abstract: This article measures scientific influence by means of citations to academic papers. The data source is the Institute for Scientific Information (ISI); the scientific institutions included are the top 110 U.S. research universities; the 12 main fields that classify the data cover nearly all of science; and the time period is 1981-1999. Altogether the database includes 2.4 million papers and 18.8 million citations. Thus the evidence underlying our findings accounts for much of the basic research conducted in the United States during the last quarter of the 20th century. This research in turn contributes a significant part of knowledge production in the U.S. during the same period. The citation measure used is the citation probability, which equals actual citations divided by potential citations, and captures average utilization of cited literature by individual citing articles. The mean citation probability within fields is on the order of 10-5. Cross-field citation probabilities are one-tenth to one-hundredth as large, or 10-6 to 10-7. Citations between pairs of citing and cited fields are significant in less than one-fourth of the possible cases. It follows that citations are largely bounded by field, with corresponding implications for the limits of scientific influence. Cross-field citation probabilities appear to be symmetric for mutually citing fields. Scientific influence is asymmetric within fields, and occurs primarily from top institutions to those less highly ranked. Still, there is significant reverse influence on higher-ranked schools. We also find that top institutions are more often cited by peer institutions than lower-ranked institutions are cited by their peers. Overall the results suggest that knowledge spillovers in basic science research are important, but are circumscribed by field and by intrinsic relevance. Perhaps the most important implication of the results are the limits that they seem to impose on the returns to scale in the knowledge production function for basic research, namely the proportion of available knowledge that spills over from one scientist to another.
Handle: RePEc:nbr:nberwo:10875
Template-Type: ReDIF-Paper 1.0
Title: Minimum Hours Constraints, Job Requirements and Retirement
Classification-JEL: H55; J26; J14; J32; E21
Author-Name: Alan L. Gustman
Author-Person: pgu327
Author-Name: Thomas L. Steinmeier
Note: AG LS
Number: 10876
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10876
File-URL: http://www.nber.org/papers/w10876.pdf
File-Format: application/pdf
Publication-Status: published as Alan L. Gustman and Thomas L. Steinmeier. "Projecting Behavioral Responses to the Next Generation of Retirement Policies". Research in Labor Economics, Vol. 28, 2008, pp. 141-196.
Abstract: A structural retirement model estimated with data from the Health and Retirement Study is used to simulate the effects of policies firms might adopt to improve employment conditions for older workers and thereby encourage delayed retirement. Firm policies that effectively abolished minimum hours constraints would strongly increase the number partially retired, while reducing full time work and full retirement, resulting in only a small net increase in full-time equivalent employment. Reducing physical and mental requirements of jobs would have much weaker effects on retirement than was suggested by work with the 1970s Retirement History Study. Reducing informal pressures to retire, increasing employer accommodations to health problems, and reducing the prevalence of layoffs and retirement windows would have only small effects on retirement outcomes.
Handle: RePEc:nbr:nberwo:10876
Template-Type: ReDIF-Paper 1.0
Title: Product Quality, Linder, and the Direction of Trade
Classification-JEL: F1
Author-Name: Juan Carlos Hallak
Author-Person: pha474
Note: ITI
Number: 10877
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10877
File-URL: http://www.nber.org/papers/w10877.pdf
File-Format: application/pdf
Publication-Status: published as Hallak, Juan Carlos. "Product Quality And The Direction Of Trade," Journal of International Economics, 2006, v68(1,Jan), 238-265.
Abstract: A substantial amount of theoretical work predicts that quality plays an important role as a determinant of the global patterns of bilateral trade. This paper develops an empirical framework to estimate the empirical relevance of this prediction. In particular, it identifies the effect of quality operating on the demand side through the relationship between per capita income and aggregate demand for quality. The model yields predictions for bilateral flows at the sectoral level, and is estimated using cross-sectional data for bilateral trade among 60 countries in 1995. The empirical results confirm the theoretical prediction: rich countries tend to import relatively more from countries that produce high quality goods. The paper also shows that a severe aggregation bias explains the failure of the literature so far to find consistent empirical support for the "Linder hypothesis", the conjectured corollary to the first theory relating product quality and the direction of trade.
Handle: RePEc:nbr:nberwo:10877
Template-Type: ReDIF-Paper 1.0
Title: Two Decades of Japanese Monetary Policy and the Deflation Problem
Classification-JEL: E42; E52; E58
Author-Name: Takatoshi Ito
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: EFG IFM ME
Number: 10878
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10878
File-URL: http://www.nber.org/papers/w10878.pdf
File-Format: application/pdf
Publication-Status: published as Two Decades of Japanese Monetary Policy and the Deflation Problem, Takatoshi Ito, Frederic S. Mishkin. in Monetary Policy with Very Low Inflation in the Pacific Rim, Ito and Rose. 2006
Abstract: This paper reviews Japanese monetary policy over the last two decades with an emphasis on the experience of deflation from the mid-1990s. The paper is quite critical of the conduct of monetary policy, particularly from 1998 to 2003. The Bank of Japan's rhetoric was not helpful in fighting deflation, and the interest rate hike in August 2000 amid deflation was a serious mistake. Deflation can be quite costly, and a key element in both preventing and escaping deflation is the management of expectations, using either price level or inflation targeting, because the zero lower bound on interest rates means that the overnight interest rate can no longer be used as the instrument of monetary policy. This paper proposes how to best manage expectations to exit deflation. Price-level targeting overcomes theoretical problems, such as need for a history dependent strategy, associated with inflation targeting. However, because actions speak louder than words, management of expectations also involves non-conventional monetary policies, a combination of which might have to be tried to help the Japanese economy escape its deflationary trap.
Handle: RePEc:nbr:nberwo:10878
Template-Type: ReDIF-Paper 1.0
Title: Educational Opportunity and Income Inequality
Classification-JEL: D8; H4; I2
Author-Name: Paul Willen
Author-Person: pwi457
Author-Name: Igal Hendel
Author-Name: Joel Shapiro
Author-Person: psh297
Note: ED EFG
Number: 10879
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10879
File-URL: http://www.nber.org/papers/w10879.pdf
File-Format: application/pdf
Publication-Status: published as Hendel, Igal & Shapiro, Joel & Willen, Paul, 2005. "Educational opportunity and income inequality," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 841-870, June.
Abstract: Affordable higher education is, and has been, a key element of social policy in the United States with broad bipartisan support. Financial aid has substantially increased the number of people who complete university - generally thought to be a good thing. We show, however, that making education more affordable can increase income inequality. The mechanism that drives our results is a combination of credit constraints and the `signaling' role of education first explored by Spence (1973). When borrowing for education is difficult, lack of a college education could mean that one is either of low ability or of high ability but with low financial resources. When government programs make borrowing or lower tuition more affordable, high-ability persons become educated and leave the uneducated pool, driving down the wage for unskilled workers and raising the skill premium.
Handle: RePEc:nbr:nberwo:10879
Template-Type: ReDIF-Paper 1.0
Title: R&D Subsidies and Climate Policy: Is There a "Free Lunch"?
Classification-JEL: O33; O38; O41; Q42
Author-Name: David Popp
Note: PR EEE
Number: 10880
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10880
File-URL: http://www.nber.org/papers/w10880.pdf
File-Format: application/pdf
Publication-Status: published as Popp, David. "R&D Subsidies and Climate Policy: Is There a "Free Lunch"?" Climatic Change 77, 3-4 (August 2006): 311-341.
Abstract: Because of the long-term nature of the climate problem, technological advances are often seen as an important component of any solution. However, when considering the potential for technology to help solve the climate problem, two market failures exist which lead to underinvestment in climate-friendly R&D: environmental externalities and the public goods nature of new knowledge. As a result, government subsidies to climate-friendly R&D projects are often proposed as part of a policy solution. Using the ENTICE model, I analyze the effectiveness of such subsidies, both with and without other climate policies, such as a carbon tax. While R&D subsidies do lead to significant increases in climate-friendly R&D, this R&D has little impact on the climate itself. Subsidies address the problem of knowledge as a public good, but they do not address the environmental externality, and thus offer no additional incentive to adopt new technologies. Moreover, high opportunity costs to R&D limit the potential role that subsidies can play. While R&D subsidies can improve efficiency, policies that directly affect the environmental externality have a much larger impact on both atmospheric temperature and economic welfare.
Handle: RePEc:nbr:nberwo:10880
Template-Type: ReDIF-Paper 1.0
Title: Behavioral Economics and Health Economics
Classification-JEL: I1
Author-Name: Richard G. Frank
Note: EH
Number: 10881
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10881
File-URL: http://www.nber.org/papers/w10881.pdf
File-Format: application/pdf
Abstract: The health sector is filled with institutions and decision-making circumstances that create friction in markets and cognitive errors by decision makers. This paper examines the potential contributions to health economics of the ideas of behavioral economics. The discussion presented here focuses on the economics of doctor-patient interactions and some aspects of quality of care. It also touches on issues related to insurance and the demand for health care. The paper argues that long standing research impasses may be aided by applying concepts from behavioral economics.
Handle: RePEc:nbr:nberwo:10881
Template-Type: ReDIF-Paper 1.0
Title: Aged-Care Support in Japan: Perspectives and Challenges
Classification-JEL: H53; H55; I11; I18
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: John Piggott
Author-Person: ppi34
Author-Name: Satoshi Shimizutani
Author-Person: psh330
Note: AG LS
Number: 10882
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10882
File-URL: http://www.nber.org/papers/w10882.pdf
File-Format: application/pdf
Publication-Status: published as Mitchell, Olivia S., John Piggott & Satoshi Shimizutani. “Aged-Care Support in Japan: Perspectives and Challenges.” Benefits Quarterly. 1st Quarter 2006 22(1):7-18.
Abstract: This study explores economic aspects of the market for long term care (LTC) with a special focus on Japan. First, we describe the LTC system in Japan as presently implemented, and we highlight some aspects of the program that are novel and potentially of interest to other countries seeking models for long-term care provision. Next, we discuss alternative projections of Japanese LTC utilization and costs. Finally, since Japan appears likely to experience important shortfalls in LTC in the future, we discuss whether such services might be more efficiently organized and financed under alternate forms of provision.
Handle: RePEc:nbr:nberwo:10882
Template-Type: ReDIF-Paper 1.0
Title: Inattentive Consumers
Classification-JEL: E2; D9; D1; D8
Author-Name: Ricardo Reis
Author-Person: pre73
Note: EFG
Number: 10883
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10883
File-URL: http://www.nber.org/papers/w10883.pdf
File-Format: application/pdf
Publication-Status: published as Reis, Ricardo, 2006. "Inattentive consumers," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1761-1800, November.
Abstract: This paper studies the consumption decisions of agents who face costs of acquiring, absorbing and processing information. These consumers rationally choose to only sporadically update their information and re-compute their optimal consumption plans. In between updating dates, they remain inattentive. This behavior implies that news disperses slowly throughout the population, so events have a gradual and delayed effect on aggregate consumption. The model predicts that aggregate consumption adjusts slowly to shocks, and is able to explain the excess sensitivity and excess smoothness puzzles. In addition, individual consumption is sensitive to ordinary and unexpected past news, but it is not sensitive to extraordinary or predictable events. The model further predicts that some people rationally choose to not plan, live hand-to-mouth, and save less, while other people sporadically update their plans. The longer are these plans, the more they save. Evidence using U.S. aggregate and microeconomic data generally supports these predictions.
Handle: RePEc:nbr:nberwo:10883
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Drug Vintage on Survival: Micro Evidence from Puerto Rico's Medicaid Program
Classification-JEL: H4; I12; I18; J1; L65
Author-Name: Frank R. Lichtenberg
Author-Person: pli76
Note: EH PR
Number: 10884
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10884
File-URL: http://www.nber.org/papers/w10884.pdf
File-Format: application/pdf
Abstract: Using micro data on virtually all of the drugs and diseases of over 500,000 people enrolled in Puerto Rico's Medicaid program, we examine the impact of the vintage (original FDA approval year) of drugs used to treat a patient on the patient's 3-year probability of survival, controlling for demographic characteristics (age, sex, and region), utilization of medical services, and the nature and complexity of illness. We find that people using newer drugs during January-June 2000 were less likely to die by the end of 2002, conditional on the covariates. The estimated mortality rates are strictly declining with respect to drug vintage. For pre-1970 drugs, the estimated mortality rate is 4.4%. The mortality rates for 1970s, 1980s, and 1990s drugs are 3.6%, 3.0%, and 2.5%, respectively. The actual mortality rate is about 16% (3.7% vs. 4.4%) lower than it would have been if all of the drugs utilized in 2000 had been pre-1970 drugs. Estimates for subgroups of people with specific diseases display the same general pattern.
Handle: RePEc:nbr:nberwo:10884
Template-Type: ReDIF-Paper 1.0
Title: One Hit Wonders: Why Some of the Most Important Works of Modern Art are Not by Important Artists
Classification-JEL: J0; J4
Author-Name: David W. Galenson
Note: LS
Number: 10885
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10885
File-URL: http://www.nber.org/papers/w10885.pdf
File-Format: application/pdf
Publication-Status: published as David W. Galenson, 2005. "One-Hit Wonders: Why Some of the Most Important Work of Modern Art are not by Important Artists," Historical Methods: A Journal of Quantitative and Interdisciplinary History, vol 38(3), pages 101-117.
Abstract: How can minor artists produce major works of art? This paper considers 13 modern visual artists, each of whom produced a single masterpiece that dominates the artist's career. The artists include painters, sculptors, and architects, and their masterpieces include works as prominent as the painting American Gothic, the Centre Georges Pompidou in Paris, and the Vietnam Veterans Memorial in Washington, D. C. In each case, these isolated achievements were the products of innovative ideas that the artists formulated early in their careers, and fully embodied in individual works. The phenomenon of the artistic one-hit wonder highlights the nature of conceptual innovation, in which radical new approaches based on new ideas are introduced suddenly by young practitioners.
Handle: RePEc:nbr:nberwo:10885
Template-Type: ReDIF-Paper 1.0
Title: The Impact of the Civil War on Capital Intensity and Labor Productivity in Southern Manufacturing
Classification-JEL: N61; N91
Author-Name: William Hutchinson
Author-Name: Robert A. Margo
Author-Person: pma319
Note: DAE
Number: 10886
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10886
File-URL: http://www.nber.org/papers/w10886.pdf
File-Format: application/pdf
Publication-Status: published as Hutchinson, William K. & Margo, Robert A., 2006. "The impact of the Civil War on capital intensity and labor productivity in southern manufacturing," Explorations in Economic History, Elsevier, vol. 43(4), pages 689-704, October.
Abstract: The Civil War resulted in a substantial divergence in the regional structure of factor prices. In particular, wages fell in the South relative to the non-South, but interest rates and other measures of the costs of capital increased. Using archival data for manufacturing establishments, we show that capital-output and capital-labor ratios in southern manufacturing declined relative to non-southern manufacturing after the War, precisely in the direction implied by the regional shifts in factor prices. Labor productivity in Southern manufacturing also declined, but this decline is explained by the reduction in capital intensity.
Handle: RePEc:nbr:nberwo:10886
Template-Type: ReDIF-Paper 1.0
Title: $1000 Cash Back: Asymmetric Information in Auto Manufaturer Promotions
Classification-JEL: D82; L15; L62; L11
Author-Name: Meghan Busse
Author-Name: Florian Zettelmeyer
Author-Name: Jorge Silva-Risso
Note: IO
Number: 10887
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10887
File-URL: http://www.nber.org/papers/w10887.pdf
File-Format: application/pdf
Abstract: Automobile manufacturers make frequent use of promotions that give cash-back payments. Two common types of cash-back promotions are rebates to customers, which are widely publicized to potential customers, and discounts to dealers, which are not publicized. While the payments nominally go entirely to one party or the other, the real division of the manufacturer-supplied surplus between dealer and customer depends on what price the two parties negotiate. These two types of promotions thus form a natural experiment of the effect of information asymmetry on bargaining outcomes: in the customer rebate case, the parties are symmetrically informed about the availability of the manufacturer-supplied surplus, while in the dealer discount case, the dealer will generally have an informational advantage. The aim of this paper is to compare, in appropriate settings and with appropriate controls, the price outcomes of transactions conducted under these two types of promotions in order to empirically quantify the effect of this information asymmetry. We show that customers obtain approximately 80% of the surplus in cases when they are likely to be well-informed about the promotion (customer rebate), and approximately 35% when they are likely to be uninformed (dealer discount). For a promotion of average size, this difference translates to customers being worse off by $500 when they do not know that the promotion is being offered.
Handle: RePEc:nbr:nberwo:10887
Template-Type: ReDIF-Paper 1.0
Title: Disentangling the Importance of the Precautionary Saving Mode
Classification-JEL: D91; E21; C21
Author-Name: Arthur Kennickell
Author-Name: Annamaria Lusardi
Author-Person: plu347
Note: AG EFG
Number: 10888
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10888
File-URL: http://www.nber.org/papers/w10888.pdf
File-Format: application/pdf
Abstract: We assess the importance of the precautionary saving motive by relying on a direct question about precautionary wealth from the 1995 and 1998 waves of the Survey of Consumer Finances. In this survey, a new question has been designed to elicit the amount of desired precautionary wealth. This allows us to bound the amount of precautionary accumulation and to overcome many of the problems of previous works on this topic. We find that a precautionary saving motive exists and affects virtually every type of household. Even though this motive does not give rise to large amounts of wealth for young and middle-age households, it is particularly important for two groups: older households and business owners. Overall, we provide strong evidence that we need to take the precautionary saving motive into account when modeling saving behavior.
Handle: RePEc:nbr:nberwo:10888
Template-Type: ReDIF-Paper 1.0
Title: The Cost of Nominal Inertia in NNS Models
Classification-JEL: E3
Author-Name: Matthew B. Canzoneri
Author-Person: pca260
Author-Name: Robert E. Cumby
Author-Person: pcu115
Author-Name: Behzad T. Diba
Author-Person: pdi273
Note: EFG
Number: 10889
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10889
File-URL: http://www.nber.org/papers/w10889.pdf
File-Format: application/pdf
Publication-Status: published as Matthew B. Canzoneri & Robert E. Cumby & Behzad T. Diba, 2007. "The Cost of Nominal Rigidity in NNS Models," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(7), pages 1563-1586, October.
Abstract: We calculate the welfare cost of nominal inertia in a New Neoclassical Synthesis model with wage and price stickiness, capital formation, and empirically estimated rules for government spending and the cental bank's interest rate policy. We calibrate our model to U.S. data, and we show that it captures many aspects of the U.S. business cycle. Moreover, our model is capable of generating the kind of volatility that has been observed in the efficiency gaps emphasized by Erceg, Henderson and Levin (2000) and Gali, Gertler and Lopez-Salido (2002). We also highlight some of the empirical shortcomings of the model; in particular, demand side shocks appear to be either missing or improperly modeled. We calculate the cost of nominal inertia under two specifications of monetary policy. The bottom line is that, under our preferred specification of monetary policy, the model implies a conservative estimate of the cost that is twenty to sixty times larger than Lucas's (2003) estimate: the "average" household in our model would be willing to give up one to three percent of consumption each period to be free of the effects of wage and price stickiness. Wage inertia appears to be the major source of these welfare costs.
Handle: RePEc:nbr:nberwo:10889
Template-Type: ReDIF-Paper 1.0
Title: The Evolution of Income and Fertility Inequalities over the Course of Economic Development: A Human Capital Perspective
Classification-JEL: D3; J1; O1
Author-Name: Isaac Ehrlich
Author-Person: peh1
Author-Name: Jinyoung Kim
Author-Person: pki140
Note: EH CH
Number: 10890
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10890
File-URL: http://www.nber.org/papers/w10890.pdf
File-Format: application/pdf
Publication-Status: published as Isaac Ehrlich & Jinyoung Kim, 2007. "The Evolution of Income and Fertility Inequalities over the Course of Economic Development: A Human Capital Perspective, Journal of Human Capital, Volume 1, No. 1, pages 137-174, December.
Abstract: Using an endogenous-growth, overlapping-generations framework where human capital is the engine of growth, we trace the dynamic evolution of income and fertility distributions and their interdependencies over three endogenous phases of economic development. In our model, heterogeneous families determine fertility and children's human capital, and generations are linked via parental altruism and social interactions. We derive and test discriminating propositions concerning the dynamic behavior of inequalities in fertility, educational attainments, and three endogenous income inequality measures -- family-income inequality, income-group inequality, and the Gini coefficient. In this context, we also reexamine the "Kuznets hypothesis" concerning the relation between income growth and inequality.
Handle: RePEc:nbr:nberwo:10890
Template-Type: ReDIF-Paper 1.0
Title: Bidding With Securities: Auctions and Security Design
Classification-JEL: D4; G3
Author-Name: Peter M. DeMarzo
Author-Person: pde650
Author-Name: Ilan Kremer
Author-Name: Andrzej Skrzypacz
Author-Person: psk11
Note: AP
Number: 10891
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10891
File-URL: http://www.nber.org/papers/w10891.pdf
File-Format: application/pdf
Publication-Status: published as DeMarzo, Peter M., Ilan Kremer and Andrzej Skrzypacz. "Bidding With Securities: Auctions And Security Design," American Economic Review, 2005, v95(4,Sep), 936-959.
Abstract: We study security-bid auctions in which bidders compete by bidding with securities whose payments are contingent on the realized value of the asset being sold. Such auctions are commonly used, both formally and informally. In formal auctions, the seller restricts bids to an ordered set, such as an equity share or royalty rate, and commits to a format, such as first or second-price. In informal settings with competing buyers, the seller does not commit to a mechanism upfront. Rather, bidders offer securities and the seller chooses the most attractive bid, based on his beliefs, ex-post. We characterize equilibrium payoffs and bidding strategies for formal and informal auctions. For formal auctions, we examine the impact of both the security design and the auction format. We define a notion of the steepness of a set of securities, and show that steeper securities lead to higher revenues. We also show that the revenue equivalence principle holds for equity and cash auctions, but that it fails for debt (second-price auctions are superior) and for options (a first-price auction yields higher revenues). We then show that an informal auction yields the lowest possible revenues across all possible formal mechanisms. Finally, we extend our analysis to consider the effects of liquidity constraints, different information assumptions, and aspects of moral hazard.
Handle: RePEc:nbr:nberwo:10891
Template-Type: ReDIF-Paper 1.0
Title: The Closing of the Gender Gap as a Roy Model Illusion
Classification-JEL: J21; J31; J16; C31
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Author-Name: Yona Rubinstein
Author-Person: pru68
Note: EFG LS
Number: 10892
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10892
File-URL: http://www.nber.org/papers/w10892.pdf
File-Format: application/pdf
Abstract: Rising wage inequality within-gender since 1975 has created the illusion of rising wage equality between genders. In the 1970's, women were relatively equal (to each other) in terms of their earnings potential, so that nonwage factors may have dominated female labor supply decisions and nonworking women actually had more earnings potential than working women. By 1990, wages had become unequal enough that they dominated nonwage factors, so that nonworking women tended to be the ones with less earnings potential, and the wage gap between workers and nonworkers was large. Accounting for the growing selection bias using both parametric and semi-parametric versions of the Roy model, we show how the earning power of the median woman has not caught up to the earning power of a median man, even while the earning power of the median working woman has. As an illustration, we give some attention to wives with advanced degrees -- they have high and stable labor force participation rates -- and show how their measured wages have grown at about the same rate as those of men with advanced degrees.
Handle: RePEc:nbr:nberwo:10892
Template-Type: ReDIF-Paper 1.0
Title: Catching-Up to Foreign Technology? Evidence on the "Veblen-Gerschenkron" Effect of Foreign Investments
Classification-JEL: F23; O47; R11
Author-Name: Giovanni Peri
Author-Person: ppe210
Note: ITI
Number: 10893
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10893
File-URL: http://www.nber.org/papers/w10893.pdf
File-Format: application/pdf
Publication-Status: published as Peri, Giovanni and Dieter Urban. "Catching-Up To Foreign Technology? Evidence On The 'Veblen-Gerschenkron' Effect Of Foreign Investments," Regional Science and Urban Economics, 2006, v36(1,Jan), 72-98.
Abstract: The presence of foreign multinational enterprises may benefit local economies. In particular, highly productive foreign-owned firms may promote technological catch-up of local firms. Such channel of spillovers is defined as "Veblen-Geschenkron" effect of Foreign Direct Investments and is analyzed in this article. Rather than the overall density of foreign-owned plants in a region or sector, it is their productivity advantage that determines the positive effect on domestic firms in geographical and technological proximity. We test this hypothesis using new firm-level data for German and Italian manufacturing firms during the 90's. We find evidence of a significant Veblen-Gerschenkron effect which is robust to different ways of measuring total factor productivity (TFP) of firms and to different empirical specifications.
Handle: RePEc:nbr:nberwo:10893
Template-Type: ReDIF-Paper 1.0
Title: What Happens When We Randomly Assign Children to Families?
Classification-JEL: J0; I2
Author-Name: Bruce Sacerdote
Note: CH
Number: 10894
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10894
File-URL: http://www.nber.org/papers/w10894.pdf
File-Format: application/pdf
Abstract: I use a new data set of Korean-American adoptees who, as infants, were randomly assigned to families in the U.S. I examine the treatment effects from being assigned to a high income family, a high education family or a family with four or more children. I calculate the transmission of income, education and health characteristics from adoptive parents to adoptees. I then compare these coefficients of transmission to the analogous coefficients for biological children in the same families, and to children raised by their biological parents in other data sets. Having a college educated mother increases an adoptee's probability of graduating from college by 7 percentage points, but raises a biological child's probability of graduating from college by 26 percentage points. In contrast, transmission of drinking and smoking behavior from parents to children is as strong for adoptees as for non-adoptees. For height, obesity, and income, transmission coefficients are significantly higher for non-adoptees than for adoptees. In this sample, sibling gender composition does not appear to affect adoptee outcomes nor does the mix of adoptee siblings versus biological siblings.
Handle: RePEc:nbr:nberwo:10894
Template-Type: ReDIF-Paper 1.0
Title: Biases in Static Oligopoly Models? Evidence from the California Electricity Market
Classification-JEL: L1; L5; L9
Author-Name: Dae-Wook Kim
Author-Name: Christopher R. Knittel
Author-Person: pkn5
Note: IO EEE
Number: 10895
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10895
File-URL: http://www.nber.org/papers/w10895.pdf
File-Format: application/pdf
Publication-Status: published as Kim, Dae-Wook and Christopher R. Knittel. “Biases in Static Oligopoly Models? Evidence from the California Electricity Market.” The Journal of Industrial Economics LIV 4 (December 2006): 451-470.
Abstract: Estimating market power is often complicated by the lack of reliable measures of marginal cost. Instead, policy-makers often rely on other summary statistics of the market, thought to be correlated with price cost margins---such as concentration ratios or the HHI. In many industries, these summary statistics may be only weakly correlated with deviations from perfectly competitive pricing. Beginning with Gollop and Roberts (1979), a number of empirical studies have allowed the data to identify industry competition and marginal cost levels by estimating the firms' first order condition within a conjectural variations framework. Despite the prevalence of such "New Empirical Industrial Organization" (NEIO) studies, Corts (1999) illustrates the estimated mark-up levels may be biased, since the estimated conjectural variations model forces the supply relationship to be a ray through the marginal cost intercept, whereas this need not be true in dynamic games. In this paper, we use direct measures of marginal cost for the California electricity market to measure the extent to which estimated mark-ups and marginal costs are biased. Our results suggest that the NEIO technique poorly estimates the level of mark-ups and the sensitivity of marginal cost to cost shifters.
Handle: RePEc:nbr:nberwo:10895
Template-Type: ReDIF-Paper 1.0
Title: Well-Being and Social Capital: Does Suicide Pose a Puzzle?
Classification-JEL: I0
Author-Name: John F. Helliwell
Author-Person: phe368
Note: EH
Number: 10896
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10896
File-URL: http://www.nber.org/papers/w10896.pdf
File-Format: application/pdf
Publication-Status: published as John Helliwell, 2007. "Well-Being and Social Capital: Does Suicide Pose a Puzzle?," Social Indicators Research, Springer, vol. 81(3), pages 455-496, May.
Abstract: This paper has a double purpose: to see how well Durkheim's (1897) findings apply a century later, and to see if the beneficial effects of social capital on suicide prevention are parallel to those already found for subjective well-being (Helliwell 2003). The results show that more social capital and higher levels of trust are associated with lower national suicide rates, just as they are associated with higher levels of subjective well-being. Furthermore, there is a strong negative correlation between national average suicide rates and measures of life satisfaction. Thus social capital does appear to improve well-being, whether measured by higher average values of life satisfaction or by lower average suicide rates. There is a slight asymmetry, since the very high Scandinavian measures of subjective wellbeing are not matched by equally low suicide rates. To take the Swedish case as an example, this asymmetry is explained by Sweden having particularly high values of variables that have more weight in explaining life satisfaction than suicide (trust and quality of government), and less beneficial values of variables that have more influence in explaining suicide rates (Swedes have low belief in God and high divorce rates), because with the latest data and models the Swedish data fit the wellbeing and suicide equations with only tiny errors. If the international suicide data pose a puzzle, it is more because suicide rates, and their estimated equations, differ greatly by gender, while life satisfaction and its explanations are similar for men and women.
Handle: RePEc:nbr:nberwo:10896
Template-Type: ReDIF-Paper 1.0
Title: The Importance of R&D for Innovation: A Reassessment Using French Survey Data
Classification-JEL: C35; L60; O31; O33
Author-Name: Jacques Mairesse
Author-Person: pma712
Author-Name: Pierre Mohnen
Author-Person: pmo6
Note: PR
Number: 10897
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10897
File-URL: http://www.nber.org/papers/w10897.pdf
File-Format: application/pdf
Publication-Status: published as Jacques Mairesse & Pierre Mohnen, 2005. "The Importance of R&D for Innovation: A Reassessment Using French Survey Data," The Journal of Technology Transfer, Springer, vol. 30(2_2), pages 183-197, 01.
Abstract: This paper compares the contribution of R&D to innovation in terms of the various innovation output measures provided by the third Community Innovation Survey (CIS 3) for French manufacturing firms and in terms of accounting for inter-industry innovation differences.
Handle: RePEc:nbr:nberwo:10897
Template-Type: ReDIF-Paper 1.0
Title: Is Mexico A Lumpy Country?
Classification-JEL: F11; J31
Author-Name: Andrew B. Bernard
Author-Name: Raymond Robertson
Author-Person: pro310
Author-Name: Peter K. Schott
Author-Person: psc98
Note: ITI
Number: 10898
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10898
File-URL: http://www.nber.org/papers/w10898.pdf
File-Format: application/pdf
Publication-Status: published as Andrew B. Bernard & Raymond Robertson & Peter K. Schott, 2010. "Is Mexico a Lumpy Country?," Review of International Economics, Blackwell Publishing, vol. 18(5), pages 937-950, November.
Abstract: Mexico's experience before and after trade liberalization presents a challenge to neoclassical trade theory. Though labor abundant, it nevertheless exported skill-intensive goods and protected labor-intensive sectors prior to liberalization. Post-liberalization, the relative wage of skilled workers rose. Courant and Deardorff (1992) have shown theoretically that an extremely uneven distribution of factors within a country can induce behavior at odds with overall comparative advantage. We demonstrate the importance of this insight for developing countries. We show that Mexican regions exhibit substantial variation in skill abundance, offer significantly different relative factor rewards, and produce disjoint sets of industries. This heterogeneity helps to both undermine Mexico's aggregate labor abundance and motivate behavior that is more consistent with relative skill abundance.
Handle: RePEc:nbr:nberwo:10898
Template-Type: ReDIF-Paper 1.0
Title: Unbalanced Growth
Classification-JEL: O12; O30; D50
Author-Name: Kala Krishna
Author-Person: pkr26
Author-Name: Cesar A. Perez
Note: ITI
Number: 10899
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10899
File-URL: http://www.nber.org/papers/w10899.pdf
File-Format: application/pdf
Publication-Status: published as Krishna, Kala and Cesar A. Perez. "Unbalanced Growth," Canadian Journal of Economics, 2005, v38(3,Aug), 832-851.
Abstract: We study a model designed to understand the concept of unbalanced growth. We define leading sectors to be those that raise the profits from industrialization for other sectors the most. We identify the leading sectors and show that subsidizing them in sequences will raise welfare if the future is not discounted too strongly.
Handle: RePEc:nbr:nberwo:10899
Template-Type: ReDIF-Paper 1.0
Title: Corporate Governance and the Plight of Minority Shareholders in the United States Before the Great Depression
Classification-JEL: N4; K2
Author-Name: Naomi Lamoreaux
Author-Name: Jean-Laurent Rosenthal
Note: CF DAE
Number: 10900
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10900
File-URL: http://www.nber.org/papers/w10900.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. and Claudia Goldin (eds.)Corruption and Reform: Lessons from America's Economic History (National Bureau of Economic Research Conference Report). Chicago: University of Chicago Press, 2006.
Publication-Status: published as Corporate Governance and the Plight of Minority Shareholders in the United States before the Great Depression, Naomi R. Lamoreaux, Jean-Laurent Rosenthal. in Corruption and Reform: Lessons from America's Economic History, Glaeser and Goldin. 2006
Abstract: Legal records indicate that conflicts of interest -- that is, situations in which officers and directors were in a position to benefit themselves at the expense of minority shareholders -- were endemic to corporations in the late-nineteenth and early-twentieth century U.S. Yet investors nonetheless continued to buy stock in the ever increasing numbers of corporations that business people formed during this period. We attempt to understand this puzzling situation by examining the evolution of the legal rules governing both corporations and the main organizational alternative, partnerships. Because partnerships existed only at the will of their members, disputes among partners had the potential to lead to an untimely (and costly) dissolution of the enterprise. We find that the courts quite consciously differentiated the corporate form from the partnership so as to prevent disputes from having similarly disruptive effects on corporations. The cost of this differentiation, however, was to give controlling shareholders the power to extract more than their fair share of their enterprise's profits. The courts put limits on this behavior by defining the boundary at which private benefits of control became fraud, but the case law suggests that these constraints became weaker over our period. We model the basic differences between corporations and partnerships and show that, if one takes the magnitude of private benefits of control as given by the legal system, the choice of whether or not to form a firm, and whether to organize it as a partnership or a corporation, was a function of the expected profitability of the enterprise and the probability that a partnership would suffer untimely dissolution. We argue that the large number of corporations formed during the late nineteenth and early twentieth centuries were made possible by an abundance of high-profit opportunities. But the large number of partnerships that also continued to be organized suggests that the costs of corporate form were significant.
Handle: RePEc:nbr:nberwo:10900
Template-Type: ReDIF-Paper 1.0
Title: Uncovering GPTS with Patent Data
Classification-JEL: O33; O31; L86
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Author-Name: Manuel Trajtenberg
Author-Person: ptr35
Note: PR
Number: 10901
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10901
File-URL: http://www.nber.org/papers/w10901.pdf
File-Format: application/pdf
Publication-Status: published as Antonelli, C., D. Foray, B. H. Hall, and W. E. Steinmueller (eds.) New Frontiers in the Economics of Innovation and New Technology, Essays in Honor of Paul David. Edward Elgar, 2006.
Abstract: This paper asks the question: Can we see evidence of General Purpose Technologies in patent data? Using data on three million US patents granted between 1967 and 1999, and their citations received between 1975 and 2002, we construct a number of measures of GPTs, including generality, number of citations, and patent class growth, for patents themselves and for the patents that cite the patents. A selection of the top twenty patents in the tails of the distribution of several of these measures yields a set of mostly ICT technologies, of which the most important are those underlying transactions on the internet and object-oriented software. We conclude with a brief discussion of the problems we encountered in developing our measures and suggestions for future work in this area.
Handle: RePEc:nbr:nberwo:10901
Template-Type: ReDIF-Paper 1.0
Title: Race and Older Age Mortality: Evidence from Union Army Veterans
Classification-JEL: J15; N31
Author-Name: Dora L. Costa
Author-Person: pco358
Note: AG EH DAE
Number: 10902
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10902
File-URL: http://www.nber.org/papers/w10902.pdf
File-Format: application/pdf
Abstract: This paper uses the records of the Union Army to compare the older age mortality experience of the first black and white cohorts who reached middle and late ages in the twentieth century. Blacks faced a greater risk of death from all causes, especially in large cities, from infectious and parasitic diseases, from genito-urinary disease, and from heart disease, particularly valvular heart disease. Blacks' greater risk of death was the result both of the worse conditions in which they lived at the time of their deaths and of their lifelong poorer nutritional status and higher incidence of infectious disease. Compared to the 1821-40 black cohort, the 1841-50 black cohort was both under greater stress at a young age and had higher older age mortality rates.
Handle: RePEc:nbr:nberwo:10902
Template-Type: ReDIF-Paper 1.0
Title: Hiccups for HIPCs?
Classification-JEL: E31; H63; O11; O23
Author-Name: Craig Burnside
Author-Person: pbu20
Author-Name: Domenico Fanizza
Note: EFG IFM
Number: 10903
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10903
File-URL: http://www.nber.org/papers/w10903.pdf
File-Format: application/pdf
Publication-Status: published as Burnside, Craig and Domenico Fanizza. "Hiccups For HIPCs? Implications Of Debt Relief For Fiscal Sustainability And Monetary Policy," Contributions to Macroeconomics, 2005, v5(1), Article 4.
Abstract: In this paper we discuss fiscal and monetary policy issues facing heavily-indebted poor countries (HIPCs) who receive debt reduction via the enhanced HIPC initiative. This debt relief program is distinguished from previous ones by its conditionality: freed resources must be used for poverty reduction. We argue that (i) this conditionality severely limits the extent to which the initiative provides significant debt relief; (ii) depending on the response of monetary policy to an increase in social spending there could be a short-run increase in inflation in HIPC countries and (iii) the keys to long-run fiscal sustainability in the HIPCs are significant fiscal reforms by their governments, and the effectiveness of their poverty reduction programs in raising growth.
Handle: RePEc:nbr:nberwo:10903
Template-Type: ReDIF-Paper 1.0
Title: The Economic Value of Cultural Diversity: Evidence from US Cities
Classification-JEL: O4; R0; F1
Author-Name: Gianmarco I.P. Ottaviano
Author-Person: pot15
Author-Name: Giovanni Peri
Author-Person: ppe210
Note: ITI
Number: 10904
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10904
File-URL: http://www.nber.org/papers/w10904.pdf
File-Format: application/pdf
Publication-Status: published as Gianmarco I.P. Ottaviano & Giovanni Peri, 2006. "The economic value of cultural diversity: evidence from US cities," Journal of Economic Geography, Oxford University Press, vol. 6(1), pages 9-44, January.
Abstract: What are the economic consequences to U.S. natives of the growing diversity of American cities? Is their productivity or utility affected by cultural diversity as measured by diversity of countries of birth of U.S. residents? We document in this paper a very robust correlation: US-born citizens living in metropolitan areas where the share of foreign-born increased between 1970 and 1990, experienced a significant increase in their wage and in the rental price of their housing. Such finding is economically significant and survives omitted variable bias and endogeneity bias. As people and firms are mobile across cities in the long run we argue that, in equilibrium, these correlations are consistent only with a net positive effect of cultural diversity on productivity of natives.
Handle: RePEc:nbr:nberwo:10904
Template-Type: ReDIF-Paper 1.0
Title: The social Security Retirement Earnings Test, Retirement and Benefit Claiming
Classification-JEL: H55; J26; J14; J32; E21
Author-Name: Alan L. Gustman
Author-Person: pgu327
Author-Name: Thomas L. Steinmeier
Note: AG LS PE
Number: 10905
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10905
File-URL: http://www.nber.org/papers/w10905.pdf
File-Format: application/pdf
Publication-Status: published as Alan L. Gustman and Thomas L. Steinmeier. "Projecting Behavioral Responses to the Next Generation of Retirement Policies". Research in Labor Economics, Vol. 28, 2008, pp. 141-196.
Abstract: This paper introduces the age at which Social Security benefits are claimed as an additional outcome in a structural model of retirement and wealth. The model is then used to simulate the effects of abolishing the remainder of the Social Security earnings test, between age 62 and the full retirement age. Estimates are based on data for married men from the first six waves of the Health and Retirement Study. From age 62 through the full retirement age, the earnings test reduces the share of married men who work full time by about four percentage points, which entails a reduction of about ten percent in the number of married men of that age at full time work. In terms of the cash flow of the system, abolishing the earnings test would have an adverse effect, at least initially. If the earnings test were abolished between the early and full retirement ages, the share of married men claiming Social Security benefits would increase by about 10 percentage points, and the average benefit payments would increase by about $1,800 per recipient. The initial increase in benefit payments would eventually be reversed, over a time span of decades, because the annual benefit amounts would eventually be reduced by more than an actuarially fair amount due to the earlier collection of benefits. One can increase the employment of older persons either by abolishing the earnings test or by increasing the early entitlement age under Social Security. A major difference on the funding side is that abolishing the earning test results in an earlier flow of benefit payments from Social Security, worsening the cash-flow problems of the system, while increasing the early entitlement age delays the flow of benefit payments from the system, improving its liquidity.
Handle: RePEc:nbr:nberwo:10905
Template-Type: ReDIF-Paper 1.0
Title: Vertical Equity Consequences of Very High Cigarette Tax Increases: If the Poor are the Ones Smoking, How Could Cigarette Tax Increases be Progressive?
Classification-JEL: I1
Author-Name: Greg Colman
Author-Person: pco455
Author-Name: Dahlia K. Remler
Note: EH PR
Number: 10906
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10906
File-URL: http://www.nber.org/papers/w10906.pdf
File-Format: application/pdf
Publication-Status: published as Gregory J. Colman & Dahlia K. Remler, 2008. "Vertical equity consequences of very high cigarette tax increases: If the poor are the ones smoking, how could cigarette tax increases be progressive?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(2), pages 376-400.
Abstract: Cigarette smoking is concentrated among low income groups. Consequently, cigarette taxes are considered regressive. However, if poorer individuals are much more price sensitive than richer individuals, then tax increases would reduce smoking much more among the poor and their cigarette tax expenditures as a share of income would rise by much less than for the rich. Warner (2000) said this phenomenon would make cigarette tax increases progressive. We test this empirically. Among low-, middle-, and high-income, we estimate total price elasticities of -0.37, -0.35, and -0.20, respectively. We find that cigarette tax increases are not close to progressive using both tax expenditure-based and traditional welfare measures. This finding is robust to cross-border purchasing, generic cigarettes, and substantial external effects. However, we find that taxes can be progressive under some behavioral economic models (Gruber & Koszegi, 2004) but that these may only apply to a small share of smokers.
Handle: RePEc:nbr:nberwo:10906
Template-Type: ReDIF-Paper 1.0
Title: Managing Macroeconomic Crises
Classification-JEL: F3; F4
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: IFM
Number: 10907
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10907
File-URL: http://www.nber.org/papers/w10907.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua and Brian Pinto (eds.) Managing Economic Volatility and Crises: A Practitioner’s Guide. Cambridge: Cambridge University Press, 2005.
Abstract: This study reviews broadly the experience of the last decade on crisis prevention and management. It seeks to draw greater attention to policy decisions that are made during the phase when capital inflows come to a sudden stop. Procrastination---the period of financing a balance of payments deficit rather than adjusting---had serious consequences in some cases. Crises are more frequent and more severe when short-term borrowing and dollar denomination external debt are high, and foreign direct investment (FDI) and reserves are low, in large part because balance sheets are then very sensitive to increases in exchange rates and short-term interest rates. If countries that are faced with a fall in inflows adjusted more promptly, rather than stalling for time by running down reserves or shifting to loans that are shorter-termed and dollar-denominated, they might be able to adjust on more attractive terms.
Handle: RePEc:nbr:nberwo:10907
Template-Type: ReDIF-Paper 1.0
Title: Deposit Insurance and External Finance
Classification-JEL: G21; G22; G32
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Author-Name: Stefan Krause
Note: CH CF ME
Number: 10908
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10908
File-URL: http://www.nber.org/papers/w10908.pdf
File-Format: application/pdf
Publication-Status: published as Cecchetti, Stephen G. and Stefan Krause. "Deposit Insurance And External Finance," Economic Inquiry, 2005, v43(3,Jul), 531-541.
Abstract: Countries around the world differ substantially in the relative importance of their banks and capital markets in providing investment financing. This paper examines one potential explanation for the cross-country differences in the importance of banks and capital market financing of investment. It is our contention that much of the variation across countries in the depth and breadth of capital markets can be explained by a combination of the existence of deposit insurance and the extent to which a country's banking system is state owned. We provide both an equilibrium model predicting and empirical evidence showing that countries with explicit deposit insurance and a high degree of state-owned bank assets have smaller equity markets, a lower number of publicly traded firms and a smaller amount of bank credit to the private sector. Finally, our results suggest that the effects of deposit guarantees are more important than the origins of national legal systems.
Handle: RePEc:nbr:nberwo:10908
Template-Type: ReDIF-Paper 1.0
Title: Land Prices and Business Fixed Investments in Japan
Classification-JEL: E2
Author-Name: Nobuhiro Kiyotaki
Author-Name: Kenneth D. West
Author-Person: pwe16
Note: EFG
Number: 10909
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10909
File-URL: http://www.nber.org/papers/w10909.pdf
File-Format: application/pdf
Publication-Status: published as Klein, L.R. (ed.) Long Run Growth and Short Run Stabilization: Essays in Memory of Albert Ando. Cheltenham: Edward Elgar, 2006.
Abstract: Japan has seen episodes in which boom and bust in land prices is accompanied by boom and bust in business fixed investment. We develop a model that includes land in the production function. We show that in this model movements in land prices will be associated with movements of the capital stock in the same direction, provided the elasticity of substitution between land and capital is greater than one. We then estimate an aggregate investment function. Consistent with an elasticity greater than one, increases in land prices are associated with increases in the business capital stock even after controlling for movements in output and the cost of capital; decreases have a symmetric effect. In the end, however, we find that movements in land prices explain relatively little of the movement in the business fixed investment. In addition to possibly indicating that the elasticity is very near one, the small effect may result because of difficulty in extracting information from noisy land prices, neglect of the effects of regulations, and failure to consider credit constraints.
Handle: RePEc:nbr:nberwo:10909
Template-Type: ReDIF-Paper 1.0
Title: The Product Cycle and Inequality
Classification-JEL: F0
Author-Name: Boyan Jovanovic
Note: EFG PR
Number: 10910
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10910
File-URL: http://www.nber.org/papers/w10910.pdf
File-Format: application/pdf
Abstract: This paper models the product cycle and explains how it relates to world inequality. In the model, both phenomena arise because skilled people have a comparative advantage in making high-tech products. The model can explain up to a 10:1 income differential between people and up to a 7:1 differential between countries.
Handle: RePEc:nbr:nberwo:10910
Template-Type: ReDIF-Paper 1.0
Title: Fast Times at Ridgemont High? The Effect of Compulsory Schooling Laws on Teenage Births
Classification-JEL: I21; J13; J24
Author-Name: Sandra E. Black
Author-Person: pbl92
Author-Name: Paul J. Devereaux
Author-Person: pde187
Author-Name: Kjell Salvanes
Author-Person: psa3
Note: CH ED LS
Number: 10911
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10911
File-URL: http://www.nber.org/papers/w10911.pdf
File-Format: application/pdf
Abstract: Research suggests that teenage childbearing adversely affects both the outcomes of the mothers as well as those of their children. We know that low-educated women are more likely to have a teenage birth, but does this imply that policies that increase educational attainment reduce early fertility? This paper investigates whether increasing mandatory educational attainment through compulsory schooling legislation encourages women to delay childbearing. We use variation induced by changes in compulsory schooling laws in both the United States and Norway to estimate the effect in two very different institutional environments. We find evidence that increased compulsory schooling does in fact reduce the incidence of teenage childbearing in both the United States and Norway, and these results are quite robust to various specification checks. Somewhat surprisingly, we also find that the magnitude of these effects is quite similar in the two countries. These results suggest that legislation aimed at improving educational outcomes may have spillover effects onto the fertility decisions of teenagers.
Handle: RePEc:nbr:nberwo:10911
Template-Type: ReDIF-Paper 1.0
Title: Jump and Volatility Risk and Risk Premia: A New Model and Lessons from S&P 500 Options
Classification-JEL: G1
Author-Name: Pedro Santa-Clara
Author-Person: psa1486
Author-Name: Shu Yan
Author-Person: pya169
Note: AP
Number: 10912
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10912
File-URL: http://www.nber.org/papers/w10912.pdf
File-Format: application/pdf
Abstract: We use a novel pricing model to filter times series of diffusive volatility and jump intensity from S&P 500 index options. These two measures capture the ex-ante risk assessed by investors. We find that both components of risk vary substantially over time, are quite persistent, and correlate with each other and with the stock index. Using a simple general equilibrium model with a representative investor, we translate the filtered measures of ex-ante risk into an ex-ante risk premium. We find that the average premium that compensates the investor for the risks implicit in option prices, 10.1 percent, is about twice the premium required to compensate the same investor for the realized volatility, 5.8 percent. Moreover, the ex-ante equity premium that we uncover is highly volatile, with values between 2 and 32 percent. The component of the premium that corresponds to the jump risk varies between 0 and 12 percent.
Handle: RePEc:nbr:nberwo:10912
Template-Type: ReDIF-Paper 1.0
Title: There is a Risk-Return Tradeoff After All
Classification-JEL: G1
Author-Name: Eric Ghysels
Author-Person: pgh7
Author-Name: Pedro Santa-Clara
Author-Person: psa1486
Author-Name: Rossen Valkanov
Author-Person: pva496
Note: AP
Number: 10913
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10913
File-URL: http://www.nber.org/papers/w10913.pdf
File-Format: application/pdf
Publication-Status: published as Ghysels, Eric, Pedro Santa-Clara and Rossen Valkanov. "There is a risk-return tradeoff after all." Journal of Financial Economics 76 (June 2005): 509-548.
Abstract: This paper studies the ICAPM intertemporal relation between the conditional mean and the conditional variance of the aggregate stock market return. We introduce a new estimator that forecasts monthly variance with past daily squared returns -- the Mixed Data Sampling (or MIDAS) approach. Using MIDAS, we find that there is a significantly positive relation between risk and return in the stock market. This finding is robust in subsamples, to asymmetric specifications of the variance process, and to controlling for variables associated with the business cycle. We compare the MIDAS results with tests of the ICAPM based on alternative conditional variance specifications and explain the conflicting results in the literature. Finally, we offer new insights about the dynamics of conditional variance.
Handle: RePEc:nbr:nberwo:10913
Template-Type: ReDIF-Paper 1.0
Title: Predicting Volatility: Getting the Most out of Return Data Sampled at Different Frequencies
Classification-JEL: G1
Author-Name: Eric Ghysels
Author-Person: pgh7
Author-Name: Pedro Santa-Clara
Author-Person: psa1486
Author-Name: Rossen Valkanov
Author-Person: pva496
Note: AP
Number: 10914
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10914
File-URL: http://www.nber.org/papers/w10914.pdf
File-Format: application/pdf
Publication-Status: published as Ghysels, Eric, Pedro Santa-Clara and Rossen Valkanov. "Predicting Volatility: Getting The Most Our Of Return Data Sampled At Different Frequencies," Journal of Econometrics, 2006, v131(1-2,Mar-Apr), 59-95.
Abstract: We consider various MIDAS (Mixed Data Sampling) regression models to predict volatility. The models differ in the specification of regressors (squared returns, absolute returns, realized volatility, realized power, and return ranges), in the use of daily or intra-daily (5-minute) data, and in the length of the past history included in the forecasts. The MIDAS framework allows us to compare models across all these dimensions in a very tightly parameterized fashion. Using equity return data, we find that daily realized power (involving 5-minute absolute returns) is the best predictor of future volatility (measured by increments in quadratic variation) and outperforms model based on realized volatility (i.e. past increments in quadratic variation). Surprisingly, the direct use of high-frequency (5-minute) data does not improve volatility predictions. Finally, daily lags of one to two months are sucient to capture the persistence in volatility. These findings hold both in- and out-of-sample.
Handle: RePEc:nbr:nberwo:10914
Template-Type: ReDIF-Paper 1.0
Title: Fair Pricing
Classification-JEL: E3; D4; D11; E44
Author-Name: Julio J. Rotemberg
Author-Person: pro30
Note: EFG IO
Number: 10915
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10915
File-URL: http://www.nber.org/papers/w10915.pdf
File-Format: application/pdf
Publication-Status: published as Julio J. Rotemberg, 2011. "Fair Pricing," Journal of the European Economic Association, European Economic Association, vol. 9(5), pages 952-981, October.
Abstract: I suppose that consumers see a firm as fair if they cannot reject the hypothesis that the firm is somewhat benevolent towards them. Consumers that can reject this hypothesis become angry, which is costly to the firm. I show that firms that wish to avoid this anger will keep their prices rigid under some circumstances when prices would vary under more standard assumptions. The desire to appear benevolent can also lead firms to practice both third-degree and intertemporal price discrimination. Thus, the observation of temporary sales is consistent with my model of fair prices. The model can also explain why prices seem to be more responsive to changes in factor costs than to changes in demand that have the same effect on marginal cost, why increases in inflation seem to affect mostly the frequency of price adjustment without having sizeable effects on the size of price increases and why firms often announce their intent to increase prices in advance of actually doing so.
Handle: RePEc:nbr:nberwo:10915
Template-Type: ReDIF-Paper 1.0
Title: Model Uncertainty and Policy Evaluation: Some Theory and Empirics
Classification-JEL: C5; E5
Author-Name: William A. Brock
Author-Person: pbr142
Author-Name: Steven N. Durlauf
Author-Person: pdu117
Author-Name: Kenneth D. West
Author-Person: pwe16
Note: EFG ME
Number: 10916
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10916
File-URL: http://www.nber.org/papers/w10916.pdf
File-Format: application/pdf
Publication-Status: published as William Brock & Steven Durlauf & Kenneth West, 2005. "Model uncertainty and policy evaluation: some theory and empirics," Proceedings, Federal Reserve Bank of San Francisco.
Publication-Status: published as Brock, William A. & Durlauf, Steven N. & West, Kenneth D., 2007. "Model uncertainty and policy evaluation: Some theory and empirics," Journal of Econometrics, Elsevier, vol. 136(2), pages 629-664, February.
Abstract: This paper explores ways to integrate model uncertainty into policy evaluation. We first describe a general framework for the incorporation of model uncertainty into standard econometric calculations. This framework employs Bayesian model averaging methods that have begun to appear in a range of economic studies. Second, we illustrate these general ideas in the context of assessment of simple monetary policy rules for some standard New Keynesian specifications. The specifications vary in their treatment of expectations as well as in the dynamics of output and inflation. We conclude that the Taylor rule has good robustness properties, but may reasonably be challenged in overall quality with respect to stabilization by alternative simple rules that also condition on lagged interest rates, even though these rules employ parameters that are set without accounting for model uncertainty.
Handle: RePEc:nbr:nberwo:10916
Template-Type: ReDIF-Paper 1.0
Title: Stochastic Infinite Horizon Forecasts for Social Security and Related Studies
Classification-JEL: H0; H5
Author-Name: Ronald Lee
Author-Person: ple147
Author-Name: Timothy Miller
Author-Name: Michael Anderson
Author-Person: pan105
Note: AG PE
Number: 10917
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10917
File-URL: http://www.nber.org/papers/w10917.pdf
File-Format: application/pdf
Abstract: This paper consists of three reports on stochastic forecasting for Social Security, on infinite horizons, immigration, and structural time series models. 1) In our preferred stochastic immigration forecast, total net immigration drops from current levels down to about one million by 2020, then slowly rises to 1.2 million at the end of the century, with 95% probability bounds of 800,000 to 1.8 million at the century's end. Adding stochastic immigration makes little difference to the probability distribution of the old age dependency ratio. 2) We incorporate parameter uncertainty, stochastic trends, and uncertain ultimate levels in stochastic models of wage growth and fertility. These changes sometimes substantially affect the probability distributions of the individual input forecasts, but they make relatively little difference when embedded in the more fully stochastic Social Security projection. 3) Using a 500-year stochastic projection, we estimate an infinite horizon balance of -5.15% of payroll, compared to the -3.5% of the 2004 Trustees Report, probably reflecting different mortality projections. Our 95% probability interval bounds are -10.5 and -1.3%. Such forecasts, which reflect only "routine" uncertainty, have many problems but nonetheless seem worthwhile.
Handle: RePEc:nbr:nberwo:10917
Template-Type: ReDIF-Paper 1.0
Title: Why Are Power Couples Increasingly Concentrated in Large Metropolitan Areas
Classification-JEL: J61
Author-Name: Janice Compton
Author-Person: pco813
Author-Name: Robert A. Pollak
Author-Person: ppo36
Note: LS
Number: 10918
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10918
File-URL: http://www.nber.org/papers/w10918.pdf
File-Format: application/pdf
Publication-Status: published as Janice Compton & Robert A. Pollak, 2007. "Why Are Power Couples Increasingly Concentrated in Large Metropolitan Areas?," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 475-512.
Abstract: Using census data, Costa and Kahn (QJE, 2000) find that power couples - couples in which both spouses have college degrees - are increasingly likely to be located in the largest metropolitan areas. One explanation for this trend is that college educated couples are more likely to face a co-location problem - the desire to satisfy the career aspirations of both spouses - and therefore are more attracted to large labor markets than are other couples. An alternative explanation is that all college educated individuals, married and unmarried, are attracted to the amenities and high returns to education found in large cities and that as a result, the formation of power couples through marriage of educated singles and additional education is more likely to occur in larger than smaller metropolitan areas. Using the Panel Study of Income Dynamics (PSID), we analyze the dynamic patterns of migration, marriage, divorce and education in relation to city size and find that power couples are not more likely to migrate to the largest cities than part-power couples or power singles. Instead, the location trends are better explained by the higher rate of power couple formation in larger metropolitan areas. Regression analysis suggests that it is only the education of the husband and not the joint education profile of the couple that affects the propensity to migrate to large metropolitan areas.
Handle: RePEc:nbr:nberwo:10918
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Improvements in Health and Longevity on Optimal Retirement and Saving
Classification-JEL: J26; D91
Author-Name: David E. Bloom
Author-Person: pbl79
Author-Name: David Canning
Author-Person: pca340
Author-Name: Michael Moore
Author-Person: pmo284
Note: AG EH LS
Number: 10919
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10919
File-URL: http://www.nber.org/papers/w10919.pdf
File-Format: application/pdf
Abstract: We develop a life-cycle model of optimal retirement and savings behavior under complete markets where retirement is caused by worsening health in old age. Our model explains the long-run decline in the age of retirement as an income level effect. We show that improvements in health and longevity tend to increase the desired retirement age, though less than proportionately, while, contrary to conventional views, reducing savings rates. The retirement age is not simply proportional to healthy life span because compound interest creates a wealth effect when lifespan increases, leading to more leisure (early retirement) and higher consumption (lower savings).
Handle: RePEc:nbr:nberwo:10919
Template-Type: ReDIF-Paper 1.0
Title: Partnership Status and the Human Sex Ratio at Birth
Classification-JEL: J1; I3
Author-Name: Karen Norberg
Author-Person: pno208
Note: CH
Number: 10920
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10920
File-URL: http://www.nber.org/papers/w10920.pdf
File-Format: application/pdf
Publication-Status: published as K. Norberg, 2004. "Partnership status and the human sex ratio at birth," Proceedings of the Royal Society B: Biological Sciences, vol 271(1555), pages 2403-2410.
Abstract: If two-parent care has different consequences for the reproductive success of sons and daughters, then natural selection may favor adjustment of the sex ratio at birth according to circumstances that forecast later family structure. In humans, this partnership status hypothesis predicts fewer sons among extra-pair conceptions, but the rival "attractiveness" hypothesis predicts more sons among extra-pair conceptions, and the "fixed phenotype" hypothesis predicts a constant probability of having a son, regardless of partnership status. In a sample of 86,436 human births pooled from five US population-based surveys, I find 51.5% male births reported by respondents who were living with a spouse or partner before the child's conception or birth, and 49.9% male births reported by respondents who were not (X2=16.77, d.f. = 1, p<.0001). The effect was not explained by paternal bias against daughters, by parental age, education, income, ethnicity, or by year of observation, and was larger when comparisons were made between siblings. To my knowledge, this is the first direct evidence for conditional adjustment of the sex ratio at birth in humans, and could explain the recent decline in the sex ratio at birth in some developed countries.
Handle: RePEc:nbr:nberwo:10920
Template-Type: ReDIF-Paper 1.0
Title: The Steady-State Growth Theorem: A Comment on Uzawa (1961)
Classification-JEL: E1; O4
Author-Name: Charles I. Jones
Author-Person: pjo24
Author-Name: Dean Scrimgeour
Author-Person: psc246
Note: EFG
Number: 10921
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10921
File-URL: http://www.nber.org/papers/w10921.pdf
File-Format: application/pdf
Publication-Status: published as Charles I. Jones & Dean Scrimgeour, 2008. "A New Proof of Uzawa's Steady-State Growth Theorem," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 180-182, November.
Abstract: This brief note revisits the proof of the Steady-State Growth Theorem, first provided by Uzawa (1961). We provide a clear statement of the theorem and a new version of Uzawa's proof that makes the intuition underlying the result more apparent.
Handle: RePEc:nbr:nberwo:10921
Template-Type: ReDIF-Paper 1.0
Title: Diverging Trends in Macro and Micro Volatility: Facts
Classification-JEL: E3; F1; D2
Author-Name: Diego Comin
Author-Person: pco55
Author-Name: Sunil Mulani
Note: EFG
Number: 10922
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10922
File-URL: http://www.nber.org/papers/w10922.pdf
File-Format: application/pdf
Publication-Status: published as Comin, Diego and Sunil Mulani. "Diverging Trends in Macro and Micro Volatility: Facts." Review of Economics and Statistics (May 2006).
Abstract: This paper documents the diverging trends in volatility of the growth rate of sales at the aggregate and firm level. We establish that the upward trend in micro volatility is not simply driven by a compositional bias in the sample studied. We argue that this new fact sheds some shadows on the proposed explanations for the decline in aggregate volatility and that, given the symmetry of the diverging trends at the micro and macro level, a common explanation is likely. We conclude by describing one such theory.
Handle: RePEc:nbr:nberwo:10922
Template-Type: ReDIF-Paper 1.0
Title: Financing Invention During the Second Industrial Revolution: Cleveland, Ohio, 1870-1920
Classification-JEL: N2; N6; O3
Author-Name: Naomi R. Lamoreaux
Author-Name: Margaret Levenstein
Author-Person: ple808
Author-Name: Kenneth L. Sokoloff
Note: DAE PR
Number: 10923
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10923
File-URL: http://www.nber.org/papers/w10923.pdf
File-Format: application/pdf
Publication-Status: published as Auerswald, Philip and Ant Bozkaya (eds.) Financing Entrepreneurship Elgar Reference Collection. International Library of Entrepreneurship, vol. 12. Cheltenham, U.K. and Northampton, MA: Elgar, 2008.
Abstract: For those who think of Cleveland as a decaying rustbelt city, it may seem difficult to believe that this northern Ohio port was once a hotbed of high-tech startups, much like Silicon Valley today. During the late nineteenth and early twentieth centuries, Cleveland played a leading role in the development of a number of second-industrial-revolution industries, including electric light and power, steel, petroleum, chemicals, and automobiles. In an era when production and inventive activity were both increasingly capital-intensive, technologically creative individuals and firms required greater and greater amounts of funds to succeed. This paper explores how the city's leading inventors and technologically innovative firms obtained financing, and finds that formal institutions, such as banks and securities markets, played only a very limited role. Instead, most funding came from local investors who took long-term stakes in start-ups formed to exploit promising technological discoveries, often assuming managerial positions in these enterprises as well. Business people who were interested in investing in cutting-edge ventures needed help in deciding which inventors and ideas were most likely to yield economic returns, and we show how enterprises such as the Brush Electric Company served multiple functions for the inventors who flocked to work there. Not only did they provide forums for the exchange of ideas, but by assessing each other's discoveries, the members of these technological communities conveyed information to local businessmen about which inventions were most worthy of support.
Handle: RePEc:nbr:nberwo:10923
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy and Regional Interest Rates in the United States, 1880-2002
Classification-JEL: N1
Author-Name: John Landon-Lane
Author-Person: pla84
Author-Name: Hugh Rockoff
Author-Person: pro65
Note: DAE ME
Number: 10924
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10924
File-URL: http://www.nber.org/papers/w10924.pdf
File-Format: application/pdf
Abstract: The long running debate among economic historians over how long it took regional financial markets in the United States to become fully integrated should be of considerable interest to students of monetary unions. This paper reviews the debate, discusses the implications of various hypotheses for the optimality of the US monetary union, and presents some new findings on the origin and diffusion of monetary shocks. It appears that financial markets were integrated in the late nineteenth and early twentieth centuries in the sense that monetary shocks were routinely transmitted from one part of the United States to another. In particular, shocks to interest rates in the eastern financial centers were routinely transmitted to the periphery. However, it also appears that during this period significant shocks to bank lending rates in the periphery often arose on the periphery itself. This suggests that a nineteenth century monetary authority that relied on operations confined to eastern financial centers would have had a difficult time managing the U.S. monetary union. After World War II the problem of eruptions on the periphery declined.
Handle: RePEc:nbr:nberwo:10924
Template-Type: ReDIF-Paper 1.0
Title: The Information of Option Volume for Future Stock Prices
Classification-JEL: G1
Author-Name: Jun Pan
Author-Person: ppa1004
Author-Name: Allen Poteshman
Note: AP
Number: 10925
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10925
File-URL: http://www.nber.org/papers/w10925.pdf
File-Format: application/pdf
Publication-Status: published as Pan, Jun and Allen M. Poteshman. "The Information In Option Volume For Future Stock Prices," Review of Financial Studies, 2006, v19(3,Fall), 871-908.
Abstract: We present strong evidence that option trading volume contains information about future stock price movements. Taking advantage of a unique dataset from the Chicago Board Options Exchange, we construct put-call ratios from option volume initiated by buyers to open new positions. On a risk-adjusted basis, stocks with low put-call ratios outperform stocks with high put-call ratios by more than 40 basis points on the next day and more than 1% over the next week. Partitioning our option signals into components that are publicly and non-publicly observable, we find that the economic source of this predictability is non-public information possessed by option traders rather than market inefficiency. We also find greater predictability from option signals for stocks with higher concentrations of informed traders and from option contracts with greater leverage.
Handle: RePEc:nbr:nberwo:10925
Template-Type: ReDIF-Paper 1.0
Title: The Cost of Business Cycles and the Benefits of Stabilization: A Survey
Classification-JEL: E32; E63; D6
Author-Name: Gadi Barlevy
Author-Person: pba129
Note: EFG
Number: 10926
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10926
File-URL: http://www.nber.org/papers/w10926.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: This article reviews the literature on the cost of U.S. post-War business cycle fluctuations. I argue that recent work has established this cost is considerably larger than initial work found. However, despite the large cost of macroeconomic volatility, it is not obvious that policymakers should have pursued a more aggressive stabilization policy than they did. Still, the fact that volatility is so costly suggests stable growth is a desirable goal that ought to be maintained to the extent possible, just as policymakers are currently required to do under the Balanced Growth and Full Employment Act of 1978. This survey was prepared for the Economic Perspectives, a publication of the Federal Reserve Bank of Chicago.
Handle: RePEc:nbr:nberwo:10926
Template-Type: ReDIF-Paper 1.0
Title: Can Public Discussion Enhance Program Ownership?
Classification-JEL: D72; D74; F34
Author-Name: Allan Drazen
Author-Person: pdr25
Author-Name: Peter Isard
Note: EFG POL
Number: 10927
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10927
File-URL: http://www.nber.org/papers/w10927.pdf
File-Format: application/pdf
Abstract: We use the concepts of deliberative democracy from political science and cheap talk from economics to develop a better understanding of how public discussion can contribute to building and demonstrating ownership of IMF programs and hence to program success. We argue that ownership is more complex than many discussions of it would suggest, since it must include not only the willingness to carry out a program, but also the technical capacity and especially the political ability to do so. Public discussion can serve a number of purposes, each of which can be better understood by moving to a more formal treatment. We illustrate our points by means of simple examples. We also consider some of the drawbacks of public discussion, especially as applied to IMF programs.
Handle: RePEc:nbr:nberwo:10927
Template-Type: ReDIF-Paper 1.0
Title: Political Contribution Caps and Lobby Formation: Theory and Evidence
Classification-JEL: D7; H0; P16
Author-Name: Allan Drazen
Author-Person: pdr25
Author-Name: Nuno Limão
Author-Person: pli22
Author-Name: Thomas Stratman
Author-Person: pst44
Note: EFG POL
Number: 10928
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10928
File-URL: http://www.nber.org/papers/w10928.pdf
File-Format: application/pdf
Publication-Status: published as Drazen, Allan & Limao, Nuno & Stratmann, Thomas, 2007. "Political contribution caps and lobby formation: Theory and evidence," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 723-754, April.
Abstract: The perceived importance of "special interest group" money in election campaigns motivates widespread use of caps on allowable contributions. We present a bargaining model in which putting a cap that is not too stringent on the size of the contribution a lobby can make improves its bargaining position relative to the politician, thus increasing the payoff from lobbying. Such a cap will therefore increase the equilibrium number of lobbies when lobby formation is endogenous. Caps may then also increase total contributions from all lobbies, increase politically motivated government spending, and lower social welfare. We present empirical evidence from U.S. states consistent with the predictions of the model. We find a positive effect on the number of PACs formed from enacting laws constraining PAC contributions. Moreover, the estimated effect is nonlinear, as predicted by the theoretical model. Very stringent caps reduce the number of PACs, but as the cap increases above a threshold level, the effect becomes positive. Contribution caps in the majority of US states are above this threshold.
Handle: RePEc:nbr:nberwo:10928
Template-Type: ReDIF-Paper 1.0
Title: Regulation of Entry and the Distortion of Industrial Organization
Classification-JEL: O14; K2; L11
Author-Name: Raymond Fisman
Author-Person: pfi257
Author-Name: Virginia Sarria-Allende
Note: CF
Number: 10929
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10929
File-URL: http://www.nber.org/papers/w10929.pdf
File-Format: application/pdf
Publication-Status: published as Raymond Fisman & Virginia Sarria Allende, 2010. "Regulation of entry and the distortion of industrial organization," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 91-111, May.
Abstract: We study the distortions to industrial organization caused by entry regulation. We take advantage of heterogeneity across industries in their natural barriers and growth opportunities to examine whether some industries are differentially affected by country-level entry regulation. In industries with high natural entry barriers, entry regulation has little impact on the quantity and average size of firms in an industry. By contrast, in industries with low natural entry barriers, countries with high entry regulation have relatively few, large firms. We find no relation between natural entry barriers and overall industry share of manufacturing, as a function of entry regulation. Utilizing firm-level data, we show that operating margins are relatively high in low barrier industries in high entry regulation countries. Finally, we analyze the ability of industries to take advantage of shocks to growth opportunities. In countries with high entry regulation, industries respond to growth opportunities through the expansion of existing firms, while in countries with low entry regulation, the response is through the creation of new firms; the total sectoral response is invariant to the level of regulation. Our results suggest that regulation distorts the structure of industry, promoting industry concentration, but does not have measurable effects on intersectoral allocations.
Handle: RePEc:nbr:nberwo:10929
Template-Type: ReDIF-Paper 1.0
Title: The Distortionary Effects of Government Procurement: Evidence from Medicaid Prescription Drug Purchasing
Classification-JEL: H32; H57; I11; I18; L11
Author-Name: Mark Duggan
Author-Person: pdu194
Author-Name: Fiona Scott Morton
Note: EH IO
Number: 10930
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10930
File-URL: http://www.nber.org/papers/w10930.pdf
File-Format: application/pdf
Publication-Status: published as Duggan, Mark and Fiona M. Scott Morton. "The Distortionary Effects Of Government Procurement: Evidence From Medicaid Prescription Drug Purchasing," Quarterly Journal of Economics, 2006, v121(1,Feb), 1-30.
Abstract: The federal-state Medicaid program insures 43 million people for virtually all of the prescription drugs approved by the FDA. To determine the price that it will pay for a drug treatment, the government uses the average price in the private sector for that same drug. Assuming that Medicaid recipients are unresponsive to price because of the program's zero co-pay, this rule will increase prices for non-Medicaid consumers. Using drug utilization and expenditure data for the top 200 drugs in 1997 and in 2002, we investigate the relationship between the Medicaid market share (MMS) and the average price of a prescription. Our findings suggest that the Medicaid rules substantially increase equilibrium prices for non-Medicaid consumers. Specifically, a ten percentage-point increase in the MMS is associated with a ten percent increase in the average price of a prescription. This result is robust to the inclusion of controls for a drug's therapeutic class, the existence of generic competition, the number of brand competitors, and the years since the drug entered the market. We also demonstrate that the Medicaid rules increase a firm's incentive to introduce new versions of a drug at higher prices and find empirical evidence in support of this for drugs that do not face generic competition. Taken together, our findings suggest that government procurement can have an important effect on equilibrium prices in the private sector.
Handle: RePEc:nbr:nberwo:10930
Template-Type: ReDIF-Paper 1.0
Title: The Structure of Early Care and Education in the United States: Historical Evolution and International Comparisons
Classification-JEL: H5; H6; I2; I3
Author-Name: Ann Dryden Witte
Author-Name: Marisol Trowbridge
Note: CH ED
Number: 10931
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10931
File-URL: http://www.nber.org/papers/w10931.pdf
File-Format: application/pdf
Publication-Status: published as Witte, Ann Dryden and Marisol Trowbridge. “The Structure of Early Care and Education in the United States: Historical Evolution and International Comparisons.” Tax Policy and the Economy 19 (2005): 1-37.
Publication-Status: published as The Structure of Early Care and Education in the United States: Historical Evolution and International Comparisons, Ann Dryden Witte, Marisol Trowbridge. in Tax Policy and the Economy, Volume 19, Poterba. 2005
Abstract: Most European governments have universal, consolidated, education-based ECE programs that are available from early in the morning to late in the evening throughout the year. European ECE programs are uniformly of high quality, generally last at least three years, and are funded to serve all children. The US ECE system is composed of three separate programs (Head Start, Pre-Kindergarten (Pre-K) and the child care voucher program) targeted to low-income children. With a few notable exceptions, US ECE programs are funded to serve less than half of the eligible children. US ECE programs developed quite separately. They have different goals, different funding sources, different administrations and policies, and generally last for an academic year or less. Pre-K and Head Start operate only 3 to 6 hours a day and are open only during the academic year. The average quality of US ECE programs is generally much lower than the average quality of European ECE programs. Further, the quality of US ECE programs varies widely even within local areas. Although the US has greatly increased expenditures on ECE, US governments pay only 40% of the costs of ECE, while European governments pay 70% to 90% of the costs of ECE. None of the major US ECE programs simultaneously provides work supports for parents, child development opportunities for children and preparation for school for low-income children. The evidence suggests that the US ECE system is neither efficient nor equitable. Consolidation of funding and administration of current US ECE programs could substantially lower transaction costs for parents and provide more stable care arrangements for children. Increased funding could improve the quality of existing programs, extend hours and months of operation, and make care available to all eligible families. Both the evaluation literature and the European experience suggest that such a consolidated, well-funded system could be successful in preparing poor children for school. Further, the benefits of such a program could well exceed the costs since it is precisely low-income children that benefit most from stable, high-quality ECE. However, such a targeted program will have neither the positive peer group effects nor the social-integration benefits of universal ECE programs.
Handle: RePEc:nbr:nberwo:10931
Template-Type: ReDIF-Paper 1.0
Title: Speeding, Tax Fraud, and Teaching to the Test
Classification-JEL: I0
Author-Name: Edward P. Lazear
Author-Person: pla64
Note: ED
Number: 10932
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10932
File-URL: http://www.nber.org/papers/w10932.pdf
File-Format: application/pdf
Publication-Status: published as Lazear, Edward P. "Speeding, Terrorism, And Teaching To The Test," Quarterly Journal of Economics, 2006, v121(3,Aug), 1029-1061.
Abstract: Educators worry that high-stakes testing will induce teachers and their students to focus only on the test and ignore other, untested aspects of knowledge. Some counter that although this may be true, knowing something is better than knowing nothing and many students would benefit even by learning the material that is to be tested. Using the metaphor of deterring drivers from speeding, it is shown that the optimal rules for high-stakes testing depend on the costs of learning and of monitoring. For high cost learners, and when monitoring technology is inefficient, it is better to announce what will be tested. For efficient learners, de-emphasizing the test itself is the right strategy. This is analogous to telling drivers where the police are posted when police are few. At least there will be no speeding on those roads. When police are abundant or when the fine is high relative to the benefit from speeding, it is better to keep police locations secret, which results in obeying the law everywhere. Children who are high cost learners are less likely to learn all the material and therefore learn more when they are told what is on the exam. The same logic also implies that tests should be clearly defined for younger children, but more amorphous for more advanced students.
Handle: RePEc:nbr:nberwo:10932
Template-Type: ReDIF-Paper 1.0
Title: Organizational Scope and Investment: Evidence from the Drug Development Strategies and Performance of Biopharmaceutical Firms
Classification-JEL: G3; L2; O31; O32
Author-Name: Ilan Guedj
Author-Person: pgu92
Author-Name: David Scharfstein
Author-Person: psc177
Note: CF PR
Number: 10933
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10933
File-URL: http://www.nber.org/papers/w10933.pdf
File-Format: application/pdf
Abstract: This paper compares the clinical trial strategies and performance of large, established ("mature") biopharmaceutical firms to those of smaller ("early stage") firms that have not yet successfully developed a drug. We study a sample of 235 cancer drug candidates that entered clinical trials during the period 1990-2002 and were sponsored by public firms. Early stage firms are more likely than mature firms to advance drug candidates from Phase I to Phase II clinical trials. However, early stage firms have much less promising clinical results in their Phase II trials and their Phase II drug candidates are also less likely to advance to Phase III and to receive Food and Drug Administration approval. This pattern is more pronounced for early stage firms with large cash reserves. The evidence points to an agency problem between shareholders and managers of single-product early stage firms who are reluctant to abandon development of their only viable drug candidates. By contrast, the managers of mature firms with multiple products in development are more willing to drop unpromising drug candidates. The findings appear to be consistent with the benefits of internal capital markets identified by Stein (1997).
Handle: RePEc:nbr:nberwo:10933
Template-Type: ReDIF-Paper 1.0
Title: A Simulation Approach to Dynamic Portfolio Choice with an Application to Learning About Return Predictability
Classification-JEL: G1
Author-Name: Michael W. Brandt
Author-Name: Amit Goyal
Author-Person: pgo419
Author-Name: Pedro Santa-Clara
Author-Person: psa1486
Author-Name: Jonathan Storud
Note: AP
Number: 10934
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10934
File-URL: http://www.nber.org/papers/w10934.pdf
File-Format: application/pdf
Publication-Status: published as Brandt, Michael W., Amit Goyal, Pedro Santa-Clara, and Jonathan R. Stroud. "A Simulation Approach to Dynamic Portfolio Choice with an Application to Learning About Return Predictability." Review of Financial Studies 18 (2005): 831-873.
Abstract: We present a simulation-based method for solving discrete-time portfolio choice problems involving non-standard preferences, a large number of assets with arbitrary return distribution, and, most importantly, a large number of state variables with potentially path-dependent or non-stationary dynamics. The method is flexible enough to accommodate intermediate consumption, portfolio constraints, parameter and model uncertainty, and learning. We first establish the properties of the method for the portfolio choice between a stock index and cash when the stock returns are either iid or predictable by the dividend yield. We then explore the problem of an investor who takes into account the predictability of returns but is uncertain about the parameters of the data generating process. The investor chooses the portfolio anticipating that future data realizations will contain useful information to learn about the true parameter values.
Handle: RePEc:nbr:nberwo:10934
Template-Type: ReDIF-Paper 1.0
Title: Evaluation of Four Tax Reforms in the United States: Labor Supply and Welfare Effects for Single Mothers
Classification-JEL: H2; D6; J2
Author-Name: Nada Eissa
Author-Name: Henrik Jacobsen Kleven
Author-Name: Claus Thustrup Kreiner
Author-Person: pkr231
Note: LS PE
Number: 10935
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10935
File-URL: http://www.nber.org/papers/w10935.pdf
File-Format: application/pdf
Publication-Status: published as Eissa, Nada, Henrik Kleven, and Claus Kreiner. “Evaluation of Four Tax Reforms in the United States: Labor Supply and Welfare Effects for Single Mothers.” Journal of Public Economics 92, 3-4 (April 2008).
Abstract: A large literature evaluating the welfare effects of taxation has examined the role of the labor supply elasticity, and has shown that the estimated welfare effects are highly sensitive to its size. A common feature of this literature is its exclusive focus on hours worked and the associated marginal tax rate. An emerging consensus among public finance and labor economists, however, is that labor supply is more responsive along the extensive margin (participation) than along the intensive margin (hours worked). To understand the implications of the participation decision for the welfare analysis of tax reform, this paper embeds the extensive margin in an explicit welfare theoretic framework. It is shown that the participation effect on welfare is created by a different tax wedge than the marginal-tax wedge relevant for hours of work. This difference is due to non-linearities and discontinuities in tax-transfer schemes, features that are particularly important for the welfare evaluation of tax reforms affecting the bottom of the income distribution. We apply our framework to examine the labor supply and welfare effects for single mothers in the United States following four tax acts passed in 1986, 1990, 1993, and 2001. Our simulations show that each of the four tax acts reduced the tax burden on low-income single mothers, and created substantial welfare gains. We note three features of the welfare effects. First, we find that welfare gains are almost exclusively concentrated along the extensive margin of labor supply. Second, welfare effects along the extensive margin tend to dominate those along the intensive margin, even when the two labor supply elasticities are of similar size. This occurs because the welfare effect on each margin is created by a different tax wedge. Finally, ignoring the composition of the labor supply elasticity may reverse the sign of the welfare effect. In the welfare evaluation of tax reform, we conclude that the composition of the total labor supply elasticity is as important as its size.
Handle: RePEc:nbr:nberwo:10935
Template-Type: ReDIF-Paper 1.0
Title: Do Tax Havens Flourish?
Classification-JEL: H87; H25
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: IFM PE
Number: 10936
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10936
File-URL: http://www.nber.org/papers/w10936.pdf
File-Format: application/pdf
Publication-Status: published as Do Tax Havens Flourish?, James R. Hines Jr.. in Tax Policy and the Economy, Volume 19, Poterba. 2005
Abstract: Tax haven countries offer foreign investors low tax rates and other tax features designed to attract investment and thereby stimulate economic activity. Major tax havens have less than one percent of the world's population (outside the United States), and 2.3 percent of world GDP, but host 5.7 percent of the foreign employment and 8.4 percent of foreign property, plant and equipment of American firms. Per capita real GDP in tax haven countries grew at an average annual rate of 3.3 percent between 1982 and 1999, which compares favorably to the world average of 1.4 percent. Tax haven governments appear to be adequately funded, with an average 25 percent ratio of government to GDP that exceeds the 20 percent ratio for the world as a whole, though the small populations and relative affluence of these countries would normally be associated with even larger governments. Whether the economic prosperity of tax haven countries comes at the expense of higher tax countries is unclear, though recent research suggests that tax haven activity stimulates investment in nearby high-tax countries.
Handle: RePEc:nbr:nberwo:10936
Template-Type: ReDIF-Paper 1.0
Title: Patterns of Comovement: The Role of Information Technology in the U.S. Economy
Classification-JEL: G0; E3; O3; O4
Author-Name: Hyunbae Chun
Author-Person: pch115
Author-Name: Jung-Wook Kim
Author-Name: Jason Lee
Author-Name: Randall Morck
Author-Person: pmo146
Note: CH PR
Number: 10937
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10937
File-URL: http://www.nber.org/papers/w10937.pdf
File-Format: application/pdf
Abstract: Firm-specific variation in stock returns and fundamental performance measures is significantly higher in industries that have a history of more investment in information technology (IT). We hypothesise that IT is associated with creative destruction or product differentiation, either of which can widen the performance difference between winner and loser firms. Thus, economy-level volatility can fall while firm-level volatility rises because firm-specific volatility cancels out in the aggregate. Our results are consistent with rising firm-specific variation in US stocks reflecting a rising pace of creative destruction; and with greater firm-specific variation in richer and faster growing countries reflecting more intensive creative destruction in those economies, though other explanations are probably valid as well.
Handle: RePEc:nbr:nberwo:10937
Template-Type: ReDIF-Paper 1.0
Title: Lost Decade in Translation: Did the US Learn from Japan's Post-Bubble Mistakes?
Classification-JEL: E32; E58; E65
Author-Name: James Harrigan
Author-Person: pha151
Author-Name: Kenneth Kuttner
Author-Person: pku75
Note: ME
Number: 10938
Creation-Date: 2004-11
Order-URL: http://www.nber.org/papers/w10938
File-URL: http://www.nber.org/papers/w10938.pdf
File-Format: application/pdf
Publication-Status: published as Patrick, Hugh, Takatoshi Ito and David Weinstein (eds.) Reviving Japan’s Economy: Problems and Prescriptions. Cambridge, MA: MIT Press, 2005.
Abstract: In 1991, the Japanese economy ended a historic expansion and entered a period of stagnation that has yet to abate. Nine years later, the US economy ended a similarly historic expansion. There were many similarities in the two countries' expansions: asset price bubbles, a real investment boom, easy monetary policy, and improvements in government finances. In the wake of bursting bubbles, the Japanese banking system was insolvent and monetary policy was too tight, problems not evident in the US post-bubble period. But the US has worse fiscal and current account imbalances than Japan had at the same stage in the post-bubble era.
Handle: RePEc:nbr:nberwo:10938
Template-Type: ReDIF-Paper 1.0
Title: FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment
Classification-JEL: F21; F23
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: Ronald B. Davies
Author-Person: pda64
Author-Name: Glen R. Waddell
Author-Person: pwa85
Author-Name: Helen T. Naughton
Author-Person: pna326
Note: ITI
Number: 10939
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10939
File-URL: http://www.nber.org/papers/w10939.pdf
File-Format: application/pdf
Publication-Status: published as Blonigen, Bruce A. & Davies, Ronald B. & Waddell, Glen R. & Naughton, Helen T., 2007. "FDI in space: Spatial autoregressive relationships in foreign direct investment," European Economic Review, Elsevier, vol. 51(5), pages 1303-1325, July.
Abstract: Theoretical models of foreign direct investment (FDI) have only recently begun to model the role of third countries, and the empirical FDI literature has almost exclusively examined bilateral FDI data without recognizing the potential interdependence between FDI decisions to alternative host countries. This paper uses spatial econometric techniques to examine the spatial correlation between FDI to alternative (neighboring) regions. The sign of such correlations can provide evidence for or against alternative theories for FDI motivations. Using data on OECD countries from 1980-2000, we find evidence consistent with export platform FDI in Europe.
Handle: RePEc:nbr:nberwo:10939
Template-Type: ReDIF-Paper 1.0
Title: Quantitative Implication of A Debt-Deflation Theory of Sudden Stops and Asset Prices
Classification-JEL: F41; F32; E44; D52
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Author-Name: Katherine A. Smith
Author-Person: psm108
Note: IFM
Number: 10940
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10940
File-URL: http://www.nber.org/papers/w10940.pdf
File-Format: application/pdf
Publication-Status: published as Mendoza, Enrique G. & Smith, Katherine A., 2006. "Quantitative implications of a debt-deflation theory of Sudden Stops and asset prices," Journal of International Economics, Elsevier, vol. 70(1), pages 82-114, September.
Abstract: This paper shows that the quantitative predictions of an equilibrium asset pricing model with financial frictions are consistent with the large consumption and current-account reversals and asset-price collapses observed in the "Sudden Stops" of emerging markets crises. Margin requirements set a collateral constraint on foreign borrowing by domestic agents. Foreign traders incur costs in trading assets with domestic agents. Margin constraints bind occasionally depending on equilibrium portfolios and asset prices. When the constraints do not bind, productivity shocks cause standard real-business-cycle effects. When the constraints bind, shocks of the same magnitude cause strikingly different effects that vary with the leverage ratio and the liquidity of asset markets. With high leverage and liquid markets, the shocks trigger margin calls forcing "fire sales" of assets. Fisher's debt-deflation mechanism causes subsequent rounds of margin calls, a fall in asset prices and large consumption and current account reversals. The size of the price decline depends on trading costs parameters because these parameters determine the price elasticity of the foreign traders' asset demand function. Price declines of the magnitude observed in the data require a less-than-unitary price elasticity. Precautionary saving makes Sudden Stops infrequent in the long run so that the model can explain both regular business cycles and the unusually large reversals of consumption and current accounts associated with Sudden Stops.
Handle: RePEc:nbr:nberwo:10940
Template-Type: ReDIF-Paper 1.0
Title: When in Peril, Retrench: Testing the Portfolio Channel of Contagion
Classification-JEL: F02; F30; F32; F36
Author-Name: Fernando A. Broner
Author-Person: pbr162
Author-Name: R. Gaston Gelos
Author-Person: pge1
Author-Name: Carmen Reinhart
Author-Person: pre33
Note: IFM
Number: 10941
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10941
File-URL: http://www.nber.org/papers/w10941.pdf
File-Format: application/pdf
Publication-Status: published as Broner, Fernando A., R. Gaston Gelos and Carmen M. Reinhart. "When In Peril, Retrench: Testing The Portfolio Channel Of Contagion," Journal of International Economics, 2006, v69(1,Jun), 203-230.
Publication-Status: published as Fernando Broner & Gaston Gelos & Carmen Reinhart, 2004. "When in peril, retrench: testing the portfolio channel of contagion," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
Abstract: One plausible mechanism through which financial market shocks may propagate across countries is through the effect of past gains and losses on investors' risk aversion. The paper first presents a simple model examining how heterogeneous changes in investors' risk aversion affects portfolio decisions and stock prices. Second, the paper shows empirically that, when funds' returns are below average, they adjust their holdings toward the average (or benchmark) portfolio. In other words, they tend to sell the assets of countries in which they were "overweight", increasing their exposure to countries in which they were "underweight." Based on this insight, the paper discusses a matrix of financial interdependence reflecting the extent to which countries share overexposed funds. Comparing this measure to indices of trade or bank linkages indicates that our index can improve predictions about which countries are likely to be affected by contagion from crisis centers.
Handle: RePEc:nbr:nberwo:10941
Template-Type: ReDIF-Paper 1.0
Title: Financial Globalization, Growth and Volatility in Developing Countries
Classification-JEL: F15; F36; F41; F43
Author-Name: Eswar S. Prasad
Author-Person: ppr1
Author-Name: Kenneth S. Rogoff
Author-Person: pro164
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Author-Name: M. Ayhan Kose
Author-Person: pko65
Note: IFM
Number: 10942
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10942
File-URL: http://www.nber.org/papers/w10942.pdf
File-Format: application/pdf
Publication-Status: published as Financial Globalization, Growth and Volatility in Developing Countries, Eswar S. Prasad, Kenneth Rogoff, Shang-Jin Wei, M. Ayhan Kose. in Globalization and Poverty, Harrison. 2007
Abstract: This paper provides a comprehensive assessment of empirical evidence about the impact of financial globalization on growth and volatility in developing countries. The results suggest that it is difficult to establish a robust causal relationship between financial integration and economic growth. Furthermore, there is little evidence that developing countries have been consistently successful in using financial integration to stabilize fluctuations in consumption growth. However, we do find that financial globalization can be beneficial under the right circumstances. Empirically, good institutions and quality of governance are crucial in helping developing countries derive the benefits of globalization. Similarly, macroeconomic stability appears to be an important prerequisite for ensuring that financial globalization is beneficial for developing countries. Finally, countries that employ relatively flexible exchange rate regimes and succeed in maintaining fiscal discipline are more likely to enjoy the potential growth and stabilization benefits of financial globalization.
Handle: RePEc:nbr:nberwo:10942
Template-Type: ReDIF-Paper 1.0
Title: Information and Externalities in Sequential Litigation
Classification-JEL: K13; K41; D83
Author-Name: Xinyu Hua
Author-Name: Kathryn E. Spier
Note: LE
Number: 10943
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10943
File-URL: http://www.nber.org/papers/w10943.pdf
File-Format: application/pdf
Publication-Status: published as Hua, Xinyu and Kathryn E. Spier. “Information and Externalities in Sequential Litigation.” Journal of Institutional and Theoretical Economics 161, 2 (2005): 215-232.
Abstract: The information created and disseminated through the litigation process can have social value. Suppose a long-lived plaintiff is suing a defendant for damages sustained in an accident. The plaintiff may suffer similar damages in future accidents involving different defendants. Potential injurers update their beliefs after observing the first case and subsequently fine-tune their precautions to avoid accidents. The joint incentive of the plaintiff and the first defendant to create public information through litigation is too small. The optimal liability rule trades off providing future injurers with incentives to take precautions and providing the plaintiff with incentives to create information.
Handle: RePEc:nbr:nberwo:10943
Template-Type: ReDIF-Paper 1.0
Title: How to Eliminate Pyramidal Business Groups - The Double Taxation of Inter-Corporate Dividends and Other Incisive Uses of Tax Policy
Classification-JEL: H1; G3
Author-Name: Randall Morck
Author-Person: pmo146
Note: CF
Number: 10944
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10944
File-URL: http://www.nber.org/papers/w10944.pdf
File-Format: application/pdf
Publication-Status: published as How to Eliminate Pyramidal Business Groups: The Double Taxation of Intercorporate Dividends and Other Incisive Uses of Tax Policy, Randall Morck. in Tax Policy and the Economy, Volume 19, Poterba. 2005
Abstract: Arguments for eliminating the double taxation of dividends apply only to dividends paid by corporations to individuals. The double (and multiple) taxation of dividends paid by one firm to another -- intercorporate dividends - was explicitly included in the 1930s as part of a package of tax and other policies aimed at eliminating United States pyramidal business groups. These structures remain the predominant form of corporate organization outside the United States. The first Roosevelt administration associated them with corporate governance problems, corporate tax avoidance, market power, and an objectionable concentration of economic power. Future tax reforms in the United States should mind the original intent of Congress and the President regarding intercorporate dividend taxation. Foreign governments may find the American experience of value should they desire to eliminate their business groups.
Handle: RePEc:nbr:nberwo:10944
Template-Type: ReDIF-Paper 1.0
Title: Demographic Changes and International Factor Mobility
Classification-JEL: F4; F2
Author-Name: John F. Helliwell
Author-Person: phe368
Note: IFM ITI
Number: 10945
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10945
File-URL: http://www.nber.org/papers/w10945.pdf
File-Format: application/pdf
Publication-Status: published as John F. Helliwell, 2004. "Demographic changes and international factor mobility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 369-420.
Abstract: This paper reviews the extent and policy implications of linkages between demographic changes and international factor mobility. Evidence is found of significant demographic effects on both migration and the current account, but for different reasons neither increased migration nor international transfers of savings is expected to offer much assistance in digesting the variety of demographic transitions expected over the next fifty years. The paper also examines more briefly the effects of demography on the factor content of international trade, as exemplified by offshore provision of back-office and other services previously provided closer to home. When considering the consequences of using international capital movements and especially migration to mediate international differences in demographic patterns, I broaden the focus from the usual economic variables, such as the size and distribution of incomes and employment, to consider explicit measures of well-being, which have been shown to depend on far more than economic variables. This has implications for a whole range of policies, both domestic and international, that might help deal with national and global demographic transitions.
Handle: RePEc:nbr:nberwo:10945
Template-Type: ReDIF-Paper 1.0
Title: Measuring Disparate Impacts and Extending Disparate Impact Doctrine to Organ Transplantation
Classification-JEL: K32
Author-Name: Robert Bornholz
Author-Name: James J. Heckman
Note: EH LE
Number: 10946
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10946
File-URL: http://www.nber.org/papers/w10946.pdf
File-Format: application/pdf
Publication-Status: published as Bornholz, Robert and James J. Heckman. "Measuring Disparate Imparct and Extending Disparate Impact Doctrine to Organ Transplantation." Perspectives in Biology and Medicine 48, 1 (2005): S95-S122.
Abstract: This paper examines the economic and statistical foundations of proposed tests for discrimination. We focus on extension of disparate impact doctrine to new domains.
Handle: RePEc:nbr:nberwo:10946
Template-Type: ReDIF-Paper 1.0
Title: Using Hit Rate Tests to Test for Racial Bias in Law Enforcement: Vehicle Searches in Wichita
Classification-JEL: J70; K42
Author-Name: Nicola Persico
Author-Person: ppe261
Author-Name: Petra Todd
Note: LS LE
Number: 10947
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10947
File-URL: http://www.nber.org/papers/w10947.pdf
File-Format: application/pdf
Abstract: This paper considers the use of outcomes-based tests for detecting racial bias in the context of police searches of motor vehicles. It shows that the test proposed in Knowles, Persico and Todd (2001) can also be applied in a more general environment where police officers are heterogenous in their tastes for discrimination and in their costs of search and motorists are heterogeneous in their benefits and costs from criminal behavior. We characterize the police and motorist decision problems in a game theoretic framework and establish properties of the equilibrium. We also extend the model to the case where drivers' characteristics are mutable in the sense that drivers can adapt some of their characteristics to reduce the probability of being monitored. After developing the theory that justifies the application of outcomes-based tests, we apply the tests to data on police searches of motor vehicles gathered by the Wichita Police deparment. The empirical findings are consistent with the notion that police in Wichita choose their search strategies to maximize successful searches, and not out of racial bias.
Handle: RePEc:nbr:nberwo:10947
Template-Type: ReDIF-Paper 1.0
Title: Individual Behaviors and Substance Use: The Role of Price
Classification-JEL: I12; I18
Author-Name: Michael Grossman
Author-Person: pgr107
Note: EH CH
Number: 10948
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10948
File-URL: http://www.nber.org/papers/w10948.pdf
File-Format: application/pdf
Publication-Status: published as Substance Use: Individual Behavior, Social Interaction, Markets and Politics, edited by Bjorn Lindgren and Michael Grossman. Volume 16 of Advances in Health Economics and Health Services Research. Amsterdam: JAI, an imprint of Elsevier Ltd., 2005, pp. 15-39
Abstract: I discuss economic approaches to the demand for harmfully addictive substances and estimate time-series demand functions for the period from 1975 through 2003. My estimates suggest that changes in price can explain a good deal of the observed changes in cigarette smoking, binge alcohol drinking, and marijuana use by high school seniors. For example, the 70 percent increase in the real price of cigarettes since 1997 due to the Medicaid Master Settlement Agreement explains almost all of the 12 percentage point reduction in the cigarette smoking participation rate since that year. The 7 percent increase in the real price of beer between 1990 and 1992 due to the Federal excise tax hike on that beverage in 1991 accounts for almost 90 percent of the 4 percentage point decline in binge drinking in the period at issue. The wide swings in the real price of marijuana explain 70 percent of the reduction in particpation from 1975 to 1992, 60 percent of the subsequent growth to 1997, and almost 60 percent of the decline since that year. I conclude with implications for tax policy and for the lively and contentious debate concerning the legalization of marijuana, cocaine, and heroin.
Handle: RePEc:nbr:nberwo:10948
Template-Type: ReDIF-Paper 1.0
Title: An Investigation of the Effects of Alcohol Policies on Youth STDs
Classification-JEL: I1
Author-Name: Michael Grossman
Author-Person: pgr107
Author-Name: Robert Kaestner
Author-Person: pka42
Author-Name: Sara Markowitz
Author-Person: pma138
Note: EH CH
Number: 10949
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10949
File-URL: http://www.nber.org/papers/w10949.pdf
File-Format: application/pdf
Publication-Status: published as Sara Markowitz & Robert Kaestner & Michael Grossman, 2005. "An Investigation of the Effects of Alcohol Consumption and Alcohol Policies on Youth Risky Sexual Behaviors," American Economic Review, American Economic Association, vol. 95(2), pages 263-266, May.
Publication-Status: published as Substance Use: Individual Behavior, Social Interaction, Markets and Politics, edited by Bjorn Lindgren and Michael Grossman. Volume 16 of Advances in Health Economics and Health Services Research. Amsterdam: JAI, an imprint of Elsevier Ltd., 2005, pp. 229-256
Abstract: The purpose of this paper is to examine the role of alcohol policies in reducing the incidence of sexually transmitted diseases among youth. Previous research has shown that risky sexual practices (e.g., unprotected sex and multiple partners) that increase the risk of contracting a STD are highly correlated with alcohol use. If alcohol is a cause of risky sexual behavior, then policies that reduce the consumption of alcohol may also reduce the incidence of STDs. In this paper, we examine the relationship between alcohol policies (e.g., beer taxes and statutes pertaining to alcohol sales and drunk driving) and rates of gonorrhea and AIDS among teenagers and young adults. Results indicate that higher beer taxes are associated with lower rates of gonorrhea for males and are suggestive of lower AIDS rates. Strict drunk driving policies in the form of zero tolerance laws may also lower the gonorrhea rate among males under the legal drinking age.
Handle: RePEc:nbr:nberwo:10949
Template-Type: ReDIF-Paper 1.0
Title: Retrospective on the 1970s Productivity Slowdown
Classification-JEL: O4; E1
Author-Name: William Nordhaus
Author-Person: pno115
Note: EFG PR EEE
Number: 10950
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10950
File-URL: http://www.nber.org/papers/w10950.pdf
File-Format: application/pdf
Abstract: The present study analyzes the "productivity slowdown" of the 1970s. The study also develops a new data set -- industrial data available back to 1948 -- as well as a new set of tools for decomposing changes in productivity growth. The major result of this study is that the productivity slowdown of the 1970s has survived three decades of scrutiny, conceptual refinements, and data revisions. The slowdown was primarily centered in those sectors that were most energy-intensive, were hardest hit by the energy shocks of the 1970s, and therefore had large output declines. In a sense, the energy shocks were the earthquake, and the industries with the largest slowdown were near the epicenter of the tectonic shifts in the economy.
Handle: RePEc:nbr:nberwo:10950
Template-Type: ReDIF-Paper 1.0
Title: Resolving the Puzzle of the Underissuance of National Bank Notes
Classification-JEL: E5; E42; G21; G28; N11
Author-Name: Charles W. Calomiris
Author-Person: pca421
Author-Name: Joseph R. Mason
Note: DAE
Number: 10951
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10951
File-URL: http://www.nber.org/papers/w10951.pdf
File-Format: application/pdf
Publication-Status: published as Calomiris, Charles W. & Mason, Joseph R., 2008. "Resolving the puzzle of the underissuance of national bank notes," Explorations in Economic History, Elsevier, vol. 45(4), pages 327-355, September.
Abstract: The puzzle of underissuance of national bank notes disappears when one disaggregates data, takes account of regulatory limits, and considers differences in opportunity costs. Banks with poor lending opportunities maximized their issuance. Other banks chose to limit issuance. Redemption costs do not explain cross-sectional variation in issuance and the observed relationship between note issuance and excess reserves is inconsistent with the redemption risk hypothesis of underissuance. National banks did not enter primarily to issue national bank notes, and a "pure arbitrage" strategy of chartering a national bank only to issue national bank notes would not have been profitable. Indeed, new entrants issued less while banks exiting were often maximum issuers. Economies of scope between note issuing and deposit banking included shared overhead costs and the ability to reduce costs of mandatory minimum reserve and capital requirements.
Handle: RePEc:nbr:nberwo:10951
Template-Type: ReDIF-Paper 1.0
Title: The Concept of Systematic Corruption in American Political and Economic History
Classification-JEL: B1; N0; N2; N4
Author-Name: John Joseph Wallis
Note: DAE
Number: 10952
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10952
File-URL: http://www.nber.org/papers/w10952.pdf
File-Format: application/pdf
Publication-Status: published as John Joseph Wallis, 2006. "The Concept of Systematic Corruption in American History," NBER Chapters, in: Corruption and Reform: Lessons from America's Economic History, pages 23-62 National Bureau of Economic Research, Inc.
Abstract: The critical role of governance in the promotion of economic development has created intense interest in the manner in which the United States eliminated corruption. This paper examines the concept of corruption in American history; tracing the term corruption to its roots in British political philosophy of the 17th and 18th century, and from there back to Machiavelli, Polybius and Artistole. Corruption was defined prior to 1850 in a way that was significantly different from how it was defined in the Progressive Era. "Systematic corruption" embodied the idea that political actors manipulated the economic system to create economic rents that politicians could use to secure control of the government. In other words, politics corrupts economics. The classic cure for systematic corruption was balanced government. Americans fought for independence because they believed that the British government was corrupt. The structure of American constitutions was shaped by the need to implement balanced government. Conflict and debate over the implementation of balanced government dominated the political agenda until the 1840s, when states began moving regulatory policy firmly towards open entry and free competition. By the 1890s, systematic corruption had essentially appeared from political discourse. By then corruption had come to take on its modern meaning: the idea that economic interests corrupt the political process. What modern developing countries with corrupt governments need to learn is how the United States eliminated systematic corruption.
Handle: RePEc:nbr:nberwo:10952
Template-Type: ReDIF-Paper 1.0
Title: Has the Unified Budget Undermined the Federal Government Trust Funds?
Classification-JEL: H0
Author-Name: Sita Nataraj
Author-Person: pna81
Author-Name: John B. Shoven
Note: EFG AG PE
Number: 10953
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10953
File-URL: http://www.nber.org/papers/w10953.pdf
File-Format: application/pdf
Abstract: In order to ease the burden on workers during the retirement of the baby boom generation, the 1983 Social Security Reforms set payroll taxes above the level needed to pay current benefits, thus partially prefunding the baby boomers' retirement. The military and civil service retirement programs followed suit in the mid-1980s and switched from pay-as-you-go financing to funded systems. The excess income generated by these retirement programs was held in the federal trust funds, which have accumulated almost $3 trillion since the reforms took place. However, this paper presents evidence that the trust fund build-up may not help future generations due to the adoption of the Unified Budget in 1970. The Unified Budget includes trust fund receipts as income and trust fund payments as expenditures. The empirical evidence suggests that attempts to balance the Unified Budget while the trust funds were generating surpluses has led to increased government spending and personal and corporation income tax cuts within the rest of the federal government. There is no evidence of increased government saving as a result of the trust fund accumulations. An alternate theory of increased national saving is also explored, where increased payroll taxes accompanied by decreased income taxes induces higher personal saving. This mechanism, suggested by Diamond, also does not appear to have significantly enhanced the wealth of future generations.
Handle: RePEc:nbr:nberwo:10953
Template-Type: ReDIF-Paper 1.0
Title: Globalization and Disinflation: A Note
Classification-JEL: E5; F3
Author-Name: Assaf Razin
Author-Person: pra388
Note: IFM
Number: 10954
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10954
File-URL: http://www.nber.org/papers/w10954.pdf
File-Format: application/pdf
Abstract: The note analyzes how globalization forces induce monetary authorities, guided in their policies by the welfare criterion of a representative household, to put greater emphasis on reducing the inflation rate than on narrowing the output gaps.
Handle: RePEc:nbr:nberwo:10954
Template-Type: ReDIF-Paper 1.0
Title: A Theory of Housing Collateral, Consumption Insurance and Risk Premia
Classification-JEL: G0
Author-Name: Hanno Lustig
Author-Person: plu17
Author-Name: Stijn Van Nieuwerburgh
Author-Person: pva368
Note: AP
Number: 10955
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10955
File-URL: http://www.nber.org/papers/w10955.pdf
File-Format: application/pdf
Abstract: In a model with housing collateral, 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. This collateral mechanism can quantitatively replicate the conditional and the cross-sectional variation in risk premia on stocks for reasonable parameter values. The increase of the conditional equity premium and Sharpe ratio when collateral is scarce in the model matches the increase observed in US data. The model also generates a return spread of value firms over growth firms of the magnitude observed in the data, because the term structure of consumption strip risk premia is downward sloping.
Handle: RePEc:nbr:nberwo:10955
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Technology Sharing: Open Source and Beyond
Classification-JEL: L8; O3
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: Jean Tirole
Author-Person: pti33
Note: IO LS PR
Number: 10956
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10956
File-URL: http://www.nber.org/papers/w10956.pdf
File-Format: application/pdf
Publication-Status: published as Lerner, Josh and Jean Tirole. "The Economics Of Technology Sharing: Open Source and Beyond," Journal of Economic Perspectives, 2005, v19(2,Spring), 99-120.
Abstract: This paper reviews our understanding of the growing open source movement. We highlight how many aspects of open source software appear initially puzzling to an economist. As we have acknowledge, our ability to answer confidently many of the issues raised here questions is likely to increase as the open source movement itself grows and evolves. At the same time, it is heartening to us how much of open source activities can be understood within existing economic frameworks, despite the presence of claims to the contrary. The labor and industrial organization literatures provide lenses through which the structure of open source projects, the role of contributors, and the movement's ongoing evolution can be viewed.
Handle: RePEc:nbr:nberwo:10956
Template-Type: ReDIF-Paper 1.0
Title: Does Openness to Trade Make Countries More Vulnerable to Sudden Stops, Or Less? Using Gravity to Establish Causality
Classification-JEL: F32; F36; F41
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Author-Name: Eduardo A. Cavallo
Note: IFM ITI
Number: 10957
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10957
File-URL: http://www.nber.org/papers/w10957.pdf
File-Format: application/pdf
Publication-Status: published as Cavallo, Eduardo A. & Frankel, Jeffrey A., 2008. "Does openness to trade make countries more vulnerable to sudden stops, or less? Using gravity to establish causality," Journal of International Money and Finance, Elsevier, vol. 27(8), pages 1430-1452, December.
Abstract: Openness to trade is one factor that has been identified as determining whether a country is prone to sudden stops in capital inflow, currency crashes, or severe recessions. Some believe that openness raises vulnerability to foreign shocks, while others believe that it makes adjustment to crises less painful. Several authors have offered empirical evidence that having a large tradable sector reduces the contraction necessary to adjust to a given cut-off in funding. This would help explain lower vulnerability to crises in Asia than in Latin America. Such studies may, however, be subject to the problem that trade is endogenous. We use the gravity instrument for trade openness, which is constructed from geographical determinants of bilateral trade. We find that openness indeed makes countries less vulnerable, both to severe sudden stops and currency crashes, and that the relationship is even stronger when correcting for the endogeneity of trade.
Handle: RePEc:nbr:nberwo:10957
Template-Type: ReDIF-Paper 1.0
Title: Using Tontines to Finance Public Goods: Back to the Future?
Classification-JEL: H41
Author-Name: Andreas Lange
Author-Person: pla289
Author-Name: John A. List
Author-Person: pli176
Author-Name: Michael K. Price
Author-Person: ppr89
Note: PE
Number: 10958
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10958
File-URL: http://www.nber.org/papers/w10958.pdf
File-Format: application/pdf
Abstract: The tontine, which is an interesting mixture of group annuity, group life insurance, and lottery, has a peculiar place in economic history. In the seventeenth and eighteenth centuries it played a major role in raising funds to finance public goods in Europe, but today it is rarely encountered outside of murder mysteries. This study provides a formal model of individual contribution decisions under a tontine mechanism. We analyze the performance of tontines and compare them to another popular fundraising scheme used today by both government and charitable fundraisers: lotteries. Our major theoretical results are that (i) the optimal tontine for agents with identical valuations of the public good consists of all agents receiving a fixed "prize" amount in the first period equal to a percentage of their total contribution, (ii) contribution levels in the optimal tontine are identical to those of risk-neutral agents in an equivalently valued single prize lottery, (iii) contribution levels for the optimal tontine are independent of risk-aversion, and thereby outperform lotteries when agents are risk-averse, (iv) if agents are sufficiently asymmetric in their valuation of the public good, equilibrium contribution levels are larger under tontines than any lottery. In particular, one can obtain full participation in the tontine mechanism compared to only partial participation in a lottery. These insights highlight that the tontine institution can be a useful tool for fundraisers in the future.
Handle: RePEc:nbr:nberwo:10958
Template-Type: ReDIF-Paper 1.0
Title: Sorting It Out: International Trade and Protection With Heterogeneous Workers
Classification-JEL: F11; F13; F16; J3
Author-Name: Franziska Ohnsorge
Author-Person: poh37
Author-Name: Daniel Trefler
Author-Person: ptr44
Note: ITI
Number: 10959
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10959
File-URL: http://www.nber.org/papers/w10959.pdf
File-Format: application/pdf
Publication-Status: published as Ohnsorge, Franziska and Daniel Trefler. “Sorting it Out: International Trade and Protection with Heterogeneous Workers.” Journal of Political Economy 115, 5 (October 2007): 868-892.
Abstract: The two models of international trade with developed factor markets -- Heckscher-Ohlin and Specific Factors -- both suffer significant defects. For example, their predictions about the patterns of domestic production and international trade are for the most part either indeterminate or uselessly complex. The problem with these models is that the supply of factors to an industry is either perfectly elastic or perfectly inelastic. Using a model in which heterogeneous workers sort across industries we eliminate this problem. The result is a multi-good model with sharp predictions about (1) the domestic pattern of production, (2) North-North and North-South trade, (3) the demand for protection, (4) the determinants of domestic income distribution, and (5) the effect of trade on economic development.
Handle: RePEc:nbr:nberwo:10959
Template-Type: ReDIF-Paper 1.0
Title: Gunboats, Reputation, and Sovereign Repayment: Lessons from the Southern Confederacy
Classification-JEL: F34; N2
Author-Name: Marc Weidenmier
Author-Person: pwe14
Note: DAE
Number: 10960
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10960
File-URL: http://www.nber.org/papers/w10960.pdf
File-Format: application/pdf
Publication-Status: published as Weidenmier, Marc D. "Gunboats, Reputation, And Sovereign Repayment: Lessons From The Southern Confederacy," Journal of International Economics, 2005, v66(2,Jul), 407-422.
Abstract: Many states that formed the Southern Confederacy defaulted on sovereign debt sold in international capital markets during the 1840s. The Confederacy also elected President Jefferson Davis, who openly advocated the repudiation of U.S. states' debts while a member of Congress. Despite its poor credit record, the Confederate government managed to float cotton bonds in England that constituted under two percent of its expenditures. The bonds were largely issued to settle overdue debts with gun contractors who had cut off trade credit. The South serviced the bonds as late as March 1865, a time of domestic hyperinflation and weeks before the fall of Richmond. Although the Confederate experience shows that trade sanctions can promote debt repayment, the gunboat model can only account for a small amount of lending. A reputation or another type of sanction would be necessary to support higher levels of lending in international capital markets.
Handle: RePEc:nbr:nberwo:10960
Template-Type: ReDIF-Paper 1.0
Title: Covered Interest Arbitrage: Then vs. Now
Classification-JEL: F3; N2
Author-Name: Ted Juhl
Author-Name: William Miles
Author-Name: Marc D. Weidenmier
Author-Person: pwe14
Note: DAE IFM
Number: 10961
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10961
File-URL: http://www.nber.org/papers/w10961.pdf
File-Format: application/pdf
Publication-Status: published as Juhl, Ted, William Miles and Marc D. Weidenmier. "Covered Interest Arbitrage: Then Versus Now," Economica, 2006, v73(290,May), 341-352.
Abstract: We introduce a new weekly database of spot and forward US-UK exchange rates as well as interest rates to examine the integration of forward exchange markets during the classical gold standard period (1880-1914). Using threshold autoregressions (TAR), we estimate the transactions cost band of covered interest differentials (CIDs) and compare our results to studies of more recent periods. Our findings indicate that CIDs for the US-UK rate were generally larger during the classical gold standard than any period since. We argue that slower information and communications technology during the gold standard period led to fewer short-term financial flows, higher transactions costs, and larger CIDs.
Handle: RePEc:nbr:nberwo:10961
Template-Type: ReDIF-Paper 1.0
Title: Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs
Classification-JEL: L1; L4; L8
Author-Name: Christopher R. Knittel
Author-Person: pkn5
Author-Name: Victor Stango
Author-Person: pst264
Note: PR
Number: 10962
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10962
File-URL: http://www.nber.org/papers/w10962.pdf
File-Format: application/pdf
Publication-Status: published as Knittel Christopher R. & Stango Victor, 2008. "Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-42, January.
Abstract: Incompatibility in market with network effects reduces consumers' ability to "mix and match" components offered by different sellers, but can also spur changes in product attributes that might benefit consumers. In this paper, we estimate the effects of incompatibility on consumers in a classic hardware/software market: ATM cards and machines. We find that while ATM fees ceteris paribus reduce the network benefit from other banks' ATMs, a surge in ATM deployment accompanies the shift to surcharging. This is valuable to consumers and often completely offsets the harm from higher fees. The results suggest that policy discussions of incompatibility must consider not only its direct effect on consumers, but also its effect on product attributes.
Handle: RePEc:nbr:nberwo:10962
Template-Type: ReDIF-Paper 1.0
Title: Bounds in Competing Risks Models and the War on Cancer
Classification-JEL: I10; C40
Author-Name: Bo E. Honore
Author-Name: Adriana Lleras Muney
Author-Person: pll45
Note: EH
Number: 10963
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10963
File-URL: http://www.nber.org/papers/w10963.pdf
File-Format: application/pdf
Publication-Status: published as Honore, Bo E. and Adriana Lleras-Muney. "Bounds in Competing Risks Models and the War on Cancer." Econometrica 74, 6 (Novermber 2006): 1675-98.
Abstract: In 1971 President Nixon declared war on cancer and increased the federal funds allocated to cancer research dramatically. Thirty years later, many have declared this war a failure. Overall cancer statistics confirm this view: age-adjusted mortality in 2000 was essentially unchanged from the early 1970s. At the same time, age-adjusted mortality rates from cardiovascular disease have fallen quite dramatically. Since the causes underlying cancer and cardiovascular disease are likely to be correlated, the decline in mortality rates from cardiovascular disease may be somewhat responsible for the rise in cancer mortality. It is natural to model mortality with more than one cause of death as a competing risks model. Such models are fundamentally unidentified, and it is therefore difficult to get a clear picture of the progress in cancer. This paper derives bounds for aspects of the underlying distributions under a number of different assumptions. Most importantly, we do not assume that the underlying risks are independent, and impose weak parametric assumptions in order to obtain identification. The theoretical contribution of the paper is to provide a framework to estimate competing risk models with interval data and discrete explanatory variables, both of which are common in empirical applications. We use our method to estimate changes in cancer and cardiovascular mortality since 1970. The estimated bounds for the effect of time on the duration until death for either cause are fairly tight and we find that trends in cancer show much larger improvements than previously estimated. For example, we find that time until death from cancer increased by about 10% for white males and 20% for white women.
Handle: RePEc:nbr:nberwo:10963
Template-Type: ReDIF-Paper 1.0
Title: Prescription Drugs, Medical Care, and Health Outcomes: A Model of Elderly Health Dynamics
Classification-JEL: I12; I18; H5
Author-Name: Zhou Yang
Author-Name: Donna B. Gilleskie
Author-Name: Edward C. Norton
Author-Person: pno89
Note: AG EH
Number: 10964
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10964
File-URL: http://www.nber.org/papers/w10964.pdf
File-Format: application/pdf
Publication-Status: published as Yang, Zhou, Donna Gilleskie, and Edward Norton. “Health Insurance, Medical Care, and Health Outcomes: A Model of Elderly Health Dynamics.” Journal of Human Resources 44, 1 (2009): 47-114.
Abstract: There is much debate about whether the Medicare Prescription Drug Bill -- the greatest expansion of Medicare benefits since its creation in 1965 -- will improve the health of elderly Americans, and how much it will cost. We model how insurance affects medical care utilization, and subsequently, health outcomes over time in a dynamic model with correlated errors. Longitudinal individual-level data from the 1992-1998 Medicare Current Beneficiary Survey provide estimates of these effects. Simulations over five years show that expanding prescription drug coverage would increase drug expenditures by between 12% and 17%. However, other health care expenditures would only increase slightly, and the mortality rate would improve.
Handle: RePEc:nbr:nberwo:10964
Template-Type: ReDIF-Paper 1.0
Title: Digging the Dirt at Public Expense: Governance in the Building of the Erie Canal and Other Public Works
Classification-JEL: N10; H4; O1; O2
Author-Name: Stanley Engerman
Author-Name: Kenneth L. Sokoloff
Note: DAE
Number: 10965
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10965
File-URL: http://www.nber.org/papers/w10965.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. and Claudia Goldin (eds.) Corruption and Reform: Lessons from America's Economic History (National Bureau of Economic Research Conference Report). Chicago: University Of Chicago Press, 2006.
Publication-Status: published as Digging the Dirt at Public Expense: Digging the Dirt at Public Expense Erie Canal and Other Public Works, Stanley L. Engerman, Kenneth L. Sokoloff. in Corruption and Reform: Lessons from America's Economic History, Glaeser and Goldin. 2006
Abstract: The Erie Canal was a mammoth public works project undertaken largely because the scope of the investment was beyond what a private firm could manage during the early 19th century. As with most public works, there were ample opportunities for public officials to realize private gains from the effort, and many did. On the whole, however, the construction of the Erie Canal (and most other major public works projects of the era) appears to have been well conceived and executed; it not only paid off more than its costs through tolls, but also generated substantial welfare improvements for the residents of the state of New York in the form of producer and consumer surplus and a wide range of positive externalities. Although there was obviously some fraud and mismanagement, the public authorities carried out the work at costs relatively close to those projected at the point of authorization. In an effort to try to place this episode in a broader perspective, we compare the ratio of actual expenditures on construction relative to the estimated costs at the time of authorization for the Erie Canal, to those for a range of other public works over American history up to the present day. It is our contention that this measure, albeit quite narrow in focus, is informative about the quality of governance of public resources. We highlight how, by this standard, the governance of public resources during the canal era stands up well in comparison with what we have seen since. Indeed, the cost overrun ratios have risen sharply over the last half-century, coinciding with both a marked increase in the relative size of the government sector as well as sustained economic growth. These patterns suggest how important it is that better measures and other means of systematically studying how the prevalence and effects of corruption vary across different contexts be developed.
Handle: RePEc:nbr:nberwo:10965
Template-Type: ReDIF-Paper 1.0
Title: Institutions and Technological Innovation During the Early Economic Growth: Evidence from the Great Inventors of the United States, 1790-1930
Classification-JEL: N10; N71; O31; O34
Author-Name: B. Zorina Khan
Author-Name: Kenneth L. Sokoloff
Note: DAE PR
Number: 10966
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10966
File-URL: http://www.nber.org/papers/w10966.pdf
File-Format: application/pdf
Publication-Status: published as Khan, B. Zorina and Kenneth L. Sokoloff. "Institutions And Democratic Invention In 19th-Century American: Evidence From 'Great Inventors,' 1790-1930," American Economic Review, 2004, v94(2,May), 395-401.
Abstract: Employing a sample of renowned U.S. inventors that combines biographical detail with information on the patents they received over their careers, we highlight the impact of early U.S. patent institutions in providing broad access to economic opportunity and in encouraging trade in new technological knowledge. Through setting low fees and establishing administrative procedures for application, the United States deliberately created a patent system that allowed a much wider range, in socioeconomic class terms, of technologically creative individuals to obtain property rights to their inventions than did European patent institutions. Moreover, by requiring that applications be examined for novelty by technical experts, and by enforcing patent rights strictly, the U.S. system reduced uncertainty about the validity of patent rights, and in that way lowered the cost of transacting in them. Creating secure assets in new technological knowledge and facilitating access to markets in technology in this way both stimulated specialization at invention and further enhanced the opportunities available to technologically creative individuals who would otherwise have lacked the capital to directly extract returns from their efforts. Indeed, we show that until the late 19th century, the 'great inventors' of the U.S. generally had backgrounds that permitted them only limited formal schooling, and made extensive use of their abilities under the patent system to extract returns from trading their patent rights. The usefulness of the 19th century U.S. patent system to inventors with humble origins may have implications for the design of intellectual property institutions in contemporary developing countries.
Handle: RePEc:nbr:nberwo:10966
Template-Type: ReDIF-Paper 1.0
Title: Aging and the Welfare State: The Role of Young and Old Voting Pivots
Classification-JEL: E6; H2
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Note: AG PE
Number: 10967
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10967
File-URL: http://www.nber.org/papers/w10967.pdf
File-Format: application/pdf
Abstract: An income tax is generally levied on both capital and labor income. The working young bears mostly the burden of the tax on labor income, whereas the retired old, who already acummulated her savings, bears the brunt of the capital income tax. Therefore, there arise two types of conflict in the determination of the income tax: the standard intragenerational conflict between the poor and the rich, and an ntergenerational conflict between the young and the old. The paper studies how aging affects the resolution of these conflicts, and the politico-economic forces that are at play: the changes in the voting pivots and the fiscal leakage from tax payers to transfer recipients.
Handle: RePEc:nbr:nberwo:10967
Template-Type: ReDIF-Paper 1.0
Title: The Integration of Child Tax Credits and Welfare: Evidence from the National Child Benefit Program
Author-Name: Kevin Milligan
Author-Person: pmi14
Author-Name: Mark Stabile
Author-Person: pst179
Note: CH PE
Number: 10968
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10968
File-URL: http://www.nber.org/papers/w10968.pdf
File-Format: application/pdf
Publication-Status: published as Milligan, Kevin and Mark Stabile. “The integration of child tax credits and welfare: Evidence from the Canadian National Child Benefit program.” Journal of Public Economics 91, 1-2 (February, 2007): 305-326.
Abstract: In 1998, the Canadian government introduced a new child tax credit. The innovation in the program was its integration with social assistance (welfare). Some provinces agreed to subtract the new federally-paid benefits from provincially-paid social assistance, partially lowering the welfare wall. Three provinces did not integrate benefits, providing a quasi-experimental framework for estimation. We find large changes in social assistance take-up and employment in provinces that provided the labour market incentives to do so. In our sample, the integration of benefits can account for around one third of the total decline in social assistance receipt between 1997 and 2000.
Handle: RePEc:nbr:nberwo:10968
Template-Type: ReDIF-Paper 1.0
Title: Who Wins and Who Loses? Public Transfer Accounts for US Generations Born 1850 to 2090
Classification-JEL: H0
Author-Name: Antoine Bommier
Author-Person: pbo59
Author-Name: Ronald Lee
Author-Person: ple147
Author-Name: Timothy Miller
Author-Name: Stephane Zuber
Note: AG PE
Number: 10969
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10969
File-URL: http://www.nber.org/papers/w10969.pdf
File-Format: application/pdf
Publication-Status: published as Antoine Bommier & Ronald Lee & Tim Miller & Stéphane Zuber, 2010. "Who Wins and Who Loses? Public Transfer Accounts for US Generations Born 1850 to 2090," Population and Development Review, The Population Council, Inc., vol. 36(1), pages 1-26.
Abstract: Public transfer programs in industrial nations have massive long term fiscal imbalances, and apparently permit the elderly to benefit through pension and health care programs at the cost of the young and future generations. However, the intergenerational picture is turned upside down when public education is included in generational accounts along with pensions and health care. We calculate the net present value (NPV) of benefits received minus taxes paid for US generations born 1850 to 2090, and find that all generations born from 1950 to 2050 are net gainers, while many of today's old people are net losers. Windfall gains for early generations when Social Security and Medicare started up partially offset windfall losses when public education was started, roughtly consistent with the Becker-Murphy theory.
Handle: RePEc:nbr:nberwo:10969
Template-Type: ReDIF-Paper 1.0
Title: Consumption Commitments and Habit Formation
Classification-JEL: D8; E21; G11; G12
Author-Name: Raj Chetty
Author-Person: pch161
Author-Name: Adam Szeidl
Author-Person: psz25
Note: EFG PE
Number: 10970
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10970
File-URL: http://www.nber.org/papers/w10970.pdf
File-Format: application/pdf
Publication-Status: published as Raj Chetty & Adam Szeidl, 2016. "Consumption Commitments and Habit Formation," Econometrica, Econometric Society, vol. 84, pages 855-890, 03.
Abstract: We analyze the implications of household-level adjustment costs for the dynamics of aggregate consumption. We show that an economy in which agents have “consumption commitments” is approximately equivalent to a habit formation model in which the habit stock is a weighted average of past consumption if idiosyncratic risk is large relative to aggregate risk. Consumption commitments can thus explain the empirical regularity that consumption is excessively sensitive and excessively smooth, findings that are typically attributed to habit formation. Unlike habit formation and other theories, but consistent with empirical evidence, the consumption commitments model also predicts that excess sensitivity and smoothness vanish for large shocks. These results suggest that behavior previously attributed to habit formation may be better explained by adjustment costs. We develop additional testable predictions to further distinguish the commitment and habit models and show that the two models have different welfare implications.
Handle: RePEc:nbr:nberwo:10970
Template-Type: ReDIF-Paper 1.0
Title: Incentives to Learn
Classification-JEL: I21; O15; C93
Author-Name: Michael Kremer
Author-Person: pkr20
Author-Name: Edward Miguel
Author-Person: pmi499
Author-Name: Rebecca Thornton
Author-Person: pth143
Note: EFG ED CH
Number: 10971
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10971
File-URL: http://www.nber.org/papers/w10971.pdf
File-Format: application/pdf
Publication-Status: published as Kremer, Michael, Edward Miguel and Rebecca Thornton. “Incentives to Learn.” Education Next: a Journal of Opinion and Research 5, 2 (Spring 2005): 57-64.
Publication-Status: published as Michael Kremer & Edward Miguel & Rebecca Thornton, 2009. "Incentives to Learn," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 437-456, August.
Abstract: We report results from a randomized evaluation of a merit scholarship program for adolescent girls in Kenya. Girls who scored well on academic exams had their school fees paid and received a cash grant for school supplies. Girls eligible for the scholarship showed significant gains in academic exam scores (average gain 0.12-0.19 standard deviations) and these gains persisted following the competition. There is also evidence of positive program externalities on learning: boys, who were ineligible for the awards, also showed sizeable average test gains, as did girls with low pretest scores, who were unlikely to win. Both student and teacher school attendance increased in the program schools. We discuss implications both for understanding the nature of educational production functions and for the policy debate surrounding merit scholarships.
Handle: RePEc:nbr:nberwo:10971
Template-Type: ReDIF-Paper 1.0
Title: Manufacturer Liability for Harms Caused by Consumers to Others
Classification-JEL: K13; D62
Author-Name: Bruce Hay
Author-Name: Kathryn E. Spier
Note: LE
Number: 10972
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10972
File-URL: http://www.nber.org/papers/w10972.pdf
File-Format: application/pdf
Publication-Status: published as Hay, Bruce and Katherine Spier. “Manufacturer Liability for Harm Caused by Consumers to Others.” The American Economic Review 94, 5 (2005): 1700-1711.
Abstract: Should the manufacturer of a product be held legally responsible when a consumer, while using the product, harms someone else? We show that if consumers have deep pockets then manufacturer liability is not economically efficient. It is more efficient for the consumers themselves to bear responsibility for the harms that they cause. If homogeneous consumers have limited assets, then the most efficient rule is "residual-manufacturer liability" where the manufacturer pays the shortfall in damages not paid by the consumer. Residual-manufacturer liability distorts the market quantity when consumers' willingness to pay is correlated with their propensity to cause harm. It distorts product safety when consumers differ in their wealth levels. In both cases, consumer-only liability may be more efficient.
Handle: RePEc:nbr:nberwo:10972
Template-Type: ReDIF-Paper 1.0
Title: Has Monetary Policy Become More Efficient? A Cross Country Analysis
Classification-JEL: E52; E58
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Author-Name: Alfonso Flores-Lagunes
Author-Person: pfl60
Author-Name: Stefan Krause
Note: ME
Number: 10973
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10973
File-URL: http://www.nber.org/papers/w10973.pdf
File-Format: application/pdf
Publication-Status: published as Cecchetti, Stephen G., Alfonso Flores-Lagunes and Stefan Krause. "Has Monetary Policy Become More Efficient? A Cross-Country Analysis," Economic Journal, 2006, v116(511,Apr), 408-433.
Abstract: Over the past twenty years, macroeconomic performance has improved in industrialized and developing countries alike. In a broad cross-section of countries inflation volatility has fallen markedly while output variability has either fallen or risen only slightly. This increased stability can be attributed to either: 1) more efficient policy-making by the monetary authority, 2) a reduction in the variability of the aggregate supply shocks, or 3) changes in the structure of the economy. In this paper we develop a method for measuring changes in performance, and allocate the source of performance changes to these two factors. Our technique involves estimating movements toward an inflation and output variability efficiency frontier, and shifts in the frontier itself. We study the change from the 1980s to the 1990s in the macroeconomic performance of 24 countries and find that, for most of the analyzed countries, more efficient policy has been the driving force behind improved macroeconomic performance.
Handle: RePEc:nbr:nberwo:10973
Template-Type: ReDIF-Paper 1.0
Title: Tobacco Spending and its Crowd-Out of Other Goods
Classification-JEL: I1
Author-Name: Susan H. Busch
Author-Name: Mireia Jofre-Bonet
Author-Person: pjo124
Author-Name: Tracy A. Falba
Author-Person: pfa211
Author-Name: Jody L. Sindelar
Note: EH
Number: 10974
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10974
File-URL: http://www.nber.org/papers/w10974.pdf
File-Format: application/pdf
Publication-Status: published as Busch, Susan H., Mireia Jofre-Bonet, Tracy A. Falba, and Jody L. Sindelar. "Burning a Hole in the Budget: Tobacco Spending and Its Crowd-Out of Other Goods." Applied Health Economics and Health Policy 3, 4 (2004): 263-72.
Abstract: Smoking is an expensive habit. Smoking households spend, on average, more than $1000 annually on cigarettes. For households in which some members smoke, smoking expenditures crowd-out other purchases, which may affect other household members, as well as the smoker. We empirically analyze how expenditures on tobacco crowd out consumption of other goods, estimating the patterns of substitution between tobacco products and other expenditures. We use the Consumer Expenditure Survey (1995 to 2001), which we complement with regional price data, and state cigarette prices. We estimate a consumer demand system of expenditures on cigarettes, food, alcohol, housing, apparel, transportation, medical care and controls for socio-economic variables and other sources of observable heterogeneity. Descriptive data indicate that, compared to non-smokers, smokers spend less on housing. Results from the demand system indicate that as the price of cigarettes rises, households increase the quantity of food purchased, and, in some samples, reduce the quantity of apparel and housing purchased.
Handle: RePEc:nbr:nberwo:10974
Template-Type: ReDIF-Paper 1.0
Title: Semiparametric Causality Tests Using the Policy Propensity Score
Classification-JEL: C14; C22; E52
Author-Name: Joshua D. Angrist
Author-Person: pan29
Author-Name: Guido M. Kuersteiner
Author-Person: pku116
Note: ME
Number: 10975
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10975
File-URL: http://www.nber.org/papers/w10975.pdf
File-Format: application/pdf
Abstract: Time series data are widely used to explore causal relationships, typically in a regression framework with lagged dependent variables. Regression-based causality tests rely on an array of functional form and distributional assumptions for valid causal inference. This paper develops a semi-parametric test for causality in models linking a binary treatment or policy variable with unobserved potential outcomes. The procedure is semiparametric in the sense that we model the process determining treatment -- the policy propensity score -- but leave the model for outcomes unspecified. This general approach is motivated by the notion that we typically have better prior information about the policy determination process than about the macro-economy. A conceptual innovation is that we adapt the cross-sectional potential outcomes framework to a time series setting. This leads to a generalized definition of Sims (1980) causality. We also develop a test for full conditional independence, in contrast with the usual focus on mean independence. Our approach is illustrated using data from the Romer and Romer (1989) study of the relationship between the Federal reserve's monetary policy and output.
Handle: RePEc:nbr:nberwo:10975
Template-Type: ReDIF-Paper 1.0
Title: The Economic Theory of Illegal Goods: The Case of Drugs
Classification-JEL: D00; D11; D60; I11; I18
Author-Name: Gary S. Becker
Author-Name: Kevin M. Murphy
Author-Person: pmu108
Author-Name: Michael Grossman
Author-Person: pgr107
Note: EH PE
Number: 10976
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10976
File-URL: http://www.nber.org/papers/w10976.pdf
File-Format: application/pdf
Abstract: This paper concentrates on both the positive and normative effects of punishments that enforce laws to make production and consumption of particular goods illegal, with illegal drugs as the main example. Optimal public expenditures on apprehension and conviction of illegal suppliers obviously depend on the extent of the difference between the social and private value of consumption of illegal goods, but they also depend crucially on the elasticity of demand for these goods. In particular, when demand is inelastic, it does not pay to enforce any prohibition unless the social value is negative and not merely less than the private value. We also compare outputs and prices when a good is legal and taxed with outputs and prices when the good is illegal. We show that a monetary tax on a legal good could cause a greater reduction in output and increase in price than would optimal enforcement, even recognizing that producers may want to go underground to try to avoid a monetary tax. This means that fighting a war on drugs by legalizing drug use and taxing consumption may be more effective than continuing to prohibit the legal use of drugs.
Handle: RePEc:nbr:nberwo:10976
Template-Type: ReDIF-Paper 1.0
Title: Tax Policy for Health Insurance
Classification-JEL: H2; I1
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: EH PE
Number: 10977
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10977
File-URL: http://www.nber.org/papers/w10977.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan and Ebonya Washington. "Subsidies To Employee Health Insurance Premiums And The Health Insurance Market," Journal of Health Economics, 2005, v24(2,Mar), 253-276.
Publication-Status: published as Tax Policy for Health Insurance , Jonathan Gruber. in Tax Policy and the Economy, Volume 19, Poterba. 2005
Abstract: Despite a $140 billion existing tax break for employer-provided health insurance, tax policy remains the tool of choice for many policy-makers in addressing the problem of the uninsured. In this paper, I use a microsimulation model to estimate the impact of various tax interventions to cover the uninsured, relative to an expansion of public insurance designed to accomplish the same goals. I contrast the efficiency of these policies along several dimensions, most notably the dollars of public spending per dollar of insurance value provided. I find that every tax policy is much less efficient than public insurance expansions: while public insurance costs the government only between $1.17 and $1.33 per dollar of insurance value provided, tax policies cost the government between $2.36 and $12.98 per dollar of insurance value provided. I also find that targeting is crucial for efficient tax policy; policies tightly targeted to the lowest income earners have a much higher efficiency than those available higher in the income distribution. Within tax policies, tax credits aimed at employers are the most efficient, and tax credits aimed at employees are the least efficient, because the single greatest determinant of insurance coverage is being offered insurance by your employer, and because most employees who are offered already take up that insurance. Tax credits targeted at non-group coverage are fairly similar to employer tax credits at low levels, but much less efficient at higher levels.
Handle: RePEc:nbr:nberwo:10977
Template-Type: ReDIF-Paper 1.0
Title: Theft and Taxes
Classification-JEL: G0; G1; G2; G3
Author-Name: Mihir A. Desai
Author-Name: Alexander Dyck
Author-Person: pdy5
Author-Name: Luigi Zingales
Note: CF PE
Number: 10978
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10978
File-URL: http://www.nber.org/papers/w10978.pdf
File-Format: application/pdf
Publication-Status: published as Desai, Mihir, A. Dyck and L. Zingales. “Theft and Taxes.” Journal of Financial Economics 84, 3 (June 2007): 591-623.
Abstract: This paper analyzes the interaction between corporate taxes and corporate governance. We show that the characteristics of a taxation system affect the extraction of private benefits by company insiders. A higher tax rate increases the amount of income insiders divert and thus worsens governance outcomes. In contrast, stronger tax enforcement reduces diversion and, in so doing, can raise the stock market value of a company in spite of the increase in the tax burden. We also show that the corporate governance system affects the level of tax revenues and the sensitivity of tax revenues to tax changes. When the corporate governance system is ineffective (i.e., when it is easy to divert income), an increase in the tax rate can reduce tax revenues. We test this prediction in a panel of countries. Consistent with the model, we find that corporate tax rate increases have smaller (in fact, negative) effects on revenues when corporate governance is weaker. Finally, this approach provides a novel justification for the existence of a separate corporate tax based on profits.
Handle: RePEc:nbr:nberwo:10978
Template-Type: ReDIF-Paper 1.0
Title: Finance, Inequality, and Poverty: Cross-Country Evidence
Classification-JEL: O11; O16; G00
Author-Name: Thorsten Beck
Author-Person: pbe266
Author-Name: Asli Demirguc-Kunt
Author-Person: pde226
Author-Name: Ross Levine
Author-Person: ple61
Note: CF
Number: 10979
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10979
File-URL: http://www.nber.org/papers/w10979.pdf
File-Format: application/pdf
Publication-Status: published as Beck, Thorsten, Asli Demirguc-Kunt and Ross Levine. "SMEs, Growth, And Poverty: Cross-Country Evidence," Journal of Economic Growth, 2005, v10(3,Sep), 199-229
Abstract: While substantial research finds that financial development boosts overall economic growth, we study whether financial development disproportionately raises the incomes of the poor and alleviates poverty. Using a broad cross-country sample, we distinguish among competing theoretical predictions about the impact of financial development on changes in income distribution and poverty alleviation. We find that financial development reduces income inequality by disproportionately boosting the incomes of the poor. Countries with better-developed financial intermediaries experience faster declines in measures of both poverty and income inequality. These results are robust to controlling for other country characteristics and potential reverse causality.
Handle: RePEc:nbr:nberwo:10979
Template-Type: ReDIF-Paper 1.0
Title: Why Should We Care About Child Labor? The Education, Labor Market, and Health Consequences of Child Labor
Classification-JEL: D19; J22; J82; O15; Q12
Author-Name: Kathleen Beegle
Author-Person: pbe298
Author-Name: Rajeev Dehejia
Author-Person: pde179
Author-Name: Roberta Gatti
Author-Person: pga278
Note: LS
Number: 10980
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10980
File-URL: http://www.nber.org/papers/w10980.pdf
File-Format: application/pdf
Publication-Status: published as Kathleen Beegle & Rajeev Dehejia & Roberta Gatti, 2009. "Why Should We Care About Child Labor?: The Education, Labor Market, and Health Consequences of Child Labor," Journal of Human Resources, University of Wisconsin Press, vol. 44(4).
Abstract: Although there is an extensive literature on the determinants of child labor and many initiatives aimed at combating it, there is limited evidence on the consequences of child labor on socio-economic outcomes such as education, wages, and health. We evaluate the causal effect of child labor participation on these outcomes using panel data from Vietnam and an instrumental variables strategy. Five years subsequent to the child labor experience, we find significant negative impacts on school participation and educational attainment, but also find substantially higher earnings for those (young) adults who worked as children. We find no significant effects on health. Over a longer horizon, we estimate that from age 30 onward the forgone earnings attributable to lost schooling exceed any earnings gain associated with child labor and that the net present discounted value of child labor is positive for discount rates of 11.5 percent or higher. We show that child labor is prevalent among households likely to have higher borrowing costs, that are farther from schools, and whose adult members experienced negative returns to their own education. This evidence suggests that reducing child labor will require facilitating access to credit and will also require households to be forward looking.
Handle: RePEc:nbr:nberwo:10980
Template-Type: ReDIF-Paper 1.0
Title: Some New Variance Bounds for Asset Prices
Classification-JEL: G12; G14
Author-Name: Charles Engel
Author-Person: pen14
Note: AP
Number: 10981
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10981
File-URL: http://www.nber.org/papers/w10981.pdf
File-Format: application/pdf
Publication-Status: published as Engel, Charles, 2005. "Some New Variance Bounds for Asset Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(5), pages 949-55, October.
Abstract: When equity prices are determined as the discounted sum of current and expected future dividends, Shiller (1981) and LeRoy and Porter (1981) derived a relationship between the variance of the price of equities, p(t), and the variance of the ex post realized discounted sum of current and future dividends: p*(t): Var(p*(t))>= Var(p(t)). The literature has long since recognized that this variance bound is valid only when dividends follow a stationary process. Others, notably West (1988), derive variance bounds that apply when dividends are nonstationary. West shows that the variance in innovations in p(t) must be less than the variance of innovations in a forecast of the discounted sum of current and future dividends constructed by the econometrician, p^(t). Here we derive a new variance bound when dividends are stationary or have a unit root, that sheds light on the discussion in the 1980s of the Shiller variance bound: Var(p(t)-p(t-1)) >= Var(p*(t)-p*(t-1))! We also derive a variance bound related to the West bound: Var(p^(t)-p^(t-1)) >= Var(p(t)-p(t-1)).
Handle: RePEc:nbr:nberwo:10981
Template-Type: ReDIF-Paper 1.0
Title: How do Banks Manage Liquidity Risk? Evidence from Equity and Deposit Markets in the Fall of 1998
Classification-JEL: G18; G21
Author-Name: Philip E. Strahan
Author-Name: Evan Gatev
Author-Name: Til Schuermann
Author-Person: psc73
Note: CF
Number: 10982
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10982
File-URL: http://www.nber.org/papers/w10982.pdf
File-Format: application/pdf
Publication-Status: published as Carey, Mark and René Stulz (eds.) Risks of Financial Institutions. Chicago: NBER & University of Chicago Press, 2006.
Publication-Status: published as How Do Banks Manage Liquidity Risk? Evidence from the Equity and Deposit Markets in the Fall of 1998 , Evan Gatev, Til Schuermann, Philip Strahan. in The Risks of Financial Institutions, Carey and Stulz. 2006
Abstract: We report evidence from the equity market that unused loan commitments expose banks to systematic liquidity risk, especially during crises such as the one observed in the fall of 1998. We also find, however, that banks with higher levels of transactions deposits had lower risk during the 1998 crisis than other banks. These banks experienced large inflows of funds just as they were needed -- when liquidity demanded by firms taking down funds from commercial paper backup lines of credit peaked. Our evidence suggests that combining loan commitments with deposits mitigates liquidity risk, and that this deposit-lending synergy is especially powerful during period of crises as nervous investors move funds into their banks.
Handle: RePEc:nbr:nberwo:10982
Template-Type: ReDIF-Paper 1.0
Title: Finance, Firm Size, and Growth
Classification-JEL: G2; L11; L25; O1
Author-Name: Thorsten Beck
Author-Person: pbe266
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: 10983
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10983
File-URL: http://www.nber.org/papers/w10983.pdf
File-Format: application/pdf
Publication-Status: published as Thorsten Beck & Asli Demirguc-Kunt & Luc Laeven & Ross Levine, 2008. "Finance, Firm Size, and Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(7), pages 1379-1405, October.
Abstract: This paper examines whether financial development boosts the growth of small firms more than large firms and hence provides information on the mechanisms through which financial development fosters aggregate economic growth. We define an industry's technological firm size as the firm size implied by industry specific production technologies, including capital intensities and scale economies. Using cross-industry, cross-country data, the results indicate that financial development exerts a disproportionately large effect on the growth of industries that are technologically more dependent on small firms. This suggests that financial development accelerates economic growth by removing growth constraints on small firms and also implies that financial development has sectoral as well as aggregate growth ramifications.
Handle: RePEc:nbr:nberwo:10983
Template-Type: ReDIF-Paper 1.0
Title: The Determinants of Progressive Era Reform: The Pure Food and Drugs Act of 1906
Classification-JEL: I1; N4; L5
Author-Name: Marc T. Law
Author-Person: pla238
Author-Name: Gary D. Libecap
Author-Person: pli409
Note: DAE
Number: 10984
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10984
File-URL: http://www.nber.org/papers/w10984.pdf
File-Format: application/pdf
Publication-Status: published as The Determinants of Progressive Era Reform. The Pure Food and Drugs Act of 1906, Marc Law, Gary D. Libecap. in Corruption and Reform: Lessons from America's Economic History, Glaeser and Goldin. 2006
Abstract: We examine three theories of Progressive Era regulation: public interest, industry capture, and information manipulation by the federal bureaucracy and muckraking press. Based on analysis of qualitative legislative histories and econometric evidence, we argue that the adoption of the 1906 Pure Food and Drugs Act was due to all three factors. Select producer groups sought regulation to tilt the competitive playing field to their advantage. Progressive reform interests desired regulation to reduce uncertainty about food and drug quality. Additionally, rent-seeking by the muckraking press and its bureaucratic allies played a key role in the timing of the legislation. We also find that because the interests behind regulation could not shape the enforcing agency or the legal environment in which enforcement took place, these groups did not ultimately benefit from regulation in the ways originally anticipated.
Handle: RePEc:nbr:nberwo:10984
Template-Type: ReDIF-Paper 1.0
Title: Globalization and the Returns to Speaking English in South Africa
Classification-JEL: F0
Author-Name: James Levinsohn
Author-Person: ple386
Note: ITI
Number: 10985
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10985
File-URL: http://www.nber.org/papers/w10985.pdf
File-Format: application/pdf
Publication-Status: published as Harrison, Ann. Globalization and Poverty. Chicago: Univ. of Chicago Press, 2007.
Publication-Status: published as Globalization and the Returns to Speaking English in South Africa, James Levinsohn. in Globalization and Poverty, Harrison. 2007
Abstract: This paper takes a novel approach to trying to disentangle the impact of globalization on wages by focusing on changes in the return to speaking English, the international language of commerce, in South Africa as that country re-integrated with the global economy after 1993. The paper finds that he return to speaking English increased overall and that within racial groups the return increased primarily for Whites but not for Blacks.
Handle: RePEc:nbr:nberwo:10985
Template-Type: ReDIF-Paper 1.0
Title: Large Devaluations and the Real Exchange Rate
Classification-JEL: F31
Author-Name: Ariel Burstein
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Sergio Rebelo
Note: EFG IFM
Number: 10986
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10986
File-URL: http://www.nber.org/papers/w10986.pdf
File-Format: application/pdf
Publication-Status: published as Ariel Burstein & Martin Eichenbaum & Sergio Rebelo, 2005. "Large Devaluations and the Real Exchange Rate," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 742-784, August.
Abstract: In this paper we argue that the primary force behind the large drop in real exchange rates that occurs after large devaluations is the slow adjustment in the price of nontradable goods and services. Our empirical analysis uses data from five large devaluation episodes: Argentina (2001), Brazil (1999), Korea (1997), Mexico (1994), and Thailand (1997). We conduct a detailed analysis of the Argentina case using disaggregated CPI data, data from our own survey of prices in Buenos Aires, and scanner data from supermarkets. We assess the robustness of our findings by studying large real-exchange-rate appreciations, medium devaluations, and small exchange-rate movements.
Handle: RePEc:nbr:nberwo:10986
Template-Type: ReDIF-Paper 1.0
Title: Enforcement, Private Political Pressure and the GATT/WTO Escape Clause
Classification-JEL: F1
Author-Name: Kyle Bagwell
Author-Person: pba409
Author-Name: Robert W. Staiger
Author-Person: pst85
Note: ITI
Number: 10987
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10987
File-URL: http://www.nber.org/papers/w10987.pdf
File-Format: application/pdf
Publication-Status: published as Bagwell, Kyle and Robert Staiger. “Enforcement, Private Political Pressure and the GATT/WTO Escape Clause.” The Journal of Legal Studies 34, 2 (June 2005): 471-513.
Publication-Status: published as Reprinted in Chad P. Bown (ed.), "The WTO, Safeguards, and Temporary Protection From Imports," Edward Elgar (Cheltenham, U.K.), 2006, 177-219.
Abstract: We consider the design and implementation of international trade agreements when: (i) negotiations are undertaken and commitments made in the presence of uncertainty about future political pressures; (ii) governments possess private information about political pressures at the time that the agreement is actually implemented; and (iii) negotiated commitments can be implemented only if they are self-enforcing. We thus consider the design of self-enforcing trade agreements among governments that acquire private information over time. In this context, we provide equilibrium interpretations of GATT/WTO negotiations regarding upper bounds on applied tariffs and GATT/WTO escape clauses. We find that governments achieve greater welfare when they negotiate the optimal upper bound on tariffs rather than precise tariff levels; furthermore, when governments negotiate the optimal upper bound on tariffs, the observed applied tariffs often fall strictly below the bound. Our analysis also provides a novel interpretation of a feature of the WTO Safeguard Agreement, under which escape clause actions cannot be re-imposed in the same industry for a time period equal to the duration of the most recent escape clause action. We find that a dynamic usage constraint of this kind can raise the expected welfare of negotiating governments.
Handle: RePEc:nbr:nberwo:10987
Template-Type: ReDIF-Paper 1.0
Title: Happy News from the Dismal Science: Reassessing the Japanese Fiscal Policy and Sustainability
Classification-JEL: E6; H5; H6
Author-Name: Christian Broda
Author-Name: David E. Weinstein
Author-Person: pwe34
Note: AG ITI PE
Number: 10988
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10988
File-URL: http://www.nber.org/papers/w10988.pdf
File-Format: application/pdf
Abstract: We analyze fiscal policy and fiscal sustainability in Japan using a variant of the methodology developed in Blanchard (1990). We find that Japan can achieve fiscal sustainability over a 100-year horizon with relatively small changes in the tax-to-GDP ratio. Our analysis differs from more pessimistic analyses in several dimensions. First, since Japanese net debt is only half that of gross debt, we demonstrate that the current debt burden is much lower than is typically reported. This means that monetization of the debt will have little impact on Japan's fiscal sustainability because Japan's problem is the level of future liabilities not current ones. Second, we argue that one obtains very different projections of social security burdens based on the standard assumption that Japan's population is on a trend towards extinction rather than transitioning to a new lower level. Third, we demonstrate that some modest cost containment of the growth rate of real per capita benefits, such as cutting expenditures for shrinking demographic categories, can dramatically lower the necessary tax burden. In sum, no scenario involves Japanese taxes rising above those in Europe today and many result in tax-to-GDP ratios comparable to those in the United States.
Handle: RePEc:nbr:nberwo:10988
Template-Type: ReDIF-Paper 1.0
Title: The Interaction of Public and Private Insurance: Medicaid and the Long-Term Care Insurance Market
Classification-JEL: H4; H51; I11; J14
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Author-Name: Amy Finkelstein
Author-Person: pfi264
Note: AG EH PE
Number: 10989
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10989
File-URL: http://www.nber.org/papers/w10989.pdf
File-Format: application/pdf
Publication-Status: published as Jeffrey R. Brown & Amy Finkelstein, 2008. "The Interaction of Public and Private Insurance: Medicaid and the Long-Term Care Insurance Market," American Economic Review, American Economic Association, vol. 98(3), pages 1083-1102, June.
Abstract: We show that the provision of even incomplete public insurance can substantially crowd out private insurance demand. We examine the interaction of the public Medicaid program with the private market for long-term care insurance and estimate that Medicaid can explain the lack of private insurance purchases for at least two-thirds and as much as 90 percent of the wealth distribution, even if comprehensive, actuarially fair private policies were available. Medicaid's large crowd out effect stems from the very large implicit tax (on the order of 60 to 75 percent for a median wealth individual) that Medicaid imposes on the benefits paid from private insurance policies. Importantly, Medicaid itself provides an inadequate mechanism for smoothing consumption for most individuals, so that its crowd out effect has important implications for overall risk exposure. An implication of our findings is that public policies designed to stimulate private insurance demand will be of limited efficacy as long as Medicaid continues to impose this large implicit tax.
Handle: RePEc:nbr:nberwo:10989
Template-Type: ReDIF-Paper 1.0
Title: Global Growth Opportunities and Market Integration
Classification-JEL: F30; F36; G15; O11; O57
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Campbell R. Harvey
Author-Person: pha102
Author-Name: Christian Lundblad
Author-Person: plu185
Author-Name: Stephan Siegel
Author-Person: psi489
Note: AP
Number: 10990
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10990
File-URL: http://www.nber.org/papers/w10990.pdf
File-Format: application/pdf
Publication-Status: published as Geert Bekaert & Campbell R. Harvey & Christian Lundblad & Stephan Siegel, 2007. "Global Growth Opportunities and Market Integration," Journal of Finance, American Finance Association, vol. 62(3), pages 1081-1137, 06.
Abstract: We measure a country's growth opportunities by investigating how its industry mix is priced in global capital markets, using price earnings ratios of global industry portfolios. We derive three sets of empirical results. First, these exogenous growth opportunities strongly predict future changes in real GDP and investment in a large panel of countries. This relation is strongest in countries that have liberalized their capital accounts, equity markets, and banking systems. Second, we re-examine the link between financial development, investor protection, capital allocation, and growth. We find that financial development and investor protection measures are much less important in aligning growth opportunities with growth than is capital market openness. Third, we formulate new tests of market integration and segmentation. Under integration, the difference between a country's local PE ratio and its global counterpart should not predict relative growth, but the difference between its "exogenous" global PE ratio and the world market PE ratio should predict relative growth.
Handle: RePEc:nbr:nberwo:10990
Template-Type: ReDIF-Paper 1.0
Title: The Gift of the Dying: The Tragedy of AIDS and the Welfare of Future African Generations
Classification-JEL: O1
Author-Name: Alwyn Young
Note: EFG EH
Number: 10991
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10991
File-URL: http://www.nber.org/papers/w10991.pdf
File-Format: application/pdf
Publication-Status: published as Young, Alwyn. "The Gift Of The Dying: The Tragedy Of AIDS And The Welfare Of Future African Generations," Quarterly Journal of Economics, 2005, v120(2,May), 423-466.
Abstract: This paper simulates the impact of the AIDS epidemic on future living standards in South Africa. I emphasize two competing effects. On the one hand, the epidemic is likely to have a detrimental impact on the human capital accumulation of orphaned children. On the other hand, widespread community infection lowers fertility, both directly, through a reduction in the willingness to engage in unprotected sexual activity, and indirectly, by increasing the scarcity of labour and the value of a woman's time. I find that even with the most pessimistic assumptions concerning reductions in educational attainment, the fertility effect dominates. The AIDS epidemic, on net, enhances the future per capita consumption possibilities of the South African economy.
Handle: RePEc:nbr:nberwo:10991
Template-Type: ReDIF-Paper 1.0
Title: China's New Regional Trade Agreements
Classification-JEL: F02; F10; O24
Author-Name: Agata Antkiewicz
Author-Name: John Whalley
Author-Person: pwh8
Note: ITI
Number: 10992
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10992
File-URL: http://www.nber.org/papers/w10992.pdf
File-Format: application/pdf
Publication-Status: published as Agata Antkiewicz & John Whalley, 2005. "China's New Regional Trade Agreements," The World Economy, Blackwell Publishing, vol. 28(10), pages 1539-1557, October.
Abstract: This paper discusses the recent regional trade agreements that China has concluded rapidly following accession to the WTO in 2002. Agreements are in place with Hong Kong, Macao, ASEAN, Australia, and New Zealand, and are either in negotiation or under discussion with South Africa, Chile, India, and the Gulf Cooperation Council. These agreements differ sharply in form and substance, and involve process commitments to ongoing negotiation and cooperation on a wide range of issues. Differences relating to the regional agreements negotiated by the EU and the US are emphasized, as are later potential difficulties these agreements create in moving to an Asian trade bloc centred on them.
Handle: RePEc:nbr:nberwo:10992
Template-Type: ReDIF-Paper 1.0
Title: Fluctuations in a Dreadful Childhood: Synthetic Longitudinal Height Data, Relative Prices and Weather in the Short-Term Health of American Slaves
Classification-JEL: N3; I1
Author-Name: Richard H. Steckel
Author-Person: pst352
Note: DAE
Number: 10993
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10993
File-URL: http://www.nber.org/papers/w10993.pdf
File-Format: application/pdf
Abstract: For over a quarter century anthropometric historians have struggled to identify and measure the numerous factors that affect adult stature, which depends upon diet, disease and physical activity from conception to maturity. I simplify this complex problem by assessing nutritional status in a particular year using synthetic longitudinal data created from measurements of children born in the same year but measured at adjacent ages, which are abundantly available from 28,000 slave manifests housed at the National Archives. I link this evidence with annual measures of economic conditions and new measures of the disease environment to test hypotheses of slave owner behavior. Height-by-age profiles furnish clear evidence that owners substantially managed slave health. The short-term evidence shows that weather affected growth via exposure to pathogens and that owners modified net nutrition in response to sustained price signals.
Handle: RePEc:nbr:nberwo:10993
Template-Type: ReDIF-Paper 1.0
Title: Explaining the Magnitude of Liquidity Premia: The Roles of Return Predictability, Wealth Shocks and State-Dependent Transaction Costs
Classification-JEL: G11; G12
Author-Name: Anthony W. Lynch
Author-Name: Sinan Tan
Note: AP
Number: 10994
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10994
File-URL: http://www.nber.org/papers/w10994.pdf
File-Format: application/pdf
Publication-Status: published as ANTHONY W. LYNCH & SINAN TAN, 2011. "Explaining the Magnitude of Liquidity Premia: The Roles of Return Predictability, Wealth Shocks, and State-Dependent Transaction Costs," The Journal of Finance, vol 66(4), pages 1329-1368.
Abstract: The seminal work of Constantinides (1986) documents how, when the risky return is calibrated to the U.S. market return, the impact of transaction costs on per-annum liquidity premia is an order of magnitude smaller than the cost rate itself. A number of recent papers have formed portfolios sorted on liquidity measures and found a spread in expected per-annum return that is definitely not an order of magnitude smaller than the transaction cost spread: the expected per-annum return spread is found to be around 6-7% per annum. Our paper bridges the gap between Constantinides' theoretical result and the empirical magnitude of the liquidity premium by examining dynamic portfolio choice with transaction costs in a variety of more elaborate settings that move the problem closer to the one solved by real-world investors. In particular, we allow returns to be predictable and transaction costs to be stochastic, and we introduce wealth shocks, both stationary multiplicative and labor income. With predictable returns, we also allow the wealth shocks and transaction costs to be state dependent. We find that adding these real world complications to the canonical problem can cause transactions costs to produce per-annum liquidity premia that are no longer an order of magnitude smaller than the rate, but are instead the same order of magnitude. For example, predictable returns and i.i.d. labor income growth causes the liquidity premium for an agent with a wealth to monthly labor income ratio of 0 or 10 to be 1.68\% and 1.20\% respectively; these are 21-fold and 15-fold increases, respectively, relative to that in the standard i.i.d. return case. We conclude that the effect of proportional transaction costs on the standard consumption and portfolio allocation problem with i.i.d. returns can be materially altered by reasonable perturbations that bring the problem closer to the one investors are actually solving.
Handle: RePEc:nbr:nberwo:10994
Template-Type: ReDIF-Paper 1.0
Title: Taylor Rules and the Deutschmark-Dollar Real Exchange Rate
Classification-JEL: F41; E52
Author-Name: Charles Engel
Author-Person: pen14
Author-Name: Kenneth D. West
Author-Person: pwe16
Note: IFM ME
Number: 10995
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10995
File-URL: http://www.nber.org/papers/w10995.pdf
File-Format: application/pdf
Publication-Status: published as Engel, Charles & West, Kenneth D., 2006. "Taylor Rules and the Deutschmark: Dollar Real Exchange Rate," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(5), pages 1175-1194, August.
Abstract: We explore the link between an interest rate rule for monetary policy and the behavior of the real exchange rate. The interest rate rule, in conjunction with some standard assumptions, implies that the deviation of the real exchange rate from its steady state depends on the present value of a weighted sum of inflation and output gap differentials. The weights are functions of the parameters of the interest rate rule. An initial look at German data yields some support for the model.
Handle: RePEc:nbr:nberwo:10995
Template-Type: ReDIF-Paper 1.0
Title: Parametric Portfolio Policies: Exploiting Characteristics in the Cross Section of Equity Returns
Classification-JEL: G0; G1
Author-Name: Michael W. Brandt
Author-Name: Pedro Santa-Clara
Author-Person: psa1486
Author-Name: Rossen Valkanov
Author-Person: pva496
Note: AP
Number: 10996
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10996
File-URL: http://www.nber.org/papers/w10996.pdf
File-Format: application/pdf
Publication-Status: published as Michael W. Brandt & Pedro Santa-Clara & Rossen Valkanov, 2009. "Parametric Portfolio Policies: Exploiting Characteristics in the Cross-Section of Equity Returns," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 22(9), pages 3411-3447, September.
Abstract: We propose a novel approach to optimizing portfolios with large numbers of assets. We model directly the portfolio weight in each asset as a function of the asset's characteristics. The coefficients of this function are found by optimizing the investor's average utility of the portfolio's return over the sample period. Our approach is computationally simple, easily modified and extended, produces sensible portfolio weights, and offers robust performance in and out of sample. In contrast, the traditional approach of first modeling the joint distribution of returns and then solving for the corresponding optimal portfolio weights is not only difficult to implement for a large number of assets but also yields notoriously noisy and unstable results. Our approach also provides a new test of the portfolio choice implications of equilibrium asset pricing models. We present an empirical implementation for the universe of all stocks in the CRSP-Compustat dataset, exploiting the size, value, and momentum anomalies.
Handle: RePEc:nbr:nberwo:10996
Template-Type: ReDIF-Paper 1.0
Title: Vertical Integration and Technology: Theory and Evidence
Classification-JEL: L22; L23; L24; L60
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Rachel Griffith
Author-Person: pgr70
Author-Name: Fabrizio Zilibotti
Author-Person: pzi3
Note: CF EFG IO
Number: 10997
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10997
File-URL: http://www.nber.org/papers/w10997.pdf
File-Format: application/pdf
Publication-Status: published as Daron Acemoglu & Philippe Aghion & Rachel Griffith & Fabrizio Zilibotti, 2010. "Vertical Integration and Technology: Theory and Evidence," Journal of the European Economic Association, MIT Press, vol. 8(5), pages 989-1033, 09.
Abstract: This paper investigates the determinants of vertical integration using data from the UK manufacturing sector. We find that the relationship between a downstream (producer) industry and an upstream (supplier) industry is more likely to be vertically integrated when the producing industry is more technology intensive and the supplying industry is less technology intensive. Moreover, both of these effects are stronger when the supplying industry accounts for a large fraction of the producer's costs. These results are generally robust and hold with alternative measures of technology intensity, with alternative estimation strategies, and with or without controlling for a number of firm and industry-level characteristics. They are consistent with the incomplete contract theories of the firm that emphasize both the potential costs and benefits of vertical integration in terms of investment incentives.
Handle: RePEc:nbr:nberwo:10997
Template-Type: ReDIF-Paper 1.0
Title: Corporate Financing Decisions When Investors Take the Path of Least Resistance
Classification-JEL: G32; G34
Author-Name: Malcolm Baker
Author-Person: pba735
Author-Name: Joshua Coval
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: CF
Number: 10998
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10998
File-URL: http://www.nber.org/papers/w10998.pdf
File-Format: application/pdf
Publication-Status: published as Baker, Malcolm, Joshua Coval and Jeremy Stein. “Corporate Financing Decisions When Investors Take the Path of Least Resistance.” Journal of Financial Economics 84, 2 (2007): 266-298.
Abstract: We explore the consequences for corporate financial policy that arise when investors exhibit inertial behavior. One implication of investor inertia is that, all else equal, a firm pursuing a strategy of equity-financed growth will prefer a stock-for-stock merger to greenfield investment financed with an SEO. With a merger, acquirer stock is placed in the hands of investors, who, because of inertia, do not resell it all on the open market. If there is downward-sloping demand for acquirer shares, this leads to less price pressure than an SEO, and cheaper equity financing as a result. We develop a simple model to illustrate this idea, and present supporting empirical evidence. Both individual and institutional investors tend to hang on to shares granted them in mergers, with this tendency being much stronger for individuals. Consistent with the model and with this cross-sectional pattern in inertia, acquirers targeting firms with high institutional ownership experience more negative announcement effects and greater announcement volume. Moreover, the results are strongest when the overlap in target and acquirer institutional ownership is low and when the demand curve for the acquirer's shares appears to be steep.
Handle: RePEc:nbr:nberwo:10998
Template-Type: ReDIF-Paper 1.0
Title: Growth vs. Margins: Destabilizing Consequences of Giving the Stock Market What it Wants
Classification-JEL: E32; E44; G30
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: CF EFG
Number: 10999
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w10999
File-URL: http://www.nber.org/papers/w10999.pdf
File-Format: application/pdf
Abstract: We develop a multi-tasking model in which a firm can devote its efforts either to increasing sales growth, or to improving per-unit profit margins by, e.g., cutting costs. If the firm's manager is concerned with the current stock price, she will tend to favor the growth strategy at those times when the stock market is paying more attention to performance on the growth dimension. Conversely, it can be rational for the stock market to weight observed growth measures more heavily when it is known that the firm is following a growth strategy. This two-way feedback between firms' business strategies and the market's pricing rule can lead to purely intrinsic fluctuations in sales and output, creating excess volatility in these real variables even in the absence of any external source of shocks.
Handle: RePEc:nbr:nberwo:10999
Template-Type: ReDIF-Paper 1.0
Title: Dynamic Scoring: A Back-of-the-Envelope Guide
Classification-JEL: E1; H3; H6
Author-Name: N. Gregory Mankiw
Author-Name: Matthew Weinzierl
Author-Person: pwe206
Note: EFG
Number: 11000
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11000
File-URL: http://www.nber.org/papers/w11000.pdf
File-Format: application/pdf
Publication-Status: published as Mankiw, N. Gregory and Matthew Weinzierl. "Dynamic Scoring: A Back-of-the-Envelope Guide," Journal of Public Economics, 2006, v90(8-9,Sep), 1415-1433.
Abstract: This paper uses the neoclassical growth model to examine the extent to which a tax cut pays for itself through higher economic growth. The model yields simple expressions for the steady-state feedback effect of a tax cut. The feedback is surprisingly large: for standard parameter values, half of a capital tax cut is self-financing. The paper considers various generalizations of the basic model, including elastic labor supply departures from infinite horizons, and non-neoclassical production settings. It also examines how the steady-state results are modified when one considers the transition path to the steady state.
Handle: RePEc:nbr:nberwo:11000
Template-Type: ReDIF-Paper 1.0
Title: Do Markets Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency
Classification-JEL: L11; L43; L51; L94; D24
Author-Name: Kira Markiewicz
Author-Name: Nancy L. Rose
Author-Person: pro786
Author-Name: Catherine Wolfram
Note: IO PR EEE
Number: 11001
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11001
File-URL: http://www.nber.org/papers/w11001.pdf
File-Format: application/pdf
Publication-Status: published as Fabrizio, Kira, Nancy Rose and Catherine Wolfram. "Do Markets Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency.” American Economic Review 97 (September 2007): 1250-1277.
Abstract: While neoclassical models assume static cost-minimization by firms, agency models suggest that firms may not minimize costs in less-competitive or regulated environments. We test this using a transition from cost-of-service regulation to market-oriented environments for many U.S. electric generating plants. Our estimates of input demand suggest that publicly-owned plants, whose owners were largely insulated from these reforms, experienced the smallest efficiency gains, while investor-owned plants in states that restructured their wholesale electricity markets improved the most. The results suggest modest medium-term efficiency benefits from replacing regulated monopoly with a market-based industry structure.
Handle: RePEc:nbr:nberwo:11001
Template-Type: ReDIF-Paper 1.0
Title: Executive Financial Incentives and Payout Policy: Firm Responses to the 2003 Dividend Tax Cut
Classification-JEL: G32; G35; H24
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Author-Name: Nellie Liang
Author-Name: Scott Weisbenner
Note: PE CF
Number: 11002
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11002
File-URL: http://www.nber.org/papers/w11002.pdf
File-Format: application/pdf
Publication-Status: published as Jeffrey R. Brown & Nellie Liang & Scott Weisbenner, 2007. "Executive Financial Incentives and Payout Policy: Firm Responses to the 2003 Dividend Tax Cut," Journal of Finance, American Finance Association, vol. 62(4), pages 1935-1965, 08.
Abstract: We test whether executive stock ownership affects firm payouts using the 2003 dividend tax cut to identify an exogenous change in the after-tax value of dividends. We find that executives with higher stock ownership were more likely to increase dividends after the tax cut in 2003, whereas no relation is found in previous periods when the dividend tax rate was higher. Relative to previous years, firms that initiated dividends in 2003 were more likely to reduce repurchases. The stock price reaction to the tax cut suggests that the substitution of dividends for repurchases may have been anticipated, consistent with agency conflicts.
Handle: RePEc:nbr:nberwo:11002
Template-Type: ReDIF-Paper 1.0
Title: An Assignment Theory of Foreign Direct Investment
Classification-JEL: F12; F14; F23; L11
Author-Name: Volker Nocke
Author-Person: pno17
Author-Name: Stephen Yeaple
Author-Person: pye37
Note: ITI
Number: 11003
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11003
File-URL: http://www.nber.org/papers/w11003.pdf
File-Format: application/pdf
Publication-Status: published as Volker Nocke & Stephen Yeaple, 2008. "An Assignment Theory of Foreign Direct Investment," Review of Economic Studies, Blackwell Publishing, vol. 75(2), pages 529-557, 04.
Abstract: We develop an assignment theory to analyze the volume and composition of foreign direct investment (FDI). Firms conduct FDI by either engaging in greenfield investment or in cross-border acquisitions. Cross-border acquisitions involve firms trading heterogeneous corporate assets to exploit complementarities, while greenfield FDI involves building a new plant in the foreign market. In equilibrium, greenfield FDI and cross-border acquisitions co-exist, but the composition of FDI between these modes varies with firm and country characteristics. Firms engaging in greenfield investment are systematically more efficient than those engaging in cross-border acquisitions. Furthermore, most FDI takes the form of cross-border acquisitions when factor price differences between countries are small, while greenfield investment plays a more important role for FDI from high-wage into low-wage countries. These results capture important features of the data.
Handle: RePEc:nbr:nberwo:11003
Template-Type: ReDIF-Paper 1.0
Title: Do Liquidation Values Affect Financial Contracts? Evidence from Commercial Loan Contracts and Zoning Regulation
Classification-JEL: G3; R0
Author-Name: Efraim Benmelech
Author-Person: pbe459
Author-Name: Mark J. Garmaise
Author-Name: Tobias Moskowitz
Note: AP
Number: 11004
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11004
File-URL: http://www.nber.org/papers/w11004.pdf
File-Format: application/pdf
Publication-Status: published as Benmelech, Efraim, Mark J. Garmaise and Tobias J. Moskowitz. "Do Liquidation Values Affect Financial Contracts? Evidence From Commercial Loan Contracts And Zoning Regulation," Quarterly Journal of Economics, 2005, v120(3,Aug), 1121-1154.
Abstract: We examine the impact of asset liquidation value on debt contracting using a unique set of commercial property non-recourse loan contracts. We employ commercial zoning regulation to capture the flexibility of a property's permitted uses as a measure of an asset's redeployability or value in its next best use. Within a census tract, more redeployable assets receive larger loans with longer maturities and durations, lower interest rates, and fewer creditors, controlling for the current value of the property, its type, and neighborhood. These results are consistent with incomplete contracting and transaction cost theories of liquidation value and financial structure.
Handle: RePEc:nbr:nberwo:11004
Template-Type: ReDIF-Paper 1.0
Title: Cultural Biases in Economic Exchange
Classification-JEL: G0; G3; F1
Author-Name: Luigi Guiso
Author-Person: pgu58
Author-Name: Paola Sapienza
Author-Person: psa155
Author-Name: Luigi Zingales
Note: CF ITI
Number: 11005
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11005
File-URL: http://www.nber.org/papers/w11005.pdf
File-Format: application/pdf
Publication-Status: published as Guiso, Luigi, Paolo Sapienza and Luigi Zingales. “Cultural Biases in Economic Exchange?.” Quarterly Journal of Economics 124, 3 (August 2009).
Abstract: How much do cultural biases affect economic exchange? We try to answer this question by using the relative trust European citizens have for citizens of other countries. First, we document that this trust is affected not only by objective characteristics of the country being trusted, but also by cultural aspects such as religion, a history of conflicts, and genetic similarities. We then find that lower relative levels of trust toward citizens of a country lead to less trade with that country, less portfolio investment, and less direct investment in that country, even after controlling for the objective characteristics of that country. This effect is stronger for good that are more trust intensive and doubles or triples when trust is instrumented with its cultural determinants. We conclude that perceptions rooted in culture are important (and generally omitted) determinants of economic exchange.
Handle: RePEc:nbr:nberwo:11005
Template-Type: ReDIF-Paper 1.0
Title: Bank Mergers and Crime: The Real and Social Effects of Credit Market Competition
Classification-JEL: G3
Author-Name: Mark J. Garmaise
Author-Name: Tobias J. Moskowitz
Note: AP ME PE
Number: 11006
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11006
File-URL: http://www.nber.org/papers/w11006.pdf
File-Format: application/pdf
Publication-Status: published as Garmaise, Mark J. and Tobias J. Moskowitz. "Bank Mergers and Crime: The Real and Social Effects Of Credit Market Competition," Journal of Finance, 2006, v61(2,Apr), 495-538.
Abstract: Using a unique sample of commercial loans and mergers between large banks, we provide microlevel (within-county) evidence linking credit conditions to economic development and find a spillover effect on crime. Neighborhoods that experienced more bank mergers are subjected to higher interest rates, diminished local construction, lower prices, an influx of poorer households, and higher property crime in subsequent years. The elasticity of property crime with respect to merger-induced banking concentration is 0.18. We show that these results are not likely due to reverse causation, and confirm the central findings using state branching deregulation to instrument for bank competition.
Handle: RePEc:nbr:nberwo:11006
Template-Type: ReDIF-Paper 1.0
Title: Macroeconomic Conditions, Health and Mortality
Classification-JEL: E32; I12
Author-Name: Christopher J. Ruhm
Author-Person: pru7
Note: EH
Number: 11007
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11007
File-URL: http://www.nber.org/papers/w11007.pdf
File-Format: application/pdf
Publication-Status: published as Jones, Andrew M. (ed.) Elgar Companion to Health Economics. Cheltenham, UK: Edward Elgar Publishing, 2006.
Abstract: Although health is conventionally believed to deteriorate during macroeconomic downturns, the empirical evidence supporting this view is quite weak and comes from studies containing methodological shortcomings that are difficult to remedy. Recent research that better controls for many sources of omitted variables bias instead suggests that mortality decreases and physical health improves when the economy temporarily weakens. This partially reflects reductions in external sources of death, such as traffic fatalities and other accidents, but changes in lifestyles and health behaviors are also likely to play a role. This paper summarizes our current understanding of how health is affected by macroeconomic fluctuations and describes potential mechanisms for the effects.
Handle: RePEc:nbr:nberwo:11007
Template-Type: ReDIF-Paper 1.0
Title: Latin America in the Rearview Mirror
Classification-JEL: O1; O4
Author-Name: Harold L. Cole
Author-Person: pco70
Author-Name: Lee E. Ohanian
Author-Person: poh1
Author-Name: Alvaro Riascos
Author-Name: James A. Schmitz, Jr.
Author-Person: psc70
Note: EFG
Number: 11008
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11008
File-URL: http://www.nber.org/papers/w11008.pdf
File-Format: application/pdf
Publication-Status: published as Harold L. Cole & Lee E. Ohanian & Alvaro Riascos & James A. Schmitz, Jr., 2006. "Latin America in the rearview mirror," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sep.
Publication-Status: published as Cole, Harold L. & Ohanian, Lee E. & Riascos, Alvaro & Schmitz, James Jr, 2005. "Latin America in the rearview mirror," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 69-107, January.
Abstract: Latin American countries are the only Western countries that are poor and that aren't gaining ground on the United States. This paper evaluates why Latin America has not replicated Western economic success. We find that this failure is primarily due to TFP differences. Latin America's TFP gap is not plausibly accounted for by human capital differences, but rather reflects inefficient production. We argue that competitive barriers are a promising channel for understanding low Latin TFP. We document that Latin America has many more international and domestic competitive barriers than do Western and successful East Asian countries. We also document a number of microeconomic cases in Latin America in which large reductions in competitive barriers increase productivity to Western levels.
Handle: RePEc:nbr:nberwo:11008
Template-Type: ReDIF-Paper 1.0
Title: Externalities and Growth
Classification-JEL: O11; O33; O40
Author-Name: Peter J. Klenow
Author-Name: Andres Rodriguez-Clare
Author-Person: pro372
Note: EFG
Number: 11009
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11009
File-URL: http://www.nber.org/papers/w11009.pdf
File-Format: application/pdf
Publication-Status: published as Klenow, Peter J. & Rodriguez-Clare, Andres, 2005. "Externalities and Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 11, pages 817-861 Elsevier.
Abstract: Externalities play a central role in most theories of economic growth. We argue that international externalities, in particular, are essential for explaining a number of empirical regularities about growth and development. Foremost among these is that many countries appear to share a common long run growth rate despite persistently different rates of investment in physical capital, human capital, and research. With this motivation, we construct a hybrid of some prominent growth models that have international knowledge externalities. When calibrated, the hybrid model does a surprisingly good job of generating realistic dispersion of income levels with modest barriers to technology adoption. Human capital and physical capital contribute to income differences both directly (as usual), and indirectly by boosting resources devoted to technology adoption. The model implies that most of income above subsistence is made possible by international diffusion of knowledge.
Handle: RePEc:nbr:nberwo:11009
Template-Type: ReDIF-Paper 1.0
Title: Labor Income Dynamics at Business-Cycle Frequencies: Implications for Portfolio Choice
Classification-JEL: G11; G12
Author-Name: Anthony W. Lynch
Author-Name: Sinan Tan
Note: EFG AP
Number: 11010
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11010
File-URL: http://www.nber.org/papers/w11010.pdf
File-Format: application/pdf
Publication-Status: published as Anthony W. Lynch & Sinan Tan, 2011. "Labor income dynamics at business-cycle frequencies: Implications for portfolio choice," Journal of Financial Economics, vol 101(2), pages 333-359.
Abstract: A large recent literature has focused on multiperiod portfolio choice with labor income, and while the models are elaborate along several dimensions, they all assume that the joint distribution of shocks to labor income and asset returns is i.i.d.. Calibrating this joint distribution to U.S. data, these papers obtain three results not found empirically for U.S. households: young agents choose a higher stock allocation than old agents; young agents choose a higher stock allocation when poor than when rich; and, young agents always hold some stock. This paper asks whether allowing the conditional joint distribution to depend on the business cycle can allow the model to generate equity holdings that better match those of U.S. households, while keeping the unconditional distribution the same as in the data. Calibrating the business-cycle variation in the first two moments of labor income growth to U.S. data leads to large reductions in stock holdings by young agents with low wealth-income ratios. The reductions are so large that young, poor agents now hold less stock than both young, rich agents and old agents, and also hold no stock a large fraction of the time. Our results suggest that the predictability of labor-income growth at a business-cycle frequency plays an important role in a young agent's decision-making about her portfolio's stock holding.
Handle: RePEc:nbr:nberwo:11010
Template-Type: ReDIF-Paper 1.0
Title: PIPE Dreams? The Performance of Companies Issuing Equity Privately
Classification-JEL: G1; G2; G3
Author-Name: David J. Brophy
Author-Name: Paige P. Ouimet
Author-Name: Clemens Sialm
Author-Person: psi59
Note: CF AP
Number: 11011
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11011
File-URL: http://www.nber.org/papers/w11011.pdf
File-Format: application/pdf
Abstract: Private Investments in Public Equity (PIPEs) have become an important source of financing for young, publicly traded firms whose poor operating performance may limit alternative financing options. We propose that firms are motivated to sell these securities to minimize costs associated with asymmetric information. We find that both the security structure and the investor composition of a PIPE security matter in the subsequent performance of the issuing firm. Poor post-issuance performance is associated with securities where investors obtain significant repricing rights, which protect them from future stock price declines. Furthermore, companies that obtain financing from hedge funds tend to under-perform companies that obtain financing from other institutional investors. We argue that hedge funds act as investors of last resort, playing an important role in the market for young, high-risk firms with substantial asymmetric information. Hedge funds are willing to fund such high-risk companies because they can protect against possible price declines in the issuing companies by either negotiating PIPE securities with repricing rights or by entering into short positions of the underlying stocks of the issuing companies.
Handle: RePEc:nbr:nberwo:11011
Template-Type: ReDIF-Paper 1.0
Title: The Macroeconomics of Subsistence Points
Classification-JEL: D10; D12; D42; E30
Author-Name: Morten O. Ravn
Author-Person: pra16
Author-Name: Stephanie Schmitt-Grohe
Author-Person: psc44
Author-Name: Martin Uribe
Note: EFG
Number: 11012
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11012
File-URL: http://www.nber.org/papers/w11012.pdf
File-Format: application/pdf
Publication-Status: published as Ravn, Morten, Stephanie Schmitt-Grohe and Martin Uribe. “The Macroeconomics of Subsistence Points.” Macroe-conomic Dynamics 12 (2008): 136-147.
Abstract: This paper explores the macroeconomic consequences of preferences displaying a subsistence point. It departs from the existing related literature by assuming that subsistence points are specific to each variety of goods rather than to the composite consumption good. We show that this simple feature makes the price elasticity of demand for individual goods procyclical. As a result, markups behave countercyclically in equilibrium. This implication is in line with the available empirical evidence.
Handle: RePEc:nbr:nberwo:11012
Template-Type: ReDIF-Paper 1.0
Title: Forging a New Identity: The Costs and Benefits of Diversity in Civil War Combat Units for Black Slaves and Freemen
Classification-JEL: J24; M12; Z13
Author-Name: Dora L. Costa
Author-Person: pco358
Author-Name: Matthew E. Kahn
Author-Person: pka41
Note: DAE
Number: 11013
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11013
File-URL: http://www.nber.org/papers/w11013.pdf
File-Format: application/pdf
Publication-Status: published as Costa, Dora L. & Kahn, Matthew E., 2006. "Forging a New Identity: The Costs and Benefits of Diversity in Civil War Combat Units for Black Slaves and Freemen," The Journal of Economic History, Cambridge University Press, vol. 66(04), pages 936-962, December.
Abstract: By the end of the Civil War, 186,017 black men had fought for the Union Army and roughly three-quarters of these men were former slaves. Because most of the black soldiers who served were illiterate farm workers, the war exposed them to a much broader world. The war experience of these men depended upon their peers, their commanding officers, and where their regiment toured. These factors affected the later life outcomes of black slaves and freemen. This paper documents both the short run costs and long run benefits of participating in a diverse environment. In the short run the combat unit benefited from company homogeneity as this built social capital and minimized shirking, but in the long run men's human capital and aquisition of information was best served by fighting in heterogeneous companies.
Handle: RePEc:nbr:nberwo:11013
Template-Type: ReDIF-Paper 1.0
Title: A Protectionist Bias in Majoritarian Politics
Classification-JEL: D72; F13
Author-Name: Gene M. Grossman
Author-Person: pgr21
Author-Name: Elhanan Helpman
Author-Person: phe205
Note: ITI POL
Number: 11014
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11014
File-URL: http://www.nber.org/papers/w11014.pdf
File-Format: application/pdf
Publication-Status: published as Grossman, Gene M. and Elhanan Helpman. "A Protectionist Bias In Majoritarian Politics," Quarterly Journal of Economics, 2005, v120(4,Nov), 11239-1282.
Abstract: We develop a novel model of campaigns, elections, and policymaking in which the ex ante objectives of national party leaders differ from the ex post objectives of elected legislators. This generates a distinction between "policy rhetoric" and "policy reality" and introduces an important role for "party discipline" in the policymaking process. We identify a protectionist bias in majoritarian politics. When trade policy is chosen by the majority delegation and legislators in the minority have limited means to influence choices, the parties announce trade policies that favor specific factors, and the expected tariff or export subsidy is positive. Positions and expected outcomes monotonically approach free trade as party discipline strengthens.
Handle: RePEc:nbr:nberwo:11014
Template-Type: ReDIF-Paper 1.0
Title: Crises and Prices: Information Aggregation, Multiplicity and Volatility
Classification-JEL: D8; E5; F3; G1
Author-Name: George-Marios Angeletos
Author-Person: pan143
Author-Name: Ivan Werning
Author-Person: pwe141
Note: EFG
Number: 11015
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11015
File-URL: http://www.nber.org/papers/w11015.pdf
File-Format: application/pdf
Publication-Status: published as George-Marios Angeletos & Iván Werning, 2006. "Crises and Prices: Information Aggregation, Multiplicity, and Volatility," American Economic Review, American Economic Association, vol. 96(5), pages 1720-1736, December.
Abstract: Many argue that crises -- such as currency attacks, bank runs and riots -- can be described as times of non-fundamental volatility. We argue that crises are also times when endogenous sources of information are closely monitored and thus an important part of the phenomena. We study the role of endogenous information in generating volatility by introducing a financial market in a coordination game where agents have heterogeneous information about the fundamentals. The equilibrium price aggregates information without restoring common knowledge. In contrast to the case with exogenous information, we find that uniqueness may not be obtained as a perturbation from common knowledge: multiplicity is ensured when individuals observe fundamentals with small idiosyncratic noise. Multiplicity may emerge also in the financial price. When the equilibrium is unique, it becomes more sensitive to non-fundamental shocks as private noise is reduced.
Handle: RePEc:nbr:nberwo:11015
Template-Type: ReDIF-Paper 1.0
Title: Incomplete Market Dynamics in a Neoclassical Production Economy
Classification-JEL: D51; D52; D92; E20; E32
Author-Name: George-Marios Angeletos
Author-Person: pan143
Author-Name: Laurent-Emmanuel Calvet
Author-Person: pca582
Note: EFG
Number: 11016
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11016
File-URL: http://www.nber.org/papers/w11016.pdf
File-Format: application/pdf
Publication-Status: published as Angeletos, George-Marios and Laurent-Emmanuel Calvet. "Incomplete-Market Dynamics In A Neoclassical Production Economy," Journal of Mathematical Economics, 2005, v41(4-5,Aug), 407-438.
Abstract: We investigate a neoclassical economy with heterogeneous agents, convex technologies and idiosyncratic production risk. Combined with precautionary savings, investment risk generates rich effects that do not arise in the presence of pure endowment risk. Under a finite horizon, multiple growth paths and endogenous fluctuations can exist even when agents are very patient. In infinite-horizon economies, multiple steady states may arise from the endogeneity of risktaking and interest rates instead of the usual wealth effects. Depending on the economy's parameters, the local dynamics around a steady state are locally unique, totally unstable or locally undetermined, and the equilibrium path can be attracted to a limit cycle. The model generates closed-form expressions for the equilibrium dynamics and easily extends to a variety of environments, including heterogeneous capital types and multiple sectors.
Handle: RePEc:nbr:nberwo:11016
Template-Type: ReDIF-Paper 1.0
Title: Information Dynamics and Equilibrium Multiplicity in Global Games of Regime Change
Classification-JEL: C7; D7; D8; F3
Author-Name: George-Marios Angeletos
Author-Person: pan143
Author-Name: Christian Hellwig
Author-Person: phe110
Author-Name: Alessandro Pavan
Author-Person: ppa367
Note: EFG
Number: 11017
Creation-Date: 2004-12
Order-URL: http://www.nber.org/papers/w11017
File-URL: http://www.nber.org/papers/w11017.pdf
File-Format: application/pdf
Abstract: Global games of regime change -- that is, coordination games of incomplete information in which a status quo is abandoned once a sufficiently large fraction of agents attacks it -- have been used to study crises phenomena such as currency attacks, bank runs, debt crises, and political change. We extend the static benchmark examined in the literature by allowing agents to accumulate information over time and take actions in many periods. It is shown that dynamics may lead to multiple equilibria under the same information assumptions that guarantee uniqueness in the static benchmark. Multiplicity originates in the interaction between the arrival of information over time and the endogenous change in beliefs induced by the knowledge that the regime survived past attacks. This interaction also generates interesting equilibrium properties, such as the possibility that fundamentals predict the eventual regime outcome but not the timing or the number of attacks, or that dynamics alternate between crises and phases of tranquility without changes in fundamentals.
Handle: RePEc:nbr:nberwo:11017