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Template-Type: ReDIF-Paper 1.0
Title: Money Illusion in the Stock Market: The Modigliani-Cohn Hypothesis
Classification-JEL: G12; G14; N22
Author-Name: Randolph B. Cohen
Author-Name: Christopher Polk
Author-Person: ppo238
Author-Name: Tuomo Vuolteenaho
Note: AP
Number: 11018
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11018
File-URL: http://www.nber.org/papers/w11018.pdf
File-Format: application/pdf
Publication-Status: published as Randolph B. Cohen & Christopher Polk & Tuomo Vuolteenaho, 2005. "Money Illusion in the Stock Market: The Modigliani-Cohn Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 639-668, May.
Abstract: Modigliani and Cohn [1979] hypothesize that the stock market suffers from money illusion, discounting real cash flows at nominal discount rates. While previous research has focused on the pricing of the aggregate stock market relative to Treasury bills, the money-illusion hypothesis also has implications for the pricing of risky stocks relative to safe stocks. Simultaneously examining the pricing of Treasury bills, safe stocks, and risky stocks allows us to distinguish money illusion from any change in the attitudes of investors towards risk. Our empirical resuts support the hypothesis that the stock market suffers from money illusion.
Handle: RePEc:nbr:nberwo:11018
Template-Type: ReDIF-Paper 1.0
Title: Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes
Classification-JEL: J41; R14
Author-Name: Patrick Bayer
Author-Person: pba636
Author-Name: Stephen Ross
Author-Name: Giorgio Topa
Author-Person: pto149
Note: LS
Number: 11019
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11019
File-URL: http://www.nber.org/papers/w11019.pdf
File-Format: application/pdf
Publication-Status: published as Patrick Bayer & Stephen L. Ross & Giorgio Topa, 2008. "Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1150-1196, December.
Abstract: We use a novel research design to empirically detect the effect of social interactions among neighbors on labor market outcomes. Specifically, using Census data that characterize residential and employment locations down to the city block, we examine whether individuals residing in the same block are more likely to work together than those in nearby blocks. We find evidence of significant social interactions operating at the block level: residing on the same versus nearby blocks increases the probability of working together by over 33 percent. The results also indicate that this referral effect is stronger when individuals are similar in socio-demographic characteristics (e.g., both have children of similar ages) and when at least one individual is well attached to the labor market. These findings are robust across various specifications intended to address concerns related to sorting and reverse causation. Further, having determined the characteristics of a pair of individuals that lead to an especially strong referral effect, we provide evidence that the increased availability of neighborhood referrals has a significant impact on a wide range of labor market outcomes including labor force participation, hours and earnings.
Handle: RePEc:nbr:nberwo:11019
Template-Type: ReDIF-Paper 1.0
Title: Mimicking Portfolios with Conditioning Information
Classification-JEL: G1; G10; G11; G12; G14
Author-Name: Wayne E. Ferson
Author-Person: pfe32
Author-Name: Andrew F. Siegel
Author-Name: Pisun (Tracy) Xu
Note: AP
Number: 11020
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11020
File-URL: http://www.nber.org/papers/w11020.pdf
File-Format: application/pdf
Publication-Status: published as Ferson, Wayne, Andrew F. Siegel and Pisun Xu. "Mimicking Portfolios With Conditional Information," Journal of Financial and Quantitative Analysis, 2006, v41(3,Sep), 607-635.
Abstract: Mimicking portfolios have long been useful in asset pricing research. In most empirical applications, the portfolio weights are assumed to be fixed over time, while in theory they may be functions of the economic state. This paper derives and characterizes mimicking portfolios in the presence of predetermined state variables, or conditioning information. The results generalize and integrate multifactor minimum variance efficiency (Fama, 1996) with conditional and unconditional mean variance efficiency (Hansen and Richard (1987), Ferson and Siegel, 2001). Empirical examples illustrate the potential importance of time-varying mimicking portfolio weights and highlight challenges in their application.
Handle: RePEc:nbr:nberwo:11020
Template-Type: ReDIF-Paper 1.0
Title: Weak and Semi-Strong Form Stock Return Predictability Revisited
Classification-JEL: G1; G11; G12; G14
Author-Name: Wayne E. Ferson
Author-Person: pfe32
Author-Name: Andrea Heuson
Author-Name: Tie Su
Note: AP
Number: 11021
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11021
File-URL: http://www.nber.org/papers/w11021.pdf
File-Format: application/pdf
Publication-Status: published as Ferson, Wayne, 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:11021
Template-Type: ReDIF-Paper 1.0
Title: Lobbies and Technology Diffusion
Classification-JEL: N10; O30; O57
Author-Name: Diego Comin
Author-Person: pco55
Author-Name: Bart Hobijn
Author-Person: pho54
Note: EFG PR
Number: 11022
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11022
File-URL: http://www.nber.org/papers/w11022.pdf
File-Format: application/pdf
Publication-Status: published as Diego Comin & Bart Hobijn, 2009. "Lobbies and Technology Diffusion," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 229-244, December.
Abstract: This paper explores whether lobbies slow down technology diffusion. To answer this question, we exploit the differential effect of various institutional attributes that should affect the costs of erecting barriers when the new technology has a technologically close predecessor but not otherwise. We implement this test in a unique dataset compiled by us that covers the diffusion of 20 technologies for 23 countries over the past two centuries. We find that each of the relevant institutional variables that affect the costs of erecting barriers has a significantly larger effect on the diffusion of technologies with a competing predecessor technology than when no such a technology exists. These effects are quantitatively important. Thus, we conclude that lobbies are an important barrier to technology adoption and to development.
Handle: RePEc:nbr:nberwo:11022
Template-Type: ReDIF-Paper 1.0
Title: Internationalization and the Evolution of Corporate Valuation
Classification-JEL: G15; F36; F20
Author-Name: Ross Levine
Author-Person: ple61
Author-Name: Sergio L. Schmukler
Author-Person: psc64
Note: CF IFM AP
Number: 11023
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11023
File-URL: http://www.nber.org/papers/w11023.pdf
File-Format: application/pdf
Publication-Status: published as Gozzi, Juan Carlos & Levine, Ross & Schmukler, Sergio L., 2008. "Internationalization and the evolution of corporate valuation," Journal of Financial Economics, Elsevier, vol. 88(3), pages 607-632, June.
Abstract: By documenting the evolution of Tobin's "q" before, during, and after firms internationalize, this paper provides evidence on the bonding, segmentation, and market timing theories of internationalization. Using new data on 9,096 firms across 74 countries over the period 1989-2000, we find that Tobin's "q" does not rise after internationalization, even relative to firms that do not internationalize. Instead, "q" rises significantly one year before internationalization and during the internationalization year. But, then "q" falls sharply in the year after internationalization, relinquishing the increases of the previous two years. To account for these dynamics, we show that market capitalization rises one year before internationalization and remains high, while corporate assets increase during internationalization. The evidence supports models stressing that internationalization facilitates corporate expansion, but challenges models stressing that internationalization produces an enduring effect on "q" by bonding firms to a better corporate governance system.
Handle: RePEc:nbr:nberwo:11023
Template-Type: ReDIF-Paper 1.0
Title: Separating Uncertainty from Heterogeneity in Life Cycle Earnings
Classification-JEL: C33; D84; I21
Author-Name: Flavio Cunha
Author-Person: pcu47
Author-Name: James J. Heckman
Author-Name: Salvador Navarro
Author-Person: pna222
Note: EFG ED LS CH
Number: 11024
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11024
File-URL: http://www.nber.org/papers/w11024.pdf
File-Format: application/pdf
Publication-Status: published as Cunha, Flavio, James Heckman and Salvador Navarro. "Separating Uncertainty From Heterogeneity In Life Cycle Earnings," Oxford Economic Papers, 2005, v57(2,Apr), 191-261.
Abstract: This paper develops and applies a method for decomposing cross section variability of earnings into components that are forecastable at the time students decide to go to college (heterogeneity) and components that are unforecastable. About 60% of variability in returns to schooling is forecastable. This has important implications for using measured variability to price risk and predict college attendance.
Handle: RePEc:nbr:nberwo:11024
Template-Type: ReDIF-Paper 1.0
Title: Choosing Between Gifts and Bequests: How Taxes Affect the Timing of Wealth Transfers
Classification-JEL: H3
Author-Name: David Joulfaian
Author-Person: pjo3
Note: PE
Number: 11025
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11025
File-URL: http://www.nber.org/papers/w11025.pdf
File-Format: application/pdf
Publication-Status: published as Joulfaian, David. "Choosing Between Gifts And Bequests: How Taxes Affect The Timing Of Wealth Transfers," Journal of Public Economics, 2005, v89(11-12,Dec), 2069-2091.
Abstract: A number of theories have been advanced to explain the size and timing of intergenerational transfers. One factor only recently explored is the effects of taxes, and in particular the estate tax, on such transfers. This paper represents the first attempt to explore how capital gains and gift taxes, in addition to the estate tax, interact to influence incentives in the timing of transfers. Using estate tax data and exploiting variations in state inheritance, gift, and capital gains tax rates, this paper finds taxes to be an important consideration in the choice between gifts and bequests. In particular, each of capital gains and gift taxes are found to be important determinants of the timing of transfers. These findings are robust to a number of specifications that control for borrowing, charitable bequests, marital status, and the portfolio composition of wealth transfers.
Handle: RePEc:nbr:nberwo:11025
Template-Type: ReDIF-Paper 1.0
Title: Consumption Risk and the Cost of Equity Capital
Classification-JEL: G12
Author-Name: Ravi Jagannathan
Author-Person: pja91
Author-Name: Yong Wang
Note: AP
Number: 11026
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11026
File-URL: http://www.nber.org/papers/w11026.pdf
File-Format: application/pdf
Publication-Status: Forthcoming in the August 2007 issue of the Journal of Finance under the title, "Lazy Investors, Discretionary Consumption, and the Cross Section of Stock Returns."
Abstract: We demonstrate, using data for the period 1954-2003, that differences in exposure to consumption risk explains cross sectional differences in average excess returns (cost of equity capital) across the 25 benchmark equity portfolios constructed by Fama and French (1993). We use yearly returns on stocks to take into account well documented within year deterministic seasonal patterns in returns, measurement errors in the consumption data, and possible slow adjustment of consumption to changes in wealth due to habit and prior commitments. Consumption during the fourth quarter is likely to have a larger discretionary component. Further, given the availability of more leisure time during the holiday season and the ending of the tax year in December, investors are more likely to review their asset holdings and make trading decisions during the fourth quarter. We therefore match the growth rate in the fourth quarter consumption from one year to the next with the corresponding calendar year return when computing the latter's exposure to consumption risk. We find strong support for our consumption risk model specification in the data.
Handle: RePEc:nbr:nberwo:11026
Template-Type: ReDIF-Paper 1.0
Title: Globalization, Labor Income, and Poverty in Mexico
Classification-JEL: F1
Author-Name: Gordon H. Hanson
Author-Person: pha80
Note: ITI
Number: 11027
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11027
File-URL: http://www.nber.org/papers/w11027.pdf
File-Format: application/pdf
Publication-Status: published as Globalization, Labor Income, and Poverty in Mexico, Gordon H. Hanson. in Globalization and Poverty, Harrison. 2007
Abstract: In this paper, I examine changes in the distribution of labor income across regions of Mexico during the country's decade of globalization in the 1990's. I focus the analysis on men born in states with either high-exposure or low-exposure to globalization, as measured by the share of foreign direct investment, imports, or export assembly in state GDP. Controlling for regional differences in the distribution of observable characteristics and for initial differences in regional incomes, the distribution of labor income in high-exposure states shifted to the right relative to the distribution of income in low-exposure states. This change was primarily the result of a shift in mass in the income distribution for low-exposure states from upper-middle income earners to lower income earners. Labor income in low-exposure states fell relative to high-exposure states by 10% and the incidence of wage poverty (the fraction of wage earners whose labor income would not sustain a family of four at above-poverty consumption levels) in low-exposure states increased relative to high-exposure states by 7%.
Handle: RePEc:nbr:nberwo:11027
Template-Type: ReDIF-Paper 1.0
Title: Public Finance and Individual Preferences over Globalization Strategies
Classification-JEL: F2; H3
Author-Name: Gordon H. Hanson
Author-Person: pha80
Author-Name: Kenneth F. Scheve
Author-Name: Matthew Slaughter
Note: ITI
Number: 11028
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11028
File-URL: http://www.nber.org/papers/w11028.pdf
File-Format: application/pdf
Publication-Status: published as Gordon H. Hanson & Kenneth Scheve & Matthew J. Slaughter, 2007. "Public Finance And Individual Preferences Over Globalization Strategies," Economics and Politics, Blackwell Publishing, vol. 19(1), pages 1-33, 03.
Abstract: In the absence of distortionary tax and spending policies, freer immigration and trade for a country would often be supported by similar groups thanks to similar impacts on labor income. But government policies that redistribute income may alter the distributional politics. In particular, immigrants may pay taxes and receive public services. Imports, obviously, can do neither of these. This suggests quite different political coalitions may organize around trade and immigration. In this paper we develop a framework for examining how pre-tax and post-tax cleavages may differ across globalization strategies and also fiscal jurisdictions. We then apply this framework to the case of individual immigration and trade preferences across U.S. states. We have two main findings. First, high exposure to immigrant fiscal pressures reduces support for freer immigration among natives, especially the more-skilled. Second, there is no public-finance variation in opinion over trade policy, consistent with the data that U.S. trade policy has negligible fiscal-policy impacts. Public-finance concerns appear to be crucial in shaping opinions towards alternative globalization strategies.
Handle: RePEc:nbr:nberwo:11028
Template-Type: ReDIF-Paper 1.0
Title: Optimal Taxation in an RBC Model: A Linear-Quadratic Approach
Classification-JEL: C63; H21
Author-Name: Pierpaolo Benigno
Author-Person: pbe203
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG ME
Number: 11029
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11029
File-URL: http://www.nber.org/papers/w11029.pdf
File-Format: application/pdf
Publication-Status: published as Benigno, Pierpaolo & Woodford, Michael, 2006. "Optimal taxation in an RBC model: A linear-quadratic approach," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1445-1489.
Abstract: We reconsider the optimal taxation of income from labor and capital in the stochastic growth model analyzed by Chari et al. (1994, 1995), but using a linear-quadratic (LQ) approximation to derive a log-linear approximation to the optimal policy rules. The example illustrates how inaccurate "naive" LQ approximation --- in which the quadratic objective is obtained from a simple Taylor expansion of the utility function of the representative household --- can be, but also shows how a correct LQ approximation can be obtained, which will provide a correct local approximation to the optimal policy rules in the case of small enough shocks. We also consider the numerical accuracy of the LQ approximation in the case of shocks of the size assumed in the calibration of Chari et al. We find that the correct LQ approximation yields results that are quite accurate, and similar in most respects to the results obtained by Chari et al. using a more computationally intensive numerical method.
Handle: RePEc:nbr:nberwo:11029
Template-Type: ReDIF-Paper 1.0
Title: Politics and Efficiency of Separating Capital and Ordinary Government Budgets
Classification-JEL: E6; H6; H7
Author-Name: Marco Bassetto
Author-Name: Thomas Sargent
Author-Person: psa83
Note: EFG
Number: 11030
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11030
File-URL: http://www.nber.org/papers/w11030.pdf
File-Format: application/pdf
Publication-Status: published as Marco Bassetto & Thomas J Sargent, 2006. "Politics and Efficiency of Separating Capital and Ordinary Government Budgets," The Quarterly Journal of Economics, MIT Press, vol. 121(4), pages 1167-1210, November.
Abstract: We analyze the democratic politics of a rule that separates capital and ordinary account budgets and allows the government to issue debt to finance capital items only. Many national governments followed this rule in the 18th and 19th centuries and most U.S. states do today. This simple 1800s financing rule sometimes provides excellent incentives for majorities to choose an efficient mix of public goods in an economy with a growing population of overlapping generations of long-lived but mortal agents. In a special limiting case with demographics that make Ricardian equivalence prevail, the 1800s rule does nothing to promote efficiency. But when the demographics imply even a moderate departure from Ricardian equivalence, imposing the rule substantially improves the efficiency of democratically chosen allocations. We calibrate some examples to U.S. demographic data. We speculate why in the twentieth century most national governments abandoned the 1800s rule while U.S. state governments have retained it.
Handle: RePEc:nbr:nberwo:11030
Template-Type: ReDIF-Paper 1.0
Title: Wage Dynamics and Unobserved Heterogeneity: Time Preference of Learning Ability?
Classification-JEL: J22; J24; J31
Author-Name: Lalith Munasinghe
Author-Name: Nachum Sicherman
Note: LS
Number: 11031
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11031
File-URL: http://www.nber.org/papers/w11031.pdf
File-Format: application/pdf
Abstract: A large portion of the variation in wages and wage growth rates among individuals is due to "unobserved" heterogeneity, and the source of individual heterogeneity is typically attributed to data limitations and/or the unobservability of certain productivity related factors. In this paper we develop a test that discriminates between two inherently unobservable sources of heterogeneity (both of which can clearly account for the variation in wages and wage growth rates): learning ability and workers' inter-temporal preferences (discounting). We apply this test to the large observed differences in wages and wage growth rates between smokers and non-smokers. The evidence supports the discounting hypothesis.
Handle: RePEc:nbr:nberwo:11031
Template-Type: ReDIF-Paper 1.0
Title: Allander Series: Skill Policies for Scotland
Classification-JEL: J31; I21; I22; I28
Author-Name: James J. Heckman
Author-Name: Dimitriy V. Masterov
Note: ED LS PE CH
Number: 11032
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11032
File-URL: http://www.nber.org/papers/w11032.pdf
File-Format: application/pdf
Publication-Status: published as Coyle, D., W. Alexander and B. Ashcroft (eds.) New Wealth for Old Nations: Scotland’s Economic Prospects. Princeton and Oxford: Princeton University Press, 2005.
Abstract: This paper argues that skill formation is a life-cycle process and develops the implications of this insight for Scottish social policy. Families are major producers of skills, and a successful policy needs to promote effective families and to supplement failing ones. We present evidence that early disadvantages produce severe later disadvantages that are hard to remedy. We also show that cognitive ability is not the only determinant of education, labor market outcomes and pathological behavior like crime. Abilities differ in their malleability over the life-cycle, with noncognitive skills being more malleable at later ages. This has important implications for the design of policy. The gaps in skills and abilities open up early, and schooling merely widens them. Additional university tuition subsidies or improvements in school quality are not warranted by Scottish evidence. Company-sponsored job training yields a higher return for the most able and so this form of investment will exacerbate the gaps it is intended to close. For the same reason, public job training is not likely to help adult workers whose skills are rendered obsolete by skill-biased technological change. Targeted early interventions, however, have proven to be very effective in compensating for the effect of neglect.
Handle: RePEc:nbr:nberwo:11032
Template-Type: ReDIF-Paper 1.0
Title: The Predictive Content of Energy Futures: An Update on Petroleum, Natural Gas, Heating Oil and Gasoline
Classification-JEL: G13; Q43
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: Michael LeBlanc
Author-Name: Olivier Coibion
Author-Person: pco205
Note: IFM AP
Number: 11033
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11033
File-URL: http://www.nber.org/papers/w11033.pdf
File-Format: application/pdf
Abstract: This paper examines the relationship between spot and futures prices for energy commodities (crude oil, gasoline, heating oil markets and natural gas). In particular, we examine whether futures prices are (1) an unbiased and/or (2) accurate predictor of subsequent spot prices. We find that while futures prices are unbiased predictors of future spot prices, with the exception those in the natural gas markets at the 3-month horizon. Futures do not appear to well predict subsequent movements in energy commodity prices, although they slightly outperform time series models.
Handle: RePEc:nbr:nberwo:11033
Template-Type: ReDIF-Paper 1.0
Title: Firm-Specific Capital, Nominal Rigidities and the Business Cycle
Classification-JEL: E3; E4; E5
Author-Name: David Altig
Author-Name: Lawrence Christiano
Author-Person: pch45
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Jesper Linde
Author-Person: pli302
Note: EFG
Number: 11034
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11034
File-URL: http://www.nber.org/papers/w11034.pdf
File-Format: application/pdf
Publication-Status: published as David Altig & Lawrence Christiano & Martin Eichenbaum & Jesper Linde, . "Firm-Specific Capital, Nominal Rigidities and the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
Abstract: Macroeconomic and microeconomic data paint conflicting pictures of price behavior. Macroeconomic data suggest that inflation is inertial. Microeconomic data indicate that firms change prices frequently. We formulate and estimate a model which resolves this apparent micro - macro conflict. Our model is consistent with post-war U.S. evidence on inflation inertia even though firms re-optimize prices on average once every 1.5 quarters. The key feature of our model is that capital is firm-specific and pre-determined within a period.
Handle: RePEc:nbr:nberwo:11034
Template-Type: ReDIF-Paper 1.0
Title: Drinking and Academic Performance in High School
Classification-JEL: I1; I2
Author-Name: Jeff DeSimone
Author-Person: pde214
Author-Name: Amy M. Wolaver
Note: EH CH
Number: 11035
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11035
File-URL: http://www.nber.org/papers/w11035.pdf
File-Format: application/pdf
Publication-Status: published as Jeff DeSimone, 2010. "Drinking and academic performance in high school," Applied Economics, Taylor & Francis Journals, vol. 42(12), pages 1481-1497.
Abstract: We investigate the extent to which negative alcohol use coefficients in GPA regressions reflect unobserved heterogeneity rather than direct effects of drinking, using 2001 and 2003 Youth Risk Behavior Survey data on high school students. Results illustrate that omitted factors are quite important. Drinking coefficient magnitudes fall substantially in regressions that control for risk and time preference, mental health, self-esteem, and consumption of other substances. Moreover, the impact of binge drinking is negligible for students who are less risk averse, heavily discount the future, or use other drugs. However, effects that remain significant after accounting for unobserved heterogeneity and are relatively large for risk averse, future oriented and drug free students suggest that binge drinking might slightly worsen academic performance. Consistent with this, the relationship between grades and drinking without binging is small and insignificant on the extensive margin and positive on the intensive margin.
Handle: RePEc:nbr:nberwo:11035
Template-Type: ReDIF-Paper 1.0
Title: Work and the Disability Transition in 20th Century America
Classification-JEL: I12
Author-Name: Sven Wilson
Author-Name: Joseph Burton
Author-Name: Benjamin Howell
Note: AG
Number: 11036
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11036
File-URL: http://www.nber.org/papers/w11036.pdf
File-Format: application/pdf
Abstract: Using data from Union Army pensioners and from the National Health Interview Surveys, we estimate that work-disability among white males aged 45-64 was 3.5 times as high in the late 19th century than at the end of the 20th century, including a decline and flattening of the age-profile since 1970. We present a descriptive model of disability that can account for a) the secular decline in prevalence; b) changes in slope of the age-profile; and c) periods of increasing prevalence. The high level and relatively flat slope of the historical disability age-profile is consistent with the early onset of chronic conditions and with high mortality associated with a subset of those conditions. We show that many common conditions in the 19th century have been either eliminated, delayed to later ages, or rendered less disabling by treatment innovations and the transformation of the workplace. These improvements have swamped the effect of declining mortality, which put upward pressure on disability prevalence. Given the low rate of mortality prior to age 65, technological changes will likely induce further reductions in work-disability, though recent increases in the prevalence of asthma and obesity may eventually work against this trend.
Handle: RePEc:nbr:nberwo:11036
Template-Type: ReDIF-Paper 1.0
Title: Bank Trading Risk and Systemic Risk
Classification-JEL: G11; G21; G28
Author-Name: Philippe Jorion
Note: CF
Number: 11037
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11037
File-URL: http://www.nber.org/papers/w11037.pdf
File-Format: application/pdf
Publication-Status: published as Carey, Mark and Rene M. Stulz (eds.) The Risks of Financial Institutions A National Bureau of Economic Research Conference Report. Chicago and London: University of Chicago Press, 2006.
Publication-Status: published as Bank Trading Risk and Systemic Risk, Philippe Jorion. in The Risks of Financial Institutions, Carey and Stulz. 2006
Abstract: This paper provides an empirical analysis of the risk of trading revenues of U.S. commercial banks. We collect quarterly data on trading revenues, broken down by business line, as well as the Value at Risk-based market risk charge. The overall picture from these preliminary results is that there is a fair amount of diversification across banks and within banks across business lines. These low correlations do not corroborate systemic risk concerns. Neither is there evidence that the post-1998 period has witnessed an increase in volatility of trading revenues.
Handle: RePEc:nbr:nberwo:11037
Template-Type: ReDIF-Paper 1.0
Title: Insuring Against Terrorism: The Policy Challenge
Classification-JEL: H0; H2
Author-Name: Kent Smetters
Author-Person: psm21
Note: PE
Number: 11038
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11038
File-URL: http://www.nber.org/papers/w11038.pdf
File-Format: application/pdf
Publication-Status: published as Smetters, Kent. “Insuring Against Terrorism: the Policy Challenge.” Brookings-Wharton Papers on Financial Services, 2004.
Abstract: Terrorist attacks worldwide during the past several years have spurned an interest in understanding not only how governments can mitigate terrorism risk but also how governments might help finance future losses. This interest was buttressed by the seemingly failure of the private insurance market to provide coverage for terrorism losses after the attack on September 11, 2001. This paper surveys the evidence of the supposed private market failures after 9/11 and the arguments for government provision of terrorism insurance. The paper argues that mostly unfettered insurance and capital markets are capable of insuring large terrorism losses. If there is any "failure," it rests with government tax, accounting, and regulatory policies that have made it costly for insurers to hold surplus capital. Government policy has also hindered the implementation of instruments that could securitize the underlying risks. Correcting these policies would likely enable private insurers to cover both terrorism and war risks.
Handle: RePEc:nbr:nberwo:11038
Template-Type: ReDIF-Paper 1.0
Title: Dynamic Inefficiencies in Insurance Markets: Evidence from long-term care insurance
Classification-JEL: D4; D8; I11; G22; J14
Author-Name: Amy Finkelstein
Author-Person: pfi264
Author-Name: Kathleen McGarry
Author-Person: pmc264
Author-Name: Amir Sufi
Author-Person: psu303
Note: AG EH PE
Number: 11039
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11039
File-URL: http://www.nber.org/papers/w11039.pdf
File-Format: application/pdf
Publication-Status: published as Finkelstein, Amy, Kathleen McGarry and Amir Sufi. "Dynamic Inefficiencies In Insurance Markets: Evidence From Long-Term Care Insurance," American Economic Review, 2005, v95(2,May), 224-228.
Abstract: We examine whether unregulated, private insurance markets efficiently provide insurance against reclassification risk (the risk of becoming a bad risk and facing higher premiums). To do so, we examine the ex-post risk type of individuals who drop their long-term care insurance contracts relative to those who are continually insured. Consistent with dynamic inefficiencies, we find that individuals who drop coverage are of lower risk ex-post than individuals who were otherwise-equivalent at the time of purchase but who do not drop out of their contracts. These findings suggest that dynamic market failures in private insurance markets can preclude the efficient provision of insurance against reclassification risk.
Handle: RePEc:nbr:nberwo:11039
Template-Type: ReDIF-Paper 1.0
Title: World Trade Flows: 1962-2000
Classification-JEL: F10; F14; C82
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Author-Name: Robert E. Lipsey
Author-Person: pli259
Author-Name: Haiyan Deng
Author-Name: Alyson C. Ma
Author-Name: Hengyong Mo
Note: ITI
Number: 11040
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11040
File-URL: http://www.nber.org/papers/w11040.pdf
File-Format: application/pdf
Abstract: We document a set of bilateral trade data by commodity for 1962-2000, which is available from www.nber.org/data (International Trade Data, NBER-UN world trade data). Users must agree not to resell or distribute the data for 1984-2000. The data are organized by the 4-digit Standard International Trade Classification, revision 2, with country codes similar to the United Nations classification. This dataset updates the Statistics Canada World Trade Database as described in Feenstra, Lipsey, and Bowen (1997), which was available for years 1970-1992. In that database, Statistics Canada had revised the United Nations trade data, mostly derived from the export side, to fit the Canadian trade classification and in some cases to add data not available from the export reports. In contrast, in the new NBER-UN dataset we give primacy to the trade flows reported by the importing country, whenever they are available, assuming that these are more accurate than reports by the exporters. If the importer report is not available for a country-pair, however, then the corresponding exporter report is used instead. Corrections and additions are made to the United Nations data for trade flows to and from the United States, exports from Hong Kong and China, and imports into many other countries.
Handle: RePEc:nbr:nberwo:11040
Template-Type: ReDIF-Paper 1.0
Title: Do Currency Markets Absorb News Quickly?
Classification-JEL: F3; F4; G1
Author-Name: Martin D.D. Evans
Author-Person: pev5
Author-Name: Richard K. Lyons
Author-Person: ply9
Note: IFM AP
Number: 11041
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11041
File-URL: http://www.nber.org/papers/w11041.pdf
File-Format: application/pdf
Publication-Status: published as Evans, Martin D.D. & Lyons, Richard K., 2005. "Do currency markets absorb news quickly?," Journal of International Money and Finance, Elsevier, vol. 24(2), pages 197-217, March.
Abstract: This paper addresses whether macro news arrivals affect currency markets over time. The null from macro exchange-rate theory is that they do not: macro news is impounded in ex-change rates instantaneously. We test this by examining the effects of news on subsequent trades by end-user participants (such as hedge funds, mutual funds, and non-financial corporations). News arrivals induce subsequent changes in trading in all of the major end-user segments. These induced changes remain significant for days. Induced trades also have persistent effects on prices. Currency markets are not responding to news instantaneously.
Handle: RePEc:nbr:nberwo:11041
Template-Type: ReDIF-Paper 1.0
Title: Meese-Rogoff Redux: Micro-Based Exchange Rate Forecasting
Classification-JEL: F3; F4; G1
Author-Name: Martin D.D. Evans
Author-Person: pev5
Author-Name: Richard K. Lyons
Author-Person: ply9
Note: IFM AP
Number: 11042
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11042
File-URL: http://www.nber.org/papers/w11042.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: This paper compares the true, ex-ante forecasting performance of a micro-based model against both a standard macro model and a random walk. In contrast to existing literature, which is focused on longer horizon forecasting, we examine forecasting over horizons from one day to one month (the one-month horizon being where micro and macro analysis begin to overlap). Over our 3-year forecasting sample, we find that the micro-based model consistently out-performs both the random walk and the macro model. Micro-based forecasts account for almost 16 per cent of the sample variance in monthly spot rate changes. These results provide a level of empirical validation as yet unattained by other models. Our result that the micro-based model out-performs the macro model does not imply that macro fundamentals will never explain exchange rates. Quite the contrary, our findings are in fact consistent with the view that the principal driver of exchange rates is standard macro fundamentals. In Evans and Lyons (2004b)we report firm evidence that the non-public information that we exploit here for forecasting exchange rates is also useful for forecasting macro fundamentals themselves.
Handle: RePEc:nbr:nberwo:11042
Template-Type: ReDIF-Paper 1.0
Title: State-Dependent or Time-Dependent Pricing: Does it Matter for Recent U.S. Inflation?
Classification-JEL: E31; E32
Author-Name: Peter J. Klenow
Author-Name: Oleksiy Kryvtsov
Author-Person: pkr59
Note: EFG
Number: 11043
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11043
File-URL: http://www.nber.org/papers/w11043.pdf
File-Format: application/pdf
Publication-Status: published as Peter J. Klenow & Oleksiy Kryvtsov, 2008. "State-Dependent or Time-Dependent Pricing: Does it Matter for Recent U.S. Inflation?," The Quarterly Journal of Economics, Oxford University Press, vol. 123(3), pages 863-904.
Abstract: Inflation equals the product of two terms: an extensive margin (the fraction of items with price changes) and an intensive margin (the average size of those price changes). The variance of inflation over time can be decomposed into contributions from each margin. The extensive margin figures importantly in many state-dependent pricing models, whereas the intensive margin is the sole source of inflation changes in staggered time-dependent pricing models. We use micro data collected by the U.S. Bureau of Labor Statistics to decompose the variance of consumer price inflation from 1988 through 2003. We find that around 95% of the variance of monthly inflation stems from fluctuations in the average size of price changes, i.e., the intensive margin. When we calibrate a prominent state-dependent pricing model to match this empirical variance decomposition, the model's shock responses are very close to those in time-dependent pricing models.
Handle: RePEc:nbr:nberwo:11043
Template-Type: ReDIF-Paper 1.0
Title: On the Optimal Progressivity of the Income Tax Code
Classification-JEL: E62; H21; H24
Author-Name: Juan Carlos Conesa
Author-Person: pco15
Author-Name: Dirk Krueger
Author-Person: pkr7
Note: PE
Number: 11044
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11044
File-URL: http://www.nber.org/papers/w11044.pdf
File-Format: application/pdf
Publication-Status: published as Conesa, Juan Carlos & Krueger, Dirk, 2006. "On the optimal progressivity of the income tax code," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1425-1450, October.
Abstract: This paper computes the optimal progressivity of the income tax code in a dynamic general equilibrium model with household heterogeneity in which uninsurable labor productivity risk gives rise to a nontrivial income and wealth distribution. A progressive tax system serves as a partial substitute for missing insurance markets and enhances an equal distribution of economic welfare. These beneficial effects of a progressive tax system have to be traded off against the efficiency loss arising from distorting endogenous labor supply and capital accumulation decisions. Using a utilitarian steady state social welfare criterion we find that the optimal US income tax is well approximated by a flat tax rate of 17.2% and a fixed deduction of about $9,400. The steady state welfare gains from a fundamental tax reform towards this tax system are equivalent to 1.7% higher consumption in each state of the world. An explicit computation of the transition path induced by a reform of the current towards the optimal tax system indicates that a majority of the population currently alive (roughly 62%) would experience welfare gains, suggesting that such fundamental income tax reform is not only desirable, but may also be politically feasible.
Handle: RePEc:nbr:nberwo:11044
Template-Type: ReDIF-Paper 1.0
Title: Is Poland the Next Spain?
Classification-JEL: F15; F43; N10; O11
Author-Name: Francesco Caselli
Author-Person: pca205
Author-Name: Silvana Tenreyro
Author-Person: pte171
Note: EFG
Number: 11045
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11045
File-URL: http://www.nber.org/papers/w11045.pdf
File-Format: application/pdf
Publication-Status: published as Francesco Caselli & Silvana Tenreyro, 2004. "Is Poland the next Spain?," Communities and Banking, Federal Reserve Bank of Boston.
Publication-Status: published as Is Poland the Next Spain?, Francesco Caselli, Silvana Tenreyro. in NBER International Seminar on Macroeconomics 2004, Clarida, Frankel, Giavazzi, and West. 2006
Abstract: We revisit Western Europe's record with labor-productivity convergence, and tentatively extrapolate its implications for the future path of Eastern Europe. The poorer Western European countries caught up with the richer ones through both higher rates of physical capital accumulation and greater total factor productivity gains. These (relatively) high rates of capital accumulation and TFP growth reflect convergence along two margins. One margin (between industry) is a massive reallocation of labor from agriculture to manufacturing and services, which have higher capital intensity and use resources more efficiently. The other margin (within industry) reflects capital deepening and technology catch-up at the industry level. In Eastern Europe the employment share of agriculture is typically quite large, and agriculture is particularly unproductive. Hence, there are potential gains from sectoral reallocation. However, quantitatively the between-industry component of the East's income gap is quite small. Hence, the East seems to have only one real margin to exploit: the within-industry one. Coupled with the fact that within-industry productivity gaps are enormous, this suggests that convergence will take a long time. On the positive side, however, Eastern Europe already has levels of human capital similar to those of Western Europe. This is good news because human capital gaps have proved very persistent in Western Europe's experience. Hence, Eastern Europe does start out without the handicap that is harder to overcome.
Handle: RePEc:nbr:nberwo:11045
Template-Type: ReDIF-Paper 1.0
Title: Does Tariff Liberalization Increase Wage Inequality? Some Empirical Evidence
Classification-JEL: F1; F13; D31; J31
Author-Name: Branko Milanovic
Author-Person: pmi44
Author-Name: Lyn Squire
Note: ITI
Number: 11046
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11046
File-URL: http://www.nber.org/papers/w11046.pdf
File-Format: application/pdf
Publication-Status: published as Does Tariff Liberalization Increase Wage Inequality? Some Empirical Evidence, Branko Milanovic, Lyn Squire. in Globalization and Poverty, Harrison. 2007
Abstract: The objective of the paper is to answer an often-asked question : if tariff rates are reduced, what will happen to wage inequality ? We consider two types of wage inequality : between occupations (skills premium), and between industries. We use two large data bases of wage inequality that have become recently available and a large dataset of average tariff rates all covering the period between 1980 and 2000. We find that tariff reduction is associated with higher inter-occupational and inter-industry inequality in poorer countries (those below the world median income) and the reverse in richer countries. The results for inter-occupational inequality though must be treated with caution.
Handle: RePEc:nbr:nberwo:11046
Template-Type: ReDIF-Paper 1.0
Title: Foreign Direct Investment vs. Foreiegn Portfolio Investment
Classification-JEL: F3
Author-Name: Itay Goldstein
Author-Name: Assaf Razin
Author-Person: pra388
Note: IFM ITI
Number: 11047
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11047
File-URL: http://www.nber.org/papers/w11047.pdf
File-Format: application/pdf
Abstract: The paper develops a model of foreign direct investments (FDI) and foreign portfolio investments (FPI). FDI is characterized by hands-on management style which enables the owner to obtain relatively refined information about the productivity of the firm. This superiority, relative to FPI, comes with a cost: a firm owned by the relatively well-informed FDI investor has a low resale price because of a "lemons" type asymmetric information between the owner and potential buyers. The model can explain several stylized facts regarding foreign equity flows, such as the larger ratio of FDI to FPI inflows in developing countries relative to developed countries, and the smaller volatility of FDI net inflows relative to FPI net inflows.
Handle: RePEc:nbr:nberwo:11047
Template-Type: ReDIF-Paper 1.0
Title: Does Food Aid Harm the Poor? Household Evidence from Ethiopia
Classification-JEL: F1; O1
Author-Name: James Levinsohn
Author-Person: ple386
Author-Name: Margaret McMillan
Author-Person: pmc26
Note: ITI
Number: 11048
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11048
File-URL: http://www.nber.org/papers/w11048.pdf
File-Format: application/pdf
Publication-Status: published as Does Food Aid Harm the Poor? Household Evidence from Ethiopia, James Levinsohn, Margaret McMillan. in Globalization and Poverty, Harrison. 2007
Abstract: This paper uses household-level data from Ethiopia to investigate the impact of food aid on the poor. We find that food aid in Ethiopia is "pro-poor." Our results indicate that (i) net buyers of wheat are poorer than net sellers of wheat, (ii) there are more buyers of wheat than sellers of wheat at all levels of income, (iii) the proportion of net sellers is increasing in living standards and (iv) net benefit ratios are higher for poorer households indicating that poorer households benefit proportionately more from a drop in the price of wheat. In light of this evidence, it appears that households at all levels of income benefit from food aid and that - somewhat surprisingly - the benefits go disproportionately to the poorest households.
Handle: RePEc:nbr:nberwo:11048
Template-Type: ReDIF-Paper 1.0
Title: The Black-White Test Score Gap Through Third Grade
Classification-JEL: I2
Author-Name: Roland G. Fryer
Author-Person: pfr43
Author-Name: Steven D. Levitt
Author-Person: ple59
Note: ED LS CH
Number: 11049
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11049
File-URL: http://www.nber.org/papers/w11049.pdf
File-Format: application/pdf
Publication-Status: published as Roland G. Fryer & Steven D. Levitt, 2006. "The Black-White Test Score Gap Through Third Grade," American Law and Economics Review, Oxford University Press, vol. 8(2), pages 249-281.
Abstract: This paper describes basic facts regarding the black-white test score gap over the first four years of school. Black children enter school substantially behind their white counterparts in reading and math, but including a small number of covariates erases the gap. Over the first four years of school, however, blacks lose substantial ground relative to other races; averaging .10 standard deviations per school year. By the end of third grade there is a large Black-White test score gap that cannot be explained by observable characteristics. Blacks are falling behind in virtually all categories of skills tested, except the most basic. None of the explanations we examine, including systematic differences in school quality across races, convincingly explain the divergent academic trajectory of Black students.
Handle: RePEc:nbr:nberwo:11049
Template-Type: ReDIF-Paper 1.0
Title: Financial Markets and Wages
Classification-JEL: G31; J31; E24
Author-Name: Claudio Michelacci
Author-Person: pmi94
Author-Name: Vincenzo Quadrini
Author-Person: pqu2
Note: EFG LS
Number: 11050
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11050
File-URL: http://www.nber.org/papers/w11050.pdf
File-Format: application/pdf
Publication-Status: published as Claudio Michelacci & Vincenzo Quadrini, 2009. "Financial Markets and Wages," Review of Economic Studies, Blackwell Publishing, vol. 76(2), pages 795-827, 04.
Abstract: We study a labor market equilibrium model in which firms sign optimal long-term contracts with workers. Firms that are financially constrained offer an increasing wage profile: They pay lower wages today in exchange of higher wages once they become unconstrained and operate at a larger scale. In equilibrium, constrained firms are on average smaller and pay lower wages. In this way the model generates a positive relation between firm size and wages. Using data from the National Longitudinal Survey of Youth (NLSY) we show that the key dynamic properties of the model are supported by the data.
Handle: RePEc:nbr:nberwo:11050
Template-Type: ReDIF-Paper 1.0
Title: A Multi-Country Approach to Factor-Proportions Trade and Trade Costs
Classification-JEL: F11
Author-Name: James R. Markusen
Author-Person: pma528
Author-Name: Anthony J. Venables
Author-Person: pve7
Note: ITI
Number: 11051
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11051
File-URL: http://www.nber.org/papers/w11051.pdf
File-Format: application/pdf
Publication-Status: published as Markusen, James R. & Venables, Anthony J., 2007. "Interacting factor endowments and trade costs: A multi-country, multi-good approach to trade theory," Journal of International Economics, Elsevier, vol. 73(2), pages 333-354, November.
Abstract: Classic trade questions are reconsidered by generalizing a factor-proportions model to multiple countries, multi-stage production, and country-specific trade costs. We derive patterns of production specialization and trade for a matrix of countries that differ in relative endowments (columns) and trade costs (rows). We demonstrate how the ability to fragment production and/or a proportional change in all countries' trade costs alters these patterns. Production specialization and the volume of trade are higher with fragmentation for most countries but interestingly, for a large block of countries, these variables fall following fragmentation. Countries with moderate trade costs engage in market-oriented assembly, while those with lower trade costs engage in export-platform production. These two cases correspond to the concepts of horizontal and vertical affiliate production in the literature on multinational enterprises. Increases in specialization and the volume of trade accelerate as trade costs go to zero with and without fragmentation.
Handle: RePEc:nbr:nberwo:11051
Template-Type: ReDIF-Paper 1.0
Title: How Law and Institutions Shape Financial Contracts: The Case of Bank Loans
Classification-JEL: K0; G2; O5
Author-Name: Jun Qian
Author-Person: pqi75
Author-Name: Philip E. Strahan
Note: CF
Number: 11052
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11052
File-URL: http://www.nber.org/papers/w11052.pdf
File-Format: application/pdf
Publication-Status: published as Qian, Jun and Philip Strahan. "HOW LAWS AND INSTITUTIONS SHAPE FINANCIAL CONTRACTS: THE CASE OF BANK LOANS." Journal of Finance 62, 6 (2007): 2803-34.
Abstract: We examine empirically how legal origin, creditor rights, property rights, legal formalism, and financial development affect the design of price and non-price terms of bank loans in almost 60 countries. Our results support the law and finance view that private contracts reflect differences in legal protection of creditors and the enforcement of contracts. Loans made to borrowers in countries where creditors can seize collateral in case of default are more likely to be secured, have longer maturity, and have lower interest rates. We also find evidence, however, that ?Coasian? bargaining can partially offset weak legal or institutional arrangements. For example, lenders mitigate risks associated with weak property rights and government corruption by securing loans with collateral and shortening maturity. Our results also suggest that the choice of loan ownership structure affects loan contract terms.
Handle: RePEc:nbr:nberwo:11052
Template-Type: ReDIF-Paper 1.0
Title: Market Distortions when Agents are Better Informed: The Value of Information in Real Estate Transactions
Classification-JEL: D8; L1; L8; R2
Author-Name: Steven D. Levitt
Author-Person: ple59
Author-Name: Chad Syverson
Author-Person: psy13
Note: CF
Number: 11053
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11053
File-URL: http://www.nber.org/papers/w11053.pdf
File-Format: application/pdf
Publication-Status: published as Steven D. Levitt & Chad Syverson, 2008. "Market Distortions When Agents Are Better Informed: The Value of Information in Real Estate Transactions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 599-611, 08.
Abstract: Agents are often better informed than the clients who hire them and may exploit this informational advantage. Real-estate agents, who know much more about the housing market than the typical homeowner, are one example. Because real estate agents receive only a small share of the incremental profit when a house sells for a higher value, there is an incentive for them to convince their clients to sell their houses too cheaply and too quickly. We test these predictions by comparing home sales in which real estate agents are hired by others to sell a home to instances in which a real estate agent sells his or her own home. In the former case, the agent has distorted incentives; in the latter case, the agent wants to pursue the first-best. Consistent with the theory, we find homes owned by real estate agents sell for about 3.7 percent more than other houses and stay on the market about 9.5 days longer, even after controlling for a wide range of housing characteristics. Situations in which the agent's informational advantage is larger lead to even greater distortions.
Handle: RePEc:nbr:nberwo:11053
Template-Type: ReDIF-Paper 1.0
Title: Interest Rate, Inflation, and Housing Price: With an Emphasis on Chonsei Price in Korea
Classification-JEL: R2; E4; E1
Author-Name: Dongchul Cho
Note: EFG
Number: 11054
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11054
File-URL: http://www.nber.org/papers/w11054.pdf
File-Format: application/pdf
Publication-Status: published as Cho, Deokho and Seugryul Ma. "Dynamic Relationship Between Housing Values And Interest Rats In The Korean Housing Market," Journal of Real Estate Finance and Economics, 2006, v32(2,Mar), 169-184.
Publication-Status: published as Interest Rate, Inflation, and Housing Price: With an Emphasis on Chonsei Price in Korea, Dongchul Cho. in Monetary Policy with Very Low Inflation in the Pacific Rim, Ito and Rose. 2006
Abstract: This paper discusses the relationship between interest rate and inflation rate on one part and the house price relative to chonsei price (up-front lump-sum deposit from the tenant to the owner for the use of the property with no additional requirement for periodic rent payments) on the other. The key point of the paper is that the relative price of sales to chonsei depends on the ratio of inflation to real interest rate, and thus even when the monetary authority maintains a pre-announced target level of inflation rate, the relative price of sales to chonsei rises if the real interest rate is lowered. This finding seems to help understand the recent hikes of the house prices despite the stabilizing chonsei prices. Recognizing this relationship, it may be sensible to lower the target inflation rate in an economy where real interest rates permanently decline, if the society wishes to reduce its adverse effect on the wealth distribution between house owners and chonsei tenants.
Handle: RePEc:nbr:nberwo:11054
Template-Type: ReDIF-Paper 1.0
Title: How Do Monetary and Fiscal Policy Interact in the European Monetary Union?
Classification-JEL: E63; F33
Author-Name: Matthew B. Canzoneri
Author-Person: pca260
Author-Name: Robert E. Cumby
Author-Person: pcu115
Author-Name: Behzad T. Diba
Author-Person: pdi273
Note: IFM
Number: 11055
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11055
File-URL: http://www.nber.org/papers/w11055.pdf
File-Format: application/pdf
Publication-Status: published as How Do Monetary and Fiscal Policy Interact in the European Monetary Union?, Matthew B. Canzoneri, Robert E. Cumby, Behzad T. Diba. in NBER International Seminar on Macroeconomics 2004, Clarida, Frankel, Giavazzi, and West. 2006
Abstract: Formation of the Euro area raises new questions about the coordination of monetary and fiscal policy. Using a New Neoclassical Synthesis (NNS) model, we show that a common monetary policy, responding to area-wide aggregates, has asymmetric effects on countries within the union, depending on whether they are large or small, or whether they have high or low debts. We analyze the implications of these asymmetries for the various countries welfare and for their fiscal policies. We also study rules for setting national tax and spending rates, rules that constrain movements in the deficit to GDP ratio. We ask whether these rules are necessary for the common monetary policy to be able to harmonize national inflation rates, and we analyze their effects on national welfare. We also discuss some potential failings of our model (and perhaps NNS models generally); in particular, our model's variance decompositions suggest that productivity shocks may play an inordinately large role, while fiscal shocks (or demand shocks generally) may play too small a role (even when 'rule of thumb' spenders are added).
Handle: RePEc:nbr:nberwo:11055
Template-Type: ReDIF-Paper 1.0
Title: A Monetary Policy Rule for Automatic Prevention of a Liquidity Trap
Classification-JEL: E52; E3; F41
Author-Name: Bennett T. McCallum
Note: EFG ME
Number: 11056
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11056
File-URL: http://www.nber.org/papers/w11056.pdf
File-Format: application/pdf
Publication-Status: published as A Monetary Policy Rule for Automatic Prevention of a Liquidity Trap, Bennett T. McCallum . in Monetary Policy with Very Low Inflation in the Pacific Rim, Ito and Rose. 2006
Abstract: In analyses of "liquidity trap" problems associated with the zero lower bound (ZLB) on nominal interest rates, it is important to emphasize the difference between policy rule changes, intended to help escape an existing ZLB situation, and maintained policy rules designed so as to avoid ZLB situations. Analysis assuming that rule changes would lead to a new RE equilibrium immediately seems implausible. Accordingly, the paper focuses on the design of a rule that should retain stabilization effectiveness even if the economy is temporarily shocked into a ZLB situation. The rule considered is one that uses as its instrument variable a weighted average of an interest rate and the rate of depreciation of the nominal exchange rate. With a small weight attached to the depreciation term, it will be nearly irrelevant in normal situations but call for strong adjustments when the ZLB condition prevails. Stabilizing properties of this "MC" rule are studied within a small open economy model developed by McCallum and Nelson. Results indicate that under ZLB conditions the MC rule will provide strong stabilizing policy actions yet, under conditions such that the ZLB constraint is not relevant, the MC rule need not hinder monetary policy.
Handle: RePEc:nbr:nberwo:11056
Template-Type: ReDIF-Paper 1.0
Title: Colonialism, Inequality, and Long-Run Paths of Development
Classification-JEL: N10
Author-Name: Stanley L. Engerman
Author-Name: Kenneth L. Sokoloff
Note: DAE
Number: 11057
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11057
File-URL: http://www.nber.org/papers/w11057.pdf
File-Format: application/pdf
Abstract: Over the last few years, colonialism, especially as pursued by Europeans, has enjoyed a revival in interest among both scholars and the general public. Although a number of new accounts cast colonial empires in a more favorable light than has generally been customary, others contend that colonial powers often leveraged their imbalance in power to impose institutional arrangements on the colonies that were adverse to long-term development. We argue here, however, that one of the most fundamental impacts of European colonization may have been in altering the composition of the populations in the areas colonized. The efforts of the Europeans often involved implanting ongoing communities who were greatly advantaged over natives in terms of human capital and legal status. Because the paths of institutional development were sensitive to the incidence of extreme inequality which resulted, their activity had long lingering effects. More study is needed to identify all of the mechanisms at work, but the evidence from the colonies in the Americas suggests that it was those that began with extreme inequality and population heterogeneity that came to exhibit persistence over time in evolving institutions that restricted access to economic opportunities and generated lower rates of public investment in schools and other infrastructure considered conducive to growth. These patterns may help to explain why a great many societies with legacies as colonies with extreme inequality have suffered from poor development experiences.
Handle: RePEc:nbr:nberwo:11057
Template-Type: ReDIF-Paper 1.0
Title: The Irony of Reform: Did Large Employers Subvert Workplace Safety Reform, 1869 to 1930?
Classification-JEL: N3; N4; K2; H7
Author-Name: Price Fishback
Author-Person: pfi13
Note: DAE
Number: 11058
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11058
File-URL: http://www.nber.org/papers/w11058.pdf
File-Format: application/pdf
Publication-Status: published as The Irony of Reform. Did Large Employers Subvert Workplace Safety Reform, 1869 to 1930?, Price V. Fishback. in Corruption and Reform: Lessons from America's Economic History, Glaeser and Goldin. 2006
Abstract: Between 1869 and the early 1900s state governments regulated safety in mines and factories and reformed the liability for accidents. Reformers sought to reduce workers' risks and ensure that those involved in accidents received reasonable medical care and compensation for lost earnings. Yet large employers often wielded significant clout. This paper explores the extent to which large employers, measured by average number of employees, subverted the safety reform process, including the adoption of safety legislation, its scope, and the resources devoted to enforcement. The findings vary by industry. In coal mining large employers followed a defensive strategy, limiting the breadth of regulation, pressing for regulations that were enforced more against workers than against employers, and weakening enforcement. In manufacturing, on the other hand, safety regulations were introduced earlier in states with larger average establishment sizes. Reformers may have succeeded in imposing regulations on large manufacturing employers. However, the finding is also consistent with large firms working to raise rivals' costs and the analytical narratives suggest that manufacturing employers at times shaped the legislation to their benefit and that the regulations were often poorly enforced.
Handle: RePEc:nbr:nberwo:11058
Template-Type: ReDIF-Paper 1.0
Title: NAFTA's and CUSFTA's Impact on International Trade
Classification-JEL: F1
Author-Name: John Romalis
Note: ITI
Number: 11059
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11059
File-URL: http://www.nber.org/papers/w11059.pdf
File-Format: application/pdf
Publication-Status: published as Romalis, John. "NAFTA's and CUSFTA's Impact on International Trade." Review of Economics and Statistics 89, 3 (August 2007): 416-35.
Abstract: This paper identifies the effects of preferential trade agreements on trade volumes and prices using detailed trade and tariff data. It identifies demand elasticities by developing a difference in differences based method that exploits the fact that the additional wedge driven between consumption patterns in a liberalizing versus a non-liberalizing country is directly related to the tariff reduction. Supply elasticities are identified by using tariffs as instruments for observed quantities. Analysis of world-wide trade data for 5,000 commodities shows that NAFTA and CUSFTA have had a substantial impact on international trade volumes, but a modest effect on prices and welfare. NAFTA and CUSFTA increased North American output and prices in many highly-protected sectors by driving out imports from non-member countries.
Handle: RePEc:nbr:nberwo:11059
Template-Type: ReDIF-Paper 1.0
Title: Measuring Social Security's Financial Problems
Classification-JEL: H0; H6
Author-Name: Jagadeesh Gokhale
Author-Name: Kent Smetters
Author-Person: psm21
Note: PE
Number: 11060
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11060
File-URL: http://www.nber.org/papers/w11060.pdf
File-Format: application/pdf
Abstract: The U.S. Social Security system has helped keep many retirees out of poverty. However, according to the Social Security and Medicare Trustees, Social Security faces a future financial shortfall of $10.4 trillion in present value. This enormous imbalance has received little attention in public debates about Social Security. Instead, the media and policymakers continue to focus on the program's trust fund and several other ad-hoc measures that create a misleading impression of the size of Social Security's financial problem. Although the Social Security Trust Fund is not projected to be exhausted until 2042, Social Security's $10.4 trillion present value imbalance is accruing interest and will grow by $600 billion during 2004 alone. The current cash-flow federal budget, however, is biased against reforms that would improve Social Security's finances. As shown herein, a new federal accounting system would remove this bias.
Handle: RePEc:nbr:nberwo:11060
Template-Type: ReDIF-Paper 1.0
Title: Changing Monetary Policy Rules, Learning, and Real Exchange Rate Dynamics
Classification-JEL: F4
Author-Name: Nelson C. Mark
Author-Person: pma186
Note: IFM ME
Number: 11061
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11061
File-URL: http://www.nber.org/papers/w11061.pdf
File-Format: application/pdf
Publication-Status: published as Nelson C. Mark, 2009. "Changing Monetary Policy Rules, Learning, and Real Exchange Rate Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(6), pages 1047-1070, 09.
Abstract: When central banks set nominal interest rates according to an interest rate reaction function, such as the Taylor rule, and the exchange rate is priced by uncovered interest parity, the real exchange rate is determined by expected inflation differentials and output gap differentials. In this paper I examine the implications of these Taylor-rule fundamentals for real exchange rate determination in an environment where market participants are ignorant of the numerical values of the model's coefficients but attempt to acquire that information using least-squares learning rules. I find evidence that this simple learning environment provides a plausible framework for understanding real dollar--DM exchange rate dynamics from 1976 to 2003. The least-squares learning path for the real exchange rate implied by inflation and output gap data exhibits the real depreciation of the 70s, the great appreciation (1979.4-1985.1) and the subsequent great depreciation (1985.2-1991.1) observed in the data. An emphasis on Taylor-rule fundamentals may provide a resolution to the exchange rate disconnect puzzle.
Handle: RePEc:nbr:nberwo:11061
Template-Type: ReDIF-Paper 1.0
Title: The Global History of Corporate Governance: An Introduction
Classification-JEL: G3; N2
Author-Name: Randall K. Morck
Author-Person: pmo146
Author-Name: Lloyd Steier
Note: CF
Number: 11062
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11062
File-URL: http://www.nber.org/papers/w11062.pdf
File-Format: application/pdf
Publication-Status: published as The Global History of Corporate Governance: An Introduction, Randall Morck, Lloyd Steier. in A History of Corporate Governance around the World: Family Business Groups to Professional Managers, Morck. 2005
Abstract: This paper presents a synopsis of recent NBER studies of the history of corporate governance in Canada, China, France, Germany, Japan, India, Italy, the Netherlands, Sweden, the United Kingdom, and the United States. Together, the studies underscore the importance of path dependence, often as far back into preindustrial period; legal system origin, though in a more nuanced form than mere statutory shareholder rights; and wealthy families. They also clarify the roles of ideologies, business groups, trust, institutional transplants, and politics in institutional evolution and financial development. Other themes are the universality of business insiders' investments in, entrenchment, and a possible behavioral basis for this.
Handle: RePEc:nbr:nberwo:11062
Template-Type: ReDIF-Paper 1.0
Title: Wage and Benefit Changes in Response to Rising Health Insurance Costs
Classification-JEL: J33
Author-Name: Dana Goldman
Author-Person: pgo681
Author-Name: Neeraj Sood
Author-Person: pso62
Author-Name: Arleen Leibowitz
Note: EH LS
Number: 11063
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11063
File-URL: http://www.nber.org/papers/w11063.pdf
File-Format: application/pdf
Publication-Status: published as Dana P. Goldman & Neeraj Sood & Arleen Leibowitz, 2005. "Wage and Benefit Changes in Response to Rising Health Insurance," NBER Chapters, in: Frontiers in Health Policy Research, Volume 8 National Bureau of Economic Research, Inc.
Publication-Status: published as Goldman, Dana P., Neeraj Sood and Arleen Leibowitz. "Wage And Benefit Changes In Response To Rising Health Insurance," Forum for Health Economics and Policy, 2005, v8, Article 3.
Abstract: Many companies have defined-contribution benefit plans requiring employees to pay the full cost (before taxes) of more generous health insurance choices. Research has shown that employee decisions are quite responsive to these arrangements. What is less clear is how the total compensation package changes when health insurance premiums rise. This paper examines employee compensation decisions during a three-year period when health insurance premiums were rising rapidly. The data come from a single large firm with a flexible benefits plan wherein employees explicitly choose how to allocate compensation between cash wages and other benefits. Under such an arrangement, higher health insurance premiums must induce changes in the composition of total compensation -- either in lower after-tax wages or in decreased contributions to other benefits. The results suggest that about two-thirds of the premium increase is financed out of cash wages and the remaining one-thirds is financed by a reduction in benefits.
Handle: RePEc:nbr:nberwo:11063
Template-Type: ReDIF-Paper 1.0
Title: Where Are We Now? Real-Time Estimates of the Macro Economy
Classification-JEL: E3; C3
Author-Name: Martin D.D. Evans
Author-Person: pev5
Note: EFG
Number: 11064
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11064
File-URL: http://www.nber.org/papers/w11064.pdf
File-Format: application/pdf
Publication-Status: published as Martin D. D. Evans, 2005. "Where Are We Now? Real-Time Estimates of the Macroeconomy," International Journal of Central Banking, International Journal of Central Banking, vol. 1(2), September.
Abstract: This paper describes a method for calculating daily real-time estimates of the current state of the U.S. economy. The estimates are computed from data on scheduled U.S. macroeconomic announcements using an econometric model that allows for variable reporting lags, temporal aggregation, and other complications in the data. The model can be applied to find real-time estimates of GDP, inflation, unemployment or any other macroeconomic variable of interest. In this paper I focus on the problem of estimating the current level of and growth rate in GDP. I construct daily real-time estimates of GDP that incorporate public information known on the day in question. The real-time estimates produced by the model are uniquely-suited to studying how perceived developments the macro economy are linked to asset prices over a wide range of frequencies. The estimates also provide, for the first time, daily time series that can be used in practical policy decisions.
Handle: RePEc:nbr:nberwo:11064
Template-Type: ReDIF-Paper 1.0
Title: Does it Cost to be Virtuous? The Macroeconomic Effects of Fiscal Constraints
Classification-JEL: E3; E5; H7
Author-Name: Fabio Canova
Author-Person: pca50
Author-Name: Evi Pappa
Author-Person: ppa381
Note: EFG PE
Number: 11065
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11065
File-URL: http://www.nber.org/papers/w11065.pdf
File-Format: application/pdf
Publication-Status: published as Canova, Fabio and Evi Pappa. "The Elusive Costs And The Immaterial Gains Of Fiscal Constraints," Journal of Public Economics, 2006, v90(8-9,Sep), 1391-1414.
Publication-Status: published as Does It Cost to Be Virtuous? The Macroeconomic Effects of Fiscal Constraints, Fabio Canova, Evi Pappa. in NBER International Seminar on Macroeconomics 2004, Clarida, Frankel, Giavazzi, and West. 2006
Abstract: We study whether and how fiscal restrictions alter the business cycle features of macrovariables for a sample of 48 US states. We also examine the "typical" transmission properties of fiscal disturbances and the implied fiscal rules of states with different fiscal restrictions. Fiscal constraints are characterized with a number of indicators. There are similarities in second moments of macrovariables and in the transmission properties of fiscal shocks across states with different fiscal constraints. The cyclical response of expenditure differs in size and sometimes in sign, but heterogeneity within groups makes point estimates statistically insignificant. Creative budget accounting is responsible for the pattern. Implications for the design of fiscal rules and the reform of the Stability and Growth Pact are discussed.
Handle: RePEc:nbr:nberwo:11065
Template-Type: ReDIF-Paper 1.0
Title: Why are the Critics so Convinced that Globalization is Bad for the Poor?
Classification-JEL: F0
Author-Name: Emma Aisbett
Note: ITI
Number: 11066
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11066
File-URL: http://www.nber.org/papers/w11066.pdf
File-Format: application/pdf
Publication-Status: published as Why are the Critics So Convinced that Globalization is Bad for the Poor?, Emma Aisbett. in Globalization and Poverty, Harrison. 2007
Abstract: Proponents of globalization often conclude that its critics are ignorant or self-motivated. In doing so, they have missed a valuable opportunity to discover both how best to communicate the benefits of globalization, and how to improve on the current model of globalization. This paper examines the values, beliefs and facts that lead critics to the view that globalization is bad for the poor. We find that critics of globalization tend to be concerned about non-monetary as well as monetary dimensions of poverty, and more concerned about the total number of poor than the incidence of poverty. In regard to inequality, critics tend to refer more to changes in absolute inequality, and income polarization, rather than the inequality measures preferred by economists. It is particularly important to them that no group of poor people is made worse off by globalization. Finally, we argue that the perceived concentration of political and economic power that accompanies globalization causes many people to presume that globalization is bad for the poor, and the continued ambiguities in the empirical findings mean that this presumption can be readily supported with evidence.
Handle: RePEc:nbr:nberwo:11066
Template-Type: ReDIF-Paper 1.0
Title: Bank-Tax Conformity for Corporate Income: An Introduction to the Issues
Classification-JEL: K34; M41; E62; G12
Author-Name: Michelle Hanlon
Author-Name: Terry Shevlin
Note: PE
Number: 11067
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11067
File-URL: http://www.nber.org/papers/w11067.pdf
File-Format: application/pdf
Abstract: This paper discusses the issues surrounding the proposals to conform financial accounting income and taxable income. The two incomes diverged in the late 1990s with financial accounting income becoming increasingly greater than taxable income through the year 2000. While the cause of this divergence is not known for certain, many suspect that it is the result of earnings management for financial accounting and/or the tax sheltering of corporate income. Our paper outlines the potential costs and benefits of one of the proposed "fixes" to the divergence: the conforming of the two incomes into one measure. We review relevant research that sheds light on the issues surrounding conformity both in the U.S. as well as evidence from other countries that have more closely aligned book and taxable incomes. The extant empirical literature reveals that it is unlikely that conforming the incomes will reduce the amount of tax sheltering by corporations and that having only one measure of income will result in a loss of information to the capital markets.
Handle: RePEc:nbr:nberwo:11067
Template-Type: ReDIF-Paper 1.0
Title: Income and the Use of Prescription Drugs by the Elderly: Evidence from the Notch Cohorts
Classification-JEL: I12; I18
Author-Name: John R. Moran
Author-Name: Kosali Ilayperuma Simon
Author-Person: psi314
Note: AG EH
Number: 11068
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11068
File-URL: http://www.nber.org/papers/w11068.pdf
File-Format: application/pdf
Publication-Status: published as Moran, J. and K. Simon 2006. “Income and the Use of Prescription Drugs by the Elderly: Evidence from the Notch Cohorts.” Journal of Human Resources 41, 2 (February 2006): 411–432.
Abstract: We use exogenous variation in Social Security payments created by the Social Security benefits notch to estimate how retirees' use of prescription medications responds to changes in their incomes. In contrast to estimates obtained using ordinary least squares, instrumental variables estimates based on the notch suggest that lower-income retirees exhibit considerable income sensitivity in their use of prescription drugs. Our estimates are potentially useful for thinking about the health care usage implications of any changes in transfer payments to the elderly that may occur in the future, and for evaluating the benefits of the recently enacted Medicare prescription drug benefit.
Handle: RePEc:nbr:nberwo:11068
Template-Type: ReDIF-Paper 1.0
Title: Practical Volatility and Correlation Modeling for Financial Market Risk Management
Classification-JEL: G1
Author-Name: Torben G. Andersen
Author-Name: Tim Bollerslev
Author-Person: pbo66
Author-Name: Peter F. Christoffersen
Author-Person: pch343
Author-Name: Francis X. Diebold
Author-Person: pdi1
Note: AP
Number: 11069
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11069
File-URL: http://www.nber.org/papers/w11069.pdf
File-Format: application/pdf
Publication-Status: published as Practical Volatility and Correlation Modeling for Financial Market Risk Management , Torben G. Andersen, Tim Bollerslev, Peter Christoffersen, Francis X. Diebold. in The Risks of Financial Institutions, Carey and Stulz. 2006
Abstract: What do academics have to offer market risk management practitioners in financial institutions? Current industry practice largely follows one of two extremely restrictive approaches: historical simulation or RiskMetrics. In contrast, we favor flexible methods based on recent developments in financial econometrics, which are likely to produce more accurate assessments of market risk. Clearly, the demands of real-world risk management in financial institutions -- in particular, real-time risk tracking in very high-dimensional situations -- impose strict limits on model complexity. Hence we stress parsimonious models that are easily estimated, and we discuss a variety of practical approaches for high-dimensional covariance matrix modeling, along with what we see as some of the pitfalls and problems in current practice. In so doing we hope to encourage further dialog between the academic and practitioner communities, hopefully stimulating the development of improved market risk management technologies that draw on the best of both worlds.
Handle: RePEc:nbr:nberwo:11069
Template-Type: ReDIF-Paper 1.0
Title: The Limits of Financial Globalization
Classification-JEL: F36; F30; G32; G10
Author-Name: Rene M. Stulz
Note: AP CF
Number: 11070
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11070
File-URL: http://www.nber.org/papers/w11070.pdf
File-Format: application/pdf
Publication-Status: published as René M. Stulz, 2005. "The Limits of Financial Globalization," Journal of Finance, American Finance Association, vol. 60(4), pages 1595-1638, 08.
Publication-Status: published as René M. Stulz, 2007. "The Limits of Financial Globalization," Journal of Applied Corporate Finance, Morgan Stanley, vol. 19(1), pages 8-15.
Abstract: Despite the dramatic reduction in explicit barriers to international investment activity over the last 60 years, the impact of financial globalization has been remarkably limited. I argue that country attributes are still critical to financial decision-making because of what I call the twin agency problems. These twin agency problems arise because rulers of sovereign states and corporate insiders pursue their own interests at the expense of outside investors. When these twin agency problems are significant, diffuse ownership is inefficient and corporate insiders must co-invest with other investors, retaining substantial equity. The resulting ownership concentration limits economic growth, financial development, and the ability of a country to take advantage of financial globalization. The twin agency problems help explain why the impact of financial globalization has been limited and why financial globalization can lead to capital flight and financial crises. The impact of financial globalization will remain limited as long as these agency problems are significant.
Handle: RePEc:nbr:nberwo:11070
Template-Type: ReDIF-Paper 1.0
Title: Structuring and Restructuring Sovereign Debt: The Role of Seniority
Classification-JEL: F3; G3
Author-Name: Patrick Bolton
Author-Person: pbo544
Author-Name: Olivier Jeanne
Author-Person: pje59
Note: CF IFM
Number: 11071
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11071
File-URL: http://www.nber.org/papers/w11071.pdf
File-Format: application/pdf
Publication-Status: published as Patrick Bolton & Olivier Jeanne, 2009. "Structuring and Restructuring Sovereign Debt: The Role of Seniority-super-1," Review of Economic Studies, Blackwell Publishing, vol. 76(3), pages 879-902, 07.
Abstract: In an environment characterized by weak contractual enforcement, sovereign lenders can enhance the likelihood of repayment by making their claims more difficult to restructure. We show within a simple model how competition for repayment between lenders may result in sovereign debt that is excessively difficult to restructure in equilibrium. Alleviating this inefficiency requires a sovereign debt restructuring mechanism that fulfills some of the functions of corporate bankruptcy regimes, in particular the enforcement of seniority and subordination clauses in debt contracts.
Handle: RePEc:nbr:nberwo:11071
Template-Type: ReDIF-Paper 1.0
Title: How do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines
Classification-JEL: L1; L9
Author-Name: Austan Goolsbee
Author-Person: pgo49
Author-Name: Chad Syverson
Author-Person: psy13
Note: IO
Number: 11072
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11072
File-URL: http://www.nber.org/papers/w11072.pdf
File-Format: application/pdf
Publication-Status: published as Austan Goolsbee & Chad Syverson, 2008. "How do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines," The Quarterly Journal of Economics, MIT Press, vol. 123(4), pages 1611-1633, November.
Abstract: We examine how incumbents respond to the threat of entry by competitors (as distinct from how they respond to actual entry). We look specifically at passenger airlines, using the evolution of Southwest Airlines' route network to identify particular routes where the probability of future entry rises abruptly. We find incumbents cut fares significantly when threatened by Southwest's entry. Over half of Southwest's total impact on incumbent fares occurs before Southwest starts flying. These cuts are only on threatened routes, not those out of non-Southwest competing airports. The evidence on whether incumbents are seeking to deter or accommodate entry is mixed.
Handle: RePEc:nbr:nberwo:11072
Template-Type: ReDIF-Paper 1.0
Title: Aggregation Issues in Integrating and Accelerating BEA's Accounts: Improved Methods for Calculating GDP by Industry
Classification-JEL: C82
Author-Name: Brian Moyer
Author-Name: Marshall Reinsdorf
Author-Name: Robert Yuskavage
Note: EFG
Number: 11073
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11073
File-URL: http://www.nber.org/papers/w11073.pdf
File-Format: application/pdf
Publication-Status: published as Brian C. Moyer & Marshall B. Reinsdorf & Robert E. Yuskavage, 2006. "Aggregation Issues in Integrating and Accelerating the BEA," NBER Chapters, in: A New Architecture for the U.S. National Accounts, pages 263-287 National Bureau of Economic Research, Inc.
Abstract: Aggregate measures of real GDP growth obtained from the GDP by Industry Accounts often differ from the featured measure of real GDP growth obtained from the National Income and Product Accounts (NIPAs). We find that differences in source data account for most of the difference in aggregate real output growth rates; very little is due to the treatment of the statistical discrepancy, differences in aggregation methods, or the contributions formula. Moreover, we demonstrate that with consistent data, use of BEA's Fisher-Ideal aggregation procedures to aggregate value added over industries yields the same estimate of real GDP as aggregation over final commodities. Thus, two major approaches to measuring real GDP -- "expenditures" approach used in the NIPAs and the "production" or "industry" approach used in the Industry Accounts -- give the same answer under certain conditions. This result enables us to show that the "exact contributions" formula that the NIPAs use to calculate commodity contributions to change in real GDP can also be used to calculate consistent industry contributions to change in real GDP. We also find that using some newly developed datasets would help to bring the aggregate real output measures into closer alignment.
Handle: RePEc:nbr:nberwo:11073
Template-Type: ReDIF-Paper 1.0
Title: Optimal Defaults and Active Decisions
Classification-JEL: D0; E21; G23
Author-Name: Gabriel D. Carroll
Author-Person: pca1576
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: AG LS PE
Number: 11074
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11074
File-URL: http://www.nber.org/papers/w11074.pdf
File-Format: application/pdf
Publication-Status: published as Carroll, Gabriel D., James J. Choi, David Laibson, Brigitte C. Madrian, and Andrew Metrick. “Optimal Defaults and Active Decisions.” Quarterly Journal of Economics 124, 4 (November 2009).
Abstract: Defaults can have a dramatic influence on consumer decisions. We identify an overlooked but practical alternative to defaults: requiring individuals to make an explicit choice for themselves. We study such "active decisions" in the context of 401(k) saving. We find that compelling new hires to make active decisions about 401(k) enrollment raises the initial fraction that enroll by 28 percentage points relative to a standard opt-in enrollment procedure, producing a savings distribution three months after hire that would take three years to achieve under standard enrollment. We also present a model of 401(k) enrollment and characterize the optimal enrollment regime. Active decisions are optimal when consumers have a strong propensity to procrastinate and savings preferences that are highly heterogeneous. Naive beliefs about future time-inconsistency strengthen the normative appeal of the active-decision enrollment regime. However, financial illiteracy favors default enrollment over active decision enrollment.
Handle: RePEc:nbr:nberwo:11074
Template-Type: ReDIF-Paper 1.0
Title: Foreign Direct Investment and the Domestic Capital Stock
Classification-JEL: F23; F21; H87
Author-Name: Mihir C. Desai
Author-Name: C. Fritz Foley
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: CF IFM ITI PE
Number: 11075
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11075
File-URL: http://www.nber.org/papers/w11075.pdf
File-Format: application/pdf
Publication-Status: published as Desai, Mihir A., C. Fritz Foley and James R. Hines, Jr. "Foreign Direct Investment And The Domestic Capital Stock," American Economic Review, 2005, v95(2,May), 33-38.
Abstract: This paper evaluates evidence of the impact of outbound foreign direct investment (FDI) on domestic investment rates. OECD countries with high rates of outbound FDI in the 1980s and 1990s exhibited lower domestic investment than other countries, which suggests that FDI and domestic investment are substitutes. U.S. time series data tell a very different story, however: years in which American multinational firms have greater foreign capital expenditures coincide with greater domestic capital spending by the same firms. One dollar of additional foreign capital spending is associated with 3.5 dollars of additional domestic capital spending in the time series, implying that foreign and domestic capital are complements in production by multinational firms. This effect is consistent with cross sectional evidence that firms whose foreign operations expand simultaneously expand their domestic operations, and suggests that interpretation of the OECD cross sectional evidence may be confounded by omitted variables.
Handle: RePEc:nbr:nberwo:11075
Template-Type: ReDIF-Paper 1.0
Title: Systemic Crises and Growth
Classification-JEL: F34; F36; F43; O41
Author-Name: Romain Ranciere
Author-Person: pra52
Author-Name: Aaron Tornell
Author-Person: pto157
Author-Name: Frank Westermann
Author-Person: pwe84
Note: IFM
Number: 11076
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11076
File-URL: http://www.nber.org/papers/w11076.pdf
File-Format: application/pdf
Publication-Status: published as Romain Rancière & Aaron Tornell & Frank Westermann, 2008. "Systemic Crises and Growth," The Quarterly Journal of Economics, MIT Press, vol. 123(1), pages 359-406, 02.
Abstract: In this paper, we document the fact that countries that have experienced occasional financial crises have, on average, grown faster than countries with stable financial conditions. We measure the incidence of crisis with the skewness of credit growth, and find that it has a robust negative effect on GDP growth. This link coexists with the negative link between variance and growth typically found in the literature. To explain the link between crises and growth we present a model where contract enforce-ability problems generate borrowing constraints and impede growth. In the set of financially liberalized countries with a moderate degree of contract enforceability, systemic risk-taking relaxes borrowing constraints and increases investment. This leads to higher mean growth, but also to greater incidence of crises. We find that the negative link between skewness and growth is indeed strongest in this set of countries, validating the restrictions imposed by the model's equilibrium.
Handle: RePEc:nbr:nberwo:11076
Template-Type: ReDIF-Paper 1.0
Title: Testing Uncovered Interest Parity at Short and Long Horizons during the Post-Bretton Woods Era
Classification-JEL: F21; F31; F41
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: Guy Meredith
Note: AP IFM
Number: 11077
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11077
File-URL: http://www.nber.org/papers/w11077.pdf
File-Format: application/pdf
Abstract: The hypothesis that interest rate differentials are unbiased predictors of future exchange rate movements has been almost universally rejected in empirical studies. In contrast to previous studies, which have used short-horizon data, we test this hypothesis using interest rates on longer-maturity bonds for the U.S., Germany, Japan and Canada. The results of these long-horizon regressions are much more positive -- the coefficients on interest differentials are of the correct sign, and most are closer to the predicted value of unity than to zero. These results are robust to the use of different data frequencies, sample periods, yield definitions, and base currencies. We appeal to an econometric interpretation of the results, which focuses on the presence of simultaneity in a cointegration framework.
Handle: RePEc:nbr:nberwo:11077
Template-Type: ReDIF-Paper 1.0
Title: Private Credit in 129 Countries
Classification-JEL: G3; G32; K22
Author-Name: Simeon Djankov
Author-Person: pdj4
Author-Name: Caralee McLiesh
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: AP CF EFG LE PE
Number: 11078
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11078
File-URL: http://www.nber.org/papers/w11078.pdf
File-Format: application/pdf
Publication-Status: published as Djankov, Simeon & McLiesh, Caralee & Shleifer, Andrei, 2007. "Private credit in 129 countries," Journal of Financial Economics, Elsevier, vol. 84(2), pages 299-329, May.
Abstract: We investigate cross-country determinants of private credit, using new data on legal creditor rights and private and public credit registries in 129 countries. We find that both creditor protection through the legal system and information sharing institutions are associated with higher ratios of private credit to GDP, but that the former is relatively more important in the richer countries. An analysis of legal reforms also shows that improvements in creditor rights and in information sharing precede faster credit growth. We also find that creditor rights are extremely stable over time, contrary to the convergence hypothesis. Finally, we find that legal origins are an important determinant of both creditor rights and information sharing institutions.
Handle: RePEc:nbr:nberwo:11078
Template-Type: ReDIF-Paper 1.0
Title: Saving and Cohabitation: The Economic Consequences of Living with One's Parents in Italy and the Netherlands
Classification-JEL: E2; D1; D9
Author-Name: Rob Alessie
Author-Person: pal293
Author-Name: Agar Brugiavini
Author-Person: pbr101
Author-Name: Guglielmo Weber
Author-Person: pwe54
Note: EFG
Number: 11079
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11079
File-URL: http://www.nber.org/papers/w11079.pdf
File-Format: application/pdf
Publication-Status: published as Saving and Cohabitation: The Economic Consequences of Living with One's Parents in Italy and the Netherlands, Rob Alessie, Agar Brugiavini, Guglielmo Weber. in NBER International Seminar on Macroeconomics 2004, Clarida, Frankel, Giavazzi, and West. 2006
Abstract: The paper deals with the e.ects of cohabitation of grown children with their parents on household saving, using data from Italy and the Netherlands. It presents a two-period gametheoretical model where the child has to decide whether to move out of the parental home. This decision is affected by transaction costs, the child's preference for independence, and by the consumption loss induced by the move (consumption is a public good while the child lives in the parental home). We show that the child's income share affects the household saving decision, in contrast with predictions of the standard unitary model of household decision making. Empirical results from both countries are supportive of the key model predictions. We find strong positive effects of the child income share on the saving rate in Italy, where we calculate saving as the difference between disposable income and consumption but cannot distinguish children who will leave from those who will stay. We also find some significant effects of the child income share on household saving rate in the Netherlands, where saving is computed as the change over time in financial wealth. In the Dutch data we distinguish between children who stay and children who leave. The effect of the child's income share is significantly negative for those who stay, positive for those who leave.
Handle: RePEc:nbr:nberwo:11079
Template-Type: ReDIF-Paper 1.0
Title: Politics, Relief, and Reform: The Transformation of America's Social Welfare System during the New Deal
Classification-JEL: N3; N4; H0; H1; H4
Author-Name: John Joseph Wallis
Author-Name: Price Fishback
Author-Person: pfi13
Author-Name: Shawn Kantor
Author-Person: pka54
Note: DAE PE
Number: 11080
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11080
File-URL: http://www.nber.org/papers/w11080.pdf
File-Format: application/pdf
Abstract: The American social welfare system was transformed during the 1930s. Prior to the New Deal public relief was administered almost exclusively by local governments. The administration of local public relief was widely thought to be corrupt. Beginning in 1933, federal, state, and local governments cooperatively built a larger social welfare system. While the majority of the funds for relief spending came from the federal government, the majority of administrative decisions were made at state and local levels. While New Dealers were often accused of playing politics with relief, social welfare system created by the New Deal (still largely in place today) is more often maligned for being bureaucratic than for being corrupt. We do not believe that New Dealers were motivated by altruistic motives when they shaped New Deal relief policies. Evidence suggests that politics was always the key issue. But we show how the interaction of political interests at the federal, state, and local levels of government created political incentives for the national relief administration to curb corruption by actors at the state and local level. This led to different patterns of relief spending when programs were controlled by national, rather than state and local officials. In the permanent social welfare system created by the Social Security Act, the national government pressed for the substitution of rules rather than discretion in the administration of relief. This, ultimately, significantly reduced the level of corruption in the administration of welfare programs.
Handle: RePEc:nbr:nberwo:11080
Template-Type: ReDIF-Paper 1.0
Title: The Effects of the Colombian Trade Liberalization on Urban Poverty
Classification-JEL: F10; F13; J31
Author-Name: Pinelopi Koujianou Goldberg
Author-Person: pgo1
Author-Name: Nina Pavcnik
Author-Person: ppa511
Note: ITI
Number: 11081
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11081
File-URL: http://www.nber.org/papers/w11081.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.
Publication-Status: published as The Effects of the Colombian Trade Liberalization on Urban Poverty, Pinelopi Koujianou Goldberg, Nina Pavcnik. in Globalization and Poverty, Harrison. 2007
Abstract: We examine whether the Colombian trade reform can explain any of Colombia's decline in urban poverty between 1984 and 1995. Our approach focuses on short- and medium- run channels through which trade reform could affect poverty. Despite the chronological coincidence of the poverty reduction with the trade reforms over this period, we do not observe any evidence of a link between poverty and tariff reductions operating through the labor income channel. Our descriptive analysis suggests that although poverty is predominately concentrated among individuals living in households with unemployed head, it is non-negligible among the employed and especially those working in the informal sector and those paid below minimum wage. Industry affiliation also plays a role. However, we find no evidence that the trade reforms reduced poverty via any of the above variables in a significant way. We cannot rule out the possibility that trade liberalization has contributed to the poverty reduction through general equilibrium effects, and in particular through its potential role in lowering the prices of goods consumed primarily by the poor.
Handle: RePEc:nbr:nberwo:11081
Template-Type: ReDIF-Paper 1.0
Title: A Theory of Takeovers and Disinvestment
Classification-JEL: G34; C72; G13
Author-Name: Bart Lambrecht
Author-Name: Stewart C. Myers
Note: CF
Number: 11082
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11082
File-URL: http://www.nber.org/papers/w11082.pdf
File-Format: application/pdf
Publication-Status: published as Lambrecht, Bart M. and Steward C. Myers. "A Theory of Takeovers and Disinvestment." Journal of Finance 62, 2 (April 2007): 809-45.
Abstract: We present a real-options model of takeovers and disinvestment in declining industries. As product demand declines, a first-best closure level is reached, where overall value is maximized by shutting down the .rm and releasing its capital to investors. Absent takeovers, managers of unlevered firms always abandon the firm's business too late. We model the managers' payout policy absent takeovers and consider the effects of golden parachutes and leverage on managers' shut-down decisions. We analyze the effects of takeovers of under-leveraged firms. Takeovers by raiders enforce first-best closure. Hostile takeovers by other firms occur either at the first-best closure point or too early. We also consider management buyouts and mergers of equals and show that in both cases closure happens inefficiently late.
Handle: RePEc:nbr:nberwo:11082
Template-Type: ReDIF-Paper 1.0
Title: A Dynamic Theory of Optimal Capital Structure and Executive Compensation
Classification-JEL: G3
Author-Name: Andrew Atkeson
Author-Person: pat52
Author-Name: Harold Cole
Author-Person: pco70
Note: EFG
Number: 11083
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11083
File-URL: http://www.nber.org/papers/w11083.pdf
File-Format: application/pdf
Abstract: We put forward a theory of the optimal capital structure of the firm based on Jensen's (1986) hypothesis that a firm's choice of capital structure is determined by a trade-off between agency costs and monitoring costs. We model this tradeoff dynamically. We assume that early on in the production process, outside investors face an informational friction with respect to withdrawing funds from the firm which dissipates over time. We assume that they also face an agency friction which increases over time with respect to funds left inside the firm. The problem of determining the optimal capital structure of the firm as well as the optimal compensation of the manager is then a problem of choosing payments to outside investors and the manager at each stage of production to balance these two frictions.
Handle: RePEc:nbr:nberwo:11083
Template-Type: ReDIF-Paper 1.0
Title: Reducing the Risk of Investment-Based Social Security Reform
Classification-JEL: H0; H3; H5
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: AG AP PE
Number: 11084
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11084
File-URL: http://www.nber.org/papers/w11084.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin. "Structural Reform Of Social Security," Journal of Economic Perspectives, 2005, v19(2,Spring), 33-55.
Publication-Status: published as Reducing the Risk of Investment-Based Social Security Reform, Martin Feldstein. in Social Security Policy in a Changing Environment, Brown, Liebman, and Wise. 2009
Abstract: This paper describes the risks implied by a mixed system of Social Security pension benefits with different combinations of pay-as-you-go taxes and personal retirement account (PRA) saving. The analysis shows how these risks can be reduced by using alternative private market guarantee strategies. The first such strategy uses a blend of equities and TIPS to guarantee at least a positive real rate or return on each year's PRA saving. The second is an explicit zero-cost collar that guarantees an annual rate of return by giving up all returns above a certain level. One variant of these guarantees uses a two stage procedure: a guaranteed return to age 66 and then a separate guarantee on the implicit return in the annuity phase. An alternative strategy provides a combined guarantee on the return during both the accumulation and the annuity phase. Simulations are presented of the probability distributions of retirement incomes relative to the "benchmark" benefits specified in current law. Calculations of expected utility show that these risk reduction techniques can raise expected utility relative to the plans with no guarantees. The ability to do so depends on the individual's risk aversion level. This underlines the idea that different individuals would rationally prefer different investment strategies and risk reduction options.
Handle: RePEc:nbr:nberwo:11084
Template-Type: ReDIF-Paper 1.0
Title: Electoral Manipulation via Expenditure Composition: Theory and Evidence
Classification-JEL: D72; E62; D78
Author-Name: Allan Drazen
Author-Person: pdr25
Author-Name: Marcela Eslava
Author-Person: pes57
Note: EFG PE POL
Number: 11085
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11085
File-URL: http://www.nber.org/papers/w11085.pdf
File-Format: application/pdf
Abstract: We present a model of the Political Budget Cycle in which voters and politicians have preferences for different types of government spending. Incumbents try to influence voters by changing the composition of government spending, rather than overall spending or revenues. Rational voters may support an incumbent who targets them with spending before the election even though such spending may be due to opportunistic manipulation, because it can also reflect sincere preference of the incumbent for types of spending voters favor. Classifying expenditures into those which are targeted to voters and those that are not, we provide evidence supporting our model in data on local public finances for all Colombian municipalities. Our findings indicate both a pre-electoral increase in targeted expenditures, combined with a contraction of other types of expenditure, and a voter response to targeting.
Handle: RePEc:nbr:nberwo:11085
Template-Type: ReDIF-Paper 1.0
Title: Federal Oversight, Local Control, and the Specter of "Resegregation" in Southern Schools
Classification-JEL: I28
Author-Name: Charles T. Clotfelter
Author-Person: pcl34
Author-Name: Helen F. Ladd
Author-Person: pla158
Author-Name: Jacob L. Vigdor
Author-Person: pvi23
Note: ED LE PE
Number: 11086
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11086
File-URL: http://www.nber.org/papers/w11086.pdf
File-Format: application/pdf
Publication-Status: published as Charles T. Clotfelter & Jacob L. Vigdor & Helen F. Ladd, 2006. "Federal Oversight, Local Control, and the Specter of "Resegregation" in Southern Schools," American Law and Economics Review, Oxford University Press, vol. 8(2), pages 347-389.
Abstract: Analyzing data for the 100 largest school districts in the South and Border states, we ask whether there is evidence of "resegregation" of school districts and whether levels of segregation can be linked to judicial decisions. We distinguish segregation measures indicating the extent of racial isolation from those indicating the degree of racial imbalance across schools. For the period 1994 to 2004 the trend in only one measure of racial isolation is consistent with the hypothesis that districts in these regions are resegregating. Yet the increase in this measure appears to be driven by the general increase in the nonwhite percentage in the student population rather than policy-determined increases in racial imbalance. Racial imbalance itself shows no trend over this period. Racial imbalance is nevertheless associated with judicial declarations of unitary status, suggesting that segregation in schools might have declined had it not been for the actions of federal courts. This estimated relationship is subject to a lag, which is in keeping with the tendency for courts to grant unitary status only if districts agree to limit their own freedom to reassign students.
Handle: RePEc:nbr:nberwo:11086
Template-Type: ReDIF-Paper 1.0
Title: Did the HMO Revolution Cause Hospital Consolidation?
Classification-JEL: I11; L12
Author-Name: Robert Town
Author-Person: pto430
Author-Name: Douglas Wholey
Author-Name: Roger Feldman
Author-Name: Lawton R. Burns
Note: EH IO
Number: 11087
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11087
File-URL: http://www.nber.org/papers/w11087.pdf
File-Format: application/pdf
Abstract: During the 1990s US healthcare markets underwent a significant transformation. Managed care rose to become the dominant form of insurance in the private sector. Also, a wave of hospital consolidation occurred. In 1990, the mean population-weighted hospital Herfindahl-Hirschman Index (HHI) in a Health Services Area (HSA) was .19. By 2000, the HHI had risen to .26. This paper explores whether the rise in managed care caused the increase in hospital concentration. We use an instrumental variables approach with 10-year differences to identify the relationship between managed care penetration and hospital consolidation. Our results strongly imply that the rise of managed care did not cause the hospital consolidation wave. This finding is robust to a number of different specifications.
Handle: RePEc:nbr:nberwo:11087
Template-Type: ReDIF-Paper 1.0
Title: Time Consistency of Fiscal and Monetary Policy: A Solution
Classification-JEL: E31; E52; H21
Author-Name: Mats Persson
Author-Person: ppe498
Author-Name: Torsten Persson
Author-Person: ppe28
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: EFG IFM ME
Number: 11088
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11088
File-URL: http://www.nber.org/papers/w11088.pdf
File-Format: application/pdf
Publication-Status: published as Mats Persson & Torsten Persson & Lars E. O. Svensson, 2006. "Time Consistency of Fiscal and Monetary Policy: A Solution," Econometrica, Econometric Society, vol. 74(1), pages 193-212, 01.
Abstract: This paper demonstrates how time consistency of the Ramsey policy - the optimal fiscal and monetary policy under commitment - can be achieved. Each government should leave its successor with a unique maturity structure for the nominal and indexed debt, such that the marginal benefit of a surprise inflation exactly balances the marginal cost. Unlike in earlier papers on the topic, the result holds for quite a general Ramsey policy, including timevarying polices with positive inflation and positive nominal interest rates. We compare our results with those in Persson, Persson, and Svensson (1987), Calvo and Obstfeld (1990), and Alvarez, Kehoe, and Neumeyer (2004).
Handle: RePEc:nbr:nberwo:11088
Template-Type: ReDIF-Paper 1.0
Title: Modeling Bond Yields in Finance and Macroeconomics
Classification-JEL: G1; E4; E5
Author-Name: Francis X. Diebold
Author-Person: pdi1
Author-Name: Monika Piazzesi
Author-Person: ppi37
Author-Name: Glenn Rudebusch
Author-Person: pru10
Note: AP EFG ME
Number: 11089
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11089
File-URL: http://www.nber.org/papers/w11089.pdf
File-Format: application/pdf
Publication-Status: published as Diebold, Francis X., Monika Piazzesi and Glenn D. Rudebusch. "Modeling Bonds Yields In Finance And Macroeconomics," American Economic Review, 2005, v95(2,May), 415-420.
Abstract: From a macroeconomic perspective, the short-term interest rate is a policy instrument under the direct control of the central bank. From a finance perspective, long rates are risk-adjusted averages of expected future short rates. Thus, as illustrated by much recent research, a joint macro-finance modeling strategy will provide the most comprehensive understanding of the term structure of interest rates. We discuss various questions that arise in this research, and we also present a new examination of the relationship between two prominent dynamic, latent factor models in this literature: the Nelson-Siegel and affne no-arbitrage term structure models.
Handle: RePEc:nbr:nberwo:11089
Template-Type: ReDIF-Paper 1.0
Title: Why Has Black-White Skill Convergence Stopped?
Classification-JEL: J0; J1; J7
Author-Name: Derek Neal
Note: ED LS
Number: 11090
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11090
File-URL: http://www.nber.org/papers/w11090.pdf
File-Format: application/pdf
Publication-Status: published as “Why Has Black-White Skill Convergence Stopped?” Handbook of Economics of Education, edited by Eric Hanushek and Finis Welch, Elsiver. 2006
Abstract: All data sources indicate that black-white skill gaps diminished over most of the 20th century, but black-white skill gaps as measured by test scores among youth and educational attainment among young adults have remained constant or increased in absolute value since the late 1980s. I examine the potential importance of discrimination against skilled black workers, changes in black family structures, changes in black household incomes, black-white differences in parenting norms, and education policy as factors that may contribute to the recent stability of black-white skill gaps. Absent changes in public policy or the economy that facilitate investment in black children, best case scenarios suggest that even approximate black-white skill parity is not possible before 2050, and equally plausible scenarios imply that the black-white skill gap will remain quite significant throughout the 21st century.
Handle: RePEc:nbr:nberwo:11090
Template-Type: ReDIF-Paper 1.0
Title: Stemming the Tide? The Effect of Expanding Medicaid Eligibility on Health Insurance
Classification-JEL: I1
Author-Name: Lara D. Shore-Sheppard
Author-Person: psh71
Note: CH EH
Number: 11091
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11091
File-URL: http://www.nber.org/papers/w11091.pdf
File-Format: application/pdf
Publication-Status: published as Shore-Sheppard, Lara D. "Stemming the Tide? The Effect of Expanding Medicaid Eligibility on Health Insurance." The B.E. Journal of Economic Analysis & Policy 8, 2 (2008): Article 6.
Abstract: Despite considerable research, there is little consensus about the impact of Medicaid eligibility expansions for low-income children. In this paper, I reexamine the expansions' impact on Medicaid take-up and private insurance "crowd-out." Focusing on the most influential estimates of the expansions' impact, I show that while many of the critiques leveled at these estimates have little effect on their magnitude, accounting for age-specific trends in coverage produces estimates similar to others in the literature. Estimating the impact of later expansions using additional years of data, I find low rates of take-up and no evidence of crowding out.
Handle: RePEc:nbr:nberwo:11091
Template-Type: ReDIF-Paper 1.0
Title: Can Endogenous Changes in Price Flexibility Alter the Relative Welfare Performance of Exchange Rate Regimes?
Classification-JEL: E52; F41; F42
Author-Name: Ozge Senay
Author-Person: pse42
Author-Name: Alan Sutherland
Author-Person: psu35
Note: IFM
Number: 11092
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11092
File-URL: http://www.nber.org/papers/w11092.pdf
File-Format: application/pdf
Publication-Status: published as Can Endogenous Changes in Price Flexibility Alter the Relative Welfare Performance of Exchange Rate Regimes?, Ozge Senay, Alan Sutherland. in NBER International Seminar on Macroeconomics 2004, Clarida, Frankel, Giavazzi, and West. 2006
Abstract: A dynamic general equilibrium model of a small open economy is presented where agents may choose the frequency of price changes. A fixed exchange rate is compared to inflation targeting and money targeting. A fixed rate generates more price flexibility than the other regimes when the expenditure switching effect is relatively weak, while money targeting generates more flexibility when the expenditure switching effect is strong. These endogenous changes in price flexibility can lead to changes in the welfare performance of regimes. But, for the model calibration considered here, the extra price flexibility generated by a peg does not compensate for the loss of monetary independence. Inflation targeting yields the highest welfare level despite generating the least price flexibility of the three regimes considered.
Handle: RePEc:nbr:nberwo:11092
Template-Type: ReDIF-Paper 1.0
Title: General Purpose Technologies
Classification-JEL: O3; N2
Author-Name: Boyan Jovanovic
Author-Name: Peter L. Rousseau
Author-Person: pro64
Note: DAE EFG PR
Number: 11093
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11093
File-URL: http://www.nber.org/papers/w11093.pdf
File-Format: application/pdf
Publication-Status: published as Jovanovic, Boyan & Rousseau, Peter L., 2005. "General Purpose Technologies," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 18, pages 1181-1224 Elsevier.
Abstract: Electricity and Information Technology (IT) are perhaps the two most important general purpose technologies (GPTs) to date. We analyze how the U.S. economy reacted to them. The Electricity and IT eras are similar, but also differ in several important ways. Electrification was more broadly adopted, whereas IT seems to be technologically more "revolutionary." The productivity slowdown is stronger in the IT era but the ongoing spread of IT and its continuing precipitous price decline are reasons for optimism about growth in the 21st century.
Handle: RePEc:nbr:nberwo:11093
Template-Type: ReDIF-Paper 1.0
Title: Offshoring in a Knowledge Economy
Classification-JEL: D2; F1; F2; J3; L2
Author-Name: Pol Antràs
Author-Person: pan181
Author-Name: Luis Garicano
Author-Person: pga77
Author-Name: Esteban Rossi-Hansberg
Author-Person: pro72
Note: ITI LS
Number: 11094
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11094
File-URL: http://www.nber.org/papers/w11094.pdf
File-Format: application/pdf
Publication-Status: published as Pol Antràs & Luis Garicano & Esteban Rossi-Hansberg, 2006. "Offshoring in a Knowledge Economy," The Quarterly Journal of Economics, MIT Press, vol. 121(1), pages 31-77, 02.
Abstract: How does the formation of cross-country teams affect the organization of work and the structure of wages? To study this question we propose a theory of the assignment of heterogeneous agents into hierarchical teams, where less skilled agents specialize in production and more skilled agents specialize in problem solving. We first analyze the properties of the competitive equilibrium of the model in a closed economy, and show that the model has a unique and efficient solution. We then study the equilibrium of a two-country model (North and South), where countries differ in their distributions of ability, and in which agents in different countries can join together in teams. We refer to this type of integration as globalization. Globalization leads to better matches for all southern workers but only for the best northern workers. As a result, we show that globalization increases wage inequality in the South but not necessarily in the North. We also study how globalization affects the size distribution of firms and the patterns of consumption and trade in the global economy.
Handle: RePEc:nbr:nberwo:11094
Template-Type: ReDIF-Paper 1.0
Title: Residential Segregation in General Equilibrium
Classification-JEL: H0; J7; R0; R2
Author-Name: Patrick Bayer
Author-Person: pba636
Author-Name: Robert McMillan
Author-Name: Kim Rueben
Author-Person: pru27
Note: ED
Number: 11095
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11095
File-URL: http://www.nber.org/papers/w11095.pdf
File-Format: application/pdf
Abstract: Black households in the United States with high levels of income and education (SES) typically face a stark tradeoff when deciding where to live. They can choose neighborhoods with high levels of public goods or a high proportion of blacks, but very few neighborhoods combine both, a fact we document clearly. In the face of this constraint, we conjecture that racial sorting may dramatically lower the consumption of local public goods by high-SES blacks. To shed light on this, we estimate a model of residential sorting using unusually detailed restricted Census microdata, then use the estimated preferences to simulate a counterfactual world in which racial factors play no role in household residential location decisions. Results from this exercise provide the first evidence that sorting on the basis of race gives rise to significant reductions in the consumption of local public goods by black and high-SES black households in particular. These consumption effects lead to significant losses of welfare and are likely to have important intergenerational implications.
Handle: RePEc:nbr:nberwo:11095
Template-Type: ReDIF-Paper 1.0
Title: Water, Water, Everywhere: Municipal Finance and Water Supply in American Cities
Classification-JEL: N4; I1; H4
Author-Name: David Cutler
Author-Person: pcu64
Author-Name: Grant Miller
Note: DAE EH PE
Number: 11096
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11096
File-URL: http://www.nber.org/papers/w11096.pdf
File-Format: application/pdf
Publication-Status: published as Water, Water Everywhere. Municipal Finance and Water Supply in American Cities, David M. Cutler, Grant Miller. in Corruption and Reform: Lessons from America's Economic History, Glaeser and Goldin. 2006
Abstract: The construction of municipal water systems was a major event in the history of American cities -- bringing relief from disease, providing resources to combat fires, attracting business investment, and promoting development generally. Although the first large-scale municipal water system in the United States was completed in 1801, many American cities lacked waterworks until the turn of the twentieth century. This paper investigates the reason for the century-long delay and the subsequent frenzy of waterworks construction from 1890 through the 1920s. We propose an explanation that emphasizes the development of local public finance. Specifically, we highlight the importance of municipal bond market growth as a facilitator of debt finance. We argue that this explanation is superior to others put forward in the literature, including disease knowledge, the presence of externalities, municipal population density, natural monopoly, contracting difficulties, corruption costs, and growth in the supply of civil engineers.
Handle: RePEc:nbr:nberwo:11096
Template-Type: ReDIF-Paper 1.0
Title: Urban Growth and Housing Supply
Classification-JEL: R0
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Joseph Gyourko
Author-Person: pgy3
Author-Name: Raven E. Saks
Note: PR PE
Number: 11097
Creation-Date: 2005-01
Order-URL: http://www.nber.org/papers/w11097
File-URL: http://www.nber.org/papers/w11097.pdf
File-Format: application/pdf
Publication-Status: published as Edward L. Glaeser & Joseph Gyourko & Raven E. Saks, 2006. "Urban growth and housing supply," Journal of Economic Geography, Oxford University Press, vol. 6(1), pages 71-89, January.
Abstract: Cities are physical structures, but the modern literature on urban economic development rarely acknowledges that fact. The elasticity of housing supply helps determine the extent to which increases in productivity will create bigger cities or just higher paid workers and more expensive homes. In this paper, we present a simple model that provides a framework for doing empirical work that integrates the heterogeneity of housing supply into urban development. Empirical analysis yields results consistent with the implications of the model that differences in the nature of house supply across space are not only responsible for higher housing prices, but also affect how cities respond to increases in productivity.
Handle: RePEc:nbr:nberwo:11097
Template-Type: ReDIF-Paper 1.0
Title: Structural Reform of Social Security
Classification-JEL: H0; H3; H1
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: AG AP PE
Number: 11098
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11098
File-URL: http://www.nber.org/papers/w11098.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin. "Structural Reform Of Social Security," Journal of Economic Perspectives, 2005, v19(2,Spring), 33-55.
Abstract: Governments around the world have enacted or are currently considering fundamental structural reforms of their Social Security pension programs. The key feature in these reforms is a shift from a pure pay-as-you-go tax-financed system, in which taxes on current workers are primarily distributed to current retirees, to a mixed system that combines pay-as-you-go benefits with investment-based personal retirement accounts. This paper discusses how such a mixed system could work in practice and how the transition to such a change could be achieved. It then analyzes the economic gains that would result from shifting to a mixed system. I turn next to the three problems that critics raise about any investment-based plan: administrative costs, risk, and income distribution. Finally, I comment on some of the ad hoc proposals for dealing with the financial problem of Social Security without shifting to an investment-based system.
Handle: RePEc:nbr:nberwo:11098
Template-Type: ReDIF-Paper 1.0
Title: Health Insurance, Treatment and Outcomes: Using Auto Accidents as Health Shocks
Classification-JEL: I11
Author-Name: Joseph J. Doyle Jr.
Note: EFG EH
Number: 11099
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11099
File-URL: http://www.nber.org/papers/w11099.pdf
File-Format: application/pdf
Publication-Status: published as Doyle Jr., Joseph J. "Health Insurance, Treatment, and Outcomes: Using Auto Accidents as Health Shocks." Review of Economics and Statistics 87, 2 (May 2005): 256-270.
Abstract: Previous studies find that the uninsured receive less health care than the insured, yet differences in health outcomes have rarely been studied. In addition, selection bias may partly explain the difference in care received. This paper focuses on an unexpected health shock -- severe automobile accidents where victims have little choice but to visit a hospital. Another innovation is the use of a comparison group that is similar to the uninsured: those who have private health insurance but do not have automobile insurance. The medically uninsured are found to receive twenty percent less care and have a substantially higher mortality rate.
Handle: RePEc:nbr:nberwo:11099
Template-Type: ReDIF-Paper 1.0
Title: What Explains Differences in Smoking, Drinking and Other Health-Related Behaviors
Classification-JEL: I2
Author-Name: David Cutler
Author-Person: pcu64
Author-Name: Edward Glaeser
Author-Person: pgl9
Note: EH AG
Number: 11100
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11100
File-URL: http://www.nber.org/papers/w11100.pdf
File-Format: application/pdf
Publication-Status: published as Cutler, David M. and Edward Glaeser. "What Explains Differences In Smoking, Drinking, And Other Health-Related Behaviors?," American Economic Review, 2005, v95(2,May), 238-242.
Abstract: We explore economic model of health behaviors. While the standard economic model of health as an investment is generally supported empirically, the ability of this model to explain heterogeneity across individuals is extremely limited. Most prominently, the correlation of different health behaviors across people is virtually zero, suggest that standard factors such as variation in discount rates or the value of life are not the drivers of behavior. We focus instead on two other factors: genetics; and behavioral-specific situational factors. The first factor is empirically important, and we suspect the second is as well.
Handle: RePEc:nbr:nberwo:11100
Template-Type: ReDIF-Paper 1.0
Title: Social Security Privatization with Elastic Labor Supply and Second-Best Taxes
Classification-JEL: H0; H2
Author-Name: Kent Smetters
Author-Person: psm21
Note: AG PE
Number: 11101
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11101
File-URL: http://www.nber.org/papers/w11101.pdf
File-Format: application/pdf
Abstract: This paper shows that many common methods of privatizing social security fail to reduce labor market distortions when taxes are second best, challenging a key reason to privatize. Ironically, providing "transition relief" to workers alive at the time of the reform, in an effort to protect their previous contributions, undercuts potential efficiency gains. Chile's reform -- the first major privatization that also served as a model for other countries -- actually increased labor market distortions. It is then shown that privatization with limited transition relief can reduce labor market distortions and produce gains to current and future generations without hurting initial retirees, i.e., a Pareto gain, even with second-best taxes.
Handle: RePEc:nbr:nberwo:11101
Template-Type: ReDIF-Paper 1.0
Title: Money Growth and Interest Rates
Classification-JEL: E43; E44; E52
Author-Name: Seok-Kyun Hur
Note: IFM
Number: 11102
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11102
File-URL: http://www.nber.org/papers/w11102.pdf
File-Format: application/pdf
Publication-Status: published as Ito, Takatoshi and Andrew K. Rose (eds.) Monetary Policy with Very Low Inflation in the Pacific Rim NBER-East Asia Seminar on Economics, vol. 15. Chicago and London: University of Chicago Press, 2006.
Publication-Status: published as Money Growth and Interest Rates, Seok-Kyun Hur. in Monetary Policy with Very Low Inflation in the Pacific Rim, Ito and Rose. 2006
Abstract: Our paper explores a transmission mechanism of monetary policy through bond market. Based on the assumption of delayed responses of economic agents to monetary shocks, we derive a system of equations relating the term structure of interest rates with the past history of money growth rates and test the equations with the US data. Our results confirm that the higher ordered moments of money growth rate(converted from the past history of money growth rates) influence the yields of bonds with various maturities in different timing as well as in different magnitudes and monetary policy targeting a certain shape of the term structure of interest rates could be implemented with certain time lags due to path-dependency of interest rates.
Handle: RePEc:nbr:nberwo:11102
Template-Type: ReDIF-Paper 1.0
Title: Implications of Alternative Operational Risk Modeling Techniques
Classification-JEL: G2
Author-Name: Patrick de Fontnouvelle
Author-Name: John Jordan
Author-Name: Eric Rosengren
Note: AP
Number: 11103
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11103
File-URL: http://www.nber.org/papers/w11103.pdf
File-Format: application/pdf
Publication-Status: published as Carey, Mark and Rene M. Stulz (eds.) The Risks of Financial Institutions A National Bureau of Economic Research Conference Report. Chicago and London: University of Chicago Press, 2006.
Publication-Status: published as Implications of Alternative Operational Risk Modeling Techniques, Patrick de Fontnouvelle, Eric Rosengren, John Jordan. in The Risks of Financial Institutions, Carey and Stulz. 2006
Abstract: Quantification of operational risk has received increased attention with the inclusion of an explicit capital charge for operational risk under the new Basle proposal. The proposal provides significant flexibility for banks to use internal models to estimate their operational risk, and the associated capital needed for unexpected losses. Most banks have used variants of value at risk models that estimate frequency, severity, and loss distributions. This paper examines the empirical regularities in operational loss data. Using loss data from six large internationally active banking institutions, we find that loss data by event types are quite similar across institutions. Furthermore, our results are consistent with economic capital numbers disclosed by some large banks, and also with the results of studies modeling losses using publicly available "external" loss data.
Handle: RePEc:nbr:nberwo:11103
Template-Type: ReDIF-Paper 1.0
Title: The Cross-Section of Currency Risk Premia and US Consumption Growth Risk
Classification-JEL: G0; F3
Author-Name: Hanno Lustig
Author-Person: plu17
Author-Name: Adrien Verdelhan
Author-Person: pve80
Note: AP IFM
Number: 11104
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11104
File-URL: http://www.nber.org/papers/w11104.pdf
File-Format: application/pdf
Publication-Status: published as Hanno Lustig & Adrien Verdelhan, 2007. "The Cross Section of Foreign Currency Risk Premia and Consumption Growth Risk," American Economic Review, American Economic Association, vol. 97(1), pages 89-117, March.
Abstract: Aggregate consumption growth risk explains why low interest rate currencies do not appreciate as much as the interest rate differential and why high interest rate currencies do not depreciate as much as the interest rate differential. We sort foreign T-bills into portfolios based on the nominal interest rate differential with the US, and we test the Euler equation of a US investor who invests in these currency portfolios. US investors earn negative excess returns on low interest rate currency portfolios and positive excess returns on high interest rates currency portfolios. We find that low interest rate currencies provide US investors with a hedge against US aggregate consumption growth risk, because these currencies appreciate on average when US consumption growth is low, while high interest rate currencies depreciate when US consumption growth is low. As a result, the risk premia predicted by the Consumption-CAPM match the average excess returns on these currency portfolios.
Handle: RePEc:nbr:nberwo:11104
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy, Asset-Price Bubbles and the Zero Lower Bound
Classification-JEL: E32; E52; E60
Author-Name: Tim Robinson
Author-Person: pro719
Author-Name: Andrew Stone
Note: ME
Number: 11105
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11105
File-URL: http://www.nber.org/papers/w11105.pdf
File-Format: application/pdf
Publication-Status: published as Ito, Takatoshi and Andrew K. Rose (eds.) Monetary Policy with Very Low Inflation in the Pacific Rim, NBER-East Asia Seminar on Economics vol. 15. Chicago and London: University of Chicago Press, 2006.
Publication-Status: published as Monetary Policy, Asset-Price Bubbles, and the Zero Lower Bound, Tim Robinson, Andrew Stone. in Monetary Policy with Very Low Inflation in the Pacific Rim, Ito and Rose. 2006
Abstract: We use a simple model of a closed economy to study the recommendations of monetary policy-makers, attempting to respond optimally to an asset-price bubble whose stochastic properties they understand. We focus on the impact which the zero lower bound (ZLB) on nominal interest rates has on the recommendations of such policy-makers. For a given target inflation rate, we identify several different forms of `insurance' which policy-makers could potentially take out against encountering the ZLB due to the future bursting of a bubble. Even with perfect knowledge of the bubble process, however, which of these will be optimal varies from one type of bubble to another and, for certain bubbles, from one period to the next. It is therefore difficult to say whether the ZLB should cause policy-makers to operate policy more tightly or loosely than they would otherwise do, while a bubble is growing -- even after abstracting from the informational difficulties they face in practice. We also examine the implications of the ZLB for policy-makers' preferences as to their inflation target. Policy-makers who wish to avoid concerns about the ZLB should take care not to set too low a target -- especially if the neutral real interest rate is low.
Handle: RePEc:nbr:nberwo:11105
Template-Type: ReDIF-Paper 1.0
Title: The Architecture of the System of National Accounts: A Three Country Comparison, Canada, Australia, and United Kingdom
Classification-JEL: C82; E20
Author-Name: Karen Wilson
Note: EFG
Number: 11106
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11106
File-URL: http://www.nber.org/papers/w11106.pdf
File-Format: application/pdf
Publication-Status: published as Karen Wilson, 2006. "The Architecture of the System of National Accounts: A Three-Way International Comparison of Canada, Australia, and the United Kingdom," NBER Chapters, in: A New Architecture for the U.S. National Accounts, pages 113-142 National Bureau of Economic Research, Inc.
Abstract: This paper summarizes the characteristics of the System of National Accounts as outlined in SNA93. It outlines the elements of infrastructure used to build the accounts and then describes the flow of accounts and supply and use framework used to construct integrated macro economic statistics. Three countries are then compared in the use of this standard; Australia, Canada and the United Kingdom. Each of the three countries uses the Supply and Use framework (variant of Input Output tables) as the key integrating tool for building the system of accounts and GDP benchmarks are determined using the "production" approach inherent in the Supply and Use framework. In Australia and United Kingdom, the supply and use framework is used to balance and benchmark the flow of accounts up to and including the measures of net lending/borrowing across the institutional sectors of the economy. In Canada the supply and use framework is used to determine the level of GDP but not all of the components of the flow of accounts are benchmarked to it, leaving statistical discrepancies between incomes and final expenditures and net lending/borrowing across sectors. This allows Canada to track the statistical system which provides independent estimates form establishment or kind of activity unit data (industry statistics) and institutional unit (savings and investment decision unit -- enterprise in the case of businesses) data used to build accounts by institutional sector. In particular, it allows coherence and coverage analysis of the data system. In all three countries, the financial accounts and balance sheets are integrated with the flow of accounts. Statistical discrepancies are shown in all countries between net lending/borrowing and net financial investment by institutional sector. None of the three countries publishes regular "other volume changes in assets" accounts although all recognize it as a part of the system which is more and more important to explaining wealth changes. Finally the paper ends with some summary comparisons of the three countries' systems of accounts and recognizes that while they all follow international standards to high degree, differences still exist which may or may not effect international comparability. International coordination is the key to making the standard meet this purpose. The United Kingdom system, as an example of the European system, best meets the standard for international comparison purposes.
Handle: RePEc:nbr:nberwo:11106
Template-Type: ReDIF-Paper 1.0
Title: The Integration of the Canadian Productivity Accounts within the System of National Accounts: Current Status and Challenges Ahead
Classification-JEL: C67; E22; O47
Author-Name: John R. Baldwin
Author-Name: Tarek Harchaoui
Author-Person: pha216
Note: EFG
Number: 11107
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11107
File-URL: http://www.nber.org/papers/w11107.pdf
File-Format: application/pdf
Publication-Status: published as The Integration of the Canadian Productivity Accounts within the System of National Accounts: Current Status and Challenges Ahead, John R. Baldwin, Tarek M. Harchaoui. in A New Architecture for the US National Accounts, Jorgenson, Landefeld, and Nordhaus. 2006
Abstract: A statistical agency faces several challenges in building Productivity Accounts. What started out as a request for simple ratios of output to employment has moved to a demand for multifactor (total factor) productivity measures that take into account both labor and capital inputs, the compositional changes in both, and price corrections for the changing quality of outputs. The challenge that faces users of productivity measures is that many series often exist within statistical agencies that can be used on an ad hoc basis by outsiders to generate productivity estimates; however, these series often generate conflicting estimates. Only by pulling together data into one coherent consistent framework can the statistical agency solve the problem of "multiple" stories. This can be done by developing a set of Productivity Accounts that are part of an integrated system of National Accounts. This paper discusses the challenges that a statistical agency faces in this area -- as illustrated by the Canadian experience. First, it examines the progress that has been made in developing a system that integrates the Productivity Accounts into the overall System of National Accounts. It also discusses deficiencies that still need to be overcome. The paper notes that integration provides not only benefits when it comes to the construction of productivity estimates, but also a means of quality control for the National Accounts. Productivity accounts bring together data on outputs, materials inputs, labor and capital. By confronting one series with another, the process of constructing productivity accounts provides a valuable means of quality assessment. It also helps to identify and fill data gaps. An integrated set of productivity accounts enhances the quality of the SNA through improvements in accuracy, coherence, relevance, and interpretability. Finally, the paper focuses on the need to consider whether the SNA manual should be extended into the area of productivity measurement. International comparisons of GDP have benefited immensely by the development of international standards over the last half-century. But productivity is not a central focus of the 1993 SNA. The paper argues that the advantage of integrating productivity accounts into the general accounts is sufficiently great that it is time to include more detail on the nature of productivity accounts in the general SNA framework.
Handle: RePEc:nbr:nberwo:11107
Template-Type: ReDIF-Paper 1.0
Title: Property Tax Limitations and Mobility: The Lock-in Effect of California's Proposition 13
Classification-JEL: H2; R2; H7; K2
Author-Name: Nada Wasi
Author-Person: pwa475
Author-Name: Michelle J. White
Author-Person: pwh52
Note: LE LS PE
Number: 11108
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11108
File-URL: http://www.nber.org/papers/w11108.pdf
File-Format: application/pdf
Publication-Status: published as Nada Wasi & Michelle J. White, 2005. "Property Tax Limitations and Mobility: Lock-in Effect of California's Proposition 13," Brookings-Wharton Papers on Urban Affairs, vol 2005(1), pages 59-97.
Abstract: Proposition 13, adopted by California voters in 1978, mandates a property tax rate of one percent, requires that properties be assessed at market value at the time of sale, and allows assessments to rise by no more than 2% per year until the next sale. In this paper, we examine how Prop 13 has affected the average tenure length of owners and renters in California versus in other states. We find that from 1970 to 2000, the average tenure length of owners and renters in California increased by 1.04 years and .79 years, respectively, relative to the comparison states. We also find substantial variation in the response to Prop 13, with African-American households responding more than households of other races and migrants responding more than native-born households. Among owner-occupiers, the response to Prop 13 increases sharply as the size of the subsidy rises. Homeowners living in inland California cities such as Bakersfield receive Prop 13 subsidies averaging only $110/year and their average tenure length increased by only .11 years in 2000, but owners living in coastal California cities receive Prop 13 subsidies averaging in the thousands of dollars and their average tenure length increased by 2 to 3 years.
Handle: RePEc:nbr:nberwo:11108
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Impact of Medical Innovation: A Case Study of HIV Antiretroviral Treatments
Classification-JEL: H51; I12; I18
Author-Name: Mark G. Duggan
Author-Person: pdu194
Author-Name: William N. Evans
Author-Person: pev28
Note: EH
Number: 11109
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11109
File-URL: http://www.nber.org/papers/w11109.pdf
File-Format: application/pdf
Publication-Status: published as Mark Duggan & William Evans, 2008. "Estimating the Impact of Medical Innovation: A Case Study of HIV Antiretroviral Treatments," Forum for Health Economics & Policy, Berkeley Electronic Press, vol. 11(2), pages 1102-1102.
Abstract: As health care consumes a growing share of national income in the U.S., the demand for better estimates regarding both the benefits and the costs of new health care treatments is likely to increase. Estimating these effects with observational data is difficult given the endogeneity of treatment decisions. But because the random assignment clinical trials (RACTs) used in the FDA's approval process do not consider costs, there is often no good alternative. In this study we use administrative data from the Medicaid program to estimate the impact of a particular category of new treatments - HIV antiretroviral drugs - on health care spending and health outcomes. We use the detailed information on health care utilization to proxy for health status and exploit the differential take-up of ARVs following their FDA approval. Our estimate of a 70 percent reduction in mortality is in line with the results from RACTs and with studies that had more detailed clinical data. We also find that the ARVs lowered short-term health care spending by reducing expenditures on other categories of medical care. Combining these two effects we estimate the cost per life year saved at $22,000. Our results suggest that the administrative data that is readily available from programs like Medicaid, used with a properly specified econometric model that allows for heterogeneity in take-up rates and in effectiveness based on initial health conditions, can produce reliable estimates of the impact of new health care treatments on both spending and health.
Handle: RePEc:nbr:nberwo:11109
Template-Type: ReDIF-Paper 1.0
Title: Testing out Contractual Incompleteness: Evidence from Soccer
Classification-JEL: L10; L20; L60; K0
Author-Name: Oriol Carbonell-Nicolau
Author-Name: Diego Comin
Author-Person: pco55
Note: CF EFG
Number: 11110
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11110
File-URL: http://www.nber.org/papers/w11110.pdf
File-Format: application/pdf
Abstract: The theory of incomplete contracting is rival to that of complete contracting as a frame of reference to understand contractual relationships. Both approaches rest upon diametrically opposed postulates and lead to very different policy conclusions. From a theoretical viewpoint, scrutiny of the postulates has revealed that both frameworks are reasonable. This paper designs and implements an empirical test to discern whether contracts are complete or incomplete. We analyze a problem where the parties' inability to commit not to renegotiate inefficiencies is sufficient for contractual incompleteness. We study optimal contracts with and without commitment and derive an exclusion restriction that is useful to identify the relevant commitment scenario. The empirical analysis takes advantage of a data set from Spanish soccer player contracts. Our test rejects the commitment hypothesis, which entails the acceptance of the existence of contractual incompleteness in the data. We argue that our conclusions should hold a fortiori in many other economic environments.
Handle: RePEc:nbr:nberwo:11110
Template-Type: ReDIF-Paper 1.0
Title: The Foreign Service and Foreign Trade: Embassies as Export Promotion
Classification-JEL: F13
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: ITI
Number: 11111
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11111
File-URL: http://www.nber.org/papers/w11111.pdf
File-Format: application/pdf
Publication-Status: published as Andrew K. Rose, 2007. "The Foreign Service and Foreign Trade: Embassies as Export Promotion," The World Economy, Blackwell Publishing, vol. 30(1), pages 22-38, 01.
Abstract: As communication costs fall, foreign embassies and consulates have lost much of their role in decision-making and information-gathering. Accordingly, foreign services are increasingly marketing themselves as agents of export promotion. I investigate whether exports are in fact systematically associated with diplomatic representation abroad. I use a recent cross-section of data covering twenty-two large exporters and two-hundred import destinations. Bilateral exports rise by approximately 6-10% for each additional consulate abroad, controlling for a host of other features including reverse causality. The effect varies by exporter, and is non-linear; consulates have smaller effects than the creation of an embassy.
Handle: RePEc:nbr:nberwo:11111
Template-Type: ReDIF-Paper 1.0
Title: Capital Account Liberalization, Institutional Quality and Economic Growth: Theory and Evidence
Classification-JEL: F32; F33; F36
Author-Name: Michael W. Klein
Author-Person: pkl9
Note: IFM
Number: 11112
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11112
File-URL: http://www.nber.org/papers/w11112.pdf
File-Format: application/pdf
Abstract: This paper shows that the effect of capital account liberalization on growth depends upon the environment in which that policy occurs. A theoretical model demonstrates the possibility of an inverted-U shaped relationship between the responsiveness of growth to capital account liberalization and institutional quality. Three empirical specifications based on the model are estimated using a panel of 71 countries. Estimates of all three specifications support the hypothesis of a non-monotonic interaction between the responsiveness of growth to capital account liberalization and institutional quality, with about one-quarter of the countries, those with better (but not the best) institutions exhibiting a statistically significant and economically meaningful effect of capital account openness on economic growth.
Handle: RePEc:nbr:nberwo:11112
Template-Type: ReDIF-Paper 1.0
Title: Schooling and the AFQT: Evidence from School Entry Laws
Classification-JEL: I20; J24; J15
Author-Name: Elizabeth U. Cascio
Author-Person: pca757
Author-Name: Ethan G. Lewis
Author-Person: ple579
Note: DAE
Number: 11113
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11113
File-URL: http://www.nber.org/papers/w11113.pdf
File-Format: application/pdf
Publication-Status: published as Cascio, Elizabeth U. and Ethan Lewis. “Schooling and the Armed Forces Qualifying Test: Evidence from School-Entry Laws.” The Journal of Human Resources 41, 2 (Spring 2006): 294-318.
Abstract: Is the Armed Forces Qualifying Test (AFQT) a measure of achievement or ability? The answer to this question is critical for drawing inferences from studies in which it is employed. In this paper, we test for a relationship between schooling and AFQT performance in the NLSY 79 by comparing test-takers with birthdays near state cutoff dates for school entry. We instrument for schooling at the test date with academic cohort - the year in which an individual should have entered first grade - in a model that allows age at the test date to have a direct effect on AFQT performance. This identification strategy reveals large impacts of schooling on the AFQT performance of racial minorities, providing support for the hypothesis that the AFQT measures school achievement.
Handle: RePEc:nbr:nberwo:11113
Template-Type: ReDIF-Paper 1.0
Title: The Cost of US Pharmaceutical Price Reductions: A Financial Simulation Model of R&D Decisions
Classification-JEL: I1; L1; L2; L5
Author-Name: Thomas A. Abbott
Author-Name: John A. Vernon
Note: EH PR
Number: 11114
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11114
File-URL: http://www.nber.org/papers/w11114.pdf
File-Format: application/pdf
Publication-Status: published as Thomas A. Abbott & John A. Vernon, 2007. "The cost of US pharmaceutical price regulation: a financial simulation model of R&D decisions," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 293-306.
Abstract: Previous empirical studies that have examined the links between pharmaceutical price controls, profits, cash flows, and investment in research and development (R&D) have been largely based on retrospective statistical analyses of firm- and/or industry-level data. These studies, which have contributed numerous insights and findings to the literature, relied upon ad hoc reduced-form model specifications. In the current paper we take a very different approach: a prospective micro-simulation approach. Using Monte Carlo techniques we model how future price controls in the U.S. will impact early-stage product development decisions in the pharmaceutical industry. This is done within the context of a net present value (NPV) framework that appropriately reflects the uncertainty associated with R&D project technical success, development costs, and future revenues. Using partial-information estimators calibrated with the most contemporary clinical and economic data available, we demonstrate how pharmaceutical price controls will significantly diminish the incentives to undertake early-stage R&D investment. For example, we estimate that cutting prices by 40 to 50 percent in the U.S. will lead to between 30 to 60 percent fewer R&D projects being undertaken (in early-stage development). Given the recent legislative efforts to control prescription drug prices in the U.S., and the likelihood that price controls will prevail as a result, it is important to better understand the firm response to such a regulatory change.
Handle: RePEc:nbr:nberwo:11114
Template-Type: ReDIF-Paper 1.0
Title: Testing for Ownership Mix Efficiency: The Case of the Nursing Home Industry
Classification-JEL: I1; L3; L2
Author-Name: Rexford E. Santerre
Author-Person: psa151
Author-Name: John A. Vernon
Note: EH
Number: 11115
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11115
File-URL: http://www.nber.org/papers/w11115.pdf
File-Format: application/pdf
Abstract: This paper offers an empirical test of ownership mix efficiency in the U.S. nursing home industry. We test to compare the benefits of quality assurance with the costs from the attenuation of property rights that result from an increased presence of nonprofit organizations. The empirical results suggest that too few nonprofit nursing homes may exist in the typical market area of the U.S. The policy implication is that more quality of care per dollar might be obtained by attracting a greater percentage of nonprofit nursing homes into most market areas.
Handle: RePEc:nbr:nberwo:11115
Template-Type: ReDIF-Paper 1.0
Title: Order Flow and the Formation of Dealer Bids: Information Flows and Strategic Behavior in the Government of Canada Securities Auctions
Classification-JEL: G1; L1
Author-Name: Ali Hortacsu
Author-Name: Samita Sareen
Note: IO
Number: 11116
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11116
File-URL: http://www.nber.org/papers/w11116.pdf
File-Format: application/pdf
Abstract: Is order-flow an important component of private information possessed by traders in government securities markets? Utilizing a detailed data set on Government of Canada securities auctions, we argue that the answer is yes. Direct participation in these auctions is limited to government securities dealers. However, non-dealer customers can also submit bids through dealers. We document patterns of strategic behavior by both sides of the market, dealers and customers, that support the hypothesis that customer bids provide valuable order-flow information to dealers. Dealer bids respond to privately observed customer bids, and dealers observing customer bid can predict the auction cutoff price better. Customers also respond strategically to dealers' use of the information contained in their bids.
Handle: RePEc:nbr:nberwo:11116
Template-Type: ReDIF-Paper 1.0
Title: The Globalization of Trade and Democracy, 1870-2000
Classification-JEL: F1; N0
Author-Name: J. Ernesto Lopez-Cordova
Author-Name: Christopher M. Meissner
Author-Person: pme45
Note: DAE ITI POL
Number: 11117
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11117
File-URL: http://www.nber.org/papers/w11117.pdf
File-Format: application/pdf
Abstract: We study whether international trade fosters democracy. The likely endogeneity between democracy and trade is addressed via the gravity model of trade, allowing us to obtain a measure of natural openness. This serves as our instrumental variable for actual trade openness à la Frankel and Romer (1999). We use this powerful instrument to obtain estimates of the causal impact of openness on democratization. A positive impact of openness on democracy is apparent from about 1895 onwards. Late nineteenth century trade globalization may have helped generate the "first wave" of democratization. Between 1920 and 1938 countries more exposed to international trade were less likely to become authoritarian. Finally, our post-World War II results suggest that a one standard deviation increase in trade with other countries could bring countries like Indonesia, Russia or Venezuela to be as democratic as the US, Great Britain or France. We also see some variation in the impact of openness by region and note that commodity exporters and petroleum producers do not seem to become more democratic by exporting more of such items.
Handle: RePEc:nbr:nberwo:11117
Template-Type: ReDIF-Paper 1.0
Title: An Integrated Model of Downtown Parking and Traffic Congestion
Classification-JEL: R4
Author-Name: Richard Arnott
Author-Person: par13
Author-Name: Eren Inci
Author-Person: pin10
Note: PE EEE
Number: 11118
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11118
File-URL: http://www.nber.org/papers/w11118.pdf
File-Format: application/pdf
Publication-Status: published as Arnott, Richard & Inci, Eren, 2006. "An integrated model of downtown parking and traffic congestion," Journal of Urban Economics, Elsevier, vol. 60(3), pages 418-442, November.
Abstract: This paper presents a downtown parking model that integrates traffic congestion and saturated on-street parking. We assume that the stock of cars cruising for parking adds to traffic congestion. Two major results come out from the model, one of which is robust. The robust one is that, whether or not the amount of on-street parking is optimal, it is efficient to raise the on-street parking fee to the point where cruising for parking is eliminated without parking becoming unsaturated. The other is that, if the parking fee is fixed at a sub-optimal level, it is second-best optimal to increase the amount of curbside allocated to parking until cruising for parking is eliminated without parking becoming unsaturated.
Handle: RePEc:nbr:nberwo:11118
Template-Type: ReDIF-Paper 1.0
Title: The Term Structure of the Risk-Return Tradeoff
Classification-JEL: G12
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Luis Viceira
Author-Person: pvi31
Note: AP
Number: 11119
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11119
File-URL: http://www.nber.org/papers/w11119.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, John Y. and Luis Viceira. "The Term Structure of the Risk-Return Tradeoff.” Financial Analysts Journal 61 (January/February 2005): 34-44.
Abstract: Recent research in empirical finance has documented that expected excess returns on bonds and stocks, real interest rates, and risk shift over time in predictable ways. Furthermore, these shifts tend to persist over long periods of time. In this paper we propose an empirical model that is able to capture these complex dynamics, yet is simple to apply in practice, and we explore its implications for asset allocation. Changes in investment opportunities can alter the risk-return tradeoff of bonds, stocks, and cash across investment horizons, thus creating a ``term structure of the risk-return tradeoff.'' We show how to extract this term structure from our parsimonious model of return dynamics, and illustrate our approach using data from the U.S. stock and bond markets. We find that asset return predictability has important effects on the variance and correlation structure of returns on stocks, bonds and T-bills across investment horizons.
Handle: RePEc:nbr:nberwo:11119
Template-Type: ReDIF-Paper 1.0
Title: Proprietary vs. Public Domain Licensing of Software and Research Products
Classification-JEL: O31; O34; L22; L86
Author-Name: Alfonso Gambardella
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Note: IO PR
Number: 11120
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11120
File-URL: http://www.nber.org/papers/w11120.pdf
File-Format: application/pdf
Publication-Status: published as Gambardella, Alfonso and Bronwyn H. Hall. "Proprietary Versus Public Domain Licensing Of Software And Research Products," Research Policy, 2006, v35(6,Jul), 875-892.
Abstract: We study the production of knowledge when many researchers or inventors are involved, in a setting where tensions can arise between individual public and private contributions. We first show that without some kind of coordination, production of the public knowledge good (science or research software or database) is sub-optimal. Then we demonstrate that if "lead" researchers are able to establish a norm of contribution to the public good, a better outcome can be achieved, and we show that the General Public License (GPL) used in the provision of open source software is one of such mechanisms. Our results are then applied to the specific setting where the knowledge being produced is software or a database that will be used by academic researchers and possibly by private firms, using as an example a product familiar to economists, econometric software. We conclude by discussing some of the ways in which pricing can ameliorate the problem of providing these products to academic researchers.
Handle: RePEc:nbr:nberwo:11120
Template-Type: ReDIF-Paper 1.0
Title: Social Security, Demographic Trends, and Economic Growth: Theory and Evidence from the International Experience
Classification-JEL: J1; O1
Author-Name: Isaac Ehrlich
Author-Person: peh1
Author-Name: Jinyoung Kim
Author-Person: pki140
Note: AG PE
Number: 11121
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11121
File-URL: http://www.nber.org/papers/w11121.pdf
File-Format: application/pdf
Publication-Status: published as "Social security and demographic trends: Theory and evidence from the international experience", Review of Economic Dynamics, Volume 10, Issue 1, January 2007, Pages 55-77
Abstract: The worldwide problem with pay-as-you-go (PAYG) social security systems isn't just financial. This study indicates that these systems may have exerted adverse effects on key demographic factors, private savings, and long-term growth rates. Through a comprehensive endogenous-growth model where human capital is the engine of growth, family choices affect human capital formation, and family formation itself is a choice variable, we show that social security taxes and benefits can create adverse incentive effects on family formation and subsequent household choices, and that these effects cannot be fully neutralized by counteracting intergenerational transfers within families. We implement the model using calibrated simulations as well as panel data from 57 countries over 32 years (1960-92). We find that PAYG tax measures account for a sizeable part of the downward trends in family formation and fertility worldwide, and for a slowdown in the rates of savings and economic growth, especially in OECD countries.
Handle: RePEc:nbr:nberwo:11121
Template-Type: ReDIF-Paper 1.0
Title: Junior is Rich: Bequests as Consumption
Classification-JEL: D91; D1; E2; E60; G11
Author-Name: George M. Constantinides
Author-Person: pco144
Author-Name: John B. Donaldson
Author-Name: Rajnish Mehra
Author-Person: pme56
Note: AP
Number: 11122
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11122
File-URL: http://www.nber.org/papers/w11122.pdf
File-Format: application/pdf
Publication-Status: published as George Constantinides & John Donaldson & Rajnish Mehra, 2007. "Junior is rich: bequests as consumption," Economic Theory, Springer, vol. 32(1), pages 125-155, July.
Abstract: We explore the consequences for asset pricing of admitting a bequest motive into an otherwise standard overlapping generations model where agents trade equity and perpetual debt securities. Prices of securities are seen to be approximately 50% higher in an economy with bequests as compared to an otherwise identical one where bequests are absent. Robust estimates of the equity premium are obtained in several cases where the desire to leave bequests is modest relative to the desire for old age consumption.
Handle: RePEc:nbr:nberwo:11122
Template-Type: ReDIF-Paper 1.0
Title: Understanding Strategic Bidding in Restructured Electricity Markets: A Case Study of ERCOT
Classification-JEL: L1; L2; L5; L9
Author-Name: Ali Hortacsu
Author-Name: Steven L. Puller
Author-Person: ppu28
Note: IO
Number: 11123
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11123
File-URL: http://www.nber.org/papers/w11123.pdf
File-Format: application/pdf
Publication-Status: published as Hortacsu, Ali and Steven Puller. “Understanding Strategic Bidding in Multi-Unit Auctions: A Case Study of the Texas Electricity Spot Market.” RAND Journal of Economics 39 (Spring 2008): 86-114.
Abstract: We examine the bidding behavior of firms competing on ERCOT, the hourly electricity balancing market in Texas. We characterize an equilibrium model of bidding into this uniform-price divisible-good auction market. Using detailed firm-level data on bids and marginal costs of generation, we find that firms with large stakes in the market performed close to theoretical benchmarks of static, profit-maximizing bidding derived from our model. However, several smaller firms utilized excessively steep bid schedules that deviated significantly from our theoretical benchmarks, in a manner that could not be empirically accounted for by the presence of technological adjustment costs, transmission constraints, or collusive behavior. Our results suggest that payoff scale matters in firms' willingness and ability to participate in complex, strategic market environments. Finally, although smaller firms moved closer to theoretical bidding benchmarks over time, their bidding patterns contributed to productive inefficiency in this newly restructured market, along with efficiency losses due to the close-to optimal exercise of market power by larger firms.
Handle: RePEc:nbr:nberwo:11123
Template-Type: ReDIF-Paper 1.0
Title: Does Educational Tracking Affect Performance and Inequality? Differences-in-Differences Evidence across Countries
Classification-JEL: I2
Author-Name: Eric A. Hanushek
Author-Person: pha97
Author-Name: Ludger Woessmann
Author-Person: pwo29
Note: CH ED
Number: 11124
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11124
File-URL: http://www.nber.org/papers/w11124.pdf
File-Format: application/pdf
Publication-Status: published as Eric A. Hanushek & Ludger Wössmann, 2006. "Does Educational Tracking Affect Performance and Inequality? Differences- in-Differences Evidence Across Countries," Economic Journal, Royal Economic Society, vol. 116(510), pages C63-C76, 03.
Abstract: Even though some countries track students into differing-ability schools by age 10, others keep their entire secondary-school system comprehensive. To estimate the effects of such institutional differences in the face of country heterogeneity, we employ an international differences-in-differences approach. We identify tracking effects by comparing differences in outcome between primary and secondary school across tracked and non-tracked systems. Six international student assessments provide eight pairs of achievement contrasts for between 18 and 26 cross-country comparisons. The results suggest that early tracking increases educational inequality. While less clear, there is also a tendency for early tracking to reduce mean performance. Therefore, there does not appear to be any equity-efficiency trade-off.
Handle: RePEc:nbr:nberwo:11124
Template-Type: ReDIF-Paper 1.0
Title: RECONSIDERING EXPECTATIONS OF ECONOMIC GROWTH AFTER
Classification-JEL: O10
Author-Name: Robert W. Fogel
Note: DAE EFG
Number: 11125
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11125
File-URL: http://www.nber.org/papers/w11125.pdf
File-Format: application/pdf
Publication-Status: published as Robert W. Fogel, 2005. "Reconsidering Expectations of Economic Growth After World War II from the Perspective of 2004," IMF Staff Papers, Palgrave Macmillan Journals, vol. 52(si), pages 2.
Abstract: At the close of World War II, there were wide-ranging debates about the future of economic developments. Historical experience has since shown that these forecasts were uniformly too pessimistic. Expectations for the American economy focused on the likelihood of secular stagnation; this topic continued to be debated throughout the post-World War II expansion. Concerns raised during the late 1960s and early 1970s about rapid population growth smothering the potential for economic growth in less developed countries were contradicted when during the mid- and late-1970s, fertility rates in third world countries began to decline very rapidly. Predictions that food production would not be able to keep up with population growth have also been proven wrong, as between 1961 and 2000 calories per capita worldwide have increased by 24 percent, despite the doubling of the global population. The extraordinary economic growth in Southeast and East Asia had also been unforeseen by economists.
Handle: RePEc:nbr:nberwo:11125
Template-Type: ReDIF-Paper 1.0
Title: Profitable Investments or Dissipated Cash? Evidence on the Investment-Cash Flow Relationship From Oil and Gas Lease Bidding
Classification-JEL: G3
Author-Name: Marianne Bertrand
Author-Person: pbe697
Author-Name: Sendhil Mullainathan
Author-Person: pmu103
Note: CF
Number: 11126
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11126
File-URL: http://www.nber.org/papers/w11126.pdf
File-Format: application/pdf
Abstract: The strong positive relationship between corporate cash flow and investment has been interpreted through the lens of both agency- and non-agency-based models. In this paper, we distinguish between these two interpretations using project-level data in the oil and gas industry. The specific projects we consider are auctioned-off leases that give mineral exploration rights to tracts of federal land. We find the standard positive relationship between investment and cash flow in this data, in that positive shocks to residual cash flow (netting out firm and time effects) are associated with higher spending on these leases. Interestingly, the increased investment comes from an increase in the price paid per tract with little to no change in the total number of tracts or total acreage of land bought. The positive association between price and cash flow holds even after controlling for a set of tract and firm characteristics that might be ex-ante related to expected return on a given tract. This data is most useful, however, because we can directly observe the eventual productivity of each of these projects. We find that the increase in price induced by higher cash flow is associated with lower average productivity. In fact, the total number of productive tracts does not increase with cash flow. In other words, while higher cash flow is associated with higher spending on these projects, higher cash flow does not lead to higher revenues from these projects. Combining this finding with the lack of a quantity response, we conclude that our results are best described by an agency model where managers use cash flow to simplify their job (or live a ``quiet life'') rather than ``empire-build.''
Handle: RePEc:nbr:nberwo:11126
Template-Type: ReDIF-Paper 1.0
Title: Vehicle Currency Use in International Trade
Classification-JEL: F3; F4
Author-Name: Linda S. Goldberg
Author-Person: pgo256
Author-Name: Cedric Tille
Author-Person: pti5
Note: IFM ME
Number: 11127
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11127
File-URL: http://www.nber.org/papers/w11127.pdf
File-Format: application/pdf
Publication-Status: published as Goldberg, Linda S. & Tille, Cédric, 2008. "Vehicle currency use in international trade," Journal of International Economics, Elsevier, vol. 76(2), pages 177-192, December.
Abstract: Although currency invoicing in international trade transactions is central to the transmission of monetary policy, the forces motivating the choice of currency have long been debated. We introduce a model wherein agents involved in international trade can invoice in the exporter's currency, the importer's currency, or a third-country vehicle currency. The model is designed to contrast the contribution of macroeconomic variability with that of industry-specific features in the selection of an invoice currency. We show that producers in industries with high demand elasticities are more likely than producers in other industries to display herding in their choice of currency. This industry-related force is more influential than local macroeconomic performance in determining producers' choices. Drawing on data on invoice currency use in exports and imports for twenty-four countries, we document that the dollar is the currency of choice for most transactions involving the United States. The dollar is also extensively used as a vehicle currency in international trade flows that do not directly involve the United States. Consistent with the results of our model, this last finding is largely attributable to international trade in reference-priced and organized-exchange traded goods. Although the magnitude of business-cycle volatility matters for invoicing of more differentiated products, it is less central for invoicing nondifferentiated goods.
Handle: RePEc:nbr:nberwo:11127
Template-Type: ReDIF-Paper 1.0
Title: Shirking, Sharing Risk, and Shelving: The Role of University License Contracts
Classification-JEL: D82; L14; O3
Author-Name: Marie Thursby
Author-Person: pth283
Author-Name: Jerry Thursby
Author-Person: pth25
Author-Name: Emmanuel Dechenaux
Author-Person: pde725
Note: PR
Number: 11128
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11128
File-URL: http://www.nber.org/papers/w11128.pdf
File-Format: application/pdf
Publication-Status: published as Dechenaux, Emmanuel & Thursby, Marie & Thursby, Jerry, 2009. "Shirking, sharing risk and shelving: The role of university license contracts," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 80-91, January.
Abstract: In this paper, we develop a theoretical model of university licensing to explain why university license contracts often include payment types that differ from the fixed fees and royalties typically examined by economists. Our findings suggest that milestone payments and annual payments are common because moral hazard, risk sharing, and adverse selection all play a role when embryonic inventions are licensed. Milestones address inventor moral hazard without the inefficiency inherent in royalties. The potential for a licensee to shelve inventions is an adverse selection problem which can be addressed by annual fees if shelving is unintentional, but may require an upfront fee if the firm licenses an invention with the intention to shelve it. Whether the licensing contract prevents shelving depends in part on the university credibly threatening to take the license back from a shelving firm. This supports the rationale for Bayh-Dole march-in rights but also shows the need for the exercise of these rights can be obviated by contracts.
Handle: RePEc:nbr:nberwo:11128
Template-Type: ReDIF-Paper 1.0
Title: Why Have Housing Prices Gone Up?
Classification-JEL: O2
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Joseph Gyourko
Author-Person: pgy3
Author-Name: Raven Saks
Note: EFG
Number: 11129
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11129
File-URL: http://www.nber.org/papers/w11129.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L., Joseph Gyourko and Raven E. Saks. "Why Have Housing Prices Gone Up?," American Economic Review, 2005, v95(2,May), 329-333.
Abstract: Since 1950, housing prices have risen regularly by almost two percent per year. Between 1950 and 1970, this increase reflects rising housing quality and construction costs. Since 1970, this increase reflects the increasing difficulty of obtaining regulatory approval for building new homes. In this paper, we present a simple model of regulatory approval that suggests a number of explanations for this change including changing judicial tastes, decreasing ability to bribe regulators, rising incomes and greater tastes for amenities, and improvements in the ability of homeowners to organize and influence local decisions. Our preliminary evidence suggests that there was a significant increase in the ability of local residents to block new projects and a change of cities from urban growth machines to homeowners' cooperatives.
Handle: RePEc:nbr:nberwo:11129
Template-Type: ReDIF-Paper 1.0
Title: Trends in Hours, Balanced Growth, and the Role of Technology in the Business Cycle
Classification-JEL: E32
Author-Name: Jordi Gali
Author-Person: pga43
Note: EFG
Number: 11130
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11130
File-URL: http://www.nber.org/papers/w11130.pdf
File-Format: application/pdf
Publication-Status: published as Gali, Jordi. "Trends In Hours, Balanced Growth, And The Role Of Technology In The Business Cycle," FRB St. Louis - Review, 2005, v87(4,Jul/Aug), 459-486.
Abstract: The present paper revisits a property embedded in most dynamic macroeconomic models: the stationarity of hours worked. First, I argue that, contrary to what is often believed, there are many reasons why hours could be nonstationary in those models, while preserving the property of balanced growth. Second, I show that the postwar evidence for most industrialized economies is clearly at odds with the assumption of stationary hours per capita. Third, I examine the implications of that evidence for the role of technology as a source of economic fluctuations in the G7 countries.
Handle: RePEc:nbr:nberwo:11130
Template-Type: ReDIF-Paper 1.0
Title: Evaluation of Exchange-Rate, Capital Market, and Dollarization Regimes in the Presence of Sudden Stops
Classification-JEL: F4
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Yona Rubinstein
Author-Person: pru68
Note: IFM
Number: 11131
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11131
File-URL: http://www.nber.org/papers/w11131.pdf
File-Format: application/pdf
Abstract: The literature has not being able to identify clear-cut real effects of exchange-rate regimes on output growth. Similarly, no definitive view emerges from the literature in regard to the effects of open capital markets on macroeconomic performance. The paper attributes the failure of the literature to fundamental flaws, consisting of ignoring non-linearities in the effects of exchange rate and capital-market liberalization regimes, on the macroeconomic performance. The paper develops a methodology consisting of accounting for the "crisis-prone state of the economy", summarized by a projected probability of crisis, due to sudden stops in international capital inflows. We apply the new methodology to a cross-country panel of 100 low and middle-income countries. Findings indicate that the effects of exchange rate regimes, and liberalization regimes, on macroeconomic performance go through two distinct channels: a direct channel via the real side of the economy, and an indirect channel via the financial side, which influences the probability of sudden stops. We also analyze how the projected probability of sudden stops affects the level of dollarization, and provide estimates for the effect of dollarization on growth.
Handle: RePEc:nbr:nberwo:11131
Template-Type: ReDIF-Paper 1.0
Title: The Market Price of Aggregate Risk and the Wealth Distribution
Classification-JEL: G0
Author-Name: Hanno Lustig
Author-Person: plu17
Author-Name: Yi-Li Chien
Author-Person: pch650
Note: AP
Number: 11132
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11132
File-URL: http://www.nber.org/papers/w11132.pdf
File-Format: application/pdf
Publication-Status: published as YiLi Chien & Hanno Lustig, 2010. "The Market Price of Aggregate Risk and the Wealth Distribution," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 23(4), pages 1596-1650, April.
Abstract: We introduce limited liability in a model with a continuum of ex ante identical agents who face aggregate and idiosyncratic income risk. These agents can trade a complete menu of contingent claims, but they cannot commit and shares in a Lucas tree serve as collateral to back up their state-contingent promises. The limited liability option gives rise to a second risk factor, in addition to aggregate consumption growth risk. This liquidity risk is created by binding solvency constraints, and it is measured by the growth rate of one moment of the wealth distribution. The economy is said to experience a negative liquidity shock when this growth rate is high and a large fraction of agents faces severely binding solvency constraints. The adjustment to the Breeden-Lucas stochastic discount factor induces substantial time variation in equity risk premia that is consistent with the data at business cycle frequencies.
Handle: RePEc:nbr:nberwo:11132
Template-Type: ReDIF-Paper 1.0
Title: Sudden Stops and Output Drops
Classification-JEL: F4; F41; E3; E32
Author-Name: V.V. Chari
Author-Person: pch40
Author-Name: Patrick Kehoe
Author-Person: pke4
Author-Name: Ellen R. McGrattan
Author-Person: pmc46
Note: EFG IFM
Number: 11133
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11133
File-URL: http://www.nber.org/papers/w11133.pdf
File-Format: application/pdf
Publication-Status: published as Chari, V. V., Patrick J. Kehoe and Ellen R. McGrattan. "Sudden Stops And Output Drops," American Economic Review, 2005, v95(2,May), 381-387.
Abstract: In recent financial crises and in recent theoretical studies of them, abrupt declines in capital inflows, or sudden stops, have been linked with large drops in output. Do sudden stops cause output drops? No, according to a standard equilibrium model in which sudden stops are generated by an abrupt tightening of a country's collateral constraint on foreign borrowing. In this model, in fact, sudden stops lead to output increases, not decreases. An examination of the quantitative effects of a well-known sudden stop, in Mexico in the mid-1990s, confirms that a drop in output accompanying a sudden stop cannot be accounted for by the sudden stop alone. To generate an output drop during a financial crisis, as other studies have done, the model must include other economic frictions which have negative effects on output large enough to overwhelm the positive effect of the sudden stop.
Handle: RePEc:nbr:nberwo:11133
Template-Type: ReDIF-Paper 1.0
Title: A Framework for Exploring the Macroeconomic Determinants of Systematic Risk
Classification-JEL: G12
Author-Name: Torben G. Andersen
Author-Name: Tim Bollerslev
Author-Person: pbo66
Author-Name: Francis X. Diebold
Author-Person: pdi1
Author-Name: Jin (Ginger) Wu
Note: AP EFG
Number: 11134
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11134
File-URL: http://www.nber.org/papers/w11134.pdf
File-Format: application/pdf
Publication-Status: published as Andersen, Torben G., Tim Bollerslev, Francis X. Diebold and Jin Wu. "A Framework For Exploring The Macroeconomic Determinants Of Systematic Risk," American Economic Review, 2005, v95(2,May), 398-404.
Abstract: We selectively survey, unify and extend the literature on realized volatility of financial asset returns. Rather than focusing exclusively on characterizing the properties of realized volatility, we progress by examining economically interesting functions of realized volatility, namely realized betas for equity portfolios, relating them both to their underlying realized variance and covariance parts and to underlying macroeconomic fundamentals.
Handle: RePEc:nbr:nberwo:11134
Template-Type: ReDIF-Paper 1.0
Title: How Does Job-Protected Maternity Leave Affect Mothers' Employment and Infant Health?
Classification-JEL: J13; J32
Author-Name: Michael Baker
Author-Person: pba400
Author-Name: Kevin Milligan
Author-Person: pmi14
Note: CH LS
Number: 11135
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11135
File-URL: http://www.nber.org/papers/w11135.pdf
File-Format: application/pdf
Publication-Status: published as Baker, Michael and Kevin Milligan. "How does job protected maternity leave affect mothers’ employment?” Journal of Labor Economics 26, 4 (October 2008): 655-692.
Abstract: Maternity leaves can affect mothers' and infants' welfare if they first affect the amount of time working women stay at home post birth. We provide new evidence of the labor supply effects of these leaves from an analysis of the introduction and expansion of job-protected maternity leave in Canada. The substantial variation in leave entitlements across mothers by time and space is likely exogenous to their unobserved characteristics. This is important because unobserved heterogeneity correlated with leave entitlement potentially biases many previous studies of this topic. We find that modest mandates of 17-18 weeks do not increase the time mothers spend at home. The physical demands of birth and private arrangements appear to render short mandates redundant. These mandates do, however, decrease the proportion of women quitting their jobs, increase leave taking, and increase the proportion returning to their pre-birth employers. In contrast, we find that expansions of job-protected leaves to lengths up to 70 weeks do increase the time spent at home (as well as leave-taking and job continuity). We also examine whether this increase in time at home affects infant health, finding no evidence of an effect on the incidence of low birth weight or infant mortality.
Handle: RePEc:nbr:nberwo:11135
Template-Type: ReDIF-Paper 1.0
Title: Smart Institutions, Foolish Choices? The Limited Partner Performance Puzzle
Classification-JEL: G1; G2
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: Antoinette Schoar
Author-Person: psc180
Author-Name: Wan Wong
Note: AP CF
Number: 11136
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11136
File-URL: http://www.nber.org/papers/w11136.pdf
File-Format: application/pdf
Publication-Status: published as Lerner, Josh, Antoinette Schoar and Wan Wong. "Smart Institutions, Foolish Choices?: The Limited Partner Performance Puzzle." Journal of Finance 62 (2007): 731-764.
Abstract: The returns that institutional investors realize from private equity investments differ dramatically across institutions. Using detailed and hitherto unexplored records of fund investors and performance, we document large heterogeneity in the performance of different classes of limited partners. In particular, endowments' annual returns are nearly 14% greater than average. Funds selected by investment advisors and banks lag sharply. These results are robust to controlling for the type and year of the investment, as well as to the use of different specifications. Analyses of reinvestment decisions and young funds suggest that the results are not primarily due to endowments' greater access to established funds. Finally, we examine the differences in the choice of intermediaries across various institutional investors and their relationship to success. We find that LPs that have higher average IRRs also tend to invest in older funds and have a smaller fraction of GPs in their geographic area, and that the performance of university endowments is correlated with measures of the quality and loyalty of the student body.
Handle: RePEc:nbr:nberwo:11136
Template-Type: ReDIF-Paper 1.0
Title: The U.S. Current Account and the Dollar
Classification-JEL: E3; F21; F32; F41
Author-Name: Olivier Blanchard
Author-Person: pbl2
Author-Name: Francesco Giavazzi
Author-Person: pgi18
Author-Name: Filipa Sa
Note: EFG IFM
Number: 11137
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11137
File-URL: http://www.nber.org/papers/w11137.pdf
File-Format: application/pdf
Publication-Status: published as Blanchard, Oliver, Francesco Giavazzi,and Filipa Sa. "International Investors, the U.S. Current Account, and the Dollar." Brookings Papers on Economic Activity 1 (2005): 1-49.
Abstract: There are two main forces behind the large U.S. current account deficits. First, an increase in the U.S. demand for foreign goods. Second, an increase in the foreign demand for U.S. assets. Both forces have contributed to steadily increasing current account deficits since the mid--1990s. This increase has been accompanied by a real dollar appreciation until late 2001, and a real depreciation since. The depreciation has accelerated recently, raising the questions of whether and how much more is to come, and if so, against which currencies, the euro, the yen, or the renminbi. Our purpose in this paper is to explore these issues. Our theoretical contribution is to develop a simple portfolio model of exchange rate and current account determination, and to use it to interpret the past and explore alternative scenarios for the future. Our practical conclusions are that substantially more depreciation is to come, surely against the yen and the renminbi, and probably against the euro.
Handle: RePEc:nbr:nberwo:11137
Template-Type: ReDIF-Paper 1.0
Title: Are Alcohol Excise Taxes Good For Us? Short and Long-Term Effects on Mortality Rates
Classification-JEL: I12
Author-Name: Philip J. Cook
Author-Person: pco30
Author-Name: Jan Ostermann
Author-Name: Frank A. Sloan
Author-Person: psl34
Note: EH
Number: 11138
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11138
File-URL: http://www.nber.org/papers/w11138.pdf
File-Format: application/pdf
Abstract: Regression results from a 30-year panel of the state-level data indicate that changes in alcohol-excise taxes cause a reduction in drinking and lower all-cause mortality in the short run. But those results do not fully capture the long-term mortality effects of a permanent change in drinking levels. In particular, since moderate drinking has a protective effect against heart disease in middle age, it is possible that a reduction in per capita drinking will result in some people drinking "too little" and dying sooner than they otherwise would. To explore that possibility, we simulate the effect of a one percent reduction in drinking on all-cause mortality for the age group 35-69, using several alternative assumptions about how the reduction is distributed across this population. We find that the long-term mortality effect of a one percent reduction in drinking is essentially nil.
Handle: RePEc:nbr:nberwo:11138
Template-Type: ReDIF-Paper 1.0
Title: Assessing Consumer Gains from a Drug Price Control Policy in the U.S.
Classification-JEL: I1; L5; K2
Author-Name: Rexford Santerre
Author-Person: psa151
Author-Name: John A. Vernon
Note: EH
Number: 11139
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11139
File-URL: http://www.nber.org/papers/w11139.pdf
File-Format: application/pdf
Publication-Status: published as Santerre, Rexford E. and John A. Vernon. "Assessing Consumer Gains From A Drug Price Control Policy In The United States," Southern Economic Journal, 2006, v73(1,Jul), 233-245.
Abstract: This paper uses national data for the period 1960 to 2000 to estimate an aggregate private consumer demand for pharmaceuticals in the U.S. The estimated demand curve is then used to simulate the value of consumer surplus gains from a drug price control regime that holds drug price increases to the same rate of growth as the general consumer price level over the time period from 1981 to 2000. Based upon a 7 percent real interest rate, we find that the future value of consumer surplus gains from this hypothetical policy would have been $319 billion at the end of 2000. According to a recent study, that same drug price control regime would have led to 198 fewer new drugs being brought to the U.S. market over this period. Therefore, we approximate that the average social opportunity cost per drug developed during this period to be approximately $1.6 billion. Recent research on the value of pharmaceuticals suggests that the social benefits of a new drug may be far greater than this estimated social opportunity cost.
Handle: RePEc:nbr:nberwo:11139
Template-Type: ReDIF-Paper 1.0
Title: Constraining Managers without Owners: Governance of the Not-for-Profit Enterprise
Classification-JEL: L30; G30; H40; K20
Author-Name: Mihir A. Desai
Author-Name: Robert J. Yetman
Note: CF PE
Number: 11140
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11140
File-URL: http://www.nber.org/papers/w11140.pdf
File-Format: application/pdf
Publication-Status: published as Mihir A. Desai & Robert J. Yetman, 2015. "Constraining Managers without Owners: Governance of the Not-for-Profit Enterprise," Journal of Governmental & Nonprofit Accounting, vol 4(1), pages 53-72.
Abstract: In the absence of owners, how effective are the constraints imposed by the state in promoting effective firm governance? This paper develops state-level indices of the legal and reporting rules facing not-for-profits and examines the effects of these rules on not-for-profit behavior. Stronger non-distribution constraints are associated with greater charitable expenditures and foundation payouts while more stringent reporting requirements are associated with lower insider compensation. The paper also examines how governance influences an alternative metric of not-for-profit performance -- the provision of social insurance. Stronger governance measures are associated with intertemporal smoothing of resources and greater activity in response to negative economic shocks.
Handle: RePEc:nbr:nberwo:11140
Template-Type: ReDIF-Paper 1.0
Title: The War Against Drug Producers
Classification-JEL: D74; K42
Author-Name: Herschel I. Grossman
Author-Name: Daniel Mejia
Author-Person: pme228
Note: EH PE
Number: 11141
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11141
File-URL: http://www.nber.org/papers/w11141.pdf
File-Format: application/pdf
Publication-Status: published as Herschel Grossman & Daniel Mejía, 2008. "The war against drug producers," Economics of Governance, Springer, vol. 9(1), pages 5-23, January.
Abstract: This paper develops a model of a war against the producers of illegal hard drugs. This war occurs on two fronts. First, to prevent the cultivation of crops that are the raw material for producing drugs the state engages the drug producers in conflict over the control of arable land. Second, to impede further the production and exportation of drugs the state attempts to eradicate crops and to interdict drug shipments. The model also includes an interested outsider who uses both a stick and a carrot to strengthen the resolve of the state in its war against drug producers. The results of the calibration of the model yield an estimate that from 2001 through 2003 subsidies from the United States to the Colombian armed forces under Plan Colombia caused a decrease in the exportation of drugs from Colombia to about 44 percent of what exportation was before Plan Colombia was implemented. The results of the calibration of the model also suggests that a more efficient allocation of the about $2 billion that the United States spent on Plan Colombia through 2003 would have involved larger subsidies to the conflict over control of arable land and smaller subsidies to eradication and interdiction efforts.
Handle: RePEc:nbr:nberwo:11141
Template-Type: ReDIF-Paper 1.0
Title: Lessons from the Technology of Skill Formation
Classification-JEL: J24; J31; I20
Author-Name: James J. Heckman
Note: ED LS
Number: 11142
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11142
File-URL: http://www.nber.org/papers/w11142.pdf
File-Format: application/pdf
Publication-Status: published as JAMES J. HECKMAN, 2004. "Lessons from the Technology of Skill Formation," Annals of the New York Academy of Sciences, vol 1038(1), pages 179-200.
Abstract: This paper discusses recent advances in our understanding of differences in human abilities and skills, their sources, and their evolution over the lifecycle.
Handle: RePEc:nbr:nberwo:11142
Template-Type: ReDIF-Paper 1.0
Title: Trade Protection and Industry Wage Structure in Poland
Classification-JEL: F16
Author-Name: Chor-ching Goh
Author-Person: pgo854
Author-Name: Beata Smarzynska Javorcik
Author-Person: pja78
Note: ITI LS
Number: 11143
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11143
File-URL: http://www.nber.org/papers/w11143.pdf
File-Format: application/pdf
Publication-Status: published as Trade Protection and Industry Wage Structure in Poland, Chor-ching Goh, Beata S. Javorcik. in Globalization and Poverty, Harrison. 2007
Abstract: This study examines the impact of Poland's trade liberalization 1994-2001 on the industry wage structure. The liberalization was undertaken in preparation for Poland's accession to the European Union and was more pronounced in industries with larger shares of unskilled labor. Our analysis indicates that a decrease in an industry tariff was associated with higher wages being earned by workers employed in the industry, controlling for worker characteristics and geographic variables. The result is robust to including year and industry fixed effects, controlling for industry-level exports, imports, concentration, stock of foreign direct investment and capital accumulation. The finding is consistent with liberalization increasing competitive pressures, forcing firms to restructure and improve their productivity, which in turn translates into higher profits being shared with workers. It could also be potentially attributed to trade liberalization lowering the costs of imported inputs which enhances firm profitability. The result holds when skilled workers are excluded from the sample, thus suggesting that reductions in trade barriers benefited the unskilled in terms of an increase in wages.
Handle: RePEc:nbr:nberwo:11143
Template-Type: ReDIF-Paper 1.0
Title: Why is Long-Horizon Equity Less Risky? A Duration-Based Explanation of the Value Premium
Classification-JEL: G1
Author-Name: Martin Lettau
Author-Person: ple572
Author-Name: Jessica Wachter
Author-Person: pwa346
Note: AP
Number: 11144
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11144
File-URL: http://www.nber.org/papers/w11144.pdf
File-Format: application/pdf
Publication-Status: published as Martin Lettau & Jessica A. Wachter, 2007. "Why Is Long-Horizon Equity Less Risky? A Duration-Based Explanation of the Value Premium," Journal of Finance, American Finance Association, vol. 62(1), pages 55-92, 02.
Abstract: This paper proposes a dynamic risk-based model that captures the high expected returns on value stocks relative to growth stocks, and the failure of the capital asset pricing model to explain these expected returns. To model the difference between value and growth stocks, we introduce a cross-section of long-lived firms distinguished by the timing of their cash flows. Firms with cash flows weighted more to the future have high price ratios, while firms with cash flows weighted more to the present have low price ratios. We model how investors perceive the risks of these cash flows by specifying a stochastic discount factor for the economy. The stochastic discount factor implies that shocks to aggregate dividends are priced, but that shocks to the time-varying price of risk are not. As long-horizon equity, growth stocks covary more with this time-varying price of risk than value stocks, which covary more with shocks to cash flows. When the model is calibrated to explain aggregate stock market behavior, we find that it can also account for the observed value premium, the high Sharpe ratios on value stocks relative to growth stocks, and the outperformance of value (and underperformance of growth) relative to the CAPM.
Handle: RePEc:nbr:nberwo:11144
Template-Type: ReDIF-Paper 1.0
Title: Financial Liberalization in Latin-America in the 1990s: A Reassessment
Classification-JEL: F21; F23; F36; F43
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: EFG ITI
Number: 11145
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11145
File-URL: http://www.nber.org/papers/w11145.pdf
File-Format: application/pdf
Publication-Status: published as Joshua Aizenman, 2005. "Financial Liberalisations in Latin America in the 1990s: A Reassessment," The World Economy, Blackwell Publishing, vol. 28(7), pages 959-983, 07.
Abstract: This paper studies the experience of Latin-America [LATAM] with financial liberalization in the 1990s. The rush towards financial liberalizations in the early 1990s was associated with expectations that external financing would alleviate the scarcity of saving in LATAM, thereby increasing investment and growth. Yet, the data and several case studies suggest that the gains from external financing are overrated. The bottleneck inhibiting economic growth is less the scarcity of saving, and more the scarcity of good governance. A possible interpretation for these findings is that in countries where private savings and investments were taxed in an arbitrary and unpredictable way, the credibility of a new regime could not be assumed or imposed. Instead, credibility must be acquired as an outcome of a learning process. Consequently, increasing the saving and investment rates tends to be a time consuming process. This also suggests that greater political instability and polarization would induce consumers to be more cautious in increasing their saving and investment rates following a reform. Hence, reaching a sustained take-off in Latin-America is a harder task to accomplish than in Asia.
Handle: RePEc:nbr:nberwo:11145
Template-Type: ReDIF-Paper 1.0
Title: Fertility and Social Security
Classification-JEL: E10; J10; J13; O10
Author-Name: Michele Boldrin
Author-Name: Mariacristina De Nardi
Author-Person: pde51
Author-Name: Larry E. Jones
Author-Person: pjo88
Note: AG EFG PE
Number: 11146
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11146
File-URL: http://www.nber.org/papers/w11146.pdf
File-Format: application/pdf
Publication-Status: published as Michele BOLDRIN & Mariacristina DE NARDI & Larry E. JONES, 2015. "Fertility and Social Security," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 81(3), pages 261-299, September.
Abstract: The data show that an increase in government provided old-age pensions is strongly correlated with a reduction in fertility. What type of model is consistent with this finding? We explore this question using two models of fertility, the one by Barro and Becker (1989), and the one inspired by Caldwell and developed by Boldrin and Jones (2002). In the Barro and Becker model parents have children because they perceive their children's lives as a continuation of their own. In the Boldrin and Jones' framework parents procreate because the children care about their old parents' utility, and thus provide them with old age transfers. The effect of increases in government provided pensions on fertility in the Barro and Becker model is very small, and inconsistent with the empirical findings. The effect on fertility in the Boldrin and Jones model is sizeable and accounts for between 55 and 65% of the observed Europe-US fertility differences both across countries and across time and over 80% of the observed variation seen in a broad cross-section of countries. Another key factor affecting fertility the Boldrin and Jones model is the access to capital markets, which can account for the other half of the observed change in fertility in developed countries over the last 70 years.
Handle: RePEc:nbr:nberwo:11146
Template-Type: ReDIF-Paper 1.0
Title: Why Inflation Rose and Fell: Policymakers' Beliefs and US Postwar Stabilization Policy
Classification-JEL: E31; E32; E5
Author-Name: Giorgio Primiceri
Author-Person: ppr18
Note: ME
Number: 11147
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11147
File-URL: http://www.nber.org/papers/w11147.pdf
File-Format: application/pdf
Publication-Status: published as Primiceri, Giorgio. “Why Inflation Rose and Fell: Policymakers’ Beliefs and US Postwar Stabilization Policy.” The Quarterly Journal of Economics 121 (August 2006): 867-901.
Abstract: This paper provides an explanation for the run-up of U.S. inflation in the 1960s and 1970s and the sharp disinflation in the early 1980s, which standard macroeconomic models have difficulties in addressing. I present a model in which rational policymakers learn about the behavior of the economy in real time and set stabilization policy optimally, conditional on their current beliefs. The steady state associated with the self-confirming equilibrium of the model is characterized by low inflation. However, prolonged episodes of high inflation ending with rapid disinflations can occur when policymakers underestimate both the natural rate of unemployment and the persistence of inflation in the Phillips curve. I estimate the model using likelihood methods. The estimation results show that the model accounts remarkably well for the evolution of policymakers' beliefs, stabilization policy and the postwar behavior of inflation and unemployment in the United States.
Handle: RePEc:nbr:nberwo:11147
Template-Type: ReDIF-Paper 1.0
Title: Investment Timing, Agency, and Information
Classification-JEL: E31; E32; E5
Author-Name: Steven R. Grenadier
Author-Name: Neng Wang
Author-Person: pwa390
Note: AP
Number: 11148
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11148
File-URL: http://www.nber.org/papers/w11148.pdf
File-Format: application/pdf
Publication-Status: published as Grenadier, Steven and Neng Wang. “Investment Timing, Agency and Information.” Journal of Financial Economics 75, 3 (2005): 493-533.
Abstract: This paper provides a model of investment timing by managers in a decentralized firm in the presence of agency conflicts and information asymmetries. When investment decisions are delegated to managers, contracts must be designed to provide incentives for managers to both extend effort and truthfully reveal private information. Using a real options approach, we show that an underlying option to invest can be decomposed into two components: a manager's option and an owner's option. The implied investment behavior differs significantly from that of the first-best no-agency solution. In particular, greater inertia occurs in investment, as the model predicts that the manager will have a more valuable option to wait than the owner.
Handle: RePEc:nbr:nberwo:11148
Template-Type: ReDIF-Paper 1.0
Title: Firm-Specific Capital and the New-Keynesian Phillips Curve
Classification-JEL: E30
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG ME
Number: 11149
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11149
File-URL: http://www.nber.org/papers/w11149.pdf
File-Format: application/pdf
Publication-Status: published as Michael Woodford, 2005. "Firm-Specific Capital and the New Keynesian Phillips Curve," International Journal of Central Banking, International Journal of Central Banking, vol. 1(2), September.
Abstract: A relation between inflation and the path of average marginal cost (often measured by unit labor cost) implied by the Calvo (1983) model of staggered pricing --- sometimes referred to as the "new-Keynesian Phillips curve"--- has been the subject of extensive econometric estimation and testing. Standard theoretical justifications of this form of aggregate-supply relation, however, either assume (i) the existence of a competitive rental market for capital services, so that the shadow cost of capital services is equated across firms and sectors at all points in time, despite the fact that prices are set at different times, or (ii) that the capital stock of each firm is constant, or at any rate exogenously given, and so independent of the firm's pricing decision. But neither assumption is realistic. The present paper examines the extent to which existing empirical specifications and interpretations of parameter estimates are compromised by reliance on either of these assumptions. The paper derives an aggregate-supply relation for a model with monopolistic competition and Calvo pricing in which capital is firm-specific and endogenous, and investment is subject to convex adjustment costs. The aggregate-supply relation is shown to again take the standard "new-Keynesian" form, but with an elasticity of inflation with respect to real marginal cost that is a different function of underlying parameters than in the simpler cases studied earlier. Thus the relations estimated in the empirical literature remain correctly specified under the assumptions proposed here, but the interpretation of the estimated elasticity is different; in particular, the implications of the estimated Phillips-curve slope for the frequency of price adjustment is changed. Assuming a rental market for capital results in a substantial exaggeration of the infrequency of price adjustment; assuming exogenous capital instead results in a smaller under-estimate.
Handle: RePEc:nbr:nberwo:11149
Template-Type: ReDIF-Paper 1.0
Title: Understanding Rules of Origin
Classification-JEL: F13; F15
Author-Name: Kala Krishna
Author-Person: pkr26
Note: ITI
Number: 11150
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11150
File-URL: http://www.nber.org/papers/w11150.pdf
File-Format: application/pdf
Publication-Status: published as Cadot, O., A. Estevadeordal, A. Suwa-Eisenmann and T. Verdier (eds.) The Origin of Goods: Rules of Origin in Regional Trade Agreements. Oxford University Press, 2006.
Abstract: This paper surveys recent work on the economic effects, both theoretical and empirical, of Rules of Origin (RoO) in a Free Trade Area (FTA).
Handle: RePEc:nbr:nberwo:11150
Template-Type: ReDIF-Paper 1.0
Title: Monetary and Fiscal Policy in a Liquidity Trap: The Japanese Experience 1999-2004
Classification-JEL: E31; E52; E58; E61; E62
Author-Name: Mitsuru Iwamara
Author-Name: Takeshi Kudo
Author-Name: Tsutomu Watanabe
Note: ME
Number: 11151
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11151
File-URL: http://www.nber.org/papers/w11151.pdf
File-Format: application/pdf
Publication-Status: published as Mitsuru Iwamura & Takeshi Kudo & Tsutomu Watanabe, 2005. "Monetary and fiscal policy in a liquidity trap: the Japanese experience 1999-2004," Proceedings, Federal Reserve Bank of San Francisco. Special Issue.
Publication-Status: published as Ito, Takatoshi and Andrew K. Rose. Monetary Policy with Very Low Inflation in the Pacific Rim NBER-East Asia Seminar on Economics, vol. 15. Chicago and London: University of Chicago Press, 2006.
Publication-Status: published as Monetary and Fiscal Policy in a Liquidity Trap: The Japanese Experience 1999-2004 , Mitsuru Iwamura, Takeshi Kudo, Tsutomu Watanabe. in Monetary Policy with Very Low Inflation in the Pacific Rim, Ito and Rose. 2006
Abstract: We characterize monetary and fiscal policy rules to implement optimal responses to a substantial decline in the natural rate of interest, and compare them with policy decisions made by the Japanese central bank and government in 1999-2004. First, we find that the Bank of Japan's policy commitment to continuing monetary easing until some prespecified conditions are satisfied lacks history dependence, a key feature of the optimal monetary policy rule. Second, the term structure of the interest rate gap (the spread between the actual real interest rate and its natural rate counterpart) was not downward sloping, indicating that the Bank of Japan's commitment failed to have su.cient influence on the market's expectations about the future course of monetary policy. Third, we find that the primary surplus in 1999-2004 was higher than predicted by the historical regularity, implying that the Japanese government deviated from the Ricardian rule toward fiscal tightening. These findings suggest that inappropriate conduct of monetary and fiscal policy during this period delayed the timing to escape from the liquidity trap.
Handle: RePEc:nbr:nberwo:11151
Template-Type: ReDIF-Paper 1.0
Title: Anticipating Artistic Success (or, How to Beat the Art Market): Lessons from History
Classification-JEL: J4
Author-Name: David W. Galenson
Note: LS AP
Number: 11152
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11152
File-URL: http://www.nber.org/papers/w11152.pdf
File-Format: application/pdf
Publication-Status: published as David Galenson, 2005. "Anticipating Artistic Success," World Economics, World Economics, Economic & Financial Publishing, PO Box 69, Henley-on-Thames, Oxfordshire, United Kingdom, RG9 1GB, vol. 6(2), pages 11-26, April.
Abstract: The recent history of modern art provides clues as to how important artists can be identified before their work becomes generally known. Advanced art has been dominated by conceptual innovators since the late 1950s, and the importance of formal art education in the training of leading artists has also increased during this period. A few schools have been particularly prominent. Auction market records reveal that during the past five decades the Yale School of Art has produced a series of graduates who have achieved great success commercially as well as critically. Recognizing Yale's role can allow collectors to identify important artists before they become widely recognized, and therefore before their early innovative work rises in value.
Handle: RePEc:nbr:nberwo:11152
Template-Type: ReDIF-Paper 1.0
Title: Sudden Stop, Financial Factors and Economic Collpase in Latin America: Learning from Argentina and Chile
Classification-JEL: F31; F32; F34; F41
Author-Name: Guillermo A. Calvo
Author-Person: pca694
Author-Name: Ernesto Talvi
Note: IFM
Number: 11153
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11153
File-URL: http://www.nber.org/papers/w11153.pdf
File-Format: application/pdf
Publication-Status: published as Serra, Narcis and Joseph E. Stiglitz (eds.) The Washington Consensus Reconsidered: Towards a New Global Governance (Initiative for Policy Dialogue Series). New York: Oxford University Press, 2008.
Abstract: This paper shows that the Russian 1998 crisis had a big impact on capital flows to Emerging Market Economies, EMs, especially in Latin America, and that the impact of the Russian shock differs quite markedly across EMs. To illustrate this statement, we compare the polar cases of Chile and Argentina. While Chile exhibited a significant economic slowdown after August 1998, it did not suffer the excruciating collapse suffered by Argentina, where even the payments system came to a full stop. We attribute their difference to the fact that Chile is more open to trade than Argentina, and that it appears to suffer much less from balance-sheet currency-denomination mismatch that was rampant in Argentina before the 2002 crisis (due to large domestic liability dollarization). The paper is essentially descriptive but is in line with and, thus, complements econometric studies like Calvo, Izquierdo and Mejia (NBER Working Paper 10520). The final section addresses policy issues in light of the paper's findings and conjectures.
Handle: RePEc:nbr:nberwo:11153
Template-Type: ReDIF-Paper 1.0
Title: The Market for Teacher Quality
Classification-JEL: I2; J4; H4
Author-Name: Eric A. Hanushek
Author-Person: pha97
Author-Name: John F. Kain
Author-Name: Daniel M. O'Brien
Author-Name: Steven G. Rivkin
Author-Person: pri265
Note: PE ED
Number: 11154
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11154
File-URL: http://www.nber.org/papers/w11154.pdf
File-Format: application/pdf
Abstract: Much of education policy focuses on improving teacher quality, but most policies lack strong research support. We use student achievement gains to estimate teacher value-added, our measure of teacher quality. The analysis reveals substantial variation in the quality of instruction, most of which occurs within rather than between schools. Although teacher quality appears to be unrelated to advanced degrees or certification, experience does matter -- but only in the first year of teaching. We also find that good teachers tend to be effective with all student ability levels but that there is a positive value of matching students and teachers by race. In the second part of the analysis, we show that teachers staying in our sample of urban schools tend to be as good as or better than those who exit. Thus, the main cost of large turnover is the introduction of more first year teachers. Finally, there is little or no evidence that districts that offer higher salaries and have better working conditions attract the higher quality teachers among those who depart the central city district. The overall results have a variety of direct policy implications for the design of school accountability and the compensation of teachers.
Handle: RePEc:nbr:nberwo:11154
Template-Type: ReDIF-Paper 1.0
Title: International Financial Adjustment
Classification-JEL: F3
Author-Name: Pierre-Olivier Gourinchas
Author-Person: pgo28
Author-Name: Helene Rey
Author-Person: pre8
Note: IFM AP
Number: 11155
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11155
File-URL: http://www.nber.org/papers/w11155.pdf
File-Format: application/pdf
Publication-Status: published as Pierre-Olivier Gourinchas & Hélène Rey, 2005. "International financial adjustment," Proceedings, Federal Reserve Bank of San Francisco.
Publication-Status: published as Gourinchas, Pierre-Olivier & Hélène Rey. "International Financial Adjustment." Journal of Political Economy 115, 4 August (2007): 665-703.
Abstract: The paper proposes a unified framework to study the dynamics of net foreign assets and exchange rate movements. We show that deteriorations in a country's net exports or net foreign asset position have to be matched either by future net export growth (trade adjustment channel) or by future increases in the returns of the net foreign asset portfolio (hitherto unexplored financial adjustment channel). Using a newly constructed data set on US gross foreign positions, we find that stabilizing valuation effects contribute as much as 31% of the external adjustment. Our theory also has asset pricing implications. Deviations from trend of the ratio of net exports to net foreign assets predict net foreign asset portfolio returns one quarter to two years ahead and net exports at longer horizons. The exchange rate affects the trade balance and the valuation of net foreign assets. It is forecastable in and out of sample at one quarter and beyond. A one standard deviation decrease of the ratio of net exports to net foreign assets predicts an annualized 4% depreciation of the exchange rate over the next quarter.
Handle: RePEc:nbr:nberwo:11155
Template-Type: ReDIF-Paper 1.0
Title: The Rules of Standard Setting Organizations: An Empirical Analysis
Classification-JEL: L2; O3
Author-Name: Benjamin Chiao
Author-Person: pch653
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: Jean Tirole
Author-Person: pti33
Note: CF PR
Number: 11156
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11156
File-URL: http://www.nber.org/papers/w11156.pdf
File-Format: application/pdf
Publication-Status: published as Chiang, Benjamin, Josh Lerner, and Jean Tirole. "The Rules of Standard Setting Organizations: An Empirical Analysis" Rand Journal of Economics 38 (2007): 905 - 930.
Abstract: This paper empirically explores the procedures employed by standard-setting organizations. Consistent with Lerner-Tirole (2004), we find (a) a negative relationship between the extent to which an SSO is oriented to technology sponsors and the concession level required of sponsors and (b) a positive correlation between the sponsor-friendliness of the selected SSO and the quality of the standard. We also develop and test two extensions of the earlier model: the presence of provisions mandating royalty-free licensing is negatively associated with disclosure requirements, and when there are only a limited number of SSOs, the relationship between concessions and user friendliness is weaker.
Handle: RePEc:nbr:nberwo:11156
Template-Type: ReDIF-Paper 1.0
Title: An Improved Annual Chronology of U.S. Business Cycles since the 1790's
Classification-JEL: N1; E3
Author-Name: Joseph H. Davis
Note: DAE
Number: 11157
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11157
File-URL: http://www.nber.org/papers/w11157.pdf
File-Format: application/pdf
Publication-Status: published as Davis, Joseph H. "An Improved Annual Chronology Of US Business Cycles Since The 1790s," Journal of Economic History, 2006, v66(1,Mar), 103-121.
Abstract: The NBER's pre-WWI chronology of annual peaks and troughs has the remarkable implication that the U.S. economy spent nearly every other year in recession, although previous research has argued that the post-Civil War dates are flawed. This paper extends that research by redating annual peaks and troughs for the entire 1796-1914 period using a single metric: Davis' (2004) annual industrial production index. The new pre-WWI chronology alters more than 40% of the peak and troughs, and removes cycles long considered the most questionable. An important implication of the new chronology is the lack of discernible differences in the frequency and duration of industrial cycles among the pre-Civil War, Civil War to WWI, and post-WWII periods. Of course, my comparison between pre-WWI and post-WWII cycles is limited by its reliance on a single annual index (as opposed to many monthly series) that is less comprehensive than GDP.
Handle: RePEc:nbr:nberwo:11157
Template-Type: ReDIF-Paper 1.0
Title: Outsourcing and Technological Change
Classification-JEL: M55; O33
Author-Name: Ann Bartel
Author-Name: Saul Lach
Author-Person: pla110
Author-Name: Nachum Sicherman
Note: LS PR
Number: 11158
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11158
File-URL: http://www.nber.org/papers/w11158.pdf
File-Format: application/pdf
Abstract: In this paper we argue that an important source of the recent increase in outsourcing is the computer and information technology revolution, characterized by increased rates of technological change. Our model shows that an increase in the pace of technological change increases outsourcing because it allows firms to use services based on leading edge technologies without incurring the sunk costs of adopting these new technologies. In addition, firms using more IT-intensive technologies face lower outsourcing costs of IT-based services generating a positive correlation between the IT level of the user and its outsourcing share of IT-based services. This implication is verified in the data.
Handle: RePEc:nbr:nberwo:11158
Template-Type: ReDIF-Paper 1.0
Title: Selection, Investment, and Women's Relative Wages Since 1975
Classification-JEL: J24; J31; J16; C34
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Author-Name: Yona Rubinstein
Author-Person: pru68
Note: LS
Number: 11159
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11159
File-URL: http://www.nber.org/papers/w11159.pdf
File-Format: application/pdf
Abstract: In theory, growing wage inequality within gender should cause women to invest more in their market productivity and should differentially pull able women into the workforce, thereby closing the measured gender gap even though women's wages might have grown less than men's had their behavior been held constant. Using the CPS repeated cross-sections between 1975 and 2001, we use control function (Heckit) methods to correct married women's conditional mean wages for selectivity and investment biases. Our estimates suggest that selection of women into the labor market has changed sign, from negative to positive, or at least that positive selectivity bias has come to overwhelm investment bias. The estimates also explain why measured women's relative wage growth coincided with growth of wage inequality within-gender, and attribute the measured gender wage gap closure to changing selectivity and investment biases, rather than relative increases in women's earning potential. Using PSID waves 1975-93 to control for the changing female workforce with person-fixed effects, we also find little growth in women's mean log wages. Finally, we make a first attempt to gauge the relative importance of selection versus investment biases, by examining the family and cognitive backgrounds of members of the female workforce. PSID, NLS, and NLSY data sets show how the cross-section correlation between female employment and family/cognitive background has changed from "negative" to "positive" over the last thirty years, in amounts that might be large enough to attribute most of women's relative wage growth to changing selectivity bias.
Handle: RePEc:nbr:nberwo:11159
Template-Type: ReDIF-Paper 1.0
Title: The Labor Market Effects of Rising Health Insurance Premiums
Classification-JEL: I1; J0; J3
Author-Name: Katherine Baicker
Author-Name: Amitabh Chandra
Author-Person: pch893
Note: EH LS PE AG
Number: 11160
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11160
File-URL: http://www.nber.org/papers/w11160.pdf
File-Format: application/pdf
Publication-Status: published as Baicker, Katherine and Amitabh Chandra. "The Labor Market Effects Of Rising Health Insurance Premiums," Journal of Labor Economics, 2006, v24(3,Jul), 609-634.
Abstract: Since 2000, premiums for employer-provided health insurance have increased by 59 percent with little corresponding increase in the generosity of coverage. The effect of this increase in costs on wages and employment will depend on workers' valuation of the benefit, the elasticities of labor supply and demand, and institutional constraints on employers' ability to lower wages. Measuring these effects is difficult, however, without a source of exogenous variation in the cost of benefits. We use variation in medical malpractice payments driven by the recent "medical malpractice crisis" to identify the causal effect of rising health insurance premiums on wages, employment, and health insurance coverage. We estimate that a 10 percent increase in health insurance premiums reduces the aggregate probability of being employed by 1.6 percent and hours worked by 1 percent, and increases the likelihood that a worker is employed only part-time by 1.9 percent. For workers covered by employer provided health insurance, this increase in premiums results in an offsetting decrease in wages of 2.3 percent. Thus, rising health insurance premiums may both increase the ranks of the unemployed and place an increasing burden on workers through decreased wages for workers with employer health insurance and decreased hours for workers moved from full time jobs with benefits to part time jobs without.
Handle: RePEc:nbr:nberwo:11160
Template-Type: ReDIF-Paper 1.0
Title: What's Real About the Business Cycle?
Classification-JEL: E3
Author-Name: James D. Hamilton
Author-Person: pha60
Note: EFG
Number: 11161
Creation-Date: 2005-02
Order-URL: http://www.nber.org/papers/w11161
File-URL: http://www.nber.org/papers/w11161.pdf
File-Format: application/pdf
Publication-Status: published as Hamilton, James D. "What's Real About The Business Cycle?," FRB St. Louis - Review, 2005, v87(4,Jul/Aug), 435-452.
Abstract: This paper argues that a linear statistical model with homoskedastic errors cannot capture the nineteenth-century notion of a recurring cyclical pattern in key economic aggregates. A simple nonlinear alternative is proposed and used to illustrate that the dynamic behavior of unemployment seems to change over the business cycle, with the unemployment rate rising more quickly than it falls. Furthermore, many but not all economic downturns are also accompanied by a dramatic change in the dynamic behavior of short-term interest rates. It is suggested that these nonlinearities are most naturally interpreted as resulting from short-run failures in the employment and credit markets, and that understanding these short-run failures is the key to understanding the nature of the business cycle.
Handle: RePEc:nbr:nberwo:11161
Template-Type: ReDIF-Paper 1.0
Title: Private Benefits of Control, Ownership, and the Cross-Listing Decision
Classification-JEL: G15; G34; K00; P51
Author-Name: Craig Doidge
Author-Name: G. Andrew Karolyi
Author-Person: pka329
Author-Name: Karl V. Lins
Author-Name: Darius P. Miller
Author-Name: Rene M. Stulz
Note: AP CF
Number: 11162
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11162
File-URL: http://www.nber.org/papers/w11162.pdf
File-Format: application/pdf
Publication-Status: published as Doidge, Craig, G. Andrew Karolyi, Karl V.Lins, Darius P. Miller, and Rene M. Stulz. "Private Benefits of Control, Ownership, and the Cross-Listing Decision." Journal of Finance 64, 1 (February 2009): 425-66.
Abstract: This paper investigates how a foreign firm's decision to cross-list its shares in the U.S. is related to the concentration of the ownership of its cash flow rights and of its control rights. Theory has proposed that when private benefits are high, controlling shareholders are less likely to choose to list their firm's shares in the U.S. because the higher standards for transparency and disclosure, as well as the increased monitoring associated with such listings, limit their ability to extract private benefits. We offer evidence that confirms this hypothesis using data on more than 4,000 firms from 31 countries. Using logistic regression analysis, we show that the control rights held by controlling shareholders, as well as the difference between their control rights and their cash flow rights are significantly and negatively related to the existence of a U.S. listing. In addition, we employ duration analysis using a Cox proportional-hazard model to show that the probability of listing in a given year from 1995 to 2001, conditional on not yet having listed, is significantly lower for firms whose managers have high levels of control and for firms whose controlling shareholder owns more control rights than cash flow rights.
Handle: RePEc:nbr:nberwo:11162
Template-Type: ReDIF-Paper 1.0
Title: Estimating Life-Cycle Parameters from Consumption Behavior at Retirement
Classification-JEL: E21; D11; D12
Author-Name: John Laitner
Author-Person: pla447
Author-Name: Dan Silverman
Author-Person: psi181
Note: EFG
Number: 11163
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11163
File-URL: http://www.nber.org/papers/w11163.pdf
File-Format: application/pdf
Abstract: Using pseudo-panel data, we estimate the structural parameters of a life--cycle consumption model with discrete labor supply choice. A focus of our analysis is the abrupt drop in consumption upon retirement for a typical household. The literature sometimes refers to the drop, which in the U.S. Consumer Expenditure Survey we estimate to be approximately 16%, as the "retirement--consumption puzzle." Although a downward step in consumption at retirement contradicts predictions from life--cycle models with additively separable consumption and leisure, or with continuous work-hour options, a consumption jump is consistent with a setup having nonseparable preferences over consumption and leisure and requiring discrete work choices. This paper specifies a life--cycle model with these latter two elements, and it uses the empirical magnitude of the drop in consumption at retirement to provide an advantageous method of identifying structural parameters --- most importantly, the intertemporal elasticity of substitution.
Handle: RePEc:nbr:nberwo:11163
Template-Type: ReDIF-Paper 1.0
Title: Technology, Monopoly, and the Decline of the Viatical Settlements Industry
Classification-JEL: I1; L1; O3
Author-Name: Neeraj Sood
Author-Person: pso62
Author-Name: Abby Alpert
Author-Name: Jay Bhattacharya
Note: EH
Number: 11164
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11164
File-URL: http://www.nber.org/papers/w11164.pdf
File-Format: application/pdf
Abstract: The viatical settlement industry provides an opportunity for terminally-ill consumers, typically HIV patients, to exploit a previously untapped source of equity in existing life insurance contracts to finance consumption and medical expenses. The 1996 introduction and dissemination of effecive anti-HIV medication reduced AIDS mortality, but also reduced viatical settlement prices, even holding fixed changes in life expectancy. Using Freedom of Information Act requests to state insurance regulatory agencies, we have assembled a unique dataset of over twelve thousand viatical transactions from firms licensed in states that regulate viatical settlement markets. We distinguish two explanations for falling prices---an increase in market power, and a change in market expectations about the likelihood of further improvements in HIV care. We find that both explanations have contributed to diminishing settlement prices over the last decade, but increased market power has been the more important driver in the most recent years. Our estimates imply that the increase in market power of firms reduced the value of life insurance holdings of HIV persons by about $1.0 billion.
Handle: RePEc:nbr:nberwo:11164
Template-Type: ReDIF-Paper 1.0
Title: Productivity Spillovers, Terms of Trade and the "Home Market Effect"
Classification-JEL: F41; F32
Author-Name: Giancarlo Corsetti
Author-Name: Philippe Martin
Author-Person: pma588
Author-Name: Paolo A. Pesenti
Author-Person: ppe152
Note: ITI IFM
Number: 11165
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11165
File-URL: http://www.nber.org/papers/w11165.pdf
File-Format: application/pdf
Abstract: This paper analyzes the welfare implications of international spillovers related to productivity gains, changes in market size, or government spending. We introduce trade costs and endogenous varieties in a two-country general-equilibrium model with monopolistic competition, drawing a distinction between productivity gains that enhance manufacturing efficiency, and gains that lower the cost of firms' entry and product differentiation. Our model suggests that countries with lower manufacturing costs have higher GDP but supply a smaller number of goods at a lower international price. Countries with lower entry and differentiation costs also have higher GDP, but supply a larger array of goods at improved terms of trade. The sign of the international welfare spillovers depends on terms of trade, but also on consumers' taste for variety. Higher domestic demand has macroeconomic implications that are similar to those of a reduction in firms' entry costs.
Handle: RePEc:nbr:nberwo:11165
Template-Type: ReDIF-Paper 1.0
Title: Stocks, Bonds, Money Markets and Exchange Rates: Measuring International Financial Transmission
Classification-JEL: E44; F3; C5
Author-Name: Michael Ehrmann
Author-Person: peh4
Author-Name: Marcel Fratzscher
Author-Person: pfr34
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: IFM
Number: 11166
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11166
File-URL: http://www.nber.org/papers/w11166.pdf
File-Format: application/pdf
Publication-Status: published as Michael Ehrmann & Marcel Fratzscher & Roberto Rigobon, 2011. "Stocks, bonds, money markets and exchange rates: measuring international financial transmission," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(6), pages 948-974, 09.
Abstract: The paper presents a framework for analyzing the degree of financial transmission between money, bond and equity markets and exchange rates within and between the United States and the euro area. We find that asset prices react strongest to other domestic asset price shocks, and that there are also substantial international spillovers, both within and across asset classes. The results underline the dominance of US markets as the main driver of global financial markets: US financial markets explain, on average, more than 25% of movements in euro area financial markets, whereas euro area markets account only for about 8% of US asset price changes. The international propagation of shocks is strengthened in times of recession, and has most likely changed in recent years: prior to EMU, the paper finds smaller international spillovers.
Handle: RePEc:nbr:nberwo:11166
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy with Judgment: Forecast Targeting
Classification-JEL: E42; E52; E58
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: ME
Number: 11167
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11167
File-URL: http://www.nber.org/papers/w11167.pdf
File-Format: application/pdf
Publication-Status: published as Lars E O Svensson, 2005. "Monetary Policy with Judgment: Forecast Targeting," International Journal of Central Banking, International Journal of Central Banking, vol. 1(1), May.
Abstract: "Forecast targeting," forward-looking monetary policy that uses central-bank judgment to construct optimal policy projections of the target variables and the instrument rate, may perform substantially better than monetary policy that disregards judgment and follows a given instrument rule. This is demonstrated in a few examples for two empirical models of the U.S. economy, one forward looking and one backward looking. A complicated infinite-horizon central-bank projection model of the economy can be closely approximated by a simple finite system of linear equations, which is easily solved for the optimal policy projections. Optimal policy projections corresponding to the optimal policy under commitment in a timeless perspective can easily be constructed. The whole projection path of the instrument rate is more important than the current instrument setting. The resulting reduced-form reaction function for the current instrument rate is a very complicated function of all inputs in the monetary-policy decision process, including the central bank's judgment. It cannot be summarized as a simple reaction function such as a Taylor rule. Fortunately, it need not be made explicit.
Handle: RePEc:nbr:nberwo:11167
Template-Type: ReDIF-Paper 1.0
Title: What is the Impact of Software Patent Shifts?: Evidence from Lotus v. Borland
Classification-JEL: O3
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: Feng Zhu
Author-Person: pzh106
Note: PR
Number: 11168
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11168
File-URL: http://www.nber.org/papers/w11168.pdf
File-Format: application/pdf
Publication-Status: published as Lerner, Josh and Feng Zhu. "What is the impact of software patent shifts? Evidence from Lotus v. Borland." International Journal of Industrial Organization 25, 3 (June 2007): 511-529.
Abstract: Economists have debated the extent to which strengthening patent protection spurs or detracts from technological innovation. In this paper, we examine the reduction of software copyright protection in the Lotus v. Borland decision. If patent and copyright protections are substitutes, then weakening of one form of protection should be associated with an increasing reliance on the other. We find that the firms affected by the diminution of copyright protection disproportionately accelerated their patenting in subsequent years. But little evidence can be found for harmful effects: in fact, the increased reliance on patents is correlated with some positive outcomes for firms.
Handle: RePEc:nbr:nberwo:11168
Template-Type: ReDIF-Paper 1.0
Title: Explaining Returns with Cash-Flow Proxies
Classification-JEL: E44; G10; G12
Author-Name: Peter Hecht
Author-Name: Tuomo Vuolteenaho
Note: AP
Number: 11169
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11169
File-URL: http://www.nber.org/papers/w11169.pdf
File-Format: application/pdf
Publication-Status: published as Hecht, Peterand Tuomo Vuolteenaho. "Explaining Returns with Cash-Flow Proxies." Review of Financial Studies 19, 1 (Spring 2006): 159-94.
Abstract: Stock returns are correlated with contemporaneous earnings growth, dividend growth, future real activity, and other cash-flow proxies. The correlation between cash-flow proxies and stock returns may arise from association of cash-flow proxies with one-period expected returns, cash-flow news, and/or expected-return news. We use Campbell's (1991) return decomposition to measure the relative importance of these three effects in regressions of returns on cash-flow proxies. In some of the popular specifications, variables that are motivated as proxies for cash-flow news also track a nontrivial proportion of one-period expected returns and expected-return news. As a result, the R2 from a regression of returns on cash-flow proxies may overstate or understate the importance of cash-flow news as a source of return variance.
Handle: RePEc:nbr:nberwo:11169
Template-Type: ReDIF-Paper 1.0
Title: Capital Controls, Sudden Stops and Current Account Reversals
Classification-JEL: F30; F32
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM
Number: 11170
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11170
File-URL: http://www.nber.org/papers/w11170.pdf
File-Format: application/pdf
Publication-Status: published as Capital Controls, Sudden Stops, and Current Account Reversals, Sebastian Edwards. in Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, Edwards. 2007
Abstract: In this paper I use a broad multi-country data set to analyze the relationship between restrictions to capital mobility and external crises. The analysis focuses on two manifestations of external crises: (a) sudden stops of capital inflows; and (b) current account reversals. I deal with two important policy-related issues: First, does the extent of capital mobility affect countries' degree of vulnerability to external crises; and second, does the extent of capital mobility determine the depth of external crises -- as measured by the decline in growth -- once the crises occur? Overall, my results cast some doubts on the assertion that increased capital mobility has caused heightened macroeconomic vulnerabilities. I find no systematic evidence suggesting that countries with higher capital mobility tend to have a higher incidence of crises, or tend to face a higher probability of having a crisis, than countries with lower mobility. My results do suggest, however, that once a crisis occurs, countries with higher capital mobility may face a higher cost, in terms of growth decline.
Handle: RePEc:nbr:nberwo:11170
Template-Type: ReDIF-Paper 1.0
Title: Forms of Democracy, Policy and Economic Development
Classification-JEL: F43; H11; O57
Author-Name: Torsten Persson
Author-Person: ppe28
Note: EFG IFM
Number: 11171
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11171
File-URL: http://www.nber.org/papers/w11171.pdf
File-Format: application/pdf
Abstract: The paper combines insights from the recent research programs on constitutions and economic policy, and on history, institutions and growth. Drawing on cross-sectional as well as panel data, it presents new empirical results showing that the form of democracy (rather than democracy vs. non-democracy) has important consequences for the adoption of structural polices that promote long-run economic performance. Reforms into parliamentary (as opposed to presidential), proportional (as opposed to majoritarian) and permanent (as opposed to temporary) democracy appear to produce the most growth-promoting policies.
Handle: RePEc:nbr:nberwo:11171
Template-Type: ReDIF-Paper 1.0
Title: Measurement and Explanation of the Intensity of Co-publication in Scientific Research: An Analysis at the Laboratory Level
Classification-JEL: D29; O39
Author-Name: Jacques Mairesse
Author-Person: pma712
Author-Name: Laure Turner
Note: PR
Number: 11172
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11172
File-URL: http://www.nber.org/papers/w11172.pdf
File-Format: application/pdf
Publication-Status: published as Antonelli, C., et al. (eds.) New Frontiers in the Economics of Innovation and New Technology: Essays in Honour of Paul A. David. Cheltenham, U.K. and Northampton, MA: Edward Elgar, 2006.
Abstract: In order to study networks of collaboration between researchers, we propose a simple measure of the intensity of collaboration, which can be easily interpreted in terms of relative probability and aggregated at the laboratory level. We first use this measure to characterize the relations of collaboration, as defined in terms of co-publication between the scientists of the French "Centre National de la Recherche Scientifique" (CNRS) in the field of condensed-matter physic, during the six-year period 1992-1997. We then use it to investigate the importance of various factors of collaboration: mainly the geographical distance between laboratories, but also their specialization and size, their productivity and the quality of their publications, and their international openness. We find that the average intensity of co-publication of researchers within laboratories is about 40 times higher than the average intensity between laboratories if they are located in the same towns, and that it is 100 times higher than the intensity between laboratories which are not located in the same towns. Yet, geographical distance does not have a significant impact, or a very weak one, on the existence and intensity of co-publication between laboratories located in different towns. What matters is immediate proximity. We also find that the productivity of laboratories, their size and specialization profiles are significant determinants of collaboration.
Handle: RePEc:nbr:nberwo:11172
Template-Type: ReDIF-Paper 1.0
Title: Financial Crises, 1880-1913: The Role of Foreign Currency Debt
Classification-JEL: F33; F34; N20
Author-Name: Michael Bordo
Author-Person: pbo243
Author-Name: Christopher Meissner
Author-Person: pme45
Note: DAE IFM ME
Number: 11173
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11173
File-URL: http://www.nber.org/papers/w11173.pdf
File-Format: application/pdf
Publication-Status: published as Financial Crises, 1880-1913: The Role of Foreign Currency Debt, Michael D. Bordo, Christopher M. Meissner. in The Decline of Latin American Economies: Growth, Institutions, and Crises, Edwards, Esquivel Hernández, and Marquez. 2007
Abstract: What is the role of foreign currency debt in precipitating financial crises? In this paper we assemble data for nearly 30 countries between 1880 and 1913 and examine debt crises, currency crises, banking crises and twin crises. We pay special attention to the role of foreign currency and gold clause debt, currency mismatches and debt intolerance. We find fairly robust evidence that more foreign currency debt leads to a higher chance of having a debt crisis or a banking crisis. However, a key finding is that countries with noticeably different backgrounds, and strong institutions such as Australia, Canada, New Zealand, Norway, and the US deftly managed their exposure to hard currency debt, generally avoided having too many crises and never had severe financial meltdowns. Moreover, a strong reserve position matched up to hard currency liabilities seems to be correlated with a lower likelihood of a debt crisis, currency crisis or a banking crisis. This strengthens the evidence for the hypothesis that foreign currency debt is dangerous when mis-managed. We also see that countries with previous default histories seem prone to debt crises even at seemingly low debt to revenue ratios. Finally we discuss the robustness of these results to local idiosyncrasies and the implications from this representative historical sample.
Handle: RePEc:nbr:nberwo:11173
Template-Type: ReDIF-Paper 1.0
Title: Cost-Effective Policies to Reduce Vehicle Emissions
Classification-JEL: H2; Q5
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Li Gan
Author-Person: pga94
Note: PE EEE
Number: 11174
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11174
File-URL: http://www.nber.org/papers/w11174.pdf
File-Format: application/pdf
Publication-Status: published as Fullerton, Don and Li Gan. "Cost-Effective Policies To Reduce Vehicle Emissions," American Economic Review, 2005, v95(2,May), 300-304.
Abstract: This paper uses an estimated demand system that accounts for heterogeneity to calculate and compare the lost consumer surplus from a higher tax on gasoline, a tax on distance, or a subsidy for buying a newer car. We introduce a view of cost-effectiveness that compares policies instead of technologies. Each tax might induce some consumers to drive less, some to switch from two vehicles to one, and some to buy a car instead of an SUV. Our model captures these behaviors. For each rate of tax, we simulate the changes in all such choices and how the new choices affect emissions. We also calculate the equivalent variation and subtract tax revenue to get deadweight loss. Finally, we take the added deadweight loss over the additional abatement as the social marginal cost of abatement, and we plot this curve for several different tax policies.
Handle: RePEc:nbr:nberwo:11174
Template-Type: ReDIF-Paper 1.0
Title: Globalization and Complementary Policies: Poverty Impacts in Rural Zambia
Classification-JEL: I32; Q12; Q17; Q18
Author-Name: Jorge F. Balat
Author-Person: pba1602
Author-Name: Guido Porto
Author-Person: ppo196
Note: ITI
Number: 11175
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11175
File-URL: http://www.nber.org/papers/w11175.pdf
File-Format: application/pdf
Publication-Status: published as Jorge F. Balat & Guido G. Porto, 2007. "Globalization and Complementary Policies: Poverty Impacts on Rural Zambia," NBER Chapters, in: Globalization and Poverty, pages 373-416 National Bureau of Economic Research, Inc.
Abstract: In this paper, we have two main objectives: to investigate the links between globalization and poverty observed in Zambia during the 1990s, and to explore the poverty impacts of non-traditional export growth. We look at consumption and income effects separately. On the consumption side, we study the maize marketing reforms and the elimination of maize subsidies. We find that complementary policies matter: the introduction of competition policies at the milling industry acted as a cushion that benefited consumers but the restriction on maize imports by small-scale mills hurt them. On the income side, we study agricultural export growth to estimate income gains from international trade. The gains are associated with market agriculture activities (such as growing cotton, tobacco, hybrid maize) and rural labor markets and wages. We find that by expanding trade opportunities Zambian households would earn significantly higher income. Securing these higher levels of well-being requires complementary policies, like the provision of infrastructure, credit, and extension services.
Handle: RePEc:nbr:nberwo:11175
Template-Type: ReDIF-Paper 1.0
Title: The Effect of the 1998 Master Settlement on Prenatal Smoking
Classification-JEL: I12; I18
Author-Name: Douglas E. Levy
Author-Name: Ellen Meara
Note: EH
Number: 11176
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11176
File-URL: http://www.nber.org/papers/w11176.pdf
File-Format: application/pdf
Publication-Status: published as Levy, Douglas E. and Ellen Meara. "The Effect Of The 1998 Master Settlement Agreement On Prenatal Smoking," Journal of Health Economics, 2006, v25(2,Mar), 276-294.
Abstract: The Master Settlement Agreement (MSA) between the major tobacco companies and 46 states created an abrupt 45 cent (21%) increase in cigarette prices in November, 1998. Earlier estimates of the elasticity of prenatal smoking implied that the price rise would reduce prenatal cigarette smoking by 7% to 21%. Using birth records on 10 million U.S. births between January 1996 and February 2000, we examined the change in smoking during pregnancy and conditional smoking intensity in response to the MSA. Overall, adjusting for secular trends in smoking, prenatal smoking declined much less than predicted in response to the MSA.
Handle: RePEc:nbr:nberwo:11176
Template-Type: ReDIF-Paper 1.0
Title: Reading, Writing and Raisinets: Are School Finances Contributing to Children's Obesity?
Classification-JEL: I1; I2; J1
Author-Name: Patricia M. Anderson
Author-Name: Kristin F. Butcher
Author-Person: pbu245
Note: CH ED PE
Number: 11177
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11177
File-URL: http://www.nber.org/papers/w11177.pdf
File-Format: application/pdf
Abstract: The proportion of adolescents in the United States who are obese has nearly tripled over the last two decades. At the same time, schools, often citing financial pressures, have given students greater access to "junk" foods, using proceeds from the sales to fund school programs. We examine whether schools under financial pressure are more likely to adopt potentially unhealthful food policies. We find that a 10 percentage point increase in the probability of access to junk food leads to about a one percent increase in students' body mass index (BMI). However, this average effect is entirely driven by adolescents who have an overweight parent, for whom the effect of such food policies is much larger (2.2%). This suggests that those adolescents who have a genetic or family susceptibility to obesity are most affected by the school food environment. A rough calculation suggests that the increase in availability of junk foods in schools can account for about one-fifth of the increase in average BMI among adolescents over the last decade.
Handle: RePEc:nbr:nberwo:11177
Template-Type: ReDIF-Paper 1.0
Title: Are Asset Price Guarantees Useful for Preventing Sudden Stops?: A Quantitative Investigation of the Globalization Hazard-Moral Hazard Tradeoff
Classification-JEL: F41; F32; E44; D52
Author-Name: Ceyhun Bora Durdu
Author-Person: pdu88
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Note: IFM
Number: 11178
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11178
File-URL: http://www.nber.org/papers/w11178.pdf
File-Format: application/pdf
Publication-Status: published as Durdu, Ceyhun and Enrique G. Mendoza. "Are Asset Price Guarantees Useful For Preventing Sudden Stops?: A Quantitative Investigation Of The Globalization Hazard-Moral Hazard Tradeoff," Journal of International Economics, 2006, v69(1,Jun), 84-119.
Abstract: The globalization hazard hypothesis maintains that the current account reversals and asset price collapses observed during 'Sudden Stops' are caused by global capital market frictions. A policy implication of this view is that Sudden Stops can be prevented by offering global investors price guarantees on emerging markets assets. These guarantees, however, introduce a moral hazard incentive for global investors, thus creating a tradeoff by which price guarantees weaken globalization hazard but strengthen international moral hazard. This paper studies the quantitative implications of this tradeoff using a dynamic stochastic equilibrium asset-pricing model. Without guarantees, distortions induced by margin calls and trading costs cause Sudden Stops driven by Fisher's debt-deflation mechanism. Price guarantees prevent this deflation by introducing a distortion that props up foreign demand for assets. Non-state-contingent guarantees contain Sudden Stops but they are executed often and induce persistent asset overvaluation. Guarantees offered only in high-debt states are executed rarely and prevent Sudden Stops without persistent asset overvaluation. If the elasticity of foreign asset demand is low, price guarantees can still contain Sudden Stops but domestic agents obtain smaller welfare gains at Sudden Stop states and suffer welfare losses on average in the stochastic steady state.
Handle: RePEc:nbr:nberwo:11178
Template-Type: ReDIF-Paper 1.0
Title: Out-of-Pocket Health Spending Between Low- and High-Income Populations: Who is at Risk of Having High Financial Burdens?
Classification-JEL: I1
Author-Name: Yu-Chu Shen
Author-Name: Joshua McFeeters
Note: EH
Number: 11179
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11179
Publication-Status: published as Shen, Y. and McFeeters, J. 2006. Out-of-pocket health spending between low- and high-income populations: Who is at risk of having high expenses and financial burdens? Medical Care 44(3): 200-209
Abstract: We examined characteristics of people with little, moderate, and high burden of out-of-pocket health spending separately for low-income (below 200% of Federal Poverty Line) and higher-income populations. We find that public insurance appears to offer the best financial protection against high out-of-pocket burden. People with private non-group coverage, regardless of their income levels, have the highest risk of being exposed to high out-of-pocket burden. Low-income adults with employer-sponsored insurance are also more likely to be in high burden group than the low-income uninsured adults. For higher-income families, having a family member in fair or poor health is another significant risk factor to increase the likelihood of high out-of-pocket burden. Increasing presence of HMO and Federally Qualified Health Centers appear to have lowered the odds of being in the high-burden category relative to low-burden category, especially for the low-income group.
Handle: RePEc:nbr:nberwo:11179
Template-Type: ReDIF-Paper 1.0
Title: UNINSURED IDIOSYNCRATIC INVESTMENT RISK
Classification-JEL: D52; E13; E32; G11
Author-Name: George-Marios Angeletos
Author-Person: pan143
Note: EFG
Number: 11180
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11180
File-URL: http://www.nber.org/papers/w11180.pdf
File-Format: application/pdf
Publication-Status: published as George-Marios Angeletos, 2007. "Uninsured Idiosyncratic Investment Risk and Aggregate Saving," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(1), pages 1-30, January.
Abstract: This paper augments the neoclassical growth model to study the macroeconomic effects of idiosyncratic investment risk. The general equilibrium is solved in closed form under standard assumptions for preferences and technologies. A simple condition is identified for incomplete markets to result in both a lower interest rate and a lower capital stock in the steady state: the elasticity of intertemporal substitution must be higher than the income share of capital. For plausible calibrations of the model, the reduction in the steady-state levels of aggregate savings and income relative to complete markets is quantitatively significant. Finally, cyclical variation in private investment risks is shown to amplify the transitional dynamics.
Handle: RePEc:nbr:nberwo:11180
Template-Type: ReDIF-Paper 1.0
Title: Socio-economic Impact of Nanoscale Science: Initial Results and NanoBank
Classification-JEL: O31; L63; L65; M13
Author-Name: Lynne G. Zucker
Author-Person: pzu2
Author-Name: Michael R. Darby
Note: PR
Number: 11181
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11181
File-URL: http://www.nber.org/papers/w11181.pdf
File-Format: application/pdf
Publication-Status: published as Lynne G. Zucker and Michael R. Darby, “Socio-economic Impact of Nanoscale Science: Initial Results and NanoBank,” in Mihail C. Roco and William S. Bainbridge, eds., Nanotechnology: Societal Implications II — Individual Perspectives, Dordrecht, The Netherlands: Springer, 2007. [ISBN 1-4020-4658-8, pp. 7-23]
Abstract: Research on the nanoscale has revolutionized areas of science and has begun to have an impact on, and be impacted by, society and economy. We are capturing early traces of these processes in NanoBank, a large scale, multi-year project to provide a public data resource which will link individuals and organizations involved in creating and using nano S&T across a number of activities including publishing, patenting, research funding, and commercial financing, innovation and production. We report preliminary results from our work in progress. Nanotechnology is on a similar trajectory to biotechnology in terms of patents and publication, already accounting for over 2.5% of scientific articles and 0.7% of patents. Joint university-firm research is widespread and increasing. Regional agglomeration is also evident in both science and commercial applications, with the main clusters of firm entry by both new and pre-existing firms forming around major research universities publishing in nanoscience. Nanoscience has been highly concentrated in the United States, a few European countries, and Japan, but China has recently passed Japan in total articles per year and is beginning to have a significant number of highly-cited articles.
Handle: RePEc:nbr:nberwo:11181
Template-Type: ReDIF-Paper 1.0
Title: Cohort Turnover and Productivity: The July Phenomenon in Teaching Hospitals
Classification-JEL: I1; J0
Author-Name: Robert S. Huckman
Author-Person: phu90
Author-Name: Jason Barro
Note: EH
Number: 11182
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11182
File-URL: http://www.nber.org/papers/w11182.pdf
File-Format: application/pdf
Abstract: The impact of labor turnover on productivity has received a great deal of attention in the literature on organizations. We consider the impact of cohort turnover -- the simultaneous exit of a large number of experienced employees and a similarly sized entry of new workers -- on productivity in the context of teaching hospitals. In particular, we examine the impact of the annual July turnover of house staff (i.e., residents and fellows) in American teaching hospitals on levels of resource utilization (measured by risk-adjusted length of hospital stay) and quality (measured by risk-adjusted mortality rates). Using patient-level data from roughly 700 hospitals per year over the period from 1993 to 2001, we compare monthly trends in length of stay and mortality for teaching hospitals to those for non-teaching hospitals, which, by definition, do not experience systematic turnover in July. We find that the annual house-staff turnover results in increased resource utilization (i.e., higher risk-adjusted length of hospital stay) for both minor and major teaching hospitals and decreased quality (i.e., higher risk-adjusted mortality rates) for major teaching hospitals. Further, these effects with respect to mortality are not monotonically increasing in a hospital's reliance on residents for the provision of care. In fact, the most-intensive teaching hospitals manage to avoid significant effects on mortality following this turnover. We provide a preliminary examination of the roles of supervision and worker ability in explaining the ability of the most-intensive teaching hospitals to reduce turnover's negative effect on performance.
Handle: RePEc:nbr:nberwo:11182
Template-Type: ReDIF-Paper 1.0
Title: Employment Efficiency and Sticky Wages: Evidence from Flows in the Labor Market
Classification-JEL: E24; E32; J64
Author-Name: Robert E. Hall
Note: EFG LS PR
Number: 11183
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11183
File-URL: http://www.nber.org/papers/w11183.pdf
File-Format: application/pdf
Publication-Status: published as Hall, Robert E. “Employment Efficiency and Sticky Wages: Evidence from Flows in the Labor Market.” Review of Economics and Statistics 87, 3 (August 2005): 397-407.
Abstract: I consider three views of the labor market. In the first, wages are flexible and employment follows the principle of bilateral efficiency. Workers never lose their jobs because of sticky wages. In the second view, wages are sticky and inefficient layoffs do occur. In the third, wages are also sticky, but employment governance is efficient. I show that the behavior of flows in the labor market strongly favors the third view. In the modern U.S. economy, recessions do not begin with a burst of layoffs. Unemployment rises because jobs are hard to find, not because an unusual number of people are thrown into unemployment.
Handle: RePEc:nbr:nberwo:11183
Template-Type: ReDIF-Paper 1.0
Title: Outsourcing Price Decisions: Evidence from U.S. 9802 Imports
Classification-JEL: F1; F2
Author-Name: Deborah Swenson
Author-Person: psw14
Note: ITI
Number: 11184
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11184
File-URL: http://www.nber.org/papers/w11184.pdf
File-Format: application/pdf
Abstract: This paper studies U.S. overseas assembly imports to identify whether factors related to information or search costs appear to condition outsourcing decisions. The data for 1991-2000 show that U.S. overseas assembly imports were characterized by incomplete pass-through of production and trade costs to import prices, though products assembled in more highly educated countries passed-through a much larger portion of their cost changes. In addition, the price of outsourcing imports responded to competing suppliers' prices, with the largest responses occurring for products in capital-intense industries. These differential price responses suggest that information issues play an important role in the mediation of outsourcing relationships.
Handle: RePEc:nbr:nberwo:11184
Template-Type: ReDIF-Paper 1.0
Title: Optimal Taxation with Endogenous Insurance Markets
Classification-JEL: E62; H21; H23; H53
Author-Name: Mikhail Golosov
Author-Person: pgo200
Author-Name: Aleh Tsyvinski
Note: EFG PE
Number: 11185
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11185
File-URL: http://www.nber.org/papers/w11185.pdf
File-Format: application/pdf
Publication-Status: published as Mikhail Golosov, 2007. "Optimal Taxation With Endogenous Insurance Markets," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 487-534, 05.
Abstract: We study optimal tax policy in a dynamic private information economy with endogenous private markets. We characterize efficient allocations and competitive equilibria. A standard assumption in the literature is that trades are observable by all agents. We show that in such an environment the competitive equilibrium is efficient. The only effect of government interventions is crowding out of private insurance. We then relax the assumption of observability of consumption and consider an environment with unobservable trades in competitive markets. We show that efficient allocations have the property that the marginal product of capital is different from the market interest rate associated with unobservable trades. In any competitive equilibrium without taxation, the marginal product of capital and the market interest rate are equated, so that competitive equilibria are not efficient. Taxation of capital income can be welfare-improving because such taxation introduces a wedge between market interest rates and the marginal product of capital and allows agents to obtain better insurance in private markets. Finally, we use plausibly calibrated numerical examples to compute optimal taxes and welfare gains and compare results to an economy with a restricted set of tax instruments, and to an economy with observable trades.
Handle: RePEc:nbr:nberwo:11185
Template-Type: ReDIF-Paper 1.0
Title: The Amplification of Unemployment Fluctuations through Self-Selection
Classification-JEL: E24; E32; J64
Author-Name: Robert E. Hall
Note: EFG LS
Number: 11186
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11186
File-URL: http://www.nber.org/papers/w11186.pdf
File-Format: application/pdf
Abstract: Unemployment arises from frictions in the matching of job-seekers and employers. The level of resources that employers devote to evaluating applicants for jobs is a key factor in the magnitude of the frictions. Unemployment will be low if employers can review applicants cheaply. The cost of evaluation per hire depends on the fraction of applicants who are qualified for the job. Applicants may be better informed about their qualifications than are employers. If incentives induce self-selection by job-seekers, so that they apply mainly for jobs where they are qualified, friction and thus unemployment will be low. Self-selection is strongest in markets where unemployment is low and jobs are easy to find. Because of this positive feedback, the equilibrium in a market with self-selection is fragile -- unemployment is sensitive to its determinants. Self-selection provides a mechanism for amplification of small changes in the determinants of unemployment.
Handle: RePEc:nbr:nberwo:11186
Template-Type: ReDIF-Paper 1.0
Title: Integrating Industry and National Economic Accounts: First Steps and Future Improvements
Classification-JEL: C13; C67; C81; E1
Author-Name: Ann M. Lawson
Author-Name: Brian C. Moyer
Author-Name: Sumiye Okubo
Author-Name: Mark A. Planting
Note: EFG
Number: 11187
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11187
File-URL: http://www.nber.org/papers/w11187.pdf
File-Format: application/pdf
Publication-Status: published as Integrating Industry and National Economic Accounts: First Steps and Future Improvements, Ann M. Lawson, Brian C. Moyer, Sumiye Okubo. in A New Architecture for the US National Accounts, Jorgenson, Landefeld, and Nordhaus. 2006
Abstract: The integration of the annual I-O accounts with the GDP-by-industry accounts is the most recent in a series of improvements to the industry accounts provided by the BEA in recent years. BEA prepares two sets of national industry accounts: The I-O accounts, which consist of the benchmark I-O accounts and the annual I-O accounts, and the GDPby- industry accounts. Both the I-O accounts and the GDP-by-industry accounts present measures of gross output, intermediate inputs, and value added by industry. However, in the past, they were inconsistent because of the use of different methodologies, classification frameworks, and source data. The integration of these accounts eliminated these inconsistencies and improved the accuracy of both sets of accounts. The integration of the annual industry accounts represents a major advance in the timeliness, accuracy, and consistency of these accounts, and is a result of significant improvements in BEA's estimating methods. The paper describes the new methodology, and the future steps required to integrate the industry accounts with the NIPAs. The new methodology combines source data between the two industry accounts to improve accuracy; it prepares the newly integrated accounts within an I-O framework that balances and reconciles industry production with commodity usage. Moreover, the new methodology allows the acceleration of the release of the annual I-O accounts by 2 years and for the first time, provides a consistent time series of annual I-O accounts. Three appendices are provided: A description of the probability-based method to rank source data by quality; a description of the new balancing produced for producing the annual I-O accounts; and a description of the computation method used to estimate chaintype price and quantity indexes in the GDP-by-industry accounts.
Handle: RePEc:nbr:nberwo:11187
Template-Type: ReDIF-Paper 1.0
Title: Volatility Forecasting
Classification-JEL: C1; G1
Author-Name: Torben G. Andersen
Author-Name: Tim Bollerslev
Author-Person: pbo66
Author-Name: Peter F. Christoffersen
Author-Person: pch343
Author-Name: Francis X. Diebold
Author-Person: pdi1
Note: AP EFG
Number: 11188
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11188
File-URL: http://www.nber.org/papers/w11188.pdf
File-Format: application/pdf
Abstract: Volatility has been one of the most active and successful areas of research in time series econometrics and economic forecasting in recent decades. This chapter provides a selective survey of the most important theoretical developments and empirical insights to emerge from this burgeoning literature, with a distinct focus on forecasting applications. Volatility is inherently latent, and Section 1 begins with a brief intuitive account of various key volatility concepts. Section 2 then discusses a series of different economic situations in which volatility plays a crucial role, ranging from the use of volatility forecasts in portfolio allocation to density forecasting in risk management. Sections 3, 4 and 5 present a variety of alternative procedures for univariate volatility modeling and forecasting based on the GARCH, stochastic volatility and realized volatility paradigms, respectively. Section 6 extends the discussion to the multivariate problem of forecasting conditional covariances and correlations, and Section 7 discusses volatility forecast evaluation methods in both univariate and multivariate cases. Section 8 concludes briefly.
Handle: RePEc:nbr:nberwo:11188
Template-Type: ReDIF-Paper 1.0
Title: Strategic Bargaining Behavior, Self-Serving Biases, and the Role of Expert Agents: An Empirical Study of Final-Offer Arbitration
Classification-JEL: J5
Author-Name: Orley Ashenfelter
Author-Person: pas9
Author-Name: Gordon B. Dahl
Author-Person: pda455
Note: LS
Number: 11189
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11189
File-URL: http://www.nber.org/papers/w11189.pdf
File-Format: application/pdf
Abstract: In this paper we study the complete evolution of a final-offer arbitration system used in New Jersey with data we have systematically collected over the 18-year life of the program. Covering the wages of police officers and firefighters, this system provides virtually a laboratory setting for the study of strategic interaction. Our empirical analysis provides convincing evidence that, left alone, the parties do not construct and present their offers as successfully as when they retain expert agents to assist them. In principle, expert agents may be helpful to the parties for two different reasons: (a) they may move the arbitrator to favor their position independently of the facts, or (b) they may help eliminate inefficiencies in the conduct of strategic behavior. In this paper we construct a model where the agent may influence outcomes independent of the facts, but where the agent may also improve the outcomes of the process by moderating any self-serving biases or over-confidence that may have led to impasse in the first instance. Our data indicate that expert agents may well have had an important role in moderating self-serving biases early in the history of the system, but that the parties have slowly evolved to a non-cooperative equilibrium where the use of third-party agents has become nearly universal and where agents are used primarily to move the fact finder's decisions.
Handle: RePEc:nbr:nberwo:11189
Template-Type: ReDIF-Paper 1.0
Title: Special Purpose Vehicles and Securitization
Classification-JEL: G3; G2; E5; K2
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: Nicholas Souleles
Author-Person: pso104
Note: AP
Number: 11190
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11190
File-URL: http://www.nber.org/papers/w11190.pdf
File-Format: application/pdf
Publication-Status: published as Special Purpose Vehicles and Securitization, Gary B. Gorton, Nicholas S. Souleles. in The Risks of Financial Institutions, Carey and Stulz. 2006
Abstract: Firms can finance themselves on- or off-balance sheet. Off-balance sheet financing involves transferring assets to "special purpose vehicles" (SPVs), following accounting and regulatory rules that circumscribe relations between the sponsoring firm and the SPVs. SPVs are carefully designed to avoid bankruptcy. If the firm's bankruptcy costs are high, off-balance sheet financing can be advantageous, especially for sponsoring firms that are risky. In a repeated SPV game, firms can "commit" to subsidize or "bail out" their SPVs when the SPV would otherwise not honor its debt commitments. Investors in SPVs know that, despite legal and accounting restrictions to the contrary, SPV sponsors can bail out their SPVs if there is the need. We find evidence consistent with these predictions using data on credit card securitizations.
Handle: RePEc:nbr:nberwo:11190
Template-Type: ReDIF-Paper 1.0
Title: Self-Fulfilling Currency Crises: The Role of Interest Rates
Classification-JEL: E43; E44; E58; F30
Author-Name: Christian Hellwig
Author-Person: phe110
Author-Name: Arijit Mukherji
Author-Name: Aleh Tsyvinski
Note: EFG IFM
Number: 11191
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11191
File-URL: http://www.nber.org/papers/w11191.pdf
File-Format: application/pdf
Publication-Status: published as Christian Hellwig & Arijit Mukherji & Aleh Tsyvinski, 2006. "Self-Fulfilling Currency Crises: The Role of Interest Rates," American Economic Review, American Economic Association, vol. 96(5), pages 1769-1787, December.
Abstract: We develop a stylized currency crises model with heterogeneous information among investors and endogenous determination of interest rates in a noisy rational expectations equilibrium. Our model captures three key features of interest rates: the opportunity cost of attacking the currency responds to the investors' behavior; the domestic interest rate may influence the central bank's preferences for a fixed exchange rate; and the domestic interest rate serves as a public signal which aggregates private information about fundamentals. We explore the payoff and informational channels through which interest rates determine devaluation outcomes, and examine the implications for equilibrium selection by global games methods. Our main conclusion is that multiplicity is not an artifact of common knowledge. In particular, we show that multiplicity emerges robustly, either when a devaluation is triggered by the cost of high domestic interest rates as in Obstfeld (1996), or when a devaluation is triggered by the central bank's loss of foreign reserves as in Obstfeld (1986), provided that the domestic asset supply is sufficiently elastic in the interest rate and shocks to the domestic bond supply are sufficiently small.
Handle: RePEc:nbr:nberwo:11191
Template-Type: ReDIF-Paper 1.0
Title: Hospital Ownership Mix Efficiency in the US: An Exploratory Study
Classification-JEL: I1; L3; L2
Author-Name: Rexford E. Santerre
Author-Person: psa151
Author-Name: John A. Vernon
Note: EH
Number: 11192
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11192
File-URL: http://www.nber.org/papers/w11192.pdf
File-Format: application/pdf
Abstract: This paper offers an empirical test of ownership mix efficiency in the U.S. hospital services industry. The test compares the benefits of quality assurance with the costs from the attenuation of property rights that result from an increased presence of nonprofit organizations. The empirical results suggest that too many not-for-profit and public hospitals may exist in the typical market area of the U.S. The policy implication is that more quality of care per dollar might be obtained by attracting a greater percentage of for-profit hospitals into some market areas. This conclusion, however, is tempered with several caveats. We discuss these and also make recommendations for further research.
Handle: RePEc:nbr:nberwo:11192
Template-Type: ReDIF-Paper 1.0
Title: Financial Markets and the Real Economy
Classification-JEL: G1; E3
Author-Name: John Cochrane
Author-Person: pco57
Note: AP EFG
Number: 11193
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11193
File-URL: http://www.nber.org/papers/w11193.pdf
File-Format: application/pdf
Publication-Status: published as Cochrane, John (ed.) Financial Markets and the Real Economy Volume 18 of the International Library of Critical Writings in Financial Economics. London: Edward Elgar, March 2006.
Publication-Status: published as John H. Cochrane, 2005. "Financial Markets and the Real Economy," Foundations and Trends® in Finance, vol 1(1), pages 1-101.
Abstract: I survey work on the intersection between macroeconomics and finance. The challenge is to find the right measure of "bad times," rises in the marginal value of wealth, so that we can understand high average returns or low prices as compensation for assets' tendency to pay off poorly in "bad times." I survey the literature, covering the time-series and cross-sectional facts, the equity premium, consumption-based models, general equilibrium models, and labor income/idiosyncratic risk approaches.
Handle: RePEc:nbr:nberwo:11193
Template-Type: ReDIF-Paper 1.0
Title: Testing, Crime and Punishment
Classification-JEL: I2
Author-Name: David N. Figlio
Author-Person: pfi57
Note: CH ED
Number: 11194
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11194
File-URL: http://www.nber.org/papers/w11194.pdf
File-Format: application/pdf
Publication-Status: published as Figlio, David N. "Testing, Crime And Punishment," Journal of Public Economics, 2006, v90(4-5,May), 837-851.
Abstract: The recent passage of the No Child Left Behind Act of 2001 solidified a national trend toward increased student testing for the purpose of evaluating public schools. This new environment for schools provides strong incentives for schools to alter the ways in which they deliver educational services. This paper investigates whether schools may employ discipline for misbehavior as a tool to bolster aggregate test performance. To do so, this paper utilizes an extraordinary dataset constructed from the school district administrative records of a subset of the school districts in Florida during the four years surrounding the introduction of a high-stakes testing regime. It compare the suspensions of students involved in each of the 41,803 incidents in which two students were suspended and where prior year test scores for both students are observed. While schools always tend to assign harsher punishments to low-performing students than to high-performing students throughout the year, this gap grows substantially during the testing window. Moreover, this testing window-related gap is only observed for students in testing grades. In summary, schools apparent act on the incentive to re-shape the testing pool through selective discipline in response to accountability pressures.
Handle: RePEc:nbr:nberwo:11194
Template-Type: ReDIF-Paper 1.0
Title: Names, Expectations and the Black-White Test Score Gap
Classification-JEL: I2
Author-Name: David N. Figlio
Author-Person: pfi57
Note: CH ED
Number: 11195
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11195
File-URL: http://www.nber.org/papers/w11195.pdf
File-Format: application/pdf
Abstract: This paper investigates the question of whether teachers treat children differentially on the basis of factors other than observed ability, and whether this differential treatment in turn translates into differences in student outcomes. I suggest that teachers may use a child's name as a signal of unobserved parental contributions to that child's education, and expect less from children with names that "sound" like they were given by uneducated parents. These names, empirically, are given most frequently by Blacks, but they are also given by White and Hispanic parents as well. I utilize a detailed dataset from a large Florida school district to directly test the hypothesis that teachers and school administrators expect less on average of children with names associated with low socio-economic status, and these diminished expectations in turn lead to reduced student cognitive performance. Comparing pairs of siblings, I find that teachers tend to treat children differently depending on their names, and that these same patterns apparently translate into large differences in test scores.
Handle: RePEc:nbr:nberwo:11195
Template-Type: ReDIF-Paper 1.0
Title: Corporate Taxation and Bilateral FDI with Threshold Barriers
Classification-JEL: F3; H2; F1
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Yona Rubinstein
Author-Person: pru68
Author-Name: Efraim Sadka
Author-Person: psa492
Note: IFM ITI PE
Number: 11196
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11196
File-URL: http://www.nber.org/papers/w11196.pdf
File-Format: application/pdf
Abstract: The paper brings out the special mechanism through which taxes influence bilateral FDI, when investment decisions are two-fold in the presence of fixed setup flows costs. For each pair of source-host countries, there is a set of factors determining whether aggregate FDI flows will occur at all, and a different set of factors determimnig the volume of FDI flows (provided that they occur). We demonstrate that the notion that the mere international tax differetials are a key factor behind the direction and magnitude of FDI flows is too simple. We argue that the source country tax rate works primarely on the selection process, whereas the host-country tax rate affect mainly the magnitude of the FDI, once they occur. We analyze international panel data with 24 OECD countries over the period 1981-1998 by the Heckman selection method to bring evidence in support of this argument.
Handle: RePEc:nbr:nberwo:11196
Template-Type: ReDIF-Paper 1.0
Title: Do Firms Go Public to Raise Capital?
Classification-JEL: G3; F3
Author-Name: Woojin Kim
Author-Person: pki279
Author-Name: Michael Weisbach
Note: CF
Number: 11197
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11197
File-URL: http://www.nber.org/papers/w11197.pdf
File-Format: application/pdf
Abstract: This paper considers the question of whether raising capital is an important reason why firms go public. Using a sample of 16,958 initial public offerings from 38 countries between 1990 and 2003, we consider differences between firms that sell new, primary shares to the public, and existing secondary shares that previously belonged to insiders. Our results suggest that the sale of primary shares is correlated with a number of factors associated with the firm's demand for capital. In particular, issuance of primary shares is correlated with higher increases of investment, higher repayment of debt and increases in cash, and more subsequent capital-raising through seasoned equity offers. Since 79% of all capital raised through IPOs in our sample is from the sale of primary shares, we conclude that capital-raising is an important motive in the going-public decision.
Handle: RePEc:nbr:nberwo:11197
Template-Type: ReDIF-Paper 1.0
Title: The IMF in a World of Private Capital Markets
Classification-JEL: F0; F2
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Kenneth Kletzer
Author-Name: Ashoka Mody
Note: IFM ITI
Number: 11198
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11198
File-URL: http://www.nber.org/papers/w11198.pdf
File-Format: application/pdf
Publication-Status: published as Eichengreen, Barry, Kenneth Kletzer and Ashoka Mody. "The IMF In A World Of Private Capital Markets," Journal of Banking and Finance, 2006, v30(5,May), 1335-1357.
Abstract: The IMF attempts to stabilize private capital flows to emerging markets by providing public monitoring and emergency finance. In analyzing its role we contrast cases where banks and bondholders do the lending. Banks have a natural advantage in monitoring and creditor coordination, while bonds have superior risk sharing characteristics. Consistent with this assumption, banks reduce spreads as they obtain more information through repeat transactions with borrowers. By comparison, repeat borrowing has little influence in bond markets, where publicly-available information dominates. But spreads on bonds are lower when they are issued in conjunction with IMF-supported programs, as if the existence of a program conveyed positive information to bondholders. The influence of IMF monitoring in bond markets is especially pronounced for countries vulnerable to liquidity crises.
Handle: RePEc:nbr:nberwo:11198
Template-Type: ReDIF-Paper 1.0
Title: Slow Passthrough Around the World: A New Import for Developing Countries?
Classification-JEL: F3; F4
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Author-Name: David C. Parsley
Author-Person: ppa30
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: ITI
Number: 11199
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11199
File-URL: http://www.nber.org/papers/w11199.pdf
File-Format: application/pdf
Publication-Status: published as Jeffrey Frankel & David Parsley & Shang-Jin Wei, 2012. "Slow Pass-through Around the World: A New Import for Developing Countries?," Open Economies Review, Springer, vol. 23(2), pages 213-251, April.
Abstract: Developing countries traditionally exhibit passthrough of exchange rate changes that is greater and more rapid than high-income countries, but have experienced a rapid downward trend in recent years in the degree of short-run passthrough, and in the adjustment speed. As a consequence, slow and incomplete passthrough is no longer exclusively a luxury of industrial countries. Using a new data set -- prices of eight narrowly defined brand commodities, observed in 76 countries -- we find empirical support for some of the factors that have been hypothesized in the literature, but not for others. Significant determinants of the passthrough coefficient include per capita incomes, bilateral distance, tariffs, country size, wages, long-term inflation, and long-term exchange rate variability. Some of these factors changed during the 1990s. Part (and only part) of the downward trend in passthrough to imported goods prices, and in turn to competitors' prices and the CPI, can be explained by changes in the monetary environment. Real wages also work to reduce passthrough to competitors' prices and the CPI, confirming the hypothesized role of distribution and retail costs in pricing to market. Rising distribution costs, due perhaps to the Balassa-Samuelson-Baumol effect, could contribute to the decline in the passthrough coefficient in some developing countries.
Handle: RePEc:nbr:nberwo:11199
Template-Type: ReDIF-Paper 1.0
Title: Systemic Risk and Hedge Funds
Classification-JEL: G12
Author-Name: Nicholas Chan
Author-Name: Mila Getmansky
Author-Name: Shane M. Haas
Author-Name: Andrew W. Lo
Author-Person: plo171
Note: AP
Number: 11200
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11200
File-URL: http://www.nber.org/papers/w11200.pdf
File-Format: application/pdf
Publication-Status: published as Carey, Mark and Rene M. Stulz (eds.) The Risks of Financial Institutions. Chicago and London: University of Chicago Press, 2006.
Publication-Status: published as Systemic Risk and Hedge Funds, Nicholas Chan, Mila Getmansky, Shane M. Haas, Andrew W. Lo. in The Risks of Financial Institutions, Carey and Stulz. 2006
Abstract: Systemic risk is commonly used to describe the possibility of a series of correlated defaults among financial institutions---typically banks---that occur over a short period of time, often caused by a single major event. However, since the collapse of Long Term Capital Management in 1998, it has become clear that hedge funds are also involved in systemic risk exposures. The hedge-fund industry has a symbiotic relationship with the banking sector, and many banks now operate proprietary trading units that are organized much like hedge funds. As a result, the risk exposures of the hedge-fund industry may have a material impact on the banking sector, resulting in new sources of systemic risks. In this paper, we attempt to quantify the potential impact of hedge funds on systemic risk by developing a number of new risk measures for hedge funds and applying them to individual and aggregate hedge-fund returns data. These measures include: illiquidity risk exposure, nonlinear factor models for hedge-fund and banking-sector indexes, logistic regression analysis of hedge-fund liquidation probabilities, and aggregate measures of volatility and distress based on regime-switching models. Our preliminary findings suggest that the hedge-fund industry may be heading into a challenging period of lower expected returns, and that systemic risk is currently on the rise.
Handle: RePEc:nbr:nberwo:11200
Template-Type: ReDIF-Paper 1.0
Title: Competition and Efficiency in Congested Markets
Classification-JEL: D43; C62
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Asuman Ozdaglar
Note: EFG LS
Number: 11201
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11201
File-URL: http://www.nber.org/papers/w11201.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron and Asuman Ozdaglar. "Competition and Efficiency in Congested Markets." Mathematics of Operations Research 32 (February 2007): 1-31.
Abstract: We study the efficiency of oligopoly equilibria in congested markets. The motivating examples are the allocation of network flows in a communication network or of traffic in a transportation network. We show that increasing competition among oligopolists can reduce efficiency, measured as the difference between users' willingness to pay and delay costs. We characterize a tight bound of 5/6 on efficiency in pure strategy equilibria. This bound is tight even when the number of routes and oligopolists is arbitrarily large. We also study the efficiency properties of mixed strategy equilibria.
Handle: RePEc:nbr:nberwo:11201
Template-Type: ReDIF-Paper 1.0
Title: Did Iraq Cheat the United Nations? Underpricing, Bribes, and the Oil for Food Program
Classification-JEL: J0; K4
Author-Name: Chang-Tai Hsieh
Author-Name: Enrico Moretti
Author-Person: pmo392
Note: EFG PE
Number: 11202
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11202
File-URL: http://www.nber.org/papers/w11202.pdf
File-Format: application/pdf
Publication-Status: published as Chang-Tai Hsieh & Enrico Moretti, 2006. "Did Iraq Cheat the United Nations? Underpricing, Bribes, and the Oil for Food Program," The Quarterly Journal of Economics, MIT Press, vol. 121(4), pages 1211-1248, November.
Abstract: From 1997 through early 2003, the United Nations Oil for Food Program allowed Iraq to export oil in exchange for humanitarian supplies. We measure the extent to which this program was corrupted by Iraq's attempts to deliberately set the price of its oil below market prices in an effort to solicit bribes, both in the form of direct cash bribes and in the form of political favors, from the buyers of the underpriced oil. We infer the magnitude of the potential bribe by comparing the gap between the official selling price of Iraq's two crude oils (Basrah Light and Kirkuk) and the market price of several comparison crude oils during the Program to the gap observed prior to the Program. We find consistent evidence that underpricing of Basrah Light averaged $1 per barrel from 1997 through 1999 and reaches a peak (almost $3 per barrel) from May 2000 through September 2001. The estimated underpricing quickly declines after the UN introduced a retroactive pricing scheme that reduced Iraq's ability to set the price of its oil. The evidence on whether Kirkuk was underpriced is less clear. Notably, we find that episodes of underpricing of Basrah Light are associated with a decline in the share of major oil multinationals among the oil buyers, and an increase in the share of obscure individual traders. The observed underpricing of Iraqi oil suggests that Iraq generated $5 billion in rents through its strategic underpricing. Of this amount, we estimate that Iraq collected $0.7 to $2 billion in bribes (depending on Iraq's share of the rents implied by the price gap), which is roughly 1 to 3 percent of the total value of oil sales under the Program. Finally, we find little evidence that underpricing was associated with increases in the relative supply or declines in the relative demand of Iraqi oil.
Handle: RePEc:nbr:nberwo:11202
Template-Type: ReDIF-Paper 1.0
Title: Financing Cities
Classification-JEL: H11; H7; R38; R51
Author-Name: Robert Inman
Note: PE
Number: 11203
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11203
File-URL: http://www.nber.org/papers/w11203.pdf
File-Format: application/pdf
Abstract: The macro-economic and micro-economic evidences makes a persuasive case for cities as important centers for productive efficiency, innnovation, and economic growth. For cities to achieve their full economic potential, however, complementary public services are required. This paper reviews the arguments and the evidence for the efficient financing and governance of city public services. Against the criterion of efficiency, city services should be limited to those services valued by city residents; financing should assign residential taxes to residential services and business land taxes and fees to business services; and city governance should foster competition and choice.
Handle: RePEc:nbr:nberwo:11203
Template-Type: ReDIF-Paper 1.0
Title: From Education to Democracy?
Classification-JEL: P16; O10
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Simon Johnson
Author-Person: pjo44
Author-Name: James A. Robinson
Author-Person: pro179
Author-Name: Pierre Yared
Author-Person: pya107
Note: EFG LS POL
Number: 11204
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11204
File-URL: http://www.nber.org/papers/w11204.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron, Simon Johnson, James A. Robinson and Pierre Yared. "From Education To Democracy?," American Economic Review, 2005, v95(2,May), 44-49.
Abstract: The conventional wisdom views high levels of education as a prerequisite for democracy. This paper shows that existing evidence for this view is based on cross-sectional correlations, which disappear once we look at within-country variation. In other words, there is no evidence that countries that increase their education are more likely to become democratic.
Handle: RePEc:nbr:nberwo:11204
Template-Type: ReDIF-Paper 1.0
Title: Income and Democracy
Classification-JEL: P16; O10
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Simon Johnson
Author-Person: pjo44
Author-Name: James Robinson
Author-Person: pro179
Author-Name: Pierre Yared
Author-Person: pya107
Note: EFG POL
Number: 11205
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11205
File-URL: http://www.nber.org/papers/w11205.pdf
File-Format: application/pdf
Publication-Status: published as Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2008. "Income and Democracy," American Economic Review, American Economic Association, vol. 98(3), pages 808-42, June.
Abstract: We revisit one of the central empirical findings of the political economy literature that higher income per capita causes democracy. Existing studies establish a strong cross-country correlation between income and democracy, but do not typically control for factors that simultaneously affect both variables. We show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and various measures of democracy. We also present instrumental-variables using two different strategies. These estimates also show no causal effect of income on democracy. Furthermore, we reconcile the positive cross-country correlation between income and democracy with the absence of a causal effect of income on democracy by showing that the long-run evolution of income and democracy is related to historical factors. Consistent with this, the positive correlation between income and democracy disappears, even without fixed effects, when we control for the historical determinants of economic and political development in a sample of former European colonies.
Handle: RePEc:nbr:nberwo:11205
Template-Type: ReDIF-Paper 1.0
Title: Industrialization and Urbanization: Did the Steam Engine Contribute to the Growth of Cities in the United States?
Classification-JEL: N60; N90; R38
Author-Name: Sukkoo Kim
Note: DAE
Number: 11206
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11206
File-URL: http://www.nber.org/papers/w11206.pdf
File-Format: application/pdf
Publication-Status: published as Kim, Sukkoo. "Industrialization And Urbanization: Did The Steam Engine Contribute To The Growth Of Cities In The United States?," Explorations in Economic History, 2005, v42(4,Oct), 586-598.
Abstract: Industrialization and urbanization are seen as interdependent processes of modern economic development. However, the exact nature of their causal relationship is still open to considerable debate. This paper uses firm-level data from the manuscripts of the decennial censuses between 1850 and 1880 to examine whether the adoption of the steam engine as the primary power source by manufacturers during industrialization contributed to urbanization. While the data indicate that steam-powered firms were more likely to locate in urban areas than water-powered firms, the adoption of the steam engine did not contribute substantially to urbanization.
Handle: RePEc:nbr:nberwo:11206
Template-Type: ReDIF-Paper 1.0
Title: Health, Information, and Migration: Geographic Mobility of Union Army Veterans, 1860-1880
Author-Name: Chulhee Lee
Author-Person: ple383
Note: LS
Number: 11207
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11207
File-URL: http://www.nber.org/papers/w11207.pdf
File-Format: application/pdf
Publication-Status: published as Lee, Chulhee, 2008. "Health, Information, and Migration: Geographic Mobility of Union Army Veterans, 1860?1880," The Journal of Economic History, Cambridge University Press, vol. 68(03), pages 862-899, September.
Abstract: This paper explores how injuries, sickness, and geographical mobility of Union Army veterans while in service affected their post-service migrations. Wartime wounds and illnesses significantly diminished the geographical mobility of veterans after the war. Geographic moves while carrying out military missions had strong positive effects on their post-service geographic mobility. Geographic moves while in service also influenced the choice of destination among the migrants. The farther into the South a veteran had traveled while in service, the higher the probability that he would migrate to the South. Furthermore, these migrants to the South were more likely to settle in a state they had entered while in service. Increased general knowledge about geographical transfer itself, greater information on distant lands and labor markets, and reduced psychological cost of moving were probably important mechanisms by which prior mobility affected subsequent migration. I discuss some implications of the results for the elements of self-selection in migration, the roles of different types of information in migration decisions, and the overall impact of the Civil War on geographic mobility.
Handle: RePEc:nbr:nberwo:11207
Template-Type: ReDIF-Paper 1.0
Title: Belief in a Just World and Redistributive Politics
Classification-JEL: D31; D72; D80; E62
Author-Name: Roland Benabou
Author-Person: pbe27
Author-Name: Jean Tirole
Author-Person: pti33
Note: EFG PE POL
Number: 11208
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11208
File-URL: http://www.nber.org/papers/w11208.pdf
File-Format: application/pdf
Publication-Status: published as Benabou, Richard and Jean Tirole. "Belief In A Just World And Redistributive Politics," Quarterly Journal of Economics, 2006, v121(2,May), 699-746.
Abstract: International surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate. At the same time, social ethnographies and experiments by psychologists demonstrate individuals' recurrent struggle with cognitive dissonance as they seek to maintain, and pass on to their children, a view of the world where effort ultimately pays off and everyone gets their just deserts. This paper offers a model that helps explain: i) why most people feel such a need to believe in a "just world"; ii) why this need, and therefore the prevalence of the belief, varies considerably across countries; iii) the implications of this phenomenon for international differences in political ideology, levels of redistribution, labor supply, aggregate income, and popular perceptions of the poor. The model shows in particular how complementarities arise endogenously between individuals' desired beliefs or ideological choices, resulting in two equilibria. A first, "American" equilibrium is characterized by a high prevalence of just-world beliefs among the population and relatively laissez-faire policies. The other, "European" equilibrium is characterized by more pessimism about the role of effort in economic outcomes and a more extensive welfare state. More generally, the paper develops a theory of collective beliefs and motivated cognitions, including those concerning "money" (consumption) and happiness, as well as religion.
Handle: RePEc:nbr:nberwo:11208
Template-Type: ReDIF-Paper 1.0
Title: Equivalence Results for Optimal Pass-Through, Optimal Indexing to Exchange Rates, and Optimal Choice of Currency for Export Pricing
Classification-JEL: F1; F4
Author-Name: Charles Engel
Author-Person: pen14
Note: IFM
Number: 11209
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11209
File-URL: http://www.nber.org/papers/w11209.pdf
File-Format: application/pdf
Publication-Status: published as Charles Engel, 2006. "Equivalence Results for Optimal Pass-Through, Optimal Indexing to Exchange Rates, and Optimal Choice of Currency for Export Pricing," Journal of the European Economic Association, MIT Press, vol. 4(6), pages 1249-1260, December.
Abstract: Firms sometimes write price lists or catalogs for their exports, so they set prices for a period of time and do not adjust prices during that interval in response to changes in their environment. The firm sets the price either in its own currency or the importer's currency. This paper draws a simple link between the choice of currency, and the pricing decision of a firm that changes prices in response to all shocks. Specifically, if the latter firm's price has a lower variance in terms of its own currency than the importer's currency, then the firm with a price list will set the price in its own currency (and otherwise it will set price in the foreign currency.) This relationship is established by consideration of the firm with a price list as a special case of a firm that indexes its export price to the exchange rate.
Handle: RePEc:nbr:nberwo:11209
Template-Type: ReDIF-Paper 1.0
Title: Asymmetric Crime Cycles
Classification-JEL: K4
Author-Name: H. Naci Mocan
Author-Person: pmo270
Author-Name: Turan G. Bali
Note: PE
Number: 11210
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11210
File-URL: http://www.nber.org/papers/w11210.pdf
File-Format: application/pdf
Publication-Status: published as H. Naci Mocan & Turan G. Bali, 2010. "Asymmetric Crime Cycles," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 899-911, 01.
Abstract: Recent theoretical models based on dynamic human capital formation, or social influence, suggest an inverse relationship between criminal activity and economic opportunity and between criminal activity and deterrence, but predict an asymmetric response of crime. In this paper we use three different data sets and three different empirical methodologies to document this previously-unnoticed regularity. Using nonparametric methods we show that the behavior of property crime is asymmetric over time, where increases are sharper but decreases are gradual. Using aggregate time-series U.S. data as well as data from New York City we demonstrate that property crime reacts more (less) strongly to increases (decreases) in the unemployment rate, to decreases (increases) in per capita real GDP and to decreases (increases) in the police force. The same result is obtained between unemployment and property crime in annual state-level panel data. These results suggest that it may be cost effective to implement mechanisms to prevent crime commission rates from rising in the first place.
Handle: RePEc:nbr:nberwo:11210
Template-Type: ReDIF-Paper 1.0
Title: Attention, Demographics, and the Stock Market
Classification-JEL: G1; J1; D0
Author-Name: Stefano DellaVigna
Author-Person: pde710
Author-Name: Joshua M. Pollet
Note: AP LS
Number: 11211
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11211
File-URL: http://www.nber.org/papers/w11211.pdf
File-Format: application/pdf
Abstract: Do investors pay enough attention to long-term fundamentals? We consider the case of demographic information. Cohort size fluctuations produce forecastable demand changes for age-sensitive sectors, such as toys, bicycles, beer, life insurance, and nursing homes. These demand changes are predictable once a specific cohort is born. We use lagged consumption and demographic data to forecast future consumption demand growth induced by changes in age structure. We find that demand forecasts predict profitability by industry. Moreover, forecasted demand changes 5 to 10 years in the future predict annual industry returns. One additional percentage point of annualized demand growth due to demographics predicts a 5 to 10 percentage point increase in annual abnormal industry stock returns. However, forecasted demand changes over shorter horizons do not predict stock returns. The predictability results are more substantial for industries with higher barriers to entry and with more pronounced age patterns in consumption. A trading strategy exploiting demographic information earns an annualized risk-adjusted return of 5 to 7 percent. We present a model of underreaction to information about the distant future that is consistent with the findings.
Handle: RePEc:nbr:nberwo:11211
Template-Type: ReDIF-Paper 1.0
Title: Fluctuating Macro Policies and the Fiscal Theory
Classification-JEL: E1; E5; E6
Author-Name: Troy Davig
Author-Person: pda131
Author-Name: Eric M. Leeper
Author-Person: ple3
Note: EFG
Number: 11212
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11212
File-URL: http://www.nber.org/papers/w11212.pdf
File-Format: application/pdf
Publication-Status: published as Fluctuating Macro Policies and the Fiscal Theory, Troy Davig, Eric M. Leeper. in NBER Macroeconomics Annual 2006, Volume 21, Acemoglu, Rogoff, and Woodford. 2007
Abstract: This paper estimates regime-switching rules for monetary policy and tax policy over the post-war period in the United States and imposes the estimated policy process on a calibrated dynamic stochastic general equilibrium model with nominal rigidities. Decision rules are locally unique and produce a stationary long-run rational expectations equilibrium in which (lump-sum) tax shocks always affect output and inflation. Tax non-neutralities in the model arise solely through the mechanism articulated by the fiscal theory of the price level. The paper quantifies that mechanism and finds it to be important in U.S. data, reconciling a popular class of monetary models with the evidence that tax shocks have substantial impacts. Because long-run policy behavior determines existence and uniqueness of equilibrium, in a regime-switching environment more accurate qualitative inferences can be gleaned from full-sample information than by conditioning on policy regime.
Handle: RePEc:nbr:nberwo:11212
Template-Type: ReDIF-Paper 1.0
Title: Affirmative Action in Hierarchies
Classification-JEL: J7
Author-Name: Suzanne Scotchmer
Author-Person: psc49
Note: LS LE
Number: 11213
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11213
File-URL: http://www.nber.org/papers/w11213.pdf
File-Format: application/pdf
Abstract: If promotion in a hierarchy is based on a random signal of ability, rates of promotion will be affected by risk-taking. Further, the numbers and abilities of risk-takers and non-risk-takers will be different at each stage of the hierarchy, and the ratio will be changing. I show that, under mild conditions, more risk-takers than non-risk-takers will survive at early stages, but they will have lower ability. At later stages, this will be reversed: Fewer risk-takers than non-risk-takers survive, but they will have higher ability. I give several interpretations for how these theorems relate to affirmative action, in light of considerable evidence that males are more risk-taking than females.
Handle: RePEc:nbr:nberwo:11213
Template-Type: ReDIF-Paper 1.0
Title: Pitfalls of a State-Dominated Financial System: The Case of China
Classification-JEL: G1; F3
Author-Name: Genevieve Boyreau-Debray
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: CF IFM
Number: 11214
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11214
File-URL: http://www.nber.org/papers/w11214.pdf
File-Format: application/pdf
Abstract: State-owned financial institutions have been proposed as a way to address market failure, but the recent literature has also highlighted their pathological problems. This paper studies the case of China for pitfalls of a state-dominated financial system, including possible segmentation of the internal capital market due to local government interference and mis-allocation of capital. Even without formal legal prohibition to capital movement across regions, we find that capital mobility within China is low. Furthermore, to the extent some capital moves around the country, the government (as opposed to the private sector) tends to allocate capital systematically away from more productive regions toward less productive ones. In this context, a smaller role of the government in the financial sector might increase economic efficiency and the rate of economic growth.
Handle: RePEc:nbr:nberwo:11214
Template-Type: ReDIF-Paper 1.0
Title: Does Competition Among Public Schools Benefit Students and Taxpayers? A Comment on Hoxby (2000)
Classification-JEL: H7; I2; R5
Author-Name: Jesse Rothstein
Author-Person: pro180
Note: CH ED
Number: 11215
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11215
File-URL: http://www.nber.org/papers/w11215.pdf
File-Format: application/pdf
Publication-Status: published as "Does Competition Among Public Schools Benefit Students and Taxpayers? A Comment on Hoxby (2000)." American Economic Review 97(5), December 2007, pp. 2026-2037.
Abstract: In an influential paper, Hoxby (2000) studies the relationship between the degree of so-called "Tiebout choice" among local school districts within a metropolitan area and average test scores. She argues that choice is endogenous to school quality, and instruments with the number of larger and smaller streams. She finds a large positive effect of choice on test scores, which she interprets as evidence that school choice induces greater school productivity. This paper revisits Hoxby's analysis. I document several important errors in Hoxby's data and code. I also demonstrate that the estimated choice effect is extremely sensitive to the way that "larger streams" are coded. When Hoxby's hand count of larger streams is replaced with any of several alternative, easily replicable measures, there is no significant difference between IV and OLS, each of which indicates a choice effect near zero. There is thus little evidence that schools respond to Tiebout competition by raising productivity.
Handle: RePEc:nbr:nberwo:11215
Template-Type: ReDIF-Paper 1.0
Title: Competition Among Public Schools: A Reply to Rothstein (2004)
Classification-JEL: H70; I20
Author-Name: Caroline M. Hoxby
Author-Person: pho46
Note: ED CH
Number: 11216
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11216
File-URL: http://www.nber.org/papers/w11216.pdf
File-Format: application/pdf
Publication-Status: published as Caroline M. Hoxby, 2007. "Does Competition Among Public Schools Benefit Students and Taxpayers? Reply," American Economic Review, American Economic Association, vol. 97(5), pages 2038-2055, December.
Abstract: Rothstein has produced two comments, Rothstein (2003) and Rothstein (2004), on Hoxby "Does Competition Among Public Schools Benefit Students and Taxpayers," American Economic Review, 2000. In this paper, I discuss every claim of any importance in the comments. I show that every claim is wrong. I also discuss a number of Rothstein's innuendos--that is, claims that are made by implication rather than with the support of explicit arguments or evidence. I show that, when held up against the evidence, each innuendo proves to be false. One of the major points of Rothstein (2003) is that lagged school districts are a valid instrumental variable for today's school districts. This is not credible. Another major claim of Rothstein (2003) is that it is better to use highly non-representative achievement data based on students' self-selecting into test-taking than to use nationally representative achievement data. This claim is wrong for multiple reasons. The most important claim of Rothstein (2004) is that the results of Hoxby (2000) are not robust to including private school students in the sample. This is incorrect. While Rothstein appears merely to be adding private school students to the data, he actually substitutes error-prone data for error-free data on all students, generating substantial attenuation bias. He attributes the change in estimates to the addition of the private school students, but I show that the change in estimates is actually due to his using erroneous data for public school students. Another important claim in Rothstein (2004) that the results in Hoxby (2000) are not robust to associating streams with the metropolitan areas through which they flow rather than the metropolitan areas where they have their source. This is false: the results are virtually unchanged when the association is shifted from source to flow. Since 93.5 percent of streams flow only in the metropolitan area where they have their source, it would be surprising if the results did change much. The comments Rothstein (2003) and Rothstein (2004) are without merit. All of the data and code used in Hoxby (2000) are available to other researchers. An easy-to-use CD provides not only extracts and estimation code, but all of the raw data and the code for constructing the dataset.
Handle: RePEc:nbr:nberwo:11216
Template-Type: ReDIF-Paper 1.0
Title: The Labor Market Impact of High-Skill Immigration
Classification-JEL: J1; J4
Author-Name: George J. Borjas
Author-Person: pbo44
Note: LS
Number: 11217
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11217
File-URL: http://www.nber.org/papers/w11217.pdf
File-Format: application/pdf
Publication-Status: published as Borjas, George J. "The Labor-Market Impact Of High-Skill Immigration," American Economic Review, 2005, v95(2,May), 56-60.
Abstract: The rapid growth in the number of foreign students enrolled in American universities has transformed the higher education system, particularly at the graduate level. Many of these newly minted doctorates remain in the United States after receiving their doctoral degrees, so that the foreign student influx can have a significant impact in the labor market for high-skill workers. Using data drawn from the Survey of Earned Doctorates and the Survey of Doctoral Recipients, the study shows that a foreign student influx into a particular doctoral field at a particular time had a significant and adverse effect on the earnings of doctorates in that field who graduated at roughly the same time. A 10 percent immigration-induced increase in the supply of doctorates lowers the wage of competing workers by about 3 percent.
Handle: RePEc:nbr:nberwo:11217
Template-Type: ReDIF-Paper 1.0
Title: Socioeconomic Differences in the Adoption of New Medical Technologies
Classification-JEL: D6; H0
Author-Name: Dana Goldman
Author-Person: pgo681
Author-Name: James P. Smith
Author-Person: psm28
Note: EH
Number: 11218
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11218
File-URL: http://www.nber.org/papers/w11218.pdf
File-Format: application/pdf
Publication-Status: published as Goldman, Dana and James P. Smith. "Socioeconomic Differences In The Adoption Of New Medical Technologies," American Economic Review, 2005, v95(2,May), 234-237.
Abstract: New medical technologies hold tremendous promise for improving population health, but they also raise concerns about exacerbating already large differences in health by socioeconomic status (SES). If effective treatments are more rapidly adopted by the better educated, SES health disparities may initially expand even though the health of those in all groups eventually improves. Hypertension provides a useful case study. It is an important risk factor for developing cardiovascular disease, the condition is relatively common, and there are large differences in rates of hypertension by education. This paper examines the short and long-term diffusion of two important classes of anti-hypertensives - ACE inhibitors and calcium channel blockers - over the last twenty-five years. Using three prominent medical surveys, we find no evidence that the diffusion of these drugs into medical practice favored one education group relative to another. The findings suggest that - at least for hypertension - SES differences in the adoption of new medical technologies are not an important reason for the SES health gradient.
Handle: RePEc:nbr:nberwo:11218
Template-Type: ReDIF-Paper 1.0
Title: Rural Windfall or a New Resource Curse? Coca, Income, and Civil Conflict in Colombia
Classification-JEL: O1; R0; Q0
Author-Name: Joshua D. Angrist
Author-Person: pan29
Author-Name: Adriana Kugler
Author-Person: pku361
Note: LS
Number: 11219
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11219
File-URL: http://www.nber.org/papers/w11219.pdf
File-Format: application/pdf
Publication-Status: published as Joshua D. Angrist & Adriana D. Kugler, 2008. "Rural Windfall or a New Resource Curse? Coca, Income, and Civil Conflict in Colombia," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 191-215, 03.
Abstract: Natural and agricultural resources for which there is a substantial black market, such as coca, opium, and diamonds, appear especially likely to be exploited by the parties to a civil conflict. On the other hand, these resources may also provide one of the few reliable sources of income in the countryside. In this paper, we study the economic and social consequences of a major shift in the production of coca paste from Peru and Bolivia to Colombia, where most coca leaf is now harvested. This shift, which arose in response to the disruption of the "air bridge" that previously ferried coca paste into Colombia, provided an exogenous boost in the demand for Colombian coca leaf. Our analysis shows this shift generated economic gains in rural areas, primarily in the form of increased self-employment earnings and increased labor supply by teenage boys. There is little evidence of widespread economic spillovers, however. The results also suggest that the rural areas which saw accelerated coca production subsequently became much more violent. Taken together, these findings support the view that the Colombian civil conflict is fueled by the financial opportunities that coca provides. This is in line with a recent literature which attributes the extension of civil conflicts to economic rewards and an environment that favors insurgency more than to the persistence of economic or political grievances.
Handle: RePEc:nbr:nberwo:11219
Template-Type: ReDIF-Paper 1.0
Title: An Information Approach to International Currencies
Classification-JEL: F3; F4; G1
Author-Name: Richard K. Lyons
Author-Person: ply9
Author-Name: Michael J. Moore
Author-Person: pmo284
Note: AP IFM
Number: 11220
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11220
File-URL: http://www.nber.org/papers/w11220.pdf
File-Format: application/pdf
Publication-Status: published as Lyons, Richard K. & Moore, Michael J., 2009. "An information approach to international currencies," Journal of International Economics, Elsevier, vol. 79(2), pages 211-221, November.
Abstract: This paper addresses currency competition from an information perspective. Transactions in traditional models do not convey information, so transaction costs -- the driver of competition outcomes -- are driven by market size. In our model transactions do convey information (consistent with recent empirical findings). Several important departures arise. First, adding the information dimension resolves the traditional indeterminacy of currency trade patterns (by mitigating the concentrating force of market-size economies). Second, whether transactions are executed directly or through a vehicle actually affects prices (because these trading methods do not in general reveal the same information). Third, our model provides a new rationale for why some currency pairs never trade directly (information is not sufficiently symmetric to support trading). Fourth, our model formalizes the arbitrage process and shows that arbitrage transaction quantities and price levels are jointly determined. Empirically, the paper provides a first integrated analysis of transactions in a triangle of markets: ¥/$, $/Euro, and ¥/Euro. Data for the full triangle permits comparison of direct, indirect and arbitrage transactions, for each pair. The information model predicts that transactions should affect prices across markets (e.g., flow in the ¥/$ market should convey information relevant to $/Euro and ¥/Euro prices), which is borne out.
Handle: RePEc:nbr:nberwo:11220
Template-Type: ReDIF-Paper 1.0
Title: The Structure of Factor Content Predictions
Classification-JEL: F1
Author-Name: Daniel Trefler
Author-Person: ptr44
Author-Name: Susan Chun Zhu
Author-Person: pzh95
Note: ITI
Number: 11221
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11221
File-URL: http://www.nber.org/papers/w11221.pdf
File-Format: application/pdf
Publication-Status: published as Trefler, Daniel & Zhu, Susan Chun, 2010. "The structure of factor content predictions," Journal of International Economics, Elsevier, vol. 82(2), pages 195-207, November.
Abstract: The last decade witnessed an explosion of research into the impact of international technology differences on the factor content of trade. Yet the literature has failed to confront two pivotal issues. First, with international technology differences and traded intermediate inputs there does not exist a Vanek-consistent definition of the factor content of trade. Restated, we do not know what we are trying to explain! We fill this gap by providing the correct definition. Second, as Helpman and Krugman (1985) showed, many models beyond Heckscher-Ohlin imply the Vanek prediction. So what model is being tested? We completely characterize the class of models being tested by providing a familiar `consumption similarity' condition that is necessary and sufficient for the Vanek prediction. We illustrate with a unique dataset containing input-output tables for 41 rich and poor countries. We find modest support for the strong version of the Vanek prediction and impressive support for weaker versions of the prediction.
Handle: RePEc:nbr:nberwo:11221
Template-Type: ReDIF-Paper 1.0
Title: The Tactical and Strategic Value of Commodity Futures
Classification-JEL: G11; G12; G13; E44
Author-Name: Claude B. Erb
Author-Name: Campbell R. Harvey
Author-Person: pha102
Note: AP
Number: 11222
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11222
File-URL: http://www.nber.org/papers/w11222.pdf
File-Format: application/pdf
Abstract: Historically, commodity futures have had excess returns similar to those of equities. But what should we expect in the future? The usual risk factors are unable to explain the time-series variation in excess returns. In addition, our evidence suggests that commodity futures are an inconsistent, if not tenuous, hedge against unexpected inflation. Further, the historically high average returns to a commodity futures portfolio are largely driven by the choice of weighting schemes. Indeed, an equally weighted long-only portfolio of commodity futures returns has approximately a zero excess return over the past 25 years. Our portfolio analysis suggests that the a long-only strategic allocation to commodities as a general asset class is a bet on the future term structure of commodity prices, in general, and on specific portfolio weighting schemes, in particular. In contrast, we provide evidence that there are distinct benefits to an asset allocation overlay that tactically allocates using commodity futures exposures. We examine three trading strategies that use both momentum and the term structure of futures prices. We find that the tactical strategies provide higher average returns and lower risk than a long-only commodity futures exposure.
Handle: RePEc:nbr:nberwo:11222
Template-Type: ReDIF-Paper 1.0
Title: The Competitive Effects of Drug Withdrawals
Classification-JEL: I1
Author-Name: John Cawley
Author-Person: pca6
Author-Name: John A. Rizzo
Author-Person: pri334
Note: EH
Number: 11223
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11223
File-URL: http://www.nber.org/papers/w11223.pdf
File-Format: application/pdf
Publication-Status: published as Cawley, John, and John A. Rizzo. “Spillover Effects of Prescription Drug Withdrawals.” Advances in Health Economics and Health Services Research, 2008, 19: 119-144.
Abstract: In September 1997, the anti-obesity drugs Pondimin and Redux, ingredients in the popular drug combination fen-phen, were withdrawn from the market for causing potentially fatal side effects. That event provides an opportunity for studying how consumers respond to drug withdrawals. In theory, remaining drugs in the therapeutic class could enjoy competitive benefits, or suffer negative spillovers, from the withdrawal of a competing drug. Our findings suggest that, while the withdrawal of a rival drug may impose negative spillovers in the form of higher patient quit rates, on the whole non-withdrawn drugs in the same therapeutic class enjoy competitive benefits in the form of higher utilization.
Handle: RePEc:nbr:nberwo:11223
Template-Type: ReDIF-Paper 1.0
Title: SMEs, Growth, and Poverty
Classification-JEL: O1; O2; L11; L25
Author-Name: Thorsten Beck
Author-Person: pbe266
Author-Name: Asli Demirguc-Kunt
Author-Person: pde226
Author-Name: Ross Levine
Author-Person: ple61
Note: EFG
Number: 11224
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11224
File-URL: http://www.nber.org/papers/w11224.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: This paper explores the relationship between the relative size of the Small and Medium Enterprise (SME) sector, economic growth, and poverty alleviation using a new database on the share of SME labor in the total manufacturing labor force. Using a sample of 45 countries, we find a strong, positive association between the importance of SMEs and GDP per capita growth. The data do not, however, confidently support the conclusions that SMEs exert a causal impact on growth. Furthermore, we find no evidence that SMEs alleviate poverty or decrease income inequality.
Handle: RePEc:nbr:nberwo:11224
Template-Type: ReDIF-Paper 1.0
Title: Pricing Capital Under Mandatory Unbundling and Facilities Sharing
Classification-JEL: L51
Author-Name: Robert S. Pindyck
Author-Person: ppi130
Note: AP IO
Number: 11225
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11225
File-URL: http://www.nber.org/papers/w11225.pdf
File-Format: application/pdf
Abstract: The regulation of telecommunications, railroads, and other network industries has been based on mandatory unbundling and facilities sharing - entrants have the option to lease part or all of incumbents' facilities if and when they desire, at rates determined by regulators. This flexibility is of great value to entrants, but because investments are largely irreversible, it is costly to supply by incumbents. However, pricing formulas used by regulators to set lease rates for capital do not compensate incumbents for this flexibility, so that incumbents are effectively forced to subsidized entrants, discouraging further investments. This paper shows how pricing formulas used to set lease rates can be adjusted to account for the transfer of option value from incumbents to entrants, and estimates the average size of the adjustment for land-based local voice telecommunications in the U.S.
Handle: RePEc:nbr:nberwo:11225
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Competition on Variation in the Quality and Cost of Medical Care
Classification-JEL: I1
Author-Name: Daniel P. Kessler
Author-Name: Jeffrey J. Geppert
Note: EH IO AG
Number: 11226
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11226
File-URL: http://www.nber.org/papers/w11226.pdf
File-Format: application/pdf
Publication-Status: published as Kessler, Daniel P.and Jeffrey J. Geppert. "The Effects of Competition on Variation in the Quality and Cost of Medical Care." Journal of Economics and Management Strategy 14, 3 (Fall 2005): 575-89.
Abstract: We estimate the effects of hospital competition on the level of and the variation in quality of care and hospital expenditures for elderly Medicare beneficiaries with heart attack. We compare competition's effects on more-severely ill patients, whom we assume value quality more highly, to the effects on less-severely ill, low-valuation patients. We find that low-valuation patients in less-competitive markets receive more intensive treatment than in more-competitive markets, but have statistically similar health outcomes. In contrast, high-valuation patients in less-competitive markets receive less intensive treatment than in more-competitive markets, and have significantly worse health outcomes. Since this competition-induced increase in variation in expenditures is, on net, expenditure-decreasing and outcome-beneficial, we conclude that it is welfare-enhancing. These findings are inconsistent with conventional models of vertical differentiation, although they can be accommodated by more recent models.
Handle: RePEc:nbr:nberwo:11226
Template-Type: ReDIF-Paper 1.0
Title: A Damage-Revelation Rationale for Coupon Remedies
Classification-JEL: D18; D82; D83; H23; K19
Author-Name: A. Mitchell Polinsky
Author-Person: ppo94
Author-Name: Daniel L. Rubinfeld
Note: LE
Number: 11227
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11227
File-URL: http://www.nber.org/papers/w11227.pdf
File-Format: application/pdf
Publication-Status: published as Polinsky, A. Mitchell and Daniel L. Rubinfeld. "A Damage-Revelation Rationale for Coupon Remedies." Journal of Law, Economics, and Organization 3, 3 (October 2007): 653-61.
Abstract: This article studies optimal remedies in a setting in which damages vary among plaintiffs and are difficult to determine. We show that giving plaintiffs a choice between cash and coupons to purchase units of the defendant's product at a discount -- a "coupon-cash remedy" -- is superior to cash alone. The optimal coupon-cash remedy offers a cash amount that is less than the value of the coupons to plaintiffs who suffer relatively high harm. Such a remedy induces these plaintiffs to choose coupons, and plaintiffs who suffer relatively low harm to choose cash. Sorting plaintiffs in this way leads to better deterrence because the costs borne by defendants (the cash payments and the cost of providing coupons) more closely approximate the harms that they have caused.
Handle: RePEc:nbr:nberwo:11227
Template-Type: ReDIF-Paper 1.0
Title: Globalization and Taste Convergence: The Case of Wine and Beer
Classification-JEL: F13; F15
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Eileen L. Brooks
Note: ITI
Number: 11228
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11228
File-URL: http://www.nber.org/papers/w11228.pdf
File-Format: application/pdf
Publication-Status: published as Joshua Aizenman & Eileen Brooks, 2008. "Globalization and Taste Convergence: the Cases of Wine and Beer," Review of International Economics, Blackwell Publishing, vol. 16(2), pages 217-233, 05.
Abstract: This paper investigates changes in cultural consumption patterns for a low concentration industry: wine and beer. Using data on 38 countries from 1963-2000, there is clear convergence in the consumption of wine relative to beer between 1963 and 2000. Convergence occurs even more quickly within groups of countries that have a higher degree of integration. A key prediction of international trade is confirmed in the data: greater trade integration weakens the association between production and consumption patterns -- although the relative consumption of wine can be explained well in 1963 by grape production and latitude, these variables are much less significant in 2000. Despite these "scientific" explanations for the consumption of wine, there is also a cultural angle to wine consumption. While the relative wine consumption of France and Germany is converging, several Latin American countries fail to converge. The patterns of convergence are consistent with dynamics of adjustment in an overlapping generation habit formation model.
Handle: RePEc:nbr:nberwo:11228
Template-Type: ReDIF-Paper 1.0
Title: Pharmaceutical Stock Price Reactions to Price Constraint Threats and Firm-Level R&D Spending
Classification-JEL: G31; O32; L65; I1
Author-Name: Joseph Golec
Author-Name: Shantaram Hegde
Author-Name: John A. Vernon
Note: EH PR
Number: 11229
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11229
File-URL: http://www.nber.org/papers/w11229.pdf
File-Format: application/pdf
Abstract: Political pressure in the United States is again building to constrain pharmaceutical prices either directly or through legalized reimportation of lower-priced pharmaceuticals from foreign countries. This study uses the Clinton Administration's Health Security Act (HSA) of 1993 as a natural experiment to show how threats of price constraints affect firm-level R&D spending. We link events surrounding the HSA to pharmaceutical company stock price changes and then examine the cross-sectional relation between the stock price changes and subsequent unexpected R&D spending changes. Results show that the HSA had significant negative effects on firm stock prices and R&D spending. Conservatively, the HSA reduced R&D spending by $1.6 billion, even though it never became law. If the HSA had passed, and had many small firms not raised capital just prior to the HSA, the R&D effects could have been much larger.
Handle: RePEc:nbr:nberwo:11229
Template-Type: ReDIF-Paper 1.0
Title: Changes in the Labor Supply Behavior of Married Women: 1980-2000
Classification-JEL: J1; J2
Author-Name: Francine D. Blau
Author-Person: pbl16
Author-Name: Lawrence M. Kahn
Author-Person: pka63
Note: LS
Number: 11230
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11230
File-URL: http://www.nber.org/papers/w11230.pdf
File-Format: application/pdf
Publication-Status: published as Francine D. Blau & Lawrence M. Kahn, 2007. "Changes in the Labor Supply Behavior of Married Women: 1980–2000," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 393-438.
Abstract: Using March Current Population Survey (CPS) data, we investigate married women's labor supply behavior from 1980 to 2000. We find that their labor supply function for annual hours shifted sharply to the right in the 1980s, with little shift in the 1990s. In an accounting sense, this is the major reason for the more rapid growth of female labor supply observed in the 1980s, with an additional factor being that husbands' real wages fell slightly in the 1980s but rose in the 1990s. Moreover, a major new development was that, during both decades, there was a dramatic reduction in women's own wage elasticity. And, continuing past trends, women's labor supply also became less responsive to their husbands' wages. Between 1980 and 2000, women's own wage elasticity fell by 50 to 56 percent, while their cross wage elasticity fell by 38 to 47 percent in absolute value. These patterns hold up under virtually all alternative specifications correcting for: selectivity bias in observing wage offers; selection into marriage; income taxes and the earned income tax credit; measurement error in wages and work hours; and omitted variables that affect both wage offers and the propensity to work; as well as when education groups and mothers of small children are analyzed separately.
Handle: RePEc:nbr:nberwo:11230
Template-Type: ReDIF-Paper 1.0
Title: Time on the Ladder: Career Mobility in Agriculture, 1890-1938
Classification-JEL: N3; N5; J6
Author-Name: Lee J. Alston
Author-Person: pal162
Author-Name: Joseph P. Ferrie
Note: DAE
Number: 11231
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11231
File-URL: http://www.nber.org/papers/w11231.pdf
File-Format: application/pdf
Publication-Status: published as Alston, Lee J. and Joseph P. Ferrie. "Time On The Ladder: Career Mobility In Agriculture, 1890-1938," Journal of Economic History, 2005, v65(4,Dec), 1058-1081.
Abstract: We explore the dynamics of the agricultural ladder (the progression from laborer to cropper to renter) in the U.S. before 1940 using individual-level data from a survey of farmers conducted in 1938 in Jefferson County, Arkansas. Using information on each individual's complete career history (their tenure status at each date, in some cases as far back as 1890), their location, and a variety of their personal and farm characteristics, we develop and test hypotheses to explain the time spent as a tenant, sharecropper, and wage laborer. The pessimistic view of commentators who saw sharecropping and tenancy as a trap has some merit, but individual characteristics played an important role in mobility. In all periods, some farmers moved up the agricultural ladder quite rapidly while others remained stuck on a rung. Ascending the ladder was an important route to upward mobility, particularly for blacks, before large-scale migration from rural to urban places.
Handle: RePEc:nbr:nberwo:11231
Template-Type: ReDIF-Paper 1.0
Title: Beyond Goods and Services: Competition Policy, Investment, Mutual Recognition, Movement of Persons, and Broader Cooperation Provisions of Recent FTAs involving ASEAN Countries
Classification-JEL: F00; F02; F11; F15
Author-Name: O. G. Dayaratna Banda
Author-Name: John Whalley
Author-Person: pwh8
Note: ITI
Number: 11232
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11232
File-URL: http://www.nber.org/papers/w11232.pdf
File-Format: application/pdf
Abstract: We discuss recent bilateral, regional, and country trade, partnership, and economic agreements involving both ASEAN as a single entity and individual ASEAN countries (Singapore, Thailand, Malaysia) focusing on their reach beyond conventional trade in goods and services issues. What emerges is of a picture of ill-defined general commitments and precise undertaking, which vary from element to element and country pair to country pair. These agreements are recent, but they are numerous and more are under negotiation. We separately synthesize and evaluate provisions in five areas: competition policy, investment, mutual recognition, movement of persons, and broader cooperation.
Handle: RePEc:nbr:nberwo:11232
Template-Type: ReDIF-Paper 1.0
Title: Changes in the Physiology of Aging during the Twentieth Century
Classification-JEL: I11; I12; J11; J14
Author-Name: Robert W. Fogel
Note: AG DAE
Number: 11233
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11233
File-URL: http://www.nber.org/papers/w11233.pdf
File-Format: application/pdf
Abstract: One way to demonstrate how remarkable changes in the process of aging have been is to compare health over the life cycles of 3 cohorts. For the first cohort, born between 1835 and 1845 (the Civil War cohort), life was short and disabilities were common even at young ages. Other factors contributing to lifelong poor health were widespread exposure to severely debilitating diseases and chronic malnutrition. Fewer of the World War II cohort, born between 1920 and 1930, died in infancy and most of the survivors have lived past age 60 without developing severe chronic diseases. Members of this cohort have experienced better health throughout their lives largely due to their lower exposure to environmental hazards before birth and throughout their infancy and early childhood. Members of the cohort born between 1980 and 1990 have a 50-50 chance of living to age 100. The average age at onset of disabilities has continued to rise, so members of this cohort can expect to remain healthy at later ages. Adopting a healthy life style early can help to prevent or postpone disability at older ages.
Handle: RePEc:nbr:nberwo:11233
Template-Type: ReDIF-Paper 1.0
Title: The Economic Winners and Losers of Legalized Gambling
Classification-JEL: H2; H3; H7
Author-Name: Melissa S. Kearney
Note: PE
Number: 11234
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11234
File-URL: http://www.nber.org/papers/w11234.pdf
File-Format: application/pdf
Publication-Status: published as Kearney, Melissa Schettini. "The Economic Winners And Losers Of Legalized Gambling," National Tax Journal, 2005, v58(2,Jun), 281-302.
Abstract: This paper reviews the government role in the legalized gambling sector and addresses some of the major issues relevant to any normative analysis of what the government role should be. In particular, the paper reviews evidence identifying the economic "winners" and "losers" associated with the three largest sectors of the industry: commercial casinos, state lotteries, and Native American casinos. The paper also includes a discussion of the growing internet gambling industry. In addition to reviewing existing literature and evidence, the paper raises relevant questions and policy issues that have not yet been adequately addressed in the economics literature.
Handle: RePEc:nbr:nberwo:11234
Template-Type: ReDIF-Paper 1.0
Title: Constitutions, Politics and Economics: A Review Essay on Persson and Tabellini's "The Economic Effect of Constitutions"
Classification-JEL: P16; O10
Author-Name: Daron Acemoglu
Author-Person: pac16
Note: EFG POL
Number: 11235
Creation-Date: 2005-03
Order-URL: http://www.nber.org/papers/w11235
File-URL: http://www.nber.org/papers/w11235.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron. "Constitutions, Politics, and Economics: A Review Essay On Persson and Tabellini's The Economic Effects Of Constitutions," Journal of Economic Literature, 2005, v43(4,Dec), 1025-1048.
Abstract: In this essay I review the new book by Torsten Persson and Guido Tabellini, The Economic Effects of Constitutions, which investigates the policy and economic consequences of different forms of government and electoral rules. I also take advantage of this opportunity to discuss the advantages and disadvantages of a number of popular empirical strategies in the newly emerging field of comparative political economy.
Handle: RePEc:nbr:nberwo:11235
Template-Type: ReDIF-Paper 1.0
Title: Choosing Electoral Rules: Theory and Evidence from US Cities
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Francesco Trebbi
Author-Person: ptr40
Note: PE POL
Number: 11236
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11236
File-URL: http://www.nber.org/papers/w11236.pdf
File-Format: application/pdf
Publication-Status: published as Aghion, Philippe, Alberto Alesina, and Francesco Trebbi. "Electoral Rules and Minority Representation in U.S. Cities." The Quarterly Journal of Economics 123, 1 (February 2008): 325-357.
Abstract: This paper studies the choice of electoral rules, in particular, the question of minority representation. Majorities tend to disenfranchise minorities through strategic manipulation of electoral rules. With the aim of explaining changes in electoral rules adopted by US cities (particularly in the South), we show why majorities tend to adopt "winner-take-all" city-wide rules (at-large elections) in response to an increase in the size of the minority when the minority they are facing is relatively small. In this case, for the majority it is more effective to leverage on its sheer size instead of risking to concede representation to voters from minority-elected districts. However, as the minority becomes larger (closer to a fifty-fifty split), the possibility of losing the whole city induces the majority to prefer minority votes to be confined in minority-packed districts. Single-member district rules serve this purpose. We show empirical results consistent with these implications of the model.
Handle: RePEc:nbr:nberwo:11236
Template-Type: ReDIF-Paper 1.0
Title: Deflation and the International Great Depression: A Productivity Puzzle
Classification-JEL: E0; N1
Author-Name: Harold L. Cole
Author-Person: pco70
Author-Name: Lee E. Ohanian
Author-Person: poh1
Author-Name: Ron Leung
Note: EFG
Number: 11237
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11237
File-URL: http://www.nber.org/papers/w11237.pdf
File-Format: application/pdf
Abstract: This paper develops the first dynamic, stochastic, general equilibrium analysis of the International Great Depression. We construct a new version of Lucas?s (1972) monetary misperceptions model, with a real shock (productivity) and a nominal shock (money supply). We use the model with a newly assembled panel data set from 17 countries between 1929-33 to quantify the fraction of output change and price change that is accounted for by these two shocks. Data limitations require us to develop a new procedure for identifying the two shocks. The identified productivity shock has a large country-specific component, and is highly correlated with actual productivity. The identified monetary shock has a large common component, and is highly correlated with money supply changes. We find that the model accounts for most of the variation in macroeconomic activity in the panel of countries. About 2/3 of output change is accounted for by the real (productivity) shock, and virtually all of the change in nominal prices is accounted for by the nominal (money supply) shock. The only variable we find that is highly correlated with the productivity shock is stock prices. We conclude that financial friction models are potentially the most promising class of models for understanding the Solow Residual during this period, and thus the Great Depression.
Handle: RePEc:nbr:nberwo:11237
Template-Type: ReDIF-Paper 1.0
Title: Suicidal Behavior and the Labor Market Productivity of Young Adults
Classification-JEL: I1; J24
Author-Name: Erdal Tekin
Author-Person: pte12
Author-Name: Sara Markowitz
Author-Person: pma138
Note: CH EH
Number: 11238
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11238
File-URL: http://www.nber.org/papers/w11238.pdf
File-Format: application/pdf
Publication-Status: published as Tekin, Erdal and Sara Markowitz. “The Effects of Suicidal Behavior on Productive Activities of Young Adults.” Southern Economic Journal 75,2 (October 2008): 300-331.
Abstract: This paper provides a comprehensive analysis of the link between suicidal behaviors and human capital formation of young adults in the United States. Using data from the National Longitudinal Study of Adolescent Health, we estimate the effects of suicide thoughts and attempts on the probability of engaging in work or school. The richness of the data set allows us to implement several strategies to control for unobserved heterogeneity and the potential reverse causality. These include using a large set of control variables that are likely to be correlated with both suicidal behavior and the outcome measures, an instrumental variables method, and a fixed effects analysis from the subsample of twin pairs contained in the data. The longitudinal nature of the data set also allows us to control for past suicidal thoughts and suicide attempts of the individuals from their high school years as well as the suicidal behavior of their family members. Results from the different identification strategies consistently indicate that both suicide thoughts and suicide attempts decrease the likelihood a young adult individual engages in work or schooling.
Handle: RePEc:nbr:nberwo:11238
Template-Type: ReDIF-Paper 1.0
Title: Bargaining Power in Marriage: Earnings, Wage Rates and Household Production
Classification-JEL: D1; J1; J2
Author-Name: Robert A. Pollak
Author-Person: ppo36
Note: LS
Number: 11239
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11239
File-URL: http://www.nber.org/papers/w11239.pdf
File-Format: application/pdf
Abstract: What determines bargaining power in marriage? This paper argues that wage rates, not earnings, determine well-being at the threat point and, hence, determine bargaining power. Observed earnings at the bargaining equilibrium may differ from earnings at the threat point because hours allocated to market work at the bargaining solution may differ from hours allocated to market work at the threat point. In the divorce threat model, for example, a wife who does not work for pay while married might do so following a divorce; hence, her bargaining power would be related to her wage rate, not to her earnings while married. More generally, a spouse whose earnings are high because he or she chooses to allocate more hours to market work, and correspondingly less to household production and leisure, does not have more bargaining power. But a spouse whose earnings are high because of a high wage rate does have more bargaining power. Household production has received little attention in the family bargaining literature. The output of household production is analogous to earnings, and a spouse's productivity in household production is analogous to his or her wage rate. Thus, in a bargaining model with household production, a spouse's productivity in home production is a source of bargaining power.
Handle: RePEc:nbr:nberwo:11239
Template-Type: ReDIF-Paper 1.0
Title: What Do Wage Differentials Tell Us about Labor Market Discrimination?
Classification-JEL: J0
Author-Name: June E. O'Neill
Author-Person: pon36
Author-Name: Dave M. O'Neill
Note: LS
Number: 11240
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11240
File-URL: http://www.nber.org/papers/w11240.pdf
File-Format: application/pdf
Publication-Status: published as O'Neill, June, and Dave O'Neill. 2006 "What Do Wage Differentials Tell Us about Labor Market Discrimination?" In The Economics of Immigration and Social Policy, edited by Soloman Polachek, Carmel Chiswich, and Hillel Rapoport. Research in Labor Economics 24:293-357.
Abstract: We examine the extent to which non-discriminatory factors can explain observed wage gaps between racial and ethnic minorities and whites, and between women and men. In general we find that differences in productivity-related factors account for most of the between group wage differences in the year 2000. Determinants of wage gaps differ by group. Differences in schooling and in skills developed in the home and in school, as measured by test scores, are of central importance in explaining black/white and Hispanic/white wage gaps among both women and men. Immigrant assimilation is an additional factor for Asians and workers from Central and South America. The sources of the gender gap are quite different, however. Gender differences in schooling and cognitive skills as measured by the AFQT are quite small and explain little of the pay gap. Instead the gender gap largely stems from choices made by women and men concerning the amount of time and energy devoted to a career, as reflected in years of work experience, utilization of part-time work, and other workplace and job characteristics.
Handle: RePEc:nbr:nberwo:11240
Template-Type: ReDIF-Paper 1.0
Title: Corporate Tax Avoidance and Firm Value
Classification-JEL: G32; H25; H26; K34
Author-Name: Mihir A. Desai
Author-Name: Dhammika Dharmapala
Author-Person: pdh6
Note: CF PE
Number: 11241
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11241
File-URL: http://www.nber.org/papers/w11241.pdf
File-Format: application/pdf
Publication-Status: published as Desai, Mihir, and D. Dharmapala. "Corporate Tax Avoidance and Firm Value." The Review of Economics and Statistics. August 2009, Vol. 91, No. 3, Pages 537-546
Abstract: How do investors value managerial actions designed solely to minimize corporate tax obligations? Using a framework in which managers' tax sheltering decisions are related to their ability to divert value, this paper predicts that the effect of tax avoidance on firm value should vary systematically with the strength of firm governance institutions. The empirical results indicate that the average effect of tax avoidance on firm value is not significantly different from zero; however, the effect is positive for well-governed firms as predicted. Coefficient estimates are consistent with an expected life of five years for the devices that generate these tax savings for well-governed firms. Alternative explanations for the dependence of the valuation of the tax avoidance measure on firm governance do not appear to be consistent with the empirical results. The findings indicate that the simple view of corporate tax avoidance as a transfer of resources from the state to shareholders is incomplete, given the agency problems characterizing shareholder-manager relations.
Handle: RePEc:nbr:nberwo:11241
Template-Type: ReDIF-Paper 1.0
Title: Ex Ante Carrots instead of Ex Post Sticks: Two Examples
Classification-JEL: F15; F21; F34
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: ITI
Number: 11242
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11242
File-URL: http://www.nber.org/papers/w11242.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua. “Ex ante carrots instead of ex post sticks: two examples." The Journal of the Korean Economy (Fall 2005): 131-159.
Abstract: This paper argues that the limited ability to help developing countries in a crisis should shift the focus to policies helping in reducing the ex ante probability of crises. Indirectly, such policies would also alleviate the depths of realized crises. Two specific ideas are explored: I. International reserves escrow accounts: Managing international reserves provides an effective mechanism for self insurance. The hazard of this mechanism is that international reserves are easy prey for opportunistic policy makers in polarized countries characterized by political instability. This hazard may be alleviated by escrow accounts run by the International Financial Institutions (IFIs), where part of the international reserves of a country are saved and would be used if pre-set conditions, like large TOT deteriorations, are met. The IFIs may offer a subsidized return on these escrow accounts in order to encourage countries to reduce external borrowing and to increase fiscal savings. Such subsidies may be welfare improving due to the over borrowing bias induced by sovereign risk. II. IFIs as lenders of last resort to finance fiscal reforms: I illustrate this possibility in a modified version of Cukierman, Edwards and Tabellinis (AER 1992) model. I identify conditions where IFIs function as the lenders of last resort, financing fiscal reforms. IFIs financing may shift the equilibrium from an inefficient outcome with a low tax base and high inflation to a superior outcome, associated with a more sound tax system.
Handle: RePEc:nbr:nberwo:11242
Template-Type: ReDIF-Paper 1.0
Title: Fear and Greed in Financial Markets: A Clinical Study of Day-Traders
Classification-JEL: G12
Author-Name: Andrew W. Lo
Author-Person: plo171
Author-Name: Dmitry V. Repin
Author-Name: Brett N. Steenbarger
Note: AP
Number: 11243
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11243
File-URL: http://www.nber.org/papers/w11243.pdf
File-Format: application/pdf
Publication-Status: published as Lo, Andrew W., Dimitry V. Repin and Brett N. Steenbarger. "Fear And Greed In Financial Markets: A Clinical Study Of Day-Traders," American Economic Review, 2005, v95(2,May), 352-359.
Abstract: We investigate several possible links between psychological factors and trading performance in a sample of 80 anonymous day-traders. Using daily emotional-state surveys over a five-week period as well as personality inventory surveys, we construct measures of personality traits and emotional states for each subject and correlate these measures with daily normalized profits-and-losses records. We find that subjects whose emotional reaction to monetary gains and losses was more intense on both the positive and negative side exhibited significantly worse trading performance. Psychological traits derived from a standardized personality inventory survey do not reveal any specific "trader personality profile", raising the possibility that trading skills may not necessarily be innate, and that different personality types may be able to perform trading functions equally well after proper instruction and practice.
Handle: RePEc:nbr:nberwo:11243
Template-Type: ReDIF-Paper 1.0
Title: Deflation and Monetary Policy in Taiwan
Classification-JEL: E0; E3; E5
Author-Name: Ya-Hwei Yang
Author-Name: Jia-Dong Shea
Note: IFM ME
Number: 11244
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11244
File-URL: http://www.nber.org/papers/w11244.pdf
File-Format: application/pdf
Publication-Status: published as Ito, Takoshi and Andrew K. Rose, eds. Monetary Policy with Very Low Inflation in the Pacific Rim (National Bureau of Economic Research-East Asia Seminar on Economics). Chicago, IL: University of Chicago Press, 2006.
Publication-Status: published as Deflation and Monetary Policy in Taiwan, Jia-dong Shea, Ya-Hwei Yang. in Monetary Policy with Very Low Inflation in the Pacific Rim, Ito and Rose. 2006
Abstract: From 1999 to 2003, Taiwan faced a deflationary situation. The reasons for this deflation can be attributed to both domestic and global factors. Domestic changes including local political unrest, tensions with China, outbound investment to China, a weakened financial system, and a deteriorating government financial situation, provided the backdrop for the economic slowdown and corresponding deflation. A number of global factors, especially the bursting of the Internet and IT bubbles in late 2000 and the rise of China's economy, also heavily influenced both global and Taiwanese prices. This paper adopts a simplified aggregate demand and aggregate supply model to derive a deterministic equation of the GDP deflator (PGDP), and then applies quarterly data covering the period from 1982 to 2003 to estimate the PGDP equation using 2SLS. The empirical results are used to identify the sources of PGDP deflation in Taiwan. In addition, the phenomenon of price divergence appears since 2002 where the WPI increased and the CPI decreased. The causes of the WPI-CPI divergence are also investigated in this paper.
Handle: RePEc:nbr:nberwo:11244
Template-Type: ReDIF-Paper 1.0
Title: The Limited Influence of Unemployment on the Wage Bargain
Classification-JEL: E24; E32; J64
Author-Name: Robert E. Hall
Author-Name: Paul R. Milgrom
Author-Person: pmi34
Note: EFG LS
Number: 11245
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11245
File-URL: http://www.nber.org/papers/w11245.pdf
File-Format: application/pdf
Publication-Status: published as Hall, Robert E. and Paul R. Milgrom. "The Limited Influence of Unemployment on the Wage Bargain." American Economic Review 98,4 (September 2008): 1653-1674.
Abstract: When a job-seeker and an employer meet, find a prospective surplus, and bargain over the wage, conditions in the outside labor market, including especially unemployment, may be irrelevant. The job-seeker's threat point in the bargain is to delay bargaining, not to terminate bargaining and resume search at other employers. Similarly, the employer's threat point is to delay bargaining, not to terminate it. Consequently, the outcome of the bargain depends on the relative costs of delay to the parties, not on the results of irrational threats to disclaim any bargain. In a model of the labor market that otherwise adopts all of the features of the standard Mortensen-Pissarides model, unemployment is much more sensitive to changes in productivity than in the standard model, because feedback through the wage is absent. We also present models where the wage bargain is in partial contact with conditions in the labor market.
Handle: RePEc:nbr:nberwo:11245
Template-Type: ReDIF-Paper 1.0
Title: Births, Deaths, and New Deal Relief during the Great Depression
Classification-JEL: I38; J11; N32
Author-Name: Price V. Fishback
Author-Person: pfi13
Author-Name: Michael R. Haines
Author-Person: pha740
Author-Name: Shawn Kantor
Author-Person: pka54
Note: DAE
Number: 11246
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11246
File-URL: http://www.nber.org/papers/w11246.pdf
File-Format: application/pdf
Publication-Status: published as Fishback, Price V., Michael R. Haines, and Shawn Kantor. "Births, Deaths, and New Deal Relief during the Great Depression." The Review of Economics and Statistics 89,1 (February 2007): 1-14.
Abstract: This paper examines the impact of New Deal relief programs on infant mortality, noninfant mortality and general fertility rates in major U.S. cities between 1929 and 1940. We estimate the effects using a variety of specifications and techniques for a panel of 114 cities for which data on relief spending during the 1930s were available. The significant rise in relief spending during the New Deal contributed to reductions in infant mortality, suicide rates, and some other causes of death, while contributing to increases in the general fertility rate. Estimates of the relationship between economic activity and death rates suggest that many types of death rates were pro-cyclical, similar to Ruhm's (2000) findings for the modern U.S.. Estimates of the relief costs associated with saving a life (adjusted for inflation) are similar to estimates found in studies of modern social insurance programs.
Handle: RePEc:nbr:nberwo:11246
Template-Type: ReDIF-Paper 1.0
Title: Portfolio Choice over the Life-Cycle in the Presence of 'Trickle Down' Labor Income
Classification-JEL: G1; E2; E3
Author-Name: Luca Benzoni
Author-Person: pbe1008
Author-Name: Pierre Collin-Dufresne
Author-Name: Robert S. Goldstein
Note: AP
Number: 11247
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11247
File-URL: http://www.nber.org/papers/w11247.pdf
File-Format: application/pdf
Publication-Status: published as Benzoni, Luca, Pierre Collin-Dufresne and Robert S. Goldstein. "Portfolio Choice over the Life-Cycle when the Stock and Labor Markets Are Cointegrated." The Journal of Finance 62,5 (2007): 2123-2167.
Abstract: Empirical evidence shows that changes in aggregate labor income and stock market returns exhibit only weak correlation at short horizons. As we document below, however, this correlation increases substantially at longer horizons, which provides at least suggestive evidence that stock returns and labor income are cointegrated. In this paper, we investigate the implications of such a cointegrated relation for life-cycle optimal portfolio and consumption decisions of an agent whose non-tradable labor income faces permanent and temporary idiosyncratic shocks. We find that, under economically plausible calibrations, the optimal portfolio choice for the young investor is to take a substantial {\em short} position in the risky portfolio, in spite of the large risk premium associated with it. Intuitively, this occurs because the cointegration effect makes the present value of future labor income flows `stock-like' for the young agent. However, for older agents who have shorter times-to-retirement, the cointegration effect does not have sufficient time to act, and the remaining human capital becomes more `bond-like.' Together, these effects create a hump-shaped optimal portfolio decision for the agent over the life cycle, consistent with empirical observation.
Handle: RePEc:nbr:nberwo:11247
Template-Type: ReDIF-Paper 1.0
Title: The Thick Market Effect on Local Unemployment Rate Fluctuations
Classification-JEL: J64; R23
Author-Name: Li Gan
Author-Person: pga94
Author-Name: Qinghua Zhang
Author-Person: pzh354
Note: LS
Number: 11248
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11248
File-URL: http://www.nber.org/papers/w11248.pdf
File-Format: application/pdf
Publication-Status: published as Gan, Li and Qinghua Zhang. "The Thick Market Effect on Local Unemployment Rate Fluctuations." Journal of Econometrics 133, 1 (July 2006): 127-152
Abstract: This paper studies how the thick market effect influences local unemployment rate fluctuations. The paper presents a model to demonstrate that the average matching quality improves as the number of workers and firms increases. Unemployed workers accumulate in a city until the local labor market reaches a critical minimum size, which leads to cyclical fluctuations in the local unemployment rates. Since larger cities attain the critical market size more frequently, they have shorter unemployment cycles, lower peak unemployment rates, and lower mean unemployment rates. Our empirical tests are consisten with the predictions of the model. In particular, we find that an increase of two standard deviations in city size shortens the unemployment cycles by about 0.72 months, lowers the peak unemployment rates by 0.33 percentage points, and lowers the mean unemployment rates by 0.16 percentage points.
Handle: RePEc:nbr:nberwo:11248
Template-Type: ReDIF-Paper 1.0
Title: The Euro and the Stability Pact
Classification-JEL: F4
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: EFG IFM PE POL
Number: 11249
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11249
File-URL: http://www.nber.org/papers/w11249.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin. "The Euro And The Stability Pact," Journal of Policy Modeling, 2005, v27(4,Jun), 421-426.
Abstract: This paper begins by discussing the inherent conflict between the simultaneous existence of a single currency for the countries of the European Economic and Monetary Union (EMU) and the independent fiscal policies of those countries. The Stability and Growth Pact was an attempt to reconcile that conflict. I describe how EMU governments have chosen to ignore the Stability Pact's constraint on budget deficits and how they sought to undermine it by changing the rules themselves. The final part of the paper describes the actual resolution of the issue by the agreement reached at the end of March 2005 by the European Council. The new policy effectively abandons the Stability Pact and leaves the way open to much larger sustained deficits.
Handle: RePEc:nbr:nberwo:11249
Template-Type: ReDIF-Paper 1.0
Title: Rethinking Social Insurance
Classification-JEL: H5
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: EFG PE
Number: 11250
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11250
File-URL: http://www.nber.org/papers/w11250.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin. "Rethinking Social Insurance," American Economic Review, 2005, v95(1,Mar), 1-24.
Abstract: This paper begins by discussing the nature of and rationale for social insurance programs. I then consider three political principles and four economic principles that could guide the design and reform of social insurance programs. These ideas are then applied to unemployment insurance, Social Security pensions, health insurance and Medicare. A common theme is the advantage of incorporating investment based personal accounts in each of these programs.
Handle: RePEc:nbr:nberwo:11250
Template-Type: ReDIF-Paper 1.0
Title: Technology Adoption From Hybrid Corn to Beta Blockers
Classification-JEL: O3; I1
Author-Name: Jonathan Skinner
Author-Person: psk23
Author-Name: Douglas Staiger
Author-Person: pst466
Note: EH PR AG
Number: 11251
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11251
File-URL: http://www.nber.org/papers/w11251.pdf
File-Format: application/pdf
Publication-Status: published as Culyer, A.J. and J. P. Newhouse (eds.) Handbook of Health Economics. Amsterdam: Elsevier Science, 2000.
Publication-Status: published as Jonathan Skinner & Douglas Staiger, 2005. "Technology adoption from hybrid corn to beta blockers," Proceedings, Federal Reserve Bank of San Francisco.
Abstract: In his classic 1957 study of hybrid corn, Griliches emphasized the importance of economic incentives and profitability in the adoption of new technology, and this focus has been continued in the economics literature. But there is a distinct literature with roots in sociology emphasizing the structure of organizations, informal networks, and "change agents." We return to a forty-year-old debate between Griliches and the sociologists by considering state-level factors associated with the adoption of a variety of technological innovations: hybrid corn and tractors in the first half of the 20th century, computers in the 1990s, and the treatment of heart attacks during the last decade. First, we find that some states consistently adopted new effective technology, whether hybrid corn, tractors, or effective treatments for heart attacks such as Beta Blockers. Second, the adoption of these new highly effective technologies was closely associated with social capital and state-level 1928 high school graduation rates, but not per capita income, density, or (in the case of Beta Blockers) expenditures on heart attack patients. Economic models are useful in identifying why some regions are more likely to adopt early, but sociological barriers -- perhaps related to a lack of social capital or informational networks -- can potentially explain why other regions lag far behind.
Handle: RePEc:nbr:nberwo:11251
Template-Type: ReDIF-Paper 1.0
Title: Charter School Quality and Parental Decision Making With School Choice
Classification-JEL: I2; H4; D1
Author-Name: Eric A. Hanushek
Author-Person: pha97
Author-Name: John F. Kain
Author-Name: Steven G. Rivkin
Author-Person: pri265
Author-Name: Gregory F. Branch
Note: CH ED
Number: 11252
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11252
File-URL: http://www.nber.org/papers/w11252.pdf
File-Format: application/pdf
Publication-Status: published as Hanusheka, Eric A., John F. Kainb, Steven G. Rivkinb, and Gregory F. Branch. "Charter School Quality and Parental Decision Making With School Choice." Journal of Public Economics 91, 5-6 (June 2007): 823-848.
Abstract: Charter schools have become a very popular instrument for reforming public schools, because they expand choices, facilitate local innovation, and provide incentives for the regular public schools while remaining under public control. Despite their conceptual appeal, evaluating their performance has been hindered by the selective nature of their student populations. This paper investigates the quality of charter schools in Texas in terms of mathematics and reading achievement and finds that, after an initial start-up period, average school quality in the charter sector is not significantly different from that in regular public schools. Perhaps most important, the parental decision to exit a charter school is much more sensitive to education quality than the decision to exit a regular public school, consistent with the notion that the introduction of charter schools substantially reduces the transactions costs of switching schools. Low income charter school families are, however, less sensitive to school quality than higher income families.
Handle: RePEc:nbr:nberwo:11252
Template-Type: ReDIF-Paper 1.0
Title: A Tale of Two Labor Markets: Intergenerational Occupational Mobility in Britain and the U.S. Since 1850
Classification-JEL: J6; N3
Author-Name: Jason Long
Author-Name: Joseph Ferrie
Note: DAE
Number: 11253
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11253
File-URL: http://www.nber.org/papers/w11253.pdf
File-Format: application/pdf
Abstract: The U.S. both tolerates more inequality than Europe and believes its economic mobility is greater than Europe's. These attitudes and beliefs help account for differences in the magnitude of redistribution through taxation and social welfare spending. In fact, the U.S. and Europe had roughly equal rates of inter-generational occupational mobility in the late twentieth century. We extend this comparison into the late nineteenth century using longitudinal data on 23,000 nationally-representative British and U.S. fathers and sons. The U.S. was substantially more mobile then Britain through 1900, so in the experience of those who created the U.S. welfare state in the 1930s, the U.S. had indeed been "exceptional." The margin by which U.S. mobility exceeded British mobility was erased by the 1950s, as U.S. mobility fell compared to its nineteenth century levels.
Handle: RePEc:nbr:nberwo:11253
Template-Type: ReDIF-Paper 1.0
Title: When Labor Has a Voice in Corporate Governance
Classification-JEL: G3; J0
Author-Name: Olubunmi Faleye
Author-Name: Vikas Mehrotra
Author-Name: Randall Morck
Author-Person: pmo146
Note: CF LS
Number: 11254
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11254
File-URL: http://www.nber.org/papers/w11254.pdf
File-Format: application/pdf
Publication-Status: published as Faleye, Olubunmi, Vikas Mehrotra and Randall Morck. "When Labor Has A Voice In Corporate Finance," Journal of Financial and Quantitative Analysis, 2006, v41(3,Sep), 489-510.
Abstract: Equity ownership gives labor both a fractional stake in the firm's residual cash flows and a voice in corporate governance. Relative to other firms, labor-controlled publicly-traded firms deviate more from value maximization, invest less in long-term assets, take fewer risks, grow more slowly, create fewer new jobs, and exhibit lower labor and total factor productivity. We therefore propose that labor uses its corporate governance voice to maximize the combined value of its contractual and residual claims, and that this often pushes corporate policies away from, rather than towards, shareholder value maximization.
Handle: RePEc:nbr:nberwo:11254
Template-Type: ReDIF-Paper 1.0
Title: Trade Policy, Income Risk, and Welfare
Classification-JEL: F13; F16; D52; E21
Author-Name: Tom Krebs
Author-Person: pkr48
Author-Name: Pravin Krishna
Author-Person: pkr50
Author-Name: William Maloney
Author-Person: pma705
Note: ITI
Number: 11255
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11255
File-URL: http://www.nber.org/papers/w11255.pdf
File-Format: application/pdf
Publication-Status: published as Tom Krebs & Pravin Krishna & William Maloney, 2010. "Trade Policy, Income Risk, and Welfare," The Review of Economics and Statistics, MIT Press, vol. 92(3), pages 467-481, October.
Abstract: This paper studies empirically the relationship between trade policy and individual income risk faced by workers, and uses the estimates of this empirical analysis to evaluate the welfare effect of trade reform. The analysis proceeds in three steps. First, longitudinal data on workers are used to estimate time-varying individual income risk parameters in various manufacturing sectors. Second, the estimated income risk parameters and data on trade barriers are used to analyze the relationship between trade policy and income risk. Finally, a simple dynamic incomplete-market model is used to assess the corresponding welfare costs. In the implementation of this methodology using Mexican data, we find that trade policy changes have a significant short run effect on income risk. Further, while the tariff level has an insignificant mean effect, it nevertheless changes the degree to which macroeconomic shocks affect income risk.
Handle: RePEc:nbr:nberwo:11255
Template-Type: ReDIF-Paper 1.0
Title: Winners and Losers from Enacting the Financial Modernization Statute
Classification-JEL: G21; G24; G28; L51
Author-Name: Kenneth A. Carow
Author-Name: Edward J. Kane
Author-Person: pka853
Author-Name: Rajesh P. Narayanan
Note: CF
Number: 11256
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11256
File-URL: http://www.nber.org/papers/w11256.pdf
File-Format: application/pdf
Abstract: Previous studies of the announcement effects of relaxing administrative and legislative restraints show that signal events leading up to the enactment of the Financial Services Modernization Act (FSMA) increased the prices of several classes of financial-institution stocks. An unsettled question is whether the gains observed for these stocks arise mainly from projected increases in efficiency or from reductions in customer or competitor bargaining power. This paper documents that the value increase came at the expense of customers and competitors. The stock prices of credit-constrained customers declined during FSMA event windows and experienced significant increases in beta in the wake of its enactment. These findings reinforce evidence in the literature on bank mergers that large-bank consolidation is adversely affecting access to credit for capital-constrained firms.
Handle: RePEc:nbr:nberwo:11256
Template-Type: ReDIF-Paper 1.0
Title: Prices, Production and Inventories over the Automotive Model Year
Classification-JEL: D21; D42; E22; L11; L62
Author-Name: Adam Copeland
Author-Name: Wendy Dunn
Author-Name: George Hall
Author-Person: pha118
Note: EFG
Number: 11257
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11257
File-URL: http://www.nber.org/papers/w11257.pdf
File-Format: application/pdf
Publication-Status: published as Copeland, Adam, Wendy Dunn and George Hal (2007) “Prices, Production and Inventories over the Automotive Model Year.” FEDS Working Paper 2005-25
Publication-Status: published as as "Inventories and the automobile market" in The RAND Journal of Economics, Volume 42, Issue 1, pages 121–149, Spring 2011
Abstract: This paper studies the within-model-year pricing and production of new automobiles. Using new monthly data on U.S. transaction prices, we document that for the typical new vehicle, prices fall over the model year at a 9.2 percent annual rate. Concurrently, both sales and inventories are hump shaped. To explain these time series, we formulate a market equilibrium model for new automobiles in which inventory and pricing decisions are made simultaneously. On the demand side, we use micro-level data to estimate time-varying aggregate demand curves for each vehicle. On the supply side, we solve a dynamic programming model of an automaker that, while able to produce only one vintage of a product at a time, may accumulate inventories and consequently sell multiple vintages of the same product simultaneously. The profit maximizing pricing and production strategies under a build-to-stock inventory policy imply declining prices and hump-shaped sales and inventories of the magnitudes observed in the data. Further, roughly half of the price decline is driven by inventory control considerations, as opposed to decreasing demand.
Handle: RePEc:nbr:nberwo:11257
Template-Type: ReDIF-Paper 1.0
Title: On the Measurement of Segregation
Classification-JEL: Z13; C0
Author-Name: Federico Echenique
Author-Person: pec5
Author-Name: Roland G. Fryer, Jr.
Author-Person: pfr43
Note: ED LS
Number: 11258
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11258
File-URL: http://www.nber.org/papers/w11258.pdf
File-Format: application/pdf
Abstract: This paper develops a measure of segregation based on two premises: (1) a measure of segregation should disaggregate to the level of individuals, and (2) an individual is more segregated the more segregated are the agents with whom she interacts. Developing three desirable axioms that any segregation measure should satisfy, we prove that one and only one segregation index satisfies our three axioms, and the two aims mentioned above; which we coin the Spectral Segregation Index. We apply the index to two well-studied social phenomena: residential and school segregation. We calculate the extent of residential segregation across major US cities using data from the 2000 US Census. The correlation between the Spectral index and the commonly-used dissimilarity index is .42. Using detailed data on friendship networks, available in the National Longitudinal Study of Adolescent Health, we calculate the prevalence of within-school racial segregation. The results suggests that the percent of minority students within a school, commonly used as a substitute for a measure of in-school segregation, is a poor proxy for social interactions.
Handle: RePEc:nbr:nberwo:11258
Template-Type: ReDIF-Paper 1.0
Title: Structural Equations, Treatment Effects and Econometric Policy Evaluation
Classification-JEL: C1
Author-Name: James J. Heckman
Author-Name: Edward Vytlacil
Author-Person: pvy2
Note: ED LS PE CH
Number: 11259
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11259
File-URL: http://www.nber.org/papers/w11259.pdf
File-Format: application/pdf
Publication-Status: published as Heckman, James J. and Edward Vytlacil. "Structural Equations, Treatment Effects, And Econometric Policy Evaluation," Econometrica, v73(3,May), 2005, 669-738.
Abstract: This paper uses the marginal treatment effect (MTE) to unify the nonparametric literature on treatment effects with the econometric literature on structural estimation using a nonparametric analog of a policy invariant parameter; to generate a variety of treatment effects from a common semiparametric functional form; to organize the literature on alternative estimators; and to explore what policy questions commonly used estimators in the treatment effect literature answer. A fundamental asymmetry intrinsic to the method of instrumental variables is noted. Recent advances in IV estimation allow for heterogeneity in responses but not in choices, and the method breaks down when both choice and response equations are heterogeneous in a general way.
Handle: RePEc:nbr:nberwo:11259
Template-Type: ReDIF-Paper 1.0
Title: School-to-Career and Post-Secondary Education: Evidence from the Philadelphia Educational Longitudinal Study
Classification-JEL: I28; J24
Author-Name: Frank F. Furstenberg, Jr.
Author-Name: David Neumark
Author-Person: pne16
Note: ED LS CH
Number: 11260
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11260
File-URL: http://www.nber.org/papers/w11260.pdf
File-Format: application/pdf
Abstract: We study a set of programs implemented in Philadelphia high schools that focus on boosting post-secondary enrollment. These programs are less career oriented than traditional school-to-work programs, but are consistent with the broadening of the goals of school-to-work to emphasize post-secondary education. The Philadelphia Longitudinal Educational Study (PELS) data set that we examine contains an unusually large amount of information on individuals prior to placement in STC programs. We use the detailed information in the PELS to study the process of selection into these programs and to examine their impact on a set of mainly schooling-related outcomes during and after high school, although we also consider their impact on non-academic outcomes. The data point to positive effects of these programs on high school graduation and on both academic and non-academic awards in high school, and similar negative effects on dropping out of high school. The results also suggest positive effects on aspirations for higher education and on college attendance. In addition, there is some evidence that these programs are more effective in increasing college attendance and aspirations among at-risk youths.
Handle: RePEc:nbr:nberwo:11260
Template-Type: ReDIF-Paper 1.0
Title: Firm Size Dynamics in the Aggregate Economy
Classification-JEL: E2; D2; L2
Author-Name: Esteban Rossi-Hansberg
Author-Person: pro72
Author-Name: Mark L.J. Wright
Author-Person: pwr6
Note: EFG
Number: 11261
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11261
File-URL: http://www.nber.org/papers/w11261.pdf
File-Format: application/pdf
Abstract: Why do firm growth and exit rates decline with size? What determines the size distribution of firms? This paper presents a theory of firm dynamics that simultaneously rationalizes the basic facts on firm growth, exit, and size distributions. The theory emphasizes the accumulation of industry specific human capital in response to industry specific productivity shocks. The theory implies that firm growth and exit rates should decline faster with size, and the size distribution should have thinner tails, in sectors that use human capital less intensively, or correspondingly, physical capital more intensively. In line with the theory, we document substantial sectoral heterogeneity in US firm dynamics and firm size distributions, which is well explained by variation in physical capital intensities.
Handle: RePEc:nbr:nberwo:11261
Template-Type: ReDIF-Paper 1.0
Title: Urban Structure and Growth
Classification-JEL: E0; O4; R0
Author-Name: Esteban Rossi-Hansberg
Author-Person: pro72
Author-Name: Mark L.J. Wright
Author-Person: pwr6
Note: EFG
Number: 11262
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11262
File-URL: http://www.nber.org/papers/w11262.pdf
File-Format: application/pdf
Publication-Status: published as Rossi-Hansberg, Esteban and Mark L. J. Wright. “Urban Structure and Growth.” Review of Economic Studies 74,2 (April 2007): 597-624.
Abstract: Most economic activity occurs in cities. This creates a tension between local increasing returns, implied by the existence of cities, and aggregate constant returns, implied by balanced growth. To address this tension, we develop a theory of economic growth in an urban environment. We show that the urban structure is the margin that eliminates local increasing returns to yield constant returns to scale in the aggregate, which is sufficient to deliver balanced growth. In a multi-sector economy with specific factors and productivity shocks, the same mechanism leads to a city size distribution that is well described by a power distribution with coefficient one: Zipf's Law. Under certain assumptions our theory produces Zipf's Law exactly. More generally, it produces the systematic deviations from Zipf's Law observed in the data, including the under-representation of small cities and the absence of very large ones. In general, the model identifies the standard deviation of industry productivity shocks as the key parameter determining dispersion in the city size distribution. We present evidence that the relationship between the dispersion of city sizes and the variance of productivity shocks is consistent with the data.
Handle: RePEc:nbr:nberwo:11262
Template-Type: ReDIF-Paper 1.0
Title: Treatment Effect Bounds: An Application to Swan-Ganz Catheterization
Classification-JEL: C1; I1
Author-Name: Jay Bhattacharya
Author-Name: Azeem Shaikh
Author-Person: psh256
Author-Name: Edward Vytlacil
Author-Person: pvy2
Note: EH
Number: 11263
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11263
File-URL: http://www.nber.org/papers/w11263.pdf
File-Format: application/pdf
Publication-Status: published as Bhattacharya, Jay, Azeem M. Shaikh, and Edward Vytlacil. "Treatment Effect Bounds under Monotonicity Assumptions: An Application to Swan-Ganz Catheterization." American Economic Review 98,2 (2008): 351–56.
Publication-Status: published as Bhattacharya, Jay & Shaikh, Azeem M. & Vytlacil, Edward, 2012. "Treatment effect bounds: An application to SwanâGanz catheterization," Journal of Econometrics, Elsevier, vol. 168(2), pages 223-243.
Abstract: We reanalyze data from the observational study by Connors et al. (1996) on the impact of Swan-Ganz catheterization on mortality outcomes. The Connors et al. (1996) study assumes that there are no unobserved differences between patients who are catheterized and patients who are not catheterized and finds that catheterization increases patient mortality. We instead allow for such differences between patients by implementing both the bounds of Manski (1990), which only exploits an instrumental variable, and the bounds of Shaikh and Vytlacil (2004), which exploit mild nonparametric, structural assumptions in addition to an instrumental variable. We propose and justify the use of indicators of weekday admission as an instrument for catheterization in this context. We find that in our application, the Manski (1990) bounds do not indicate whether catheterization increases or decreases mortality, whereas the Shaikh and Vytlacil (2004) bounds reveal that catheterization increases mortality at 30 days and beyond. We also extend the analysis of Shaikh and Vytlacil (2004) to exploit a further nonparametric, structural assumption -- that doctors catheterize individuals with systematically worse latent health -- and find that this assumption further narrows these bounds and strengthens our conclusions.
Handle: RePEc:nbr:nberwo:11263
Template-Type: ReDIF-Paper 1.0
Title: An Alternative Test of Racial Prejudice in Motor Vehicle Searches: Theory and Evidence
Classification-JEL: J7
Author-Name: Shamena Anwar
Author-Name: Hanming Fang
Author-Person: pfa17
Note: PE
Number: 11264
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11264
File-URL: http://www.nber.org/papers/w11264.pdf
File-Format: application/pdf
Publication-Status: published as Anwar, Shamena and Hanming Fang. "An Alternative Test of Racial Prejudice in Motor Vehicle Searches: Theory and Evidence." American Economic Review 96, 1 (March 2006): 127-151.
Abstract: We propose a simple model of trooper behavior to design empirical tests for whether troopers of different races are monolithic in their search behavior, and whether they exhibit relative racial prejudice in motor vehicle searches. Our test of relative racial prejudice provides a partial solution to the well-known infra-marginality and omitted variables problems associated with outcome tests. When applied to a unique data set from Florida, our tests soundly reject the hypothesis that troopers of different races are monolithic in their search behavior, but fail to reject the hypothesis that troopers of different races do not exhibit relative racial prejudice.
Handle: RePEc:nbr:nberwo:11264
Template-Type: ReDIF-Paper 1.0
Title: The Evolution of Precedent
Classification-JEL: K13; K4
Author-Name: Nicola Gennaioli
Author-Person: pge95
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: LE
Number: 11265
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11265
File-URL: http://www.nber.org/papers/w11265.pdf
File-Format: application/pdf
Abstract: We evaluate Richard Posner's famous hypothesis that common law converges to efficient legal rules using a model of precedent setting by appellate judges. Following legal realists, we assume that judicial decisions are subject to personal biases, and that changing precedent is costly to judges. We consider separately the evolution of precedent under judicial overruling of previous decisions, as well as under distinguishing cases based on new material dimensions. Convergence to efficient legal rules occurs only under very special circumstances, but the evolution of precedent over time is on average beneficial under more plausible conditions.
Handle: RePEc:nbr:nberwo:11265
Template-Type: ReDIF-Paper 1.0
Title: British Investment Overseas 1870-1913: A Modern Portfolio Theory Approach
Classification-JEL: F0
Author-Name: William N. Goetzmann
Author-Person: pgo59
Author-Name: Andrey Ukhov
Note: AP IFM PR
Number: 11266
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11266
File-URL: http://www.nber.org/papers/w11266.pdf
File-Format: application/pdf
Publication-Status: published as Goetzmann, William N. and Andrey D. Ukhov. "British Investment Overseas 1870-1913: A Modern Portfolio Theory Approach," Review of Finance, 2006, v10(2,Jun), 261-300.
Abstract: Many scholars have asked whether British investors benefited from overseas investment investing in the 19th century and whether this export of capital had negative effects. We re-visit the issue using modern portfolio theory. We examine the set of investment opportunities available to British investors, the developments in information transmission technology, and advances in financial and investment theory at the time. We use mean-variance optimization techniques ot take into account the risk and return characteristics of domestic and international investments available to a British investor, and to quantify the beneifts from international diversification. Evidence suggests that capital export was a consequence of both the opportunity and the understanding of diversification. foreign assets offered higher rates of return, but equally important, they offered significant diversification benefits. Even when--by setting expected return on each foreign asset class equal to that of the corresponding UK asset class--we put foreign assets at a disadvantage, we find that it was rational for a British investor to include foreign debts and equity in the portfolio.
Handle: RePEc:nbr:nberwo:11266
Template-Type: ReDIF-Paper 1.0
Title: Tax Structure in Developing Countries: Many Puzzles and a Possible Explanation
Classification-JEL: H21; O23; O17; F23
Author-Name: Roger Gordon
Author-Person: pgo95
Author-Name: Wei Li
Author-Person: pli922
Note: PE
Number: 11267
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11267
File-URL: http://www.nber.org/papers/w11267.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Roger & Li, Wei, 2009. "Tax structures in developing countries: Many puzzles and a possible explanation," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 855-866, August.
Abstract: Tax policies seen in developing countries are puzzling on many dimensions. To begin with, revenue/GDP is surprisingly small compared with that in developed economies. Taxes on labor income play a minor role. Taxes on consumption are important, but effective tax rates vary dramatically by firm, with many firms avoiding taxes entirely by operating through cash in the informal economy and others facing very high liabilities. Taxes on capital are an important source of revenue, as are tariffs and seignorage, all contrary to the theoretical literature. In this paper, we argue that all of these aspects of policy may be sensible responses if a government is able in practice to collect taxes only from those firms that make use of the financial sector. Through use of the financial sector, firms generate a paper trail, facilitating tax enforcement. The threat of disintermediation then limits how much can be collected in taxes. Taxes can most easily be collected from the firms most dependent on the financial sector, presumably capital-intensive firms. Given the resulting differential tax rates by sector, other policies would sensibly be used to offset these tax distortions. Tariff protection for capital-intensive firms is one. Inflation, imposing a tax on the cash economy is another.
Handle: RePEc:nbr:nberwo:11267
Template-Type: ReDIF-Paper 1.0
Title: Culture: An Empirical Investigation of Beliefs, Work, and Fertility
Classification-JEL: J13; J21; Z10
Author-Name: Raquel Fernandez
Author-Person: pfe17
Author-Name: Alessandra Fogli
Author-Person: pfo48
Note: EFG LS
Number: 11268
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11268
File-URL: http://www.nber.org/papers/w11268.pdf
File-Format: application/pdf
Publication-Status: published as Fernandez, Raquel and Alessandra Fogli. "Culture: An Empirical Investigation of Beliefs, Work, and Fertility." American Economic Journal: Macroeconomics 1,1 (January 2009): 146-177.
Abstract: We study the effect of culture on important economic outcomes by using the 1970 Census to examine the work and fertility behavior of women 30-40 years old, born in the U.S., but whose parents were born elsewhere. We use past female labor force participation and total fertility rates from the country of ancestry as our cultural proxies. These variables should capture, in addition to past economic and institutional conditions, the beliefs commonly held about the role of women in society, i.e. culture. Given the different time and place, only the beliefs embodied in the cultural proxies should be potentially relevant to women's behavior in the US in 1970. We show that these cultural proxies have positive and significant explanatory power for individual work and fertility outcomes, even after controlling for possible indirect effects of culture (e.g., education and spousal characteristics). We examine alternative hypotheses for these positive correlations and show that neither unobserved human capital nor networks are likely to be responsible. We also show that the effect of these cultural proxies is amplified the greater is the tendency for ethnic groups to cluster in the same neighborhoods.
Handle: RePEc:nbr:nberwo:11268
Template-Type: ReDIF-Paper 1.0
Title: Protection for Sale with Imperfect Rent Capturing
Classification-JEL: F13
Author-Name: Giovanni Facchini
Author-Person: pfa31
Author-Name: Johannes Van Biesebroeck
Author-Person: pva139
Author-Name: Gerald Willmann
Author-Person: pwi37
Note: ITI PR
Number: 11269
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11269
File-URL: http://www.nber.org/papers/w11269.pdf
File-Format: application/pdf
Publication-Status: published as Facchini, Giovanni, Johannes Van Biesebroeck and Gerald Willmann. "Protection for Sale with Imperfect Rent Capturing." Canadian Journal of Economics 39,3 (August 2006): 845-873.
Abstract: Structurally estimating the Grossman and Helpman (1994) model using coverage ratios that include non-tariff barriers leads to biased parameter estimates. We develop a "protection for sale" theoretical framework consistent with the data, by explicitly allowing for non-tariff barriers. Introducing partial rent capturing we obtain a testable specification which finds support in the data. Our results suggest that average rent capturing is in the order of 72-75 percent.
Handle: RePEc:nbr:nberwo:11269
Template-Type: ReDIF-Paper 1.0
Title: Overconfidence vs. Market Efficiency in the National Football League
Classification-JEL: F21; J3; G1
Author-Name: Cade Massey
Author-Name: Richard Thaler
Note: AP CF LS
Number: 11270
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11270
File-URL: http://www.nber.org/papers/w11270.pdf
File-Format: application/pdf
Abstract: A question of increasing interest to researchers in a variety of fields is whether the incentives and experience present in many "real world" settings mitigate judgment and decision-making biases. To investigate this question, we analyze the decision making of National Football League teams during their annual player draft. This is a domain in which incentives are exceedingly high and the opportunities for learning rich. It is also a domain in which multiple psychological factors suggest teams may overvalue the "right to choose" in the draft -- non-regressive predictions, overconfidence, the winner's curse and false consensus all suggest a bias in this direction. Using archival data on draft-day trades, player performance and compensation, we compare the market value of draft picks with the historical value of drafted players. We find that top draft picks are overvalued in a manner that is inconsistent with rational expectations and efficient markets and consistent with psychological research.
Handle: RePEc:nbr:nberwo:11270
Template-Type: ReDIF-Paper 1.0
Title: Betting on Death and Capital Markets in Retirement: A Shortfall Risk Analysis of Life Annuities
Classification-JEL: G22; G23; J26; J32
Author-Name: Ivica Dus
Author-Name: Raimond Maurer
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Note: AG LS
Number: 11271
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11271
File-URL: http://www.nber.org/papers/w11271.pdf
File-Format: application/pdf
Publication-Status: published as Dus, Ivica, Raimond Maurer and Olivia S. Mitchell. "Betting On Death And Capital Marekts In Retirement: A Shortfall Risk Analysis Of Life Annuities Versus Phased Withdrawal Plans," Financial Services Review, 2005, v14(3,Fall), 169-196.
Abstract: Retirees must draw down their accumulated assets in an orderly fashion, so as not to exhaust their funds too soon. We compare alternative phased withdrawal strategies to a life annuity benchmark using German data; one particular phased withdrawal rule seems attractive, as it offers relatively low expected shortfall risk, good expected payouts for the retiree during his life, and some bequest potential; results are similar for the US case. Delayed annuitization may also appeal, as it offers higher expected benefits with lower expected shortfalls. Requiring unisex mortality tables in annuity pric-ing raises women's risks under a phased withdrawal program.
Handle: RePEc:nbr:nberwo:11271
Template-Type: ReDIF-Paper 1.0
Title: Effective Exchange Rate Classifications and Growth
Classification-JEL: F30; F31; F41
Author-Name: Justin M. Dubas
Author-Name: Byung-Joo Lee
Author-Person: ple388
Author-Name: Nelson C. Mark
Author-Person: pma186
Note: IFM
Number: 11272
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11272
File-URL: http://www.nber.org/papers/w11272.pdf
File-Format: application/pdf
Abstract: We propose an econometric procedure for obtaining de facto exchange rate regime classifications which we apply to study the relationship between exchange rate regimes and economic growth. Our classification method models the de jure regimes as outcomes of a multinomial logit choice problem conditional on the volatility of a country's effective exchange rate, a bilateral exchange rate and international reserves. An `effective' de facto exchange rate regime classification is then obtained by assigning country-year observations to the regime with the highest predictive probability obtained from the estimation problem. An econometric investigation into the relationship between exchange rate regimes and GDP growth finds that growth is higher under stable currency-value regimes. Significant asymmetric effects on country growth from not doing what is said are found for nonindustrialized countries. Countries that exhibit `fear of floating' experience significantly higher growth.
Handle: RePEc:nbr:nberwo:11272
Template-Type: ReDIF-Paper 1.0
Title: Pork for Policy: Executive and Legislative Exchange in Brazil
Classification-JEL: D73; D72; D23
Author-Name: Lee J. Alston
Author-Person: pal162
Author-Name: Bernardo Mueller
Author-Person: pmu296
Note: IFM POL
Number: 11273
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11273
File-URL: http://www.nber.org/papers/w11273.pdf
File-Format: application/pdf
Publication-Status: published as Alston, Lee J. and Bernardo Mueller. "Pork For Policy: Executive and Legislative Exchange In Brazil," Journal of Law, Economics and Organization, 2006, v22(1,Apr), 87-114.
Abstract: The Brazilian Constitution of 1988 gave relatively strong powers to the President. We model and test Executive-Legislative relations in Brazil and demonstrate that Presidents have used pork as a political currency to exchange for votes on policy reforms. In particular Presidents Cardoso and Lula have used pork to exchange for amendments to the Constitution. Without policy reforms Brazil would have had greater difficulty meeting their debt obligations. The logic for the exchange of pork for policy reform is that Presidents typically have greater electoral incentives than members of Congress to care about economic growth, economic opportunity, income equality and price stabilization. Members of Congress generally care more about redistributing gains to their constituents. Given the differences in preferences and the relative powers of each, the Legislative and Executive benefit by exploiting the gains from trade.
Handle: RePEc:nbr:nberwo:11273
Template-Type: ReDIF-Paper 1.0
Title: On the Renminbi: The Choice between Adjustment under a Fixed Exchange Rate and Adjustment under a Flexible Rate
Classification-JEL: F0
Author-Name: Jeffrey Frankel
Author-Person: pfr12
Note: IFM
Number: 11274
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11274
File-URL: http://www.nber.org/papers/w11274.pdf
File-Format: application/pdf
Abstract: Fixed and flexible exchange rates each have advantages, and a country has the right to choose the regime suited to its circumstances. Nevertheless, several arguments support the view that the de facto dollar peg may now have outlived its usefulness for China. (1) China's economy is on the overheating side of internal balance, and appreciation would help easy inflationary pressure. (2) Although foreign exchange reserves are a useful shield against currency crises, by now China's current level is fully adequate, and US treasury securities do not pay a high return. (3) It becomes increasingly difficult to sterilize the inflow over time, exacerbating inflation. (4) Although external balance could be achieved by expenditure reduction, e.g., by raising interest rates, the existence of two policy goals (external balance and internal balance) in general requires the use of two independent policy instruments (e.g., the real exchange rate and the interest rate). (5) A large economy like China can achieve adjustment in the real exchange rate via flexibility in the nominal exchange rate more easily than via price flexibility. (6) The experience of other emerging markets points toward exiting from a peg when times are good and the currency is strong, rather than waiting until times are bad and the currency is under attack. (7) From a longer-run perspective, prices of goods and services in China are low -- not just low relative to the United States (.23), but also low by the standards of a Balassa-Samuelson relationship estimated across countries (which predicts .36). In this specific sense, the yuan was undervalued by approximately 35% in 2000, and is by at least as much today. The paper finds that, typically across countries, such gaps are corrected halfway, on average, over the subsequent decade. These seven arguments for increased exchange rate flexibility need not imply a free float. China is a good counter-example to the popular "corners hypothesis" prohibition on intermediate exchange rate regimes.
Handle: RePEc:nbr:nberwo:11274
Template-Type: ReDIF-Paper 1.0
Title: Politics and Economics in Weak and Strong States
Classification-JEL: P16; H10
Author-Name: Daron Acemoglu
Author-Person: pac16
Note: EFG POL
Number: 11275
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11275
File-URL: http://www.nber.org/papers/w11275.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron. "Politics And Economics In Weak And Strong States," Journal of Monetary Economics, 2005, v52(7,Oct), 1199-1226.
Abstract: While much research in political economy points out the benefits of "limited government," political scientists have long emphasized the problems created in many less developed nations by "weak states," which lack the power to tax and regulate the economy and to withstand the political and social challenges from non-state actors. I construct a model in which the state apparatus is controlled by a self-interested ruler, who tries to divert resources for his own consumption, but who can also invest in socially productive public goods. Both weak and strong states create distortions. When the state is excessively strong, the ruler imposes such high taxes that economic activity is stifled. When the state is excessively weak, the ruler anticipates that he will not be able to extract rents in the future and underinvests in public goods. I show that the same conclusion applies in the analysis of both the economic power of the state (i.e., its ability to raise taxes) and its political power (i.e., its ability to remain entrenched from the citizens). I also discuss how under certain circumstances, a different type of equilibrium, which I refer to as "consensually-strong state equilibrium," can emerge whereby the state is politically weak but is allowed to impose high taxes as long as a sufficient fraction of the proceeds are invested in public goods. The consensually-strong state might best correspond to the state in OECD countries where taxes are high despite significant control by the society over the government.
Handle: RePEc:nbr:nberwo:11275
Template-Type: ReDIF-Paper 1.0
Title: Taylor Rules, McCallum Rules and the Term Structure of Interest Rates
Classification-JEL: G0; G1; E4
Author-Name: Michael Gallmeyer
Author-Person: pga446
Author-Name: Burton Hollifield
Author-Person: pho211
Author-Name: Stanley E. Zin
Author-Person: pzi46
Note: AP ME
Number: 11276
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11276
File-URL: http://www.nber.org/papers/w11276.pdf
File-Format: application/pdf
Publication-Status: published as Gallmeyer, Michael F., Burton Hollifield and Stanley E. Zin. "Taylor Rules, McCallum Rules And The Term Structure Of Interest Rates," Journal of Monetary Economics, 2005, v52(5,Jul), 921-950.
Abstract: Recent empirical research shows that a reasonable characterization of federal-funds-rate targeting behavior is that the change in the target rate depends on the maturity structure of interest rates and exhibits little dependence on lagged target rates. See, for example, Cochrane and Piazzesi (2002). The result echoes the policy rule used by McCallum (1994) to rationalize the empirical failure of the `expectations hypothesis' applied to the term- structure of interest rates. That is, rather than forward rates acting as unbiased predictors of future short rates, the historical evidence suggests that the correlation between forward rates and future short rates is surprisingly low. McCallum showed that a desire by the monetary authority to adjust short rates in response to exogenous shocks to the term premiums imbedded in long rates (i.e. "yield-curve smoothing"), along with a desire for smoothing interest rates across time, can generate term structures that account for the puzzling regression results of Fama and Bliss (1987). McCallum also clearly pointed out that this reduced-form approach to the policy rule, although naturally forward looking, needed to be studied further in the context of other response functions such as the now standard Taylor (1993) rule. We explore both the robustness of McCallum's result to endogenous models of the term premium and also its connections to the Taylor Rule. We model the term premium endogenously using two different models in the class of affine term structure models studied in Duffie and Kan (1996): a stochastic volatility model and a stochastic price-of- risk model. We then solve for equilibrium term structures in environments in which interest rate targeting follows a rule such as the one suggested by McCallum (i.e., the "McCallum Rule"). We demonstrate that McCallum's original result generalizes in a natural way to this broader class of models. To understand the connection to the Taylor Rule, we then consider two structural macroeconomic models which have reduced forms that correspond to the two affine models and provide a macroeconomic interpretation of abstract state variables (as in Ang and Piazzesi (2003)). Moreover, such structural models allow us to interpret the parameters of the term-structure model in terms of the parameters governing preferences, technologies, and policy rules. We show how a monetary policy rule will manifest itself in the equilibrium asset-pricing kernel and, hence, the equilibrium term structure. We then show how this policy can be implemented with an interest-rate targeting rule. This provides us with a set of restrictions under which the Taylor and McCallum Rules are equivalent in the sense if implementing the same monetary policy. We conclude with some numerical examples that explore the quantitative link between these two models of monetary policy.
Handle: RePEc:nbr:nberwo:11276
Template-Type: ReDIF-Paper 1.0
Title: Boys Named Sue: Disruptive Children and their Peers
Classification-JEL: I2
Author-Name: David N. Figlio
Author-Person: pfi57
Note: CF EFG
Number: 11277
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11277
File-URL: http://www.nber.org/papers/w11277.pdf
File-Format: application/pdf
Publication-Status: published as Figlio, David N. "Boys Named Sue: Disruptive Children and Their Peers." Education Finance and Policy 2, 4 (Fall 2007): 376-94.
Abstract: This paper proposes an unusual identification strategy to estimate the effects of disruptive students on peer behavior and academic outcomes. I suggest that boys with names most commonly given to girls may be more prone to misbehavior as they get older. This paper utilizes data on names, classroom assignment, behavior problems and student test scores from a large Florida school district in the school years spanning 1996-97 through 1999-2000 to directly study the relationship between behavior and peer outcomes. I find that boys with female-sounding names tend to misbehave disproportionately upon entry to middle school, as compared to other boys and to their previous (relative) behavior patterns. In addition, I find that behavior problems, instrumented with the distribution of boys' names in the class, are associated with increased peer disciplinary problems and reduced peer test scores, indicating that disruptive behavior of students has negative ramifications for their peers.
Handle: RePEc:nbr:nberwo:11277
Template-Type: ReDIF-Paper 1.0
Title: Work and Leisure in the U.S. and Europe: Why So Different?
Classification-JEL: J3; E0
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Bruce Sacerdote
Note: EFG LS PE
Number: 11278
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11278
File-URL: http://www.nber.org/papers/w11278.pdf
File-Format: application/pdf
Publication-Status: published as Work and Leisure in the United States and Europe: Why So Different?, Alberto Alesina, Edward Glaeser, Bruce Sacerdote. in NBER Macroeconomics Annual 2005, Volume 20, Gertler and Rogoff. 2006
Abstract: Americans average 25.1 working hours per person in working age per week, but the Germans average 18.6 hours. The average American works 46.2 weeks per year, while the French average 40 weeks per year. Why do western Europeans work so much less than Americans? Recent work argues that these differences result from higher European tax rates, but the vast empirical labor supply literature suggests that tax rates can explain only a small amount of the differences in hours between the U.S. and Europe. Another popular view is that these differences are explained by long-standing European "culture," but Europeans worked more than Americans as late as the 1960s. In this paper, we argue that European labor market regulations, advocated by unions in declining European industries who argued "work less, work all" explain the bulk of the difference between the U.S. and Europe. These policies do not seem to have increased employment, but they may have had a more society-wide influence on leisure patterns because of a social multiplier where the returns to leisure increase as more people are taking longer vacations.
Handle: RePEc:nbr:nberwo:11278
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Family Income on Child Achievement
Classification-JEL: I3
Author-Name: Gordon B. Dahl
Author-Person: pda455
Author-Name: Lance Lochner
Author-Person: plo31
Note: CH LS PE
Number: 11279
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11279
File-URL: http://www.nber.org/papers/w11279.pdf
File-Format: application/pdf
Abstract: Understanding the consequences of growing up poor for a child's well-being is an important research question, but one that is difficult to answer due to the potential endogeneity of family income. Past estimates of the effect of family income on child development have often been plagued by omitted variable bias and measurement error. In this paper, we use a fixed effect instrumental variables strategy to estimate the causal effect of income on children's math and reading achievement. Our primary source of identification comes from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20%, or approximately $2,100. Using a panel of over 6,000 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity and endogenous transitory income shocks as well as measurement error in income. Our baseline estimates imply that a $1,000 increase in income raises math test scores by 2.1% and reading test scores by 3.6% of a standard deviation. The results are even stronger when looking at children from disadvantaged families who are affected most by the large changes in the EITC, and are robust to a variety of alternative specifications.
Handle: RePEc:nbr:nberwo:11279
Template-Type: ReDIF-Paper 1.0
Title: Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches
Classification-JEL: G1; G3; C1
Author-Name: Mitchell A. Petersen
Author-Person: ppe42
Note: AP CF
Number: 11280
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11280
File-URL: http://www.nber.org/papers/w11280.pdf
File-Format: application/pdf
Publication-Status: published as Petersen, Mitchell A. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches." Review of Financial Studies 22, 1 (January 2009): 435-80.
Abstract: In both corporate finance and asset pricing empirical work, researchers are often confronted with panel data. In these data sets, the residuals may be correlated across firms and across time, and OLS standard errors can be biased. Historically, the two literatures have used different solutions to this problem. Corporate finance has relied on Rogers standard errors, while asset pricing has used the Fama-MacBeth procedure to estimate standard errors. This paper will examine the different methods used in the literature and explain when the different methods yield the same (and correct) standard errors and when they diverge. The intent is to provide intuition as to why the different approaches sometimes give different answers and give researchers guidance for their use.
Handle: RePEc:nbr:nberwo:11280
Template-Type: ReDIF-Paper 1.0
Title: The Evolution of the Mexican-Born Workforce in the United States
Classification-JEL: J1; J6
Author-Name: George J. Borjas
Author-Person: pbo44
Author-Name: Lawrence F. Katz
Author-Person: pka266
Note: LS
Number: 11281
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11281
File-URL: http://www.nber.org/papers/w11281.pdf
File-Format: application/pdf
Publication-Status: published as The Evolution of the Mexican-Born Workforce in the United States , George J. Borjas, Lawrence F. Katz. in Mexican Immigration to the United States, Borjas. 2007
Abstract: This paper examines the evolution of the Mexican-born workforce in the United States using data drawn from the decennial U.S. Census throughout the entire 20th century. It is well known that there has been a rapid rise in Mexican immigration to the United States in recent years. Interestingly, the share of Mexican immigrants in the U.S. workforce declined steadily beginning in the 1920s before beginning to rise in the 1960s. It was not until 1980 that the relative number of Mexican immigrants in the U.S. workforce was at the 1920 level. The paper examines the trends in the relative skills and economic performance of Mexican immigrants, and contrasts this evolution with that experienced by other immigrants arriving in the United States during the period. The paper also examines the costs and benefits of this influx by examining how the Mexican influx has altered economic opportunities in the most affected labor markets and by discussing how the relative prices of goods and services produced by Mexican immigrants may have changed over time.
Handle: RePEc:nbr:nberwo:11281
Template-Type: ReDIF-Paper 1.0
Title: Rockonomics: The Economics of Popular Music
Classification-JEL: Z1; L82; O34
Author-Name: Marie Connolly
Author-Person: pco193
Author-Name: Alan B. Krueger
Author-Person: pkr63
Note: IO LS
Number: 11282
Creation-Date: 2005-04
Order-URL: http://www.nber.org/papers/w11282
File-URL: http://www.nber.org/papers/w11282.pdf
File-Format: application/pdf
Publication-Status: published as Connolly, Marie & Krueger, Alan B., 2006. "Rockonomics: The Economics of Popular Music," Handbook of the Economics of Art and Culture, Elsevier.
Abstract: This paper considers economic issues and trends in the rock and roll industry, broadly defined. The analysis focuses on concert revenues, the main source of performers ' income. Issues considered include: price measurement; concert price acceleration in the 1990s; the increased concentration of revenue among performers; reasons for the secondary ticket market; methods for ranking performers; copyright protection; and technological change.
Handle: RePEc:nbr:nberwo:11282
Template-Type: ReDIF-Paper 1.0
Title: Conditional Policies in General Equilibrium
Classification-JEL: F13; F15; F16
Author-Name: Kala Krishna
Author-Person: pkr26
Note: ITI
Number: 11283
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11283
File-URL: http://www.nber.org/papers/w11283.pdf
File-Format: application/pdf
Publication-Status: published as Kala Krishna, 2015. "Conditional Policies in General Equilibrium," Review of Development Economics, Wiley Blackwell, vol. 19(4), pages 797-819, November.
Abstract: Obtaining lower generalized system of preferences (GSP) tariffs requires meeting costly Rules of Origin (ROOs). Growing coffee in the shade is more costly, but yields a price premium. This paper analyzes the effects of such restrictions in a general equilibrium setting and shows that such policies may have unanticipated effects. It is shown that in a world with capital mobility, the GSP could result in capital outflows rather than inflows and consumer preferences for shade grown coffee end up hurting labor in developing countries. Even small subsidies that are contingent on the use of domestic intermediates can result in specialization in the targeted good. Value added contingent policies can easily lead to multiple equilibria despite the absence of externalities or market imperfections.
Handle: RePEc:nbr:nberwo:11283
Template-Type: ReDIF-Paper 1.0
Title: Contracts, Holdup, and Legal Intervention
Classification-JEL: D8; K12
Author-Name: Steven Shavell
Author-Person: psh42
Note: LE
Number: 11284
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11284
File-URL: http://www.nber.org/papers/w11284.pdf
File-Format: application/pdf
Abstract: This article develops the point that the problems associated with contractual holdup may justify legal intervention in theory, and the article relates this conclusion to legal intervention in practice. Contractual holdup is considered for both fresh contracts and for modifications of contracts. The law can in principle alleviate the incentive and risk-bearing problems due to holdup in two ways. One approach is for the law simply to void agreements made in certain circumstances, since that will remove the prospect of profit from holdup. This policy may be desirable when the events that permit holdup are engineered, for these events would not have been instigated if they would not have resulted in enforceable contracts. When situations of need are not engineered (bad weather puts a ship in jeopardy), flat voiding of contracts is undesirable, since contracts for aid in situations of need (to tow a ship) are often socially beneficial. In these circumstances, the policy of controlling the contract price is preferable, as that policy can reduce the problems of holdup but still allow contracts to be made. Both types of legal intervention in contracts and their modifications -- voiding without regard to price and control of price -- are used by courts to counter problems of pronounced holdup. Also, various price control regulations appear to serve the same objective, at least in part, for instance maximum price ordinances for car towing services, emergency price regulations, and the historically important rule of laesio enormis of the Middle Ages.
Handle: RePEc:nbr:nberwo:11284
Template-Type: ReDIF-Paper 1.0
Title: Understanding and Comparing Factor-Based Forecasts
Classification-JEL: E37; E47; C3; C53
Author-Name: Jean Boivin
Author-Person: pbo43
Author-Name: Serena Ng
Author-Person: png6
Note: EFG ME
Number: 11285
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11285
File-URL: http://www.nber.org/papers/w11285.pdf
File-Format: application/pdf
Publication-Status: published as Jean Boivin & Serena Ng, 2005. "Understanding and Comparing Factor-Based Forecasts," International Journal of Central Banking, International Journal of Central Banking, vol. 1(3), December.
Abstract: Forecasting using `diffusion indices' has received a good deal of attention in recent years. The idea is to use the common factors estimated from a large panel of data to help forecast the series of interest. This paper assesses the extent to which the forecasts are influenced by (i) how the factors are estimated, and/or (ii) how the forecasts are formulated. We find that for simple data generating processes and when the dynamic structure of the data is known, no one method stands out to be systematically good or bad. All five methods considered have rather similar properties, though some methods are better in long horizon forecasts, especially when the number of time series observations is small. However, when the dynamic structure is unknown and for more complex dynamics and error structures such as the ones encountered in practice, one method stands out to have smaller forecast errors. This method forecasts the series of interest directly, rather than the common and idiosyncratic components separately, and it leaves the dynamics of the factors unspecified. By imposing fewer constraints, and having to estimate a smaller number of auxiliary parameters, the method appears to be less vulnerable to misspecification, leading to improved forecasts.
Handle: RePEc:nbr:nberwo:11285
Template-Type: ReDIF-Paper 1.0
Title: Labour Market Institutions Without Blinders: The Debate over Flexibility and Labour Market Performance
Classification-JEL: J0
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 11286
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11286
File-URL: http://www.nber.org/papers/w11286.pdf
File-Format: application/pdf
Publication-Status: published as Richard Freeman, 2005. "Labour market institutions without blinders: The debate over flexibility and labour market performance," International Economic Journal, Korean International Economic Association, vol. 19(2), pages 129-145, June.
Abstract: The debate over the influence of labour market flexibility on performance is unlikely to be settled by additional studies using aggregate data and making cross-country comparisons. While this approach holds little promise, micro-analysis of workers and firms and increased use of experimental methods represent a path forward. Steps along this path could help end the current 'lawyer's case' empiricism in which priors dominate evidence.
Handle: RePEc:nbr:nberwo:11286
Template-Type: ReDIF-Paper 1.0
Title: Lucky Stores, Gambling, and Addiction: Empirical Evidence from State Lottery Sales
Classification-JEL: H3; H8; D8; L83
Author-Name: Jonathan Guryan
Author-Person: pgu126
Author-Name: Melissa S. Kearney
Note: PE
Number: 11287
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11287
File-URL: http://www.nber.org/papers/w11287.pdf
File-Format: application/pdf
Publication-Status: published as Jonathan Guryan & Melissa S. Kearney, 2008. "Gambling at Lucky Stores: Empirical Evidence from State Lottery Sales," American Economic Review, American Economic Association, vol. 98(1), pages 458-73, March.
Abstract: There is a large body of literature in both psychology and economics documenting mistaken perceptions of randomness. In this paper we demonstrate that people appear to believe that "lightning will strike twice" when it comes to lottery jackpots. First, we show that in the week following the sale of a winning ticket, retailers that sell a winning jackpot ticket experience relative increases in game-specific ticket sales of between 12 and 38 percent, with the sales response increasing in the size of the jackpot. In addition, the increase in sales experienced by the winning vendor increases with the proportion of the local population comprised of high school dropouts, elderly adults, and households receiving public assistance. We further show that this increase in retail-game sales initially reflects an increase in total sales at the retail and zip code level. Second, we show that the increase in sales is persistent at the winning retailer. However, the data no not provide clear evidence that the increase in sales at the zip code level is persistent. It thus appears that in the long run, consumers are persistent in their habit of buying lottery tickets at the "lucky" store; however, as the shock to total gambling dissipates, there is no evidence that lottery gambling itself is habit forming or addictive.
Handle: RePEc:nbr:nberwo:11287
Template-Type: ReDIF-Paper 1.0
Title: Advanced Purchase Commitments for a Malaria Vaccine: Estimating Costs and Effectiveness
Classification-JEL: I18; O19; O31; O38
Author-Name: Ernst R. Berndt
Author-Name: Rachel Glennerster
Author-Person: pgl73
Author-Name: Michael R. Kremer
Author-Person: pkr20
Author-Name: Jean Lee
Author-Person: ple936
Author-Name: Ruth Levine
Author-Name: Georg Weizsacker
Author-Name: Heidi Williams
Author-Person: pwi239
Note: EH PR
Number: 11288
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11288
File-URL: http://www.nber.org/papers/w11288.pdf
File-Format: application/pdf
Abstract: To overcome the problem of insufficient research and development (R&D) on vaccines for diseases concentrated in low-income countries, sponsors could commit to purchase viable vaccines if and when they are developed. One or more sponsors would commit to a minimum price that would be paid per person immunized for an eligible product, up to a certain number of individuals immunized. For additional purchases, the price would eventually drop to short-run marginal cost. If no suitable product were developed, no payments would be made. We estimate the offer size which would make the revenues from R&D investments on a malaria vaccine similar to revenues realized from investments in typical existing commercial pharmaceutical products, as well as the degree to which various contract models and assumptions would affect the cost-effectiveness of such a commitment for the case of a malaria vaccine. Under conservative assumptions, we document that the intervention would be highly cost-effective from a public health perspective. Sensitivity analyses suggest most characteristics of a hypothetical malaria vaccine would have little effect on the cost-effectiveness, but that the duration of protection against malaria conferred by a vaccine strongly affects potential cost-effectiveness. Readers can conduct their own sensitivity analyses employing a web-based spreadsheet tool.
Handle: RePEc:nbr:nberwo:11288
Template-Type: ReDIF-Paper 1.0
Title: My Policies or Yours: Does OECD Support for Agriculture Increase Poverty in Developing Countries?
Classification-JEL: F0; O1; Q0
Author-Name: Margaret McMillan
Author-Person: pmc26
Author-Name: Alix Peterson Zwane
Author-Name: Nava Ashraf
Note: ITI
Number: 11289
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11289
File-URL: http://www.nber.org/papers/w11289.pdf
File-Format: application/pdf
Publication-Status: published as My Policies or Yours: Does OECD Support for Agriculture Increase Poverty in Developing Countries?, Margaret S. McMillan, Alix Peterson Zwane, Nava Ashraf. in Globalization and Poverty, Harrison. 2007
Abstract: This paper investigates the impact of rich-country agricultural support on the poor. Using non-parametric analysis we establish that the majority of poor countries are consistently net importers of food products that are heavily supported by OECD governments. Using a cross-country regression framework we measure the overall impact of agricultural support policies in rich countries on poverty and average incomes in poor countries. We find no support in the cross-country analysis for the claim that OECD polices worsen poverty in developing countries. To better understand what might drive these results, we turn to national employment and household consumption and expenditure surveys from Mexico. There are four important findings from the country case study: (1) the majority of the poorest corn farmers in Mexico report that they never sell any corn, (2) Mexico's own policies (signing NAFTA) have dramatically reduced the Mexican producer price of corn, (3) US corn subsidies have had a limited impact on this price and, (4) domestic policies have largely cushioned Mexican corn farmers from the drop in corn prices. Taken together, the evidence suggests that a reduction in rich-country agricultural support that raises world food prices is likely to hurt the poorest countries but may have little impact at all on the poorest farmers within these countries.
Handle: RePEc:nbr:nberwo:11289
Template-Type: ReDIF-Paper 1.0
Title: Social Security Programs and Retirement around the World: Fiscal Implications, Introduction and Summary
Classification-JEL: F0; H0
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: David Wise
Author-Person: pwi45
Note: AG PE
Number: 11290
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11290
File-URL: http://www.nber.org/papers/w11290.pdf
File-Format: application/pdf
Publication-Status: published as Jonathan Gruber & David A. Wise, 2007. "Social Security Programs and Retirement around the World: Fiscal Implications of Reform," NBER Books, National Bureau of Economic Research, Inc, number grub07-1, December.
Abstract: This is the introduction to and summary of Phase III of an international research project to study the relationship between social security provisions and retirement. The project relies on the work of a large group of economists in 12 countries who conduct the analysis for each of their countries. The first phase described the retirement incentives inherent in plan provisions and documented the strong relationship across countries between social security incentives to retire and the proportion of older persons out of the labor force. The second phase illustrated the large effects that changing plan provisions would have on the labor force participation of older workers. This third phase shows the consequent fiscal implications that extending labor force participation would have on net program costs -- reduced government social security benefit payments less increased government tax revenues. The findings are conveyed by simulating the implications of illustrative reforms. One reform increases benefit eligibility ages by three years. Another illustrative reform reduces actuarially benefits received before the normal retirement age. A common reform prescribes the same provisions in each country. The financial implications of the illustrative reforms are very large in many instances, often as much as 20 to 40 percent of current program costs. The savings amount to as much a 1 percent or more of country GDP. The results make clear that reforms like those considered in this volume can have very large fiscal implications for the cost of social security benefits as well as for government revenues engendered by changes in the labor force participation of older workers.
Handle: RePEc:nbr:nberwo:11290
Template-Type: ReDIF-Paper 1.0
Title: Branch Banking, Bank Competition, and Financial Stability
Classification-JEL: G21; N22; E44
Author-Name: Mark Carlson
Author-Person: pca881
Author-Name: Kris James Mitchener
Note: DAE ME
Number: 11291
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11291
File-URL: http://www.nber.org/papers/w11291.pdf
File-Format: application/pdf
Publication-Status: published as Carlson, Mark and Kris James Mitchener. "Branch Banking, Bank Competition, and Financial Stability," Journal of Money, Credit and Banking, 2006, v38(5,Aug), 1293-1328.
Abstract: It is often argued that branching stabilizes banking systems by facilitating diversification of bank portfolios; however, previous empirical research on the Great Depression offers mixed support for this view. Analyses using state-level data find that states allowing branch banking had lower failure rates, while those examining individual banks find that branch banks were more likely to fail. We argue that an alternative hypothesis can reconcile these seemingly disparate findings. Using data on national banks from the 1920s and 1930s, we show that branch banking increases competition and forces weak banks to exit the banking system. This consolidation strengthens the system as a whole without necessarily strengthening the branch banks themselves. Our empirical results suggest that the effects that branching had on competition were quantitatively more important than geographical diversification for bank stability in the 1920s and 1930s.
Handle: RePEc:nbr:nberwo:11291
Template-Type: ReDIF-Paper 1.0
Title: Contractibility and the Design of Research Agreements
Classification-JEL: D23; L14; L24; O31
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: Ulrike Malmendier
Author-Person: pma1397
Note: CF PR
Number: 11292
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11292
File-URL: http://www.nber.org/papers/w11292.pdf
File-Format: application/pdf
Publication-Status: published as Josh Lerner & Ulrike Malmendier, 2010. "Contractibility and the Design of Research Agreements," American Economic Review, American Economic Association, vol. 100(1), pages 214-46, March.
Abstract: We analyze how variations in contractibility affect the design of contracts in the context of biotechnology research agreements. A major concern of firms financing biotechnology research is that the R&D firms might use the funding to subsidize other projects or substitute one project for another. We develop a model based on the property-rights theory of the firm that allows for researchers in the R&D firms to pursue multiple projects. When research activities are non-verifiable, we show that it is optimal for the financing company to obtain the option right to terminate the research agreement while maintaining broad property rights to the terminated project. The option right induces the biotechnology firm researchers not to deviate from the proposed research activities. The contract prevents opportunistic exercise of the termination right by conditioning payments on the termination of the agreement. We test the model empirically using a new data set on 584 biotechnology research agreements. We find that the assignment of termination and broad intellectual property rights to the financing firm occurs in contractually difficult environments in which there is no specifiable lead product candidate. We also analyze how the contractual design varies with the R&D firm's financial constraints and research capacities and with the type of financing firm. The additional empirical results allow us to distinguish the property-rights explanation from alternative stories, based on uncertainty and asymmetric information about the project quality or research abilities.
Handle: RePEc:nbr:nberwo:11292
Template-Type: ReDIF-Paper 1.0
Title: A Quantitative Model of Sudden Stops and External Liquidity Management
Classification-JEL: E2; E3; F3; F4
Author-Name: Ricardo Caballero
Author-Person: pca44
Author-Name: Stavros Panageas
Author-Person: ppa250
Note: EFG IFM
Number: 11293
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11293
File-URL: http://www.nber.org/papers/w11293.pdf
File-Format: application/pdf
Abstract: Emerging market economies, which have much of their growth ahead of them, run persistent current account deficits in order to smooth consumption intertemporally. The counterpart of these deficits is their dependence on capital inflows, which can suddenly stop. In this paper we develop and estimate a quantifiable model of sudden stops and use it to study practical mechanisms to insure emerging markets against them. We first assess the standard practice of protecting the current account through the accumulation of international reserves and conclude that, even when optimally managed, this mechanism is expensive and incomplete. External insurance, on the other hand, is hard to obtain because sudden stops often come together with distress in emerging market investors themselves (the most natural insurers). Thus, one needs to find global (non-emerging-market-specific) assets that are correlated to sudden stops. We show an example of such an asset based on the S&P 500's implied volatility index. If added to these countries portfolios, it would significantly enhance their sudden stop risk-management strategies. In our simulations, the median gain in terms of reserves available at the time of sudden stop is around 30 percent. Moreover, in instances where the level of non-contingent reserves is low, the median gain is close to 300 percent. We also find that as countries manage to reduce the size of the sudden stops that afflict them, they should reduce their stock of reserves and significantly increase their share of contingent reserves. The main insights of the paper extend to external liquidity and liability management more generally.
Handle: RePEc:nbr:nberwo:11293
Template-Type: ReDIF-Paper 1.0
Title: Why Do Public Firms Issue Private and Public Securities?
Classification-JEL: G0; G2; G3
Author-Name: Armando Gomes
Author-Name: Gordon Phillips
Author-Person: pph31
Note: CF
Number: 11294
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11294
File-URL: http://www.nber.org/papers/w11294.pdf
File-Format: application/pdf
Publication-Status: published as Armando Gomes & Gordon Phillips, 2012. "Why do public firms issue private and public securities?," Journal of Financial Intermediation, vol 21(4), pages 619-658.
Abstract: We examine a comprehensive set of private and public security issuance decisions by publicly traded companies. We study private and public issues of debt, convertibles and common equity securities - a total of 6 different security-market choices. The market for public firms issuing private securities is large. Of the over 13,000 issues we examine, more than half are in the private market. We find that asymmetric information and moral hazard problems play a large role in the public versus private market choice and the security type choice. Our findings show that asymmetric information impacts security choice in a particular pattern: Conditional on issuing in the public market we find a pecking order of security issuance holds, firms with higher measures of asymmetric information are less likely to issue equity. We find a reversal of this pecking order in the private market, firms with higher measures of asymmetric information are more likely to issue equity and convertibles. Second, we find risk and investment opportunities are important in determining which security type a firm issues. Firms with high risk, low profitability and good investment opportunities are more likely to choose equity and convertibles and to issue privately. The results support models of security issuance where private securities give investors more incentives to produce information and monitor the firm.
Handle: RePEc:nbr:nberwo:11294
Template-Type: ReDIF-Paper 1.0
Title: Is the Melting Pot Still Hot? Explaining the Resurgence of Immigrant Segregation
Classification-JEL: J1; N3; R0
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Jacob L. Vigdor
Author-Person: pvi23
Note: DAE LS
Number: 11295
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11295
File-URL: http://www.nber.org/papers/w11295.pdf
File-Format: application/pdf
Publication-Status: published as David M. Cutler & Edward L. Glaeser & Jacob L. Vigdor, 2008. "Is the Melting Pot Still Hot? Explaining the Resurgence of Immigrant Segregation," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 478-497, 04.
Abstract: This paper uses decennial Census data to examine trends in immigrant segregation in the United States between 1910 and 2000. Immigrant segregation declined in the first half of the century, but has been rising over the past few decades. Analysis of restricted access 1990 Census microdata suggests that this rise would be even more striking if the native-born children of immigrants could be consistently excluded from the analysis. We analyze longitudinal variation in immigrant segregation, as well as housing price patterns across metropolitan areas, to test four hypotheses of immigrant segregation. Immigration itself has surged in recent decades, but the tendency for newly arrived immigrants to be younger and of lower socioeconomic status explains very little of the recent rise in immigrant segregation. We also find little evidence of increased nativism in the housing market. Evidence instead points to changes in urban form, manifested in particular as native-driven suburbanization and the decline of public transit as a transportation mode, as a central explanation for the new immigrant segregation.
Handle: RePEc:nbr:nberwo:11295
Template-Type: ReDIF-Paper 1.0
Title: A Global View of Economic Growth
Classification-JEL: F10; F15; F40; F43
Author-Name: Jaume Ventura
Author-Person: pve110
Note: EFG ITI
Number: 11296
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11296
File-URL: http://www.nber.org/papers/w11296.pdf
File-Format: application/pdf
Publication-Status: published as Ventura, Jaume, 2005. "A Global View of Economic Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 22, pages 1419-1497 Elsevier.
Abstract: This paper integrates in a unified and tractable framework some of the key insights of the field of international trade and economic growth. It examines a sequence of theoretical models that share a common description of technology and preferences but differ on their assumptions about trade frictions. By comparing the predictions of these models against each other, it is possible to identify a variety of channels through which trade affects the evolution of world income and its geographical distribution. By comparing the predictions of these models against the data, it is also possible to construct coherent explanations of income differences and long-run trends in economic growth.
Handle: RePEc:nbr:nberwo:11296
Template-Type: ReDIF-Paper 1.0
Title: The Time-Series Properties of Aggregate Consumption: Implications for the Costs of Fluctuation
Classification-JEL: E32; E21; E60
Author-Name: Ricardo Reis
Author-Person: pre73
Note: EFG ME
Number: 11297
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11297
File-URL: http://www.nber.org/papers/w11297.pdf
File-Format: application/pdf
Publication-Status: published as Ricardo Reis, 2009. "The Time-Series Properties of Aggregate Consumption: Implications for the Costs of Fluctuations," Journal of the European Economic Association, MIT Press, vol. 7(4), pages 722-753, 06.
Abstract: While this is typically ignored, the properties of the stochastic process followed by aggregate consumption affect the estimates of the costs of fluctuations. This paper pursues two approaches to modelling aggregate consumption dynamics and to measuring how much society dislikes fluctuations, one statistical and one economic. The statistical approach estimates the properties of consumption and calculates the cost of having consumption fluctuating around its mean growth. The paper finds that the persistence of consumption is a crucial determinant of these costs and that the high persistence in the data severely distorts conventional measures. It shows how to compute valid estimates and confidence intervals. The economic approach uses a calibrated model of optimal consumption and measures the costs of eliminating income shocks. This uncovers a further cost of uncertainty, through its impact on precautionary savings and investment. The two approaches lead to costs of fluctuations that are higher than the common wisdom, between 0.5% and 5% of per capita consumption.
Handle: RePEc:nbr:nberwo:11297
Template-Type: ReDIF-Paper 1.0
Title: From the Webbs to the Web: The Contribution of the Internet to Reviving Union Fortunes
Classification-JEL: J0
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 11298
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11298
File-URL: http://www.nber.org/papers/w11298.pdf
File-Format: application/pdf
Publication-Status: published as Fernie, Sue and David Metcalf (eds.) Trade Unions: Resurgence or Demise? Leverhulme Series Volume 3 on The Future of Trade Unions. London: Routledge, 2005.
Abstract: This paper shows that in the 2000s unions in the UK and US made innovative use of the Internet to deliver union services and move toward open source unions better suited for the modern world than traditional union structures. In contrast to analysts who see unions as being on an inexorable path of decline, I argue that these innovations are changing unions from institutions of the Webbs to institutions of the Web, which will improve their effectiveness and revive their role as the key worker organization in capitalism.
Handle: RePEc:nbr:nberwo:11298
Template-Type: ReDIF-Paper 1.0
Title: A Review of the Empirical Literature on FDI Determinants
Classification-JEL: F21; F23
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Note: ITI
Number: 11299
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11299
File-URL: http://www.nber.org/papers/w11299.pdf
File-Format: application/pdf
Publication-Status: published as Blonigen, Bruce A. "A Review Of The Empirical Literature On FDI Determinants," Atlantic Economic Journal, 2005, v33(4,Dec), 383-403.
Abstract: This paper surveys the recent burgeoning literature that empirically examines the foreign direct investment (FDI) decisions of multinational enterprises (MNEs) and the resulting aggregate location of FDI across the world. The contribution of the paper is to evaluate what we can say with relative confidence about FDI as a profession, given the evidence, and what we cannot have much confidence in at this point. Suggestions are made for future research directions.
Handle: RePEc:nbr:nberwo:11299
Template-Type: ReDIF-Paper 1.0
Title: The Life-Cycle Personal Accounts Proposal for Social Security: A Review
Classification-JEL: H55
Author-Name: Robert J. Shiller
Author-Person: psh69
Note: AG EFG PE
Number: 11300
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11300
File-URL: http://www.nber.org/papers/w11300.pdf
File-Format: application/pdf
Publication-Status: published as Shiller, Robert J. "Life-Cycle Personal Accounts Proposal For Social Security: An Evaluation Of President Bush's Proposal," Journal of Policy Modeling, 2006, v28(4,May), 427-444.
Abstract: The life-cycle accounts proposal for Social Security reform has been justified by its proponents using a number of different arguments, but these arguments generally involve the assumption of a high likelihood of good returns on the accounts. A simulation is undertaken to estimate the probability distribution of returns in the accounts based on long-term historical experience. U.S. stock market, bond market and money market data 1871-2004 are used for the analysis. Assuming that future returns behave like historical data, it is found that a baseline personal account portfolio after offset will be negative 32% of the time on the retirement date. The median internal rate of return in this case is 3.4 percent, just above the amount necessary for holders of the accounts to break even. However, the U.S. stock market has been unusually successful historically by world standards. It would be better if we adjust the historical data to reduce the assumed average stock market return for the simulation. When this is done so that the return matches the median stock market return of 15 countries 1900-2000 as reported by Dimson et al. [2002], the baseline personal account is found to be negative 71% of the time on the date of retirement and the median internal rate of return is 2.6 percent.
Handle: RePEc:nbr:nberwo:11300
Template-Type: ReDIF-Paper 1.0
Title: Why Does Capital Flow to Rich States?
Classification-JEL: F21; F41
Author-Name: Sebnem Kalemli-Ozcan
Author-Person: pka37
Author-Name: Ariell Reshef
Author-Person: pre248
Author-Name: Bent Sorensen
Author-Person: pso113
Author-Name: Oved Yosha
Note: IFM ITI
Number: 11301
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11301
File-URL: http://www.nber.org/papers/w11301.pdf
File-Format: application/pdf
Publication-Status: published as Sebnem Kalemli-Ozcan & Ariell Reshef & Bent E Sørensen & Oved Yosha, 2010. "Why Does Capital Flow to Rich States?," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 769-783, October.
Abstract: The magnitude and the direction of net international capital flows does not fit neo-classical models. The 50 U.S. states comprise an integrated capital market with very low barriers to capital flows, which makes them an ideal testing ground for neoclassical models. We develop a simple frictionless open economy model with perfectly diversified ownership of capital and find that capital flows between the U.S. states are consistent with the model. Therefore, the small size and "wrong" direction of net international capital flows are likely due to frictions associated with national borders and not due to inherent flaws in the neoclassical model.
Handle: RePEc:nbr:nberwo:11301
Template-Type: ReDIF-Paper 1.0
Title: Parental Educational Investment and Children's Academic Risk: Estimates of the Impact of Sibship Size and Birth Order from Exogenous Variations in Fertility
Classification-JEL: I0
Author-Name: Dalton Conley
Author-Name: Rebecca Glauber
Note: CH ED EH
Number: 11302
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11302
File-URL: http://www.nber.org/papers/w11302.pdf
File-Format: application/pdf
Publication-Status: published as Dalton Conley & Rebecca Glauber, 2006. "Parental Educational Investment and Children’s Academic Risk: Estimates of the Impact of Sibship Size and Birth Order from Exogenous Variation in Fertility," Journal of Human Resources, University of Wisconsin Press, vol. 41(4).
Abstract: The stylized fact that individuals who come from families with more children are disadvantaged in the schooling process has been one of the most robust effects in human capital and stratification research over the last few decades. For example, Featherman and Hauser (1978: 242-243) estimate that each additional brother or sister costs respondents on the order of a fifth of a year of schooling. However, more recent analyses suggest that the detrimental effects of sibship size on children's educational achievement might be spurious. We extend these recent analyses of spuriousness versus causality using a different method and a different set of outcome measures. We suggest an instrumental variable approach to estimate the effect of sibship size on children's private school attendance and on their likelihood of being held back in school. Specifically, we deploy the sex-mix instrument used by Angrist and Evans (1998). Analyses of educational data from the 1990 PUMS five percent sample reveal that children from larger families are less likely to attend private school and are more likely to be held back in school. Our estimates are smaller than traditional OLS estimates, but are nevertheless greater than zero. Most interesting is the fact that the effect of sibship size is uniformly strongest for latter-born children and zero for first born children.
Handle: RePEc:nbr:nberwo:11302
Template-Type: ReDIF-Paper 1.0
Title: The Incidence of the Healthcare Costs of Obesity
Classification-JEL: I1; J7
Author-Name: Jay Bhattacharya
Author-Name: M. Kate Bundorf
Note: EH LS
Number: 11303
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11303
File-URL: http://www.nber.org/papers/w11303.pdf
File-Format: application/pdf
Publication-Status: published as Bhattacharya, Jay & Bundorf, M. Kate, 2009. "The incidence of the healthcare costs of obesity," Journal of Health Economics, Elsevier, vol. 28(3), pages 649-658, May.
Abstract: The incidence of obesity has increased dramatically in the U.S. Obese individuals tend to be sicker and spend more on health care, raising the question of who bears the incidence of obesity-related health care costs. This question is particularly interesting among those with group coverage through an employer given the lack of explicit risk adjustment of individual health insurance premiums in the group market. In this paper, we examine the incidence of the healthcare costs of obesity among full time workers. We find that the incremental healthcare costs associated with obesity are passed on to obese workers with employer-sponsored health insurance in the form of lower cash wages. Obese workers in firms without employer-sponsored insurance do not have a wage offset relative to their non-obese counterparts. Our estimate of the wage offset exceeds estimates of the expected incremental health care costs of these individuals for obese women, but not for men. We find that a substantial part of the lower wages among obese women attributed to labor market discrimination can be explained by the higher health insurance premiums required to cover them.
Handle: RePEc:nbr:nberwo:11303
Template-Type: ReDIF-Paper 1.0
Title: Employment-Contingent Health Insurance, Illness, and Labor Supply of Women: Evidence from Married Women with Breast Cancer
Classification-JEL: I12; J22
Author-Name: Cathy J. Bradley
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Zhehui Luo
Author-Person: plu71
Author-Name: Heather L. Bednarek
Note: EH LS
Number: 11304
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11304
File-URL: http://www.nber.org/papers/w11304.pdf
File-Format: application/pdf
Publication-Status: published as Cathy J. Bradley & David Neumark & Zhehui Luo & Heather L. Bednarek, 2007. "Employment-contingent health insurance, illness, and labor supply of women: evidence from married women with breast cancer," Health Economics, John Wiley & Sons, Ltd., vol. 16(7), pages 719-737.
Abstract: We examine the effects of employment-contingent health insurance on married women's labor supply following a health shock. First, we develop a theoretical model that examines the effects of employment-contingent health insurance on the labor supply response to a health shock, to clarify under what conditions employment-contingent health insurance is likely to dampen the labor supply response. Second, we empirically evaluate this relationship using primary data. The results from our analysis find that -- as the model suggests is likely -- health shocks decrease labor supply to a greater extent among women insured by their spouse's policy than among women with health insurance through their own employer. Employment-contingent health insurance appears to create incentives to remain working and to work at a greater intensity when faced with a serious illness.
Handle: RePEc:nbr:nberwo:11304
Template-Type: ReDIF-Paper 1.0
Title: Crises in Emerging Market Economies: A Global Perspective
Classification-JEL: F31; F32; F34; F41
Author-Name: Guillermo A. Calvo
Author-Person: pca694
Note: IFM
Number: 11305
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11305
File-URL: http://www.nber.org/papers/w11305.pdf
File-Format: application/pdf
Abstract: The paper argues that global financial factors played an important role in the capital-inflow episode in Emerging Market economies (EMs), during the early part of the 1990s, and clearly in the Sudden Stop (of capital inflows) crises that took place after the 1998 Russian crisis. Moreover, the paper shows that recovery after crises that exhibit large output loss (more than 5 percent of GDP from peak to trough) occurs in a Phoenix-like fashion: little credit or investment is required. These results strongly suggest that: (1) deep financial crises can be prevented or at least largely alleviated and (2) global institutions and arrangements should be high on the policy agenda. The paper then discusses an Emerging Market Fund (EMF) charged with the task of lowering the incidence of contagion in EM bond prices. In addition, the paper analyzes domestic policies and concludes that they are critical and important in making EMs less vulnerable to shocks but are unlikely to succeed in fully shielding these economies from global financial shocks if not supported by arrangements like the EMF. Finally, two sections of the paper are devoted to discussing some current issues regarding applicable theory and econometrics.
Handle: RePEc:nbr:nberwo:11305
Template-Type: ReDIF-Paper 1.0
Title: The Chinese Approach to Capital Inflows: Patterns and Possible Explanations
Classification-JEL: F2; F3; F4
Author-Name: Eswar Prasad
Author-Person: ppr1
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: IFM ITI
Number: 11306
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11306
File-URL: http://www.nber.org/papers/w11306.pdf
File-Format: application/pdf
Publication-Status: published as The Chinese Approach to Capital Inflows: Patterns and Possible Explanations, Eswar Prasad, Shang-Jin Wei. in Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, Edwards. 2007
Abstract: In this paper, we adopt a cross-country perspective to examine the evolution of capital flows into China, both in terms of volumes and composition. China's inflows have generally been dominated by foreign direct investment (FDI), a pattern that appears to be favorable in light of the recent literature on the experiences of developing countries with financial globalization. We provide a detailed documentation of the evolution of China's capital controls, a proximate determinant of the pattern of capital inflows. We also discuss a number of other intriguing hypotheses that attempt to capture the "deeper" causes underlying China's approach to capital flows. In particular, we argue that some popular mercantilist-type arguments are inconsistent with the facts. We also analyze the recent rapid rise of China's international reserves and discuss its implications. Contrary to some popular perceptions, the dramatic surge in foreign exchange reserves since 2001 is mainly attributable to non-FDI capital inflows, rather than current account surpluses or FDI.
Handle: RePEc:nbr:nberwo:11306
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Implications of Sales and Consumer Inventory Behavior
Classification-JEL: G0
Author-Name: Igal Hendel
Author-Name: Aviv Nevo
Author-Person: pne133
Note: IO
Number: 11307
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11307
File-URL: http://www.nber.org/papers/w11307.pdf
File-Format: application/pdf
Publication-Status: published as Igal Hendel & Aviv Nevo, 2006. "Measuring the Implications of Sales and Consumer Inventory Behavior," Econometrica, Econometric Society, vol. 74(6), pages 1637-1673, November.
Abstract: Temporary price reductions (sales) are common for many goods and naturally result in large increases in the quantity sold. Demand estimation based on temporary price reductions may mis-measure the long run responsiveness to prices. In this paper we quantify the extent of the problem and assess its economic implications. We structurally estimate a dynamic model of consumer choice using two years of scanner data on the purchasing behavior of a panel of households. The results suggest that static demand estimates, which neglect dynamics: (i) overestimate own price elasticities by 30 percent; (ii) underestimate cross-price elasticities to other products by up to a factor of 5; and (iii) overestimate the substitution to the no purchase, or outside option, by over 200 percent.
Handle: RePEc:nbr:nberwo:11307
Template-Type: ReDIF-Paper 1.0
Title: The Great Escape: A Review Essay on Fogel's 'The Escape from Hunger and Premature Death, 1700-2100'
Classification-JEL: I1; N3
Author-Name: Angus Deaton
Author-Person: pde30
Note: AG CH EH
Number: 11308
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11308
File-URL: http://www.nber.org/papers/w11308.pdf
File-Format: application/pdf
Publication-Status: published as Deaton, Angus. "The Great Escape: A Review Of Robert Fogel's The Escape From Hunger and Premature Death, 1700-2100," Journal of Economic Literature, 2006, v44(1,Mar), 106-114.
Abstract: In this essay, I review Robert Fogel's The Escape from Hunger and Premature Death, 1700-2100 which is concerned with the past, present, and future of human health. Fogel's work places great emphasis on nutrition, not only for the history of health, but for explaining aspects of current health, not only in comparing poor and rich countries, but in thinking about rich countries now and in the future. I discuss Fogel's analysis alongside alternative interpretations that place greater emphasis on the historical role of public health, and on the current and future role of improvements in medical technology.
Handle: RePEc:nbr:nberwo:11308
Template-Type: ReDIF-Paper 1.0
Title: Does Voting Technology Affect Election Outcomes? Touch-screen Voting and the 2004 Presidential Election
Classification-JEL: H0; J0
Author-Name: David Card
Author-Person: pca271
Author-Name: Enrico Moretti
Author-Person: pmo392
Note: LS POL
Number: 11309
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11309
File-URL: http://www.nber.org/papers/w11309.pdf
File-Format: application/pdf
Publication-Status: published as David Card & Enrico Moretti, 2007. "Does Voting Technology Affect Election Outcomes? Touch-screen Voting and the 2004 Presidential Election," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 660-673, 04.
Abstract: Supporters of touch-screen voting claim it is a highly reliable voting technology, while a growing number of critics argue that paperless electronic voting systems are vulnerable to fraud. In this paper we use county-level data on voting technologies in the 2000 and 2004 presidential elections to test whether voting technology affects electoral outcomes. We first show that there is a positive correlation between use of touch-screen voting and the level of electoral support for George Bush. This is true in models that compare the 2000-2004 changes in vote shares between adopting and non-adopting counties within a state, after controlling for income, demographic composition, and other factors. Although small, the effect could have been large enough to influence the final results in some closely contested states. While on the surface this pattern would appear to be consistent with allegations of voting irregularities, a closer examination suggests this interpretation is incorrect. If irregularities did take place, they would be most likely in counties that could potentially affect statewide election totals, or in counties where election officials had incentives to affect the results. Contrary to this prediction, we find no evidence that touch-screen voting had a larger effect in swing states, or in states with a Republican Secretary of State. Touch-screen voting could also indirectly affect vote shares by influencing the relative turnout of different groups. We find that the adoption of touch-screen voting has a negative effect on estimated turnout rates, controlling for state effects and a variety of county-level controls. This effect is larger in counties with a higher fraction of Hispanic residents (who tend to favor Democrats) but not in counties with more African Americans (who are overwhelmingly Democrat voters). Models for the adoption of touch-screen voting suggest it was more likely to be used in counties with a higher fraction of Hispanic and Black residents, especially in swing states. Nevertheless, the impact of non-random adoption patterns on vote shares is small.
Handle: RePEc:nbr:nberwo:11309
Template-Type: ReDIF-Paper 1.0
Title: Rare Events and the Equity Premium
Author-Name: Robert J. Barro
Author-Person: pba251
Note: AP EFG ME
Number: 11310
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11310
File-URL: http://www.nber.org/papers/w11310.pdf
File-Format: application/pdf
Abstract: The allowance for low-probability disasters, suggested by Rietz (1988), explains a lot of puzzles related to asset returns and consumption. These puzzles include the high equity premium, the low risk-free rate, the volatility of stock returns, and the low values of typical macro-econometric estimates of the intertemporal elasticity of substitution for consumption. Another mystery that may be resolved is why expected real interest rates were low in the United States during major wars, such as World War II. This resolution works even though price-earnings ratios tended also to be low during the wars. This approach achieves these explanations while maintaining the tractable framework of a representative agent, time-additive and iso-elastic preferences, complete markets, and i.i.d. shocks to productivity growth. Perhaps just as puzzling as the high equity premium is why Rietz's framework has not been taken more seriously by researchers in macroeconomics and finance.
Handle: RePEc:nbr:nberwo:11310
Template-Type: ReDIF-Paper 1.0
Title: The General Equilibrium Incidence of Environmental Taxes
Classification-JEL: H23; Q52
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Garth Heutel
Author-Person: phe315
Note: PE EEE
Number: 11311
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11311
File-URL: http://www.nber.org/papers/w11311.pdf
File-Format: application/pdf
Publication-Status: published as Fullerton, Don & Heutel, Garth, 2007. "The general equilibrium incidence of environmental taxes," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 571-591, April.
Abstract: We study the distributional effects of a pollution tax in general equilibrium, with general forms of substitution where pollution might be a relative complement or substitute for labor or for capital in production. We find closed form solutions for pollution, output prices, and factor prices. Various special cases help clarify the impact of differential factor intensities, substitution effects, and output effects. Intuitively, the pollution tax might place disproportionate burdens on capital if the polluting sector is capital intensive, or if labor is a better substitute for pollution than is capital; however, conditions are found where these intuitive results do not hold. We show exact conditions for the wage to rise relative to the capital return. Plausible values are then assigned to all the parameters, and we find that variations over the possible range of factor intensities have less impact than variations over the possible range of elasticities.
Handle: RePEc:nbr:nberwo:11311
Template-Type: ReDIF-Paper 1.0
Title: Real-Time Price Discovery in Stock, Bond and Foreign Exchange Markets
Classification-JEL: F3; F4; G1; C5
Author-Name: Torben G. Andersen
Author-Name: Tim Bollerslev
Author-Person: pbo66
Author-Name: Francis X. Diebold
Author-Person: pdi1
Author-Name: Clara Vega
Author-Person: pve43
Note: AP
Number: 11312
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11312
File-URL: http://www.nber.org/papers/w11312.pdf
File-Format: application/pdf
Publication-Status: published as Andersen, Torben, Tim Bollerslev, Francis Diebold, and Clara Vega. "Real-Time Price Discovery in Stock, Bond and Foreign Exchange Markets." Journal of International Economics 73 (2007): 251-277.
Abstract: We characterize the response of U.S., German and British stock, bond and foreign exchange markets to real-time U.S. macroeconomic news. Our analysis is based on a unique data set of high-frequency futures returns for each of the markets. We find that news surprises produce conditional mean jumps; hence high-frequency stock, bond and exchange rate dynamics are linked to fundamentals. The details of the linkages are particularly intriguing as regards equity markets. We show that equity markets react differently to the same news depending on the state of the U.S. economy, with bad news having a positive impact during expansions and the traditionally-expected negative impact during recessions. We rationalize this by temporal variation in the competing "cash flow" and "discount rate" effects for equity valuation. This finding also helps explain the apparent time-varying correlation between stock and bond returns, and the relatively small equity market news announcement effect when averaged across expansions and recessions. Hence, while our results confirm previous unconditional rankings suggesting that bond markets almost uniformly react most strongly to macroeconomic news, followed by foreign exchange and then equity markets, importantly when conditioning on the state of the economy the foreign exchange and equity markets appear equally responsive. Lastly, relying on the pronounced heteroskedasticity in the new high-frequency data, we also document important contemporaneous linkages across all markets and countries over-and-above the direct news announcement effects.
Handle: RePEc:nbr:nberwo:11312
Template-Type: ReDIF-Paper 1.0
Title: Measuring and Interpreting Expectations of Equity Returns
Classification-JEL: G1; D8
Author-Name: Jeff Dominitz
Author-Name: Charles F. Manski
Author-Person: pma111
Note: EFG
Number: 11313
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11313
File-URL: http://www.nber.org/papers/w11313.pdf
File-Format: application/pdf
Publication-Status: published as Jeff Dominitz & Charles F. Manski, 2011. "Measuring and interpreting expectations of equity returns," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(3), pages 352-370, 04.
Abstract: We analyze probabilistic expectations of equity returns elicited in the Survey of Economic Expectations in 1999—2001 and in the Michigan Survey of Consumers in 2002—2004. Our empirical findings suggest that individuals use interpersonally variable but intrapersonally stable processes to form their expectations. We therefore propose to think of the population as a mixture of expectations types, each forming expectations in a stable but different way. We use our expectations data to learn about the prevalence of several specific types suggested by research in conventional and behavioral finance, but conclude that these types do not adequately explain the diverse expectations held by the population.
Handle: RePEc:nbr:nberwo:11313
Template-Type: ReDIF-Paper 1.0
Title: Has US Monetary Policy Changed? Evidence from Drifting Coefficients and Real-Time Data
Author-Name: Jean Boivin
Author-Person: pbo43
Note: ME
Number: 11314
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11314
File-URL: http://www.nber.org/papers/w11314.pdf
File-Format: application/pdf
Publication-Status: published as Boivin, Jean. “Has U.S. Monetary Policy Changed? Evidence from Drifting Coefficients and Real-Time Data.” Journal of Money, Credit and Banking 38, 5 (August 2006): 1149-1174.
Abstract: Despite the large amount of empirical research on monetary policy rules, there is surprisingly little consensus on the nature or even the existence of changes in the conduct of U.S. monetary policy. Three issues appear central to this disagreement: 1) the specific type of changes in the policy coefficients, 2) the treatment of heteroskedasticity, and 3) the real-time nature of the data used. This paper addresses these issues in the context of forward-looking Taylor rules with drifting coefficients. The estimation is based on real-time data and accounts for the presence of heteroskedasticity in the policy shock. The findings suggest important but gradual changes in the rule coefficients, not adequately captured by the usual split-sample estimation. In contrast to Orphanides (2002, 2003), I find that the Fed's response to the real-time forecast of inflation was weak in the second half of the 1970's, perhaps not satisfying Taylor's principle as suggested by Clarida, Galìì and Gertler (2000). However, the response to inflation was strong before 1973 and gradually regained strength from the early 1980's onward. Moreover, as in Orphanides (2003), the Fed's response to real activity fell substantially and lastingly during the 1970's.
Handle: RePEc:nbr:nberwo:11314
Template-Type: ReDIF-Paper 1.0
Title: Employee Cost-Sharing and the Welfare Effects of Flexible Spending Accounts
Classification-JEL: D60; H21; I18
Author-Name: William Jack
Author-Person: pja302
Author-Name: Arik Levinson
Author-Person: ple135
Author-Name: Sjamsu Rahardja
Note: EH PE
Number: 11315
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11315
File-URL: http://www.nber.org/papers/w11315.pdf
File-Format: application/pdf
Publication-Status: published as Jack, William & Levinson, Arik & Rahardja, Sjamsu, 2006. "Employee cost-sharing and the welfare effects of flexible spending accounts," Journal of Public Economics, Elsevier, vol. 90(12), pages 2285-2301, December.
Abstract: Flexible Spending Accounts (FSAs) subsidize out-of-pocket health expenses not covered by employer-provided health insurance, making health care cheaper ex post, but also reducing the incentive to insure. We use a cross section of .rm-level data to show that FSAs are indeed associated with reduced insurance coverage, and to evaluate the welfare consequences of this shift. Correcting for selection effects we find that FSAs are associated with insurance contracts that have coinsurance rates about 7 percentage points higher, relative to a sample average coinsurance rate of 17 percent. Meanwhile, coinsurance rates net of the subsidy are approximately unchanged, providing evidence that FSAs are welfare-neutral. These results show that FSAs may explain a significant fraction of the shift in health care costs to employees that has occurred in recent years.
Handle: RePEc:nbr:nberwo:11315
Template-Type: ReDIF-Paper 1.0
Title: The Determinants of the Willingness to be an Organ Donor
Classification-JEL: I0; I1
Author-Name: Naci Mocan
Author-Person: pmo270
Author-Name: Erdal Tekin
Author-Person: pte12
Note: EH
Number: 11316
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11316
File-URL: http://www.nber.org/papers/w11316.pdf
File-Format: application/pdf
Publication-Status: published as Mocan, Naci and Erdal Tekin. “The Determinants of the Willingness to Donate an Organ among Young Adults: Evidence from the United States and the European Union.” Social Science and Medicine 65, 12 (December 2007): 2527-2538.
Abstract: The total value of life lost due to death because of waiting for an organ transplant is greater than $4 billion annually in the United States, and the excess demand for organs has been increasing over time. To shed light on the factors that impact the willingness to donate an organ, we analyze data from the United States and the European Union. The rate of willingness to donate an organ is 38 % among young adults in the U.S., and it is 42 % in Europe. Interesting similarities emerge between the U.S. and Europe regarding the impact of gender, political views and education on the willingness to donate. In the U.S. Blacks, Hispanics and Catholics are less likely to donate. In Europe, individuals who reveal that they are familiar with the rules and regulations governing the donation and transplantation of human organs are more likely to donate. In both data sets individuals who had some encounter with the health care sector -either through a recent emergency room visit (in the U.S.), or perhaps because of a long-standing illness (in the E.U), are more likely to become organ donors. Mother's education has a separate positive impact.
Handle: RePEc:nbr:nberwo:11316
Template-Type: ReDIF-Paper 1.0
Title: Judicial Lobbying: The Politics of Labor Law Constitutional Interpretation
Classification-JEL: K4; O1
Author-Name: Matias Iaryczower
Author-Person: pia12
Author-Name: Pablo Spiller
Author-Person: psp34
Author-Name: Mariano Tommasi
Author-Person: pto19
Note: LE
Number: 11317
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11317
File-URL: http://www.nber.org/papers/w11317.pdf
File-Format: application/pdf
Publication-Status: published as Iaryczower, Matias, Pablo T. Spiller, and Mariano Tommasi. "Judicial Lobbying: The Politics of Labor Law Constitutional Interpretation." American Political Science Review 100, 1 (Feb 2006): 85-97.
Abstract: This paper links the theory of interest groups influence over the legislature with that of congressional control over the judiciary. The resulting framework reconciles the theoretical literature of lobbying with the negative available evidence on the impact of lobbying over legislative outcomes, and sheds light to the determinants of lobbying in separation-of-powers systems. We provide conditions for judicial decisions to be sensitive to legislative lobbying, and find that lobbying falls the more divided the legislature is on the relevant issues. We apply this framework to analyze supreme court labor decisions in Argentina, and find results consistent with the predictions of the theory.
Handle: RePEc:nbr:nberwo:11317
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Impact of Crack Cocaine
Classification-JEL: J00
Author-Name: Roland G. Fryer
Author-Person: pfr43
Author-Name: Paul S. Heaton
Author-Person: phe123
Author-Name: Steven D. Levitt
Author-Person: ple59
Author-Name: Kevin M. Murphy
Author-Person: pmu108
Note: CH EH LE LS
Number: 11318
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11318
File-URL: http://www.nber.org/papers/w11318.pdf
File-Format: application/pdf
Publication-Status: published as ROLAND G. FRYER & PAUL S. HEATON & STEVEN D. LEVITT & KEVIN M. MURPHY, 2013. "MEASURING CRACK COCAINE AND ITS IMPACT," Economic Inquiry, vol 51(3), pages 1651-1681.
Abstract: A wide range of social indicators turned sharply negative for Blacks in the late 1980s and began to rebound roughly a decade later. We explore whether the rise and fall of crack cocaine can explain these patterns. Absent a direct measure of crack cocaine's prevalence, we construct an index based on a range of indirect proxies (cocaine arrests, cocaine-related emergency room visits, cocaine-induced drug deaths, crack mentions in newspapers, and DEA drug busts). The crack index we construct reproduces many of the spatial and temporal patterns described in ethnographic and popular accounts of the crack epidemic. We find that our measure of crack can explain much of the rise in Black youth homicides, as well as more moderate increases in a wide range of adverse birth outcomes for Blacks in the 1980s. Although our crack index remains high through the 1990s, the deleterious social impact of crack fades. One interpretation of this result is that changes over time in behavior, crack markets, and the crack using population mitigated the damaging impacts of crack. Our analysis suggests that the greatest social costs of crack have been associated with the prohibition-related violence, rather than drug use per se.
Handle: RePEc:nbr:nberwo:11318
Template-Type: ReDIF-Paper 1.0
Title: Volatility in an Era of Reduced Uncertainty: Lessons from Pax Britannica
Classification-JEL: E6; H3; N2
Author-Name: William O. Brown
Author-Name: Richard C. K. Burdekin
Author-Person: pbu17
Author-Name: Marc D. Weidenmier
Author-Person: pwe14
Note: AP DAE
Number: 11319
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11319
File-URL: http://www.nber.org/papers/w11319.pdf
File-Format: application/pdf
Publication-Status: published as Brown, William O., Jr., Richard C. K. Burdekin and Marc D. Weidenmier. "Volatility In An Era Of Reduced Uncertainty: Lessons From Pax Britannica," Journal of Financial Economics, 2006, v79(3,Mar), 693-707.
Abstract: Although it has been well established that financial volatility is related to news and macroeconomic shocks, there has been less emphasis on the importance of underlying economic and political stability. In this paper we study the behavior of consol returns since 1729 and identify a greater-than-50% decline in volatility from the end of the Napoleonic wars in 1815 until the First World War. News events and macroeconomic variables cannot account for this extended period of reduced volatility. Underlying political stability under Pax Britannica seems to be a more likely explanation, however.
Handle: RePEc:nbr:nberwo:11319
Template-Type: ReDIF-Paper 1.0
Title: Sibling Similarity and Difference in Socioeconomic Status: Life Course and Family Resource Effects
Classification-JEL: J0
Author-Name: Dalton Conley
Author-Name: Rebecca Glauber
Note: EH LS
Number: 11320
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11320
File-URL: http://www.nber.org/papers/w11320.pdf
File-Format: application/pdf
Abstract: For decades, geneticists and social scientists have relied on sibling correlations as indicative of the effects of genes and environment on behavioral traits and socioeconomic outcomes. The current paper advances this line of inquiry by exploring sibling similarity across a variety of socioeconomic outcomes and by providing answers to two relatively under-examined questions: do siblings' socioeconomic statuses diverge or converge across the life course? And do siblings from demographic groups that putatively differ on the degree of opportunity they enjoy vary with respect to how similar they turn out? Findings inform theoretical debates over parental investment models, especially in relation to diverging opportunities and capital constraints, and life course status attainment models. We report three new findings. First, sibling resemblance in occupational prestige is explained almost entirely by shared education, and sibling resemblance in family income is explained almost entirely by the combination of shared education, occupational prestige, and earnings. This is contrasted to sibling resemblance in earnings and wealth, as siblings retain 60 percent of their resemblance in earnings once we control for education and occupational prestige, and siblings retain more than 30 percent of their resemblance in wealth once we control for all other socioeconomic outcomes. Second, across the life course, siblings converge in earnings and income and maintain stable correlations in education, occupational prestige, and wealth. Third, black siblings have significantly lower correlations on earnings and income than nonblack siblings overall, but black siblings dramatically converge in income across the life course -- in their twenties black siblings have a .181 correlation in income and above age 40 they have a .826 correlation in income -- suggesting almost complete social reproduction in income by the fifth decade of life for African Americans. This pattern does not hold for nonblack siblings. Furthermore, when we split the sample by class and age, we find the opposite effect: by age 40 and above, siblings from higher SES families tend to increase in their resemblance while those from lower SES families do not. Descriptive accounts about the openness of American society, then, strongly depend on which group we are talking about and at which stage in the life course we measure economic status.
Handle: RePEc:nbr:nberwo:11320
Template-Type: ReDIF-Paper 1.0
Title: Patents, Price Controls, and Access to New Drugs: How Policy Affects Global Market Entry
Classification-JEL: L1; I1
Author-Name: Jean O. Lanjouw
Note: PR
Number: 11321
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11321
File-URL: http://www.nber.org/papers/w11321.pdf
File-Format: application/pdf
Abstract: Efforts to strengthen the global patent system for pharmaceuticals continue to be controversial, and what will likely be a similarly fraught international debate over price controls has begun. The outcome of international negotiations and the resulting policy decisions made by each country will have many ramifications - influencing the size of future investment in medical research, the availability of the resulting therapies, how the financial burdens are distributed across countries, and finally the health of consumers. This paper considers how legal and regulatory policies affect whether new drugs are marketed in a country, and how quickly. Less than one-half of the new pharmaceutical molecules that are marketed worldwide are sold in any given country, and those that are sold are often available to consumers in one country only six or seven years after those in another. Both price regulation and intellectual property rights influence these outcomes. The analysis covers a large sample of 68 countries at all income levels and includes all drug launches over the period 1982-2002. It uses newly compiled information on legal and regulatory policy, and is the first systematic analysis of the determinants of drug launch in poor countries.
Handle: RePEc:nbr:nberwo:11321
Template-Type: ReDIF-Paper 1.0
Title: Anomalies
Classification-JEL: D21; D92; E22; E44
Author-Name: Lu Zhang
Author-Person: pzh29
Note: AP
Number: 11322
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11322
File-URL: http://www.nber.org/papers/w11322.pdf
File-Format: application/pdf
Publication-Status: published as Erica X. N. Li & Dmitry Livdan & Lu Zhang, 2009. "Anomalies," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 22(11), pages 4301-4334, November.
Abstract: I construct a neoclassical, Q-theoretical foundation for time-varying expected returns in connection with corporate policies and events. Under certain conditions, stock return equals investment return, which is directly tied with firm characteristics. This single equation is shown analytically to be qualitatively consistent with many anomalies, including the relations of future stock returns with market-to-book, investment and disinvestment rates, seasoned equity offerings, tender offers and stock repurchases, dividend omissions and initiations, expected profitability, profitability, and more important, earnings announcement. The Q-framework also provides a new asset pricing test.
Handle: RePEc:nbr:nberwo:11322
Template-Type: ReDIF-Paper 1.0
Title: Expected Returns, Yield Spreads, and Asset Pricing Tests
Classification-JEL: G12; E44
Author-Name: Murillo Campello
Author-Person: pca164
Author-Name: Long Chen
Author-Name: Lu Zhang
Author-Person: pzh29
Note: AP
Number: 11323
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11323
File-URL: http://www.nber.org/papers/w11323.pdf
File-Format: application/pdf
Publication-Status: published as Murillo Campello & Long Chen & Lu Zhang, 2008. "Expected returns, yield spreads, and asset pricing tests," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 21(3), pages 1297-1338, May.
Publication-Status: published as Lu Zhang & Murillo Campello & Long Chen, 2005. "Expected returns, yield spreads, and asset pricing tests," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
Abstract: We use yield spreads to construct ex-ante returns on corporate securities, and then use the ex-ante returns in asset pricing assets. Differently from the standard approach, our tests do not use ex-post average returns as a proxy for expected returns. We find that the market beta plays a much more important role in the cross-section of expected returns than previously reported. The expected value premium is significantly positive and countercyclical. We find no evidence of ex-ante positive momentum profits.
Handle: RePEc:nbr:nberwo:11323
Template-Type: ReDIF-Paper 1.0
Title: The End of American Exceptionalism? Mobility in the U.S. Since 1850
Classification-JEL: N0; J0
Author-Name: Joseph P. Ferrie
Note: DAE LS
Number: 11324
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11324
File-URL: http://www.nber.org/papers/w11324.pdf
File-Format: application/pdf
Publication-Status: published as Ferrie, Joseph P. "History Lessons: The End Of American Exceptionalism? Mobility In The United States Since 1850," Journal of Economic Perspectives, 2005, v19(3,Summer), 199-215.
Abstract: New longitudinal data on individuals linked across nineteenth century U.S. censuses document the geographic and occupational mobility of more than 75,000 Americans from the 1850s to the 1920s. Together with longitudinal data for more recent years, these data make possible for the first time systematic comparisons of mobility over the last 150 years of American economic development, as well as cross-national comparisons for the nineteenth century. The U.S. was a substantially more mobile economy than Britain between 1850 and 1880. But both intergenerational occupational mobility and geographic mobility have declined in the U.S. since the beginning of the twentieth century, leaving much less apparent two aspects of the "American Exceptionalism" noted by nineteenth century observers.
Handle: RePEc:nbr:nberwo:11324
Template-Type: ReDIF-Paper 1.0
Title: Addressing the Needs of Under-Prepared Students in Higher Education: Does College Remediation Work?
Classification-JEL: I2; H4; C2
Author-Name: Eric P. Bettinger
Author-Person: pbe413
Author-Name: Bridget Terry Long
Author-Person: plo320
Note: ED
Number: 11325
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11325
File-URL: http://www.nber.org/papers/w11325.pdf
File-Format: application/pdf
Publication-Status: published as Eric P. Bettinger & Bridget Terry Long, 2009. "Addressing the Needs of Underprepared Students in Higher Education: Does College Remediation Work?," Journal of Human Resources, University of Wisconsin Press, vol. 44(3).
Abstract: Each year, thousands of students graduate high school academically unprepared for college. As a result, approximately one-third of entering postsecondary students require remedial or developmental work before entering college-level courses. However, little is known about the causal impact of remediation on student outcomes. At an annual cost of over $1 billion at public colleges alone, there is a growing debate about its effectiveness. Who should be placed in remediation, and how does it affect their educational progress? This project addresses these critical questions by examining the effects of math and English remediation using a unique dataset of approximately 28,000 students. To account for selection biases, the paper uses variation in remedial placement policies across institutions and the importance of proximity in college choice. The results suggest that students in remediation are more likely to persist in college in comparison to students with similar test scores and backgrounds who were not required to take the courses. They are also more likely to transfer to a higher-level college and to complete a bachelor's degree.
Handle: RePEc:nbr:nberwo:11325
Template-Type: ReDIF-Paper 1.0
Title: The Value Spread as a Predictor of Returns
Classification-JEL: G12; E44; M41
Author-Name: Naiping Lu
Author-Name: Lu Zhang
Author-Person: pzh29
Note: AP
Number: 11326
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11326
File-URL: http://www.nber.org/papers/w11326.pdf
File-Format: application/pdf
Publication-Status: published as Liu, Naiping & Zhang, Lu, 2008. "Is the value spread a useful predictor of returns?," Journal of Financial Markets, Elsevier, vol. 11(3), pages 199-227, August.
Abstract: Recent studies have used the value spread to predict aggregate stock returns to construct cash-flow betas that appear to explain the size and value anomalies. We show that two related variables, the book-to-market spread (the book-to-market of value stocks minus that of growth stocks) and the market-to-book spread (the market-to-book of growth stocks minus that of value stocks) predict returns in different directions and exhibit opposite cyclical variations. Most important, the value spread mixes information on the book-to-market and market-to-book spreads, and appears much less useful in predicting returns.
Handle: RePEc:nbr:nberwo:11326
Template-Type: ReDIF-Paper 1.0
Title: Forsaking All Others? The Effects of "Gay Marriage" on Risky Sex
Classification-JEL: I1; D1
Author-Name: Thomas S. Dee
Note: EH
Number: 11327
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11327
File-URL: http://www.nber.org/papers/w11327.pdf
File-Format: application/pdf
Publication-Status: published as Dee, Thomas. “Forsaking All Others? The Effects of Same-Sex Partnership Laws on Risky Sex.” Economic Journal 118, 530 (July 2008): 1055-1078.
Abstract: One of the conjectured benefits of establishing the legal recognition of samesex partnerships is that it would promote a culture of responsibility and commitment among homosexuals. A specific implication of this claim is that "gay marriage" will reduce the prevalence of sexually transmitted infections (STI). In this study, I present a simple 2-period model, which provides a framework for discussing the ways in which gay marriage might reduce (or increase) the prevalence of STI. Then, I present reduced-form empirical evidence on whether gay marriage has actually reduced STI rates. These evaluations are based on country-level panel data from Europe, where nations began introducing national recognition of same-sex partnerships in 1989. The results suggest that these gay-marriage laws led to statistically significant reductions in syphilis rates. However, these effects were smaller and statistically imprecise with respect to gonorrhea and HIV.
Handle: RePEc:nbr:nberwo:11327
Template-Type: ReDIF-Paper 1.0
Title: Early Teen Marriage and Future Poverty
Classification-JEL: J2
Author-Name: Gordon B. Dahl
Author-Person: pda455
Note: CH LS
Number: 11328
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11328
File-URL: http://www.nber.org/papers/w11328.pdf
File-Format: application/pdf
Publication-Status: published as Gordon Dahl, 2010. "Early teen marriage and future poverty," Demography, Springer, vol. 47(3), pages 689-718, August.
Abstract: Both early teen marriage and dropping out of high school have historically been associated with a variety of negative outcomes, including higher poverty rates throughout life. Are these negative outcomes due to pre-existing differences or do they represent the causal effect of marriage and schooling choices? To better understand the true personal and societal consequences, this paper uses an instrumental variables approach which takes advantage of variation in state laws regulating the age at which individuals are allowed to marry, drop out of school, and begin work. The baseline IV estimate indicates that a woman who marries young is 31 percentage points more likely to live in poverty when she is older. Similarly, a woman who drops out of school is 11 percentage points more likely to be poor. The results are robust to a variety of alternative specifications and estimation methods, including LIML estimation and a control function approach. While grouped OLS estimates for the early teen marriage variable are also large, OLS estimates based on individual-level data are small, consistent with a large amount of measurement error.
Handle: RePEc:nbr:nberwo:11328
Template-Type: ReDIF-Paper 1.0
Title: Evidence on Rationality in Commercial Property Markets: An Interpretation and Critique
Classification-JEL: G0
Author-Name: Patric Hendershott
Author-Name: Robert J. Hendershott
Author-Name: Bryan D. MacGregor
Note: AP PE
Number: 11329
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11329
File-URL: http://www.nber.org/papers/w11329.pdf
File-Format: application/pdf
Publication-Status: published as Hendershott, Patric H., Robert J. Hendershott and Bryan D. MacGregor. "Evidence On Rationality In Commercial Property Markets: An Interpretation and Critique," Journal of Real Estate Literature, 2006, v14(2), 149-172.
Abstract: Periodic sharp sustained increases and then reversals in asset prices lead many to posit irrational price bubbles. The general case for irrationality is that real asset prices simply have moved too much given the future real cash flows the assets are reasonably likely to produce. A corollary for property is that observed mean reversion in real cash flows is not reflected in investor valuations, resulting in asset values being too high when real cash flows are high and vice versa. In this paper we interpret, critique and extend existing analyses of movements in real commercial property prices during the late 1980s and early 1990s.
Handle: RePEc:nbr:nberwo:11329
Template-Type: ReDIF-Paper 1.0
Title: The Role of Collateralized Household Debt in Macroeconomic Stabilization
Classification-JEL: E3
Author-Name: Jeffrey R. Campbell
Author-Person: pca89
Author-Name: Zvi Hercowitz
Author-Person: phe121
Note: EFG
Number: 11330
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11330
File-URL: http://www.nber.org/papers/w11330.pdf
File-Format: application/pdf
Abstract: Market innovations following the financial reforms of the early 1980s relaxed collateral constraints on household borrowing. The present paper examines the contribution of this development to the macroeconomic stabilization that occurred shortly thereafter. The model combines collateral constraints on households with heterogeneity of thrift in a calibrated general equilibrium setup. We use this tool to characterize the business cycle implications of lowering required down payments and rates of amortization for durable goods purchases as in the early 1980s. The model predicts that this relaxation of collateral constraints can explain a large fraction of the actual volatility decline in hours worked, output, household debt, and household durable goods purchases.
Handle: RePEc:nbr:nberwo:11330
Template-Type: ReDIF-Paper 1.0
Title: Interpreting the Evidence on Life Cycle Skill Formation
Classification-JEL: J31; I21; I22; I28
Author-Name: Flavio Cunha
Author-Person: pcu47
Author-Name: James J. Heckman
Author-Name: Lance Lochner
Author-Person: plo31
Author-Name: Dimitriy V. Masterov
Note: CH ED LS
Number: 11331
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11331
File-URL: http://www.nber.org/papers/w11331.pdf
File-Format: application/pdf
Publication-Status: published as Cunha, Flavio & Heckman, James J. & Lochner, Lance, 2006. "Interpreting the Evidence on Life Cycle Skill Formation," Handbook of the Economics of Education, Elsevier.
Abstract: This paper presents economic models of child development that capture the essence of recent findings from the empirical literature on skill formation. The goal of this essay is to provide a theoretical framework for interpreting the evidence from a vast empirical literature, for guiding the next generation of empirical studies, and for formulating policy. Central to our analysis is the concept that childhood has more than one stage. We formalize the concepts of self-productivity and complementarity of human capital investments and use them to explain the evidence on skill formation. Together, they explain why skill begets skill through a multiplier process. Skill formation is a life cycle process. It starts in the womb and goes on throughout life. Families play a role in this process that is far more important than the role of schools. There are multiple skills and multiple abilities that are important for adult success. Abilities are both inherited and created, and the traditional debate about nature versus nurture is scientifically obsolete. Human capital investment exhibits both self-productivity and complementarity. Skill attainment at one stage of the life cycle raises skill attainment at later stages of the life cycle (self-productivity). Early investment facilitates the productivity of later investment (complementarity). Early investments are not productive if they are not followed up by later investments (another aspect of complementarity). This complementarity explains why there is no equity-efficiency trade-off. for early investment. The returns to investing early in the life cycle are high. Remediation of inadequate early investments is difficult and very costly as a consequence of both self-productivity and complementarity.
Handle: RePEc:nbr:nberwo:11331
Template-Type: ReDIF-Paper 1.0
Title: Faith-Based Charity and Crowd Out during the Great Depression
Classification-JEL: H3; N4
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Daniel M. Hungerman
Author-Person: phu114
Note: AG EH PE
Number: 11332
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11332
File-URL: http://www.nber.org/papers/w11332.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan & Hungerman, Daniel M., 2007. "Faith-based charity and crowd-out during the great depression," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1043-1069, June.
Abstract: Interest in religious organizations as providers of social services has increased dramatically in recent years. Churches in the U.S. were a crucial provider of social services through the early part of the twentieth century, but their role shrank dramatically with the expansion in government spending under the New Deal. In this paper, we investigate the extent to which the New Deal crowded out church charitable spending in the 1930s. We do so using a new nationwide data set of charitable spending for six large Christian denominations, matched to data on local New Deal spending. We instrument for New Deal spending using measures of the political strength of a state's congressional delegation, and confirm our findings using a different instrument based on institutional constraints on state relief spending. With both instruments we find that higher government spending leads to lower church charitable activity. Crowd-out was small as a share of total New Deal spending (3%), but large as a share of church spending: our estimates suggest that church spending fell by 30% in response to the New Deal, and that government relief spending can explain virtually all of the decline in charitable church activity observed between 1933 and 1939.
Handle: RePEc:nbr:nberwo:11332
Template-Type: ReDIF-Paper 1.0
Title: Banker Fees and Acquisition Premia for Targets in Cash Tender Offers: Challenges to the Popular Wisdom on Banker Conflicts
Classification-JEL: G24; G28; G34
Author-Name: Charles W. Calomiris
Author-Person: pca421
Author-Name: Donna M. Hitscherich
Note: CF
Number: 11333
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11333
File-URL: http://www.nber.org/papers/w11333.pdf
File-Format: application/pdf
Publication-Status: published as Calomiris, Charles W. and Donna M. Hitscherich. “Banker Fees and Acquisition Premia for Targets in Cash Tender Offers: Challenges to the Popular Wisdom on Banker Conflicts.” Journal of Empirical Legal Studies 4 (December 2007): 909-38.
Abstract: We analyze data on fees paid to investment bankers and acquisition premia paid for targets in cash tender offers. Our results are broadly consistent with the predictions of a benign view of the role of investment banks in advising acquisition targets. Fees to investment banks are correlated with attributes of transactions and target firms in ways that make sense if banks are being paid for processing information. The more contingent (and, therefore, risky) the fees, the higher they tend to be, all else held constant. Variation in acquisition premia also can be explained by fundamental deal attributes. Contrary to the jaundiced view of fairness opinions, greater fixity of fees is not associated with higher acquisition premia, and there is no evidence that investment banks are suborned by acquirors with whom they have had a prior banking relationship.
Handle: RePEc:nbr:nberwo:11333
Template-Type: ReDIF-Paper 1.0
Title: An Empirical Analysis of 'Acting White'
Classification-JEL: J0; I2
Author-Name: Roland G. Fryer, Jr.
Author-Person: pfr43
Author-Name: Paul Torelli
Note: LS
Number: 11334
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11334
File-URL: http://www.nber.org/papers/w11334.pdf
File-Format: application/pdf
Abstract: There is a debate among social scientists regarding the existence of a peer externality commonly referred to as 'acting white.' Using a newly available data set (the National Longitudinal Study of Adolescent Health), which allows one to construct an objective measure of a student's popularity, we demonstrate that there are large racial differences in the relationship between popularity and academic achievement; our (albeit narrow) definition of 'acting white.' The effect is intensified among high achievers and in schools with more interracial contact, but non-existent among students in predominantly black schools or private schools. The patterns in the data appear most consistent with a two-audience signaling model in which investments in education are thought to be indicative of an individual's opportunity costs of peer group loyalty. Other models we consider, such as self-sabotage among black youth or the presence of an oppositional culture, all contradict the data in important ways.
Handle: RePEc:nbr:nberwo:11334
Template-Type: ReDIF-Paper 1.0
Title: Is China's FDI Coming at the Expense of Other Countries?
Classification-JEL: F0
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Hui Tong
Author-Person: pto159
Note: ITI
Number: 11335
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11335
File-URL: http://www.nber.org/papers/w11335.pdf
File-Format: application/pdf
Publication-Status: published as Eichengreen, Barry & Tong, Hui, 2007. "Is China's FDI coming at the expense of other countries?," Journal of the Japanese and International Economies, Elsevier, vol. 21(2), pages 153-172, June.
Abstract: We analyze how China's emergence as a destination for foreign direct investment is affecting the ability of other countries to attract FDI. We do so using an approach that accounts for the endogeneity of China's FDI. The impact turns out to vary by region. China's rapid growth and attractions as a destination for FDI also encourages FDI flows to other Asian countries, as if producers in these economies belong to a common supply chain. There is also evidence of FDI diversion from OECD recipients. We interpret this in terms of FDI motivated by the desire to produce close to the market where the final sale takes place. For whatever reason -- limits on their ability to raise finance for investment in multiple markets or limits on their ability to control operations in diverse locations -- firms more inclined to invest in China for this reason are corresponding less inclined to invest in the OECD. A detailed analysis of Japanese foreign direct investment outflows disaggregated by sector further supports these conclusions.
Handle: RePEc:nbr:nberwo:11335
Template-Type: ReDIF-Paper 1.0
Title: Sterling's Past, Dollar's Future: Historical Perspectives on Reserve Currency Competition
Classification-JEL: F0
Author-Name: Barry Eichengreen
Author-Person: pei2
Note: DAE IFM
Number: 11336
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11336
File-URL: http://www.nber.org/papers/w11336.pdf
File-Format: application/pdf
Abstract: This paper provides an historical perspective on reserve currency competition and on the prospects of the dollar as an international currency. It questions the conventional wisdom that competition for reserve-currency status is a winner-take-all game, showing that several currencies have often shared this role in the past and arguing that innovations in financial markets make it even more likely that they will do so in the future. It suggests that the dollar and the euro are likely to share this position for the foreseeable future. Hopes that the yuan could become a major international currency 20 or even 40 years from now are highly premature.
Handle: RePEc:nbr:nberwo:11336
Template-Type: ReDIF-Paper 1.0
Title: Adolescent Drinking and High School Dropout
Classification-JEL: I12; I21
Author-Name: Pinka Chatterji
Author-Person: pch732
Author-Name: Jeff DeSimone
Author-Person: pde214
Note: CH EH
Number: 11337
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11337
File-URL: http://www.nber.org/papers/w11337.pdf
File-Format: application/pdf
Abstract: This paper estimates the effect of binge and frequent drinking by adolescents on subsequent high school dropout using data from the National Longitudinal Survey of Youth 1979 Young Adults. We estimate an instrumental variables model with an indicator of any past month alcohol use, which is by definition correlated with heavy drinking but should have minimal additional impact on educational outcomes, as the identifying instrument, and also control for a rich set of potentially confounding variables, including maternal characteristics and dropout risk factors measured before and during adolescence. In comparison, OLS provides conservative estimates of the causal impact of heavy drinking on dropping out, implying that binge or frequent drinking among 15—16 year old students lowers the probability of having graduated or being enrolled in high school four years later by at least 11 percent. Overidentification tests using two measures of maternal youthful alcohol use as additional instruments support our identification strategy.
Handle: RePEc:nbr:nberwo:11337
Template-Type: ReDIF-Paper 1.0
Title: The Wage Curve Reloaded
Classification-JEL: J3; E2
Author-Name: David G. Blanchflower
Author-Person: pbl22
Author-Name: Andrew J. Oswald
Note: LS
Number: 11338
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11338
File-URL: http://www.nber.org/papers/w11338.pdf
File-Format: application/pdf
Abstract: This paper provides evidence for the existence of a wage curve -- a micro-econometric association between the level of pay and the local unemployment rate -- in modern U.S. data. Consistent with recent evidence from more than 40 other countries, the wage curve in the United States has a long-run elasticity of approximately -0.1. In line with the paper's theoretical framework: (i) wages are higher in states with more generous unemployment benefits, (ii) the perceived probability of job-finding is lower in states with higher unemployment, and (iii) employees are less happy in states that have higher unemployment. We conclude that it is reasonable to view the wage curve as an empirical law of economics.
Handle: RePEc:nbr:nberwo:11338
Template-Type: ReDIF-Paper 1.0
Title: Trade Responses to Geographic Frictions: A Decomposition Using Micro-Data
Classification-JEL: F1; R3
Author-Name: Russell Hillberry
Author-Person: phi69
Author-Name: David Hummels
Author-Person: phu100
Note: ITI
Number: 11339
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11339
File-URL: http://www.nber.org/papers/w11339.pdf
File-Format: application/pdf
Publication-Status: published as Hillberry, Russell & Hummels, David, 2008. "Trade responses to geographic frictions: A decomposition using micro-data," European Economic Review, Elsevier, vol. 52(3), pages 527-550, April.
Abstract: A large literature has shown that geographic frictions reduce trade, but has not clarified precisely why. We provide insights into why such frictions matter by examining which parts of trade these frictions reduce most. Using data that tracks manufacturers' shipments within the United States on an exceptionally fine grid, we find that the pattern of shipments is extremely localized. Shipments within 5-digit zip codes, which have a median radius of just 4 miles, are 3 times larger than shipments outside the zip code. We decompose aggregate shipments into extensive and intensive margins, and show that distance and other frictions reduce aggregate trade values primarily by reducing the number of commodities shipped and the number of establishments shipping. We consider two broad reasons for these facts and conclude that trade in intermediate goods is the most likely explanation for highly localized shipments and the dominant role of the extensive margin. In addition, we find no evidence of state-level home bias when distances are measured precisely and trade is observed over a very fine grid.
Handle: RePEc:nbr:nberwo:11339
Template-Type: ReDIF-Paper 1.0
Title: New-Keynesian Macroeconomics and the Term Structure
Classification-JEL: E4; E5; G2
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Seonghoon Cho
Author-Person: pch580
Author-Name: Antonio Moreno
Author-Person: pmo498
Note: AP ME
Number: 11340
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11340
File-URL: http://www.nber.org/papers/w11340.pdf
File-Format: application/pdf
Publication-Status: published as Geert Bekaert & Seonghoon Cho & Antonio Moreno, 2010. "New Keynesian Macroeconomics and the Term Structure," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(1), pages 33-62, 02.
Abstract: This article complements the structural New-Keynesian macro framework with a no-arbitrage affine term structure model. Whereas our methodology is general, we focus on an extended macro-model with an unobservable time-varying inflation target and the natural rate of output which are filtered from macro and term structure data. We obtain large and significant estimates of the Phillips curve and real interest rate response parameters. Our model also delivers strong contemporaneous responses of the entire term structure to various macroeconomic shocks. The inflation target dominates the variation in the "level factor" whereas the monetary policy shocks dominate the variation in the "slope and curvature factors".
Handle: RePEc:nbr:nberwo:11340
Template-Type: ReDIF-Paper 1.0
Title: The Simple Geometry of Transmission and Stabilization in Closed and Open Economies
Classification-JEL: E31; E52; F42
Author-Name: Giancarlo Corsetti
Author-Name: Paolo Pesenti
Author-Person: ppe152
Note: IFM
Number: 11341
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11341
File-URL: http://www.nber.org/papers/w11341.pdf
File-Format: application/pdf
Publication-Status: published as Comment on "The Simple Geometry of Transmission and Stabilization in Closed and Open Economies", Richard Clarida . in NBER International Seminar on Macroeconomics 2007, Clarida and Giavazzi. 2008
Abstract: This paper provides an introduction to the recent literature on macroeconomic stabilization in closed and open economies. We present a stylized theoretical framework, and illustrate its main properties with the help of an intuitive graphical apparatus. Among the issues we discuss: optimal monetary policy and the welfare gains from macroeconomic stabilization; international transmission of real and monetary shocks and the role of exchange rate pass-through; the design of optimal exchange rate regimes and monetary coordination among interdependent economies.
Handle: RePEc:nbr:nberwo:11341
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Living Wage Laws: Evidence from Failed and Derailed Living Wage Campaigns
Classification-JEL: J38; J58
Author-Name: Scott Adams
Author-Person: pad22
Author-Name: David Neumark
Author-Person: pne16
Note: LS
Number: 11342
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11342
File-URL: http://www.nber.org/papers/w11342.pdf
File-Format: application/pdf
Publication-Status: published as Adams, Scott and David Neumark. "The Effects Of Living Wage Laws: Evidence From Failed And Derailed Living Wage Campaigns," Journal of Urban Economics, 2005, v58(2,Sep), 177-202.
Abstract: Living wage campaigns have succeeded in about 100 jurisdictions in the United States but have also been unsuccessful in numerous cities. These unsuccessful campaigns provide a better control group or counterfactual for estimating the effects of living wage laws than the broader set of all cities without a law, and also permit the separate estimation of the effects of living wage laws and living wage campaigns. We find that living wage laws raise wages of low-wage workers but reduce employment among the least-skilled, especially when the laws cover business assistance recipients or are accompanied by similar laws in nearby cities.
Handle: RePEc:nbr:nberwo:11342
Template-Type: ReDIF-Paper 1.0
Title: Gender, Body Mass and Economic Status
Classification-JEL: I0
Author-Name: Dalton Conley
Author-Name: Rebecca Glauber
Note: EH
Number: 11343
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11343
File-URL: http://www.nber.org/papers/w11343.pdf
File-Format: application/pdf
Publication-Status: published as Conley, Dalton and Rebecca Glauber. “Gender, Body Mass and Socioeconomic Status: New Evidence from the PSID.” Advances in Health Economics and Health Services Research 17 (2006): 255-280.
Abstract: Previous research on the effect of body mass on economic outcomes has used a variety of methods to mitigate endogeneity bias. We extend this research by using an older sample of U.S. individuals from the PSID. This sample allows us to examine age-gender interactive effects. Through sibling-random and fixed effects models, we find that a one percent increase in a woman's body mass results in a .6 percentage point decrease in her family income and a .4 percentage point decrease in her occupational prestige measured 13 to 15 years later. Body mass is also associated with a reduction in a woman's likelihood of marriage, her spouse's occupational prestige, and her spouse's earnings. However, consistent with past research, men experience no negative effects of body mass on economic outcomes. Age splits show that it is among younger adults where BMI effects are most robust, lending support to the interpretation that it is BMI causing occupational outcomes and not the reverse.
Handle: RePEc:nbr:nberwo:11343
Template-Type: ReDIF-Paper 1.0
Title: The Worldwide Economic Impact of the Revolutionary and Napoleonic Wars
Classification-JEL: F1; N7
Author-Name: Kevin H. O'Rourke
Author-Person: por7
Note: DAE
Number: 11344
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11344
File-URL: http://www.nber.org/papers/w11344.pdf
File-Format: application/pdf
Publication-Status: published as O'Rourke, Kevin. “The worldwide economic impact of the French Revolutionary and Napoleonic Wars, 1793-1815.” Journal of Global History 1 (2006): 123-149.
Abstract: The paper provides a comparative history of the economic impact of the Revolutionary and Napoleonic Wars. By focussing on the relative price evidence, it is possible to show that the conflict had major economic effects around the world. Britain's control of the seas meant that it was much less affected than other nations, such as France and the United States. Explicit welfare calculations are provided for four countries, Britain, France, Sweden and the United States. Welfare losses were largest in the US, where they were of the order of 5-6% per annum; by contrast, they lay between 3-4% per annum in France, and between 1.7-1.8% per annum in Britain. On the other hand, the conflict helped pave the way for the more liberal international economic environment of the long 19th century.
Handle: RePEc:nbr:nberwo:11344
Template-Type: ReDIF-Paper 1.0
Title: Adjustment in Property Space Markets: Estimates from the Stockholm Office Market
Classification-JEL: R1; R0
Author-Name: Peter Englund
Author-Name: Ake Gunnelin
Author-Name: Patric H. Hendershott
Author-Name: Bo Soderberg
Note: AP
Number: 11345
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11345
File-URL: http://www.nber.org/papers/w11345.pdf
File-Format: application/pdf
Publication-Status: published as Peter Englund & Åke Gunnelin & Patric H. Hendershott & Bo Söderberg, 2008. "Adjustment in Property Space Markets: Taking Long-Term Leases and Transaction Costs Seriously," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(1), pages 81-109, 03.
Abstract: Markets for property space adjust only gradually because tenants are constrained by long-term leases and landlords and tenants face transactions and information costs. Not only do rents adjust slowly, but space occupancy may differ from demand at current rent, giving rise to "hidden vacancies". We estimate the joint dynamics of office rents and vacancies using an error-correction model using a new lease rent series for Stockholm offices 1977--2002 estimated on 2,500 leases. It takes 5-10 years for the market to adjust to a shock. In a model simulation of a positive employment shock open vacancies fall from the natural level of 7 percent to below 4 percent, while hidden vacancies increase by about as much. Most of the variation in hidden vacancies over time is explained by the difference between demand at current and average rent on existing leases, which we calculate using data on contract lease length.
Handle: RePEc:nbr:nberwo:11345
Template-Type: ReDIF-Paper 1.0
Title: What Remains from the Volcker Experiment?
Classification-JEL: E52
Author-Name: Benjamin M. Friedman
Note: ME
Number: 11346
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11346
File-URL: http://www.nber.org/papers/w11346.pdf
File-Format: application/pdf
Publication-Status: published as Benjamin M. Friedman, 2005. "What Remains from the Volcker Experiment?," Review, vol 87(2).
Abstract: Under conventional representations of economic policymaking, any innovation is either (1) a change in the objectives that policymakers are seeking to achieve, (2) a change in the choice of policy instrument, or (3) a change in the way auxiliary aspects of economic activity are used to steer policy in the context of time lags. Most public discussion of the 1979 Volcker experiment at the time, and likewise most of the subsequent academic literature, emphasized either the role of quantitative targets for money growth (3) or the use of an open market operating procedure based on a reserves quantity rather than a short-term interest rate (2). With time, however, neither has survived as part of U.S. monetary policymaking. What remains is the question of whether 1979 brought a new, greater weight on the Federal Reserve's objective of price stability vis-a-vis its objective of output growth and high employment (1). That is certainly one interpretation of the historical record. But the historical evidence is also consistent with the view that the 1970s were exceptional, rather than that the experience since 1979 has differed from what went before as a whole.
Handle: RePEc:nbr:nberwo:11346
Template-Type: ReDIF-Paper 1.0
Title: School Quality, Neighborhoods and Housing Prices: The Impacts of school Desegregation
Classification-JEL: J0; R0
Author-Name: Thomas J. Kane
Author-Name: Douglas O. Staiger
Author-Person: pst466
Author-Name: Stephanie K. Riegg
Note: ED LS
Number: 11347
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11347
File-URL: http://www.nber.org/papers/w11347.pdf
File-Format: application/pdf
Publication-Status: published as Thomas J. Kane & Stephanie K. Riegg & Douglas O. Staiger, 2006. "School Quality, Neighborhoods, and Housing Prices," American Law and Economics Review, Oxford University Press, vol. 8(2), pages 183-212.
Abstract: We study the relationship between school characteristics and housing prices in Mecklenburg County, North Carolina between 1994 and 2001. During this period, the school district was operating under a court-imposed desegregation order and redrew a number of school boundaries. We use two different sources of variation to disentangle the effect of schools and other neighborhood characteristics: differences in housing prices along assignment zone boundaries and changes in housing prices following the change in school assignments. We find systematic differences in house prices along school boundaries, although the impact of schools is only one-quarter as large as the naive cross-sectional estimates would imply. Moreover, house prices seem to react to changes in school assignments. Part of the impact of school assignments is mediated by subsequent changes in the characteristics of the population living in the school zone.
Handle: RePEc:nbr:nberwo:11347
Template-Type: ReDIF-Paper 1.0
Title: The Determinants of Faculty Patenting Behavior: Demographics or Opportunities?
Classification-JEL: O31; O32; O33
Author-Name: Pierre Azoulay
Author-Name: Waverly Ding
Author-Name: Toby Stuart
Note: PR
Number: 11348
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11348
File-URL: http://www.nber.org/papers/w11348.pdf
File-Format: application/pdf
Publication-Status: published as Azoulay, Pierre, Waverly Ding, and Toby Stuart. "The determinants of faculty patenting behavior: Demographics or opportunities?" Journal of Economic Behavior & Organization 63, 4 (August 2007): 599-623.
Publication-Status: published as The Determinants of Faculty Patenting Behavior: Demographics or Opportunities?, Pierre Azoulay, Waverly Ding, Toby Stuart. in Academic Science and Entrepreneurship: Dual Engines of Growth, Jaffe, Lerner, Stern, and Thursby. 2007
Abstract: We examine the individual, contextual, and institutional determinants of faculty patenting behavior in a panel dataset spanning the careers of 3,884 academic life scientists. Using a combination of discrete time hazard rate models and fixed effects logistic models, we find that patenting events are preceded by a flurry of publications, even holding constant time-invariant scientific talent and the latent patentability of a scientist's research. Moreover, the magnitude of the effect of this flurry is influenced by context --- such as the presence of coauthors who patent and the patent stock of the scientist's university. Whereas previous research emphasized that academic patenters are more accomplished on average than their non-patenting counterparts, our findings suggest that patenting behavior is also a function of scientific opportunities. This result has important implications for the public policy debate surrounding academic patenting.
Handle: RePEc:nbr:nberwo:11348
Template-Type: ReDIF-Paper 1.0
Title: Volatility and Growth: Credit Constraints and Productivity-Enhancing Investment
Classification-JEL: E22; E32; O16; O30
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: George-Marios Angeletos
Author-Person: pan143
Author-Name: Abhijit Banerjee
Author-Name: Kalina Manova
Author-Person: pma2520
Note: EFG
Number: 11349
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11349
File-URL: http://www.nber.org/papers/w11349.pdf
File-Format: application/pdf
Abstract: We examine how credit constraints affect the cyclical behavior of productivity-enhancing investment and thereby volatility and growth. We first develop a simple growth model where firms engage in two types of investment: a short-term one and a long-term productivity-enhancing one. Because it takes longer to complete, long-term investment has a relatively less procyclical return but also a higher liquidity risk. Under complete financial markets, long-term investment is countercyclical, thus mitigating volatility. But when firms face tight credit constraints, long-term investment turns procyclical, thus amplifying volatility. Tighter credit therefore leads to both higher aggregate volatility and lower mean growth for a given total investment rate. We next confront the model with a panel of countries over the period 1960-2000 and find that a lower degree of financial development predicts a higher sensitivity of both the composition of investment and mean growth to exogenous shocks, as well as a stronger negative effect of volatility on growth.
Handle: RePEc:nbr:nberwo:11349
Template-Type: ReDIF-Paper 1.0
Title: Venture Capital as Human Resource Management
Classification-JEL: G14; G24; J23
Author-Name: Antonio Geldson de Carvalho
Author-Name: Charles W. Calomiris
Author-Person: pca421
Author-Name: Joao Amaro de Matos
Note: CF DAE LS
Number: 11350
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11350
File-URL: http://www.nber.org/papers/w11350.pdf
File-Format: application/pdf
Publication-Status: published as de Carvalho, Antonio Gledson & Calomiris, Charles W. & de Matos, João Amaro, 2008. "Venture capital as human resource management," Journal of Economics and Business, Elsevier, vol. 60(3), pages 223-255.
Abstract: Venture capitalists add value to portfolio firms by obtaining and transferring information about senior managers across firms over time. Information transfer occurs on a significant scale and takes place both among a single venture capitalist's portfolio firms and between different venture capitalists' firms via a network of venture capitalists, which venture capitalists use to locate and relocate managers. Cross-sectional differences are associated with differences in the intensity with which venture capitalists network. The observable factors relevant in explaining the intensity with which venture capitalists network include: 1) the value of the information transmitted through the network, 2) the riskiness of the activities of portfolio firms, 3) the size of the venture capital fund, 4) the degree of difficulty in enticing executives to manage portfolio firms, and 5) the reputation of the venture capitalist for successfully recycling managers. These factors reflect costs and benefits to venture capitalists of participating in the network.
Handle: RePEc:nbr:nberwo:11350
Template-Type: ReDIF-Paper 1.0
Title: Monopoly-Creating Bank Consolidation? The Merger of Fleet and BankBoston
Classification-JEL: G21; L13; D43
Author-Name: Charles W. Calomiris
Author-Person: pca421
Author-Name: Thanavut Pornrojnangkool
Note: IO
Number: 11351
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11351
File-URL: http://www.nber.org/papers/w11351.pdf
File-Format: application/pdf
Abstract: The merger of Fleet and BankBoston in September 1999 resulted in a regional New England lending market in which only one large, universal bank remained. We explore the extent to which that merger resulted in monopoly rents for the combined entity in some niches within the regional loan market. For small- and medium-sized middle-market borrowers, prior to the merger, Fleet and BankBoston charged unusually low loan interest rates, reflecting their ability to realize economies of scope and scale. After the merger, those cost savings were no longer passed on to medium-sized middle-market borrowers, which resulted in an increase in the average interest rate credit spreads to those borrowers of roughly one percent. Small-sized middle-market borrowers (which continued to enjoy the advantage of loan market competition from remaining small banks) maintained their low spreads. Our results suggest that it may be desirable for regulators to consider the concentration in lending markets in addition to deposit markets when evaluating mergers and structuring appropriate divestiture requirements.
Handle: RePEc:nbr:nberwo:11351
Template-Type: ReDIF-Paper 1.0
Title: Studying Texts: A Gemara of the Israeli Economy
Classification-JEL: N0
Author-Name: Michael W. Klein
Author-Person: pkl9
Note: EFG IFM ITI
Number: 11352
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11352
File-URL: http://www.nber.org/papers/w11352.pdf
File-Format: application/pdf
Publication-Status: published as Klein, Michael W. "Studying Texts: A Gemara of the Israeli Economy." Israel Economic Review 3, 1 (August 2005): 121-47.
Abstract: This paper reviews six English-language books on the economy of Israel. Each book was written or edited by Israelis, and each is from a different decade. The earliest book, Don Patinkin's The Israel Economy: The First Decade, was written in the late 1950s, and the most recent volume, The Israeli Economy, 1985 - 1998: From Government Intervention to Market Economics (edited by Avi Ben-Bassat), was published in 2002. While each book considers the Israeli economy at a different stage of its development, five common themes appear: (i) the relevant comparison group for considering the Israeli economy, (ii) the challenges of immigration, integration and inequality, (iii) the appropriate roles of the government and markets, (iv) openness and dependence, and (v) inflation, crisis, and stabilization. Overall, the chronology of economic views presented in these books corresponds to an increasing acceptance of the role of markets and an increasing desire for open trade in goods and assets.
Handle: RePEc:nbr:nberwo:11352
Template-Type: ReDIF-Paper 1.0
Title: International Borrowing and Macroeconomic Performance in Argentina
Classification-JEL: O54; F3; F21; F42
Author-Name: Kathryn M.E. Dominguez
Author-Person: pdo227
Author-Name: Linda L. Tesar
Author-Person: pte111
Note: IFM
Number: 11353
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11353
File-URL: http://www.nber.org/papers/w11353.pdf
File-Format: application/pdf
Publication-Status: published as International Borrowing and Macroeconomic Performance in Argentina, Kathryn M. E. Dominguez, Linda L. Tesar. in Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, Edwards. 2007
Abstract: This paper provides an overview of the major economic events in Argentina from the adoption of the convertibility plan in 1991 to the collapse of the exchange rate regime in 2001. We focus on the relationship between the credibility of the currency board and capital flows, and the inescapable link between fiscal and monetary policy. Argentina inadvertently entered into a vicious circle with financial markets -- one in which it felt compelled to raise the exit costs from the currency board in order to maintain the regime's credibility. As exit costs mounted, financial markets became increasingly concerned about the dire implications of a devaluation, which in turn, compelled the government to raise exit costs further. In the late 1990s, when Argentina went into recession, it required some sort of stimulus -- either a loosening of monetary policy (i.e. a devaluation) or fiscal stimulus. But either way spelled disaster. The added pressure of capital outflow, first by international investors and then the withdrawal of deposits from the Argentine banking system, eventually tipped the scales.
Handle: RePEc:nbr:nberwo:11353
Template-Type: ReDIF-Paper 1.0
Title: The Sources of the Productivity Rebound and the Manufacturing Employment Puzzle
Classification-JEL: O4; E1
Author-Name: William Nordhaus
Author-Person: pno115
Note: EFG PR
Number: 11354
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11354
File-URL: http://www.nber.org/papers/w11354.pdf
File-Format: application/pdf
Abstract: Productivity has rebounded in the last decade while manufacturing employment has declined sharply. The present study uses data on industrial output and employment to examine the sources of these trends. It finds that the productivity rebound since 1995 has been widespread, with approximately two-fifths of the productivity rebound occurring in New Economy industries. Moreover, after suffering a slowdown in the 1970s, productivity growth since 1995 has been at the rapid pace of the earlier 1948-73 period. Finally, the study investigates the relationship between employment and productivity growth. If finds that the relevant elasticities indicate that more rapid productivity growth leads to increased rather than decreased employment in manufacturing. The results here suggest that productivity is not to be feared - at least not in manufacturing, where the largest recent employment declines have occurred. This shows up most sharply for the most recent period, since 1998. Overall, higher productivity has led to lower prices, expanding demand, and to higher employment, but the partial effects of rapid domestic productivity growth have been more than offset by more rapid productivity growth and price declines from foreign competitors.
Handle: RePEc:nbr:nberwo:11354
Template-Type: ReDIF-Paper 1.0
Title: The Opium Wars, Opium Legalization, and Opium Consumption in China
Classification-JEL: K4; N4
Author-Name: Jeffrey A. Miron
Author-Person: pmi250
Author-Name: Chris Feige
Note: EH ITI
Number: 11355
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11355
File-URL: http://www.nber.org/papers/w11355.pdf
File-Format: application/pdf
Publication-Status: published as Chris Feige & Jeffrey Miron, 2008. "The opium wars, opium legalization and opium consumption in China," Applied Economics Letters, Taylor and Francis Journals, vol. 15(12), pages 911-913.
Abstract: The effect of drug prohibition on drug consumption is a critical issue in debates over drug policy. One episode that provides information on the consumption-reducing effect of drug prohibition is the Chinese legalization of opium in 1858. In this paper we examine the impact of China's opium legalization on the quantity and price of British opium exports from India to China during the 19th century. We find little evidence that legalization increased exports or decreased price. Thus, the evidence suggests China's opium prohibition had a minimal impact on opium consumption.
Handle: RePEc:nbr:nberwo:11355
Template-Type: ReDIF-Paper 1.0
Title: Contracts and the Division of Labor
Classification-JEL: D2; J2; L2; O3
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Pol Antràs
Author-Person: pan181
Author-Name: Elhanan Helpman
Author-Person: phe205
Note: EFG PR
Number: 11356
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11356
File-URL: http://www.nber.org/papers/w11356.pdf
File-Format: application/pdf
Abstract: We develop a tractable framework for the analysis of the relationship between contractual incompleteness, technological complementarities, and technology adoption. In our model a firm chooses its technology and investment levels in contractible activities by suppliers of intermediate inputs. Suppliers then choose investments in noncontractible activities, anticipating payoffs from an ex post bargaining game. We show that greater contractual incompleteness leads to the adoption of less advanced technologies and that the impact of contractual incompleteness is more pronounced when there is greater complementary among the intermediate inputs. We study a number of applications of the main framework and show that the mechanism proposed in the paper can generate sizable productivity differences across countries with different contracting institutions and that differences in contracting institutions lead to endogenous comparative advantage differences.
Handle: RePEc:nbr:nberwo:11356
Template-Type: ReDIF-Paper 1.0
Title: Asset Fire Sales (and Purchases) in Equity Markets
Classification-JEL: G14; G32; G20
Author-Name: Joshua D. Coval
Author-Name: Erik Stafford
Author-Person: pst291
Note: AP
Number: 11357
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11357
File-URL: http://www.nber.org/papers/w11357.pdf
File-Format: application/pdf
Publication-Status: published as Coval, Joshua & Stafford, Erik, 2007. "Asset fire sales (and purchases) in equity markets," Journal of Financial Economics, Elsevier, vol. 86(2), pages 479-512, November.
Abstract: This paper examines asset fire sales, and institutional price pressure more generally, in equity markets, using market prices of mutual fund transactions caused by capital flows from 1980 to 2003. Funds experiencing large outflows (inflows) tend to decrease (increase) existing positions, which creates price pressure in the securities held in common by these funds. Forced transactions represent a significant cost of financial distress for mutual funds. We find that investors who trade against constrained mutual funds earn highly significant returns for providing liquidity when few others are willing or able. In addition, future flow-driven transactions are predictable, creating an incentive to front-run the anticipated forced trades by funds experiencing extreme capital flows.
Handle: RePEc:nbr:nberwo:11357
Template-Type: ReDIF-Paper 1.0
Title: A Proposed Method for Monitoring U.S. Population Health: Linking Symptoms, Impairments, and Health Ratings
Classification-JEL: I10; I12
Author-Name: Susan T. Stewart
Author-Name: Rebecca M. Woodward
Author-Name: Allison B. Rosen
Author-Name: David M. Cutler
Author-Person: pcu64
Note: EH
Number: 11358
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11358
File-URL: http://www.nber.org/papers/w11358.pdf
File-Format: application/pdf
Abstract: We propose a method of quantifying non-fatal health on a 0-1 QALY scale that details the impact of specific symptoms and impairments and is not based on ratings of counterfactual scenarios. Measures of general health status are regressed on health impairments and symptoms in different domains, using ordered probit and ordinary least squares regression. This yields estimates of their effects analogous to disutility weights, and accounts for complex non-additive relationships. Health measures used include self-rated health status on a 5-point scale, EuroQol 5D (EQ-5D) scores, and ratings of current health using a 0-100 rating scale and a time-tradeoff. Data are from the nationally representative Medical Expenditure Panel Survey (MEPS) year 2002 (N=34,615), with validation in an independent sample from MEPS 2000 (N=21,067) and among 1420 adults age 45-89 in the Beaver Dam Health Outcomes Study. Decrement weights for symptoms and impairments are used to derive estimates of overall health-related quality of life, laying the groundwork for a detailed national summary measure of health. To purchase a copy of the earlier version of this paper, please contact the Working Papers department directly at (617) 588 1405.
Handle: RePEc:nbr:nberwo:11358
Template-Type: ReDIF-Paper 1.0
Title: Age and Great Invention
Classification-JEL: O3; O4; J2; I2
Author-Name: Benjamin F. Jones
Author-Person: pjo400
Note: PR
Number: 11359
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11359
File-URL: http://www.nber.org/papers/w11359.pdf
File-Format: application/pdf
Publication-Status: published as Benjamin F Jones, 2010. "Age and Great Invention," Review of Economics and Statistics, vol 92(1), pages 1-14.
Abstract: Great achievements in knowledge are produced by older innovators today than they were a century ago. Using data on Nobel Prize winners and great inventors, I find that the age at which noted innovations are produced has increased by approximately 6 years over the 20th Century. This trend is consistent with a shift in the life-cycle productivity of great minds. It is also consistent with an aging workforce. The paper employs a semi-parametric maximum likelihood model to (1) test between these competing explanations and (2) locate any specific shifts in life-cycle productivity. The productivity explanation receives considerable support. I find that innovators are much less productive at younger ages, beginning to produce major ideas 8 years later at the end of the 20th Century than they did at the beginning. Furthermore, the later start to the career is not compensated for by increasing productivity beyond early middle age. I show that these distinct shifts for knowledge-based careers are consistent with a knowledge-based theory, where the accumulation of knowledge across generations leads innovators to seek more education over time. More generally, the results show that individual innovators are productive over a narrowing span of their life cycle, a trend that reduces -- other things equal -- the aggregate output of innovators. This drop in productivity is particularly acute if innovators' raw ability is greatest when young.
Handle: RePEc:nbr:nberwo:11359
Template-Type: ReDIF-Paper 1.0
Title: The Burden of Knowledge and the 'Death of the Renaissance Man': Is Innovation Getting Harder?
Classification-JEL: O3; O4; J2; I2
Author-Name: Benjamin F. Jones
Author-Person: pjo400
Note: PR
Number: 11360
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11360
File-URL: http://www.nber.org/papers/w11360.pdf
File-Format: application/pdf
Publication-Status: published as Jones, Benjamin. "The Burden of Knowledge and the 'Death of the Renaissance Man': Is Innovation Getting Harder?" Review of Economic Studies 76, 1 (January 2009): 283-317.
Publication-Status: published as Benjamin F. Jones, 2005. "The burden of knowledge and the ‘death of the Renaissance man’: Is innovation getting harder?," Proceedings, Federal Reserve Bank of San Francisco.
Abstract: This paper investigates, theoretically and empirically, a possibly fundamental aspect of technological progress. If knowledge accumulates as technology progresses, then successive generations of innovators may face an increasing educational burden. Innovators can compensate in their education by seeking narrower expertise, but narrowing expertise will reduce their individual capacities, with implications for the organization of innovative activity - a greater reliance on teamwork - and negative implications for growth. I develop a formal model of this "knowledge burden mechanism" and derive six testable predictions for innovators. Over time, educational attainment will rise while increased specialization and teamwork follow from a sufficiently rapid increase in the burden of knowledge. In cross-section, the model predicts that specialization and teamwork will be greater in deeper areas of knowledge while, surprisingly, educational attainment will not vary across fields. I test these six predictions using a micro-data set of individual inventors and find evidence consistent with each prediction. The model thus provides a parsimonious explanation for a range of empirical patterns of inventive activity. Upward trends in academic collaboration and lengthening doctorates, which have been noted in other research, can also be explained by the model, as can much-debated trends relating productivity growth and patent output to aggregate inventive effort. The knowledge burden mechanism suggests that the nature of innovation is changing, with negative implications for long-run economic growth.
Handle: RePEc:nbr:nberwo:11360
Template-Type: ReDIF-Paper 1.0
Title: Optimism and Economic Choice
Classification-JEL: G1; D1
Author-Name: Manju Puri
Author-Person: ppu153
Author-Name: David Robinson
Author-Person: pro347
Note: AP CF
Number: 11361
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11361
File-URL: http://www.nber.org/papers/w11361.pdf
File-Format: application/pdf
Publication-Status: published as Puri, Manju & Robinson, David T., 2007. "Optimism and economic choice," Journal of Financial Economics, Elsevier, vol. 86(1), pages 71-99, October.
Abstract: This paper presents some of the first large-scale survey evidence linking optimism to major economic choices. We create a novel measure of optimism using the Survey of Consumer Finance by comparing a person's self-reported life expectancy to that implied by statistical tables. Optimists are more likely to believe that future economic conditions will improve. Self-employed respondents are more optimistic than regular wage earners. In general, more optimistic people work harder and anticipate longer age-adjusted work careers. They are more likely to remarry, conditional on divorce. In addition, they tilt their investment portfolios more toward individual stocks.
Handle: RePEc:nbr:nberwo:11361
Template-Type: ReDIF-Paper 1.0
Title: Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia
Classification-JEL: G0; G1; F3
Author-Name: Jianping Mei
Author-Person: pme634
Author-Name: Jose Scheinkman
Author-Person: psc26
Author-Name: Wei Xiong
Author-Person: pxi88
Note: AP
Number: 11362
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11362
File-URL: http://www.nber.org/papers/w11362.pdf
File-Format: application/pdf
Publication-Status: published as Jianping Mei & Jose A. Scheinkman & Wei Xiong, 2009. "Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia," Annals of Economics and Finance, Society for AEF, vol. 10(2), pages 225-255, November.
Abstract: The market dynamics of technology stocks in the late nineties has stimulated a growing body of theories that analyze the joint effects of short-sales constraints and heterogeneous beliefs on stock prices and trading volume. This paper examines implications of these theories using a unique data sample from China, a market with stringent short-sales constraints and perfectly segmented dual-class shares. The identical rights of the dual-class shares allow us to control for stock fundamentals. We find that trading caused by investors' speculative motive can help explain a significant fraction of the price difference between the dual-class shares.
Handle: RePEc:nbr:nberwo:11362
Template-Type: ReDIF-Paper 1.0
Title: Bank Credit Cycles
Classification-JEL: E3; G2
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: Ping He
Author-Person: phe155
Note: CF ME
Number: 11363
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11363
File-URL: http://www.nber.org/papers/w11363.pdf
File-Format: application/pdf
Publication-Status: published as Gorton & Ping He, 2008. "Bank Credit Cycles," Review of Economic Studies, Blackwell Publishing, vol. 75(4), pages 1181-1214, October.
Abstract: Private information about prospective borrowers produced by a bank can affect rival lenders due to a "winner's curse" effect. Strategic interaction between banks with respect to the intensity of costly information production results in endogenous credit cycles, periodic "credit crunches." Empirical tests are constructed based on parameterizing public information about relative bank performance that is at the root of banks' beliefs about rival banks' behavior. Consistent with the theory, we find that the relative performance of rival banks has predictive power for subsequent lending in the credit card market, where we can identify the main competitors. At the macroeconomic level, we show that the relative bank performance of commercial and industrial loans is an autonomous source of macroeconomic fluctuations. We also find that the relative bank performance is a priced risk factor for both banks and nonfinancial firms. The factor-coefficients for non-financial firms are decreasing with size.
Handle: RePEc:nbr:nberwo:11363
Template-Type: ReDIF-Paper 1.0
Title: Eat or Be Eaten: A Theory of Mergers and Merger Waves
Classification-JEL: G3
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: Matthias Kahl
Author-Name: Richard Rosen
Note: CF
Number: 11364
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11364
File-URL: http://www.nber.org/papers/w11364.pdf
File-Format: application/pdf
Publication-Status: published as Gary Gorton & Matthias Kahl & Richard J. Rosen, 2009. "Eat or Be Eaten: A Theory of Mergers and Firm Size," Journal of Finance, American Finance Association, vol. 64(3), pages 1291-1344, 06.
Abstract: In this paper, we present a model of defensive mergers and merger waves. We argue that mergers and merger waves can occur when managers prefer that their firms remain independent rather than be acquired. We assume that managers can reduce their chance of being acquired by acquiring another firm and hence increasing the size of their own firm. We show that if managers value private benefits of control sufficiently, they may engage in unprofitable defensive acquisitions. A technological or regulatory change that makes acquisitions profitable in some future states of the world can induce a preemptive wave of unprofitable, defensive acquisitions. The timing of mergers, the identity of acquirers and targets, and the profitability of acquisitions depend on the size of the private benefits of control, managerial equity ownership, the likelihood of a regime shift that makes some mergers profitable, and the distribution of firm sizes within an industry.
Handle: RePEc:nbr:nberwo:11364
Template-Type: ReDIF-Paper 1.0
Title: The International Exposure of U.S. Banks
Classification-JEL: F3; G2
Author-Name: Linda S. Goldberg
Author-Person: pgo256
Note: IFM
Number: 11365
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11365
File-URL: http://www.nber.org/papers/w11365.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian. Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences (National Bureau of Economic Research Conference Report). Chicago: University of Chicago Press, 2007.
Publication-Status: published as The International Exposure of U.S. Banks: Europe and Latin America Compared, Linda S. Goldberg. in Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, Edwards. 2007
Abstract: This paper documents the changing international exposures of U.S. bank balance sheets since the mid-1980s. U.S. banks have foreign positions heavily concentrated in Europe, with more volatile flows to other regions of the world. In recent years some cross-border claims on Latin American countries have declined, while claims extended locally by the branches and subsidiaries of U.S. banks have grown. The foreign exposures of larger U.S. banks tend to be less volatile than claims of smaller banks, and locally-issued claims tend to be more stable than cross-border flows. Business cycle variables have mixed influence on U.S. bank cross-border and local claims. The cross-border claims of U.S. banks on European customers tend to be procyclical. By contrast, locally generated and cross border claims on Latin American customers of U.S. banks are not robustly related to either U.S. or country-specific business cycle variables. U.S. banks do not appear to be strong conduits for transmitting U.S. cycles to these smaller markets, and may instead serve a positive role in stabilizing the amplitude of foreign country cycles.
Handle: RePEc:nbr:nberwo:11365
Template-Type: ReDIF-Paper 1.0
Title: International Reserves: Precautionary versus Mercantilist Views, Theory and Evidence
Classification-JEL: F15; F31; F43
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Jaewoo Lee
Author-Person: ple103
Note: IFM ITI
Number: 11366
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11366
File-URL: http://www.nber.org/papers/w11366.pdf
File-Format: application/pdf
Publication-Status: published as Joshua Aizenman & Jaewoo Lee, 2005. "International reserves: precautionary versus mercantilist views, theory and evidence," Proceedings, Federal Reserve Bank of San Francisco.
Publication-Status: published as Joshua Aizenman & Jaewoo Lee, 2007. "International Reserves: Precautionary Versus Mercantilist Views, Theory and Evidence," Open Economies Review, Springer, vol. 18(2), pages 191-214, April.
Abstract: This paper tests the importance of precautionary and mercantilist motives in accounting for the hoarding of international reserves by developing countries, and provides a model that quantifies the welfare gains from optimal management of international reserves. While the variables associated with the mercantilist motive are statistically significant, their economic importance in accounting for reserve hoarding is close to zero and is dwarfed by other variables. Overall, the empirical results are in line with the precautionary demand. The effects of financial crises have been localized, increasing reserve hoarding in the aftermath of crises mostly in countries located in the affected region, but not in other regions. We also investigate the micro foundation of precautionary demand, extending Diamond and Dybvig (1983)'s model to an open, emerging market economy where banks finance long-term projects with short-term deposits. We identify circumstances that lead to large precautionary demand for international reserves, providing self-insurance against the adverse output effects of sudden stop and capital flight shocks. This would be the case if premature liquidation of long-term projects is costly, and the economy is de-facto integrated with the global financial system, hence sudden stops and capital flight may reduce deposits sharply. We show that the welfare gain from the optimal management of international reserves is of a first-order magnitude, reducing the welfare cost of liquidity shocks from a first-order to a second-order magnitude.
Handle: RePEc:nbr:nberwo:11366
Template-Type: ReDIF-Paper 1.0
Title: Asset Float and Speculative Bubbles
Classification-JEL: G0; G1
Author-Name: Harrison Hong
Author-Person: pho390
Author-Name: Jose Scheinkman
Author-Person: psc26
Author-Name: Wei Xiong
Author-Person: pxi88
Note: AP
Number: 11367
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11367
File-URL: http://www.nber.org/papers/w11367.pdf
File-Format: application/pdf
Publication-Status: published as Hong, Harrison, Jos Scheinkman and Wei Xiong. "Asset Float And Speculative Bubbles," Journal of Finance, 2006, v61(3,Jun), 1073-1117.
Abstract: We model the relationship between asset float (tradeable shares) and speculative bubbles. Investors trade a stock with limited float because of insider lock-ups. They have heterogeneous beliefs due to overconfidence and face short-sales constraints. A bubble arises as price overweighs optimists' beliefs and investors anticipate the option to resell to those with even higher valuations. The bubble's size depends on float as investors anticipate an increase in float with lock-up expirations and speculate over the degree of insider selling. Consistent with the internet experience, the bubble, turnover and volatility decrease with float and prices drop on the lock-up expiration date.
Handle: RePEc:nbr:nberwo:11367
Template-Type: ReDIF-Paper 1.0
Title: A Theory of Pyramidal Ownership and Family Business Groups
Classification-JEL: G32
Author-Name: Heitor Almeida
Author-Name: Daniel Wolfenzon
Note: CF
Number: 11368
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11368
File-URL: http://www.nber.org/papers/w11368.pdf
File-Format: application/pdf
Publication-Status: published as Almeida, Heitor and Daniel Wolfenzon. "A Theory of Pyramidal Ownership and Family Business Groups." Journal of Finance 61 (2006): 2637-2681.
Abstract: We provide a rationale for pyramidal ownership (the control of a firm through a chain of ownership relations) that departs from the traditional argument that pyramids arise to separate cash flow from voting rights. With a pyramidal structure, a family uses a firm it already controls to set up a new firm. This structure allows the family to 1) access the entire stock of retained earnings of the original firm, and 2) to share the new firm's non-diverted payoff with minority shareholders of the original firm. Thus, pyramids are attractive if external funds are costlier than internal funds, and if the family is expected to divert a large fraction of the new firm's payoff; conditions that hold in an environment with poor investor protection. The model can differentiate between pyramids and dual-class shares even in situations in which the same deviation from one share-one vote can be achieved with either method. Unlike the traditional argument, our model is consistent with recent empirical evidence that some pyramidal firms are associated with small deviations between ownership and control. We also analyze the creation of business groups (a collection of multiple firms under the control of a single family) and find that, when they arise, they are likely to adopt a pyramidal ownership structure. Other predictions of the model are consistent with systematic and anecdotal evidence on pyramidal business groups.
Handle: RePEc:nbr:nberwo:11368
Template-Type: ReDIF-Paper 1.0
Title: Capital Flows and Exchange Rate Volatility: Singapore's Experience
Classification-JEL: F4; F3
Author-Name: Basant K. Kapur
Author-Person: pka299
Note: IFM
Number: 11369
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11369
File-URL: http://www.nber.org/papers/w11369.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian. Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences (National Bureau of Economic Research Conference Report). Chicago: University of Chicago Press, 2007.
Publication-Status: published as Capital Flows and Exchange Rate Volatility: Singapore's Experience, Basant K. Kapur. in Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, Edwards. 2007
Abstract: Singapore's experience with international capital flows over the past two decades or so has been a rather - although not completely - benign one, owing to strong fundamentals and generally well-conceived macro-economic policies. We begin by briefly discussing the experience in 1998 of Hong Kong, another city-state with a well-developed banking system and equities market, and operating on a Currency Board (CB) system (although with some differences from Singapore's CB system). The discussion serves to identify some 'areas of vulnerability' in the Hong Kong set-up at that time. We next discuss Singapore's policy background and early experience, and in the light of Hong Kong's experience are better able to appreciate how Singapore's policy framework served to circumvent or minimize important vulnerabilities. Particular attention is paid to Singapore's exchange-rate policy and its policy of non-internationalization of the Singapore dollar. Equity- and currency- market interactions are also considered. We next show how Singapore emerged relatively unscathed from the 1997 Asian Crisis. Lastly, we discuss Singapore's debt markets, and show how under the imperative of promoting the development of its bond markets the non-internationalization policy has been progressively relaxed, while retaining key safeguards.
Handle: RePEc:nbr:nberwo:11369
Template-Type: ReDIF-Paper 1.0
Title: What Matters for Financial Development? Capital Controls, Institutions, and Interactions
Classification-JEL: F36; F43; G28
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: Hiro Ito
Author-Person: pit4
Note: IFM
Number: 11370
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11370
File-URL: http://www.nber.org/papers/w11370.pdf
File-Format: application/pdf
Publication-Status: published as Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
Abstract: We extend our earlier work, focusing on the links between capital account liberalization, legal and institutional development, and financial development, especially that in equity markets. In a panel data analysis encompassing 108 countries and twenty years ranging from 1980 to 2000, we explore several dimensions of the financial sector. First, we test whether financial openness can lead to equity market development when we control for the level of legal and institutional development. Then, we examine whether the opening of the goods sector is a precondition for financial opening. Finally, we investigate whether a well-developed banking sector is a precondition for financial liberalization to lead to equity market development and also whether bank and equity market development complements or substitutes. Our empirical results suggest that a higher level of financial openness contributes to the development of equity markets only if a threshold level of general legal systems and institutions is attained, which is more prevalent among emerging market countries. Among emerging market countries, a higher level of bureaucratic quality and law and order, as well as the lower levels of corruption, increases the effect of financial opening in fostering the development of equity markets. We also find that the finance-related legal/institutional variables do not enhance the effect of capital account opening as strongly as the general legal/institutional variables. In examining the issue of the sequencing, we find that the liberalization in cross-border goods transactions is found to be a precondition for capital account liberalization. Our findings also indicate that the development in the banking sector is a precondition for equity market development, and that the developments in these two types of financial markets have synergistic effects.
Handle: RePEc:nbr:nberwo:11370
Template-Type: ReDIF-Paper 1.0
Title: Lobbying Competition Over Trade Policy
Classification-JEL: D72; D78; F12; F13
Author-Name: Kishore Gawande
Author-Person: pga113
Author-Name: Pravin Krishna
Author-Person: pkr50
Author-Name: Marcelo Olarreaga
Author-Person: pol64
Note: ITI
Number: 11371
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11371
File-URL: http://www.nber.org/papers/w11371.pdf
File-Format: application/pdf
Publication-Status: published as By Kishore Gawande & Pravin Krishna & Marcelo Olarreaga, 2012. "Lobbying Competition Over Trade Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 115-132, 02.
Abstract: Competition between opposing lobbies is an important factor in the endogenous determination of trade policy. This paper investigates empirically the consequences of lobbying competition between upstream and downstream producers for trade policy. The theoretical structure underlying the empirical analysis is the well-known Grossman-Helpman model of trade policy determination, modified suitably to account for the cross-sectoral use of inputs in production (itself a quantitatively significant phenomenon with around 50 percent of manufacturing output being used by other sectors rather than in final consumption). Data from more than 40 countries are used in our analysis. Our empirical results validate the predictions of the theoretical model with lobbying competition. Importantly, accounting for lobbying competition also alters substantially estimates of the"welfare-mindedness" of governments in setting trade policy.
Handle: RePEc:nbr:nberwo:11371
Template-Type: ReDIF-Paper 1.0
Title: The Microeconomic Evidence on Capital Controls: No Free Lunch
Classification-JEL: F2; F3; G1
Author-Name: Kristin J. Forbes
Author-Person: pfo1
Note: IFM
Number: 11372
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11372
File-URL: http://www.nber.org/papers/w11372.pdf
File-Format: application/pdf
Publication-Status: published as The Microeconomic Evidence on Capital Controls: No Free Lunch, Kristin J. Forbes. in Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, Edwards. 2007
Abstract: Macroeconomic analyses of capital controls face a number of imposing challenges and have yielded mixed results to date. This paper takes a different approach and surveys an emerging literature that evaluates various microeconomic effects of capital controls and capital account liberalization. Several key themes emerge. First, capital controls tend to reduce the supply of capital, raise the cost of financing, and increase financial constraints - especially for smaller firms, firms without access to international capital markets and firms without access to preferential lending. Second, capital controls can reduce market discipline in financial markets and the government, leading to a more inefficient allocation of capital and resources. Third, capital controls significantly distort decision-making by firms and individuals, as they attempt to minimize the costs of the controls or even evade them outright. Fourth, the effects of capital controls can vary across different types of firms and countries, reflecting different pre-existing economic distortions. Finally, capital controls can be difficult and costly to enforce, even in countries with sound institutions and low levels of corruption. This microeconomic evidence on capital controls suggests that they have pervasive effects and often generate unexpected costs. Capital controls are no free lunch.
Handle: RePEc:nbr:nberwo:11372
Template-Type: ReDIF-Paper 1.0
Title: Productivity, Efficiency, Scale Economies and Technical Change: A New Decomposition Analysis
Classification-JEL: C43; D24; O47
Author-Name: Jiro Nemoto
Author-Name: Mika Goto
Note: PR
Number: 11373
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11373
File-URL: http://www.nber.org/papers/w11373.pdf
File-Format: application/pdf
Publication-Status: published as Nemoto, Jiro and Mika Goto. "Productivity, Efficiency, Scale Economies And Technical Change: A New Decomposition Analysis Of TFP Applied To The Japanese Prefectures," Journal of the Japanese and International Economies, 2005, v19(4,Dec), 617-634.
Abstract: This paper aims to examine the productivity change of the Japanese economy using the data pertaining to the 47 prefectures during the period 1981-2000. The decomposition analysis of the Hicks-Moorsteen-Bjurek productivity index is conducted to explore the sources of the productivity change. In summary, technical change and efficiency change are two of the most important components driving procyclical productivity. We find that their relative importance varies over periods. Supply shocks captured by technical change component caused upturns in productivity in the mid and late 80s and in 1999 and 2000. Supply shocks also caused downturns in the early and mid 90s. On the other hand, demand shocks captured by the efficiency change component drove upturns of productivity in 1984, 1990, and 1996 when supply shocks were not detected.
Handle: RePEc:nbr:nberwo:11373
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Remedies for Japan's Slump
Classification-JEL: E3; E6
Author-Name: Laurence Ball
Author-Person: pba605
Note: EFG ME PE
Number: 11374
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11374
File-URL: http://www.nber.org/papers/w11374.pdf
File-Format: application/pdf
Publication-Status: published as Fiscal Remedies for Japan's Slump, Laurence M. Ball. in Monetary Policy with Very Low Inflation in the Pacific Rim, Ito and Rose. 2006
Abstract: This paper asks how a fiscal expansion would affect Japan. It uses a textbook-style macro model calibrated to fit the Japanese economy. According to the results, Japan's output slump would be ended by a fiscal transfer of 6.6% of GDP. This policy raises the debt-income ratio in the short run, but it reduces this ratio in the long run through higher inflation and tax revenue. The financing of the transfer -- bonds or money -- affects debt in the short run but not the long run.
Handle: RePEc:nbr:nberwo:11374
Template-Type: ReDIF-Paper 1.0
Title: A Simple Scheme to Improve the Efficiency of Referenda
Author-Name: Alessandra Casella
Author-Person: pca496
Author-Name: Andrew Gelman
Note: POL
Number: 11375
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11375
File-URL: http://www.nber.org/papers/w11375.pdf
File-Format: application/pdf
Publication-Status: published as Casella, Alessandra & Gelman, Andrew, 2008. "A simple scheme to improve the efficiency of referenda," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2240-2261, October.
Abstract: This paper proposes a simple scheme designed to elicit and reward intensity of preferences in referenda: voters faced with a number of binary proposals are given one regular vote for each proposal plus an additional number of bonus votes to cast as desired. Decisions are taken according to the majority of votes cast. In our base case, where there is no systematic difference between proposals' supporters and opponents, there is always a positive number of bonus votes such that ex ante utility is increased by the scheme, relative to simple majority voting. When the distributions of valuations of supporters and opponents differ, the improvement in efficiency is guaranteed only if the distributions can be ranked according to first order stochastic dominance. If they are, however, the existence of welfare gains is independent of the exact number of bonus votes.
Handle: RePEc:nbr:nberwo:11375
Template-Type: ReDIF-Paper 1.0
Title: Does Corporate Ownership Matter? Service Provision in the Hospital Industry
Classification-JEL: I1; L3; L2
Author-Name: Jill R. Horwitz
Note: EH
Number: 11376
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11376
File-URL: http://www.nber.org/papers/w11376.pdf
File-Format: application/pdf
Abstract: Three types of firms — nonprofit, for-profit, and government — own U.S. hospitals, yet we do not know whether ownership results in the specialization of medical service provision. This study of over 30 medical services in urban, general hospitals (1988-2000) shows that ownership types specialize in medical services according to the profitability of those services. The paper examines three theories to explain the differences: 1) objectives, 2) capital prices, and 3) market characteristics. The findings are best explained by differences in the objectives adopted by hospital types rather than differences in capital constraints faced by them. Preliminary evidence suggests that hospital behavior depends on the ownership form of neighboring hospitals.
Handle: RePEc:nbr:nberwo:11376
Template-Type: ReDIF-Paper 1.0
Title: Religious Market Structure, Religious Participation, and Outcomes: Is Religion Good for You?
Classification-JEL: H3; N4
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: LS PE
Number: 11377
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11377
File-URL: http://www.nber.org/papers/w11377.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan. “Religious Market Structure, Religious Participation and Outcomes: Is Religion Good for You?” Advances in Economic Analysis and Policy 5, 1 (2005).
Abstract: Religion plays an important role in the lives of many Americans, but there is relatively little study by economists of the implications of religiosity for economic outcomes. This likely reflects the enormous difficulty inherent in separating the causal effects of religiosity from other factors that are correlated with outcomes. In this paper, I propose a potential solution to this long standing problem, by noting that a major determinant of religious participation is religious market density, or the share of the population in an area which is of an individual's religion. I make use of the fact that exogenous predictions of market density can be formed based on area ancestral mix. That is, I relate religious participation and economic outcomes to the correlation of the religious preference of one's own heritage with the religious preference of other heritages that share one's area. I use the General Social Survey (GSS) to model the impact of market density on church attendance, and micro-data from the 1990 Census to model the impact on economic outcomes. I find that a higher market density leads to a significantly increased level of religious participation, and as well to better outcomes according to several key economic indicators: higher levels of education and income, lower levels of welfare receipt and disability, higher levels of marriage, and lower levels of divorce.
Handle: RePEc:nbr:nberwo:11377
Template-Type: ReDIF-Paper 1.0
Title: An Investigation of the Effects of Alcohol Consumption and Alcohol Policies on Youth Risky Sexual Behaviors
Classification-JEL: I0
Author-Name: Sara Markowitz
Author-Person: pma138
Author-Name: Robert Kaestner
Author-Person: pka42
Author-Name: Michael Grossman
Author-Person: pgr107
Note: CH EH
Number: 11378
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11378
File-URL: http://www.nber.org/papers/w11378.pdf
File-Format: application/pdf
Publication-Status: published as Markowitz, Sara, Robert Kaestner and Michael Grossman. "An Investigation Of The Effects Of Alcohol Consumption And Alcohol Policies On Youth Risky Sexual Behaviors," American Economic Review, 2005, v95(2,May), 263-266.
Abstract: The problems of teen pregnancy, HIV/AIDS and the high rates of other sexually transmitted diseases among youth have lead to widespread concern with the sexual behaviors of teenagers. Alcohol use is one of the most commonly cited correlates of risky sexual behavior. The purpose of this research is to investigate the causal role of alcohol in determining sexual activity and risky sexual behavior among teenagers and young adults. This research also addresses the question of whether there are public policies that can reduce the risky sexual behavior that results in harmful consequences. Individual and aggregate level data are used to investigate these questions. Results show that alcohol use appears to have no causal influence in determining whether or not a teenage has sex. However, alcohol use may lower contraception use among sexually active teens.
Handle: RePEc:nbr:nberwo:11378
Template-Type: ReDIF-Paper 1.0
Title: Hospital Integration and Vertical Consolidation: An Analysis of Acquisitions in New York State
Classification-JEL: I1; L2
Author-Name: Robert S. Huckman
Author-Person: phu90
Note: EH
Number: 11379
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11379
File-URL: http://www.nber.org/papers/w11379.pdf
File-Format: application/pdf
Publication-Status: published as Huckman, Robert S. "Hospital Integration And Vertical Consolidation: An Analysis Of Acquisitions In New York State," Journal of Health Economics, 2006, v25(1,Jan), 58-80.
Abstract: While prior studies tend to view hospital integration through the lens of horizontal consolidation, I provide an analysis of its vertical aspects. I examine the effect of hospital acquisitions in New York State on the distribution of market share for major cardiac procedures across providers in target markets. I find evidence of benefits to acquirers via business stealing, with the resulting redistribution of volume across providers having small effects, if any, on total welfare with respect to cardiac care. The results of this analysis--along with similar assessments for other services--can be incorporated into future studies of hospital consolidation.
Handle: RePEc:nbr:nberwo:11379
Template-Type: ReDIF-Paper 1.0
Title: Ultra High Frequency Volatility Estimation with Dependent Microstructure Noise
Classification-JEL: G12; C22
Author-Name: Yacine Ait-Sahalia
Author-Person: pai23
Author-Name: Per A. Mykland
Author-Name: Lan Zhang
Note: AP
Number: 11380
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11380
File-URL: http://www.nber.org/papers/w11380.pdf
File-Format: application/pdf
Publication-Status: published as Aït-Sahalia, Yacine & Mykland, Per A. & Zhang, Lan, 2011. "Ultra high frequency volatility estimation with dependent microstructure noise," Journal of Econometrics, Elsevier, vol. 160(1), pages 160-175, January.
Abstract: We analyze the impact of time series dependence in market microstructure noise on the properties of estimators of the integrated volatility of an asset price based on data sampled at frequencies high enough for that noise to be a dominant consideration. We show that combining two time scales for that purpose will work even when the noise exhibits time series dependence, analyze in that context a refinement of this approach based on multiple time scales, and compare empirically our different estimators to the standard realized volatility.
Handle: RePEc:nbr:nberwo:11380
Template-Type: ReDIF-Paper 1.0
Title: South Korea's Experience with International Capital Flows
Classification-JEL: F3
Author-Name: Marcus Noland
Author-Person: pno56
Note: IFM
Number: 11381
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11381
File-URL: http://www.nber.org/papers/w11381.pdf
File-Format: application/pdf
Publication-Status: published as South Korea's Experience with International Capital Flows, Marcus Noland. in Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, Edwards. 2007
Abstract: South Korea's experience is unparalleled in its combination of sustained prosperity, capital controls, and financial crisis. Over several decades, South Korea experienced rapid sustained growth in the presence of capital controls. These controls and the de-linking of domestic and international financial markets were an essential component of the country's state-led development strategy. As the country developed, opportunities for easy technological catch-up eroded, requiring more sophisticated corporate and financial sector decision-making, but decades of financial repression had bequeathed a bureaucratized financial system and a formidable constellation of incumbent stakeholders opposed to transition to a more market-oriented development model. Liberalization undertaken in the 1990s was less a product of textbook economic analysis than of parochial politicking. Capital account liberalization program affected the timing, magnitude, and particulars of the 1997-98 crisis. Despite considerable reforms undertaken since the crisis, concerns remain about both South Korea's lending culture and its authorities' capacity to successfully regulate the more complex financial system. The main lesson of the South Korean case appear to be that while the state-led model may deliver impressive initial gains, transitioning out of this approach presents an exceedingly complex challenge of political-economy.
Handle: RePEc:nbr:nberwo:11381
Template-Type: ReDIF-Paper 1.0
Title: International Borrowing, Capital Controls and the Exchange Rate: Lessons from Chile
Classification-JEL: E51; F31; F32; F34
Author-Name: Kevin Cowan
Author-Person: pco175
Author-Name: Jose De Gregorio
Author-Person: pde80
Note: IFM
Number: 11382
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11382
File-URL: http://www.nber.org/papers/w11382.pdf
File-Format: application/pdf
Publication-Status: published as International Borrowing, Capital Controls, and the Exchange Rate: Lessons from Chile, Kevin Cowan, José De Gregorio. in Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, Edwards. 2007
Abstract: This paper analyzes the Chilean experience with capital flows. We discuss the role played by capital controls, financial regulations and the exchange rate regime. The focus is on the period after 1990, the period when Chile returned to international capital markets. We also discuss the early 80s, where a currency collapse triggered a financial crisis in Chile, despite stricter capital controls on inflows than the 90s and tighter currency matching requirements on the banking sector. We conclude that financial regulation and the exchange rate regime are at the center of capital inflows experiences and financial vulnerabilities. Rigid exchange rates induce vulnerabilities, which may lead to sharp capital account reversals. We also discuss three important characteristics of the Chilean experience since the 90s. The first is the fact that most international borrowing is done directly by corporations and it is not intermediated by the banking system. The second is the implication of the free trade agreement of Chilean and the US regarding capital controls. Finally, we examine the Chilean experience following the Asian-Russia crisis, showing that Chile did not suffer a sudden-stop, but a current account reversal due to policy reactions and a sudden-start in capital outflows.
Handle: RePEc:nbr:nberwo:11382
Template-Type: ReDIF-Paper 1.0
Title: Historical Perspective on Global Imbalances
Classification-JEL: F02; F32
Author-Name: Michael D. Bordo
Author-Person: pbo243
Note: DAE ME
Number: 11383
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11383
File-URL: http://www.nber.org/papers/w11383.pdf
File-Format: application/pdf
Abstract: This paper takes an historical perspectives approach to the current episode of global imbalances. I consider four historical episodes which may give some indications as to whether the adjustment to U.S. current account deficit will lead to a 'benign' or 'gloomy' outlook. The episodes are: the transfer of capital in the earlier era of globalization the late nineteenth century; the interwar gold exchange standard; Bretton Woods; and the 1977-79 dollar crisis. I conclude that adjustment in earlier era of globalization has more resonance for the current imbalance than the other scenarios.
Handle: RePEc:nbr:nberwo:11383
Template-Type: ReDIF-Paper 1.0
Title: Incomes in South Africa Since the Fall of Apartheid
Classification-JEL: F0; O1; O5
Author-Name: Murray Leibbrandt
Author-Person: ple227
Author-Name: James Levinsohn
Author-Person: ple386
Author-Name: Justin McCrary
Note: ITI LS
Number: 11384
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11384
File-URL: http://www.nber.org/papers/w11384.pdf
File-Format: application/pdf
Abstract: This paper examines changes in individual real incomes in South Africa between 1995 and 2000. We document substantial declines--on the order of 40%--in real incomes for both men and women. The brunt of the income decline appears to have been shouldered by the young and the non-white. We argue that changes in respondent attributes are insufficient to explain this decline. For most groups, a (conservative) correction for selection into income recipiency explains some, but not all, of the income decline. For other groups, selection is a potential explanation for the income decline. Perhaps the most persuasive explanation of the evidence is substantial economic restructuring of the South African economy in which wages are not bid up to keep pace with price changes due to a differentially slack labor market.
Handle: RePEc:nbr:nberwo:11384
Template-Type: ReDIF-Paper 1.0
Title: Venture Capital Investment Cycles: The Impact of Public Markets
Classification-JEL: G2
Author-Name: Paul Gompers
Author-Person: pgo301
Author-Name: Anna Kovner
Author-Person: pko289
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: David Scharfstein
Author-Person: psc177
Note: AP CH PR
Number: 11385
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11385
File-URL: http://www.nber.org/papers/w11385.pdf
File-Format: application/pdf
Publication-Status: published as Gompers, Paul & Kovner, Anna & Lerner, Josh & Scharfstein, David, 2008. "Venture capital investment cycles: The impact of public markets," Journal of Financial Economics, Elsevier, vol. 87(1), pages 1-23, January.
Abstract: It is well documented that the venture capital industry is highly volatile and that much of this volatility is associated with shifting valuations and activity in public equity markets. This paper examines how changes in public market signals affected venture capital investing between 1975 and 1998. We find that venture capitalists with the most industry experience increase their investments the most when public market signals become more favorable. Their reaction to an increase is greater than the reaction of venture capital organizations with relatively little industry experience and those with considerable experience but in other industries. The increase in investment rates does not affect the success of these transactions adversely to a significant extent. These findings are consistent with the view that venture capitalists rationally respond to attractive investment opportunities signaled by public market shifts.
Handle: RePEc:nbr:nberwo:11385
Template-Type: ReDIF-Paper 1.0
Title: A General Formula for the Optimal Level of Social Insurance
Classification-JEL: H5
Author-Name: Raj Chetty
Author-Person: pch161
Note: LS PE
Number: 11386
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11386
File-URL: http://www.nber.org/papers/w11386.pdf
File-Format: application/pdf
Publication-Status: published as Chetty, Raj. "A General Formula For The Optimal Level Of Social Insurance," Journal of Public Economics, 2006, v90(10-11,Nov), 1879-1901.
Abstract: In an influential paper, Baily (1978) showed that the optimal level of unemployment insurance (UI) in a stylized static model depends on only three parameters: risk aversion, the consumption-smoothing benefit of UI, and the elasticity of unemployment durations with respect to the benefit rate. This paper examines the key economic assumptions under which these parameters determine the optimal level of social insurance. A Baily-type expression, with an adjustment for precautionary saving motives, holds in a very general class of dynamic models subject to weak regularity conditions. For example, the simple reduced-form formula derived here applies with arbitrary borrowing constraints, endogenous insurance markets, and search and leisure benefits of unemployment. A counterintuitive aspect of this result is that the optimal benefit rate appears not to depend on (1) any benefit of UI besides consumption-smoothing or (2) the relative magnitudes of income and substitution effects in the link between UI benefits and durations. However, these parameters enter implicitly in the optimal benefit calculation, and estimating them can be useful in testing whether the values of the primary inputs are consistent with observed behavior.
Handle: RePEc:nbr:nberwo:11386
Template-Type: ReDIF-Paper 1.0
Title: India's Experience with Capital Flows: The Elusive Quest for a Sustainable Current Account Deficit
Classification-JEL: F3
Author-Name: Ajay Shah
Author-Person: psh40
Author-Name: Ila Patnaik
Note: IFM
Number: 11387
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11387
File-URL: http://www.nber.org/papers/w11387.pdf
File-Format: application/pdf
Publication-Status: published as India's Experience with Capital Flows: The Elusive Quest for a Sustainable Current Account Deficit, Ajay Shah, Ila Patnaik. in Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, Edwards. 2007
Abstract: From the early 1990s onwards, India has engaged in policies involving trade liberalisation, strong controls on debt flows, and encouragement for portfolio flows and FDI, under a pegged exchange rate regime. Domestic institutional factors have led to relatively little FDI and substantial portfolio flows. There has been significant tension between capital flows and the currency regime. Many tactical details of the intricate reforms to the capital controls derive from the interlocking relationships between monetary policy, the currency regime and capital flows. In the recent period, pegging has given a capital outflow through reserves accumulation which was larger than the substantial net private capital inflows. In March 2004, difficulties of pegging appear to have led to a near-tripling of the nominal rupee-dollar returns volatility, which has reduced outward capital flows. The goal of the early 1990s - of finding a consistent way to augment investment using current account deficits - has remained elusive.
Handle: RePEc:nbr:nberwo:11387
Template-Type: ReDIF-Paper 1.0
Title: The Rise in Firm-Level Volatility: Causes and Consequences
Classification-JEL: E3; O3; D4
Author-Name: Diego Comin
Author-Person: pco55
Author-Name: Thomas Philippon
Author-Person: pph81
Note: EFG
Number: 11388
Creation-Date: 2005-05
Order-URL: http://www.nber.org/papers/w11388
File-URL: http://www.nber.org/papers/w11388.pdf
File-Format: application/pdf
Publication-Status: published as The Rise in Firm-Level Volatility: Causes and Consequences, Diego A. Comin, Thomas Philippon. in NBER Macroeconomics Annual 2005, Volume 20, Gertler and Rogoff. 2006
Abstract: We document that the recent decline in aggregate volatility has been accompanied by a large increase in firm level risk. The negative relationship between firm and aggregate risk seems to be present across industries in the US, and across OECD countries. Firm volatility increases after deregulation. Firm volatility is linked to research and development spending as well as access to external financing. Further, R&D intensity is also associated with lower correlation of sectoral growth with the rest of the economy.
Handle: RePEc:nbr:nberwo:11388
Template-Type: ReDIF-Paper 1.0
Title: Growth or Glamour? Fundamentals and Systematic Risk in Stock Returns
Classification-JEL: G12; G14; N22
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Christopher Polk
Author-Person: ppo238
Author-Name: Tuomo Vuolteenaho
Note: AP
Number: 11389
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11389
File-URL: http://www.nber.org/papers/w11389.pdf
File-Format: application/pdf
Publication-Status: published as John Campbell & Christopher Polk & Tuomo Vuolteenaho, 2005. "Growth or glamour? fundamentals and systemic risk in stock returns," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
Publication-Status: published as John Y. Campbell & Christopher Polk & Tuomo Vuolteenaho, 2010. "Growth or Glamour? Fundamentals and Systematic Risk in Stock Returns," Review of Financial Studies, Society for Financial Studies, vol. 23(1), pages 305-344, January.
Abstract: The cash flows of growth stocks are particularly sensitive to temporary movements in aggregate stock prices (driven by movements in the equity risk premium), while the cash flows of value stocks are particularly sensitive to permanent movements in aggregate stock prices (driven by market-wide shocks to cash flows.) Thus the high betas of growth stocks with the market's discount-rate shocks, and of value stocks with the market's cash-flow shocks, are determined by the cash-flow fundamentals of growth and value companies. Growth stocks are not merely "glamour stocks" whose systematic risks are purely driven by investor sentiment. More generally, accounting measures of firm-level risk have predictive power for firms' betas with market-wide cash flows, and this predictive power arises from the behavior of firms' cash flows. The systematic risks of stocks with similar accounting characteristics are primarily driven by the systematic risks of their fundamentals.
Handle: RePEc:nbr:nberwo:11389
Template-Type: ReDIF-Paper 1.0
Title: Assigning Deviant Youths to Minimize Total Harm
Classification-JEL: I18; I2; K42
Author-Name: Philip J. Cook
Author-Person: pco30
Author-Name: Jens Ludwig
Note: CH EH
Number: 11390
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11390
File-URL: http://www.nber.org/papers/w11390.pdf
File-Format: application/pdf
Publication-Status: published as Dodge, Kenneth A, Thomas J. Dishion, and Jennifer E. Lansford (eds.) Diviant Peer Influences in Programs for Youth: Problems and Solutions. The Guilford Press, 2006.
Abstract: A common practice in the fields of education, mental health, and juvenile justice is to segregate problem youths in groups with deviant peers. Assignments of this sort, which concentrate deviant youths, may facilitate deviant peer influence and lead to perverse outcomes. This possibility adds to the list of arguments in support of "mainstreaming" whenever possible. But there are other concerns that help justify segregated-group assignments, including efficiency of service delivery and protection of the public. Our analysis organizes the discussion about the relevant tradeoffs. First, the number of deviant youths (relative to the size of the relevant population, or to the number of assignment locations) affects whether the harm-minimizing assignment calls for diffusion or segregation. Second, the nature of the problematic behavior is relevant; behavior which has a direct, detrimental effect on others who share the assignment makes a stronger case for segregation. Third, the capacity for behavior control matters, and may make the difference in a choice between segregation and integration. We briefly discuss the empirical literature, which with some exceptions is inadequate to the task of providing clear guidance about harm-minimizing assignment strategies. Finally, we reflect briefly on the medical-practice principle "first do no harm," and contrast it with the claims of potential victims of deviants.
Handle: RePEc:nbr:nberwo:11390
Template-Type: ReDIF-Paper 1.0
Title: Is Cash Negative Debt? A Hedging Perspective on Corporate Financial Policies
Classification-JEL: G31
Author-Name: Viral V. Acharya
Author-Person: pac33
Author-Name: Heitor Almeida
Author-Name: Murillo Campello
Author-Person: pca164
Note: CF
Number: 11391
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11391
File-URL: http://www.nber.org/papers/w11391.pdf
File-Format: application/pdf
Publication-Status: published as Acharya, Viral V. & Almeida, Heitor & Campello, Murillo, 2007. "Is cash negative debt? A hedging perspective on corporate financial policies," Journal of Financial Intermediation, Elsevier, vol. 16(4), pages 515-554, October.
Abstract: We model the interplay between cash and debt policies in the presence of financial constraints. While saving cash allows financially constrained firms to hedge against future income shortfalls, reducing debt - "saving borrowing capacity" - is a more effective way of securing future investment in high cash flow states. This trade-off implies that constrained firms will allocate excess cash flows into cash holdings if their hedging needs are high (i.e., if the correlation between operating cash flows and investment opportunities is low). However, constrained firms will use excess cash flows to reduce current debt if their hedging needs are low. The empirical examination of cash and debt policies of a large sample of constrained and unconstrained firms reveals evidence that is consistent with our theory. In particular, our evidence shows that financially constrained firms with high hedging needs have a strong propensity to save cash out of cash flows, while showing no propensity to reduce outstanding debt. In contrast, constrained firms with low hedging needs systematically channel free cash flows towards debt reduction, as opposed to cash savings. Our analysis points to an important hedging motive behind standard financial policies such as cash and debt management. It suggests that cash should not be viewed as negative debt.
Handle: RePEc:nbr:nberwo:11391
Template-Type: ReDIF-Paper 1.0
Title: Optimal Policy Projections
Classification-JEL: E52; E58
Author-Name: Lars O. Svensson
Author-Person: psv2
Author-Name: Robert J. Tetlow
Author-Person: pte28
Note: EFG IFM ME
Number: 11392
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11392
File-URL: http://www.nber.org/papers/w11392.pdf
File-Format: application/pdf
Publication-Status: published as Lars E.O. Svensson & Robert J. Tetlow, 2005. "Optimal Policy Projections," International Journal of Central Banking, International Journal of Central Banking, vol. 1(3), December.
Abstract: We outline a method to provide advice on optimal monetary policy while taking policymakers' judgment into account. The method constructs Optimal Policy Projections (OPPs) by extracting the judgment terms that allow a model, such as the Federal Reserve Board's FRB/US model, to reproduce a forecast, such as the Greenbook forecast. Given an intertemporal loss function that represents monetary policy objectives, OPPs are the projections - of target variables, instruments, and other variables of interest -that minimize that loss function for given judgment terms. The method is illustrated by revisiting the Greenbook forecasts of February 1997 and November 1999, in each case using the vintage of the FRB/US model that was in place at that time. These two particular forecasts were chosen, in part, because they were at the beginning and the peak, respectively, of the late 1990s boom period. As such, they differ markedly in their implied judgments of the state of the world, and our OPPs illustrate this difference. For a conventional loss function, our OPPs provide significantly better performance than Taylor-rule simulations.
Handle: RePEc:nbr:nberwo:11392
Template-Type: ReDIF-Paper 1.0
Title: Market Size, Trade, and Productivity
Classification-JEL: F12; R13
Author-Name: Marc J. Melitz
Author-Person: pme260
Author-Name: Gianmarco I.P. Ottaviano
Author-Person: pot15
Note: ITI
Number: 11393
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11393
File-URL: http://www.nber.org/papers/w11393.pdf
File-Format: application/pdf
Publication-Status: published as Marc J. Melitz & Giancarlo I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Blackwell Publishing, vol. 75(1), pages 295-316, 01.
Abstract: We develop a monopolistically competitive model of trade with firm heterogeneity - in terms of productivity differences - and endogenous differences in the 'toughness' of competition across markets - in terms of the number and average productivity of competing firms. We analyze how these features vary across markets of different size that are not perfectly integrated through trade; we then study the effects of different trade liberalization policies. In our model, market size and trade affect the toughness of competition, which then feeds back into the selection of heterogeneous producers and exporters in that market. Aggregate productivity and average markups thus respond to both the size of a market and the extent of its integration through trade (larger, more integrated markets exhibit higher productivity and lower markups). Our model remains highly tractable, even when extended to a general framework with multiple asymmetric countries integrated to different extents through asymmetric trade costs. We believe this provides a useful modeling framework that is particularly well suited to the analysis of trade and regional integration policy scenarios in an environment with heterogeneous firms and endogenous markups.
Handle: RePEc:nbr:nberwo:11393
Template-Type: ReDIF-Paper 1.0
Title: Evaluating the Role of Brown vs. Board of Education in School Equalization, Desegregation, and the Income of African Americans
Classification-JEL: J7; I28; N32
Author-Name: Orley Ashenfelter
Author-Person: pas9
Author-Name: William J. Collins
Author-Person: pco315
Author-Name: Albert Yoon
Note: ED LS
Number: 11394
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11394
File-URL: http://www.nber.org/papers/w11394.pdf
File-Format: application/pdf
Publication-Status: published as Orley Ashenfelter & William J. Collins & Albert Yoon, 2006. "Evaluating the Role of Brown v. Board of Education in School Equalization, Desegregation, and the Income of African Americans," American Law and Economics Review, Oxford University Press, vol. 8(2), pages 213-248.
Abstract: In this paper we study the long-term labor market implications of school resource equalization before Brown and school desegregation after Brown. For cohorts born in the South in the 1920s and 1930s, we find that racial disparities in measurable school characteristics had a substantial influence on black males' earnings and educational attainment measured in 1970, albeit one that was smaller in the later cohorts. When we examine the income of male workers in 1990, we find that southern-born blacks who finished their schooling just before effective desegregation occurred in the South fared poorly compared to southern-born blacks who followed behind them in school by just a few years.
Handle: RePEc:nbr:nberwo:11394
Template-Type: ReDIF-Paper 1.0
Title: Price and the Health Plan Choices of Retirees
Classification-JEL: I11; D12
Author-Name: Thomas C. Buchmueller
Author-Person: pbu179
Note: EH
Number: 11395
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11395
File-URL: http://www.nber.org/papers/w11395.pdf
File-Format: application/pdf
Publication-Status: published as Buchmueller, Thomas. "Price And The Health Plan Choices Of Retirees," Journal of Health Economics, 2006, v25(1,Jan), 81-101.
Abstract: This study analyzes health plan choices of retirees in an employer-sponsored health benefits program that resembles "premium support" models proposed for Medicare. In this program, out-of-pocket premiums depend on when an individual retired and his or her years of service as of that date. Since this price variation is exogenous to unobserved plan attributes and retiree characteristics, it possible to obtain unbiased premium elasticity estimates. The results indicate a significantly negative effect of premiums. The implied elasticities are at the low end of the range found in previous studies on active employees.
Handle: RePEc:nbr:nberwo:11395
Template-Type: ReDIF-Paper 1.0
Title: Party Discipline and Pork Barrel Politics
Classification-JEL: D72; H41
Author-Name: Gene M. Grossman
Author-Person: pgr21
Author-Name: Elhanan Helpman
Author-Person: phe205
Note: IFM ITI PE POL
Number: 11396
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11396
File-URL: http://www.nber.org/papers/w11396.pdf
File-Format: application/pdf
Publication-Status: published as E. Helpman (ed.) Institutions and Economic Performance. Cambridge: Harvard University Press, 2008.
Abstract: Polities differ in the extent to which political parties can pre-commit to carry out promised policy actions if they take power. Commitment problems may arise due to a divergence between the ex ante incentives facing national parties that seek to capture control of the legislature and the ex post incentives facing individual legislators, whose interests may be more parochial. We study how differences in "party discipline" shape fiscal policy choices. In particular, we examine the determinants of national spending on local public goods in a three-stage game of campaign rhetoric, voting, and legislative decision-making. We find that the rhetoric and reality of pork-barrel spending, and also the efficiency of the spending regime, bear a non-monotonic relationship to the degree of party discipline.
Handle: RePEc:nbr:nberwo:11396
Template-Type: ReDIF-Paper 1.0
Title: Equilibrium Impotence: Why the States and Not the American National Government Financed Economic Development in the Antebellum Era
Classification-JEL: N0; N4; N7; H1
Author-Name: John Joseph Wallis
Author-Name: Barry R. Weingast
Author-Person: pwe334
Note: DAE PE POL
Number: 11397
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11397
File-URL: http://www.nber.org/papers/w11397.pdf
File-Format: application/pdf
Abstract: Why did states dominate investments in economic development in early America? Between 1787 and 1860, the national government's $54 million on promoting transportation infrastructure while the states spent $450 million. Using models of legislative choice, we show that Congress could not finance projects that provided benefits to a minority of districts while spreading the taxes over all. Although states faced the same political problems, they used benefit taxation schemes -- for example, by assessing property taxes on the basis of the expected increase in value due to an infrastructure investment. The U.S. Constitution prohibited the federal government from using benefit taxation. Moreover, the federal government's expenditures were concentrated in collections small projects -- such as lighthouses and rivers and harbors -- that spent money in all districts. Federal inaction was the result of the equilibrium political forces in Congress, and hence an equilibrium impotence.
Handle: RePEc:nbr:nberwo:11397
Template-Type: ReDIF-Paper 1.0
Title: Urban Colossus: Why is New York America's Largest City?
Classification-JEL: N0
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Note: EFG
Number: 11398
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11398
File-URL: http://www.nber.org/papers/w11398.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward I. "Urban Colossus: Why Is New York America's Largest City?," FRB New York - Economic Policy Review, 2005, v11(2,Dec), 7-24.
Abstract: New York has been remarkably successful relative to any other large city outside of the sunbelt and it remains the nation's premier metropolis. What accounts for New York's rise and continuing success? The rise of New York in the early nineteenth century is the result of technological changes that moved ocean shipping from a point-to-point system to a hub and spoke system; New York's geography made it the natural hub of this system. Manufacturing then centered in New York because the hub of a transport system is, in many cases, the ideal place to transform raw materials into finished goods. This initial dominance was entrenched by New York's role as the hub for immigration. In the late 20th century, New York's survival is based almost entirely on finance and business services, which are also legacies of the port. In this period, New York's role as a hub still matters, but it is far less important than the edge that density and agglomeration give to the acquisition of knowledge.
Handle: RePEc:nbr:nberwo:11398
Template-Type: ReDIF-Paper 1.0
Title: Corruption, Inequality and Fairness
Classification-JEL: D31; E62; H2; P16
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: George-Marios Angeletos
Author-Person: pan143
Note: PE POL
Number: 11399
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11399
File-URL: http://www.nber.org/papers/w11399.pdf
File-Format: application/pdf
Publication-Status: published as Alesina, Alberto and George-Marios Angeletos. "Corruption, Inequality, And Fairness," Journal of Monetary Economics, 2005, v52(7,Oct), 1227-1244.
Abstract: Bigger governments raise the possibilities for corruption; more corruption may in turn raise the support for redistributive policies that intend to correct the inequality and injustice generated by corruption. We formalize these insights in a simple dynamic model. A positive feedback from past to current levels of taxation and corruption arises either when wealth originating in corruption and rent seeking is considered unfair, or when the ability to engage in corruption is unevenly distributed in the population. This feedback introduces persistence in the size of the government and the levels of corruption and inequality. Multiple steady states exist in some cases.
Handle: RePEc:nbr:nberwo:11399
Template-Type: ReDIF-Paper 1.0
Title: Investor Attention: Overconfidence and Category Learning
Classification-JEL: G0; G1
Author-Name: Lin Peng
Author-Name: Wei Xiong
Author-Person: pxi88
Note: AP
Number: 11400
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11400
File-URL: http://www.nber.org/papers/w11400.pdf
File-Format: application/pdf
Publication-Status: published as Peng, Lin and Wei Xiong. "Investor Attention, Overconfidence And Category Learning," Journal of Financial Economics, 2006, v80(3,Jun), 563-602.
Abstract: Motivated by psychological evidence that attention is a scarce cognitive resource, we model investors' attention allocation in learning and study the effects of this on asset-price dynamics. We show that limited investor attention leads to ``category-learning" behavior, i.e., investors tend to process more market and sector-wide information than firm-specific information. This endogenous structure of information, when combined with investor overconfidence, generates important features observed in return comovement that are otherwise difficult to explain with standard rational expectations models. Our model also demonstrates new cross-sectional implications for return predictability.
Handle: RePEc:nbr:nberwo:11400
Template-Type: ReDIF-Paper 1.0
Title: Real Business Cycle Models: Past, Present, and Future
Classification-JEL: E1
Author-Name: Sergio Rebelo
Note: EFG
Number: 11401
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11401
File-URL: http://www.nber.org/papers/w11401.pdf
File-Format: application/pdf
Publication-Status: published as Rebelo, Sergio. "Real Business Cycle Models: Past, Present And Future," Scandinavian Journal of Economics, 2005, v107(2), 217-238.
Publication-Status: published as S. Rebelo., 2010. "Real Business Cycle Models: Past, Present, and Future," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 10.
Abstract: In this paper I review the contribution of real business cycles models to our understanding of economic fluctuations, and discuss open issues in business cycle research.
Handle: RePEc:nbr:nberwo:11401
Template-Type: ReDIF-Paper 1.0
Title: Efficient Kidney Exchange: Coincidence of Wants in a Structured Market
Classification-JEL: C7; C6
Author-Name: Alvin E. Roth
Author-Person: pro40
Author-Name: Tayfun Sonmez
Author-Name: M. Utku Unver
Author-Person: pun2
Note: EH
Number: 11402
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11402
File-URL: http://www.nber.org/papers/w11402.pdf
File-Format: application/pdf
Publication-Status: published as Roth, Alvin E., Tayfun Sönmez and M. Utku Ünver. "Efficient Kidney Exchange: Coincidence of Wants in Markets with Compatibility-Based Preferences." American Economic Review 97, 3 (June 2007): 828-851.
Abstract: Patients needing kidney transplants may have willing donors who cannot donate to them because of blood or tissue incompatibility. Incompatible patient-donor pairs can exchange donor kidneys with other such pairs. The situation facing such pairs resembles models of the "double coincidence of wants," and relatively few exchanges have been consummated by decentralized means. As the population of available patient-donor pairs grows, the frequency with which exchanges can be arranged will depend in part on how exchanges are organized. We study the potential frequency of exchanges as a function of the number of patient-donor pairs, and the size of the largest feasible exchange. Developing infrastructure to identify and perform 3-way as well as 2-way exchanges will have a substantial effect on the number of transplants, and will help the most vulnerable patients. Larger than 3-way exchanges have much smaller impact. Larger populations of patient-donor pairs increase the percentage of patients of all kinds who can find exchanges.
Handle: RePEc:nbr:nberwo:11402
Template-Type: ReDIF-Paper 1.0
Title: FDI and Trade -- Two Way Linkages?
Classification-JEL: F15; F21; F36; H21
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Ilan Noy
Author-Person: pno49
Note: ITI
Number: 11403
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11403
File-URL: http://www.nber.org/papers/w11403.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua & Noy, Ilan, 2006. "FDI and trade--Two-way linkages?," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(3), pages 317-337, July.
Abstract: The purpose of this paper is to investigate the intertemporal linkages between FDI and disaggregated measures of international trade. We outline a model exemplifying some of these linkages, describe several methods for investigating two-way feedbacks between various categories of trade, and apply them to the recent experience of developing countries. After controlling for other macroeconomic and institutional effects, we find that the strongest feedback between the sub-accounts is between FDI and manufacturing trade. More precisely, applying Geweke (1982)'s decomposition method, we find that most of the linear feedback between trade and FDI (81%) can be accounted for by Granger-causality from FDI gross flows to trade openness (50%) and from trade to FDI (31%). The rest of the total linear feedback is attributable to simultaneous correlation between the two annual series.
Handle: RePEc:nbr:nberwo:11403
Template-Type: ReDIF-Paper 1.0
Title: Importers, Exporters, and Multinationals: A Portrait of Firms in the U.S. that Trade Goods
Classification-JEL: F10; F16; F23; J21
Author-Name: Andrew B. Bernard
Author-Name: J. Bradford Jensen
Author-Person: pje75
Author-Name: Peter K. Schott
Author-Person: psc98
Note: ITI
Number: 11404
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11404
File-URL: http://www.nber.org/papers/w11404.pdf
File-Format: application/pdf
Publication-Status: published as Importers, Exporters and Multinationals: A Portrait of Firms in the U.S. that Trade Goods, Andrew B. Bernard, J. Bradford Jensen, Peter K. Schott. in Producer Dynamics: New Evidence from Micro Data, Dunne, Jensen, and Roberts. 2009
Abstract: This paper provides an integrated view of globally engaged U.S. firms by exploring a newly developed dataset that links U.S. international trade transactions to longitudinal data on U.S. enterprises. These data permit examination of a number of new dimensions of firm activity, including how many products firms trade, how many countries firms trade with, the characteristics of those countries, the concentration of trade across firms, whether firms transact at arms length or with related parties, and whether firms import as well as export. Firms that trade goods play an important role in the U.S., employing more than a third of the U.S. workforce. We find that the most globally engaged U.S. firms, i.e. those that both export to and import from related parties, dominate U.S. trade flows and employment at trading firms. We also find that firms that begin trading between 1993 and 2000 experience especially rapid employment growth and are a major force in overall job creation.
Handle: RePEc:nbr:nberwo:11404
Template-Type: ReDIF-Paper 1.0
Title: The Value of Health and Longevity
Classification-JEL: D11; I10; I18; J19
Author-Name: Kevin M. Murphy
Author-Person: pmu108
Author-Name: Robert H. Topel
Author-Person: pto111
Note: EFG EH LS
Number: 11405
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11405
File-URL: http://www.nber.org/papers/w11405.pdf
File-Format: application/pdf
Publication-Status: published as Murphy, Kevin M. and Robert H. Topel. "The Value Of Health And Longevity," Journal of Political Economy, 2006, v114 (No. 5, Oct), 871-904.
Abstract: We develop an economic framework for valuing improvements to health and life expectancy, based on individuals' willingness to pay. We then apply the framework to past and prospective reductions in mortality risks, both overall and for specific life-threatening diseases. We calculate (i) the social values of increased longevity for men and women over the 20th century; (ii) the social value of progress against various diseases after 1970; and (iii) the social value of potential future progress against various major categories of disease. The historical gains from increased longevity have been enormous. Over the 20th century, cumulative gains in life expectancy were worth over $1.2 million per person for both men and women. Between 1970 and 2000 increased longevity added about $3.2 trillion per year to national wealth, an uncounted value equal to about half of average annual GDP over the period. Reduced mortality from heart disease alone has increased the value of life by about $1.5 trillion per year since 1970. The potential gains from future innovations in health care are also extremely large. Even a modest 1 percent reduction in cancer mortality would be worth nearly $500 billion.
Handle: RePEc:nbr:nberwo:11405
Template-Type: ReDIF-Paper 1.0
Title: Alternative Methods of Price Indexing Social Security: Implications for Benefits and System Financing
Classification-JEL: H55; J14
Author-Name: Andrew G. Biggs
Author-Person: pbi177
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Author-Name: Glenn Springstead
Note: AG PE
Number: 11406
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11406
File-URL: http://www.nber.org/papers/w11406.pdf
File-Format: application/pdf
Publication-Status: published as Biggs, Andrew G., Jeffrey R. Brown and Glenn Springstead. "Alternative Methods Of Price Indexing Social Security: Implications For Benefits And System Financing," National Tax Journal, 2005, v58(3,Sep), 483-504.
Abstract: This paper explains four methods of "price indexing" initial Social Security retirement benefits, and discusses the effect of each method on the fiscal sustainability of Social Security, benefit levels and replacement rates, redistribution, and sensitivity of system finances to demographic and economic shocks. Of these methods, PIA Factor Indexing would generate the largest cost savings while reducing benefit growth at approximately an equal rate for all income levels. Methods that index the AIME, the formula "bend points," or both, would reduce benefit growth at a slower rate and would have different effects on benefit distribution and system sustainability.
Handle: RePEc:nbr:nberwo:11406
Template-Type: ReDIF-Paper 1.0
Title: Tying, Upgrades, and Switching Costs in Durable-Goods Markets
Classification-JEL: L0; L1; L4
Author-Name: Dennis W. Carlton
Author-Person: pca14
Author-Name: Michael Waldman
Author-Person: pwa40
Note: IO
Number: 11407
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11407
File-URL: http://www.nber.org/papers/w11407.pdf
File-Format: application/pdf
Abstract: This paper investigates the role of product upgrades and consumer switching costs in the tying of complementary products. Previous analyses of tying have found that a monopolist of one product cannot increase its profits and reduce social welfare by tying and monopolizing a complementary product if the initial monopolized product is essential, where essential means that all uses of the complementary good require the initial monopolized product. We show that this is not true in durable-goods settings characterized by product upgrades, where we show tying is especially important when consumer switching costs are present. In addition to our results concerning tying our analysis also provides a new rationale for leasing in durable-goods markets. We also discuss various extensions including the role of the reversibility of tying as well as the antitrust implications of our analysis.
Handle: RePEc:nbr:nberwo:11407
Template-Type: ReDIF-Paper 1.0
Title: Inequality, Social Discounting and Estate Taxation
Classification-JEL: C61; D30; D63; H21
Author-Name: Emmanuel Farhi
Author-Person: pfa207
Author-Name: Ivan Werning
Author-Person: pwe141
Note: EFG PE
Number: 11408
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11408
File-URL: http://www.nber.org/papers/w11408.pdf
File-Format: application/pdf
Publication-Status: published as Farhi, Emmanuel and Ivan Werning. “Inequality and Social Discounting.” Journal of Political Economy 115, 3 (June 2007).
Abstract: To what degree should societies allow inequality to be inherited? What role should estate taxation play in shaping the intergenerational transmission of welfare? We explore these questions by modeling altruistically-linked individuals who experience privately observed taste or productivity shocks. Our positive economy is identical to models with infinite-lived individuals where efficiency requires immiseration: inequality grows without bound and everyone's consumption converges to zero. However, under an intergenerational interpretation, previous work only characterizes a particular set of Pareto-efficient allocations: those that value only the initial generation's welfare. We study other efficient allocations where the social welfare criterion values future generations directly, placing a positive weight on their welfare so that the effective social discount rate is lower than the private one. For any such difference in social and private discounting we find that consumption exhibits mean-reversion and that a steady-state, cross-sectional distribution for consumption and welfare exists, where no one is trapped at misery. The optimal allocation can then be implemented by a combination of income and estate taxation. We find that the optimal estate tax is progressive: fortunate parents face higher average marginal tax rates on their bequests.
Handle: RePEc:nbr:nberwo:11408
Template-Type: ReDIF-Paper 1.0
Title: Employee Sentiment and Stock Option Compensation
Classification-JEL: G3; J3
Author-Name: Nittai K. Bergman
Author-Name: Dirk Jenter
Author-Person: pje55
Note: CF
Number: 11409
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11409
File-URL: http://www.nber.org/papers/w11409.pdf
File-Format: application/pdf
Publication-Status: published as Bergman, Nittai K. & Jenter, Dirk, 2007. "Employee sentiment and stock option compensation," Journal of Financial Economics, Elsevier, vol. 84(3), pages 667-712, June.
Abstract: The use of equity-based compensation for employees in the lower ranks of large organizations is a puzzle for standard economic theory: undiversified employees should discount company equity heavily, and any positive incentive effects should be diminished by free rider problems. We analyze whether the popularity of option compensation for rank and file employees may be driven by employee optimism. We develop a model of optimal compensation policy for a firm faced with employees with positive or negative sentiment, and explicitly take into account that current and potential employees are able to purchase equity in the firm through the stock market. We show that employee optimism by itself is insufficient to make equity compensation optimal for the firm. Any behavioral explanation for equity compensation based on employee optimism requires two ingredients: first, employees need be over-optimistic about firm value, and second, firms must be able to extract part of the implied rents even though employees can purchase company equity in the market. Such rent extraction becomes feasible if employees prefer the non-traded compensation options offered by firms to the traded equity offered by the market, or if the traded equity is overvalued. We then provide empirical evidence confirming that firms use broad-based option compensation when boundedly rational employees are likely to be excessively optimistic about company stock, and when employees are likely to have a strict preference for options over stock.
Handle: RePEc:nbr:nberwo:11409
Template-Type: ReDIF-Paper 1.0
Title: What Do Unions Do?: The 2004 M-Brane Stringtwister Edition
Classification-JEL: J0
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 11410
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11410
File-URL: http://www.nber.org/papers/w11410.pdf
File-Format: application/pdf
Publication-Status: published as Freeman, Richard B. "What Do Unions Do? The 2004 M-Brane Stringtwister Edition," Journal of Labor Research, 2005, v26(4,Fall), 641-668.
Publication-Status: published as “What Do Unions Do? The 2004 M-Brane Stringtwister Edition,” Chapter 20 in James T. Bennett and Bruce E. Kaufman, eds. What Do Unions Do? A Twenty-Year Perspective (New Brunswick, NJ: Transaction Publishers, 2007)
Abstract: The Journal of Labor Research 20th anniversary symposium review of What Do Unions Do? offers a unique opportunity to examine how the claims made in the book have fared in ensuing research and to ponder what parts of the book I would change if I could. This paper responds to the 18 critical essays in the journal. It recognizes three major errors of omission: failure to take account of unionism outside the US; failure to analyze public sector unionism; and failure to analyze the effects of unionism on economic growth; and the problem of determining the "optimal level of unionism" on the basis of estimates of what unions do. Ensuing research has found that What Do Unions Do? correctly identified union effects on turnover, fringe benefits, earnings inequality, political action, profits, managerial flexibility and human resource management, and that wage effects vary widely. Estimates of the union effect on productivity tend to be positive but modest, ruling out negative effects on average, but not conclusively establishing positive effects. Critical comments from some of the symposium panelists notwithstanding, I believe that the bulk of the evidence supports the What Do Unions Do? claim that management opposition has been a major factor in the decline in union density in the US.
Handle: RePEc:nbr:nberwo:11410
Template-Type: ReDIF-Paper 1.0
Title: The Impact of State Physical Education Requirements on Youth Physical Activity and Overweight
Classification-JEL: I1; I2
Author-Name: John Cawley
Author-Person: pca6
Author-Name: Chad D. Meyerhoefer
Author-Person: pme235
Author-Name: David Newhouse
Note: EH
Number: 11411
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11411
File-URL: http://www.nber.org/papers/w11411.pdf
File-Format: application/pdf
Publication-Status: published as Cawley, John, Chad Meyerhoefer, and David Newhouse. "The Impact of State Physical Education Requirements on Youth Physical Activity and Overweight." Health Economics, December 2007, 16(12): 1287-1301.
Abstract: To combat childhood overweight, which has risen dramatically in the past three decades, many medical and public health organizations have called for students to spend more time in physical education (PE) classes. This paper is the first to exploit state PE requirements as quasi-natural experiments in order to estimate the causal impact of PE on student activity and weight. We study nationwide data from the YRBSS for 1999, 2001, and 2003 merged with data on state minimum PE requirements from the 1994 and 2000 School Health Policies and Programs Study and the 2001 Shape of the Nation Report.
We find that certain state regulations are effective in raising the number of minutes during which students are active in PE. Our results also indicate that additional PE time raises the number of days per week that students report having exercised or engaged in strength-building activities, but lowers the number of days in which students report light physical activity. PE time has no detectable impact on youth BMI or the probability that a student is overweight. We conclude that while raising PE requirements may make students more active by some (but not all) measures, there is not yet the scientific base to declare raising PE requirements an anti-obesity initiative.
Handle: RePEc:nbr:nberwo:11411
Template-Type: ReDIF-Paper 1.0
Title: Emigration, Labor Supply, and Earnings in Mexico
Classification-JEL: F2; J6
Author-Name: Gordon H. Hanson
Author-Person: pha80
Note: ITI LS
Number: 11412
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11412
File-URL: http://www.nber.org/papers/w11412.pdf
File-Format: application/pdf
Publication-Status: published as Emigration, Labor Supply, and Earnings in Mexico , Gordon H. Hanson. in Mexican Immigration to the United States, Borjas. 2007
Abstract: In this paper, I examine changes in labor supply and earnings across regions of Mexico during the 1990s. I focus the analysis on individuals born in states with either high-exposure or low-exposure to emigration, as measured by historical data on state migration to the United States. During the 1990s, rates of external migration and interval migration were higher among individuals born in high-migration states. Consistent with positive selection of emigrants in terms of observable skill, emigration rates appear to be highest among individuals with earnings in the top half of the wage distribution. Controlling for regional differences in observable characteristics and for initial regional differences in earnings, the distribution of male earnings in high-migration states shifted to the right relative to low-migration states. Over the decade, average hourly earnings in high-migration states rose relative to low-migration states by 6-9%.
Handle: RePEc:nbr:nberwo:11412
Template-Type: ReDIF-Paper 1.0
Title: Liquidity and Expected Returns: Lessons From Emerging Markets
Classification-JEL: G12; G14; G15; F30; F36; F02
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Campbell R. Harvey
Author-Person: pha102
Author-Name: Christian Lundblad
Author-Person: plu185
Note: AP
Number: 11413
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11413
File-URL: http://www.nber.org/papers/w11413.pdf
File-Format: application/pdf
Publication-Status: published as Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2007. "Liquidity and Expected Returns: Lessons from Emerging Markets," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 20(6), pages 1783-1831, November.
Abstract: Given the cross-sectional and temporal variation in their liquidity, emerging equity markets provide an ideal setting to examine the impact of liquidity on expected returns. Our main liquidity measure is a transformation of the proportion of zero daily firm returns, averaged over the month. We find that our liquidity measures significantly predict future returns, whereas alternative measures such as turnover do not. Consistent with liquidity being a priced factor, unexpected liquidity shocks are positively correlated with contemporaneous return shocks and negatively correlated with shocks to the dividend yield. We consider a simple asset pricing model with liquidity and the market portfolio as risk factors and transaction costs that are proportional to liquidity. The model differentiates between integrated and segmented countries and periods. Our results suggest that local market liquidity is an important driver of expected returns in emerging markets, and that the liberalization process has not eliminated its impact.
Handle: RePEc:nbr:nberwo:11413
Template-Type: ReDIF-Paper 1.0
Title: Zero Returns to Compulsory Schooling In Germany: Evidence and Interpretation
Classification-JEL: I21; J24; J31
Author-Name: Jorn-Steffen Pischke
Author-Person: ppi29
Author-Name: Till von Wachter
Author-Person: pvo196
Note: LS
Number: 11414
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11414
File-URL: http://www.nber.org/papers/w11414.pdf
File-Format: application/pdf
Publication-Status: published as Jorn-Steffen Pischke, Till von Wachter. "Zero Returns to Compulsory Schooling In Germany: Evidence and Interpretation" Review of Economics and Statistics 90, August 2008, 592-598.
Abstract: We estimate the impact of compulsory schooling on earnings using the changes in compulsory schooling laws for secondary schools in West German states during the period from 1948 to 1970. While our research design is very similar to studies for various other countries, we find very different estimates of the returns. Most estimates in the literature indicate returns in the range of 10 to 15 percent. We find no return to compulsory schooling in Germany in terms of higher wages. We investigate whether this is due to labor market institutions or the existence of the apprenticeship training system in Germany, but find no evidence for these explanations. We conjecture that the result might be due to the fact that the basic skills most relevant for the labor market are learned earlier in Germany than in other countries.
Handle: RePEc:nbr:nberwo:11414
Template-Type: ReDIF-Paper 1.0
Title: They Don't Invent Them Like They Used To: An Examination of Energy Patent Citations Over Time
Classification-JEL: O33; O38; Q40
Author-Name: David Popp
Note: PR EEE
Number: 11415
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11415
File-URL: http://www.nber.org/papers/w11415.pdf
File-Format: application/pdf
Publication-Status: published as Popp, David. "They Don't Invent Them Like They Used To: An Examination of Energy Patent Citations Over Time.” Economics of Innovation and New Technology 15, 8 (November 2006): 753-776.
Abstract: This paper uses patent citation data to study flows of knowledge across time and across institutions in the field of energy research. Popp (2002) finds the level of energy-saving R&D depends not only on energy prices, but also on the quality of the accumulated knowledge available to inventors. Patent citations are used to represent this quality. This paper explores the pattern of citations in these fields more carefully. I find evidence for diminishing returns to research inputs, both across time and within a given year. To check whether government R&D can help alleviate potential diminishing returns, I pay special attention to citations to government patents. Government patents filed in or after 1981 are more likely to be cited. More importantly, descendants of these government patents are 30 percent more likely to be cited by subsequent patents. Earlier government research was more applied in nature and is not cited more frequently.
Handle: RePEc:nbr:nberwo:11415
Template-Type: ReDIF-Paper 1.0
Title: Happiness and the Human Development Index: The Paradox of Australia
Classification-JEL: J2
Author-Name: David G. Blanchflower
Author-Person: pbl22
Author-Name: Andrew J. Oswald
Note: LS
Number: 11416
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11416
File-URL: http://www.nber.org/papers/w11416.pdf
File-Format: application/pdf
Publication-Status: published as Blanchflower, David G. and Andrew J. Oswald. "Happiness And The Human Development Index: The Paradox Of Australia," Australian Economic Review, 2005, v38(3,Sep), 307-318.
Abstract: According to the well-being measure known as the U.N. Human Development Index, Australia now ranks 3rd in the world and higher than all other English-speaking nations. This paper questions that assessment. It reviews work on the economics of happiness, considers implications for policymakers, and explores where Australia lies in international subjective well-being rankings. Using new data on approximately 50,000 randomly sampled individuals from 35 nations, the paper shows that Australians have some of the lowest levels of job satisfaction in the world. Moreover, among the sub-sample of English-speaking nations, where a common language should help subjective measures to be reliable, Australia performs poorly on a range of happiness indicators. The paper discusses this paradox. Our purpose is not to reject HDI methods, but rather to argue that much remains to be understood in this area.
Handle: RePEc:nbr:nberwo:11416
Template-Type: ReDIF-Paper 1.0
Title: Optimal Fiscal and Monetary Policy in a Medium-Scale Macroeconomic Model: Expanded Version
Classification-JEL: E52; E61; E63
Author-Name: Stephanie Schmitt-Grohe
Author-Person: psc44
Author-Name: Martin Uribe
Note: EFG ME
Number: 11417
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11417
File-URL: http://www.nber.org/papers/w11417.pdf
File-Format: application/pdf
Publication-Status: published as Gertler, Mark and Kenneth Rogoff (eds.) NBER Macroeconomics Annual. MIT Press: Cambridge MA, 2006, 383-425.
Publication-Status: published as Optimal Fiscal and Monetary Policy in a Medium-Scale Macroeconomic Model, Stephanie Schmitt-Grohé, Martín Uribe. in NBER Macroeconomics Annual 2005, Volume 20, Gertler and Rogoff. 2006
Abstract: In this paper, we study Ramsey-optimal fiscal and monetary policy in a medium-scale model of the U.S.\ business cycle. The model features a rich array of real and nominal rigidities that have been identified in the recent empirical literature as salient in explaining observed aggregate fluctuations. The main result of the paper is that price stability appears to be a central goal of optimal monetary policy. The optimal rate of inflation under an income tax regime is half a percent per year with a volatility of 1.1 percent. This result is surprising given that the model features a number of frictions that in isolation would call for a volatile rate of inflation---particularly nonstate-contingent nominal public debt, no lump-sum taxes, and sticky wages. Under an income-tax regime, the optimal income tax rate is quite stable, with a mean of 30 percent and a standard deviation of 1.1 percent. Simple monetary and fiscal rules are shown to implement a competitive equilibrium that mimics well the one induced by the Ramsey policy. When the fiscal authority is allowed to tax capital and labor income at different rates, optimal fiscal policy is characterized by a large and volatile subsidy on capital.
Handle: RePEc:nbr:nberwo:11417
Template-Type: ReDIF-Paper 1.0
Title: International Outsourcing and Incomplete Contracts
Classification-JEL: F1; L14
Author-Name: Barbara J. Spencer
Author-Person: psp2
Note: ITI
Number: 11418
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11418
File-URL: http://www.nber.org/papers/w11418.pdf
File-Format: application/pdf
Publication-Status: published as Spencer, Barbara J. "International Outsourcing And Incomplete Contracts," Canadian Journal of Economics, 2005, v38(4,Nov), 1107-1135.
Abstract: International outsourcing to lower cost countries such as China and India can best be understood through the enrichment of trade models to include concepts from industrial organization and contract theory that explain the vertical organization of production. The combination of trade with the choice of organizational form represents an important new area for both theoretical and empirical research. This survey paper provides a perspective on this new literature so as to gain insights into the forces driving international outsourcing. The paper focuses on relationship-specific investment, incomplete contracts, and also search and matching, as fundamental concepts that explain outsourcing decisions.
Handle: RePEc:nbr:nberwo:11418
Template-Type: ReDIF-Paper 1.0
Title: Can Ranking Hospitals on the Basis of Patients' Travel Distances Improve Quality of Care?
Classification-JEL: I1
Author-Name: Daniel P. Kessler
Note: EH AG
Number: 11419
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11419
File-URL: http://www.nber.org/papers/w11419.pdf
File-Format: application/pdf
Abstract: Conventional outcomes report cards-- public disclosure of information about the patient-background-adjusted health outcomes of individual hospitals and physicians -- may help improve quality, but they may also encourage providers to "game" the system by avoiding sick and/or seeking healthy patients. In this paper, I propose an alternative approach: ranking hospitals on the basis of the travel distances of their Medicare patients. At least in theory, a distance report card could dominate conventional outcomes report cards: a distance report card might measure quality of care at least as well but suffer less from selection problems. I use data on elderly Medicare beneficiaries with heart attack and stroke from 1994 and 1999 to show that a distance report card would be both valid -- that is, correlated with true quality -- and able to distinguish confidently among hospitals -- that is, able to reject at conventional significance levels the hypothesis that the true quality of a low-ranked hospital was the same as the quality of the average hospital. The hypothetical distance report card I propose compares favorably to (although does not necessarily dominate) the California AMI outcomes report card.
Handle: RePEc:nbr:nberwo:11419
Template-Type: ReDIF-Paper 1.0
Title: Do Report Cards Tell Consumers Anything They Don't Already Know? The Case of Medicare HMOs
Classification-JEL: D8; H4; I1
Author-Name: Leemore Dafny
Author-Name: David Dranove
Author-Person: pdr111
Note: AG EH
Number: 11420
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11420
File-URL: http://www.nber.org/papers/w11420.pdf
File-Format: application/pdf
Publication-Status: published as Dafny, Leemore and David Dranove. “Do Report Cards Tell Consumers Anything They Don’t Already Know? The Case of Medicare HMOs.” The RAND Journal of Economics 39, 3 (Autumn 2008): 790-821.
Abstract: The use of government-mandated report cards to diminish uncertainty about the quality of products and services is widespread. However, report cards will have little effect if they simply confirm consumers' prior beliefs. Moreover, documented "responses" to report cards may reflect learning about quality that would have occurred in their absence ("market-based learning"). Using panel data on Medicare HMO market shares between 1994 and 2002, we examine the relationship between enrollment and quality before and after report cards were mailed to 40 million Medicare beneficiaries in 1999 and 2000. We find evidence that consumers learn from both public report cards and market-based sources, with the latter having a larger impact during our study period. Consumers are especially sensitive to both sources of information when the variance in HMO quality is greater. The effect of report cards is driven by beneficiaries' responses to consumer satisfaction scores; other reported quality measures such as the mammography rate did not affect enrollment decisions.
Handle: RePEc:nbr:nberwo:11420
Template-Type: ReDIF-Paper 1.0
Title: Are Durable Goods Consumers Forward Looking? Evidence from College Textbooks
Classification-JEL: L2; L6; D9
Author-Name: Judith Chevalier
Author-Person: pch151
Author-Name: Austan Goolsbee
Author-Person: pgo49
Note: IO
Number: 11421
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11421
File-URL: http://www.nber.org/papers/w11421.pdf
File-Format: application/pdf
Publication-Status: published as Judith Chevalier & Austan Goolsbee, 2009. "Are Durable Goods Consumers Forward-Looking? Evidence from College Textbooks," The Quarterly Journal of Economics, MIT Press, vol. 124(4), pages 1853-1884, November.
Abstract: Popular wisdom holds that publishers revise college textbooks mainly to kill off the secondary market for used books. While this behavior might be profitable if consumers are myopic, uninformed or have high short-run discount rates (that exceed the publishers'), neoclassical authors have noted that it will typically not be profitable if publishers can precommit not to cut prices and if consumers are forward-looking and have similar discount rates as the publishers; the consumer's willingness to pay for new books falls if they know that they cannot resell their used books. Using a large new dataset on all textbooks sold in psychology, biology and economics in the 10 semesters from 1997 to 2001, we estimate a demand system for books to test whether textbook consumers are forward-looking. The data strongly support the view that students are forward-looking with low short-run discount rates and that they have rational expectations of publishers' revision behavior. When the students buy their textbooks, they correctly take into account the probability that they will not be able to resell their books at the end of the semester due to a new edition release. Conditional on faculty assignment behavior, simulation results suggest that students are sufficiently forward-looking that publishers could not raise revenues by accelerating current revision cycles.
Handle: RePEc:nbr:nberwo:11421
Template-Type: ReDIF-Paper 1.0
Title: Dating Business Cycle Turning Points
Classification-JEL: E32
Author-Name: Marcelle Chauvet
Author-Person: pch41
Author-Name: James D. Hamilton
Author-Person: pha60
Note: EFG
Number: 11422
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11422
File-URL: http://www.nber.org/papers/w11422.pdf
File-Format: application/pdf
Publication-Status: published as Milas, Costas, Philip Rothman, and Dick van Dijk (eds.) Nonlinear Time Series Analysis of Business Cycles. The Netherlands: Elsevier, 2006.
Abstract: This paper discusses formal quantitative algorithms that can be used to identify business cycle turning points. An intuitive, graphical derivation of these algorithms is presented along with a description of how they can be implemented making very minimal distributional assumptions. We also provide the intuition and detailed description of these algorithms for both simple parametric univariate inference as well as latent-variable multiple-indicator inference using a state-space Markov-switching approach. We illustrate the promise of this approach by reconstructing the inferences that would have been generated if parameters had to be estimated and inferences drawn based on data as they were originally released at each historical date. Waiting until one extra quarter of GDP growth is reported or one extra month of the monthly indicators released before making a call of a business cycle turning point helps reduce the risk of misclassification. We introduce two new measures for dating business cycle turning points, which we call the "quarterly real-time GDP-based recession probability index" and the "monthly real-time multiple-indicator recession probability index" that incorporate these principles. Both indexes perform quite well in simulation with real-time data bases. We also discuss some of the potential complicating factors one might want to consider for such an analysis, such as the reduced volatility of output growth rates since 1984 and the changing cyclical behavior of employment. Although such refinements can improve the inference, we nevertheless find that the simpler specifications perform very well historically and may be more robust for recognizing future business cycle turning points of unknown character.
Handle: RePEc:nbr:nberwo:11422
Template-Type: ReDIF-Paper 1.0
Title: Ethnic Identification, Intermarriage, and Unmeasured Progress by Mexican Americans
Classification-JEL: J12; J15; J62
Author-Name: Brian Duncan
Author-Name: Stephen J. Trejo
Author-Person: ptr78
Note: LS
Number: 11423
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11423
File-URL: http://www.nber.org/papers/w11423.pdf
File-Format: application/pdf
Publication-Status: published as Ethnic Identification, Intermarriage, and Unmeasured Progress by Mexican Americans , Brian Duncan, Stephen J. Trejo. in Mexican Immigration to the United States, Borjas. 2007
Abstract: Using Census and CPS data, we show that U.S.-born Mexican Americans who marry non-Mexicans are substantially more educated and English proficient, on average, than are Mexican Americans who marry co-ethnics (whether they be Mexican Americans or Mexican immigrants). In addition, the non-Mexican spouses of intermarried Mexican Americans possess relatively high levels of schooling and English proficiency, compared to the spouses of endogamously married Mexican Americans. The human capital selectivity of Mexican intermarriage generates corresponding differences in the employment and earnings of Mexican Americans and their spouses. Moreover, the children of intermarried Mexican Americans are much less likely to be identified as Mexican than are the children of endogamous Mexican marriages. These forces combine to produce strong negative correlations between the education, English proficiency, employment, and earnings of Mexican-American parents and the chances that their children retain a Mexican ethnicity. Such findings raise the possibility that selective ethnic "attrition" might bias observed measures of intergenerational progress for Mexican Americans.
Handle: RePEc:nbr:nberwo:11423
Template-Type: ReDIF-Paper 1.0
Title: Determinants of Vertical Integration: Finance, Contracts, and Regulation
Classification-JEL: G30; G34; L22; L23
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Simon Johnson
Author-Person: pjo44
Author-Name: Todd Mitton
Note: CF IO
Number: 11424
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11424
File-URL: http://www.nber.org/papers/w11424.pdf
File-Format: application/pdf
Publication-Status: published as Daron Acemoglu & Simon Johnson & Todd Mitton, 2009. "Determinants of Vertical Integration: Financial Development and Contracting Costs," Journal of Finance, American Finance Association, vol. 64(3), pages 1251-1290, 06.
Abstract: We study the determinants of vertical integration in a new dataset of over 750,000 firms from 93 countries. Existing evidence suggests the presence of large cross-country differences in the organization of firms, which may be related to differences in financial development, contracting costs or regulation. We find cross-country correlations between vertical integration on the one hand and financial development, contracting costs, and entry barriers on the other that are consistent with these "priors". Nevertheless, we also show that these correlations are almost entirely driven by industrial composition; countries with more limited financial development, higher contracting costs or greater entry barriers are concentrated in industries with a high propensity for vertical integration. Once we control for differences in industrial composition, none of these factors are correlated with average vertical integration. However, we also find a relatively robust differential effect of financial development across industries; countries with less-developed financial markets are significantly more integrated in industries that are more human capital or technology intensive.
Handle: RePEc:nbr:nberwo:11424
Template-Type: ReDIF-Paper 1.0
Title: Opportunities for Improving the Drug Development Process: Results from a Survey of Industry and the FDA
Classification-JEL: I1; H11; K23
Author-Name: Ernst R. Berndt
Author-Name: Adrian H. B. Gottschalk
Author-Name: Matthew W. Strobeck
Note: EH PR
Number: 11425
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11425
File-URL: http://www.nber.org/papers/w11425.pdf
File-Format: application/pdf
Publication-Status: published as Berndt, Ernst R., Adrian H. B. Gottschalk, Matthew W. Strobeck. "Opportunities for Improving the Drug Development Process: Results from a Survey of Industry and the FDA." Innovation Policy and the Economy 6 (2006): 91-121.
Publication-Status: published as Opportunities for Improving the Drug Development Process: Results from a Survey of Industry and the FDA, Ernst R. Berndt, Adrian H. B. Gottschalk, Matthew W. Strobeck. in Innovation Policy and the Economy, Volume 6, Jaffe, Lerner, and Stern. 2006
Abstract: In the United States, the Food and Drug Administration (FDA) agency is responsible for regulating the safety and efficacy of biopharmaceutical drug products. Furthermore, the FDA is tasked with speeding new medical innovations to market. These two missions create an inherent tension within the agency and between the agency and key stakeholders. Oftentimes, communications and interactions between regulated companies and the FDA suffer. The focus of this research is on the interactions between the FDA and the biopharmaceutical companies that perform drug R&D. To assess the current issues and state of communication and interaction between the FDA and industry, we carried out a survey of industry leadership in R&D and regulatory positions as well as senior leadership at the FDA who have responsibility for drug evaluation and oversight. Based on forty-nine industry and eight FDA interviews we conducted, we found that industry seeks additional structured and informal interactions with the FDA, especially during Phase II of development. Overall, industry placed greater value on additional communication than did the FDA. Furthermore, industry interviewees indicated that they were willing to pay PDUFA-like fees during clinical development to ensure that the FDA could hire additional, well-qualified staff to assist with protocol reviews and decision-making. Based on our survey and discussions, we uncovered several thematic opportunities to improve interactions between the FDA and industry and to reduce clinical development times: 1) develop metrics and goals at the FDA for clinical development times in exchange for PDUFA like fees; 2) establish an oversight board consisting of industry, agency officials, and premier external scientists (possibly at NIH or CDC) to evaluate and audit retrospectively completed and terminated drug projects; and 3) construct a knowledge database that can simultaneously protect proprietary data while allowing sponsor companies to understand safety issues and problems of previously developed/failed drug programs. While profound scientific and medical challenges face the FDA and industry, the first step to reducing development times and associated costs and facilitating innovation is to provide an efficient regulatory process that reduces unnecessary uncertainty and delays due to lack of communication and interaction.
Handle: RePEc:nbr:nberwo:11425
Template-Type: ReDIF-Paper 1.0
Title: Investor Competence, Trading Frequency, and Home Bias
Classification-JEL: G11; G15; F30
Author-Name: John R. Graham
Author-Name: Campbell R. Harvey
Author-Person: pha102
Author-Name: Hai Huang
Author-Person: phu198
Note: AP
Number: 11426
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11426
File-URL: http://www.nber.org/papers/w11426.pdf
File-Format: application/pdf
Publication-Status: published as Graham, John R., Hai Huang, and Cam Harvey. "Investor Competence, Trading Frequency, and Home Bias." Management Science 55 (2009): 1094-1106.
Abstract: People are more willing to bet on their own judgments when they feel skillful or knowledgeable (Heath and Tversky (1991)). We investigate whether this "competence effect" influences trading frequency and home bias. We find that investors who feel competent trade more often and have a more internationally diversified portfolio. We also find that male investors, and investors with higher income or more education, are more likely to perceive themselves as competent investors than are female investors, and investors with lower income or less education. Our results are unlikely to be explained by other hypotheses, such as overconfidence or information advantage. Finally, we separately establish a link between optimism towards the home market and international portfolio diversification.
Handle: RePEc:nbr:nberwo:11426
Template-Type: ReDIF-Paper 1.0
Title: Death and the City: Chicago's Mortality Transition, 1850-1925
Classification-JEL: N0; N9
Author-Name: Joseph P. Ferrie
Author-Name: Werner Troesken
Author-Person: ptr352
Note: DAE
Number: 11427
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11427
File-URL: http://www.nber.org/papers/w11427.pdf
File-Format: application/pdf
Abstract: Between 1850 and 1925, the crude death rate in Chicago fell by 60 percent, driven by reductions in infectious disease rates and infant and child mortality. What lessons might be drawn from the mortality transition in Chicago, and American cities more generally? What were the policies that had the greatest effect on infectious diseases and childhood mortality? Were there local policies that slowed the mortality transition? If the transition to low mortality in American cities was driven by forces largely outside the control of local governments (higher per capita incomes or increases in the amount and quality of calories available to urban dwellers from rising agricultural productivity), then expensive public health projects, such as the construction of public water and sewer systems, probably should have taken a back seat to broader national policies to promote overall economic growth. The introduction of pure water explains between 30 and 50 percent of Chicago's mortality decline, and that other interventions, such as the introduction of the diphtheria antitoxin and milk inspection had much smaller effects. These findings have important implications for current policy debates and economic development strategies.
Handle: RePEc:nbr:nberwo:11427
Template-Type: ReDIF-Paper 1.0
Title: Impacts of Policy Reforms on Labor Migration From Rural Mexico to the United States
Classification-JEL: F1; J6; J4; O1
Author-Name: Susan M. Richter
Author-Name: J. Edward Taylor
Author-Name: Antonio Naude
Note: ITI LS
Number: 11428
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11428
File-URL: http://www.nber.org/papers/w11428.pdf
File-Format: application/pdf
Publication-Status: published as Richter, Susan M., J. Edward Taylor, and Antonio Yunez-Naude. "Impacts of Policy Reforms on Labor Migration from Rural Mexico to the United States." Mexican Immigration to the United States (2007): 269-88.
Publication-Status: published as Impacts of Policy Reforms on Labor Migration from Rural Mexico to the United States , Susan M. Richter, J. Edward Taylor, Antonio Yúnez-Naude. in Mexican Immigration to the United States, Borjas. 2007
Abstract: Using new survey data from Mexico, a dynamic econometric model is estimated to test the effect of policy changes on the flow of migrant labor from rural Mexico to the United States and test for differential effects of policy changes on male and female migration. We find that both IRCA and NAFTA reduced the share of rural Mexicans working in the United States. Increased U.S. border enforcement had the opposite effect. The impacts of these policy variables are small compared with those of macroeconomic variables. The influence of policy and macroeconomic variables is small compared with that of migration networks, as reflected in past migration by villagers to the United States. The effects of all of these variables on migration propensities differ, quantitatively and in some cases qualitatively, by gender.
Handle: RePEc:nbr:nberwo:11428
Template-Type: ReDIF-Paper 1.0
Title: Establishing Credibility: The Role of Foreign Advisors
Classification-JEL: F30; F32
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM
Number: 11429
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11429
File-URL: http://www.nber.org/papers/w11429.pdf
File-Format: application/pdf
Publication-Status: published as Sebastian Edwards The Decline of Latin American Economies: Growth, Institutions, and Crises, , pages 291-332, 2007.
Abstract: In this paper I analyze the role of foreign advisors in stabilization programs. I discuss from an analytical perspective why foreigners may help a developing country's government put in place a successful stabilization program. This framework is used to analyze Chile's experience with anti-inflationary policies in the mid 1950s. In 1955-58 Chile implemented a stabilization package with the advice of the U.S. consulting firm of Klein-Saks. The Klein-Saks program took place in a period of acute political confrontation. After what was considered to be an initial success -- inflation declined from 85% in 1955 to 17% in 1957 -- the program failed to achieve durable price stability. I argue that the foreign advisors of the Klein-Saks Mission gave initial credibility to the stabilization program launched in 1955. But providing initial credibility was not enough to ensure success. Congress failed to act decisively on the fiscal front. Consequently the fiscal imbalances that had plagued Chile for a long time were reduced, but not eliminated. I present empirical results on the evolution of inflation, exchange rates and interest rates that support my historical analysis.
Handle: RePEc:nbr:nberwo:11429
Template-Type: ReDIF-Paper 1.0
Title: Sunk Costs and Real Options in Antitrust
Classification-JEL: L40; L10; D43
Author-Name: Robert S. Pindyck
Author-Person: ppi130
Note: IO
Number: 11430
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11430
File-URL: http://www.nber.org/papers/w11430.pdf
File-Format: application/pdf
Publication-Status: published as Collins, W. D. (ed.) Issues in Competition Law and Policy. ABA Press, 2008.
Abstract: Sunk costs play a central role in antitrust economics, but are often misunderstood and mismeasured. I will try to clarify some of the conceptual and empirical issues related to sunk costs, and explain their implications for antitrust analysis. I will be particularly concerned with the role of uncertainty. When market conditions evolve unpredictably (as they almost always do), firms incur an opportunity cost when they invest in new capital, because they give up the option to wait for the arrival of new information about the likely returns from the investment. This option value is a sunk cost, and is just as relevant for antitrust analysis as the direct cost of a machine or a factory.
Handle: RePEc:nbr:nberwo:11430
Template-Type: ReDIF-Paper 1.0
Title: Generic Scrip Share and the Price of Brand-Name Drugs: The Role of the Consumer
Classification-JEL: I11; D12; D40
Author-Name: John A. Rizzo
Author-Person: pri334
Author-Name: Richard Zeckhauser
Author-Person: pze7
Note: EH IO
Number: 11431
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11431
File-URL: http://www.nber.org/papers/w11431.pdf
File-Format: application/pdf
Abstract: Generic drug utilization has risen dramatically, from 19% of scrips in 1984 to 47% in 2001, thus bringing significant direct dollar savings. Generic drug use may also yield indirect savings if it lowers the average price of those brand-name drugs that are still purchased. Prior work indicates - and we confirm - that generic competition does not induce brand-name producers to lower prices. However, consumer choices between generic and brand-name drugs could affect the average price of those brand-name drugs that are purchased. We use nationally representative panel data on drug utilization and costs for the years 1996-2001 to examine how the share of an individual's prescriptions filled by generics affects his average out-of-pocket cost for brand-name drugs. Our principal finding is that a higher generic scrip share lowers average brand-name prices to consumers, presumably because consumers are more likely to substitute generics when the price gap is great. This effect is substantial: a 10% increase in the consumer's generic scrip share is associated with a 15.6% decline in the average price he pays for brand-name drugs.
Handle: RePEc:nbr:nberwo:11431
Template-Type: ReDIF-Paper 1.0
Title: Regional Economic Development and Mexican Out-Migration
Classification-JEL: J1
Author-Name: Kurt Unger
Author-Person: pun31
Note: ITI LS
Number: 11432
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11432
File-URL: http://www.nber.org/papers/w11432.pdf
File-Format: application/pdf
Abstract: This paper shows evidence of positive effects in the economic development of sending communities in Mexico due to migration. The principal hypothesis of this study is that remittances, knowledge and experience acquired by migrants during their migratory cycle, can be translated into larger economic growth in the out migration municipalities. This result presupposes that Government could create complementary incentives to take advantage of profitable activities. Economic and migration data for each municipality is used which allows to associate characteristics of communities, migratory flows and the effects in profitable activities. There are three sections. A first section describes the sending municipalities according to migratory intensity and their urban /rural nature. The second section analyzes the relation between remittances and socioeconomic conditions of the communities. In a third section the effect over time is estimated, relating per capita income growth and migratory flows intensity. The most relevant results are the existence of income convergence over time between high and low migration municipalities in the North and South of Mexico. As well, we find a positive and significant relation between per capita income growth and the percentage of households that receive remittances across communities, both at the country level and for the northern and southern regions separately.
Handle: RePEc:nbr:nberwo:11432
Template-Type: ReDIF-Paper 1.0
Title: Prenatal Drug Use and the Production of Infant Health
Classification-JEL: I12
Author-Name: Kelly Noonan
Author-Name: Nancy E. Reichman
Author-Name: Hope Corman
Author-Name: Dhaval Dave
Author-Person: pda245
Note: EH
Number: 11433
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11433
File-URL: http://www.nber.org/papers/w11433.pdf
File-Format: application/pdf
Publication-Status: published as Kelly Noonan & Nancy E. Reichman & Hope Corman & Dhaval Dave, 2007. "Prenatal drug use and the production of infant health," Health Economics, John Wiley & Sons, Ltd., vol. 16(4), pages 361-384.
Abstract: We estimate the effect of illicit drug use during pregnancy on low birth weight. We use data from a national longitudinal study of urban parents that includes post-partum interviews with mothers, hospital medical record data on the mother and newborn, extensive demographic information on both parents, and information about the city where the mother resides. We address the potential endogeneity of prenatal drug use and present estimates using alternative measures of prenatal illicit drug use. Depending on how drug use is measured, we find deleterious effects of illicit drug use on low birth weight that range from 3 to 5 percentage points.
Handle: RePEc:nbr:nberwo:11433
Template-Type: ReDIF-Paper 1.0
Title: Capital Controls, Exchange Rate Volatility and External Vulnerability
Classification-JEL: F30; F32
Author-Name: Sebastian Edwards
Author-Person: ped3
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: IFM
Number: 11434
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11434
File-URL: http://www.nber.org/papers/w11434.pdf
File-Format: application/pdf
Publication-Status: published as Sebastian Edwards & Roberto Rigobon, 2009. "Capital controls on inflows, exchange rate volatility and external vulnerability," Journal of International Economics, vol 78(2), pages 256-267.
Abstract: We use high frequency data and a new econometric methodology to evaluate the effectiveness of controls on capital inflows. We focus on Chile's experience during the 1990s and investigate whether controls on capital inflows reduced Chile's vulnerability to external shocks. We recognize that changes in the controls will affect the way in which different macro variables relate to each other. We take this problem seriously, and we develop a methodology to deal explicitly with it. The main findings may be summarized as follows: (a) A tightening of capital controls on inflows depreciates the exchange rate. (b) We find that the "vulnerability" of the nominal exchange rate to external factors decreases with a tightening of the capital controls. And (c), we find that a tightening of capital controls increases the unconditional volatility of the exchange rate, but makes this volatility less sensitive to external shocks.
Handle: RePEc:nbr:nberwo:11434
Template-Type: ReDIF-Paper 1.0
Title: Age, Women, and Hiring: An Experimental Study
Classification-JEL: J1; J7
Author-Name: Joanna Lahey
Author-Person: pla533
Note: LS AG
Number: 11435
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11435
File-URL: http://www.nber.org/papers/w11435.pdf
File-Format: application/pdf
Publication-Status: published as Lahey, Joanna N. "Age, Women, and Hiring: An Experimental Study." Journal of Human Resources 43, 1 (Winter 2008): 30-56.
Abstract: As the baby boom cohort reaches retirement age, demographic pressures on public programs such as social security may cause policy makers to cut benefits and encourage employment at later ages. This paper reports on a labor market experiment to determine the hiring conditions for older women in entry-level jobs in Boston, MA and St. Petersburg, FL. Differential interviewing by age is found for these jobs. A younger worker is more than 40% more likely to be offered an interview than an older worker. No evidence is found to support taste-based discrimination as a reason for this differential and some suggestive evidence is found to support statistical discrimination.
Handle: RePEc:nbr:nberwo:11435
Template-Type: ReDIF-Paper 1.0
Title: Firms' Demand for Employment-Based Mental Health Benefits
Classification-JEL: I1
Author-Name: Judith Shinogle
Author-Name: David Salkever
Author-Person: psa1313
Note: EH
Number: 11436
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11436
File-URL: http://www.nber.org/papers/w11436.pdf
File-Format: application/pdf
Abstract: Employment-based health insurance is the main source of health coverage for the non-elderly. Few previous studies have examined the factors that impact employer decision-making in selecting the coverage to offer to their employees and none have examined generosity of mental health coverage. This paper uses cross-sectional data from a survey of medium to large firms, including information on employee characteristics, to examine the empirical determinants of mental health coverage choices. We find that the firm's demand for mental health coverage is strongly influenced by employee characteristics. We also find that certain state and local policy interventions directed at enhancing access to mental health care have impacts on coverage decisions. Specifically, public provision of mental health lowers mental health coverage generosity and parity legislation increases mental health generosity. Future research with panel data is warranted to examine the causal effects of these policies.
Handle: RePEc:nbr:nberwo:11436
Template-Type: ReDIF-Paper 1.0
Title: Crafting A Class: The Trade Off Between Merit Scholarships and Enrolling Lower-Income Students
Classification-JEL: I2; J4
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Author-Name: Liang Zhang
Author-Name: Jared Levin
Note: ED LS
Number: 11437
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11437
File-URL: http://www.nber.org/papers/w11437.pdf
File-Format: application/pdf
Publication-Status: published as Ehrenberg, Ronald G., Liang Zhang, and Jared M. Levin. "Crafting a Class: The Trade-Off between Merit Scholarships and Enrolling Lower-Income Students." The Review of Higher Education 29, 2 (Winter 2006): 195-211.
Abstract: Our paper uses institutional-level panel data to testwhether an increase in the number of institutionally funded National Merit Scholarship (NMS) winners at an institution isassociated with a reduction in the number of Pell Grant recipients at the institution. We find that, other factors held constant, an increase in the share of institutionally funded NMS winners in an institution's first-year class is associated with a reduction in the share of Pell Grant recipients among the institution's undergraduate student body and that the magnitude of this relationship is larges at the institutions that enroll the greatest number of NMS students.
Handle: RePEc:nbr:nberwo:11437
Template-Type: ReDIF-Paper 1.0
Title: The Incidence of Pollution Control Policies
Classification-JEL: Q52; H23; H22
Author-Name: Ian W.H. Parry
Author-Person: ppa261
Author-Name: Hilary Sigman
Author-Person: psi55
Author-Name: Margaret Walls
Author-Person: pwa428
Author-Name: Roberton C. Williams III
Author-Person: pwi38
Note: PE EEE
Number: 11438
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11438
File-URL: http://www.nber.org/papers/w11438.pdf
File-Format: application/pdf
Publication-Status: published as Tietenberg, Tom and Henk Folmer (eds.) International Yearbook of Environmental and Resource Economics 2006/2007. Cheltenham, UK: Edward Elgar, 2006.
Abstract: This paper reviews theoretical and empirical literature on the household distribution of the costs and benefits of pollution control policies, and ways of integrating distributional issues into environmental cost/benefit analysis. Most studies find that policy costs fall disproportionately on poorer groups, though this is less pronounced when lifetime income is used, and policies affect prices of inputs used pervasively across the economy. The policy instrument itself is also critical; freely allocated emission permits may hurt the poor the most, as they transfer income to shareholders via scarcity rents created by higher prices, while emissions taxes offer opportunities for progressive revenue recycling. And although low-income households appear to bear a disproportionate share of environmental risks, policies that reduce risks are not always progressive, for example, they may alter property values in ways that benefit the wealthy. The review concludes by noting a number of areas where future research is badly needed.
Handle: RePEc:nbr:nberwo:11438
Template-Type: ReDIF-Paper 1.0
Title: Caught On Tape: Institutional Order Flow and Stock Returns
Classification-JEL: G1
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Tarun Ramadorai
Author-Person: pra44
Author-Name: Tuomo O. Vuolteenaho
Note: AG
Number: 11439
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11439
File-URL: http://www.nber.org/papers/w11439.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, John Y. & Ramadorai, Tarun & Schwartz, Allie, 2009. "Caught on tape: Institutional trading, stock returns, and earnings announcements," Journal of Financial Economics, Elsevier, vol. 92(1), pages 66-91, April.
Abstract: Many questions about institutional trading can only be answered if one can track high-frequency changes in institutional ownership. In the US, however, institutions are only required to report their ownership quarterly in 13-F filings. We infer daily institutional trading behavior from the "tape", the Transactions and Quotes database of the New York Stock Exchange, using both a naive approach and a sophisticated method that best matches quarterly 13-F data. Increases in our measures of institutional flows negatively predict returns, particularly when institutions are selling. We interpret this as evidence that 13-F institutions compensate more patient investors for the service of providing liquidity. We also find that both very large and very small trades signal institutional activity, while medium size trades signal activity by the rest of the market.
Handle: RePEc:nbr:nberwo:11439
Template-Type: ReDIF-Paper 1.0
Title: Wealth Transfers, Contagion, and Portfolio Constraints
Classification-JEL: G12; G15; F31; F36
Author-Name: Anna Pavlova
Author-Person: ppa810
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: IFM
Number: 11440
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11440
File-URL: http://www.nber.org/papers/w11440.pdf
File-Format: application/pdf
Abstract: This paper examines the co-movement among stock market prices and exchange rates within a three-country Center-Periphery dynamic equilibrium model in which agents in the Center country face portfolio constraints. In our model, international transmission occurs through the terms of trade, through the common discount factor for cash flows, and, finally, through an additional channel reflecting the tightness of the portfolio constraints. Portfolio constraints are shown to generate endogenous wealth transfers to or from the Periphery countries. These implicit transfers are responsible for creating contagion among the terms of trade of the Periphery countries, as well as their stock market prices. Under a portfolio constraint limiting investment of the Center country in the stock markets of the Periphery, stock prices also exhibit a flight to quality: a negative shock to one of the Periphery countries depresses stock prices throughout the Periphery, while boosting the stock market in the Center.
Handle: RePEc:nbr:nberwo:11440
Template-Type: ReDIF-Paper 1.0
Title: Multifrequency News and Stock Returns
Classification-JEL: G12; C22
Author-Name: Laurent E. Calvet
Author-Person: pca582
Author-Name: Adlai J. Fisher
Author-Person: pfi214
Note: AP EFG
Number: 11441
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11441
File-URL: http://www.nber.org/papers/w11441.pdf
File-Format: application/pdf
Publication-Status: published as Calvet, Laurent E. and Adlai J. Fisher. "Multifrequency News and Stock Returns." Journal of Financial Economics 86, 1 (October 2007): 178-212.
Abstract: Recent research documents that aggregate stock prices are driven by shocks with persistence levels ranging from daily intervals to several decades. Building on these insights, we introduce a parsimonious equilibrium model in which regime-shifts of heterogeneous durations affect the volatility of dividend news. We estimate tightly parameterized specifications with up to 256 discrete states on daily U.S. equity returns. The multifrequency equilibrium has significantly higher likelihood than the classic Campbell and Hentschel (1992) specification, while generating volatility feedback effects 6 to 12 times larger. We show in an extension that Bayesian learning about stochastic volatility is faster for bad states than good states, providing a novel source of endogenous skewness that complements the "uncertainty" channel considered in previous literature (e.g., Veronesi, 1999). Furthermore, signal precision induces a tradeoff between skewness and kurtosis, and economies with intermediate investor information best match the data.
Handle: RePEc:nbr:nberwo:11441
Template-Type: ReDIF-Paper 1.0
Title: The Risks of Financial Institutions
Classification-JEL: G2; G21; G22; G28; G10; D81
Author-Name: Mark Carey
Author-Person: pca1564
Author-Name: Rene M. Stulz
Note: AP CF
Number: 11442
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11442
File-URL: http://www.nber.org/papers/w11442.pdf
File-Format: application/pdf
Publication-Status: published as Stulz, Rene and Mark Carey (eds.) The Risks of Financial Institutions. Chicago: University of Chicago Press, 2006.
Publication-Status: published as David J. Hand, 2007. "The Risks of Financial Institutions edited by Mark Carey, Rene M. Stulz," International Statistical Review, International Statistical Institute, vol. 75(2), pages 266-267, 08.
Publication-Status: published as Introduction to "The Risks of Financial Institutions", Mark Carey, Rene M. Stulz. in The Risks of Financial Institutions, Carey and Stulz. 2006
Abstract: Over the last twenty years, the consensus view of systemic risk in the financial system that emerged in response to the banking crises of the 1930s and before has lost much of its relevance. This view held that the main systemic problem is runs on solvent banks leading to bank panics. But financial crises of the last two decades have not fit the mold. A new consensus has yet to emerge, but financial institutions and regulators have considerably broadened their assessment of the risks facing financial institutions. The dramatic rise of modern risk management has changed how the risks of financial institutions are measured and how these institutions are managed. However, modern risk management is not without weaknesses that will have to be addressed.
Handle: RePEc:nbr:nberwo:11442
Template-Type: ReDIF-Paper 1.0
Title: The Growth of Executive Pay
Classification-JEL: D23; G32; G38; J33; J44; K22; M14
Author-Name: Lucian Bebchuk
Author-Person: pbe72
Author-Name: Yaniv Grinstein
Author-Person: pgr187
Note: CF LS
Number: 11443
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11443
File-URL: http://www.nber.org/papers/w11443.pdf
File-Format: application/pdf
Publication-Status: published as Bebchuk, Lucian A. and Yaniv Grinstein. “The Growth of Executive Pay.” Oxford Review of Economic Policy 21 (2005): 283-303.
Abstract: This paper examines both empirically and theoretically the growth of U.S. executive pay during the period 1993-2003. During this period, pay has grown much beyond the increase that could be explained by changes in firm size, performance and industry classification. Had the relationship of compensation to size, performance and industry classification remained the same in 2003 as it was in 1993, mean compensation in 2003 would have been only about half of its actual size. During the 1993-2003 period, equity-based compensation has increased considerably in both new economy and old economy firms, but this growth has not been accompanied by a substitution effect, i.e., a reduction in non-equity compensation. The aggregate compensation paid by public companies to their top-five executives during the considered period added up to about $350 billion, and the ratio of this aggregate top-five compensation to the aggregate earnings of these firms increased from 5% in 1993-1995 to about 10% in 2001-2003. After presenting evidence about the growth of pay, we discuss alternative explanations for it. We examine how this growth could be explained under either the arm's length bargaining model of executive compensation or the managerial power model. Among other things, we discuss the relevance of the parallel rise in market capitalizations and in the use of equity-based compensation.
Handle: RePEc:nbr:nberwo:11443
Template-Type: ReDIF-Paper 1.0
Title: Optimal Trading Strategy and Supply/Demand Dynamics
Classification-JEL: G11; G12
Author-Name: Anna Obizhaeva
Author-Person: pob57
Author-Name: Jiang Wang
Note: AP
Number: 11444
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11444
File-URL: http://www.nber.org/papers/w11444.pdf
File-Format: application/pdf
Publication-Status: published as Obizhaeva, Anna A. & Wang, Jiang, 2013. "Optimal trading strategy and supply/demand dynamics," Journal of Financial Markets, Elsevier, vol. 16(1), pages 1-32.
Abstract: The supply/demand of a security in the market is an intertemporal, not a static, object and its dynamics is crucial in determining market participants' trading behavior. Previous studies on the optimal trading strategy to execute a given order focuses mostly on the static properties of the supply/demand. In this paper, we show that the dynamics of the supply/demand is of critical importance to the optimal execution strategy, especially when trading times are endogenously chosen. Using a limit-order-book market, we develop a simple framework to model the dynamics of supply/demand and its impact on execution cost. We show that the optimal execution strategy involves both discrete and continuous trades, not only continuous trades as previous work suggested. The cost savings from the optimal strategy over the simple continuous strategy can be substantial. We also show that the predictions about the optimal trading behavior can have interesting implications on the observed behavior of intraday volume, volatility and prices.
Handle: RePEc:nbr:nberwo:11444
Template-Type: ReDIF-Paper 1.0
Title: Race, Income, and College in 25 Years: The Continuing Legacy of Segregation and Discrimination
Classification-JEL: I2; J15; J7
Author-Name: Alan Krueger
Author-Person: pkr63
Author-Name: Jesse Rothstein
Author-Person: pro180
Author-Name: Sarah Turner
Author-Person: ptu103
Note: ED PE
Number: 11445
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11445
File-URL: http://www.nber.org/papers/w11445.pdf
File-Format: application/pdf
Publication-Status: published as Krueger, Alan, Jesse Rothstein and Sarah Turner. “Race, Income and College in 25 Years: Evaluating Justice O'Connor's Conjecture.” American Law and Economics Review 8, 2 (2006): 282–311.
Abstract: The rate at which racial gaps in pre-collegiate academic achievement can plausibly be expected to erode is a matter of great interest and much uncertainty. In her opinion in Grutter v. Bollinger, Supreme Court Justice O'Connor took a firm stand: "We expect that 25 years from now, the use of racial preferences will no longer be necessary . . ." We evaluate the plausibility of Justice O'Connor's forecast, by projecting the racial composition and SAT distribution of the elite college applicant pool 25 years from now. We focus on two important margins: First, changes in the black-white relative distribution of income, and second, narrowing of the test score gap between black and white students within family income groups. Other things equal, progress on each margin can be expected to reduce the racial gap in qualifications among students pursuing admission to the most selective colleges. Under plausible assumptions, however, projected economic progress will not yield nearly as much racial diversity as is currently obtained with race-sensitive admissions. Simulations that assume additional increases in black students' test scores, beyond those deriving from changes in family income, yield more optimistic estimates. In this scenario, race-blind rules approach the black representation among admitted students seen today at moderately selective institutions, but continue to fall short at the most selective schools. Maintaining a critical mass of African American students at the most selective institutions would require policies at the elementary and secondary levels or changes in parenting practices that deliver unprecedented success in narrowing the test score gap in the next quarter century.
Handle: RePEc:nbr:nberwo:11445
Template-Type: ReDIF-Paper 1.0
Title: Health Insurance Reform and HMO Penetration in the Small Group Market
Classification-JEL: I10; 118; E
Author-Name: Thomas C. Buchmueller
Author-Person: pbu179
Note: EH
Number: 11446
Creation-Date: 2005-06
Order-URL: http://www.nber.org/papers/w11446
File-URL: http://www.nber.org/papers/w11446.pdf
File-Format: application/pdf
Publication-Status: published as Thomas C. Buchmueller & Su Liu, 2005. "Health Insurance Reform and HMO Penetration in the Small Group Market," INQUIRY: The Journal of Health Care Organization, Provision, and Financing, vol 42(4), pages 367-380.
Abstract: We use data from several national employer surveys conducted between the late 1980s and the mid-1990s to investigate the effect of state-level underwriting reforms on HMO penetration in the small-group health insurance market. We identify reform effects by exploiting cross-state variation in the timing and content of reform legislation and by using mid-sized and large employers, which were not affected by the legislation, as within-state control groups. While it is difficult to disentangle the effect of state reforms from other factors affecting HMO penetration in the small group markets, the results suggest a positive relationship between insurance market regulations and HMO penetration.
Handle: RePEc:nbr:nberwo:11446
Template-Type: ReDIF-Paper 1.0
Title: The Influence of University Research on Industrial Innovation
Classification-JEL: J62; O31; O33
Author-Name: Jinyoung Kim
Author-Person: pki140
Author-Name: Sangjoon John Lee
Author-Name: Gerald Marschke
Author-Person: pma293
Note: PR
Number: 11447
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11447
File-URL: http://www.nber.org/papers/w11447.pdf
File-Format: application/pdf
Publication-Status: published as Gerald Marschke, 2006. "The influence of university research on industrial innovation," Proceedings, Federal Reserve Bank of Cleveland.
Abstract: We use U.S. patent records to examine the role of research personnel as a pathway for the diffusion of ideas from university to industry. Appearing on a patent assigned to a university is evidence that an inventor has been exposed to university research, either directly as a university researcher or through some form of collaboration with university researchers. Having an advanced degree is another indicator of an inventor's exposure to university research. We find a steady increase in industry's use of inventors with university research experience over the period 1985-97, economy wide and in the pharmaceutical and semiconductor industries in particular. We interpret this as evidence of growth in the influence of university research on industrial innovation. Moreover, during this period we find that firms with large research operations in both industries, and young and highly capitalized firms in the pharmaceutical industry, are disproportionately active in the diffusion of ideas from the university sector. Finally, we find that the patents of firms that employ inventors with university research experience are more likely to cite university patents as prior art, suggesting that this experience better enables firms to tap academic research.
Handle: RePEc:nbr:nberwo:11447
Template-Type: ReDIF-Paper 1.0
Title: A Note on the Empirical Implementation of the Lens Condition
Classification-JEL: F11; F16
Author-Name: Andrew B. Bernard
Author-Name: Raymond Robertson
Author-Person: pro310
Author-Name: Peter K. Schott
Author-Person: psc98
Note: ITI
Number: 11448
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11448
File-URL: http://www.nber.org/papers/w11448.pdf
File-Format: application/pdf
Abstract: Deardorff [Journal of International Economics 36 (1994) 167-175] offers an intuitively appealing test for factor price equality (FPE). He demonstrates that FPE is impossible if the set (i.e., lens) of points defined by regional factor abundance vectors does not lie within the set of points defined by goods' input intensities. This note demonstrates that empirical implementation of the lens condition is problematic if the "true" number of either goods or regions is unknown. We show that satisfaction of the lens condition is more likely when goods are relatively disaggregate compared to regions.
Handle: RePEc:nbr:nberwo:11448
Template-Type: ReDIF-Paper 1.0
Title: The 2003 Dividend Tax Cuts and the Value of the Firm: An Event Study
Classification-JEL: G12; H24
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Kevin A. Hassett
Author-Person: pha378
Note: PE
Number: 11449
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11449
File-URL: http://www.nber.org/papers/w11449.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, A., J. Hines, and J. Slemrod (eds.) Taxing Corporate Income in the 21st Century. 2007.
Abstract: The "Jobs and Growth Tax Relief Act of 2003" (JGTRA03) contained a number of significant tax provisions, but the most noteworthy may have been the reduction in dividend tax rates. The political debate over the dividend tax reductions of 2003 took a number of surprising twists and turns. Accordingly, it is likely that the views of market participants concerning the probability of significant dividend tax reduction fluctuated significantly during 2003. In this paper, we use this fact to estimate the effects of dividend tax policy on firm value. We find that firms with higher dividend yields benefited more than other dividend paying firms, a result that, in itself, is consistent with both new and traditional views of dividend taxation. But further evidence points toward the new view and away from the traditional view. We also find that non-dividend-paying firms experienced larger abnormal returns than other firms as the result of the dividend tax cut, and that a similar bonus accrued to firms likely to issue new shares, two results that may appear surprising at first but are consistent with the theory developed in the paper.
Handle: RePEc:nbr:nberwo:11449
Template-Type: ReDIF-Paper 1.0
Title: Biomedical Academic Entrepreneurship Through the SBIR Program
Classification-JEL: O38; O31; G38; M13; C25
Author-Name: Andrew A. Toole
Author-Name: Dirk Czarnitzki
Author-Person: pcz8
Note: PR
Number: 11450
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11450
File-URL: http://www.nber.org/papers/w11450.pdf
File-Format: application/pdf
Publication-Status: published as Toole, Andrew A. and Dirk Czarnitzki. "Biomedical academic entrepreneurship through the SBIR program." Journal of Economic Behavior & Organization 63, 4 (August 2007): 716-738 .
Publication-Status: published as Biomedical Academic Entrepreneurship through the SBIR Program, Andrew Toole, Dirk Czarnitzki. in Academic Science and Entrepreneurship: Dual Engines of Growth, Jaffe, Lerner, Stern, and Thursby. 2007
Abstract: This paper considers the U.S. Small Business Innovation research (SBIR) program as a policy fostering academic entrepreneurship. We highlight two main characteristics of the program that make it attractive as an entrepreneurship policy: early-stage financing and scientist involvement in commercialization. Using unique data on NIH supported biomedical researchers, we trace the incidence of biomedical entrepreneurship through SBIR and describe some of the characteristics of these individuals. To explore the importance of early-stage financing and scientist involvement, we complement our individual level data with information on scientist-linked and non-linked SBIR firms. Our results show that the SBIR program is being used as a commercialization channel by academic scientists. Moreover, we find that the firms associated with these scientists perform significantly better than other non-linked SBIR firms in terms of follow-on venture capital funding, SBIR program completion, and patenting.
Handle: RePEc:nbr:nberwo:11450
Template-Type: ReDIF-Paper 1.0
Title: Managerial Skill Acquisition and the Theory of Economic Development
Classification-JEL: O14; O33
Author-Name: Paul Beaudry
Author-Person: pbe35
Author-Name: Patrick Francois
Author-Person: pfr24
Note: EFG LS
Number: 11451
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11451
File-URL: http://www.nber.org/papers/w11451.pdf
File-Format: application/pdf
Publication-Status: published as Paul Beaudry & Patrick Francois, 2010. "Managerial Skills Acquisition and the Theory of Economic Development," Review of Economic Studies, Blackwell Publishing, vol. 77(1), pages 90-126, 01.
Abstract: Micro level studies in developing countries suggest managerial skills play a key role in the adoption of modern technologies. The human resources literature suggests that managerial skills are difficult to codify and learn formally, but instead tend to be learned on the job. In this paper we present a model of the interactive process between on-the-job managerial skill acquisition and the adoption of modern technology. The environment considered is one where all learning possibilities are internalized in the market, and where managers are complementary inputs to non-managerial workers. The paper illustrates why some countries may adopt modern technologies while others stay backwards. The paper also explains why managers may not want to migrate from rich countries to poor countries as would be needed to generate income convergence.
Handle: RePEc:nbr:nberwo:11451
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Taxes on Market Responses to Dividend Announcements and Payments: What Can we Learn from the 2003 Dividend Tax Cut?
Classification-JEL: G1; H3
Author-Name: Raj Chetty
Author-Person: pch161
Author-Name: Joseph Rosenberg
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE
Number: 11452
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11452
File-URL: http://www.nber.org/papers/w11452.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, A., J. Hines, and J. Slemrod (eds.) Taxing Corporate Income in the 21st Century. Cambridge: Cambridge University Press, 2007.
Abstract: This paper investigates the effects of capital gains and dividend taxes on excess returns around announcements of dividend increases and ex-dividend days for U.S. corporations. Consistent with standard no-arbitrage conditions, we find that the ex-dividend day premium increased from 2002 to 2004 when the dividend tax rate was cut. Consistent with the signalling theory of dividends, we also find that the excess return for dividend increase announcements went down from 2002 to 2004. However, these findings are very sensitive to the years chosen for the pre-reform control period. Semi-parametric graphical analysis using data since 1962 shows that the relationship between tax rates and ex-day and announcement day premia is very fragile and sensitive to sample period choices. Strong year-to-year fluctuations in the ex-day and announcement day premia greatly reduce statistical power, making it impossible to credibly detect responses even around large tax reforms. The important non-tax factors affecting these premia must therefore be understood before progress can be made in evaluating the role of taxation in market responses.
Handle: RePEc:nbr:nberwo:11452
Template-Type: ReDIF-Paper 1.0
Title: The Value of Peripatetic Economists: A Sesqui-Difference Evaluation of Bob Gregory
Classification-JEL: J24; H43
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Note: LS
Number: 11453
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11453
File-URL: http://www.nber.org/papers/w11453.pdf
File-Format: application/pdf
Publication-Status: published as "The Value of Peripatetic Economists: A Sesqui-Difference Evaluation of Bob Gregory" Hamermesh, Daniel S.; Economic Record, June 2006, v. 82, iss. 257, pp. 138-49
Abstract: I ask generally whether a country can benefit from the temporary importation of human capital, and specifically whether a program that attracts large groups of academic visitors to a distant country benefits it by generating additional scholarly research on local issues. Using the list of visitors to the ANU Research School's Economics Program, I estimate this impact from responses to a survey in which visitors described their research before and after their visit and designated as a"control person" another economist who had a similar career but had not visited. The matching of the control may be viewed as being along both observable and (to the researcher) unobservable characteristics of the "treated" and control individuals. The results show a highly significant ceteris paribus impact of such visits on the visitor's subsequent research. Valuing this extra research based on the scholarly citations it received and the effects of citations on salaries shows a substantial monetary impact of visiting economists. Less tangible additional impacts in terms of research style also clearly result.
Handle: RePEc:nbr:nberwo:11453
Template-Type: ReDIF-Paper 1.0
Title: Labor Supply Effects of the Earned Income Tax Credit: Evidence from Wisconsin Supplemental Benefit for Families with Three Children
Classification-JEL: H24; H73; J38
Author-Name: Maria Cancian
Author-Name: Arik Levinson
Author-Person: ple135
Note: LS PE
Number: 11454
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11454
File-URL: http://www.nber.org/papers/w11454.pdf
File-Format: application/pdf
Publication-Status: published as Cancian, Maria and Arik Levinson. "Labor Supply Effects of the Earned Income Tax Credit: Evidence from Wisconsin's Supplemental Benefit for Families with Three Children." National Tax Journal (December 2006).
Abstract: We examine the labor market consequences of the Earned Income Tax Credit (EITC), comparing labor market behavior of eligible parents in Wisconsin, which supplements the federal EITC for families with three children, to that of similar parents in states that do not supplement the federal EITC. Data come from the 2000 Census of Population. Most previous studies have relied on changes in the EITC over time, or EITC eligibility differences for families with and without children, or have extrapolated from measured labor supply responses to other tax and benefit programs, and find significant effects of the EITC on employment. In contrast, our cross-state comparison examines a larger difference in EITC subsidy rates, uses more similar treatment and control groups, relies on a policy that has been in place for 5 years, and finds no effect of the EITC on employment or hours worked.
Handle: RePEc:nbr:nberwo:11454
Template-Type: ReDIF-Paper 1.0
Title: Accounting for the Effect of Health on Economic Growth
Classification-JEL: I1; O1; O4
Author-Name: David N. Weil
Author-Person: pwe24
Note: EFG EH
Number: 11455
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11455
File-URL: http://www.nber.org/papers/w11455.pdf
File-Format: application/pdf
Publication-Status: published as David N. Weil, 2007. "Accounting for The Effect of Health on Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 1265-1306, 08.
Abstract: I use microeconomic estimates of the effect of health on individual outcomes to construct macroeconomic estimates of the proximate effect of health on GDP per capita. I employ avariety of methods to construct estimates of the return to health, which I combine with cross-country and historical data on height, adult survival rates, and age at menarche. Using my preferred estimate, eliminating health differences among countries would reduce the variance oflog GDP per worker by 9.9 percent, and reduce the ratio of GDP per worker at the 90th percentileto GDP per worker at the 10th percentile from 20.5 to 17.9. While this effect is economically significant, it is also substantially smaller than estimates of the effect of health on economic growth that are derived from cross-country regressions.
Handle: RePEc:nbr:nberwo:11455
Template-Type: ReDIF-Paper 1.0
Title: Mexican Immigration and Self-Selection: New Evidence from the 2000 Mexican Census
Classification-JEL: J6; F2
Author-Name: Pablo Ibarraran
Author-Person: pib8
Author-Name: Darren Lubotsky
Author-Person: plu41
Note: LS
Number: 11456
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11456
File-URL: http://www.nber.org/papers/w11456.pdf
File-Format: application/pdf
Publication-Status: published as Mexican Immigration and Self-Selection: New Evidence from the 2000 Mexican Census , Pablo Ibarraran, Darren Lubotsky. in Mexican Immigration to the United States, Borjas. 2007
Abstract: We use data from the 2000 Mexican Census to examine how the education and socioeconomic status of Mexican immigrants to the United States compares to that of non-migrants in Mexico. Our primary conclusion is that migrants tend to be less educated than non-migrants. This finding is consistent with the idea that the return to education is higher in Mexico than in the United States, and thus the wage gain to migrating is proportionately smaller for high-educated Mexicans than it is for lower-educated Mexicans. We also find that the degree of negative selection of migrants is stronger in Mexican counties that have a higher return to education.
Handle: RePEc:nbr:nberwo:11456
Template-Type: ReDIF-Paper 1.0
Title: Does Globalization of the Scientific/Engineering Workforce Threaten U.S. Economic Leadership?
Classification-JEL: G0; I2; F0; J0
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: ED ITI LS PR
Number: 11457
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11457
File-URL: http://www.nber.org/papers/w11457.pdf
File-Format: application/pdf
Publication-Status: published as Does Globalization of the Scientific/Engineering Workforce Threaten US Economic Leadership?, Richard B. Freeman. in Innovation Policy and the Economy, Volume 6, Jaffe, Lerner, and Stern. 2006
Abstract: This paper develops four propositions that show that changes in the global job market for science and engineering (S&E) workers are eroding US dominance in S&E, which diminishes comparative advantage in high tech production and creates problems for American industry and workers: (1) The U.S. share of the world's science and engineering graduates is declining rapidly as European and Asian universities, particularly from China, have increased S&E degrees while US degree production has stagnated. 2) The job market has worsened for young workers in S&E fields relative to many other high-level occupations, which discourages US students from going on in S&E, but which still has sufficient rewards to attract large immigrant flows, particularly from developing countries. 3) Populous low income countries such as China and India can compete with the US in high tech by having many S&E specialists although those workers are a small proportion of their work forces. This threatens to undo the "North-South" pattern of trade in which advanced countries dominate high tech while developing countries specialize in less skilled manufacturing. 4) Diminished comparative advantage in high-tech will create a long period of adjustment for US workers, of which the off-shoring of IT jobs to India, growth of high-tech production in China, and multinational R&D facilities in developing countries, are harbingers. To ease the adjustment to a less dominant position in science and engineering, the US will have to develop new labor market and R&D policies that build on existing strengths and develop new ways of benefitting from scientific and technological advances in other countries.
Handle: RePEc:nbr:nberwo:11457
Template-Type: ReDIF-Paper 1.0
Title: Organization and Inequality in a Knowledge Economy
Classification-JEL: D2; J3; L2
Author-Name: Luis Garicano
Author-Person: pga77
Author-Name: Esteban Rossi-Hansberg
Author-Person: pro72
Note: EFG
Number: 11458
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11458
File-URL: http://www.nber.org/papers/w11458.pdf
File-Format: application/pdf
Publication-Status: published as Luis Garicano & Esteban Rossi-Hansberg, 2006. "Organization and Inequality in a Knowledge Economy," The Quarterly Journal of Economics, MIT Press, vol. 121(4), pages 1383-1435, November.
Abstract: We present a theory of the organization of work in an economy where knowledge is an essential input in production: a knowledge economy. In this economy a continuum of agents with heterogeneous skills must choose how much knowledge to acquire and may produce on their own or in organizations. Our theory generates an assignment of workers to positions, a wage structure, and a continuum of knowledge-based hierarchies. Organization allows low skill agents to ask others for directions. Thus, they acquire less knowledge than in isolation. In contrast, organization allows high skill agents to leverage their knowledge through large teams. Hence, they acquire more knowledge than on their own. As a result, organization decreases wage inequality within workers, but increases income inequality among the highest skill agents. We also show that equilibrium assignments and earnings can be interpreted as the outcome of alternative market institutions such as firms, or consulting and referral markets. We use our theory to study the impact of information and communication technology, and contrast its predictions with US evidence.
Handle: RePEc:nbr:nberwo:11458
Template-Type: ReDIF-Paper 1.0
Title: Investment-Based Underperformance Following Seasoned Equity Offerings
Classification-JEL: E22; E44; G12; G14; G24; G31; G32
Author-Name: Evgeny Lyandres
Author-Name: Le Sun
Author-Name: Lu Zhang
Author-Person: pzh29
Note: AP
Number: 11459
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11459
File-URL: http://www.nber.org/papers/w11459.pdf
File-Format: application/pdf
Abstract: Adding a return factor based on capital investment into standard, calendar-time factor regressions makes underperformance following seasoned equity offerings largely insignificant and reduces its magnitude by 37-46%. The reason is that issuers invest more than nonissuers matched on size and book-to-market. Moreover, the low-minus-high investment-to-asset factor earns a significant average return of 0.37% per month. Our evidence suggests that the underperformance results from the negative investment-expected return relation, as predicted by Carlson, Fisher, and Giammarino (2005).
Handle: RePEc:nbr:nberwo:11459
Template-Type: ReDIF-Paper 1.0
Title: The Role of Patents for Bridging the Science to Market Gap
Classification-JEL: O33; O34; M13
Author-Name: Thomas Hellmann
Author-Person: phe157
Note: PR
Number: 11460
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11460
File-URL: http://www.nber.org/papers/w11460.pdf
File-Format: application/pdf
Publication-Status: published as Hellmann, Thomas, 2007. "The role of patents for bridging the science to market gap," Journal of Economic Behavior & Organization, Elsevier, vol. 63(4), pages 624-647, August.
Publication-Status: published as The Role of Patents for Bridging the Science to Market Gap, Thomas Hellmann. in Academic Science and Entrepreneurship: Dual Engines of Growth, Jaffe, Lerner, Stern, and Thursby. 2007
Abstract: This paper examines an ex-post rationale for the patenting of scientific discoveries. In this model, scientist do not know which firms can make use of their discoveries, and firms do not know which scientific discoveries might be useful to them. To bridge this gap, either or both sides need to engage in costly search activities. Patents determine the appropriability of scientific discoveries, which affects the scientists. and firms. willingness to engage in search. Patents decrease dissemination when the search intensity of firms is sufficiently elastic, relative to that of scientists. The model also examines the role of universities. Patents facilitate the delegation of search activities to the universities' technology transfer offices, which enables efficient specialization. Rather than distracting scientists from doing research, patenting may be a complement to doing research.
Handle: RePEc:nbr:nberwo:11460
Template-Type: ReDIF-Paper 1.0
Title: Estimating Risk Preferences from Deductible Choice
Classification-JEL: D82; G22
Author-Name: Alma Cohen
Author-Person: pco678
Author-Name: Liran Einav
Author-Person: pei64
Note: IO
Number: 11461
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11461
File-URL: http://www.nber.org/papers/w11461.pdf
File-Format: application/pdf
Publication-Status: published as Einav, Liran and Alma Cohen. “Estimating Risk Preferences from Deductible Choice.” American Economic Review 97, 3 (June 2007): 745-788.
Abstract: We use a large data set of deductible choices in auto insurance contracts to estimate the distribution of risk preferences in our sample. To do so, we develop a structural econometric model, which accounts for adverse selection by allowing for unobserved heterogeneity in both risk (probability of an accident) and risk aversion. Ex-post claim information separately identifies the marginal distribution of risk, while the joint distribution of risk and risk aversion is identified by the deductible choice. We find that individuals in our sample have on average an estimated absolute risk aversion which is higher than other estimates found in the literature. Using annual income as a measure of wealth, we find an average two-digit coefficient of relative risk aversion. We also find that women tend to be more risk averse than men, that proxies for income and wealth are positively related to absolute risk aversion, that unobserved heterogeneity in risk preferences is higher relative to that of risk, and that unobserved risk is positively correlated with unobserved risk aversion. Finally, we use our results for counterfactual exercises that assess the profitability of insurance contracts under various assumptions.
Handle: RePEc:nbr:nberwo:11461
Template-Type: ReDIF-Paper 1.0
Title: Socially Optimal Districting
Classification-JEL: D7
Author-Name: Stephen Coate
Author-Person: pco66
Author-Name: Brian Knight
Author-Person: pkn7
Note: PE POL
Number: 11462
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11462
File-URL: http://www.nber.org/papers/w11462.pdf
File-Format: application/pdf
Publication-Status: published as Coate, Stephen and Brian Knight. “Socially Optimal Districting: A Theoretical and Empirical Exploration” Quarterly Journal of Economics 122, 4 (November 2007): 1409-1471.
Abstract: This paper provides a welfare economic analysis of the problem of districting. In the context of a simple micro-founded model intended to capture the salient features of U.S. politics, it studies how a social planner should allocate citizens of different ideologies across districts to maximize aggregate utility. In the model, districting determines the equilibrium seat-vote curve which is the relationship between the aggregate vote share of the political parties and their share of seats in the legislature. To understand optimal districting, the paper first characterizes the optimal seat-vote curve which describes the ideal relationship between votes and seats. It then shows that under rather weak conditions the optimal seat-vote curve is implementable in the sense that there exist districtings which make the equilibrium seat-vote curve equal to the optimal seat-vote curve. The nature of these optimal districtings is described. Finally, the paper provides a full characterization of the constrained optimal seat-vote curve and the districtings that underlie it when the optimal seat-vote curve is not achievable.
Handle: RePEc:nbr:nberwo:11462
Template-Type: ReDIF-Paper 1.0
Title: Principals as Agents: Subjective Performance Measurement in Education
Classification-JEL: I0
Author-Name: Brian A. Jacob
Author-Name: Lars Lefgren
Author-Person: ple392
Note: CH ED
Number: 11463
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11463
File-URL: http://www.nber.org/papers/w11463.pdf
File-Format: application/pdf
Abstract: In this paper, we compare subjective principal assessments of teachers to the traditional determinants of teacher compensation ¡V education and experience ¡V and another potential compensation mechanism -- value-added measures of teacher effectiveness based on student achievement gains. We find that subjective principal assessments of teachers predict future student achievement significantly better than teacher experience, education or actual compensation, though not as well as value-added teacher quality measures. In particular, principals appear quite good at identifying those teachers who produce the largest and smallest standardized achievement gains in their schools, but have far less ability to distinguish between teachers in the middle of this distribution and systematically discriminate against male and untenured faculty. Moreover, we find that a principal¡'s overall rating of a teacher is a substantially better predictor of future parent requests for that teacher than either the teacher¡'s experience, education and current compensation or the teacher¡'s value-added achievement measure. These findings not only inform education policy, but also shed light on subjective performance assessment more generally.
Handle: RePEc:nbr:nberwo:11463
Template-Type: ReDIF-Paper 1.0
Title: Affirmative Action and Its Mythology
Classification-JEL: J7
Author-Name: Roland G. Fryer, Jr.
Author-Person: pfr43
Author-Name: Glenn C. Loury
Author-Person: plo117
Note: LS PE
Number: 11464
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11464
File-URL: http://www.nber.org/papers/w11464.pdf
File-Format: application/pdf
Publication-Status: published as Fryer, Roland G., Jr. and Glenn C. Loury. "Affirmative Action and Its Mythology," Journal of Economic Perspectives, 2005, v19(3,Summer), 147-162.
Abstract: For more than three decades, critics and supporters of affirmative action have fought for the moral high ground -- through ballot initiatives and lawsuits, in state legislatures, and in varied courts of public opinion. The goal of this paper is to show the clarifying power of economic reasoning to dispel some myths and misconceptions in the racial affirmative action debates. We enumerate seven commonly held (but mistaken) views one often encounters in the folklore about affirmative action (affirmative action may involve goals and timelines, but definitely not quotas, e.g.). Simple economic arguments reveal these seven views to be more myth than fact.
Handle: RePEc:nbr:nberwo:11464
Template-Type: ReDIF-Paper 1.0
Title: Do Formal Intellectual Property Rights Hinder the Free Flow of Scientific Knowledge? An Empirical Test of the Anti-Commons Hypothesis
Classification-JEL: O30; O33; O34; L33
Author-Name: Fiona Murray
Author-Name: Scott Stern
Note: IO PR
Number: 11465
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11465
File-URL: http://www.nber.org/papers/w11465.pdf
File-Format: application/pdf
Publication-Status: published as Murray, Fiona and Scott Stern. "Do formal intellectual property rights hinder the free flow of scientific knowledge?: An empirical test of the anti-commons hypothesis" Journal of Economic Behavior & Organization 63, 4 (2007): 648-687.
Abstract: While the potential for intellectual property rights to inhibit the diffusion of scientific knowledge is at the heart of several contemporary policy debates, evidence for the "anti-commons effect" has been anecdotal. A central issue in this debate is how intellectual property rights over a given piece of knowledge affects the propensity of future researchers to build upon that knowledge in their own scientific research activities. This article frames this debate around the concept of dual knowledge, in which a single discovery may contribute to both scientific research and useful commercial applications. A key implication of dual knowledge is that it may be simultaneously instantiated as a scientific research article and as a patent. Such patent-paper pairs are at the heart of our empirical strategy. We exploit the fact that patents are granted with a substantial lag, often many years after the knowledge is initially disclosed through paper publication. The knowledge associated with a patent paper pair therefore diffuses within two distinct intellectual property environments - one associated with the pre-grant period and another after formal IP rights are granted. Relative to the expected citation pattern for publications with a given quality level, anticommons theory predicts that the citation rate to a scientific publication should fall after formal IP rights associated with that publication are granted. Employing a differences-indifferences estimator for 169 patent-paper pairs (and including a control group of publications from the same journal for which no patent is granted), we find evidence for a modest anti-commons effect (the citation rate after the patent grant declines by between 9 and 17%). This decline becomes more pronounced with the number of years elapsed since the date of the patent grant, and is particularly salient for articles authored by researchers with public sector affiliations.
Handle: RePEc:nbr:nberwo:11465
Template-Type: ReDIF-Paper 1.0
Title: Spacey Parents: Spatial Autoregressive Patterns in Inbound FDI
Classification-JEL: F21; F23
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: Ronald B. Davies
Author-Person: pda64
Author-Name: Helen T. Naughton
Author-Person: pna326
Author-Name: Glen R. Waddell
Author-Person: pwa85
Note: ITI
Number: 11466
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11466
File-URL: http://www.nber.org/papers/w11466.pdf
File-Format: application/pdf
Publication-Status: published as Brakman, S. and H. Garretsen (eds.) Foreign Direct Investment and the Multinational Enterprise. Cambridge, MA: The MIT Press, 2008.
Abstract: Increasing attention has been given to the impact of third countries on outbound FDI to a given host country. Here, we consider potential third-country effects on inbound FDI. A simple model suggests two sources of such effects on a country's inbound FDI. First, it will tend to receive more FDI fromparent countries proximate to large third countries. Second, FDI from third countries may increase or decrease FDI from the parent country in question depending on whether production spillovers or crowding out effects dominate. Using data on US inbound FDI from OECD countries during 1980-2000, we find strong evidence for parent market proximity effects. We find robust results for third country FDI effects only in a European subsample. There, crowding out effects dominate.
Handle: RePEc:nbr:nberwo:11466
Template-Type: ReDIF-Paper 1.0
Title: Implications of Dynamic Factor Models for VAR Analysis
Classification-JEL: C32; E17
Author-Name: James H. Stock
Author-Person: pst148
Author-Name: Mark W. Watson
Author-Person: pwa582
Note: EFG
Number: 11467
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11467
File-URL: http://www.nber.org/papers/w11467.pdf
File-Format: application/pdf
Abstract: This paper considers VAR models incorporating many time series that interact through a few dynamic factors. Several econometric issues are addressed including estimation of the number of dynamic factors and tests for the factor restrictions imposed on the VAR. Structural VAR identification based on timing restrictions, long run restrictions, and restrictions on factor loadings are discussed and practical computational methods suggested. Empirical analysis using U.S. data suggest several (7) dynamic factors, rejection of the exact dynamic factor model but support for an approximate factor model, and sensible results for a SVAR that identifies money policy shocks using timing restrictions.
Handle: RePEc:nbr:nberwo:11467
Template-Type: ReDIF-Paper 1.0
Title: Predicting the Equity Premium Out of Sample: Can Anything Beat the Historical Average?
Classification-JEL: G1
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Samuel B. Thompson
Note: AP
Number: 11468
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11468
File-URL: http://www.nber.org/papers/w11468.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, John Y. and Samuel B. Thompson. "Predicting Excess Stock Returns Out of Sample: Can anything Beat the Historical Average?" Review of Financial Studies 21 (July 2008): 1509-1531.
Abstract: A number of variables are correlated with subsequent returns on the aggregate US stock market in the 20th Century. Some of these variables are stock market valuation ratios, others reflect patterns in corporate finance or the levels of short- and long-term interest rates. Amit Goyal and Ivo Welch (2004) have argued that in-sample correlations conceal a systematic failure of these variables out of sample: None are able to beat a simple forecast based on the historical average stock return. In this note we show that forecasting variables with significant forecasting power in-sample generally have a better out-of-sample performance than a forecast based on the historical average return, once sensible restrictions are imposed on the signs of coefficients and return forecasts. The out-of-sample predictive power is small, but we find that it is economically meaningful. We also show that a variable is quite likely to have poor out-of-sample performance for an extended period of time even when the variable genuinely predicts returns with a stable coefficient.
Handle: RePEc:nbr:nberwo:11468
Template-Type: ReDIF-Paper 1.0
Title: Taxation and the Evolution of Aggregate Corporate Ownership Concentration
Classification-JEL: G30; H24
Author-Name: Mihir A. Desai
Author-Name: Dhammika Dharmapala
Author-Person: pdh6
Author-Name: Winnie Fung
Author-Person: pfu177
Note: CF PE
Number: 11469
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11469
File-URL: http://www.nber.org/papers/w11469.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J., James R. Hines, Jr. and Joel Slemrod (eds.) Taxing Corporate Income in the 21st Century. Cambridge and New York: Cambridge University Press, 2007.
Abstract: Legal rules, politics and behavioral factors have all been emphasized as explanatory factors in analyses of the determinants of the concentration of corporate ownership and stock market participation. An extension of standard tax clientele arguments demonstrates that changes in the progressivity of taxes can also significantly influence patterns of equity ownership. A novel index of the concentration of corporate ownership over the twentieth century in the U.S. provides the opportunity to quantitatively test for the role of taxes in shaping ownership concentration. The index of ownership concentration is characterized by considerable time series variation, with significant diffusion of ownership in the post WWII era and reconcentration in the late 1990s. Analysis of this index indicates that the progressivity of taxation significantly influences corporate ownership concentration and equity market participation as predicted by the model. This evidence supports the intuition of Berle and Means (1932) that taxation can significantly influence patterns of equity ownership.
Handle: RePEc:nbr:nberwo:11469
Template-Type: ReDIF-Paper 1.0
Title: Early Academis Science and the Birth of Industrial Research Laboratories in the U.S. Pharmaceutical Industry
Classification-JEL: O32; N00
Author-Name: Megan MacGarvie
Author-Person: pma1307
Author-Name: Jeffrey L. Furman
Note: DAE PR
Number: 11470
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11470
File-URL: http://www.nber.org/papers/w11470.pdf
File-Format: application/pdf
Abstract: The establishment and growth of industrial research laboratories is one of the key organizational innovations affecting technological progress in the United States in the 20th century. In this paper, we investigate the rise of industrial research laboratories in the U.S. pharmaceutical industry between 1927 and 1946. Our evidence suggests that institutional factors, namely the presence of universities dedicated to research, played a significant role in the establishment and diffusion of private pharmaceutical research laboratories. Specifically, we document that the growth of industrial pharmaceutical laboratories between 1927 and 1946 is positively and significantly correlated with the extent of local university research, after controlling for other observable factors likely to influence the geographic distribution of industrial research. We supplement our core results with case histories illustrative of early university-industry interaction and an examination of the determinants of university-industry research cooperation. Our qualitative historical evidence and analyses of the birth of chemical engineering programs suggest that industry also played a role in influencing university research agendas. We correct for feedback effects from industry to universities using instrumental variables. Overall, our analyses suggest that while the presence of industrial facilities helped shape the direction of university research programs, there was a significant, positive, and causal effect running from university research to the growth of pharmaceutical research laboratories in the first half of the twentieth century in the United States.
Handle: RePEc:nbr:nberwo:11470
Template-Type: ReDIF-Paper 1.0
Title: Heterogeneous Firms and Trade: Testable and Untestable Properties of the Melitz Model
Classification-JEL: F1; F2; F3
Author-Name: Richard Baldwin
Author-Person: pba124
Note: ITI
Number: 11471
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11471
File-URL: http://www.nber.org/papers/w11471.pdf
File-Format: application/pdf
Abstract: This paper sets out a basic heterogeneous-firms trade model that is closely akin to Melitz (2003). The positive and normative properties of the model are studied in a manner intended to highlight the core economic logic of the model. The paper also studies the impact of greater openness at the firm-level and aggregate level, focusing on changes in the number and type of firms, trade volumes and prices, and productivity effects. The normative effects of liberalisation are also studied and here the paper focuses on aggregate gains from trade, and income redistribution effects, showing inter alia that the model is marked by a Stolper-Samuelson like effect. A number of empirically testable hypotheses are also developed. These concern the impact of greater openness on the firm-level trade pattern, the variance of unit-prices, the stock market valuation of firms according to size, and the lobbying behaviour by size.
Handle: RePEc:nbr:nberwo:11471
Template-Type: ReDIF-Paper 1.0
Title: Supersanctions and Sovereign Debt Repayment
Classification-JEL: F10; F34; G15; N10; N20; N40
Author-Name: Kris James Mitchener
Author-Name: Marc D. Weidenmier
Author-Person: pwe14
Note: DAE IFM
Number: 11472
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11472
File-URL: http://www.nber.org/papers/w11472.pdf
File-Format: application/pdf
Publication-Status: published as Kris James Mitchener & Marc D. Weidenmier, 2010. "Supersanctions and sovereign debt repayment," Journal of International Money and Finance, vol 29(1), pages 19-36.
Abstract: Theoretical models have suggested that sanctions may be important for enforcing sovereign debt contracts (Bulow and Rogoff, 1989a, 1989b). This paper examines the role of sanctions in promoting debt repayment during the classical gold standard period. We analyze a wide range of sanctions including gunboat diplomacy, external fiscal control over a country's finances, asset seizures by private creditors, and trade sanctions. We find that "supersanctions," instances where military pressure or political control were applied in response to default, were an important and commonly used enforcement mechanism from 1870-1913. Following the implementation of supersanctions, on average, ex ante default probabilities on new debt issues fell by more than 60 percent, yield spreads declined approximately 800 basis points, and defaulting countries experienced almost a 100 percent reduction of time spent in default. We also find that debt defaulters that surrendered their fiscal sovereignty for an extended period of time were able to issue large amounts of new debt on international capital markets. Consistent with policies advocated by Caballero and Dornbusch (2002) for Argentina, our results suggest that third-party enforcement mechanisms, with the authority to enact financial and fiscal reforms, may be beneficial for resuscitating the capital market reputation of sovereign defaulters.
Handle: RePEc:nbr:nberwo:11472
Template-Type: ReDIF-Paper 1.0
Title: Long-Run Determinants of Inflation Differentials in a Monetary Union
Classification-JEL: E31; F41
Author-Name: Filippo Altissimo
Author-Name: Pierpaolo Benigno
Author-Person: pbe203
Author-Name: Diego Rodriguez Palenzuela
Note: EFG IFM ME
Number: 11473
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11473
File-URL: http://www.nber.org/papers/w11473.pdf
File-Format: application/pdf
Publication-Status: published as Altissimo, Filippo, Pierpaolo Benigno, and Diego Rodriguez Palenzuela. "Long-Run Determinants of Inflation Differentials in a Monetary Union." Moneda y Credito 220 (2005): 205-47.
Abstract: This paper analyzes the long-run determinants of inflation differentials in a monetary union. First, we aim at establishing some stylized facts relating the regional dispersion in headline inflation rates in the euro area as well as in the main components of the consumer price index. We find that a relatively large proportion of it occurs in the Service category of the EU's harmonized consumer price index (HICP). We then lay out a model of a monetary union with fully flexible prices, the long-run properties of which are analyzed. Our model departs in several respect from the Balassa-Samuelson hypotheses. Our results are in contrast with the result that movements in the real exchange rate are mainly driven by regionally asymmetric productivity shocks in the traded sectors. Our results point instead to relative variations in productivity in the non-traded sector as the primary cause of price and inflation differentials, with shocks to productivity in the traded sector being largely absorbed by movements in the terms of trade in the regional economies. These shocks are also found to largely drive the variability of real wages at the country level.
Handle: RePEc:nbr:nberwo:11473
Template-Type: ReDIF-Paper 1.0
Title: Do Women Shy Away From Competition? Do Men Compete Too Much?
Classification-JEL: L0; C9
Author-Name: Muriel Niederle
Author-Person: pni95
Author-Name: Lise Vesterlund
Author-Person: pve25
Note: LS
Number: 11474
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11474
File-URL: http://www.nber.org/papers/w11474.pdf
File-Format: application/pdf
Publication-Status: published as Muriel Niederle & Lise Vesterlund, 2007. "Do Women Shy Away from Competition? Do Men Compete Too Much?," The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 1067-1101, 08.
Abstract: Competitive high ranking positions are largely occupied by men, and women remain scarce in engineering and sciences. Explanations for these occupational differences focus on discrimination and preferences for work hours and field of study. We examine if absent these factors gender differences in occupations may still occur. Specifically we explore whether women and men, on a leveled playing field, differ in their selection into competitive environments. Men and women in a laboratory experiment perform a real task under a non-competitive piece rate and a competitive tournament scheme. Although there are no gender differences in performance under either compensation, there is a substantial gender difference when participants subsequently choose the scheme they want to apply to their next performance. Twice as many men as women choose the tournament over the piece rate. This gender gap in tournament entry is not explained by performance either before or after the entry decision. Furthermore, while men are more optimistic about their relative performance, differences in beliefs only explain a small share of the gap in tournament entry. In a final task we assess the impact of non-tournament-specific factors, such as risk and feedback aversion, on the gender difference in compensation choice. We conclude that even controlling for these general factors, there is a large residual gender gap in tournament entry.
Handle: RePEc:nbr:nberwo:11474
Template-Type: ReDIF-Paper 1.0
Title: University Invention, Entrepreneurship, and Start-Ups
Classification-JEL: L31; O31; O32
Author-Name: Celestine Chukumba
Author-Name: Richard Jensen
Note: PR
Number: 11475
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11475
File-URL: http://www.nber.org/papers/w11475.pdf
File-Format: application/pdf
Abstract: This paper develops a game-theoretic model that predicts when a university invention is commercialized in a start-up firm rather than an established firm. The model predicts that university inventions are more likely to occur in start-ups when the technology transfer officers (TTOs) search cost is high, the cost of development or commercialization is lower for a start-up, or the inventor's effort cost in development is lower in a start-up. We test the theory using data from the Association of University Technology Managers, the National Research Council, and the National Venture Capital Association. Licensing is more likely in general, and especially so in start-ups, by universities with higher quality engineering faculty and older TTOs. Start-ups are more likely by universities in states with larger levels of venture capital. TTO size has no effect on start-ups, but does increase licenses. Conversely, universities that earn greater licensing royalties have fewer start-ups but more licenses. The number of start-ups is decreasing in the interest rate, increasing in the S&P 500, and unaffected by levels of industrial research funding and the presence of a medical school. All of these results are consistent with the predictions of our theory.
Handle: RePEc:nbr:nberwo:11475
Template-Type: ReDIF-Paper 1.0
Title: Consumption Strikes Back?: Measuring Long-Run Risk
Classification-JEL: G1; E2
Author-Name: Lars Peter Hansen
Author-Person: pha303
Author-Name: John Heaton
Author-Name: Nan Li
Author-Person: pli406
Note: AP EFG POL
Number: 11476
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11476
File-URL: http://www.nber.org/papers/w11476.pdf
File-Format: application/pdf
Publication-Status: published as Hansen, Lars Peter, John C. Heaton, and Nan Li. "Consumption Strikes Back? Measuring Long-Run Risk." Journal of Political Economy 116, 2 (2008).
Abstract: We characterize and measure a long-run risk return tradeoff for the valuation of financial cash flows that are exposed to fluctuations in macroeconomic growth. This tradeoff features components of financial cash flows that are only realized far into the future but are still reflected in current asset values. We use the recursive utility model with empirical inputs from vector autoregressions to quantify this relationship; and we study the long-run risk differences in aggregate securities and in portfolios constructed based on the ratio of book equity to market equity. Finally, we explore the resulting measurement challenges and the implied sensitivity to alternative specifications of stochastic growth.
Handle: RePEc:nbr:nberwo:11476
Template-Type: ReDIF-Paper 1.0
Title: The Empirical Risk-Return Relation: A Factor Analysis Approach
Classification-JEL: G12; G10
Author-Name: Sydney C. Ludvigson
Author-Person: plu153
Author-Name: Serena Ng
Author-Person: png6
Note: AP
Number: 11477
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11477
File-URL: http://www.nber.org/papers/w11477.pdf
File-Format: application/pdf
Publication-Status: published as Ludvigson, Sydney C. & Ng, Serena, 2007. "The empirical risk-return relation: A factor analysis approach," Journal of Financial Economics, Elsevier, vol. 83(1), pages 171-222, January.
Abstract: A key criticism of the existing empirical literature on the risk-return relation relates to the relatively small amount of conditioning information used to model the conditional mean and conditional volatility of excess stock market returns. To the extent that financial market participants have information not reflected in the chosen conditioning variables, measures of conditional mean and conditional volatility--and ultimately the risk-return relation itself--will be misspecified and possibly highly misleading. We consider one remedy to these problems using the methodology of dynamic factor analysis for large datasets, whereby a large amount of economic information can be summarized by a few estimated factors. We find that three new factors, a "volatility," "risk premium," and "real" factor, contain important information about one-quarter ahead excess returns and volatility that is not contained in commonly used predictor variables. Moreover, the factor-augmented specifications we examine predict an unusual 16-20 percent of the one-quarter ahead variation in excess stock market returns, and exhibit remarkably stable and strongly statistically significant out-of-sample forecasting power. Finally, in contrast to several pre-existing studies that rely on a small number of conditioning variables, we find a positive conditional correlation between risk and return that is strongly statistically significant, whereas the unconditional correlation is weakly negative and statistically insignificant.
Handle: RePEc:nbr:nberwo:11477
Template-Type: ReDIF-Paper 1.0
Title: Mandated Disclosure, Stock Returns, and the 1964 Securities Acts Amendments
Classification-JEL: G28; G38; K22; L51; M41; M49; N22
Author-Name: Michael Greenstone
Author-Person: pgr38
Author-Name: Paul Oyer
Author-Person: poy2
Author-Name: Annette Vissing-Jorgensen
Author-Person: pvi437
Note: AP LE
Number: 11478
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11478
File-URL: http://www.nber.org/papers/w11478.pdf
File-Format: application/pdf
Publication-Status: published as Greenstone, Michael, Paul Oyer and Annette Vissing-Jorgensen. "Mandated Disclosure, Stock Returns, And The 1964 Securities Acts Amendments," Quarterly Journal of Economics, 2006, v121(2,May), 399-460.
Abstract: The 1964 Securities Acts Amendments extended the mandatory disclosure requirements that had applied to listed firms since 1934 to large firms traded Over-the-Counter (OTC). We find several pieces of evidence indicating that investors valued these disclosure requirements, two of which are particularly striking. First, a firm-level event study reveals that OTC firms most impacted by the 1964 Amendments had abnormal excess returns of about 3.5 percent in the weeks immediately surrounding the announcement that they had begun to comply with the new requirements. Second, we estimate that the most affected OTC firms had abnormal excess returns ranging between 11.5 and 22.1 percent in the period between when the legislation was initially proposed and when it went it went into force, relative to unaffected listed firms and after adjustment for the standard four-factor model. While we cannot determine how much of shareholders' gains were a transfer from insiders of these same companies, our results suggest that mandatory disclosure causes managers to more narrowly focus on the maximization of shareholder value.
Handle: RePEc:nbr:nberwo:11478
Template-Type: ReDIF-Paper 1.0
Title: Global Engagement and the Innovation Activities of Firms
Classification-JEL: F1; F2; O3
Author-Name: Chiara Criscuolo
Author-Person: pcr53
Author-Name: Jonathan E. Haskel
Author-Person: pha161
Author-Name: Matthew J. Slaughter
Note: ITI PR
Number: 11479
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11479
File-URL: http://www.nber.org/papers/w11479.pdf
File-Format: application/pdf
Publication-Status: published as Criscuolo, Chiara & Haskel, Jonathan E. & Slaughter, Matthew J., 2010. "Global engagement and the innovation activities of firms," International Journal of Industrial Organization, Elsevier, vol. 28(2), pages 191-202, March.
Abstract: Firms that export or, even more so, are part of a multinational enterprise tend to exhibit higher productivity than their purely domestic counterparts. To better understand this correlation, we incorporate the perspective of industrial organization that one of the main drivers of differences in productivity is differences in knowledge. We examine a new data set of several thousand U.K. enterprises covering all industries from 1994 through 2000. For each enterprise we have multiple detailed measures of knowledge outputs, knowledge investments, and sources of existing knowledge. We find that globally engaged firms do innovate more. But this is not just because globally engaged firms use more researchers. It is also because they learn more from more sources such as suppliers and customers, universities, and their intra-firm worldwide pool of information. We also find that the relative importance of knowledge sources varies systematically with the type of innovation.
Handle: RePEc:nbr:nberwo:11479
Template-Type: ReDIF-Paper 1.0
Title: Momentum Profits and Macroeconomic Risk
Classification-JEL: G12; E44
Author-Name: Laura X.L. Liu
Author-Name: Jerold B. Warner
Author-Name: Lu Zhang
Author-Person: pzh29
Note: AP
Number: 11480
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11480
File-URL: http://www.nber.org/papers/w11480.pdf
File-Format: application/pdf
Abstract: Previous work shows that the growth rate of industrial production is a common macroeconomic risk factor in the cross-section of expected returns. We demonstrate the connection between momentum profits and shifts in factor loadings on this macroeconomic variable. Winners have temporarily higher loadings on the growth rate of industrial production than losers. The loading dispersion derives mostly from the high, positive loadings of winners. Depending on model specification, this loading dispersion can explain up to 40% of momentum profits.
Handle: RePEc:nbr:nberwo:11480
Template-Type: ReDIF-Paper 1.0
Title: Layoffs, Lemons, Race, and Gender
Classification-JEL: J6; J7
Author-Name: Luojia Hu
Author-Person: phu258
Author-Name: Christopher Taber
Note: LS
Number: 11481
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11481
File-URL: http://www.nber.org/papers/w11481.pdf
File-Format: application/pdf
Abstract: This paper expands on Gibbons and Katz (1991) by looking at how the difference in wage losses across plant closing and layoff varies with race and gender. We find that the differences between white males and the other groups are striking and complex. The lemons effect of layoff holds for white males as in Gibbons and Katz model, but not for the other three demographic groups (white females, black females, and black males). These three all experience a greater decline in earnings at plant closings than at layoffs. This results from two reinforcing effects. First, plant closings have substantially more negative effects on minorities than on whites. Second, layoffs seem to have more negative consequences for white men than the other groups. We also find that the relative wage losses of blacks following layoffs increased after the Civil Rights Act of 1991 which we take as suggestive of an informational effect of layoff as in Gibbons and Katz. The results are suggestive that the large losses that African Americans experience at plant closing could result from heterogeneity in taste discrimination across firms.
Handle: RePEc:nbr:nberwo:11481
Template-Type: ReDIF-Paper 1.0
Title: Reexamining the Distribution of Wealth in 1870
Classification-JEL: N3; R2; O1
Author-Name: Joshua L. Rosenbloom
Author-Person: pro664
Author-Name: Gregory W. Stutes
Note: DAE
Number: 11482
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11482
File-URL: http://www.nber.org/papers/w11482.pdf
File-Format: application/pdf
Publication-Status: published as Rosenbloom, Joshua (ed.) Quantitative Economic History (Routledge Explorations in Economic History). Routledge, 2008.
Abstract: This paper uses data on real and personal property ownership collected in the 1870 Federal Census to explore factors influencing individual wealth accumulation and the aggregate distribution of wealth in the United States near the middle of the nineteenth century. Previous analyses of these data have relied on relatively small samples, or focused on population subgroups. By using the much larger sample available in the Integrated Public Use Microdata Series (IPUMS) we are able to disaggregate the data much more finely than has previously been possible allowing us to explore differences in inequality across space and between different population groups. The data provide strong support for the hypothesis that American industrialization during the nineteenth century resulted in increasing inequality in the distribution of wealth.
Handle: RePEc:nbr:nberwo:11482
Template-Type: ReDIF-Paper 1.0
Title: Does Falling Smoking Lead to Rising Obesity?
Classification-JEL: H1; I1
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Michael Frakes
Note: EH
Number: 11483
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11483
File-URL: http://www.nber.org/papers/w11483.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan and Michael Frakes. "Does Falling Smoking Lead To Rising Obesity?," Journal of Health Economics, 2006, v25(2,Mar), 183-197.
Abstract: The strong negative correlation over time between smoking rates and obesity have led some to suggest that reduced smoking is increasing weight gain in the U.S.. This conclusion is supported by the findings of Chou et al. (2004), who conclude that higher cigarette prices lead to increased body weight. We investigate this issue and find no evidence that reduced smoking leads to weight gain. Using the cigarette tax rather than the cigarette price and controlling for non-linear time effects, we find a negative effect of cigarette taxes on body weight, implying that reduced smoking leads to lower body weights. Yet our results, as well as Chou et al., imply implausibly large effects of smoking on body weight. Thus, we cannot confirm that falling smoking leads in a major way to rising obesity rates in the U.S.
Handle: RePEc:nbr:nberwo:11483
Template-Type: ReDIF-Paper 1.0
Title: Political Competition and Economic Performance: Theory and Evidence from the United States
Classification-JEL: D72; H11; H70; N12; O11
Author-Name: Timothy Besley
Author-Person: pbe46
Author-Name: Torsten Persson
Author-Person: ppe28
Author-Name: Daniel Sturm
Author-Person: pst443
Note: PE POL
Number: 11484
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11484
File-URL: http://www.nber.org/papers/w11484.pdf
File-Format: application/pdf
Abstract: One of the most cherished propositions in economics is that market competition by and large raises consumer welfare. But whether political competition has similarly virtuous consequences is far less discussed. This paper formulates a model to explain why political competition may enhance economic performance and uses the United States as a testing ground for the model's implications. It finds statistically robust evidence that political competition has quantitatively important effects on state income growth, state policies, and the quality of Governors.
Handle: RePEc:nbr:nberwo:11484
Template-Type: ReDIF-Paper 1.0
Title: Denial of Death and Economic Behavior
Classification-JEL: D11; D81; D91
Author-Name: Wojciech Kopczuk
Author-Person: pko20
Author-Name: Joel Slemrod
Author-Person: psl10
Note: AG AP
Number: 11485
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11485
File-URL: http://www.nber.org/papers/w11485.pdf
File-Format: application/pdf
Publication-Status: published as Advances in Theoretical Economics, 2005: Vol. 5: No. 1, Article 5.
Publication-Status: published as Wojciech Kopczuk & Joel Slemrod, 2005. "Denial of Death and Economic Behavior," The B.E. Journal of Theoretical Economics, Berkeley Electronic Press, vol. 0(1), pages 5.
Abstract: We model denial of death and its effect on economic behavior. Attempts to reduce death anxiety and the possibility of denial of mortality-relevant information interact with intertemporal choices and may lead to time-inconsistent behavior and other "behavioral" phenomena. In the model, repression of signals of mortality leads to underconsumption for unsophisticated individuals, but forward-sophisticated individuals may over-consume in anticipation of future denial and may seek ways to commit to act according to one's mortality prospects as currently perceived. We show that the mere possibility of engaging in this kind of denial leads to time-inconsistent but efficient behavior. Refusal to face up to the reality of death may help explain a wide range of empirical phenomena, including the underutilization of tax-advanced inter vivos gifts and inadequate purchase of life insurance.
Handle: RePEc:nbr:nberwo:11485
Template-Type: ReDIF-Paper 1.0
Title: Filming Images or Filming Reality: The Life Cycles of Movie Directors from D.W. Griffith to Federico Fellini
Author-Name: David W. Galenson
Author-Name: Joshua Kotin
Note: LS PR
Number: 11486
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11486
File-URL: http://www.nber.org/papers/w11486.pdf
File-Format: application/pdf
Publication-Status: published as David W. Galenson & Joshua Kotin, 2007. "Filming Images or Filming Reality: The Life Cycles of Important Movie Directors from D. W. Griffith to Federico Fellini," Historical Methods: A Journal of Quantitative and Interdisciplinary History, vol 40(3), pages 117-134.
Abstract: Why have some movie directors made classic early films, but subsequently failed to match their initial successes, whereas other directors have begun much more modestly, but have made great movies late in their lives? This study demonstrates that the answer lies in the directors' motivations, and in the nature of their films. Conceptual directors, who use their films to express their ideas or emotions, mature early; thus such great conceptual innovators as D. W. Griffith, Sergei Eisenstein, and Orson Welles made their major contributions early in their careers, and declined thereafter. In contrast experimental directors, whose films present convincing characters in realistic circumstances, improve their techniques with experience, so that such great experimental innovators as John Ford, Alfred Hitchcock, and Akira Kurosawa made their greatest films late in their lives. Understanding these contrasting life cycles can be part of a more systematic understanding of the development of film, and can resolve previously elusive questions about the creative life cycles of individual filmmakers.
Handle: RePEc:nbr:nberwo:11486
Template-Type: ReDIF-Paper 1.0
Title: Nonrenewable Resource Prices: Deterministic or Stochastic Trends?
Classification-JEL: Q31; C12; C53
Author-Name: Junsoo Lee
Author-Name: John A. List
Author-Person: pli176
Author-Name: Mark Strazicich
Note: AG
Number: 11487
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11487
File-URL: http://www.nber.org/papers/w11487.pdf
File-Format: application/pdf
Publication-Status: published as Lee, Junsoo, John A. List and Mark C. Strazicich. "Non-renewable Resource Prices: Deterministic Or Stochastic Trends?," Journal of Environmental Economics and Management, 2006, v51(3,May), 354-370.
Abstract: In this paper we examine temporal properties of eleven natural resource real price series from 1870-1990 by employing a Lagrangian Multiplier unit root test that allows for two endogenously determined structural breaks with and without a quadratic trend. Contrary to previous research, we find evidence against the unit root hypothesis for all price series. Our findings support characterizing natural resource prices as stationary around deterministic trends with structural breaks. This result is important in both a positive and normative sense. For example, without an appropriate understanding of the dynamics of a time series, empirical verification of theories, forecasting, and proper inference are potentially fruitless. More generally, we show that both pre-testing for unit roots with breaks and allowing for breaks in the forecast model can improve forecast accuracy.
Handle: RePEc:nbr:nberwo:11487
Template-Type: ReDIF-Paper 1.0
Title: The Only Game in Town: Stock-Price Consequences of Local Bias
Classification-JEL: G11; G12
Author-Name: Harrison Hong
Author-Person: pho390
Author-Name: Jeffrey D. Kubik
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: AG CF
Number: 11488
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11488
File-URL: http://www.nber.org/papers/w11488.pdf
File-Format: application/pdf
Publication-Status: published as Hong, Harrison, Jeffrey D. Kubik and Jeremy C. Stein. “The Only Game in Town: The Stock Price Consequences of Local Bias.” Journal of Financial Economics 90 (2008): 20-37.
Abstract: Theory suggests that, in the presence of local bias, the price of a stock should be decreasing in the ratio of the aggregate book value of firms in its region to the aggregate risk tolerance of investors in its region. We test this proposition using data on U.S. Census regions and states, and find clear-cut support for it. Most of the variation in the ratio of interest comes from differences across regions in aggregate book value per capita. Regions with low population density--e.g., the Deep South--are home to relatively few firms per capita, which leads to higher stock prices via an "only-game-in-town" effect. This effect is especially pronounced for smaller, less visible firms, where the impact of location on stock prices is roughly 12 percent.
Handle: RePEc:nbr:nberwo:11488
Template-Type: ReDIF-Paper 1.0
Title: The Sensitivity of Homeowner Leverage to the Deductibility of Home Mortgage Interest
Classification-JEL: H2; H3
Author-Name: Patric H. Hendershott
Author-Name: Gwilym Pryce
Note: AP PE
Number: 11489
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11489
File-URL: http://www.nber.org/papers/w11489.pdf
File-Format: application/pdf
Publication-Status: published as Hendershott, Patric H. and Gwilym Pryce. "The Sensitivity Of Homeowner Leverage To The Deductibility Of Home Mortgage Interest," Journal of Urban Economics, 2006, v60(1,Jul), 50-68.
Abstract: Mortgage interest tax deductibility is needed to treat debt and equity financing of homes equally. Countries that limit deductibility create a debt tax penalty that presumably leads households to shift from debt toward equity financing. The greater the shift, the less is the tax revenue raised by the limitation and smaller is its negative impact on housing demand. Measuring the financing response to a legislative change is complicated by the fact that lenders restrict mortgage debt to the value of the house (or slightly less) being financed. Taking this restriction into account reduces the estimated financing response by 20 percent (a 32 percent decline in debt vs a 40 percent decline). The estimation is based on 86,000 newly originated UK loans from the late 1990s.
Handle: RePEc:nbr:nberwo:11489
Template-Type: ReDIF-Paper 1.0
Title: Efficient Fiscal Policy and Amplification
Classification-JEL: F3; F4; E3; E6
Author-Name: Mark Aguiar
Author-Person: pag57
Author-Name: Manuel Amador
Author-Person: pam50
Author-Name: Gita Gopinath
Note: IFM PE
Number: 11490
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11490
File-URL: http://www.nber.org/papers/w11490.pdf
File-Format: application/pdf
Abstract: We provide a rationale for the observed pro-cyclicality of tax policies in emerging markets and present a novel mechanism through which tax policy amplifies the business cycle. Our explanation relies on two features of emerging markets: limited access to financial markets and limited commitment to tax policy. We present a small open economy model with capital where a government maximizes the utility of a working population that has no access to financial markets and is subject to endowment shocks. The government's insurance motive generates pro-cyclical taxes on capital income. If the government could commit, this policy is not distortionary. However, we show that if the government lacks the ability to commit, the best fiscal policy available exacerbates the economic cycle by distorting investment during recessions. We characterize the mechanism through which limited commitment generates cycles in investment in an environment where under commitment investment would be constant. We extend our results to standard productivity shocks and to the case where the government has access to intra-period insurance markets. Lastly, we conjecture that our results would hold as well if the government could issue debt subject to borrowing constraints.
Handle: RePEc:nbr:nberwo:11490
Template-Type: ReDIF-Paper 1.0
Title: Crime, Punishment, and Myopia
Classification-JEL: D9; K4
Author-Name: David S. Lee
Author-Name: Justin McCrary
Note: LS
Number: 11491
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11491
File-URL: http://www.nber.org/papers/w11491.pdf
File-Format: application/pdf
Abstract: Economic theory predicts that increasing the severity of punishments will deter criminal behavior by raising the expected price of committing crime. This implicit price can be substantially raised by making prison sentences longer, but only if offenders' discount rates are relatively low. We use a large sample of felony arrests to measure the deterrence effect of criminal sanctions. We exploit the fact that young offenders are legally treated as adults--and face longer lengths of incarceration--the day they turn 18. Sufficiently patient individuals should therefore significantly lower their offending rates immediately upon turning 18. The small behavioral responses that we estimate suggest that potential offenders are extremely impatient, myopic, or both.
Handle: RePEc:nbr:nberwo:11491
Template-Type: ReDIF-Paper 1.0
Title: Relative Price Volatility Under Sudden Stops: The Relevance of Balance Sheet Effects
Classification-JEL: F31; F32; F34; F41
Author-Name: Guillermo A. Calvo
Author-Person: pca694
Author-Name: Alejandro Izquierdo
Author-Person: piz6
Author-Name: Rudy Loo-Kung
Author-Person: plo100
Note: IFM
Number: 11492
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11492
File-URL: http://www.nber.org/papers/w11492.pdf
File-Format: application/pdf
Publication-Status: published as Calvo, Guillermo A., Alejandro Izquierdo and Rudy Loo-Kung. "Relative Price Volatility Under Sudden Stops: The Relevance Of Balance Sheet Effects," Journal of International Economics, 2006, v69(1,Jun), 231-254.
Abstract: Sudden Stops are associated with increased volatility in relative prices. We introduce a model based on information acquisition to rationalize this increased volatility. An empirical analysis of the conditional variance of the wholesale price to consumer price ratio using panel ARCH techniques confirms the relevance of Sudden Stops and potential balance-sheet effects as key determinants of relative-price volatility, where balance-sheet effects are captured by the interaction of a proxy for potential changes in the real exchange rate (linked to the degree of external leverage of the absorption of tradable goods) and a measure of domestic liability dollarization.
Handle: RePEc:nbr:nberwo:11492
Template-Type: ReDIF-Paper 1.0
Title: Global Business Cycles and Credit Risk
Classification-JEL: C32; E17; G20
Author-Name: M. Hashem Pesaran
Author-Person: ppe34
Author-Name: Til Schuermann
Author-Person: psc73
Author-Name: Björn-Jakob Treutler
Note: AP CF
Number: 11493
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11493
File-URL: http://www.nber.org/papers/w11493.pdf
File-Format: application/pdf
Publication-Status: published as Global Business Cycles and Credit Risk, M. Hashem Pesaran, Til Schuermann, Bjorn-Jakob Treutler. in The Risks of Financial Institutions, Carey and Stulz. 2006
Abstract: The potential for portfolio diversification is driven broadly by two characteristics: the degree to which systematic risk factors are correlated with each other and the degree of dependence individual firms have to the different types of risk factors. Using a global vector autoregressive macroeconomic model accounting for about 80% of world output, we propose a model for exploring credit risk diversification across industry sectors and across different countries or regions. We find that full firm-level parameter heterogeneity along with credit rating information matters a great deal for capturing differences in simulated credit loss distributions. These differences become more pronounced in the presence of systematic risk factor shocks: increased parameter heterogeneity reduces shock sensitivity. Allowing for regional parameter heterogeneity seems to better approximate the loss distributions generated by the fully heterogenous model than allowing just for industry heterogeneity. The regional model also exhibits less shock sensitivity.
Handle: RePEc:nbr:nberwo:11493
Template-Type: ReDIF-Paper 1.0
Title: What Do Parents Value in Education? An Empirical Investigation of Parents' Revealed Preferences for Teachers
Classification-JEL: I2
Author-Name: Brian A. Jacob
Author-Name: Lars Lefgren
Author-Person: ple392
Note: CH ED
Number: 11494
Creation-Date: 2005-07
Order-URL: http://www.nber.org/papers/w11494
File-URL: http://www.nber.org/papers/w11494.pdf
File-Format: application/pdf
Publication-Status: published as Brian A. Jacob & Lars Lefgren, 2007. "What Do Parents Value in Education? An Empirical Investigation of Parents' Revealed Preferences for Teachers," The Quarterly Journal of Economics, MIT Press, vol. 122(4), pages 1603-1637, November.
Abstract: This paper examines revealed parent preferences for their children's education using a unique data set that includes the number of parent requests for individual elementary school teachers along with information on teacher attributes including principal reports of teacher characteristics that are typically unobservable. We find that, on average, parents strongly prefer teachers that principals describe as good at promoting student satisfaction and place relatively less value on a teacher's ability to raise standardized math or reading achievement. These aggregate effects, however, mask striking differences across family demographics. Families in higher poverty schools strongly value student achievement and are essentially indifferent to the principal's report of a teacher's ability to promote student satisfaction. The results are reversed for families in higher-income schools.
Handle: RePEc:nbr:nberwo:11494
Template-Type: ReDIF-Paper 1.0
Title: Inefficiency in Legislative Policy-Making: A Dynamic Analysis
Classification-JEL: D7
Author-Name: Marco Battaglini
Author-Person: pba170
Author-Name: Stephen Coate
Author-Person: pco66
Note: PE POL
Number: 11495
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11495
File-URL: http://www.nber.org/papers/w11495.pdf
File-Format: application/pdf
Publication-Status: published as Marco Battaglini & Stephen Coate, 2007. "Inefficiency in Legislative Policymaking: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 97(1), pages 118-149, March.
Abstract: This paper develops an infinite horizon model of public spending and taxation in which policy decisions are determined by legislative bargaining. The policy space incorporates both productive and distributive public spending and distortionary taxation. The productive spending is investing in a public good that benefits all citizens (e.g., national defense or air quality) and the distributive spending is district-specific transfers (e.g., pork barrel spending). Investment in the public good creates a dynamic linkage across policy-making periods. The analysis explores the dynamics of legislative policy choices, focusing on the efficiency of the steady state level of taxation and allocation of tax revenues. The model sheds new light on the efficiency of legislative policy-making and has a number of novel positive implications.
Handle: RePEc:nbr:nberwo:11495
Template-Type: ReDIF-Paper 1.0
Title: The "News" View of Economic Fluctuations: Evidence from Aggregate Japanese Data and Sectoral U.S. Data
Classification-JEL: E3
Author-Name: Paul Beaudry
Author-Person: pbe35
Author-Name: Franck Portier
Author-Person: ppo12
Note: EFG
Number: 11496
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11496
File-URL: http://www.nber.org/papers/w11496.pdf
File-Format: application/pdf
Publication-Status: published as Beaudry, Paul and Franck Portier. "The 'News View' Of Economic Fluctuations: Evidence From Aggregate Japanese Data And Sectoral US Data," Journal of the Japanese and International Economies, 2005, v19(4,Dec), 635-652.
Abstract: This paper uses aggregate Japanese data and sectoral U.S. data to explore the properties of the joint behavior of stock prices and total factor productivity (TFP) with the aim of highlighting data patterns that are useful for evaluating business cycle theories. The approach used follows that presented in Beaudry and Portier [2004b]. The main findings are that (i) in both Japan and the U.S., innovations in stock prices that are contemporaneously orthogonal to TFP precede most of the long run movements in total factor productivity and (ii) such stock prices innovations do not affect U.S. sectoral TFPs contemporaneously, but do precede TFP increases in those sectors that are driving U.S. TFP growth, namely durable goods, and among them equipment sectors.
Handle: RePEc:nbr:nberwo:11496
Template-Type: ReDIF-Paper 1.0
Title: Are There Real Effects of Licensing on Academic Research? A Life Cycle View
Classification-JEL: D9; J2; O3
Author-Name: Marie Thursby
Author-Person: pth283
Author-Name: Jerry Thursby
Author-Person: pth25
Author-Name: Swasti Gupta-Mukherjee
Note: PR
Number: 11497
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11497
File-URL: http://www.nber.org/papers/w11497.pdf
File-Format: application/pdf
Publication-Status: published as Thursby, Marie & Thursby, Jerry & Gupta-Mukherjee, Swasti, 2007. "Are there real effects of licensing on academic research? A life cycle view," Journal of Economic Behavior & Organization, Elsevier, vol. 63(4), pages 577-598, August.
Publication-Status: published as Are There Real Effects of Licensing on Academic Research? A Life Cycle View, Marie C. Thursby, Jerry Thursby, Swasti Gupta-Mukherjee. in Academic Science and Entrepreneurship: Dual Engines of Growth, Jaffe, Lerner, Stern, and Thursby. 2007
Abstract: Whether financial returns to university licensing divert faculty from basic research is examined in a life cycle context. As in traditional life cycle models, faculty devote more time to research, which can be either basic or applied, early and more time to leisure as they age. Licensing has real effects by increasing the ratio of applied to basic effort and reducing leisure throughout the life cycle, but basic research need not suffer. When applied effort adds nothing to the stock of knowledge, licensing reduces research output, but if applied effort leads to publishable output as well as licenses, then research output and the stock of knowledge are higher with licensing than without. When tenure is added to the system, licensing has a positive effect on research output except when the incentives to license are very high.
Handle: RePEc:nbr:nberwo:11497
Template-Type: ReDIF-Paper 1.0
Title: Bank Supervision and Corruption in Lending
Classification-JEL: G3; G28; L51; O16
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: 11498
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11498
File-URL: http://www.nber.org/papers/w11498.pdf
File-Format: application/pdf
Publication-Status: published as Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2006. "Bank supervision and corruption in lending," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 2131-2163, November.
Abstract: Which commercial bank supervisory policies ease - or intensify - the degree to which bank corruption is an obstacle to firms raising external finance? Based on new data from more than 2,500 firms across 37 countries, this paper provides the first empirical assessment of the impact of different bank supervisory policies on firms' financing obstacles. We find that the traditional approach to bank supervision, which involves empowering official supervisory agencies to directly monitor, discipline, and influence banks, does not improve the integrity of bank lending. Rather, we find that a supervisory strategy that focuses on empowering private monitoring of banks by forcing banks to disclose accurate information to the private sector tends to lower the degree to which corruption of bank officials is an obstacle to firms raising external finance. In extensions, we find that regulations that empower private monitoring exert a particularly beneficial effect on the integrity of bank lending in countries with sound legal institutions.
Handle: RePEc:nbr:nberwo:11498
Template-Type: ReDIF-Paper 1.0
Title: Is There a Diversification Discount in Financial Conglomerates?
Classification-JEL: G2; G3; L2
Author-Name: Luc Laeven
Author-Person: pla174
Author-Name: Ross Levine
Author-Person: ple61
Note: CF IFM
Number: 11499
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11499
File-URL: http://www.nber.org/papers/w11499.pdf
File-Format: application/pdf
Publication-Status: published as Laeven, Luc & Levine, Ross, 2007. "Is there a diversification discount in financial conglomerates?," Journal of Financial Economics, Elsevier, vol. 85(2), pages 331-367, August.
Abstract: This paper investigates whether the diversity of activities conducted by financial institutions influences their market valuations. We find that there is a diversification discount: The market values financial conglomerates that engage in multiple activities, e.g., lending and non-lending financial services, lower than if those financial conglomerates were broken into financial intermediaries that specialize in the individual activities. While difficult to identify a single causal factor, the results are consistent with theories that stress intensified agency problems in financial conglomerates that engage in multiple activities and indicate that economies of scope are not sufficiently large to produce a diversification premium.
Handle: RePEc:nbr:nberwo:11499
Template-Type: ReDIF-Paper 1.0
Title: Bank Concentration and Fragility: Impact and Mechanics
Classification-JEL: G21; G28; L16
Author-Name: Thorsten Beck
Author-Person: pbe266
Author-Name: Asli Demirguc-Kunt
Author-Person: pde226
Author-Name: Ross Levine
Author-Person: ple61
Note: CF IFM
Number: 11500
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11500
File-URL: http://www.nber.org/papers/w11500.pdf
File-Format: application/pdf
Publication-Status: published as Carey, Mark and Rene Stulz (eds.) The Risk of Financial Institutions. Chicago: University of Chicago Press, 2006.
Publication-Status: published as Bank Concentration and Fragility. Impact and Mechanics, Thorsten Beck. in The Risks of Financial Institutions, Carey and Stulz. 2006
Abstract: Public policy debates and theoretical disputes motivate this paper's examination of (i) the relationship between bank concentration and banking system fragility and (ii) the mechanisms underlying this relationship. We find no support for the view that concentration increases the fragility of banks. Rather, banking system concentration is associated with a lower probability that the country suffers a systemic banking crisis. In terms of policies, we find that (i) regulations and institutions that facilitate competition in banking are associated with less—not more—banking system fragility and (ii) including these policy indicators does not change the results on concentration. This suggests that concentration is a proxy for something else besides the competitive environment. Also, we do not find that official capital regulations, reserve requirements, or official prudential regulations lower crises probabilities. Finally, we present suggestive evidence that concentrated banking systems tend to have larger, better-diversified banks, which may help account for the positive link between concentration and stability.
Handle: RePEc:nbr:nberwo:11500
Template-Type: ReDIF-Paper 1.0
Title: Toward Abstraction: Ranking European Painters of the Early Twentieth Century
Classification-JEL: J0
Author-Name: David W. Galenson
Note: LS
Number: 11501
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11501
File-URL: http://www.nber.org/papers/w11501.pdf
File-Format: application/pdf
Publication-Status: published as Galenson, David W. "Toward Abstraction Ranking European Painters of the Early Twentieth Century." Historical Methods: A Journal of Quantitative and Interdisciplinary History 39, 3 (Summer 2006): 99-111.
Abstract: Paris was the undisputed capital of modern art in the nineteenth century, but during the early twentieth century major innovations began to occur elsewhere in Europe. This paper examines the careers of the artists who led such movements as Italian Futurism, German Expressionism, Holland's De Stijl, and Russia's Suprematism. Quantitative analysis reveals the conceptual basis of the art of Umberto Boccioni, Giorgio de Chirico, Kazimir Malevich, and Edvard Munch, and the experimental basis of the innovations of Wassily Kandinsky, Paul Klee, and Piet Mondrian. That the invention of abstract art was made nearly simultaneously by the conceptual Malevich and the experimental Kandinsky and Mondrian emphasizes the importance of both deductive and inductive approaches in the history of modern art.
Handle: RePEc:nbr:nberwo:11501
Template-Type: ReDIF-Paper 1.0
Title: Law, Endowments, and Property Rights
Classification-JEL: N01; K4; O1
Author-Name: Ross Levine
Author-Person: ple61
Note: IFM LE
Number: 11502
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11502
File-URL: http://www.nber.org/papers/w11502.pdf
File-Format: application/pdf
Publication-Status: published as Levine, Ross. "Law, Endowments and Property Rights," Journal of Economic Perspectives, 2005, v19(3,Summer), 61-88.
Abstract: While scholars have hypothesized about the sources of variation in property rights for over 2500 years, it is only very recently that researchers have begun to test these theories empirically. This paper reviews both the theory and empirical evidence supporting and refuting the law and endowment views of property rights. The law view holds that historically determined differences in national legal traditions continue to shape cross-country differences in property rights. The endowment view argues that during European colonization, differences in climate, crops, the indigenous population, and the disease environment influenced long-run property rights.
Handle: RePEc:nbr:nberwo:11502
Template-Type: ReDIF-Paper 1.0
Title: A Theory of Growth and Volatility at the Aggregate and Firm Level
Classification-JEL: D9; E3; L1
Author-Name: Diego Comin
Author-Person: pco55
Author-Name: Sunil Mulani
Note: EFG
Number: 11503
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11503
File-URL: http://www.nber.org/papers/w11503.pdf
File-Format: application/pdf
Publication-Status: published as Comin, Diego and Sunil Mulani. "Diverging Trends In Aggregate And Firm Volatility," Review of Economics and Statistics, 2006, v88(2,May), 374-383. Also: Diego Comin & Sunil Mulani. "A theory of growth and volatility at the aggregate and firm level," Proceedings, Federal Reserve Bank of San Francisco, issue Nov 2007.
Publication-Status: published as Comin, Diego & Mulani, Sunil, 2009. "A theory of growth and volatility at the aggregate and firm level," Journal of Monetary Economics, Elsevier, vol. 56(8), pages 1023-1042, November.
Abstract: This paper presents an endogenous growth model that explains the evolution of the first and second moments of productivity growth at the aggregate and firm level during the post-war period. Growth is driven by the development of both (i) idiosyncratic R&D innovations and (ii) general innovations that can be freely adopted by many firms. Firm-level volatility is affected primarily by the Schumpeterian dynamics associated with the development of R&D innovations. On the other hand, the variance of aggregate productivity growth is determined mainly by the arrival rate of general innovations. Ceteris paribus, the share of resources spent on development of general innovations increases with the stability of the market share of the industry leader. As market shares become less persistent, the model predicts an endogenous shift in the allocation of resources from the development of general innovations to the development of R&D innovations. This results in an increase in R&D, an increase in firm-level volatility, and a decline in aggregate volatility. The effect on productivity growth is ambiguous. On the empirical side, this paper documents an upward trend in the instability of market shares. It shows that firm volatility is positively associated with R&D spending, and that R&D is negatively associated with the correlation of growth between sectors which leads to a decline in aggregate volatility.
Handle: RePEc:nbr:nberwo:11503
Template-Type: ReDIF-Paper 1.0
Title: The Changing Role of Auditors in Corporate Tax Planning
Classification-JEL: H2; M4; L1; L5
Author-Name: Edward L. Maydew
Author-Name: Douglas A. Shackelford
Author-Person: psh631
Note: PE
Number: 11504
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11504
File-URL: http://www.nber.org/papers/w11504.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J., James R. Hines, Jr., and Joel B. Slemrod (eds.) Taxing Corporate Income in the 21st Century. Cambridge: Cambridge University Press, 2007.
Abstract: This paper examines changes in the role that auditors play in corporate tax planning following recent events, including the well-known accounting scandals, passage of the Sarbanes-Oxley Act, and regulatory actions by the SEC and PCAOB. On the whole, these events have increased the sensitivity to and scrutiny of auditor independence. We examine the effects of these events on the market for tax planning, in particular the longstanding link between audit and tax services. While the effects are recent, they are already being seen in the data. Specifically, there has already been a dramatic shift in the market for tax planning away from obtaining tax planning services from one's auditor. We estimate that the ratio of tax fees to audit fees paid to the auditors of firms in the S&P 500 decline from approximately one in 2001 to one-fourth in 2004. At the same time, we find no evidence of a general decline in spending for tax services. In sum, the evidence indicates a decoupling of the longstanding link between audit and tax services, such that firms are shifting their purchase of tax services away from their auditor and towards other providers.
Handle: RePEc:nbr:nberwo:11504
Template-Type: ReDIF-Paper 1.0
Title: Why Do Firms Become Widely Held? An Analysis of the ynamics of Corporate Ownership
Classification-JEL: G30; G32; D0
Author-Name: Jean Helwege
Author-Name: Christo Pirinsky
Author-Name: René M. Stulz
Note: CF
Number: 11505
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11505
File-URL: http://www.nber.org/papers/w11505.pdf
File-Format: application/pdf
Publication-Status: published as Stulz, Rene, Jean Helwege, and Christo Pirinsky. “Why do firms become widely held? An analysis of the dynamics of corporate ownership.” Journal of Finance 62 , 3 (2007): 995-1028.
Abstract: We consider IPO firms from 1970 to 2001 and examine the evolution of their insider ownership over time to understand better why and how U.S. firms that become widely held do so. In our sample, a majority of firms has insider ownership below 20% after ten years. We find that a firm's stock market performance and trading play an extremely important role in its insider ownership dynamics. Firms that experience large decreases in insider ownership and/or become widely held are firms with high valuations, good recent stock market performance, and liquid markets for their stocks. In contrast and surprisingly, variables suggested by agency theory have limited success in explaining the evolution of insider ownership.
Handle: RePEc:nbr:nberwo:11505
Template-Type: ReDIF-Paper 1.0
Title: Matching and Price Competition
Classification-JEL: D44; J41; L44
Author-Name: Jeremy Bulow
Author-Name: Jonathan Levin
Author-Person: ple318
Note: IO
Number: 11506
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11506
File-URL: http://www.nber.org/papers/w11506.pdf
File-Format: application/pdf
Publication-Status: published as Bulow, Jeremy and Jonathan Levin. "Matching And Price Competition," American Economic Review, 2006, v96(3,Jun), 652-668.
Abstract: We develop a model in which firms set impersonal salary levels before matching with workers. Salaries fall relative to any competitive equilibrium while profits rise by almost as much, implying little inefficiency. Furthermore, the best firms gain the most from the system while wages become compressed. We discuss the performance of alternative institutions and the recent antitrust case against the National Residency Matching Program in light of our results.
Handle: RePEc:nbr:nberwo:11506
Template-Type: ReDIF-Paper 1.0
Title: Separate When Equal? Racial Inequality and Residential Segregation
Classification-JEL: H0; J7; R0; R2
Author-Name: Patrick Bayer
Author-Person: pba636
Author-Name: Hanming Fang
Author-Person: pfa17
Author-Name: Robert McMillan
Note: ED PE
Number: 11507
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11507
File-URL: http://www.nber.org/papers/w11507.pdf
File-Format: application/pdf
Publication-Status: published as Bayer, Patrick & Fang, Hanming & McMillan, Robert, 2014. "Separate when equal? Racial inequality and residential segregation," Journal of Urban Economics, Elsevier, vol. 82(C), pages 32-48.
Abstract: This paper hypothesizes that segregation in US cities increases as racial inequality narrows due to the emergence of middle-class black neighborhoods. Employing a novel research design based on life-cycle variations in the relationship between segregation and inequality, we test this hypothesis using the 1990 and 2000 Censuses. Indeed, increased black educational attainment in a city leads to a significant rise in the number of middle-class black communities and segregation for older adults both in the cross-section and over time, consistent with our hypothesis. These findings imply a negative feedback loop that inhibits reductions in racial inequality and segregation over time.
Handle: RePEc:nbr:nberwo:11507
Template-Type: ReDIF-Paper 1.0
Title: Contractionary Currency Crashes in Developing Countries
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Note: IFM
Number: 11508
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11508
File-URL: http://www.nber.org/papers/w11508.pdf
File-Format: application/pdf
Abstract: To update a famous old statistic: a political leader in a developing country is almost twice as likely to lose office in the 6 months following a currency crash as otherwise. This difference, which is highly significant statistically, holds regardless whether the devaluation takes place in the context of an IMF program. Why are devaluations so costly? Many of the currency crises of the last ten years have been associated with output loss. Is this, as alleged, because of excessive reliance on raising the interest rate as a policy response? More likely it is because of contractionary effects of devaluation. There are various possible contractionary effects of devaluation, but it is appropriate that the balance sheet effect receives the most emphasis. Passthrough from exchange rate changes to import prices in developing countries is not the problem: this coefficient fell in the 1990s, as a look at some narrowly defined products shows. Rather, balance sheets are the problem. How can countries mitigate the fall in output resulting from the balance sheet effect in crises? In the shorter term, adjusting promptly after inflows cease is better than procrastinating by shifting to short-term dollar debt, which raises the costliness of the devaluation when it finally comes. In the longer term, greater openness to trade reduces vulnerability to both sudden stops and currency crashes.
Handle: RePEc:nbr:nberwo:11508
Template-Type: ReDIF-Paper 1.0
Title: Futures Prices in a Production Economy with Investment Constraints
Classification-JEL: G12; G13
Author-Name: Leonid Kogan
Author-Person: pko698
Author-Name: Dmitry Livdan
Author-Person: pli1379
Author-Name: Amir Yaron
Author-Person: pya156
Note: AP
Number: 11509
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11509
File-URL: http://www.nber.org/papers/w11509.pdf
File-Format: application/pdf
Publication-Status: published as Leonid Kogan, Dmitry Livdan and Amir Yaron. Journal of Finance, 2009, vol. 64, issue 3, pages 1345-1375
Abstract: We document a new stylized fact regarding the term-structure of futures volatility. We show that the relation between the volatility of futures prices and the slope of the term structure of prices is non-monotone and has a "V-shape"'. This aspect of the data cannot be generated by basic models that emphasize storage while this fact is consistent with models that emphasize investment constraints or, more generally, time-varying supply-elasticity. We develop an equilibrium model in which futures prices are determined endogenously in a production economy in which investment is both irreversible and is capacity constrained. Investment constraints affect firms' investment decisions, which in turn determine the dynamic properties of their output and consequently imply that the supply-elasticity of the commodity changes over time. Since demand shocks must be absorbed either by changes in prices, or by changes in supply, time-varying supply-elasticity results in time-varying volatility of futures prices. Calibrating this model, we show it is quantitatively consistent with the aforementioned "V-shape" relation between the volatility of futures prices and the slope of the term-structure.
Handle: RePEc:nbr:nberwo:11509
Template-Type: ReDIF-Paper 1.0
Title: Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency?
Classification-JEL: F02; F31; F33
Author-Name: Menzie Chinn
Author-Person: pch129
Author-Name: Jeffrey Frankel
Author-Person: pfr12
Note: IFM
Number: 11510
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11510
File-URL: http://www.nber.org/papers/w11510.pdf
File-Format: application/pdf
Publication-Status: published as Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency?, Menzie Chinn, Jeffrey A. Frankel. in G7 Current Account Imbalances: Sustainability and Adjustment, Clarida. 2007
Abstract: Might the dollar eventually follow the precedent of the pound and cede its status as leading international reserve currency? Unlike ten years ago, there now exists a credible competitor: the euro. This paper econometrically estimates determinants of the shares of major currencies in the reserve holdings of the world's central banks. Significant factors include: size of the home country, inflation rate (or lagged depreciation trend), exchange rate variability, and size of the relevant home financial center (as measured by the turnover in its foreign exchange market). We have not found that net international debt position is an important determinant. Network externality theories would predict a tipping phenomenon. Indeed we find that the relationship between currency shares and their determinants is nonlinear (which we try to capture with a logistic function, or else with a dummy "leader" variable for the largest country). But changes are felt only with a long lag (we estimate a weight on the preceding year's currency share around .9). The advent of the euro interrupts the continuity of the historical data set. So we estimate parameters on pre-1999 data, and then use them to forecast the EMU era. The equation correctly predicts a (small) narrowing in the gap between the dollar and euro over the period 1999-2004. Whether the euro might in the future rival or surpass the dollar as the world's leading international reserve currency appears to depend on two things: (1) do the United Kingdom and enough other EU members join euroland so that it becomes larger than the US economy, and (2) does US macroeconomic policy eventually undermine confidence in the value of the dollar, in the form of inflation and depreciation. What we learn about functional form and parameter values helps us forecast, contingent on these two developments, how quickly the euro might rise to challenge the dollar. Under two important scenarios the remaining EU members, including the UK, join EMU by 2020 or else the recent depreciation trend of the dollar persists into the future the euro may surpass the dollar as leading international reserve currency by 2022.
Handle: RePEc:nbr:nberwo:11510
Template-Type: ReDIF-Paper 1.0
Title: Inequality
Classification-JEL: J0
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Note: PE
Number: 11511
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11511
File-URL: http://www.nber.org/papers/w11511.pdf
File-Format: application/pdf
Publication-Status: published as Fullerton, D. and B. Weingast (eds.) The Oxford Handbook of Political Economy. New York: Oxford University Press, 2006.
Abstract: This paper reviews five striking facts about inequality across countries. As Kuznets (1955) famously first documented, inequality first rises and then falls with income. More unequal societies are much less likely to have democracies or governments that respect property rights. Unequal societies have less redistribution, and we have little idea whether this relationship is caused by redistribution reducing inequality or inequality reducing redistribution. Inequality and ethnic heterogeneity are highly correlated, either because of differences in educational heritages across ethnicities or because ethnic heterogeneity reduces redistribution. Finally, there is much more inequality and less redistribution in the U.S. than in most other developed nations.
Handle: RePEc:nbr:nberwo:11511
Template-Type: ReDIF-Paper 1.0
Title: Gender and Assimilation Among Mexican Americans
Classification-JEL: J1; J2; J3; J6
Author-Name: Francine D. Blau
Author-Person: pbl16
Author-Name: Lawrence M. Kahn
Author-Person: pka63
Note: CH ED LS
Number: 11512
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11512
File-URL: http://www.nber.org/papers/w11512.pdf
File-Format: application/pdf
Publication-Status: published as Gender and Assimilation among Mexican Americans, Francine D. Blau, Lawrence M. Kahn. in Mexican Immigration to the United States, Borjas. 2007
Abstract: Using 1994-2003 CPS data, we study gender and assimilation of Mexican Americans. Source country patterns, particularly the more traditional gender division of labor in the family in Mexico, strongly influence the outcomes and behavior of Mexican immigrants. On arrival in the United States, immigrant women have a higher incidence of marriage (spouse present), higher fertility, and much lower labor supply than comparable white natives; wage differences are smaller than labor supply differences, and smaller than comparable wage gaps for men. Immigrant women's labor supply assimilates dramatically: the ceteris paribus immigrant shortfall is virtually eliminated after twenty years. While men experience moderate wage assimilation, evidence is mixed for women. Rising education in the second generation considerably reduces raw labor supply (especially for women) and wage gaps with nonhispanic whites. Female immigrants' high marriage rates assimilate towards comparable natives', but immigrant women and men remain more likely to be married even after long residence. The remaining ceteris paribus marriage gap is eliminated in the second generation. Immigrants' higher fertility does not assimilate toward the native level, and, while the size of the Mexican American- white native fertility differential declines across generations, it is not eliminated.
Handle: RePEc:nbr:nberwo:11512
Template-Type: ReDIF-Paper 1.0
Title: Aid and Growth: What Does the Cross-Country Evidence Really Show?
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Author-Name: Arvind Subramanian
Author-Person: psu108
Note: IFM
Number: 11513
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11513
File-URL: http://www.nber.org/papers/w11513.pdf
File-Format: application/pdf
Publication-Status: published as Raghuram G. Rajan & Arvind Subramanian, 2008. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 643-665, 06.
Abstract: We examine the effects of aid on growth in cross-sectional and panel data—after correcting for the possible bias that poorer (or stronger) growth may draw aid contributions to recipient countries. Even after this correction, we find little robust evidence of a positive (or negative) relationship between aid inflows into a country and its economic growth. We also find no evidence that aid works better in better policy or geographical environments, or that certain forms of aid work better than others. Our findings suggest that for aid to be effective in the future, the aid apparatus will have to be rethought.
Handle: RePEc:nbr:nberwo:11513
Template-Type: ReDIF-Paper 1.0
Title: Information and Consumer Choice: The Value of Publicized Health Plan Ratings
Classification-JEL: I11; L15
Author-Name: Ginger Zhe Jin
Author-Name: Alan T. Sorensen
Note: IO
Number: 11514
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11514
File-URL: http://www.nber.org/papers/w11514.pdf
File-Format: application/pdf
Publication-Status: published as Jin, Ginger Zhe and Alan T. Sorensen. "Information And Consumer Choice: The Value Of Publicized Health Plan Ratings," Journal of Health Economics, 2006, v25(2,Mar), 248-275.
Abstract: We use data on the enrollment decisions of federal annuitants to estimate the influence of publicized ratings on health plan choice. We focus on the impact of ratings disseminated by the National Committee for Quality Assurance (NCQA), and use our estimates to calculate the value of the information. Our approach exploits a novel feature of the data—the availability of nonpublic plan ratings—to correct for a source of bias that is inherent in studies of consumer responsiveness to information on product quality: since publicized ratings are correlated with other quality signals known to consumers (but unobserved by researchers), the estimated influence of ratings is likely to be overstated. We control for this bias by comparing the estimated impact of publicized ratings to the estimated impact of ratings that were never disclosed. The results indicate that NCQA's plan ratings had a meaningful influence on individuals' choices, particularly for individuals choosing a plan for the first time. Although we estimate that a very small fraction of individual decisions were materially affected by the information, for those that were affected the implied utility gains are substantial.
Handle: RePEc:nbr:nberwo:11514
Template-Type: ReDIF-Paper 1.0
Title: How the Internet Lowers Prices: Evidence from Matched Survey and Auto Transaction Data
Classification-JEL: L11; L15; L62; D82; M31
Author-Name: Florian Zettelmeyer
Author-Name: Fiona Scott Morton
Author-Name: Jorge Silva-Risso
Note: IO
Number: 11515
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11515
File-URL: http://www.nber.org/papers/w11515.pdf
File-Format: application/pdf
Publication-Status: published as Florian Zettelmeyer & Fiona Scott Morton & Jorge Silva-Risso, 2006. "How the Internet Lowers Prices: Evidence from Matched Survey and Automobile Transaction Data," Journal of Marketing Research, vol 43(2), pages 168-181.
Abstract: There is convincing evidence that the Internet has lowered the prices paid by some consumers in established industries, for example, term life insurance and car retailing. However, current research does not reveal much about how using the Internet lowers prices. This paper answers this question for the auto retailing industry. We use direct measures of search behavior and consumer characteristics to investigate how the Internet affects negotiated prices. We show that the Internet lowers prices for two distinct reasons. First, the Internet helps consumers learn the invoice price of dealers. Second, the referral process of online buying services, a novel institution made possible by the Internet, also helps consumers obtain lower prices. The combined information and referral price effects are -1.5%, corresponding to 22% of dealers' average gross profit margin per vehicle. We also find that buyers with a high disutility of bargaining benefit from information on the specific car they eventually purchased while buyers who like the bargaining process do not. The results suggest that the decisions consumers make to use the Internet to gather information and to use the negotiating clout of an online buying service have a real effect on the prices paid by these consumers.
Handle: RePEc:nbr:nberwo:11515
Template-Type: ReDIF-Paper 1.0
Title: Do Stronger Intellectual Property Rights Increase International Technology Transfer? Empirical Evidence from U.S. Firm-Level Data
Classification-JEL: O34; O33; F23
Author-Name: Lee Branstetter
Author-Person: pbr854
Author-Name: Raymond Fisman
Author-Person: pfi257
Author-Name: C. Fritz Foley
Note: ITI PR
Number: 11516
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11516
File-URL: http://www.nber.org/papers/w11516.pdf
File-Format: application/pdf
Publication-Status: published as Branstetter, Lee G., Raymond Fisman and C. Fritz Foley. "Do Stronger Intellectual Property Rights Increase International Technology Transfer? Empirical Evidence From U.S. Firm-Level Panel Data," Quarterly Journal of Economics, 2006, v121(1,Feb), 321-349.
Abstract: This paper examines how technology transfer within U.S. multinational firms changes in response to a series of IPR reforms undertaken by 16 countries over the 1982-1999 period. Analysis of detailed firm-level data reveals that royalty payments for technology transferred to affiliates increase at the time of reforms, as do affiliate R&D expenditures and total levels of foreign patent applications. Increases in royalty payments and R&D expenditures are concentrated among affiliates of parent companies that use U.S. patents extensively prior to reform and are therefore expected to value IPR reform most. For this set of affiliates, increases in royalty payments exceed 30 percent. Our results collectively imply that U.S. multinationals respond to changes in IPR regimes abroad by significantly increasing technology transfer to reforming countries.
Handle: RePEc:nbr:nberwo:11516
Template-Type: ReDIF-Paper 1.0
Title: Regime-Switching Behavior of the Term Structure of Forward Markets
Classification-JEL: F31; C13
Author-Name: Elena Tchernykh
Author-Name: William H. Branson
Note: IFM
Number: 11517
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11517
File-URL: http://www.nber.org/papers/w11517.pdf
File-Format: application/pdf
Abstract: This paper presents techniques for modelling and estimating the behavior of financial market price or return differentials that follow non-linear regime-switching behaviour. The methodology to be used here is estimation of variants of threshold autoregression (TAR) models. In the basic model the differentials are random within a band defined by transactions costs and contract risk; they occasionally jump outside the band, and then follow an autoregressive path back towards the band. The principal reference is Tchernykh (1998). The application here is to deviations from covered interest parity (CIP) between forward foreign exchange (FX) markets in Hong Kong and the Philippines. We have observed that these deviations from the band follow irregular steps, rather than single jumps. Therefore a Modified TAR model (MTAR) that allows for this behaviour is also estimated. The estimation methodology is a regime-switching maximum likelihood procedure. The estimates can provide indicators for policy-makers of the market's expectation of crisis, and could also provide indicators for the private sector of convergence of deviations to their usual bands. The TAR model has the potential to be applied to differentials between linked pairs of financial market prices more generally.
Handle: RePEc:nbr:nberwo:11517
Template-Type: ReDIF-Paper 1.0
Title: Behavioral Public Economics: Welfare and Policy Analysis with Non-Standard Decision-Makers
Classification-JEL: D0; D1; D6; D9; H0; H1; H4
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Author-Name: Antonio Rangel
Author-Person: pra69
Note: EH PE
Number: 11518
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11518
File-URL: http://www.nber.org/papers/w11518.pdf
File-Format: application/pdf
Abstract: This paper has two goals. First, we discuss several emerging approaches to applied welfare analysis under non-standard ("behavioral") assumptions concerning consumer choice. This provides a foundation for Behavioral Public Economics. Second, we illustrate applications of these approaches by surveying behavioral studies of policy problems involving saving, addiction, and public goods. We argue that the literature on behavioral public economics, though in its infancy, has already fundamentally changed our understanding of public policy in each of these domains.
Handle: RePEc:nbr:nberwo:11518
Template-Type: ReDIF-Paper 1.0
Title: Evaluating Labor Market Reforms: A General Equilibrium Approach
Classification-JEL: E24; C68; J30
Author-Name: César Alonso-Borrego
Author-Person: pal9
Author-Name: Jesús Fernández-Villaverde
Author-Person: pfe14
Author-Name: José E. Galdón-Sánchez
Author-Person: pga60
Note: EFG
Number: 11519
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11519
File-URL: http://www.nber.org/papers/w11519.pdf
File-Format: application/pdf
Abstract: Job security provisions are commonly invoked to explain the high and persistent European unemployment rates. This belief has led several countries to reform their labor markets and liberalize the use of fixed-term contracts. Despite how common such contracts have become after deregulation, there is a lack of quantitative analysis of their impact on the economy. To fill this gap, we build a general equilibrium model with heterogeneous agents and firing costs in the tradition of Hopenhayn and Rogerson (1993). We calibrate our model to Spanish data, choosing in part parameters estimated with firm-level longitudinal data. Spain is particularly interesting, since its labor regulations are among the most protective in the OECD, and both its unemployment and its share of fixed-term employment are the highest. We find that fixed-term contracts increase unemployment, reduce output, and raise productivity. The welfare effects are ambiguous.
Handle: RePEc:nbr:nberwo:11519
Template-Type: ReDIF-Paper 1.0
Title: Savings Gluts and Interest Rates: The Missing Link to Europe
Classification-JEL: F2; F32; F33
Author-Name: Michael P. Dooley
Author-Person: pdo13
Author-Name: David Folkerts-Landau
Author-Name: Peter M. Garber
Author-Person: pga124
Note: IFM ME
Number: 11520
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11520
File-URL: http://www.nber.org/papers/w11520.pdf
File-Format: application/pdf
Abstract: Data for world savings rates do not suggest that an aggregate glut of world savings has depressed US and international interest rates in recent years. Unusual but offsetting changes in savings rates have been limited to three regions: sharp declines in the US have been matched by sharp increases for developing Asia and the Middle East. The world saving rate has increased very little. There are two important features of this change in regional savings behavior. First, three-quarters of the increase in Asian and Middle Eastern savings has been placed in international reserves. Second, all these additional savings have been absorbed by the United States. Even if reserves are mostly placed initially in the US, we would not expect all the savings exported from these high savings regions to remain in the United States. A collapse of expected profits outside the US seems to us a compelling explanation for the US current account deficit and depressed international interest rates.
Handle: RePEc:nbr:nberwo:11520
Template-Type: ReDIF-Paper 1.0
Title: A Primer on Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows and Competitive Devaluation
Classification-JEL: F31; F41
Author-Name: Menzie D. Chinn
Author-Person: pch129
Note: IFM
Number: 11521
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11521
File-URL: http://www.nber.org/papers/w11521.pdf
File-Format: application/pdf
Publication-Status: published as Chinn, Menzie D. "A Primer On Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows And Competitive Devaluation," Open Economies Review, 2006, v17(1,Jan), 115-143.
Abstract: Several alternative measures of "effective" exchange rates are discussed in the context of their theoretical underpinnings and actual construction. Focusing on contemporary indices and recently developed econometric methods, the empirical characteristics of these differing series are examined, including the exchange rates for the U.S., the euro area and several East Asian countries. The issues that confront the applied economist or policymaker in using the measures of real effective exchange rates available are illustrated in several case studies from current interest: (i) evaluating exchange rate misalignment, (ii) testing the Balassa-Samuelson effect, (iii) estimating the price responsiveness of trade flows, and (iv) assessing the potential impact of competitive devaluations.
Handle: RePEc:nbr:nberwo:11521
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Child Support Enforcement on Fertility, Parental Investment and Child Well-Being
Classification-JEL: J12; J13; I38
Author-Name: Anna Aizer
Author-Person: pai9
Author-Name: Sara McLanahan
Note: CH
Number: 11522
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11522
File-URL: http://www.nber.org/papers/w11522.pdf
File-Format: application/pdf
Publication-Status: published as Aizer, Anna and Sara McLanahan. "The Impact Of Child Support Enforcement On Fertility, Parental Investments, and Child Well-Being," Journal of Human Resources, 2006, v41(1,Winter), 28-45.
Abstract: Increasing the probability of paying child support, in addition to increasing resources available for investment in children, may also alter the incentives faced by men to have children out of wedlock. We find that strengthening child support enforcement leads men to have fewer out-of-wedlock births and among those who do become fathers, to do so with more educated women and those with a higher propensity to invest in children. Thus, policies that compel men to pay child support may affect child outcomes through two pathways: an increase in financial resources and a birth selection process.
Handle: RePEc:nbr:nberwo:11522
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy Under Uncertainty in Micro-Founded Macroeconometric Models
Classification-JEL: C11; C22; E31; E52; E61; E63
Author-Name: Andrew T. Levin
Author-Person: ple143
Author-Name: Alexei Onatski
Author-Person: pon27
Author-Name: John C. Williams
Author-Person: pwi23
Author-Name: Noah Williams
Author-Person: pwi107
Note: EFG ME
Number: 11523
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11523
File-URL: http://www.nber.org/papers/w11523.pdf
File-Format: application/pdf
Publication-Status: published as Monetary Policy under Uncertainty in Micro-Founded Macroeconometric Models, Andrew T. Levin, Alexei Onatski, John Williams, Noah M. Williams. in NBER Macroeconomics Annual 2005, Volume 20, Gertler and Rogoff. 2006
Abstract: We use a micro-founded macroeconometric modeling framework to investigate the design of monetary policy when the central bank faces uncertainty about the true structure of the economy. We apply Bayesian methods to estimate the parameters of the baseline specification using postwar U.S. data, and then determine the policy under commitment that maximizes household welfare. We find that the performance of the optimal policy is closely matched by a simple operational rule that focuses solely on stabilizing nominal wage inflation. Furthermore, this simple wage stabilization rule is remarkably robust to uncertainty about the model parameters and to various assumptions regarding the nature and incidence of the innovations. However, the characteristics of optimal policy are very sensitive to the specification of the wage contracting mechanism, thereby highlighting the importance of additional research regarding the structure of labor markets and wage determination.
Handle: RePEc:nbr:nberwo:11523
Template-Type: ReDIF-Paper 1.0
Title: The International Dynamics of R&D and Innovation in the Short and in the Long Run
Classification-JEL: O31; F43; C23
Author-Name: Laura Bottazzi
Author-Person: pbo90
Author-Name: Giovanni Peri
Author-Person: ppe210
Note: ITI PR
Number: 11524
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11524
File-URL: http://www.nber.org/papers/w11524.pdf
File-Format: application/pdf
Publication-Status: published as Peri, Giovanni and Laura Bottazzi. “The Dynamics of R&D and Innovation in the Short Run and in the Long Run." Economic Journal (March 2007).
Abstract: In this paper we estimate the dynamic relationship between employment in R&D and generation of knowledge as measured by patent applications across OECD countries. In several recently developed models, known as `idea-based' models of growth, the afore mentioned "idea-generating" process is the engine of productivity growth. Moreover, in real business cycle models technological shocks are an important source of fluctuations. Our empirical strategy is able to test whether knowledge spillovers are strong enough to generate sustained endogenous growth and to estimate the quantitative impact of international knowledge on technological innovation of a country in the short and in the long run. We find that a country's stock of knowledge, its R&D resources and the stock of international knowledge move together in the long run. International knowledge has a very significant impact on innovation. As a consequence, a positive shock to R&D in the US (the largest world innovator) has a significant positive effect on the innovation of all other countries. Such a shock produces its largest effect on domestic and international innovation after five to ten years from its occurrence.
Handle: RePEc:nbr:nberwo:11524
Template-Type: ReDIF-Paper 1.0
Title: Antitrust in Innovative Industries
Classification-JEL: L40; O31
Author-Name: Ilya Segal
Author-Name: Michael Whinston
Author-Person: pwh46
Note: IO
Number: 11525
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11525
File-URL: http://www.nber.org/papers/w11525.pdf
File-Format: application/pdf
Publication-Status: published as Whinston, Michael and Ilya Segal. "Antitrust in Innovative Industries." American Economic Review 97 (December 2007): 1703-30.
Abstract: We study the effects of antitrust policy in industries with continual innovation. A more protective antitrust policy may have conflicting effects on innovation incentives, raising the profits of new entrants, but lowering those of continuing incumbents. We show that the direction of the net effect can be determined by analyzing shifts in innovation benefit and supply holding the innovation rate fixed. We apply this framework to analyze several specific antitrust policies. We show that in some cases, holding the innovation rate fixed, as suggested by our comparative statics results, the tension does not arise and a more protective policy necessarily raises the rate of innovation.
Handle: RePEc:nbr:nberwo:11525
Template-Type: ReDIF-Paper 1.0
Title: Dumb Money: Mutual Fund Flows and the Cross-Section of Stock Returns
Classification-JEL: G14; G23; G32
Author-Name: Andrea Frazzini
Author-Person: pfr54
Author-Name: Owen A. Lamont
Note: AP CF
Number: 11526
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11526
File-URL: http://www.nber.org/papers/w11526.pdf
File-Format: application/pdf
Publication-Status: published as Frazzini, Andrea & Lamont, Owen A., 2008. "Dumb money: Mutual fund flows and the cross-section of stock returns," Journal of Financial Economics, Elsevier, vol. 88(2), pages 299-322, May.
Abstract: We use mutual fund flows as a measure for individual investor sentiment for different stocks, and find that high sentiment predicts low future returns at long horizons. Fund flows are dumb money – by reallocating across different mutual funds, retail investors reduce their wealth in the long run. This dumb money effect is strongly related to the value effect. High sentiment also is associated high corporate issuance, interpretable as companies increasing the supply of shares in response to investor demand.
Handle: RePEc:nbr:nberwo:11526
Template-Type: ReDIF-Paper 1.0
Title: Mexican Entrepreneurship: A Comparison of Self-Employment in Mexico and the United States
Classification-JEL: F2; J2
Author-Name: Robert Fairlie
Author-Person: pfa338
Author-Name: Christopher Woodruff
Author-Person: pwo165
Note: ITI LS
Number: 11527
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11527
File-URL: http://www.nber.org/papers/w11527.pdf
File-Format: application/pdf
Publication-Status: published as Mexican Entrepreneurship: A Comparison of Self-Employment in Mexico and the United States , Robert W. Fairlie, Christopher Woodruff. in Mexican Immigration to the United States, Borjas. 2007
Abstract: Nearly a quarter of Mexico's workforce is self employed. But in the U.S. rates of self employment among Mexican Americans are only 6 percent, about half the rate among non-Latino whites. Using data from the Mexican and U.S. population census, we show that neither industrial composition nor differences in the age and education of Mexican born populations residing in Mexico and the U.S. accounts for the differences in the self employment rates in the two countries. Within the U.S., however, the data show self employment rates are much higher in ethnic enclaves. In PUMAS with a high percentage of residents of Latino origin, rates of self employment are comparable to rates among non-Latino whites. The data also indicate that the lack of English language ability and the lack of legal status among Mexican American immigrants helps account for their lower rates of self employment.
Handle: RePEc:nbr:nberwo:11527
Template-Type: ReDIF-Paper 1.0
Title: The Anatomy of Start-Stop Growth
Classification-JEL: O47; O11
Author-Name: Benjamin F. Jones
Author-Person: pjo400
Author-Name: Benjamin A. Olken
Author-Person: pol170
Note: EFG
Number: 11528
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11528
File-URL: http://www.nber.org/papers/w11528.pdf
File-Format: application/pdf
Publication-Status: published as Jones, Benjamin and Ben Olken. "The Anatomy of Start-Stop Growth." Review of Economics and Statistics 90, 3 (August 2008).
Abstract: This paper investigates the remarkable extremes of growth experiences within countries and examines the changes that occur when growth starts and stops. We find three main results. First, all but the very richest countries experience both growth miracles and failures over substantial periods. Second, growth accounting reveals that physical capital accumulation plays a negligible role in growth take-offs and a larger but still modest role in growth collapses. The implied role of productivity in these shifts is also directly reflected in employment reallocations and changes in trade. Third, growth accelerations and collapses are asymmetric phenomena. Collapses typically feature reduced manufacturing and investment amidst increasing price instability, whereas growth takeoffs are primarily associated with large and steady expansions in international trade. This asymmetry suggests that the roads into and out of rapid growth expansions may not be the same. The results stand in contrast to much growth theory and conventional wisdom: despite much talk of poverty traps, even very poor countries regularly grow rapidly, and the role of aggregate investment in growth accelerations is negligible.
Handle: RePEc:nbr:nberwo:11528
Template-Type: ReDIF-Paper 1.0
Title: Health Insurance and the Obesity Externality
Classification-JEL: I1; D6
Author-Name: Jay Bhattacharya
Author-Name: Neeraj Sood
Author-Person: pso62
Note: EH
Number: 11529
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11529
File-URL: http://www.nber.org/papers/w11529.pdf
File-Format: application/pdf
Publication-Status: published as Bhattacharya, Jay and Neeraj Sood. “Health Insurance and the Obesity Externality.” Advances In Health Economics And Health Services Research 17 (2007): 279-318.
Abstract: If rational individuals pay the full costs of their decisions about food intake and exercise, economists, policy makers, and public health officials should treat the obesity epidemic as a matter of indifference. In this paper, we show that, as long as insurance premiums are not risk rated for obesity, health insurance coverage systematically shields those covered from the full costs of physical inactivity and overeating. Since the obese consume significantly more medical resources than the non-obese, but pay the same health insurance premiums, they impose a negative externality on normal weight individuals in their insurance pool. To estimate the size of this externality, we develop a model of weight loss and health insurance under two regimes——(1) underwriting on weight is allowed, and (2) underwriting on weight is not allowed. We show that under regime (1), there is no obesity externality. Under regime (2), where there is an obesity externality, all plan participants face inefficient incentives to undertake unpleasant dieting and exercise. These reduced incentives lead to inefficient increases in body weight, and reduced social welfare. Using data on medical expenditures and body weight from the National Health and Interview Survey and the Medical Expenditure Panel Survey, we estimate that, in a health plan with a coinsurance rate of 17.5%, the obesity externality imposes a welfare cost of about $150 per capita. Our results also indicate that the welfare loss can be reduced by technological change that lowers the pecuniary and non-pecuniary costs of losing weight, and also by increasing the coinsurance rate.
Handle: RePEc:nbr:nberwo:11529
Template-Type: ReDIF-Paper 1.0
Title: How Do Friendships Form?
Classification-JEL: J0; J2
Author-Name: Bruce Sacerdote
Author-Name: David Marmaros
Note: CH
Number: 11530
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11530
File-URL: http://www.nber.org/papers/w11530.pdf
File-Format: application/pdf
Publication-Status: published as Sacerdote, Bruce and David Marmaros. "How Do Friendships Form?" The Quarterly Journal of Economics 121, 1 (Feb 2006): 79-119.
Abstract: We examine how people form social networks among their peers. We use a unique dataset that tells us the volume of email between any two people in the sample. The data are from students and recent graduates of Dartmouth College. First year students interact with peers in their immediate proximity and form long term friendships with a subset of these people. This result is consistent with a model in which the expected value of interacting with an unknown person is low (making traveling solely to meet new people unlikely), while the benefits from interacting with the same person repeatedly are high. Geographic proximity and race are greater determinants of social interaction than are common interests, majors, or family background. Two randomly chosen white students interact three times more often than do a black student and a white student. However, placing the black and white student in the same freshman dorm increases their frequency of interaction by a factor of three. A traditional "linear in group means" model of peer ability is only a reasonable approximation to the ability of actual peers chosen when we form the groups around all key factors including distance, race and cohort.
Handle: RePEc:nbr:nberwo:11530
Template-Type: ReDIF-Paper 1.0
Title: Why Do Politicians Delegate?
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Guido Tabellini
Author-Person: pta37
Note: ME PE POL
Number: 11531
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11531
File-URL: http://www.nber.org/papers/w11531.pdf
File-Format: application/pdf
Abstract: Opportunistic politicians maximize the probability of reelection and rents from office holding. Can it be optimal from their point of view to delegate policy choices to independent bureaucracies? The answer is yes: politicians will delegate some policy tasks, though in general not those that would be socially optimal to delegate. In particular, politicians tend not to delegate coalition forming redistributive policies and policies that create large rents or effective campaign contributions. Instead they prefer to delegate risky policies to shift risk (and blame) on bureaucracies.
Handle: RePEc:nbr:nberwo:11531
Template-Type: ReDIF-Paper 1.0
Title: Digital Rights Management and the Pricing of Digital Products
Classification-JEL: L13; L14; L15; K21; O33
Author-Name: Yooki Park
Author-Name: Suzanne Scotchmer
Author-Person: psc49
Note: LE PR
Number: 11532
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11532
File-URL: http://www.nber.org/papers/w11532.pdf
File-Format: application/pdf
Abstract: As it becomes cheaper to copy and share digital content, vendors are turning to technical protections such as encryption. We argue that if protection is nevertheless imperfect, this transition will generally lower the prices of content relative to perfect legal enforcement. However, the effect on prices depends on whether the content providers use independent protection standards or a shared one, and if shared, on the governance of the system. Even if a shared system permits content providers to set their prices independently, the equilibrium prices will depend on how the vendors share the costs. We show that demand-based cost sharing generally leads to higher prices than revenue-based cost sharing. Users, vendors and the antitrust authorities will typically have different views on what capabilities the DRM system should have. We argue that, when a DRM system is implemented as an industry standard, there is a potential for "collusion through technology."
Handle: RePEc:nbr:nberwo:11532
Template-Type: ReDIF-Paper 1.0
Title: Notes for a Contingent Claims Theory of Limit Order Markets
Classification-JEL: G10; G13; G19
Author-Name: Bruce N. Lehmann
Note: AP
Number: 11533
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11533
File-URL: http://www.nber.org/papers/w11533.pdf
File-Format: application/pdf
Abstract: This paper provides a road map for building a contingent claims theory of limit order markets grounded in a simple observation: limit orders are equivalent to a portfolio of cash-or-nothing and asset-or-nothing digital options on market order flow. However, limit orders are not conventional derivative securities: order flow is an endogenous, non-price state variable; the underlying asset value is a construct, the value of the security in different order flow states; and arbitrage trading or hedging of limit orders is not feasible. Fortunately, none of these problems is fatal since options on order flow can be conceptualized as bets implicit in limit orders, arbitrage trading can be replaced by limit order substitution, and plausible assumptions can be made about the endogeneity of order flow states and their associated asset values. The analysis yields two main results: Arrow-Debreu prices for order flow ''states'' are proportional to the slope of the limit order book and the limit order book at one time proves to be identical to that at an earlier time adjusted for the net order flow since that time when all information arrives via trades.
Handle: RePEc:nbr:nberwo:11533
Template-Type: ReDIF-Paper 1.0
Title: How Do House Prices Affect Consumption? Evidence From Micro Data
Classification-JEL: D1; G1
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: João F. Cocco
Note: AP EFG ME
Number: 11534
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11534
File-URL: http://www.nber.org/papers/w11534.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, John Y. & Cocco, Joao F., 2007. "How do house prices affect consumption? Evidence from micro data," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 591-621, April.
Abstract: Housing is a major component of wealth. Since house prices fluctuate considerably over time, it is important to understand how these fluctuations affect households' consumption decisions. Rising house prices may stimulate consumption by increasing households' perceived wealth, or by relaxing borrowing constraints. This paper investigates the response of household consumption to house prices using UK micro data. We estimate the largest effect of house prices on consumption for older homeowners, and the smallest effect, insignificantly different from zero, for younger renters. This finding is consistent with heterogeneity in the wealth effect across these groups. In addition, we find that regional house prices affect regional consumption growth. Predictable changes in house prices are correlated with predictable changes in consumption, particularly for households that are more likely to be borrowing constrained, but this effect is driven by national rather than regional house prices and is important for renters as well as homeowners, suggesting that UK house prices are correlated with aggregate financial market conditions.
Handle: RePEc:nbr:nberwo:11534
Template-Type: ReDIF-Paper 1.0
Title: Incentives and Prosocial Behavior
Classification-JEL: D64; D82; H41; Z13
Author-Name: Roland Bénabou
Author-Person: pbe27
Author-Name: Jean Tirole
Author-Person: pti33
Note: PE
Number: 11535
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11535
File-URL: http://www.nber.org/papers/w11535.pdf
File-Format: application/pdf
Publication-Status: published as Roland Bénabou & Jean Tirole, 2006. "Incentives and Prosocial Behavior," American Economic Review, American Economic Association, vol. 96(5), pages 1652-1678, December.
Abstract: We develop a theory of prosocial behavior that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect. Rewards or punishments (whether material or image-related) create doubt about the true motive for which good deeds are performed and this "overjustification effect" can induce a partial or even net crowding out of prosocial behavior by extrinsic incentives. We also identify settings that are conducive to multiple social norms and those where disclosing one's generosity may backfire. Finally, we analyze the choice by public and private sponsors of incentive levels, their degree of confidentiality and the publicity given to agents' behavior. Sponsor competition is shown to potentially reduce social welfare.
Handle: RePEc:nbr:nberwo:11535
Template-Type: ReDIF-Paper 1.0
Title: Economic Analysis of Corporate and Personal Bankruptcy Law
Classification-JEL: K2; G3
Author-Name: Michelle J. White
Author-Person: pwh52
Note: LE
Number: 11536
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11536
File-URL: http://www.nber.org/papers/w11536.pdf
File-Format: application/pdf
Abstract: This paper surveys research on the economics of corporate and personal bankruptcy law. Since the literatures on the two types of bankruptcy have developed in isolation of each other, a goal of the survey is to draw out parallels between them. Both theoretical and empirical research are discussed.
Handle: RePEc:nbr:nberwo:11536
Template-Type: ReDIF-Paper 1.0
Title: Social Value of Public Information: Morris and Shin (2002) Is Actually Pro Transparency, Not Con
Classification-JEL: D82; D83; E52; E58
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: ME
Number: 11537
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11537
File-URL: http://www.nber.org/papers/w11537.pdf
File-Format: application/pdf
Publication-Status: published as Svensson, Lars E. O. "Social Value of Public Information: Morris and Shin (2002) Is Actually Pro Transparency, Not Con." American Economic Review Vol. 96, No. 1, Mar., 2006
Abstract: The main result of Morris and Shin (2002) (restated in papers by Amato, Morris, and Shin (2002) and Amato and Shin (2003) and commented upon by Economist (2004)) has been presented and interpreted as an anti-transparency result: more public information can be bad. However, some scrutiny of the result shows that it is actually pro transparency: except in very special circumstances, more public information is good. Furthermore, for a conservative benchmark of equal precision in public and private information, social welfare is higher than in a situation without public information.
Handle: RePEc:nbr:nberwo:11537
Template-Type: ReDIF-Paper 1.0
Title: Do Macro Variables, Asset Markets or Surveys Forecast Inflation Better?
Classification-JEL: E31; E37; E43; E44
Author-Name: Andrew Ang
Author-Person: pan374
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Min Wei
Note: AP EFG
Number: 11538
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11538
File-URL: http://www.nber.org/papers/w11538.pdf
File-Format: application/pdf
Publication-Status: published as Ang, Andrew & Bekaert, Geert & Wei, Min, 2007. "Do macro variables, asset markets, or surveys forecast inflation better?," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1163-1212, May.
Abstract: Surveys do! We examine the forecasting power of four alternative methods of forecasting U.S. inflation out-of-sample: time series ARIMA models; regressions using real activity measures motivated from the Phillips curve; term structure models that include linear, non-linear, and arbitrage-free specifications; and survey-based measures. We also investigate several optimal methods of combining forecasts. Our results show that surveys outperform the other forecasting methods and that the term structure specifications perform relatively poorly. We find little evidence that combining forecasts using means or medians, or using optimal weights with prior information produces superior forecasts to survey information alone. When combining forecasts, the data consistently places the highest weights on survey information.
Handle: RePEc:nbr:nberwo:11538
Template-Type: ReDIF-Paper 1.0
Title: The Collection Efficiency of the Value Added Tax: Theory and International Evidence
Classification-JEL: F15; H21
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Yothin Jinjarak
Note: ITI PE
Number: 11539
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11539
File-URL: http://www.nber.org/papers/w11539.pdf
File-Format: application/pdf
Publication-Status: published as Joshua Aizenman & Yothin Jinjarak, 2008. "The collection efficiency of the Value Added Tax: Theory and international evidence," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 17(3), pages 391-410.
Abstract: This paper evaluates the political economy and structural factors explaining the collection efficiency of the Value Added Tax [VAT]. We consider the case where the collection efficiency is determined by the probability of audit and by the penalty on underpaying. Implementation lags imply that the present policy maker determines the efficiency of the tax system next period. Theory suggests that the collection efficiency is impacted by political economy considerations greater polarization and political instability would reduce the efficiency of the tax collection. In addition, collection is impacted by structural factors affecting the ease of tax evasion, like the urbanization level, the share of agriculture, and trade openness. Defining the collection efficiency of the VAT as the ratio of the VAT revenue to aggregate consumption divided by the standard VAT rate, we evaluate the evidence on VAT collection efficiency in a panel of 44 countries over 1970-99. The results are consistent with the theory - a one standard deviation increase in durability of political regime, and in the ease and fluidity of political participation, increase the VAT collection efficiency by 3.1% and 3.6%, respectively. A one standard deviation increase in urbanization, trade openness, and the share of agriculture changes the VAT collection efficiency by 12.7%, 3.9%, and - 4.8%, respectively. In addition, a one standard deviation increase in GDP/Capita increases the tax efficiency by 8.1%. Qualitatively identical results apply for an alternative measure of VAT collection efficiency, defined by the ratio of VAT revenue to GDP divided by the standard VAT.
Handle: RePEc:nbr:nberwo:11539
Template-Type: ReDIF-Paper 1.0
Title: Competition and Productivity in Japanese Manufacturing Industries
Classification-JEL: L11; L60; O30
Author-Name: Yosuke Okada
Note: PR
Number: 11540
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11540
File-URL: http://www.nber.org/papers/w11540.pdf
File-Format: application/pdf
Publication-Status: published as Okada, Yosuke. "Competition And Productivity In Japanese Manufacturing Industries," Journal of the Japanese and International Economies, 2005, v19(4,Dec), 586-616.
Abstract: This paper examines the determinants of productivity in Japanese manufacturing industries, looking particularly at the impact of product market competition on productivity. Using a newly available panel data on around ten thousand firms in Japanese manufacturing for the years 1994-2000, I show that competition, as measured by lower level of industrial price-cost margin, enhances productivity growth, controlling for a broad range of industrial and firm-specific characteristics. Moreover, I suggest that market power, as measured by either individual firm's price-cost margin or market share, has negative impact on productivity level of R&D performing firms.
Handle: RePEc:nbr:nberwo:11540
Template-Type: ReDIF-Paper 1.0
Title: Is the U.S. Current Account Deficit Sustainable? And If Not, How Costly is Adjustment Likely To Be?
Classification-JEL: F02; F43; O11
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM
Number: 11541
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11541
File-URL: http://www.nber.org/papers/w11541.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebvastian. "Is The U.S. Current Account Deficit Sustainable? If Not, How Costly Is Adjustment Likely To Be?," Brookings Papers on Economic Activity, 2005, v2005(1), 211-288.
Abstract: In this paper I analyze the relationship between the U.S. dollar and the U.S. current account. I deal with issues of sustainability, and I discuss the mechanics of current account adjustment. The analysis presented in this paper differs from other work in several respects: First, I emphasis the dynamics of the current account adjustment, going beyond computations of the "required" real depreciation of the dollar to achieve sustainability. I show that even if foreigners' (net) demand for U.S. assets continues to increase significantly, the current account deficit is likely to experience a large decline in the (not too distant) future. Second, I rely on international evidence to explore the likelihood of an abrupt decline in capital flows into the U.S. And third, I analyze the international evidence on current account reversals, to investigate the potential consequences of a (possible) sudden stop of capital flows into the U.S. This analysis suggests that the future adjustment of the U.S. external accounts is likely to result in a significant reduction in growth.
Handle: RePEc:nbr:nberwo:11541
Template-Type: ReDIF-Paper 1.0
Title: Academic Freedom, Private-Sector Focus, and the Process of Innovation
Classification-JEL: L33; O31
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Mathias Dewatripont
Author-Person: pde423
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: CF EFG PR
Number: 11542
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11542
File-URL: http://www.nber.org/papers/w11542.pdf
File-Format: application/pdf
Publication-Status: published as Philippe Aghion & Mathias Dewatripont & Jeremy C. Stein, 2008. "Academic freedom, private-sector focus, and the process of innovation," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 617-635.
Abstract: We develop a model that clarifies the respective advantages and disadvantages of academic and private-sector research. Our model assumes full protection of intellectual property rights at all stages of the development process, and hence does not rely on lack of appropriability or spillovers to generate a rationale for academic research. Instead, we focus on control-rights considerations, and argue that the fundamental tradeoff between academia and the private sector is one of creative control versus focus. By serving as a precommitment mechanism that allows scientists to freely pursue their own interests, academia can be indispensable for early-stage research. At the same time, the private sector's ability to direct scientists towards higher-payoff activities makes it more attractive for later-stage research.
Handle: RePEc:nbr:nberwo:11542
Template-Type: ReDIF-Paper 1.0
Title: The Dot-Com Bubble the Bush Deficits, and the U.S. Current Account
Classification-JEL: F21; F32; F36
Author-Name: Aart Kraay
Author-Person: pkr80
Author-Name: Jaume Ventura
Author-Person: pve110
Note: EFG IFM PE
Number: 11543
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11543
File-URL: http://www.nber.org/papers/w11543.pdf
File-Format: application/pdf
Publication-Status: published as The Dot-Com Bubble, the Bush Deficits, and the US Current Account, Aart Kraay, Jaume Ventura. in G7 Current Account Imbalances: Sustainability and Adjustment, Clarida. 2007
Abstract: Over the past decade the US has experienced widening current account deficits and a steady deterioration of its net foreign asset position. During the second half of the 1990s, this deterioration was fueled by foreign investment in a booming US stock market. During the first half of the 2000s, this deterioration has been fuelled by foreign purchases of rapidly increasing US government debt. A somewhat surprising aspect of the current debate is that stock market movements and fiscal policy choices have been largely treated as unrelated events. Stock market movements are usually interpreted as reflecting exogenous changes in perceived or real productivity, while budget deficits are usually understood as a mainly political decision. We challenge this view here and develop two alternative interpretations. Both are based on the notion that a bubble the 'dot-com' bubble) has been driving the stock market, but differ in their assumptions about the interactions between this bubble and fiscal policy (the 'Bush' deficits). The 'benevolent' view holds that a change in investor sentiment led to the collapse of the dot-com bubble and the Bush deficits were a welfare-improving policy response to this event. The 'cynical' view holds instead that the Bush deficits led to the collapse of the dot-com bubble as the new administration tried to appropriate rents from foreign investors. We discuss the implications of each of these views for the future evolution of the US economy and, in particular, its net foreign asset position.
Handle: RePEc:nbr:nberwo:11543
Template-Type: ReDIF-Paper 1.0
Title: Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond
Classification-JEL: C31
Author-Name: James J. Heckman
Author-Name: Lance J. Lochner
Author-Person: plo31
Author-Name: Petra E. Todd
Note: LS
Number: 11544
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11544
File-URL: http://www.nber.org/papers/w11544.pdf
File-Format: application/pdf
Publication-Status: published as Heckman, James J. & Lochner, Lance J. & Todd, Petra E., 2006. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," Handbook of the Economics of Education, Elsevier.
Abstract: This paper considers the interpretation of "Mincer rates of return." We test and reject the Mincer model. It fails to track the time series of true returns. We show how repeated cross section and panel data improves the ability of analysts to estimate the ex ante and ex post marginal rate of returns. Accounting for sequential revelation of information calls into question the validity of the internal rate of return as a tool for policy analysis. The large estimated psychic costs of schooling found in recent work helps to explain why persons do not attend school even though the financial rewards for doing so are high. We present methods for computing distributions of ex post and ex ante returns.
Handle: RePEc:nbr:nberwo:11544
Template-Type: ReDIF-Paper 1.0
Title: The Methods and Careers of Leading American Painters in the late Nineteenth Century
Author-Name: David W. Galenson
Note: LS PR
Number: 11545
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11545
File-URL: http://www.nber.org/papers/w11545.pdf
File-Format: application/pdf
Abstract: Although American painters of the late nineteenth century were much less influential than their European counterparts, the methods and careers of the leading American artists of the period reflect the same division between visual and conceptual approaches that characterized French art. The conceptual painters Thomas Eakins and John Singer Sargent matured early, and made individual landmark paintings, whereas the experimentalists Mary Cassatt, Winslow Homer, Albert Pinkham Ryder, and James McNeill Whistler developed more slowly, and made their contributions gradually in larger bodies of work. These American artists were less innovative than their French contemporaries, but they created approaches to art no less considered than those of their more famous counterparts.
Handle: RePEc:nbr:nberwo:11545
Template-Type: ReDIF-Paper 1.0
Title: An Empirical Model of Growth Through Product Innovation
Classification-JEL: E22; E24; J23; J24; L11; L25; O3; O4
Author-Name: Rasmus Lentz
Author-Person: ple474
Author-Name: Dale T. Mortensen
Author-Person: pmo42
Note: EFG
Number: 11546
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11546
File-URL: http://www.nber.org/papers/w11546.pdf
File-Format: application/pdf
Publication-Status: published as Lentz, Rasmus and Dale T. Mortensen. “An Empirical Model of Growth through Product Innovation.” Econometrica 76, 6 (November 2008): 1317-73.
Abstract: Productivity dispersion across firms is large and persistent, and worker reallocation among firms is an important source of productivity growth. The purpose of the paper is to estimate the structure of an equilibrium model of growth through innovation that explains these facts. The model is a modified version of the Schumpeterian theory of firm evolution and growth developed by Klette and Kortum (2004). The data set is a panel of Danish firms than includes information on value added, employment, and wages. The model's fit is good and the structural parameter estimates have interesting implications for the aggregate growth rate and the contribution of worker reallocation to it.
Handle: RePEc:nbr:nberwo:11546
Template-Type: ReDIF-Paper 1.0
Title: Is the New Immigration Really So Bad?
Classification-JEL: J61
Author-Name: David Card
Author-Person: pca271
Note: CH ED LS
Number: 11547
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11547
File-URL: http://www.nber.org/papers/w11547.pdf
File-Format: application/pdf
Publication-Status: published as Card, David. "Is The New Immigration Really So Bad?," Economic Journal, 2005, v115(506,Oct), F300-F323.
Abstract: This paper reviews the recent evidence on U.S. immigration, focusing on two key questions: (1) Does immigration reduce the labor market opportunities of less-skilled natives? (2) Have immigrants who arrived after the 1965 Immigration Reform Act successfully assimilated? Looking across major cities, differential immigrant inflows are strongly correlated with the relative supply of high school dropouts. Nevertheless, data from the 2000 Census shows that relative wages of native dropouts are uncorrelated with the relative supply of less-educated workers, as they were in earlier years. At the aggregate level, the wage gap between dropouts and high school graduates has remained nearly constant since 1980, despite supply pressure from immigration and the rise of other education-related wage gaps. Overall, evidence that immigrants have harmed the opportunities of less educated natives is scant. On the question of assimilation, the success of the U.S.-born children of immigrants is a key yardstick. By this metric, post-1965 immigrants are doing reasonably well: second generation sons and daughters have higher education and wages than the children of natives. Even children of the least- educated immigrant origin groups have closed most of the education gap with the children of natives.
Handle: RePEc:nbr:nberwo:11547
Template-Type: ReDIF-Paper 1.0
Title: Apparel Prices 1914-93 and the Hulten/Brueghel Paradox
Classification-JEL: E31; I31; N32; N62; O47; R21; R31
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: DAE EFG
Number: 11548
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11548
File-URL: http://www.nber.org/papers/w11548.pdf
File-Format: application/pdf
Publication-Status: published as Diewert, W. Erwin, John S. Greenlees, and Charles R. Hulten (eds.) Price Index Concepts and Measurement. Chicago: University of Chicago Press, 2009.
Abstract: Backcasting upward bias in price index over long periods of time yields levels of real consumption two or four centuries ago that are implausibly low, raising the possibility that price index bias for important products may have been zero or even negative at some point in the past. This paper studies apparel prices over the long period 1914-93, developing new price indexes based on more than 16,000 data observations from the Sears catalog for that interval. The basic conclusion is that hedonic price indexes for womens' dresses exhibit a rate of increase of many orders of magnitude faster than either the Sears Matched-model index developed from the same source data or as compared to the CPI. The results provided here offer a complement to past research on computer prices, which also found that price changes were contemporaneous with model changes. Just as hedonic price indexes for computers almost always drop faster than matched-model indexes for computers, we have found the opposite relationship for apparel prices, although presumably for the same reason. The Sears matched-model indexes do not exhibit a consistent negative or positive drift relative to the CPI. For womens' apparel the drift is always negative but for mens' apparel there is a turnaround, from negative before 1965 to positive thereafter. Both the matched- model indexes and the CPI rise less rapidly for womens' apparel than for mens' apparel, which would be consistent with the hypothesis that price changes accompanying model changes (and thus linked out of both the Sears matched-model index and of the CPI but not in the hedonic index) are more frequent for womens' apparel, since models change more frequently.
Handle: RePEc:nbr:nberwo:11548
Template-Type: ReDIF-Paper 1.0
Title: The Formation and Evolution of Physician Treatment Styles: An Application to Cesarean Sections
Classification-JEL: I11; D83
Author-Name: Andrew Epstein
Author-Name: Sean Nicholson
Author-Person: pni108
Note: EH
Number: 11549
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11549
File-URL: http://www.nber.org/papers/w11549.pdf
File-Format: application/pdf
Publication-Status: published as Epstein, Andrew J. & Nicholson, Sean, 2009. "The formation and evolution of physician treatment styles: An application to cesarean sections," Journal of Health Economics, Elsevier, vol. 28(6), pages 1126-1140, December.
Abstract: Small-area-variation studies have shown that physician treatment styles differ substantially both between and within markets, controlling for patient characteristics. Using a data set containing the universe of deliveries in Florida over a 12-year period with consistent physician identifiers and a rich set of patient characteristics, we examine why treatment styles differ across obstetricians at a point in time, and why styles change over time. We find that the variation in c-section rates across physicians within a market is two to three times greater than the variation between markets. Surprisingly, residency programs explain less than four percent of the variation between physicians in their risk-adjusted c-section rates, even among newly-trained physicians. Although we find evidence that physicians, especially relatively inexperienced ones, learn from their peers, they do not substantially revise their prior beliefs regarding how patients should be treated due to the local exchange of information. Our results indicate that physicians are not likely to converge over time to a community standard; thus, within-market variation in treatment styles is likely to persist.
Handle: RePEc:nbr:nberwo:11549
Template-Type: ReDIF-Paper 1.0
Title: Globalization and Emerging Markets: With or Without Crash?
Classification-JEL: F3; F4
Author-Name: Philippe Martin
Author-Person: pma588
Author-Name: Hélène Rey
Author-Person: pre8
Note: IFM ITI
Number: 11550
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11550
File-URL: http://www.nber.org/papers/w11550.pdf
File-Format: application/pdf
Publication-Status: published as Philippe Martin & Hélène Rey, 2006. "Globalization and Emerging Markets: With or Without Crash?," American Economic Review, American Economic Association, vol. 96(5), pages 1631-1651, December.
Abstract: This paper develops a theory of financial crisis based on the demand side of the economy. We analyze the impact of financial and trade globalizations on asset prices, investment and the possibility of self-fulfilling financial crashes. In a two-country model, we show that financial and trade globalizations have different effects on asset prices, investment and income in the emerging market and in the industrialized country. Whereas trade globalization always has a positive effect on the emerging market, financial globalization may not, especially when trade costs are high. For intermediate levels of financial transaction costs and high levels of trade costs, pessimistic expectations can be self-fulfilling and may lead to a collapse in demand for goods and assets of the emerging market. Such a crash in asset prices is accompanied by a current account reversal, a drop in income and investment and more market incompleteness. We show that countries with lower income are more prone to such demand-based financial crashes. Our model can replicate the main stylized facts of financial crashes in emerging markets. Our results strongly suggest that emerging markets should liberalize trade in goods before trade in assets.
Handle: RePEc:nbr:nberwo:11550
Template-Type: ReDIF-Paper 1.0
Title: The Marginal Product of Capital
Classification-JEL: E22; O11; O16; O41
Author-Name: Francesco Caselli
Author-Person: pca205
Author-Name: James Feyrer
Author-Person: pfe139
Note: EFG
Number: 11551
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11551
File-URL: http://www.nber.org/papers/w11551.pdf
File-Format: application/pdf
Publication-Status: published as Francesco Caselli, 2007. "The Marginal Product of Capital," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 535-568, 05.
Abstract: Whether or not the marginal product of capital (MPK) differs across countries is a question that keeps coming up in discussions of comparative economic development and patterns of capital flows. Attempts to provide an empirical answer to this question have so far been mostly indirect and based on heroic assumptions. The first contribution of this paper is to present new estimates of the cross-country dispersion of marginal products. We find that the MPK is much higher on average in poor countries. However, the financial rate of return from investing in physical capital is not much higher in poor countries, so heterogeneity in MPKs is not principally due to financial market frictions. Instead, the main culprit is the relatively high cost of investment goods in developing countries. One implication of our findings is that increased aid flows to developing countries will not significantly increase these countries' incomes.
Handle: RePEc:nbr:nberwo:11551
Template-Type: ReDIF-Paper 1.0
Title: The Diffusion of Mexican Immigrants During the 1990s: Explanations and Impacts
Classification-JEL: J61
Author-Name: David Card
Author-Person: pca271
Author-Name: Ethan G. Lewis
Author-Person: ple579
Note: LS
Number: 11552
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11552
File-URL: http://www.nber.org/papers/w11552.pdf
File-Format: application/pdf
Publication-Status: published as The Diffusion of Mexican Immigrants during the 1990s: Explanations and Impacts, David Card, Ethan G. Lewis. in Mexican Immigration to the United States, Borjas. 2007
Abstract: Mexican immigrants were historically clustered in a few cities, mainly in California and Texas. During the past 15 years, however, arrivals from Mexico established sizeable immigrant communities in many "new" cities. We explore the causes and consequences of the widening geographic diffusion of Mexican immigrants. A combination of demand-pull and supply push factors explains most of the inter-city variation in inflows of Mexican immigrants over the 1990s, and also illuminates the most important trend in the destination choices of new Mexican immigrants - the move away from Los Angeles. Mexican inflows raise the relative supply of low-education labor in a city, leading to the question of how cities adapt to these shifts. One mechanism, suggested by the Hecksher Olin model, is shifting industry composition. We find limited evidence of this mechanism: most of the increases in the relative supply of low-education labor are absorbed by changes in skill intensity within narrowly defined industries. Such adjustments could be readily explained if Mexican immigrant inflows had large effects on the relative wage structures of different cities. As has been found in previous studies of the local impacts of immigration, however, our analysis suggests that relative wage adjustments are small.
Handle: RePEc:nbr:nberwo:11552
Template-Type: ReDIF-Paper 1.0
Title: Vehicle Choices, Miles Driven, and Pollution Policies
Classification-JEL: D12; H23; Q58
Author-Name: Ye Feng
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Li Gan
Author-Person: pga94
Note: PE EEE
Number: 11553
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11553
File-URL: http://www.nber.org/papers/w11553.pdf
File-Format: application/pdf
Publication-Status: published as Ye Feng & Don Fullerton & Li Gan, 2013. "Vehicle choices, miles driven, and pollution policies," Journal of Regulatory Economics, Springer, vol. 44(1), pages 4-29, August.
Abstract: Mobile sources contribute large percentages of each pollutant, but technology is not yet available to measure and tax emissions from each vehicle. We build a behavioral model of household choices about vehicles and miles traveled. The ideal-but-unavailable emissions tax would encourage drivers to abate emissions through many behaviors, some of which involve market transactions that can be observed for feasible market incentives (such as a gas tax, subsidy to new cars, or tax by vehicle type). Our model can calculate behavioral effects of each such price and thus calculate car choices, miles, and emissions. A nested logit structure is used to model discrete choices among different vehicle bundles. We also consider continuous choices of miles driven and the age of each vehicle. We propose a consistent estimation method for both discrete and continuous demands in one step, to capture the interactive effects of simultaneous decisions. Results are compared with those of the traditional sequential estimation procedure.
Handle: RePEc:nbr:nberwo:11553
Template-Type: ReDIF-Paper 1.0
Title: $100 Bills on the Sidewalk: Suboptimal Investment in 401(k) Plans
Classification-JEL: G1
Author-Name: James J. Choi
Author-Name: David Laibson
Author-Person: pla164
Author-Name: Brigitte C. Madrian
Author-Person: pma384
Note: AG EFG PE
Number: 11554
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11554
File-URL: http://www.nber.org/papers/w11554.pdf
File-Format: application/pdf
Publication-Status: published as James J. Choi & David Laibson & Brigitte C. Madrian, 2011. "$100 Bills on the Sidewalk: Suboptimal Investment in 401(k) Plans," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 748-763, 03.
Abstract: It is typically difficult to determine whether households invest optimally. But sometimes, investment incentives are strong enough to create sharp normative restrictions. We identify employees at seven companies who are eligible to receive employer matching contributions in their 401(k) and can make penalty-free withdrawals for any reason. For these employees, contributing less than the match threshold is a dominated action that violates the no-arbitrage condition. Nevertheless, between 20% and 60% contribute below the threshold, losing as much as 6% of their annual pay. Providing employees with information about the free lunch they are foregoing fails to raise contribution rates.
Handle: RePEc:nbr:nberwo:11554
Template-Type: ReDIF-Paper 1.0
Title: Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?
Classification-JEL: E2; L1; L6; O4
Author-Name: Lucia Foster
Author-Person: pfo74
Author-Name: John Haltiwanger
Author-Person: pha231
Author-Name: Chad Syverson
Author-Person: psy13
Note: EFG PR
Number: 11555
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11555
File-URL: http://www.nber.org/papers/w11555.pdf
File-Format: application/pdf
Publication-Status: published as Lucia Foster & John Haltiwanger & Chad Syverson, 2008. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," American Economic Review, American Economic Association, vol. 98(1), pages 394-425, March.
Abstract: There is considerable evidence that producer-level churning contributes substantially to aggregate (industry) productivity growth, as more productive businesses displace less productive ones. However, this research has been limited by the fact that producer-level prices are typically unobserved; thus within-industry price differences are embodied in productivity measures. If prices reflect idiosyncratic demand or market power shifts, high "productivity" businesses may not be particularly efficient, and the literature's findings might be better interpreted as evidence of entering businesses displacing less profitable, but not necessarily less productive, exiting businesses. In this paper, we investigate the nature of selection and productivity growth using data from industries where we observe producer-level quantities and prices separately. We show there are important differences between revenue and physical productivity. A key dissimilarity is that physical productivity is inversely correlated with plant-level prices while revenue productivity is positively correlated with prices. This implies that previous work linking (revenue-based) productivity to survival has confounded the separate and opposing effects of technical efficiency and demand on survival, understating the true impacts of both. We further show that young producers charge lower prices than incumbents, and as such the literature understates the productivity advantage of new producers and the contribution of entry to aggregate productivity growth.
Handle: RePEc:nbr:nberwo:11555
Template-Type: ReDIF-Paper 1.0
Title: The Highest Price Ever: The Great NYSE Seat Sale of 1928-1929 and Capacity Constraints
Classification-JEL: N2; G2
Author-Name: Lance E. Davis
Author-Name: Larry Neal
Author-Person: pne240
Author-Name: Eugene N. White
Author-Person: pwh5
Note: DAE
Number: 11556
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11556
File-URL: http://www.nber.org/papers/w11556.pdf
File-Format: application/pdf
Publication-Status: published as Davis, Lance E. & Neal, Larry & White, Eugene, 2007. "The Highest Price Ever: The Great NYSE Seat Sale of 1928 1929 and Capacity Constraints," The Journal of Economic History, Cambridge University Press, vol. 67(03), pages 705-739, September.
Abstract: A surge in orders during the stock market boom of the late 1920s collided against the constraint created by the fixed number of brokers on the New York Stock Exchange. Estimates of the determinants of individual stock bid-ask spreads from panel data reveal that spreads jumped when volume spiked, confirming contemporary observers complaints that there were insufficient counterparties. When the position of the NYSE as the dominant exchange became threatened, the management of the exchange proposed a 25 percent increase in the number of seats in February 1929 by issuing a quarter-seat dividend to all members. While such a "stock split" would be expected to leave the aggregate value of the NYSE unchanged, an event study reveals that its value rose in anticipation of increased efficiency. These expectations were justified as bid-ask spreads became less sensitive to peak volume days after the increase in seats.
Handle: RePEc:nbr:nberwo:11556
Template-Type: ReDIF-Paper 1.0
Title: Real Output in Mental Health Care During the 1990s
Classification-JEL: I10; C43; O33
Author-Name: Ernst R. Berndt
Author-Name: Alisa B. Busch
Author-Name: Richard G. Frank
Author-Name: Sharon-Lise Normand
Note: EH PR
Number: 11557
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11557
File-URL: http://www.nber.org/papers/w11557.pdf
File-Format: application/pdf
Publication-Status: published as Berndt, Ernst R., Alisa B. Busch, Richard G. Frank, Sahron-Lise Normand. "Real Output in Mental Health Care during the 1990s." Forum for Health Economics and Policy 9, 1 (2006).
Publication-Status: published as Real Output in Mental Health Care during the 1990s, Ernst R. Berndt, Alisa B. Busch, Richard G. Frank, Sharon-Lise Normand. in Frontiers in Health Policy Research, Volume 9, Cutler and Garber. 2006
Abstract: Health accounts document changes over time in the level and composition of health spending. There has been a continued evolution in the ability to track such outlays. Less rapid has been the ability to interpret changes in spending. In this paper we apply quality adjusted price indexes for several major mental disorders to national mental health account estimates to assess changes in real "output". We show that using the new price indexes reveals large gains in real output relative to application of BLS indexes.
Handle: RePEc:nbr:nberwo:11557
Template-Type: ReDIF-Paper 1.0
Title: Work Disability is a Pain in the *****, Especially in England, The Netherlands, and the United States
Classification-JEL: J28; I12; C81
Author-Name: James Banks
Author-Person: pba509
Author-Name: Arie Kapteyn
Author-Person: pka406
Author-Name: James P. Smith
Author-Person: psm28
Author-Name: Arthur van Soest
Author-Person: pva270
Note: AG EH
Number: 11558
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11558
File-URL: http://www.nber.org/papers/w11558.pdf
File-Format: application/pdf
Publication-Status: published as James Banks & Arie Kapteyn & James P. Smith & Arthur van Soest, 2009. "Work Disability is a Pain in the ****, Especially in England, the Netherlands, and the United States," NBER Chapters, in: Health at Older Ages: The Causes and Consequences of Declining Disability among the Elderly National Bureau of Economic Research, Inc.
Abstract: This paper investigates the role of pain in determining self-reported work disability in the US, the UK and The Netherlands. Even if identical questions are asked, cross-country differences in reported work disability remain substantial. In the US and the Netherlands, respondent evaluations of work limitations of hypothetical persons described in pain vignettes are used to identify the extent to which differences in self-reports between countries or socio-economic groups are due to systematic variation in the response scales.
Handle: RePEc:nbr:nberwo:11558
Template-Type: ReDIF-Paper 1.0
Title: Solving Models with External Habit
Classification-JEL: G1
Author-Name: Jessica A. Wachter
Author-Person: pwa346
Note: AP
Number: 11559
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11559
File-URL: http://www.nber.org/papers/w11559.pdf
File-Format: application/pdf
Publication-Status: published as Wachter, Jessica A. "Solving Models With External Habit," Finance Research Letters, 2005, v2(4,Dec), 210-226.
Abstract: Habit utility has been the focus of a large and growing body of literature in financial economics. This study investigates ways of accurately and efficiently solving the Campbell and Cochrane (1999) external habit model. Solutions for this model based on a grid of values for the state variable are shown to converge as the grid becomes increasingly fine. Convergence is substantially faster if the price-dividend ratio is computed as a series of ``zero-coupon equity'' claims rather than as the fixed-point of the Euler equation. Fitting the model to the term structure as well as to equity moments (as in Wachter (2005)) also results in faster convergence.
Handle: RePEc:nbr:nberwo:11559
Template-Type: ReDIF-Paper 1.0
Title: Borrowing Constraints and Consumption Behavior in Japan
Classification-JEL: D12; D91; E21; O16
Author-Name: Midori Wakabayashi
Author-Name: Charles Yuji Horioka
Author-Person: pho41
Note: EFG
Number: 11560
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11560
File-URL: http://www.nber.org/papers/w11560.pdf
File-Format: application/pdf
Abstract: In this paper, we use Japanese micro data to examine what characteristics borrowing-constrained households have and whether borrowing constraints have an important influence on household consumption behavior. We identify borrowing-constrained households using three different indicators, some of which are unique to our data source, and find that the characteristics of households that are likely to be borrowing-constrained differ depending on which of the three indicators we use. We also find that changes in current income have a positive and significant impact on changes in consumption in the case of households that are likely to be borrowing-constrained but not in the case of households that are unlikely to be borrowing-constrained. This result suggests that borrowing constraints have an important influence on household consumption behavior and that the presence of borrowing constraints is one explanation for why the life cycle-permanent income hypothesis does not hold in the real world.
Handle: RePEc:nbr:nberwo:11560
Template-Type: ReDIF-Paper 1.0
Title: Is Academic Science Driving a Surge in Industrial Innovation? Evidence from Patent Citations
Classification-JEL: O31; O38
Author-Name: Lee Branstetter
Author-Person: pbr854
Author-Name: Yoshiaki Ogura
Author-Person: pog39
Note: PR
Number: 11561
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11561
File-URL: http://www.nber.org/papers/w11561.pdf
File-Format: application/pdf
Abstract: What is driving the remarkable increase over the last decade in the propensity of patents to cite academic science? Does this trend indicate that stronger knowledge spillovers from academia have helped power the surge in innovative activity in the U.S. in the 1990s? This paper seeks to shed light on these questions by using a common empirical framework to assess the relative importance of various alternative hypotheses in explaining the growth in patent citations to science. Our analysis supports the notion that the nature of U.S. inventive activity has changed over the sample period, with an increased emphasis on the use of the knowledge generated by university-based scientists in later years. However, the concentration of patent-to-paper citation activity within what we call the "bio nexus" suggests that much of the contribution of knowledge spillovers from academia may be largely confined to bioscience-related inventions.
Handle: RePEc:nbr:nberwo:11561
Template-Type: ReDIF-Paper 1.0
Title: The Incredible Volcker Disinflation
Classification-JEL: E3; E4; E5; N1
Author-Name: Marvin Goodfriend
Author-Person: pgo19
Author-Name: Robert King
Author-Person: pki21
Note: EFG ME
Number: 11562
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11562
File-URL: http://www.nber.org/papers/w11562.pdf
File-Format: application/pdf
Publication-Status: published as Goodfriend, Marvin and Robert G. King. "The Incredible Volcker Disinflation," Journal of Monetary Economics, 2005, v52(5,Jul), 981-1015.
Abstract: Using a simple modern macroeconomic model, we argue that the real effects of the Volcker disinflation in the early 1980s were mainly due to imperfect credibility, evident in volatility and stubbornness of long-term interest rates. Studying recently released transcripts of the Federal Open Market Committee, we find -- to our surprise -- that Volcker and other FOMC members also regarded long-term interest rates as key indicators of inflation expectations and of their disinflationary policy's credibility. We also consider the interplay of monetary targets, operating procedures, and credibility during the Volcker disinflation.
Handle: RePEc:nbr:nberwo:11562
Template-Type: ReDIF-Paper 1.0
Title: From World Banker to World Venture Capitalist: US External Adjustment and the Exorbitant Privilege
Classification-JEL: F3; N1
Author-Name: Pierre-Olivier Gourinchas
Author-Person: pgo28
Author-Name: Hélène Rey
Author-Person: pre8
Note: EFG IFM
Number: 11563
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11563
File-URL: http://www.nber.org/papers/w11563.pdf
File-Format: application/pdf
Publication-Status: published as From World Banker to World Venture Capitalist: US External Adjustment and the Exorbitant Privilege, Pierre-Olivier Gourinchas, Hélène Rey. in G7 Current Account Imbalances: Sustainability and Adjustment, Clarida. 2007
Abstract: Does the center country of the International Monetary System enjoy an "exorbitant privilege" that significantly weakens its external constraint as has been asserted in some European quarters? Using a newly constructed dataset, we perform a detailed analysis of the historical evolution of US external assets and liabilities at market value since 1952. We find strong evidence of a sizeable excess return of gross assets over gross liabilities. Interestingly, this excess return increased after the collapse of the BrettonWoods fixed exchange rate system. It is mainly due to a "return discount": within each class of assets, the total return (yields and capital gains) that the US has to pay to foreigners is smaller than the total return the US gets on its foreign assets. We also find evidence of a "composition effect": the US tends to borrow short and lend long. As financial globalization accelerated its pace, the US transformed itself from a World Banker into a World Venture Capitalist, investing greater amounts in high yield assets such as equity and FDI. We use these findings to cast some light on the sustainability of the current global imbalances.
Handle: RePEc:nbr:nberwo:11563
Template-Type: ReDIF-Paper 1.0
Title: The Returns on Human Capital: Good News on Wall Street is Bad News on Main Street
Classification-JEL: G1
Author-Name: Hanno Lustig
Author-Person: plu17
Author-Name: Stijn Van Nieuwerburgh
Author-Person: pva368
Note: AP EFG
Number: 11564
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11564
File-URL: http://www.nber.org/papers/w11564.pdf
File-Format: application/pdf
Publication-Status: published as Hanno Lustig & Stijn Van Nieuwerburgh, 2008. "The Returns on Human Capital: Good News on Wall Street is Bad News on Main Street," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 21(5), pages 2097-2137, September.
Abstract: We use a standard single-agent model to conduct a simple consumption growth accounting exercise. Consumption growth is driven by news about current and expected future returns on the market portfolio. The market portfolio includes financial and human wealth. We impute the residual of consumption growth innovations that cannot be attributed to either news about financial asset returns or future labor income growth to news about expected future returns on human wealth, and we back out the implied human wealth and market return process. This accounting procedure only depends on the agent's willingness to substitute consumption over time, not her consumption risk preferences. We find that innovations in current and future human wealth returns are negatively correlated with innovations in current and future financial asset returns, regardless of the elasticity of intertemporal substitution. The evidence from the cross-section of stock returns suggests that the market return we back out of aggregate consumption innovations is a better measure of market risk than the return on the stock market.
Handle: RePEc:nbr:nberwo:11564
Template-Type: ReDIF-Paper 1.0
Title: Collateral Damage: Trade Disruption and the Economic Impact of War
Classification-JEL: D74; F02; F10; F14; H56; N40; N70
Author-Name: Reuven Glick
Author-Person: pgl13
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE ITI
Number: 11565
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11565
File-URL: http://www.nber.org/papers/w11565.pdf
File-Format: application/pdf
Publication-Status: published as Reuven Glick & Alan M Taylor, 2010. "Collateral Damage: Trade Disruption and the Economic Impact of War," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 102-127, 05.
Abstract: Conventional wisdom in economic history suggests that conflict between countries can be enormously disruptive of economic activity, especially international trade. We study the effects of war on bilateral trade with available data extending back to 1870. Using the gravity model, we estimate the contemporaneous and lagged effects of wars on the trade of belligerent nations and neutrals, controlling for other determinants of trade as well as the possible effects of reverse causality. We find large and persistent impacts of wars on trade, on national income, and on global economic welfare. We also conduct a general equilibrium comparative statics exercise that indicates costs associated with lost trade might be at least as large as the conventionally measured "direct" costs of war, such as lost human capital, as illustrated by case studies of World War I and World War II.
Handle: RePEc:nbr:nberwo:11565
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Workaholism: We Should Not Have Worked on This Paper
Classification-JEL: J22; H24; D91
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Author-Name: Joel Slemrod
Author-Person: psl10
Note: LS PE
Number: 11566
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11566
File-URL: http://www.nber.org/papers/w11566.pdf
File-Format: application/pdf
Publication-Status: published as Contributions in Economic Analysis and Policy, vol 8, no. 1, January 2008.
Publication-Status: published as Daniel S. Hamermesh & Joel B. Slemrod, 2008. "The Economics of Workaholism: We Should Not Have Worked on This Paper," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 8(1), pages 3.
Abstract: A large literature examines the addictive properties of such behaviors as smoking, drinking alcohol and eating. We argue that for some people addictive behavior may apply to a much more central aspect of economic life: working. Workaholism is subject to the same concerns about the individual as other addictions, is more likely to be a problem of higher-income individuals, and can, under conditions of jointness in the workplace or the household, generate negative spillovers onto individuals around the workaholic. Using the Retirement History Survey and the Panel Study of Income Dynamics, we find evidence that is consistent with the idea that high-income, highly educated people suffer from workaholism with regard to retiring, in that they are more likely to postpone earlier plans for retirement. The evidence and theory suggest that the negative effects of workaholism can be addressed with a more progressive income tax system than would be appropriate in the absence of this behavior.
Handle: RePEc:nbr:nberwo:11566
Template-Type: ReDIF-Paper 1.0
Title: Biology as Destiny? Short and Long-Run Determinants of Intergenerational Transmission of Birth Weight
Classification-JEL: I1
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Enrico Moretti
Author-Person: pmo392
Note: CH ED LS
Number: 11567
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11567
File-URL: http://www.nber.org/papers/w11567.pdf
File-Format: application/pdf
Publication-Status: published as Janet Currie & Enrico Moretti, 2007. "Biology as Destiny? Short- and Long-Run Determinants of Intergenerational Transmission of Birth Weight," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 231-264.
Abstract: Little is known about the mechanisms underlying the transfer of economic status between generations. This paper addresses the question of whether inter-generational correlations in health contribute to the perpetuation of economic status. We examine inter-generational correlations in birth weight, a key indicator of the health of newborns that we link to future educational attainment and earnings using a unique data set based on California births from 1960s to the present. We use names and birth dates to link the records of mothers and children. We also identify mothers who are siblings. We show that there is a strong intergenerational correlation in the birth weight of mothers and children, but that a measure of household income at the time of the mother's birth is also predictive of low birth weight and that there is an interaction between maternal low birth weight and poverty in the production of low birth weight. Together these findings suggest that intergenerational correlations in health could play a role in the intergenerational transmission of income. Parent's income affects child health, and health at birth affects future income.
Handle: RePEc:nbr:nberwo:11567
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Child SSI Enrollment on Household Outcomes: Evidence from the Survey of Income and Program Participation
Classification-JEL: H3; I12; I32; I38; J21
Author-Name: Mark Duggan
Author-Person: pdu194
Author-Name: Melissa Schettini Kearney
Note: CH ED EH PE
Number: 11568
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11568
File-URL: http://www.nber.org/papers/w11568.pdf
File-Format: application/pdf
Publication-Status: published as Duggan, Mark G., Melissa Schettini Kearney. "The Impact of Child SSI Enrollment on Household Outcomes." Journal of Policy Analysis and Management 26, 4 (Autumn 2007): 861-85.
Abstract: The federal Supplemental Security Income (SSI) program has become a primary source of cash assistance for low-income families with children in the United States, with 1.04 million children currently receiving SSI benefits and 6 percent of children in a household with some SSI income. In this paper we use data from the Survey of Income and Program Participation (SIPP) to investigate the impact that child SSI enrollment has on household outcomes such as poverty, household earnings, and health insurance coverage. The longitudinal nature of the SIPP allows us to control for unobserved differences across households by measuring outcomes in the same household in the months leading up to and immediately following a child's first enrollment in SSI. Our regression analyses demonstrate that for every $100 increase in household SSI income, total household income increases by roughly $72, reflecting some modest offset of other transfer income and conditional household earnings. Our analyses further demonstrate that child SSI enrollment is associated with a statistically significant and persistent reduction in the probability that a child lives in poverty of roughly 11 percentage points. Additional analyses suggest that program enrollment has virtually no impact on health insurance coverage because most new SSI recipients have health insurance from Medicaid or another source at the time of enrollment.
Handle: RePEc:nbr:nberwo:11568
Template-Type: ReDIF-Paper 1.0
Title: Fertility: The Role of Culture and Family Experience
Classification-JEL: J13; J16; Z10
Author-Name: Raquel Fernández
Author-Person: pfe17
Author-Name: Alessandra Fogli
Author-Person: pfo48
Note: CH ED LS
Number: 11569
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11569
File-URL: http://www.nber.org/papers/w11569.pdf
File-Format: application/pdf
Publication-Status: published as Raquel Fernández & Alessandra Fogli, 2006. "Fertility: The Role of Culture and Family Experience," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 552-561, 04-05.
Abstract: This paper attempts to disentangle the direct effects of experience from those of culture in determining fertility. We use the GSS to examine the fertility of women born in the US but from different ethnic backgrounds. We take lagged values of the total fertility rate in the woman's country of ancestry as the cultural proxy and use the woman's number of siblings to capture her direct family experience. We find that both variables are significant determinants of fertility, even after controlling for several individual and family-level characteristics.
Handle: RePEc:nbr:nberwo:11569
Template-Type: ReDIF-Paper 1.0
Title: Diversity and Redistribution
Classification-JEL: D30; D72
Author-Name: Raquel Fernández
Author-Person: pfe17
Author-Name: Gilat Levy
Author-Person: ple544
Note: PE POL
Number: 11570
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11570
File-URL: http://www.nber.org/papers/w11570.pdf
File-Format: application/pdf
Publication-Status: published as Fernandez, Raquel and Gilat Levy. "Diversity and Redistribution." Journal of Public Economics 92, 5-6 (June 2008): 925-43.
Abstract: This paper examines how preference heterogeneity affects the ability of the poor to extract resources from the rich. We study the equilibrium of a game in which coalitions of individuals form parties, parties propose platforms, and all individuals vote, with the winning policy chosen by plurality. Political parties are restricted to offering platforms that are credible (in that they belong to the Pareto set of their members). The platforms specify the values of two policy tools: a general redistributive tax which is lumpsum rebated and a series of taxes whose revenue is used to fund specific (targeted) goods. We show that taste conflict first dilutes but later reinforces class interests. When the degree of taste diversity is low, the equilibrium policy is characterized by some amount of general income redistribution and some targeted transfers. As taste diversity increases in society, the set of equilibrium policies becomes more and more tilted towards special interest groups and against general redistribution. As diversity increases further, however, only general redistribution survives.
Handle: RePEc:nbr:nberwo:11570
Template-Type: ReDIF-Paper 1.0
Title: Wake Up and Smell the Ginseng: The Rise of Incremental Innovation in Low-Wage Countries
Classification-JEL: F1
Author-Name: Diego Puga
Author-Person: ppu2
Author-Name: Daniel Trefler
Author-Person: ptr44
Note: ITI PR
Number: 11571
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11571
File-URL: http://www.nber.org/papers/w11571.pdf
File-Format: application/pdf
Publication-Status: published as Puga, Diego & Trefler, Daniel, 2010. "Wake up and smell the ginseng: International trade and the rise of incremental innovation in low-wage countries," Journal of Development Economics, Elsevier, vol. 91(1), pages 64-76, January.
Abstract: Increasingly, a small number of low-wage countries such as China and India are involved in innovation -- not `big ideas' innovation, but the constant incremental innovations needed to stay ahead in business. We provide some evidence of this new phenomenon and develop a model in which there is a transition from old-style product-cycle trade to trade involving incremental innovation in low-wage countries. We explain why levels of involvement in innovation vary across low-wage countries and even across firms within each low-wage country. We then draw out implications for the location of production, trade, capital flows, earnings and living standards.
Handle: RePEc:nbr:nberwo:11571
Template-Type: ReDIF-Paper 1.0
Title: Why Does the Average Price of Tuna Fall During Lent?
Author-Name: Aviv Nevo
Author-Person: pne133
Author-Name: Konstantinos Hatzitaskos
Note: IO
Number: 11572
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11572
File-URL: http://www.nber.org/papers/w11572.pdf
File-Format: application/pdf
Abstract: For many products the average price paid by consumers falls during periods of high demand. We use information from a large supermarket chain to decompose the decrease in the average price into a substitution effect, due to an increase in the share of cheaper products, and a price reduction effect. We find that for almost all the products we study the substitution effect explains a large part of the decrease. We estimate demand for these products and show the price declines are consistent with a change in demand elasticity and the relative demand for different brands. Our findings are less consistent with "loss-leader" models of retail competition.
Handle: RePEc:nbr:nberwo:11572
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Fraudulent Accounting
Classification-JEL: E0; G3
Author-Name: Simi Kedia
Author-Name: Thomas Philippon
Author-Person: pph81
Note: AP EFG
Number: 11573
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11573
File-URL: http://www.nber.org/papers/w11573.pdf
File-Format: application/pdf
Publication-Status: published as Kedia, Simi and Thomas Philippon. "The Economics of Fraudulent Accounting." Review of Financial Studies 22, 6 (2009): 2169-2199.
Abstract: We argue that earnings management and fraudulent accounting have important economic consequences. In a model where the costs of earnings management are endogenous, we show that in equilibrium, bad managers hire and invest too much in order to pool with the good managers. This behavior distorts the allocation of economic resources among firms. We test the predictions of the model using new historical and firm-level data. First, we show that periods of high stock market valuations are systematically followed by large increases in reported frauds. We then show that during periods of suspicious accounting, firms hire and invest excessively, while insiders exercise options and sell stocks. When the misreporting is detected, firms shed labor and capital and productivity improves. In the aggregate, our model seems able to account for periods of jobless and investment-less growth.
Handle: RePEc:nbr:nberwo:11573
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Policy and the Term Structure of Interest Rates
Classification-JEL: E0; G0
Author-Name: Qiang Dai
Author-Name: Thomas Philippon
Author-Person: pph81
Note: AP EFG
Number: 11574
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11574
File-URL: http://www.nber.org/papers/w11574.pdf
File-Format: application/pdf
Abstract: Macroeconomists want to understand the effects of fiscal policy on interest rates, while financial economists look for the factors that drive the dynamics of the yield curve. To shed light on both issues, we present an empirical macro-finance model that combines a no-arbitrage affine term structure model with a set of structural restrictions that allow us to identify fiscal policy shocks, and trace the effects of these shocks on the prices of bonds of different maturities. Compared to a standard VAR, this approach has the advantage of incorporating the information embedded in a large cross-section of bond prices. Moreover, the pricing equations provide new ways to assess the model's ability to capture risk preferences and expectations. Our results suggest that (i) government deficits affect long term interest rates: a one percentage point increase in the deficit to GDP ratio, lasting for 3 years, will eventually increase the 10-year rate by 40--50 basis points; (ii) this increase is partly due to higher expected spot rates, and partly due to higher risk premia on long term bonds; and (iii) the fiscal policy shocks account for up to 12% of the variance of forecast errors in bond yields.
Handle: RePEc:nbr:nberwo:11574
Template-Type: ReDIF-Paper 1.0
Title: Products and Productivity
Classification-JEL: L11; D21; L60
Author-Name: Peter K. Schott
Author-Person: psc98
Author-Name: Andrew B. Bernard
Author-Name: Stephen J. Redding
Author-Person: pre64
Note: ITI PR
Number: 11575
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11575
File-URL: http://www.nber.org/papers/w11575.pdf
File-Format: application/pdf
Publication-Status: published as Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2009. "Products and Productivity," Scandinavian Journal of Economics, Blackwell Publishing, vol. 111(4), pages 681-709, December.
Abstract: Firms' decisions about which goods to produce are often made at a more disaggregate level than the data observed by empirical researchers. When products differ according to production technique or the way in which they enter demand, this data aggregation problem introduces a bias into standard measures of firm productivity. We develop a theoretical model of heterogeneous firms endogenously self-selecting into heterogeneous products. We characterize the bias introduced by unobserved variation in product mix across firms, and the implications of this bias for identifying firm and industry responses to exogenous policy shocks such as deregulation. More generally, we demonstrate that product switching gives rise to a richer set of industry-level dynamics than models where firm product mix remains fixed.
Handle: RePEc:nbr:nberwo:11575
Template-Type: ReDIF-Paper 1.0
Title: Insuring Consumption and Happiness Through Religious Organizations
Classification-JEL: D12; H31; J60; Z12
Author-Name: Rajeev Dehejia
Author-Person: pde179
Author-Name: Thomas DeLeire
Author-Person: pde167
Author-Name: Erzo F.P. Luttmer
Author-Person: plu27
Note: LS PE
Number: 11576
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11576
File-URL: http://www.nber.org/papers/w11576.pdf
File-Format: application/pdf
Publication-Status: published as Dehejia, Rajeev & DeLeire, Thomas & Luttmer, Erzo F.P., 2007. "Insuring consumption and happiness through religious organizations," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 259-279, February.
Abstract: This paper examines whether involvement with religious organizations insures an individual's stream of consumption and of happiness. Using data from the Consumer Expenditure Survey (CEX), we examine whether households who contribute to a religious organization are able to insure their consumption stream against income shocks and find strong insurance effects for whites. Using the National Survey of Families and Households (NSFH), we examine whether individuals who attend religious services are able to insure their stream of happiness against income shocks and find strong happiness insurance effects for blacks but smaller effects for whites. Overall, our results are consistent with the view that religion provides an alternative form of insurance for both whites and blacks though the mechanism by which religious organizations provide insurance to each of these groups appears to be different.
Handle: RePEc:nbr:nberwo:11576
Template-Type: ReDIF-Paper 1.0
Title: Experimental Analysis of Neighborhood Effects
Classification-JEL: H43; I18; I38; J38
Author-Name: Jeffrey R. Kling
Author-Person: pkl126
Author-Name: Jeffrey B. Liebman
Author-Person: pli184
Author-Name: Lawrence F. Katz
Author-Person: pka266
Note: CH LS PE
Number: 11577
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11577
File-URL: http://www.nber.org/papers/w11577.pdf
File-Format: application/pdf
Publication-Status: published as Revised and published in Econometrica, 75:1 (January 2007), 83-119
Abstract: Families, primarily female-headed minority households with children, living in high-poverty public housing projects in five U.S. cities were offered housing vouchers by lottery in the Moving to Opportunity program. Four to seven years after random assignment, families offered vouchers lived in safer neighborhoods that had lower poverty rates than those of the control group not offered vouchers. We find no significant overall effects of this intervention on adult economic self-sufficiency or physical health. Mental health benefits of the voucher offers for adults and for female youth were substantial. Beneficial effects for female youth on education, risky behavior, and physical health were offset by adverse effects for male youth. For outcomes exhibiting significant treatment effects, we find, using variation in treatment intensity across voucher types and cities, that the relationship between neighborhood poverty rate and outcomes is approximately linear.
Handle: RePEc:nbr:nberwo:11577
Template-Type: ReDIF-Paper 1.0
Title: Understanding the Effects of Government Spending on Consumption
Classification-JEL: E32; E62
Author-Name: Jordi Galí
Author-Person: pga43
Author-Name: J. David López-Salido
Author-Person: plo26
Author-Name: Javier Vallés
Author-Person: pva889
Note: EFG
Number: 11578
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11578
File-URL: http://www.nber.org/papers/w11578.pdf
File-Format: application/pdf
Publication-Status: published as Jordi Galí & J. David López-Salido & Javier Vallés, 2007. "Understanding the Effects of Government Spending on Consumption," Journal of the European Economic Association, MIT Press, vol. 5(1), pages 227-270, 03.
Publication-Status: published as J. Galà & D. López-Salido & J. Vallés, 2003. "Understanding the effects of government spending on consumption," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
Abstract: Recent evidence suggests that consumption rises in response to an increase in government spending. That finding cannot be easily reconciled with existing optimizing business cycle models. We extend the standard new Keynesian model to allow for the presence of rule-of-thumb consumers. We show how the interaction of the latter with sticky prices and deficit financing can account for the existing evidence on the effects of government spending.
Handle: RePEc:nbr:nberwo:11578
Template-Type: ReDIF-Paper 1.0
Title: How Much Do Banks Use Credit Derivatives to Reduce Risk?
Classification-JEL: G10; G20; G21; D82
Author-Name: Bernadette A. Minton
Author-Name: René Stulz
Author-Name: Rohan Williamson
Note: AP CF
Number: 11579
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11579
File-URL: http://www.nber.org/papers/w11579.pdf
File-Format: application/pdf
Publication-Status: published as Bernadette Minton & René Stulz & Rohan Williamson, 2009. "How Much Do Banks Use Credit Derivatives to Hedge Loans?," Journal of Financial Services Research, Springer, vol. 35(1), pages 1-31, February.
Abstract: This paper examines the use of credit derivatives by US bank holding companies from 1999 to 2003 with assets in excess of one billion dollars. Using the Federal Reserve Bank of Chicago Bank Holding Company Database, we find that in 2003 only 19 large banks out of 345 use credit derivatives. Though few banks use credit derivatives, the assets of these banks represent on average two thirds of the assets of bank holding companies with assets in excess of $1 billion. Few banks are net buyers of credit protection and disclose using credit derivatives to hedge loans. Banks are more likely to be net protection buyers if they engage in asset securitization, originate foreign loans, and have lower capital ratios. The likelihood of a bank being a net protection buyer is positively related to the percentage of commercial and industrial loans in a bank's loan portfolio and negatively or not related to other types of bank loans. The use of credit derivatives by banks is limited because adverse selection and moral hazard problems make the market for credit derivatives illiquid for the typical credit exposures of banks.
Handle: RePEc:nbr:nberwo:11579
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Divergence and Business Cycle Synchronization: Irresponsibility is Idiosyncratic
Classification-JEL: F42
Author-Name: Zsolt Darvas
Author-Person: pda162
Author-Name: Andrew K. Rose
Author-Person: pro71
Author-Name: György Szapáry
Note: EFG IFM
Number: 11580
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11580
File-URL: http://www.nber.org/papers/w11580.pdf
File-Format: application/pdf
Publication-Status: published as Fiscal Divergence and Business Cycle Synchronization: Irresponsibility is Idiosyncratic, Zsolt Darvas, Andrew K. Rose, György Szapáry. in NBER International Seminar on Macroeconomics 2005, Frankel and Pissarides. 2007
Abstract: Using a panel of 21 OECD countries and 40 years of annual data, we find that countries with similar government budget positions tend to have business cycles that fluctuate more closely. That is, fiscal convergence (in the form of persistently similar ratios of government surplus/deficit to GDP) is systematically associated with more synchronized business cycles. We also find evidence that reduced fiscal deficits increase business cycle synchronization. The Maastricht "convergence criteria," used to determine eligibility for EMU, encouraged fiscal convergence and deficit reduction. They may thus have indirectly moved Europe closer to an optimum currency area, by reducing countries' abilities to create idiosyncratic fiscal shocks. Our empirical results are economically and statistically significant, and robust.
Handle: RePEc:nbr:nberwo:11580
Template-Type: ReDIF-Paper 1.0
Title: What Are Firms? Evolution from Birth to Public Companies
Classification-JEL: L2; G3
Author-Name: Steven N. Kaplan
Author-Name: Berk A. Sensoy
Author-Name: Per Strömberg
Author-Person: pst18
Note: CF IO
Number: 11581
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11581
File-URL: http://www.nber.org/papers/w11581.pdf
File-Format: application/pdf
Abstract: We study how firm characteristics evolve from early business plan to initial public offering to public company for 49 venture capital financed companies. The average time elapsed is almost 6 years. We describe the financial performance, business idea, point(s) of differentiation, non-human capital assets, growth strategy, customers, competitors, alliances, top management, ownership structure, and the board of directors. Our analysis focuses on the nature and stability of those firm attributes. Firm business lines remain remarkably stable from business plan through public company. Within those business lines, non-human capital aspects of the businesses appear more stable than human capital aspects. In the cross-section, firms with more alienable assets have substantially more human capital turnover.
Handle: RePEc:nbr:nberwo:11581
Template-Type: ReDIF-Paper 1.0
Title: Education and Nonmarket Outcomes
Classification-JEL: I10; I20
Author-Name: Michael Grossman
Author-Person: pgr107
Note: ED EH
Number: 11582
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11582
File-URL: http://www.nber.org/papers/w11582.pdf
File-Format: application/pdf
Publication-Status: published as Grossman, Michael, 2006. "Education and Nonmarket Outcomes," Handbook of the Economics of Education, Elsevier.
Abstract: I explore the effects of education on nonmarket outcomes from both theoretical and empirical perspectives. Examples of outcomes considered include general consumption patterns at a moment in time, savings and the rate of growth of consumption over time, own (adult) health and inputs into the production of own health, fertility, and child quality or well-being reflected by their health and cognitive development. I pay a good deal of attention to the effects of education on health because they are the two most important sources of human capital: knowledge capital and health capital. There is a large literature addressing the nature of their complementarities. In the conceptual foundation section, I consider models in which education has productive efficiency and allocative efficiency effects. I then modify these frameworks to allow for the endogenous nature of schooling decisions, so that observed schooling effects can be traced in part to omitted "third variables" such as an orientation towards the future. An additional complication is that schooling may contribute to a future orientation. The empirical review provides a good deal of evidence for the proposition that the education effects are causal but is less conclusive with regard to the identification of specific mechanisms.
Handle: RePEc:nbr:nberwo:11582
Template-Type: ReDIF-Paper 1.0
Title: Smooth Landing or Crash? Model-Based Scenarios of Global Current Account Rebalancing
Classification-JEL: E66; F32; F47
Author-Name: Hamid Faruqee
Author-Person: pfa43
Author-Name: Douglas Laxton
Author-Person: pla306
Author-Name: Dirk Muir
Author-Name: Paolo Pesenti
Author-Person: ppe152
Note: IFM
Number: 11583
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11583
File-URL: http://www.nber.org/papers/w11583.pdf
File-Format: application/pdf
Publication-Status: published as Hamid Faruqee & Douglas Laxton & Dirk Muir & Paolo Pesenti, 2005. "Smooth landing or crash? model based scenarios of global current account rebalancing," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
Publication-Status: published as Smooth Landing or Crash? Model-Based Scenarios of Global Current Account Rebalancing, Hamid Faruqee, Douglas Laxton, Dirk Muir, Paolo A. Pesenti. in G7 Current Account Imbalances: Sustainability and Adjustment, Clarida. 2007
Abstract: This paper re-examines the implications, risks, and attendant policies surrounding global rebalancing of current accounts through the lens of a dynamic, multi-region model of the global economy. In the baseline scenario, world macroeconomic imbalances of the early 2000s can be attributed to a combination of six related but distinct tendencies: (i)expansionary U.S. fiscal policy, (ii) declining rate of U.S. private savings, (iii) increased foreign demand for U.S. assets, particularly in Asia, (iv) strong productivity growth in emerging Asia, (v) lagging productivity growth in Japan and the euro area, and (vi) gaining export competitiveness in emerging Asia. The baseline projects stabilizing U.S. public and foreign debt (albeit at higher levels) and a gradual depreciation of the dollar, allowing the U.S. external deficit to gradually move to a sustainable level. An alternative scenario, involving a sudden portfolio reshuffling in the rest of the world, would result in higher U.S. real interest rates, a significantly weaker dollar, with harmful effects on U.S. (and possibly global) growth. More flexible exchange rates in emerging Asia can help reduce variability in both regional output and inflation. Other simulations consider the effects of U.S. fiscal adjustment, as well as growth-enhancing structural reforms in Europe and Japan.
Handle: RePEc:nbr:nberwo:11583
Template-Type: ReDIF-Paper 1.0
Title: The Super Size of America: An Economic Estimation of Body Mass Index and Obesity in Adults
Classification-JEL: I10; I12
Author-Name: Inas Rashad
Author-Person: pke191
Author-Name: Michael Grossman
Author-Person: pgr107
Author-Name: Shin-Yi Chou
Note: EH
Number: 11584
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11584
File-URL: http://www.nber.org/papers/w11584.pdf
File-Format: application/pdf
Publication-Status: published as Rashad, Inas, Michael Grossman and Shin-Yi Chou. "The Super Size Of America: An Economic Estimation Of Body Mass Index And Obesity In Adults," Eastern Economic Journal, 2006, v32(1,Winter), 133-148.
Abstract: The increased prevalence of obesity in the United States stresses the pressing need for answers as to why this rapid rise has occurred. This paper employs micro-level data from the First, Second, and Third National Health and Nutrition Examination Surveys to determine the effects that various state-level variables have on body mass index and obesity. These variables, which include the per capita number of restaurants, the gasoline tax, the cigarette tax, and clean indoor air laws, display many of the expected effects on obesity and explain a substantial amount of its trend. These findings control for individual-level measures of household income, years of formal schooling completed, and marital status.
Handle: RePEc:nbr:nberwo:11584
Template-Type: ReDIF-Paper 1.0
Title: Determinants of City Growth in Brazil
Classification-JEL: O; R
Author-Name: Daniel da Mata
Author-Person: pda853
Author-Name: U. Deichmann
Author-Name: J. Vernon Henderson
Author-Person: phe30
Author-Name: Somik V. Lall
Author-Name: H.G. Wang
Note: PE
Number: 11585
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11585
File-URL: http://www.nber.org/papers/w11585.pdf
File-Format: application/pdf
Publication-Status: published as da Mata, D. & Deichmann, U. & Henderson, J.V. & Lall, S.V. & Wang, H.G., 2007. "Determinants of city growth in Brazil," Journal of Urban Economics, Elsevier, vol. 62(2), pages 252-272, September.
Abstract: In this paper, we examine the determinants of Brazilian city growth between 1970 and 2000. We consider a model of a city, which combines aspects of standard urban economics and the new economic geography literatures. For the empirical analysis, we constructed a dataset of 123 Brazilian agglomerations, and estimate aspects of the demand and supply side as well as a reduced form specification that describes city sizes and their growth. Our main findings are that increases in rural population supply, improvements in inter-regional transport connectivity and education attainment of the labor force have strong impacts on city growth. We also find that local crime and violence, measured by homicide rates impinge on growth. In contrast, a higher share of private sector industrial capital in the local economy stimulates growth. Using the residuals from the growth estimation, we also find that cities who better administer local land use and zoning laws have higher growth. Finally, our policy simulations show that diverting transport investments from large cities towards secondary cities do not provide significant gains in terms of national urban performance.
Handle: RePEc:nbr:nberwo:11585
Template-Type: ReDIF-Paper 1.0
Title: Seventy Years of Central Banking: The Bank of Canada in International Context, 1935-2005
Classification-JEL: E58
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Angela Redish
Author-Person: pre9
Note: DAE ME
Number: 11586
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11586
File-URL: http://www.nber.org/papers/w11586.pdf
File-Format: application/pdf
Abstract: On the seventieth birthday of the Bank of Canada, we evaluate the Bank's contribution to monetary policy in an international context. We focus on: the reasons for the establishment of the central bank in 1935, its unique record of floating in a sea of fixed currencies under Bretton Woods; its experience with the Great Inflation and monetarism; its pioneering adoption of inflation targeting; and recent innovations in the payments and the phasing out of reserve requirements.
Handle: RePEc:nbr:nberwo:11586
Template-Type: ReDIF-Paper 1.0
Title: The Intergenerational Effect of Worker Displacement
Classification-JEL: J0
Author-Name: Philip Oreopoulos
Author-Person: por38
Author-Name: Marianne Page
Author-Person: ppa539
Author-Name: Ann Huff Stevens
Author-Person: pst180
Note: CH LS
Number: 11587
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11587
File-URL: http://www.nber.org/papers/w11587.pdf
File-Format: application/pdf
Publication-Status: published as Philip Oreopoulos & Marianne Page & Ann Huff Stevens, 2008. "The Intergenerational Effects of Worker Displacement," Journal of Labor Economics, University of Chicago Press, vol. 26(3), pages 455-483, 07.
Abstract: This paper uses variation induced by firm closures to explore the intergenerational effects of worker displacement. Using a Canadian panel of administrative data that follows almost 60,000 father-child pairs from 1978 to 1999 and includes detailed information about the firms at which the father worked, we construct narrow treatment and control groups whose fathers had the same level of permanent income prior to 1982 when some of the fathers were displaced. We demonstrate that job loss leads to large permanent reductions in family income. Comparing outcomes among individuals whose fathers experienced an employment shock to outcomes among individuals whose fathers did not, we find that children whose fathers were displaced have annual earnings about 9% lower than similar children whose fathers did not experience an employment shock. They are also more likely to receive unemployment insurance and social assistance. The estimates are driven by the experiences of children whose family income was at the bottom of the income distribution, and are robust to a number of specification checks.
Handle: RePEc:nbr:nberwo:11587
Template-Type: ReDIF-Paper 1.0
Title: Commitment, Risk, and Consumption: Do Birds of a Feather Have Bigger Nests?
Classification-JEL: E21; R21; D8
Author-Name: Stephen H. Shore
Author-Name: Todd Sinai
Author-Person: psi354
Note: EFG LS PE
Number: 11588
Creation-Date: 2005-08
Order-URL: http://www.nber.org/papers/w11588
File-URL: http://www.nber.org/papers/w11588.pdf
File-Format: application/pdf
Publication-Status: published as Stephen H Shore & Todd Sinai, 2010. "Commitment, Risk, and Consumption: Do Birds of a Feather Have Bigger Nests?," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 408-424, 07.
Abstract: We show that incorporating consumption commitments into a standard model of precautionary saving can complicate the usual relationship between risk and consumption. In particular, we present a model where the presence of plausible adjustment costs can cause a mean-preserving increase in unemployment risk to lead to increased consumption. The predictions of this model are consistent with empirical evidence from dual-earning couples. Couples who share an occupation face increased risk as their unemployment shocks are more highly correlated. Such couples spend more on owner-occupied housing than other couples, spend no more on rent, and are more likely to rent than own. This pattern is strongest when the household faces higher moving costs, or when unemployment insurance provides a less generous safety net.
Handle: RePEc:nbr:nberwo:11588
Template-Type: ReDIF-Paper 1.0
Title: A Global Perspective on External Positions
Classification-JEL: F31; F32
Author-Name: Philip R. Lane
Author-Person: pla15
Author-Name: Gian Maria Milesi-Ferretti
Author-Person: pmi28
Note: IFM
Number: 11589
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11589
File-URL: http://www.nber.org/papers/w11589.pdf
File-Format: application/pdf
Publication-Status: published as A Global Perspective on External Positions, Philip R. Lane, Gian Maria Milesi-Ferretti. in G7 Current Account Imbalances: Sustainability and Adjustment, Clarida. 2007
Abstract: The paper highlights the increased dispersion in net external positions in recent years, particularly among industrial countries. It provides a simple accounting framework that disentangles the factors driving the accumulation of external assets and liabilities (such as trade imbalances, investment income flows, and capital gains) for major external creditors and debtors. It also examines the factors driving the foreign asset portfolio of international investors, with a special focus on the weight of U.S. liabilities in the rest of the world's stock of external assets. Finally, it relates the empirical evidence to the current debate about the roles of portfolio balance effects and exchange rate adjustment in shaping the external adjustment process.
Handle: RePEc:nbr:nberwo:11589
Template-Type: ReDIF-Paper 1.0
Title: Endogenous Fertility, Mortality and Economic Growth: Can a Malthusian Framework Account for the Conflicting Historical Trends in Population?
Classification-JEL: O1; J1; I1
Author-Name: Isaac Ehrlich
Author-Person: peh1
Author-Name: Jinyoung Kim
Author-Person: pki140
Note: EH
Number: 11590
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11590
File-URL: http://www.nber.org/papers/w11590.pdf
File-Format: application/pdf
Publication-Status: published as "Endogenous fertility, mortality and economic growth: Can a Malthusian framework account for the conflicting historical trends in population?" Journal of Asian Economics, 16 (2005), pp. 789-806.
Abstract: The 19th century economist, Thomas Robert Malthus, hypothesized that the long-run supply of labor is completely elastic at a fixed wage-income level because population growth tends to outstrip real output growth. Dynamic equilibrium with constant income and population is achieved through equilibrating adjustments in "positive checks" (mortality, starvation) and "preventive checks" (marriage, fertility). Developing economies since the Industrial Revolution, and more recently especially Asian economies, have experienced steady income growth accompanied by sharply falling fertility and mortality rates. We develop a dynamic model of endogenous fertility, longevity, and human capital formation within a Malthusian framework that allows for diminishing returns to labor but also for the role of human capital as an engine of growth. Our model accounts for economic stagnation with high fertility and mortality and constant population and income, as predicted by Malthus, but also for takeoffs to a growth regime and a demographic transition toward low fertility and mortality rates, and a persistent growth in per-capita income.
Handle: RePEc:nbr:nberwo:11590
Template-Type: ReDIF-Paper 1.0
Title: Evidence that Seat Belts are as Effective as Child Safety Seats in Preventing Death for Children Aged Two and Up
Classification-JEL: K2; R4
Author-Name: Steven D. Levitt
Author-Person: ple59
Note: CH LE PE
Number: 11591
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11591
File-URL: http://www.nber.org/papers/w11591.pdf
File-Format: application/pdf
Publication-Status: published as Steven D. Levitt, 2008. "Evidence that Seat Belts Are as Effective as Child Safety Seats in Preventing Death for Children Aged Two and Up," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 158-163, 07.
Abstract: Over the last thirty years, the use of child safety seats in motor vehicles has increased dramatically, fueled by well publicized information campaigns and legal mandates. In spite of this movement, there is relatively little empirical evidence regarding the efficacy of child safety seats relative to the much cheaper alternative of traditional seat belts. Using data from the Fatality Analysis Reporting System (FARS) on all fatal crashes in the United States from 1975-2003, I find that child safety seats, in actual practice, are no better than seat belts at reducing fatalities among children aged 2-6. This result is robust to a wide range of sensitivity analyses, including controlling for sample selection that arises because the FARS data set includes only crashes in which at least one fatality occurs.
Handle: RePEc:nbr:nberwo:11591
Template-Type: ReDIF-Paper 1.0
Title: Eat, Drink, Firms and Government: An Investigation of Corruption from Entertainment and Travel Costs of Chinese Firms
Classification-JEL: L2; O1; H2
Author-Name: Hongbin Cai
Author-Person: pca504
Author-Name: Hanming Fang
Author-Person: pfa17
Author-Name: Lixin Colin Xu
Note: PE
Number: 11592
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11592
File-URL: http://www.nber.org/papers/w11592.pdf
File-Format: application/pdf
Publication-Status: published as Hongbin Cai & Hanming Fang & Lixin Colin Xu, 2011. "Eat, Drink, Firms, Government: An Investigation of Corruption from the Entertainment and Travel Costs of Chinese Firms," The Journal of Law and Economics, vol 54(1), pages 55-78.
Abstract: Entertainment and Travel Costs (ETC) is a standard expenditure item for Chinese firms with an annual amount equal to about 20 percent of total wage bills. We use this objective accounting measure as a basis to analyze the composition of ETC and the effect of ETC on firm performance. We rely on the predictions from a simple but plausible model of managerial decision-making to identify components of ETC by examining how the total ETC responds to different environmental variables. In our empirical analysis we find strong evidence that firms. ETC consists of a mix that includes bribery to government officials both as "grease money" and "protection money," expenditures to build relational capital with suppliers and clients, and managerial excesses. ETC overall has a significantly negative effect on firm performance, but its negative effect is much less pronounced for those firms located in cities with low quality government service, those who are subject to severe government expropriation, and those who do not have strong relationship with suppliers and clients. Our findings have important implications on how to effectively curb corruption.
Handle: RePEc:nbr:nberwo:11592
Template-Type: ReDIF-Paper 1.0
Title: Searching for Non-Monotonic Effects of Fiscal Policy: New Evidence
Classification-JEL: E21; E62; H31
Author-Name: Francesco Giavazzi
Author-Person: pgi18
Author-Name: Tullio Jappelli
Author-Person: pja11
Author-Name: Marco Pagano
Author-Person: ppa56
Author-Name: Marina Benedetti
Note: EFG
Number: 11593
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11593
File-URL: http://www.nber.org/papers/w11593.pdf
File-Format: application/pdf
Publication-Status: published as Giavazzi, Francesco & Jappelli, Tullio & Pagano, Marco & Benedetti, Marina, 2005. "Searching for Non-monotonic Effects of Fiscal Policy: New Evidence," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 23(S1), pages 197-217, October.
Abstract: Data revisions and the availability of a longer sample offer the opportunity to reconsider the empirical findings that suggest that in the OECD countries national saving responds non-monotonically to fiscal policy. The paper confirms that the circumstance most likely to give rise to a non-monotonic response of national saving to a fiscal impulse is a "large and persistent impulse", defined as one in which the full employment surplus, as a percent of potential output, changes by at least 1.5 percentage points per year over a two-year period. This particular circumstance remains the only statistically significant one even when we allow for non-monotonic responses to arise when public debt is growing rapidly or interest rate spreads are widening. We find that non-monotonic responses are similar for fiscal contractions and expansions. In particular, an increase in net taxes has no effect on national saving during large fiscal contractions or expansions. For government consumption there is a large, albeit in some specifications less then complete, offset during expansions or contractions.
Handle: RePEc:nbr:nberwo:11593
Template-Type: ReDIF-Paper 1.0
Title: Wealth Transfers from Implementing Real-Time Retail Electricity Pricing
Classification-JEL: L9
Author-Name: Severin Borenstein
Author-Person: pbo78
Note: IO EEE
Number: 11594
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11594
File-URL: http://www.nber.org/papers/w11594.pdf
File-Format: application/pdf
Publication-Status: published as Borenstein, Severin. "The Long-Run Efficiency Of Real-Time Electricity Pricing," Energy Journal, v26(3), 2005, 93-116.
Abstract: Adoption of real-time electricity pricing — retail prices that vary hourly to reflect changing wholesale prices — removes existing cross-subsidies to those customers that consume disproportionately more when wholesale prices are highest. If their losses are substantial, these customers are likely to oppose RTP initiatives unless there is a supplemental program to offset their loss. Using data on a random sample of 636 industrial and commercial customers in southern California, I show that RTP adoption would result in significant transfers compared to a flat-rate tariff. When compared to the time-of-use rates (simple peak/offpeak tariffs) that these customers already face, however, the transfers drop by nearly half; even under the more extreme price volatility scenario that I examine, 90% of customers would see changes of between a 9% bill reduction and a 14% bill increase. Though customer price responsiveness reduces the loss incurred by those with high-cost demand profiles, I also demonstrate that this offsetting effect is unlikely to be large enough for most customers with costly demand patterns to completely offset their lost cross-subsidy. The analysis suggests that adoption of real-time pricing may be difficult without a supplemental program that compensates the customers who are made worse off by the change. I discuss how "two-part RTP" programs, which allow customers to purchase a baseline quantity at regulated TOU rates, can reduce the transfers associated with adoption of RTP.
Handle: RePEc:nbr:nberwo:11594
Template-Type: ReDIF-Paper 1.0
Title: Why Are Some Public Officials more Corrupt Than Others?
Classification-JEL: K4; H4
Author-Name: Jennifer Hunt
Author-Person: phu9
Note: LE LS
Number: 11595
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11595
File-URL: http://www.nber.org/papers/w11595.pdf
File-Format: application/pdf
Publication-Status: published as Rose-Ackerman, Susan (ed.) International Handbook on the Economics of Corruption, Northampton, MA: Edward Elgar, 2006.
Abstract: Using detailed Peruvian data measuring bribery, I assess which types of public official are most corrupt and why. I distinguish between the bribery rate and the size of bribes received, and seek to explain the variation in each across public institutions. The characteristics of officials' clients explain most of the variation for bribery rates, but none for bribe amounts. A measure of the speed of honest service at the institution explains much of the remaining variation for both bribery rates and amounts. The results indicate that the bribery rate is higher at institutions with bribe-prone clients, and that bribery rates and bribe amounts are higher where clients are frustrated at slow service. Faster and better service would reduce corruption. Overall, the judiciary and the police are by far the most corrupt institutions.
Handle: RePEc:nbr:nberwo:11595
Template-Type: ReDIF-Paper 1.0
Title: Declining Volatility in the U.S. Automobile Industry
Classification-JEL: E2
Author-Name: Valerie A. Ramey
Author-Person: pra154
Author-Name: Daniel J. Vine
Note: EFG
Number: 11596
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11596
File-URL: http://www.nber.org/papers/w11596.pdf
File-Format: application/pdf
Publication-Status: published as Valerie A. Ramey & Daniel J. Vine, 2006. "Declining Volatility in the U.S. Automobile Industry," American Economic Review, American Economic Association, vol. 96(5), pages 1876-1889, December.
Abstract: This paper documents the dramatic changes in volatility that occurred in the U.S. auto industry in the early 1980s. Namely, output volatility declined significantly, the covariance of inventory investment and sales became much more negative, and adjustments to output, which in earlier decades stemmed primarily from plants hiring and laying off workers, were more often accomplished with changes in average hours per worker after the mid 1980s. Building on the work of Blanchard (1983), we show how all of these changes could have stemmed from one underlying factor—a decline in the persistence of motor vehicle sales. We use both industry-level data as well as micro data on production schedules from 103 assembly plants in the United States and Canada to document the developments in the early 1980s. We then use the original Holt, Modigliani, Muth and Simon (1960) linear quadratic inventory model to show how a decline in the persistence of sales leads to all of the changes noted above, including the propensity to use intensive margins of adjustment over extensive labor margins, even in the absence of technological change.
Handle: RePEc:nbr:nberwo:11596
Template-Type: ReDIF-Paper 1.0
Title: Do Accountability and Voucher Threats Improve Low-Performing Schools?
Classification-JEL: I20; I21
Author-Name: David N. Figlio
Author-Person: pfi57
Author-Name: Cecilia Rouse
Note: CH ED
Number: 11597
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11597
File-URL: http://www.nber.org/papers/w11597.pdf
File-Format: application/pdf
Publication-Status: published as Figlio, David N. and Cecilia Elena Rouse. "Do Accountability And Voucher Threats Improve Low-Performing Schools?," Journal of Public Economics, 2006, v90(1-2,Jan), 239-255.
Abstract: In this paper we study the effects of the threat of school vouchers and school stigma in Florida on the performance of "low-performing" schools using student-level data from a subset of districts. Estimates of the change in school-level high-stakes test scores from the first year of the reform are consistent with the early results used by the state of Florida to claim large-scale improvements associated with the threat of voucher assignment. However, we also find that much of this estimated effect may be due to other factors. While we estimate a small relative improvement in reading scores on the high-stakes test for voucher-threatened/stigmatized schools, we estimate a much smaller relative improvement on a lower-stakes, nationally norm-referenced, test. Further, the relative gains in reading scores are explained largely by changing student characteristics. We find more evidence for a positive differential effect on math test scores on both the low- and highstakes tests, however, the results from the lower-stakes test appear primarily limited to students in the high-stakes grade. Finally, we find some evidence that the relative improvements following the introduction of the A Plan by low-performing schools were more due to the stigma of receiving the low grade rather than the threat of vouchers.
Handle: RePEc:nbr:nberwo:11597
Template-Type: ReDIF-Paper 1.0
Title: The 2004 Global Labor Survey: Workplace Institutions and Practices Around the World
Author-Name: Davin Chor
Author-Person: pch787
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 11598
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11598
File-URL: http://www.nber.org/papers/w11598.pdf
File-Format: application/pdf
Abstract: The 2004 Global Labor Survey (GLS) is an Internet-based survey that seeks to measure de facto labor practices in countries around the world, covering issues such as freedom of association, the regulation of work contracts, employee benefits and the prevalence of collective bargaining. To find out about de facto practices, the GLS invited labor practitioners, ranging from union officials and activists to professors of labor law and industrial relations, to report on conditions in their country. Over 1,500 persons responded, which allowed us to create indices of practices in ten broad areas for 33 countries. The GLS' focus on de facto labor practices contrasts with recent studies of de jure labor regulations (Botero et al., 2004) and with more limited efforts to measure labor practices as part of surveys of economic freedom (Fraser Institute) and competitiveness (World Economic Forum). Although our pool of respondents differs greatly from the conservative foundations and business leaders who contribute respectively to the Fraser Institute and World Economic Forum reports, the GLS and the labor market components of the economic freedom and competitiveness measures give similar pictures of labor practices across countries. This similarity across respondents with different economic interests and ideological perspectives suggests that they are all reporting on labor market realities in a relatively unbiased way. As a broad summary statement, the GLS shows that practices favorable to workers are more prevalent in countries with high levels of income per capita; are associated with less income inequality; are unrelated to aggregate growth rates; but are modestly positively associated with unemployment.
Handle: RePEc:nbr:nberwo:11598
Template-Type: ReDIF-Paper 1.0
Title: Workplace Segregation in the United States: Race, Ethnicity, and Skill
Author-Name: Judith Hellerstein
Author-Person: phe270
Author-Name: David Neumark
Author-Person: pne16
Note: LS
Number: 11599
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11599
File-URL: http://www.nber.org/papers/w11599.pdf
File-Format: application/pdf
Publication-Status: published as Judith K. Hellerstein & David Neumark, 2008. "Workplace Segregation in the United States: Race, Ethnicity, and Skill," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 459-477, 04.
Abstract: We study workplace segregation in the United States using a unique matched employer-employee data set that we have created. We present measures of workplace segregation by education and language-as skilled workers may be more complementary with other skilled workers than with unskilled workers-and by race and ethnicity, using simulation methods to measure segregation beyond what would occur randomly as workers are distributed across establishments. We also assess the role of education- and language-related skill differentials in generating workplace segregation by race and ethnicity, as skill is often correlated with race and ethnicity. Finally, we attempt to distinguish between segregation by skill based on general crowding of unskilled poor English speakers into a narrow set of jobs, and segregation based on common language for reasons such as complementarity among workers speaking the same language. Our results indicate that there is considerable segregation by education and language in the workplace. Racial segregation in the workplace is of the same order of magnitude as education segregation, and segregation between Hispanics and whites is larger yet. Only a tiny portion of racial segregation in the workplace is driven by education differences between blacks and whites, but a substantial fraction of ethnic segregation in the workplace can be attributed to differences in language proficiency.
Handle: RePEc:nbr:nberwo:11599
Template-Type: ReDIF-Paper 1.0
Title: Why is Fiscal Policy Often Procyclical?
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Guido Tabellini
Author-Person: pta37
Note: EFG PE POL
Number: 11600
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11600
File-URL: http://www.nber.org/papers/w11600.pdf
File-Format: application/pdf
Publication-Status: published as Alberto Alesina & Filipe R. Campante & Guido Tabellini, 2008. "Why is Fiscal Policy Often Procyclical?," Journal of the European Economic Association, MIT Press, vol. 6(5), pages 1006-1036, 09.
Abstract: Many countries, especially developing ones, follow procyclical fiscal polices, namely spending goes up (taxes go down) in booms and spending goes down (taxes go up) in recessions. We provide an explanation for this suboptimal fiscal policy based upon political distortions and incentives for less-than-benevolent government to appropriate rents. Voters have incentives similar to the "starving the Leviathan" classic argument, and demand more public goods or fewer taxes to prevent governments from appropriating rents when the economy is doing well. We test this argument against more traditional explanations based purely on borrowing constraints, with a reasonable amount of success.
Handle: RePEc:nbr:nberwo:11600
Template-Type: ReDIF-Paper 1.0
Title: Lifecycle Prices and Production
Classification-JEL: E2; D1; J2
Author-Name: Mark Aguiar
Author-Person: pag57
Author-Name: Erik Hurst
Author-Person: phu87
Note: EFG PE
Number: 11601
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11601
File-URL: http://www.nber.org/papers/w11601.pdf
File-Format: application/pdf
Publication-Status: published as Mark Aguiar & Erik Hurst, 2007. "Life-Cycle Prices and Production," American Economic Review, American Economic Association, vol. 97(5), pages 1533-1559, December.
Abstract: Using scanner data and time diaries, we document how households substitute time for money through shopping and home production. We find evidence that there is substantial heterogeneity in prices paid across households for identical consumption goods in the same metro area at any given point in time. For identical goods, prices paid are highest for middle age, rich, and large households, consistent with the hypothesis that shopping intensity is low when the cost of time is high. The data suggest that a doubling of shopping frequency lowers the price paid for a given good by approximately 10 percent. From this elasticity and observed shopping intensity, we impute the opportunity cost of time for the shopper which peaks in middle age at a level roughly 40 percent higher than that of retirees. Using this measure of the price of time and observed time spent in home production, we estimate the parameters of a home production function. We find an elasticity of substitution between time and market goods in home production of close to two. Finally, we use the estimated elasticities for shopping and home production to calibrate an augmented lifecycle consumption model. The augmented model predicts the observed empirical patterns quite well. Taken together, our results highlight the danger of interpreting lifecycle expenditure without acknowledging the changing demands on time and the available margins of substituting time for money.
Handle: RePEc:nbr:nberwo:11601
Template-Type: ReDIF-Paper 1.0
Title: Insurance and Innovation in Health Care Markets
Classification-JEL: I1; O3
Author-Name: Darius Lakdawalla
Author-Person: pla295
Author-Name: Neeraj Sood
Author-Person: pso62
Note: EH
Number: 11602
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11602
File-URL: http://www.nber.org/papers/w11602.pdf
File-Format: application/pdf
Abstract: Innovation policy often involves an uncomfortable trade-off between rewarding innovators sufficiently and providing the innovation at the lowest possible price. However, in health care markets with insurance for innovative goods, society may be able to ensure efficient rewards for inventors and the efficient dissemination of inventions. Health insurance resembles a two-part pricing contract in which a group of consumers pay an up-front fee ex ante in exchange for a fixed unit price ex post. This functions as if innovators themselves wrote efficient two-part pricing contracts, where they extracted sufficient profits from the ex ante payment, but still sold the good ex post at marginal cost. As a result, we show that complete, efficient, and competitive health insurance for innovative products - such as new drugs, medical devices, or patented procedures - can lead to perfectly efficient innovation and utilization, even when moral hazard exists. Conversely, incomplete insurance markets in this context lead to inefficiently low levels of innovation. Moreover, optimally designed public health insurance for innovative products can solve the innovation problem by charging ex ante premia equal to consumer surplus, and ex post co-payments at or below marginal cost. When these quantities are unknown, society can usually improve static and dynamic welfare by covering the uninsured with contracts that mimic observed private insurance contracts.
Handle: RePEc:nbr:nberwo:11602
Template-Type: ReDIF-Paper 1.0
Title: The Industrial Organization of Markets with Two-Sided Platforms
Classification-JEL: D4; L1; L4
Author-Name: David S. Evans
Author-Person: pev18
Author-Name: Richard Schmalensee
Author-Person: psc313
Note: IO
Number: 11603
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11603
File-URL: http://www.nber.org/papers/w11603.pdf
File-Format: application/pdf
Publication-Status: published as David Evans & Richard Schmalensee, 2007. "The Industrial Organization of Markets with Two-Sided Platforms," CPI Journal, Competition Policy International, vol. 3.
Abstract: Two-sided platforms (2SPs) cater to two or more distinct groups of customers, facilitating value-creating interactions between them. The village market and the village matchmaker were 2SPs; eBay and Match.com are more recent examples. Other examples include payment card systems, magazines, shopping malls, and personal computer operating systems. Building on the seminal work of Rochet and Tirole (2003), a rapidly growing literature has illuminated the economic principles that apply to 2SPs generally. One key result is that 2SPs may find it profit-maximizing to charge prices for one customer group that are below marginal cost or even negative, and such skewed pricing pattern is prevalent, although not universal, in industries that appear to be based on 2SPs. Over the years, courts have also recognized that certain industries, notably payment card systems and newspapers, now understood to be based on 2SPs, are governed by unusual economic relationships. This chapter provides an introduction to the economics of 2SPs and its application to several competition policy issues.
Handle: RePEc:nbr:nberwo:11603
Template-Type: ReDIF-Paper 1.0
Title: Building the Stock of College-Educated Labor
Classification-JEL: I21; I22; I28
Author-Name: Susan Dynarski
Author-Person: pdy1
Note: ED LS
Number: 11604
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11604
File-URL: http://www.nber.org/papers/w11604.pdf
File-Format: application/pdf
Publication-Status: published as Susan Dynarski, 2008. "Building the Stock of College-Educated Labor," Journal of Human Resources, University of Wisconsin Press, vol. 43(3), pages 576-610.
Abstract: Half of college students drop out before completing a degree. These low rates of college completion among young people should be viewed in the context of slow future growth in the educated labor force, as the well-educated baby boomers retire and new workers are drawn from populations with historically low education levels. This paper establishes a causal link between college costs and the share of workers with a college education. I exploit the introduction of two large tuition subsidy programs, finding that they increase the share of the population that completes a college degree by three percentage points. The effects are strongest among women, with white women increasing degree receipt by 3.2 percentage points and the share of nonwhite women attempting or completing any years of college increasing by six and seven percentage points, respectively. A cost-benefit analysis indicates that tuition reduction can be a socially efficient method for increasing college completion. However, even with the offer of free tuition, a large share of students continue to drop out, suggesting that the direct costs of school are not the only impediment to college completion.
Handle: RePEc:nbr:nberwo:11604
Template-Type: ReDIF-Paper 1.0
Title: Disability Risk and the Value of Disability Insurance
Classification-JEL: H0; I1; J1
Author-Name: Amitabh Chandra
Author-Person: pch893
Author-Name: Andrew A. Samwick
Author-Person: psa395
Note: EH LS PE AG
Number: 11605
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11605
File-URL: http://www.nber.org/papers/w11605.pdf
File-Format: application/pdf
Publication-Status: published as Culter, David and David Wise (eds.) Health In Older Ages: The Causes and Consequences of Declining Disability Among the Elderly. Chicago, IL: University of Chicago Press, 2006.
Publication-Status: published as Disability Risk and the Value of Disability Insurance, Amitabh Chandra, Andrew A. Samwick. in Health at Older Ages: The Causes and Consequences of Declining Disability among the Elderly, Cutler and Wise. 2008
Abstract: We estimate consumers' valuation of disability insurance using a stochastic lifecycle framework in which disability is modeled as permanent, involuntary retirement. We base our probabilities of worklimiting disability on 25 years of data from the Current Population Survey and examine the changes in the disability gradient for different demographic groups over their lifecycle. Our estimates show that a typical consumer would be willing to pay about 5 percent of expected consumption to eliminate the average disability risk faced by current workers. Only about 2 percentage points reflect the impact of disability on expected lifetime earnings; the larger part is attributable to the uncertainty associated with the threat of disablement. We estimate that no more than 20 percent of mean assets accumulated before voluntary retirement are attributable to disability risks measured for any demographic group in our data. Compared to other reductions in expected utility of comparable amounts, such as a reduction in the replacement rate at voluntary retirement or increases in annual income fluctuations, disability risk generates substantially less pre-retirement saving. Because the probability of disablement is small and the average size of the loss — conditional on becoming disabled — is large, disability risk is not effectively insured through precautionary saving.
Handle: RePEc:nbr:nberwo:11605
Template-Type: ReDIF-Paper 1.0
Title: Euler Equation Errors
Classification-JEL: G10; G12
Author-Name: Martin Lettau
Author-Person: ple572
Author-Name: Sydney C. Ludvigson
Author-Person: plu153
Note: AP
Number: 11606
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11606
File-URL: http://www.nber.org/papers/w11606.pdf
File-Format: application/pdf
Publication-Status: published as Martin Lettau & Sydney Ludvigson, 2008. "Code and data files for "Euler Equation Errors"," Computer Codes 08-106, Review of Economic Dynamics.
Publication-Status: published as Lettau, Matt and Sydney Ludvigson. "Euler Equation Errors." Review of Economic Dynamics 12 (2009): 255-283.
Abstract: The standard, representative agent, consumption-based asset pricing theory based on CRRA utility fails to explain the average returns of risky assets. When evaluated on cross- sections of stock returns, the model generates economically large unconditional Euler equation errors. Unlike the equity premium puzzle, these large Euler equation errors cannot be resolved with high values of risk aversion. To explain why the standard model fails, we need to develop alternative models that can rationalize its large pricing errors. We evaluate whether four newer theories at the vanguard of consumption-based asset pricing can explain the large Euler equation errors of the standard consumption-based model. In each case, we find that the alternative theory counterfactually implies that the standard model has negligible Euler equation errors. We show that the models miss on this dimension because they mischaracterize the joint behavior of consumption and asset returns in recessions, when aggregate consumption is falling. By contrast, a simple model in which aggregate consumption growth and stockholder consumption growth are highly correlated most of the time, but have low or negative correlation in severe recessions, produces violations of the standard model's Euler equations and departures from joint lognormality that are remarkably similar to those found in the data.
Handle: RePEc:nbr:nberwo:11606
Template-Type: ReDIF-Paper 1.0
Title: "Aggregation Bias" DOES Explain the PPP Puzzle
Classification-JEL: C23; F31; F15
Author-Name: Jean Imbs
Author-Person: pim10
Author-Name: Haroon Mumtaz
Author-Name: Morten O. Ravn
Author-Person: pra16
Author-Name: Hélène Rey
Author-Person: pre8
Note: IFM
Number: 11607
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11607
File-URL: http://www.nber.org/papers/w11607.pdf
File-Format: application/pdf
Abstract: This article summarizes our views on the role of an "aggregation bias" in explaining the PPP Puzzle, in response to the several papers recently written in reaction to our initial contribution. We discuss in particular the criticisms of Imbs, Mumtaz, Ravn and Rey (2002) presented in Chen and Engel (2005). We show that their contentions are based on: (i) analytical counter-examples which are not empirically relevant; (ii) simulation results minimizing the extent of "aggregation bias"; (iii) unfounded claims on the impact of measurement errors on our results; and (iv) problematic implementation of small-sample bias corrections. We conclude, as in our original paper, that "aggregation bias" goes a long way towards explaining the PPP puzzle.
Handle: RePEc:nbr:nberwo:11607
Template-Type: ReDIF-Paper 1.0
Title: Estimating Bank Trading Risk: A Factor Model Approach
Classification-JEL: G21
Author-Name: James O'Brien
Author-Name: Jeremy Berkowitz
Note: AP
Number: 11608
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11608
File-URL: http://www.nber.org/papers/w11608.pdf
File-Format: application/pdf
Publication-Status: published as Carey, Mark and Rene M. Stulz (eds.) The Risks of Financial Institutions. Chicago and London: University of Chicago Press, 2006.
Publication-Status: published as Estimating Bank Trading Risk. A Factor Model Approach, James M. O'Brien, Jeremy Berkowitz. in The Risks of Financial Institutions, Carey and Stulz. 2006
Abstract: Risk in bank trading portfolios and its management are potentially important to the banks' soundness and to the functioning of securities and derivatives markets. In this paper, proprietary daily trading revenues of 6 large dealer banks are used to study the bank dealers' market risks using a market factor model approach. Dealers' exposures to exchange rate, interest rate, equity, and credit market factors are estimated. A factor model framework for variable exposures is presented and two modeling approaches are used: a random coefficient model and rolling factor regressions. The results indicate small average market exposures with significant but relatively moderate variation in exposures over time. Except for interest rates, there is heterogeneity in market exposures across the dealers. For interest rates, the dealers have small average long exposures and exposures vary inversely with the level of rates. Implications for aggregate bank dealer risk and market stability issues are discussed.
Handle: RePEc:nbr:nberwo:11608
Template-Type: ReDIF-Paper 1.0
Title: What Did Medicare Do (And Was It Worth It)?
Classification-JEL: H51; I11; I18
Author-Name: Amy Finkelstein
Author-Person: pfi264
Author-Name: Robin McKnight
Note: AG EH PE
Number: 11609
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11609
File-URL: http://www.nber.org/papers/w11609.pdf
File-Format: application/pdf
Publication-Status: published as Finkelstein, Amy and Robin McKnight. "What Did Medicare Do? The Initial Impact of Medicare on Mortality and Out of Pocket Medical Spending." Journal of Public Economics 92 (2008): 1644-1669.
Abstract: We study the impact of the introduction of one of the major pillars of the social insurance system in the United States: the introduction of Medicare in 1965. Our results suggest that, in its first 10 years, the establishment of universal health insurance for the elderly had no discernible impact on their mortality. However, we find that the introduction of Medicare was associated with a substantial reduction in the elderly's exposure to out of pocket medical expenditure risk. Specifically, we estimate that Medicare's introduction is associated with a forty percent decline in out of pocket spending for the top quartile of the out of pocket spending distribution. A stylized expected utility framework suggests that the welfare gains from such reductions in risk exposure alone may be sufficient to cover between half and three-quarters of the costs of the Medicare program. These findings underscore the importance of considering the direct insurance benefits from public health insurance programs, in addition to any indirect benefits from an effect on health.
Handle: RePEc:nbr:nberwo:11609
Template-Type: ReDIF-Paper 1.0
Title: Native Internal Migration and the Labor Market Impact of Immigration
Classification-JEL: J61; R23
Author-Name: George J. Borjas
Author-Person: pbo44
Note: LS
Number: 11610
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11610
File-URL: http://www.nber.org/papers/w11610.pdf
File-Format: application/pdf
Publication-Status: published as Borjas, George J. "Native Internal Migration and The Labor Market Impact Of Immigration," Journal of Human Resources 41(2): 221-258, Spring 2006
Abstract: This paper presents a theoretical and empirical study of how immigration influences the joint determination of the wage structure and internal migration behavior for native-born workers in local labor markets. Using data from the 1960-2000 decennial censuses, the study shows that immigration is associated with lower in-migration rates, higher out-migration rates, and a decline in the growth rate of the native workforce. The native migration response attenuates the measured impact of immigration on wages in a local labor market by 40 to 60 percent, depending on whether the labor market is defined at the state or metropolitan area level.
Handle: RePEc:nbr:nberwo:11610
Template-Type: ReDIF-Paper 1.0
Title: Toward an Understanding of the Economics of Charity: Evidence from a Field Experiment
Classification-JEL: C93; H41; L30
Author-Name: Craig Landry
Author-Person: pla339
Author-Name: Andreas Lange
Author-Person: pla289
Author-Name: John A. List
Author-Person: pli176
Author-Name: Michael K. Price
Author-Person: ppr89
Author-Name: Nicholas G. Rupp
Author-Person: pru112
Note: PE
Number: 11611
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11611
File-URL: http://www.nber.org/papers/w11611.pdf
File-Format: application/pdf
Publication-Status: published as Landry, Craig E., Andreas Lange, John A. List, Michael K. Price and Nicholas G. Rupp. "Toward An Understanding Of The Economics Of Charity: Evidence From A Field Experiment," Quarterly Journal of Economics, 2006, v121(2,May), 747-782.
Abstract: This study develops theory and uses a door-to-door fundraising field experiment to explore the economics of charity. We approached nearly 5000 households, randomly divided into four experimental treatments, to shed light on key issues on the demand side of charitable fundraising. Empirical results are in line with our theory: in gross terms, our lottery treatments raised considerably more money than our voluntary contributions treatments. Interestingly, we find that a one standard deviation increase in female solicitor physical attractiveness is similar to that of the lottery incentive¡ªthe magnitude of the estimated difference in gifts is roughly equivalent to the treatment effect of moving from our theoretically most attractive approach (lotteries) to our least attractive approach (voluntary contributions).
Handle: RePEc:nbr:nberwo:11611
Template-Type: ReDIF-Paper 1.0
Title: Recent Trends in Resource Sharing Among the Poor
Classification-JEL: I3; J0; H0
Author-Name: Steven J. Haider
Author-Person: pha224
Author-Name: Kathleen McGarry
Author-Person: pmc264
Note: AG
Number: 11612
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11612
File-URL: http://www.nber.org/papers/w11612.pdf
File-Format: application/pdf
Abstract: Motivated in part by the dramatic changes in the United States economy and public assistance policies, many researchers have examined the changes in the resources of the low-income population over the last two decades, with particular attention paid to income from earnings and public assistance programs. One source of income that has received comparatively little attention is income from private transfers. However, private transfers may be a key source of support for low-income individuals, especially for those who have had little attachment to the labor force or who have experienced reductions in public assistance. In this paper, we provide a conceptual discussion of private transfers drawing on several related literatures and provide new empirical evidence regarding the significance of private of transfers as a source income. We find that private transfers are an important source of income for many less-skilled households, the contribution of private transfers to total income has increased over time, and shared living arrangements are a common mechanism for providing assistance.
Handle: RePEc:nbr:nberwo:11612
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Child Access Prevention Laws on Non-Fatal Gun Injuries
Classification-JEL: I1; K3
Author-Name: Jeff DeSimone
Author-Person: pde214
Author-Name: Sara Markowitz
Author-Person: pma138
Note: EH
Number: 11613
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11613
File-URL: http://www.nber.org/papers/w11613.pdf
File-Format: application/pdf
Abstract: Many states have passed child access prevention (CAP) laws, which hold the gun owner responsible if a child gains access to a gun that is not securely stored. Previous CAP law research has focused exclusively on gun-related deaths even though most gun injuries are not fatal. We use annual hospital discharge data from 1988-2001 to investigate whether CAP laws decrease non-fatal gun injuries. Results from Poisson regressions that control for various hospital, county and state characteristics, including state-specific fixed effects and time trends, indicate that CAP laws substantially reduce non-fatal gun injuries among both children and adults. Our interpretation of the estimates as causal impacts is supported by the absence of effects on self-inflicted gun injuries among adults, non-gun self-inflicted injuries, and knife assaults, the failure of violent crime levels and law leads to attain significance or alter estimated law coefficients, and larger coefficient magnitudes in states where the law covers older children.
Handle: RePEc:nbr:nberwo:11613
Template-Type: ReDIF-Paper 1.0
Title: Trade Liberalization, Poverty, and Inequality: Evidence from Indian Districts
Classification-JEL: F1
Author-Name: Petia Topalova
Note: ITI
Number: 11614
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11614
File-URL: http://www.nber.org/papers/w11614.pdf
File-Format: application/pdf
Publication-Status: published as Trade Liberalization, Poverty and Inequality: Evidence from Indian Districts, Petia Topalova. in Globalization and Poverty, Harrison. 2007
Abstract: Although it is commonly believed that trade liberalization results in higher GDP, little is known about its effects on poverty and inequality. This paper uses the sharp trade liberalization in India in 1991, spurred to a large extent by external factors, to measure the causal impact of trade liberalization on poverty and inequality in districts in India. Variation in pre-liberalization industrial composition across districts in India and the variation in the degree of liberalization across industries allow for a difference-in-difference approach, establishing whether certain areas benefited more from, or bore a disproportionate share of the burden of liberalization. In rural districts where industries more exposed to liberalization were concentrated, poverty incidence and depth decreased by less as a result of trade liberalization, a setback of about 15 percent of India's progress in poverty reduction over the 1990s. The results are robust to pre-reform trends, convergence and time-varying effects of initial district-specific characteristics. Inequality was unaffected in the sample of all Indian states in both urban and rural areas. The findings are related to the extremely limited mobility of factors across regions and industries in India. The findings, consistent with a specific factors model of trade, suggest that to minimize the social costs of inequality, additional policies may be needed to redistribute some of the gains of liberalization from winners to those who do not benefit as much.
Handle: RePEc:nbr:nberwo:11614
Template-Type: ReDIF-Paper 1.0
Title: Smart Cities: Quality of Life, Productivity, and the Growth Effects of Human Capital
Classification-JEL: R11; N92; J24
Author-Name: Jesse M. Shapiro
Author-Person: psh70
Note: LS
Number: 11615
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11615
File-URL: http://www.nber.org/papers/w11615.pdf
File-Format: application/pdf
Publication-Status: published as Shapiro, Jesse M. "Smart Cities: Quality Of Life, Productivity, And The Growth Effects Of Human Capital," Review of Economics and Statistics, 2006, v88(2,May), 324-335.
Abstract: From 1940 to 1990, a 10 percent increase in a metropolitan area's concentration of college-educated residents was associated with a .8 percent increase in subsequent employment growth. Instrumental variables estimates support a causal relationship between college graduates and employment growth, but show no evidence of an effect of high school graduates. Using data on growth in wages, rents and house values, I calibrate a neoclassical city growth model and find that roughly 60 percent of the employment growth effect of college graduates is due to enhanced productivity growth, the rest being caused by growth in the quality of life. This finding contrasts with the common argument that human capital generates employment growth in urban areas solely through changes in productivity.
Handle: RePEc:nbr:nberwo:11615
Template-Type: ReDIF-Paper 1.0
Title: The Behavioralist Meets the Market: Measuring Social Preferences and Reputation Effects in Actual Transactions
Classification-JEL: C93; D63; D64
Author-Name: John A. List
Author-Person: pli176
Note: PE
Number: 11616
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11616
File-URL: http://www.nber.org/papers/w11616.pdf
File-Format: application/pdf
Publication-Status: published as John A. List, 2006. "The Behavioralist Meets the Market: Measuring Social Preferences and Reputation Effects in Actual Transactions," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 1-37, February.
Abstract: The role of the market in mitigating and mediating various forms of behavior is perhaps the central issue facing behavioral economics today. This study designs a field experiment that is explicitly linked to a controlled laboratory experiment to examine whether, and to what extent, social preferences influence outcomes in actual market transactions. While agents drawn from a well-functioning marketplace behave in accord with social preference models in tightly controlled laboratory experiments, when observed in their naturally occurring settings their behavior approaches what is predicted by self-interest theory. In the limit, much of the observed behavior in the marketplace that is consistent with social preferences is due to reputational concerns: suppliers who expect to have future interactions with buyers provide higher product quality only when the buyer can verify quality via a third-party certifier. The data also speak to theories of how reputation effects enhance market performance. In particular, reputation and the monitoring of quality are found to be complements, and findings suggest that the private market can solve the lemons problem through third party verification.
Handle: RePEc:nbr:nberwo:11616
Template-Type: ReDIF-Paper 1.0
Title: The Divergence of Human Capital Levels Across Cities
Classification-JEL: J0
Author-Name: Christopher R. Berry
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Note: EFG
Number: 11617
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11617
File-URL: http://www.nber.org/papers/w11617.pdf
File-Format: application/pdf
Publication-Status: published as Christopher R. Berry & Edward L. Glaeser, 2005. "The divergence of human capital levels across cities*," Papers in Regional Science, vol 84(3), pages 407-444.
Abstract: Over the past 30 years, the share of adult populations with college degrees increased more in cities with higher initial schooling levels than in initially less educated places. This tendency appears to be driven by shifts in labor demand as there is an increasing wage premium for skilled people working in skilled cities. In this paper, we present a model where the clustering of skilled people in metropolitan areas is driven by the tendency of skilled entrepreneurs to innovate in ways that employ other skilled people and by the elasticity of housing supply.
Handle: RePEc:nbr:nberwo:11617
Template-Type: ReDIF-Paper 1.0
Title: Bubbles and Capital Flow Volatility: Causes and Risk Management
Classification-JEL: E32; E44; F32; F34; F41; G10
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Arvind Krishnamurthy
Author-Person: pkr393
Note: EFG IFM ME
Number: 11618
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11618
File-URL: http://www.nber.org/papers/w11618.pdf
File-Format: application/pdf
Publication-Status: published as Caballero, Ricardo J. and Arvind Krishnamurthy. "Bubbles And Capital Flow Volatility: Causes And Risk Management," Journal of Monetary Economics, 2006, v53(1,Jan), 35-53.
Abstract: Emerging market economies are fertile ground for the development of real estate and other financial bubbles. Despite these economies' significant growth potential, their corporate and government sectors do not generate the financial instruments to provide residents with adequate stores of value. Capital often flows out of these economies seeking these stores of value in the developed world. Bubbles are beneficial because they provide domestic stores of value and thereby reduce capital outflows while increasing investment. But they come at a cost, as they expose the country to bubble-crashes and capital flow reversals. We show that domestic financial underdevelopment not only facilitates the emergence of bubbles, but also leads agents to undervalue the aggregate risk embodied in financial bubbles. In this context, even rational bubbles can be welfare reducing. We study a set of aggregate risk management policies to alleviate the bubble-risk. We show that liquidity requirements, sterilization of capital inflows and structural policies aimed at developing public debt markets "collateralized" by future revenues, all have a high payoff in this environment.
Handle: RePEc:nbr:nberwo:11618
Template-Type: ReDIF-Paper 1.0
Title: The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare
Classification-JEL: H51; I11; I18
Author-Name: Amy Finkelstein
Author-Person: pfi264
Note: AG EH
Number: 11619
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11619
File-URL: http://www.nber.org/papers/w11619.pdf
File-Format: application/pdf
Publication-Status: published as Finkelstein, Amy. "The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare." Quarterly Journal of Economics 122, 3 (2007): 1-37.
Abstract: This paper investigates the effects of market-wide changes in health insurance by examining the single largest change in health insurance coverage in American history: the introduction of Medicare in 1965. I estimate that the impact of Medicare on hospital spending is substantially larger than what the existing evidence from individual-level changes in health insurance would have predicted. Consistent with a disproportionately larger impact of aggregate changes in health insurance, the evidence suggests that the introduction of Medicare altered the practice of medicine. For example, I find that the introduction of Medicare is associated with an increase in the rate of adoption of then-new medical technologies. A back of the envelope calculation based on the estimated impact of Medicare suggests that the overall spread of health insurance between 1950 and 1990 may be able to explain at least forty percent of the increase in real per capita health spending over this time period.
Handle: RePEc:nbr:nberwo:11619
Template-Type: ReDIF-Paper 1.0
Title: Death and Development
Classification-JEL: I10; J10; O10
Author-Name: Peter Lorentzen
Author-Person: plo161
Author-Name: John McMillan
Author-Person: pmc60
Author-Name: Romain Wacziarg
Author-Person: pwa67
Note: EFG IFM
Number: 11620
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11620
File-URL: http://www.nber.org/papers/w11620.pdf
File-Format: application/pdf
Publication-Status: published as Peter Lorentzen & John McMillan & Romain Wacziarg, 2008. "Death and development," Journal of Economic Growth, Springer, vol. 13(2), pages 81-124, June.
Abstract: Analyzing a variety of cross-national and sub-national data, we argue that high adult mortality reduces economic growth by shortening time horizons. Higher adult mortality is associated with increased levels of risky behavior, higher fertility, and lower investment in physical and human capital. Furthermore, the feedback effect from economic prosperity to better health care implies that mortality could be the source of a poverty trap. In our regressions, adult mortality explains almost all of Africa's growth tragedy. Our analysis also underscores grim forecasts of the long-run economic costs of the ongoing AIDS epidemic.
Handle: RePEc:nbr:nberwo:11620
Template-Type: ReDIF-Paper 1.0
Title: Welfare Reform, Returns to Experience, and Wages: Using Reservation Wages to Account for Sample Selection Bias
Classification-JEL: I3; J3; C3
Author-Name: Jeffrey Grogger
Author-Person: pgr125
Note: LS PE
Number: 11621
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11621
File-URL: http://www.nber.org/papers/w11621.pdf
File-Format: application/pdf
Publication-Status: published as Jeffrey Grogger, 2009. "Welfare Reform, Returns to Experience, and Wages: Using Reservation Wages to Account for Sample Selection Bias," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 490-502, 02.
Abstract: Work was one of the central motivations for welfare reform during the 1990s. One important rationale for work was based on human capital theory: work today should raise experience tomorrow, which in turn should raise future wage offers and reduce dependency on aid. Despite the importance of the this notion, few studies have estimated the effect of welfare reform on wages. Furthermore, several recent analyses suggest that low-skill workers, such as welfare recipients, enjoy only meager returns to experience, undermining the link between welfare reform and wages. An important analytical obstacle is the sample selection problem. Since non-employment levels are high and workers are unlikely to represent a random sample from the population of former recipients, estimates that fail to account for sample selection could be seriously biased. In this paper, I propose a method to solve the selection problem based on the use of reservation wage data. Reservation wage data allow one to solve the problem using censored regression methods. Furthermore, the use of reservation wage data obviates the need for the controversial exclusion restrictions sometimes used to identify familiar two-step sample selection estimators. Correcting for sample selection bias matters a great deal empirically. Estimates from models that lack such corrections suggest that welfare recipients gain little from work experience. Estimates based on the reservation wage approach suggest that they enjoy returns similar to those estimated from other samples of workers. They also suggest that the particular reform program that I analyze may have raised wages modestly.
Handle: RePEc:nbr:nberwo:11621
Template-Type: ReDIF-Paper 1.0
Title: Does Social Security Privatization Produce Efficiency Gains?
Classification-JEL: H0; H2; H3
Author-Name: Shinichi Nishiyama
Author-Person: pni21
Author-Name: Kent Smetters
Author-Person: psm21
Note: AG PE
Number: 11622
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11622
File-URL: http://www.nber.org/papers/w11622.pdf
File-Format: application/pdf
Publication-Status: published as Shinichi Nishiyama & Kent Smetters, 2007. "Does Social Security Privatization Produce Efficiency Gains?," The Quarterly Journal of Economics, MIT Press, vol. 122(4), pages 1677-1719, November.
Abstract: While privatizing Social Security can improve labor supply incentives, it can also reduce risk sharing when households face uninsurable risks. We simulate a stylized 50-percent privatization using an overlapping-generations model where heterogenous agents with elastic labor supply face idiosyncratic earnings shocks and longevity uncertainty. When wage shocks are insurable, privatization produces about $21,900 of new resources for each future household (growth adjusted over time) after all households have been fully compensated for their possible transitional losses. However, when wages are not insurable, privatization reduces efficiency by about $5,600 per future household despite improved labor supply incentives. We check the robustness of these results to different model specications and arrive at several surprising conclusions. First, privatization actually performs relatively better in a closed economy, where interest rates decline with capital accumulation, than in an open economy where capital can be accumulated without reducing interest rates. Second, privatization also performs relatively better when an actuarially-fair private annuity market does not exist than when it does exist. Third, introducing progressivity into the privatized system to restore risk sharing must be done carefully. In particular, having the government match private contributions on a progressive basis is not very effective at restoring risk sharing -- too much matching actually harms efficiency. However, increasing the progressivity of the remaining traditional system is very effective at restoring risk sharing, thereby allowing partial privatization to produce efficiency gains of $2,700 per future household.
Handle: RePEc:nbr:nberwo:11622
Template-Type: ReDIF-Paper 1.0
Title: Supporting "The Best and Brightest" in Science and Engineering: NSF Graduate Research Fellowships
Author-Name: Richard B. Freeman
Author-Person: pfr23
Author-Name: Tanwin Chang
Author-Name: Hanley Chiang
Note: LS PR
Number: 11623
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11623
File-URL: http://www.nber.org/papers/w11623.pdf
File-Format: application/pdf
Publication-Status: published as Supporting "The Best and Brightest" in Science and Engineering: NSF Graduate Research Fellowships, Richard B. Freeman, Tanwin Chang, Hanley Chiang. in Science and Engineering Careers in the United States: An Analysis of Markets and Employment, Freeman and Goroff. 2009
Abstract: The National Science Foundation's (NSF) Graduate Research Fellowship (GRF) is a highly prestigious award for science and engineering (S&E) graduate students. This paper uses data from 1952 to 2004 on the population of over 200,000 applicants to the GRF to examine the determinants of the number and characteristics of applicants and the characteristics of awardees. In the early years of the program, GRF awards went largely to physical science and mathematics students and disproportionately to white men, but as the composition of S&E students has changed, larger shares have gone to biological sciences, social sciences, and engineering, and to women and minorities. The absolute number of awards has varied over time, with no trend. Because the number of new S&E college graduates has risen, the result is a sharp decline in the number of awards per S&E bachelor's graduate. In the 2000s approximately 1/3rd as many NSF Fellowships were granted per S&E baccalaureate than in the 1950s-1970s. The dollar value of the awards relative to the earnings of college graduates has also varied greatly over time. Our analysis of the variation in the number and value of awards and of the characteristics of applicants and awardees finds that: 1. The primary determinant of winning a GRF are academic skills, which greatly impact panel ratings of applicants. Consistent with efforts to increase S&E diversity, women and minorities have higher changes of winning an award than white men with similar attributes. 2. The size of the applicant pool varies with the relative value of the stipend, the number of S&E bachelor's graduates, and the lagged number of awards per graduate. We estimate that for every 10% increase in the stipend value, the number of applications goes up by 8 to 10 percent. 3. The average measured skill of awardees falls when the number of awards are increased and rises with the value of fellowships. 4. The supply of applicants contains enough qualified candidates to allow for a sizeable increase in the number of awards without greatly reducing measured skills. 5. The supply of highly skilled applicants is sufficiently responsive to the value of awards that increases in the value of stipends could attract some potentially outstanding science and engineering students who would otherwise choose other careers.
Handle: RePEc:nbr:nberwo:11623
Template-Type: ReDIF-Paper 1.0
Title: Venture Capital Contracting and Syndication: An Experiment in Computational Corporate Finance
Classification-JEL: G24; G32
Author-Name: Zsuzsanna Fluck
Author-Name: Kedran Garrison
Author-Name: Stewart C. Myers
Note: CF
Number: 11624
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11624
File-URL: http://www.nber.org/papers/w11624.pdf
File-Format: application/pdf
Abstract: This paper develops a model to study how entrepreneurs and venture-capital investors deal with moral hazard, effort provision, asymmetric information and hold-up problems. We explore several financing scenarios, including first-best, monopolistic, syndicated and fully competitive financing. We solve numerically for the entrepreneur's effort, the terms of financing, the venture capitalist's investment decision and NPV. We find significant value losses due to holdup problems and under-provision of effort that can outweigh the benefits of staged financing and investment. We show that a commitment to later-stage syndicate financing increases effort and NPV and preserves the option value of staged investment. This commitment benefits initial venture capital investors as well as the entrepreneur.
Handle: RePEc:nbr:nberwo:11624
Template-Type: ReDIF-Paper 1.0
Title: Can a Rapidly-Growing Export-Oriented Economy Smoothly Exit an Exchange Rate Peg? Lessons for China from Japan's High-Growth Era
Classification-JEL: F31; F33; N15; N65
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Mariko Hatase
Note: IFM
Number: 11625
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11625
File-URL: http://www.nber.org/papers/w11625.pdf
File-Format: application/pdf
Abstract: We explore the parallels between Japanese currency policy after World War II and Chinese currency policy today. After two decades of pegging at 360 yen, Japan decoupled from the dollar on August 1971 and then repegged at a revalued rate of 308 yen. After stabilizing the exchange rate at this new level for about a year, greater flexibility was introduced. This phased adjustment - revaluation followed after a time by an increase in flexibility - bears more than a passing resemblance to recent Chinese policy initiatives. We analyze the impact of Japan's exit from its peg on exports and investment. The results point to sizeable effects of the yen's revaluation on both variables, especially investment. While our analysis suggests that a rapidly-growing, export-oriented economy can operate a heavily managed float despite the presence of capital controls and the absence of sophisticated foreign currency forward markets, it underscores the importance of managing the exchange rate with domestic conditions in mind and avoiding the kind of large real appreciation that would sharply compress profits and damage investment. For China this suggests starting with a modest band widening and a limited increase in flexibility, and not with a large step revaluation which could have a sharp negative impact on investment and growth. Our results thus provide support for the kind of measures taken at the end of July.
Handle: RePEc:nbr:nberwo:11625
Template-Type: ReDIF-Paper 1.0
Title: Distributional Impacts of the Self-Sufficiency Project
Classification-JEL: J2; I38; H53
Author-Name: Marianne P. Bitler
Author-Person: pbi12
Author-Name: Jonah B. Gelbach
Author-Person: pge238
Author-Name: Hilary W. Hoynes
Author-Person: pho278
Note: LS PE
Number: 11626
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11626
File-URL: http://www.nber.org/papers/w11626.pdf
File-Format: application/pdf
Publication-Status: published as Bitler, Marianne P. & Gelbach, Jonah B. & Hoynes, Hilary W., 2008. "Distributional impacts of the Self-Sufficiency Project," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 748-765, April.
Abstract: A large literature has been concerned with the impacts of recent welfare reforms on income, earnings, transfers, and labor-force attachment. While one strand of this literature relies on observational studies conducted with large survey-sample data sets, a second makes use of data generated by experimental evaluations of changes to means-tested programs. Much of the overall literature has focused on mean impacts. In this paper, we use random-assignment experimental data from Canada's Self-Sufficiency Project (SSP) to look at impacts of this unique reform on the distributions of income, earnings, and transfers. SSP offered members of the treatment group a generous subsidy for working full time. Quantile treatment effect (QTE) estimates show there was considerable heterogeneity in the impacts of SSP on the distributions of earnings, transfers, and total income; heterogeneity that would be missed by looking only at average treatment effects. Moreover, these heterogeneous impacts are consistent with the predictions of labor supply theory. During the period when the subsidy is available, the SSP impact on the earnings distribution is zero for the bottom half of the distribution. The SSP earnings distribution is higher for much of the upper third of the distribution except at the very top, where the earnings distribution is the same under either program or possibly lower under SSP. Further, during the period when SSP receipt was possible, the impacts on the distributions of transfer payments (IA plus the subsidy) and total income (earnings plus transfers) are also different at different points of the distribution. In particular, positive impacts on the transfer distribution are concentrated at the lower end of the transfer distribution while positive impacts on the income distribution are concentrated in the upper end of the income distribution. Impacts of SSP on these distributions were essentially zero after the subsidy was no longer available.
Handle: RePEc:nbr:nberwo:11626
Template-Type: ReDIF-Paper 1.0
Title: Trends in U.S. Wage Inequality: Re-Assessing the Revisionists
Classification-JEL: J3; D3; O3
Author-Name: David H. Autor
Author-Person: pau9
Author-Name: Lawrence F. Katz
Author-Person: pka266
Author-Name: Melissa S. Kearney
Note: ED EFG LS
Number: 11627
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11627
File-URL: http://www.nber.org/papers/w11627.pdf
File-Format: application/pdf
Publication-Status: published as Autor, David H., Lawrence F. Katz and Melissa Schettini Kearney. “Trends in U.S. Wage Inequality: Re-Assessing the Revisionists.” Review of Economics and Statistics 90, 2 (May 2008) 300 – 323.
Abstract: A recent "revisionist " literature characterizes the pronounced rise in U.S. wage inequality since 1980 as an "episodic " event of the first-half of the 1980s driven by non-market factors (particularly a falling real minimum wage) and concludes that continued increases in wage inequality since the late 1980s substantially reflect the mechanical confounding effects of changes in labor force composition. Analyzing data from the Current Population Survey for 1963 to 2005, we find limited support for these claims. The slowing of the growth of overall wage inequality in the 1990s hides a divergence in the paths of upper-tail (90/50) inequality -- which has increased steadily since 1980, even adjusting for changes in labor force composition -- and lower tail (50/10) inequality, which rose sharply in the first-half of the 1980s and plateaued or contracted thereafter. Fluctuations in the real minimum wage are not a plausible explanation for these trends since the bulk of inequality growth occurs above the median of the wage distribution. Models emphasizing rapid secular growth in the relative demand for skills -- attributable to skill-biased technical change -- and a sharp deceleration in the relative supply of college workers in the 1980s do an excellent job of capturing the evolution of the college/high-school wage premium over four decades. But these models also imply a puzzling deceleration in relative demand growth for college workers in the early 1990s, also visible in a recent "polarization" of skill demands in which employment has expanded in high-wage and low-wage work at the expense of middle-wage jobs. These patterns are potentially reconciled by a modified version of the skill-biased technical change hypothesis that emphasizes the role of information technology in complementing abstract (high-education) tasks and substituting for routine (middle-education) tasks.
Handle: RePEc:nbr:nberwo:11627
Template-Type: ReDIF-Paper 1.0
Title: Rising Wage Inequality: The Role of Composition and Prices
Classification-JEL: J3; D3; O3; C1
Author-Name: David H. Autor
Author-Person: pau9
Author-Name: Lawrence F. Katz
Author-Person: pka266
Author-Name: Melissa S. Kearney
Note: EFG LS
Number: 11628
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11628
File-URL: http://www.nber.org/papers/w11628.pdf
File-Format: application/pdf
Abstract: During the early 1980s, earnings inequality in the U.S. labor market rose relatively uniformly throughout the wage distribution. But this uniformity gave way to a significant divergence starting in 1987, with upper-tail (90/50) inequality rising steadily and lower tail (50/10) inequality either flattening or compressing for the next 16 years (1987 to 2003). This paper applies and extends a quantile decomposition technique proposed by Machado and Mata (2005) to evaluate the role of changing labor force composition (in terms of education and experience) and changing labor market prices to the expansion and subsequent divergence of upper- and lower-tail inequality over the last three decades We show that the extended Machado-Mata quantile decomposition corrects shortcomings of the original Juhn-Murphy-Pierce (1993) full distribution accounting method and nests the kernel reweighting approach proposed by DiNardo, Fortin and Lemieux (1996). Our analysis reveals that shifts in labor force composition have positively impacted earnings inequality during the 1990s. But these compositional shifts have primarily operated on the lower half of the earnings distribution by muting a contemporaneous, countervailing lower-tail price compression. The steady rise of upper tail inequality since the late 1970s appears almost entirely explained by ongoing between-group price changes (particularly increasing wage differentials by education) and residual price changes.
Handle: RePEc:nbr:nberwo:11628
Template-Type: ReDIF-Paper 1.0
Title: Hours Worked: Long-Run Trends
Classification-JEL: E24; J22; O11; O33
Author-Name: Jeremy Greenwood
Author-Person: pgr12
Author-Name: Guillaume Vandenbroucke
Author-Person: pva82
Note: EFG LS
Number: 11629
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11629
File-URL: http://www.nber.org/papers/w11629.pdf
File-Format: application/pdf
Abstract: For 200 years the average number of hours worked per worker declined, both in the market place and at home. Technological progress is the engine of such transformation. Three mechanisms are stressed: (i) The rise in real wages and its corresponding wealth effect; (ii) The enhanced value of time off from work, due to the advent of time-using leisure goods; (iii) The reduced need for housework, due to the introduction of time-saving appliances. These mechanisms are incorporated into a model of household production. The notion of Edgeworth-Pareto complementarity/substitutability is key to the analysis. Numerical examples link theory and data. This note has been prepared for The New Palgrave Dictionary of Economics, 2nd edition, edited by Lawrence E. Blume and Steven N. Durlauf (London: Palgrave Macmillan).
Handle: RePEc:nbr:nberwo:11629
Template-Type: ReDIF-Paper 1.0
Title: Deficits and Debt in the Short and Long Run
Classification-JEL: E62
Author-Name: Benjamin M. Friedman
Note: EFG ME PE
Number: 11630
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11630
File-URL: http://www.nber.org/papers/w11630.pdf
File-Format: application/pdf
Publication-Status: published as Kopcke, Richard W., Geoffrey M.B. Tootell, and Robert K. Triest (eds.) The Macroeconomics of Fiscal Policy. Cambridge and London: MIT Press, 2006.
Abstract: This paper begins by examining the persistence of movements in the U.S. Government's budget posture. Deficits display considerable persistence, and debt levels (relative to GDP) even more so. Further, the degree of persistence depends on what gives rise to budget deficits in the first place. Deficits resulting from shocks to defense spending exhibit the greatest persistence and those from shocks to nondefense spending the least; deficits resulting from shocks to revenues fall in the middle. The paper next reviews recent evidence on the impact of changes in government debt levels (again, relative to GDP) on interest rates. The recent literature, focusing on expected future debt levels and expected real interest rates, indicates impacts that are large in the context of actual movements in debt levels: for example, an increase of 94 basis points due to the rise in the debt-to-GDP ratio during 1981-93, and a decline of 65 basis point due to the decline in the debt-to-GDP ratio during 1993-2001. The paper next asks why deficits would exhibit the observed negative correlation with key elements of investment. One answer, following the analysis presented earlier, is that deficits are persistent and therefore lead to changes in expected future debt levels, which in turn affect real interest rates. A different reason, however, revolves around the need for markets to absorb the increased issuance of Government securities in a setting of costly portfolio adjustment. The paper concludes with some reflections on "the Perverse Corollary of Stein's Law": that is, the view that in the presence of large government deficits nothing need be done because something will be done.
Handle: RePEc:nbr:nberwo:11630
Template-Type: ReDIF-Paper 1.0
Title: The Law and Economics of Antidiscrimination Law
Classification-JEL: H; J; K
Author-Name: John J. Donohue III
Author-Person: pdo40
Note: LE
Number: 11631
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11631
File-URL: http://www.nber.org/papers/w11631.pdf
File-Format: application/pdf
Abstract: This essay provides an overview of the central theoretical law and economics insights concerning antidiscrimination law across a variety of contexts including discrimination in labor markets, housing markets, consumer purchases, and policing. The different models of discrimination based on animus, statistical discrimination, and cartel exploitation are analyzed for both race and sex discrimination. I explore the theoretical arguments for prohibiting private discriminatory conduct and illustrates the tensions that exist between concerns for liberty and equality. I also discuss the critical point that one cannot automatically attribute observed disparities in various economic or social outcomes to discrimination, and illustrate the complexities in establishing the existence of discrimination. The major empirical findings showing the effectiveness of federal law in the first decade after passage of the 1964 Civil Rights Act are contrasted with the generally less optimistic findings from subsequent antidiscrimination interventions.
Handle: RePEc:nbr:nberwo:11631
Template-Type: ReDIF-Paper 1.0
Title: Exchange-Rate Pass-Through to Import Prices in the Euro Area
Classification-JEL: F3; F4
Author-Name: José Manuel Campa
Author-Person: pca393
Author-Name: Linda S. Goldberg
Author-Person: pgo256
Author-Name: José M. González-Mínguez
Note: IFM
Number: 11632
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11632
File-URL: http://www.nber.org/papers/w11632.pdf
File-Format: application/pdf
Publication-Status: published as José Manuel Campa & Linda S. Goldberg, 2005. "Exchange Rate Pass-Through into Import Prices," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 679-690, December.
Publication-Status: published as di Mauro, Filippo and Robert Anderton. The External Dimension of the Euro Area: Assessing the Linkages. Cambridge and New York: Cambridge University Press, 2007.
Abstract: This paper presents an empirical analysis of transmission rates from exchange rate movements to import prices, across countries and product categories, in the euro area over the last fifteen years. Our results show that the transmission of exchange rate changes to import prices in the short run is high, although incomplete, and that it differs across industries and countries; in the long run, exchange rate pass-through is higher and close to one. We find no strong statistical evidence that the introduction of the euro caused a structural change in this transmission. Although estimated point elasticities seem to have declined since the introduction of the euro, we find little evidence of a structural break in the transmission of exchange rate movements except in the case of some manufacturing industries. And since the euro was introduced, industries producing differentiated goods have been more likely to experience reduced rates of exchange rate pass-through to import prices. Exchange rate changes continue to lead to large changes in import prices across euro-area countries.
Handle: RePEc:nbr:nberwo:11632
Template-Type: ReDIF-Paper 1.0
Title: Rational Inattention: A Solution to the Forward Discount Puzzle
Classification-JEL: F3; G1; E4
Author-Name: Philippe Bacchetta
Author-Person: pba111
Author-Name: Eric van Wincoop
Author-Person: pva387
Note: IFM
Number: 11633
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11633
File-URL: http://www.nber.org/papers/w11633.pdf
File-Format: application/pdf
Abstract: The uncovered interest rate parity equation is the cornerstone of most models in international macro. However, this equation does not hold empirically since the forward discount, or interest rate differential, is negatively related to the subsequent change in the exchange rate. This forward discount puzzle is one of the most extensively researched areas in international finance. It implies that excess returns on foreign currency investments are predictable. In this paper we propose a new explanation for this puzzle based on rational inattention. We develop a model where investors face a cost of collecting and processing information. Investors with low information processing costs trade actively, while other investors are inattentive and trade infrequently. We calibrate the model to the data and show that (i) inattention can account for most of the observed predictability of excess returns in the foreign exchange market, (ii) the benefit from frequent trading is relatively small so that few investors choose to be attentive, (iii) average expectational errors about future exchange rates are predictable in a way consistent with survey data for market participants, and (iv) the model can account for the puzzle of delayed overshooting of the exchange rate in response to interest rate shocks.
Handle: RePEc:nbr:nberwo:11633
Template-Type: ReDIF-Paper 1.0
Title: Current Account Reversals: Always a Problem?
Classification-JEL: F31; F33; N15; N65
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Muge Adalet
Note: DAE IFM ME
Number: 11634
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11634
File-URL: http://www.nber.org/papers/w11634.pdf
File-Format: application/pdf
Publication-Status: published as Current Account Reversals: Always a Problem?, Muge Adalet, Barry Eichengreen. in G7 Current Account Imbalances: Sustainability and Adjustment, Clarida. 2007
Abstract: Using panel data and case studies, we analyze the pre-1970 history of international capital flows and current account reversals. Considering a sample of emerging markets and advanced economies with per capita GDPs at least 60 per cent those of the lead country, we show that the incidence of reversals has been unusually great in recent years. The only prior period that matched the last three decades in terms of the frequency and magnitude of reversals was the 1920s and 1930s, decades notorious for the instability of capital flows. In contrast, reversals were both less common and smaller in the Bretton Woods and pre-World War I gold standard eras.
Handle: RePEc:nbr:nberwo:11634
Template-Type: ReDIF-Paper 1.0
Title: Bribery: Who Pays, Who Refuses, What Are the Payoffs?
Author-Name: Jennifer Hunt
Author-Person: phu9
Author-Name: Sonia Laszlo
Author-Person: pla99
Note: LS PE
Number: 11635
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11635
File-URL: http://www.nber.org/papers/w11635.pdf
File-Format: application/pdf
Abstract: We provide a theoretical framework for understanding when an official angles for a bribe, when a client pays, and the payoffs to the client's decision. We test this framework using a new data set on bribery of Peruvian public officials by households. The theory predicts that bribery is more attractive to both parties when the client is richer, and we find empirically that both bribery incidence and value are increasing in household income. However, 65% of the relation between bribery incidence and income is explained by greater use of officials by high-income households, and by their use of more corrupt types of official. Compared to a client dealing with an honest official, a client who pays a bribe has a similar probability of concluding her business, while a client who refuses to bribe has a probability 16 percentage points lower. This indicates that service improvements in response to a bribe merely offset service reductions associated with angling for a bribe, and that clients refusing to bribe are punished. We use these and other results to argue that bribery is not a regressive tax.
Handle: RePEc:nbr:nberwo:11635
Template-Type: ReDIF-Paper 1.0
Title: Do School-To-Work Programs Help the "Forgotten Half"?
Classification-JEL: I28; J15; J24
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Donna Rothstein
Note: ED LS
Number: 11636
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11636
File-URL: http://www.nber.org/papers/w11636.pdf
File-Format: application/pdf
Publication-Status: published as Neumark, David (ed.) Improving School-to-Work Transitions. New York: Russell Sage Foundation, 2007.
Abstract: This paper tests whether school-to-work (STW) programs are particularly beneficial for those less likely to go to college in their absence——often termed the ""forgotten half"" in the STW literature. The empirical analysis is based on the NLSY97, which allows us to study six types of STW programs, including job shadowing, mentoring, coop, school enterprises, tech prep, and internships/apprenticeships. For men there is quite a bit of evidence that STW program participation is particularly advantageous for those in the forgotten half. For these men, specifically, mentoring and coop programs increase post-secondary education, and coop, school enterprise, and internship/apprenticeship programs boost employment and decrease idleness after leaving high school. There is less evidence that STW programs are particularly beneficial for women in the forgotten half, although internship/apprenticeship programs do lead to positive earnings effects concentrated among these women.
Handle: RePEc:nbr:nberwo:11636
Template-Type: ReDIF-Paper 1.0
Title: Tradability, Productivity, and Understanding International Economic Integration
Classification-JEL: F4
Author-Name: Paul R. Bergin
Author-Person: pbe249
Author-Name: Reuven Glick
Author-Person: pgl13
Note: IFM ITI
Number: 11637
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11637
File-URL: http://www.nber.org/papers/w11637.pdf
File-Format: application/pdf
Publication-Status: published as Bergin, Paul R.and Reuven Glick. "Tradability, Productivity, and International Economic Integration." Journal of International Economics 73 , 1 (2007): 128-151.
Abstract: This paper develops a two-country macro model with endogenous tradability to study features of international economic integration. Recent episodes of integration in Europe and North America suggest some surprising observations: while quantities of trade have increased significantly, especially along the extensive margin, price dispersion has not decreased and may even have increased. We propose a way of reconciling these price and quantity observations in a macroeconomic model where the decision of heterogeneous firms to trade internationally is endogenous. Trade is shaped both by the nature of heterogeneity -- trade costs versus productivity -- and by the nature of trade policies -- cuts in fixed costs versus cuts in per unit costs like tariffs. For example, in contrast to tariff cuts, trade policies that work mainly by lowering various fixed costs of trade may have large effects on entry decisions at the extensive margin without having direct effects on price-setting decisions. Whether this entry raises or lowers overall price dispersion depends on the type of heterogeneity that distinguishes the new entrants from incumbent traders.
Handle: RePEc:nbr:nberwo:11637
Template-Type: ReDIF-Paper 1.0
Title: Modeling Exchange-Rate Passthrough After Large Devaluations
Classification-JEL: F31
Author-Name: Ariel Burstein
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Sergio Rebelo
Note: EFG IFM
Number: 11638
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11638
File-URL: http://www.nber.org/papers/w11638.pdf
File-Format: application/pdf
Publication-Status: published as Burstein, Ariel & Eichenbaum, Martin & Rebelo, Sergio, 2007. "Modeling exchange rate passthrough after large devaluations," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 346-368, March.
Abstract: Large devaluations are generally associated with large declines in real exchange rates. We develop a model which embodies two complementary forces that account for the large declines in the real exchange rate that occur in the aftermath of large devaluations. The first force is sticky nontradable-goods prices. The second force is the impact of real shocks that often accompany large devaluations. We argue that sticky nontradable goods prices generally play an important role in explaining post-devaluation movements in real exchange rates. However, real shocks can sometimes be primary drivers of real exchange-rate movements.
Handle: RePEc:nbr:nberwo:11638
Template-Type: ReDIF-Paper 1.0
Title: Bilateral FDI Flows: Threshold Barriers and Productivity Shocks
Classification-JEL: F2; F3
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Author-Name: Hui Tong
Author-Person: pto159
Note: IFM PR
Number: 11639
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11639
File-URL: http://www.nber.org/papers/w11639.pdf
File-Format: application/pdf
Publication-Status: published as Razin, Assaf, Efraim Sadka and Hui Tong. "Bilateral FDI Flows: Threshold Barriers and Productivity Shocks." CESifo Economic Studies 54, 3 (2008):451-470.
Abstract: A positive productivity shock in the host country tends typically to increase the volume of the desired FDI flows to the host country, through the standard marginal profitability effect. But, at the same time, such a shock may lower the likelihood of making any new FDI flows by the source country, through a total profitability effect, derived from the a general-equilibrium increase in domestic input prices. This is the gist of the theory that we develop in the paper. For a sample of 62 OECD and Non-OECD countries over the period 1987-2000, we provide supporting evidence for the existence of such conflicting effects of productivity change on bilateral FDI flows. We also uncover sizeable threshold barriers in our data set and link the analysis to the Lucas Paradox.
Handle: RePEc:nbr:nberwo:11639
Template-Type: ReDIF-Paper 1.0
Title: Capital Flows and Controls in Brazil: What Have We Learned?
Classification-JEL: F21; F32; F40
Author-Name: Ilan Goldfajn
Author-Name: André Minella
Author-Person: pmi230
Note: IFM
Number: 11640
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11640
File-URL: http://www.nber.org/papers/w11640.pdf
File-Format: application/pdf
Publication-Status: published as Capital Flows and Controls in Brazil: What Have We Learned?, Ilan Goldfajn, André Minella. in Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, Edwards. 2007
Abstract: This paper analyzes the relationship between capital account liberalization and macroeconomic volatility using Brazil as a case study. The paper provides several stylized facts regarding the evolution of capital flows and controls in Brazil in the last three decades. We conclude that, notwithstanding the financial crises and macroeconomic volatility of the recent past, capital account liberalization and the floating exchange regime have led to a more resilient economy. Further liberalization of the capital account is warranted and should be accompanied by a broad range of reforms to improve and foster stronger institutions.
Handle: RePEc:nbr:nberwo:11640
Template-Type: ReDIF-Paper 1.0
Title: Globalization and Inflation-Output Tradeoffs
Classification-JEL: E3; F3
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Prakash Loungani
Author-Person: plo21
Note: IFM ITI
Number: 11641
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11641
File-URL: http://www.nber.org/papers/w11641.pdf
File-Format: application/pdf
Publication-Status: published as NBER International Macro Annual, MIT Press, May 2007.
Publication-Status: published as Globalization and Equilibrium Inflation-Output Tradeoffs, Assaf Razin, Prakash Loungani. in NBER International Seminar on Macroeconomics 2005, Frankel and Pissarides. 2007
Abstract: We demonstrate how capital account and trade account liberalizations help reduce inefficiencies associated with the fluctuations in the output gap, relative to the inefficiencies associated with the fluctuations in inflation. With capital account liberalization the representative household is able to smooth fluctuations in consumption, and thus becomes relatively insensitive to fluctuations in the output gap. With trade liberalization the economy tends to specialize in production but not in consumption. The correlation between fluctuations in the output gap and aggregate consumption is therefore weakened by trade openness; hence a smaller weight on the output gap in the utility-based loss function, compared to the closed economy situations.A key implication of the theory is that globalization forces could induce monetary authorities, to put a greater emphasis on reducing the inflation rate than on narrowing the output gaps. We provide a re- interpretation of the evidence on the effect of openness on the sacrifice ratio which supports the prediction of the theory.
Handle: RePEc:nbr:nberwo:11641
Template-Type: ReDIF-Paper 1.0
Title: Technology Adoption In and Out of Major Urban Areas: When Do Internal Firm Resources Matter Most?
Classification-JEL: R30; O33; L86
Author-Name: Chris Forman
Author-Name: Avi Goldfarb
Author-Person: pgo53
Author-Name: Shane Greenstein
Author-Person: pgr134
Note: IO PR
Number: 11642
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11642
File-URL: http://www.nber.org/papers/w11642.pdf
File-Format: application/pdf
Abstract: How much do internal firm resources contribute to technology adoption in major urban locations, where the advantages from agglomeration are greatest? The authors address this question in the context of a business's decision to adopt advanced Internet technology. Drawing on a rich data set of adoption decisions by 86,879 U.S. establishments, the authors find that the marginal contribution of internal resources to adoption is greater outside of a major urban area than inside one. Agglomeration is therefore less important for highly capable firms. The authors conclude that firms behave as if resources available in cities are substitutes for both establishment-level and firm-level internal resources.
Handle: RePEc:nbr:nberwo:11642
Template-Type: ReDIF-Paper 1.0
Title: Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions
Classification-JEL: R21; R31; G10
Author-Name: Charles Himmelberg
Author-Name: Christopher Mayer
Author-Person: pma212
Author-Name: Todd Sinai
Author-Person: psi354
Note: AP PE
Number: 11643
Creation-Date: 2005-09
Order-URL: http://www.nber.org/papers/w11643
File-URL: http://www.nber.org/papers/w11643.pdf
File-Format: application/pdf
Publication-Status: published as Himmelberg, Charles, Christopher Mayer and Todd Sinai. "Assessing High House Prices: Bubbles, Fundamentals and Misperceptions," Journal of Economic Perspectives, 2005, v19(4,Fall), 67-92.
Abstract: We construct measures of the annual cost of single-family housing for 46 metropolitan areas in the United States over the last 25 years and compare them with local rents and incomes as a way of judging the level of housing prices. Conventional metrics like the growth rate of house prices, the price-to-rent ratio, and the price-to-income ratio can be misleading because they fail to account both for the time series pattern of real long-term interest rates and predictable differences in the long-run growth rates of house prices across local markets. These factors are especially important in recent years because house prices are theoretically more sensitive to interest rates when rates are already low, and more sensitive still in those cities where the long-run rate of house price growth is high. During the 1980s, our measures show that houses looked most overvalued in many of the same cities that subsequently experienced the largest house price declines. We find that from the trough of 1995 to 2004, the cost of owning rose somewhat relative to the cost of renting, but not, in most cities, to levels that made houses look overvalued.
Handle: RePEc:nbr:nberwo:11643
Template-Type: ReDIF-Paper 1.0
Title: Who Are the Greatest Living Artists? The View from the Auction Market
Classification-JEL: J
Author-Name: David W. Galenson
Note: AP LS
Number: 11644
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11644
File-URL: http://www.nber.org/papers/w11644.pdf
File-Format: application/pdf
Abstract: Many art critics and scholars argue that art markets are irrational, and that there is no correlation between prices and artistic importance. This paper identifies all living artists who have executed at least one work that has sold at auction for at least $1 million, and ranks them both by the highest price for which any of their works have sold, and by the number of times their works have sold for $1 million or more. These rankings show that the most valuable art is made by the greatest artists: the leaders in these tables, including Jasper Johns, Bruce Nauman, Robert Rauschenberg, Gerhard Richter, and Jeff Koons, are clearly among the most important artists alive today. This study also underscores the fact that the most important art of the past 50 years has overwhelmingly been made by young geniuses who have made radical conceptual innovations at early ages.
Handle: RePEc:nbr:nberwo:11644
Template-Type: ReDIF-Paper 1.0
Title: Barriers To Entry
Classification-JEL: L1; L4
Author-Name: Dennis W. Carlton
Author-Person: pca14
Note: IO
Number: 11645
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11645
File-URL: http://www.nber.org/papers/w11645.pdf
File-Format: application/pdf
Abstract: This paper analyzes the concept of barriers to entry. It explains that the concept is a static one and explores the inadequacy of the concept in a world with sunk costs, adjustment costs and uncertainty. The static concept addresses the question of whether profits are excessive. The more interesting and relevant question is how fast entry or exit will erode profits or losses and how do the bounds that entry and exit place on price vary with uncertainty and sunk cost. Intuition based on the static concept of barrier to entry can be misleading in many industries.
Handle: RePEc:nbr:nberwo:11645
Template-Type: ReDIF-Paper 1.0
Title: Monetary-Fiscal Policy Interactions and the Price Level: Background and Beyond
Classification-JEL: E31; E52; E62
Author-Name: Eric M. Leeper
Author-Person: ple3
Author-Name: Tack Yun
Note: EFG
Number: 11646
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11646
File-URL: http://www.nber.org/papers/w11646.pdf
File-Format: application/pdf
Publication-Status: published as Eric Leeper & Tack Yun, 2006. "Monetary-fiscal policy interactions and the price level:Background and beyond," International Tax and Public Finance, Springer, vol. 13(4), pages 373-409, August.
Abstract: The paper presents the fiscal theory of the price level in a variety of models, including endowment economies with lump-sum taxes and production economies with proportional income taxes. We offer a microeconomic perspective on the fiscal theory by computing a Slutsky-Hicks decomposition of the effects of tax changes into substitution, wealth, and revaluation effects. Revaluation effects arise whenever tax changes alter the value of outstanding nominal government liabilities by changing the price level. Under certain assumptions on monetary and fiscal behavior, the revaluation effect reflects the fiscal theory mechanism. When taxes distort, two Laffer curves arise, implying that a tax increase can lower or raise the price level and the revaluation effect can be positive or negative, depending on which side of a particular Laffer curve the economy resides.
Handle: RePEc:nbr:nberwo:11646
Template-Type: ReDIF-Paper 1.0
Title: Employment Dynamics and Business Relocation: New Evidence from the National Establishment Time Series
Classification-JEL: J2; C8; L0
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Junfu Zhang
Author-Person: pzh105
Author-Name: Brandon Wall
Author-Person: pwa198
Note: LS
Number: 11647
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11647
File-URL: http://www.nber.org/papers/w11647.pdf
File-Format: application/pdf
Publication-Status: published as Neumark, David, Junfu Zhang, and Brandon Wall. “Employment Dynamics and Business Relocation: New Evidence from the National Establishment Time Series.” Research in Labor Economics (2007): 39-83.
Abstract: We analyze and assess new evidence on employment dynamics from a new data source — the National Establishment Time Series (NETS). The NETS offers advantages over existing data sources for studying employment dynamics, including tracking business establishment relocations that can contribute to job creation or destruction on a regional level. Our primary purpose in this paper is to assess the reliability of the NETS data along a number of dimensions, and we conclude that it is a reliable data source although not without limitations. We also illustrate the usefulness of the NETS data by reporting, for California, a full decomposition of employment change into its six constituent processes, including job creation and destruction stemming from business relocation, which has figured prominently in policy debates but on which there has been no systematic evidence.
Handle: RePEc:nbr:nberwo:11647
Template-Type: ReDIF-Paper 1.0
Title: Trusting the Stock Market
Classification-JEL: D1; D8
Author-Name: Luigi Guiso
Author-Person: pgu58
Author-Name: Paola Sapienza
Author-Person: psa155
Author-Name: Luigi Zingales
Note: CF
Number: 11648
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11648
File-URL: http://www.nber.org/papers/w11648.pdf
File-Format: application/pdf
Publication-Status: published as Luigi Guiso & Paola Sapienza & Luigi Zingales, 2008. "Trusting the Stock Market," Journal of Finance, American Finance Association, vol. 63(6), pages 2557-2600, December.
Abstract: We provide a new explanation to the limited stock market participation puzzle. In deciding whether to buy stocks, investors factor in the risk of being cheated. The perception of this risk is a function not only of the objective characteristics of the stock, but also of the subjective characteristics of the investor. Less trusting individuals are less likely to buy stock and, conditional on buying stock, they will buy less. The calibration of the model shows that this problem is sufficiently severe to account for the lack of participation of some of the richest investors in the United States as well as for differences in the rate of participation across countries. We also find evidence consistent with these propositions in Dutch and Italian micro data, as well as in cross country data.
Handle: RePEc:nbr:nberwo:11648
Template-Type: ReDIF-Paper 1.0
Title: Entry and Competition in Local Hospital Markets
Classification-JEL: I1; L1; L8
Author-Name: Jean M. Abraham
Author-Name: Martin S. Gaynor
Author-Person: pga1
Author-Name: William B. Vogt
Author-Person: pvo14
Note: EH IO
Number: 11649
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11649
File-URL: http://www.nber.org/papers/w11649.pdf
File-Format: application/pdf
Publication-Status: published as Abraham, Jean Marie, Martin Gaynor, and William B. Vogt. "Entry and Competition in Local Hospital Markets." Journal of Industrial Economics 55, 2 (June 2007): 265-88.
Abstract: There has been considerable consolidation in the hospital industry in recent years. Over 900 deals occurred from 1994-2000, and many local markets, even in large urban areas, have been reduced to monopolies, duopolies, or triopolies. This surge in consolidation has led to concern about competition in local markets for hospital services. We examine the effect of market structure on competition in local hospital markets -- specifically, does the hardness of competition increase with the number of firms? We extend the entry model developed by Bresnahan and Reiss to make use of quantity information, and apply it to data on the U.S. hospital industry. In the hospital markets we examine, entry leads to a quick convergence to competitive conduct. Entry reduces variable profits and increases quantity. Most of the effects of entry come from having a second and a third firm enter the market. The fourth entrant has little estimated effect. The use of quantity information allows us to infer that entry is consumer-surplus-increasing.
Handle: RePEc:nbr:nberwo:11649
Template-Type: ReDIF-Paper 1.0
Title: Heterogeneous Firms, Agglomeration and Economic Geography: Spatial Selection and Sorting
Classification-JEL: H32; P16
Author-Name: Richard Baldwin
Author-Person: pba124
Author-Name: Toshihiro Okubo
Author-Person: pok11
Note: ITI
Number: 11650
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11650
File-URL: http://www.nber.org/papers/w11650.pdf
File-Format: application/pdf
Publication-Status: published as Richard E. Baldwin & Toshihiro Okubo, 2006. "Heterogeneous firms, agglomeration and economic geography: spatial selection and sorting," Journal of Economic Geography, Oxford University Press, vol. 6(3), pages 323-346, June.
Abstract: A Melitz-style model of monopolistic competition with heterogeneous firms is integrated into a simple New Economic Geography model to show that the standard assumption of identical firms is neither necessary nor innocuous. We show that re-locating to the big region is most attractive for the most productive firms; this implies interesting results for empirical work and policy analysis. A 'selection effect' means standard empirical measures overestimate agglomeration economies. A 'sorting effect' means that a regional policy induces the highest productivity firms to move to the core while the lowest productivity firms to move to the periphery. We also show that heterogeneity dampens the home market effect.
Handle: RePEc:nbr:nberwo:11650
Template-Type: ReDIF-Paper 1.0
Title: Separating the Business Cycle from Other Economic Fluctuations
Classification-JEL: E32; E52
Author-Name: Robert E. Hall
Note: EFG
Number: 11651
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11651
File-URL: http://www.nber.org/papers/w11651.pdf
File-Format: application/pdf
Publication-Status: published as The Greenspan Era: Lessons for the Future, proceedings of the Federal Reserve Bank of Kansas City Symposium, August 2005, pp. 133-179.
Publication-Status: published as Robert E. Hall, 2005. "Separating the business cycle from other economic fluctuations," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 133-179.
Abstract: Macroeconomists——especially those studying monetary policy——often view the business cycle as a transitory departure from the smooth evolution of a neoclassical growth model. Important ideas contributed by Friedman, Lucas, and the developers of the sticky-price macro model generate this type of aggregate behavior. But the real-business cycle model shows that the neoclassical model implies anything but smooth growth. A purely neoclassical model, devoid of anything resembling a business cycle in the sense of transitory departures from neoclassical equilibrium, nevertheless explains most of the volatility of GDP growth at all frequencies. Monetary policymakers looking to a neoclassical model to provide the neutral levels of key variables-potential GDP, the natural rate of unemployment, and the equilibrium real interest rate, need to solve a complicated and controversial model to find these constructs. They cannot take average or smoothed values of actual data to find them. Further, low-frequency movements of unemployment suggest a failure of the basic idea that departures from the neoclassical equilibrium are transitory. I discuss new theories of the labor market capable of explaining the low-frequency movements of unemployment. I conclude that monetary policymakers should not try to discern neutral values of real variables. Some branches of modem theory do not support the concepts of potential GDP, the natural rate of unemployment, and the equilibrium real interest rate. Even the theories that do support the concepts suggest that measurement in real time is impractical.
Handle: RePEc:nbr:nberwo:11651
Template-Type: ReDIF-Paper 1.0
Title: Pegged Exchange Rate Regimes -- A Trap?
Classification-JEL: F15; F31; F43
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Reuven Glick
Author-Person: pgl13
Note: IFM
Number: 11652
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11652
File-URL: http://www.nber.org/papers/w11652.pdf
File-Format: application/pdf
Publication-Status: published as Joshua Aizenman & Reuven Glick, 2008. "Pegged Exchange Rate Regimes-A Trap?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(4), pages 817-835, 06.
Abstract: This paper studies the empirical and theoretical association between the duration of a pegged exchange rate and the cost experienced upon exiting the regime. We confirm empirically that exits from pegged exchange rate regimes during the past two decades have often been accompanied by crises, the cost of which increases with the duration of the peg before the crisis. We explain these observations in a framework in which the exchange rate peg is used as a commitment mechanism to achieve inflation stability, but multiple equilibria are possible. We show that there are ex ante large gains from choosing a more conservative not only in order to mitigate the inflation bias from the well-known time inconsistency problem, but also to steer the economy away from the high inflation equilibria. These gains, however, come at a cost in the form of the monetary authority's lesser responsiveness to output shocks. In these circumstances, using a pegged exchange rate as an anti-inflation commitment device can create a "trap" whereby the regime initially confers gains in anti-inflation credibility, but ultimately results in an exit occasioned by a big enough adverse real shock that creates large welfare losses to the economy. We also show that the more conservative is the regime in place and the larger is the cost of regime change, the longer will be the average spell of the fixed exchange rate regime, and the greater the output contraction at the time of a regime change.
Handle: RePEc:nbr:nberwo:11652
Template-Type: ReDIF-Paper 1.0
Title: Trade Invoicing in the Accession Countries: Are They Suited to the Euro?
Classification-JEL: F3; F4
Author-Name: Linda Goldberg
Author-Person: pgo256
Note: IFM ITI
Number: 11653
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11653
File-URL: http://www.nber.org/papers/w11653.pdf
File-Format: application/pdf
Publication-Status: published as Trade Invoicing in the Accession Countries: Are They Suited to the Euro?, Linda S. Goldberg. in NBER International Seminar on Macroeconomics 2005, Frankel and Pissarides. 2007
Abstract: The accession countries to the euro area are increasingly binding their economic activity, external and internal, to the euro area countries. One aspect of this phenomenon concerns the currency invoicing of international trade transactions, where accession countries have reduced their use of the US dollar in invoicing international trade transactions. Theory predicts that the optimal invoicing choices for accession countries depend on the composition of goods in exports and imports and on the macroeconomic fluctuations of trade partners, both bearing on the role of herding and hedging considerations within exporter profitability. These considerations yield country-specific estimates about the degree of euro-denominated invoicing of exports. I find that the exporters of some accession countries, even in their trade transactions with the euro zone and other European Union countries, might be pricing too much of their trade in euros rather than in dollars, thus taking on excessive risk in international markets.
Handle: RePEc:nbr:nberwo:11653
Template-Type: ReDIF-Paper 1.0
Title: The Decline of the Independent Inventor: A Schumpterian Story?
Classification-JEL: N; O
Author-Name: Naomi R. Lamoreaux
Author-Name: Kenneth L. Sokoloff
Note: DAE PR
Number: 11654
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11654
File-URL: http://www.nber.org/papers/w11654.pdf
File-Format: application/pdf
Abstract: Joseph Schumpeter argued in Capitalism, Socialism and Democracy that the rise of large firms' investments in in-house R&D spelled the doom of the entrepreneurial innovator. We explore this idea by analyzing the career patterns of successive cohorts of highly productive inventors from the late nineteenth and early twentieth centuries. We find that over time highly productive inventors were increasingly likely to form long-term attachments with firms. In the Northeast, these attachments seem to have taken the form of employment positions within large firms, but in the Midwest inventors were more likely to become principals in firms bearing their names. Entrepreneurship, therefore, was by no means dead, but the increasing capital requirements—both financial and human—for effective invention and the need for inventors to establish a reputation before they could attract support made it more difficult for creative people to pursue careers as inventors. The relative numbers of highly productive inventors in the population correspondingly decreased, as did rates of patenting per capita.
Handle: RePEc:nbr:nberwo:11654
Template-Type: ReDIF-Paper 1.0
Title: Is It Is or Is It Ain't My Obligation? Regional Debt in a Fiscal Federation
Classification-JEL: E6; F4; R5
Author-Name: Russell Cooper
Author-Name: Hubert Kempf
Author-Person: pke25
Author-Name: Dan Peled
Author-Person: ppe182
Note: EFG PE
Number: 11655
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11655
File-URL: http://www.nber.org/papers/w11655.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 repayment of regional debt in a multi-region economy with a central authority: who pays the obligation issued by a region? With commitment, a central government will use its taxation power to smooth distortionary taxes across regions. Absent commitment, the central government may be induced to bailout the regional government in order to smooth consumption and distortionary taxes across the regions. We characterize the conditions under which bailouts occur and their welfare implications. The gains to creating a federation are higher when the (government spending) shocks across regions are negatively correlated and volatile. We use these insights to comment on actual fiscal relations in three quite different federations: the US, the European Union and Argentina.
Handle: RePEc:nbr:nberwo:11655
Template-Type: ReDIF-Paper 1.0
Title: Factor Adjustments After Deregulation: Panel Evidence from Colombian Plants
Classification-JEL: E22; E24; O11; C14; J63
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: 11656
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11656
File-URL: http://www.nber.org/papers/w11656.pdf
File-Format: application/pdf
Publication-Status: published as Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2010. "Factor Adjustments after Deregulation: Panel Evidence from Colombian Plants," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 378-391, 08.
Abstract: We analyze employment and capital adjustments using plant data from the Colombian Annual Manufacturing Survey. We estimate adjustment functions for capital and labor as a non-linear function of the gaps between desired and actual factor levels, allowing for interdependence in adjustments of the two factors. In addition to non-linear employment and capital adjustments in response to market fundamentals, we find that capital shortages reduce hiring and labor surpluses reduce capital shedding. We also find that after factor market deregulation in Colombia in 1991, factor adjustment hazards increased on the job destruction and capital formation margins. Finally, we find that completely eliminating frictions in factor adjustment would yield a substantial increase in aggregate productivity through improved allocative efficiency. Yet, the actual impact of the Colombian deregulation on aggregate productivity through factor adjustment was modest.
Handle: RePEc:nbr:nberwo:11656
Template-Type: ReDIF-Paper 1.0
Title: What Undermines Aid's Impact on Growth?
Classification-JEL: 1; 4; E; F
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Author-Name: Arvind Subramanian
Author-Person: psu108
Note: IFM PE
Number: 11657
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11657
File-URL: http://www.nber.org/papers/w11657.pdf
File-Format: application/pdf
Abstract: We examine one of the most important and intriguing puzzles in economics: why it is so hard to find a robust effect of aid on the long-term growth of poor countries, even those with good policies. We look for a possible offset to the beneficial effects of aid, using a methodology that exploits both cross-country and within-country variation. We find that aid inflows have systematic adverse effects on a country's competitiveness, as reflected in a decline in the share of labor intensive and tradable industries in the manufacturing sector. We find evidence suggesting that these effects stem from the real exchange rate overvaluation caused by aid inflows. By contrast, private-to-private flows like remittances do not seem to create these adverse effects. We offer an explanation why and conclude with a discussion of the policy implications of these findings.
Handle: RePEc:nbr:nberwo:11657
Template-Type: ReDIF-Paper 1.0
Title: Effects of Employment Protection on Worker and Job Flows: Evidence from the 1990 Italian Reform
Classification-JEL: E24; J63; J65
Author-Name: Adriana Kugler
Author-Person: pku361
Author-Name: Giovanni Pica
Note: LS PE
Number: 11658
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11658
File-URL: http://www.nber.org/papers/w11658.pdf
File-Format: application/pdf
Publication-Status: published as Kugler, Adriana & Pica, Giovanni, 2008. "Effects of employment protection on worker and job flows: Evidence from the 1990 Italian reform," Labour Economics, Elsevier, vol. 15(1), pages 78-95, February.
Abstract: This paper uses the Italian Social Security employer-employee panel to study the effects of the Italian reform of 1990 on worker and job flows. We exploit the fact that this reform increased unjust dismissal costs for firms below 15 employees, while leaving dismissal costs unchanged for bigger firms, to set up a natural experiment research design. We find that the increase in dismissal costs decreased accessions and separations for workers in small relative to big firms, especially in sectors with higher employment volatility. Moreover, we find that the reform reduced firms' employment adjustments on the internal margin as well as entry rates while increasing exit rates.
Handle: RePEc:nbr:nberwo:11658
Template-Type: ReDIF-Paper 1.0
Title: How Unobservable Productivity Biases the Value of a Statistical Life
Classification-JEL: I10; J17; J28; K00
Author-Name: Thomas J. Kniesner
Author-Person: pkn21
Author-Name: W. Kip Viscusi
Author-Person: pvi69
Author-Name: Christopher Woock
Author-Name: James P. Ziliak
Author-Person: pzi120
Note: EH LE PE
Number: 11659
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11659
File-URL: http://www.nber.org/papers/w11659.pdf
File-Format: application/pdf
Abstract: A prominent theoretical controversy in the compensating differentials literature concerns unobservable individual productivity. Competing models yield opposite predictions depending on whether the unobservable productivity is safety-related skill or productivity generally. Using five panel waves and several new measures of worker fatality risks, first-difference estimates imply that omitting individual heterogeneity leads to overestimates of the value of statistical life, consistent with the latent safety-related skill interpretation. Risk measures with less measurement error raise the value of statistical life, the net effect being that estimates from the static model range from $5.3 million to $6.7 million, with dynamic model estimates somewhat higher.
Handle: RePEc:nbr:nberwo:11659
Template-Type: ReDIF-Paper 1.0
Title: Teachers and the Gender Gaps in Student Achievement
Classification-JEL: I2
Author-Name: Thomas S. Dee
Note: CH ED
Number: 11660
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11660
File-URL: http://www.nber.org/papers/w11660.pdf
File-Format: application/pdf
Publication-Status: published as Dee, Thomas S. “Teachers and the Gender Gaps in Student Achievement.” Journal of Human Resources 42, 3 (Summer 2007): 528-554.
Abstract: In the United States, girls outperform boys in measures of reading achievement while generally underperforming in science and mathematics. One major class of explanations for these gaps involves the gender-based interactions between students and teachers (e.g., role-model and Pygmalion effects). However, the evidence on whether these interactions actually matter is limited and contradictory. In this study, I present new empirical evidence on whether assignment to a same-gender teacher influences student achievement, teacher perceptions of student performance, and student engagement. This study's identification strategy exploits a unique "matched pairs" feature of a major longitudinal survey. Within-student comparisons based on these data indicate that assignment to a same-gender teacher significantly improves the achievement of both girls and boys as well as teacher perceptions of student performance and student engagement with the teacher's subject. For example, assignment to a female science teacher increases the likelihood that a girl views science as useful for her future. However, because the middle-school teachers in most academic subjects are female, these results also suggest that the gender dynamics between teachers and students at this level amplify boys' large underperformance in reading while attenuating the more modest underperformance of girls in math and science.
Handle: RePEc:nbr:nberwo:11660
Template-Type: ReDIF-Paper 1.0
Title: Puzzling Tax Structures in Developing Countries: A Comparison of Two Alternative Explanations
Classification-JEL: H21; O23; O17; F13; F23
Author-Name: Roger Gordon
Author-Person: pgo95
Author-Name: Wei Li
Author-Person: pli922
Note: PE
Number: 11661
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11661
File-URL: http://www.nber.org/papers/w11661.pdf
File-Format: application/pdf
Publication-Status: published as Ito, Takatoshi and Andrew K. Rose. Fiscal Policy and Management in East Asia, NBER-East Asia Seminar on Economics series, vol 16. Chicago and London: University of Chicago Press, 2007.
Publication-Status: published as Puzzling Tax Structures in Devloping Countries: A Comparison of Two Alternative Explanations, Roger Gordon, Wei Li. in Fiscal Policy and Management in East Asia, Ito and Rose. 2007
Abstract: Observed economic policies in developing countries differ sharply both from those observed among developed countries and from those forecast by existing models of optimal policies. For example, developing countries rely little on broad-based taxes, and make substantial use of tariffs and seignorage as nontax sources of revenue. The objective of this paper is to contrast the implications of two models designed to explain such anomalous policies. One approach, by Gordon-Li (2005), focuses on the greater difficulties faced in poor countries in monitoring taxable activity, and explores the best available policies given such difficulties. The other, building on Grossman-Helpman (1994), presumes that political-economy problems in developing countries are worse, leading to worse policy choices. The paper compares the contrasting theoretical implications of the two models with the data, and finds that the political-economy approach does poorly in reconciling many aspects of the data with the theory. In contrast, the forecasts from Gordon-Li model are largely consistent with the data currently available.
Handle: RePEc:nbr:nberwo:11661
Template-Type: ReDIF-Paper 1.0
Title: Hospital Ownership and Financial Performance: A Quantitative Research Review
Classification-JEL: I11; L30
Author-Name: Yu-Chu Shen
Author-Name: Karen Eggleston
Author-Person: peg13
Author-Name: Joseph Lau
Author-Name: Christopher Schmid
Note: EH
Number: 11662
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11662
File-URL: http://www.nber.org/papers/w11662.pdf
File-Format: application/pdf
Abstract: We apply meta-analytic methods to conduct a quantitative review of the empirical literature since 1990 comparing financial performance of US for-profit, not-for-profit, and government-owned general acute hospitals. We find that the diverse results in the hospital ownership literature can be explained largely by differences in authors' underlying theoretical frameworks, assumptions about the functional form of the dependent variables, and model specifications. Weaker methods and functional forms tend to predict larger differences in financial performance between not-for-profits and for-profits. The combined estimates across studies suggest little difference in cost among all three types of hospital ownership, and that for-profit hospitals generate more revenue and greater profits than not-for-profit hospitals, although the difference is only of modest economic significance. There is little difference in revenue or profits between government and not-for-profit hospitals.
Handle: RePEc:nbr:nberwo:11662
Template-Type: ReDIF-Paper 1.0
Title: Religious Extremism: The Good, The Bad, and The Deadly
Classification-JEL: Z12; H56; H41; K4
Author-Name: Eli Berman
Author-Person: pbe188
Author-Name: Laurence R. Iannaccone
Author-Person: pia4
Note: LS
Number: 11663
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11663
File-URL: http://www.nber.org/papers/w11663.pdf
File-Format: application/pdf
Publication-Status: published as Laurence Iannaccone & Eli Berman, 2006. "Religious extremism: The good, the bad, and the deadly," Public Choice, Springer, vol. 128(1), pages 109-129, July.
Abstract: This paper challenges conventional views of violent religious extremism, particularly those that emphasize militant theology. We offer an alternative analysis that helps explain the persistent demand for religion, the different types of religious that naturally arise, and the special attributes of the "sectarian" type. Sects are adept at producing club goods both spiritual and material. Where governments and economies function poorly, sects often become major suppliers of social services, political action, and coercive force. Their success as providers is much more due to the advantages of their organizational structure than it is to their theology. Religious militancy is most effectively controlled through a combination of policies that raise the direct costs of violence, foster religious competition, improve social services, and encourage private enterprise.
Handle: RePEc:nbr:nberwo:11663
Template-Type: ReDIF-Paper 1.0
Title: Media Bias and Reputation
Classification-JEL: L82; L10; D83
Author-Name: Matthew Gentzkow
Author-Person: pge43
Author-Name: Jesse Shapiro
Author-Person: psh70
Note: LS PE
Number: 11664
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11664
File-URL: http://www.nber.org/papers/w11664.pdf
File-Format: application/pdf
Publication-Status: published as Gentzkow, Matthew and Jesse M. Shapiro. "Media Bias And Reputation," Journal of Political Economy, 2006, v114(2,Apr), 280-316.
Abstract: A Bayesian consumer who is uncertain about the quality of an information source will infer that the source is of higher quality when its reports conform to the consumer's prior expectations. We use this fact to build a model of media bias in which firms slant their reports toward the prior beliefs of their customers in order to build a reputation for quality. Bias emerges in our model even though it can make all market participants worse off. The model predicts that bias will be less severe when consumers receive independent evidence on the true state of the world, and that competition between independently owned news outlets can reduce bias. We present a variety of empirical evidence consistent with these predictions.
Handle: RePEc:nbr:nberwo:11664
Template-Type: ReDIF-Paper 1.0
Title: Tax Reform and Environmental Taxation
Classification-JEL: H2; Q4; Q5
Author-Name: Gilbert E. Metcalf
Note: PE EEE
Number: 11665
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11665
File-URL: http://www.nber.org/papers/w11665.pdf
File-Format: application/pdf
Abstract: I measure the industry impacts of an environmental tax reform where a carbon tax is used to finance full or partial corporate tax integration. I find that the industry impacts of such a reform are likely to be modest (in the sense of impacts on returns on equity).
Handle: RePEc:nbr:nberwo:11665
Template-Type: ReDIF-Paper 1.0
Title: Pillar 1 vs. Pillar 2 Under Risk Management
Classification-JEL: G21; G28
Author-Name: Loriana Pelizzon
Author-Person: ppe207
Author-Name: Stephen Schaefer
Note: AP ME
Number: 11666
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11666
File-URL: http://www.nber.org/papers/w11666.pdf
File-Format: application/pdf
Publication-Status: published as Loriana Pelizzon & Stephen Schaefer, 2007. "Pillar 1 versus Pillar 2 under Risk Management," NBER Chapters, in: The Risks of Financial Institutions, pages 377-416 National Bureau of Economic Research, Inc.
Abstract: Under the New Basel Accord bank capital adequacy rules (Pillar 1) are substantially revised but the introduction of two new "Pillars" is, perhaps, of even greater significance. This paper focuses on Pillar 2 which expands the range of instruments available to the regulator when intervening with banks that are capital inadequate and investigates the complementarity between Pillar 1 (risk-based capital requirements) and Pillar 2. In particular, the paper focuses on the role of closure rules when recapitalization is costly. In the model banks are able to manage their portfolios dynamically and their decisions on recapitalization and capital structure are determined endogenously. A feature of our approach is to consider the costs as well as the benefits of capital regulation and to accommodate the behavioral response of banks in terms of their portfolio strategy and capital structure. The paper argues that problems of capital adequacy are minor unless, in at least some states of the world, banks are able to violate the capital adequacy rules. The paper shows how the role of Pillar 2 depends on the effectiveness of capital regulation, i.e., the extent to which banks can "cheat".
Handle: RePEc:nbr:nberwo:11666
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Joint and Several Liability Under Superfund on Brownfields
Classification-JEL: Q5; K32; R3
Author-Name: Howard F. Chang
Author-Name: Hilary Sigman
Author-Person: psi55
Note: LE PE EEE
Number: 11667
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11667
File-URL: http://www.nber.org/papers/w11667.pdf
File-Format: application/pdf
Publication-Status: published as Chang, Howard F. & Sigman, Hilary, 2007. "The effect of joint and several liability under superfund on brownfields," International Review of Law and Economics, Elsevier, vol. 27(4), pages 363-384, December.
Abstract: In response to claims that the threat of environmental liability under the Superfund law deters the acquisition of potentially contaminated sites (or "brownfields") for redevelopment, the federal government has adopted programs to protect purchasers from liability. This protection may be unwarranted, however, if sellers can simply adjust property prices downward to compensate buyers for this liability. We present a model of joint and several liability under Superfund that allows us to distinguish four different reasons that this liability may discourage the purchase of brownfields. The previous literature has overlooked the effects that we identify, which all arise because a sale may increase the number of defendants in a suit to recover cleanup costs. Our analysis suggests that the brownfields problem may be more widespread than one might infer from the prior literature. Furthermore, the effects that we identify may distort not only the incentives to sell property subject to Superfund liability but also any decision of any party subject to any joint and several liability if that decision could affect the number of other defendants liable for the same harm.
Handle: RePEc:nbr:nberwo:11667
Template-Type: ReDIF-Paper 1.0
Title: Will China Eat Our Lunch or Take Us Out to Dinner? Simulating the Transition Paths of the U.S., EU, Japan, and China
Classification-JEL: E2; E4; H2; H3; H5; H6; J1
Author-Name: Hans Fehr
Author-Person: pfe183
Author-Name: Sabine Jokisch
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Note: EFG IFM ITI
Number: 11668
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11668
File-URL: http://www.nber.org/papers/w11668.pdf
File-Format: application/pdf
Publication-Status: published as Will China Eat Our Lunch or Take Us to Dinner? Simulating the Transition Paths of the United States, the European Union, Japan, and China, Hans Fehr, Sabine Jokisch, Laurence J. Kotlikoff. in Fiscal Policy and Management in East Asia, Ito and Rose. 2007
Abstract: This paper develops a dynamic, life-cycle, general equilibrium model to study the interdependent demographic, fiscal, and economic transition paths of China, Japan, the U.S., and the EU. Each of these countries/regions is entering a period of rapid and significant aging requiring major fiscal adjustments. In previous studies that excluded China we predicted that tax hikes needed to pay benefits along the developed world's demographic transition would lead to capital shortage, reducing real wages per unit of human capital. Adding China to the model dramatically alters this prediction. Even though China is aging rapidly, its saving behavior, growth rate, and fiscal policies are very different from those of developed countries. If this continues to be the case, the model's long run looks much brighter. China eventually becomes the world's saver and, thereby, the developed world's savoir with respect to its long-run supply of capital and long-run general equilibrium prospects. And, rather than seeing the real wage per unit of human capital fall, the West and Japan see it rise by one fifth by 2030 and by three fifths by 2100. These wage increases are over and above those associated with technical progress.
Handle: RePEc:nbr:nberwo:11668
Template-Type: ReDIF-Paper 1.0
Title: The End of Large Current Account Deficits, 1970-2002: Are There Lessons for the United States?
Classification-JEL: F02; F43; O11
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: EFG IFM ME
Number: 11669
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11669
File-URL: http://www.nber.org/papers/w11669.pdf
File-Format: application/pdf
Publication-Status: published as Sebastian Edwards, 2005. "The end of large current account deficits : 1970-2002 : are there lessons for the United States?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 205-268.
Abstract: The future of the U.S. current account -- and thus of the U.S. dollar -- depend on whether foreign investors will continue to add U.S. assets to their investment portfolios. However, even under optimistic scenarios, the U.S. current account deficit is likely to go through a significant reversal at some point in time. This adjustment may be as large of 4% to 5% of GDP. In order to have an idea of the possible consequences of this type of adjustment, I have analyzed the international evidence on current account reversals using both non-parametric techniques as well as panel regressions. The results from this empirical investigation indicate that major current account reversals have tended to result in large declines in GDP growth. I also analyze the large U.S. current account adjustment of 1987-1991.
Handle: RePEc:nbr:nberwo:11669
Template-Type: ReDIF-Paper 1.0
Title: Expanding School Enrollment by Subsidizing Private Schools: Lessons from Bogotá
Classification-JEL: I2
Author-Name: Claudia Uribe
Author-Name: Richard J. Murnane
Author-Person: pmu87
Author-Name: John B. Willett
Author-Name: Marie Andrée Somers
Note: ED
Number: 11670
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11670
File-URL: http://www.nber.org/papers/w11670.pdf
File-Format: application/pdf
Publication-Status: published as Uribe, Claudia, Richard J. Murnane, John B. Willett, and Marie-Andrée Somers. "Expanding School Enrollment by Subsidizing Private Schools: Lessons from Bogotá." Comparative Education Review 50, 2 (2006).
Abstract: Many countries use tax revenues to subsidize private schools. Whether these policies meet social objectives depends, in part, on the relative quality of education provided by the two types of schools. We use data on elementary school students and their teachers in Bogotá, Colombia to examine difference in resource mixes and differences in the relative effectiveness of public and private schools. We find that, on average, the schools in the two sectors are equally effective. However, they produce education using very different resource combinations. Moreover, there are large differences in the effectiveness of schools in both sectors, especially in the private sector. The results of our analysis shed light on the quantity-quality tradeoff that governments in many developing countries face in deciding how to use scarce educational resources.
Handle: RePEc:nbr:nberwo:11670
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Efficiency of an FCC Spectrum Auction
Classification-JEL: L0; L5; C1
Author-Name: Patrick Bajari
Author-Name: Jeremy T. Fox
Author-Person: pfo144
Note: IO
Number: 11671
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11671
File-URL: http://www.nber.org/papers/w11671.pdf
File-Format: application/pdf
Publication-Status: published as Jeremy T. Fox & Patrick Bajari, 2013. "Measuring the Efficiency of an FCC Spectrum Auction," American Economic Journal: Microeconomics, American Economic Association, vol. 5(1), pages 100-146, February.
Abstract: FCC spectrum auctions sell licenses to provide mobile phone service in designated geographic territories. We propose a method to structurally estimate the deterministic component of bidder valuations and apply it to the 1995-1996 C-block auction. We base our estimation of bidder values on a pairwise stability condition, which implies that two bidders cannot exchange licenses in a way that increases total surplus. Pairwise stability holds in many theoretical models of simultaneous ascending auctions, including some models of intimidatory collusion and demand reduction. Pairwise stability is also approximately satisfied in data that we examine from economic experiments. The lack of post-auction resale also suggests pairwise stability. Using our estimates of deterministic valuations, we measure the allocative efficiency of the C-block outcome.
Handle: RePEc:nbr:nberwo:11671
Template-Type: ReDIF-Paper 1.0
Title: Rethinking the Gains from Immigration: Theory and Evidence from the U.S.
Classification-JEL: F22; J61; J31; R13
Author-Name: Gianmarco I.P. Ottaviano
Author-Person: pot15
Author-Name: Giovanni Peri
Author-Person: ppe210
Note: ITI LS
Number: 11672
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11672
File-URL: http://www.nber.org/papers/w11672.pdf
File-Format: application/pdf
Abstract: Recent influential empirical work has emphasized the negative impact immigrants have on the wages of U.S.-born workers, arguing that immigration harms less educated American workers in particular and all U.S.-born workers in general. Because U.S. and foreign born workers belong to different skill groups that are imperfectly substitutable, one needs to articulate a production function that aggregates different types of labor (and accounts for complementarity and substitution effects) in order to calculate the various effects of immigrant labor on U.S.-born labor. We introduce such a production function, making the crucial assumption that U.S. and foreign-born workers with similar education and experience levels may nevertheless be imperfectly substitutable, and allowing for endogenous capital accumulation. This function successfully accounts for the negative impact of the relative skill levels of immigrants on the relative wages of U.S. workers. However, contrary to the findings of previous literature, overall immigration generates a large positive effect on the average wages of U.S.-born workers. We show evidence of this positive effect by estimating the impact of immigration on both average wages and housing values across U.S. metropolitan areas (1970-2000). We also reproduce this positive effect by simulating the behavior of average wages and housing prices in an open city-economy, with optimizing U.S.-born agents who respond to an inflow of foreign-born workers of the size and composition comparable to the immigration of the 1990s.
Handle: RePEc:nbr:nberwo:11672
Template-Type: ReDIF-Paper 1.0
Title: Estimation and Identification of Merger Effects: An Application to Hospital Mergers
Classification-JEL: I1; D4; L0
Author-Name: Leemore S. Dafny
Note: EH IO
Number: 11673
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11673
File-URL: http://www.nber.org/papers/w11673.pdf
File-Format: application/pdf
Publication-Status: published as Leemore Dafny, 2009. "Estimation and Identification of Merger Effects: An Application to Hospital Mergers," The Journal of Law and Economics, vol 52(3), pages 523-550.
Abstract: Advances in structural demand estimation have substantially improved economists' ability to forecast the impact of mergers. However, these models rely on extensive assumptions about consumer choice and firm objectives, and ultimately observational methods are needed to test their validity. Observational studies, in turn, suffer from selection problems arising from the fact that merging entities differ from non-merging entities in unobserved ways. To obtain an accurate estimate of the effect of consummated mergers, I propose a combination of rival analysis and instrumental variables. By focusing on the effect of a merger on the behavior of rival firms, and instrumenting for these mergers, unbiased estimates of the effect of a merger on market outcomes can be obtained. Using this methodology, I evaluate the impact of independent hospital mergers between 1989 and 1996 on rivals' prices. I find sharp increases in rivals' prices following a merger, with the greatest effect on the closest rivals. The results for this industry are more consistent with predictions from structural models than with prior observational estimates.
Handle: RePEc:nbr:nberwo:11673
Template-Type: ReDIF-Paper 1.0
Title: Minorities and Storable Votes
Classification-JEL: C9; D7; H1; K19
Author-Name: Alessandra Casella
Author-Person: pca496
Author-Name: Thomas Palfrey
Author-Person: ppa1164
Author-Name: Raymond Riezman
Author-Person: pri43
Note: ME PE
Number: 11674
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11674
File-URL: http://www.nber.org/papers/w11674.pdf
File-Format: application/pdf
Publication-Status: published as Casella, Alessandra & Palfrey, Thomas & Riezman, Raymond, 2008. "Minorities and Storable Votes," International Quarterly Journal of Political Science, now publishers, vol. 3(2), pages 165-200, July.
Abstract: The paper studies a simple voting system that has the potential to increase the power of minorities without sacrificing aggregate efficiency. Storable votes grant each voter a stock of votes to spend as desidered over a series of binary decisions. By cumulating votes on issues that it deems most important, the minority can win occasionally. But because the majority typically can outvote it, the minority wins only of its strength of preferences is high and the majority's strength of preferences is low. The result is that aggregate efficiency either falls little or in fact rises. The theoretical predictions are confirmed by a series of experiments: the frequency of minority victories, the relative payoff of the minority versus the majority, and the aggregate payoffs all match the theory.
Handle: RePEc:nbr:nberwo:11674
Template-Type: ReDIF-Paper 1.0
Title: Fractional Treatment Rules for Social Diversification of Indivisible Private Risks
Classification-JEL: D7; H0
Author-Name: Charles F. Manski
Author-Person: pma111
Note: PE
Number: 11675
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11675
File-URL: http://www.nber.org/papers/w11675.pdf
File-Format: application/pdf
Abstract: Should a social planner treat observationally identical persons identically? This paper shows that uniform treatment is not necessarily desirable when a planner has only partial knowledge of treatment response. Then there may be reason to implement a fractional treatment rule, with positive fractions of the observationally identical persons receiving different treatments. The planning problems studied here share some important features: treatment is individualistic, social welfare is a strictly increasing function of a population mean outcome, and outcomes depend on an unknown state of nature. They differ in the information that the planner has about the state of nature and in how he uses this information to make treatment choices. In particular, I compare treatment choice using Bayes rules and the minimax-regret criterion. Following the analysis, I put aside the literal notion of a planner who makes decisions on behalf of society and consider the feasibility of implementing fractional treatment rules in functioning democracies.
Handle: RePEc:nbr:nberwo:11675
Template-Type: ReDIF-Paper 1.0
Title: Price Discrimination, Copyright Law, and Technological Innovation: Evidence from the Introduction of DVDs
Classification-JEL: L0; O3
Author-Name: Julie Holland Mortimer
Author-Person: pmo678
Note: IO
Number: 11676
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11676
File-URL: http://www.nber.org/papers/w11676.pdf
File-Format: application/pdf
Publication-Status: published as Mortimer, Julie Holland. "Price Discrimination, Copyright Law, and Technological Innovation: Evidence from the Introduction of DVDs." Quarterly Journal of Economics 122, 3 (August 2007): 1307-50.
Abstract: This paper examines the welfare effects of intellectual property protection, accounting for firms' optimal responses to legal environments and technological innovation. I examine firms' use of indirect price discrimination in response to U.S. copyright law, which effectively prevents direct price discrimination. Using data covering VHS and DVD movie distribution, I explain studios' optimal pricing strategies under U.S. copyright law, and determine optimal pricing strategies under E.U. copyright law, which allows for direct price discrimination. I analyze these optimal pricing strategies for both the existing VHS technology and the new digital DVD technology. I find that studios' use of indirect price discrimination under US copyright law benefits consumers and harms retailers. Optimal pricing under E.U. copyright law also tends to benefit studios and consumers. I also reanalyze these issues assuming continued DVD adoption.
Handle: RePEc:nbr:nberwo:11676
Template-Type: ReDIF-Paper 1.0
Title: Health Risk, Income, and Employment-Based Health Insurance
Classification-JEL: I1
Author-Name: M. Kate Bundorf
Author-Name: Bradley Herring
Author-Person: phe204
Author-Name: Mark Pauly
Note: EH PE
Number: 11677
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11677
File-URL: http://www.nber.org/papers/w11677.pdf
File-Format: application/pdf
Publication-Status: published as M. Kate Bundorf & Bradley Herring & Mark V. Pauly, 2010. "Health Risk, Income, and Employment-Based Health Insurance," Forum for Health Economics & Policy, Berkeley Electronic Press, vol. 13(2).
Abstract: While many believe that an individual's health plays an important role in both their willingness and ability to obtain health insurance in the employment-based setting, relatively little agreement exists on the extent to which health status affects coverage rates, particularly for those with lower incomes. In this paper, we examine the relationship between health risk and the purchase of group health insurance and whether that relationship differs by a person's income and whether they obtain coverage in the small, medium, or large group market. Using the panel component of the 1996-2002 Medical Expenditure Panel Survey (MEPS), we find that health risk is positively associated with private health insurance across the different markets, and that this positive relationship is stronger for low and middle income people, particularly in the large group market. Our results are consistent with the existence of adverse selection in the group market in the form of low rates of coverage among low risks due to an absence of risk rating of premiums. We conclude that pooled premiums for low risks, particularly those with low incomes, may represent a more important financial barrier to coverage in voluntary group insurance than high premiums for high risks.
Handle: RePEc:nbr:nberwo:11677
Template-Type: ReDIF-Paper 1.0
Title: Job Loss, Job Finding, and Unemployment in the U.S. Economy Over the Past Fifty Years
Classification-JEL: E24; J64
Author-Name: Robert E. Hall
Note: EFG LS
Number: 11678
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11678
File-URL: http://www.nber.org/papers/w11678.pdf
File-Format: application/pdf
Publication-Status: published as Hall, Robert E. “Job Loss, Job Finding, and Unemployment in the U.S. Economy over the Past Fifty Years.” NBER Macroeconomics Annual (2005): 101-137.
Publication-Status: published as Robert E. Hall, 2005. "Job Loss, Job Finding, and Unemployment in the U.S. Economy over the Past Fifty Years," NBER Macroeconomics Annual, vol 20, pages 101-137.
Abstract: New data compel a new view of events in the labor market during a recession. Unemployment rises almost entirely because jobs become harder to find. Recessions involve little increase in the flow of workers out of jobs. Another important finding from new data is that a large fraction of workers departing jobs move to new jobs without intervening unemployment. I develop estimates of separation rates and job-finding rates for the past 50 years, using historical data informed by detailed recent data. The separation rate is nearly constant while the job-finding rate shows high volatility at business-cycle and lower frequencies. I review modern theories of fluctuations in the job-finding rate. The challenge to these theories is to identify mechanisms in the labor market that amplify small changes in driving forces into fluctuations in the job-finding rate of the high magnitude actually observed. In the standard theory developed over the past two decades, the wage moves to offset driving forces and the predicted magnitude of changes in the job-finding rate is tiny. New models overcome this property by invoking a new form of sticky wages or by introducing information and other frictions into the employment relationship.
Handle: RePEc:nbr:nberwo:11678
Template-Type: ReDIF-Paper 1.0
Title: The Climate for Business Development and Employment Growth in Puerto Rico
Classification-JEL: J21; J23; D73; O54
Author-Name: Steven J. Davis
Author-Person: pda15
Author-Name: Luis Rivera-Batiz
Note: EFG LS
Number: 11679
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11679
File-URL: http://www.nber.org/papers/w11679.pdf
File-Format: application/pdf
Publication-Status: published as Collins, Susan M., Barry Bosworth, and Miguel A. Soto-Class(eds.) The Economy of Puerto Rico. Brookings Institution Press and Center for the New Economy, 2006.
Abstract: Employment rates in Puerto Rico range from 55 to 65 percent of U.S. rates during the past thirty years. This huge employment shortfall holds for men and women, cuts across all education groups, and is deeper for persons without a college degree. The shortfall is concentrated in the private sector, especially labor-intensive industries that rely heavily on less educated workers. Motivated by these facts, we identify several factors that undermine employment growth and business development, including high minimum wage requirements, a history of tax incentives for capital-intensive activities, a host of regulatory entry barriers, and a business climate in which profitability and survival too often rest on the ability to secure favors from the government,. We pay close attention to the permitting process whereby the government oversees and regulates construction and real estate development projects, the commercial use of equipment and facilities, and the periodic renewal of various business licenses. Based on interviews with experts and participants in the permitting process, and supplemented by other sources, we compile evidence that the permitting process is excessively slow and costly, fraught with uncertainty, subject to capricious outcomes, susceptible to corruption, and prone to manipulation by business rivals and special interest groups.
Handle: RePEc:nbr:nberwo:11679
Template-Type: ReDIF-Paper 1.0
Title: Saving Incentives for Low- and Middle-Income Families: Evidence from a Field Experiment with H&R Block
Classification-JEL: H0; H3
Author-Name: Esther Duflo
Author-Person: pdu166
Author-Name: William Gale
Author-Person: pga40
Author-Name: Jeffrey Liebman
Author-Person: pli184
Author-Name: Peter Orszag
Author-Person: por201
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE AG
Number: 11680
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11680
File-URL: http://www.nber.org/papers/w11680.pdf
File-Format: application/pdf
Publication-Status: published as Esther Duflo & William Gale & Jeffrey Liebman & Peter Orszag & Emmanuel Saez, 2006. "Saving Incentives for Low- and Middle-Income Families: Evidence from a Field Experiment with H&R Block," The Quarterly Journal of Economics, MIT Press, vol. 121(4), pages 1311-1346, November.
Abstract: This paper analyzes the effects of a large randomized field experiment carried out with H&R Block, offering matching incentives for IRA contributions at the time of tax preparation. About 14,000 H&R Block clients, across 60 offices in predominantly low- and middle-income neighborhoods in St. Louis, were randomly offered a 20 percent match on IRA contributions, a 50 percent match, or no match (the control group). The evaluation generates two main findings. First, higher match rates significantly raise IRA participation and contributions. Take-up rates were 3 percent for the control group, 8 percent in the 20 percent match group, and 14 percent in the 50 percent match group. Average IRA contributions (including non-contributors, excluding the match) for the 20 percent and 50 percent match groups were 4 and 7 times higher than in the control group, respectively. Second, several additional findings are inconsistent with the full information, rational-saver model. In particular, we find much more modest effects on take-up and amounts contributed from the existing Saver's Credit, which provides an effective match for retirement saving contributions through the tax code; we suspect that the differences may reflect the complexity of the Saver's Credit as enacted, and the way in which its effective match is presented. Taken together, our results suggest that the combination of a clear and understandable match for saving, easily accessible savings vehicles, the opportunity to use part of an income tax refund to save, and professional assistance could generate a significant increase in contributions to retirement accounts, including among middle- and low-income households.
Handle: RePEc:nbr:nberwo:11680
Template-Type: ReDIF-Paper 1.0
Title: Poverty in America: Trends and Explanations
Classification-JEL: I32; I38; J21
Author-Name: Hilary Hoynes
Author-Person: pho278
Author-Name: Marianne Page
Author-Person: ppa539
Author-Name: Ann Stevens
Author-Person: pst180
Note: LS PE
Number: 11681
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11681
File-URL: http://www.nber.org/papers/w11681.pdf
File-Format: application/pdf
Publication-Status: published as Hoynes, Hilary W., Marianne E. Page and Ann Huff Stevens. "Poverty In America: Trends and Explanations," Journal of Economic Perspectives, 2006, v20(1,Winter), 47-68.
Abstract: Despite robust growth in real per capita GDP over the last three decades, the U.S. poverty rate has changed very little. In an effort to better understand this disconnect, we document and quantify the relationship between poverty and four different factors that may affect poverty and its evolution over time: labor market opportunities, family structure, anti-poverty programs, and immigration. We find that the relationship between the macro-economy and poverty has weakened over time. Nevertheless, changes in labor market opportunities predict changes in the poverty rate rather well. We also find that changes in female labor supply should have reduced poverty, but was counteracted by an increase in the rate of female headship. Changes in the number and composition of immigrants and changes in the generosity of anti-poverty programs seem to have had little effect.
Handle: RePEc:nbr:nberwo:11681
Template-Type: ReDIF-Paper 1.0
Title: Markov Forecasting Methods for Welfare Caseloads
Classification-JEL: I3
Author-Name: Jeffrey Grogger
Author-Person: pgr125
Note: LS PE
Number: 11682
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11682
File-URL: http://www.nber.org/papers/w11682.pdf
File-Format: application/pdf
Publication-Status: published as Grogger, Jeffrey, 2007. "Markov forecasting methods for welfare caseloads," Children and Youth Services Review, Elsevier, vol. 29(7), pages 900-911, July.
Abstract: Forecasting welfare caseloads, particularly turning points, has become more important than ever. Since welfare reform, welfare has been funded via a block grant, which means that unforeseen changes in caseloads can have important fiscal implications for states. In this paper I develop forecasts based on the theory of Markov chains. Since today's caseload is a function of the past caseload, the caseload exhibits inertia. The method exploits that inertia, basing forecasts of the future caseload on past functions of entry and exit rates. In an application to California welfare data, the method accurately predicted the late-2003 turning point roughly one year in advance.
Handle: RePEc:nbr:nberwo:11682
Template-Type: ReDIF-Paper 1.0
Title: Investor Inattention, Firm Reaction, and Friday Earnings Announcements
Classification-JEL: G1; G3; J0
Author-Name: Stefano DellaVigna
Author-Person: pde710
Author-Name: Joshua Pollet
Note: AP
Number: 11683
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11683
File-URL: http://www.nber.org/papers/w11683.pdf
File-Format: application/pdf
Publication-Status: published as DellaVigna, Stefano and Joshua Pollet. “Investor Inattention and Friday Earnings Announcements.” Journal of Finance 64 (April 2009): 709-749.
Abstract: Do firms release news strategically in response to investor inattention? We consider news about earnings and analyze the response of returns to announcements on Friday and other weekdays. Friday announcements have less immediate and more delayed stock return response. The delayed response as a percentage of the total response is 60 percent on Friday and 40 percent on other weekdays. In addition, abnormal trading volume around announcement day is 10 percent lower for Friday announcements. These findings suggest that weekends distract investor attention temporarily. They support explanations of post-earning announcement drift based on underreaction to information caused by limited attention. We also document that firms release worse announcements on Friday. Friday announcements are associated with a 45 percent higher probability of a negative earnings surprise and a 50 basis points lower abnormal return. The firm-based evidence of strategic news release corroborates the investor-based evidence of inattention on Friday. The results for stock returns, volume, and strategic behavior support the hypothesis of limited attention.
Handle: RePEc:nbr:nberwo:11683
Template-Type: ReDIF-Paper 1.0
Title: The Labor Market and Macro Volatility: A Nonstationary General-Equilibrium Analysis
Classification-JEL: E24; E52
Author-Name: Robert E. Hall
Note: EFG LS
Number: 11684
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11684
File-URL: http://www.nber.org/papers/w11684.pdf
File-Format: application/pdf
Publication-Status: published as Robert E. Hall, 2006. "The labor market and macro volatility: a nonstationary general-equilibrium analysis," Proceedings, Federal Reserve Bank of San Francisco.
Abstract: The evolution of the aggregate labor market is far from smooth. I investigate the success of a macro model in replicating the observed levels of volatility of unemployment and other key variables. I take variations in productivity growth and in exogenous product demand (government purchases plus net exports) as the primary exogenous sources of fluctuations. The macro model embodies new ideas about the labor market, all based on equilibrium - the models I consider do not rest on inefficiency in the use of labor caused by an inappropriate wage. I find that non-standard features of the labor market are essential for understanding the volatility of unemployment. These models include simple equilibrium wage stickiness, where the sticky wage is an equilibrium selection rule. A second model based on modern bargaining theory delivers a different kind of stickiness and has a unique equilibrium. A third model posits fluctuations in matching efficiency that may arise from variations over time in the information about prospective jobs among job-seekers. Reasonable calibrations of each of the three models match the observed volatility of unemployment.
Handle: RePEc:nbr:nberwo:11684
Template-Type: ReDIF-Paper 1.0
Title: The Risk-Adjusted Cost of Financial Distress
Classification-JEL: G31
Author-Name: Heitor Almeida
Author-Name: Thomas Philippon
Author-Person: pph81
Note: CF
Number: 11685
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11685
File-URL: http://www.nber.org/papers/w11685.pdf
File-Format: application/pdf
Publication-Status: published as Heitor Almeida and Thomas Philippon "The Risk-Adjusted Cost of Financial Distress" The Journal of Finance, Volume 62: Issue 6 (2007)
Abstract: In this paper we argue that risk-adjustment matters for the valuation of financial distress costs, since financial distress is more likely to happen in bad times. Systematic distress risk implies that the risk-adjusted probability of financial distress is larger than the historical probability. Alternatively, the correct valuation of distress costs should use a discount rate that is lower than the risk free rate. We derive a formula for the valuation of distress costs, and propose two strategies to implement it. The first strategy uses corporate bond spreads to derive risk-adjusted probabilities of financial distress. The second strategy estimates the risk adjustment directly from historical data on distress probabilities, using several established asset pricing models. In both cases, we find that exposure to systematic risk increases the NPV of financial distress costs. In addition, the magnitude of the risk-adjustment can be very large, suggesting that a valuation of distress costs that ignores systematic risk significantly underestimates their true present value. Finally, we show that marginal distress costs computed using our new formula can be large enough to balance the marginal tax benefits of debt derived by Graham (2000), and we conclude that systematic distress risk can help explain why firms appear rather conservative in their use of debt.
Handle: RePEc:nbr:nberwo:11685
Template-Type: ReDIF-Paper 1.0
Title: Who Bears the Corporate Tax? A review of What We Know
Classification-JEL: H22; H25
Author-Name: Alan J. Auerbach
Author-Person: pau33
Note: PE
Number: 11686
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11686
File-URL: http://www.nber.org/papers/w11686.pdf
File-Format: application/pdf
Publication-Status: published as Who Bears the Corporate Tax? A Review of What We Know , Alan J. Auerbach. in Tax Policy and the Economy, Volume 20, Poterba. 2006
Abstract: This paper reviews what we know from economic theory and evidence about who bears the burden of the corporate income tax. Among the lessons from the recent literature are: 1. For a variety of reasons, shareholders may bear a certain portion of the corporate tax burden. In the short run, they may be unable to shift taxes on corporate capital. Even in the long run, they may be unable to shift taxes attributable to a discount on "old" capital, taxes on rents, or taxes that simply reduce the advantages of corporate ownership. Thus, the distribution of share ownership remains empirically quite relevant to corporate tax incidence analysis, though attributing ownership is itself a challenging exercise. 2. One-dimensional incidence analysis -- distributing the corporate tax burden over a representative cross-section of the population -- can be relatively uninformative about who bears the corporate tax burden, because it misses the element timing. 3. It is more meaningful to analyze the incidence of corporate tax changes than of the corporate tax in its entirety, because different components of the tax have different incidence and incidence relates to the path of the economy over time, not just in a single year.
Handle: RePEc:nbr:nberwo:11686
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Hedging and the Yield Curve
Classification-JEL: E4; E6; G1
Author-Name: Hanno Lustig
Author-Person: plu17
Author-Name: Christopher Sleet
Author-Name: Sevin Yeltekin
Author-Person: pye128
Note: EFG ME AP PE
Number: 11687
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11687
File-URL: http://www.nber.org/papers/w11687.pdf
File-Format: application/pdf
Publication-Status: published as Lustig, Hanno, Chris Sleet, and Sevin Yeltekin. "Fiscal Hedging with Nominal Assets." Journal of Monetary Economics 55, 4(2008).
Abstract: We identify a novel, fiscal hedging motive that helps to explain why governments issue more expensive, long-term debt. We analyze optimal fiscal policy in an economy with distortionary labor income taxes, nominal rigidities and nominal debt of various maturities. The government in our model can smooth labor tax rates by changing the real return it pays on its outstanding liabilities. These changes require state contingent inflation or adjustments in the nominal term structure. In the presence of nominal pricing rigidities and a cash in advance constraint, these changes are themselves distortionary. We show that long term nominal debt can help a government hedge fiscal shocks by spreading out and delaying the distortions associated with increases in nominal interest rates over the maturity of the outstanding long-term debt. After a positive spending shock, the government raises the yield curve and steepens it.
Handle: RePEc:nbr:nberwo:11687
Template-Type: ReDIF-Paper 1.0
Title: Airplanes and Comparative Advantage
Classification-JEL: F1
Author-Name: James Harrigan
Author-Person: pha151
Note: ITI
Number: 11688
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11688
File-URL: http://www.nber.org/papers/w11688.pdf
File-Format: application/pdf
Publication-Status: published as Harrigan, James, 2010. "Airplanes and comparative advantage," Journal of International Economics, Elsevier, vol. 82(2), pages 181-194, November.
Abstract: Airplanes are a fast but expensive means of shipping goods, a fact which has implications for comparative advantage. The paper develops a Ricardian model with a continuum of goods which vary by weight and hence transport cost. Comparative advantage depends on relative air and surface transport costs across countries and goods, as well as stochastic productivity. A key testable implication is that the U.S. should import heavier goods from nearby countries, and lighter goods from faraway counties. This implications is tested using detailed data on U.S. imports from 1990 to 2003. Looking across goods the U.S. imports, nearby exporters have lower market share in goods that the rest of the world ships by air. Looking across exporters for individual goods, distance from the US is associated with much higher import unit values. These effects are large, which establishes that the model identifies an important influence on specialization and trade.
Handle: RePEc:nbr:nberwo:11688
Template-Type: ReDIF-Paper 1.0
Title: Liquidity and Insurance for the Unemployed
Classification-JEL: D82; J65
Author-Name: Robert Shimer
Author-Person: psh9
Author-Name: Ivan Werning
Author-Person: pwe141
Note: EFG LS PE
Number: 11689
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11689
File-URL: http://www.nber.org/papers/w11689.pdf
File-Format: application/pdf
Publication-Status: published as Shimer, Robert and Ivan Werning. “Liquidity and Insurance for the Unemployed.” American Economic Review 98, 5 (2008): 1922–1942.
Abstract: We study the optimal design of unemployment insurance for workers sampling job opportunities over time. We focus on the timing of benefits and the desirability of allowing workers to freely access a riskless asset. When workers have constant absolute risk aversion preferences, a very simple policy is optimal: a constant benefit during unemployment, a constant tax during employment, and free access to savings using the riskless asset. Away from this benchmark, for constant relative risk aversion preferences, the optimal policy involves nearly constant benefits and the welfare gains from more elaborate policies are minuscule. Our results highlight two distinct roles for policy toward the unemployed: ensuring workers have sufficient liquidity to smooth their consumption; and providing unemployment subsidies that serve as insurance against the uncertain duration of unemployment spells.
Handle: RePEc:nbr:nberwo:11689
Template-Type: ReDIF-Paper 1.0
Title: Race and Health Disparities Among Seniors in Urban Areas in Brazil
Classification-JEL: J1; I1
Author-Name: Antonio J. Trujillo
Author-Name: John A. Vernon
Author-Name: Laura Rodriguez Wong
Author-Name: Gustavo Angeles
Note: EH
Number: 11690
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11690
File-URL: http://www.nber.org/papers/w11690.pdf
File-Format: application/pdf
Publication-Status: published as Trujillo, Antonio J., John A. Vernon, Laura Rodriguez Wong, and Gustavo Angeles. "Race and Health Disparities Among Seniors in Urban Areas in Brazil." Journal of Aging and Health 21, 1 (2009): 3-37.
Abstract: White seniors report better health than Black seniors in urban areas in Sao Paulo, Brazil. This is the case even after controlling for baseline health conditions and several demographic, socio-economic and family support characteristics. Furthermore, adjusted racial disparities in self-reported health are larger than the disparities found using alternative measures of functional health. Our empirical research in this paper suggests that the two most important factors driving racial disparities in health among seniors (in our sample) are historical differences in rural living conditions and current income. Present economic conditions are more relevant to racial disparities among poor seniors than among rich seniors. Moreover, racial differences in health not attributable to observable characteristics are more important when comparing individuals in the upper half of the income distribution.
Handle: RePEc:nbr:nberwo:11690
Template-Type: ReDIF-Paper 1.0
Title: Real Exchange Rate Volatility and the Price of Nontradables in Sudden-Stop-Prone Economies
Classification-JEL: F30; F41; G11
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Note: IFM
Number: 11691
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11691
File-URL: http://www.nber.org/papers/w11691.pdf
File-Format: application/pdf
Publication-Status: published as Mendoza, Enrique G. “Real Exchange Rate Volatility and the Price of Nontradables in Sudden-Stop-Prone Economies.” Economia 6, 1 (Fall 2005).
Abstract: The dominant view in the empirical literature on exchange rates is that the high variability of real exchange rates is due to movements in exchange-rate-adjusted prices of tradable goods. This paper shows that this dominant view does not hold in Mexican data for the periods in which the country had managed exchange rate regimes. Variance analysis of a 30-year sample of monthly data shows that movements in the price of nontradables relative to tradables account for up to 70 percent of the variability of the real exchange rate during these periods. The paper proposes a model in which this stylized fact, and the Sudden Stops that accompanied the collapse of Mexico's managed exchange rates, could result from an endogenous amplification mechanism operating via nontradables prices in economies with dollarized liabilities and credit constraints. The key feature of this mechanism is Irving Fisher's debt-deflation process. Numerical evaluation suggests that the Fisherian deflation effects on consumption, the current account, and relative prices dwarf those induced by the standard balance sheet effect typical of the Sudden Stops literature.
Handle: RePEc:nbr:nberwo:11691
Template-Type: ReDIF-Paper 1.0
Title: More on Unemployment and Vacancy Fluctuations
Classification-JEL: E2; G0; J0
Author-Name: Dale T. Mortensen
Author-Person: pmo42
Author-Name: Eva Nagypal
Author-Person: pna193
Note: EFG LS
Number: 11692
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11692
File-URL: http://www.nber.org/papers/w11692.pdf
File-Format: application/pdf
Publication-Status: published as Dale Mortensen & Eva Nagypal, 2007. "More on Unemployment and Vacancy Fluctuations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 327-347, July.
Abstract: Shimer (2005a) argues that the Mortensen-Pissarides equilibrium search model of unemployment explains only about 10% of the response in the job-finding rate to an aggregate productivity shock. Some of the recent papers inspired by his critique are reviewed and commented on here. Specifically, we suggest that the sole problem is neither the procyclicality of the wage nor the failure to account fully for the opportunity cost of employment. Although an amended version of the model, one that accounts for capital costs and counter cyclic involuntary separations, does much better, it still explains only 40% of the observed volatility of the job-finding rate. Finally, allowing for on-the-job search does not improve the amended models implications for the amplification of productivity shocks.
Handle: RePEc:nbr:nberwo:11692
Template-Type: ReDIF-Paper 1.0
Title: Work Hours, Wages, and Vacation Leave
Classification-JEL: J2
Author-Name: Joseph G. Altonji
Author-Person: pal266
Author-Name: Emiko Usui
Author-Person: pus11
Note: LS
Number: 11693
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11693
File-URL: http://www.nber.org/papers/w11693.pdf
File-Format: application/pdf
Publication-Status: published as Joseph G. Altonji & Emiko Usui, 2007. "Work Hours, Wages, and Vacation Leave," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 60(3), pages 408-437, April.
Abstract: Using the Panel Study of Income Dynamics and the Health and Retirement Study, we provide a set of facts about vacation leave and its relationship to hours worked, hours constraints, wage rates, worker characteristics, spouse's vacation leave, labor market experience, job tenure, occupation, industry, and labor market conditions. We show that on average vacation time taken rises 1 to 1 with paid vacation but varies around it, that annual hours worked fall by about 1 full time week with every week of paid vacation, that the gap between time taken and time paid for is higher for women, union members, and government workers, that hourly wage rates have a strong positive relationship with paid vacation weeks both in the cross section and across jobs, and that nonwage compensation is positively related to vacation weeks. We provide evidence that vacation leave is determined by broad employer policy rather than by negotiation between the worker and firm. In particular, it is strongly related to job seniority but depends very little on labor market experience, and for job changers it is only weakly related to the amount of vacation on the previous job.
Handle: RePEc:nbr:nberwo:11693
Template-Type: ReDIF-Paper 1.0
Title: Measures of Per Capita Hours and their Implications for the Technology-Hours Debate
Classification-JEL: E2; E3
Author-Name: Neville Francis
Author-Name: Valerie A. Ramey
Author-Person: pra154
Note: EFG LS
Number: 11694
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11694
File-URL: http://www.nber.org/papers/w11694.pdf
File-Format: application/pdf
Publication-Status: published as Neville Francis & Valerie A. Ramey, 2009. "Measures of per Capita Hours and Their Implications for the Technology-Hours Debate," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(6), pages 1071-1097, 09.
Abstract: Structural vector autoregressions give conflicting results on the effects of technology shocks on hours. The results depend crucially on the assumed data generating process for hours per capita. We show that the standard measure of hours per capita has significant low frequency movements that are the source of the conflicting results. HP filtered hours per capita produce results consistent with the those obtained when hours are assumed to have a unit root. We provide an alternative measure of hours per capita that adjusts for low frequency movements in government employment, schooling, and the aging of the population. When the new measure is used to determine the effect of technology shocks on hours using long-run restrictions, both the levels and the difference specifications give the same answer: hours decline in the short-run in response to a positive technology shock.
Handle: RePEc:nbr:nberwo:11694
Template-Type: ReDIF-Paper 1.0
Title: Historical Financing of Small- and Medium-Sized Enterprises
Classification-JEL: G2; N2
Author-Name: Robert Cull
Author-Person: pcu60
Author-Name: Lance E. Davis
Author-Name: Naomi R. Lamoreaux
Author-Name: Jean-Laurent Rosenthal
Note: DAE
Number: 11695
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11695
File-URL: http://www.nber.org/papers/w11695.pdf
File-Format: application/pdf
Publication-Status: published as Cull, Robert & Davis, Lance E. & Lamoreaux, Naomi R. & Rosenthal, Jean-Laurent, 2006. "Historical financing of small- and medium-size enterprises," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 3017-3042, November.
Abstract: We focus on the economies of the North Atlantic Core during the nineteenth and early twentieth centuries and find that an impressive variety of local financial institutions emerged to supply the needs of SMEs wherever there was sufficient demand for their services. Although these intermediaries had significant weaknesses, they were able to tap into local information networks and so extend credit to firms that were too young or small to secure funds from large regional or national institutions. In addition, by raising the return to savings for local households, they helped to mobilize significant new resources for economic development.
Handle: RePEc:nbr:nberwo:11695
Template-Type: ReDIF-Paper 1.0
Title: Capital Flows in a Globalized World: The Role of Policies and Institutions
Classification-JEL: F21; F41; O1
Author-Name: Laura Alfaro
Author-Person: pal64
Author-Name: Sebnem Kalemli-Ozcan
Author-Person: pka37
Author-Name: Vadym Volosovych
Author-Person: pvo44
Note: IFM
Number: 11696
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11696
File-URL: http://www.nber.org/papers/w11696.pdf
File-Format: application/pdf
Publication-Status: published as Capital Flows in a Globalized World: The Role of Policies and Institutions, Laura Alfaro, Sebnem Kalemli-Ozcan, Vadym Volosovych. in Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, Edwards. 2007
Abstract: We describe the patterns of international capital flows in the period 1970 - 2000. We then examine the determinants of capital flows and capital flows volatility during this period. We find that institutional quality is an important determinant of capital flows. Historical determinants of current legal institutions have a direct effect on foreign investments. Policy plays a significant role in explaining the changes in the level of capital flows over time and their volatility.
Handle: RePEc:nbr:nberwo:11696
Template-Type: ReDIF-Paper 1.0
Title: Do Local Analysts Know More? A Cross-Country Study of the Performance of Local Analysts and Foreign Analysts
Classification-JEL: F30; G11; G14; G24
Author-Name: Kee-Hong Bae
Author-Name: Rene M. Stulz
Author-Name: Hongping Tan
Note: AP
Number: 11697
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11697
File-URL: http://www.nber.org/papers/w11697.pdf
File-Format: application/pdf
Publication-Status: published as Bae, Kee-Hong, Rene M. Stulz, and Hongping Tan. "Do local analysts know more? A cross-country study of performance of local analysts and foreign analysts." Journal of Financial Economics 88, 3 (2008): 581-606.
Abstract: This paper examines whether analysts resident in a country make more precise earnings forecasts for firms in that country than analysts who are not resident in that country. Using a sample of 32 countries, we find that there is an economically and statistically significant analyst local advantage even after controlling for firm and analyst characteristics. The importance of the local advantage is inversely related to the quality of the information provided by firms. In particular, the local advantage is high in countries where earnings are smoothed more, less information is disclosed by firms, and firm idiosyncratic information explains a smaller fraction of stock returns. The local advantage is also negatively related to market participation by foreign investors and by institutions and positively related to holdings by insiders. U.S. investors underweight a country's stocks more in their portfolios if that country has a higher analyst local advantage.
Handle: RePEc:nbr:nberwo:11697
Template-Type: ReDIF-Paper 1.0
Title: Banking System Stability: A Cross-Atlantic Perspective
Classification-JEL: G12; G28; G29; G12; C49
Author-Name: Philipp Hartmann
Author-Person: pha392
Author-Name: Stefan Straetmans
Author-Person: pst399
Author-Name: Casper G. De Vries
Author-Person: pde225
Note: AP
Number: 11698
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11698
File-URL: http://www.nber.org/papers/w11698.pdf
File-Format: application/pdf
Publication-Status: published as Banking System Stability. A Cross-Atlantic Perspective, Philipp Hartmann, Stefan Straetmans, Casper de Vries. in The Risks of Financial Institutions, Carey and Stulz. 2006
Abstract: This paper derives indicators of the severity and structure of banking system risk from asymptotic interdependencies between banks' equity prices. We use new tools available from multivariate extreme value theory to estimate individual banks' exposure to each other ("contagion risk") and to systematic risk. Moreover, by applying structural break tests to those measures we study whether capital markets indicate changes in the importance of systemic risk over time. Using data for the United States and the euro area, we can also compare banking system stability between the two largest economies in the world. Finally, for Europe we assess the relative importance of cross-border bank spillovers as compared to domestic bank spillovers. The results suggest, inter alia, that systemic risk in the US is higher than in the euro area, mainly as cross-border risks are still relatively mild in Europe. On both sides of the Atlantic systemic risk has increased during the 1990s.
Handle: RePEc:nbr:nberwo:11698
Template-Type: ReDIF-Paper 1.0
Title: The Importance of Nontradable Goods' Prices in Cyclical Real Exchange Rate Fluctuations
Classification-JEL: F31
Author-Name: Ariel Burstein
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Sergio Rebelo
Note: EFG IFM ME
Number: 11699
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11699
File-URL: http://www.nber.org/papers/w11699.pdf
File-Format: application/pdf
Publication-Status: published as Burstein, Ariel, Martin Eichenbaum and Sergio Rebelo. "The Importance Of Nontradable Goods' Prices In Cyclical Real Exchange Rate Fluctuations," Japan and the World Economy, 2006, v18(3,Aug), 247-253.
Abstract: Changes in the price of nontradable goods relative to tradable goods account for roughly 50 percent of the cyclical movements in real exchange rates.
Handle: RePEc:nbr:nberwo:11699
Template-Type: ReDIF-Paper 1.0
Title: Good bye Lenin (or not?): The Effect of Communism on People's Preferences
Classification-JEL: H3; E6
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Nichola Fuchs Schuendeln
Author-Person: pfu121
Note: PE POL
Number: 11700
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11700
File-URL: http://www.nber.org/papers/w11700.pdf
File-Format: application/pdf
Publication-Status: published as Alesina, Alberto and Nicola Fuchs-Schuendeln. “Good Bye Lenin (or not?) – The Effect of Communism on People’s Preferences.” American Economic Review 97 (September 2007): 1507-1528.
Abstract: Preferences for redistribution, as well as the generosities of welfare states, differ significantly across countries. In this paper, we test whether there exists a feedback process of the economic regime on individual preferences. We exploit the "experiment" of German separation and reunification to establish exogeneity of the economic system. From 1945 to 1990, East Germans lived under a Communist regime with heavy state intervention and extensive redistribution. We find that, after German reunification, East Germans are more in favor of redistribution and state intervention than West Germans, even after controlling for economic incentives. This effect is especially strong for older cohorts, who lived under Communism for a longer time period. We further find that East Germans' preferences converge towards those of West Germans. We calculate that it will take one to two generations for preferences to converge completely.
Handle: RePEc:nbr:nberwo:11700
Template-Type: ReDIF-Paper 1.0
Title: International Capital Flows, Returns and World Financial Integration
Classification-JEL: D52; F36; G11
Author-Name: Martin D. D. Evans
Author-Person: pev5
Author-Name: Viktoria Hnatkovska
Author-Person: phn1
Note: IFM
Number: 11701
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11701
File-URL: http://www.nber.org/papers/w11701.pdf
File-Format: application/pdf
Publication-Status: published as Evans, Martin D.D. & Hnatkovska, Viktoria V., 2014. "International capital flows, returns and world financial integration," Journal of International Economics, Elsevier, vol. 92(1), pages 14-33.
Abstract: International capital flows have increased dramatically since the 1980s, with much of the increase being due to trade in equity and debt markets. Such developments are often attributed to the increased integration of world financial markets. We present a model that allows us to examine how greater integration in world financial markets affects the behavior of international capital flows and financial returns. Our model predicts that international capital flows are large (in absolute value) and very volatile during the early stages of financial integration when international asset trading is concentrated in bonds. As integration progresses and households gain access to world equity markets, the size and volatility of international bond flows fall dramatically but continue to exceed the size and volatility of international equity flows. This is the natural outcome of greater risk sharing facilitated by increased integration. We find that the equilibrium flows in bonds and stocks are larger than their empirical counterparts, and are largely driven by variations in equity risk premia. The paper also makes a methodological contribution to the literature on dynamic general equilibrium asset-pricing. We implement a new technique for solving a dynamic general equilibrium model with production, portfolio choice and incomplete markets.
Handle: RePEc:nbr:nberwo:11701
Template-Type: ReDIF-Paper 1.0
Title: Does Head Start Improve Children's Life Chances? Evidence from a Regression Discontinuity Design
Classification-JEL: I18; I20; I38
Author-Name: Jens Ludwig
Author-Name: Douglas L. Miller
Author-Person: pmi179
Note: CH
Number: 11702
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11702
File-URL: http://www.nber.org/papers/w11702.pdf
File-Format: application/pdf
Publication-Status: published as Jens Ludwig & Douglas L Miller, 2007. "Does Head Start Improve Children's Life Chances? Evidence from a Regression Discontinuity Design," The Quarterly Journal of Economics, MIT Press, vol. 122(1), pages 159-208, 02.
Abstract: This paper exploits a new source of variation in Head Start funding to identify the program's effects on health and schooling. In 1965 the Office of Economic Opportunity (OEO) provided technical assistance to the 300 poorest counties in the U.S. to develop Head Start funding proposals. The result was a large and lasting discontinuity in Head Start funding rates at the OEO cutoff for grant-writing assistance, but no discontinuity in other forms of federal social spending. We find evidence of a large negative discontinuity at the OEO cutoff in mortality rates for children ages 5-9 from causes that could be affected by Head Start, but not for other mortality causes or birth cohorts that should not be affected by the program. We also find suggestive evidence for a positive effect of Head Start on educational attainment in both the 1990 Census, concentrated among those cohorts born late enough to have been exposed to the program, and among respondents in the National Education Longitudinal Study of 1988.
Handle: RePEc:nbr:nberwo:11702
Template-Type: ReDIF-Paper 1.0
Title: Macro Factors in Bond Risk Premia
Classification-JEL: G10; G12; E0; E4
Author-Name: Sydeny C. Ludvigson
Author-Person: plu153
Author-Name: Serena Ng
Author-Person: png6
Note: AP
Number: 11703
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11703
File-URL: http://www.nber.org/papers/w11703.pdf
File-Format: application/pdf
Publication-Status: published as Sydney C. Ludvigson & Serena Ng, 2009. "Macro Factors in Bond Risk Premia," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 22(12), pages 5027-5067, December.
Abstract: Empirical evidence suggests that excess bond returns are forecastable by financial indicators such as forward spreads and yield spreads, a violation of the expectations hypothesis based on constant risk premia. But existing evidence does not tie the forecastable variation in excess bond returns to underlying macroeconomic fundamentals, as would be expected if the forecastability were attributable to time variation in risk premia. We use the methodology of dynamic factor analysis for large datasets to investigate possible empirical linkages between forecastable variation in excess bond returns and macroeconomic fundamentals. We find that several common factors estimated from a large dataset on U.S. economic activity have important forecasting power for future excess returns on U.S. government bonds. Following Cochrane and Piazzesi (2005), we also construct single predictor state variables by forming linear combinations of either five or six estimated common factors. The single state variables forecast excess bond returns at maturities from two to five years, and do so virtually as well as an unrestricted regression model that includes each common factor as a separate predictor variable. The linear combinations we form are driven by both "real" and "inflation" macro factors, in addition to financial factors, and contain important information about one year ahead excess bond returns that is not captured by forward spreads, yield spreads, or the principal components of the yield covariance matrix.
Handle: RePEc:nbr:nberwo:11703
Template-Type: ReDIF-Paper 1.0
Title: Contraception as Development? New Evidence from Family Planning in Colombia
Classification-JEL: I12; I31; J13; N36; O12
Author-Name: Grant Miller
Note: EH CH
Number: 11704
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11704
File-URL: http://www.nber.org/papers/w11704.pdf
File-Format: application/pdf
Publication-Status: published as Grant Miller, 2010. "Contraception as Development? New Evidence from Family Planning in Colombia," The Economic Journal, vol 120(545), pages 709-736.
Abstract: There has been considerable debate in the last decade about whether or not family planning programs in developing countries reduce fertility or improve socio-economic outcomes. Despite suggestive associations, disagreement persists because the availability and use of modern contraceptives are generally determined by both supply- and demand-side factors. This paper provides new evidence on the role of contraceptive supply by exploiting the surprisingly haphazard expansion of one of the world's oldest and largest family planning organizations — PROFAMILIA of Colombia. Its findings suggest that family planning allowed Colombian women to postpone their first birth and have approximately one-half fewer children in their lifetime. Delayed first births, in turn, seem to have enabled young women to obtain more education and to work more and live independently later in life. Although family planning explains only about 10% of Colombia's fertility decline, it appears to have reduced the otherwise substantial costs of fertility control and may be among the most effective development interventions.
Handle: RePEc:nbr:nberwo:11704
Template-Type: ReDIF-Paper 1.0
Title: Does the Profit Motive Make Jack Nimble? Ownership Form and the Evolution of the U.S. Hospital Industry
Classification-JEL: I11; L11; L2; L3
Author-Name: Sujoy Chakravarty
Author-Name: Martin Gaynor
Author-Person: pga1
Author-Name: Steven Klepper
Author-Person: pkl19
Author-Name: William B. Vogt
Author-Person: pvo14
Note: EH
Number: 11705
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11705
File-URL: http://www.nber.org/papers/w11705.pdf
File-Format: application/pdf
Publication-Status: published as Sujoy Chakravarty & Martin Gaynor & Steven Klepper & William B. Vogt, 2006. "Does the profit motive make Jack nimble? Ownership form and the evolution of the US hospital industry," Health Economics, John Wiley & Sons, Ltd., vol. 15(4), pages 345-361.
Abstract: We examine the evolving structure of the U.S. hospital industry since 1970, focusing on how ownership form influences entry and exit behavior. We develop theoretical predictions based on the model of Lakdawalla and Philipson, in which for-profit and not-for-profit hospitals differ regarding their objectives and costs of capital. The model predicts for-profits would be quicker to enter and exit than not-for-profits in response to changing market conditions. We test this hypothesis using data for all U.S. hospitals from 1984 through 2000. Examining annual and regional entry and exit rates, for-profit hospitals consistently have higher entry and exit rates than not-for-profits. Econometric modeling of entry and exit rates yields similar patterns. Estimates of an ordered probit model of entry indicate that entry is more responsive to demand changes for for-profit than not-for-profit hospitals. Estimates of a discrete hazard model for exit similarly indicate that negative demand shifts increase the probability of exit more for for-profits than not-for-profits. Finally, membership in a hospital chain significantly decreases the probability of exit for for-profits, but not not-for-profits.
Handle: RePEc:nbr:nberwo:11705
Template-Type: ReDIF-Paper 1.0
Title: A Re-Examination of the Border Effect
Classification-JEL: F3; F40; F41
Author-Name: Yuriy Gorodnichenko
Author-Person: pgo175
Author-Name: Linda Tesar
Author-Person: pte111
Note: IFM
Number: 11706
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11706
File-URL: http://www.nber.org/papers/w11706.pdf
File-Format: application/pdf
Abstract: This paper reexamines the evidence on the border effect, the finding that the border drives a wedge between domestic and foreign prices. We argue that the border effect can be inflated by the volatility and persistence of the nominal exchange rate and by the cross-country heterogeneity in the distribution of within-country price differentials. We develop a simple framework to separate the border effect from these confounding factors. Using price data from Engel and Rogers (1996) and Parsley and Wei (2001), we show that after controlling for the confounding factors the border effect between the U.S. and Canada and the U.S. and Japan is negligible.
Handle: RePEc:nbr:nberwo:11706
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Cardiac Specialty Hospitals on the Cost and Quality of Medical Care
Classification-JEL: I1
Author-Name: Jason R. Barro
Author-Name: Robert S. Huckman
Author-Person: phu90
Author-Name: Daniel P. Kessler
Note: EH
Number: 11707
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11707
File-URL: http://www.nber.org/papers/w11707.pdf
File-Format: application/pdf
Publication-Status: published as Barro, Jason R. & Huckman, Robert S. & Kessler, Daniel P., 2006. "The effects of cardiac specialty hospitals on the cost and quality of medical care," Journal of Health Economics, Elsevier, vol. 25(4), pages 702-721, July.
Abstract: The recent rise of specialty hospitals -- typically for-profit firms that are at least partially owned by physicians -- has led to substantial debate about their effects on the cost and quality of care. Advocates of specialty hospitals claim they improve quality and lower cost; critics contend they concentrate on providing profitable procedures and attracting relatively healthy patients, leaving (predominantly nonprofit) general hospitals with a less-remunerative, sicker patient population. We find support for both sides of this debate. Markets experiencing entry by a cardiac specialty hospital have lower spending for cardiac care without significantly worse clinical outcomes. In markets with a specialty hospital, however, specialty hospitals tend to attract healthier patients and provide higher levels of intensive procedures than general hospitals.
Handle: RePEc:nbr:nberwo:11707
Template-Type: ReDIF-Paper 1.0
Title: Income Risk and the Benefits of Social Insurance: Evidence from Indonesia and the United States
Classification-JEL: H0
Author-Name: Raj Chetty
Author-Person: pch161
Author-Name: Adam Looney
Note: PE
Number: 11708
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11708
File-URL: http://www.nber.org/papers/w11708.pdf
File-Format: application/pdf
Publication-Status: published as Ito, T. and A. Rose. Fiscal Policy and Management in East Asia: NBER East Asia Seminar on Economics 16. Chicago: University of Chicago Press, 2007.
Publication-Status: published as Income Risk and the Benefits of Social Insurance: Evidence from Indonesia and the United States, Raj Chetty, Adam Looney. in Fiscal Policy and Management in East Asia, Ito and Rose. 2007
Abstract: This paper examines the welfare consequences of social safety nets in developing economies relative to developed economies. Using panel surveys of households in Indonesia and the United States, we find that food consumption falls by approximately ten percent when individuals become unemployed in both countries. This finding suggests that introducing a formal social insurance program would have small benefits in terms of reducing consumption fluctuations in Indonesia. However, in contrast with households in the U.S., Indonesians use costly methods such as reducing human capital investment to smooth consumption. The primary benefit of social insurance in developing countries may therefore come not from consumption smoothing itself but from reducing the use of inefficient smoothing methods.
Handle: RePEc:nbr:nberwo:11708
Template-Type: ReDIF-Paper 1.0
Title: Consumption Smoothing and the Welfare Consequences of Social Insurance in Developing Economies
Classification-JEL: H0
Author-Name: Raj Chetty
Author-Person: pch161
Author-Name: Adam Looney
Note: PE
Number: 11709
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11709
File-URL: http://www.nber.org/papers/w11709.pdf
File-Format: application/pdf
Publication-Status: published as Chetty, Raj & Looney, Adam, 2006. "Consumption smoothing and the welfare consequences of social insurance in developing economies," Journal of Public Economics, Elsevier, vol. 90(12), pages 2351-2356, December.
Abstract: Studies of risk in developing economies have focused on consumption fluctuations as a measure of the value of insurance. A common view in the literature is that the welfare costs of risk and benefits of social insurance are small if income shocks do not cause large consumption fluctuations. We present a simple model showing that this conclusion is incorrect if the consumption path is smooth because individuals are highly risk averse. Empirical studies find that many households in developing countries rely on inefficient methods to smooth consumption, suggesting that they are indeed quite risk averse. Hence, social safety nets may be valuable in low-income economies even when consumption is not very sensitive to shocks.
Handle: RePEc:nbr:nberwo:11709
Template-Type: ReDIF-Paper 1.0
Title: Job Hopping in Silicon Valley: Some Evidence Concerning the Micro-Foundations of a High Technology Cluster
Classification-JEL: R12; L63; O3; J63; J48
Author-Name: Bruce Fallick
Author-Person: pfa146
Author-Name: Charles A. Fleischmann
Author-Name: James B. Rebitzer
Author-Person: pre77
Note: LS PR
Number: 11710
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11710
File-URL: http://www.nber.org/papers/w11710.pdf
File-Format: application/pdf
Publication-Status: published as Bruce Fallick & Charles A Fleischman & James B Rebitzer, 2006. "Job-Hopping in Silicon Valley: Some Evidence Concerning the Microfoundations of a High-Technology Cluster," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 472-481, 09.
Abstract: In Silicon Valley's computer cluster, skilled employees are reported to move rapidly between competing firms. This job-hopping facilitates the reallocation of resources towards firms with superior innovations, but it also creates human capital externalities that reduce incentives to invest in new knowledge. Using a formal model of innovation we identify conditions where the innovation benefits of job-hopping exceed the costs from reduced incentives to invest in human capital. These conditions likely hold for computers, but not in most other settings. Features of state law also favor high rates of inter-firm mobility in California. Outside of California, employers can use non-compete agreements to inhibit mobility, but these agreements are unenforceable in California. Using new data on labor mobility we find higher rates of job-hopping for college-educated men in Silicon Valley's computer industry than in computer clusters located out of the state. Mobility rates in other California computer clusters are similar to Silicon Valley's, suggesting some role for state laws restricting non-compete agreements. Consistent with our model of innovation, we also find that outside of the computer industry, California's mobility rates are no higher than elsewhere.
Handle: RePEc:nbr:nberwo:11710
Template-Type: ReDIF-Paper 1.0
Title: Dams
Classification-JEL: O21; O12; H43; H23
Author-Name: Esther Duflo
Author-Person: pdu166
Author-Name: Rohini Pande
Author-Person: ppa900
Note: PE
Number: 11711
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11711
File-URL: http://www.nber.org/papers/w11711.pdf
File-Format: application/pdf
Publication-Status: published as Esther Duflo & Rohini Pande, 2007. "Dams," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 601-646, 05.
Abstract: The construction of large dams is one of the most costly and controversial forms of public infrastructure investment in developing countries, but little is known about their impact. This paper studies the productivity and distributional effects of large dams in India. To account for endogenous placement of dams we use GIS data and the fact that river gradient affects a district's suitability for dams to provide instrumental variable estimates of their impact. We find that, in a district where a dam is built, agricultural production does not increase but poverty does. In contrast, districts located downstream from the dam benefit from increased irrigation and see agricultural production increase and poverty fall. Overall, our estimates suggest that large dam construction in India is a marginally cost-effective investment with significant distributional implications, and has, in aggregate, increased poverty.
Handle: RePEc:nbr:nberwo:11711
Template-Type: ReDIF-Paper 1.0
Title: Changing Looks and Changing "Discrimination:" The Beauty of Economists
Classification-JEL: J7
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Note: LS
Number: 11712
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11712
File-URL: http://www.nber.org/papers/w11712.pdf
File-Format: application/pdf
Publication-Status: published as "Changing looks and changing 'discrimination': The beauty of economists" Economics Letters, Vol 93, 3 (December 2006), Pages 405-412
Abstract: I estimate the effects of changing an ascriptive characteristic on a market outcome while keeping the average amount of information unchanged. Taking advantage of candidates' multiple appearances in elections to office in a professional association and of the presence of different photographs accompanying the ballots, I show that exogenous increases in beauty raise a candidate's chance of success. The results support the inference that differential outcomes are inherent in agents' responses to an ascriptive characteristic and do not stem from correlations with unobserved differences in productivity-enhancing characteristics.
Handle: RePEc:nbr:nberwo:11712
Template-Type: ReDIF-Paper 1.0
Title: Monetary and Exchange Rate Policy Coordination in ASEAN 1
Classification-JEL: F33; F41; G15
Author-Name: William H. Branson
Author-Name: Conor N. Healy
Note: IFM ITI
Number: 11713
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11713
File-URL: http://www.nber.org/papers/w11713.pdf
File-Format: application/pdf
Abstract: This paper develops the basis for monetary and exchange rate coordination in Asia as part of a package of monetary integration that could support growth and poverty reduction. This could be achieved directly through coordinated exchange rate stabilization, and indirectly through the implications of this for reserve pooling and investment in an Asian development fund (ADF) and through development of the Asian bond market (ABM). Macro policy coordination could be viewed as a necessary condition for further development of both reserve pooling via the Chiang Mai Initiative (CMI) and of the ABM. The paper analyzes the trade structure of ASEAN and China in terms of both geographic sources of imports and markets for exports, and of the commodity structure of trade. The similarities of the geographic and commodity trade structures across the region are consistent with adoption of a common currency basket for stabilization, and with an argument for monetary integration across the region along the lines of Mundell (1961) on optimum currency areas. The paper constructs currency baskets and real effective exchange rates (REERs) for the countries in the region. Since their trade patterns are quite similar and their policies are already implicitly coordinated, their REERs tend to move together. This means that ASEAN and China are already moving toward integration in practical effect. Explicit movement toward coordination could support surveillance and reserve-sharing under the CMI, and release reserves to be invested in an ADF.
Handle: RePEc:nbr:nberwo:11713
Template-Type: ReDIF-Paper 1.0
Title: Review of A History of the Federal Reserve. Volume 1 (2003) by Allan H. Meltzer
Classification-JEL: E58
Author-Name: Michael D. Bordo
Author-Person: pbo243
Note: DAE ME
Number: 11714
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11714
File-URL: http://www.nber.org/papers/w11714.pdf
File-Format: application/pdf
Publication-Status: published as Bordo, Michael D., 2006. "Review of A History of the Federal Reserve. Volume I (2003) by Allan H. Meltzer," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 633-657, April.
Abstract: In this essay I distill the seven major themes in A History of the Federal Reserve which covers the Federal Reserve's record from 1914 to 1951. I conclude with a critique.
Handle: RePEc:nbr:nberwo:11714
Template-Type: ReDIF-Paper 1.0
Title: Do the Young British Artists Rule (or: Has London Stolen the Idea of Postmodern Art from New York?): Evidence from the Auction Market
Classification-JEL: J4
Author-Name: David W. Galenson
Note: LS
Number: 11715
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11715
File-URL: http://www.nber.org/papers/w11715.pdf
File-Format: application/pdf
Abstract: In recent years, some English critics have claimed that Damien Hirst and his fellow young British artists have made London the new center of the advanced art world. As Hirst reaches the age of 40, this paper uses auction results to measure the importance of the YBAs compared to their American peers. Auction prices show that the YBAs do rule over their American rivals: both Hirst and the English painter Chris Ofili have had individual works sell for more than $1 million, a level no American artist under 40 has achieved. Whether London can continue its success will depend in part on whether it can match New York's ability to attract important artists born in other countries.
Handle: RePEc:nbr:nberwo:11715
Template-Type: ReDIF-Paper 1.0
Title: A Political-Economy Theory of Trade Agreements
Classification-JEL: D72; F13
Author-Name: Giovanni Maggi
Author-Person: pma1315
Author-Name: Andres Rodriguez-Clare
Author-Person: pro372
Note: ITI
Number: 11716
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11716
File-URL: http://www.nber.org/papers/w11716.pdf
File-Format: application/pdf
Publication-Status: published as Giovanni Maggi & Andrés Rodríguez-Clare, 2007. "A Political-Economy Theory of Trade Agreements," American Economic Review, American Economic Association, vol. 97(4), pages 1374-1406, September.
Abstract: This paper presents a theory of trade agreements where "politics" play an central role. This stands in contrast with the standard theory, where even politically-motivated governments sign trade agreements only to deal with terms-of-trade externalities. We develop a model where governments may be motivated to sign a trade agreement both by the presence of standard terms-of-trade externalities and by the desire to commit vis-a-vis domestic industrial lobbies. The model is rich in implications. In particular, it predicts that trade agreements result in deeper trade liberalization when governments are more politically motivated (provided capital mobility is sufficiently high) and when capital can move more freely across sectors. Also, governments tend to prefer a commitment in the form of tariff ceilings rather than exact tariff levels. In a fully dynamic specification of the model, trade liberalization occurs in two stages: an immediate slashing of tariffs and a subsequent gradual reduction of tariffs. The immediate tariff cut is a reflection of the terms-of-trade motive for the agreement, while the domestic-commitment motive is reflected in the gradual phase of trade liberalization. Finally, the speed of trade liberalization is higher when capital is more mobile across sectors.
Handle: RePEc:nbr:nberwo:11716
Template-Type: ReDIF-Paper 1.0
Title: Foreign Direct Investment and Domestic Economic Activity
Classification-JEL: F23; F21; H25
Author-Name: Mihir A. Desai
Author-Name: C. Fritz Foley
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: CF IFM ITI PE
Number: 11717
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11717
File-URL: http://www.nber.org/papers/w11717.pdf
File-Format: application/pdf
Publication-Status: published as Desai, Mihir A., C. Fritz Foley and James R. Hines, Jr. "Foreign Direct Investment And The Domestic Capital Stock," American Economic Review, 2005, v95(2,May), 33-38.
Abstract: How does rising foreign investment influence domestic economic activity? Firms whose foreign operations grow rapidly exhibit coincident rapid growth of domestic operations, but this pattern alone is inconclusive, as foreign and domestic business activities are jointly determined. This study uses foreign GDP growth rates, interacted with lagged firm-specific geographic distributions of foreign investment, to predict changes in foreign investment by a large panel of American firms. Estimates produced using this instrument for changes in foreign activity indicate that 10% greater foreign capital investment is associated with 2.2% greater domestic investment, and that 10% greater foreign employee compensation is associated with 4.0% greater domestic employee compensation. Changes in foreign and domestic sales, assets, and numbers of employees are likewise positively associated; the evidence also indicates that greater foreign investment is associated with additional domestic exports and R&D spending. The data do not support the popular notion that greater foreign activity crowds out domestic activity by the same firms, instead suggesting the reverse.
Handle: RePEc:nbr:nberwo:11717
Template-Type: ReDIF-Paper 1.0
Title: Y2K and Offshoring: The Role of External Economies and Firm Heterogeneity
Classification-JEL: F1
Author-Name: Devashish Mitra
Author-Person: pmi161
Author-Name: Priya Ranjan
Author-Person: pra207
Note: ITI
Number: 11718
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11718
File-URL: http://www.nber.org/papers/w11718.pdf
File-Format: application/pdf
Abstract: We construct a model of offshoring with externalities and firm heterogeneity. Due to the presence of externalities, temporary shocks like the Y2K problem can have permanent effects, i.e., they can permanently raise the extent of offshoring in an industry. Also, the initial advantage of a country as a potential host for outsourcing activities can create a lock in effect, whereby late movers have a comparative disadvantage. Furthermore, the existence of firm heterogeneity along with externalities can help explain the dynamic process of offshoring, where the most productive firms offshore first and the others follow later. Finally, we show the possibility of complementarity between two modes of offshoring: FDI and offshore outsourcing.
Handle: RePEc:nbr:nberwo:11718
Template-Type: ReDIF-Paper 1.0
Title: Supply Capacity, Vertical Specialization and Tariff Rates: The Implications for Aggregate U.S. Trade Flow Equations
Classification-JEL: F12; F41
Author-Name: Menzie D. Chinn
Author-Person: pch129
Note: IFM ITI
Number: 11719
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11719
File-URL: http://www.nber.org/papers/w11719.pdf
File-Format: application/pdf
Abstract: This paper re-examines aggregate and disaggregate import and export demand functions for the United States. This re-examination is warranted because (1) income elasticities are too high to be warranted by standard theories, and (2) remain high even when it is assumed that supply factors are important. These findings suggest that the standard models omit important factors. An empirical investigation indicates that the rising importance of vertical specialization combined with decreasing tariffs rates explains some of results. Accounting for these factors yields more plausible estimates of income elasticities, as well as smaller prediction errors.
Handle: RePEc:nbr:nberwo:11719
Template-Type: ReDIF-Paper 1.0
Title: Local Public Good Provision: Voting, Peer Effects, and Mobility
Classification-JEL: H4; H7; H1; R5
Author-Name: Stephen Calabrese
Author-Person: pca1347
Author-Name: Dennis Epple
Author-Person: pep21
Author-Name: Thomas Romer
Author-Name: Holger Sieg
Note: PE
Number: 11720
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11720
File-URL: http://www.nber.org/papers/w11720.pdf
File-Format: application/pdf
Publication-Status: published as Calabrese, Stephen, Dennis Epple, Thomas Romer and Holger Sieg. "Local Public Good Provision: Voting, Peer Effects, And Mobility," Journal of Public Economics, 2006, v90(6-7,Aug), 959-981.
Abstract: Few empirical strategies have been developed that investigate public provision under majority rule while taking explicit account of the constraints implied by mobility of households. The goal of this paper is to improve our understanding of voting in local communities when neighborhood quality depends on peer or neighborhood effects. We develop a new empirical approach which allows us to impose all restrictions that arise from locational equilibrium models with myopic voting simultaneously on the data generating process. We can then analyze how close myopic models come in replicating the main regularities about expenditures, taxes, sorting by income and housing observed in the data. We find that a myopic voting model that incorporates peer effects fits all dimensions of the data reasonably well.
Handle: RePEc:nbr:nberwo:11720
Template-Type: ReDIF-Paper 1.0
Title: Training, Wages, and Sample Selection: Estimating Sharp Bounds on Treatment Effects
Classification-JEL: J0; J3; C1; C2; C5
Author-Name: David S. Lee
Note: LS
Number: 11721
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11721
File-URL: http://www.nber.org/papers/w11721.pdf
File-Format: application/pdf
Publication-Status: published as Lee, David. “Training, Wages, and Sample Selection: Estimating Sharp Bounds on Treatment Effects.” Review of Economic Studies 76(3), 1071-1102. 2009
Abstract: This paper empirically assesses the wage effects of the Job Corps program, one of the largest federally-funded job training programs in the United States. Even with the aid of a randomized experiment, the impact of a training program on wages is difficult to study because of sample selection, a pervasive problem in applied micro-econometric research. Wage rates are only observed for those who are employed, and employment status itself may be affected by the training program. This paper develops an intuitive trimming procedure for bounding average treatment effects in the presence of sample selection. In contrast to existing methods, the procedure requires neither exclusion restrictions nor a bounded support for the outcome of interest. Identification results, estimators, and their asymptotic distribution, are presented. The bounds suggest that the program raised wages, consistent with the notion that the Job Corps raises earnings by increasing human capital, rather than solely through encouraging work. The estimator is generally applicable to typical treatment evaluation problems in which there is non-random sample selection/attrition.
Handle: RePEc:nbr:nberwo:11721
Template-Type: ReDIF-Paper 1.0
Title: Institutional Investors and Stock Market Volatility
Classification-JEL: G1; G12
Author-Name: Xavier Gabaix
Author-Person: pga174
Author-Name: Parameswaran Gopikrishnan
Author-Name: Vasiliki Plerou
Author-Name: H. Eugene Stanley
Note: AP EFG
Number: 11722
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11722
File-URL: http://www.nber.org/papers/w11722.pdf
File-Format: application/pdf
Publication-Status: published as Gabaix, Xavier, Parameswaran Gopikrishnan, Vasiliki Plerou and H. Eugene Stanley. "Institutional Investors And Stock Market Volatility," Quarterly Journal of Economics, 2006, v121(2,May), 461-504.
Abstract: We present a theory of excess stock market volatility, in which market movements are due to trades by very large institutional investors in relatively illiquid markets. Such trades generate significant spikes in returns and volume, even in the absence of important news about fundamentals. We derive the optimal trading behavior of these investors, which allows us to provide a unified explanation for apparently disconnected empirical regularities in returns, trading volume and investor size.
Handle: RePEc:nbr:nberwo:11722
Template-Type: ReDIF-Paper 1.0
Title: Moral Hazard in Nursing Home Use
Classification-JEL: I11; I18
Author-Name: David C. Grabowski
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: AG EH PE
Number: 11723
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11723
File-URL: http://www.nber.org/papers/w11723.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan and David Grabowski. “Moral Hazard in Nursing Home Use.” Journal of Health Economics 26 (2007): 560-577. .
Abstract: Nursing home expenditures are a rapidly growing share of national health care spending with the government functioning as the dominant payer of services. Public insurance for nursing home care is tightly targeted on income and assets, which imposes a major tax on savings; moreover, low state reimbursement for Medicaid patients has been shown to lower treatment quality, and bed supply constraints may deny access to needy individuals. However, expanding eligibility, increasing Medicaid reimbursement, or allowing more nursing home bed slots has the potential to induce more nursing home use, increasing the social costs of long term care. A problem in evaluating this tradeoff is that we know remarkably little about the effects of government policy on nursing home utilization. We attempt to address this shortcoming using multiple waves of the National Long-Term Care Survey, matched to changing state Medicaid rules for nursing home care. We find consistent evidence of no effect of Medicaid policies on nursing home utilization, suggesting that demand for nursing home care is relatively inelastic. From a policy perspective, this finding indicates that changes in overall Medicaid generosity will not have large effects on utilization.
Handle: RePEc:nbr:nberwo:11723
Template-Type: ReDIF-Paper 1.0
Title: Assessing the Safety and Efficacy of the FDA: The Case of the Prescription Drug User Fee Acts
Classification-JEL: I1; H0
Author-Name: Tomas J. Philipson
Author-Person: pph37
Author-Name: Ernst R. Berndt
Author-Name: Adrian H. B. Gottschalk
Author-Name: Matthew W. Strobeck
Note: EH PR
Number: 11724
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11724
File-URL: http://www.nber.org/papers/w11724.pdf
File-Format: application/pdf
Abstract: The US Food and drug Administration (FDA) is estimated to regulate markets accounting for about 20% of consumer spending in the US. This paper proposes a general methodology to evaluate FDA policies, in general, and the central speed-safety tradeoff it faces, in particular. We apply this methodology to estimate the welfare effects of a major piece of legislation affecting this tradeoff, the Prescription Drug User Fee Acts (PDUFA). We find that PDUFA raised the private surplus of producers, and thus innovative returns, by about $11 to $13 billion. Dependent on the market power assumed of producers while having patent protection, we find that PDUFA raised consumer welfare between $5 to$19 billion; thus the combined social surplus was raised between $18 to $31 billions. Converting these economic gains into equivalent health benefits, we find that the more rapid access of drugs on the market enabled by PDUFA saved the equivalent of 180 to 310 thousand life-years. Additionally, we estimate an upper bound on the adverse effects of PDUFA based on drugs submitted during PDUFA I/II and subsequently withdrawn for safety reasons, and find that an extreme upper bound of about 56 thousand life-years were lost. We discuss how our general methodology could be used to perform a quantitative and evidence-based evaluation of the desirability of other FDA policies in the future, particularly those affecting the speed-safety tradeoff.
Handle: RePEc:nbr:nberwo:11724
Template-Type: ReDIF-Paper 1.0
Title: Using Experimental Economics to Measure the Effects of a Natural Educational Experiment on Altruism
Classification-JEL: I2; C9
Author-Name: Eric Bettinger
Author-Person: pbe413
Author-Name: Robert Slonim
Author-Person: psl53
Note: ED CH
Number: 11725
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11725
File-URL: http://www.nber.org/papers/w11725.pdf
File-Format: application/pdf
Publication-Status: published as Bettinger, Eric and Robert Slonim. "Using Experimental Economics To Measure The Effects Of A Natural Educational Experiment On Altruism," Journal of Public Economics, 2006, v90(8-9,Sep), 1625-1648.
Abstract: Economic research examining how educational intervention programs affect primary and secondary schooling focuses largely on test scores although the interventions can affect many other outcomes. This paper examines how an educational intervention, a voucher program, affected students' altruism. The voucher program used a lottery to allocate scholarships among low-income applicant families with children in K-8th grade. By exploiting the lottery to identify the voucher effects, and using experimental economic methods, we measure the effects of the intervention on children's altruism. We also measure the voucher program's effects on parents' altruism and several academic outcomes including test scores. We find that the educational intervention positively affects students' altruism towards charitable organizations but not towards their peers. We fail to find statistically significant effects of the vouchers on parents' altruism or test scores.
Handle: RePEc:nbr:nberwo:11725
Template-Type: ReDIF-Paper 1.0
Title: Turning Workers into Savers? Incentives, Liquidity, and Choice in 401(k) Plan Design
Classification-JEL: J26; J32; G23
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: Stephen P. Utkus
Author-Name: Tongxuan (Stella) Yang
Note: AG LS PE
Number: 11726
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11726
File-URL: http://www.nber.org/papers/w11726.pdf
File-Format: application/pdf
Publication-Status: published as Mitchell, Olivia S., Steve Utkus, and Tongxuan (Stella) Yang. “Turning Workers into Savers? Incentives, Liquidity, and Choice in 401(k) Plan Design.” National Tax Journal 60 (September 2007): 469-89.
Abstract: We develop a comprehensive model of 401(k) pension design that reflects the complex tax, savings, liquidity and investment incentives of such plans. Using a new dataset on some 500 plans covering nearly 740,000 workers, we show that employer matching contributions have only a modest impact on eliciting additional retirement saving. In the typical 401(k) plan, only 10 percent of non-highly-compensated workers are induced to save more by match incentives; and 30 percent fail to join their plan at all, despite the fact that the company-proffered match would grant them a real return premium of 1-5% above market rates if they contributed. Such indifference to retirement saving incentives cannot be attributed to liquidity or investment constraints. These results underscore the need for alternative approaches beyond matching contributions, if retirement saving is to become broader-based.
Handle: RePEc:nbr:nberwo:11726
Template-Type: ReDIF-Paper 1.0
Title: U.S. v. Microsoft: Did Consumers Win?
Classification-JEL: K21; L1; L4; L6
Author-Name: David S. Evans
Author-Person: pev18
Author-Name: Albert L. Nichols
Author-Name: Richard Schmalensee
Author-Person: psc313
Note: IO LE
Number: 11727
Creation-Date: 2005-10
Order-URL: http://www.nber.org/papers/w11727
File-URL: http://www.nber.org/papers/w11727.pdf
File-Format: application/pdf
Abstract: U.S. v. Microsoft and the related state suit filed in 1998 appear finally to have concluded. In a unanimous en banc decision issued in late June 2004, the D.C. Circuit Court of Appeals rejected challenges to the remedies approved by the District Court in November 2002. The wave of follow-on private antitrust suits filed against Microsoft also appears to be subsiding. In this paper we review the remedies imposed in the United States, in terms of both their relationship to the violations found and their impact on consumer welfare. We conclude that the remedies addressed the violations ultimately found by the Court of Appeals (which were a subset of those found by the original district court and an even smaller subset of the violations alleged, both in court and in public discourse) and went beyond them in important ways. Thus, for those who believe that the courts were right in finding that some of Microsoft's actions harmed competition, the constraints placed on its behavior and the active, ongoing oversight by the Court and the plaintiffs provide useful protection against a recurrence of such harm. For those who believe that Microsoft should not have been found liable because of insufficient evidence of harm to consumers, the remedies may be unnecessary, but they avoided the serious potential damage to consumer welfare that was likely to accompany the main alternative proposals. The remedies actually imposed appear to have struck a reasonable balance between protecting consumers against the types of actions found illegal and harming consumers by unnecessarily restricting Microsoft's ability to compete.
Handle: RePEc:nbr:nberwo:11727
Template-Type: ReDIF-Paper 1.0
Title: Has Financial Development Made the World Riskier?
Classification-JEL: G0; G1; G2; G3
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Note: CF IFM
Number: 11728
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11728
File-URL: http://www.nber.org/papers/w11728.pdf
File-Format: application/pdf
Publication-Status: published as Raghuram G. Rajan, 2005. "Has financial development made the world riskier?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 313-369.
Abstract: Developments in the financial sector have led to an expansion in its ability to spread risks. The increase in the risk bearing capacity of economies, as well as in actual risk taking, has led to a range of financial transactions that hitherto were not possible, and has created much greater access to finance for firms and households. On net, this has made the world much better off. Concurrently, however, we have also seen the emergence of a whole range of intermediaries, whose size and appetite for risk may expand over the cycle. Not only can these intermediaries accentuate real fluctuations, they can also leave themselves exposed to certain small probability risks that their own collective behavior makes more likely. As a result, under some conditions, economies may be more exposed to financial-sector-induced turmoil than in the past. The paper discusses the implications for monetary policy and prudential supervision. In particular, it suggests market-friendly policies that would reduce the incentive of intermediary managers to take excessive risk.
Handle: RePEc:nbr:nberwo:11728
Template-Type: ReDIF-Paper 1.0
Title: Behavioral Responses to Taxes: Lessons from the EITC and Labor Supply
Classification-JEL: H24; J22
Author-Name: Nada Eissa
Author-Name: Hilary Hoynes
Author-Person: pho278
Note: LS PE
Number: 11729
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11729
File-URL: http://www.nber.org/papers/w11729.pdf
File-Format: application/pdf
Publication-Status: published as Behavioral Responses to Taxes: Lessons from the EITC and Labor Supply, Nada Eissa, Hilary W. Hoynes. in Tax Policy and the Economy, Volume 20, Poterba. 2006
Abstract: Twenty-two million families currently receive a total of $34 billion dollars in benefits from the Earned Income Tax Credit (EITC). In fact, the EITC is the largest cash transfer program for lower-income families at the federal level. An unusual feature of the credit is its explicit goal to use the tax system to encourage and support those who choose to work. A large body of work has evaluated the labor supply effects the EITC and has generated several important findings regarding the behavioral response to taxes. Perhaps the main lesson learned from the evidence is the confirmation that real responses to taxes are important; labor supply does respond to the EITC. The second major lesson is related to the nature of the labor supply response. A consistent finding is that labor supply responses are concentrated along the extensive (entry) margin, rather than the intensive (hours worked) margin. This distinction has important implications for the design of tax-transfer programs and for the welfare evaluation of tax reforms.
Handle: RePEc:nbr:nberwo:11729
Template-Type: ReDIF-Paper 1.0
Title: Mughal Decline, Climate Change, and Britain's Industrial Ascent: An Integrated Perspective on India's 18th and 19th Century Deindustrialization
Classification-JEL: F1; N7; O2
Author-Name: David Clingingsmith
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE
Number: 11730
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11730
File-URL: http://www.nber.org/papers/w11730.pdf
File-Format: application/pdf
Publication-Status: published as Clingingsmith, David and Jeffrey G. Williamson. ”De-Industrialization in 18th and 19th Century India: Mughal Decline, Climate Shocks and British Industrial Ascent.” Explorations in Economic History 45, 3 (July 2008): 209-234.
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. India underwent secular deindustrialization as a consequence. While India produced about 25 percent of world industrial output in 1750, this figure had fallen to only 2 percent by 1900. We ask how much of India's deindustrialization was due to local supply-side forces -- such as political fragmentation in the 18th century and rising incidence of drought between the early 18th and 19th century, and how much to world price shocks. We use an open, three-sector neo-Ricardian model to organize our thinking about the relative role played by domestic and foreign forces. A newly compiled database of 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 back to 1765. Whether Indian deindustrialization shocks and responses were big or small is then assessed by comparisons with other parts of the periphery.
Handle: RePEc:nbr:nberwo:11730
Template-Type: ReDIF-Paper 1.0
Title: Precautionary Savings and the Importance of Business Owners
Classification-JEL: E2
Author-Name: Erik Hurst
Author-Person: phu87
Author-Name: Arthur Kennickell
Author-Name: Annamaria Lusardi
Author-Person: plu347
Author-Name: Francisco Torralba
Note: AG EFG PE
Number: 11731
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11731
File-URL: http://www.nber.org/papers/w11731.pdf
File-Format: application/pdf
Abstract: In this paper, we show the pivotal role business owners play in estimating the importance of the precautionary saving motive. Since business owners hold larger amounts of wealth than other households for non-precautionary reasons and also face highly volatile income, they induce a correlation between wealth and income risk regardless of whether or not a precautionary saving motive exists. Using data from the Panel Study of Income Dynamics in the 1980s and the 1990s, we show that among both business owners and non-business owners, the size of precautionary savings with respect to labor income risk is modest and accounts for less than ten percent of total household wealth. However, pooling together the two groups leads to an artificially high estimate of the importance of precautionary savings. New data from the Survey of Consumer Finances further confirms that precautionary savings account for less than ten percent of total wealth for both business owners and non-business owners. Thus, while a precautionary saving motive exists and affects all households, it does not give rise to high amounts of wealth in the economy, particularly among those households who face the most volatile stream of income.
Handle: RePEc:nbr:nberwo:11731
Template-Type: ReDIF-Paper 1.0
Title: Colorism and African American Wealth: Evidence from the Nineteenth-Century South
Classification-JEL: N3; J7
Author-Name: Howard Bodenhorn
Author-Person: pbo547
Author-Name: Christopher S. Ruebeck
Author-Person: pru128
Note: DAE
Number: 11732
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11732
File-URL: http://www.nber.org/papers/w11732.pdf
File-Format: application/pdf
Publication-Status: published as Howard Bodenhorn & Christopher Ruebeck, 2007. "Colourism and African–american wealth: evidence from the nineteenth-century south," Journal of Population Economics, Springer, vol. 20(3), pages 599-620, July.
Abstract: Black is not always black. Subtle distinctions in skin tone translate into significant differences in outcomes. Data on more than 15,000 households interviewed during the 1860 federal census exhibit sharp differences in wealth holdings between white, mulatto, and black households in the urban South. We document these differences, investigate the relationships between wealth and the recorded household characteristics, and decompose the wealth gaps into treatment and characteristic effects. In addition to higher wealth holdings of white households as compared to free African-Americans in general, there are distinct differences between both the characteristics of and wealth of free mulatto and black households, whether male- or female-headed. While black-headed households' mean predicted log wealth was only 20% of white-headed households', mulatto-headed households' was nearly 50% that of whites'. The difference between light- and dark-complexion is highly significant in semi-log wealth regressions. In the decomposition of this wealth differential, treatment effects play a large role in explaining the wealth gap between all subpopulation pairs.
Handle: RePEc:nbr:nberwo:11732
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy with Model Uncertainty: Distribution Forecast Targeting
Classification-JEL: E42; E52; E58
Author-Name: Lars Svensson
Author-Person: psv2
Author-Name: Noah Williams
Author-Person: pwi107
Note: EFG IFM ME
Number: 11733
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11733
File-URL: http://www.nber.org/papers/w11733.pdf
File-Format: application/pdf
Abstract: We examine optimal and other monetary policies in a linear-quadratic setup with a relatively general form of model uncertainty, so-called Markov jump-linear-quadratic systems extended to include forward-looking variables. The form of model uncertainty our framework encompasses includes: simple i.i.d. model deviations; serially correlated model deviations; estimable regime-switching models; more complex structural uncertainty about very different models, for instance, backward- and forward-looking models; time-varying central-bank judgment about the state of model uncertainty; and so forth. We provide an algorithm for finding the optimal policy as well as solutions for arbitrary policy functions. This allows us to compute and plot consistent distribution forecasts---fan charts---of target variables and instruments. Our methods hence extend certainty equivalence and "mean forecast targeting" to more general certainty non-equivalence and "distribution forecast targeting."
Handle: RePEc:nbr:nberwo:11733
Template-Type: ReDIF-Paper 1.0
Title: Usury Ceilings, Relationships and Bank Lending Behavior: Evidence from Nineteenth Century
Classification-JEL: N2; N8; G2
Author-Name: Howard Bodenhorn
Author-Person: pbo547
Note: DAE
Number: 11734
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11734
File-URL: http://www.nber.org/papers/w11734.pdf
File-Format: application/pdf
Publication-Status: published as Bodenhorn, Howard, 2007. "Usury ceilings and bank lending behavior: Evidence from nineteenth century New York," Explorations in Economic History, Elsevier, vol. 44(2), pages 179-202, April.
Abstract: Few pieces of economic regulation are ubiquitous as usury limits. Similarly, few economic principles are as widely accepted as the belief that interference with freely contracted prices leads to market distortions, and many studies of financial markets find that usury limits negatively affect credit availability. This study shows that when no regulatory authority monitors and stands ready to punish violators of the usury limit when intermediaries and borrowers form long-term relationships, banks and borrowers regularly contract for interest rates in excess of the usury ceiling. Time series analysis reveals limited effects on credit availability when market rates exceed the usury ceiling. Cross-sectional analysis of individual loan contracts also shows that the positive effect of a long-term relationship offsets the negative effect of the usury limit on credit availability.
Handle: RePEc:nbr:nberwo:11734
Template-Type: ReDIF-Paper 1.0
Title: A Portfolio View of Consumer Credit
Classification-JEL: E21; E51; G21
Author-Name: David K. Musto
Author-Name: Nicholas S. Souleles
Author-Person: pso104
Note: AP EFG ME
Number: 11735
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11735
File-URL: http://www.nber.org/papers/w11735.pdf
File-Format: application/pdf
Publication-Status: published as Musto, David K. and Nicholas S. Souleles. "A Portfolio View Of Consumer Credit," Journal of Monetary Economics, 2006, v53(1,Jan), 59-84.
Abstract: To compute risk-adjusted returns and gauge the volatility of their portfolios, lenders need to know the covariances of their loans' returns with aggregate returns. Cross-sectional differences in these covariances also provide insight into the nature of the shocks hitting different types of consumers. We use a unique panel dataset of credit bureau records to measure the 'covariance risk' of individual consumers, i.e., the covariance of their default risk with aggregate consumer default rates, and more generally to analyze the cross-sectional distribution of credit, including the effects of credit scores. We obtain two key sets of results. First, there is significant systematic heterogeneity in covariance risk across consumers with different characteristics. Consumers with high covariance risk tend to also have low credit scores (high default probabilities). Second, the amount of credit obtained by consumers significantly increases with their credit scores, and significantly decreases with their covariance risk (especially revolving credit), though the effect of covariance risk is smaller in magnitude.
Handle: RePEc:nbr:nberwo:11735
Template-Type: ReDIF-Paper 1.0
Title: Stock Returns and Expected Business Conditions: Half a Century of Direct Evidence
Classification-JEL: G12
Author-Name: Sean D. Campbell
Author-Name: Francis X. Diebold
Author-Person: pdi1
Note: EFG AP
Number: 11736
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11736
File-URL: http://www.nber.org/papers/w11736.pdf
File-Format: application/pdf
Publication-Status: published as Frank Diebold & Sean Campbell, 2005. "Stock returns and expected business conditions: half a century of direct evidence," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
Publication-Status: published as Campbell, Sean D. & Diebold, Francis X., 2009. "Stock Returns and Expected Business Conditions: Half a Century of Direct Evidence," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 27(2), pages 266-278.
Abstract: We explore the macro/finance interface in the context of equity markets. In particular, using half a century of Livingston expected business conditions data we characterize directly the impact of expected business conditions on expected excess stock returns. Expected business conditions consistently affect expected excess returns in a statistically and economically significant counter-cyclical fashion: depressed expected business conditions are associated with high expected excess returns. Moreover, inclusion of expected business conditions in otherwisestandard predictive return regressions substantially reduces the explanatory power of the conventional financial predictors, including the dividend yield, default premium, and term premium, while simultaneously increasing R-squared. Expected business conditions retain predictive power even after controlling for an important and recently introduced non-financial predictor, the generalized consumption/wealth ratio, which accords with the view that expected business conditions play a role in asset pricing different from and complementary to that of the consumption/wealth ratio. We argue that time-varying expected business conditions likely capture time-varying risk, while time-varying consumption/wealth may capture time-varying risk aversion.
Handle: RePEc:nbr:nberwo:11736
Template-Type: ReDIF-Paper 1.0
Title: Underground Gun Markets
Classification-JEL: K42; L1
Author-Name: Philip J. Cook
Author-Person: pco30
Author-Name: Jens Ludwig
Author-Name: Sudhir Venkatesh
Author-Name: Anthony A. Braga
Note: CH EH LE
Number: 11737
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11737
File-URL: http://www.nber.org/papers/w11737.pdf
File-Format: application/pdf
Publication-Status: published as Cook, P. J., J. Ludwig, S.A. Venkatesh, and A.A. Braga. "Underground gun markets." Economic Journal 117 (November, 2007).
Abstract: This paper provides an economic analysis of underground gun markets drawing on interviews with gang members, gun dealers, professional thieves, prostitutes, police, public school security guards and teens in the city of Chicago, complemented by results from government surveys of recent arrestees in 22 cities plus administrative data for suicides, homicides, robberies, arrests and confiscated crime guns. We find evidence of considerable frictions in the underground market for guns in Chicago. We argue that these frictions are due primarily to the fact that the underground gun market is both illegal and "thin" -- the number of buyers, sellers and total transactions is small and relevant information is scarce. Gangs can help overcome these market frictions, but the gang's economic interests cause gang leaders to limit supply primarily to gang members, and even then transactions are usually loans or rentals with strings attached.
Handle: RePEc:nbr:nberwo:11737
Template-Type: ReDIF-Paper 1.0
Title: Debiasing through Law
Classification-JEL: K00; K11; K13; K22
Author-Name: Christine Jolls
Author-Name: Cass R. Sunstein
Author-Person: psu474
Note: LE
Number: 11738
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11738
File-URL: http://www.nber.org/papers/w11738.pdf
File-Format: application/pdf
Publication-Status: published as Jolls, Christine and Cass R. Sunstein. "Debiasing Through Law." Journal of Legal Studies 35 (2006): 199-241.
Abstract: In many settings, human beings are boundedly rational. A distinctive and insufficiently explored legal response to bounded rationality is to attempt to "debias through law," by steering people in more rational directions. In many important domains, existing legal analyses emphasize the alternative approach of insulating outcomes from the effects of boundedly rational behavior, often through blocking private choices. In fact, however, a large number of actual and imaginable legal strategies are efforts to engage in the very different approach of debiasing through law by reducing or even eliminating people's boundedly rational behavior. In important contexts, these efforts to debias through law can avoid the costs and inefficiencies associated with regulatory approaches that take bounded rationality as a given and respond by attempting to insulate outcomes from its effects. This paper offers a general account of how debiasing through law does or could work to address legal questions across a range of areas, from consumer safety law to corporate law to property law. Discussion is also devoted to the risks of government manipulation and overshooting that are sometimes raised when debiasing through law is employed.
Handle: RePEc:nbr:nberwo:11738
Template-Type: ReDIF-Paper 1.0
Title: Identifying Age, Cohort and Period Effects in Scientific Research Productivity: Discussion and Illustration Using Simulated and Actual Data on French Physicists
Classification-JEL: C23; O31; J44
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Author-Name: Jacques Mairesse
Author-Person: pma712
Author-Name: Laure Turner
Note: PR
Number: 11739
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11739
File-URL: http://www.nber.org/papers/w11739.pdf
File-Format: application/pdf
Publication-Status: published as Bronwyn Hall & Jacques Mairesse & Laure Turner, 2007. "Identifying Age, Cohort, And Period Effects In Scientific Research Productivity: Discussion And Illustration Using Simulated And Actual Data On French Physicists," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 16(2), pages 159-177.
Abstract: The identification of age, cohort (vintage), and period (year) effects in a panel of individuals or other units is an old problem in the social sciences, but one that has not been much studied in the context of measuring researcher productivity. In the context of a semi-parametric model of productivity where these effects are assumed to enter in an additive manner, we present the conditions necessary to identify and test for the presence of the three effects. In particular we show that failure to specify precisely the conditions under which such a model is identified can lead to misleading conclusions about the productivity-age relationship. We illustrate our methods using data on the publications 1986-1997 by 465 French condensed matter physicists who were born between 1936 and 1960.
Handle: RePEc:nbr:nberwo:11739
Template-Type: ReDIF-Paper 1.0
Title: Hard Targets: Theory and Evidence on Suicide Attacks
Classification-JEL: H56; Z12; D71; D74; H40
Author-Name: Eli Berman
Author-Person: pbe188
Author-Name: David Laitin
Note: LS
Number: 11740
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11740
File-URL: http://www.nber.org/papers/w11740.pdf
File-Format: application/pdf
Abstract: Who chooses suicide attacks? Though rebels typically target poor countries, suicide attacks are just as likely to target rich democracies. Though many groups have grievances, suicide attacks are favored by the radical religious. Though rebels often kill coreligionists, they seldom use suicide attacks to do so. We model the choice of tactics by rebels, bearing in mind that a successful suicide attack imposes the ultimate cost on the attacker and the organization. We first ask what a suicide attacker would have to believe to be deemed rational. We then embed the attacker and other operatives in a club good model which emphasizes the function of voluntary religious organizations as providers of benign local public goods. The sacrifices which these groups demand solve a free-rider problem in the cooperative production of public goods. These sacrifices make clubs well suited for organizing suicide attacks, a tactic in which defection by operatives (including the attacker) endangers the entire organization. The model also analyzes the choice of suicide attacks as a tactic, predicting that suicide will be used when targets are well protected and when damage is great. Those predictions are consistent with the patterns described above. The model has testable implications for tactic choice of terrorists and for damage achieved by different types of terrorists, which we find to be consistent with the data.
Handle: RePEc:nbr:nberwo:11740
Template-Type: ReDIF-Paper 1.0
Title: Default Risk Sharing Between Banks and Markets: The Contribution of Collateralized Debt Obligations
Classification-JEL: D82; G21; D74
Author-Name: Guenter Franke
Author-Person: pfr94
Author-Name: Jan Pieter Krahnen
Author-Person: pkr72
Note: AP
Number: 11741
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11741
File-URL: http://www.nber.org/papers/w11741.pdf
File-Format: application/pdf
Publication-Status: published as Carey, Mark, and Rene M. Stulz. A National Bureau of Economic Research Conference Report. Chicago and London: University of Chicago Press, 2006.
Publication-Status: published as Default Risk Sharing between Banks and Markets: The Contribution of Collateralized Debt Obligations , Gunter Franke, Jan Pieter Krahnen. in The Risks of Financial Institutions, Carey and Stulz. 2006
Abstract: This paper contributes to the economics of financial institutions risk management by exploring how loan securitization affects their default risk, their systematic risk, and their stock prices. In a typical CDO transaction a bank retains through a first loss piece a very high proportion of the default losses, and transfers only the extreme losses to other market participants. The size of the first loss piece is largely driven by the average default probability of the securitized assets. If the bank sells loans in a true sale transaction, it may use the proceeds to expand its loan business, thereby affecting systematic risk. For a sample of European CDO issues, we find an increase of the banks' betas, but no significant stock price effect around the announcement of a CDO issue.
Handle: RePEc:nbr:nberwo:11741
Template-Type: ReDIF-Paper 1.0
Title: Temporary Agency Employment as a Way out of Poverty?
Classification-JEL: I38; J20; J30; J40
Author-Name: David Autor
Author-Person: pau9
Author-Name: Susan Houseman
Author-Person: pho473
Note: LS PE
Number: 11742
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11742
File-URL: http://www.nber.org/papers/w11742.pdf
File-Format: application/pdf
Publication-Status: published as Blank, Rebecca, Sheldon Danziger and Robert Schoeni (eds.) Working and Poor: How Economic and Policy Changes are Affecting Low‑Wage Workers. New York: Russell Sage Foundation Publications, 2006.
Abstract: The high incidence of temporary agency employment among participants in government employment programs has catalyzed debate about whether these jobs help the poor transition into stable employment and out of poverty. We provide direct evidence on this question through analysis of a Michigan welfare-to-work program in which program participants were randomly allocated across service providers ('contractors') with different job placement practices. We draw on a telephone survey of contractors and on administrative program data linked with wage records data on all participants entering the program over a three-and-a half-year period. Our survey evidence documents a consensus among contractors that temporary help jobs are generally easier for those with weak skills and experience to obtain, but no consensus on whether temporary help jobs confer long-term benefits to participants. Our analysis of the quasi-experimental data introduced in Autor and Houseman (2005) shows that placing participants in either temporary or direct-hire jobs improves their odds of leaving welfare and escaping poverty in the short term. However, we find that only direct-hire placements help reduce welfare dependency over longer time horizons. Our findings raise questions about the incentive structure of many government employment programs that emphasize rapid placement of program participants into jobs and that may inadvertently encourage high placement rates with temporary help agencies.
Handle: RePEc:nbr:nberwo:11742
Template-Type: ReDIF-Paper 1.0
Title: Do Temporary Help Jobs Improve Labor Market Outcomes for Low-Skilled Workers? Evidence from 'Work First'
Classification-JEL: I38; J20; J30; J40
Author-Name: David H. Autor
Author-Person: pau9
Author-Name: Susan Houseman
Author-Person: pho473
Note: LS PE
Number: 11743
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11743
File-URL: http://www.nber.org/papers/w11743.pdf
File-Format: application/pdf
Publication-Status: published as David Autor & Susan N. Houseman, 2007. "Do temporary jobs help low-skilled workers? : surprising data from Detroit," Communities and Banking, Federal Reserve Bank of Boston, issue Fall, pages 6-8.
Publication-Status: published as David H. Autor & Susan N. Houseman, 2010. "Do Temporary-Help Jobs Improve Labor Market Outcomes for Low-Skilled Workers? Evidence from "Work First"," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 96-128, July.
Abstract: A disproportionate share of low-skilled U.S. workers is employed by temporary-help firms. These firms offer rapid entry into paid employment, but temporary-help jobs are typically brief, and it is unknown whether they foster longer-term employment. We exploit a unique aspect of the city of Detroit's welfare-to-work program, in which one in five jobs taken is obtained with a temporary-help firm, to identify the effects of temporary-help jobs on the subsequent labor market advancement of low-skilled workers. Welfare participants are assigned on a rotating basis to one of numerous program providers that have substantially different placement rates into temporary-help and regular ('direct-hire') jobs but offer otherwise standardized services. This gives rise to variation in job-taking rates that is functionally equivalent to random assignment. Using provider assignments as instrumental variables, we find that temporary-help job placements yield significant short-term earnings gains, but these gains are offset by lower earnings and less frequent employment over the next one to two years. Job placements with direct-hire employers, by contrast, substantially raise earnings over one, two, and three years following placement. The primary observable difference between these types of job placements is their effect on subsequent employment stability. Direct-hire placements roughly double the probability of ongoing employment in each of the first eight quarters following program assignment, while temporary help placements only positively affect the probability of ongoing employment for two quarters and do not facilitate transitions to direct-hire jobs. These results qualify the interpretation of a large experimental literature documenting the benefits of job placement services for labor market outcomes of low-skilled workers. We find that the benefits of job placements derive entirely from direct-hire jobs; placing low-skilled workers in temporary-help jobs is no more effective than providing no job placements at all.
Handle: RePEc:nbr:nberwo:11743
Template-Type: ReDIF-Paper 1.0
Title: "The War for the Fare": How Driver Compensation Affects Bus System Performance
Classification-JEL: D0; J3; L9
Author-Name: Ryan M. Johnson
Author-Name: David H. Reiley
Author-Person: pre371
Author-Name: Juan Carlos Munoz
Note: IO LS
Number: 11744
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11744
File-URL: http://www.nber.org/papers/w11744.pdf
File-Format: application/pdf
Publication-Status: published as Ryan M. Johnson & David H. Reiley & Juan Carlos Muñoz, 2015. "“THE WAR FOR THE FARE”: HOW DRIVER COMPENSATION AFFECTS BUS SYSTEM PERFORMANCE," Economic Inquiry, vol 53(3), pages 1401-1419.
Abstract: Two systems of bus driver compensation exist in Santiago, Chile. Most drivers are paid per passenger transported, while a second system compensates other drivers with a fixed wage. Compared with fixed-wage drivers, per-passenger drivers have incentives to engage in "La Guerra por el Boleto" ("The War for the Fare"), in which drivers change their driving patterns to compete for passengers. This paper takes advantage of a natural experiment provided by the coexistence of these two compensation schemes on similar routes in the same city. Using data on intervals between bus arrivals, we find that the fixed-wage contract leads to more bunching of buses, and hence longer average passenger wait times. The per-passenger drivers are assisted by a group of independent information intermediaries called "sapos" who earn their living by standing at bus stops, recording arrival times, and selling the information to subsequent drivers who drive past. We find that a typical bus passenger in Santiago waits roughly 10% longer for a bus on a fixed-wage route relative to an incentive-contract route. However, the incentives also lead drivers to drive noticeably more aggressively, causing approximately 67% more accidents per kilometer driven. Our results have implications for the design of incentives in public transportation systems.
Handle: RePEc:nbr:nberwo:11744
Template-Type: ReDIF-Paper 1.0
Title: A Customs Union with Multinational Firms: The Automobile Market in Argentina and Brazil
Classification-JEL: F12; F13; F15
Author-Name: Irene Brambilla
Note: ITI IO
Number: 11745
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11745
File-URL: http://www.nber.org/papers/w11745.pdf
File-Format: application/pdf
Abstract: This paper looks empirically into the behavior of multinational firms in international oligopolistic markets with trade balance constraints. I show how a particular form of non-tariff barrier applied at the firm level can lead to an increase in trade flows in the presence of intra-firm strategic trade. In my application, I estimate a model of demand, supply and trade policy in the automobile sector in Argentina and Brazil during 1996-1999. I measure the economic impact of a trade balance constraint that was in effect during that period and I compute predicted economic outcomes for the full adoption of a customs union, as has been agreed as part of the Mercosur negotiations, separating the sometimes opposing impacts of the removal of non-tariff barriers and the adoption of a common external tariff. Results show that the elimination of non-tariff barriers dominates the leveling of tariffs. Imports from outside of Mercosur increase under the new regime even though tariffs against these goods become more discriminatory, and exports from Brazil to Argentina decrease once the trade balance constraint is removed.
Handle: RePEc:nbr:nberwo:11745
Template-Type: ReDIF-Paper 1.0
Title: A Dynamic Measure of Inflation
Classification-JEL: E31; C43; J26; D91
Author-Name: Ricardo Reis
Author-Person: pre73
Note: AG ME PE
Number: 11746
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11746
File-URL: http://www.nber.org/papers/w11746.pdf
File-Format: application/pdf
Abstract: This paper shows that conventional measures of cost-of-living inflation, based on static models of consumption, suffer from two problems. The first is an intertemporal substitution bias, as these measures neglect the ability of consumers to borrow and lend in response to price changes. The second problem is the omission of intertemporal prices, which capture relevant relative prices for a consumer who lives for many periods. The paper proposes a dynamic price index (DPI) that solves these problems. Theoretically, it shows that the DPI is forward-looking, responds by more to persistent shocks, includes assets prices, and distinguishes between durable and non-durable goods' prices. A constructed DPI for the United States from 1970 to 2008 differs markedly from the CPI, it is close to serially uncorrelated, it is mostly driven by the prices of houses and bonds, and is twice as high as the CPI in 2008.
Handle: RePEc:nbr:nberwo:11746
Template-Type: ReDIF-Paper 1.0
Title: Socially Responsible Investment in Japanese Pensions
Classification-JEL: G11; G20; G23
Author-Name: Henry Hongbo Jin
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: John Piggott
Author-Person: ppi34
Note: AG LS
Number: 11747
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11747
File-URL: http://www.nber.org/papers/w11747.pdf
File-Format: application/pdf
Publication-Status: published as Jin, Henry Hongbo & Mitchell, Olivia S. & Piggott, John, 2006. "Socially responsible investment in Japanese pensions," Pacific-Basin Finance Journal, Elsevier, vol. 14(5), pages 427-438, November.
Abstract: As the level of retirement-related assets has grown, so too has public and private interest in so-called "Socially Responsible Investment" (SRI), an investment strategy that employs criteria other than the usual financial risk and return factors when selecting firms in which to invest. This study evaluates whether SRI indexes would alter portfolio risk and return patterns for the new defined contribution pension plans currently on offer in Japan. We conclude that SRI funds can be included as an option, albeit with some cost; consequently, mandatory investment in SRI portfolios cannot reasonably be justified.
Handle: RePEc:nbr:nberwo:11747
Template-Type: ReDIF-Paper 1.0
Title: Understanding Order Flow
Classification-JEL: F3; F4; G1
Author-Name: Martin D. D. Evans
Author-Person: pev5
Author-Name: Richard K. Lyons
Author-Person: ply9
Note: IFM AP
Number: 11748
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11748
File-URL: http://www.nber.org/papers/w11748.pdf
File-Format: application/pdf
Publication-Status: published as Evans, Martin D. D. and Richard K. Lyons. "Understanding Order Flow," International Journal of Finance and Economics, 2006, v11(1,Jan), 3-23.
Abstract: This paper develops a model for understanding end-user order flow in the FX market. The model addresses several puzzling findings. First, the estimated price-impact of flow from different end-user segments is, dollar-for-dollar, quite different. Second, order flow from segments traditionally thought to be liquidity-motivated actually has power to forecast exchange rates. Third, about one third of order flow's power to forecast exchange rates one month ahead comes from flow's ability to forecast future flow, whereas the remaining two-thirds applies to price components unrelated to future flow. We show that all of these features arise naturally from end-user heterogeneity, in a setting where order flow provides timely information to market-makers about the state of the macroeconomy.
Handle: RePEc:nbr:nberwo:11748
Template-Type: ReDIF-Paper 1.0
Title: Can IT be Japan's Savior?
Classification-JEL: E2; O4; O5
Author-Name: Fumio Hayashi
Author-Person: pha83
Author-Name: Koji Nomura
Note: ITI PR
Number: 11749
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11749
File-URL: http://www.nber.org/papers/w11749.pdf
File-Format: application/pdf
Publication-Status: published as Hayashi, Fumio and Koji Nomura. "Can IT Be Japan's Savior?," Journal of the Japanese and International Economies, 2005, v19(4,Dec), 543-567.
Abstract: This paper constructs a multi-sector model to take explicit account of the very sharp change in the relative price between non-IT and IT goods. The model is calibrated to the Japanese economy, and its solution path from 1990 on is compared to Japan's macroeconomic performance in the 1990s. Compared to the one-sector analysis of Japan in the 1990s in Hayashi and Prescott (2002), our model does slightly better or just as well in accounting for Japan's output slump and does worse in accounting for the capital-output ratio. We also show that, to revive a 2% long-term growth in percapita GDP, Japan needs to direct 10% of private total hours to the IT sector.
Handle: RePEc:nbr:nberwo:11749
Template-Type: ReDIF-Paper 1.0
Title: European Unemployment: The Evolution of Facts and Ideas
Classification-JEL: E24; J6
Author-Name: Olivier Blanchard
Author-Person: pbl2
Note: EFG LS
Number: 11750
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11750
File-URL: http://www.nber.org/papers/w11750.pdf
File-Format: application/pdf
Publication-Status: published as Olivier Blanchard, 2006. "European unemployment: the evolution of facts and ideas," Economic Policy, CEPR, CES, MSH, vol. 21(45), pages 5-59, 01.
Abstract: In the 1970s, European unemployment started increasing. It increased further in the 1980s, to reach a plateau in the 1990s. It is still high today, although the average unemployment rate hides a high degree of heterogeneity across countries. The focus of researchers and policy makers was initially on the role of shocks. As unemployment remained high, the focus has progressively shifted to institutions. This paper reviews the interaction of facts and theories, and gives a tentative assessment of what we know and what we still do not know.
Handle: RePEc:nbr:nberwo:11750
Template-Type: ReDIF-Paper 1.0
Title: Why Don't More Puerto Rican Men Work? The Rich Uncle (Sam) Hypothesis
Classification-JEL: j4; J6
Author-Name: Maria Enchautegui
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS PE
Number: 11751
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11751
File-URL: http://www.nber.org/papers/w11751.pdf
File-Format: application/pdf
Publication-Status: published as Collins, Susan M., Barry Bosworth, and Miguel A. Soto (eds.) The Economy of Puerto Rico: Restoring Growth. Brookings Institution Press, 2006.
Abstract: Puerto Rico has an extraordinarily low employment rate for men. We document the low employment rate using Census of Population and labor force survey data and offer "the rich uncle (Sam) hypothesis" that the connection of the relatively poor economy of Puerto Rico to the wealthier US has created conditions that generate low employment. In support of the hypothesis, we show: 1) that GNP and GDP have diverged on the island, distorting the relationship between GDP and employment, due potentially to federal tax benefits to companies operating in Puerto Rico; 2) transfers to Puerto Rican families funded mainly by the federal government, which account for about 22 percent of personal income; 3) open borders to the U.S. that give men with high desire for work incentive to migrate to the US, and potentially creates a lower bound to wages on the island; (4) a wage structure with relatively higher earnings in low paid jobs; and (5) employment in the informal sector, which is unmeasured in official statistics. We note that other regional economies with rich "uncles", such as East Germany with West Germany, Southern Italy with Northern Italy, have comparable employment problems.
Handle: RePEc:nbr:nberwo:11751
Template-Type: ReDIF-Paper 1.0
Title: Buyer Investment, Product Variety, and Intrafirm Trade
Classification-JEL: F1
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Author-Name: Yongmin Chen
Author-Person: pch420
Note: ITI
Number: 11752
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11752
File-URL: http://www.nber.org/papers/w11752.pdf
File-Format: application/pdf
Publication-Status: published as Chen, Yongmin & Feenstra, Robert C., 2008. "Buyer investment, export variety, and intrafirm trade," European Economic Review, Elsevier, vol. 52(8), pages 1313-1337, November.
Abstract: This paper studies a simple model of buyer investment and its effect on the variety and vertical structure of international trade. A distinction is made between two types of buyer investment: "flexible" and "specific." Their interactions with the entry and pricing incentives of suppliers are analyzed. It is shown that (i) there can be multiple equilibria in the variety of products traded, and (ii) less product variety is associated with more intrafirm trade. The possibility of multiple equilibria is consistent with the observation that some similar economies, such as Taiwan and South Korea, differ substantially in their export varieties to the U.S. A formal empirical analysis confirms the negative correlation between product variety and intrafirm trade.
Handle: RePEc:nbr:nberwo:11752
Template-Type: ReDIF-Paper 1.0
Title: Monitoring Corruption: Evidence from a Field Experiment in Indonesia
Classification-JEL: D73
Author-Name: Benjamin A. Olken
Author-Person: pol170
Note: PE
Number: 11753
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11753
File-URL: http://www.nber.org/papers/w11753.pdf
File-Format: application/pdf
Publication-Status: published as Olken, Benjamin. "Monitoring Corruption: Evidence from a Field Experiment in Indonesia." Journal of Political Economy 115, 2 (April 2007): 200-249.
Abstract: This paper uses a randomized field experiment to examine several approaches to reducing corruption. I measure missing expenditures in over 600 village road projects in Indonesia by having engineers independently estimate the prices and quantities of all inputs used in each road, and then comparing these estimates to villages' official expenditure reports. I find that announcing an increased probability of a government audit, from a baseline of 4 percent to 100 percent, reduced missing expenditures by about 8 percentage points, more than enough to make these audits cost-effective. By contrast, I find that increasing grass-roots participation in the monitoring process only reduced missing wages, with no effect on missing materials expenditures. Since materials account for three-quarters of total expenditures, increasing grass-roots participation had little impact overall. The findings suggest that grass-roots monitoring may be subject to free-rider problems. Overall, the results suggest that traditional top-down monitoring can play an important role in reducing corruption, even in a highly corrupt environment.
Handle: RePEc:nbr:nberwo:11753
Template-Type: ReDIF-Paper 1.0
Title: The Transformation of Hunger: The Demand for Calories Past and Present
Classification-JEL: D12; I12; I31; J10; N31
Author-Name: Trevon D. Logan
Author-Person: plo110
Note: DAE
Number: 11754
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11754
File-URL: http://www.nber.org/papers/w11754.pdf
File-Format: application/pdf
Publication-Status: published as Logan, Trevon D. "The Transformation of Hunger: The Demand for Calories Past and Present." The Journal of Economic History 69, 2 (2009): 388-408.
Abstract: According to conventional income measures, nineteenth century American and British industrial workers were two to four times as wealthy as poor people in developing countries today. Surprisingly, however, today's poor are less hungry than yesterday's wealthy industrial workers. I estimate the demand for calories of American and British industrial workers using the 1888 Cost of Living Survey and find that the estimated calorie elasticities for both American and British households are greater than calorie elasticity estimates for households in present day developing countries. The results are robust to measurement error, unreported food consumption, and indirect estimation bias. This finding implies substantial nutritional improvements among the poor in the twentieth century. Using the Engel curve implied by the historical calorie elasticities, I derive new income estimates for developing countries which yield income estimates that are six to ten times greater than those derived using purchasing power parity or GDP deflators.
Handle: RePEc:nbr:nberwo:11754
Template-Type: ReDIF-Paper 1.0
Title: Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets
Classification-JEL: D00; D60; D80; L00
Author-Name: Xavier Gabaix
Author-Person: pga174
Author-Name: David Laibson
Author-Person: pla164
Note: EFG
Number: 11755
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11755
File-URL: http://www.nber.org/papers/w11755.pdf
File-Format: application/pdf
Publication-Status: published as Gabaix, Xavier and David Laibson. "Shrouded Attributes, Consumer Myopia, And Information Suppression In Competitive Markets," Quarterly Journal of Economics, 2006, v121(2,May), 505-540.
Abstract: Bayesian consumers infer that hidden add-on prices (e.g. the cost of ink for a printer) are likely to be high prices. If consumers are Bayesian, firms will not shroud information in equilibrium. However, shrouding may occur in an economy with some myopic (or unaware) consumers. Such shrouding creates an inefficiency, which firms may have an incentive to eliminate by educating their competitors' customers. However, if add-ons have close substitutes, a "curse of debiasing" arises, and firms will not be able to profitably debias consumers by unshrouding add-ons. In equilibrium, two kinds of exploitation coexist. Optimizing firms exploit myopic consumers through marketing schemes that shroud high-priced add-ons. In turn, sophisticated consumers exploit these marketing schemes. It is not possible to profitably drive away the business of sophisticates. It is also not possible to profitably lure either myopes or sophisticates to non-exploitative firms. We show that informational shrouding flourishes even in highly competitive markets, even in markets with costless advertising, and even when the shrouding generates allocational inefficiencies.
Handle: RePEc:nbr:nberwo:11755
Template-Type: ReDIF-Paper 1.0
Title: Tax Changes and Asset Pricing: Time-Series Evidence
Classification-JEL: G12; H20; E44
Author-Name: Clemens Sialm
Author-Person: psi59
Note: AP PE
Number: 11756
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11756
File-URL: http://www.nber.org/papers/w11756.pdf
File-Format: application/pdf
Publication-Status: published as Clemens Sialm, 2009. "Tax Changes and Asset Pricing," American Economic Review, American Economic Association, vol. 99(4), pages 1356-83, September.
Abstract: The effective tax rate on equity securities has fluctuated considerably in the U.S. between 1917-2004. This study investigates whether personal taxes on equity securities are related to stock valuations using the time-series variation in tax burdens. The paper finds an economically and statistically significant relationship between asset valuations and personal tax rates. Consistent with tax capitalization, stock valuations tend to be relatively low when tax burdens are relatively high.
Handle: RePEc:nbr:nberwo:11756
Template-Type: ReDIF-Paper 1.0
Title: An Information-Based Trade Off between Foreign Direct Investment and Foreign Portfolio Investment
Classification-JEL: F3; G3
Author-Name: Itay Goldstein
Author-Name: Assaf Razin
Author-Person: pra388
Note: IFM ITI
Number: 11757
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11757
File-URL: http://www.nber.org/papers/w11757.pdf
File-Format: application/pdf
Publication-Status: published as Goldstein, Itay and Assaf Razin. "An information-based trade off between foreign direct investment and foreign portfolio investment." Journal of International Economics 7, 1(September 2006): 271-295.
Abstract: The paper develops a model of foreign direct investments (FDI) and foreign portfolio investments (FPI).The model describes an information-based trade off between direct investments and portfolio investments. Direct investors are more informed about the fundamentals of their projects. This information enables them to manage their projects more efficiently. However, it also creates an asymmetric-information problem in case they need to sell their projects prematurely, and reduces the price they can get in that case. As a result, investors, who know they are more likely to get a liquidity shock that forces them to sell early, are more likely to choose portfolio investments, whereas investors, who know they are less likely to get a liquidity shock, are more likely to choose direct investments. FDI is characterized by hands-on management style which enables the owner to obtain relatively refined information about the productivity of the firm. This superiority of FDI relative to FPI, comes with a cost: a firm owned by the relatively well-informed FDI investor has a low resale price because of a "lemons" type asymmetric information between the owner and potential buyers. The model can explain several stylized facts regarding foreign equity flows, such as the larger ratio of FDI to FPI inflows in developing countries relative to developed countries, and the greater volatility of FDI net inflows relative to FPI net inflows.
Handle: RePEc:nbr:nberwo:11757
Template-Type: ReDIF-Paper 1.0
Title: The Role of Beliefs in Inference for Rational Expectations Models
Classification-JEL: C1; C2; C3; C4; C5
Author-Name: Bruce N. Lehmann
Note: AP
Number: 11758
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11758
File-URL: http://www.nber.org/papers/w11758.pdf
File-Format: application/pdf
Publication-Status: published as Lehmann, Bruce N. "The Role of Beliefs in Inference for Rational Expectations Models." Journal of Econometrics 150, 2(June 2009): 322-331.
Abstract: This paper discusses inference for rational expectations models estimated via minimum distance methods by characterizing the probability beliefs regarding the data generating process (DGP) that are compatible with given moment conditions. The null hypothesis is taken to be rational expectations and the alternative hypothesis to be distorted beliefs. This distorted beliefs alternative is analyzed from the perspective of a hypothetical semiparametric Bayesian who believes the model and uses it to learn about the DGP. This interpretation provides a different perspective on estimates, test statistics, and confidence regions in large samples, particularly regarding the economic significance of rejections in rational expectations models.
Handle: RePEc:nbr:nberwo:11758
Template-Type: ReDIF-Paper 1.0
Title: How's the Job? Well-Being and Social Capital in the Workplace
Classification-JEL: J31; I31; Z13
Author-Name: John F. Heliwell
Author-Person: phe368
Author-Name: Haifang Huang
Author-Person: phu198
Note: LS
Number: 11759
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11759
File-URL: http://www.nber.org/papers/w11759.pdf
File-Format: application/pdf
Publication-Status: published as John F. Helliwell & Haifang Huang, 2010. "How’s the Job? Well-Being and Social Capital in the Workplace," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 63(2), pages 205-227, January.
Abstract: This paper takes a different tack in addressing one of the fundamental questions in economics: what are the factors that determine the distribution of jobs and wages? In Adam Smith's classic formulation, and in much of the subsequent literature, wage levels have been used to estimate the values of job characteristics ("compensating" or "equalizing" differentials). There are econometric problems with this approach, principally caused by unmeasured differences in talents and aptitudes that enable people of high ability to have jobs with both high wages and good working conditions, thus understating the value of working conditions. We bypass this difficulty by estimating the extent to which incomes and job characteristics influence direct measures of life satisfaction from three large and recent Canadian surveys. The well-being results show strikingly large values for non-financial job characteristics, especially workplace trust and other measures of the quality of workplace social capital. The compensating differentials estimated for the quality of workplace social capital are so large as to suggest that they do not reflect a full equilibrium. Thus the current situation probably reflects the existence of unrecognized opportunities for managers and employees to alter workplace environments, or for workers to change jobs, so as to increase both life satisfaction and workplace efficiency.
Handle: RePEc:nbr:nberwo:11759
Template-Type: ReDIF-Paper 1.0
Title: Why do Unemployment Benefits Raise Unemployment Durations? Moral Hazard vs. Liquidity
Classification-JEL: H0
Author-Name: Raj Chetty
Author-Person: pch161
Note: LS PE
Number: 11760
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11760
File-URL: http://www.nber.org/papers/w11760.pdf
File-Format: application/pdf
Abstract: It is well known that unemployment benefits raise unemployment durations. This result has traditionally been interpreted as a substitution effect caused by a distortion in the price of leisure relative to consumption, leading to moral hazard. This paper questions this interpretation by showing that unemployment benefits can also affect durations through an income effect for agents with limited liquidity. The empirical relevance of liquidity constraints and income effects is evaluated in two ways. First, I divide households into groups that are likely to be constrained and unconstrained based on proxies such as asset holdings. I find that increases in unemployment benefits have small effects on durations in the unconstrained groups but large effects in the constrained groups. Second, I find that lump-sum severance payments granted at the time of job loss significantly increase durations among constrained households. These results suggest that unemployment benefits raise durations primarily because of an income effect induced by liquidity constraints rather than moral hazard from distorted incentives.
Handle: RePEc:nbr:nberwo:11760
Template-Type: ReDIF-Paper 1.0
Title: Current Account Balances, Financial Development and Institutions: Assaying the World "Savings Glut"
Classification-JEL: F32; F41
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: Hiro Ito
Author-Person: pit4
Note: IFM
Number: 11761
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11761
File-URL: http://www.nber.org/papers/w11761.pdf
File-Format: application/pdf
Publication-Status: published as Chinn, Menzie D. & Ito, Hiro, 2007. "Current account balances, financial development and institutions: Assaying the world "saving glut"," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 546-569, June.
Abstract: We investigate the medium-term determinants of the current account using a model that controls for factors related to institutional development, with a goal of informing the recent debate over the existence and relevance of the "savings glut." The economic environmental factors that we consider are the degree of financial openness and the extent of legal development. We find that for industrial countries, the government budget balance is an important determinant of the current account balance; the budget balance coefficient is 0.21 in a specification controlling for institutional variables. More interestingly, our empirical findings are not consistent with the argument that the more developed financial markets are, the less saving a country undertakes. We find that this posited relationship is applicable only for countries with highly developed legal systems and open financial markets. For less developed countries and emerging market countries we usually find the reverse correlation; greater financial development leads to higher savings. Furthermore, there is no evidence of "excess domestic saving" in the Asian emerging market countries; rather they seem to have suffered from depressed investment in the wake of the 1997 financial crises. We also find evidence that the more developed equity markets are, the more likely countries are to run current account deficits.
Handle: RePEc:nbr:nberwo:11761
Template-Type: ReDIF-Paper 1.0
Title: Cities and Countries
Classification-JEL: F00; R12
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: IFM ITI
Number: 11762
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11762
File-URL: http://www.nber.org/papers/w11762.pdf
File-Format: application/pdf
Publication-Status: published as Rose, Andrew K. "Cities and Countries," Journal of Money, Credit and Banking, 2006, v38(8,Nov), 2225-2245.
Abstract: If one ranks cities by population, the rank of a city is inversely related to its size, a well-documented phenomenon known as Zipf's Law. Further, the growth rate of a city's population is uncorrelated with its size, another well-known characteristic known as Gibrat's Law. In this paper, I show that both characteristics are true of countries as well as cities; the size distributions of cities and countries are similar. But theories that explain the size-distribution of cities do not obviously apply in explaining the size-distribution of countries. The similarity of city- and country-size distributions is an interesting riddle.
Handle: RePEc:nbr:nberwo:11762
Template-Type: ReDIF-Paper 1.0
Title: A Simple Test of Adverse Events and Strategic Timing Theories of Consumer Bankruptcy
Classification-JEL: D12; D14
Author-Name: Li Gan
Author-Person: pga94
Author-Name: Tarun Sabarwal
Author-Person: psa197
Note: AG
Number: 11763
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11763
File-URL: http://www.nber.org/papers/w11763.pdf
File-Format: application/pdf
Abstract: A test of adverse events and strategic timing theories can be conducted by determining whether some relevant financial decision variables, such as financial benefit from filing for bankruptcy, or debt discharged in bankruptcy are endogenous with the bankruptcy decision or not. For the strategic timing theory such decisions are endogenous, while for the adverse events theory they are not. Hausman tests for endogeneity show that financial benefit, unsecured debt, and non-exempt assets are exogenous with the bankruptcy decision, consistent with the adverse events theory.
Handle: RePEc:nbr:nberwo:11763
Template-Type: ReDIF-Paper 1.0
Title: General Equilibrium Analysis of the Eaton-Kortum Model of International Trade
Classification-JEL: F0; F1
Author-Name: Fernando Alvarez
Author-Name: Robert E. Lucas
Note: EFG ITI
Number: 11764
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11764
File-URL: http://www.nber.org/papers/w11764.pdf
File-Format: application/pdf
Publication-Status: published as Alvarez, Fernando & Lucas, Robert Jr., 2007. "General equilibrium analysis of the Eaton-Kortum model of international trade," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1726-1768, September.
Abstract: We study a variation of the Eaton-Kortum model, a competitive, constant-returns-to-scale multicountry Ricardian model of trade. We establish existence and uniqueness of an equilibrium with balanced trade where each country imposes an import tariff. We analyze the determinants of the cross-country distribution of trade volumes, such as size, tariffs and distance, and compare a calibrated version of the model with data for the largest 60 economies. We use the calibrated model to estimate the gains of a world-wide trade elimination of tariffs, using the theory to explain the magnitude of the gains as well as the differential effect arising from cross-country differences in pre-liberalization of tariffs levels and country size.
Handle: RePEc:nbr:nberwo:11764
Template-Type: ReDIF-Paper 1.0
Title: Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords
Classification-JEL: L0
Author-Name: Benjamin Edelman
Author-Name: Michael Ostrovsky
Author-Person: pos32
Author-Name: Michael Schwarz
Note: IO
Number: 11765
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11765
File-URL: http://www.nber.org/papers/w11765.pdf
File-Format: application/pdf
Publication-Status: published as Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2007. "Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords," American Economic Review, American Economic Association, vol. 97(1), pages 242-259, March.
Abstract: We investigate the "generalized second price" auction (GSP), a new mechanism which is used by search engines to sell online advertising that most Internet users encounter daily. GSP is tailored to its unique environment, and neither the mechanism nor the environment have previously been studied in the mechanism design literature. Although GSP looks similar to the Vickrey-Clarke-Groves (VCG) mechanism, its properties are very different. In particular, unlike the VCG mechanism, GSP generally does not have an equilibrium in dominant strategies, and truth-telling is not an equilibrium of GSP. To analyze the properties of GSP in a dynamic environment, we describe the generalized English auction that corresponds to the GSP and show that it has a unique equilibrium. This is an ex post equilibrium that results in the same payoffs to all players as the dominant strategy equilibrium of VCG.
Handle: RePEc:nbr:nberwo:11765
Template-Type: ReDIF-Paper 1.0
Title: Unobserved Actions of Mutual Funds
Classification-JEL: G1; G2
Author-Name: Marcin Kacperczyk
Author-Name: Clemens Sialm
Author-Person: psi59
Author-Name: Lu Zheng
Author-Person: pzh589
Note: AP
Number: 11766
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11766
File-URL: http://www.nber.org/papers/w11766.pdf
File-Format: application/pdf
Publication-Status: published as Marcin Kacperczyk & Clemens Sialm & Lu Zheng, 2008. "Unobserved Actions of Mutual Funds," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 21(6), pages 2379-2416, November.
Abstract: Despite extensive disclosure requirements, mutual fund investors do not observe all actions of fund managers. We estimate the impact of unobserved actions on fund returns using the return gap, which is defined as the difference between the reported fund return and the return of a portfolio that invests in the previously disclosed holdings after adjusting for expenses. Analyzing monthly return data on more than 2,500 unique U.S. equity funds over the period 1984-2003, we document a substantial cross-sectional heterogeneity and time-series persistence in the return gap, thus demonstrating that unobserved actions of some funds persistently create value, while such actions of others destroy value. Most important, we show that the return gap helps to predict future fund performance and conclude that fund investors should use the return gap as an additional measure to evaluate the performance of mutual funds.
Handle: RePEc:nbr:nberwo:11766
Template-Type: ReDIF-Paper 1.0
Title: To Leave or Not To Leave: The Distribution of Bequest Motives
Classification-JEL: D11; D12; D91; E21
Author-Name: Wojciech Kopczuk
Author-Person: pko20
Author-Name: Joseph Lupton
Note: AG PE
Number: 11767
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11767
File-URL: http://www.nber.org/papers/w11767.pdf
File-Format: application/pdf
Publication-Status: Published in The Review of Economic Studies, 2007, 74(1), 207-235.
Abstract: In this paper, we examine the effect of observed and unobserved heterogeneity in the desire to die with positive net worth. Using a structural life-cycle model nested in a switching regression with unknown sample separation, we find that roughly three-fourths of the elderly single population has a bequest motive that may or may not have an appreciable effect on spending depending on the level of resources. Both the presence and the magnitude of the bequest motive are statistically and economically significant. On average, households with a bequest motive spend about 25 percent less on consumption expenditures. We conclude that, among the elderly single households in our sample, about four-fifths of their net wealth will be bequeathed and approximately half of this is due to a bequest motive.
Handle: RePEc:nbr:nberwo:11767
Template-Type: ReDIF-Paper 1.0
Title: Electronic Filing, Tax Preparers, and Participation in the Earned Income Tax Credit
Classification-JEL: H24; I38
Author-Name: Wojciech Kopczuk
Author-Person: pko20
Author-Name: Cristian Pop-Eleches
Author-Person: ppo349
Note: PE
Number: 11768
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11768
File-URL: http://www.nber.org/papers/w11768.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, 2007, 91(7-8), 1351-1367.
Abstract: In 2002 more than 18 million low-income individual taxpayers received the Earned Income Tax Credit (EITC). Despite its size, non-participation in this program is a concern and substantial effort is devoted by the IRS, local governments and many non-profits to address it. Most of the tax returns for EITC recipients are filed electronically by paid tax preparers who often charge significant fees for their services. Using variation across states in the introduction of state electronic filing programs, we show that the introduction of electronic filing had a significant effect on participation in the EITC. Our results are robust to accounting for other welfare, EITC and IRS reforms introduced during the same period. We suggest that this effect is due to the impact that electronic filing opportunities had on the tax preparation industry, therefore providing an example of how a market-based approach can be effective in addressing the problem of program non-participation.
Handle: RePEc:nbr:nberwo:11768
Template-Type: ReDIF-Paper 1.0
Title: What Defines "News" in Foreign Exchange Markets?
Classification-JEL: F31; F37; G15
Author-Name: Kathryn Dominguez
Author-Person: pdo227
Author-Name: Freyan Panthaki
Note: IFM
Number: 11769
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11769
File-URL: http://www.nber.org/papers/w11769.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Money and Finance, 25, 2006, 168-198.
Abstract: This paper examines whether the traditional sets of macro surprises, that most of the literature considers, are the only sorts of news that can explain exchange rate movements. We examine the intra-daily influence of a broad set of news reports, including variables which are not typically considered "fundamentals" in the context of standard models of exchange rate determination, and ask whether they too help predict exchange rate behavior. We also examine whether "news" not only impacts exchange rates directly, but also influences exchange rates via order flow (signed trade volume). Our results indicate that along with the standard fundamentals, both non-fundamental news and order flow matter, suggesting that future models of exchange rate determination ought to include all three types of explanatory variables.
Handle: RePEc:nbr:nberwo:11769
Template-Type: ReDIF-Paper 1.0
Title: Drug Advertising and Health Habit
Classification-JEL: I12; I18; D83
Author-Name: Toshiaki Iizuka
Author-Person: pii8
Author-Name: Ginger Zhe Jin
Note: EH IO
Number: 11770
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11770
File-URL: http://www.nber.org/papers/w11770.pdf
File-Format: application/pdf
Abstract: We examine the effect of direct-to-consumer advertising (DTCA) of drug treatment on an important health habit, physical exercise. By learning the existence of a new drug treatment via DTCA, rational consumers may become careless about maintaining healthy lifestyles. Using the National Health Insurance Survey (NHIS) and MSA-level DTCA data, we find that the DTCA related to four chronic conditions -- diabetes, high cholesterol, over weight, and hypertension -- reduce the likelihood of engaging in moderate exercise. This suggests the possibility that DTCA does not only affect pharmaceutical demand in the short-run, but also have long-run impacts on people's health by affecting their daily routines.
Handle: RePEc:nbr:nberwo:11770
Template-Type: ReDIF-Paper 1.0
Title: Interest Rates, Exchange Rates and International Adjustment
Classification-JEL: F02; F32; F33
Author-Name: Michael P. Dooley
Author-Person: pdo13
Author-Name: David Folkerts-Landau
Author-Name: Peter M. Garber
Author-Person: pga124
Note: IFM
Number: 11771
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11771
File-URL: http://www.nber.org/papers/w11771.pdf
File-Format: application/pdf
Publication-Status: published as Michael P Dooley & David Folkerts-Landau & Peter Garber, 2006. "Interest rates, exchange rates and international adjustment," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 51.
Abstract: In this paper we examine the behavior of interest rates and exchange rates following a variety of shocks to the international monetary system. Our analysis suggests that real interest rates in the US and Europe will remain low relative to historical experience for an extended period but converge slowly toward normal levels. During this adjustment interval, the US absorbs a disproportionate share of world savings. After a substantial initial appreciation of floating currencies relative to the dollar, the dollar and other floating currencies remain constant relative to each other. An improvement in the investment climate in Europe during the adjustment period would generate an immediate depreciation of the euro relative to the dollar. In real terms, the dollar and the floating currencies will eventually have to depreciate relative to the managed currencies. But most of the adjustment in the US trade account will come as US absorption responds to increases in real interest rates.
Handle: RePEc:nbr:nberwo:11771
Template-Type: ReDIF-Paper 1.0
Title: The Creation of the Rule of Law and the Legitimacy of Property Rights: The Political and Economic Consequences of a Corrupt Privatization
Classification-JEL: K0
Author-Name: Karla Hoff
Author-Person: pho255
Author-Name: Joseph E. Stiglitz
Note: EFG PE
Number: 11772
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11772
File-URL: http://www.nber.org/papers/w11772.pdf
File-Format: application/pdf
Abstract: How does the lack of legitimacy of property rights affect the dynamics of the creation of the rule of law? We investigate the demand for the rule of law in post-Communist economies after privatization under the assumption that theft is possible, that those who have "stolen" assets cannot be fully protected under a change in the legal regime towards rule of law, and that the number of agents with control rights over assets is large. We show that a demand for broadly beneficial legal reform may not emerge because the expectation of weak legal institutions increases the expected relative return to stripping assets, and strippers may gain from a weak and corrupt state. The outcome can be inefficient even from the narrow perspective of the asset-strippers.
Handle: RePEc:nbr:nberwo:11772
Template-Type: ReDIF-Paper 1.0
Title: How Does Information Technology Really Affect Productivity? Plant-Level Comparisons of Product Innovation, Process Improvement and Worker Skills
Classification-JEL: O33; J24; L25
Author-Name: Ann P. Bartel
Author-Name: Casey Ichniowski
Author-Name: Kathryn L. Shaw
Author-Person: psh162
Note: LS PR
Number: 11773
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11773
File-URL: http://www.nber.org/papers/w11773.pdf
File-Format: application/pdf
Publication-Status: published as Bartel, Ann P., Casey Ichniowski and Kathryn Shaw. “How Does Information Technology Affect Productivity? Plant-Level Comparisons of Product Innovation, Process Improvement and Worker Skills.” The Quarterly Journal of Economics (November 2007).
Abstract: This study presents new empirical evidence on the relationship between investments in new computer-based information technology (IT) and productivity by investigating several plant-level mechanisms through which IT could promote productivity growth. We have assembled a data set on plants with a common production technology in a narrowly defined industry - valve manufacturing - to study the effects of new IT on product innovation, production process improvements, employee skills and work practices. The homogeneity of the plants' production processes within this narrowly defined industry together with the estimation of longitudinal models eliminate many sources of unmeasured heterogeneity that could confound productivity comparisons in more aggregate data and in broader samples. The three main results of this study highlight how the adoption of new IT-enhanced machinery involves much more than just the installation of new equipment on the factory floor. We find that adoption of new IT-enhanced equipment (1)alters business strategies, moving valve manufacturers away from commodity production based on long production runs to customized production in smaller batches; (2)improves the efficiency of all stages of the production process with reductions in setup times supporting the change in business strategy and (3)increases the skill requirements of workers while promoting the adoption of new human resource practices.
Handle: RePEc:nbr:nberwo:11773
Template-Type: ReDIF-Paper 1.0
Title: The Complementary Role of Exports and R&D Investments as Sources of Productivity Growth
Classification-JEL: F14; O12; D42
Author-Name: Bee Yan Aw
Author-Name: Mark J. Roberts
Author-Person: pro190
Author-Name: Tor Winston
Note: ITI PR
Number: 11774
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11774
File-URL: http://www.nber.org/papers/w11774.pdf
File-Format: application/pdf
Publication-Status: published as The World Economy, 2007, Wol. 30, No. 1 (January), pp. 83-104
Abstract: This paper examines two potential channels of knowledge acquisition that underlie firm productivity growth in the Taiwanese electronics industry: participation in the export market and investments in R&D and/or worker training. We focus on the argument that a firm's own investments in R&D are necessary for the firm to assimilate knowledge or expertise gained from foreign contacts and thus are an important component of the process of learning-by-exporting. Firm-level panel data from 1986, 1991, and 1996 is used to investigate a firm's decision to invest in these two activities and to assess the effects of these investments on the firm's future total factor productivity. The empirical model consists of four equations. The firm's decisions to export and invest in R&D and/or worker training are modeled with a bivariate probit model that recognizes the interdependence of the decisions. We then estimate how participation in these investment activities alters the firm's future productivity trajectory while controlling for the potential selection bias introduced by endogenous firm exit. The primary empirical findings are that, on average, firms that export but do not invest in R&D and/or worker training have significantly higher future productivity than firms that do not participate in either activity. In addition, firms that export and invest in R&D and/or worker training have significantly higher future productivity than firms that only export. These findings are consistent with the hypothesis that export experience is an important source of productivity growth for Taiwanese firms and that firm investments in R&D and worker training facilitate their ability to benefit from their exposure to the export market.
Handle: RePEc:nbr:nberwo:11774
Template-Type: ReDIF-Paper 1.0
Title: Roughing it Up: Including Jump Components in the Measurement, Modeling and Forecasting of Return Volatility
Classification-JEL: C1; G1
Author-Name: Torben G. Andersen
Author-Name: Tim Bollerslev
Author-Person: pbo66
Author-Name: Francis X. Diebold
Author-Person: pdi1
Note: AP
Number: 11775
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11775
File-URL: http://www.nber.org/papers/w11775.pdf
File-Format: application/pdf
Publication-Status: published as Torben G. Andersen & Tim Bollerslev & Francis X. Diebold, 2007. "Roughing It Up: Including Jump Components in the Measurement, Modeling, and Forecasting of Return Volatility," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 701-720, 04.
Abstract: A rapidly growing literature has documented important improvements in financial return volatility measurement and forecasting via use of realized variation measures constructed from high-frequency returns coupled with simple modeling procedures. Building on recent theoretical results in Barndorff-Nielsen and Shephard (2004a, 2005) for related bi-power variation measures, the present paper provides a practical and robust framework for non-parametrically measuring the jump component in asset return volatility. In an application to the DM/$ exchange rate, the S&P500 market index, and the 30-year U.S. Treasury bond yield, we find that jumps are both highly prevalent and distinctly less persistent than the continuous sample path variation process. Moreover, many jumps appear directly associated with specific macroeconomic news announcements. Separating jump from non-jump movements in a simple but sophisticated volatility forecasting model, we find that almost all of the predictability in daily, weekly, and monthly return volatilities comes from the non-jump component. Our results thus set the stage for a number of interesting future econometric developments and important financial applications by separately modeling, forecasting, and pricing the continuous and jump components of the total return variation process.
Handle: RePEc:nbr:nberwo:11775
Template-Type: ReDIF-Paper 1.0
Title: A Century of Housing Shelter Prices: Is There a Downward Bias in the CPI?
Classification-JEL: C23; E22; L74; N12; N62
Author-Name: Robert J. Gordon
Author-Person: pgo50
Author-Name: Todd vanGoethem
Note: EFG PR
Number: 11776
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11776
File-URL: http://www.nber.org/papers/w11776.pdf
File-Format: application/pdf
Abstract: Tenant rental shelter is by far the most important component of the CPI, because it is used as a proxy for owner-occupied housing. This paper develops a wide variety of current and historical evidence dating back to 1914 to demonstrate that the CPI rent index is biased downward for all of the last century. The CPI rises roughly 2 percent per year slower than quality-unadjusted indexes of gross rent, setting a challenge for this research of measuring the rate of quality change in rental apartments. If quality increased at a rate of 2 percent per year, the CPI was not biased downward at all, but if quality increased at a slower rate of 1 percent per year, then the CPI was biased downward at a rate of 1 percent. Our analysis of a rich set of data sources goes backward chronologically, starting with a hedonic regression analysis on a large set of panel data from the American Housing Survey (AHS) covering 1975-2003. Prior to 1975, we have large micro data files from the U. S. Census of Housing extending back to 1930. In addition to the hedonic regression data, we stitch together data on the diffusion of important quality attributes of rental units, including plumbing, heating, and electrification, over the period 1918-73. Our final piece of evidence is based on a study of quality-adjusted rents in a single local community, Evanston IL, covering the period 1925-99. Our overall conclusions are surprisingly consistent across sources and eras, that the CPI bias was roughly -1.0 percent prior to the methodological improvements in the CPI that date from the mid-1980s. Our reliance on a wide variety of methodologies and evidence on types of quality change and their importance, while leaving the outcome still uncertain, at least in our view substantially narrows the range of possibilities regarding the history of CPI bias for rental shelter over the twentieth century.
Handle: RePEc:nbr:nberwo:11776
Template-Type: ReDIF-Paper 1.0
Title: What Caused the Decline in U.S. Business Cycle Volatility?
Classification-JEL: E0; E21; E22; E31; E50
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG ME
Number: 11777
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11777
File-URL: http://www.nber.org/papers/w11777.pdf
File-Format: application/pdf
Publication-Status: published as Robert J Gordon, 2005. "What Caused the Decline in US Business Cycle Volatility?," RBA Annual Conference Volume, in: Christopher Kent & David Norman (ed.), The Changing Nature of the Business Cycle Reserve Bank of Australia.
Abstract: This paper investigates the sources of the widely noticed reduction in the volatility of American business cycles since the mid 1980s. Our analysis of reduced volatility emphasizes the sharp decline in the standard deviation of changes in real GDP, of the output gap, and of the inflation rate. The primary results of the paper are based on a small three-equation macro model that includes equations for the inflation rate, the nominal Federal Funds rate, and the change in the output gap. The development and analysis of the model goes beyond the previous literature in two directions. First, instead of quantifying the role of shocks-in-general, it decomposes the effect of shocks between a specific set of supply shock variables in the model's inflation equation, and the error term in the output gap equation that is interpreted as representing "IS" shifts or "demand shocks". It concludes that the reduced variance of shocks was the dominant source of reduced business-cycle volatility. Supply shocks accounted for 80 percent of the volatility of inflation before 1984 and demand shocks the remainder. The high level of output volatility before 1984 is accounted for roughly two-thirds by the output errors (demand shocks) and the remainder by supply shocks. The output errors are tied to the paper's initial decomposition of the demand side of the economy, which concludes that three sectors — residential and inventory investment and Federal government spending, account for 50 percent in the reduction in the average standard deviation of real GDP when the 1950-83 and 1984-2004 intervals are compared. The second innovation in this paper is to reinterpret the role of changes in Fed monetary policy. Previous research on Taylor rule reaction functions identifies a shift after 1979 in the Volcker era toward inflation fighting with no concern about output, and then a shift in the Greenspan era to a combination of inflation fighting along with strong countercyclical responses to positive or negative output gaps. Our results accept this characterization of the Volcker era but find that previous estimates of Greenspan-era reaction functions are plagued by positive serial correlation. Once a correction for serial correlation is applied, the Greenspan-era reaction function looks almost identical to the pre-1979 "Burns" reaction function!
Handle: RePEc:nbr:nberwo:11777
Template-Type: ReDIF-Paper 1.0
Title: The 1920s and the 1990s in Mutual Reflection
Classification-JEL: E0; E21; E22; E32; N00; N12
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: DAE EFG
Number: 11778
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11778
File-URL: http://www.nber.org/papers/w11778.pdf
File-Format: application/pdf
Publication-Status: published as Rhode, Paul W. and Gianni Toniolo (eds.) The Global Economy in the 1990s: A Long-Run Perspective. New York: Cambridge University Press, 2006.
Abstract: This paper develops a new analysis of the U. S. economy in the 1920s that is illuminated by contrasts with the 1990s, and it also re-examines the causes of the Great Depression. In both the 1920s and the 1990s the acceleration of productivity growth linked to the delayed effects of previously invented "general purpose technologies" stimulated an increase in fixed investment that became excessive and proved to be unsustainable, while the productivity acceleration helps to account for low inflation in both decades. The uncanny parallel of the stock market boom, bubble, and collapse in 1995-2001 as in 1924-1930, reminds us that business cycles emerge from the complex interplay of multiple factors, not just one. Common elements between the two decades are overshadowed by differences, including the much larger share of agricultural output in the 1920s, the weakness of farm prices throughout the decade, and the role of collapsing farm prices in the pervasive post-1929 downward shift in aggregate demand. Another partly related difference was a high volatility of inventory accumulation that reflected the larger share of agriculture and manufacturing in the economy of the 1920s. Failures of public policy in the 1920s included the absence of deposit insurance, the unit-banking regulations that prevented the diversification of financial risk across regions, and the low margin requirements that exacerbated swings in stock market prices. Further, the 1920s witnessed the advent of protectionism and the sharp curtailment of immigration. The stability of the American economy after the 2000-01 collapse of investment and the stock market proves that good public policy matters, going beyond the narrowly defined operations of monetary and fiscal policy. Such highly diverse policies as banking regulation, deposit insurance, margin rules, reduction of tariffs, and loose restrictions on immigration all combine to make today's American economy more stable and less fragile than in the 1920s.
Handle: RePEc:nbr:nberwo:11778
Template-Type: ReDIF-Paper 1.0
Title: Financial Crises and Political Crises
Classification-JEL: F34; D72
Author-Name: Roberto Chang
Author-Person: pch80
Note: IFM POL
Number: 11779
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11779
File-URL: http://www.nber.org/papers/w11779.pdf
File-Format: application/pdf
Publication-Status: published as Chang, Roberto. “Financial Crises and Political Crises.” Journal of Monetary Economics 54 (2007): 2409-2420.
Abstract: This paper is an analysis of the simultaneous determination of financial default and political crises and its consequences. It focuses on a small open economy that faces a debt default decision. Crucially, this decision is made by a government that has superior information than the public about the social costs of default. Citizens can dismiss the government, and overrule its default decision, at the cost of a political crisis. If there is a divergence between the objectives of the government and its people, a political crisis may emerge in equilibrium. For this to be the case, the foreign debt must be large enough, and international reserves low. When this political equilibrium is seen as a part of a larger investment problem, there are equilibria in which crises are "only financial," and equilibria in which both default and political crises occur. In some cases, these two kinds of equilibria coexist and, in this sense, a loss of confidence by foreign lenders can exacerbate the likelihood of a political crisis. If so, international intervention in financial markets may ensure financial and political stability at little cost.
Handle: RePEc:nbr:nberwo:11779
Template-Type: ReDIF-Paper 1.0
Title: The Theory of Public Enforcement of Law
Classification-JEL: D23; D62; D63; H23; H26; K14; K42
Author-Name: A. Mitchell Polinsky
Author-Person: ppo94
Author-Name: Steven Shavell
Author-Person: psh42
Note: LE
Number: 11780
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11780
File-URL: http://www.nber.org/papers/w11780.pdf
File-Format: application/pdf
Publication-Status: published as Shavell, Steven and A. Mitchell Polinsky. “The Economic Theory of Public Enforcement of Law.” Journal of Economic Literature 38, 1 (March 2000): 45-76.
Publication-Status: published as Polinsky, A. Mitchell & Shavell, Steven, 2007. "The Theory of Public Enforcement of Law," Handbook of Law and Economics, Elsevier.
Abstract: This chapter of the forthcoming Handbook of Law and Economics surveys the theory of the public enforcement of law - the use of governmental agents (regulators, inspectors, tax auditors, police, prosecutors) to detect and to sanction violators of legal rules. The theoretical core of our analysis addresses the following basic questions: Should the form of the sanction imposed on a liable party be a fine, an imprisonment term, or a combination of the two? Should the rule of liability be strict or fault-based? If violators are caught only with a probability, how should the level of the sanction be adjusted? How much of society's resources should be devoted to apprehending violators? We then examine a variety of extensions of the central theory, including: activity level; errors; the costs of imposing fines; general enforcement; marginal deterrence; the principal-agent relationship; settlements; self-reporting; repeat offenders; imperfect knowledge about the probability and magnitude of sanctions; corruption; incapacitation; costly observation of wealth; social norms; and the fairness of sanctions.
Handle: RePEc:nbr:nberwo:11780
Template-Type: ReDIF-Paper 1.0
Title: Liability for Accidents
Classification-JEL: D00; D6; D8; K00
Author-Name: Steven Shavell
Author-Person: psh42
Note: LE
Number: 11781
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11781
File-URL: http://www.nber.org/papers/w11781.pdf
File-Format: application/pdf
Publication-Status: published as Shavell, Steven, 2007. "Liability for Accidents," Handbook of Law and Economics, Elsevier.
Abstract: This is a survey of legal liability for accidents. Three general aspects of accident liability are addressed. The first is the effect of liability on incentives, both whether to engage in activities (for instance, whether to drive) and how much care to exercise (at what speed to travel) to reduce risk when so doing. The second general aspect concerns risk-bearing and insurance, for the liability system acts as an implicit insurer for accident victims and it imposes risk on potential injurers (because they may have to pay judgments to victims). In this regard, victims' accident insurance and injurers' liability insurance are taken into account. The third general aspect of accident liability is its administrative expense, comprising the cost of legal services, the value of litigants' time, and the operating cost of the courts. A range of subtopics are considered, including product liability, causation, punitive damages, the judgment-proof problem, vicarious liability, and nonpecuniary harm. Liability is also compared to other methods of controlling harmful activities, notably, to corrective taxation and to regulation.
Handle: RePEc:nbr:nberwo:11781
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Wal-Mart on Local Labor Markets
Classification-JEL: J2; J3; R1
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Junfu Zhang
Author-Person: pzh105
Author-Name: Stephen Ciccarella
Author-Person: pci30
Note: LS
Number: 11782
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11782
File-URL: http://www.nber.org/papers/w11782.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Urban Economics. Volume 67, Issue 1 (2010), pages 1-168
Abstract: We estimate the effects of Wal-Mart stores on county-level retail employment and earnings, accounting for endogeneity of the location and timing of Wal-Mart openings that most likely biases the evidence against finding adverse effects of Wal-Mart stores. We address the endogeneity problem using a natural instrumental variables approach that arises from the geographic and time pattern of the opening of Wal-Mart stores, which slowly spread out from the first stores in Arkansas. The employment results indicate that a Wal-Mart store opening reduces county-level retail employment by about 150 workers, implying that each Wal-Mart worker replaces approximately 1.4 retail workers. This represents a 2.7 percent reduction in average retail employment. The payroll results indicate that Wal-Mart store openings lead to declines in county-level retail earnings of about $1.4 million, or 1.5 percent. Of course, these effects occurred against a backdrop of rising retail employment, and only imply lower retail employment growth than would have occurred absent the effects of Wal-Mart.
Handle: RePEc:nbr:nberwo:11782
Template-Type: ReDIF-Paper 1.0
Title: The U.S. Constitution and Monetary Powers: An Analysis of the 1787 Constitutional Convention and Constitutional Transformation of the Nation's Monetary System Emerged
Classification-JEL: K10; G20; E50; N21; H10
Author-Name: Farley Grubb
Author-Person: pgr272
Note: DAE
Number: 11783
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11783
File-URL: http://www.nber.org/papers/w11783.pdf
File-Format: application/pdf
Publication-Status: published as Grubb, Farley. "The U.S. Constitution and Monetary Powers: An Analysis of the 1787 Constitutional Convention and the Constitutional Transformation of the U.S. Monetary System." Financial History Review 13, 1 (April 2006): 43-71.
Abstract: The monetary powers embedded in the U.S. Constitution were revolutionary and led to a watershed transformation in the nation's monetary structure. They included determining what monies could be legal tender, who could emit fiat paper money, and who could incorporate banks. How the debate at the 1787 Constitutional Convention over these powers evolved and led the Founding Fathers to the specific powers adopted is presented and deconstructed. Why they took this path rather than replicate the successful colonial system and why they codified such powers into supreme law rather than leaving them to legislative debate and enactment are addressed.
Handle: RePEc:nbr:nberwo:11783
Template-Type: ReDIF-Paper 1.0
Title: Two Theories of Money Reconciled: The Colonial Puzzle Revisited with New Evidence
Classification-JEL: N11; E42
Author-Name: Farley Grubb
Author-Person: pgr272
Note: DAE
Number: 11784
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11784
File-URL: http://www.nber.org/papers/w11784.pdf
File-Format: application/pdf
Abstract: The purported failure of the classical quantity theory of money in the colonial economy is shown to be a failure of data and not a failure of theory. When new data on the quantity of specie in circulation is added to the current data on paper money and prices, and econometrically estimated in both short- and long-run monetary models, the long-debated anomaly regarding the performance of the classical quantity theory of money in the colonial economy disappears. How paper money was backed and could be exchanged for specie was important, but not in the way theorists assert.
Handle: RePEc:nbr:nberwo:11784
Template-Type: ReDIF-Paper 1.0
Title: Evaluation of Currency Regimes: The Unique Role of Sudden Stops
Classification-JEL: F3
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Yona Rubinstein
Author-Person: pru68
Note: IFM
Number: 11785
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11785
File-URL: http://www.nber.org/papers/w11785.pdf
File-Format: application/pdf
Publication-Status: published as Assaf Razin & Yona Rubinstein, 2006. "Evaluation of currency regimes: the unique role of sudden stops," Economic Policy, CEPR, CES, MSH, vol. 21(45), pages 119-152, 01.
Abstract: This paper tackles two established puzzles in international macroeconomics literature. The first is the lack of systematic difference in the macroeconomic performance across exchange rate regimes. The second is the absence of a clear empirical relationship between macroeconomic performance and capital-account liberalization. We suggest that both may appear because empirical methodologies fail to account for a latent economic "crisis state," influenced by exchange-rate and capital account regimes, and to allow the effects of a policy regime on growth to depend on whether the economy is in a crisis-prone latent state. In practice, we model and estimate the latent state of the economy as a crisis probability. In the framework we propose, exchange rate and capital market liberalization regimes can have both a direct effect on short-term growth, and an indirect effect on growth that is channelled through their effects on the crisis probability.
Handle: RePEc:nbr:nberwo:11785
Template-Type: ReDIF-Paper 1.0
Title: Pay Inequality, Pay Secrecy, and Effort: Theory and Evidence
Classification-JEL: C91; J41; M52
Author-Name: Gary Charness
Author-Person: pch205
Author-Name: Peter Kuhn
Author-Person: pku26
Note: LS
Number: 11786
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11786
File-URL: http://www.nber.org/papers/w11786.pdf
File-Format: application/pdf
Publication-Status: published as Gary Charness & Peter Kuhn, 2007. "Does Pay Inequality Affect Worker Effort? Experimental Evidence," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 693-723.
Abstract: We study worker and firm behavior in an efficiency-wage environment where co-workers' wages may potentially influence a worker's effort. Theoretically, we show that an increase in workers' responsiveness to co-workers' wages should lead profit-maximizing firms to compress wages under quite general conditions. Our laboratory experiments, on the other hand, show that --while workers' effort choices are highly sensitive to their own wages-- effort is not affected by co-workers' wages. As a consequence, even though firms in our experiment tended to compress wages when wages became public information, this did not raise their profits. Our experimental evidence therefore provides little support for the notion that inter-worker equity concerns can make wage compression, or wage secrecy, a profit-maximizing policy.
Handle: RePEc:nbr:nberwo:11786
Template-Type: ReDIF-Paper 1.0
Title: Openness Can be Good for Growth: The Role of Policy Complementarities
Classification-JEL: E61; F13; F43; O40
Author-Name: Roberto Chang
Author-Person: pch80
Author-Name: Linda Kaltani
Author-Name: Norman Loayza
Author-Person: plo190
Note: EFG IFM ITI
Number: 11787
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11787
File-URL: http://www.nber.org/papers/w11787.pdf
File-Format: application/pdf
Publication-Status: published as Chang, Roberto, Linda Kaltani and Norman Loayza. “Openness is Good for Growth: The Role of Policy Complementarities." Journal of Development Economics 90 (2009): 33-49.
Abstract: This paper studies how the effect of trade openness on economic growth depends on complementary reforms that help a country take advantage of international competition. This issue is illustrated with a simple Harris-Todaro model where output gains after trade liberalization depend on the degree of labor market flexibility. In that model, trade protection may ameliorate the problem of underemployment (and underproduction) in sectors affected by labor market distortions; hence trade liberalization unambiguously increases per capita income only when labor markets are sufficiently flexible. We then present some panel evidence on how the growth effect of openness depends on a variety of structural characteristics. For this purpose, we use a non-linear growth regression specification that interacts a proxy of trade openness with proxies of educational investment, financial depth, inflation stabilization, public infrastructure, governance, labor-market flexibility, ease of firm entry, and ease of firm exit. We find that the growth effects of openness are positive and economically significant if certain complementary reforms are undertaken.
Handle: RePEc:nbr:nberwo:11787
Template-Type: ReDIF-Paper 1.0
Title: Robustness of the Estimates of the Hybrid New Keynesian Phillips Curve
Classification-JEL: E31; E32
Author-Name: Jordi Gali
Author-Person: pga43
Author-Name: Mark Gertler
Author-Person: pge11
Author-Name: David Lopez-Salido
Author-Person: plo26
Note: EFG ME
Number: 11788
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11788
File-URL: http://www.nber.org/papers/w11788.pdf
File-Format: application/pdf
Publication-Status: published as Gali, Jordi & Gertler, Mark & David Lopez-Salido, J., 2005. "Robustness of the estimates of the hybrid New Keynesian Phillips curve," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1107-1118, September.
Abstract: Galí and Gertler (1999) developed a hybrid variant of the New Keynesian Phillips curve that relates inflation to real marginal cost, expected future inflation and lagged inflation. GMM estimates of the model suggest that forward looking behavior is dominant: The coefficient on expected future inflation substantially exceeds the coefficient on lagged inflation. While the latter differs significantly from zero, it is quantitatively modest. Several authors have suggested that our results are the product of specification bias or suspect estimation methods. Here we show that these claims are incorrect, and that our results are robust to a variety of estimation procedures, including GMM estimation of the closed form, and nonlinear instrumental variables. Also, as we discuss, many others have obtained very similar results to ours using a systems approach, including FIML techniques. Hence, the conclusions of GG and others regarding the importance of forward looking behavior remain robust.
Handle: RePEc:nbr:nberwo:11788
Template-Type: ReDIF-Paper 1.0
Title: Paternalism and Psychology
Classification-JEL: H1
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Note: EFG LE PE
Number: 11789
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11789
File-URL: http://www.nber.org/papers/w11789.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward. “Paternalism and Psychology.” The University of Chicago Law Review 73, 1 (2006): 133-156.
Abstract: Does bounded rationality make paternalism more attractive? This Essay argues that errors will be larger when suppliers have stronger incentives or lower costs of persuasion and when consumers have weaker incentives to learn the truth. These comparative statics suggest that bounded rationality will often increase the costs of government decisionmaking relative to private decisionmaking, because consumers have better incentives to overcome errors than government decisionmakers, consumers have stronger incentives to choose well when they are purchasing than when they are voting and it is more costly to change the beliefs of millions of consumers than a handful of bureaucrats. As such, recognizing the limits of human cognition may strengthen the case for limited government.
Handle: RePEc:nbr:nberwo:11789
Template-Type: ReDIF-Paper 1.0
Title: Does Hazardous Waste Matter? Evidence from the Housing Market and the Superfund Program
Classification-JEL: H4; Q51; Q53; R5; R2; I18
Author-Name: Michael Greenstone
Author-Person: pgr38
Author-Name: Justin Gallagher
Note: CH LS PE EEE
Number: 11790
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11790
File-URL: http://www.nber.org/papers/w11790.pdf
File-Format: application/pdf
Publication-Status: published as Michael Greenstone & Justin Gallagher, 2008. "Does Hazardous Waste Matter? Evidence from the Housing Market and the Superfund Program," The Quarterly Journal of Economics, MIT Press, vol. 123(3), pages 951-1003, August.
Abstract: Approximately $30 billion (2000$) has been spent on Superfund clean-ups of hazardous waste sites, and remediation efforts are incomplete at roughly half of the 1,500 Superfund sites. This study estimates the effect of Superfund clean-ups on local housing price appreciation. We compare housing price growth in the areas surrounding the first 400 hazardous waste sites to be cleaned up through the Superfund program to the areas surrounding the 290 sites that narrowly missed qualifying for these clean-ups. We cannot reject that the clean-ups had no effect on local housing price growth, nearly two decades after these sites became eligible for them. This finding is robust to a series of specification checks, including the application of a quasi-experimental regression discontinuity design based on knowledge of the selection rule. Overall, the preferred estimates suggest that the benefits of Superfund clean-ups as measured through the housing market are substantially lower than the $43 million mean cost of Superfund clean-ups.
Handle: RePEc:nbr:nberwo:11790
Template-Type: ReDIF-Paper 1.0
Title: Output Costs, Currency Crises, and Interest Rate Defense of a Peg
Classification-JEL: F41; E52
Author-Name: Amartya Lahiri
Author-Person: pla150
Author-Name: Carlos A. Vegh
Author-Person: pve34
Note: IFM
Number: 11791
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11791
File-URL: http://www.nber.org/papers/w11791.pdf
File-Format: application/pdf
Publication-Status: published as Amartya Lahiri & Carlos A. Végh, 2007. "Output Costs, Currency Crises and Interest Rate Defence of a Peg," Economic Journal, Royal Economic Society, vol. 117(516), pages 216-239, 01.
Abstract: Central banks typically raise short-term interest rates to defend currency pegs. Higher interest rates, however, often lead to a credit crunch and an output contraction. We model this trade-off in an optimizing, first-generation model in which the crisis may be delayed but is ultimately inevitable. We show that higher interest rates may delay the crisis, but raising interest rates beyond a certain point may actually bring forward the crisis due to the large negative output effect. The optimal interest rate defense involves setting high interest rates (relative to the no defense case) both before and at the moment of the crisis. Furthermore, while the crisis could be delayed even further, it is not optimal to do so.
Handle: RePEc:nbr:nberwo:11791
Template-Type: ReDIF-Paper 1.0
Title: Establishing Credibility: Evolving Perceptions of the European Central Bank
Classification-JEL: F3; E5; E6
Author-Name: Linda S. Goldberg
Author-Person: pgo256
Author-Name: Michael W. Klein
Author-Person: pkl9
Note: IFM ME
Number: 11792
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11792
File-URL: http://www.nber.org/papers/w11792.pdf
File-Format: application/pdf
Abstract: The perceptions of a central bank's inflation aversion may reflect institutional structure or, more dynamically, the history of its policy decisions. In this paper, we present a novel empirical framework that uses high frequency data to test for persistent variation in market perceptions of central bank inflation aversion. The first years of the European Central Bank (ECB) provide a natural experiment for this model. Tests of the effect of news announcements on the slope of yield curves in the euro-area, and on the euro/dollar exchange rate, suggest that the market's perception of the policy stance of the ECB during its first six years of operation significantly evolved, with a belief in its inflation aversion increasing in the wake of its monetary tightening. In contrast, tests based on the response of the slope of the United States yield curve to news offer no comparable evidence of any change in market perceptions of the inflation aversion of the Federal Reserve.
Handle: RePEc:nbr:nberwo:11792
Template-Type: ReDIF-Paper 1.0
Title: An Analysis of the Impact of Affirmative Action Programs on Self-Employment in the Construction Industry
Classification-JEL: J4
Author-Name: David G. Blanchflower
Author-Person: pbl22
Author-Name: Jon Wainwright
Note: LE LS
Number: 11793
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11793
File-URL: http://www.nber.org/papers/w11793.pdf
File-Format: application/pdf
Abstract: The main findings of this paper are that despite the existence of various affirmative action programs designed to improve the position of women and minorities in public construction, little has changed in the last twenty five years. We present evidence showing that where race conscious affirmative action programs exist they appear to generate significant improvements: when these programs are removed or replaced with race-neutral programs the utilization of minorities and women in public construction declines rapidly. We show that the programs have not helped minorities to become self-employed or to raise their earnings over the period 1979-2004, using data from the Current Population Survey and the Census, but have improved the position of white females. There has been a growth in incorporated self-employment rates of white women in construction such that currently their rate is significantly higher than that of white men. The data are suggestive of the possibility that some of these companies are 'fronts' which are actually run by their white male spouses or sons to take advantage of the affirmative action programs.
Handle: RePEc:nbr:nberwo:11793
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Randomized School Admissions on Voter Participation
Classification-JEL: D72; I28
Author-Name: Justine S. Hastings
Author-Person: pha804
Author-Name: Thomas J. Kane
Author-Name: Douglas O. Staiger
Author-Person: pst466
Author-Name: Jeffrey M. Weinstein
Note: CH ED LS PE IO POL
Number: 11794
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11794
File-URL: http://www.nber.org/papers/w11794.pdf
File-Format: application/pdf
Publication-Status: published as Hastings, Justine, Thomas Kane, Douglas Staiger, and Jeffrey Weinstein. “The Effect of Randomized School Admissions on Voter Participation." Journal of Public Economics (June 2007).
Abstract: There is little causal evidence on the effect of economic and policy outcomes on voting behavior. This paper uses randomized outcomes from a school choice lottery to examine if lottery outcomes affect voting behavior in a school board election. We show that losing the lottery has no significant impact on overall voting behavior; however, among white families, those with above median income and prior voting history, lottery losers were significantly more likely to vote than lottery winners. Using propensity score methods, we compare the voting of lottery participants to similar families who did not participate in the lottery. We find that losing the school choice lottery caused an increase in voter turnout among whites, while winning the lottery had no effect relative to non-participants. Overall, our empirical results lend support to models of expressive and retrospective voting, where likely voters are motivated to vote by past negative policy outcomes.
Handle: RePEc:nbr:nberwo:11794
Template-Type: ReDIF-Paper 1.0
Title: Stuck on Gold: Real Exchange Rate Volatility and the Rise and Fall of the Gold Standard
Classification-JEL: F33; F41; N10
Author-Name: Natalia Chernyshoff
Author-Name: David S. Jacks
Author-Person: pja138
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE IFM ITI
Number: 11795
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11795
File-URL: http://www.nber.org/papers/w11795.pdf
File-Format: application/pdf
Publication-Status: published as Chernyshoff, Natalia, David S. Jacks and Alan M.Taylor. “Stuck on Gold: Real Exchange Rate Volatility and the Rise and Fall of the Gold Standard, 1875-1939.” Journal of International Economics 77, 2 (2009): 195-205.
Abstract: Did adoption of the gold standard exacerbate or diminish macroeconomic volatility? Supporters thought so, critics thought not, and theory offers ambiguous messages. A hard exchange-rate regime such as the gold standard might limit monetary shocks if it ties the hands of policy makers. But any decision to forsake exchange-rate flexibility might compromise shock absorption in a world of real shocks and nominal stickiness. A simple model shows how a lack of flexibility can be discerned in the transmission of terms of trade shocks. Evidence on the relationship between real exchange rate volatility and terms of trade volatility from the late nineteenth and early twentieth century exposes a dramatic change. The classical gold standard did absorb shocks, but the interwar gold standard did not, and this historical pattern suggests that the interwar gold standard was a poor regime choice.
Handle: RePEc:nbr:nberwo:11795
Template-Type: ReDIF-Paper 1.0
Title: From the Cradle to the Labor Market? The Effect of Birth Weight on Adult Outcomes
Classification-JEL: J1; I1
Author-Name: Sandra E. Black
Author-Person: pbl92
Author-Name: Paul J. Devereux
Author-Person: pde187
Author-Name: Kjell Salvanes
Author-Person: psa3
Note: CH ED EH LS
Number: 11796
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11796
File-URL: http://www.nber.org/papers/w11796.pdf
File-Format: application/pdf
Publication-Status: published as Sandra E Black & Paul J Devereux & Kjell G Salvanes, 2007. "From the Cradle to the Labor Market? The Effect of Birth Weight on Adult Outcomes," The Quarterly Journal of Economics, MIT Press, vol. 122(1), pages 409-439, 02.
Abstract: Lower birth weight babies have worse outcomes, both short-run in terms of one-year mortality rates and longer run in terms of educational attainment and earnings. However, recent research has called into question whether birth weight itself is important or whether it simply reflects other hard-to-measure characteristics. By applying within twin techniques using a unique dataset from Norway, we examine both short-run and long-run outcomes for the same cohorts. We find that birth weight does matter; very small short-run fixed effect estimates can be misleading because longer-run effects on outcomes such as height, IQ, earnings, and education are significant and similar in magnitude to OLS estimates. Our estimates suggest that eliminating birth weight differences between socio-economic groups would have sizeable effects on the later outcomes of children from poorer families.
Handle: RePEc:nbr:nberwo:11796
Template-Type: ReDIF-Paper 1.0
Title: Motivations for Public Equity Offers: An International Perspective
Classification-JEL: F3; G3
Author-Name: Woojin Kim
Author-Person: pki279
Author-Name: Michael S. Weisbach
Note: CF
Number: 11797
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11797
File-URL: http://www.nber.org/papers/w11797.pdf
File-Format: application/pdf
Publication-Status: published as Kim, Woojin & Weisbach, Michael S., 2008. "Motivations for public equity offers: An international perspective," Journal of Financial Economics, Elsevier, vol. 87(2), pages 281-307, February.
Abstract: This paper examines the extent to which investment financing and market-timing explanations motivate public equity offers. We consider a sample of 16,958 initial public offerings and 12,373 seasoned equity offerings from 38 countries between 1990 and 2003. We provide estimates of the change in each accounting variable for each dollar raised in an equity offer, and for each dollar of internally generated cash. Our estimates imply that firms invest 18.8 cents in R&D and 7.3 cents in capital expenditures for an incremental dollar raised in an equity offer during the year following the offer, rising to 84.8 cents and 14.3 cents when the change is measured over a four-year period. These findings are consistent with one motive for the equity offer being to raise capital for investment. However, firms also hold onto much of the cash they raised, and this fraction is higher when the firm has a high q. In addition, firms are more likely to issue secondary shares, which are usually sold by insiders, when q is high, enabling insiders to benefit personally from potential overvaluation. These results suggest that market timing as well as investment financing is a motivation for equity offers.
Handle: RePEc:nbr:nberwo:11797
Template-Type: ReDIF-Paper 1.0
Title: Foreign Subsidization and Excess Capacity
Classification-JEL: F13; L11
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: Wesley W. Wilson
Author-Person: pwi277
Note: ITI
Number: 11798
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11798
File-URL: http://www.nber.org/papers/w11798.pdf
File-Format: application/pdf
Publication-Status: published as Blonigen, Bruce A. & Wilson, Wesley W., 2010. "Foreign subsidization and excess capacity," Journal of International Economics, Elsevier, vol. 80(2), pages 200-211, March.
Abstract: The U.S. steel industry has long held that foreign subsidization and excess capacity has led to its long-run demise, yet no one has formally examined this hypothesis. In this paper, we incorporate foreign subsidization considerations into a model based on Staiger and Wolak's (1992) cyclical-dumping framework and illustrate testable implications of both cyclical excess capacity and structural excess capacity stemming from foreign subsidization. We then use detailed product- and foreign country-level data on steel exports to the U.S. market from 1979 through 2002 to estimate these excess capacity effects. The results provide strong evidence of both cyclical and structural excess capacity effects for exports to the U.S. market. However, the effects are confined to such a narrow range of country-product combinations that it is unlikely that such effects were a significant factor in the fortunes of U.S. steel firms over the past decades.
Handle: RePEc:nbr:nberwo:11798
Template-Type: ReDIF-Paper 1.0
Title: Creative Careers: The Life Cycles of Nobel Laureates in Economics
Classification-JEL: J24; O30; B31
Author-Name: Bruce A. Weinberg
Author-Person: pwe74
Author-Name: David W. Galenson
Note: LS
Number: 11799
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11799
File-URL: http://www.nber.org/papers/w11799.pdf
File-Format: application/pdf
Publication-Status: published as Bruce A. Weinberg & David W. Galenson, 2019. "Creative Careers: The Life Cycles of Nobel Laureates in Economics," De Economist, Springer, vol. 167(3), pages 221-239, September.
Abstract: This paper studies life cycle creativity among Nobel laureate economists. We identify two distinct life cycles of scholarly creativity. Experimental innovators work inductively, accumulating knowledge from experience. Conceptual innovators work deductively, applying abstract principles. We find that conceptual innovators do their most important work earlier in their careers than experimental laureates. For instance, our estimates imply that the probability that the most conceptual laureate publishes his single best work peaks at age 25 compared to the mid-50s for the most experimental laureate. Thus while experience benefits experimental innovators, newness to a field benefits conceptual innovators.
Handle: RePEc:nbr:nberwo:11799
Template-Type: ReDIF-Paper 1.0
Title: The Industry Origins of Japanese Economic Growth
Classification-JEL: C82; D24; E23
Author-Name: Dale W. Jorgenson
Author-Person: pjo23
Author-Name: Koji Nomura
Note: EFG PR
Number: 11800
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11800
File-URL: http://www.nber.org/papers/w11800.pdf
File-Format: application/pdf
Publication-Status: published as Jorgenson, Dale W. and Koji Nomura. "The Industry Origins Of Japanese Economic Growth," Journal of the Japanese and International Economies, 2005, v19(4,Dec), 482-542.
Abstract: This paper presents new data on the sources of growth for the Japanese economy over the period 1960- 2000. The principal innovation is the incorporation of detailed information for individual industries, including those involved in the production of computers, communications equipment, and electronic components as information technology equipment. We show that economic growth is dominated by investments and productivity growth in information technology, both for individual industries and the economy as a whole. We also show that the revival of total factor productivity growth accounts for the modest resurgence of the Japanese economy since 1995.
Handle: RePEc:nbr:nberwo:11800
Template-Type: ReDIF-Paper 1.0
Title: Information Technology and the Japanese Economy
Classification-JEL: D24; D30; O57
Author-Name: Dale W. Jorgenson
Author-Person: pjo23
Author-Name: Kazuyuki Motohashi
Author-Person: pmo187
Note: PR
Number: 11801
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11801
File-URL: http://www.nber.org/papers/w11801.pdf
File-Format: application/pdf
Publication-Status: published as Jorgenson, Dale W. and Kazuyuki Motohashi. "Information Technology And The Japanese Economy," Journal of the Japanese and International Economies, 2005, v19(4,Dec), 460-481.
Publication-Status: published as Information Technology and the G7 Economies, Dale W. Jorgenson. in Hard-to-Measure Goods and Services: Essays in Honor of Zvi Griliches, Berndt and Hulten. 2007
Abstract: In this paper we compare sources of economic growth in Japan and the United States from 1975 through 2003, focusing on the role of information technology (IT). We have adjusted Japanese data to conform to U.S. definitions in order to provide a rigorous comparison between the two economies. The adjusted data show that the share of the Japanese gross domestic product devoted to investment in computers, telecommunications equipment, and software rose sharply after 1995. The contribution of total factor productivity growth from the IT sector in Japan also increased, while the contributions of labor input and productivity growth from the Non-IT sector lagged far behind the United States. Our projection of potential economic growth in Japan from for the next decade is substantially below that in the United States, mainly due to slower growth of labor input. Our projections of labor productivity growth in the two economies are much more similar.
Handle: RePEc:nbr:nberwo:11801
Template-Type: ReDIF-Paper 1.0
Title: Choice and Competition in Local Education Markets
Classification-JEL: I20; H41; R21
Author-Name: Patrick Bayer
Author-Person: pba636
Author-Name: Robert McMillan
Note: ED PE
Number: 11802
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11802
File-URL: http://www.nber.org/papers/w11802.pdf
File-Format: application/pdf
Abstract: Prompted by widespread concerns about public school quality, a growing empirical literature has measured the effects of greater choice on school performance. This paper contributes to that literature in three ways. First, it makes the observation that the overall effect of greater choice, which has been the focus of prior research, can be decomposed into demand and supply components: knowing the relative sizes of the two is very relevant for policy. Second, using rich data from a large metropolitan area, it provides a direct and intuitive measure of the competition each school faces. This takes the form of a school-specific elasticity that measures the extent to which reductions in school quality would lead to reductions in demand. Third, the paper provides evidence that these elasticity measures are strongly related to school performance: a one-standard deviation increase in the competitiveness of a school's local environment within the Bay Area leads to a 0.15 standard deviation increase in average test scores. This positive correlation is robust and is consistent with strong supply responsiveness on the part of public schools, of relevance to the broader school choice debate.
Handle: RePEc:nbr:nberwo:11802
Template-Type: ReDIF-Paper 1.0
Title: What Can Rational Investors Do About Excessive Volatility and Sentiment Fluctuations?
Classification-JEL: G1
Author-Name: Bernard Dumas
Author-Person: pdu519
Author-Name: Alexander Kurshev
Author-Name: Raman Uppal
Note: AP
Number: 11803
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11803
File-URL: http://www.nber.org/papers/w11803.pdf
File-Format: application/pdf
Abstract: Our objective is to understand the trading strategy that would allow an investor to take advantage of "excessive" stock price volatility and "sentiment" fluctuations. We construct a general equilibrium model of sentiment. In it, there are two classes of agents and stock prices are excessively volatile because one class is overconfident about a public signal. This class of irrational agents changes its expectations too often, sometimes being excessively optimistic, sometimes being excessively pessimistic. We find that because irrational traders introduce an additional source of risk, rational investors reduce the proportion of wealth invested into equity except when they are extremely optimistic about future growth. Moreover, their optimal portfolio strategy is based not just on a current price divergence but also on a prediction concerning the speed of convergence. Thus, the portfolio strategy includes a protection in case there is a deviation from that prediction. We find that long maturity bonds are an essential accompaniment of equity investment, as they serve to hedge this "sentiment risk." The answer to the question posed in the title is: "There is little that rational investors can do optimally to exploit, and hence, eliminate excessive volatility, except in the very long run."
Handle: RePEc:nbr:nberwo:11803
Template-Type: ReDIF-Paper 1.0
Title: Market Structure, Outgrower contracs and Farm Output. Evidence from Cotton Reforms in Zambia
Classification-JEL: O12; O13; Q12
Author-Name: Irene Brambilla
Author-Name: Guido Porto
Author-Person: ppo196
Note: AP
Number: 11804
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11804
File-URL: http://www.nber.org/papers/w11804.pdf
File-Format: application/pdf
Publication-Status: published as Irene Brambilla & Guido G. Porto, 2011. "Market structure, outgrower contracts, and farm output. Evidence from cotton reforms in Zambia," Oxford Economic Papers, Oxford University Press, vol. 63(4), pages 740-766, December.
Abstract: This paper investigates the dynamic impacts of cotton marketing reforms on farm output in rural Zambia. Following liberalization and the elimination of the Zambian cotton marketing board, the sector developed an outgrower scheme whereby cotton firms provided credit, access to inputs and output markets, and technical assistance to the farmers. There are two distinctive phases of the reforms: a failure of the outgrower contracts, due to farmers' debt renegation, firm hold up, and lack of coordination among firms and farms, and a subsequent period of success of the scheme, due to enhanced contract enforcement and commitment. We find interesting dynamics in the sector. During the phase of failure, farmers were pushed back into subsistence and cotton yields per hectare declined. With the improvement of the outgrower scheme, farmers devoted larger shares of land to cash crops, and farm output significantly increased.
Handle: RePEc:nbr:nberwo:11804
Template-Type: ReDIF-Paper 1.0
Title: Parental Preferences and School Competition: Evidence from a Public School Choice Program
Classification-JEL: I0; I20; I28
Author-Name: Justine S. Hastings
Author-Person: pha804
Author-Name: Thomas J. Kane
Author-Name: Douglas O. Staiger
Author-Person: pst466
Note: CH ED PE IO
Number: 11805
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11805
File-URL: http://www.nber.org/papers/w11805.pdf
File-Format: application/pdf
Abstract: This paper uses data from the implementation of a district-wide public school choice plan in Mecklenburg County, North Carolina to estimate preferences for school characteristics and examine their implications for the local educational market. We use parental rankings of their top three choices of schools matched with student demographic and test score data to estimate a mixed-logit discrete choice demand model for schools. We find that parents value proximity highly and the preference attached to a school's mean test score increases with student's income and own academic ability. We also find considerable heterogeneity in preferences even after controlling for income, academic achievement and race, with strong negative correlations between preferences for academics and school proximity. Simulations of parental responses to test score improvements at a school suggest that the demand response at high-performing schools would be larger than the response at low-performing schools, leading to disparate demand-side pressure to improve performance under school choice.
Handle: RePEc:nbr:nberwo:11805
Template-Type: ReDIF-Paper 1.0
Title: Real Wage Rigidities and the New Keynesian Model
Classification-JEL: E32; E50
Author-Name: Olivier Blanchard
Author-Person: pbl2
Author-Name: Jordi Gali
Author-Person: pga43
Note: EFG ME
Number: 11806
Creation-Date: 2005-11
Order-URL: http://www.nber.org/papers/w11806
File-URL: http://www.nber.org/papers/w11806.pdf
File-Format: application/pdf
Publication-Status: published as Olivier Blanchard & Jordi Galí, 2007. "Real Wage Rigidities and the New Keynesian Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 35-65, 02.
Publication-Status: published as Olivier J. Blanchard & Jordi GalÃ, 2005. "Real wage rigidities and the New Keynesian model," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
Abstract: Most central banks perceive a trade-off between stabilizing inflation and stabilizing the gap between output and desired output. However, the standard new Keynesian framework implies no such trade-off. In that framework, stabilizing inflation is equivalent to stabilizing the welfare-relevant output gap. In this paper, we argue that this property of the new Keynesian framework, which we call the "divine coincidence", is due to a special feature of the model: the absence of non trivial real imperfections. We focus on one such real imperfection, namely, real wage rigidities. When the baseline new Keynesian model is extended to allow for real wage rigidities, the divine coincidence disappears, and central banks indeed face a trade-off between stabilizing inflation and stabilizing the welfare-relevant output gap. We show that not only does the extended model have more realistic normative implications, but it also has appealing positive properties. In particular, it provides a natural interpretation for the dynamic inflation--unemployment relation found in the data.
Handle: RePEc:nbr:nberwo:11806
Template-Type: ReDIF-Paper 1.0
Title: Well-Being, Social Capital and Public Policy: What's New?
Classification-JEL: I31; Z13; P52
Author-Name: John Helliwell
Author-Person: phe368
Note: LS
Number: 11807
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11807
File-URL: http://www.nber.org/papers/w11807.pdf
File-Format: application/pdf
Publication-Status: published as Helliwell, John F. "Well-Being, Social Capital And Public Policy: What's New?," Economic Journal, 2006, v116(510,Mar), C34-C45.
Abstract: This paper summarizes recent empirical research on the determinants of subjective well-being. Results from national and international samples suggest that measures of social capital, including especially the corollary measures of specific and general trust, have substantial effects on well-being beyond those flowing through economic channels. Cross-national samples (supported by parallel analysis of suicide data) show large well-being effects from social capital and from the quality of government. Finally, Canadian life-satisfaction data show that several non-financial job characteristics, and especially the climate of workplace trust, have very large income-equivalent effects.
Handle: RePEc:nbr:nberwo:11807
Template-Type: ReDIF-Paper 1.0
Title: Searching for Better Prospects: Endogenizing Falling Job Tenure and Private Pension Coverage
Classification-JEL: E24; J32; J41; J63; J64
Author-Name: Leora Friedberg
Author-Name: Michael T. Owyang
Author-Person: pow3
Author-Name: Tara M. Sinclair
Note: AG LS
Number: 11808
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11808
File-URL: http://www.nber.org/papers/w11808.pdf
File-Format: application/pdf
Publication-Status: published as Friedberg Leora & Owyang Michael T & Sinclair Tara M, 2006. "Searching For Better Prospects: Endogenizing Falling Job Tenure and Private Pension Coverage," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-42, August.
Abstract: Recent declines in job tenure have coincided with a shift away from traditional defined benefit (DB) pensions, which reward long tenure. Recent evidence also points to an increase in job-to-job movements by workers, and we document gains in relative wages of job-to-job movers over a similar period. We develop a search model in which firms may offer tenure-based contracts like DB pensions to reduce the incidence of costly on-the-job search by workers. Reduced search costs can, under fairly general conditions, lower the value of deterring search and the use of DB pensions.
Handle: RePEc:nbr:nberwo:11808
Template-Type: ReDIF-Paper 1.0
Title: Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart
Classification-JEL: D1; D3; D4; D6
Author-Name: Jerry Hausman
Author-Person: pha893
Author-Name: Ephraim Leibtag
Author-Person: ple514
Note: EFG PR
Number: 11809
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11809
File-URL: http://www.nber.org/papers/w11809.pdf
File-Format: application/pdf
Publication-Status: published as Hausman, Jerry, Ephraim Leibtag. "Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart." Journal of Applied Econometrics 22, 7 (December 2007): 1157-77.
Abstract: Consumers often benefit from increased competition in differentiated product settings. In this paper we consider consumer benefits from increased competition in a differentiated product setting: the spread of non-traditional retail outlets. In this paper we estimate consumer benefits from supercenter entry and expansion into markets for food. We estimate a discrete choice model for household shopping choice of supercenters and traditional outlets for food. We have panel data for households so we can follow their shopping patterns over time and allow for a fixed effect in their shopping behavior. We find the benefits to be substantial, both in terms of food expenditure and in terms of overall consumer expenditure. Low income households benefit the most.
Handle: RePEc:nbr:nberwo:11809
Template-Type: ReDIF-Paper 1.0
Title: Who Benefits from New Medical Technologies? Estimates of Consumer and Producer Surpluses for HIV/AIDS Drugs
Classification-JEL: I1
Author-Name: Tomas J. Philipson
Author-Person: pph37
Author-Name: Anupam B. Jena
Author-Person: pje47
Note: EH PR
Number: 11810
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11810
File-URL: http://www.nber.org/papers/w11810.pdf
File-Format: application/pdf
Publication-Status: published as Tomas Philipson & Anupam Jena, 2006. "Who Benefits from New Medical Technologies? Estimates of Consumer and Producer Surpluses for HIV/AIDS Drugs," Forum for Health Economics & Policy, Berkeley Electronic Press, vol. 0(1), pages 1005-1005.
Abstract: The social value of an innovation is comprised of the value to consumers and the value to innovators. We estimate that for the HIV/AIDS therapies that entered the market from the late 1980's onwards, innovators appropriated only 5% of the social surplus arising from these new technologies. Despite the high annual costs of these drugs to patients, the low share of social surplus going to innovators raises concerns about advocating cost-effectiveness criteria that would further reduce this share, and hence further reduce incentives for innovation.
Handle: RePEc:nbr:nberwo:11810
Template-Type: ReDIF-Paper 1.0
Title: Aching to Retire? The Rise in the Full Retirement Age and its Impact on the Disability Rolls
Classification-JEL: H53; H55; J21; J26
Author-Name: Mark Duggan
Author-Person: pdu194
Author-Name: Perry Singleton
Author-Person: psi330
Author-Name: Jae Song
Author-Person: pso277
Note: AG EH PE
Number: 11811
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11811
File-URL: http://www.nber.org/papers/w11811.pdf
File-Format: application/pdf
Publication-Status: published as Duggan, Mark, Perry Singelton and Jae Song. "Aching to Retire? The Rise in the Full Retirement Age and it's Impact on the Disability Rolls." Journal of Public Economics 91, 7 (August 2007): 1327-50.
Abstract: The Social Security Amendments of 1983 reduced the generosity of Social Security retired worker benefits in the U.S. by increasing the program's full retirement age from 65 to 67 and increasing the penalty for claiming benefits at the early retirement age of 62. These changes were phased in gradually, so that individuals born in or before 1937 were unaffected and those born in 1960 or later were fully affected. No corresponding changes were made to the program's disabled worker benefits, and thus the relative generosity of Social Security Disability Insurance (SSDI) benefits increased. In this paper, we investigate the effect of the Amendments on SSDI enrollment by exploiting variation across birth cohorts in the policy-induced reduction in the present value of retired worker benefits. Our findings indicate that the Amendments significantly increased SSDI enrollment since 1983, with an additional 0.6 percent of men and 0.9 percent of women between the ages of 45 and 64 receiving SSDI benefits in 2005 as a result of the changes. Our results further indicate that these effects will continue to increase during the next two decades, as those fully exposed to the reduction in retirement benefit generosity reach their fifties and early sixties.
Handle: RePEc:nbr:nberwo:11811
Template-Type: ReDIF-Paper 1.0
Title: How Much is Too Much? The Influence of Preschool Centers on Children's Social and Cognitive Development
Classification-JEL: I2; I3
Author-Name: Susanna Loeb
Author-Name: Margaret Bridges
Author-Name: Bruce Fuller
Author-Name: Russ Rumberger
Author-Name: Daphna Bassok
Author-Person: pba1240
Note: CH ED
Number: 11812
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11812
File-URL: http://www.nber.org/papers/w11812.pdf
File-Format: application/pdf
Publication-Status: published as Loeb, Susanna, Margaret Bridges, Daphna Bassok, Bruce Fuller and Russell W. Rumbergerd. "How much is too much? The influence of preschool centers on children's social and cognitive development." Economics of Education Review 26, 1 (February 2007): 52-66.
Abstract: Previous research has demonstrated that attending center care is associated with cognitive benefits for young children. However, little is known about the ideal age for children to enter such care or the "right" amount of time, both weekly and yearly, for children to attend center programs. Using national data from the Early Childhood Longitudinal Study (ECLS-K), this paper asks whether there are optimal levels of center care duration and intensity and whether these levels vary by race or income. We consider pre-reading and math skills as measured by assessments administered at the beginning of kindergarten, as well as teacher-reported social-behavioral measures. We find that on average attending center care is associated with positive gains in pre-reading and math skills, but negative social behavior. Across economic levels, children who start center care between ages two and three see greater gains than those who start centers earlier or later. Further, starting earlier than age 2 is related to more pronounced negative social effects. Results for center intensity vary by income levels and race. For instance, poor and middle-income children see academic gains from attending center intensively (more than 30 hours a week), but wealthier children do not; and while intense center negatively impacts Black and White's social development, it does not have any negative impact for Hispanic children.
Handle: RePEc:nbr:nberwo:11812
Template-Type: ReDIF-Paper 1.0
Title: Racial Sorting and Neighborhood Quality
Classification-JEL: H0; J7; R0; R2
Author-Name: Patrick Bayer
Author-Person: pba636
Author-Name: Robert McMillan
Note: ED
Number: 11813
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11813
File-URL: http://www.nber.org/papers/w11813.pdf
File-Format: application/pdf
Abstract: In cities throughout the United States, blacks tend to live in significantly poorer and lower-amenity neighborhoods than whites. An obvious first-order explanation for this is that an individual's race is strongly correlated with socioeconomic status (SES), and poorer households can only afford lower quality neighborhoods. This paper conjectures that another explanation may be as important. The limited supply of high-SES black neighborhoods in most U.S. metropolitan areas means that neighborhood race and neighborhood quality are explicitly bundled together. In the presence of any form of segregating preferences, this bundling raises the implicit price of neighborhood amenities for blacks relative to whites, prompting our conjecture -- that racial differences in the consumption of neighborhood amenities are significantly exacerbated by sorting on the basis of race, given the small numbers of blacks and especially high-SES blacks in many cities. To provide evidence on this conjecture, we estimate an equilibrium sorting model with detailed restricted Census microdata and use it to carry out informative counterfactual simulations. Results from these indicate that racial sorting explains a substantial portion of the gap between whites and blacks in the consumption of a wide range of neighborhood amenities -- in fact, as much as underlying socioeconomic differences across race. We also show that the adverse effects of racial sorting for blacks are fundamentally related to the small proportion of blacks in the U.S. metropolitan population. These results emphasize the significant role of racial sorting in the inter-generational persistence of racial differences in education, income, and wealth.
Handle: RePEc:nbr:nberwo:11813
Template-Type: ReDIF-Paper 1.0
Title: How Big a Problem is Too Big to Fail?
Classification-JEL: G21; G28
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: ME
Number: 11814
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11814
File-URL: http://www.nber.org/papers/w11814.pdf
File-Format: application/pdf
Publication-Status: published as Mishkin, Frederic. “How Big a Problem is Too Big to Fail?” Journal of Economic Literature vol XLIV (December 2006): 988-1004.
Abstract: This review essay examines whether too-big-to-fail is as serious a problem as Gary Stern and Ron Feldman contend. This essay argues that Stern and Feldman overstate the importance of the too-big-to-fail problem and do not give enough credit to the FDICIA legislation of 1991 for improving bank regulation and supervision. However, this criticism of the Stern and Feldman book does not detract from many of its messages. Even if the too-big-to-fail problem is not as serious as they contend, the policies they outline can make it less likely that a banking crisis will occur even if driven by other factors.
Handle: RePEc:nbr:nberwo:11814
Template-Type: ReDIF-Paper 1.0
Title: Optimal Monetary and Fiscal Policy in a Currency Union
Classification-JEL: E52; F41; E62
Author-Name: Jordi Gali
Author-Person: pga43
Author-Name: Tommaso Monacelli
Author-Person: pmo32
Note: EFG IFM ME
Number: 11815
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11815
File-URL: http://www.nber.org/papers/w11815.pdf
File-Format: application/pdf
Publication-Status: published as Gali, Jordi and T. Monacelli. “Optimal Monetary and Fiscal Policy in a Currency Union.” Journal of International Economics 76, 1. 116-132. September 2008
Abstract: We lay out a tractable model for fiscal and monetary policy analysis in a currency union, and analyze its implications for the optimal design of such policies. Monetary policy is conducted by a common central bank, which sets the interest rate for the union as a whole. Fiscal policy is implemented at the country level, through the choice of government spending level. The model incorporates country-specific shocks and nominal rigidities. Under our assumptions, the optimal monetary policy requires that inflation be stabilized at the union level. On the other hand, the relinquishment of an independent monetary policy, coupled with nominal price rigidities, generates a stabilization role for fiscal policy, one beyond the efficient provision of public goods. Interestingly, the stabilizing role for fiscal policy is shown to be desirable not only from the viewpoint of each individual country, but also from that of the union as a whole. In addition, our paper offers some insights on two aspects of policy design in currency unions: (i) the conditions for equilibrium determinacy and (ii) the effects of exogenous government spending variations.
Handle: RePEc:nbr:nberwo:11815
Template-Type: ReDIF-Paper 1.0
Title: Cash-Flow Risk, Discount Risk, and the Value Premium
Classification-JEL: G12
Author-Name: Tano Santos
Author-Name: Pietro Veronesi
Note: AP
Number: 11816
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11816
File-URL: http://www.nber.org/papers/w11816.pdf
File-Format: application/pdf
Abstract: A habit persistence, general equilibrium model with multiple assets matches both the time series properties of the market portfolio and the cross-sectional predictability of returns on price sorted portfolios, the value premium. Consistent with empirical evidence, the model shows that (a) value stocks are those with higher cash-flow risk; (b) the size of the value premium is larger in "bad times," due to time variation in risk preferences; (c) the unconditional CAPM fails, because of general equilibrium restrictions on the market portfolio. The dynamic nature of the value premium rationalizes why the conditional CAPM and a Fama and French (1993) HML factor outperform the unconditional CAPM.
Handle: RePEc:nbr:nberwo:11816
Template-Type: ReDIF-Paper 1.0
Title: Salary or Benefits?
Classification-JEL: J32; J33; M52; K31
Author-Name: Paul Oyer
Author-Person: poy2
Note: LE LS
Number: 11817
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11817
File-URL: http://www.nber.org/papers/w11817.pdf
File-Format: application/pdf
Publication-Status: published as Oyer, Paul. "Salary or Benefits?" Research in Labor Economics 28 (2008): 429-467.
Abstract: Employer-provided benefits are a large and growing share of compensation costs. In this paper, I consider three factors that can affect the value created by employer-sponsored benefits. First, firms have a comparative advantage (for example, due to scale economies or tax treatment) in purchasing relative to employees. This advantage can vary across firms based on size and other differences in cost structure. Second, employees differ in their valuations of benefits and it is costly for workers to match with firms that offer the benefits they value. Finally, some benefits can reduce the marginal cost to an employee of extra working time. I develop a simple model that integrates these factors. I then generate empirical implications of the model and use data from the National Longitudinal Survey of Youth to test these implications. I examine access to employer-provided meals, child-care, dental insurance, and health insurance. I also study how benefits are grouped together and differences between benefits packages at for-profit, not-for-profit, and government employers. The empirical analysis provides evidence consistent with all three factors in the model contributing to firms' decisions about which benefits to offer.
Handle: RePEc:nbr:nberwo:11817
Template-Type: ReDIF-Paper 1.0
Title: Medical Expenditure Risk and Household Portfolio Choice
Classification-JEL: I0
Author-Name: Dana Goldman
Author-Person: pgo681
Author-Name: Nicole Maestas
Note: AG EH
Number: 11818
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11818
File-URL: http://www.nber.org/papers/w11818.pdf
File-Format: application/pdf
Publication-Status: published as Dana Goldman & Nicole Maestas, 2013. "Medical Expenditure Risk And Household Portfolio Choice," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(4), pages 527-550, 06.
Abstract: As health care costs continue to rise, medical expenses have become an increasingly important contributor to financial risk. Economic theory suggests that when background risk rises, individuals will reduce their exposure to other risks. This paper presents a test of this theory by examining the effect of medical expenditure risk on the willingness of elderly Medicare beneficiaries to hold risky assets. We measure exposure to medical expenditure risk by whether an individual is covered by supplemental insurance through Medigap, an employer, or a Medicare HMO. We account for the endogeneity of insurance choice by using county variation in Medigap prices and non-Medicare HMO market penetration. We find that having Medigap or an employer policy increases risky asset holding by 6 percentage points relative to those enrolled in only Medicare Parts A and B. HMO participation increases risky asset holding by 12 percentage points. Given that just 50 percent of our sample holds risky assets, these are economically sizable effects. It also suggests an important link between the availability and pricing of health insurance and the financial behavior of the elderly.
Handle: RePEc:nbr:nberwo:11818
Template-Type: ReDIF-Paper 1.0
Title: The Welfare Effects of Restricted Hospital Choice in the US Medical Care Market
Classification-JEL: I0; I1
Author-Name: Katherine Ho
Author-Person: pho493
Note: EH
Number: 11819
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11819
File-URL: http://www.nber.org/papers/w11819.pdf
File-Format: application/pdf
Publication-Status: published as Ho, Katherine. “The Welfare Effects of Restricted Hospital Choice in the US Medical Care Market.” Journal of Applied Econometrics 21, 7 (2006): 1039-1079.
Abstract: Managed care health insurers in the US restrict their enrollees' choice of hospitals to within specific networks. This paper considers the implications of these restrictions. A three-step econometric model is used to predict consumer preferences over health plans conditional on the hospitals they offer. The results indicate that consumers place a positive and significant weight on their expected utility from the hospital network when choosing plans. A welfare analysis, assuming fixed prices, implies that restricting consumers' choice of hospitals leads to a loss to society of approximately $1 billion per year across the 43 US markets considered. This figure may be outweighed by the price reductions generated by the restriction.
Handle: RePEc:nbr:nberwo:11819
Template-Type: ReDIF-Paper 1.0
Title: Inattentive Producers
Classification-JEL: D92; E31; E20
Author-Name: Ricardo Reis
Author-Person: pre73
Note: EFG ME
Number: 11820
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11820
File-URL: http://www.nber.org/papers/w11820.pdf
File-Format: application/pdf
Publication-Status: published as Reis, Ricardo. "Inattentive Producers," Review of Economic Studies, 2006, v73(3,Jul), 793-821.
Abstract: I present and solve the problem of a producer who faces costs of acquiring, absorbing, and processing information. I establish a series of theoretical results describing the producer's behavior. First, I find the conditions under which she prefers to set a plan for the price she charges, or instead prefers to set a plan for the quantity she sells. Second, I show that the agent rationally chooses to be inattentive to news, only sporadically updating her information. I solve for the optimal length of inattentiveness and characterize its determinants. Third, I explicitly aggregate the behavior of many such producers. I apply these results to a model of inflation. I find that the model can fit the quantitative facts on post-war inflation remarkably well, that it is a good forecaster of future inflation, and that it survives the Lucas critique by fitting also the pre-war facts on inflation moderately well.
Handle: RePEc:nbr:nberwo:11820
Template-Type: ReDIF-Paper 1.0
Title: Towards a Theory of Firm Entry and Stabilization Policy
Classification-JEL: E22; E52; L16
Author-Name: Paul R. Bergin
Author-Person: pbe249
Author-Name: Giancarlo Corsetti
Note: ME
Number: 11821
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11821
File-URL: http://www.nber.org/papers/w11821.pdf
File-Format: application/pdf
Abstract: This paper studies the role of stabilization policy in a model where firm entry responds to shocks and uncertainty. We evaluate stabilization policy in the context of a simple analytically solvable sticky price model, where firms have to prepay a fixed cost of entry. The presence of endogenous entry can alter the dynamic response to shocks, leading to greater persistence in the effects of monetary and real shocks. Entry affects welfare, depending on the love of variety in consumption and investment, as well as its implications for market competitiveness. In this context, monetary policy has an additional role in regulating the optimal number of entrants, as well as the optimal level of production at each firm. We find that the same monetary policy rule optimal for regulating the scale of production in familiar sticky price models without entry, also generates the amount of (endogenous) entry corresponding to a flex-price equilibrium.
Handle: RePEc:nbr:nberwo:11821
Template-Type: ReDIF-Paper 1.0
Title: Insurer-Provider Networks in the Medical Care Market
Classification-JEL: I0
Author-Name: Katherine Ho
Author-Person: pho493
Note: EH
Number: 11822
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11822
File-URL: http://www.nber.org/papers/w11822.pdf
File-Format: application/pdf
Publication-Status: published as Katherine Ho, 2009. "Insurer-Provider Networks in the Medical Care Market," American Economic Review, American Economic Association, vol. 99(1), pages 393-430, March.
Abstract: Managed care health insurers in the US restrict their enrollees' choice of hospitals to specific networks. This paper investigates the causes and welfare effects of the observed hospital networks. A simple profit maximization model explains roughly 63 per cent of the observed contracts between insurers and hospitals. I estimate a model that includes an additional effect: hospitals that do not need to contract with all insurance plans to secure demand (for example, providers that are capacity constrained under a limited or selective network) may demand high prices that not all insurers are willing to pay. Hospitals can merge to form "systems" which may also affect bargaining between hospitals and insurance plans. The analysis estimates the expected division of profits between insurance plans and different types of hospitals using data on insurers' choices of network. Hospitals in systems are found to capture markups of approximately 19 per cent of revenues, in contrast to non-system, non-capacity constrained providers, whose markups are assumed to be about zero. System members also impose high penalties on plans that exclude their partners. Providers that are expected to be capacity constrained capture markups of about 14 per cent of revenues. I show that these high markups imply an incentive for hospitals to under-invest in capacity despite a median benefit to consumers of over $330,000 per new bed per year.
Handle: RePEc:nbr:nberwo:11822
Template-Type: ReDIF-Paper 1.0
Title: Current Account Deficits in Industrial Countries: The Bigger They are, the Harder They Fall?
Classification-JEL: F3; F4
Author-Name: Caroline Freund
Author-Person: pfr135
Author-Name: Frank Warnock
Note: IFM
Number: 11823
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11823
File-URL: http://www.nber.org/papers/w11823.pdf
File-Format: application/pdf
Publication-Status: published as Current Account Deficits in Industrial Countries: The Bigger They Are, The Harder They Fall?, Caroline Freund, Frank Warnock. in G7 Current Account Imbalances: Sustainability and Adjustment, Clarida. 2007
Abstract: There are a number of worrisome features of the U.S. current account deficit. In particular, its size and persistence, the extent to which it is financing consumption as opposed to investment, and the reliance on debt inflows raise concerns about the likelihood of a sharp adjustment. We examine episodes of current account adjustment in industrial countries to assess the validity of these concerns. Our main findings are (i) larger deficits take longer to adjust and are associated with significantly slower income growth (relative to trend) during the current account recovery than smaller deficits, (ii) consumption-driven current account deficits involve significantly larger depreciations than deficits financing investment, and (iii) there is little evidence that deficits in economies that run persistent deficits, have large net foreign debt positions, experience greater short-term capital flows, or are less open are accommodated by more extensive exchange rate adjustment or slower growth. Our findings are consistent with earlier work showing that, in general, current account adjustment tends to be associated with slow income growth and a real depreciation. Overall, our results support claims that the size of the current account deficit and the extent to which it is financing consumption matter for adjustment.
Handle: RePEc:nbr:nberwo:11823
Template-Type: ReDIF-Paper 1.0
Title: Downside Risk
Classification-JEL: C12; C15; C32; G12
Author-Name: Andrew Ang
Author-Person: pan374
Author-Name: Joseph Chen
Author-Name: Yuhang Xing
Author-Person: pxi126
Note: AP
Number: 11824
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11824
File-URL: http://www.nber.org/papers/w11824.pdf
File-Format: application/pdf
Publication-Status: published as Ang, Andrew, Joseph Chen and Yuhang Xing. "Downside Risk," Review of Financial Studies, 2006, v19(4,Winter), 1191-1239.
Publication-Status: published as Andrew Ang & Joseph Chen & Yuhang Xing, 2005. "Downside risk," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
Abstract: Economists have long recognized that investors care differently about downside losses versus upside gains. Agents who place greater weight on downside risk demand additional compensation for holding stocks with high sensitivities to downside market movements. We show that the cross-section of stock returns reflects a premium for downside risk. Specifically, stocks that covary strongly with the market when the market declines have high average returns. We estimate that the downside risk premium is approximately 6% per annum. The reward for bearing downside risk is not simply compensation for regular market beta, nor is it explained by coskewness or liquidity risk, or size, book-to-market, and momentum characteristics.
Handle: RePEc:nbr:nberwo:11824
Template-Type: ReDIF-Paper 1.0
Title: Surviving Andersonville: The Benefits of Social Networks in POW Camps
Classification-JEL: I12; Z13
Author-Name: Dora L. Costa
Author-Person: pco358
Author-Name: Matthew E. Kahn
Author-Person: pka41
Note: DAE
Number: 11825
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11825
File-URL: http://www.nber.org/papers/w11825.pdf
File-Format: application/pdf
Publication-Status: published as Dora L. Costa & Matthew E. Kahn, 2007. "Surviving Andersonville: The Benefits of Social Networks in POW Camps," American Economic Review, American Economic Association, vol. 97(4), pages 1467-1487, September.
Abstract: Twenty-seven percent of the Union Army prisoners captured July 1863 or later died in captivity. At Andersonville the death rate may have been as high as 40 percent. How did men survive such horrific conditions? Using two independent data sets we find that friends had a statistically significant positive effect on survival probabilities and that the closer the ties between friends as measured by such identifiers as ethnicity, kinship, and the same hometown the bigger the impact of friends on survival probabilities.
Handle: RePEc:nbr:nberwo:11825
Template-Type: ReDIF-Paper 1.0
Title: Efficiency and Welfare with Complementarities and Asymmetric Information
Classification-JEL: C72; D62; D82
Author-Name: George-Marios Angeletos
Author-Person: pan143
Author-Name: Alessandro Pavan
Author-Person: ppa367
Note: EFG
Number: 11826
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11826
File-URL: http://www.nber.org/papers/w11826.pdf
File-Format: application/pdf
Abstract: This paper examines equilibrium and welfare in a tractable class of economies with externalities, strategic complementarity or substitutability, and incomplete information. In equilibrium, complementarity amplifies aggregate volatility by increasing the sensitivity of actions to public information; substitutability raises cross-sectional dispersion by increasing the sensitivity to private information. To address whether these effects are undesirable from a welfare perspective, we characterize the socially optimal degree of coordination and the efficient use of information. We show how efficient allocations depend on the primitives of the environment, how they compare to equilibrium, and how they can be understood in terms of a social trade-off between volatility and dispersion. We next examine the social value of information in equilibrium. When the equilibrium is efficient, welfare necessarily increases with the accuracy of information; and it increases [decreases] with the extent to which information is common if and only if agents' actions are strategic complements [substitutes]. When the equilibrium is inefficient, additional effects emerge as information affects the gap between equilibrium and efficient allocations. We conclude with a few applications, including production externalities, Keynesian frictions, inefficient fluctuations, and efficient market competition.
Handle: RePEc:nbr:nberwo:11826
Template-Type: ReDIF-Paper 1.0
Title: Modeling the Offshoring of White-Collar Services: From Comparative Advantage to the New Theories of Trade and FDI
Classification-JEL: F2
Author-Name: James Markusen
Author-Person: pma528
Note: ITI LS
Number: 11827
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11827
File-URL: http://www.nber.org/papers/w11827.pdf
File-Format: application/pdf
Publication-Status: published as Brainard, S. Lael and Susan Collins (eds.) in "Brookings Trade Forum 2005: Offshoring White-Collar Work," Washington: The Brookings Institution, 2006.
Abstract: Trade theory consists of a portfolio of models. What elements might be useful in modeling the offshoring of white-collar services, or do these issues call for an entirely fresh approach? I try to identifying some of the important aspects of this phenomenon and then argue that modeling could focus on (a) vertical fragmentation of production, (b) expansion of trade at the extensive margin, (c) fragments that differ in factor intensities and countries that differ in endowments, and (d) knowledge or capital stocks of countries or firms that are complementary to skilled labor, and create missing inputs for countries otherwise well suited to skill-intensive fragments. I argue that we can make good progress by selecting a number of "modules" from existing theory. I use these to formulate a series of simple "template" models which capture many of the characteristics of offshoring, and then use those models to identify the effects of technological or institutional changes which allow offshoring of white-collar services to occur.
Handle: RePEc:nbr:nberwo:11827
Template-Type: ReDIF-Paper 1.0
Title: Trade in Ideal Varieties: Theory and Evidence
Classification-JEL: F1
Author-Name: David Hummels
Author-Person: phu100
Author-Name: Volodymyr Lugovskyy
Author-Person: plu136
Note: ITI
Number: 11828
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11828
File-URL: http://www.nber.org/papers/w11828.pdf
File-Format: application/pdf
Publication-Status: published as Hummels, David, and Volodymyr Lugovskyy. "International Pricing in a Generalized Model of Ideal Variety." Journal of Money, Credit, and Banking 41 (February 2009): 3-33.
Abstract: Models with constant-elasticity of substitution (CES) preferences are commonly employed in the international trade literature because they provide a tractable way to handle product differentiation in general equilibrium. However this tractability comes at the cost of generating a set of counter-factual predictions regarding cross-country variation in export and import variety, output per variety, and prices. We examine whether a generalized version of Lancaster's 'ideal variety' model can better match facts. In this model, entry causes crowding in variety space, so that the marginal utility of new varieties falls as market size grows. Crowding is partially offset by income effects, as richer consumers will pay more for varieties closer matched to their ideal types. We show theoretically and confirm empirically that declining marginal utility of new varieties results in: a higher own-price elasticity of demand (and lower prices) in large countries and a lower own-price elasticity of demand (and higher prices) in rich countries. Model predictions about cross-country differences in the number and size of establishments are also empirically confirmed.
Handle: RePEc:nbr:nberwo:11828
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Firm-Level Contracts on the Structure of Wages: Evidence from Matched Employer-Employee Data
Classification-JEL: J31; J50
Author-Name: David Card
Author-Person: pca271
Author-Name: Sara de la Rica
Note: LS
Number: 11829
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11829
File-URL: http://www.nber.org/papers/w11829.pdf
File-Format: application/pdf
Publication-Status: published as Card, David and Sara de la Rica. “The Effect of Firm-Level Contracts on the Structure of Wages: Evidence from Matched Employer-Employee Data.” Industrial and Labor Relations Review (October 2006).
Abstract: In many European countries sectoral bargaining agreements are automatically extended to cover all firms in an industry. Employers and employees can also negotiate firm-specific contracts. We use a large matched employer-employee data set from Spain to study the effects of firm-level contracting on the structure of wages. We estimate a series of wage determination models, including specifications that control for individual characteristics, co-worker characteristics, the bargaining status of the workplace, and the probability the workplace is covered by a firm-level contract. We find that firm-level contracting is associated with a 5-10 percent wage premium, with larger premiums for more highly paid workers. Although we cannot decisively test between alternative explanations for the firm-level contracting premium, workers with firm-specific contracts have significantly longer job tenure, suggesting that the premium is at least partially a non-competitive phenomenon.
Handle: RePEc:nbr:nberwo:11829
Template-Type: ReDIF-Paper 1.0
Title: Do Capital Adequacy Requirements Matter for Monetary Policy?
Classification-JEL: E52; E58; G21
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Author-Name: Lianfi Li
Note: ME
Number: 11830
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11830
File-URL: http://www.nber.org/papers/w11830.pdf
File-Format: application/pdf
Publication-Status: published as Stephen G. Cecchetti & Lianfa Li, 2008. "Do Capital Adequacy Requirements Matter For Monetary Policy?," Economic Inquiry, Western Economic Association International, vol. 46(4), pages 643-659, October.
Abstract: Central bankers and financial supervisors often have different goals. While monetary policymakers want to ensure that there are always sufficient lending activities to maintain high and stable economic growth, supervisors work to limit banks. lending capacities in order to prevent excessive risk-taking. To avoid working at cross-purposes, central bankers need to adopt a policy strategy that accounts for the impact of capital adequacy requirements. In this paper we derive an optimal monetary policy that reinforces prudential capital requirements at the same time that it stabilizes aggregate economic activity. We go on to show that policymakers at the Federal Reserve adjust interest rate policy in a way that would neutralize the procyclical impact of bank capital requirements. By contrast, central bankers in Germany and Japan clearly do not act as the theory suggests they should.
Handle: RePEc:nbr:nberwo:11830
Template-Type: ReDIF-Paper 1.0
Title: Comparing Average and Marginal Tax Rates Under the FairTax and the Current System of Federal Taxation
Classification-JEL: H2
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: David Rapson
Author-Person: pra605
Note: PE
Number: 11831
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11831
File-URL: http://www.nber.org/papers/w11831.pdf
File-Format: application/pdf
Abstract: This paper compares marginal and average tax rates on working and saving under our current federal tax system with those that would arise under a federal retail sales tax, specifically the FairTax. The FairTax would replace the personal income, corporate income, payroll, and estate and gift taxes with a 23 percent effective retail sales tax plus a progressive rebate. The 23 percent rate generates more revenue than the taxes it replaces, but the rebate's cost necessitates scaling back non-Social Security expenditures to their 2000 share of GDP. The FairTax's effective marginal tax on labor supply is 23 percent. Its effective marginal tax on saving is zero. In contrast, for the stylized working households considered here, current effective marginal labor taxes are higher or much higher than 23 percent. Take our stylized 45 year-old, married couple earning $35,000 per year with two children. Given their federal tax bracket, the claw-back of the Earned Income Tax Credit, and the FICA tax, their marginal tax is 47.6 percent. The FairTax imposes a zero marginal tax on saving meaning that reducing this year's consumption by a dollar permits one to increase the present value of future consumption by a dollar. In contrast, the existing federal tax system imposes very high marginal taxes on future consumption. For our stylized working households foregoing a dollar's consumption this year to uniformly raise consumption in all future years raises the present value of future consumption by only 45.8 to 77.4 cents, i.e., the effective marginal tax rates on uniformly raising future consumption via saving facing our households ranges from 22.6 percent to 54.2 percent. The FairTax also reduces most of our stylized households' remaining average lifetime tax rates - and, often, by a lot. Consider our stylized 30 year-old, single household earning $50,000. The household's average remaining lifetime tax rate under the current system is 21.1 percent. It's 16.2 percent under the FairTax.
Handle: RePEc:nbr:nberwo:11831
Template-Type: ReDIF-Paper 1.0
Title: Universal Childcare, Maternal Labor Supply, and Family Well-Being
Classification-JEL: H2; j2
Author-Name: Michael Baker
Author-Person: pba400
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Kevin Milligan
Author-Person: pmi14
Note: CH PE
Number: 11832
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11832
File-URL: http://www.nber.org/papers/w11832.pdf
File-Format: application/pdf
Publication-Status: published as Michael Baker & Jonathan Gruber & Kevin Milligan, 2008. "Universal Child Care, Maternal Labor Supply, and Family Well-Being," Journal of Political Economy, University of Chicago Press, vol. 116(4), pages 709-745, 08.
Abstract: The growing labor force participation of women with small children in both the U.S. and Canada has led to calls for increased public financing for childcare. The optimality of public financing depends on a host of factors, such as the "crowd-out" of existing childcare arrangements, the impact on female labor supply, and the effects on child well-being. The introduction of universal, highly-subsidized childcare in Quebec in the late 1990s provides an opportunity to address these issues. We carefully analyze the impacts of Quebec's "$5 per day childcare" program on childcare utilization, labor supply, and child (and parent) outcomes in two parent families. We find strong evidence of a shift into new childcare use, although approximately one third of the newly reported use appears to come from women who previously worked and had informal arrangements. The labor supply impact is highly significant, and our measured elasticity of 0.236 is slightly smaller than previous credible estimates. Finally, we uncover striking evidence that children are worse off in a variety of behavioral and health dimensions, ranging from aggression to motor-social skills to illness. Our analysis also suggests that the new childcare program led to more hostile, less consistent parenting, worse parental health, and lower-quality parental relationships.
Handle: RePEc:nbr:nberwo:11832
Template-Type: ReDIF-Paper 1.0
Title: Who's Going Broke? Comparing Growth in Healthcare Costs in Ten OECD Countries
Classification-JEL: H51; I11
Author-Name: Christian Hagist
Author-Name: Laurence Kotlikoff
Author-Person: pko44
Note: AG EH PE
Number: 11833
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11833
File-URL: http://www.nber.org/papers/w11833.pdf
File-Format: application/pdf
Publication-Status: published as Christian Hagist & Laurence J. Kotlikoff, 2009. "Who’s going broke? Comparing growth in Public healthcare expenditure in Ten OECD Countries," Hacienda Pública Española, IEF, vol. 188(1), pages 55-72, March.
Abstract: Government healthcare expenditures have been growing much more rapidly than GDP in OECD countries. For example, between 1970 and 2002 these expenditures grew 2.3 times faster than GDP in the U.S., 2.0 times faster than GDP in Germany, and 1.4 times faster than GDP in Japan. How much of government healthcare expenditure growth is due to demographic change and how much is due to increases in benefit levels; i.e., in healthcare expenditures per beneficiary at a given age? This paper answers this question for ten OECD countries -- Australia, Austria, Canada, Germany, Japan, Norway, Spain, Sweden, the UK, and the U.S. Specifically, the paper decomposes the 1970-2002 growth in each country’s healthcare expenditures into growth in benefit levels and changes in demographics. Growth in real benefit levels has been remarkably high and explains the lions share — 89 percent — of overall healthcare spending growth in the ten countries. Norway, Spain, and the U.S. recorded the highest annual benefit growth rates. Norway’s rate averaged 5.04 percent per year. Spain and the U.S. were close behind with rates of 4.63 percent and 4.61 percent, respectively. Allowing benefit levels to continue to grow at historic rates is fraught with danger given the impending retirement of the baby boom generation. In Japan, for example, maintaining its 1970-2002 benefit growth rate of 3.57 percent for the next 40 years and letting benefits grow thereafter only with labor productivity entails present value healthcare expenditures close to 12 percent of the present value of GDP. By comparison, Japan’s government is now spending only 6.7 percent of Japans current output on healthcare. In the U.S., government healthcare spending now totals 6.6 percent of GDP. But if the U.S. lets benefits grow for the next four decades at past rates, it will end up spending almost 18 percent of its future GDP on healthcare. The difference between the Japanese 12 percent and U.S. 18 percent figures is remarkable given that Japan is already much older than the U.S. and will age more rapidly in the coming decades. Although healthcare spending is growing at unsustainable rates in most, if not all, OECD countries, the U.S. appears least able to control its benefit growth due to the nature of its fee-for-service healthcare payment system. Consequently, the U.S. may well be in the worst long-term fiscal shape of any OECD country even though it is now and will remain very young compared to the majority of its fellow OECD members.
Handle: RePEc:nbr:nberwo:11833
Template-Type: ReDIF-Paper 1.0
Title: Financial System Risk and Flight to Quality
Classification-JEL: E30; E44; E5; F34; G1
Author-Name: Ricardo Caballero
Author-Person: pca44
Author-Name: Arvind Krishnamurthy
Author-Person: pkr393
Note: CF DAE EFG IFM ME
Number: 11834
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11834
File-URL: http://www.nber.org/papers/w11834.pdf
File-Format: application/pdf
Abstract: We present a model of flight to quality episodes that emphasizes financial system risk and the Knightian uncertainty surrounding these episodes. In the model, agents are uncertain about the probability distribution of shocks in markets different from theirs, treating such uncertainty as Knightian. Aversion to this uncertainty generates demand for safe financial claims. It also leads agents to require financial intermediaries to lock-up capital to cover their own markets' shocks in a manner that is robust to uncertainty over other markets. These actions are wasteful in the aggregate and can trigger a financial accelerator. A lender of last resort can unlock private capital markets to stabilize the economy during these episodes by committing to intervene should conditions worsen.
Handle: RePEc:nbr:nberwo:11834
Template-Type: ReDIF-Paper 1.0
Title: New Evidence on the Causal Link Between the Quantity and Quality of Children
Classification-JEL: J13; I31
Author-Name: Joshua D. Angrist
Author-Person: pan29
Author-Name: Victor Lavy
Author-Person: pla111
Author-Name: Analia Schlosser
Author-Person: psc163
Note: CH ED LS
Number: 11835
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11835
File-URL: http://www.nber.org/papers/w11835.pdf
File-Format: application/pdf
Abstract: A longstanding question in the economics of the family is the relationship between sibship size and subsequent human capital formation and economic welfare. If there is a "quantity-quality trade-off," then policies that discourage large families should lead to increased human capital, higher earnings, and, at the macro level, promote economic development. Ordinary least squares regression estimates and a large theoretical literature suggest that this is indeed the case. This paper provides new evidence on the child-quantity/child-quality trade-off. Our empirical strategy exploits exogenous variation in family size due to twin births and preferences for a mixed sibling-sex composition, as well as ethnic differences in the effects of these variables, and preferences for boys in some ethnic groups. We use these sources of variation to look at the causal effect of family size on completed educational attainment, fertility, and earnings. For the purposes of this analysis, we constructed a unique matched data set linking Israeli Census data with information on the demographic structure of families drawn from a population registry. Our results show no evidence of a quantity-quality trade-off, though some estimates suggest that first-born girls from large families marry sooner.
Handle: RePEc:nbr:nberwo:11835
Template-Type: ReDIF-Paper 1.0
Title: Rising Family Income Inequality in the United States, 1968-2000: Impacts of Changing Labor Supply, Wages, and Family Structure
Classification-JEL: J2; E2; N3
Author-Name: Chulhee Lee
Author-Person: ple383
Note: LS
Number: 11836
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11836
File-URL: http://www.nber.org/papers/w11836.pdf
File-Format: application/pdf
Publication-Status: published as Chulhee Lee, 2008. "Rising family income inequality in the United States, 1968-2000: impacts of changing labor supply, wages, and family structure," International Economic Journal, Korean International Economic Association, vol. 22(2), pages 253-272.
Abstract: This study estimates what fraction of the rise in family income inequality in the United States between 1968 and 2000 is accounted for by change in each of the family income components such as wages, employment, and hours worked of family heads and spouses, family structure, and other incomes. The increased disparities in other incomes and labor supply account for, respectively, 29 percent and 28 percent of the rise in the difference in income between the top 10th and bottom 10th families. Structural changes in wages, largely regarded as the major culprit of the increase in income inequality, explain less than a quarter of the rise in the measure of family income inequality. Changing fraction of families with both husband and wife and changes in the composition of the income sources account for 11 percent and 16 percent, respectively, of the widening of the income gap. The relative importance of the effect of changing labor supply declined over time, while that of wage changes increased. For the upper half of the income distribution, wage changes were the dominant cause of the increase in the gap between the richest 10th and middle-income families. For the lower half of the income distribution, in sharp contrast, changes in labor supply and other incomes were the principal causes of the growing distance between the poor and middle-income families.
Handle: RePEc:nbr:nberwo:11836
Template-Type: ReDIF-Paper 1.0
Title: The Cost of Caring for Young Children
Classification-JEL: J13; J18; J22
Author-Name: Dan T. Rosenbaum
Author-Person: pro561
Author-Name: Christopher J. Ruhm
Author-Person: pru7
Note: CH
Number: 11837
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11837
File-URL: http://www.nber.org/papers/w11837.pdf
File-Format: application/pdf
Abstract: This study examines the "cost burden" of child care, defined as day care expenses divided by after-tax income. Data are from the wave 10 core and child care topical modules to the 1996 Survey of Income and Program Participation. We estimate that the average child under six years of age lives in a family that spends 4.9 percent of after-tax income on day care. However, this conceals wide variation: 63 percent of such children reside in families with no child care expenses and 10 percent are in families where the cost burden exceeds 16 percent. The burden is typically greater in single-parent than married-couple families but is not systematically related to a measure of socioeconomic status that we construct. One reason for this is that disadvantaged families use lower cost modes and pay less per hour for given types of care. The cost burden would be much less equal without low cost (presumably subsidized) formal care focused on needy families, as well as government tax and transfer policies that redistribute income towards them.
Handle: RePEc:nbr:nberwo:11837
Template-Type: ReDIF-Paper 1.0
Title: Persuasion in Finance
Classification-JEL: G11; G14; M3
Author-Name: Sendhil Mullainathan
Author-Person: pmu103
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: AP CF
Number: 11838
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11838
File-URL: http://www.nber.org/papers/w11838.pdf
File-Format: application/pdf
Abstract: Persuasion is a fundamental part of social activity, yet it is rarely studied by economists. We compare the traditional economic model, in which persuasion is communication of objectively valuable information, with a behavioral model, in which persuasion is an effort to fit the message into the audience's already held beliefs. We present a simple formalization of the behavioral model, and compare the two models using data on financial advertising in Money and Business Week magazines over the course of the internet bubble. The evidence on the content of the persuasive messages is broadly consistent with the behavioral model of persuasion.
Handle: RePEc:nbr:nberwo:11838
Template-Type: ReDIF-Paper 1.0
Title: Firm Fragmentation and Urban Patterns
Classification-JEL: R12; R14
Author-Name: Esteban Rossi-Hansberg
Author-Person: pro72
Author-Name: Pierre-Daniel Sarte
Author-Person: psa30
Author-Name: Raymond Owens III
Author-Person: pow21
Note: EFG
Number: 11839
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11839
File-URL: http://www.nber.org/papers/w11839.pdf
File-Format: application/pdf
Publication-Status: published as Esteban Rossi-Hansberg & Pierre-Daniel Sarte & Raymond Owens iii, 2009. "Firm Fragmentation And Urban Patterns," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 143-186, 02.
Abstract: We document several empirical regularities regarding the evolution of urban structure in the largest U.S. metropolitan areas over the period 1980-1990. These regularities relate to changes in resident population, employment, occupations, as well as the number and size of establishments in different sections of the metropolitan area. We then propose a theory of urban structure that emphasizes the location and internal structure decisions of firms. In particular, firms can decide to locate their headquarters and operation plants in different regions of the city. Given that cities experienced positive population growth throughout the 1980s, we show that firm fragmentation produces the diverse set of facts documented in the paper.
Handle: RePEc:nbr:nberwo:11839
Template-Type: ReDIF-Paper 1.0
Title: The Information in Long-Maturity Forward Rates: Implications for Exchange Rates and the Forward Premium Anomaly
Classification-JEL: G15; F31
Author-Name: Jacob Boudoukh
Author-Name: Matthew Richardson
Author-Name: Robert Whitelaw
Note: AP IFM
Number: 11840
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11840
File-URL: http://www.nber.org/papers/w11840.pdf
File-Format: application/pdf
Abstract: The forward premium anomaly is one of the most robust puzzles in financial economics. We recast the underlying parity relation in terms of cross-country differences between forward interest rates rather than spot interest rates with dramatic results. These forward interest rate differentials have statistically and economically significant forecast power for annual exchange rate movements, both in- and out-of-sample, and the signs and magnitudes of the corresponding coefficients are consistent with economic theory. Forward interest rates also forecast future spot interest rates and future inflation. Thus, we attribute much of the forward premium anomaly to the anomalous behavior of short-term interest rates, not to a breakdown of the link between fundamentals and exchange rates.
Handle: RePEc:nbr:nberwo:11840
Template-Type: ReDIF-Paper 1.0
Title: The Myth of Long-Horizon Predictability
Classification-JEL: G12; G10; C32
Author-Name: Jacob Boudoukh
Author-Name: Matthew Richardson
Author-Name: Robert Whitelaw
Note: AP
Number: 11841
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11841
File-URL: http://www.nber.org/papers/w11841.pdf
File-Format: application/pdf
Publication-Status: published as Boudoukh, Jacob, Matthew Richardson, and Robert F. Whitelaw. "The Myth of Long-Horizon Predictability." Review of Financial Studies 21, 4 (July 2008): 1576-1605.
Abstract: The prevailing view in finance is that the evidence for long-horizon stock return predictability is significantly stronger than that for short horizons. We show that for persistent regressors, a characteristic of most of the predictive variables used in the literature, the estimators are almost perfectly correlated across horizons under the null hypothesis of no predictability. For example, for the persistence levels of dividend yields, the analytical correlation is 99% between the 1- and 2-year horizon estimators and 94% between the 1- and 5-year horizons, due to the combined effects of overlapping returns and the persistence of the predictive variable. Common sampling error across equations leads to ordinary least squares coefficient estimates and R2s that are roughly proportional to the horizon under the null hypothesis. This is the precise pattern found in the data. The asymptotic theory is corroborated, and the analysis extended by extensive simulation evidence. We perform joint tests across horizons for a variety of explanatory variables, and provide an alternative view of the existing evidence.
Handle: RePEc:nbr:nberwo:11841
Template-Type: ReDIF-Paper 1.0
Title: Where Did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income
Classification-JEL: D31; D33; D63; E31
Author-Name: Ian Dew-Becker
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG LS
Number: 11842
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11842
File-URL: http://www.nber.org/papers/w11842.pdf
File-Format: application/pdf
Publication-Status: published as Dew-Becker, Ian and Robert J. Gordon. "Where Did The Productivity Growth Go? Inflation Dynamics And The Distribution Of Income," Brookings Papers on Economic Activity, 2005, v2005(2), 67-150.
Abstract: A basic tenet of economic science is that productivity growth is the source of growth in real income per capita. But our results raise doubts by creating a direct link between macro productivity growth and the micro evolution of the income distribution. We show that over the entire period 1966-2001, as well as over 1997-2001, only the top 10 percent of the income distribution enjoyed a growth rate of real wage and salary income equal to or above the average rate of economy-wide productivity growth. Growth in median real wage and salary income barely grew at all while average wage and salary income kept pace with productivity growth, because half of the income gains went to the top 10 percent of the income distribution, leaving little left over for the bottom 90 percent. Half of this inequality effect is attributable to gains of the 90th percentile over the 10th percentile; the other half is due to increased skewness within the top 10 percent. In addition to its micro analysis, this paper also asks whether faster productivity growth reduces inflation, raises nominal wage growth, or raises profits. We find that an acceleration or deceleration of the productivity growth trend alters the inflation rate by at least one-for-one in the opposite direction. This paper revives research on wage adjustment and produces a dynamic interactive model of price and wage adjustment that explains movements of labor's share of income. What caused rising income inequality? Economists have placed too much emphasis on "skill-biased technical change" and too little attention to the sources of increased skewness at the very top, within the top 1 percent of the income distribution. We distinguish two complementary explanations, the "economics of superstars," i.e., the pure rents earned by sports and entertainment stars, and the escalating compensation premia of CEOs and other top corporate officers. These sources of divergence at the top, combined with the role of deunionization, immigration, and free trade in pushing down incomes at the bottom, have led to the wide divergence between the growth rates of productivity, average compensation, and median compensation.
Handle: RePEc:nbr:nberwo:11842
Template-Type: ReDIF-Paper 1.0
Title: Demand-Based Option Pricing
Classification-JEL: G0; G12; G13; G14
Author-Name: Nicolae Garleanu
Author-Name: Lasse Heje Pedersen
Author-Person: ppe174
Author-Name: Allen M. Poteshman
Note: AP
Number: 11843
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11843
File-URL: http://www.nber.org/papers/w11843.pdf
File-Format: application/pdf
Publication-Status: published as Nicolae Garleanu & Lasse Heje Pedersen & Allen M. Poteshman, 2009. "Demand-Based Option Pricing," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 22(10), pages 4259-4299, October.
Abstract: We model the demand-pressure effect on prices when options cannot be perfectly hedged. The model shows that demand pressure in one option contract increases its price by an amount proportional to the variance of the unhedgeable part of the option. Similarly, the demand pressure increases the price of any other option by an amount proportional to the covariance of their unhedgeable parts. Empirically, we identify aggregate positions of dealers and end users using a unique dataset, and show that demand-pressure effects help explain well-known option-pricing puzzles. First, end users are net long index options, especially out-of-money puts, which helps explain their apparent expensiveness and the smirk. Second, demand patterns help explain the prices of single-stock options.
Handle: RePEc:nbr:nberwo:11843
Template-Type: ReDIF-Paper 1.0
Title: How Changes in Entry Requirements Alter the Teacher Workforce and Affect Student Achievement
Classification-JEL: I0; I2
Author-Name: Donald Boyd
Author-Name: Pamela Grossman
Author-Name: Hamilton Lankford
Author-Name: Susanna Loeb
Author-Name: James Wyckoff
Author-Person: pwy10
Note: ED
Number: 11844
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11844
File-URL: http://www.nber.org/papers/w11844.pdf
File-Format: application/pdf
Publication-Status: published as Boyd, Donald, Pamela Grossman, Hamilton Lankford, Susanna Loeb, and James Wyckoff. "How Changes in Entry Requirements Alter the Teacher Workforce and Affect Student Achievement." Education Finance and Policy 1, 2 (Spring 2006): 176-216.
Abstract: We are in the midst of what amounts to a national experiment in how best to attract, prepare, and retain teachers, particularly for high poverty urban schools. Using data on students and teachers in grades three through eight, this study assesses the effects of pathways into teaching in New York City on the teacher workforce and on student achievement. We ask whether teachers who enter through new routes, with reduced coursework prior to teaching, are more or less effective at improving student achievement than other teachers and whether the presence of these alternative pathways affects the composition of the teaching workforce. Results indicate that in some instances the new routes provide teachers with higher student achievement gains than temporary license teachers, though more typically there is no difference. When compared to teachers who completed a university-based teacher education program, teachers with reduced course work prior to entry often provide smaller initial gains in both mathematics and English language arts. Most differences disappear as the cohort matures and many of the differences are not large in magnitude, typically 2 to 5 percent of a standard deviation. The variation in effectiveness within pathways is far greater than the average differences between pathways.
Handle: RePEc:nbr:nberwo:11844
Template-Type: ReDIF-Paper 1.0
Title: Equilibrium Bias of Technology
Classification-JEL: O30; O31; O33; C65
Author-Name: Daron Acemoglu
Author-Person: pac16
Note: EFG PR
Number: 11845
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11845
File-URL: http://www.nber.org/papers/w11845.pdf
File-Format: application/pdf
Publication-Status: published as Daron Acemoglu, 2007. "Equilibrium Bias of Technology," Econometrica, Econometric Society, vol. 75(5), pages 1371-1409, 09.
Abstract: The study of the bias of new technologies is important both as part of the analysis of the nature of technology adoption and the direction of technological change, and to understand the distributional implications of new technologies. In this paper, I analyze the equilibrium bias of technology. I distinguish between the relative bias of technology, which concerns how the marginal product of a factor changes relative to that of another following the introduction of new technology, and the absolute bias, which looks only at the effect of new technology on the marginal product of a factor. The first part of the paper generalizes a number of existing results in the literature regarding the relative bias of technology. In particular, I show that when the menu of technological possibilities only allows for factor-augmenting technologies, the increase in the supply of a factor always induces technological change (or technology adoption) relatively biased towards that factor. This force can be strong enough to make the relative marginal product of a factor increasing in response to an increase in its supply, thus leading to an upward-sloping relative demand curve. However, I also show that the results about relative bias do not generalize when more general menus of technological possibilities are considered. In the second part of the paper, I show that there are much more general results about absolute bias. I prove that under fairly mild assumptions, an increase in the supply of a factor always induces changes in technology that are absolutely biased towards that factor, and these results hold both for small changes and large changes in supplies. Most importantly, I also determine the conditions under which the induced-technology response will be strong enough so that the price (marginal product) of a factor increases in response to an increase in its supply. These conditions correspond to a form of failure of joint concavity of the aggregate production function of the economy in factors and technology. This type of failure of joint concavity is quite possible in economies where equilibrium factor demands and technologies are decided by different agents.
Handle: RePEc:nbr:nberwo:11845
Template-Type: ReDIF-Paper 1.0
Title: Improving the Performance of the Education Sector: The Valuable, Challenging, and Limited Role of Random Assignment Evaluations
Classification-JEL: I21
Author-Name: Richard J. Murnane
Author-Person: pmu87
Author-Name: Richard R. Nelson
Author-Person: pne56
Note: ED
Number: 11846
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11846
File-URL: http://www.nber.org/papers/w11846.pdf
File-Format: application/pdf
Publication-Status: published as Richard J. Murnane & Richard R. Nelson, 2007. "Improving the Performance of the Education Sector: The Valuable, Challenging, and Limited Role of Random Assignment Evaluations," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 16(5), pages 307-322.
Abstract: In an attempt to improve the quality of educational research, the U.S. Department of Education's Institute of Education Sciences has provided funding for 65 randomized controlled trials of educational interventions. We argue that this research methodology is more effective in providing guidance to extremely troubled schools about how to make some progress than guidance to schools trying to move from making some progress to becoming high performance organizations. We also argue that the conventional view of medical research -- discoveries made in specialized laboratories that are then tested using randomized control trials -- is an inaccurate description of the sources of advances in medical practice. Moreover, this conventional view of the sources of advances in medical practice leads to incorrect inferences about how to improve educational research. We illustrate this argument using evidence from the history of medical research on the treatment of cystic fibrosis.
Handle: RePEc:nbr:nberwo:11846
Template-Type: ReDIF-Paper 1.0
Title: Competition in Large Markets
Classification-JEL: L11; L81
Author-Name: Jeffrey R. Campbell
Author-Person: pca89
Note: EFG
Number: 11847
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11847
File-URL: http://www.nber.org/papers/w11847.pdf
File-Format: application/pdf
Publication-Status: published as Jeffrey R. Campbell, 2011. "Competition in large markets," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(7), pages 1113-1136, November.
Abstract: This paper develops a simple and robust implication of free entry followed by competition without substantial strategic interactions: Increasing the number of consumers leaves the distributions of producers' prices and other choices unchanged. In many models featuring non-trivial strategic considerations, producers' prices fall as their numbers increase. Hence, examining the relationship between market size and producers' actions provides a nonparametric tool for empirically discriminating between these distinct approaches to competition. To illustrate its application, I examine observations of restaurants' seating capacities, exit decisions, and prices from 224 U.S. cities. Given factor prices and demographic variables, increasing a city's size increases restaurants' capacities, decreases their exit rate, and decreases their prices. These results suggest that strategic considerations lie at the heart of restaurant pricing and turnover.
Handle: RePEc:nbr:nberwo:11847
Template-Type: ReDIF-Paper 1.0
Title: Search Profiling with Partial Knowledge of Deterrence
Classification-JEL: H8; K4; D8
Author-Name: Charles F. Manski
Author-Person: pma111
Note: PE
Number: 11848
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11848
File-URL: http://www.nber.org/papers/w11848.pdf
File-Format: application/pdf
Publication-Status: published as Manski, Charles F. "Optimal Search Profiling With Linear Deterrence," American Economic Review, 2005, v95(2,May), 12-126.
Publication-Status: published as Charles F. Manski. "Search Profiling With Partial Knowledge of Deterrence," Economic Journal, Royal Economic Society, vol. 116(515), pages F385-F401, November 2006.
Abstract: Economists studying public policy have generally assumed that the relevant social planner knows how policy affects population behavior. Planners typically do not possess all of this knowledge, so there is reason to consider policy formation with partial knowledge of policy impacts. Here I consider the choice of a profiling policy where decisions to search for evidence of crime may vary with observable covariates of the persons at risk of being searched. To begin I pose a planning problem whose objective is to minimize the utilitarian social cost of crime and search. The consequences of candidate search rules depends on the extent to which search deters crime. Deterrence is expressed through the offense function, which describes how the offense rate of persons with given covariates varies with the search rate applied to these persons. I study the planning problem when the planner has partial knowledge of the offense function. To demonstrate general ideas, I suppose that the planner observes the offense rates of a study population whose search rule has previously been chosen. He knows that the offense rate weakly decreases as the search rate increases, but he does not know the magnitude of the deterrent effect of search. In this setting, I first show how the planner can eliminate dominated search rules and then how he can use the minimax or minimax-regret criterion to choose an undominated search rule.
Handle: RePEc:nbr:nberwo:11848
Template-Type: ReDIF-Paper 1.0
Title: Inertia and Incentives: Bridging Organizational Economics and Organizational Theory
Classification-JEL: L0; M0
Author-Name: Rebecca Henderson
Author-Name: Sarah Kaplan
Note: IO PR
Number: 11849
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11849
File-URL: http://www.nber.org/papers/w11849.pdf
File-Format: application/pdf
Publication-Status: published as Henderson, Rebecca and Sarah Kaplan. "Inertia an dIncentives: Bridging Organizational Economics and Organizational Theory." Organization Science 16, 5 (Sept-Oct 2005): 509-521.
Abstract: Organizational theorists have long acknowledged the importance of the formal and informal incentives facing a firm's employees, stressing that the political economy of a firm plays a major role in shaping organizational life and firm behavior. Yet the detailed study of incentive systems has traditionally been left in the hands of (organizational) economists, with most organizational theorists focusing their attention on critical problems in culture, network structure, framing and so on -- in essence, the social context in which economics and incentive systems are embedded. We argue that this separation of domains is problematic. The economics literature, for example, is unable to explain why organizations should find it difficult to change incentive structures in the face of environmental change, while the organizational literature focuses heavily on the role of inertia as sources of organizational rigidity. Drawing on recent research on incentives in organizational economics and on cognition in organizational theory, we build a framework for the analysis of incentives that highlights the ways in which incentives and cognition -- while being analytically distinct concepts -- are phenomenologically deeply intertwined. We suggest that incentives and cognition coevolve so that organizational competencies or routines are as much about building knowledge of "what should be rewarded" as they are about "what should be done."
Handle: RePEc:nbr:nberwo:11849
Template-Type: ReDIF-Paper 1.0
Title: Aging, Pension Reform, and Capital Flows: A Multi-Country Simulation Model
Classification-JEL: E27; F21; G15
Author-Name: Axel Boersch-Supan
Author-Name: Alexander Ludwig
Author-Person: plu177
Author-Name: Joachim Winter
Author-Person: pwi1
Note: AG IFM
Number: 11850
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11850
File-URL: http://www.nber.org/papers/w11850.pdf
File-Format: application/pdf
Publication-Status: published as AXEL BÖRSCH-SUPAN & ALEXANDER LUDWIG & JOACHIM WINTER, 2006. "Ageing, Pension Reform and Capital Flows: A Multi-Country Simulation Model," Economica, London School of Economics and Political Science, vol. 73(292), pages 625-658, November.
Abstract: Population aging and pension reform will have profound effects on international capital markets. First, demographic change alters the time path of aggregate savings within each country. Second this process may be amplified when a pension reform shifts old-age provision towards more pre-funding. Third, while the patterns of population aging are similar in most counries, timing and initial conditions differ substantially. Hence, to the extent that capital is internationally mobile, population aging will induce capital flows between countries. All three effects influence the rate of return to capital and interact with the demand for capital in production and with labor supply. In order to quantify these effects, we develop a computational general equilibrium model. We feed this multi-country overlapping generations model with detailed long-term demographic projections for seven world regions. Our simulations indicate that capital flows from fast-aging regions to the rest of the world will initially be substantial but that trends are reversed when households decumulate savings. We also conclude that closed-economy models of pension reform miss quantitatively important effects of international capital mobility.
Handle: RePEc:nbr:nberwo:11850
Template-Type: ReDIF-Paper 1.0
Title: Limits of Arbitrage: Theory and Evidence from the Mortgage-Backed Securities Market
Classification-JEL: G12; G14; G21
Author-Name: Xavier Gabaix
Author-Person: pga174
Author-Name: Arvind Krishnamurthy
Author-Person: pkr393
Author-Name: Olivier Vigneron
Note: AP
Number: 11851
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11851
File-URL: http://www.nber.org/papers/w11851.pdf
File-Format: application/pdf
Publication-Status: published as Xavier Gabaix & Arvind Krishnamurthy & Olivier Vigneron, 2007. "Limits of Arbitrage: Theory and Evidence from the Mortgage-Backed Securities Market," Journal of Finance, American Finance Association, vol. 62(2), pages 557-595, 04.
Abstract: "Limits of Arbitrage" theories hypothesize that the marginal investor in a particular asset market is a specialized arbitrageur rather than a diversified representative investor. We examine the mortgage-backed securities (MBS) market in this light. We show that the risk of homeowner prepayment, which is a wash in the aggregate, is priced in the MBS market. The covariance of prepayment risk with aggregate wealth implies the wrong sign to match the observed prices of prepayment risk. The price of risk is better explained by a kernel based on MBS-market-wide specific risk. This finding is consistent with the specialized arbitrageur hypothesis.
Handle: RePEc:nbr:nberwo:11851
Template-Type: ReDIF-Paper 1.0
Title: Platform Owner Entry and Innovation in Complementary Markets: Evidence from Intel
Classification-JEL: L0
Author-Name: Annabelle Gawer
Author-Name: Rebecca Henderson
Note: IO
Number: 11852
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11852
File-URL: http://www.nber.org/papers/w11852.pdf
File-Format: application/pdf
Publication-Status: published as Gawer, Annabelle and Rebecca Henderson. "Platform Owner Entry and Innovation in Complementary Markets: Evidence from Intel." Journal of Economics and Management Strategy 16, 1 (spring 2007): 1-34.
Abstract: This paper draws on a detailed history of Intel's strategy with respect to the complementary markets for microprocessors to explore the usefulness of the current theoretical literature for explaining behavior. We find that as the literature predicts, Intel invests heavily in these markets, both through direct entry and through subsidy. We also find, again consistent with the literature, that the firm's entry decisions are shaped by the belief that it does not have either the capabilities or the resources to enter all possible markets, and thus that it believes it is critical to encourage widespread entry. As several authors have pointed out, this imperative places the firm in a difficult strategic position, since it needs to attempt to commit to potential entrants that it will not engage in an ex-post "squeeze", despite the fact that ex post it has very strong incentives to do so. We find that the fact that the complementary markets in which Intel competes are complex, dynamic and multilayered considerably sharpens this dilemma. We explore the ways in which Intel attempts to solve it, highlighting in particular the organizational structure and processes through which they attempt to commit to making money in the markets which they choose to enter while also committing not to making too much. Our results have implications for both our understanding of the dynamics of competition in complements and of the role of organizational structures and processes in shaping competition.
Handle: RePEc:nbr:nberwo:11852
Template-Type: ReDIF-Paper 1.0
Title: Three Current Account Balances: A "Semi-Structuralist" Interpretation
Classification-JEL: F31; F41
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: Jaewoo Lee
Author-Person: ple103
Note: IFM
Number: 11853
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11853
File-URL: http://www.nber.org/papers/w11853.pdf
File-Format: application/pdf
Publication-Status: published as Chinn, Menzie D. & Lee, Jaewoo, 2009. "Three current account balances: A "Semi-Structuralist" interpretation," Japan and the World Economy, Elsevier, vol. 21(2), pages 202-212, March.
Abstract: Three large current account imbalances -- one deficit (the United States) and two surpluses (Japan and the Euro area) -- are subjected to a minimalist structural interpretation. Though simple, this interpretation enables us to assess how much of each of the imbalances require a real exchange rate adjustment. According to the estimates, a large part of the U.S. current account deficit (nearly 2 percentage points of the 2004 deficit of 5 1/2 percent of GDP) will undergo an adjustment process that involves real depreciation in its exchange rate. For Japan, a little more than 1 percentage point (of GDP) of the current account surplus is found to require an exchange rate movement (real appreciation) as the surpluses adjust down. For the Euro area, less than half a percentage point of its current account surplus is found to require an adjustment via real appreciation.
Handle: RePEc:nbr:nberwo:11853
Template-Type: ReDIF-Paper 1.0
Title: Optimal Inflation Stabilization in a Medium-Scale Macroeconomic Model
Classification-JEL: E52; E61; E63
Author-Name: Stephanie Schmitt-Grohe
Author-Person: psc44
Author-Name: Martin Uribe
Note: EFG
Number: 11854
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11854
File-URL: http://www.nber.org/papers/w11854.pdf
File-Format: application/pdf
Publication-Status: published as Schmidt-Hebbel, Klaus and Rick Mishkin (eds.) Monetary Policy Under Inflation Targeting. Santiago, Chile: Central Bank of Chile, 2007.
Abstract: This paper characterizes Ramsey-optimal monetary policy in a medium-scale macroeconomic model that has been estimated to fit well postwar U.S.\ business cycles. We find that mild deflation is Ramsey optimal in the long run. However, the optimal inflation rate appears to be highly sensitive to the assumed degree of price stickiness. Within the window of available estimates of price stickiness (between 2 and 5 quarters) the optimal rate of inflation ranges from -4.2 percent per year (close to the Friedman rule) to -0.4 percent per year (close to price stability). This sensitivity disappears when one assumes that lump-sum taxes are unavailable and fiscal instruments take the form of distortionary income taxes. In this case, mild deflation emerges as a robust Ramsey prediction. In light of the finding that the Ramsey-optimal inflation rate is negative, it is puzzling that most inflation-targeting countries pursue positive inflation goals. We show that the zero bound on the nominal interest rate, which is often cited as a rationale for setting positive inflation targets, is of no quantitative relevance in the present model. Finally, the paper characterizes operational interest-rate feedback rules that best implement Ramsey-optimal stabilization policy. We find that the optimal interest-rate rule is active in price and wage inflation, mute in output growth, and moderately inertial. This rule achieves virtually the same level of welfare as the Ramsey optimal policy.
Handle: RePEc:nbr:nberwo:11854
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Provider Choice on Workers' Compensation Costs and Outcomes
Classification-JEL: J28; I18
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Peter S. Barth
Author-Name: Richard Victor
Note: LS
Number: 11855
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11855
File-URL: http://www.nber.org/papers/w11855.pdf
File-Format: application/pdf
Publication-Status: published as David Neumark & Peter S. Barth & Richard A. Victor, 2007. "The Impact of Provider Choice on Workers' Compensation Costs and Outcomes," ILR Review, Cornell University, ILR School, vol. 61(1), pages 121-142, October.
Abstract: We study how provider choice in workers' compensation cases affects costs and outcomes. When employees choose the provider, costs are higher and return-to-work outcomes are worse, while physical recovery is the same although satisfaction with medical care is higher. The higher costs and worse return-to-work outcomes associated with employee choice arise largely when employees selected a new provider, rather than a provider with whom the worker had a pre-existing relationship. The findings lend some support to recent policy changes limiting workers' ability to choose a provider with whom they do not have a prior relationship.
Handle: RePEc:nbr:nberwo:11855
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy in a Changing International Environment: The Role of Global Capital Flows
Classification-JEL: E0; F0
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: IFM ME PE
Number: 11856
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11856
File-URL: http://www.nber.org/papers/w11856.pdf
File-Format: application/pdf
Publication-Status: published as Martin Feldstein, "Monetary Policy in a Changing International Environment: The Role of Global Capital Flows," in Stability and Economic Growth: The Role of the Central Bank (Banco de Mexico, 2006): 245-55
Abstract: The Feldstein-Horioka study of 1980 found that OECD countries with high saving rates had high investment rates and vice versa, contrary to the traditional theory of global capital market integration. This capital market segmentation view, which has been verified in various studies over the past several decades, has important implications for tax and monetary policy. More recently, Alan Greenspan and John Helliwell have shown that the link between domestic saving and domestic investment became substantially weaker after the mid-1990s. The research reported in the current paper suggests that this is true of the smaller OECD countries but not of the larger ones. When observations are weighted by each country's GDP, the savings-investment link (i.e., the savings retention coefficient) remains relatively high. This paper also examines the recent capital flows to the United States. The Treasury International Capital (TIC) reports are generally misunderstood. When they are properly interpreted, they do not indicate that they U.S. has an excess of capital flows to finance the current account deficit. The TIC data also cannot be relied on the distinguish private and government sources of the capital flow. The persistence of these flows is therefore uncertain. The paper discusses the implications for monetary and fiscal policy of the changes in capital flows that may be happening.
Handle: RePEc:nbr:nberwo:11856
Template-Type: ReDIF-Paper 1.0
Title: Myths and Realities of American Political Geography
Classification-JEL: H7
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Bryce A. Ward
Note: DAE POL
Number: 11857
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11857
File-URL: http://www.nber.org/papers/w11857.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. and Bryce A. Ward. "Myths and Realities Of American Political Geography," Journal of Economic Perspectives, 2006, v20(2,Spring), 119-144.
Abstract: The division of America into red states and blue states misleadingly suggests that states are split into two camps, but along most dimensions, like political orientation, states are on a continuum. By historical standards, the number of swing states is not particularly low, and America's cultural divisions are not increasing. But despite the flaws of the red state/blue state framework, it does contain two profound truths. First, the heterogeneity of beliefs and attitudes across the United States is enormous and has always been so. Second, political divisions are becoming increasingly religious and cultural. The rise of religious politics is not without precedent, but rather returns us to the pre-New Deal norm. Religious political divisions are so common because religious groups provide politicians the opportunity to send targeted messages that excite their base.
Handle: RePEc:nbr:nberwo:11857
Template-Type: ReDIF-Paper 1.0
Title: Simulating the Dynamic Macroeconomic and Microeconomic Effects of the FairTax
Classification-JEL: H2
Author-Name: Sabine Jokisch
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Note: PE
Number: 11858
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11858
File-URL: http://www.nber.org/papers/w11858.pdf
File-Format: application/pdf
Publication-Status: published as Jokisch, Sabine and Laurence J. Kotlikoff. “Simulating the Dynamic Macroeconomic Effects of the FairTax.” The National Tax Journal (2007).
Abstract: America's aging coupled with high and growing old age health and pension benefits augers for much higher payroll taxes, with potentially damaging effects on the U.S. economy. This prognosis is supported by our analysis of a detailed dynamic life-cycle general equilibrium model, which closely captures projected changes in U.S. demographics. The FairTax offers a potential alternative to this dismal economic future. The FairTax proposes to replace the federal payroll tax, personal income tax, corporate income tax, and estate tax (not modeled here) with a progressive consumption tax delivered in the form of a federal retail sales tax plus a rebate. According to our simulation model, these policy changes would almost double the U.S. capital stock by the end of the century and raise long-run real wages by 19 percent compared to the base case alternative. They would also preclude a doubling of the highly regressive payroll tax. Indeed, the poorest members of each cohort experience remarkably large welfare gains from the FairTax. To be specific, today's elderly poor are predicted to experience a 13 to 14 percent welfare gain. In contrast, their middle class counterparts enjoy a 1 to 2 percent gain, and their richest counterparts experience a .5 to 1 percent welfare loss. Poor baby boomers experience 8 percent gains, while middle- and upper-income boomers experience either very small welfare losses or small gains. Once one moves to generations postdating the baby boomers there are positive welfare gains for all income groups in each cohorts. For example, the poorest members of the generation born in 1990 enjoy a 16 percent welfare gain. Their middle-class and rich contemporaries experience 5 and 2 percent welfare gains, respectively. The welfare gains are largest for future generations. Take the cohort born in 2030. The poorest members of this cohort enjoy a huge 27 percent improvement in their well being. For middle class members of this birth group, there's an 11 percent welfare gain. And for the richest members of the group, the gain is 5 percent. The remarkable point here is the size of the gains from the reform relative to the losses. Yes, some initial high- and middle-income households are made worse off, but their welfare losses are minor compared with the gains available to future generations, particularly the poorest members of future generations. While our model is highly stylized, it suggests that the FairTax offers a real opportunity to improve the U.S. economy's performance and the wellbeing of the vast majority of Americans. The winners from this reform, primarily those who are least well off, experience very major gains, and the losers experience only minor losses.
Handle: RePEc:nbr:nberwo:11858
Template-Type: ReDIF-Paper 1.0
Title: The Generational Divide in Support for Environmental Policies: European Evidence
Classification-JEL: Q25; H23
Author-Name: Joni Hersch
Author-Person: phe130
Author-Name: W. Kip Viscusi
Author-Person: pvi69
Note: EH EEE
Number: 11859
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11859
File-URL: http://www.nber.org/papers/w11859.pdf
File-Format: application/pdf
Publication-Status: published as Hersch, Joni and W. Kip Viscusi. “The Generational Divide in Support for Environmental Policies: European Evidence.” Climatic Change 77, 1/2 (July 2006): 121-136.
Abstract: This article examines age variations in support for environmental protection policies that affect climate change using a sample of over 14,000 respondents to a 1999 Eurobarometer survey. There is a steady decline with age in whether respondents are willing to incur higher gasoline prices to protect the environment. This relationship remains after controlling for socioeconomic characteristics. There are age-related differences in information about environmental risks, information sources about the environment, perceived health risks from climate change, and degree of worry about climate change. However, taking these factors into account does not eliminate the age variation in willingness to pay more for gasoline to protect the environment.
Handle: RePEc:nbr:nberwo:11859
Template-Type: ReDIF-Paper 1.0
Title: Can the European Community Afford to Neglect the Need for More Accountable Safety-Net Management?
Classification-JEL: G21; G28; P51
Author-Name: Edward J. Kane
Author-Person: pka853
Note: CF
Number: 11860
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11860
File-URL: http://www.nber.org/papers/w11860.pdf
File-Format: application/pdf
Publication-Status: published as Kane, Edward J. "Can the European Community Afford to Neglect the Need for More Accountable Safety-Net Management?" Atlantic Economic Journal 34, 127-144. 2006.
Abstract: As financial institutions and markets transact more and more cross-border business, gaps and flaws in national safety nets become more consequential. Because citizens of host (home) countries may be made to pay for mistakes made in the home (host) country, Basel's lead-regulator paradigm violates the principle of democratic accountability. Because important differences exist in policymaking authority, instruments, and goals, banking supervisors need to improve their ability to monitor and mitigate the consequences of defects in one another's performance. A straightforward way to enhance both capacities would be to establish opportunities for public trading in debt obligations and reinsurance derivatives issued by country-level deposit-insurance entities.
Handle: RePEc:nbr:nberwo:11860
Template-Type: ReDIF-Paper 1.0
Title: Can Standard Preferences Explain the Prices of out of the Money S&P 500 Put Options
Classification-JEL: G21; G28; P51
Author-Name: Luca Benzoni
Author-Person: pbe1008
Author-Name: Pierre Collin-Dufresne
Author-Name: Robert S. Goldstein
Note: AP
Number: 11861
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11861
File-URL: http://www.nber.org/papers/w11861.pdf
File-Format: application/pdf
Abstract: Prior to the stock market crash of 1987, Black-Scholes implied volatilities of S&P 500 index options were relatively constant across moneyness. Since the crash, however, deep out-of-the-money S&P 500 put options have become 'expensive' relative to the Black-Scholes benchmark. Many researchers (e.g., Liu, Pan and Wang (2005)) have argued that such prices cannot be justified in a general equilibrium setting if the representative agent has 'standard preferences' and the endowment is an i.i.d. process. Below, however, we use the insight of Bansal and Yaron (2004) to demonstrate that the 'volatility smirk' can be rationalized if the agent is endowed with Epstein-Zin preferences and if the aggregate dividend and consumption processes are driven by a persistent stochastic growth variable that can jump. We identify a realistic calibration of the model that simultaneously matches the empirical properties of dividends, the equity premium, the prices of both at-the-money and deep out-of-the-money puts, and the level of the risk-free rate. A more challenging question (that to our knowledge has not been previously investigated) is whether one can explain within a standard preference framework the stark regime change in the volatility smirk that has maintained since the 1987 market crash. To this end, we extend the model to a Bayesian setting in which the agent updates her beliefs about the average jump size in the event of a jump. Note that such beliefs only update at crash dates, and hence can explain why the volatility smirk has not diminished over the last eighteen years. We find that the model can capture the shape of the implied volatility curve both pre- and post-crash while maintaining reasonable estimates for expected returns, price-dividend ratios, and risk-free rates.
Handle: RePEc:nbr:nberwo:11861
Template-Type: ReDIF-Paper 1.0
Title: How Do Budget Deficits and Economic Growth Affect Reelection Prospects? Evidence from a Large Cross-Section of Countries
Classification-JEL: D72; E62; H62
Author-Name: Adi Brender
Author-Name: Allan Drazen
Author-Person: pdr25
Note: EFG POL
Number: 11862
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11862
File-URL: http://www.nber.org/papers/w11862.pdf
File-Format: application/pdf
Publication-Status: published as Adi Brender & Allan Drazen, 2008. "How Do Budget Deficits and Economic Growth Affect Reelection Prospects? Evidence from a Large Panel of Countries," American Economic Review, American Economic Association, vol. 98(5), pages 2203-20, December.
Abstract: Conventional wisdom is that good economic conditions or expansionary fiscal policy help incumbents get re-elected, but this has not been tested in a large cross-section of countries. We test these arguments in a sample of 74 countries over the period 1960-2003. We find no evidence that deficits help reelection in any group of countries -- developed and less developed, new and old democracies, countries with different government or electoral systems, and countries with different levels of democracy. In developed countries, especially old democracies, election-year deficits actually reduce the probability that a leader is reelected, with similar negative electoral effects of deficits in the earlier years of an incumbent's term in office. Higher growth rates of real GDP per-capita raise the probability of reelection only in the less developed countries and in new democracies, but voters are affected by growth over the leader's term in office rather than in the election year itself. Low inflation is rewarded by voters only in the developed countries. The effects we find are not only statistically significant, but also quite substantial quantitatively. We also suggest how the absence of a positive electoral effect of deficits can be consistent with the political deficit cycle found in new democracies.
Handle: RePEc:nbr:nberwo:11862
Template-Type: ReDIF-Paper 1.0
Title: The Perception and Valuation of the Risks of Climate Change: A Rational and Behavioral Blend
Classification-JEL: Q25; H23
Author-Name: W. Kip Viscusi
Author-Person: pvi69
Author-Name: Richard Zeckhauser
Author-Person: pze7
Note: EH LE PE EEE
Number: 11863
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11863
File-URL: http://www.nber.org/papers/w11863.pdf
File-Format: application/pdf
Publication-Status: published as Viscusi, W. Kip and Richard J. Zeckhauser. “The Perception and Valuation of the Risks of Climate Change: A Rational and Behavioral Blend.” Climatic Change 77, 1/2 (July 2006): 151-177.
Abstract: Over 250 respondents--graduate students in law and public policy--assessed the risks of climate change and valued climate-change mitigation policies. Many aspects of their behavior were consistent with rational behavior. For example, respondents successfully estimated distributions of temperature increases in Boston by 2100. The median value of best estimates was 1-3 degrees Fahrenheit. In addition, people with higher risk estimates, whether for temperature or related risks (e.g., hurricane intensities) offered more to avoid warming. Median willingness to pay (WTP) to avoid global warming was $0.50/gallon, and 3% of income. And important scope tests (e.g., respondents paid more for bigger accomplishments) were passed. However, significant behavioral propensities also emerged. For example, accessibility of neutral information on global warming boosted risk estimates. Warming projections correlated with estimates for unrelated risks, such as earthquakes and heart attacks. The implied WTP for avoidance was much greater when asked as a percent of income than as a gas tax, a percent thinking bias. Home team betting showed itself; individuals predicting a Bush victory predicted smaller temperature increases. In the climate-change arena, behavioral decision tendencies are like a fun-house mirror: They magnify some estimates and shrink others, but the contours of rational decision remain recognizable.
Handle: RePEc:nbr:nberwo:11863
Template-Type: ReDIF-Paper 1.0
Title: Equilibrium Commodity Prices with Irreversible Investment and Non-Linear Technology
Classification-JEL: C0; G12; G13; D51
Author-Name: Jaime Casassus
Author-Person: pca681
Author-Name: Pierre Collin-Dufresne
Author-Name: Bryan R. Routledge
Author-Person: pro450
Note: AP
Number: 11864
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11864
File-URL: http://www.nber.org/papers/w11864.pdf
File-Format: application/pdf
Publication-Status: published as Jaime Casassus & Pierre Collin-Dufresne & Bryan R. Routledge, 2018. "Equilibrium Commodity Prices with Irreversible Investment and Non-Linear Technologies," Journal of Banking & Finance, .
Abstract: We model equilibrium spot and futures oil prices in a general equilibrium production economy. In our model production of the consumption good requires two inputs: the consumption good and a commodity, e.g., Oil. Oil is produced by wells whose flow rate is costly to adjust. Investment in new Oil wells is costly and irreversible. As a result in equilibrium, investment in Oil wells is infrequent and lumpy. Even though the state of the economy is fully described by a one-factor Markov process, the spot oil price is not Markov (in itself). Rather it is best described as a regime-switching process, the regime being an investment `proximity' indicator. The resulting equilibrium oil price exhibits mean-reversion and heteroscedasticity. Further, the risk premium for exposure to commodity risk is time-varying, positive in the far-from-investment regime but negative in the near-investment regime. Further, our model captures many of the stylized facts of oil futures prices, such as backwardation and the `Samuelson effect.' The futures curve exhibits backwardation as a result of a convenience yield, which arises endogenously. We estimate our model using the Simulated Method of Moments with economic aggregate data and crude oil futures prices. The model successfully captures the first two moments of the futures curves, the average non-durable consumption-output ratio, the average oil consumption-output and the average real interest rate. The estimation results suggest the presence of convex adjustment costs for the investment in new oil wells. We also propose and test a linear approximation of the equilibrium regime-shifting dynamics implied by our model, and test its empirical implication for time-varying risk-premia.
Handle: RePEc:nbr:nberwo:11864
Template-Type: ReDIF-Paper 1.0
Title: Confronting Divergent Interests in Cross-Country Regulatory Arrangements
Classification-JEL: G21; G28; P51
Author-Name: Edward J. Kane
Author-Person: pka853
Note: CF
Number: 11865
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11865
File-URL: http://www.nber.org/papers/w11865.pdf
File-Format: application/pdf
Publication-Status: published as Edward J. Kane, 2006. "Confronting divergent interests in cross-country regulatory arrangements," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 69, pages 12p., June.
Abstract: Although nation-based systems of financial regulation constitute a second-best approach to global welfare maximization, treacherous accountability problems must be acknowledged and resolved before regulatory cooperation can deal fairly and efficiently with cross-border issues. To track and control insolvency risk within and across any set of countries, officials must construct a partnership that allows regulators in every participating country to monitor and to influence counterpart regulators in partnering nations. Using efforts to harmonize the Australian and New Zealand regulatory systems as an example, this paper identifies characteristics by which regulatory systems differ and underscores particular features that make regulatory harmonization difficult to achieve.
Handle: RePEc:nbr:nberwo:11865
Template-Type: ReDIF-Paper 1.0
Title: A Dual Policy Paradox: Why Have Trade and Immigration Policies Always Differed in Labor-Scarce Economies
Classification-JEL: F22; J1; O1
Author-Name: Timothy J. Hatton
Author-Person: pha305
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI LS
Number: 11866
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11866
File-URL: http://www.nber.org/papers/w11866.pdf
File-Format: application/pdf
Publication-Status: published as Hatton, T., K. O’Rourke and A. Taylor (eds.). THE NEW COMPARATIVE ECONOMIC HISTORY. Cambridge, MA: MIT Press, 2007.
Abstract: Today's labor-scarce economies have open trade and closed immigration policies, while a century ago they had just the opposite, open immigration and closed trade policies. Why the inverse policy correlation, and why has it persisted for almost two centuries? This paper seeks answers to this dual policy paradox by exploring the fundamentals which have influenced the evolution of policy: the decline in the costs of migration and its impact on immigrant selectivity, a secular switch in the net fiscal impact of trade relative to immigration, and changes in the median voter. The paper also offers explanations for the between-country variance in voter anti-trade and anti-migration attitude, and links this to the fundamentals pushing policy.
Handle: RePEc:nbr:nberwo:11866
Template-Type: ReDIF-Paper 1.0
Title: Thinking Ahead: The Decision Problem
Classification-JEL: D81; D84; C61
Author-Name: Patrick Bolton
Author-Person: pbo544
Author-Name: Antoine Faure-Grimaud
Note: CF
Number: 11867
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11867
File-URL: http://www.nber.org/papers/w11867.pdf
File-Format: application/pdf
Publication-Status: published as Patrick Bolton & Antoine Faure-Grimaud, 2009. "Thinking Ahead: The Decision Problem," Review of Economic Studies, Blackwell Publishing, vol. 76(4), pages 1205-1238, October.
Abstract: We propose a model of bounded rationality based on time-costs of deliberating current and future decisions. We model an individual decision maker's thinking process as a thought-experiment that takes time and let the decision maker "think ahead" about future decision problems in yet unrealized states of nature. By formulating an intertemporal, state-contingent, planning problem, which may involve costly deliberation in every state of nature, and by letting the decision-maker deliberate ahead of the realization of a state, we attempt to capture the basic idea that individuals generally do not think through a complete action-plan. Instead, individuals prioritize their thinking and leave deliberations on less important decisions to the time or event when they arise.
Handle: RePEc:nbr:nberwo:11867
Template-Type: ReDIF-Paper 1.0
Title: The Net Asset Position of the U.S. National Government, 1784-1802: Hamilton's Blessing or the Spoils of War?
Classification-JEL: E62; F34; G18; H60
Author-Name: Farley Grubb
Author-Person: pgr272
Note: DAE
Number: 11868
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11868
File-URL: http://www.nber.org/papers/w11868.pdf
File-Format: application/pdf
Abstract: The War for Independence left the National Government deeply in debt. The spoils from winning that war also gave it an empire of land. So, post-1783, was the National Government solvent? Was its net asset position, land assets minus debt liabilities, positive or negative? Evidence is gathered to answer this question by constructing a yearly time series of its net asset position, including time series of the subcomponents of that position, from 1784 through 1802. The answer to this question may help explain the constraints that determined why the National Debt was funded in the particular way that it was. The results from the data series constructed indicate that the National Government was solvent, had more than enough land assets to cover its debt liabilities, in this period but only if it maintained the default on the Continental Dollar (its non-interest-bearing debt). To do this and not ruin its creditworthiness it had to distinguish, legally and in the marketplace, between its interest-bearing and its non-interest-bearing debt. It did this, in part, by only paying interest and no principal on its debts and by curtailing direct swaps of land for debt.
Handle: RePEc:nbr:nberwo:11868
Template-Type: ReDIF-Paper 1.0
Title: Are Countercyclical Fiscal Policies Counterproductive?
Classification-JEL: E32; E62; E63
Author-Name: David B. Gordon
Author-Person: pgo64
Author-Name: Eric M. Leeper
Author-Person: ple3
Note: EFG
Number: 11869
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11869
File-URL: http://www.nber.org/papers/w11869.pdf
File-Format: application/pdf
Abstract: Economists generally believe that countercyclical fiscal policies have stabilizing effects that work through automatic stabilizers and discretionary actions. Analyses underlying this conventional wisdom focus on intratemporal margins: how employment and personal income respond in the short run to changes in government expenditures and taxes. But in economic downturns, countercyclical policies increase government indebtedness, raising future debt service obligations. These new expenditure commitments must be financed by some mix of higher taxes, lower spending, or higher money growth in the future. Expectations of how future policies will adjust change current savings rates and the efficacy of countercyclical policies. It is thus possible for responses to expected future policies to exacerbate and prolong recessions. This paper highlights these expectations effects. Connecting the theory to U.S. data we find: (1) through this expectations channel, countercyclical policies may create a business cycle when there would be no cycle in the absence of countercyclical policies; (2) nontrivial fractions of variation in investment and velocity can be explained by variation in macro policies alone---without any nonpolicy sources of fluctuation; and (3) persistence in key macro variables can arise solely from expectations of policy.
Handle: RePEc:nbr:nberwo:11869
Template-Type: ReDIF-Paper 1.0
Title: The Response of Prices, Sales, and Output to Temporary Changes in Demand
Classification-JEL: D21; D42; E22; E23; L11
Author-Name: Adam Copeland
Author-Name: George Hall
Author-Person: pha118
Note: EFG IO
Number: 11870
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11870
File-URL: http://www.nber.org/papers/w11870.pdf
File-Format: application/pdf
Publication-Status: published as Adam Copeland & George Hall, 2011. "The response of prices, sales, and output to temporary changes in demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(2), pages 232-269, March.
Abstract: We determine empirically how the Big Three automakers accommodate shocks to demand. They have the capability to change prices, alter labor inputs through temporary layoffs and overtime, or adjust inventories. These adjustments are interrelated, non-convex, and dynamic in nature. Combining weekly plant-level data on production schedules and output with monthly data on sales and transaction prices, we estimate a dynamic profit-maximization model of the firm. Using impulse response functions, we demonstrate that when an automaker is hit with a demand shock sales respond immediately, prices respond gradually, and production responds only after a delay. The size of the immediate sales response is linear in the size of the shock, but the delayed production response is non-convex in the size of the shock. For sufficiently large shocks the cumulative production response over the product cycle is an order of magnitude larger than the cumulative price response. We examine two recent demand shocks: the Ford Explorer/Firestone tire recall of 2000, and the September 11, 2001 terrorist attacks.
Handle: RePEc:nbr:nberwo:11870
Template-Type: ReDIF-Paper 1.0
Title: The Economic Impact of AIDS Treatment: Labor Supply in Western Kenya
Classification-JEL: I1; I3; O1; J2
Author-Name: Harsha Thirumurthy
Author-Person: pth85
Author-Name: Joshua Graff-Zivin
Author-Person: pgr314
Author-Name: Markus Goldstein
Author-Person: pgo285
Note: EH
Number: 11871
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11871
File-URL: http://www.nber.org/papers/w11871.pdf
File-Format: application/pdf
Publication-Status: published as Harsha Thirumurthy & Joshua Graff Zivin & Markus Goldstein, 2008. "The Economic Impact of AIDS Treatment: Labor Supply in Western Kenya," Journal of Human Resources, University of Wisconsin Press, vol. 43(3), pages 511-552.
Abstract: Using longitudinal survey data collected in collaboration with a treatment program, this paper is the first to estimate the economic impacts of antiretroviral treatment in Africa. The responses in two important outcomes are studied: (1) labor supply of adult AIDS patients receiving treatment; and (2) labor supply of children and adults living in the patients' households. We find that within six months after the initiation of treatment, there is a 20 percent increase in the likelihood of the patient participating in the labor force and a 35 percent increase in weekly hours worked. Since patient health would continue to decline without treatment, these labor supply responses are underestimates of the impact of treatment on the treated. The upper bound of the treatment impact, which is based on plausible assumptions about the counterfactual, is considerably larger and also implies that the wage benefit from treatment is roughly equal to the costs of treatment provision. The responses in the labor supply of patients' household members are heterogeneous. Young boys and women work considerably less after initiation of treatment, while girls and men do not change their labor supply. The effects on child labor are particularly important since they suggest potential schooling impacts from treatment.
Handle: RePEc:nbr:nberwo:11871
Template-Type: ReDIF-Paper 1.0
Title: Games Parents and Adolescents Play: Risky Behaviors, Parental Reputation, and Strategic Transfers
Classification-JEL: J1
Author-Name: Lingxin Hao
Author-Name: V. Joseph Hotz
Author-Person: pho4
Author-Name: Ginger Z. Jin
Note: CH
Number: 11872
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11872
File-URL: http://www.nber.org/papers/w11872.pdf
File-Format: application/pdf
Publication-Status: published as Hao, Lingxin, V. Joseph Hotz, and Ginger Zhe Jin. “Games Parents and Adolescents Play: Risky Behaviors, Parental Reputation, and Strategic Transfers.” Economic Journal 118, 528 (April 2008): 515–555.
Abstract: This paper examines reputation formation in intra-familial interactions. We consider parental reputation in a repeated two-stage game in which adolescents decide whether to give a teen birth or drop out of high school, and given adolescent decisions, the parent decides whether to house and support his children beyond age 18. Drawing on the work of Milgrom and Roberts (1982) and Kreps and Wilson (1982), we show that the parent has, under certain conditions, the incentive to penalize older children for their teenage risky behaviors in order to dissuade the younger children from the same risky behaviors. The model generates two empirical implications: the likelihood of teen risky behaviors and parental transfers to a child who engaged in teen risky behaviors will decrease with the number of remaining children at risk. We test these two implications, using data from the National Longitudinal Survey of Youth, 1979 Cohort (NLSY79). Exploiting the availability of repeated observations on individual respondents and of observations on multiple siblings, we find evidence in favor of both predictions.
Handle: RePEc:nbr:nberwo:11872
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Regulations on the Supply and Quality of Care in Child Care Markets
Classification-JEL: L5; L8
Author-Name: V. Joseph Hotz
Author-Person: pho4
Author-Name: Mo Xiao
Note: CH
Number: 11873
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11873
File-URL: http://www.nber.org/papers/w11873.pdf
File-Format: application/pdf
Publication-Status: published as V. Joseph Hotz & Mo Xiao, 2011. "The Impact of Regulations on the Supply and Quality of Care in Child Care Markets," American Economic Review, American Economic Association, vol. 101(5), pages 1775-1805, August.
Abstract: We examine the impact of state child care regulations on the supply and quality of care in child care markets. We exploit panel data on both individual establishments and local markets to control for state, time, and, where possible, establishment-specific fixed effects to mitigate the potential bias due to policy endogeneity. We find that the imposition of regulations reduces the number of center-based child care establishments, especially in lower income markets. However, such regulations increase the quality of services provided, especially in higher income areas. Thus, there are winners and losers from the regulation of child care services.
Handle: RePEc:nbr:nberwo:11873
Template-Type: ReDIF-Paper 1.0
Title: Generalizing the Taylor Principle
Classification-JEL: E52; E62
Author-Name: Troy Davig
Author-Person: pda131
Author-Name: Eric M. Leeper
Author-Person: ple3
Note: EFG
Number: 11874
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11874
File-URL: http://www.nber.org/papers/w11874.pdf
File-Format: application/pdf
Publication-Status: published as Troy Davig & Eric M. Leeper, 2007. "Generalizing the Taylor Principle," American Economic Review, American Economic Association, vol. 97(3), pages 607-635, June.
Abstract: The paper generalizes the Taylor principle---the proposition that central banks can stabilize the macroeconomy by raising their interest rate instrument more than one-for-one in response to higher inflation---to an environment in which reaction coefficients in the monetary policy rule evolve according to a Markov process. We derive a long-run Taylor principle that delivers unique bounded equilibria in two standard models. Policy can satisfy the Taylor principle in the long run, even while deviating from it substantially for brief periods or modestly for prolonged periods. Macroeconomic volatility can be higher in periods when the Taylor principle is not satisfied, not because of indeterminacy, but because monetary policy amplifies the impacts of fundamental shocks. Regime change alters the qualitative and quantitative predictions of a conventional new Keynesian model, yielding fresh interpretations of existing empirical work.
Handle: RePEc:nbr:nberwo:11874
Template-Type: ReDIF-Paper 1.0
Title: The Future of Drug Development: The Economics of Pharmacogenomics
Classification-JEL: I10; I11; I12
Author-Name: John A. Vernon
Author-Name: W. Keener Hughen
Note: EH PR
Number: 11875
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11875
File-URL: http://www.nber.org/papers/w11875.pdf
File-Format: application/pdf
Publication-Status: published as Vernon, J., Hughen K., Trujillo, A. The Future of Drug Development: The Economics of Pharmacogenomics. January 2008, Vol. 1, No. 1, Pages 49-59 Expert Review of Clinical Pharmacology
Abstract: This paper models how the evolving field of pharmacogenomics (PG), which is the science of using genomic markers to predict drug response, may impact drug development times, attrition rates, costs, and the future returns to research and development (R&D). While there still remains an abundance of uncertainty around how PG will impact the future landscape of pharmaceutical and biological R&D, we identify several likely outcomes. We conclude PG has the potential to significantly reduce both expected drug development costs (via higher probabilities of technical success, shorter clinical development times, and smaller clinical trials) and returns. The impact PG has on expected returns is partially mitigated by higher equilibrium prices, expedited product launches, and longer effective patent lives. Our conclusions are, of course, accompanied by numerous caveats.
Handle: RePEc:nbr:nberwo:11875
Template-Type: ReDIF-Paper 1.0
Title: Technological Revolutions and Stock Prices
Classification-JEL: G1
Author-Name: Lubos Pastor
Author-Person: ppa276
Author-Name: Pietro Veronesi
Note: AP
Number: 11876
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11876
File-URL: http://www.nber.org/papers/w11876.pdf
File-Format: application/pdf
Publication-Status: published as Pastor, Lubos and Pietro Veronesi. "Technological Revolutions and Stock Prices." American Economic Review 99, 4 (2009): 1451-1483.
Abstract: We develop a general equilibrium model in which stock prices of innovative firms exhibit "bubbles" during technological revolutions. In the model, the average productivity of a new technology is uncertain and subject to learning. During technological revolutions, the nature of this uncertainty changes from idiosyncratic to systematic. The resulting "bubbles" in stock prices are observable ex post but unpredictable ex ante, and they are most pronounced for technologies characterized by high uncertainty and fast adoption. We find empirical support for the model's predictions in 1830-1861 and 1992-2005 when the railroad and Internet technologies spread in the United States.
Handle: RePEc:nbr:nberwo:11876
Template-Type: ReDIF-Paper 1.0
Title: Pensions for an Aging Population
Classification-JEL: H55
Author-Name: Peter Diamond
Author-Person: pdi24
Note: AG PE
Number: 11877
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11877
File-URL: http://www.nber.org/papers/w11877.pdf
File-Format: application/pdf
Publication-Status: published as Diamond, Peter. “Système de retraite et vieillissement de la population.” (“Pensions for an Aging Population.”) Revue Française d'Economie 20 (April 2006): 21-49.
Abstract: After presenting the Gruber-Wise analysis showing a strong effect on retirement of implicit taxes from pension rules, it is shown that there is no effect of these implicit taxes on unemployment. This supports the argument for avoiding high implicit taxes on continued work. Also discussed are methods for adjusting benefits and taxes for increases in life expectancy, with particular attention to increasing "the retirement age." Calculations are presented showing the decreases in benefits for an increase in the normal retirement age in the US and the years of service for a full benefit in France.
Handle: RePEc:nbr:nberwo:11877
Template-Type: ReDIF-Paper 1.0
Title: The More Things Change, The More They Stay the Same: Trends in Long-term Employment in the United States, 1969-2002
Classification-JEL: J6
Author-Name: Ann Huff Stevens
Author-Person: pst180
Note: LS
Number: 11878
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11878
File-URL: http://www.nber.org/papers/w11878.pdf
File-Format: application/pdf
Abstract: This study considers whether there has been a decline in the attachment of workers and firms in the United States over the past several decades. Specifically, it compares snapshots of job tenure taken at the end of workers' careers from 1969 to 2002, using data from the Retirement History Survey, the National Longitudinal Survey of Older Men, and the Health and Retirement Study. The primary finding is one of stability in the prevalence of long-term employment relationships for men in the United States. In 1969, average tenure in the longest job for males aged 58-62 was 21.9 years. In 2002, the comparable figure was 21.4 years. Just over half of men ending their careers in 1969 had been with a single employer for at least 20 years; the same is true in 2002. This finding is robust to adjustments for minor differences in question details across data sources and for educational and retirement age changes over this time period.
Handle: RePEc:nbr:nberwo:11878
Template-Type: ReDIF-Paper 1.0
Title: Fast-Food Restaurant Advertising on Television and Its Influence on Childhood Obesity
Classification-JEL: I10; I12
Author-Name: Shin-Yi Chou
Author-Name: Inas Rashad
Author-Person: pke191
Author-Name: Michael Grossman
Author-Person: pgr107
Note: EH
Number: 11879
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11879
File-URL: http://www.nber.org/papers/w11879.pdf
File-Format: application/pdf
Publication-Status: published as Shin-Yi Chou & Inas Rashad & Michael Grossman, 2008. "Fast-Food Restaurant Advertising on Television and Its Influence on Childhood Obesity," Journal of Law & Economics, University of Chicago Press, vol. 51(4), pages 599-618, November.
Abstract: Childhood obesity around the world, and particularly in the United States, is an escalating problem that is especially detrimental as its effects carry on into adulthood. In this paper we employ the 1979 Child-Young Adult National Longitudinal Survey of Youth and the 1997 National Longitudinal Survey of Youth to estimate the effects of fast-food restaurant advertising on children and adolescents being overweight. The advertising measure used is the number of hours of spot television fast-food restaurant advertising messages seen per week. Our results indicate that a ban on these advertisements would reduce the number of overweight children ages 3-11 in a fixed population by 10 percent and would reduce the number of overweight adolescents ages 12-18 by 12 percent. The elimination of the tax deductibility of this type of advertising would produce smaller declines of between 3 and 5 percent in these outcomes but would impose lower costs on children and adults who consume fast food in moderation because positive information about restaurants that supply this type of food would not be banned completely from television.
Handle: RePEc:nbr:nberwo:11879
Template-Type: ReDIF-Paper 1.0
Title: Monitoring Works: Getting Teachers to Come to School
Classification-JEL: I20; I21; J13; J30
Author-Name: Esther Duflo
Author-Person: pdu166
Author-Name: Rema Hanna
Author-Person: pha883
Note: CH ED
Number: 11880
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11880
File-URL: http://www.nber.org/papers/w11880.pdf
File-Format: application/pdf
Abstract: In the rural areas of developing countries, teacher absence is a widespread problem. This paper tests whether a simple incentive program based on teacher presence can reduce teacher absence, and whether it has the potential to lead to more teaching activities and better learning. In 60 informal one-teacher schools in rural India, randomly chosen out of 120 (the treatment schools), a financial incentive program was initiated to reduce absenteeism. Teachers were given a camera with a tamper-proof date and time function, along with instructions to have one of the children photograph the teacher and other students at the beginning and end of the school day. The time and date stamps on the photographs were used to track teacher attendance. A teacher's salary was a direct function of his attendance. The remaining 60 schools served as comparison schools. The introduction of the program resulted in an immediate decline in teacher absence. The absence rate (measured using unannounced visits both in treatment and comparison schools) changed from an average of 42 percent in the comparison schools to 22 percent in the treatment schools. When the schools were open, teachers were as likely to be teaching in both types of schools, and the number of students present was roughly the same. The program positively affected child achievement levels: a year after the start of the program, test scores in program schools were 0.17 standard deviations higher than in the comparison schools and children were 40 percent more likely to be admitted into regular schools.
Handle: RePEc:nbr:nberwo:11880
Template-Type: ReDIF-Paper 1.0
Title: The Demand for Social Interaction
Classification-JEL: Z13
Author-Name: Henry Saffer
Author-Person: psa935
Note: EH
Number: 11881
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11881
File-URL: http://www.nber.org/papers/w11881.pdf
File-Format: application/pdf
Publication-Status: published as Saffer, Henry, 2008. "The demand for social interaction," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(3), pages 1047-1060, June.
Abstract: In this paper social interaction is modeled as a consumer good. Social interaction may provide an externality in the form of social capital, but the primary reason that individuals engage in social interaction is that these activities directly yield utility. It is important to note that some measures of social interaction show declines while many do not. A model of household production is employed to derive the demand for social interaction. The model shows that the demand for social interaction is a function of its price, the price of other goods and income. The role of children and marriage in social interaction can also be explained in the model. The theory is tested with data from the General Social Survey (GSS) and the results show that social interaction can be explained as the consequence of utility maximizing behavior by individuals. Increases in education generally increase memberships but reduce visiting with relatives and friends. Increases in income generally increase memberships and some forms of visiting. The model predicts 70 percent, or more, of the time trends in social interaction. These results are in contrast to social capital theorists who have focused on the declines in social interaction and who have attributed these changes to factors such as increased community heterogeneity and increased television viewing.
Handle: RePEc:nbr:nberwo:11881
Template-Type: ReDIF-Paper 1.0
Title: Investor Sentiment and Corporate Finance: Micro and Macro
Classification-JEL: G14; G32; G34
Author-Name: Owen A. Lamont
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: CF
Number: 11882
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11882
File-URL: http://www.nber.org/papers/w11882.pdf
File-Format: application/pdf
Publication-Status: published as Lamont, Owen A. and Jeremy C. Stein. "Investor Sentiment And Corporate Finance: Micro And Macro," American Economic Review, 2005, v95(4,Sep), 147-151.
Abstract: We document that net equity issuance is considerably more sensitive to aggregate stock returns and Q's than to firm-level stock returns and Q's. Very similar patterns also emerge when we look at merger activity. In light of earlier work (Campbell 1991, Vuolteenaho 2002) which finds that aggregate stock returns are less informative about future cashflows than are firm-level stock returns--and thus, potentially more strongly influenced by investor sentiment--these results suggest that both equity issuance and mergers are to a significant extent driven by market-timing considerations, as opposed to by purely fundamental factors.
Handle: RePEc:nbr:nberwo:11882
Template-Type: ReDIF-Paper 1.0
Title: The Law and Economics of Self-Dealing
Classification-JEL: G3; G38; K22
Author-Name: Simeon Djankov
Author-Person: pdj4
Author-Name: Rafael LaPorta
Author-Person: pla273
Author-Name: Florencio Lopez-de-Silanes
Author-Person: plo137
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: CF LE
Number: 11883
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11883
File-URL: http://www.nber.org/papers/w11883.pdf
File-Format: application/pdf
Publication-Status: published as Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2008. "The law and economics of self-dealing," Journal of Financial Economics, Elsevier, vol. 88(3), pages 430-465, June.
Abstract: We present a new measure of legal protection of minority shareholders against expropriation by corporate insiders: the anti-self-dealing index. Assembled with the help of Lex Mundi law firms, the index is calculated for 72 countries based on legal rules prevailing in 2003, and focuses on private enforcement mechanisms, such as disclosure, approval, and litigation, governing a specific self-dealing transaction. This theoretically-grounded index predicts a variety of stock market outcomes, and generally works better than the commonly used index of anti-director rights.
Handle: RePEc:nbr:nberwo:11883
Template-Type: ReDIF-Paper 1.0
Title: Did Vasco da Gama Matter for European Markets? Testing Frederick Lane's Hypotheses Fifty Years Later
Classification-JEL: F14; N7
Author-Name: Kevin H. O'Rourke
Author-Person: por7
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI
Number: 11884
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11884
File-URL: http://www.nber.org/papers/w11884.pdf
File-Format: application/pdf
Publication-Status: published as O’Rourke, Kevin H. and Jeffrey G. Williamson. ”Did Vasco da Gama Matter to European Markets?” Economic History Review 62, 3 (August 2009): 655-84.
Abstract: In his seminal publications between the 1930s and 1960s, Frederick Lane offered three hypotheses regarding the impact of the Voyages of Discovery that have guided debate ever since. First, pepper and other spice prices did not rise in European markets in the century before the 1490s, and thus could not have 'pulled in' the oceanic explorations by their rising scarcity. Second, Portuguese circumnavigation of Africa did not lower European spice prices across the 16th century, implying that the discovery of the Cape route had no permanent effect on Euro-Asian market integration. Third, 15th century Venetian spice markets were already well integrated with those in Iberia and northern Europe, implying that Portugal could not have had an intra-European market integrating influence in the 16th century. Lane developed these influential hypotheses by relying heavily on nominal spice prices from Venice and the Levant. This paper revisits Lane's hypotheses by using instead relative spice prices, that is, accounting for inflation. It also draws on evidence from Iberia and northern Europe. In addition, it explores European market integration before and after 1503, the year when da Gama returned from his financially successful second voyage. Lane's three hypotheses are rejected: the impact of the Portuguese was profound on all fronts. We conclude by using a simple model of monopoly and oligopoly to decompose the sources of the Cape route's impact on European markets.
Handle: RePEc:nbr:nberwo:11884
Template-Type: ReDIF-Paper 1.0
Title: Contractual Versus Generic Outsourcing: The Role of Proximity
Classification-JEL: F1; L24
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Author-Name: Barbara J. Spencer
Author-Person: psp2
Note: ITI PR
Number: 11885
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11885
File-URL: http://www.nber.org/papers/w11885.pdf
File-Format: application/pdf
Abstract: We explore the relationship between proximity of buyers and sellers and the organizational form of outsourcing. Outsourcing can be "contractual" in which suppliers undertake specific investments or involve "generic" market transactions. Proximity expands the variety of products sourced through contracts abroad rather than at home, but the range of generic imports is unchanged. A higher-quality foreign workforce raises the variety of contractual trade, but at the expense of generics. We confirm these predictions using data for ordinary versus processing exports from Chinese provinces to destination markets and also the predictions of an extended model that allows for multinational production.
Handle: RePEc:nbr:nberwo:11885
Template-Type: ReDIF-Paper 1.0
Title: Firm Expansion and CEO Pay
Classification-JEL: D23; G32; G38; J33
Author-Name: Lucian Bebchuk
Author-Person: pbe72
Author-Name: Yaniv Grinstein
Author-Person: pgr187
Note: CF
Number: 11886
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11886
File-URL: http://www.nber.org/papers/w11886.pdf
File-Format: application/pdf
Abstract: We study the extent to which decisions to expand firm size are associated with increases in subsequent CEO compensation. Controlling for past stock performance, we find a positive correlation between CEO compensation and the CEO's past decisions to increase firm size. This correlation is economically meaningful; for example, other things being equal, CEOs who in the preceding three years were in the top quartile in terms of expanding by increasing the number of shares outstanding receive compensation that is higher by one-third than the compensation of CEOs belonging to the bottom quartile. We also find that stock returns are correlated with subsequent CEO pay only to the extent that they contribute to expanding firm size; only the component of past stock returns not distributed as dividends is correlated with subsequent CEO pay. Finally, we find an asymmetry between increases and decreases in size: while increases in firm size are followed by higher CEO pay, decreases in firm size are not followed by reduction in such pay. The association we find between CEOs' compensation and firm-expanding decisions undertaken earlier during their service could provide CEOs with incentives to expand firm size.
Handle: RePEc:nbr:nberwo:11886
Template-Type: ReDIF-Paper 1.0
Title: Measuring Aggregate Productivity Growth Using Plant-Level Data
Classification-JEL: L0
Author-Name: Amil Petrin
Author-Name: James Levinsohn
Author-Person: ple386
Note: IO PR
Number: 11887
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11887
File-URL: http://www.nber.org/papers/w11887.pdf
File-Format: application/pdf
Publication-Status: published as Amil Petrin & James Levinsohn, 2012. "Measuring aggregate productivity growth using plant-level data," The RAND Journal of Economics, vol 43(4), pages 705-725.
Abstract: We define aggregate productivity growth as the change in aggregate final demand minus the change in the aggregate cost of primary inputs. We show how to aggregate plant-level data to this measure and how to use plant-level data to decompose our measure into technical efficiency and reallocation components. This requires us to confront the "non-neoclassical" features that impact plant-level data including plant-level heterogeneity, the entry and exit of goods, adjustment costs, fixed and sunk costs, and market power. We compare our measure of aggregate productivity growth to several competing variants that are based only on a single plant-level factor of technical efficiency. We show that theory suggests our measure may differ substantially from these measures of aggregate productivity growth. We illustrate this using panel data from manufacturing industries in Chile. We find that our measure does differ substantially from other widely used measures with especially marked differences in the fraction of productivity growth attributed to reallocation.
Handle: RePEc:nbr:nberwo:11887
Template-Type: ReDIF-Paper 1.0
Title: Mismatch
Classification-JEL: E24; J63; J64
Author-Name: Robert Shimer
Author-Person: psh9
Note: EFG LS
Number: 11888
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11888
File-URL: http://www.nber.org/papers/w11888.pdf
File-Format: application/pdf
Publication-Status: published as Robert Shimer, 2006. "Mismatch," Proceedings, Federal Reserve Bank of San Francisco.
Publication-Status: published as Robert Shimer, 2007. "Mismatch," American Economic Review, American Economic Association, vol. 97(4), pages 1074-1101, September.
Abstract: This paper develops a dynamic model of mismatch. Workers and jobs are randomly assigned to labor markets. Each labor market clears at each instant but some labor markets have more workers than jobs, hence unemployment, and some have more jobs than workers, hence vacancies. As workers and jobs move between labor markets, some unemployed workers find vacant jobs and some employed workers lose or leave their job and become unemployed. The model is quantitatively consistent with the comovement of unemployment, job vacancies, and the rate at which unemployed workers find jobs over the business cycle. It can also address a variety of labor market phenomena, including duration dependence in the job finding probability and employer-to-employer transitions, and it helps explain the cyclical volatility of vacancies and unemployment.
Handle: RePEc:nbr:nberwo:11888
Template-Type: ReDIF-Paper 1.0
Title: Life After Kyoto: Alternative Approaches to Global Warming
Classification-JEL: H2; Q5
Author-Name: William Nordhaus
Author-Person: pno115
Note: EFG PR PE EEE
Number: 11889
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11889
File-URL: http://www.nber.org/papers/w11889.pdf
File-Format: application/pdf
Publication-Status: published as Nordhaus, William D. "After Kyoto: Alternative Mechanisms To Control Global Warming," American Economic Review, 2005, v96(2), 31-34.
Abstract: This study reviews different approaches to the political and economic control of global public goods like global warming. It compares quantity-oriented control mechanisms like the Kyoto Protocol with price-type control mechanisms such as internationally harmonized carbon taxes. The pros and cons of the two approaches are compared, focusing on such issues as performance under conditions of uncertainty, volatility of the induced carbon prices, the excess burden of taxation and regulation, potential for corruption and accounting finagling, and ease of implementation. It concludes that, although virtually all discussions about economic global public goods have analyzed quantitative approaches, price-type approaches are likely to be more effective and more efficient.
Handle: RePEc:nbr:nberwo:11889
Template-Type: ReDIF-Paper 1.0
Title: Neckties in the Tropics: A Model of International Trade and Cultural Diversity
Classification-JEL: F12; F13; F15; Z10
Author-Name: James E. Rauch
Author-Person: pra166
Author-Name: Vitor Trindade
Author-Person: ptr67
Note: ITI
Number: 11890
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11890
File-URL: http://www.nber.org/papers/w11890.pdf
File-Format: application/pdf
Publication-Status: published as Rauch, James E. and Vitor Trindade. "Neckties in the Tropics: A Model of International Trade and Cultural Diversity." Canadian Journal of Economics 42 (August 2009): 809-843.
Abstract: Some cultural goods, like clothes and films, are consumed socially and are thus characterized by the same consumption network externalities as languages. At the same time, producers of new cultural goods in any one country draw on the stock of ideas generated by previous cultural production in all countries. For such goods, costless trade and communication tend to lead to the dominance of one cultural style, increasing utility in the short run but reducing quality and generating cultural stagnation in the long run. Increasing trade costs while keeping communication costs low may reduce welfare by stimulating production of cultural goods that are "compatible" with the dominant style, thereby capturing consumption network externalities, but that add little to the stock of usable ideas. A reform of cultural policy suggested by our two-country analysis could be to remove import restrictions in the smaller country and replace them with subsidies to the fixed costs of production of new cultural goods in its traditional style.
Handle: RePEc:nbr:nberwo:11890
Template-Type: ReDIF-Paper 1.0
Title: Is Financial Globalization Beneficial?
Classification-JEL: F02; O10; O16; G20
Author-Name: Frederic Mishkin
Author-Person: pmi37
Note: IFM ME
Number: 11891
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11891
File-URL: http://www.nber.org/papers/w11891.pdf
File-Format: application/pdf
Publication-Status: published as Frederic S. Mishkin, 2007. "Is Financial Globalization Beneficial?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 259-294, 03.
Abstract: This lecture examines whether financial globalization is beneficial to developing countries by first examining the evidence on financial development and economic growth and concludes that financial development is indeed a key element in promoting economic growth. It then asks why if financial development is so beneficial, it often doesn't occur. It then goes on to examine whether globalization, particularly of the financial kind, can help encourage financial and economic development and argues that it can. However, financial globalization does not always work to encourage economic development because it often leads to devastating financial crises. The issue is thus not whether financial globalization is inherently good or bad, but whether it can be done right.
Handle: RePEc:nbr:nberwo:11891
Template-Type: ReDIF-Paper 1.0
Title: What's Psychology Worth? A Field Experiment in the Consumer Credit Market
Classification-JEL: D1; C93; D12; D14; D21; D81
Author-Name: Marianne Bertrand
Author-Person: pbe697
Author-Name: Dean Karlin
Author-Person: pka56
Author-Name: Sendhil Mullainathan
Author-Person: pmu103
Author-Name: Eldar Shafir
Author-Name: Jonathan Zinman
Author-Person: pzi83
Note: CF LS
Number: 11892
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11892
File-URL: http://www.nber.org/papers/w11892.pdf
File-Format: application/pdf
Abstract: Numerous laboratory studies find that minor nuances of presentation and description change behavior in ways that are inconsistent with standard economic models. How much do these context effect matter in natural settings, when consumers make large, real decisions and have the opportunity to learn from experience? We report on a field experiment designed to address this question. A South African lender sent letters offering incumbent clients large, short-term loans at randomly chosen interest rates. The letters also contained independently randomized psychological "features" that were motivated by specific types of frames and cues shown to be powerful in the lab, but which, from a normative perspective, ought to have no impact. Consistent with standard economics, the interest rate significantly affected loan take-up. Inconsistent with standard economics, some of the psychological features also significantly affected take-up. The average effect of a psychological manipulation was equivalent to a one half percentage point change in the monthly interest rate. Interestingly, the psychological features appear to have greater impact in the context of less advantageous offers and persist across different income and education levels. In short, even in a market setting with large stakes and experienced customers, subtle psychological features appear to be powerful drivers of behavior. The findings pose a challenge for the social sciences: they suggest that psychological nuance matters but may be inherently difficult to predict given the impact of context. Successful incorporation of psychological features into field studies is likely to prove a vital, but nontrivial, addition to the formation of more general theories on when, why, and how frames and cues influence important decisions.
Handle: RePEc:nbr:nberwo:11892
Template-Type: ReDIF-Paper 1.0
Title: Psychiatric Disorders and Labor Market Outcomes: Evidence from the National Latino and Asian American Study
Classification-JEL: I1
Author-Name: Pinka Chatterji
Author-Person: pch732
Author-Name: Margarita Alegria
Author-Name: Mingshan Lu
Author-Person: plu103
Author-Name: David Takeuchi
Note: EH LS
Number: 11893
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11893
File-URL: http://www.nber.org/papers/w11893.pdf
File-Format: application/pdf
Publication-Status: published as Pinka Chatterji & Margarita Alegría & Mingshan Lu & David Takeuchi, 2007. "Psychiatric disorders and labor market outcomes: evidence from the National Latino and Asian American Study," Health Economics, John Wiley & Sons, Ltd., vol. 16(10), pages 1069-1090.
Abstract: This paper investigates to what extent psychiatric disorders and mental distress affect labor market outcomes among ethnic minorities of Latino and Asian descent, most of whom are immigrants. Using data from the National Latino and Asian American Study, we examine the labor market effects of meeting diagnostic criteria for any psychiatric disorder in the past 12 months as well as the effects of psychiatric distress in the past year. Among Latinos, psychiatric disorders and mental distress are associated with detrimental effects on employment and absenteeism, similar to effects found in previous analyses of mostly white, American born populations. Among Asians, we find mixed evidence that psychiatric disorders and mental distress detract from labor market outcomes.
Handle: RePEc:nbr:nberwo:11893
Template-Type: ReDIF-Paper 1.0
Title: Internationalization and Stock Market Liquidity
Classification-JEL: G15; F36; F20
Author-Name: Ross Levine
Author-Person: ple61
Author-Name: Sergio Schmukler
Author-Person: psc64
Note: CF IFM
Number: 11894
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11894
File-URL: http://www.nber.org/papers/w11894.pdf
File-Format: application/pdf
Publication-Status: published as Levine, Ross and Sergio L. Schmukler. "Internationalization And Stock Market Liquidity," Review of Finance, 2006, v10(Mar), 153-187.
Abstract: What is the impact of internationalization (firms raising capital and trading in international markets) on the liquidity of the remaining firms in domestic markets? To address this question, we assemble a panel database of nearly 2,900 firms from 45 emerging economies over the period 1989-2000, constructed from annual and daily data. First, we find evidence of migration. The domestic trading of firms that cross-list or issue depositary receipts in foreign public exchanges tends to decrease, while a significant proportion of their trading activity concentrates in international markets. Second, this migration is negatively related to the liquidity of the remaining firms in their home market through two separate channels. There are liquidity spillovers within markets, with aggregate domestic trading activity being positively associated with the liquidity of individual firms in the same market. Moreover, the proportion of trading abroad is negatively related to the liquidity of firms in the domestic market.
Handle: RePEc:nbr:nberwo:11894
Template-Type: ReDIF-Paper 1.0
Title: The Expanding Workweek? Understanding Trends in Long Work Hours Among U.S. Men, 1979-2004
Classification-JEL: J22
Author-Name: Peter Kuhn
Author-Person: pku26
Author-Name: Fernando Lozano
Author-Person: plo228
Note: LS PE
Number: 11895
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11895
File-URL: http://www.nber.org/papers/w11895.pdf
File-Format: application/pdf
Publication-Status: published as Peter Kuhn & Fernando Lozano, 2008. "The Expanding Workweek? Understanding Trends in Long Work Hours among U.S. Men, 1979-2006," Journal of Labor Economics, University of Chicago Press, vol. 26(2), pages 311-343, 04.
Abstract: According to Census and CPS data, the share of employed American men regularly working more than 48 hours per week is higher today than it was 25 years ago. Using CPS data from 1979 to 2006, we show that this increase was greatest among highly educated, highly-paid, and older men, was concentrated in the 1980s, and was largely confined to workers paid on a salaried basis. We rule out a number of possible explanations of these changes, including changes in measurement, composition effects, and internet-facilitated work from home. Among salaried men, increases in long work hours were greatest in detailed occupations and industries with larger increases in residual wage inequality and slowly-growing real compensation at 'standard' (40) hours.
Handle: RePEc:nbr:nberwo:11895
Template-Type: ReDIF-Paper 1.0
Title: Robustly Optimal Monetary Policy with Near Rational Expectations
Classification-JEL: D81; D84; E52
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG ME
Number: 11896
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11896
File-URL: http://www.nber.org/papers/w11896.pdf
File-Format: application/pdf
Publication-Status: published as Woodford, Michael. “An Example of Robustly Optimal Monetary Policy with Near-Rational Expectations.” Journal of the European Economics Association 4, 2-3 (2006): 386-395.
Publication-Status: published as Michael Woodford, 2010. "Robustly Optimal Monetary Policy with Near-Rational Expectations," American Economic Review, American Economic Association, vol. 100(1), pages 274-303, March.
Abstract: The paper considers optimal monetary stabilization policy in a forward-looking model, when the central bank recognizes that private-sector expectations need not be precisely model-consistent, and wishes to choose a policy that will be as good as possible in the case of any beliefs that are close enough to model-consistency. The proposed method offers a way of avoiding the assumption that the central bank can count on private-sector expectations coinciding precisely with whatever it plans to do, while at the same time also avoiding the equally unpalatable assumption that the central bank can precisely model private-sector learning and optimize in reliance upon a precise law of motion for expectations. The main qualitative conclusions of the rational-expectations analysis of optimal policy carry over to the weaker assumption of near-rational expectations. It is found that commitment continues to be important for optimal policy, that the optimal long-run inflation target is unaffected by the degree of potential distortion of beliefs, and that optimal policy is even more history-dependent than if rational expectations are assumed.
Handle: RePEc:nbr:nberwo:11896
Template-Type: ReDIF-Paper 1.0
Title: The Role of Foreign Currency Debt in Financial Crises: 1880-1913 vs. 1972-1997
Classification-JEL: N1; N2; E5; F3
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Christopher M. Meissner
Author-Person: pme45
Note: DAE IFM ME
Number: 11897
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11897
File-URL: http://www.nber.org/papers/w11897.pdf
File-Format: application/pdf
Publication-Status: published as Bordo, Michael D. & Meissner, Christopher M., 2006. "The role of foreign currency debt in financial crises: 1880-1913 versus 1972-1997," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3299-3329, December.
Abstract: What is the role of foreign currency debt in precipitating financial crises? In this paper we compare the 1880 to 1913 period to recent experience. We examine debt crises, currency crises, banking crises and the interrelation between these varieties of crises. We pay special attention to the role of hard currency debt, currency mismatches and debt intolerance. We find fairly robust evidence that high exposure to foreign currency debt does not necessarily lead to a high chance of having a debt crisis, currency crisis, or a banking crisis. A key finding is some countries do not suffer from great financial fragility despite high exposure to original sin. In the nineteenth century, the British offshoots and Scandinavia generally avoided severe financial meltdowns while today many advanced countries have high original sin but have had few financial crises. The common denominator in both periods is that currency mismatches matter. A strong reserve position or high exports relative to hard currency liabilities helps decrease the likelihood of a debt crisis, currency crisis or a banking crisis. This strengthens the evidence for the hypothesis that foreign currency debt is dangerous when mis-managed. We discuss the robustness of these results and make some general comparisons based on this evidence from over 60 years of intense international capital market integration.
Handle: RePEc:nbr:nberwo:11897
Template-Type: ReDIF-Paper 1.0
Title: Central Bank Communication and Policy Effectiveness
Classification-JEL: E52; E58
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG ME
Number: 11898
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11898
File-URL: http://www.nber.org/papers/w11898.pdf
File-Format: application/pdf
Publication-Status: published as Michael Woodford, 2005. "Central bank communication and policy effectiveness," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 399-474.
Abstract: A notable change in central banking over the past 15 years has been a world-wide movement toward increased communication by central banks about their policy decisions, the targets that they seek to achieve through those decisions, and the central bank's view of the economy's likely future evolution. This paper considers the role of such communication in the successful conduct of monetary policy, with a particular emphasis on an issue that remains controversial: to what extent is it desirable for central banks to comment on the likely path of short-term interest rates? After reviewing general arguments for and against central-bank transparency, the paper considers two specific contexts in which central banks have been forced to consider how much they are willing to say about the future path of interest rates. The first is the experiment with policy signaling by the FOMC in the U.S., using the statement released following each Committee meeting, since August 2003. The second is the need to make some assumption about future policy when producing the projections (for future inflation and other variables) that are central to inflation-forecast targeting procedures, of the kind used by the Bank of England, the Swedish Riksbank, the Reserve Bank of New Zealand, and others. In both cases, it is argued that increased willingness to share the central bank's own assumptions about future policy with the public has increased the predictability of policy, in ways that are likely to have improved central bank's ability to achieve their stabilization objectives.
Handle: RePEc:nbr:nberwo:11898
Template-Type: ReDIF-Paper 1.0
Title: The Greatest Artists of the Twentieth Century
Classification-JEL: J0; J1
Author-Name: David Galenson
Note: LS
Number: 11899
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11899
File-URL: http://www.nber.org/papers/w11899.pdf
File-Format: application/pdf
Publication-Status: published as The Greatest Artists of the Twentieth Century, David W. Galenson. in Conceptual Revolutions in Twentieth-Century Art, Galenson. 2009
Abstract: Pablo Picasso was by far the greatest artist of the 20th century: textbooks of art history contain more than twice as many illustrations of his work as of that of his closest rival, Henri Matisse. A survey of textbooks also identifies Jackson Pollock as the greatest American artist, by a narrow margin over Andy Warhol. The 15 greatest artists of the century include nine conceptual innovators, who made their greatest contributions early in their lives, in their 20s and 30s, and six experimental innovators, who generally did their greatest work in their 40s and 50s - and even, in the case of Mondrian, in his 70s. Contrary to the belief of many humanists, the textbooks show that in art, as in all intellectual activities, importance is determined by innovation.
Handle: RePEc:nbr:nberwo:11899
Template-Type: ReDIF-Paper 1.0
Title: Markov Perfect Industry Dynamics with Many Firms
Classification-JEL: C63; C73; L11
Author-Name: Gabriel Weintraub
Author-Name: C. Lanier Benkard
Author-Name: Ben Van Roy
Note: IO PR
Number: 11900
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11900
File-URL: http://www.nber.org/papers/w11900.pdf
File-Format: application/pdf
Publication-Status: published as Weintraub, Gabriel, C. Lanier Benkard and Ben Van Roy. "Markov Perfect Industry Dynamics with Many Firms." Econometrica (Nov 2008): 1375-1411.
Abstract: We propose an approximation method for analyzing Ericson and Pakes (1995)-style dynamic models of imperfect competition. We develop a simple algorithm for computing an ``oblivious equilibrium,'' in which each firm is assumed to make decisions based only on its own state and knowledge of the long run average industry state, but where firms ignore current information about competitors' states. We prove that, as the market becomes large, if the equilibrium distribution of firm states obeys a certain ``light-tail'' condition, then oblivious equilibria closely approximate Markov perfect equilibria. We develop bounds that can be computed to assess the accuracy of the approximation for any given applied problem. Through computational experiments, we find that the method often generates useful approximations for industries with hundreds of firms and in some cases even tens of firms.
Handle: RePEc:nbr:nberwo:11900
Template-Type: ReDIF-Paper 1.0
Title: Why Doesn't Capital Flow from Rich to Poor Countries? An Empirical Investigation
Classification-JEL: F21; F41; O1
Author-Name: Laura Alfaro
Author-Person: pal64
Author-Name: Sebnem Kalemli-Ozcan
Author-Person: pka37
Author-Name: Vadym Volosovych
Author-Person: pvo44
Note: IFM ITI
Number: 11901
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11901
File-URL: http://www.nber.org/papers/w11901.pdf
File-Format: application/pdf
Publication-Status: published as Laura Alfaro & Sebnem Kalemli-Ozcan & Vadym Volosovych, 2008. "Why Doesn't Capital Flow from Rich to Poor Countries? An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 347-368, 01.
Abstract: We examine the empirical role of different explanations for the lack of flows of capital from rich to poor countries the "Lucas Paradox." The theoretical explanations include differences in fundamentals across countries and capital market imperfections. We show that during 1970-2000 low institutional quality is the leading explanation. For example, improving Peru's institutional quality to Australia's level, implies a quadrupling of foreign investment. Recent studies emphasize the role of institutions for achieving higher levels of income, but remain silent on the specific mechanisms. Our results indicate that foreign investment might be a channel through which institutions affect long-run development.
Handle: RePEc:nbr:nberwo:11901
Template-Type: ReDIF-Paper 1.0
Title: The Myth of the Drinker's Bonus
Classification-JEL: I12; J24
Author-Name: Philip J. Cook
Author-Person: pco30
Author-Name: Bethany Peters
Note: EH LS
Number: 11902
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11902
File-URL: http://www.nber.org/papers/w11902.pdf
File-Format: application/pdf
Abstract: Drinkers earn more than non-drinkers, even after controlling for human capital and local labor market conditions. Several mechanisms by which drinking could increase productivity have been proposed but are unconfirmed; the more obvious mechanisms predict the opposite, that drinking can impair productivity. In this paper we reproduce the positive association between drinking and earnings, using data for adults age 27-34 from the National Longitudinal Survey of Youth (1979). Since drinking is endogenous in this relationship, we then estimate a reduced-form equation, with alcohol prices (proxied by a new index of excise taxes) replacing the drinking variables. We find strong evidence that the prevalence of full-time work increases with alcohol prices - suggesting that a reduction in drinking increases the labor supply. We also demonstrate some evidence of a positive association between alcohol prices and the earnings of full-time workers. We conclude that most likely the positive association between drinking and earnings is the result of the fact that ethanol is a normal commodity, the consumption of which increases with income, rather than an elixer that enhances productivity.
Handle: RePEc:nbr:nberwo:11902
Template-Type: ReDIF-Paper 1.0
Title: CAPM Over the Long Run: 1926-2001
Classification-JEL: C51; G12
Author-Name: Andrew Ang
Author-Person: pan374
Author-Name: Joseph Chen
Note: AP
Number: 11903
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11903
File-URL: http://www.nber.org/papers/w11903.pdf
File-Format: application/pdf
Publication-Status: published as Ang, Andrew and Joe Chen. "CAPM Over the Long Run: 1926-2001." Journal of Empirical Finance 14, 1 (2007): 1-40.
Abstract: A conditional one-factor model can account for the spread in the average returns of portfolios sorted by book-to-market ratios over the long run from 1926-2001. In contrast, earlier studies document strong evidence of a book-to-market effect using OLS regressions in the post-1963 sample. However, the betas of portfolios sorted by book-to-market ratios vary over time and in the presence of time-varying factor loadings, OLS inference produces inconsistent estimates of conditional alphas and betas. We show that under a conditional CAPM with time-varying betas, predictable market risk premia, and stochastic systematic volatility, there is little evidence that the conditional alpha for a book-to-market trading strategy is statistically different from zero.
Handle: RePEc:nbr:nberwo:11903
Template-Type: ReDIF-Paper 1.0
Title: Remedying Education: Evidence from Two Randomized Experiments in India
Classification-JEL: O11; I21
Author-Name: Abhijit Banerjee
Author-Name: Shawn Cole
Author-Person: pco530
Author-Name: Esther Duflo
Author-Person: pdu166
Author-Name: Leigh Linden
Author-Person: pli719
Note: CH ED
Number: 11904
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11904
File-URL: http://www.nber.org/papers/w11904.pdf
File-Format: application/pdf
Publication-Status: published as Abhijit V. Banerjee & Shawn Cole & Esther Duflo & Leigh Linden, 2007. "Remedying Education: Evidence from Two Randomized Experiments in India," The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 1235-1264, 08.
Abstract: Many efforts to improve school quality by adding school resources have proven to be ineffective. This paper presents the results of two experiments conducted in Mumbai and Vadodara, India, designed to evaluate ways to improve the quality of education in urban slums. A remedial education program hired young women from the community to teach basic literacy and numeracy skills to children lagging behind in government schools. We find the program to be very effective: it increased average test scores of all children in treatment schools by 0.14 standard deviations in the first year, and 0.28 in the second year, relative to comparison schools. A computer-assisted learning program provided each child in the fourth grade with two hours of shared computer time per week, in which students played educational games that reinforced mathematics skills. The program was also very effective, increasing math scores by 0.35 standard deviations the first year, and 0.47 the second year. These results were not limited to the period in which students received assistance, but persisted for at least one year after leaving the program. Two instrumental variable strategies suggest that while remedial education benefited the children who attended the remedial classes, their classmates, who did not attend the remedial courses but did experience smaller classes, did not post gains, confirming that resources alone may not be sufficient to improve outcomes.
Handle: RePEc:nbr:nberwo:11904
Template-Type: ReDIF-Paper 1.0
Title: What You Export Matters
Classification-JEL: F1; O4
Author-Name: Ricardo Hausmann
Author-Person: pha552
Author-Name: Jason Hwang
Author-Name: Dani Rodrik
Author-Person: pro60
Note: ITI
Number: 11905
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11905
File-URL: http://www.nber.org/papers/w11905.pdf
File-Format: application/pdf
Publication-Status: published as Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
Abstract: When local cost discovery generates knowledge spillovers, specialization patterns become partly indeterminate and the mix of goods that a country produces may have important implications for economic growth. We demonstrate this proposition formally and adduce some empirical support for it. We construct an index of the "income level of a country's exports," document its properties, and show that it predicts subsequent economic growth.
Handle: RePEc:nbr:nberwo:11905
Template-Type: ReDIF-Paper 1.0
Title: International Stock Return Comovements
Classification-JEL: G12; G11
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Robert J. Hodrick
Author-Person: pho115
Author-Name: Xiaoyan Zhang
Author-Person: pzh588
Note: AP IFM
Number: 11906
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11906
File-URL: http://www.nber.org/papers/w11906.pdf
File-Format: application/pdf
Publication-Status: published as Geert Bekaert & Robert J. Hodrick & Xiaoyan Zhang, 2009. "International Stock Return Comovements," Journal of Finance, American Finance Association, vol. 64(6), pages 2591-2626, December.
Abstract: We examine international stock return comovements using country-industry and country-style portfolios. We first establish that parsimonious risk-based factor models capture the covariance structure of the data better than the popular Heston-Rouwenhorst (1994) model. We then establish the following stylized facts regarding stock return comovements. First, we do not find evidence for an upward trend in return correlations, excpet for the European stock markets. Second, the increasing imporatnce of industry factors relative to country factors was a short-lived, temporary phenomenon. Third, we find no evidence for a trend in idiosyncratic risk in any of the countries we examine.
Handle: RePEc:nbr:nberwo:11906
Template-Type: ReDIF-Paper 1.0
Title: Executive Pensions
Classification-JEL: D23; G32; G34; G38; J33
Author-Name: Lucian A. Bebchuk
Author-Person: pbe72
Author-Name: Robert J. Jackson, Jr.
Note: CF LS
Number: 11907
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11907
File-URL: http://www.nber.org/papers/w11907.pdf
File-Format: application/pdf
Publication-Status: published as Bebchuk, Lucian and Robert Jackson. “Executive Pensions.” Journal of Corporation Law 30 (2005): 823-855.
Abstract: Because public firms are not required to disclose the monetary value of pension plans in their executive pay disclosures, financial economists have generally analyzed executive pay using figures that do not include the value of such pension plans. This paper presents evidence that omitting the value of pension benefits significantly undermines the accuracy of existing estimates of executive pay, its variability, and its sensitivity to performance companies. Studying the pension arrangements of CEOs of S&P 500, we find that the CEOs' plans had a median actuarial value of $15 million; that the ratio of the executives' pension value to the executives' total compensation (including both equity and non-equity pay) during their service as CEO had a median value of 34%; and that including pension values increased the median percentage of the executives' total compensation composed of salary-like payments during and after their service as CEO from 15% to 39%.
Handle: RePEc:nbr:nberwo:11907
Template-Type: ReDIF-Paper 1.0
Title: Who Should Govern Congress? Access to Power and the Salary Grab of 1873
Classification-JEL: D23; D72; D73; N41
Author-Name: Lee J. Alston
Author-Person: pal162
Author-Name: Jeffery A. Jenkins
Author-Name: Tomas Nonnenmacher
Note: DAE
Number: 11908
Creation-Date: 2005-12
Order-URL: http://www.nber.org/papers/w11908
File-URL: http://www.nber.org/papers/w11908.pdf
File-Format: application/pdf
Publication-Status: published as Alston, Lee J. & Jenkins, Jeffery A. & Nonnenmacher, Tomas, 2006. "Who Should Govern Congress? Access to Power and the Salary Grab of 1873," The Journal of Economic History, Cambridge University Press, vol. 66(03), pages 674-706, September.
Abstract: We examine the politics of the "Salary Grab" of 1873, legislation that increased congressional salaries retroactively by 50 percent. A group of New England and Midwestern elites opposed the Salary Grab, along with congressional franking and patronage-based civil service appointments, as part of reform effort to reshape "who should govern Congress." Our analyses of congressional voting confirm the existence of this non-party elite coalition. While these elites lost many legislative battles in the short-run, their efforts kept reform on the legislative agenda throughout the late-nineteenth century and ultimately set the stage for the Progressive movement in the early-twentieth century.
Handle: RePEc:nbr:nberwo:11908