TY - JOUR AU - Kazianga,Harounan AU - Levy,Dan AU - Linden,Leigh L. AU - Sloan,Matt TI - The Effects of “Girl-Friendly” Schools: Evidence from the BRIGHT School Construction Program in Burkina Faso JF - National Bureau of Economic Research Working Paper Series VL - No. 18115 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18115 L1 - http://www.nber.org/papers/w18115.pdf N1 - Author contact info: Harounan Kazianga Department of Economics Oklahoma State University Business 324 Stillwater, OK 74078 Tel: (405) 744-5110 E-Mail: harounan.kazianga@okstate.edu Dan Levy John F. Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 E-Mail: dan_levy@harvard.edu Leigh L. Linden Department of Economics The Univesrity of Texas at Austin 2225 Speedway BRB 1.116, C3100 Austin, Texas 78712 Tel: (512) 475-8556 E-Mail: leigh.linden@austin.utexas.edu Matthew Sloan Mathematica Policy Research 1100 1st Street, NE, 12th Floor Washington, DC 20002-4221 E-Mail: MSloan@Mathematica-Mpr.com AB - We evaluate the causal effects of a program that constructed high quality “girl-friendly” primary schools in Burkina Faso, using a regression discontinuity design 2.5 years after the program started. We find that the program increased enrollment of all children between the ages of 5 and 12 by 20 percentage points and increased their test scores by 0.45 standard deviations. The change in test scores for those children caused to attend school by the program is 2.2 standard deviations. We also find that the program was particularly effective for girls, increasing their enrollment rate by 5 percentage points more than boys’, although this did not translate into a differential effect on test scores. Disentangling the effects of school access from the unique characteristics of the new schools, we find that the unique characteristics were responsible for a 13 percentage point increase in enrollment and 0.35 standard deviations in test scores, while simply providing a school increased enrollment by 26.5 percentage points and test scores by 0.323 standard deviations. The unique characteristics of the school account for the entire difference in the treatment effect by gender. ER - TY - JOUR AU - Benhabib,Jess AU - Evans,George W. AU - Honkapohja,Seppo TI - Liquidity Traps and Expectation Dynamics: Fiscal Stimulus or Fiscal Austerity? JF - National Bureau of Economic Research Working Paper Series VL - No. 18114 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18114 L1 - http://www.nber.org/papers/w18114.pdf N1 - Author contact info: Jess Benhabib Department of Economics New York University 19 West 4th Street, 6th Floor New York, NY 10012 Tel: 212/998-8971 Fax: 212/995-4186 E-Mail: jess.benhabib@nyu.edu George Evans Department of Economics 1285 University of Oregon Eugene, OR 97403-1285 Tel: 541/346-4662 Fax: 541/346-1243 E-Mail: gevans@uoregon.edu Seppo Honkapohja Bank of Finland Finland E-Mail: Seppo.Honkapohja@bof.fi AB - We examine global dynamics under infinite-horizon learning in New Keynesian models where the interest-rate rule is subject to the zero lower bound. As in Evans, Guse and Honkapohja (2008), the intended steady state is locally but not globally stable. Unstable deflationary paths emerge after large pessimistic shocks to expectations. For large expectation shocks that push interest rates to the zero bound, a temporary fiscal stimulus or a policy of fiscal austerity, appropriately tailored in magnitude and duration, will insulate the economy from deflation traps. However "fiscal switching rules" that automatically kick in without discretionary fine tuning can be equally effective. ER - TY - JOUR AU - Ossa,Ralph TI - Why Trade Matters After All JF - National Bureau of Economic Research Working Paper Series VL - No. 18113 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18113 L1 - http://www.nber.org/papers/w18113.pdf N1 - Author contact info: Ralph Ossa University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-8907 E-Mail: ralph.ossa@chicagobooth.edu AB - I show that accounting for cross-industry variation in trade elasticities greatly magnifies the estimated gains from trade. The main idea is as simple as it is general: While imports in the average industry do not matter too much, imports in some industries are critical to the functioning of the economy, so that a complete shutdown of international trade is very costly overall. ER - TY - JOUR AU - Glaeser,Edward L. TI - The Political Risks of Fighting Market Failures: Subversion, Populism and the Government Sponsored Enterprises JF - National Bureau of Economic Research Working Paper Series VL - No. 18112 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18112 L1 - http://www.nber.org/papers/w18112.pdf N1 - Author contact info: Edward L. Glaeser Department of Economics 315A Littauer Center Harvard University Cambridge, MA 02138 Tel: 617/495-0575 Fax: 617/495-7730 E-Mail: eglaeser@harvard.edu AB - There are many possible ways of reforming the Government-Sponsored Enterprises that insure mortgages against default, including a purely public option, complete privatization or a hybrid model with private firms and public catastrophic insurance. If the government is sufficiently capable and benign, either public intervention can yield desirable outcomes; the key risks of any reform come from the political process. This paper examines the political risks, related to corruption and populism, of differing approaches to the problems of monopoly, externalities and market breakdowns in asset insurance. If there is a high probability that political leadership will be induced to pursue policies that maximize the profitability of private entities at the expense of taxpayers, then purely public options create lower social losses. If there is a high probability that leaders will pursue a populist agenda of lowering prices or borrowing costs, then catastrophic risk insurance can lead to lower social losses than either complete laissez-faire of a pure public option. ER - TY - JOUR AU - Pope,Devin G. AU - Pope,Jaren C. TI - When Walmart Comes to Town: Always Low Housing Prices? Always? JF - National Bureau of Economic Research Working Paper Series VL - No. 18111 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18111 L1 - http://www.nber.org/papers/w18111.pdf N1 - Author contact info: Devin G. Pope Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-2297 Fax: 773/702-0458 E-Mail: devin.pope@chicagobooth.edu Jaren Pope Brigham Young University Department of Economics E-Mail: jaren_pope@byu.edu AB - Walmart often faces strong local opposition when trying to build a new store. Opponents often claim that Walmart lowers nearby housing prices. In this study we use over one million housing transactions located near 159 Walmarts that opened between 2000 and 2006 to test if the opening of a Walmart does indeed lower housing prices. Using a difference-in-differences specification, our estimates suggest that a new Walmart store actually increases housing prices by between 2 and 3 percent for houses located within 0.5 miles of the store and by 1 to 2 percent for houses located between 0.5 and 1 mile. ER - TY - JOUR AU - Albouy,David AU - Ehrlich,Gabriel TI - Metropolitan Land Values and Housing Productivity JF - National Bureau of Economic Research Working Paper Series VL - No. 18110 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18110 L1 - http://www.nber.org/papers/w18110.pdf N1 - Author contact info: David Albouy Department of Economics University of Michigan 611 Tappan Street 351C Lorch Hall Ann Arbor, MI 48109-1220 Tel: 734/763-9619 E-Mail: albouy@umich.edu Gabriel Ehrlich Department of Economics University of Michigan 611 Tappan St Ann Arbor, MI 48109-1220 E-Mail: gehrlich@umich.edu AB - We present the first nationwide index of directly-measured land values by metropolitan area and investigate their relationship with housing prices. Construction prices and geographic and regulatory constraints are shown to increase the cost of housing relative to land. On average, approximately one-third of housing costs are due to land, with an increasing share in higher-value areas, implying an elasticity of substitution between land and other inputs of about one-half. Conditional on land and construction prices, housing productivity is relatively low in larger cities. The increase in housing costs associated with greater regulation appears to outweigh any benefits from improved quality-of-life. ER - TY - JOUR AU - Kowalski,Amanda E. TI - Estimating the Tradeoff Between Risk Protection and Moral Hazard with a Nonlinear Budget Set Model of Health Insurance JF - National Bureau of Economic Research Working Paper Series VL - No. 18108 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18108 L1 - http://www.nber.org/papers/w18108.pdf N1 - Author contact info: Amanda E. Kowalski Department of Economics Yale University 37 Hillhouse Avenue Box 208264 New Haven, CT 06520 Tel: 203/432-3521 E-Mail: amanda.kowalski@yale.edu AB - Insurance induces a well-known tradeoff between the welfare gains from risk protection and the welfare losses from moral hazard. Empirical work traditionally estimates each side of the tradeoff separately, potentially yielding mutually inconsistent results. I develop a nonlinear budget set model of health insurance that allows for the calculation of both sides of the tradeoff simultaneously, allowing for a relationship between moral hazard and risk protection. An important feature of this model is that it considers nonlinearities in the consumer budget set that arise from deductibles, coinsurance rates, and stoplosses that alter moral hazard as well as risk protection relative to no insurance. I illustrate the properties of my model by estimating it using data on employer sponsored health insurance from a large firm. Within my empirical context, the average deadweight losses from moral hazard substantially outweigh the average welfare gains from risk protection. However, the welfare impact of moral hazard and risk protection are both small relative to transfers from the government through the tax preference for employer sponsored health insurance and transfers from some agents to other agents through a common premium. ER - TY - JOUR AU - Desai,Mihir A. AU - Foley,C. Fritz AU - Hines,James R.,Jr. TI - Trade Credit and Taxes JF - National Bureau of Economic Research Working Paper Series VL - No. 18107 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18107 L1 - http://www.nber.org/papers/w18107.pdf N1 - Author contact info: Mihir A. Desai Graduate School of Business Administration Harvard University Soldiers Field Boston, MA 02163 Tel: 617/495-6693 Fax: 617/496-6592 E-Mail: mdesai@hbs.edu C. Fritz Foley Graduate School of Business Administration Harvard University Soldiers Field Boston, MA 02163 Tel: 617/495-6375 Fax: 617/496-8443 E-Mail: ffoley@hbs.edu James R. Hines Department of Economics University of Michigan 343 Lorch Hall 611 Tappan Street Ann Arbor, MI 48109-1220 Tel: 734/764-2320 Fax: 734/764-2769 E-Mail: jrhines@umich.edu AB - This paper analyzes the extent to which firms use trade credit to reallocate capital in response to tax incentives. Tax-induced differences in pretax returns encourage the use of trade credit to reallocate capital from firms facing low tax rates to those facing high tax rates. Evidence from the worldwide operations of U.S. multinational firms indicates that affiliates in low-tax jurisdictions use trade credit to lend, whereas those in high-tax jurisdictions use trade credit to borrow: ten percent lower local tax rates are associated with net trade credit positions that are 1.4 percent higher as a fraction of sales. The use of trade credit to get capital out of low-tax, low-return environments is also illustrated by reactions of U.S. firms to the temporary repatriation tax holiday in 2005, when affiliates with positive net trade credit positions were significantly more likely than others to repatriate dividends to parent companies in the United States. ER - TY - JOUR AU - Juhn,Chinhui AU - Ujhelyi,Gergely AU - Villegas-Sanchez,Carolina TI - Men, Women, and Machines: How Trade Impacts Gender Inequality JF - National Bureau of Economic Research Working Paper Series VL - No. 18106 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18106 L1 - http://www.nber.org/papers/w18106.pdf N1 - Author contact info: Chinhui Juhn Department of Economics University of Houston Houston, TX 77204-5882 Tel: 713/743-3823 Fax: 713/743-3798 E-Mail: cjuhn@uh.edu Gergely Ujhelyi University of Houston Economics Department Houston, TX 77204 E-Mail: gujhelyi@uh.edu Carolina Villegas-Sanchez ESADE-Universitat Ramon Llul Av.Pedralbes, 60-62 E-08034 Barcelona, Spain E-Mail: carolina.villegas@esade.edu AB - This paper studies the effect of trade liberalization on an under-explored aspect of wage inequality – gender inequality. We consider a model where firms differ in their productivity and workers are differentiated by skill as well as gender. A reduction in tariffs induces more productive firms to modernize their technology and enter the export market. New technologies involve computerized production processes and lower the need for physically demanding skills. As a result, the relative wage and employment of women improves in blue-collar tasks, but not in white-collar tasks. We test our model using a panel of establishment level data from Mexico exploiting tariff reductions associated with the North American Free Trade Agreement (NAFTA). Consistent with our theory we find that tariff reductions caused new firms to enter the export market, update their technology and replace male blue-collar workers with female blue-collar workers. ER - TY - JOUR AU - Mahoney,Neale TI - Bankruptcy as Implicit Health Insurance JF - National Bureau of Economic Research Working Paper Series VL - No. 18105 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18105 L1 - http://www.nber.org/papers/w18105.pdf N1 - Author contact info: Neale Mahoney RWJF Scholar in Health Policy Research 1730 Cambridge Street, S410 Cambridge, MA 02138 Tel: 617/495-5366 E-Mail: neale.mahoney@gmail.com AB - This paper examines the implicit health insurance households receive from the ability to declare bankruptcy. Exploiting cross-state and within-state variation in asset exemption law, I show that uninsured households with greater seizable assets make higher out-of-pocket medical payments, conditional on the amount of care received. In turn, I find that households with greater wealth-at-risk are more likely to hold health insurance. The implicit insurance from bankruptcy distorts the insurance coverage decision. Using a microsimulation model, I calculate that the optimal Pigovian penalties are similar on average to the penalties under the Affordable Care Act (ACA). ER - TY - JOUR AU - Bansal,Ravi AU - Kiku,Dana AU - Shaliastovich,Ivan AU - Yaron,Amir TI - Volatility, the Macroeconomy and Asset Prices JF - National Bureau of Economic Research Working Paper Series VL - No. 18104 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18104 L1 - http://www.nber.org/papers/w18104.pdf N1 - Author contact info: Ravi Bansal Fuqua School of Business Duke University 1 Towerview Drive Durham, NC 27708 Tel: 919/660-7758 Fax: 919/660-8038 E-Mail: ravi.bansal@duke.edu Dana Kiku Finance Department Wharton School University of Pennsylvania 3620 Locust Walk Philadelphia, PA 19104-6367 Tel: 215/898-1118 Fax: 215/898-6200 E-Mail: kiku@wharton.upenn.edu Ivan Shaliastovich The Wharton School University of Pennsylvania 2423 Steinberg Hall-Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104 Tel: 25-746-0005 E-Mail: ishal@wharton.upenn.edu Amir Yaron The Wharton School University of Pennsylvania 2256 Steinberg-Dietrich Hall Philadelphia, PA 19104-6367 Tel: 215/898-1241 Fax: 215/898-6200 E-Mail: yaron@wharton.upenn.edu AB - We show that volatility movements have first-order implications for consumption dynamics and asset prices. Volatility news affects the stochastic discount factor and carries a separate risk premium. In the data, volatility risks are persistent and are strongly correlated with discount-rate news. This evidence has important implications for the return on aggregate wealth and the cross-sectional differences in risk premia. Estimation of our volatility risks based model yields an economically plausible positive correlation between the return to human capital and equity, while this correlation is implausibly negative when volatility risk is ignored. Our model setup implies a dynamics capital asset pricing model (DCAPM) which underscores the importance of volatility risk in addition to cash-flow and discount-rate risks. We show that our DCAPM accounts for the level and dispersion of risk premia across book-to-market and size sorted portfolios, and that equity portfolios carry positive volatility-risk premia. ER - TY - JOUR AU - Albouy,David AU - Leibovici,Fernando AU - Warman,Casey TI - Quality of Life, Firm Productivity, and the Value of Amenities across Canadian Cities JF - National Bureau of Economic Research Working Paper Series VL - No. 18103 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18103 L1 - http://www.nber.org/papers/w18103.pdf N1 - Author contact info: David Albouy Department of Economics University of Michigan 611 Tappan Street 351C Lorch Hall Ann Arbor, MI 48109-1220 Tel: 734/763-9619 E-Mail: albouy@umich.edu Fernando Leibovici Economics Department New York University 19 W. 4th Street, 6FL New York, NY 10012 E-Mail: fml234@nyu.edu Casey Warman Department of Economics Dunning Hall, Room 209 94 University Avenue Queen's University Kingston, Ontario, K7L 3N6 E-Mail: warmanc@econ.queensu.ca AB - We present hedonic general-equilibrium estimates of quality-of-life and productivity differences across Canada’s metropolitan areas. These are based off of the estimated willingness-to-pay of heterogeneous households and firms to locate in various cities, which differ in their wage levels, housing costs, and land values. Using 2006 Canadian Census data, our metropolitan quality-of-life estimates are somewhat consistent with popular rankings, but find Canadians care more about climate and culture. Quality-of-life is highest in Victoria for Anglophones, Montreal for Francophones, and Vancouver for Allophones, and lowest in more remote cities. Toronto is Canada’s most productive city; Vancouver is the overall most valuable city. ER - TY - JOUR AU - Martinez-Bravo,Monica AU - Miquel,Gerard Padró i AU - Qian,Nancy AU - Yao,Yang TI - The Effects of Democratization on Public Goods and Redistribution: Evidence from China JF - National Bureau of Economic Research Working Paper Series VL - No. 18101 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18101 L1 - http://www.nber.org/papers/w18101.pdf N1 - Author contact info: Monica Martinez-Bravo Johns Hopkins University 1717 Massachusetts Ave, NW Washington D.C., 20036 E-Mail: mmb@jhu.edu Gerard Padro i Miquel STICERD London School of Economics Houghton Street London, WC2A 2AE UNITED KINGDOM Tel: (44) (0) 2078523554 E-Mail: g.padro@lse.ac.uk Nancy Qian Department of Economics Yale University 27 Hillhouse Avenue New Haven, CT 06520-8269 E-Mail: nancy.qian@yale.edu Yang Yao China Center for Economic Research Peking University Peking, China E-Mail: yyao@ccer.pku.edu.cn AB - This study investigates the effects of introducing elections on public goods and redistribution in rural China. We collect a large and unique survey to document the history of political reforms and economic policies and exploit the staggered timing of the introduction of elections for causal identification. We find that elections significantly increase public goods expenditure, the increase corresponds to demand and is paralleled by an increase in public goods provision and local taxes. We also find that elections cause significant income redistribution within villages. The results support the basic assumptions of recent theories of democratization (Acemoglu and Robinson, 2000; Lizzeri and Persico, 2004). In addition, we show that the main mechanism underlying the effect of elections is increased leader incentives. ER - TY - JOUR AU - Heckman,James J. AU - Yi,Junjian TI - Human Capital, Economic Growth, and Inequality in China JF - National Bureau of Economic Research Working Paper Series VL - No. 18100 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18100 L1 - http://www.nber.org/papers/w18100.pdf N1 - Author contact info: James J. Heckman Department of Economics The University of Chicago 1126 E. 59th Street Chicago, IL 60637 Tel: 773/702-0634 Fax: 773/702-8490 E-Mail: jjh@uchicago.edu Junjian Yi Department of Economics 1126 E. 59th Street Chicago IL 60637 E-Mail: junjian@uchicago.edu AB - China’s rapid growth was fueled by substantial physical capital investments applied to a large stock of medium skilled labor acquired before economic reforms began. As development proceeded, the demand for high skilled labor has grown, and, in the past decade, China has made substantial investments in producing it. The egalitarian access to medium skilled education characteristic of the pre-reform era has given rise to substantial inequality in access to higher levels of education. China’s growth will be fostered by expanding access to all levels of education, reducing impediments to labor mobility, and expanding the private sector. ER - TY - JOUR AU - Grubb,Farley TI - Chronic Specie Scarcity and Efficient Barter: The Problem of Maintaining an Outside Money Supply in British Colonial America JF - National Bureau of Economic Research Working Paper Series VL - No. 18099 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18099 L1 - http://www.nber.org/papers/w18099.pdf N1 - Author contact info: Farley Grubb University of Delaware Economics Department Newark, DE 19716 Tel: 302/831-1905 Fax: 302/831-6968 E-Mail: grubbf@udel.edu AB - Colonial Americans complained that gold and silver coins (specie) were chronically scarce. These coins could be acquired only through importation. Given unrestricted trade in specie, market arbitrage should have eliminated chronic scarcity. A model of efficient barter and local inside money is developed to show how chronic specie scarcity in colonial America could prevail despite unrestricted specie-market arbitrage, thus justifying colonial complaints. The creation of inside fiat paper monies by colonial governments was a welfare-enhancing response to preexisting chronic specie scarcity, not the cause of that scarcity. ER - TY - JOUR AU - Holland,Stephen P. AU - Moore,Michael R. TI - Market Design in Cap and Trade Programs: Permit Validity and Compliance Timing JF - National Bureau of Economic Research Working Paper Series VL - No. 18098 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18098 L1 - http://www.nber.org/papers/w18098.pdf N1 - Author contact info: Stephen P. Holland Bryan School of Business and Economics University of North Carolina, Greensboro P.O. Box 26165 Greensboro, NC 27402-6165 Tel: 336/334-4925 Fax: 336/334-4089 E-Mail: sphollan@uncg.edu Michael Moore School of Natural Resources & Environment University of Michigan Ann Arbor, MI 48109-1041 E-Mail: micmoore@umich.edu AB - Cap and trade programs have considerable heterogeneity in permit validity and compliance timing. For example, permits have different validity across time (e.g., banking, borrowing, and seasons) and space (e.g., zonal restrictions), and compliance timing can be annual, in overlapping cycles, or in multi-year periods. We compare and contrast nine prominent cap and trade programs along these dimensions and construct a general model of permit validity and compliance timing. We derive sufficient conditions under which abatement is invariant to compliance timing, i.e., compliance timing cannot smooth abatement cost shocks. Under these conditions, i) expected compliance costs are invariant, ii) the variance of compliance costs increases with delayed compliance, iii) equilibrium prices may not be unique, and iv) the delayed compliance equilibrium may rely upon non-unique, “degenerate” prices not determined by marginal abatement costs. Degenerate prices are unlikely to be discovered by market forces. We then present two examples which are not invariant to compliance timing. If permit allocation is delayed or if a price cap is implemented with a reserve fund, abatement may depend on compliance timing. We demonstrate the model’s broad applicability by illustrating different types of temporal and spatial permit validity. ER - TY - JOUR AU - Chitu,Livia AU - Eichengreen,Barry AU - Mehl,Arnaud J. TI - When did the dollar overtake sterling as the leading international currency? Evidence from the bond markets JF - National Bureau of Economic Research Working Paper Series VL - No. 18097 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18097 L1 - http://www.nber.org/papers/w18097.pdf N1 - Author contact info: Livia Chitu European Central Bank Kaiserstrasse 29 60311 Frankfurt am Main Germany E-Mail: livia.chitu@ecb.europa.eu Barry Eichengreen Department of Economics University of California, Berkeley 549 Evans Hall 3880 Berkeley, CA 94720-3880 Tel: 510/642-2772 Fax: 510/643-0926 E-Mail: eichengr@econ.Berkeley.edu Arnaud J. Mehl European Central Bank Kaiserstrasse 29 60311 Frankfurt Germany E-Mail: Arnaud.Mehl@ecb.int AB - This paper offers new evidence on the emergence of the dollar as the leading international currency, focusing on its role as currency of denomination in global bond markets. We show that the dollar overtook sterling much earlier than commonly supposed, as early as in 1929. Financial market development appears to have been the main factor helping the dollar to surmount sterling’s head start. The finding that a shift from a unipolar to a multipolar international monetary and financial system has happened before suggests that it can happen again. That the shift occurred earlier than commonly believed suggests that the advantages of incumbency are not all they are cracked up to be. And that financial deepening was a key determinant of the dollar’s emergence points to the challenges facing currencies aspiring to international status. ER - TY - JOUR AU - Fisman,Raymond AU - Paravisini,Daniel AU - Vig,Vikrant TI - Cultural Proximity and Loan Outcomes JF - National Bureau of Economic Research Working Paper Series VL - No. 18096 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18096 L1 - http://www.nber.org/papers/w18096.pdf N1 - Author contact info: Raymond Fisman School of Business Columbia University 622 Uris Hall 3022 Broadway New York, NY 10027 Tel: 212/854-9157 Fax: 212-316-9219 E-Mail: rf250@columbia.edu Daniel Paravisini Columbia University Graduate School of Business 3022 Broadway, Uris Hall 416 New York, NY 10027 Tel: 212/854-4489 Fax: 212/316-9180 E-Mail: dp2239@columbia.edu Vikrant Vig London Business School Regent's Park London NW1 4S, UK Tel: 44 0 20 7000 8274 Fax: 44 0 20 7000 8201 E-Mail: vvig@london.edu AB - We present evidence that shared codes, religious beliefs, ethnicity - cultural proximity - between lenders and borrowers improves the efficiency of credit allocation. We identify in-group preferential treatment using dyadic data on the religion and caste of bank officers and borrowers from a bank in India, and a rotation policy that induces exogenous matching between officers and borrowers. Cultural proximity increases lending on both intensive and extensive margins and improves repayment performance, even after the in-group officer is replaced by an out-group one. Further, cultural proximity increases loan dispersion and reduces loan to collateral ratios. Our results imply that cultural proximity mitigates informational problems that adversely affect lending, which in turn relaxes financial constraints and improves access to finance. ER - TY - JOUR AU - Fisman,Raymond AU - Schulz,Florian AU - Vig,Vikrant TI - Private Returns to Public Office JF - National Bureau of Economic Research Working Paper Series VL - No. 18095 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18095 L1 - http://www.nber.org/papers/w18095.pdf N1 - Author contact info: Raymond Fisman School of Business Columbia University 622 Uris Hall 3022 Broadway New York, NY 10027 Tel: 212/854-9157 Fax: 212-316-9219 E-Mail: rf250@columbia.edu Florian Schulz UCLA Anderson School of Management Box 951481 Los Angeles, CA 90095-1481 E-Mail: florian.schulz.2013@anderson.ucla.edu Vikrant Vig London Business School Regent's Park London NW1 4S, UK Tel: 44 0 20 7000 8274 Fax: 44 0 20 7000 8201 E-Mail: vvig@london.edu AB - We study the wealth accumulation of Indian parliamentarians using public disclosures required of all candidates since 2003. Annual asset growth of winners is on average 3 to 6 percentage points higher than runners-up. By performing a within-constituency comparison where both runner-up and winner run in consecutive elections, and by looking at the subsample of very close elections, we rule out a range of alternative explanations for differential earnings of politicians and a relevant control group. The ``winner's premium" comes from parliamentarians holding positions in the Council of Ministers, with asset returns 13 to 29 percentage points higher than non-winners. The benefit of winning is also concentrated among incumbents, because of low asset growth for incumbent non-winners. ER - TY - JOUR AU - Stock,James H. AU - Watson,Mark W. TI - Disentangling the Channels of the 2007-2009 Recession JF - National Bureau of Economic Research Working Paper Series VL - No. 18094 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18094 L1 - http://www.nber.org/papers/w18094.pdf N1 - Author contact info: James H. Stock Department of Economics Harvard University Littauer Center M27 Cambridge, MA 02138 Tel: 617/496-0502 Fax: 617/495-7730 E-Mail: James_Stock@harvard.edu Mark W. Watson Department of Economics Princeton University Princeton, NJ 08544-1013 Tel: 609/258-4811 Fax: 609/258-5533 E-Mail: mwatson@princeton.edu AB - This paper examines the macroeconomic dynamics of the 2007-09 recession in the United States and the subsequent slow recovery. Using a dynamic factor model with 200 variables, we reach three main conclusions. First, although many of the events of the 2007-2009 collapse were unprecedented, their net effect was to produce macro shocks that were larger versions of shocks previously experienced, to which the economy responded in an historically predictable way. Second, the shocks that produced the recession primarily were associated with financial disruptions and heightened uncertainty, although oil shocks played a role in the initial slowdown and subsequent drag was added by effectively tight conventional monetary policy arising from the zero lower bound. Third, while the slow nature of the recovery is partly due to the shocks of this recession, most of the slow recovery in employment, and nearly all of the slow recovery in output, is due to a secular slowdown in trend labor force growth. ER - TY - JOUR AU - Castillo,Marco AU - Petrie,Ragan AU - Torero,Máximo AU - Vesterlund,Lise TI - Gender Differences in Bargaining Outcomes: A Field Experiment on Discrimination JF - National Bureau of Economic Research Working Paper Series VL - No. 18093 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18093 L1 - http://www.nber.org/papers/w18093.pdf N1 - Author contact info: Marco Castillo George Mason University E-Mail: mcastil8@gmu.edu Ragan Petrie Interdisciplinary Center for Economic Science George Mason University 3300 University Dr, MSN 1B2 Fairfax, VA 22030 Tel: 703-993-4842 E-Mail: rpetrie1@gmu.edu Máximo Torero International Food Policy Research Institute - IFPRI 2033 K St. NW Washington DC 20006 Tel: +1 202 862-5662 Fax: 1 202 467-4439 E-Mail: m.torero@cgiar.org Lise Vesterlund Department of Economics University of Pittsburgh 4916 Posvar Hall Pittsburgh, PA 15260 Tel: 412/648-1794 Fax: 412/648-1793 E-Mail: vester@pitt.edu AB - We examine gender differences in bargaining outcomes in a highly competitive and commonly used market: the taxi market in Lima, Peru. Examining the entire path of negotiation we find that men face higher initial prices and rejection rates. These differentials are consistent with both statistical and taste-based discrimination. To identify the source of the inferior treatment of men we conduct an experiment where passengers send a signal on valuation before negotiating. The signal eliminates gender differences and the response is shown only to be consistent with statistical discrimination. Our study secures identification within the market of interest and demonstrates that there are environments where sophisticated statistical inference is the sole source of differential gender outcomes. ER - TY - JOUR AU - Schmitt-Grohé,Stephanie AU - Uribe,Martín TI - Managing Currency Pegs JF - National Bureau of Economic Research Working Paper Series VL - No. 18092 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18092 L1 - http://www.nber.org/papers/w18092.pdf N1 - Author contact info: Stephanie Schmitt-Grohe Department of Economics Columbia University New York, NY 10027 Tel: 212/854-8059 Fax: 212/854-4010 E-Mail: stephanie.schmittgrohe@columbia.edu Martin Uribe Department of Economics Columbia University International Affairs Building New York, NY 10027 Tel: 212 851 4008 Fax: 212 854 8059 E-Mail: martin.uribe@columbia.edu AB - The combination of a fixed exchange rate and downward nominal wage rigidity creates a real rigidity. In turn, this real rigidity makes the economy prone to involuntary unemployment during external crises. This paper presents a graphical analysis of alternative policy strategies aimed at mitigating this source of inefficiency. First- and second-best monetary and fiscal solutions are analyzed. Second-best solutions are found to be prudential, whereas first-best solutions are not. ER - TY - JOUR AU - Benhabib,Jess AU - Perla,Jesse AU - Tonetti,Christopher TI - Catch-up and Fall-back through Innovation and Imitation JF - National Bureau of Economic Research Working Paper Series VL - No. 18091 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18091 L1 - http://www.nber.org/papers/w18091.pdf N1 - Author contact info: Jess Benhabib Department of Economics New York University 19 West 4th Street, 6th Floor New York, NY 10012 Tel: 212/998-8971 Fax: 212/995-4186 E-Mail: jess.benhabib@nyu.edu Jesse Perla New York University Department of Economics 19 W 4th St, 6th Floor NY, NY 10012 E-Mail: jesse.perla@nyu.edu Christopher Tonetti New York University Department of Economics 19 W. 4th Street, 6 Floor New York, NY 10012-1119 Tel: 212.992.9775 E-Mail: chris.tonetti@nyu.edu AB - Will fast growing emerging economies sustain rapid growth rates until they “catch-up” to the technology frontier? Are there incentives for some developed countries to free-ride off of innovators and optimally “fallback” relative to the frontier? This paper models agents growing as a result of investments in innovation and imitation. Imitation facilitates technology diffusion, with the productivity of imitation modeled by a catch-up function that increases with distance to the frontier. The resulting equilibrium is an endogenous segmentation between innovators and imitators, where imitating agents optimally choose to “catch-up” or “fall-back” to a productivity ratio below the frontier. ER - TY - JOUR AU - Li,Chunding AU - Whalley,John TI - China and the TPP: A Numerical Simulation Assessment of the Effects Involved JF - National Bureau of Economic Research Working Paper Series VL - No. 18090 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18090 L1 - http://www.nber.org/papers/w18090.pdf N1 - Author contact info: Chunding Li Institute of World Economics and Politics Chinese Academy of Social Sciences No.5 Jianguomenneidajie Beijing, PRC Postcode: 100732 E-Mail: cli428@uwo.ca John Whalley Department of Economics Social Science Centre University of Western Ontario London, ON N6A 5C2 CANADA Tel: 519/661-3509 Fax: 519/661-3666 E-Mail: jwhalley@uwo.ca AB - The Trans-Pacific Partnership (TPP) is a new negotiation on cross border liberalization of goods and service flows going beyond WTO disciplines and focused on issues such as regulation and border controls. Though the US, Australia and other pacific countries are included, China is notable for its exclusion from the process thus far. This paper uses numerical simulation methods to assess the potential effects of a TPP agreement on China and the other participating countries. We use a numerical five-country global general equilibrium model with trade costs and monetary structure incorporating inside money to allow for impacts on trade imbalances. Trade costs are calculated using a method based on gravity equations. Simulation results reveal that China will be hurt by TPP initiatives, but the negative effects are relatively small given the geographical and commodity composition of China’s trade. Other non-TPP countries will be hurt but member countries will all gain. Japan’s joining TPP would be beneficial to both herself and all other TPP countries, but negative effects on China and other non-TPP countries will increase further. If China takes part in TPP, it will increase China’s and other TPP countries’ gain, but non-TPP countries will be hurt more. As a regional free trade arrangement, TPP effects are different from global free trade effects which will benefit all countries (not just member countries) in the world, and the positive effects of global free trade are stronger than TPP effects. ER - TY - JOUR AU - Ericson,Keith M. Marzilli AU - Starc,Amanda TI - Age-Based Heterogeneity and Pricing Regulation on the Massachusetts Health Insurance Exchange JF - National Bureau of Economic Research Working Paper Series VL - No. 18089 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18089 L1 - http://www.nber.org/papers/w18089.pdf N1 - Author contact info: Keith Marzilli Ericson Boston University School of Management 595 Commonwealth Avenue Boston, MA 02115 Tel: 617/353-4553 E-Mail: kericson@bu.edu Amanda Starc University of Pennsylvania E-Mail: astarc@wharton.upenn.edu AB - Little is known about consumer behavior or insurer incentives in health insurance exchanges. We analyze choice on the Massachusetts exchange, using coarse insurer pricing strategies to identify price sensitivity. We find substantial age-based heterogeneity: younger individuals are more than twice as price sensitive as older individuals. Modified community rating regulations interact with price discrimination, as our results imply higher markups on older consumers. Age-based pricing regulations would bind even conditional on perfect risk adjustment, highlighting the importance of considering insurer incentives when regulating insurance markets. Changes in age-based pricing regulation can result in transfers of 8% of the purchase price. ER - TY - JOUR AU - Mulligan,Casey B. TI - Do Welfare Policies Matter for Labor Market Aggregates? Quantifying Safety Net Work Incentives since 2007 JF - National Bureau of Economic Research Working Paper Series VL - No. 18088 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18088 L1 - http://www.nber.org/papers/w18088.pdf N1 - Author contact info: Casey B. Mulligan University of Chicago Department of Economics 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-9017 Fax: 773/702-8490 E-Mail: c-mulligan@uchicago.edu AB - Inflation-adjusted spending on means-tested subsidies has increased sharply since 2007, and most of the growth was due to changes in eligibility rules, and increases in subsidies per eligible person, rather than increases in the number of people who would have been eligible under pre-recession subsidy rules. In 2007, the non-elderly parts of the safety net paid about $10,000 in benefits per person-year that non-elderly heads of household or spouses were unemployed. By the end of 2009, the annual subsidy rate per person-year unemployed was up to $16,000. As a result, the average private returns to employment are substantially less than they were in 2007. One result of the paper is a monthly time series for the overall safety net’s marginal income tax rate from the point of view of the average marginal worker. ER - TY - JOUR AU - Wehby,George AU - Courtemanche,Charles J. TI - The Heterogeneity of the Cigarette Price Effect on Body Mass Index JF - National Bureau of Economic Research Working Paper Series VL - No. 18087 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18087 L1 - http://www.nber.org/papers/w18087.pdf N1 - Author contact info: George Wehby Assistant Professor Dept. of Health Management and Policy College of Public Health University of Iowa 105 River Street, N248 CPHB Iowa City, IA 52242 E-Mail: george-wehby@uiowa.edu Charles J. Courtemanche University of Louisville College of Business Department of Economics Louisville, KY 40292 Tel: 502-852-4854 Fax: 502-852-7672 E-Mail: cjcour02@louisville.edu AB - Previous studies estimate the average effect of cigarette price on body mass index (BMI), with recent research showing that their different methodologies all point to a negative effect after several years. This literature, however, ignores the possibility that the effect could vary throughout the BMI distribution or across socioeconomic and demographic groups due to differences in underlying preferences for health or risks for obesity. We evaluate heterogeneity in the long-run impact of cigarette price on BMI by performing quantile regressions and stratifying the sample by race, education, age, and sex. Cigarette price has a highly heterogeneous negative effect that is more than three times as strong at high BMI levels – where weight loss is most beneficial for health – than at low levels. The effects are also strongest for blacks, college graduates, middle-aged adults, and women. We also assess the implications for disparities, conduct robustness checks, and evaluate potential mechanisms. ER - TY - JOUR AU - Black,Sandra E. AU - Devereux,Paul J. AU - Løken,Katrine V. AU - Salvanes,Kjell G. TI - Care or Cash? The Effect of Child Care Subsidies on Student Performance JF - National Bureau of Economic Research Working Paper Series VL - No. 18086 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18086 L1 - http://www.nber.org/papers/w18086.pdf N1 - Author contact info: Sandra Black Department of Economics University of Texas Austin, TX 78712 Tel: 512-475-8519 E-Mail: sblack@austin.utexas.edu Paul J. Devereux School of Economics and Geary Institute University College Dublin Belfield, Dublin 4 Ireland E-Mail: devereux@ucd.ie Katrine V. Løken Department of Economics University of Bergen Postboks 5802 5020 Bergen, Norway E-Mail: katrine.loken@econ.uib.no Kjell Salvanes Department of Economics Norwegian School of Economics Hellev. 30, N-5035 Bergen Norway E-Mail: kjell.salvanes@nhh.no AB - Given the wide use of childcare subsidies across countries, it is surprising how little we know about the effect of these subsidies on children’s longer run outcomes. Using a sharp discontinuity in the price of childcare in Norway, we are able to isolate the effects of childcare subsidies on both parental and student outcomes. We find very small and statistically insignificant effects of childcare subsidies on childcare utilization and parental labor force participation. Despite this, we find significant positive effect of the subsidies on children’s academic performance in junior high school, suggesting the positive shock to disposable income provided by the subsidies may be helping to improve children’s scholastic aptitude. ER - TY - JOUR AU - Galí,Jordi AU - Smets,Frank AU - Wouters,Rafael TI - Slow Recoveries: A Structural Interpretation JF - National Bureau of Economic Research Working Paper Series VL - No. 18085 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18085 L1 - http://www.nber.org/papers/w18085.pdf N1 - Author contact info: Jordi Gali Centre de Recerca en Economia Internacional (CREI) Ramon Trias Fargas 25 08005 Barcelona SPAIN Tel: 011-34-93-5422754 Fax: 011-34-93-5421860 E-Mail: jgali@crei.cat Frank Smets European Central Bank Postfach 16 03 19 D-60311 Frankfurt GERMANY E-Mail: frank.smets@ecb.int Rafael Wouters National Bank of Belgium B-1000 Brussels BELGIUM E-Mail: rafael.wouters@nbb.be AB - An analysis of the performance of GDP, employment and other labor market variables following the troughs in postwar U.S. business cycles points to much slower recoveries in the three most recent episodes, but does not reveal any significant change over time in the relation between GDP and employment. This leads us to characterize the last three episodes as slow recoveries, as opposed to jobless recoveries. We use the estimated New Keynesian model in Galí-Smets-Wouters (2011) to provide a structural interpretation for the slower recoveries since the early nineties. ER - TY - JOUR AU - Andersen,Torben G. AU - Bollerslev,Tim AU - Christoffersen,Peter F. AU - Diebold,Francis X. TI - Financial Risk Measurement for Financial Risk Management JF - National Bureau of Economic Research Working Paper Series VL - No. 18084 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18084 L1 - http://www.nber.org/papers/w18084.pdf N1 - Author contact info: Torben G. Andersen Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/467-1285 Fax: 847/491-5719 E-Mail: t-andersen@kellogg.northwestern.edu Tim Bollerslev Department of Economics Duke University Box 90097 Durham, NC 27708-0097 Tel: 919/660-1846 Fax: 919/684-8974 E-Mail: boller@econ.duke.edu Peter Christoffersen Professor of Finance Rotman School of Management University of Toronto 105 St. George Street 447 Toronto, ON, M5S 3E6, Canada Tel: 416-946-5511 E-Mail: peter.christoffersen@rotman.utoronto.ca Francis X. Diebold Department of Economics University of Pennsylvania 3718 Locust Walk Philadelphia, PA 19104-6297 Tel: 215/898-1507 Fax: 212/573-4217 E-Mail: fdiebold@sas.upenn.edu AB - Current practice largely follows restrictive approaches to market risk measurement, such as historical simulation or RiskMetrics. In contrast, we propose flexible methods that exploit recent developments in financial econometrics and are likely to produce more accurate risk assessments, treating both portfolio-level and asset-level analysis. Asset-level analysis is particularly challenging because 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 powerful yet parsimonious models that are easily estimated. In addition, we emphasize the need for deeper understanding of the links between market risk and macroeconomic fundamentals, focusing primarily on links among equity return volatilities, real growth, and real growth volatilities. Throughout, we strive not only to deepen our scientific understanding of market risk, but also cross-fertilize the academic and practitioner communities, promoting improved market risk measurement technologies that draw on the best of both. ER - TY - JOUR AU - Baldwin,Richard AU - Okubo,Toshihiro TI - Networked FDI: Sales and Sourcing Patterns of Japanese Foreign Affiliates JF - National Bureau of Economic Research Working Paper Series VL - No. 18083 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18083 L1 - http://www.nber.org/papers/w18083.pdf N1 - Author contact info: Richard Baldwin Cigale 2 1010 Lausanne SWITZERLAND Tel: 41-22-908-5900 E-Mail: rbaldwin@cepr.org Toshihiro Okubo Keio University 2-15-45 Mita Minato-ku Tokyo Japan okubo@econ.keio.ac.jp E-Mail: okubo@econ.keio.ac.jp AB - Using firm-level data on the sales and sourcing patterns of Japanese affiliates, this paper suggests that very little FDI falls neatly into the standard bins of horizontal, vertical and export-platform FDI. Most affiliates import some intermediates and export some output suggesting a pattern that might be called ‘networked FDI’. This suggests that that the nature of FDI is influenced by ‘regional comparative advantage’ i.e. the proximity of markets and suppliers. The paper also suggests an empirical strategy for testing and classifying the nature of FDI based on firms’ sales and sourcing patterns rather than standard macro-level variables such as market size and income differences. ER - TY - JOUR AU - Foote,Christopher L. AU - Gerardi,Kristopher S. AU - Willen,Paul S. TI - Why Did So Many People Make So Many Ex Post Bad Decisions? The Causes of the Foreclosure Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 18082 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18082 L1 - http://www.nber.org/papers/w18082.pdf N1 - Author contact info: Christopher Foote Federal Reserve Bank of Boston Research Department, T-8 600 Atlantic Avenue Boston, MA 02210 Tel: 617-973-3077 E-Mail: chris.foote@bos.frb.org Kristopher Gerardi Federal Reserve Bank of Atlanta 1000 Peachtree St. NE Atlanta, GA 30309 E-Mail: kristopher.gerardi@atl.frb.org Paul S. Willen Federal Reserve Bank of Boston 600 Atlantic Avenue Boston, MA 02210-2204 Tel: 617/973-3149 Fax: 617/973-2123 E-Mail: willen968@gmail.com AB - We present 12 facts about the mortgage crisis. We argue that the facts refute the popular story that the crisis resulted from finance industry insiders deceiving uninformed mortgage borrowers and investors. Instead, we argue that borrowers and investors made decisions that were rational and logical given their ex post overly optimistic beliefs about house prices. We then show that neither institutional features of the mortgage market nor financial innovations are any more likely to explain those distorted beliefs than they are to explain the Dutch tulip bubble 400 years ago. Economists should acknowledge the limits of our understanding of asset price bubbles and design policies accordingly. ER - TY - JOUR AU - Lemley,Mark A. TI - Fixing the Patent Office JF - National Bureau of Economic Research Working Paper Series VL - No. 18081 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18081 L1 - http://www.nber.org/papers/w18081.pdf N1 - Author contact info: Mark Lemley Stanford University E-Mail: mlemley@law.stanford.edu M3 - presented at "Innovation Policy and the Economy 2012", April 17, 2012 AB - How can we allow patent examiners to effectively distinguish between patentable and unpatentable inventions, without slowing the process to a crawl or wasting a bunch of money? This essay reviews the recent literature and considers a number of proposals and their limitations. It concludes that the system can be improved, but that we are unlikely to solve the problem of bad patents altogether. The focus in reform discussions should be on understanding and changing applicant and examiner incentives rather than simply spending money. ER - TY - JOUR AU - Kutsoati,Edward AU - Morck,Randall TI - Family Ties, Inheritance Rights, and Successful Poverty Alleviation: Evidence from Ghana JF - National Bureau of Economic Research Working Paper Series VL - No. 18080 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18080 L1 - http://www.nber.org/papers/w18080.pdf N1 - Author contact info: Edward Kutsoati Department of Economics Tufts University Medford, MA 02155 E-Mail: edward.kutsoati@tufts.edu Randall Morck Faculty of Business University of Alberta Edmonton, AB T6G 2R6 CANADA Tel: 780/492-5683 Fax: 780/492-3325 E-Mail: randall.morck@ualberta.ca M3 - presented at "African Development Successes", August 3-5, 2011 AB - Ghanaian custom views children as members of either their mother’s or father’s lineage (extended family), but not both. Patrilineal custom charges a man’s lineage with caring for his widow and children, while matrilineal custom places this burden on the widows’ lineage – her father, brothers, and uncles. Deeming custom inadequate, and to promote the nuclear family, Ghana enacted the Intestate Succession (PNDC) Law 111, 1985 and 1998 Children’s Act 560 to force men to provide for their widows and children, as in Western cultures. Our survey shows that, although most people die intestate and many profess to know Law 111, it is rarely implemented. Knowledge of the law correlates with couples accumulating assets jointly and with inter-vivos husband to wife transfers, controlling for education. These effects are least evident for widows of matrilineal lineage men, suggesting a persistence of traditional norms. Widows with closer ties with their own or their spouse’s lineage report greater financial support, as do those very few who benefit from legal wills or access Law 111 and, importantly, widows of matrilineal lineage. Some evidence also supports Act 560 benefiting nuclear families, especially if the decedent’s lineage is matrilineal. Overall, our study confirms African traditional institutions’ persistent importance, and the limited effects of formal law. ER - TY - JOUR AU - Dinlersoz,Emin M. AU - Greenwood,Jeremy TI - The Rise and Fall of Unions in the U.S. JF - National Bureau of Economic Research Working Paper Series VL - No. 18079 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18079 L1 - http://www.nber.org/papers/w18079.pdf N1 - Author contact info: Emin M. Dinlersoz Center for Economic Studies U.S. Census Bureau 4600 Silver Hill Road Washington, DC 20233 E-Mail: emin.m.dinlersoz@census.gov Jeremy Greenwood Department of Economics University of Pennsylvania 3718 Locust Walk McNeil Building, Rm 160 Philadelphia, PA 19104-6297 Tel: 215/898-1505 Fax: 215/746-2947 E-Mail: do-not-use@jeremygreenwood.net AB - Union membership displayed a ∩-shaped pattern over the 20th century, while the distribution of income sketched a ∪. A model of unions is developed to analyze these phenomena. There is a distribution of firms in the economy. Firms hire capital, plus skilled and unskilled labor. Unionization is a costly process. A union decides how many firms to organize and its members' wage rate. Simulation of the developed model establishes that skilled-biased technological change, which affects the productivity of skilled labor relative to unskilled labor, can potentially explain the above facts. Statistical analysis suggests that skill-biased technological change is an important factor in de-unionization. ER - TY - JOUR AU - Chen,Fei AU - Diebold,Francis X. AU - Schorfheide,Frank TI - A Markov-Switching Multi-Fractal Inter-Trade Duration Model, with Application to U.S. Equities JF - National Bureau of Economic Research Working Paper Series VL - No. 18078 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18078 L1 - http://www.nber.org/papers/w18078.pdf N1 - Author contact info: Fei Chen School of Economics, HUST No 1037 Luoyu Road, Hongshan District Wuhan, 430074 CHINA E-Mail: chenf@econ.upenn.edu Francis X. Diebold Department of Economics University of Pennsylvania 3718 Locust Walk Philadelphia, PA 19104-6297 Tel: 215/898-1507 Fax: 212/573-4217 E-Mail: fdiebold@sas.upenn.edu Frank Schorfheide University of Pennsylvania Department of Economics 3718 Locust Walk McNeil 525 Philadelphia, PA 19104-6297 Tel: 215/898-8486 Fax: 215/573-2057 E-Mail: schorf@ssc.upenn.edu AB - We propose and illustrate a Markov-switching multi-fractal duration (MSMD) model for analysis of inter-trade durations in financial markets. We establish several of its key properties with emphasis on high persistence (indeed long memory). Empirical exploration suggests MSMD's superiority relative to leading competitors. ER - TY - JOUR AU - Philippon,Thomas TI - Has the U.S. Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation JF - National Bureau of Economic Research Working Paper Series VL - No. 18077 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18077 L1 - http://www.nber.org/papers/w18077.pdf N1 - Author contact info: Thomas Philippon New York University Stern School of Business 44 West 4th Street, Suite 9-190 New York, NY 10012-1126 Tel: 212/998-0490 Fax: 212/995-4233 E-Mail: tphilipp@stern.nyu.edu AB - I provide a quantitative interpretation of financial intermediation in the U.S. over the past 130 years. Measuring separately the cost of intermediation and the production of financial services, I find that: (i) the quantity of intermediation varies a lot over time; (ii) intermediation is produced under constant returns to scale; (iii) the annual cost of intermediation is around 2% of outstanding assets; (iv) adjustments for borrowers' quality are quantitatively important; and (v) the unit cost of intermediation has increased over the past 30 years. ER - TY - JOUR AU - Hummel,Patrick AU - Knight,Brian TI - Sequential or Simultaneous Elections? A Welfare Analysis JF - National Bureau of Economic Research Working Paper Series VL - No. 18076 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18076 L1 - http://www.nber.org/papers/w18076.pdf N1 - Author contact info: Patrick Hummel Yahoo! Research E-Mail: phummel@alumni.gsb.stanford.edu Brian G. Knight Brown University Department of Economics, Box B 64 Waterman Street Providence, RI 02912 Tel: 401/863-1584 Fax: 401/863-1970 E-Mail: Brian_Knight@brown.edu AB - This paper addresses a key question on the design of electoral systems. Should all voters vote on the same day or should elections be staggered, with late voters observing early returns before making their decisions? Using a model of voting and social learning, we illustrate that sequential elections place too much weight on the preferences and information of early states but also provide late voters with valuable information. Under simultaneous elections, voters equally weigh the available information but place too much weight on their priors, providing an inappropriate advantage to front-runners. Given these trade-offs, simultaneous elections are welfare-preferred if the front-runner initially has a small advantage, but sequential elections are welfare-preferred if the front-runner initially has a large advantage. We then quantitatively evaluate this trade-off using data based on the 2004 presidential primary. The results suggest that simultaneous systems outperform sequential systems although the difference in welfare is relatively small. ER - TY - JOUR AU - Lovenheim,Michael F. AU - Reynolds,C. Lockwood TI - The Effect of Housing Wealth on College Choice: Evidence from the Housing Boom JF - National Bureau of Economic Research Working Paper Series VL - No. 18075 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18075 L1 - http://www.nber.org/papers/w18075.pdf N1 - Author contact info: Michael Lovenheim Department of Policy Analysis and Management Cornell University 135 Martha Van Rensselaer Hall Ithaca, NY 14853 Tel: 607/255-0705 Fax: 607/255-4071 E-Mail: mfl55@cornell.edu C. Lockwood Reynolds Department of Economics Kent State University P.O. Box 5190 Kent, OH 44242 E-Mail: creynol9@kent.edu AB - The higher education system in the United States is characterized by a large degree of quality heterogeneity, and there is a growing literature suggesting students attending higher quality universities have better educational and labor market outcomes. In this paper, we use NLSY97 data combined with the difference in the timing and strength of the housing boom across cities to examine how short-run home price growth affects the quality of postsecondary schools chosen by students. Our findings indicate a $10,000 increase in a family’s housing wealth in the four years prior to a student becoming of college-age increases the likelihood she attends a flagship public university relative to a non-flagship public university by 2.0 percent and decreases the relative probability of attending a community college by 1.6 percent. These effects are driven by relatively lower and middle-income families. We show that these changes are due to the effect of housing wealth on where students apply, not on whether they are admitted. We also find that short-run increases in home prices lead to increases in direct quality measures of the institutions students attend. Finally, for the lower-income sample, we find home price increases reduce student labor supply and that each $10,000 increase in home prices is associated with a 1.8% increase in the likelihood of completing college. ER - TY - JOUR AU - Benhabib,Jess AU - Wang,Pengfei TI - Financial Constraints, Endogenous Markups, and Self-fulfilling Equilibria JF - National Bureau of Economic Research Working Paper Series VL - No. 18074 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18074 L1 - http://www.nber.org/papers/w18074.pdf N1 - Author contact info: Jess Benhabib Department of Economics New York University 19 West 4th Street, 6th Floor New York, NY 10012 Tel: 212/998-8971 Fax: 212/995-4186 E-Mail: jess.benhabib@nyu.edu Pengfei Wang Department of Economics Business School Hong Kong University of Science & Technology E-Mail: pfwanghkust@gmail.com AB - We show that self-fulfilling equilibria and indeterminacy can easily arise in a simple financial accelerator model with reasonable parameter calibrations and without increasing returns in production. A key feature for generating indeterminacy in our model is the countercyclical markup due to the procyclical loan to output ratio. We illustrate, via simulations, that our financial accelerator model can generate rich business cycle dynamics, including hump-shaped output in response to demand shocks as well as serial autocorrelation in output growth rates. ER - TY - JOUR AU - Bate,Roger AU - Jin,Ginger Zhe AU - Mathur,Aparna TI - Counterfeit or Substandard? The Role of Regulation and Distribution Channel in Drug Safety JF - National Bureau of Economic Research Working Paper Series VL - No. 18073 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18073 L1 - http://www.nber.org/papers/w18073.pdf N1 - Author contact info: Roger Bate American Enterprise Institute 1150 Seventeenth Street, NW Washington DC 20036 E-Mail: rbate@aei.org Ginger Z. Jin University of Maryland Department of Economics 3105 Tydings Hall College Park, MD 20742-7211 Tel: 301/405-3484 Fax: 301/405-3542 E-Mail: jin@econ.umd.edu Aparna Mathur American Enterprise Institute 1150 Seventeenth Street, N.W. Washington, DC 20036 E-Mail: amathur@aei.org AB - Using 1437 samples of Ciprofloxacin from 18 low-to-middle-income countries, we aim to understand the role that regulation and distribution channel have played in signaling and ensuring drug safety. According to the World Health Organization, some poor quality drugs are deliberately and fraudulently mislabeled with respect to identity or source while others can have incorrect quantities of active ingredient as a result of manufacturing error or poor storage. Given the difficulty to prove “intent to deceive”, we classify poor quality drugs as counterfeit if they fail a visual check or contain zero correct active ingredient, and as substandard if they pass the visual check and contain some but less than 80% of the correct active ingredient. Following the Global Pharma Health Fund e.V. Minilab® protocol, we find 9.88% of samples are poor quality and 41.5% of the failures are counterfeits. Both product registration and chain affiliation of retailers are strong indicators of higher probability to pass in the Minilab test and higher retail price. Conditional on quality failures, chain affiliation is more likely to indicate substandard while product registration with local government is more likely to indicate counterfeit. In other words, registered products are more likely to be targeted by counterfeiters. Furthermore, substandard drugs are priced much lower than comparable generics in the same city but counterfeits offer almost no discount from the targeted genuine version. These findings have important implications for both consumers and policy makers. ER - TY - JOUR AU - Aghion,Philippe AU - Farhi,Emmanuel AU - Kharroubi,Enisse TI - Monetary Policy, Liquidity, and Growth JF - National Bureau of Economic Research Working Paper Series VL - No. 18072 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18072 L1 - http://www.nber.org/papers/w18072.pdf N1 - Author contact info: Philippe Aghion Department of Economics Harvard University 1805 Cambridge St Cambridge, MA 02138 Tel: 617/495-6675 Fax: 617/495-4341 E-Mail: paghion@fas.harvard.edu Emmanuel Farhi Harvard University Department of Economics Littauer Center Cambridge, MA 02138 Tel: 617/496-1835 Fax: 617/495-8570 E-Mail: efarhi@harvard.edu Enisse Kharroubi Monetary and Economic Department Bank for International Settlements Centralbahnplatz 2 CH-4002 Basel E-Mail: enisse.kharroubi@bis.org AB - In this paper, we use cross-industry, cross-country panel data to test whether industry growth is positively affected by the interaction between the reactivity of real short term interest rates to the business cycle and industry-level measures of financial constraints. Financial constraints are measured, either by the extent to which an industry is prone to being "credit constrained", or by the extent to which it is prone to being "liquidity constrained". Our main findings are that: (i) the interaction between credit or liquidity constraints and monetary policy countercyclicality, has a positive, significant, and robust impact on the average annual rate of labor productivity in the domestic industry; (ii) these interaction effects tend to be more significant in downturns than in upturns. ER - TY - JOUR AU - Allcott,Hunt TI - The Smart Grid, Entry, and Imperfect Competition in Electricity Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 18071 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18071 L1 - http://www.nber.org/papers/w18071.pdf N1 - Author contact info: Hunt Allcott Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10012 E-Mail: hunt.allcott@nyu.edu AB - Most US consumers are charged a near-constant retail price for electricity, despite substantial hourly variation in the wholesale market price. The Smart Grid is a set of emerging technologies that, among other effects, will facilitate "real-time pricing" for electricity and increase price elasticity of demand. This paper simulates the effects of this increased demand elasticity using counterfactual simulations in a structural model of the Pennsylvania-Jersey-Maryland electricity market. The model includes a different approach to the problem of multiple equilibria in multi-unit auctions: I non-parametrically estimate unobservables that rationalize past bidding behavior and use learning algorithms to move from the observed equilibrium counterfactual bid functions. This routine is nested as the second stage of a static entry game that models the Capacity Market, an important element of market design in some restructured electricity markets. There are three central results. First, I find that an increase in demand elasticity could actually increase wholesale electricity prices in peak hours, contrary to predictions from short run models, while decreasing Capacity Market prices and total entry. Second, although the increased demand elasticity from the Smart Grid reduces producers' market power, in practice this would be a small channel of efficiency gains relative to forestalled entry. Third, I find that the gross welfare gains from moving a typical consumer to the Smart Grid, under the assumed demand parameters and before subtracting out the initial infrastructure costs, are about 10 percent of the consumer's total wholesale electricity costs. ER - TY - JOUR AU - Currie,Janet AU - Rossin-Slater,Maya TI - Weathering the Storm: Hurricanes and Birth Outcomes JF - National Bureau of Economic Research Working Paper Series VL - No. 18070 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18070 L1 - http://www.nber.org/papers/w18070.pdf N1 - Author contact info: Janet Currie Princeton University 316 Wallace Hall Princeton, NJ 08544 Tel: 609-258-7393 Fax: 609-258-5974 E-Mail: jcurrie@princeton.edu Maya Rossin-Slater Columbia University, Department of Economics 1022 International Affairs Building 420 West 118th Street New York City, NY 10027 E-Mail: mr2856@columbia.edu AB - A growing literature suggests that stressful events in pregnancy can have negative effects on birth outcomes. Some of the estimates in this literature may be affected by small samples, omitted variables, endogenous mobility in response to disasters, and errors in the measurement of gestation, as well as by a mechanical correlation between longer gestation and the probability of having been exposed. We use millions of individual birth records to examine the effects of exposure to hurricanes during pregnancy. The data allow us to measure outcomes precisely and to follow the same mother over time; we also suggest estimation methods that correct for omitted unobserved fixed characteristics of the mother, endogenous moving in response to storms, and the above mentioned correlation between gestation length and exposure. We find that exposure to a hurricane during pregnancy increases the probability of complications of labor and delivery, and of abnormal conditions of the newborn such as being on a ventilator more than 30 minutes and meconium aspiration syndrome. Although we do not directly measure stress, our results are supportive of the idea that stressful events in pregnancy can damage the health of the fetus. However our results suggest that the effects may be subtle and not readily apparent in terms of widely-used metrics such as birth weight and gestation. ER - TY - JOUR AU - Bayer,Patrick AU - Casey,Marcus D. AU - Ferreira,Fernando AU - McMillan,Robert TI - Price Discrimination in the Housing Market JF - National Bureau of Economic Research Working Paper Series VL - No. 18069 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18069 L1 - http://www.nber.org/papers/w18069.pdf N1 - Author contact info: Patrick Bayer Department of Economics Duke University 213 Social Sciences Durham, NC 27708 Tel: 919/660-1832 E-Mail: patrick.bayer@duke.edu Marcus D. Casey Department of Economics University of Illinois at Chicago 601 South Morgan UH725 M/C144 Chicago, IL 60607 E-Mail: mcasey@uic.edu Fernando Ferreira The Wharton School University of Pennsylvania 1461 Steinberg - Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104-6302 Tel: 215/898-7181 Fax: 215/573-2220 E-Mail: fferreir@wharton.upenn.edu Robert McMillan University of Toronto Department of Economics 150 St. George Street Toronto, ON M5S 3G7 CANADA Tel: 416/978-4190 Fax: 416/978-6713 E-Mail: mcmillan@chass.utoronto.ca AB - This paper sets out a new research design to test for price discrimination by sellers in the housing market. The design controls carefully for unobserved differences in the quality of neighborhoods and homes purchased by buyers of each race, using novel panel data from over two million repeat-sales housing transactions in four metropolitan areas. The results indicate that black and Hispanic homebuyers pay premiums of around 3 percent on average across the four cities – differences that are not explained by variation in buyer income, wealth or access to credit. The estimated premiums do not vary significantly with the racial composition of the neighborhood or, most strikingly, the race of the seller. This latter result rules out racial prejudice or animosity on the part of sellers as the primary explanation for the estimated premiums. ER - TY - JOUR AU - Andrews,Rodney J. AU - Li,Jing AU - Lovenheim,Michael F. TI - Quantile Treatment Effects of College Quality on Earnings: Evidence from Administrative Data in Texas JF - National Bureau of Economic Research Working Paper Series VL - No. 18068 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18068 L1 - http://www.nber.org/papers/w18068.pdf N1 - Author contact info: Rodney Andrews The University of Texas at Dallas 800 West Campbell Road MS WT21 Richardson, TX 75080 Tel: 972/883-2548 Fax: 972/883-2551 E-Mail: rodney.j.andrews@utdallas.edu Jing Li The University of Tulsa 800 South Tucker Drive Chapman Hall Room 235 Tulsa, OK 74104 E-Mail: jing-li@utulsa.edu Michael Lovenheim Department of Policy Analysis and Management Cornell University 135 Martha Van Rensselaer Hall Ithaca, NY 14853 Tel: 607/255-0705 Fax: 607/255-4071 E-Mail: mfl55@cornell.edu AB - This paper uses administrative data on schooling and earnings from Texas to estimate the effect of college quality on the distribution of earnings. We proxy college quality using the college sector from which students graduate and focus on identifying how graduating from UT-Austin, Texas A\&M or a community college affects the distribution of earnings relative to graduating from a non-flagship university in Texas. Our methodological approach uses the rich set of observable student academic ability and background characteristics in the data to adjust the earnings distributions across college sectors for the fact that college sector quality is correlated with factors that also affect earnings. Although our mean earnings estimates are similar to previous work in this area, we find evidence of substantial heterogeneity in the returns to college quality. At UT-Austin, the returns increase across the earnings distribution, while at Texas A\&M they tend to decline with one's place in the distribution. For community college graduates, the returns relative to non-flagship four-year graduates are negative across most of the distribution of earnings, but they approach zero and become positive for higher earners. Our data also allow us to estimate effects separately by race and ethnicity, and we find that historically under-represented minorities experience the highest returns in the upper tails of the earnings distribution, particularly among UT-Austin and community college graduates. While we focus on graduates, we also show our estimates are robust to examining college attendees as well as to many other changes in the sample and to the estimation strategy. Overall, these estimates provide the first direct evidence of the extent of heterogeneity in the effect of college quality on subsequent earnings, and our estimates point to the need to consider such heterogeneity in human capital models that incorporate college quality. ER - TY - JOUR AU - Franzoni,Chiara AU - Scellato,Giuseppe AU - Stephan,Paula TI - Foreign Born Scientists: Mobility Patterns for Sixteen Countries JF - National Bureau of Economic Research Working Paper Series VL - No. 18067 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18067 L1 - http://www.nber.org/papers/w18067.pdf N1 - Author contact info: Chiara Franzoni Politecnico di Milano Dipartimento di Ingegneria Gestionale (DIG) Piazza Leonardo da Vinci, 32 Milano ITALY 20133 Tel: +39.02.2399.4823 Fax: +39.02.2399.2730 E-Mail: chiara.franzoni@polimi.it Giuseppe Scellato Department of Production Systems and Business Economics Politecnico di Torino 10129 Turin, Italy E-Mail: giuseppe.scellato@polito.it Paula Stephan Department of Economics Andrew Young School of Policy Studies Georgia State University Box 3992 Atlanta, GA 30302-3992 Tel: 404/413-0160 Fax: 404/413-0145 E-Mail: pstephan@gsu.edu AB - We report results from the first systematic study of the mobility of scientists engaged in research in a large number of countries. Data were collected from 17,182 respondents using a web-based survey of corresponding authors in 16 countries in four fields during 2011. We find considerable variation across countries, both in terms of immigration and emigration patterns. Switzerland has the largest percent of immigrant scientists working in country (56.7); Canada, and Australia trail by nine or more percent; the U.S. and Sweden by approximately eighteen percent. India has the lowest (0.8), followed closely by Italy and Japan. The most likely reason to come to a country for postdoctoral study or work is professional. Our survey methodology also allows us to study emigration patterns of individuals who were living in one of the 16 countries at age 18. Again, considerable variation exists by country. India heads the list with three in eight of those living in country when they were 18 out of country in 2011. The country with the lowest diaspora is Japan. Return rates also vary by country, with emigrants from Spain being most likely to return and those from India being least like to return. Regardless of country, the most likely reason respondents report for returning to one’s home country is family or personal. ER - TY - JOUR AU - Huggett,Mark AU - Kaplan,Greg TI - The Money Value of a Man JF - National Bureau of Economic Research Working Paper Series VL - No. 18066 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18066 L1 - http://www.nber.org/papers/w18066.pdf N1 - Author contact info: Mark Huggett Georgetown University E-Mail: mh5@georgetown.edu Greg Kaplan Department of Economics University of Pennsylvania 160 McNeil Building 3718 Locust Walk Philadelphia, PA 19104 Tel: 215/898-1875 E-Mail: gkaplan@sas.upenn.edu AB - This paper posits a notion of the value of an individual’s human capital and the associated return on human capital. These concepts are examined using U.S. data on male earnings and financial asset returns. We decompose the value of human capital into a bond, a stock and a residual value component. We find that (1) the bond component of human capital is larger than the stock component at all ages, (2) the value of human capital is far below the value implied by discounting earnings at the risk-free rate, (3) mean human capital returns exceed stock returns early in life and decline with age and (4) human capital returns and stock returns have a small positive correlation over the working lifetime. ER - TY - JOUR AU - Giné,Xavier AU - Goldberg,Jessica AU - Silverman,Dan AU - Yang,Dean TI - Revising Commitments: Field Evidence on the Adjustment of Prior Choices JF - National Bureau of Economic Research Working Paper Series VL - No. 18065 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18065 L1 - http://www.nber.org/papers/w18065.pdf N1 - Author contact info: Xavier Gine The World Bank 1818 H Street N.W. Mail Stop MC 3-307 Washington, D.C. 20433 Tel: (202) 473-0451 Fax: (202) 522-1155 E-Mail: xgine@worldbank.org Jessica Goldberg University of Maryland Department of Economics 3115G Tydings Hall College Park, MD 20742 Tel: (301) 405-3559 E-Mail: goldberg@econ.umd.edu Dan Silverman Department of Economics University of Michigan Ann Arbor MI 48109-1220 Tel: 734/764-2447 Fax: 734/764-2769 E-Mail: dansilv@umich.edu Dean Yang University of Michigan Gerald R. Ford School of Public Policy and Department of Economics 735 S. State Street, Room 3316 Ann Arbor, MI 48109 Tel: 734/764-6158 Fax: 734/763-9181 E-Mail: deanyang@umich.edu AB - The very poor in developing countries often make intertemporal choices that seem at odds with their individual self-interest. There are many possible reasons why. We investigate several of these reasons with a lab-in-the-field experiment in rural Malawi involving large stakes. We make two contributions. First, we construct a new dependent variable: revisions of prior choices regarding the allocation of future income. This allows us to directly examine intertemporal choice revision and its determinants. In particular, this dependent variable permits a novel test for the existence of self-control problems: we find that revisions of money allocations toward the present are positively associated with measures of present-bias from an earlier baseline survey, as well as the (randomly assigned) closeness in time to the first possible date of money disbursement. Second, we investigate other potential determinants of revision, aside from self-control problems. We find little evidence that revisions of money allocations toward the present are associated with spousal preferences for such revision, household shocks or the financial sophistication of respondents. ER - TY - JOUR AU - Andrews,Rodney J. AU - Logan,Trevon D. AU - Sinkey,Michael J. TI - Identifying Confirmatory Bias in the Field: Evidence from a Poll of Experts JF - National Bureau of Economic Research Working Paper Series VL - No. 18064 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18064 L1 - http://www.nber.org/papers/w18064.pdf N1 - Author contact info: Rodney Andrews The University of Texas at Dallas 800 West Campbell Road MS WT21 Richardson, TX 75080 Tel: 972/883-2548 Fax: 972/883-2551 E-Mail: rodney.j.andrews@utdallas.edu Trevon Logan The Ohio State University 410 Arps Hall 1945 N. High Street Columbus, OH 43210 Tel: 614-292-0762 Fax: 614-292-3906 E-Mail: logan.155@osu.edu Michael J. Sinkey University of West Georgia Richards College of Business Carrollton, GA 30118 E-Mail: msinkey@westga.edu AB - Laboratory experiments have established the existence of cognitive biases, but their explanatory power in real-world economic settings has been difficult to measure. We estimate the extent of a cognitive bias, confirmatory bias, among experts in a real-world environment. In the Associated Press Top 25 College Football Poll expert pollsters are tasked with assessing team quality, and their beliefs are treated week-to-week with game results that serve as signals about an individual team's quality. We exploit the variation provided by actual game results relative to market expectations to develop a novel regression-discontinuity approach to identify confirmatory bias in this real-world setting. We construct a unique personally-assembled dataset that matches more than twenty years of individual game characteristics to poll results and betting market information, and show that teams that slightly exceed and barely miss market expectations are exchangeable. The likelihood of winning the game, the average number of points scored by teams and their opponents, and even the average week of the season are no different between teams that slightly exceed and barely miss market expectations. Pollsters, however, significantly upgrade their beliefs about a team's quality when a team slightly exceeds market expectations. The effects are sizeable-- nearly half of the voters in the poll rank a team one slot higher when they slightly exceed market expectations; one-fifth of the standard deviation in poll points in a given week can be attributed to confirmatory bias. This type of updating suggests that even when informed agents make repeated decisions they may act in a manner which is consistent with confirmatory bias. ER - TY - JOUR AU - Novy-Marx,Robert TI - Pseudo-Predictability in Conditional Asset Pricing Tests: Explaining Anomaly Performance with Politics, the Weather, Global Warming, Sunspots, and the Stars JF - National Bureau of Economic Research Working Paper Series VL - No. 18063 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18063 L1 - http://www.nber.org/papers/w18063.pdf N1 - Author contact info: Robert Novy-Marx Simon Graduate School of Business University of Rochester 305 Schlegel Hall Rochester, NY 14627 Tel: 773/834-7123 E-Mail: Robert.Novy-Marx@Simon.Rochester.edu AB - Ferson, Sarkissian and Simin (2003) warn that persistence in expected returns generates spurious regression bias in predictive regressions of stock returns, even though stock returns are themselves only weakly autocorrelated. Despite this fact a growing literature attempts to explain the performance of stock market anomalies with highly persistent investor sentiment. The data suggest, however, that the potential misspecification bias may be large. Predictive regressions of real returns on simulated regressors are too likely to reject the null of independence, and it is far too easy to find real variables that have “significant power” predicting returns. Standard OLS predictive regressions find that the party of the U.S. President, cold weather in Manhattan, global warming, the El Niño phenomenon, atmospheric pressure in the Arctic, the conjunctions of the planets, and sunspots, all have “significant power” predicting the performance of anomalies. These issues appear particularly acute for anomalies prominent in the sentiment literature, including those formed on the basis of size, distress, asset growth, investment, profitability, and idiosyncratic volatility. ER - TY - JOUR AU - Rose,Andrew K. TI - Protectionism Isn’t Counter‐Cyclic (anymore) JF - National Bureau of Economic Research Working Paper Series VL - No. 18062 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18062 L1 - http://www.nber.org/papers/w18062.pdf N1 - Author contact info: Andrew K. Rose Haas School of Business Administration University of California, Berkeley Berkeley, CA 94720-1900 Tel: 510/642-6609 Fax: 510/642-4700 E-Mail: arose@haas.berkeley.edu AB - Conventional wisdom holds that protectionism is counter-cyclic; tariffs, quotas and the like grow during recessions. While that may have been a valid description of the data before the Second World War, it is now inaccurate. In the post-war era, protectionism has not actually moved counter-cyclically. Tariffs and non-tariff barriers simply do not rise systematically during cyclic downturns. I document this new stylized fact with a panel of data covering over 60 countries and 30 years, using eighteen measures of protectionism and seven of business cycles. I also provide some hints as to why protectionism is no longer counter-cyclic. ER - TY - JOUR AU - Levchenko,Andrei A. AU - Zhang,Jing TI - Comparative Advantage and the Welfare Impact of European Integration JF - National Bureau of Economic Research Working Paper Series VL - No. 18061 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18061 L1 - http://www.nber.org/papers/w18061.pdf N1 - Author contact info: Andrei Levchenko Department of Economics University of Michigan 611 Tappan Street Ann Arbor, MI 48109 Tel: 734/764-3296 E-Mail: alev@umich.edu Jing Zhang University of Michigan Department of Economics 611 Tappan Street Ann Arbor, MI 48109-1220 E-Mail: jzhang@umich.edu AB - This paper investigates the welfare gains from European trade integration, and the role of comparative advantage in determining the magnitude of those gains. We use a multisector Ricardian model implemented on 79 countries, and compare welfare in the 2000s to a counterfactual scenario in which East European countries are closed to trade. For West European countries, the mean welfare gain from trade integration with Eastern Europe is 0.16%, rang- ing from zero for Portugal to 0.4% for Austria. For East European countries, gains from trade are 9.23% at the mean, ranging from 2.85% for Russia to 20% for Estonia. For Eastern Europe, comparative advantage is a key determinant of the variation in the welfare gains: countries whose comparative advantage is most similar to Western Europe tend to gain less, while countries with technology most different from Western Europe gain the most. ER - TY - JOUR AU - Bradley,Cathy J. AU - Neumark,David AU - Barkowski,Scott TI - Does Employer-Provided Health Insurance Constrain Labor Supply Adjustments to Health Shocks? New Evidence on Women Diagnosed with Breast Cancer JF - National Bureau of Economic Research Working Paper Series VL - No. 18060 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18060 L1 - http://www.nber.org/papers/w18060.pdf N1 - Author contact info: Cathy J. Bradley Department of Healthcare Policy and Research Virginia Commonwealth University 830 E. Main Street Richmond, VA 23219 E-Mail: cjbradley@vcu.edu David Neumark Department of Economics University of California at Irvine 3151 Social Science Plaza Irvine, CA 92697 Tel: 949-824-8496 Fax: 949/824-2182 E-Mail: dneumark@uci.edu Scott Barkowski Department of Economics 3151 Social Science Plaza Irvine, CA 92697 E-Mail: scott.barkowski@uci.edu AB - Employment-contingent health insurance creates incentives for ill workers to remain employed at a sufficient level (usually full-time) to maintain access to health insurance coverage. We study employed married women, newly diagnosed with breast cancer, comparing labor supply responses to breast cancer diagnoses between women dependent on their own employment for health insurance and women with access to health insurance through their spouse’s employer. We find evidence that women more dependent on their own job for health insurance reduce their labor supply by less after a diagnosis of breast cancer – the estimate difference is about 5.5 to 7 percent. Women’s subjective responses to questions about working more to maintain health insurance are consistent with the conclusions from observed behavior. ER - TY - JOUR AU - Sinai,Todd M. TI - House Price Moments in Boom-Bust Cycles JF - National Bureau of Economic Research Working Paper Series VL - No. 18059 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18059 L1 - http://www.nber.org/papers/w18059.pdf N1 - Author contact info: Todd M. Sinai University of Pennsylvania, Wharton School 1465 Steinberg Hall - Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104-6302 Tel: 215/898-5390 Fax: 215/573-2220 E-Mail: sinai@wharton.upenn.edu M3 - presented at "Housing and the Financial Crisis", November 17-18, 2011 AB - This paper describes six stylized patterns among housing markets in the United States that potential explanations of the housing boom and bust should seek to explain. First, individual housing markets in the U.S. experienced considerable heterogeneity in the amplitudes of their cycles. Second, the areas with the biggest boom-bust cycles in the 2000s also had the largest boom-busts in the 1980s and 1990s, with a few telling exceptions. Third, the timing of the cycles differed across housing markets. Fourth, the largest booms and busts, and their timing, seem to be clustered geographically. Fifth, the cross sectional variance of annual house price changes rises in booms and declines in busts. Finally, these stylized facts are robust to controlling for housing demand fundamentals – namely, rents, incomes, or employment – although changes in fundamentals are correlated with changes in prices. ER - TY - JOUR AU - Fernández-Villaverde,Jesús AU - Gordon,Grey AU - Guerrón-Quintana,Pablo A. AU - Rubio-Ramírez,Juan TI - Nonlinear Adventures at the Zero Lower Bound JF - National Bureau of Economic Research Working Paper Series VL - No. 18058 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18058 L1 - http://www.nber.org/papers/w18058.pdf N1 - Author contact info: Jesus Fernandez-Villaverde University of Pennsylvania 160 McNeil Building 3718 Locust Walk Philadelphia, PA 19104 Tel: 267/307-1068 E-Mail: jesusfv@econ.upenn.edu Grey Gordon University of Pennsylvania 160 McNeil Building 3718 Locust Walk Philadelphia, PA 19104 E-Mail: greygordon@gmail.com Pablo A. Guerrón-Quintana Federal Reserve Bank of Philadelphia Tel: 9195132869 E-Mail: pablo.guerron@phil.frb.org Juan Rubio-Ramírez Duke University P.O. Box 90097 Durham, NC 27708 Tel: 9196601865 E-Mail: juan.rubio-ramirez@duke.edu AB - Motivated by the recent experience of the U.S. and the Eurozone, we describe the quantitative properties of a New Keynesian model with a zero lower bound (ZLB) on nominal interest rates, explicitly accounting for the nonlinearities that the bound brings. Besides showing how such a model can be efficiently computed, we find that the behavior of the economy is substantially affected by the presence of the ZLB. In particular, we document 1) the unconditional and conditional probabilities of hitting the ZLB; 2) the unconditional and conditional probabilty distributions of the duration of a spell at the ZLB; 3) the responses of output to government expenditure shocks at the ZLB, 4) the distribution of shocks that send the economy to the ZLB; and 5) the distribution of shocks that keep the economy at the ZLB. ER - TY - JOUR AU - Hassan,Tarek Alexander TI - Country Size, Currency Unions, and International Asset Returns JF - National Bureau of Economic Research Working Paper Series VL - No. 18057 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18057 L1 - http://www.nber.org/papers/w18057.pdf N1 - Author contact info: Tarek Alexander Hassan Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-3291 Fax: 773/753-0851 E-Mail: tarek.hassan@chicagobooth.edu AB - Differences in real interest rates across developed economies are puzzlingly large and persistent. I propose a simple explanation: Bonds issued in the currencies of larger economies are expensive because they insure against shocks that affect a larger fraction of the world economy. I show that differences in the size of economies indeed explain a large fraction of the cross-sectional variation in currency returns. The data also support a number of additional implications of the model: The introduction of a currency union lowers interest rates in participating countries and stocks in the non-traded sector of larger economies pay lower expected returns. ER - TY - JOUR AU - Basu,Anirban TI - Estimating Person-Centered Treatment (PeT) Effects Using Instrumental Variables JF - National Bureau of Economic Research Working Paper Series VL - No. 18056 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18056 L1 - http://www.nber.org/papers/w18056.pdf N1 - Author contact info: Anirban Basu Department of Health Services School of Public Health University of Washington 1959 NE Pacific St Box - 357660 Seattle WA 98195 Tel: 206) 616-2986 Fax: (206) 543-3964 E-Mail: basua@uw.edu AB - This paper builds on the methods of local instrumental variables developed by Heckman and Vytlacil (1999, 2001, 2005) to estimate person-centered treatment (PeT) effects that are conditioned on the person’s observed characteristics and averaged over the potential conditional distribution of unobserved characteristics that lead them to their observed treatment choices. PeT effects are more individualized than conditional treatment effects from a randomized setting with the same observed characteristics. PeT effects can be easily aggregated to construct any of the mean treatment effect parameters and, more importantly, are well-suited to comprehend individual-level treatment effect heterogeneity. The paper presents the theory behind PeT effects, studies their finite-sample properties using simulations and presents a novel analysis of treatment evaluation in health care. ER - TY - JOUR AU - Neumark,David AU - Thompson,Matthew AU - Brindisi,Francesco AU - Koyle,Leslie AU - Reck,Clayton TI - Estimating the Economic Impacts of Living Wage Mandates Using Ex Ante Simulations, Longitudinal Estimates, and New Public and Administrative Data: Evidence for New York City JF - National Bureau of Economic Research Working Paper Series VL - No. 18055 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18055 L1 - http://www.nber.org/papers/w18055.pdf N1 - Author contact info: David Neumark Department of Economics University of California at Irvine 3151 Social Science Plaza Irvine, CA 92697 Tel: 949-824-8496 Fax: 949/824-2182 E-Mail: dneumark@uci.edu Matthew Thompson Charles Rivers Associates 1545 Raymond Diehl Road Suite 260 Tallahassee, FL 32308 E-Mail: mthompson@crai.com Francesco Brindisi New York City Office of Management and Budget 75 Park Place New York, NY 10007 E-Mail: fb2012@columbia.edu Leslie Koyle Charles Rivers Associates 170 S. Main St., Suite 1050 Salt Lake City, UT 84101 E-Mail: LKoyle@crai.com Clayton Reck Charles Rivers Associates 1545 Raymond Diehl Road Suite 260 Tallahassee, FL 32308 E-Mail: creck@crai.com AB - Policy researchers often have to estimate the future effect of imposing a policy in a particular location. There is often historical information on the effects of similar policies in other jurisdictions, but no information on the effects of the policy in the jurisdiction in question, and the policy may have specific features not reflected in the experiences of other areas. It is then necessary to combine the historical evidence from other locations with information and data specific to the jurisdiction in question. In this paper, we illustrate and use this approach in estimating the impact of a proposed living wage mandate for New York City. We explain how we combined elements of “ex ante” evaluations of living wage laws with before-and-after (longitudinal) estimates of the effects of living wage laws. We also incorporate detailed location-specific information on workers, families, and employers using administrative data and other new public data sources. ER - TY - JOUR AU - Autor,David H. AU - Dorn,David AU - Hanson,Gordon H. TI - The China Syndrome: Local Labor Market Effects of Import Competition in the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 18054 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18054 L1 - http://www.nber.org/papers/w18054.pdf N1 - Author contact info: David Autor Department of Economics MIT, E52-371 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/258-7698 Fax: 617/253-1330 E-Mail: dautor@mit.edu David Dorn David Dorn CEMFI Casado del Alisal 5 28014 Madrid Spain Tel: +34 914290551 Fax: +34 914291056 E-Mail: dorn@cemfi.es Gordon H. Hanson IR/PS 0519 University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0519 Tel: 858/822-5087 Fax: 858/534-3939 E-Mail: gohanson@ucsd.edu AB - We analyze the effect of rising Chinese import competition between 1990 and 2007 on local U.S. labor markets, exploiting cross-market variation in import exposure stemming from initial differences in industry specialization while instrumenting for imports using changes in Chinese imports by industry to other high-income countries. Rising exposure increases unemployment, lowers labor force participation, and reduces wages in local labor markets. Conservatively, it explains one-quarter of the contemporaneous aggregate decline in U.S. manufacturing employment. Transfer benefits payments for unemployment, disability, retirement, and healthcare also rise sharply in exposed labor markets. ER - TY - JOUR AU - Hall,Bronwyn H. AU - Lotti,Francesca AU - Mairesse,Jacques TI - Evidence on the Impact of R&D and ICT Investment on Innovation and Productivity in Italian Firms JF - National Bureau of Economic Research Working Paper Series VL - No. 18053 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18053 L1 - http://www.nber.org/papers/w18053.pdf N1 - Author contact info: Bronwyn H. Hall Dept. of Economics 549 Evans Hall UC Berkeley Berkeley, CA 94720-3880 Tel: 510/642-3878 Fax: 510/548-5561 E-Mail: bhhall@nber.org Francesca Lotti Structural Economic Analysis Department Bank of Italy via Nazionale 91, 00184 Rome (IT) E-Mail: francesca.lotti@gmail.com Jacques Mairesse CREST-INSEE 15, Boulevard Gabriel PERI 92245 MALAKOFF CEDEX FRANCE Tel: 33-1-41-17-35-50 Fax: 33-1-41-17-76-34 E-Mail: mairesse@ensae.fr AB - Both Research and Development (R&D) and Information and Communication Technology (ICT) investment have been identified as sources of relative innovation underperformance in Europe vis-à-vis the United States. In this paper we investigate R&D and ICT investment at the firm level in an effort to assess their relative importance and to what extent they are complements or substitutes. We use data on a large unbalanced panel data sample of Italian manufacturing firms constructed from four consecutive waves of a survey of manufacturing firms, together with a version of the CDM model (Crepon et al., 1998) that has been modified to include ICT investment and R&D as the two main inputs into innovation and productivity. We find that R&D and ICT are both strongly associated with innovation and productivity, with R&D being more important for innovation, and ICT investment being more important for productivity. For the median firm, rates of return to both investments are so high that they suggest considerably underinvestment in both these activities. ER - TY - JOUR AU - Forbes,Kristin AU - Fratzscher,Marcel AU - Kostka,Thomas AU - Straub,Roland TI - Bubble Thy Neighbor: Portfolio Effects and Externalities from Capital Controls JF - National Bureau of Economic Research Working Paper Series VL - No. 18052 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18052 L1 - http://www.nber.org/papers/w18052.pdf N1 - Author contact info: Kristin Forbes MIT Sloan School of Management 100 Main Street, E62-416 Cambridge, MA 02142 Tel: 617/253-8996 Fax: 617/258-6855 E-Mail: kjforbes@mit.edu Marcel Fratzscher European Central Bank Kaiserstrasse 29 D-60311 Frankfurt/Main GERMANY Tel: +49 - 69 1344 6871 E-Mail: marcel.fratzscher@ecb.int Thomas Kostka European Central Bank Frankfurt Germany E-Mail: thomas.kostka@ecb.int Roland Straub European Central Bank E-Mail: Roland.Straub@ecb.int AB - We use changes in Brazil’s tax on capital inflows from 2006 to 2011 to test for direct portfolio effects and externalities from capital controls on investor portfolios. The analysis is structured based on information from investor interviews. We find that an increase in Brazil’s tax on foreign investment in bonds causes investors to significantly decrease their portfolio allocations to Brazil in both bonds and equities. Investors simultaneously increase allocations to other countries that have substantial exposure to China and decrease allocations to countries viewed as more likely to use capital controls. Much of the effect of capital controls on portfolio flows appears to occur through signalling —i.e. changes in investor expectations about future policies— rather than the direct cost of the controls. This evidence of significant externalities from capital controls suggests that any assessment of controls should consider their effects on portfolio flows to other countries. ER - TY - JOUR AU - Milligan,Kevin S. TI - How is Economic Hardship Avoided by Those Retiring Before the Social Security Entitlement Age? JF - National Bureau of Economic Research Working Paper Series VL - No. 18051 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18051 L1 - http://www.nber.org/papers/w18051.pdf N1 - Author contact info: Kevin S. Milligan Department of Economics University of British Columbia #997-1873 East Mall Vancouver, BC V6T 1Z1 CANADA Tel: 604/822-6747 Fax: 604/822-5915 E-Mail: kevin.milligan@ubc.ca AB - Governments around the world are reacting to extended lifespans and troubled pension finances by increasing the age of retirement benefit entitlement. One concern that arises is how those who are not working before reaching entitlement age are able to bridge their consumption to the age of entitlement. This paper studies those who retire before the age of full pension entitlement in the United States using data drawn from the Health and Retirement Study. The major finding is that four out of five people who have zero earnings at pre-entitlement ages are able to find a way to lift their incomes over the poverty line. For men, pension and annuity income is important while for women, spousal income helps most to get them over the line. Reaching the early retirement entitlement age at 62 also has a significant impact on poverty avoidance. ER - TY - JOUR AU - Cremers,Martijn AU - Petajisto,Antti AU - Zitzewitz,Eric TI - Should Benchmark Indices Have Alpha? Revisiting Performance Evaluation JF - National Bureau of Economic Research Working Paper Series VL - No. 18050 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18050 L1 - http://www.nber.org/papers/w18050.pdf N1 - Author contact info: Martijn Cremers Yale School of Management 135 Prospect Street New Haven, CT 06520-8200 Tel: 203/436-0649 Fax: 203/436-0630 E-Mail: martijn.cremers@yale.edu Antti Petajisto New York University Stern School of Business 44 W 4th St., Suite 9-190 New York, NY 10012-1126 E-Mail: antti.petajisto@stern.nyu.edu Eric Zitzewitz Department of Economics Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-2891 Fax: 603/646-2122 E-Mail: eric.zitzewitz@dartmouth.edu AB - Standard Fama-French and Carhart models produce economically and statistically significant nonzero alphas, even for passive benchmark indices such as the S&P 500 and Russell 2000. We find that these alphas arise primarily from the disproportionate weight the Fama-French factors place on small value stocks, which have performed well, and from the CRSP value-weighted market index, which is historically a downward-biased benchmark for U.S. stocks. We propose small methodological changes to the Fama-French factors to eliminate the nonzero alphas, and we also propose factor models based on common and tradable benchmark indices. Both kinds of alternative models improve performance evaluation of actively managed portfolios, with the index-based models exhibiting the best performance. ER - TY - JOUR AU - Aghion,Philippe AU - Persson,Torsten AU - Rouzet,Dorothee TI - Education and Military Rivalry JF - National Bureau of Economic Research Working Paper Series VL - No. 18049 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18049 L1 - http://www.nber.org/papers/w18049.pdf N1 - Author contact info: Philippe Aghion Department of Economics Harvard University 1805 Cambridge St Cambridge, MA 02138 Tel: 617/495-6675 Fax: 617/495-4341 E-Mail: paghion@fas.harvard.edu Torsten Persson Torsten and Ragnar Soderberg Chair in Economic Sci Institute for International Economic Studies Stockholm University SE-106 91 Stockholm SWEDEN Tel: +46 8 163066 Fax: +46 8 6747801 E-Mail: Torsten.Persson@iies.su.se Dorothee Rouzet Department of Economics Harvard University 1805 Cambridge St Cambridge, MA 02138 E-Mail: drouzet@fas.harvard.edu AB - Using data from the last 150 years in a small set of countries, and from the postwar period in a large set of countries, we show that large investments in state primary education systems tend to occur when countries face military rivals or threats from their neighbors. By contrast, we find that democratic transitions are negatively associated with education investments, while the presence of democratic political institutions magnifies the positive effect of military rivalries. These empirical results are robust to a number of statistical concerns and continue to hold when we instrument military rivalries with commodity prices or rivalries in a certain country’s immediate neighborhood. We also present historical case studies, as well as a simple model, that are consistent with the econometric evidence. ER - TY - JOUR AU - Aghion,Philippe AU - Dewatripont,Mathias AU - Du,Luosha AU - Harrison,Ann AU - Legros,Patrick TI - Industrial Policy and Competition JF - National Bureau of Economic Research Working Paper Series VL - No. 18048 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18048 L1 - http://www.nber.org/papers/w18048.pdf N1 - Author contact info: Philippe Aghion Department of Economics Harvard University 1805 Cambridge St Cambridge, MA 02138 Tel: 617/495-6675 Fax: 617/495-4341 E-Mail: paghion@fas.harvard.edu Mathias Dewatripont Universite Libre de Bruxelles E-Mail: mathias.dewatripont@ulb.ac.be Luosha Du Department of Agricultural and Resource Economics UC Berkeley Giannini Hall Berkeley, California 94720 E-Mail: luosha@berkeley.edu Ann Harrison The Wharton School University of Pennsylvania 2016 Steinberg Hall-Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104-6370 Tel: 215 746 3132 E-Mail: annh@wharton.upenn.edu Patrick Legros ECARES, Universite Libre de Bruxelles CP114 50 avenue Franklin Roosevelt 1050 Brussels BELGIUM E-Mail: plegros@ulb.ac.be AB - This paper argues that sectoral policy aimed at targeting production activities to one particular sector, can enhance growth and efficiency if it made competition-friendly. First, we develop a model in which two firms can operate either in the same (higher growth) sector or in different sectors. To escape competition, firms can either innovate vertically or differentiate by chosing a different sector from its competitor. By forcing firms to operate in the same sector, sectoral policy induces them to innovate "vertically" rather than differentiate in order to escape competition with the other firm. The model predicts that sectoral targeting enhances average growth and productivity more when competition is more intense within a sector and when competition is preserved by the policy. In the second part of the paper, we test these predictions using a panel of medium and large Chinese enterprises for the period 1998 through 2007. Our empirical results suggest that if subsidies are allocated to competitive sectors (as measured by the Lerner index) and allocated in such a way as to preserve or increase competition, then the net impacts of subsidies, tax holidays, and tariffs on total factor productivity levels or growth become positive and significant. We address the potential endogeneity of targeting and competition by using variations in targeting across Chinese cities that are exogenous to the individual firm. ER - TY - JOUR AU - Hunt,Jennifer TI - The Impact of Immigration on the Educational Attainment of Natives JF - National Bureau of Economic Research Working Paper Series VL - No. 18047 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18047 L1 - http://www.nber.org/papers/w18047.pdf N1 - Author contact info: Jennifer Hunt Department of Economics Rutgers University New Jersey Hall 75 Hamilton Street New Brunswick NJ, 08901-1248 Tel: (732) 932-7363 E-Mail: jennifer.hunt@rutgers.edu AB - Using a state panel based on census data from 1940-2010, I examine the impact of immigration on the high school completion of natives in the United States. Immigrant children could compete for schooling resources with native children, lowering the return to native education and discouraging native high school completion. Conversely, native children might be encouraged to complete high school in order to avoid competing with immigrant high-school dropouts in the labor market. I find evidence that both channels are operative and that the net effect is positive, particularly for native-born blacks, though not for native-born Hispanics. An increase of one percentage point in the share of immigrants in the population aged 11-64 increases the probability that natives aged 11-17 eventually complete 12 years of schooling by 0.3 percentage points, and increases the probability for native-born blacks by 0.4 percentage points. I account for the endogeneity of immigrant flows by using instruments based on 1940 settlement patterns. ER - TY - JOUR AU - Andersen,Torben G. AU - Fusari,Nicola AU - Todorov,Viktor TI - Parametric Inference and Dynamic State Recovery from Option Panels JF - National Bureau of Economic Research Working Paper Series VL - No. 18046 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18046 L1 - http://www.nber.org/papers/w18046.pdf N1 - Author contact info: Torben G. Andersen Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/467-1285 Fax: 847/491-5719 E-Mail: t-andersen@kellogg.northwestern.edu Nicola Fusari Department of Finance Kellogg School, Northwestern University Evanston, IL 60208 E-Mail: n-fusari@northwestern.edu Viktor Todorov Department of Finance Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL Tel: 847-467-0694 E-Mail: v-todorov@kellogg.northwestern.edu AB - We develop a new parametric estimation procedure for option panels observed with error which relies on asymptotic approximations assuming an ever increasing set of observed option prices in the moneyness- maturity (cross-sectional) dimension, but with a fixed time span. We develop consistent estimators of the parameter vector and the dynamic realization of the state vector that governs the option price dynamics. The estimators converge stably to a mixed-Gaussian law and we develop feasible estimators for the limiting variance. We provide semiparametric tests for the option price dynamics based on the distance between the spot volatility extracted from the options and the one obtained nonparametrically from high-frequency data on the underlying asset. We further construct new formal tests of the model fit for specific regions of the volatility surface and for the stability of the risk-neutral dynamics over a given period of time. A large-scale Monte Carlo study indicates the inference procedures work well for empirically realistic specifications and sample sizes. In an empirical application to S&P 500 index options we extend the popular double-jump stochastic volatility model to allow for time-varying jump risk premia and a flexible relation between risk premia and the level of risk. Both extensions lead to an improved characterization of observed option prices. ER - TY - JOUR AU - Weinzierl,Matthew C. TI - Why do we Redistribute so Much but Tag so Little? The principle of equal sacrifice and optimal taxation JF - National Bureau of Economic Research Working Paper Series VL - No. 18045 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18045 L1 - http://www.nber.org/papers/w18045.pdf N1 - Author contact info: Matthew C. Weinzierl Harvard Business School 277 Morgan Soldiers Field Boston, MA 02163 Tel: 617/495-6697 Fax: 617/496-5994 E-Mail: mweinzierl@hbs.edu AB - Tagging is a free lunch in conventional optimal tax theory because it eases the classic tradeoff between efficiency and equality. But tagging is used in only limited ways in tax policy. I propose one explanation: conventional optimal tax theory has yet to capture the diversity of normative principles with which society evaluates taxes. I generalize the conventional model to incorporate multiple normative frameworks. I then show that if the principle of equal sacrifice--a classic, comprehensive criterion of fair taxation proposed by John Stuart Mill and associated with the Libertarian normative framework--is given some weight in the social objective function, tagging generates costs that must be weighed against the benefits it generates through conventional channels. Only tags that are sufficiently predictive of ability, such as disability status, will be used. Calibrated simulations using micro data from the United States show that optimal policy may simultaneously include substantial redistribution across income-earning abilities, as in the standard model, and reject three prominently-proposed tags--gender, race, and height--as in actual policy. This explanation for limited tagging also implies that optimal marginal tax rates at high incomes are lower than in standard analysis and closer to those observed in policy. ER - TY - JOUR AU - Davis,Lucas W. AU - Fuchs,Alan AU - Gertler,Paul J. TI - Cash for Coolers JF - National Bureau of Economic Research Working Paper Series VL - No. 18044 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18044 L1 - http://www.nber.org/papers/w18044.pdf N1 - Author contact info: Lucas W. Davis Haas School of Business University of California Berkeley, CA 94720-1900 E-Mail: ldavis@haas.berkeley.edu Alan Fuchs United Nations Development Programme 304 East 45th Street, FF-1272 New York, New York 10017 E-Mail: alan.fuchs@undp.org Paul J. Gertler Haas School of Business 545 Student Services Building University of California, Berkeley Berkeley, CA 94720-1900 Tel: 510/642-1418 Fax: 510/642-4700 E-Mail: gertler@haas.berkeley.edu AB - This paper examines a large-scale appliance replacement program in Mexico that since 2009 has helped 1.5 million households replace their old refrigerators and air-conditioners with energy-efficient models. Using household-level electric billing records from the population of Mexican residential customers we find that refrigerator replacement reduces electricity consumption by an average of 11 kilowatt hours per month, about a 7% decrease. We find that air conditioning replacement, in contrast, increases electricity consumption by an average of 6 kilowatt hours per month, with larger increases during the summer. To put these results in context we present a simple conceptual framework in which energy-efficient durable goods cost less to operate, so households use them more. This behavioral response, sometimes called the “rebound” effect, is important for air-conditioners, but not important for refrigerators. ER - TY - JOUR AU - Hovakimian,Armen AU - Kane,Edward J. AU - Laeven,Luc TI - Variation in Systemic Risk at US Banks During 1974-2010 JF - National Bureau of Economic Research Working Paper Series VL - No. 18043 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18043 L1 - http://www.nber.org/papers/w18043.pdf N1 - Author contact info: Armen Hovakimian Department of Economics and Finance Baruch College Zicklin School of Business 1 Bernard Baruch Way New York, NY 10010 Tel: 646-312-3490 Fax: 646-312-3451 E-Mail: Armen_Hovakimian@baruch.cuny.edu Edward J. Kane 2325 E Calle Los Altos Tucson, AZ 85718 Tel: 520-299-5066 E-Mail: edward.kane@bc.edu Luc Laeven Deputy Division Chief International Monetary Fund 700 19th Avenue, NW Washington, DC 20431 Tel: 202/623-9020 Fax: 202/623-4740 E-Mail: Llaeven@imf.org AB - This paper proposes a theoretically sound and easy-to-implement way to measure the systemic risk of financial institutions using publicly available accounting and stock market data. The measure models credit risk of banks as a put option on bank assets, a tradition that originated with Merton (1974). We extend his contribution by expressing the value of banking-sector losses from systemic default risk as the value of a put option written on a portfolio of aggregate bank assets whose exercise price equals the face value of aggregate bank debt. We conceive of an individual bank’s systemic risk as its contribution to the value of this potential sector-wide put on the financial safety net. To track the interaction of private and governmental sources of systemic risk during and in advance of successive business-cycle contractions, we apply our model to quarterly data over the period 1974-2010. Results indicate that systemic risk reached unprecedented highs during the years 2008-2010, and that bank size, leverage, and asset risk are key drivers of systemic risk. ER - TY - JOUR AU - Leduc,Sylvain AU - Wilson,Daniel TI - Roads to Prosperity or Bridges to Nowhere? Theory and Evidence on the Impact of Public Infrastructure Investment JF - National Bureau of Economic Research Working Paper Series VL - No. 18042 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18042 L1 - http://www.nber.org/papers/w18042.pdf N1 - Author contact info: Sylvain Leduc Federal Reserve Bank of San Francisco E-Mail: sylvain.leduc@sf.frb.org Daniel Wilson Federal Reserve Bank of San Francisco 101 Market St. Mail Stop 1130 San Francisco, CA 94105-1530 Tel: 415-974-3423 Fax: 415-974-2168 E-Mail: Daniel.Wilson@sf.frb.org M3 - presented at "27th Annual Conference on Macroeconomics", April 20-21, 2012 AB - We examine the dynamic macroeconomic effects of public infrastructure investment both theoretically and empirically, using a novel data set we compiled on various highway spending measures. Relying on the institutional design of federal grant distributions among states, we construct a measure of government highway spending shocks that captures revisions in expectations about future government investment. We find that shocks to federal highway funding has a positive effect on local GDP both on impact and after 6 to 8 years, with the impact effect coming from shocks during (local) recessions. However, we find no permanent effect (as of 10 years after the shock). Similar impulse responses are found in a number of other macroeconomic variables. The transmission channel for these responses appears to be through initial funding leading to building, over several years, of public highway capital which then temporarily boosts private sector productivity and local demand. To help interpret these findings, we develop an open economy New Keynesian model with productive public capital in which regions are part of a monetary and fiscal union. We show that the presence of productive public capital in this model can yield impulse responses with the same qualitative pattern that we find empirically. ER - TY - JOUR AU - Edmond,Chris AU - Midrigan,Virgiliu AU - Xu,Daniel Yi TI - Competition, Markups, and the Gains from International Trade JF - National Bureau of Economic Research Working Paper Series VL - No. 18041 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18041 L1 - http://www.nber.org/papers/w18041.pdf N1 - Author contact info: Chris Edmond Department of Economics University of Melbourne Parkville VIC 3010 AUSTRALIA Tel: +61-3-8344-9733 Fax: +61-3-8344-6899 E-Mail: chris.edmond@gmail.com Virgiliu Midrigan Department of Economics New York University 19 W. 4th St. New York, NY 10012 Tel: 212/992-8081 Fax: 212/995-4186 E-Mail: virgiliu.midrigan@nyu.edu Daniel Xu Department of Economics Duke University 213 Social Science Bldg 419 Chapel Drive Box 90097 Durham, NC 27708-0097 Tel: 919-660-1824 E-Mail: daniel.xu@duke.edu AB - We study the gains from trade in a model with endogenously variable markups. We show that the pro-competitive gains from trade are large if the economy is characterized by (i) extensive misallocation, i.e., large inefficiencies associated with markups, and (ii) a weak pattern of cross-country comparative advantage in individual sectors. We find strong evidence for both of these ingredients using producer-level data for Taiwanese manufacturing establishments. Parameterizations of the model consistent with this data thus predict large pro-competitive gains from trade, much larger than those in standard Ricardian models. In stark contrast to standard Ricardian models, data on changes in trade volume are not sufficient for determining the gains from trade. ER - TY - JOUR AU - Banzhaf,H. Spencer AU - Oates,Wallace E. TI - On Fiscal Illusion and Ricardian Equivalence in Local Public Finance JF - National Bureau of Economic Research Working Paper Series VL - No. 18040 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18040 L1 - http://www.nber.org/papers/w18040.pdf N1 - Author contact info: H. Spencer Banzhaf Department of Economics Andrew Young School of Policy Studies Georgia State University P.O. Box 3992 Atlanta, GA 30302 Tel: 404/413-0252 Fax: 404/413-0248 E-Mail: hsbanzhaf@gsu.edu Wallace Oates Dept. of Economics University of Maryland College Park, MD 20742 E-Mail: oates@econ.umd.edu AB - We re-evaluate two forms of fiscal illusion in local public finance: debt illusion and renter illusion. The Ricardian Equivalence Theorem for local governments suggests the form of finance of a public program (tax or debt finance) has no effects on substantive outcomes. For the local case, this results from the capitalization of local fiscal differentials into property values. We show that this version of the model is quite restrictive. In particular, in the U.S, context, where state and local interest is exempt from federal taxation, rational behavior may be inconsistent with Ricardian equivalence if local governments can borrow on more favorable terms than individuals. We also suggest a new test for renter illusion (or the renter effect). In particular, whether or not renters are more likely to support public investments in general, the renter effect suggests that renters are more likely to support them when financed with property taxes than with sales taxes. Using data from hundreds of open space referenda in the U.S. using a variety of finance mechanisms, we find evidence that households do prefer debt financing to tax financing, but find no evidence of the renter effect. ER - TY - JOUR AU - Burde,Dana AU - Linden,Leigh L. TI - The Effect of Village-Based Schools: Evidence from a Randomized Controlled Trial in Afghanistan JF - National Bureau of Economic Research Working Paper Series VL - No. 18039 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18039 L1 - http://www.nber.org/papers/w18039.pdf N1 - Author contact info: Dana Burde Steinhardt School of Culture, Education, and Human Development New York University 246 Greene Street New York, NY 10003 E-Mail: dana.burde@nyu.edu Leigh L. Linden Department of Economics The Univesrity of Texas at Austin 2225 Speedway BRB 1.116, C3100 Austin, Texas 78712 Tel: (512) 475-8556 E-Mail: leigh.linden@austin.utexas.edu AB - We conduct a randomized evaluation of the effect of village-based schools on children’s academic performance using a sample of 31 villages and 1,490 children in rural northwestern Afghanistan. The program significantly increases enrollment and test scores among all children, eliminates the 21 percentage point gender disparity in enrollment, and dramatically reduces the disparity in test scores. The intervention increases formal school enrollment by 42 percentage points among all children and increases test scores by 0.51 standard deviations (1.2 standard deviations for children that enroll in school). While all students benefit, the effects accrue disproportionately to girls. Evidence suggests that the village-based schools provide a comparable education to traditional schools. Estimating the effects of distance on academic outcomes, children prove very sensitive: enrollment and test scores fall by 16 percentage points and 0.19 standard deviations per mile. Distance affects girls more than boys—girls’ enrollment falls by 6 percentage points more per mile (19 percentage points total per mile) and their test scores fall by an additional 0.09 standard deviations (0.24 standard deviations total per mile). ER - TY - JOUR AU - Cascio,Elizabeth U. AU - Staiger,Douglas O. TI - Knowledge, Tests, and Fadeout in Educational Interventions JF - National Bureau of Economic Research Working Paper Series VL - No. 18038 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18038 L1 - http://www.nber.org/papers/w18038.pdf N1 - Author contact info: Elizabeth U. Cascio Department of Economics Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755 Tel: (603) 646-4096 Fax: (603) 646-2122 E-Mail: elizabeth.u.cascio@dartmouth.edu Douglas O. Staiger Dartmouth College Department of Economics HB6106, 301 Rockefeller Hall Hanover, NH 03755-3514 Tel: 603/646-2979 Fax: 603/646-2122 E-Mail: douglas.staiger@dartmouth.edu AB - Educational interventions are often evaluated and compared on the basis of their impacts on test scores. Decades of research have produced two empirical regularities: interventions in later grades tend to have smaller effects than the same interventions in earlier grades, and the test score impacts of early educational interventions almost universally “fade out” over time. This paper explores whether these empirical regularities are an artifact of the common practice of rescaling test scores in terms of a student’s position in a widening distribution of knowledge. If a standard deviation in test scores in later grades translates into a larger difference in knowledge, an intervention’s effect on normalized test scores may fall even as its effect on knowledge does not. We evaluate this hypothesis by fitting a model of education production to correlations in test scores across grades and with college-going using both administrative and survey data. Our results imply that the variance in knowledge does indeed rise as children progress through school, but not enough for test score normalization to fully explain these empirical regularities. ER - TY - JOUR AU - Borenstein,Severin TI - Effective and Equitable Adoption of Opt-In Residential Dynamic Electricity Pricing JF - National Bureau of Economic Research Working Paper Series VL - No. 18037 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18037 L1 - http://www.nber.org/papers/w18037.pdf N1 - Author contact info: Severin Borenstein Haas School of Business University of California, Berkeley Berkeley, CA 94720-1900 Tel: 510/642-3689 E-Mail: borenste@haas.berkeley.edu AB - While time-varying retail electricity pricing is very popular with economists, that support is not matched among regulators and consumers. Many papers have been written estimating and extolling the societal benefits of time-varying rates -- especially dynamic rates that change on a day's notice or less. Yet, such tariffs have been almost completely absent in the residential sector. In this paper, I present a potential approach to implementing an opt-in dynamic pricing plan that would be equitable to both customers who choose the rate and to those who choose to remain on a default flat-rate tariff. The approach bases the dynamic and the flat rate on the same underlying cost structure, and minimizes cross-subsidies between the two groups. I study the potential distributional impact of such a tariff structure using hourly consumption data for stratified random samples of customers from California's two largest utilities. I find that low-income households would, on average, see almost no change in their bills, while low-consumption households would see their bills decline somewhat and high-consumption households would see their bills rise. I also show that the opt-in approach is unlikely to increase the flat rate charged to other customers by more than a few percentage points. I then discuss the most common approach to implementing dynamic electricity pricing -- critical-peak pricing -- and suggest how it might be designed to more accurately match retail price spikes with periods of true supply shortages. Finally, I study the incentive problems created by an alternative program in growing use that pays customers to reduce their consumption on peak usage days. ER - TY - JOUR AU - Bianchi,Javier AU - Boz,Emine AU - Mendoza,Enrique G. TI - Macro-Prudential Policy in a Fisherian model of Financial Innovation JF - National Bureau of Economic Research Working Paper Series VL - No. 18036 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18036 L1 - http://www.nber.org/papers/w18036.pdf N1 - Author contact info: Javier Bianchi Department of Economics New York University 19 West Fourth Street New York, NY 10012 Tel: 646/370-9871 E-Mail: javier.bianchi@nyu.edu Emine Boz International Monetary Fund 700 19th Street, N.W. Washington, DC 20431 Tel: (240)423-6325 E-Mail: eboz@imf.org Enrique G. Mendoza Department of Economics University of Maryland College Park, MD 20742 Tel: 301/405-3845 Fax: 301/405-7835 E-Mail: mendozae@econ.umd.edu AB - The interaction between credit frictions, financial innovation, and a switch from optimistic to pessimistic beliefs played a central role in the 2008 financial crisis. This paper develops a quantitative general equilibrium framework in which this interaction drives the financial amplification mechanism to study the effects of macro-prudential policy. Financial innovation enhances the ability of agents to collateralize assets into debt, but the riskiness of this new regime can only be learned over time. Beliefs about transition probabilities across states with high and low ability to borrow change as agents learn from observed realizations of financial conditions. At the same time, the collateral constraint introduces a pecuniary externality, because agents fail to internalize the effect of their borrowing decisions on asset prices. Quantitative analysis shows that the effectiveness of macro-prudential policy in this environment depends on the government's information set, the tightness of credit constraints and the pace at which optimism surges in the early stages of financial innovation. The policy is least effective when the government is as uninformed as private agents, credit constraints are tight, and optimism builds quickly. ER - TY - JOUR AU - Guvenen,Fatih AU - Ozkan,Serdar AU - Song,Jae TI - The Nature of Countercyclical Income Risk JF - National Bureau of Economic Research Working Paper Series VL - No. 18035 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18035 L1 - http://www.nber.org/papers/w18035.pdf N1 - Author contact info: Fatih Guvenen Department of Economics University of Minnesota 4-151 Hanson Hall 1925 Fourth Street South Minneapolis, MN, 55455 Tel: 612-6250767 E-Mail: guvenen@umn.edu Serdar Ozkan Federal Reserve Board 20th and C Streets, NW Washington, DC 20551 Tel: 202-721-4558 E-Mail: serdar.ozkan@frb.gov Jae Song Social Security Administration Office of Quality Performance 2121 Crystal Drive, Suite 825 Arlington, VA 22202 E-Mail: jae.song@ssa.gov AB - This paper studies the cyclical nature of individual income risk using a confidential dataset from the U.S. Social Security Administration, which contains (uncapped) earnings histories for millions of individuals. The base sample is a nationally representative panel containing 10 percent of all U.S. males from 1978 to 2010. We use these data to decompose individual income growth during recessions into “between-group” and “within-group” components. To study the former, we group individuals along several observable characteristics at the time a recession hits. We find two variables to be excellent predictors of fortunes during a recession. First, prime-age workers that enter a recession with high average earnings suffer substantially less compared with those who enter with low average earnings. Second, we estimate “individual betas” (analogous to “stock betas” in finance) and examine their out-of-sample predictive power. We find that the earnings of high-beta individuals (those that exhibited higher sensitivity to prior recessions and expansions) fall significantly more during subsequent recessions. Next, we turn to within-group differences. Contrary to past research, we do not find the variance of idiosyncratic income shocks to be countercyclical. Instead, it is the left-skewness of shocks that is strongly countercyclical. That is, during recessions, the upper end of the shock distribution collapses—large upward income movements become less likely—whereas the bottom end expands—large drops in income become more likely. Thus, while the dispersion of shocks does not increase, shocks become more left skewed and, hence, risky during recessions. Finally, we find that the cyclical nature of income risk is dramatically different for the top 1 percent compared with all other individuals—even relative to those in the top 2 to 5 percent. ER - TY - JOUR AU - Bond,Eric W. AU - Crucini,Mario J. AU - Potter,Tristan AU - Rodrigue,Joel TI - Misallocation and Productivity Effects of the Smoot-Hawley Tariff JF - National Bureau of Economic Research Working Paper Series VL - No. 18034 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18034 L1 - http://www.nber.org/papers/w18034.pdf N1 - Author contact info: Eric Bond Vanderbilt University Department of Economics VU Station B #351819 2301 Vanderbilt Place Nashville, TN 37235-1819 E-Mail: eric.bond@vanderbilt.edu Mario J. Crucini Department of Economics Vanderbilt University Box 1819 Station B Nashville, TN 37235-1819 Tel: 615/322-7357 Fax: 615/343-8459 E-Mail: mario.j.crucini@vanderbilt.edu Tristan Potter Department of Economics Boston College E-Mail: potter.tristan@gmail.com Joel Rodrigue Vanderbilt University E-Mail: joel.b.rodrigue@vanderbilt.edu AB - Using a newly created microeconomic archive of U.S. imports at the tariff-line level for 1930-33, we construct industry-level tariff wedges incorporating the input-output structure of U.S. economy and the heterogenous role of imports across sectors of the economy. We use these wedges to show that the average tariff rate of 46% in 1933 substantially understated the true impact of the Smoot-Hawley (SH) tariff structure, which we estimate to be equivalent to a uniform tariff rate of 70%. We use these wedges to calculate the impact of the Smoot Hawley tariffs on total factor productivity and welfare. In our benchmark parameterization, we find that tariff protection reduced TFP by 1.2% relative to free trade prior to the Smoot Hawley legislation. TFP fell by an additional 0.5% between 1930 and 1933 due to Smoot Hawley. We also conduct counterfactual policy exercises and examine the sensitivity of our results to changes in the elasticity of substitution and the import share. A doubling of the substitution elasticities yields a TFP decline of almost 5% relative to free trade, with an additional reduction due to SH of 0.4%. ER - TY - JOUR AU - Hanna,Rema AU - Duflo,Esther AU - Greenstone,Michael TI - Up in Smoke: The Influence of Household Behavior on the Long-Run Impact of Improved Cooking Stoves JF - National Bureau of Economic Research Working Paper Series VL - No. 18033 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18033 L1 - http://www.nber.org/papers/w18033.pdf N1 - Author contact info: Rema Hanna Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/496-1140 Fax: 617/496-5747 E-Mail: Rema_Hanna@hks.harvard.edu Esther Duflo Department of Economics MIT, E52-252G 50 Memorial Drive Cambridge, MA 02142 Tel: 617/258-7013 Fax: 617/253-6915 E-Mail: eduflo@mit.edu Michael Greenstone MIT Department of Economics 50 Memorial Drive, E52-359 Cambridge, MA 02142-1347 Tel: 617/452-4127 Fax: 617/253-1330 E-Mail: mgreenst@mit.edu AB - It is conventional wisdom that it is possible to reduce exposure to indoor air pollution, improve health outcomes, and decrease greenhouse gas emissions in the rural areas of developing countries through the adoption of improved cooking stoves. This belief is largely supported by observational field studies and engineering or laboratory experiments. However, we provide new evidence, from a randomized control trial conducted in rural Orissa, India (one of the poorest places in India), on the benefits of a commonly used improved stove that laboratory tests showed to reduce indoor air pollution and require less fuel. We track households for up to four years after they received the stove. While we find a meaningful reduction in smoke inhalation in the first year, there is no effect over longer time horizons. We find no evidence of improvements in lung functioning or health and there is no change in fuel consumption (and presumably greenhouse gas emissions). The difference between the laboratory and field findings appear to result from households’ revealed low valuation of the stoves. Households failed to use the stoves regularly or appropriately, did not make the necessary investments to maintain them properly, and usage rates ultimately declined further over time. More broadly, this study underscores the need to test environmental and health technologies in real-world settings where behavior may temper impacts, and to test them over a long enough horizon to understand how this behavioral effect evolves over time. ER - TY - JOUR AU - Blonigen,Bruce A. AU - Piger,Jeremy AU - Sly,Nicholas TI - Comovement in GDP Trends and Cycles Among Trading Partners JF - National Bureau of Economic Research Working Paper Series VL - No. 18032 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18032 L1 - http://www.nber.org/papers/w18032.pdf N1 - Author contact info: Bruce Blonigen Department of Economics 1285 University of Oregon Eugene, OR 97403-1285 Tel: 541/346-4680 Fax: 541/346-1243 E-Mail: bruceb@uoregon.edu Jeremy Piger Depart. of Economics University of Oregon Eugene, OR 97403-1285 E-Mail: jpiger@uoregon.edu Nicholas Sly Department of Economics 1285 University of Oregon Eugene, OR 97403-1285 E-Mail: sly@uoregon.edu AB - It has long been recognized that business cycle comovement is greater between countries that trade intensively with one another. Surprisingly, no one has previously examined the relationship between trade intensity and comovement of shocks to the trend level of output. Contrary to the result for cyclical fluctuations, we find that comovement of shocks to trend levels of real GDP is significantly weaker among countries that trade intensively with one another. We also find that the influence of trade on comovement between shocks to trends has remained stable, or become stronger in recent decades, while the role of trade in generating cyclical comovement has diminished steadily over time. In short, we find that international trade relationships have a substantial impact on comovement of shocks to output trends across countries, and these effects stand in stark contrast to the conventional wisdom regarding cyclical comovement. ER - TY - JOUR AU - Schmitt-Grohe,Stephanie AU - Uribe,Martin TI - Prudential Policy for Peggers JF - National Bureau of Economic Research Working Paper Series VL - No. 18031 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18031 L1 - http://www.nber.org/papers/w18031.pdf N1 - Author contact info: Stephanie Schmitt-Grohe Department of Economics Columbia University New York, NY 10027 Tel: 212/854-8059 Fax: 212/854-4010 E-Mail: stephanie.schmittgrohe@columbia.edu Martin Uribe Department of Economics Columbia University International Affairs Building New York, NY 10027 Tel: 212 851 4008 Fax: 212 854 8059 E-Mail: martin.uribe@columbia.edu AB - This paper shows that in a small open economy model with downward nominal wage rigidity pegging the nominal exchange rate creates a negative pecuniary externality. This peg-induced externality is shown to cause unemployment, overborrowing, and depressed levels of consumption. The paper characterizes the optimal capital control policy in this model and shows that it is prudential in nature. For it restricts capital inflows in good times and subsidizes external borrowing in bad times. Under plausible calibrations of the model, this type of macro prudential policy is shown to lower the average unemployment rate by 10 percentage points, reduce average external debt by more than 50 percent, and increase welfare by over 7 percent of consumption per period. ER - TY - JOUR AU - Kalemli-Ozcan,Sebnem AU - Sorensen,Bent E. TI - Misallocation, Property Rights, and Access to Finance: Evidence from Within and Across Africa JF - National Bureau of Economic Research Working Paper Series VL - No. 18030 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18030 L1 - http://www.nber.org/papers/w18030.pdf N1 - Author contact info: Sebnem Kalemli-Ozcan John F. Kennedy School of Government Harvard University 79 JFK Street, Mailbox 28 Cambridge, MA 02138 E-Mail: sebnem.kalemli-ozcan@mail.uh.edu Bent Sorensen Department of Economics University of Houston 204 McElhinney Hall Houston, TX 77204 Tel: 713-743-3841 Fax: 713-743-3798 E-Mail: bent.sorensen@mail.uh.edu M3 - presented at "African Development Successes", August 3-5, 2011 AB - We study capital misallocation within and across 10 African countries using the World Bank Enterprise Surveys. First, we compare the extent of misallocation among firms within countries. We document high variation in firms' marginal product of capital (MPK), implying that countries could produce significantly more with the same aggregate capital stock if capital were allocated optimally. Such variation differs from country to country with some African countries (success stories) closer to developed country benchmarks. Small firms and non-exporters have less access to finance and have higher returns to capital in general. Self reported measures of obstacles to firms' operations suggest access to finance is the most important obstacle: A firm with the worst access to finance has MPK 45 percent higher than a firm with the worst access to finance as a result of low capital per worker. We compare average levels of the MPK across countries, finding evidence that the strength of property rights and the quality of the legal system help explain country-level differences in capital misallocation. ER - TY - JOUR AU - Deb,Rahul AU - Gazzale,Robert S. AU - Kotchen,Matthew J. TI - Testing Motives for Charitable Giving: A Revealed-Preference Methodology with Experimental Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 18029 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18029 L1 - http://www.nber.org/papers/w18029.pdf N1 - Author contact info: Rahul Deb Department of Economics University of Toronto 150 St George St, Toronto, ON, Canada E-Mail: rahul.deb@utoronto.ca Robert S. Gazzale Department of Economics Williams College 24 Hopkins Hall Dr Williamstown, MA 01267 E-Mail: rgazzale@williams.edu Matthew Kotchen School of Forestry & Environmental Studies, School of Management, and Department of Economics Yale University 195 Prospect Street New Haven, CT 06511 Tel: 203/432-9533 Fax: 203/436-9150 E-Mail: matthew.kotchen@yale.edu AB - A large economics literature seeks to understand the reasons why individuals make charitable contributions. Fundamental features of most models of charitable giving are the inclusion of externalities induced by other agents and the Lancasterian characteristics approach to specifying utility functions. This paper develops a general, revealed-preference methodology for testing a variety of preference structures that allow for both externalities and characteristics. The tests are simple linear programs that are transparent, computationally efficient, and straightforward to implement. We show how the technique applies to standard models of privately provided public goods and novel models that account for social comparisons based on relative consumption and donations among individuals. We also conduct an original experiment that enables nonparametric tests of many models on a single data set. The results provide the first revealed-preference evidence on the importance of social comparisons when individuals make charitable contributions. Models that include preferences for either relative consumption or donations yield greater explanatory power than the standard model of impure altruism. ER - TY - JOUR AU - Aizenman,Joshua AU - Jinjarak,Yothin AU - Lee,Minsoo AU - Park,Donghyun TI - Developing countries’ financial vulnerability to the euro crisis: An event study of equity and bond markets JF - National Bureau of Economic Research Working Paper Series VL - No. 18028 PY - 2012 Y2 - May 2012 UR - http://www.nber.org/papers/w18028 L1 - http://www.nber.org/papers/w18028.pdf N1 - Author contact info: Joshua Aizenman Department of Economics; E2 1156 High St. University of California, Santa Cruz Santa Cruz, CA 95064 Tel: 831/459-4791 Fax: 831/459-5077 E-Mail: jaizen@ucsc.edu Yothin Jinjarak University of London College Buildings, 534 London UK, WC1H 0XG E-Mail: yothin.jinjarak@gmail.com Minsoo Lee Economics and Research Department, Asian Development Bank, Manila, PHILIPPINES E-Mail: mlee@adb.org Donghyun Park Economics and Research Department Asian Development Bank Manila, Philippines Tel: (632) 632-5825/6385 Fax: (632) 636-2342 E-Mail: dpark@adb.org AB - The global crisis highlights the continued vulnerability of developing countries to shocks from advanced economies. Just a few years after the global crisis, the eurozone sovereign debt crisis has emerged as the single biggest threat to the global outlook. In this paper, we apply the event study methodology to gauge the scope for financial contagion from the EU to developing countries. More specifically, we estimate the responsiveness of equity and bond markets in developing countries to global crisis news and euro crisis news. Overall, we find that whereas global crisis news had a consistently negative effect on returns of equity and bond markets in developing countries, the effect of euro crisis news was more mixed and limited. ER - TY - JOUR AU - Rajan,Raghuram AU - Ramcharan,Rodney TI - The Anatomy of a Credit Crisis: The Boom and Bust in Farm Land Prices in the United States in the 1920s. JF - National Bureau of Economic Research Working Paper Series VL - No. 18027 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18027 L1 - http://www.nber.org/papers/w18027.pdf N1 - Author contact info: Raghuram Rajan Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-4437 Fax: 773/702-0458 E-Mail: raghuram.rajan@ChicagoBooth.edu Rodney Ramcharan Federal Reserve Board Washington DC Tel: 202-912-7851 Fax: 202-452-5295 E-Mail: rodney.ramcharan@frb.gov AB - Does credit availability exacerbate asset price inflation? What channels could it work through? What are the long run consequences? In this paper we address these questions by examining the farm land price boom (and bust) in the United States that preceded the Great Depression. We find that credit availability likely had a direct effect on inflating land prices. Credit availability may have also amplified the relationship between the perceived improvement in fundamentals and land prices. When the perceived fundamentals soured, however, areas with higher ex ante credit availability suffered a greater fall in land prices, and experienced higher bank failure rates. Land prices stayed low for a number of decades after the bust in areas that had higher credit availability, suggesting that the effects of booms and busts induced by credit availability might be persistent. We draw lessons for regulatory policy. ER - TY - JOUR AU - Huang,Jidong AU - Chaloupka,Frank J., IV TI - The Impact of the 2009 Federal Tobacco Excise Tax Increase on Youth Tobacco Use JF - National Bureau of Economic Research Working Paper Series VL - No. 18026 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18026 L1 - http://www.nber.org/papers/w18026.pdf N1 - Author contact info: Jidong Huang Health Policy Center Institute for Health Research and Policy University of Illinois at Chicago 1747 West Roosevelt Rd. Chicago, IL 60608 Tel: (Tel) 312-355-0195 E-Mail: jhuang12@uic.edu Frank J. Chaloupka, IV University of Illinois at Chicago Department of Economics (m/c 144) College of Liberal Arts and Sciences 601 S. Morgan Street, Room 713 Chicago, IL 60607-7121 Tel: 312/413-2287 Fax: 312/996-3344;630/801-8870 E-Mail: fjc@uic.edu AB - This study examined the impact of the 2009 federal tobacco excise tax increase on the use of cigarettes and smokeless tobacco products among youth using the Monitoring the Future survey, a nationally representative survey of 8th, 10th, and 12th grade students. The results of this analysis showed that this tax increase had a substantial short-term impact. The percentage of students who reported smoking in the past 30 days dropped between 9.7% and 13.3% immediately following the tax increase, depending on model specifications, and the percentage of students who reported using smokeless tobacco products dropped between 16% and 24%. It is estimated that there would have been approximately 220,000 – 287,000 more current smokers and 135,000 – 203,000 more smokeless tobacco users among middle school and high school students (age 14 – 18) in the United States in May 2009 had the federal tax not increased in April 2009. The long-term projected number of youth prevented from smoking or using smokeless tobacco that resulted from the 2009 federal tax increase could be much larger given the resulting higher tobacco prices would deter more and more children from initiating smoking and smokeless tobacco use over time. ER - TY - JOUR AU - Lee,Jinhyung AU - McCullough,Jeffery S. AU - Town,Robert J. TI - The Impact of Health Information Technology on Hospital Productivity JF - National Bureau of Economic Research Working Paper Series VL - No. 18025 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18025 L1 - http://www.nber.org/papers/w18025.pdf N1 - Author contact info: Jinhyung Lee University of Texas - Galveston 301 University Boulevard Galveston, Texas 77555-0133 E-Mail: jinlee@utmb.edu Jeffery S. McCullough University of Minnesota MMC 729 420 Delaware St., SE Minneapolis, MN 55455 E-Mail: mccu0056@umn.edu Robert Town Health Care Management Department The Wharton School University of Pennsylvania 3641 Locust Walk Philadelphia, PA 19104 E-Mail: rtown@wharton.upenn.edu AB - The US health care sector is, by most accounts, extraordinarily inefficient. Health information technology (IT) has been championed as a tool that can transform health care delivery. Recently, the federal government has taken an active role in promoting health IT diffusion. There is little systematic analysis of the causal impact of health IT on productivity or whether private and public returns to health IT diverge thereby justifying government intervention. We estimate the parameters of a value-added hospital production function correcting for endogenous input choices in order to assess the private returns hospitals earn from health IT. Despite high marginal products, the potential benefits from expanded IT adoption are modest. Over the span of our data, health IT inputs increased by more than 210% and contributed about 6% to the increase in value-added. Virtually all the increase in value-added is attributable to the increased use of inputs{there was little change in hospital multi-factor productivity. Not-for-profits invested more heavily and differently in IT than for-profit hospitals. Finally, we find no evidence of labor complementarities or network externalities from health IT. ER - TY - JOUR AU - Malmendier,Ulrike AU - Moretti,Enrico AU - Peters,Florian S. TI - Winning by Losing: Evidence on the Long-Run Effects of Mergers JF - National Bureau of Economic Research Working Paper Series VL - No. 18024 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18024 L1 - http://www.nber.org/papers/w18024.pdf N1 - Author contact info: Ulrike Malmendier Department of Economics 549 Evans Hall # 3880 University of California, Berkeley Berkeley, CA 94720-3880 Tel: 510-642-5038 E-Mail: ulrike@econ.berkeley.edu Enrico Moretti University of California, Berkeley Department of Economics 549 Evans Hall Berkeley, CA 94720-3880 Tel: 510/642 6649 Fax: 510/643 7042 E-Mail: moretti@econ.berkeley.edu Florian S. Peters Finance Group University of Amsterdam Roetersstraat 11, 1018 WB Amsterdam The Netherlands Tel: +31 6 44264683 E-Mail: f.s.peters@uva.nl AB - Do acquirors profit from acquisitions, or do acquiring CEOs overbid and destroy shareholder value? We present a novel approach to estimating the long-run abnormal returns to mergers exploiting detailed data on merger contests. In the sample of close bidding contests, we use the loser's post-merger performance to construct the counterfactual performance of the winner had he not won the contest. We find that bidder returns are closely aligned in the years before the contest, but diverge afterwards: Winners underperform losers by 50 percent over the following three years. Existing methodologies, including announcement effects, fail to capture the acquirors' underperformance. ER - TY - JOUR AU - Chandra,Amitabh AU - Gruber,Jonathan AU - McKnight,Robin TI - The Impact of Patient Cost-Sharing on the Poor: Evidence from Massachusetts JF - National Bureau of Economic Research Working Paper Series VL - No. 18023 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18023 L1 - http://www.nber.org/papers/w18023.pdf N1 - Author contact info: Amitabh Chandra John F. Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/496-7356 E-Mail: amitabh_chandra@harvard.edu Jonathan Gruber MIT Department of Economics E52-355 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-8892 Fax: 617/253-1330 E-Mail: gruberj@mit.edu Robin McKnight Department of Economics Wellesley College 106 Central Street Wellesley, MA 02481 Tel: 781/283-2153 E-Mail: rmcknigh@wellesley.edu AB - Greater patient cost-sharing could help reduce the fiscal pressures associated with insurance expansion by reducing the scope for moral hazard. But it is possible that low-income recipients are unable to cut back on utilization wisely and that, as a result, higher cost-sharing will lead to worse health and higher downstream costs through hospitalizations. We use exogenous variation in the copayments faced by low-income enrollees in the Massachusetts’ Commonwealth Care program to study these effects. We estimate separate price elasticities of demand by type of service (hospital care, drugs, outpatient care). Overall, we find price elasticities of about -0.15 for this low-income population — fairly similar to elasticities calculated for higher-income populations in other settings. These elasticities are somewhat larger for the chronically sick and older enrollees. A substantial portion of the decline in utilization comes from some patients cutting back on use completely, but we find no (detectable) evidence of offsetting increases in hospitalizations or emergency department visits in response to the higher copayments, either overall or for the chronically ill in particular. ER - TY - JOUR AU - Coles,Melvyn G. AU - Mortensen,Dale T. TI - Equilibrium Labor Turnover, Firm Growth and Unemployment JF - National Bureau of Economic Research Working Paper Series VL - No. 18022 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18022 L1 - http://www.nber.org/papers/w18022.pdf N1 - Author contact info: Melvyn Coles Department of Economics University of Essex Colchester CO435Q ENGLAND E-Mail: mcole@essex.ac.uk Dale T. Mortensen Department of Economics Northwestern University 2003 Sheridan Road Evanston, IL 60208-2600 Tel: 847/491-8230 Fax: 847/491-7001 E-Mail: d-mortensen@northwestern.edu AB - This paper considers a dynamic, non-steady state environment in which wage dispersion exists and evolves in response to shocks. Workers do not observe firm productivity and firms do not commit to future wages, but there is on-the-job search for higher paying jobs. The model allows for firm turnover (new start-up firms are created, some existing firms die) and firm specific productivity shocks. In a separating equilibrium, more productive firms signal their type by paying strictly higher wages in every state of the market. Consequently, workers always quit to firms paying a higher wage and so move efficiently from less to more productive firms. As a further implication of the cost structure assumed, endogenous firm size growth is consistent with Gibrat's law. The paper provides a complete characterization and establishes existence and uniqueness of the separating (non-steady state) equilibrium in the limiting case of equally productive firms. The existence of equilibrium with any finite number of firm types is also established. Finally, the model provides a coherent explanation of Danish manufacturing data on firm wage and labor productivity dispersion as well as the cross firm relationship between them. ER - TY - JOUR AU - Jaremski,Matthew AU - Rousseau,Peter L. TI - Banks, Free Banks, and U.S. Economic Growth JF - National Bureau of Economic Research Working Paper Series VL - No. 18021 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18021 L1 - http://www.nber.org/papers/w18021.pdf N1 - Author contact info: Matthew S. Jaremski Colgate University Department of Economics 13 Oak Drive Hamilton, NY 13346 Tel: 315/228-7524 Fax: 315/228-7033 E-Mail: mjaremski@colgate.edu Peter L. Rousseau Department of Economics Vanderbilt University VU Station B #351819 2301 Vanderbilt Place Nashville, TN 37235-1819 Tel: 615/343-2466 E-Mail: peter.l.rousseau@vanderbilt.edu AB - The “Federalist financial revolution” may have jump-started the U.S. economy into modern growth, but the Free Banking System (1837-1862) did not play a direct role in sustaining it. Despite lowering entry barriers and extending banking into developing regions, we find in county-level data that free banks had little or no effect on growth. The result is not just a symptom of the era, as state-chartered banks seem to have strong and positive effects on manufacturing and urbanization. ER - TY - JOUR AU - Atalay,Enghin AU - Hortacsu,Ali AU - Syverson,Chad TI - Why Do Firms Own Production Chains? JF - National Bureau of Economic Research Working Paper Series VL - No. 18020 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18020 L1 - http://www.nber.org/papers/w18020.pdf N1 - Author contact info: Enghin Atalay University of Chicago 1126 E 59th Street Chicago, IL 60637 E-Mail: atalay@uchicago.edu Ali Hortacsu Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-5841 E-Mail: hortacsu@uchicago.edu Chad Syverson University of Chicago Booth School of Business 5807 S. Woodlawn Ave. Chicago, IL 60637 Tel: 773/702-7815 Fax: 773/702-8490 E-Mail: chad.syverson@chicagobooth.edu AB - We use broad-based yet detailed data from the economy’s goods-producing sectors to investigate firms’ ownership of production chains. It does not appear that vertical ownership is primarily used to facilitate transfers of goods along the production chain, as is often presumed: Roughly one-half of upstream plants report no shipments to their firms’ downstream units. We propose an alternative explanation for vertical ownership, namely that it promotes efficient intra-firm transfers of intangible inputs. We show evidence consistent with this hypothesis, including the fact that upon a change of ownership, an acquired plant begins to resemble the acquiring firm along multiple dimensions. ER - TY - JOUR AU - Mel,Suresh De AU - McKenzie,David AU - Woodruff,Christopher TI - The demand for, and consequences of, formalization among informal firms in Sri Lanka JF - National Bureau of Economic Research Working Paper Series VL - No. 18019 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18019 L1 - http://www.nber.org/papers/w18019.pdf N1 - Author contact info: Suresh De Mel University of Peradeniya E-Mail: sdemel@pdn.ac.lk David McKenzie The World Bank, MSN MC3-307 1818 H Street N.W. Washington, DC 20433 Tel: 202-458-9332 E-Mail: dmckenzie@worldbank.org Christopher Woodruff Department of Economics University of Warwick Coventry CV4 7AL UK Tel: 44 787 258 2800 Fax: 44 024 7652 3032 E-Mail: c.woodruff@warwick.ac.uk AB - We conduct a field experiment in Sri Lanka providing informal firms incentives to formalize. Information about the registration process and reimbursement of direct costs has no effect. Payments equivalent to one-half to one month (alternatively, 2 months) of the median firm’s profits leads to registration of around one-fifth (alternatively, one-half) of firms. Land ownership issues are the most common reason for not registering. Follow-up surveys 15 to 31 months later show higher mean profits, but largely in a few firms which grew rapidly. We find little evidence for other changes in behavior, but formalized firms express more trust in the state. ER - TY - JOUR AU - Einav,Liran AU - Knoepfle,Dan AU - Levin,Jonathan D. AU - Sundaresan,Neel TI - Sales Taxes and Internet Commerce JF - National Bureau of Economic Research Working Paper Series VL - No. 18018 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18018 L1 - http://www.nber.org/papers/w18018.pdf N1 - Author contact info: Liran Einav Stanford University Department of Economics 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/723-3704 Fax: 650/725-5702 E-Mail: leinav@stanford.edu Dan Knoepfle Stanford University Department of Economics 579 Serra Mall Stanford, CA 94305-6072 E-Mail: knoepfle@stanford.edu Jonathan D. Levin Stanford University Department of Economics 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/723-5962 E-Mail: jdlevin@stanford.edu Neel Sundaresan eBay Research Labs 2065 Hamilton Avenue San Jose, CA 95125 E-Mail: nsundaresan@ebay.com AB - We estimate the sensitivity of Internet retail purchasing to sales taxes using data from the eBay marketplace. Our first approach exploits the fact that seller locations are revealed only after buyers have expressed interest in an item by clicking on its listing. We use millions of location "surprises" to estimate price elasticities with respect to the effective sales tax. We then use aggregated data to estimate cross-state substitution parameters, and substitution between offline and online purchases, relying on the variation in state and local sales taxes, and on changes in these rates over time. We find substantial sensitivity to sales taxes. Using our item-level approach, we find a price elasticity of around -2 for interested buyers. Using our aggregate approach, we find that a one percentage point increase in a state's sales tax increases online purchases by state residents by just under two percent, but decreases their online purchases from home-state retailers by 3-4 percent. ER - TY - JOUR AU - Levitt,Steven D. AU - List,John A. AU - Syverson,Chad TI - Toward an Understanding of Learning by Doing: Evidence from an Automobile Assembly Plant JF - National Bureau of Economic Research Working Paper Series VL - No. 18017 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18017 L1 - http://www.nber.org/papers/w18017.pdf N1 - Author contact info: Steven D. Levitt Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 Tel: 773/834-1862 Fax: 773/702-8490 E-Mail: slevitt@midway.uchicago.edu John List Department of Economics University of Chicago 1126 East 59th Chicago, IL 60637 Tel: 301/405-1288 Fax: 301/314-9091 E-Mail: jlist@uchicago.edu Chad Syverson University of Chicago Booth School of Business 5807 S. Woodlawn Ave. Chicago, IL 60637 Tel: 773/702-7815 Fax: 773/702-8490 E-Mail: chad.syverson@chicagobooth.edu AB - Productivity improvements within establishments (e.g., factories, mines, or retail stores) are an important source of aggregate productivity growth. Past research has documented that learning by doing–productivity improvements that occur in concert with production increases–is one source of such improvements. Yet little is known about the specific mechanisms through which such learning occurs. We address this question using extremely detailed data from an assembly plant of a major auto producer. Beyond showing that there is rapid learning by doing at the plant, we are able to pinpoint the processes by which these improvements have occurred. ER - TY - JOUR AU - Mocan,Naci H. AU - Cannonier,Colin TI - Empowering Women Through Education: Evidence from Sierra Leone JF - National Bureau of Economic Research Working Paper Series VL - No. 18016 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18016 L1 - http://www.nber.org/papers/w18016.pdf N1 - Author contact info: Naci H. Mocan Department of Economics Louisiana State University 2119 Patrick F. Taylor Hall Baton Rouge, LA 70803-6306 Tel: 225/578-4570 E-Mail: mocan@lsu.edu Colin Cannonier College of Business Administration Belmont University 1900 Belmont Boulevard Nashville, TN 37212-3757 USA Tel: 615-460-6333 E-Mail: colin.cannonier@belmont.edu AB - We use data from Sierra Leone where a substantial education program provided increased access to education for primary-school age children but did not benefit children who were older. We exploit the variation in access to the program generated by date of birth and the variation in resources between various districts of the country. We find that the program has increased educational attainment and that an increase in education has changed women’s preferences. An increase in schooling, triggered by the program, had an impact on women’s attitudes towards matters that impact women’s health and on attitudes regarding violence against women. An increase in education has also reduced the number of desired children by women and increased their propensity to use modern contraception and to be tested for AIDS. While education makes women more intolerant of practices that conflict with their well-being, increased education has no impact on men’s attitudes towards women’s well-being. ER - TY - JOUR AU - Reinhart,Carmen M. AU - Reinhart,Vincent R. AU - Rogoff,Kenneth S. TI - Debt Overhangs: Past and Present JF - National Bureau of Economic Research Working Paper Series VL - No. 18015 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18015 L1 - http://www.nber.org/papers/w18015.pdf N1 - Author contact info: Carmen M. Reinhart Peterson Institute for International Economics 1750 Massachusetts Avenue, NW Washington, DC 20036-1903 Tel: 202-454-1325 Fax: 202-659-3225 E-Mail: creinhart@piie.com Vincent Reinhart Morgan Stanley New York, NY E-Mail: vincent.reinhart@morganstanley.com Kenneth S. Rogoff Thomas D Cabot Professor of Public Policy Economics Department Harvard University Littauer Center 216 Cambridge, MA 02138-3001 Tel: 617-495-4022 Fax: 617/495-7730 E-Mail: krogoff@harvard.edu AB - We identify the major public debt overhang episodes in the advanced economies since the early 1800s, characterized by public debt to GDP levels exceeding 90% for at least five years. Consistent with Reinhart and Rogoff (2010) and other more recent research, we find that public debt overhang episodes are associated with growth over one percent lower than during other periods. Perhaps the most striking new finding here is the duration of the average debt overhang episode. Among the 26 episodes we identify, 20 lasted more than a decade. Five of the six shorter episodes were immediately after World Wars I and II. Across all 26 cases, the average duration in years is about 23 years. The long duration belies the view that the correlation is caused mainly by debt buildups during business cycle recessions. The long duration also implies that cumulative shortfall in output from debt overhang is potentially massive. We find that growth effects are significant even in the many episodes where debtor countries were able to secure continual access to capital markets at relatively low real interest rates. That is, growth-reducing effects of high public debt are apparently not transmitted exclusively through high real interest rates. ER - TY - JOUR AU - Börsch-Supan,Axel H. AU - Coppola,Michela AU - Reil-Held,Anette TI - Riester Pensions in Germany: Design, Dynamics, Targetting Success and Crowding-In JF - National Bureau of Economic Research Working Paper Series VL - No. 18014 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18014 L1 - http://www.nber.org/papers/w18014.pdf N1 - Author contact info: Axel H. Boersch-Supan Munich Center for the Economics of Aging Max Planck Institute for Social Law and Social Policy Amalienstrasse 33 80779 Munich GERMANY Tel: +49 (89) 3860-2355 Fax: 49 (89) 3860-2390 E-Mail: axel@boersch-supan.de Michela Coppola Munich Center for the Economics of Aging Max Planck Institute for Social Law and Social Policy Amalienstrasse 33 80779 Munich GERMANY E-Mail: coppola@mea.mpisoc.mpg.de Anette Reil-Held Munich Center for the Economics of Aging Max-Planck-Institute for Social Law and Social Policy Amalienstrasse 33 80799 Munich Germany E-Mail: reil-held@arcor.de AB - Riester pensions are voluntary, but heavily subsidized private pension schemes in Germany. They were designed as a matching defined contribution scheme to fill the emerging “pension gap” that is being generated by the gradually declining generosity of the public pay-as-you-go pensions in response to population aging. This paper investigates how the uptake of the recently introduced “Riester pensions” depends on the state-provided saving incentives and how well the targeting to families and low-income households has worked in practice. It documents the costs of the scheme, and collects circumstantial evidence on displacement effects between saving for old-age provision and other purposes. After a slow start and several design changes, Riester pension plans took off very quickly. While saving incentives were effective in reaching parents, they were somewhat less successful in attracting low-income earners, although Riester pensions exhibit a more equal pattern by income than occupational pensions and unsubsidized private pension plans. Riester pension savings totaled €9.4bn in 2010 with an associated cost of €3.5bn. One average one Euro of subsidies is thus associated with 2 Euros of households’ own Riester saving. There is no evidence that Riester pensions have crowded out other saving. While households who plan to purchase housing and who attach high importance to a bequest motive are less likely to have a Riester pension, several regression results show that occupational pensions and other forms of private pensions act as complements rather than as substitutes. Aggregate national saving has increased since the introduction of Riester pensions. ER - TY - JOUR AU - Allen,Franklin AU - Carletti,Elena AU - Cull,Robert AU - Qian,Jun AU - Senbet,Lemma AU - Valenzuela,Patricio TI - Resolving the African Financial Development Gap: Cross-Country Comparisons and a Within-Country Study of Kenya JF - National Bureau of Economic Research Working Paper Series VL - No. 18013 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18013 L1 - http://www.nber.org/papers/w18013.pdf N1 - Author contact info: Franklin Allen Wharton Finance Dept. University of Pennsylvania 3620 Locust Walk Philadelphia, PA 19104 Tel: 215/898-3629 Fax: 215/573-2207 E-Mail: allenf@wharton.upenn.edu Elena Carletti European University Institute E-Mail: Elena.Carletti@EUI.eu Robert Cull World Bank E-Mail: rcull@worldbank.org Jun Qian Boston College 140 Commonwealth Ave Chestnut Hill, MA 02467 E-Mail: qianju@bc.edu Lemma Senbet University of Maryland Robert H Smith School of Business College Park, MD 20742 Tel: 301-405-2242 E-Mail: lsenbet@rhsmith.umd.edu Patricio Valenzuela European University Institute E-Mail: patricio.valenzuela@eui.eu M3 - presented at "African Development Successes", August 3-5, 2011 AB - With extensive country- and firm-level data sets we first document that the financial sectors of most sub-Saharan African countries remain significantly underdeveloped by the standards of other developing countries. We also find that population density appears to be considerably more important for banking sector development in Africa than elsewhere. To better understand how countries can overcome the high costs of developing viable banking sectors outside large metropolitan areas, we focus on Kenya, which has made significant strides in financial inclusion and development in recent years. We find a positive and significant impact of Equity Bank, a leading private commercial bank on financial access, especially for under-privileged households. Equity Bank’s business model—providing financial services to population segments typically ignored by traditional commercial banks and generating sustainable profits in the process—can be a potential solution to the financial access problem that has hindered the development of inclusive financial sectors in many other African countries. ER - TY - JOUR AU - Conti,Gabriella AU - Hansman,Christopher AU - Heckman,James J. AU - Novak,Matthew F. X. AU - Ruggiero,Angela AU - Suomi,Stephen J. TI - Primate Evidence on the Late Health Effects of Early Life Adversity JF - National Bureau of Economic Research Working Paper Series VL - No. 18002 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18002 L1 - http://www.nber.org/papers/w18002.pdf N1 - Author contact info: Gabriella Conti Harris School of Public Policy University of Chicago 1155 East 60th Street Chicago, IL 60637 Tel: 773/702-7052 E-Mail: gconti@uchicago.edu Christopher Hansman Department of Economics Columbia University 1022 International Affairs 420 West 118th Street New York, NY 10027 E-Mail: cjh2182@columbia.edu James J. Heckman Department of Economics The University of Chicago 1126 E. 59th Street Chicago, IL 60637 Tel: 773/702-0634 Fax: 773/702-8490 E-Mail: jjh@uchicago.edu Matthew F. X. Novak Department of Psychology Central Oregon Community College Modoc 212 2600 N.W. College Way Bend OR 97701 E-Mail: mnovak@cocc.edu Angela Ruggiero NICHD Section on Comparative Behavioral Genetics Elmer School Rd Room 205 Poolesville MD 20837 E-Mail: ar327u@nih.gov Stephen J. Suomi NICHD Section on Comparative Behavioral Genetics Elmer School Rd Room 205 Poolesville MD 20837 E-Mail: suomis@mail.nih.gov AB - This paper exploits a unique ongoing experiment to analyze the effects of early rearing conditions on physical and mental health in a sample of rhesus monkeys (Macaca mulatta). We analyze the health records of 231 monkeys which were randomly allocated at birth across three rearing conditions: Mother Rearing, Peer Rearing, and Surrogate Peer Rearing. We show that the lack of a secure attachment relationship in the early years engendered by adverse rearing conditions has detrimental long-term effects on health which are not compensated by a normal social environment later in life. ER - TY - JOUR AU - Jacobsen,Mark R. TI - Fuel Economy and Safety: The Influences of Vehicle Class and Driver Behavior JF - National Bureau of Economic Research Working Paper Series VL - No. 18012 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18012 L1 - http://www.nber.org/papers/w18012.pdf N1 - Author contact info: Mark R. Jacobsen Department of Economics, 0508 University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093 Tel: 858/822-7767 Fax: 858/534-7040 E-Mail: m3jacobs@ucsd.edu AB - Fuel economy standards change the composition of the vehicle fleet, potentially influencing accident safety. I introduce a model of the fleet that captures risks across interactions between vehicle types while simultaneously recovering estimates of unobserved driving safety behavior. The model importantly includes the ability to consider the selection of driver types across vehicles. I apply the model to the present structure of U.S. fuel economy standards and find an adverse effect on safety: Each MPG increment to the standard results in an additional 149 fatalities per year in expectation. I next show how two alternative regulatory provisions, including one slated to enter effect next year, can fully offset the negative safety consequences; minor changes in the regulation produce a robust, near-zero change in accident fatalities while conserving the same quantity of gasoline. ER - TY - JOUR AU - Abramitzky,Ran AU - Boustan,Leah Platt AU - Eriksson,Katherine TI - A Nation of Immigrants: Assimilation and Economic Outcomes in the Age of Mass Migration JF - National Bureau of Economic Research Working Paper Series VL - No. 18011 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18011 L1 - http://www.nber.org/papers/w18011.pdf N1 - Author contact info: Ran Abramitzky Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305 Tel: 650/723-9276 Fax: 650/725-5702 E-Mail: ranabr@stanford.edu Leah Platt Boustan Department of Economics 8283 Bunche Hall UCLA Los Angeles, CA 90095-1477 Tel: 310/794-4263 Fax: 310/825-9528 E-Mail: lboustan@econ.ucla.edu Katherine Eriksson Department of Economics 8283 Bunche Hall UCLA Los Angeles, CA 90095-1477 E-Mail: kath722@ucla.edu AB - During the Age of Mass Migration, the US maintained open borders and absorbed 30 million European immigrants. Using cross-sectional data, prior work on this era finds that immigrants held lower-paid occupations than natives upon first arrival but experienced rapid convergence. In newly-assembled panel data following immigrants over time, the initial immigrant earnings penalty disappears almost entirely, and immigrants experience occupational upgrading at the same rate as natives. Cross-sectional patterns are driven by declines over time in arrival cohort quality and the departure of negatively-selected return migrants. We show that these findings vary substantially across sending countries and explore potential mechanisms. ER - TY - JOUR AU - Boyd,Donald AU - Lankford,Hamilton AU - Loeb,Susanna AU - Wyckoff,James TI - Measuring Test Measurement Error: A General Approach JF - National Bureau of Economic Research Working Paper Series VL - No. 18010 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18010 L1 - http://www.nber.org/papers/w18010.pdf N1 - Author contact info: Donald Boyd The Center for Policy Research University of Albany 135 Western Ave. Albany, NY 12222 E-Mail: donboyd5@gmail.com Hamilton Lankford School of Education, ED 317 University at Albany State University of New York Albany, NY 12222 E-Mail: hamp@albany.edu Susanna Loeb 524 CERAS, 520 Galvez Mall Stanford University Stanford, CA 94305 Tel: 650/725-4262 E-Mail: sloeb@stanford.edu James Wyckoff Curry School of Education University of Virginia P.O. Box 400277 Charlottesville, VA 22904-4277 E-Mail: wyckoff@virginia.edu AB - Test-based accountability including value-added assessments and experimental and quasi-experimental research in education rely on achievement tests to measure student skills and knowledge. Yet we know little regarding important properties of these tests, an important example being the extent of test measurement error and its implications for educational policy and practice. While test vendors provide estimates of split-test reliability, these measures do not account for potentially important day-to-day differences in student performance. We show there is a credible, low-cost approach for estimating the total test measurement error that can be applied when one or more cohorts of students take three or more tests in the subject of interest (e.g., state assessments in three consecutive grades). Our method generalizes the test-retest framework allowing for either growth or decay in knowledge and skills between tests as well as variation in the degree of measurement error across tests. The approach maintains relatively unrestrictive, testable assumptions regarding the structure of student achievement growth. Estimation only requires descriptive statistics (e.g., correlations) for the tests. When student-level test-score data are available, the extent and pattern of measurement error heteroskedasticity also can be estimated. Utilizing math and ELA test data from New York City, we estimate the overall extent of test measurement error is more than twice as large as that reported by the test vendor and demonstrate how using estimates of the total measurement error and the degree of heteroskedasticity along with observed scores can yield meaningful improvements in the precision of student achievement and achievement-gain estimates. ER - TY - JOUR AU - Börsch-Supan,Axel H. TI - Entitlement Reforms in Europe: Policy Mixes in the Current Pension Reform Process JF - National Bureau of Economic Research Working Paper Series VL - No. 18009 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18009 L1 - http://www.nber.org/papers/w18009.pdf N1 - Author contact info: Axel H. Boersch-Supan Munich Center for the Economics of Aging Max Planck Institute for Social Law and Social Policy Amalienstrasse 33 80779 Munich GERMANY Tel: +49 (89) 3860-2355 Fax: 49 (89) 3860-2390 E-Mail: axel@boersch-supan.de M3 - presented at "Fiscal Policy after the Financial Crisis", December 12-13, 2011 AB - Many European countries have begun (or have announced) programs intended to reduce the growth of entitlement programs, in particular of public pensions. Current costs are high, and the pressures will increase due to population aging and negative incentive effects. This paper focuses on the pension reform process in Europe. It links the causes for current problems to the cures required to make the pay-as-you-go entitlement programs in Continental Europe sustainable above and beyond the financial crisis. It discusses examples which appear, from a current point of view, to be the most viable and effective options to bring entitlement systems closer to fiscal balance and still achieve their key aims. There is no single policy prescription that can solve all problems at once. Reform elements include a freeze in the contribution and tax rates, an indexation of benefits to the dependency ratio, measures to stop the current trend towards early retirement, an adaptation of the normal retirement age to increased life expectancy, and more reliance on private savings – elements of a sustainable but complex multipillar system of pensions and similar entitlement programs. ER - TY - JOUR AU - Redding,Stephen J. TI - Goods Trade, Factor Mobility and Welfare JF - National Bureau of Economic Research Working Paper Series VL - No. 18008 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18008 L1 - http://www.nber.org/papers/w18008.pdf N1 - Author contact info: Stephen J. Redding Department of Economics and Woodrow Wilson School Princeton University Fisher Hall Princeton, NJ 08544 Tel: 609/258-4016 Fax: 609/258-6419 E-Mail: reddings@princeton.edu AB - This paper extends a recent class of quantitative models of international trade to incorporate factor mobility within countries. We present a model-based decomposition of the variance of economic activity into the contributions of locational fundamentals, market access and their covariance. We show how the standard framework for undertaking model-based counterfactuals in trade can be augmented to obtain predictions for endogenous changes in the distribution of economic activity across regions within countries. A region's trade share with itself is no longer a sufficient statistic for the welfare gains from trade, which also depend on endogenous changes in the distribution of mobile factors. ER - TY - JOUR AU - Farmer,Roger E.A. TI - The Effect of Conventional and Unconventional Monetary Policy Rules on Inflation Expectations: Theory and Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 18007 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18007 L1 - http://www.nber.org/papers/w18007.pdf N1 - Author contact info: Roger Farmer UCLA Department of Economics Box 951477 Los Angeles, CA 90095-1477 Tel: 310/825-6547 Fax: 310/825-9528 E-Mail: rfarmer@econ.ucla.edu AB - This paper has three parts. First, I provide a theoretical framework to explain how rational expectations models, where the central bank follows a conventional monetary policy rule, can be used to understand the history of interest rates and inflation in the period between 1951 and the Great Recession of 2008. Second, I use the framework developed in the first part of the paper to illustrate how the purchase of assets other than treasuries, for example, mortgage backed securities and long bonds, can influence inflation expectations when the interest rate is zero. Third, I show that the beginning of unconventional monetary policy in 2008 coincided with a significant increase in inflation expectations. I extend existing models of monetary policy by adding explicit markets for financial securities. Using this extended framework, I show that the purchase of assets, other than short term treasury bills, has a differential impact on the prices of risky securities. Unconventional monetary policy is an important tool in a central bank’s arsenal that can be used to help prevent deflation in the wake of a financial crisis. ER - TY - JOUR AU - Ashenfelter,Orley C. TI - Comparing Real Wages JF - National Bureau of Economic Research Working Paper Series VL - No. 18006 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18006 L1 - http://www.nber.org/papers/w18006.pdf N1 - Author contact info: Orley C. Ashenfelter Industrial Relations Section Firestone Library Princeton University Princeton, NJ 08544 Tel: 609/258-4040 Fax: 609/258-2907 E-Mail: c6789@princeton.edu AB - A real wage rate is a nominal wage rate divided by the price of a good and is a transparent measure of how much of the good an hour of work buys. It provides an important indicator of the living standards of workers, and also of the productivity of workers. In this paper I set out the conceptual basis for such measures, provide some historical examples, and then provide my own preliminary analysis of a decade long project designed to measure the wages of workers doing the same job in over 60 countries—workers at McDonald’s restaurants. The results demonstrate that the wage rates of workers using the same skills and doing the same jobs differ by as much as 10 to 1, and that these gaps declined over the period 2000-2007, but with much less progress since the Great Recession. ER - TY - JOUR AU - Lacetera,Nicola AU - Sydnor,Justin R. TI - Would You Buy a Honda Made in the U.S.? The Impact of Production Location on Manufacturing Quality JF - National Bureau of Economic Research Working Paper Series VL - No. 18005 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18005 L1 - http://www.nber.org/papers/w18005.pdf N1 - Author contact info: Nicola Lacetera University of Toronto 105 St. George Street Toronto, ON M5S 2E9 Canada Tel: 416/946-0287 E-Mail: nicola.lacetera@utoronto.ca Justin R. Sydnor University of Wisconsin - Madison 975 University Avenue Madison, WI 53706 E-Mail: jsydnor@bus.wisc.edu AB - Are location-specific factors—such as the education and attitude of the local workforce, supplier networks, institutional infrastructure, and local “culture”—important for understanding persistent heterogeneities among firms? We address this question in the context of the automobile industry. Using a unique data set of over 565,000 used-car transactions at wholesale auctions, we test whether the long-run value and quality of otherwise identical cars depends on the country of assembly. We exploit the natural experiment provided by the establishment of assembly plants in the U.S. by Japanese auto manufacturers, and the fact that some of the most popular Japanese car models are assembled both in Japan and the U.S. We find evidence that the Japan-assembled cars on average sell for more than those built in the U.S., but the estimated difference is only $62. The average differences are driven almost entirely by older-model Toyotas, for which we find a more meaningful difference between the Japanese and U.S. built cars. For Hondas and more recent models of Toyotas, the Japan-built cars are no more valuable than those built in the U.S. These results suggest that Japanese automakers have been successful, though perhaps with some lag, at transferring their high-quality practices to their U.S. transplants. Our findings also suggest that there is not an inherent limitation to the U.S. manufacturing environment that prevents the production of high-quality cars in America. ER - TY - JOUR AU - Demirguc-Kunt,Asli AU - Feyen,Erik AU - Levine,Ross TI - The Evolving Importance of Banks and Securities Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 18004 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18004 L1 - http://www.nber.org/papers/w18004.pdf N1 - Author contact info: Asli Demirguc-Kunt World Bank 1818 H Street Washington, DC 20433 E-Mail: ademirguckunt@worldbank.org Erik Feyen World Bank 1818 H Street, NW Washington, DC 20433 E-Mail: efeijen@worldbank.org Ross Levine Department of Economics Brown University 64 Waterman Street Providence, RI 02912 Tel: 401/863-2170 E-Mail: ross_levine@brown.edu AB - This paper examines the evolving importance of banks and securities markets during the process of economic development. We find that as countries develop economically, (1) the size of both banks and securities markets increases relative to the size of the economy, (2) the association between an increase in economic output and an increase in bank development becomes smaller, and (3) the association between an increase in economic output and an increase in securities market development becomes larger. The results are consistent with theories predicting that as economies develop, the services provided by securities markets become more important for economic activity, while those provided by banks become less important. ER - TY - JOUR AU - Dave,Dhaval M. AU - Saffer,Henry TI - Demand for Smokeless Tobacco: Role of Magazine Advertising JF - National Bureau of Economic Research Working Paper Series VL - No. 18003 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18003 L1 - http://www.nber.org/papers/w18003.pdf N1 - Author contact info: Dhaval M. Dave Bentley University Department of Economics 175 Forest Street, AAC 195 Waltham, MA 02452-4705 Tel: 212/817-7955 Fax: 212/817-1597 E-Mail: ddave@bentley.edu Henry Saffer NBER 365 Fifth Avenue, 5th Floor New York, NY 10016-4309 Tel: 212/817-7956 Fax: 212/817-1597 E-Mail: hsaffer@gc.cuny.edu AB - While the prevalence of smokeless tobacco (ST) is low relative to smoking, the distribution of ST use is highly skewed with consumption concentrated among certain segments of the population (rural residents, males, whites, low-educated individuals). Furthermore, there is suggestive evidence that use has trended upwards recently for groups that have traditionally been at low risk of using ST, and thus started to diffuse across demographics. This study provides the first estimates, at the national level, of the effects of magazine advertising on ST use. The focus on magazine advertising is significant given that ST manufacturers have been banned from using other conventional media since the 1986 Comprehensive ST Act and the 1998 ST Master Settlement Agreement. This study is based on the 2003-2009 waves of the National Consumer Survey (NCS), a unique data source that contains extensive information on the reading habits of individuals, matched with magazine-specific advertising information over the sample period. This allows detailed and salient measures of advertising exposure at the individual level and addresses potential bias due to endogeneity and selective targeting. We find consistent and robust evidence that exposure to ST ads in magazines raises ST use, especially among males, with an estimated elasticity of 0.11. Estimates further indicate that both ST taxes and cigarette taxes reduce ST use, suggesting complementarity between these tobacco products. Sub-analyses point to some differences in the advertising and tax response across segments of the population. The advertising effects from this study inform the debate in the literature with respect to whether, and the extent to which, tobacco advertising affects primary demand at the market level versus brand-shifting. ER - TY - JOUR AU - Davidson,Robert AU - Dey,Aiyesha AU - Smith,Abbie J. TI - Executives' "Off-The-Job" Behavior, Corporate Culture, and Financial Reporting Risk JF - National Bureau of Economic Research Working Paper Series VL - No. 18001 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18001 L1 - http://www.nber.org/papers/w18001.pdf N1 - Author contact info: Robert Davidson Georgetown University McDonough School of Business Rafik Hariri Building 37th and O Streets, NW Washington, DC 20057 E-Mail: rhd22@georgetown.edu Aiyesha Dey University of Minnesota Carlson School of Management 321 - 19th Avenue South Minneapolis, MN 55455 E-Mail: deya@umn.edu Abbie Smith University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 E-Mail: abbie.smith@chicagobooth.edu M3 - presented at "Causes and Consequences of Corporate Culture", December 8-9, 2011 AB - We examine how executives’ behavior outside the workplace, as measured by their ownership of luxury goods (low “frugality”) and prior legal infractions, is related to financial reporting risk. We predict and find that CEOs and CFOs with a legal record are more likely to perpetrate fraud. In contrast, we do not find a relation between executives’ frugality and the propensity to perpetrate fraud. However, as predicted, we find that unfrugal CEOs oversee a relatively loose control environment characterized by relatively high probabilities of other insiders perpetrating fraud and unintentional material reporting errors. Further, cultural changes associated with an increase in fraud risk are more likely during unfrugal (vs. frugal) CEOs’ reign, including the appointment of an unfrugal CFO, an increase in executives’ equity-based incentives to misreport, and a decline in measures of board monitoring intensity. ER - TY - JOUR AU - Wei,Shang-Jin AU - Zhang,Xiaobo AU - Liu,Yin TI - Status Competition and Housing Prices JF - National Bureau of Economic Research Working Paper Series VL - No. 18000 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w18000 L1 - http://www.nber.org/papers/w18000.pdf N1 - Author contact info: Shang-Jin Wei Graduate School of Business Columbia University Uris Hall 619 3022 Broadway New York, NY 10027-6902 Tel: 212/854-9139 E-Mail: shangjin.wei@columbia.edu Xiaobo Zhang International Food Policy Research Institute 2033 K Street, NW Washington, DC 20006 Tel: 202-862-8149 Fax: 202-467-4439 E-Mail: x.zhang@cgiar.org Yin Liu School of Economics and Management Tsinghua University Beijing, China E-Mail: reggieliu08@gmail.com AB - While in standard housing economics housing is regarded as an asset and a consumption good, we study in this paper the consequences for housing prices if housing is also a status good. More concretely, if a family’s housing wealth relative to others is an important marker for relative status in the marriage market, then competition for marriage partners might motivate people to pursue a bigger and more expensive house/apartment beyond its direct consumption (and financial investment) value. To test the empirical validity of the hypothesis, we have to overcome the usual difficulty of not being able to observe the intensity of status competition. Our innovation is to explore regional variations in the sex ratio for the pre-marital age cohort across China, which likely has triggered variations in the intensity of competition in the marriage market. The empirical evidence appears to support this hypothesis. We estimate that due to the status good feature of housing, a rise in the sex ratio accounts for 30-48% of the rise in real urban housing prices in China during 2003-2009. ER - TY - JOUR AU - Ganglmair,Bernhard AU - Tarantino,Emanuele TI - Patent Disclosure in Standard Setting JF - National Bureau of Economic Research Working Paper Series VL - No. 17999 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17999 L1 - http://www.nber.org/papers/w17999.pdf N1 - Author contact info: Bernhard Ganglmair University of Texas at Dallas Naveen Jindal School of Management 800 W. Campbell Rd (SM31) Richardson, TX 75080 E-Mail: ganglmair@utdallas.edu Emanuele Tarantino Department of Economics - University of Bologna Piazza Scaravilli, 1 40126 Bologna Italy E-Mail: emanuele.tarantino@unibo.it M3 - presented at "Patents, Standards and Innovation Conference", January 20-21, 2012 AB - In a model of industry standard setting with private information about firms' intellectual property, we analyze (a) firms' incentives to contribute to the development and improvement of a standard, and (b) firms' decision to disclose the existence of relevant intellectual property to other participants of the standard-setting process. If participants can disclose after the end of the process and fully exploit their bargaining leverage, then patent holders aspire to disclose always after the end of the process. However, if a patent holder cannot rely on the other participants to always contribute to the process, then it may be inclined to disclose before the end of the process. We also analyze under which conditions firms enter cross-licensing agreements that eliminate the strategic aspect of patent disclosure, and show that, in an institutional setting that implies a waiver of intellectual property rights if patents are not disclosed timely, firms aspire to disclose before the end of the process. Finally, we study the effect of product-market competition on patent disclosure. ER - TY - JOUR AU - Ferraro,Domenico AU - Rogoff,Kenneth S. AU - Rossi,Barbara TI - Can Oil Prices Forecast Exchange Rates? JF - National Bureau of Economic Research Working Paper Series VL - No. 17998 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17998 L1 - http://www.nber.org/papers/w17998.pdf N1 - Author contact info: Domenico Ferraro Department of Economics Duke University PO Box 90097 213 Social Sciences Building Durham, NC 27708 E-Mail: domenico.ferraro@duke.edu Kenneth S. Rogoff Thomas D Cabot Professor of Public Policy Economics Department Harvard University Littauer Center 216 Cambridge, MA 02138-3001 Tel: 617-495-4022 Fax: 617/495-7730 E-Mail: krogoff@harvard.edu Barbara Rossi ICREA, UPF, CREI, Duke and BGSE 213 Social Sciences Duke University Durham NC 27708 E-Mail: barbara.rossi@upf.edu AB - This paper investigates whether oil prices have a reliable and stable out-of-sample relationship with the Canadian/U.S dollar nominal exchange rate. Despite state-of-the-art methodologies, we find little systematic relation between oil prices and the exchange rate at the monthly and quarterly frequencies. In contrast, the main contribution is to show the existence of a very short-term relationship at the daily frequency, which is rather robust and holds no matter whether we use contemporaneous (realized) or lagged oil prices in our regression. However, in the latter case the predictive ability is ephemeral, mostly appearing after instabilities have been appropriately taken into account ER - TY - JOUR AU - Grubb,Farley TI - Is Paper Money Just Paper Money? Experimentation and Local Variation in the Fiat Paper Monies Issued by the Colonial Governments of British North America, 1690-1775: Part I JF - National Bureau of Economic Research Working Paper Series VL - No. 17997 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17997 L1 - http://www.nber.org/papers/w17997.pdf N1 - Author contact info: Farley Grubb University of Delaware Economics Department Newark, DE 19716 Tel: 302/831-1905 Fax: 302/831-6968 E-Mail: grubbf@udel.edu AB - The British North American colonies were the first western economies to rely on legislative-issued fiat paper monies as their principal internal media of exchange. This system arose piecemeal. It was monetary experimentation on a grand scale. In the absence of banks and treasuries that exchanged local fiat monies at fixed rates for specie monies (outside monies) on demand, colonial governments experimented with other ways to anchor their fiat monies to real values in the economy. These mechanisms included tax-redemption, interest-bearing notes, land-backed mortgage loans, sinking funds, and legal tender laws. The structure and performance of these mechanisms are explained. "[The colonies] cannot keep Gold and Silver among them sufficient for the Purposes of their internal Commerce... Paper Bills called Bills of Credit or Paper Money have therefore in the colonies long been substituted for real Money. Various Ways of issuing these and on different Foundations, have at different Times been thought of and practised.... On the whole no Method has been found to give any Degree of fixed, steady, uniform Value to Bills of Credit in America,..." (Benjamin Franklin, 13 Feb. 1767) ER - TY - JOUR AU - Moehling,Carolyn M. AU - Thomasson,Melissa A. TI - Saving Babies: The Contribution of Sheppard-Towner to the Decline in Infant Mortality in the 1920s JF - National Bureau of Economic Research Working Paper Series VL - No. 17996 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17996 L1 - http://www.nber.org/papers/w17996.pdf N1 - Author contact info: Carolyn Moehling Department of Economics Rutgers University 75 Hamilton Street New Brunswick, NJ 08901-1248 Tel: 732/932-7188 Fax: NA E-Mail: cmoehling@econ.rutgers.edu Melissa A. Thomasson Miami University/FSB Department of Economics MSC 1035 800 E. High Street, Rm. #2054 Oxford, OH 45056 Tel: 513/529-2858 Fax: 513/529-8047 E-Mail: thomasma@muohio.edu AB - From 1922 to 1929, the Sheppard-Towner Act provided matching grants to states to fund maternal and infant care education initiatives. We examine the effects of this public health program on infant mortality. States engaged in different types of activities, allowing us to examine whether different interventions had differential effects on mortality. Interventions that provided one-on-one contact and opportunities for follow-up care, such as home visits by public health nurses, reduced infant deaths more than classes and conferences. Overall, we estimate that Sheppard-Towner activities can account for 9 to 21 percent of the decline in infant mortality over the period. ER - TY - JOUR AU - Milkman,Katherine L. AU - Beshears,John AU - Choi,James J. AU - Laibson,David AU - Madrian,Brigitte C. TI - Following Through on Good Intentions: The Power of Planning Prompts JF - National Bureau of Economic Research Working Paper Series VL - No. 17995 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17995 L1 - http://www.nber.org/papers/w17995.pdf N1 - Author contact info: Katherine L. Milkman University of Pennsylvania 3730 Walnut Street 561 Jon M. Huntsman Hall Philadelphia, PA19104 E-Mail: kmilkman@wharton.upenn.edu John Beshears Stanford Graduate School of Business 655 Knight Way Stanford, CA 94305-7298 Tel: 650/723-6792 E-Mail: beshears@stanford.edu James J. Choi Yale School of Management 135 Prospect Street P.O. Box 208200 New Haven, CT 06520-8200 E-Mail: james.choi@yale.edu David Laibson Department of Economics Littauer M-12 Harvard University Cambridge, MA 02138 Tel: 617/496-3402 Fax: 617/495-8570 E-Mail: dlaibson@gmail.com Brigitte C. Madrian John F. Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617-495-8917 Fax: 617-496-5960 E-Mail: Brigitte_Madrian@Harvard.edu AB - We study whether prompts to form and recall a plan can increase individuals’ responsiveness to reminders to make and attend beneficial appointments. At four companies, all employees due for a colonoscopy were randomly assigned to receive either a control mailing or a treatment mailing. The mailings were identical except that the control mailing included a blank sticky note while the treatment mailing included a sticky note that prompted the recipient to write down the appointment date for a colonoscopy and the name of the doctor who would conduct the procedure. During the seven-month follow-up period, 7.2% of treatment employees received a colonoscopy compared to 6.2% of control employees, a statistically significant difference that is roughly equal to the variation in compliance associated with a 10 percent increase in the fraction of the procedure’s cost covered by insurance. The treatment effect was largest for demographic groups judged to be at the highest risk of failing to receive a colonoscopy due to forgetfulness. ER - TY - JOUR AU - Acemoglu,Daron TI - The World our Grandchildren Will Inherit: The Rights Revolution and Beyond JF - National Bureau of Economic Research Working Paper Series VL - No. 17994 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17994 L1 - http://www.nber.org/papers/w17994.pdf N1 - Author contact info: Daron Acemoglu Department of Economics MIT, E52-380B 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-1927 Fax: 617/253-1330 E-Mail: daron@mit.edu AB - Following on Keynes’s Economic Possibilities for Our Grandchildren, this paper develops conjectures about the world we will leave to our grandchildren. It starts by outlining the 10 most important trends that have defined our economic, social, and political lives over the last 100 years. It then provides a framework for interpreting these trends, emphasizing the role of the expansion of political and civil rights and institutional changes in this process. It then uses this framework for extrapolating these 10 trends into the next 100 years. ER - TY - JOUR AU - Blau,Francine D. AU - Brummund,Peter AU - Liu,Albert Yung-Hsu TI - Trends in Occupational Segregation by Gender 1970-2009: Adjusting for the Impact of Changes in the Occupational Coding System JF - National Bureau of Economic Research Working Paper Series VL - No. 17993 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17993 L1 - http://www.nber.org/papers/w17993.pdf N1 - Author contact info: Francine D. Blau ILR School Cornell University 268 Ives Hall Ithaca, New York 14853-3901 Tel: 607/255-4381 Fax: 607/255-4496 E-Mail: fdb4@cornell.edu Peter Brummund Uris Hall Cornell University Ithaca, NY 14853 Tel: 607-592-8422 E-Mail: pwb9@cornell.edu Albert Yung-Hsu Liu Mathematica Policy Research, Inc. 505 14th St., Suite 800 Oakland, CA 94612-1475 E-Mail: aliu@mathematica-mpr.com AB - In this paper, we develop a gender-specific crosswalk based on dual-coded Current Population Survey data to bridge the change in the Census occupational coding system that occurred in 2000 and use it to provide the first analysis of the trends in occupational segregation by sex for the 1970-2009 period based on a consistent set of occupational codes and data sources. We show that our gender-specific crosswalk more accurately captures the trends in occupational segregation that are masked using the aggregate crosswalk (based on combined male and female employment) provided by the U.S. Census Bureau. Using the 2000 occupational codes, we find that segregation by sex declined over the period but at a diminished pace over the decades, falling by 6.1 percentage points over the 1970s, 4.3 percentage points over the 1980s, 2.1 percentage points over the 1990s, and only 1.1 percentage points (on a decadal basis) over the 2000s. A primary mechanism by which occupational segregation was reduced over the 1970-2009 period was through the entry of new cohorts of women, presumably better prepared than their predecessors and/or encountering less labor market discrimination; during the 1970s and 1980s, however, there were also decreases in occupational segregation within cohorts. Reductions in segregation were correlated with education, with the largest decrease among college graduates and very little change in segregation among high school dropouts. ER - TY - JOUR AU - Ghani,Ejaz AU - Goswami,Arti Grover AU - Kerr,William R. TI - Is India's Manufacturing Sector Moving Away From Cities? JF - National Bureau of Economic Research Working Paper Series VL - No. 17992 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17992 L1 - http://www.nber.org/papers/w17992.pdf N1 - Author contact info: Ejaz Ghani South Asia PREM The World Bank Washington D.C. E-Mail: Eghani@worldbank.org Arti Grover Goswami World Bank Washington, DC E-Mail: agrover1@worldbank.org William R. Kerr Harvard Business School Rock Center 212 Soldiers Field Boston, MA 02163 Tel: 617/496-7021 E-Mail: wkerr@hbs.edu AB - This paper investigates the urbanization of the Indian manufacturing sector by combining enterprise data from formal and informal sectors. We find that plants in the formal sector are moving away from urban and into rural locations, while the informal sector is moving from rural to urban locations. While the secular trend for India’s manufacturing urbanization has slowed down, the localized importance of education and infrastructure have not. Our results suggest that districts with better education and infrastructure have experienced a faster pace of urbanization, although higher urban-rural cost ratios cause movement out of urban areas. This process is associated with improvements in the spatial allocation of plants across urban and rural locations. Spatial location of plants has implications for policy on investments in education, infrastructure, and the livability of cities. The high share of urbanization occurring in the informal sector suggests that urbanization policies that contain inclusionary approaches may be more successful in promoting local development and managing its strains than those focused only on the formal sector. ER - TY - JOUR AU - Helpman,Elhanan AU - Itskhoki,Oleg AU - Muendler,Marc-Andreas AU - Redding,Stephen J. TI - Trade and Inequality: From Theory to Estimation JF - National Bureau of Economic Research Working Paper Series VL - No. 17991 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17991 L1 - http://www.nber.org/papers/w17991.pdf N1 - Author contact info: Elhanan Helpman Department of Economics Harvard University 1875 Cambridge Street Cambridge, MA 02138 Tel: 617-495-4690 Fax: 617-495-7730 E-Mail: ehelpman@harvard.edu Oleg Itskhoki Department of Economics Princeton University Fisher Hall 306 Princeton, NJ 08544-1021 Tel: 609/258-5493 Fax: 609/258-6419 E-Mail: itskhoki@princeton.edu Marc-Andreas Muendler Department of Economics, 0508 University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 Tel: 858/534-4799 Fax: 858/534-7040 E-Mail: muendler@ucsd.edu Stephen J. Redding Department of Economics and Woodrow Wilson School Princeton University Fisher Hall Princeton, NJ 08544 Tel: 609/258-4016 Fax: 609/258-6419 E-Mail: reddings@princeton.edu AB - While neoclassical theory emphasizes the impact of trade on wage inequality between occupations and sectors, more recent theories of firm heterogeneity point to the impact of trade on wage dispersion within occupations and sectors. Using linked employer-employee data for Brazil, we show that much of overall wage inequality arises within sector-occupations and for workers with similar observable characteristics; this within component is driven by wage dispersion between firms; and wage dispersion between firms is related to firm employment size and trade participation. We then extend the heterogenous-firm model of trade and inequality from Helpman, Itskhoki and Redding (2010) and structurally estimate it with Brazilian data. We show that the estimated model fits the data well, both in terms of key moments as well as in terms of the overall distributions of wages and employment, and find that international trade is important for this fit. In the estimated model, reductions in trade costs have a sizeable effect on wage inequality. ER - TY - JOUR AU - Dee,Thomas TI - School Turnarounds: Evidence from the 2009 Stimulus JF - National Bureau of Economic Research Working Paper Series VL - No. 17990 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17990 L1 - http://www.nber.org/papers/w17990.pdf N1 - Author contact info: Thomas Dee Frank Batten School of Leadership & Public Policy and Department of Economics University of Virginia 235 McCormick Road P.O. Box 400893 Charlottesville, VA 22903 Tel: 434/243-3731 Fax: 434/243-6858 E-Mail: dee@virginia.edu AB - The American Recovery and Reinvestment Act of 2009 (ARRA) targeted substantial School Improvement Grants (SIGs) to the nation’s “persistently lowest achieving” public schools (i.e., up to $2 million per school annually over 3 years) but required schools accepting these awards to implement a federally prescribed school-reform model. Schools that met the “lowest-achieving” and “lack of progress” thresholds within their state had prioritized eligibility for these SIG-funded interventions. Using data from California, this study leverages these two discontinuous eligibility rules to identify the effects of SIG-funded whole-school reforms. The results based on these “fuzzy” regression-discontinuity designs indicate that there were significant improvements in the test-based performance of schools on the “lowest-achieving” margin but not among schools on the “lack of progress” margin. Complementary panel-based estimates suggest that these improvements were largely concentrated among schools adopting the federal “turnaround” model, which compels more dramatic staff turnover. ER - TY - JOUR AU - Piketty,Thomas AU - Saez,Emmanuel TI - A Theory of Optimal Capital Taxation JF - National Bureau of Economic Research Working Paper Series VL - No. 17989 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17989 L1 - http://www.nber.org/papers/w17989.pdf N1 - Author contact info: Thomas Piketty Paris School of Economics 48 Boulevard Jourdan 75014 Paris, France E-Mail: piketty@ens.fr Emmanuel Saez Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720 Tel: 510/642-4631 Fax: 510/642-6615 E-Mail: saez@econ.berkeley.edu AB - This paper develops a realistic, tractable theoretical model that can be used to investigate socially-optimal capital taxation. We present a dynamic model of savings and bequests with heterogeneous random tastes for bequests to children and for wealth per se. We derive formulas for optimal tax rates on capitalized inheritance expressed in terms of estimable parameters and social preferences. Under our model assumptions, the long-run optimal tax rate increases with the aggregate steady-state flow of inheritances to output, decreases with the elasticity of bequests to the net-of-tax rate, and decreases with the strength of preferences for leaving bequests. For realistic parameters of our model, the optimal tax rate on capitalized inheritance would be as high as 50%-60%–or even higher for top wealth holders–if the social objective is meritocratic (i.e., the social planner puts higher welfare weights on those receiving little inheritance) and if capital is highly concentrated (as it is in the real world). In contrast to the Atkinson-Stiglitz result, the optimal tax on bequest remains positive in our model even with optimal labor taxation because inequality is two-dimensional: with inheritances, labor income is no longer the unique determinant of lifetime resources. In contrast to Chamley-Judd, the optimal tax on capital is positive in our model because we have finite long run elasticities of inheritance to tax rates. Finally, we discuss how adding capital market imperfections and uninsurable shocks to rates of return to our optimal tax model leads to shifting one-off inheritance taxation toward lifetime capital taxation, and can account for the actual structure and mix of inheritance and capital taxation. ER - TY - JOUR AU - Caplin,Andrew AU - Martin,Daniel J. TI - Defaults and Attention: The Drop Out Effect JF - National Bureau of Economic Research Working Paper Series VL - No. 17988 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17988 L1 - http://www.nber.org/papers/w17988.pdf N1 - Author contact info: Andrew Caplin Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10012 Tel: 212/998-8950 Fax: 212/995-3932 E-Mail: andrew.caplin@nyu.edu Daniel J. Martin Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10012 E-Mail: daniel.martin@nyu.edu AB - When choice options are complex, policy makers may seek to reduce decision making errors by making a high quality option the default. We show that this positive effect is at risk because such a policy creates incentives for decision makers to "drop out" by paying no attention to the decision and accepting the default sight unseen. Using decision time as a proxy for attention, we confirm the importance of this effect in an experimental setting. A key challenge for policy makers is to measure, and if possible mitigate, such drop out behavior in the field. ER - TY - JOUR AU - Yurukoglu,Ali TI - Medicare Reimbursements and Shortages of Sterile Injectable Pharmaceuticals JF - National Bureau of Economic Research Working Paper Series VL - No. 17987 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17987 L1 - http://www.nber.org/papers/w17987.pdf N1 - Author contact info: Ali Yurukoglu Graduate School of Business Stanford University Stanford, CA 94305 Tel: 650/721-1293 E-Mail: yurukoglu_ali@gsb.stanford.edu AB - This paper investigates the rise in shortages of sterile injectable pharmaceutical drugs in the United States. I focus on a policy change that occurred in 2005 that reduced Medicare Part B payments for sterile injectable drugs. The policy change affected different drugs by different amounts. I find that drugs that were more affected by the policy change, either because they serve older patient populations or had a large number of producers pre-policy change, have had quantitatively and statistically significantly greater increases in shortages and greater decreases in numbers of manufacturers post-regulation. Drugs whose average payments fell by more due to the policy change had greater increases in shortages. I interpret these results using a model of capacity choice with supply uncertainty. Total installed capacity is higher and the probability of a shortage is lower when margins are higher. I conclude that Medicare’s generous payments before the policy change provided manufacturers with incentives to take actions to avoid shortages either by investing in additional maintenance or capacity, or by inducing more entry into production of the drug. The effect on total welfare of removing those payments is theoretically ambiguous, and would require more detailed data to credibly estimate. ER - TY - JOUR AU - Epple,Dennis N. AU - Romano,Richard TI - On The Political Economy Of Educational Vouchers JF - National Bureau of Economic Research Working Paper Series VL - No. 17986 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17986 L1 - http://www.nber.org/papers/w17986.pdf N1 - Author contact info: Dennis N. Epple Tepper School of Business Carnegie Mellon University Posner Hall, Room 257B Pittsburgh, PA 15213 Tel: 412/268-1536 Fax: 412/268-7357 E-Mail: epple@cmu.edu Richard Romano University of Florida E-Mail: richard.romano@cba.ufl.edu AB - Two significant challenges hamper analyses of collective choice of educational vouchers. One is the multi-dimensional choice set arising from the interdependence of the voucher, public education spending, and taxation. The other is that household preferences between public and private schooling vary with the policy chosen. Even absent a voucher, preferences over public spending are not single-peaked; a middling level of public school spending may be less attractive to a household than either high public school spending or private education coupled with low public spending. We show that Besley and Coate’s (1997) representative democracy provides a viable approach to overcome these hurdles. We provide a complete characterization of equilibrium with an endogenous voucher. We undertake a parallel quantitative analysis. For income distributions exhibiting substantial heterogeneity, such as the U.S. distribution, we find that no voucher arises in equilibrium. For tighter income distributions, however, a voucher arises. For example, with the income distribution of Douglas County, Colorado, where a voucher was recently adopted, our model predicts a positive voucher. Public support for a not-to-large voucher arises because the cross subsidy to public school expenditure from those switching to private schools outweighs the subsidy to those that attend private school without a voucher. ER - TY - JOUR AU - Altonji,Joseph G. AU - Blom,Erica AU - Meghir,Costas TI - Heterogeneity in Human Capital Investments: High School Curriculum, College Major, and Careers JF - National Bureau of Economic Research Working Paper Series VL - No. 17985 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17985 L1 - http://www.nber.org/papers/w17985.pdf N1 - Author contact info: Joseph G. Altonji Department of Economics Yale University Box 208264 New Haven, CT 06520-8264 Tel: 203/432-6285 Fax: 203/432-5591 E-Mail: joseph.altonji@yale.edu Erica Blom Department of Economics Yale University Box 208264 New Haven, CT 06520-8264 E-Mail: erica.blom@yale.edu Costas Meghir Department of Economics Yale University 37 Hillhouse Avenue New Haven, CT 06511 Tel: 203/432-3558 E-Mail: c.meghir@yale.edu AB - Motivated by the large differences in labor market outcomes across college majors, we survey the literature on the demand for and return to high school and post-secondary education by field of study. We combine elements from several papers to provide a dynamic model of education and occupation choice that stresses the roles of specificity of human capital and uncertainty about preferences, ability, education outcomes, and labor market returns. The model implies an important distinction between the ex ante and ex post returns to education decisions. We also discuss some of the econometric difficulties in estimating the causal effects of field of study on wages in the context of a sequential choice model with learning. Finally, we review the empirical literature on choice of curriculum and the effects of high school courses and college major on labor market outcomes. ER - TY - JOUR AU - Bordo,Michael D. AU - Humpage,Owen AU - Schwartz,Anna J. TI - Epilogue: Foreign-Exchange-Market Operations in the Twenty-First Century JF - National Bureau of Economic Research Working Paper Series VL - No. 17984 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17984 L1 - http://www.nber.org/papers/w17984.pdf N1 - Author contact info: Michael D. Bordo Department of Economics Rutgers University New Jersey Hall 75 Hamilton Street New Brunswick, NJ 08901 Tel: 732/822-7152 Fax: 732/932-7416 E-Mail: bordo@econ.rutgers.edu Owen Humpage Federal Reserve Bank of Cleveland P.O. Box 6387 Cleveland, OH 44101-1387 Tel: 216 579 2019 Fax: 216 579 3050 E-Mail: owen.f.humpage@clev.frb.org Anna J. Schwartz NBER 365 Fifth Ave, 5th Floor New York, NY 10016 Tel: 212/817-7957 Fax: 212/817-1597 E-Mail: aschwartz@gc.cuny.edu AB - Foreign-exchange operations did not end after the United States stopped its activist approach to intervention. Japan persisted in such operations, but avoided overt conflict with its monetary policy. With the on-set of the Great Recession, Switzerland has transacted in foreign exchange both for monetary and exchange-rate purposes, and key central banks have used swap facilities to extended their lender-of-last-resort functions. Developing and emerging market economies continue to intervene, but their actions may hamper the development of their own foreign-exchange markets. China’s undervalued exchange rate is producing inflation and real appreciation, despite China’s efforts to sterilize its reserve accumulation. ER - TY - JOUR AU - Hall,Bronwyn H. AU - Helmers,Christian AU - Rogers,Mark AU - Sena,Vania TI - The Choice between Formal and Informal Intellectual Property: A Literature Review JF - National Bureau of Economic Research Working Paper Series VL - No. 17983 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17983 L1 - http://www.nber.org/papers/w17983.pdf N1 - Author contact info: Bronwyn H. Hall Dept. of Economics 549 Evans Hall UC Berkeley Berkeley, CA 94720-3880 Tel: 510/642-3878 Fax: 510/548-5561 E-Mail: bhhall@nber.org Christian Helmers Universidad Carlos III de Madrid c/. Madrid, 126 28903 Getafe, Spain E-Mail: christian.helmers@uc3m.es Mark Rogers deceased E-Mail: news.bhh@gmail.com Vania Sena Southend Campus Elmer Approach Southend-on-Sea SS1 1LW UK E-Mail: vsena@essex.ac.uk AB - We survey the economic literature, both theoretical and empirical, on the choice of intellectual property protection by firms. Our focus is on the tradeoffs between using patents and disclosing versus the use of secrecy, although we also look briefly at the use of other means of formal intellectual property protection. ER - TY - JOUR AU - Attanasio,Orazio AU - Hurst,Erik AU - Pistaferri,Luigi TI - The Evolution of Income, Consumption, and Leisure Inequality in The US, 1980-2010 JF - National Bureau of Economic Research Working Paper Series VL - No. 17982 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17982 L1 - http://www.nber.org/papers/w17982.pdf N1 - Author contact info: Orazio Attanasio Department of Economics University College London Gower Street London WC1E 6BT UNITED KINGDOM Tel: 44/20-76795880 Fax: 44/20-79162775 E-Mail: o.attanasio@ucl.ac.uk Erik Hurst Booth School of Business University of Chicago Harper Center Chicago, IL 60637 Tel: 773/834-4073 Fax: 773/702-0458 E-Mail: erik.hurst@chicagobooth.edu Luigi Pistaferri Department of Economics 579 Serra Mall Stanford University Stanford, CA 94305-6072 Tel: 650/724-4904 Fax: 650/725-5702 E-Mail: pista@stanford.edu AB - Recent research has documented that income inequality in the United States has increased dramatically over the prior three decades. There has been less of a consensus, however, on whether the increase in income inequality was matched by an equally large increase in consumption inequality. Most researchers have studied this question using data from the Consumer Expenditure Survey (CE) and some studies have suggested that the increase in consumption inequality has been modest. Unfortunately ,there is now mounting evidence that the CE is plagued by serious non-classical measurement error, which hinders the extent to which definitive conclusions can be made about the extent to which consumption inequality has evolved over the last three decades. In this paper, we use a variety of different techniques to overcome the measurement error problems with the CE. First, we use data from the diary component of the CE, focusing on categories where measurement error has been found to be less of an issue. Second, we explore inequality measures within the CE using the value of vehicles owned, a consumption component that is considered to be measured well. Third, we try to account directly for the non-classical measurement error of the CE by comparing the spending on luxuries (entertainment) relative to necessities (food). This is similar to the recent approach taken by Browning and Crossley (2009) and Aguiar and Bils (2011). Finally, we use expenditure data from the Panel Study of Income Dynamics to explore the dynamics of alternative measures of consumption inequality. All of our different methods yield similar results. We find that consumption inequality within the U.S. between 1980 and 2010 has increased by nearly the same amount as income inequality. ER - TY - JOUR AU - Cheung,Yan Leung AU - Rau,P. Raghavendra AU - Stouraitis,Aris TI - How much do firms pay as bribes and what benefits do they get? Evidence from corruption cases worldwide JF - National Bureau of Economic Research Working Paper Series VL - No. 17981 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17981 L1 - http://www.nber.org/papers/w17981.pdf N1 - Author contact info: Yan Leung Cheung Hong Kong Baptist University Wing Lung Bank Building Department of Finance and Decision Sciences Renfrew Road, Kowloon Tong, Hong Kong E-Mail: scheung@hkbu.edu.hk Raghavendra Rau Cambridge Judge Business School, Trumpington Street, University of Cambridge, Cambridgeshire, CB2 1AG United Kingdom E-Mail: r.rau@jbs.cam.ac.uk Aris Stouraitis Hong Kong Baptist University Rm 812, Wing Lung Bank Building Department of Finance and Decision Sciences Renfrew Road, Kowloon Tong, Hong Kong E-Mail: stoura@hkbu.edu.hk M3 - presented at "Causes and Consequences of Corporate Culture", December 8-9, 2011 AB - We analyze a hand-collected sample of 166 prominent bribery cases, involving 107 publicly listed firms from 20 stock markets that have been reported to have bribed government officials in 52 countries worldwide during 1971-2007. We focus on the initial date of award of the contract for which the bribe was paid (rather than of the revelation of the bribery). Our data enable us to describe in detail the mechanisms through which bribes affect firm value. We find that firm performance, the rank of the politicians bribed, as well as bribe-paying and bribe-taking country characteristics affect the magnitude of the bribes and the benefits that firms derive from them. ER - TY - JOUR AU - Damsgaard,Erika Farnstrand AU - Thursby,Marie C. TI - University Entrepreneurship and Professor Privilege JF - National Bureau of Economic Research Working Paper Series VL - No. 17980 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17980 L1 - http://www.nber.org/papers/w17980.pdf N1 - Author contact info: Erika Farnstrand Damsgaard Research Institute of Industrial Economics Box 55665 SE-102 15 Stockholm, Sweden E-Mail: erika.farnstrand.damsgaard@ifn.se Marie C. Thursby College of Management Georgia Institute of Technology 800 West Peachtree Street, NW Atlanta, GA 30308-1149 Tel: 404/894-6249 Fax: 404/385-4894 E-Mail: marie.thursby@mgt.gatech.edu AB - This paper analyzes how institutional differences affect university entrepreneurship. We focus on ownership of faculty inventions, and compare two institutional regimes; the US and Sweden. In the US, the Bayh Dole Act gives universities the right to own inventions from publicly funded research, whereas in Sweden, the professor privilege gives the university faculty this right. We develop a theoretical model and examine the effects of institutional differences on modes of commercialization; entrepreneurship or licenses to established firms, as well as on probabilities of successful commercialization. We find that the US system is less conducive to entrepreneurship than the Swedish system if established firms have some advantage over faculty startups, and that on average the probability of successful commercialization is somewhat higher in the US. We also use the model to perform four policy experiments as suggested by recent policy debates in both countries. ER - TY - JOUR AU - Cantoni,Davide AU - Yuchtman,Noam TI - Medieval Universities, Legal Institutions, and the Commercial Revolution JF - National Bureau of Economic Research Working Paper Series VL - No. 17979 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17979 L1 - http://www.nber.org/papers/w17979.pdf N1 - Author contact info: Davide Cantoni Seminar für Wirtschaftsgeschichte University of Munich 80539 Munich Germany E-Mail: cantoni@lmu.de Noam Yuchtman Haas School of Business University of California, Berkeley Berkeley, CA 94720 Tel: 510/642-4632 E-Mail: yuchtman@haas.berkeley.edu AB - We present new data documenting medieval Europe's "Commercial Revolution'' using information on the establishment of markets in Germany. We use these data to test whether medieval universities played a causal role in expanding economic activity, examining the foundation of Germany's first universities after 1386 following the Papal Schism. We find that the trend rate of market establishment breaks upward in 1386 and that this break is greatest where the distance to a university shrank most. There is no differential pre-1386 trend associated with the reduction in distance to a university, and there is no break in trend in 1386 where university proximity did not change. These results are not affected by excluding cities close to universities or cities belonging to territories that included universities. Universities provided training in newly-rediscovered Roman and Canon law; students with legal training served in positions that reduced the uncertainty of trade in medieval Europe. We argue that training in the law, and the consequent development of legal and administrative institutions, was an important channel linking universities and greater economic activity. ER - TY - JOUR AU - Crucini,Mario J. AU - Telmer,Christopher I. TI - Microeconomic Sources of Real Exchange Rate Variability JF - National Bureau of Economic Research Working Paper Series VL - No. 17978 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17978 L1 - http://www.nber.org/papers/w17978.pdf N1 - Author contact info: Mario J. Crucini Department of Economics Vanderbilt University Box 1819 Station B Nashville, TN 37235-1819 Tel: 615/322-7357 Fax: 615/343-8459 E-Mail: mario.j.crucini@vanderbilt.edu Christopher Telmer Tepper School of Business Frew and Tech Streets Carnegie-Mellon University Pittsburgh, PA 15213 E-Mail: chris.telmer@cmu.edu AB - We provide three sets of variance decompositions on microeconomic international relative price data. The first shows that the overall distribution of absolute deviations from the Law of One Price (LOP) is dominated by cross-sectional variation in long-term averages, not by time-series variation around the long-term averages. The second shows that time-series variation in changes in LOP deviations is dominated by idiosyncratic, goods-specific variation, not by aggregate variation such as that arising from nominal exchange rates. The third shows that time-series and cross-sectional variance are connected across goods. Goods that exhibit high cross-sectional variance also exhibit high time-series variance. Moreover, when this connection is made conditional on the tradeability of a goods, a two-factor structure for the goods-specific cross-section is revealed. We argue that this factor structure, in addition to our other variance decompositions, is informative for the construction of models that can synthesize the micro and macroeconomic behavior of relative prices. ER - TY - JOUR AU - Allcott,Hunt AU - Mullainathan,Sendhil AU - Taubinsky,Dmitry TI - Externalities, Internalities, and the Targeting of Energy Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 17977 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17977 L1 - http://www.nber.org/papers/w17977.pdf N1 - Author contact info: Hunt Allcott Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10012 E-Mail: hunt.allcott@nyu.edu Sendhil Mullainathan Department of Economics Littauer M-18 Harvard University Cambridge, MA 02138 Tel: 617/496-2720 Fax: 617/495-7730 E-Mail: mullain@fas.harvard.edu Dmitry Taubinsky Harvard University E-Mail: taubinsk@fas.harvard.edu AB - We show how the traditional logic of Pigouvian externality taxes changes if consumers under-value energy costs when buying energy-using durables such as cars and air conditioners. First, with undervaluation, there is an "Internality Dividend" from externality taxes: aside from reducing the provision of public bads, they also reduce allocative inefficiencies caused by consumers' underinvestment in energy efficient durables. Second, although Pigouvian taxes are clearly the preferred policy mechanism when externalities are the only market failure, undervaluation provides an "Internality Rationale" for alternative policies such as product subsidies that reduce the relative price of energy efficient durables. However, when some consumers misoptimize and others do not, a crucial quantity for policy analysis is the average marginal internality: the extent to which a policy preferentially targets misoptimizing consumers. As an example of the importance of the average marginal internality, we carry out a randomized field experiment to provide rebates for energy efficient lightbulbs and illustrate how the welfare effects of the rebate depend significantly on whether consumers that undervalue energy costs are more or less elastic. ER - TY - JOUR AU - Costinot,Arnaud AU - Vogel,Jonathan AU - Wang,Su TI - Global Supply Chains and Wage Inequality JF - National Bureau of Economic Research Working Paper Series VL - No. 17976 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17976 L1 - http://www.nber.org/papers/w17976.pdf N1 - Author contact info: Arnaud Costinot Department of Economics MIT, E52-243B 50 Memorial Drive Cambridge MA 02142-1347 Tel: 617/324-1712 Fax: 617/253-1330 E-Mail: costinot@mit.edu Jonathan Vogel Department of Economics Columbia University 420 West 118th Street New York, NY 10027 Tel: 212/854-9925 Fax: 212/854-8059 E-Mail: jvogel@columbia.edu Su Wang MIT E-Mail: su_wang@mit.edu AB - A salient feature of globalization in recent decades is the emergence of "global supply chains" in which different countries specialize in different stages of a sequential production process. In Arnaud Costinot, Jonathan Vogel and Su Wang (2011), CVW hereafter, we have developed a simple theory of trade with sequential production to shed light on how global supply chains affect the interdependence of nations. In this paper we develop a multi-factor extension of CVW to explore how the emergence of global supply chains may affect wage inequality within countries. Our main theoretical prediction is that the emergence of global supply chains has opposite effects on wage inequality among workers employed at the bottom and the top of these chains. This suggests that the consequences of globalization on wage inequality may be very different in primary sectors like agriculture or mining than in manufacturing sectors. ER - TY - JOUR AU - Kogan,Leonid AU - Papanikolaou,Dimitris TI - A Theory of Firm Characteristics and Stock Returns: The Role of Investment-Specific Shocks JF - National Bureau of Economic Research Working Paper Series VL - No. 17975 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17975 L1 - http://www.nber.org/papers/w17975.pdf N1 - Author contact info: Leonid Kogan MIT Sloan School of Management 100 Main Street, E62-636 Cambridge, MA 02142 Tel: 617/504-9728 Fax: 617/258-6855 E-Mail: lkogan@mit.edu Dimitris Papanikolaou Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-7704 E-Mail: d-papanikolaou@kellogg.northwestern.edu AB - We provide a theoretical model linking firm characteristics and expected returns. The key ingredient of our model is technological shocks embodied in new capital (IST shocks), which affect the profitability of new investments. Firms' exposure to IST shocks is endogenously determined by the fraction of firm value due to growth opportunities. In our structural model, several firm characteristics - Tobin's Q, past investment, earnings-price ratios, market betas, and idiosyncratic volatility of stock returns – help predict the share of growth opportunities in the firm's market value, and are therefore correlated with the firm's exposure to IST shocks and risk premia. Our calibrated model replicates: i) the predictability of returns by firm characteristics; ii) the comovement of stock returns on firms with similar characteristics; iii) the failure of the CAPM to price portfolio returns of firms sorted on characteristics; iv) the time-series predictability of market portfolio returns by aggregate investment and valuation ratios; and v) a downward sloping term structure of risk premia for dividend strips. Our model delivers testable predictions about the behavior of firm-level real variables – investment and output growth – that are supported by the data. ER - TY - JOUR AU - Hurd,Michael D. AU - Rohwedder,Susann TI - Measuring Total Household Spending in a Monthly Internet Survey: Evidence from the American Life Panel JF - National Bureau of Economic Research Working Paper Series VL - No. 17974 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17974 L1 - http://www.nber.org/papers/w17974.pdf N1 - Author contact info: Michael D. Hurd RAND Corporation 1776 Main Street Santa Monica, CA 90407 Tel: 310/451-6945 Fax: 310/451-6923 E-Mail: mhurd@rand.org Susann Rohwedder RAND 1776 Main Street P.O. Box 2138 Santa Monica, CA 90407 Tel: 310-393 0411,ext. 7885 Fax: 310-451-6923 E-Mail: Susann_Rohwedder@rand.org AB - Beginning in May 2009 we fielded a monthly Internet survey designed to measure total household spending as the aggregate of about 40 spending components. This paper reports on a number of outcomes from 30 waves of data collection. These outcomes include sample attrition, indicators of data quality such as item nonresponse and the variance in total spending, and substantive results such as the trajectory of total spending and the trajectories of some components of spending. We conclude that high-frequency surveying for total spending is feasible and that the resulting data show expected patterns of levels and change. ER - TY - JOUR AU - Hurd,Michael D. AU - Rohwedder,Susann TI - Stock Price Expectations and Stock Trading JF - National Bureau of Economic Research Working Paper Series VL - No. 17973 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17973 L1 - http://www.nber.org/papers/w17973.pdf N1 - Author contact info: Michael D. Hurd RAND Corporation 1776 Main Street Santa Monica, CA 90407 Tel: 310/451-6945 Fax: 310/451-6923 E-Mail: mhurd@rand.org Susann Rohwedder RAND 1776 Main Street P.O. Box 2138 Santa Monica, CA 90407 Tel: 310-393 0411,ext. 7885 Fax: 310-451-6923 E-Mail: Susann_Rohwedder@rand.org AB - Background: The fact that many individuals inexplicably fail to buy stocks, despite the historical evidence for a good return on investment has been referred to as the stock market puzzle. However, measurements of the subjective probability of a gain show that people are more pessimistic than historical outcomes would suggest. Further, expectations of future stock price increases apparently depend on old information, which would seem to be at odds with rational expectations in the context of efficient markets. To shed light on these apparent paradoxes, we analyzed the relationships between actual stock market price changes and the subjective probability of price changes, and between the subjective probability of price changes and the likelihood of engaging in stock trading. Approach: Drawing on 31 waves of longitudinal data on investment behavior from the American Life Panel surveys from November 2008 to the present, we tracked high frequency changes in expectations at the individual level and related them to high frequency changes in stock market prices. We analyzed both individuals who held stock in retirement accounts and those who held stocks outside of these accounts. Results: Changes in the subjective probability for one-year and 10-year gains in stock prices correlated with the Standard and Poor 500 Index with lags ranging from changes during the most recent week to changes more than a month before. This relationship was stronger among those who professed to follow the stock market and to have good knowledge than among those whose understanding is poor. Among individuals who held stock outside of retirement accounts, the likelihood of buying and selling stock was more strongly associated with recent stock behavior than among those who held stocks only within retirement accounts. Conclusions: On average, subjective expectations of stock market behavior depend on stock price changes. Furthermore, stock trading responds to changes in expectations even when the change in expectations was several weeks before the trade. These results suggest that expectations and trading are related to stock price changes in an intertemporally complex manner. Our findings also confirm that expectations about stock market gains are pessimistic, which would imply that many people simply view savings accounts as a better investment. We conclude that we need a better understanding of expectation formation and how those expectations are translated into choice. ER - TY - JOUR AU - Autor,David H. AU - Houseman,Susan N. AU - Kerr,Sari Pekkala TI - The Effect of Work First Job Placements on the Distribution of Earnings: An Instrumental Variable Quantile Regression Approach JF - National Bureau of Economic Research Working Paper Series VL - No. 17972 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17972 L1 - http://www.nber.org/papers/w17972.pdf N1 - Author contact info: David Autor Department of Economics MIT, E52-371 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/258-7698 Fax: 617/253-1330 E-Mail: dautor@mit.edu Susan Houseman W.E. Upjohn Institute 300 S. Westnedge Av. Kalamazoo, MI 49007 E-Mail: houseman@upjohn.org Sari Pekkala Kerr Wellesley College (WCW) 106 Central Street Wellesley, MA 02481 E-Mail: sari.pekkala@gmail.com AB - Federal and state employment programs for low-skilled workers typically emphasize rapid placement of participants into jobs and often place a large fraction of participants into temporary-help agency jobs. Using unique administrative data from Detroit's welfare-to-work program, we apply the Chernozhukov-Hansen instrumental variables quantile regression (IVQR) method to estimate the causal effects of welfare-to-work job placements on the distribution of participants' earnings. We find that neither direct-hire nor temporary-help job placements significantly affect the lower tail of the earnings distribution. Direct-hire placements, however, substantially raise the upper tail, yielding sizable earnings increases for more than fifty percent of participants over the medium-term (one to two years following placement). Conversely, temporary-help placements have zero or negative earnings impacts at all quantiles, and these effects are economically large and significant at higher quantiles. In net, we find that the widespread practice of placing disadvantaged workers into temporary-help jobs is an ineffective tool for improving earnings and, moreover, that programs focused solely on job placement fail to improve earnings among those who are hardest to serve. Methodologically, one surprising result is that a reduced-form quantile IV approach, akin to two-step instrumental variables, produces near-identical point estimates to the structural IVQR approach, which is based on much stronger assumptions. ER - TY - JOUR AU - Basu,Susanto AU - Pascali,Luigi AU - Schiantarelli,Fabio AU - Serven,Luis TI - Productivity and the Welfare of Nations JF - National Bureau of Economic Research Working Paper Series VL - No. 17971 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17971 L1 - http://www.nber.org/papers/w17971.pdf N1 - Author contact info: Susanto Basu Department of Economics Boston College 140 Commonwealth Avenue Chestnut Hill, MA 02467 Tel: 617/552-2182 Fax: 617/552-2308 E-Mail: susanto.basu@bc.edu Luigi Pascali Department of Economics Universitat Pompeu Fabra Ramon Trias Fargas, 25-27 08005-Barcelona E-Mail: luigi.pascali@upf.edu Fabio Schiantarelli Department of Economics Boston College 140 Commonwealth Avenue Chestnut Hill, MA 02467 Tel: 617-5524512 Fax: 617-5522308 E-Mail: schianta@bc.edu Luis Serven The World Bank 1818 H St NW Washington DC 20433 Tel: 202 473 7451 E-Mail: lserven@worldbank.org AB - We show how to relate the welfare of a country's infinitely-lived representative consumer to observable aggregate data. To a first order, welfare is summarized by total factor productivity and by the capital stock per capita. These variables suffice to calculate welfare changes within a country, as well as welfare differences across countries. The result holds regardless of the type of production technology and the degree of market competition. It applies to open economies as well, if total factor productivity is constructed using domestic absorption, instead of gross domestic product, as the measure of output. It also requires that total factor productivity be constructed with prices and quantities as perceived by consumers, not firms. Thus, factor shares need to be calculated using after-tax wages and rental rates and they will typically sum to less than one. These results are used to calculate welfare gaps and growth rates in a sample of developed countries with high-quality total factor productivity and capital data. Under realistic scenarios, the U.K. and Spain had the highest growth rates of welfare during the sample period 1985-2005, but the U.S. had the highest level of welfare. ER - TY - JOUR AU - Fosgerau,Mogens AU - McFadden,Daniel L. AU - Bierlaire,Michel TI - Choice Probability Generating Functions JF - National Bureau of Economic Research Working Paper Series VL - No. 17970 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17970 L1 - http://www.nber.org/papers/w17970.pdf N1 - Author contact info: Mogens Fosgerau Technical University of Denmark Bygningstorvet 116B Building , room 115C 2800 Kgs. Lyngby Denmark E-Mail: mf@transport.dtu.dk Daniel L. McFadden University of California, Berkeley Department of Economics 549 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-8428 Fax: 510/642-0638 E-Mail: mcfadden@econ.berkeley.edu Michel Bierlaire EPFL ENAC INTER TRANSP-OR GC B3 454 (Bâtiment GC) Station 18 CH-1015 Lausanne Switzerland E-Mail: michel.bierlaire@epfl.ch AB - This paper considers discrete choice, with choice probabilities coming from maximization of preferences from a random utility field perturbed by additive location shifters (ARUM). Any ARUM can be characterized by a choice-probability generating function (CPGF) whose gradient gives the choice probabilities, and every CPGF is consistent with an ARUM. We relate CPGF to multivariate extreme value distributions, and review and extend methods for constructing CPGF for applications. ER - TY - JOUR AU - Costinot,Arnaud AU - Donaldson,Dave TI - Ricardo's Theory of Comparative Advantage: Old Idea, New Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 17969 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17969 L1 - http://www.nber.org/papers/w17969.pdf N1 - Author contact info: Arnaud Costinot Department of Economics MIT, E52-243B 50 Memorial Drive Cambridge MA 02142-1347 Tel: 617/324-1712 Fax: 617/253-1330 E-Mail: costinot@mit.edu Dave Donaldson MIT Department of Economics 50 Memorial Drive, E52-243G Cambridge, MA 02142-1347 Tel: 617/253-4790 Fax: 617/253-1330 E-Mail: ddonald@mit.edu AB - When asked to name one proposition in the social sciences that is both true and non-trivial, Paul Samuelson famously replied: 'Ricardo's theory of comparative advantage'. Truth, however, in Samuelson's reply refers to the fact that Ricardo's theory of comparative advantage is mathematically correct, not that it is empirically valid. The goal of this paper is to assess the empirical performance of Ricardo's ideas. We use novel agricultural data that describe the productivity in 17 crops of 1.6 million parcels of land in 55 countries around the world. Crucially, this dataset contains information about the productivity of each parcel of land in all crops, not just those that are currently being grown. This direct information about relative productivity differences across economic activities allows us to compute, for the first time, the output predicted by Ricardo's theory of comparative advantage. Despite all of the real-world considerations from which this theory abstracts, we find that Ricardo's theory of comparative advantage has significant explanatory power in the data, at least within the scope of our analysis. ER - TY - JOUR AU - Banerjee,Abhijit AU - Mullainathan,Sendhil AU - Hanna,Rema TI - Corruption JF - National Bureau of Economic Research Working Paper Series VL - No. 17968 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17968 L1 - http://www.nber.org/papers/w17968.pdf N1 - Author contact info: Abhijit Banerjee MIT Department of Economics E52-252d 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-8855 Fax: 617/253-1330 E-Mail: banerjee@mit.edu Sendhil Mullainathan Department of Economics Littauer M-18 Harvard University Cambridge, MA 02138 Tel: 617/496-2720 Fax: 617/495-7730 E-Mail: mullain@fas.harvard.edu Rema Hanna Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/496-1140 Fax: 617/496-5747 E-Mail: Rema_Hanna@hks.harvard.edu AB - In this paper, we provide a new framework for analyzing corruption in public bureaucracies. The standard way to model corruption is as an example of moral hazard, which then leads to a focus on better monitoring and stricter penalties with the eradication of corruption as the final goal. We propose an alternative approach which emphasizes why corruption arises in the first place. Corruption is modeled as a consequence of the interaction between the underlying task being performed by bureaucrat, the bureaucrat's private incentives and what the principal can observe and control. This allows us to study not just corruption but also other distortions that arise simultaneously with corruption, such as red-tape and ultimately, the quality and efficiency of the public services provided, and how these outcomes vary depending on the specific features of this task. We then review the growing empirical literature on corruption through this perspective and provide guidance for future empirical research. ER - TY - JOUR AU - Woodford,Michael TI - Inflation Targeting and Financial Stability JF - National Bureau of Economic Research Working Paper Series VL - No. 17967 PY - 2012 Y2 - April 2012 UR - http://www.nber.org/papers/w17967 L1 - http://www.nber.org/papers/w17967.pdf N1 - Author contact info: Michael Woodford Department of Economics Columbia University 420 W. 118th Street New York, NY 10027 Tel: 212/854-1094 Fax: 212-854-8059 E-Mail: mw2230@columbia.edu AB - A number of commentators have argued that the desirability of inflation targeting as a framework for monetary policy analysis should be reconsidered in light of the global financial crisis, on the ground that it requires neglect of the implications of monetary policy for financial stability. This paper argues that monetary policy may indeed affect the severity of risks to financial stability, but that it is possible to generalize an inflation targeting framework to take account of financial stability concerns alongside traditional stabilization objectives. The resulting framework can still be viewed as a form of flexible inflation targeting; in particular, the paper proposes a target criterion that would still imply an invariant long-run price level, despite fluctuations over time in risks to financial stability or even the occurrence of occasional financial crises. ER - TY - JOUR AU - Rothstein,Jesse TI - The Labor Market Four Years Into the Crisis: Assessing Structural Explanations JF - National Bureau of Economic Research Working Paper Series VL - No. 17966 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17966 L1 - http://www.nber.org/papers/w17966.pdf N1 - Author contact info: Jesse Rothstein Goldman School of Public Policy University of California, Berkeley 2607 Hearst Avenue Berkeley, CA 94720-7320 Tel: 510/643-8561 Fax: 510/643-9657 E-Mail: rothstein@berkeley.edu AB - Four years after the beginning of the Great Recession, the labor market remains historically weak. Many observers have concluded that "structural" impediments to recovery bear some of the blame. This paper reviews such structural explanations. I find that there is little evidence supporting these hypotheses, and that the bulk of the evidence is more consistent with the hypothesis that continued poor performance is primarily attributable to shortfalls in the aggregate demand for labor. ER - TY - JOUR AU - Kearney,Melissa Schettini AU - Levine,Phillip B. TI - Why is the Teen Birth Rate in the United States so High and Why Does it Matter? JF - National Bureau of Economic Research Working Paper Series VL - No. 17965 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17965 L1 - http://www.nber.org/papers/w17965.pdf N1 - Author contact info: Melissa Schettini Kearney Department of Economics University of Maryland 3105 Tydings Hall College Park, MD 20742 Tel: 301/405-6202 E-Mail: kearney@econ.umd.edu Phillip B. Levine Department of Economics Wellesley College 106 Central Street Wellesley, MA 02481 Tel: 781/283-2162 Fax: 781/283-2177 E-Mail: plevine@wellesley.edu AB - This paper examines two aspects of teen childbearing in the United States. First, it reviews and synthesizes the evidence on the reasons why teen birth rates are so uniquely high in the United States and especially in some states. Second, it considers why and how it matters. We argue that economists' typical explanations are unable to account for any sizable share of the geographic variation. We describe some recent analysis indicating that the combination of being poor and living in a more unequal (and less mobile) location, like the United States, leads young women to choose early, non-marital childbearing at elevated rates, potentially because of their lower expectations of future economic success. Consistent with this view, the most rigorous studies on the topic find that teen childbearing has very little, if any, direct negative economic consequence. If it is explained by the low economic trajectory that some young women face, then it makes sense that having a child as a teen would not be an additional cause of poor economic outcomes. These findings lead us to conclude that the high rate of teen childbearing in the United States matters mostly because it is a marker of larger, underlying social problems. ER - TY - JOUR AU - Kearney,Melissa Schettini AU - Levine,Phillip B. TI - Explaining Recent Trends in the U.S. Teen Birth Rate JF - National Bureau of Economic Research Working Paper Series VL - No. 17964 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17964 L1 - http://www.nber.org/papers/w17964.pdf N1 - Author contact info: Melissa Schettini Kearney Department of Economics University of Maryland 3105 Tydings Hall College Park, MD 20742 Tel: 301/405-6202 E-Mail: kearney@econ.umd.edu Phillip B. Levine Department of Economics Wellesley College 106 Central Street Wellesley, MA 02481 Tel: 781/283-2162 Fax: 781/283-2177 E-Mail: plevine@wellesley.edu AB - We investigate possible explanations for the large decline in U.S. teen childbearing that occurred in the twenty years following the 1991 peak. Our review of previous evidence and the results of new analyses presented here leads to the following main set of observations. First, the observed decline in teen childbearing is even more surprising given the increasing share of Hispanic teens, who have higher birth rates. Second, we find that a reduction in sexual activity and an increase in contraceptive use contributed to the decline roughly equally. Third, we are able to identify a statistically discernible impact of declining welfare benefits and expanded access to family planning services through Medicaid, but combined they can only account for 12 percent of the observed decline in teen childbearing between 1991 and 2008. We are unable to find any impact of other policies (including abstinence only or mandatory sex education) or labor market conditions. In the end we conclude that the standard factors which are claimed to be related to the rate at which teens give birth appear to explain little of the recent trend. ER - TY - JOUR AU - Bo,Chen AU - Jacks,David S. TI - Trade, Variety, and Immigration JF - National Bureau of Economic Research Working Paper Series VL - No. 17963 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17963 L1 - http://www.nber.org/papers/w17963.pdf N1 - Author contact info: Bo Chen Trade Division, SIBA 777 Guo Ding Road Shanghai 200433 P.R. China E-Mail: chenbo1947@gmail.com David S. Jacks Department of Economics Simon Fraser University 8888 University Drive Burnaby, BC V5A 1S6 CANADA Tel: 778/782-5392 Fax: 778/782-5944 E-Mail: dsjacks@gmail.com AB - What are the gains from international trade? And how do immigrants influence this process? While economists have considered these questions before, particularly in the context of aggregate trade flows, there has been no work assessing the relation between immigration and international trade in varieties—that is, the trade of particular goods from particular geographic areas. We consider the case of Canada, document its impressive experience with import variety growth in the period from 1988 to 2007, and relate this variety growth to the process of immigration. We find that import varieties grew 76%, that this growth is associated with a welfare gain to Canadian consumers as large as 28%, and that enhanced immigration flows may be responsible for 25% of this variety growth and its attendant welfare gains for native-born Canadians. ER - TY - JOUR AU - House,Christopher L. AU - Zhang,Jing TI - Layoffs, Lemons and Temps JF - National Bureau of Economic Research Working Paper Series VL - No. 17962 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17962 L1 - http://www.nber.org/papers/w17962.pdf N1 - Author contact info: Christopher House University of Michigan Department of Economics 238 Lorch Hall Ann Arbor, MI 48109-1220 Tel: 734/764-2364 Fax: 734/764-2769 E-Mail: chouse@umich.edu Jing Zhang University of Michigan Department of Economics 611 Tappan Street Ann Arbor, MI 48109-1220 E-Mail: jzhang@umich.edu AB - We develop a dynamic equilibrium model of labor demand with adverse selection. Firms learn the quality of newly hired workers after a period of employment. Adverse selection makes it costly to hire new workers and to release productive workers. As a result, firms hoard labor and under-react to labor demand shocks. The adverse selection problem also creates a market for temporary workers. In equilibrium, firms hire a buffer stock of permanent workers and respond to changing business conditions by varying their temp workers. A hiring subsidy or tax can improve welfare by discouraging firms from hoarding too many productive workers. ER - TY - JOUR AU - Hanson,Gordon H. TI - The Rise of Middle Kingdoms: Emerging Economies in Global Trade JF - National Bureau of Economic Research Working Paper Series VL - No. 17961 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17961 L1 - http://www.nber.org/papers/w17961.pdf N1 - Author contact info: Gordon H. Hanson IR/PS 0519 University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0519 Tel: 858/822-5087 Fax: 858/534-3939 E-Mail: gohanson@ucsd.edu AB - In this paper, I examine changes in international trade associated with the integration of low- and middle-income countries into the global economy. Led by China and India, the share of developing economies in global exports more than doubled between 1994 and 2008. One feature of new trade patterns is greater South-South trade. China and India have booming demand for imported raw materials, which they use to build cities and factories. Industrialization throughout the South has deepened global production networks, contributing to greater trade in intermediate inputs. A second feature of new trade patterns is the return of comparative advantage as a driver of global commerce. Growth in low- and middle-income nations makes specialization according to comparative advantage more important for the global composition of trade, as North-South and South-South commerce overtakes North-North flows. China’s export specialization evolves rapidly over time, revealing a capacity to speed up product ladders. Most developing countries hyper-specialize in handful of export products. The emergence of low- and middle-income countries in trade reveals significant gaps in knowledge about the deep empirical determinants of export specialization, the dynamics of specialization patterns, and why South-South and North-North trade differ. ER - TY - JOUR AU - Bond,Timothy N. AU - Lang,Kevin TI - The Evolution of the Black-White Test Score Gap in Grades K-3: The Fragility of Results JF - National Bureau of Economic Research Working Paper Series VL - No. 17960 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17960 L1 - http://www.nber.org/papers/w17960.pdf N1 - Author contact info: Timothy N. Bond Department of Economics Boston University 270 Bay State Road Boston, MA 02215 E-Mail: timbond@bu.edu Kevin Lang Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-5694 Fax: 617/353-4001 E-Mail: lang@bu.edu AB - Although both economists and psychometricians typically treat them as interval scales, test scores are reported using ordinal scales. Using the Early Childhood Longitudinal Study and the Children of the National Longitudinal Survey, we examine the effect of order-preserving scale transformations on the evolution of the black-white reading test score gap from kindergarten entry through third grade. Plausible transformations reverse the growth of the gap in the CNLSY and greatly mitigate it in the ECLS-K during early school years. All growth from entry through first grade and a nontrivial proportion from first to third grade probably reflects scaling decisions. ER - TY - JOUR AU - Jin,Ginger Zhe AU - Rysman,Marc TI - Platform Pricing at Sports Card Conventions JF - National Bureau of Economic Research Working Paper Series VL - No. 17959 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17959 L1 - http://www.nber.org/papers/w17959.pdf N1 - Author contact info: Ginger Z. Jin University of Maryland Department of Economics 3105 Tydings Hall College Park, MD 20742-7211 Tel: 301/405-3484 Fax: 301/405-3542 E-Mail: jin@econ.umd.edu Marc Rysman Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617-353-3086 Fax: 617-353-4449 E-Mail: mrysman@bu.edu AB - We study a new data set of US sports card conventions in order to evaluate the pricing theory of two-sided markets. Conventions are two-sided because organizers must set fees to attract both consumers and dealers. We have detailed information on consumer price, dealer price and, since most conventions are local, the market structure for conventions. We present several findings: first, consumer pricing decreases with competition at any reasonable distance, but pricing to dealers is insensitive to competition and in longer distances even increases with competition. Second, when consumer price is zero (and thus constrained), dealer price decreases more strongly with competition. These results are compatible with existing models of two-sided markets, but are difficult to explain without such models. ER - TY - JOUR AU - Bachmann,Rüdiger AU - Berg,Tim O. AU - Sims,Eric R. TI - Inflation Expectations and Readiness to Spend: Cross-Sectional Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 17958 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17958 L1 - http://www.nber.org/papers/w17958.pdf N1 - Author contact info: Ruediger Bachmann Department of Economics University of Michigan Lorch Hall 335 A Ann Arbor, MI 48109-1220 Tel: +1 (734) 764-0241 E-Mail: rudib@umich.edu Tim Berg Ifo Institute Poschingerstr. 5 81679 Munich Germany E-Mail: berg@ifo.de Eric R. Sims Department of Economics University of Notre Dame 723 Flanner Hall South Bend, IN 46556 Tel: 574/631-6309 Fax: 574/631-4783 E-Mail: esims1@nd.edu AB - There have recently been suggestions for monetary policy to engineer higher inflation expectations so as to stimulate current spending. But what is the empirical relationship between inflation expectations and spending? We use the underlying micro data from the Michigan Survey of Consumers to test whether increased inflation expectations are indeed associated with greater reported readiness to spend. Cross-sectional data deliver the necessary variation to test whether the relationship between inflation expectations and spending changes in the recent zero lower bound regime compared to normal times, as suggested by many standard models. We find that the impact of inflation expectations on the reported readiness to spend on durable goods is statistically insignificant and small in absolute value when compared to other variables, such as household income or expected business conditions. Moreover, it appears that higher expected price changes have an adverse impact on the reported readiness to spend. A one percent increase in expected inflation reduces the probability that households have a positive attitude towards spending by about 0.1 percentage points. At the zero lower bound this small adverse effect remains, and is, if anything, slightly stronger. We also extend our analysis to the reported readiness to spend on cars and houses and obtain similar results. Altogether our results tell a cautionary tale for monetary (or fiscal) policy designed to engineer inflation expectations in order to generate greater current spending. ER - TY - JOUR AU - Al-Ubaydli,Omar AU - List,John A. TI - On the Generalizability of Experimental Results in Economics JF - National Bureau of Economic Research Working Paper Series VL - No. 17957 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17957 L1 - http://www.nber.org/papers/w17957.pdf N1 - Author contact info: Omar Al-Ubaydli Department of Economics and Mercatus Center George Mason University E-Mail: omar@omar.ec John List Department of Economics University of Chicago 1126 East 59th Chicago, IL 60637 Tel: 301/405-1288 Fax: 301/314-9091 E-Mail: jlist@uchicago.edu AB - Economists are increasingly turning to the experimental method as a means to estimate causal effects. By using randomization to identify key treatment effects, theories previously viewed as untestable are now scrutinized, efficacy of public policies are now more easily verified, and stakeholders can swiftly add empirical evidence to aid their decision-making. This study provides an overview of experimental methods in economics, with a special focus on developing an economic theory of generalizability. Given that field experiments are in their infancy, our secondary focus pertains to a discussion of the various parameters that they identify, and how they add to scientific knowledge. We conclude that until we conduct more field experiments that build a bridge between the lab and the naturally-occurring settings of interest we cannot begin to make strong conclusions empirically on the crucial question of generalizability from the lab to the field. ER - TY - JOUR AU - Eichenbaum,Martin S. AU - Jaimovich,Nir AU - Rebelo,Sergio AU - Smith,Josephine TI - How Frequent Are Small Price Changes? JF - National Bureau of Economic Research Working Paper Series VL - No. 17956 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17956 L1 - http://www.nber.org/papers/w17956.pdf N1 - Author contact info: Martin S. Eichenbaum Department of Economics Northwestern University 2003 Sheridan Road Evanston, IL 60208 Tel: 847/491-8232 Fax: 847/491-7001 E-Mail: eich@northwestern.edu Nir Jaimovich Department of Economics Duke University 213 Social Services Building Durham, NC 27708 Tel: 919/660-1864 E-Mail: njaimo@gmail.com Sergio Rebelo Northwestern University Kellogg School of Management Department of Finance Leverone Hall Evanston, IL 60208-2001 Tel: 847/467-2329 Fax: 847/491-5719 E-Mail: s-rebelo@northwestern.edu Josephine Smith NYU Stern School of Business Department of Finance 44 West 4th Street, Suite 9-86 New York, NY 10012 Tel: 212-998-0171 E-Mail: jsmith@stern.nyu.edu AB - Recent empirical work suggests that small price changes are relatively common. These findings have been used to evaluate competing theories of nominal price rigidities. In this paper we use micro data from the consumer price index and a scanner data set from a national supermarket chain to reassess the importance of small price changes. We argue that the vast majority of these changes are due to measurement error. We conclude that small price changes are too small a phenomenon for macro modelers to be concerned with. ER - TY - JOUR AU - Bate,Roger AU - Jin,Ginger Zhe AU - Mathur,Aparna TI - Unveiling the Mystery of Online Pharmacies: an Audit Study JF - National Bureau of Economic Research Working Paper Series VL - No. 17955 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17955 L1 - http://www.nber.org/papers/w17955.pdf N1 - Author contact info: Roger Bate American Enterprise Institute 1150 Seventeenth Street, NW Washington DC 20036 E-Mail: rbate@aei.org Ginger Z. Jin University of Maryland Department of Economics 3105 Tydings Hall College Park, MD 20742-7211 Tel: 301/405-3484 Fax: 301/405-3542 E-Mail: jin@econ.umd.edu Aparna Mathur American Enterprise Institute 1150 Seventeenth Street, N.W. Washington, DC 20036 E-Mail: amathur@aei.org AB - This study assesses the trade-off between drug safety and price savings in online drug purchases. Focusing on five brand-name prescription drugs, we acquire 370 drug samples from 41 online pharmacies and test their authenticity. Of the 41 websites, 8 are clearly US-based and verified by the National Association of Boards of Pharmacy (NABP) or LegitScript.com. We refer to them as tier 1. Another 23 websites – referred to as tier 2 – are not verified by NABP or LegitScript but verified by PharmacyChecker.com or the Canadian International Pharmacy Association (CIPA). The remaining 10 websites are not verified by any of the four verification agencies and therefore classified as tier 3. Most tier 2 and tier 3 websites are foreign. We have two main findings. First, according to our Raman spectrometry test, no failure of authenticity is found in drugs that came from verified websites, the only failures are Viagra from non-verified websites in tier 3. Second, within verified websites, tier 1 websites on average charge 52.5% more than tier 2 websites in final price (including shipping and handling) for the same drug and dosage except for Viagra. On Viagra, tier 1 and tier 2 websites show no difference in drug safety and price, but if one aims to get authentic Viagra, verified websites are both safer and cheaper than non-verified websites in tier 3. These findings confirm the FDA warning against rogue websites but suggest that a blanket warning against any foreign website may deny consumers substantial price savings from verified tier 2 websites. ER - TY - JOUR AU - Karlan,Dean AU - List,John A. TI - How Can Bill and Melinda Gates Increase Other People’s Donations to Fund Public Goods? JF - National Bureau of Economic Research Working Paper Series VL - No. 17954 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17954 L1 - http://www.nber.org/papers/w17954.pdf N1 - Author contact info: Dean Karlan Department of Economics Yale University P.O. Box 208269 New Haven, CT 06520-8629 Tel: 203/432-4479 Fax: 203/432-5591 E-Mail: dean.karlan@yale.edu John List Department of Economics University of Chicago 1126 East 59th Chicago, IL 60637 Tel: 301/405-1288 Fax: 301/314-9091 E-Mail: jlist@uchicago.edu AB - We develop a simple theory which formally describes how charities can resolve the information asymmetry problems faced by small donors by working with large donors to generate quality signals. To test the model, we conducted two large-scale natural field experiments. In the first experiment, a charity focusing on poverty reduction solicited donations from prior donors and either announced a matching grant from the Bill and Melinda Gates Foundation, or made no mention of a match. In the second field experiment, the same charity sent direct mail solicitations to individuals who had not previously donated to the charity, and tested whether naming the Bill and Melinda Gates Foundation as the matching donor was more effective than not identifying the name of the matching donor. The first experiment demonstrates that the matching grant condition generates more and larger donations relative to no match. The second experiment shows that providing a credible quality signal by identifying the matching donor generates even more and larger donations than not naming the matching donor. Importantly, the treatment effects persist long after the matching period, and the quality signal is quite heterogeneous—the Gates’ effect is much larger for prospective donors who had a record of giving to “poverty-oriented” charities. These two pieces of evidence support our model of quality signals as a key mechanism through which matching gifts inspire donors to give. ER - TY - JOUR AU - McFadden,Daniel L. AU - Fosgerau,Mogens TI - A theory of the perturbed consumer with general budgets JF - National Bureau of Economic Research Working Paper Series VL - No. 17953 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17953 L1 - http://www.nber.org/papers/w17953.pdf N1 - Author contact info: Daniel L. McFadden University of California, Berkeley Department of Economics 549 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-8428 Fax: 510/642-0638 E-Mail: mcfadden@econ.berkeley.edu Mogens Fosgerau Technical University of Denmark Bygningstorvet 116B Building , room 115C 2800 Kgs. Lyngby Denmark E-Mail: mf@transport.dtu.dk AB - We consider demand systems for utility-maximizing consumers facing general budget constraints whose utilities are perturbed by additive linear shifts in marginal utilities. Budgets are required to be compact but are not required to be convex. We define demand generating functions (DGF) whose subgradients with respect to these perturbations are convex hulls of the utility-maximizing demands. We give necessary as well as sufficient conditions for DGF to be consistent with utility maximization, and establish under quite general conditions that utility-maximizing demands are almost everywhere single-valued and smooth in their arguments. We also give sufficient conditions for integrability of perturbed demand. Our analysis provides a foundation for applications of consumer theory to problems with nonlinear budget constraints. ER - TY - JOUR AU - Karlan,Dean AU - Morten,Melanie AU - Zinman,Jonathan TI - A Personal Touch: Text Messaging for Loan Repayment JF - National Bureau of Economic Research Working Paper Series VL - No. 17952 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17952 L1 - http://www.nber.org/papers/w17952.pdf N1 - Author contact info: Dean Karlan Department of Economics Yale University P.O. Box 208269 New Haven, CT 06520-8629 Tel: 203/432-4479 Fax: 203/432-5591 E-Mail: dean.karlan@yale.edu Melanie Morten Yale University 27 Hillhouse Avenue New Haven, CT 06511 E-Mail: melanie.morten@yale.edu Jonathan Zinman Department of Economics Dartmouth College 314 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-0075 Fax: 603/646-2122 E-Mail: jzinman@dartmouth.edu AB - We worked with two microlenders to test impacts of randomly assigned reminders for loan repayments in the “text messaging capital of the world”. We do not find strong evidence that loss versus gain framing or messaging timing matter. Messages only robustly improve repayment when they include the loan officer’s name. This effect holds for clients serviced by the loan officer previously but not for first-time borrowers. Taken together, the results highlight the potential and limits of communications technology for mitigating moral hazard, and suggest that personal obligation/reciprocity between borrowers and bank employees can be harnessed to help overcome market failures. ER - TY - JOUR AU - Hoynes,Hilary W. AU - Miller,Douglas L. AU - Schaller,Jessamyn TI - Who Suffers During Recessions? JF - National Bureau of Economic Research Working Paper Series VL - No. 17951 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17951 L1 - http://www.nber.org/papers/w17951.pdf N1 - Author contact info: Hilary W. Hoynes Department of Economics University of California, Davis One Shields Ave. Davis, CA 95616-8578 Tel: 530/564-0505 Fax: 530/752-9382 E-Mail: hwhoynes@ucdavis.edu Douglas L. Miller University of California, Davis Department of Economics One Shields Avenue Davis, CA 95616-8578 Tel: 530/752-8490 E-Mail: dlmiller@ucdavis.edu Jessamyn Schaller University of California, Davis Department of Economics One Shields Avenue Davis, CA 95616-8578 E-Mail: jschaller@ucdavis.edu AB - In this paper we examine how business cycles affect labor market outcomes in the United States. We conduct a detailed analysis of how cycles affect outcomes differentially across persons of differing age, education, race, and gender, and we compare the cyclical sensitivity during the Great Recession to that in the early 1980s recession. We present raw tabulations and estimate a state panel data model that leverages variation across US states in the timing and severity of business cycles. We find that the impacts of the Great Recession are not uniform across demographic groups and have been felt most strongly for men, black and Hispanic workers, youth, and low education workers. These dramatic differences in the cyclicality across demographic groups are remarkably stable across three decades of time and throughout recessionary periods and expansionary periods. For the 2007 recession, these differences are largely explained by differences in exposure to cycles across industry-occupation employment. ER - TY - JOUR AU - Eccles,Robert G. AU - Ioannou,Ioannis AU - Serafeim,George TI - The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance JF - National Bureau of Economic Research Working Paper Series VL - No. 17950 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17950 L1 - http://www.nber.org/papers/w17950.pdf N1 - Author contact info: Robert G. Eccles Harvard Business School E-Mail: reccles@hbs.edu Ioannis Ioannou London Business School E-Mail: iioannou@london.edu George Serafeim 381 Morgan Hall Harvard Business School Boston MA 02163 Tel: 6174956548 Fax: 6174967387 E-Mail: gserafeim@hbs.edu M3 - presented at "Causes and Consequences of Corporate Culture", December 8-9, 2011 AB - We investigate the effect of a corporate culture of sustainability on multiple facets of corporate behavior and performance outcomes. Using a matched sample of 180 companies, we find that corporations that voluntarily adopted environmental and social policies by 1993 – termed as High Sustainability companies – exhibit fundamentally different characteristics from a matched sample of firms that adopted almost none of these policies – termed as Low Sustainability companies. In particular, we find that the boards of directors of these companies are more likely to be responsible for sustainability and top executive incentives are more likely to be a function of sustainability metrics. Moreover, they are more likely to have organized procedures for stakeholder engagement, to be more long-term oriented, and to exhibit more measurement and disclosure of nonfinancial information. Finally, we provide evidence that High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance. The outperformance is stronger in sectors where the customers are individual consumers, companies compete on the basis of brands and reputation, and in sectors where companies’ products significantly depend upon extracting large amounts of natural resources. ER - TY - JOUR AU - Mocan,Naci H. AU - Altindag,Duha Tore TI - Education, Cognition, Health Knowledge, and Health Behavior JF - National Bureau of Economic Research Working Paper Series VL - No. 17949 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17949 L1 - http://www.nber.org/papers/w17949.pdf N1 - Author contact info: Naci H. Mocan Department of Economics Louisiana State University 2119 Patrick F. Taylor Hall Baton Rouge, LA 70803-6306 Tel: 225/578-4570 E-Mail: mocan@lsu.edu Duha Tore Altindag Auburn University Department of Economics 0334 Haley Center Auburn AL, 36849 Tel: 334-844-2929 E-Mail: altindag@auburn.edu AB - Using data from the NLSY97 we analyze the impact of education on health behaviors, measured by smoking and heavy drinking. Controlling for health knowledge does not influence the impact of education on health behaviors, supporting the productive efficiency hypothesis. Although cognition, as measured by test scores, appears to have an effect on the relationship between education and health behaviors, this effect disappears once the models control for family fixed effects. Similarly, the impact of education on smoking and heavy drinking is the same between those with and without a learning disability, suggesting that cognition is not likely to be a significant factor in explaining the impact of education on health behaviors. ER - TY - JOUR AU - Cooper,Russell AU - Gong,Guan AU - Yan,Ping TI - Costly Labor Adjustment: Effects of China's Employment Regulations JF - National Bureau of Economic Research Working Paper Series VL - No. 17948 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17948 L1 - http://www.nber.org/papers/w17948.pdf N1 - Author contact info: Russell Cooper Department of Economics European University Institute via della Piazzola, 43 Firenze, 50133 ITALY E-Mail: russellcoop@gmail.com Guan Gong School of Economics Shanghai University of Finance and Economics 777 Guoding RD, Shanghai CHINA E-Mail: ggong@mail.shufe.edu.cn Ping Yan National School of Development China Center for Economic Research Peking University E-Mail: pyan@ccer.edu.cn AB - This paper studies the employment and productivity implications of new labor regulations in China. These new restrictions are intended to protect workers' employment conditions by, among other things, increasing firing costs and increasing compensation. We estimate a model of costly labor adjustment from data prior to the policy. We use the estimated model to simulate the effects of the policy. We find that increases in severance payments lead to sizable job creation, a significant reduction in labor reallocation and an increase in the exit rate. A policy of credit market liberalization will reduce employment, slightly increase labor reallocation and reduce exit. The estimated elasticity of labor demand is about unity so that an increase in the base wage leads to sizable job losses. ER - TY - JOUR AU - Bordalo,Pedro AU - Gennaioli,Nicola AU - Shleifer,Andrei TI - Salience and Consumer Choice JF - National Bureau of Economic Research Working Paper Series VL - No. 17947 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17947 L1 - http://www.nber.org/papers/w17947.pdf N1 - Author contact info: Pedro Bordalo Department of Economics Royal Holloway University of London Egham Hill, Egham, TW20 0EX United Kingdom E-Mail: pedro.bordalo@rhul.ac.uk Nicola Gennaioli CREI Universitat Pompeu Fabra Ramon Trias Fargas 25-27 08005 Barcelona (Spain) E-Mail: ngennaioli@crei.cat Andrei Shleifer Department of Economics Harvard University Littauer Center M-9 Cambridge, MA 02138 Tel: 617/495-5046 Fax: 617/496-1708 E-Mail: ashleifer@harvard.edu AB - We present a theory of context-dependent choice in which a consumer's attention is drawn to salient attributes of goods, such as quality or price. An attribute is salient for a good when it stands out among the good's characteristics, in the precise sense of being furthest away in that good from its average level in the choice set (or more generally, an evoked set). A local thinker chooses among goods by attaching disproportionately high weights to their salient attributes. When goods are characterized by only one quality attribute and price, salience tilts choices toward goods with higher ratios of quality to price. We use the model to account for a variety of disparate bits of evidence, including decoy effects in consumer choice, context-dependent willingness to pay, balance of qualities in desirable goods, and shifts in demand toward low quality goods when all prices in a category rise. We then apply the model to study discounts and sales, and to explain demand for low deductible insurance. ER - TY - JOUR AU - Strebulaev,Ilya A. AU - Yang,Baozhong TI - The Mystery of Zero-Leverage Firms JF - National Bureau of Economic Research Working Paper Series VL - No. 17946 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17946 L1 - http://www.nber.org/papers/w17946.pdf N1 - Author contact info: Ilya A. Strebulaev Graduate School of Business Stanford University 655 Knight Way Stanford, CA 94305 Tel: 650/725-8239 Fax: 650/725-7979 E-Mail: istrebulaev@stanford.edu Baozhong Yang J. Mack Robinson College of Business Georgia State University 35 Broad Street, Suite 1243, Atlanta GA 30303 E-Mail: bzyang@gsu.edu AB - This paper documents the puzzling evidence that a substantial number of large public non-financial US firms follow a zero-debt policy. Over the 1962-2009 period, on average 10.2% of such firms have zero debt and almost 22% have less than 5% book leverage ratio. Neither industry nor size can account for such puzzling behavior. Zero-leverage behavior is a persistent phenomenon, with 30% of zero-debt firms refrain from debt for at least five consecutive years. Particularly surprising is the presence of a large number of zero-leverage firms who pay dividends. They are more profitable, pay higher taxes, issue less equity, and have higher cash balances than their proxies chosen by industry and size. These firms also pay substantially higher dividends than their proxies and thus their total payout ratio is virtually independent of leverage. Firms with higher CEO ownership and longer CEO tenure are more likely to follow a zero-leverage policy, especially if boards are smaller and less independent. Family firms are also more likely to be zero-levered. Our results suggest that managerial and governance characteristics are related to the zero-leverage phenomena in an important way. ER - TY - JOUR AU - Grenadier,Steven AU - Malenko,Andrey AU - Strebulaev,Ilya A. TI - Investment Busts, Reputation, and the Temptation to Blend in with the Crowd JF - National Bureau of Economic Research Working Paper Series VL - No. 17945 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17945 L1 - http://www.nber.org/papers/w17945.pdf N1 - Author contact info: Steven Grenadier Graduate School of Business Stanford University Stanford, CA 94305 Tel: 650/725-0706 Fax: 650/725-6152 E-Mail: sgren@stanford.edu Andrey Malenko MIT Sloan School of Management 100 Main Street Cambridge, MA 02142 E-Mail: amalenko@mit.edu Ilya A. Strebulaev Graduate School of Business Stanford University 655 Knight Way Stanford, CA 94305 Tel: 650/725-8239 Fax: 650/725-7979 E-Mail: istrebulaev@stanford.edu AB - We provide a dynamic model of an industry in which agents strategically time liquidation decisions in an effort to protect their reputations. As in traditional models, agents delay liquidation attempting to signal their quality. However, when the industry faces a common shock that indiscriminately forces liquidation of a subset of projects, agents with bad enough projects choose to liquidate even if their projects are unaffected by the shock. Such "blending in with the crowd" creates an additional incentive to delay liquidation, further amplifying the shock. As a result, even minuscule common shocks can be evidenced by massive liquidations. As agents await common shocks, the industry accumulates "living dead" projects. Surprisingly, the potential for moderate negative common shocks often improves agents values. ER - TY - JOUR AU - Benigno,Pierpaolo AU - Romei,Federica TI - Debt Deleveraging and The Exchange Rate JF - National Bureau of Economic Research Working Paper Series VL - No. 17944 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17944 L1 - http://www.nber.org/papers/w17944.pdf N1 - Author contact info: Pierpaolo Benigno Dipartimento di Economia e Finanza Luiss Guido Carli Viale Romania 32 00197 Rome ITALY Tel: 39-0685225-552 E-Mail: pbenigno@luiss.it Federica Romei Dipartimento di Economia e Finanza Luiss Guido Carli Viale Romania 32 00197 Roma Italy E-Mail: fromei@luiss.it AB - Deleveraging from high debt can provoke deep recession with significant international side effects. The exchange rate of the deleveraging country will depreciate in the short run and appreciate in the long run. The real interest rate will fall by more than in the rest of the world. Bounds and policies that constrain the adjustment can prolong and deepen the recession. Early exit strategies from accommodating monetary policy can be quite harmful, as can such other policies as keeping interest rates too high during the deleveraging period. The analysis also applies to a monetary union facing internal adjustment of current account imbalances. ER - TY - JOUR AU - Cohen,Jessica AU - Dupas,Pascaline AU - Schaner,Simone G. TI - Price Subsidies, Diagnostic Tests, and Targeting of Malaria Treatment: Evidence from a Randomized Controlled Trial JF - National Bureau of Economic Research Working Paper Series VL - No. 17943 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17943 L1 - http://www.nber.org/papers/w17943.pdf N1 - Author contact info: Jessica Cohen Harvard School of Public Health Department of Global Health and Population Building 1, Room 1209 665 Huntington Ave Boston, Massachusetts 02115 E-Mail: cohenj@hsph.harvard.edu Pascaline Dupas Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 E-Mail: pdupas@stanford.edu Simone G. Schaner Department of Economics 303B Silsby Hall Hanover, NH 03755 E-Mail: Simone.Schaner@dartmouth.edu AB - In response to parasite resistance to older malaria medicines, the global health community is considering making new, more effective malaria treatments called Artemisinin Combination Therapies (ACTs) available over-the-counter at heavily subsidized rates throughout Africa. While this may go a long way toward reducing under-treatment (thereby saving lives in the short-run), it is also likely to increase over-treatment, wasting subsidy dollars and contributing to drug resistance (thereby making lives harder to save in the long-run). We use data from a randomized controlled trial conducted with over 2,700 households in rural Kenya to study behavioral responses to changes in ACT prices and quantify this tradeoff. We find that ACT use increases by 59 percent in the presence of an ACT subsidy over 90 percent. However, only 56 percent of those buying such a highly subsidized ACT at retail sector drug shops test positive for malaria. We show that this share increases (without substantially compromising access) to 81 percent when the over-the-counter ACT subsidy is somewhat reduced and resources are redirected towards a subsidy for rapid malaria tests. While most of the targeting benefits come from reducing the ACT subsidy, making diagnostic tests available over-the-counter more than doubles the rate at which illnesses are tested for malaria. This high take up rate suggests that subsidizing rapid tests may have great scope to improve targeting and treatment outcomes in the longer run. ER - TY - JOUR AU - Robinson,David T. AU - Sensoy,Berk A. TI - Do Private Equity Managers Earn Their Fees? Compensation, Ownership, and Cash Flow Performance JF - National Bureau of Economic Research Working Paper Series VL - No. 17942 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17942 L1 - http://www.nber.org/papers/w17942.pdf N1 - Author contact info: David T. Robinson Fuqua School of Business Duke University 100 Fuqua Drive Durham, NC 27708 Tel: 919/660-8023 Fax: 919/684-2818 E-Mail: davidr@duke.edu Berk Sensoy Ohio State University 2100 Neil Ave. Columbus, OH 43210 E-Mail: sensoy_4@fisher.osu.edu AB - We study the relation between compensation practices, incentives, and performance in private equity using new data that connect ownership structures, management contracts, and quarterly cash flows for a large sample of buyout and venture capital funds from 1984-2010. Although many critics of private equity argue that PE firms earn excessive compensation and have muted performance incentives, we find no evidence that higher compensation or lower managerial ownership are associated with worse net-of-fee performance, in stark contrast to other asset management settings. Instead, compensation is largely unrelated to net-of-fee cash flow performance. Nevertheless, market conditions during fundraising are an important driver of compensation, as pay rises and shifts to fixed components during fundraising booms. In addition, the behavior of distributions around contractual triggers for fees and carried interest is consistent with an underlying agency conflict between investors and general partners. Our evidence is most consistent with an equilibrium in which compensation terms reflect agency concerns and the productivity of manager skills, and in which managers with higher compensation earn back their pay by delivering higher gross performance. ER - TY - JOUR AU - Reinhart,Carmen M. TI - A Series of Unfortunate Events: Common Sequencing Patterns in Financial Crises JF - National Bureau of Economic Research Working Paper Series VL - No. 17941 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17941 L1 - http://www.nber.org/papers/w17941.pdf N1 - Author contact info: Carmen M. Reinhart Peterson Institute for International Economics 1750 Massachusetts Avenue, NW Washington, DC 20036-1903 Tel: 202-454-1325 Fax: 202-659-3225 E-Mail: creinhart@piie.com AB - We document that the global scope and depth of the crisis the began with the collapse of the subprime mortgage market in the summer of 2007 is unprecedented in the post World War II era and, as such, the most relevant comparison benchmark is the Great Depression (or the Great Contraction, as dubbed by Friedman and Schwartz, 1963) of the 1930s. Some of the similarities between these two global episodes are examined but the analysis of the aftermath of severe financial crises is extended to also include the most severe post-WWII crises as well. As to the causes of these great crises, we focus on those factors that are common across time and geography. We discriminate between root causes of the crises, recurring crises symptoms, and common features (such as misguided financial regulation or inadequate supervision) which serve as amplifiers of the boom-bust cycle. There are recurring temporal patterns in the boom-bust cycle and their broad sequencing is analyzed. ER - TY - JOUR AU - Yermack,David TI - Tailspotting: How Disclosure, Stock Prices and Volatility Change When CEOs Fly to Their Vacation Homes JF - National Bureau of Economic Research Working Paper Series VL - No. 17940 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17940 L1 - http://www.nber.org/papers/w17940.pdf N1 - Author contact info: David Yermack Stern School of Business New York University 44 West Fourth Street, Suite 9-160 New York, NY 10012 Tel: 212/998-0357 Fax: 212/995-4220 E-Mail: dyermack@stern.nyu.edu AB - This paper shows close connections between CEOs’ vacation schedules and corporate news disclosures. I identify vacations by merging corporate jet flight histories with real estate records of CEOs’ property owned near leisure destinations. Companies disclose favorable news just before CEOs leave for vacation and delay subsequent announcements until CEOs return, releasing news at an unusually high rate on the CEO’s first day back. When CEOs are away, companies announce less news than usual and stock prices exhibit sharply lower volatility. Volatility increases immediately when CEOs return to work. CEOs spend fewer days out of the office when their ownership is high and when the weather at their vacation homes is cold or rainy. ER - TY - JOUR AU - Duflo,Esther AU - Dupas,Pascaline AU - Kremer,Michael TI - School Governance, Teacher Incentives, and Pupil-Teacher Ratios: Experimental Evidence from Kenyan Primary Schools JF - National Bureau of Economic Research Working Paper Series VL - No. 17939 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17939 L1 - http://www.nber.org/papers/w17939.pdf N1 - Author contact info: Esther Duflo Department of Economics MIT, E52-252G 50 Memorial Drive Cambridge, MA 02142 Tel: 617/258-7013 Fax: 617/253-6915 E-Mail: eduflo@mit.edu Pascaline Dupas Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 E-Mail: pdupas@stanford.edu Michael Kremer Harvard University Department of Economics Littauer Center M20 Cambridge, MA 02138 Tel: 617/495-9145 Fax: 617/495-7730 E-Mail: mkremer@fas.harvard.edu AB - We examine a program that enabled Parent-Teacher Associations (PTAs) in Kenya to hire novice teachers on short-term contracts, reducing class sizes in grade one from 82 to 44 on average. PTA teachers earned approximately one-quarter as much as teachers operating under central government civil-service institutions but were absent one day per week less and their students learned more. In the weak institutional environment we study, civil-service teachers responded to the program along two margins: first, they reduced their effort in response to the drop in the pupil-teacher ratio, and second, they influenced PTA committees to hire their relatives. Both effects reduced the educational impact of the program. A governance program that empowered parents within PTAs mitigated both effects. Better performing contract teachers are more likely to transition into civil-service positions and we estimate large potential dynamic benefits of contract teacher programs on the teacher workforce. ER - TY - JOUR AU - McFadden,Daniel L. AU - Noton,Carlos E. AU - Olivella,Pau TI - Remedies for Sick Insurance JF - National Bureau of Economic Research Working Paper Series VL - No. 17938 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17938 L1 - http://www.nber.org/papers/w17938.pdf N1 - Author contact info: Daniel L. McFadden University of California, Berkeley Department of Economics 549 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-8428 Fax: 510/642-0638 E-Mail: mcfadden@econ.berkeley.edu Carlos E. Noton Department of Economics University of Warwick Coventry Post Code: CV4 7AL United Kingdom E-Mail: C.Noton@warwick.ac.uk Pau Olivella Departament Economia i Historia Economica Universitat Autonoma de Barcelona 08193 Cerdanyola del Valles Barcelona Spain E-Mail: pau.olivella@uab.es AB - This expository paper describes the factors that contribute to failure of health insurance markets, and the regulatory mechanisms that have been and can be used to combat these failures. Standardized contracts and creditable coverage mandates are discussed, along with premium support, enrollment mandates, guaranteed issue, and risk adjustment, as remedies for selection-related market damage. An overall conclusion of the paper is that the design and management of creditable coverage mandates are likely to be key determinants of the performance of the health insurance exchanges that are a core provision of the PPACA of 2010. Enrollment mandates, premium subsidies, and risk adjustment can improve the stability and relative efficiency of the exchanges, but with carefully designed creditable coverage mandates are not necessarily critical for their operation. ER - TY - JOUR AU - Ales,Laurence AU - Hosseini,Roozbeh AU - Jones,Larry E. TI - Is There “Too Much” Inequality in Health Spending Across Income Groups? JF - National Bureau of Economic Research Working Paper Series VL - No. 17937 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17937 L1 - http://www.nber.org/papers/w17937.pdf N1 - Author contact info: Laurence Ales Tepper School of Business Carnegie Mellon University 5000 Forbes Avenue Pittsburgh, PA 15213 E-Mail: ales@cmu.edu Roozbeh Hosseini Department of Economics Arizona State University PO Box 879801 Tempe, AZ 85287-9801 Tel: 480-727-7933 Fax: 480-965-0748 E-Mail: roozbeh.hosseini@asu.edu Larry E. Jones Department of Economics University of Minnesota 4-101 Hanson Hall 1925 Fourth Street South Minneapolis, MN 55455 Tel: 612/624-4553 Fax: 612/624-0209 E-Mail: lej@umn.edu AB - In this paper we study the efficient allocation of health resources across individuals. We focus on the relation between health resources and income (taken as a proxy for productivity). In particular we determine the efficient level of the health care social safety net for the indigent. We assume that individuals have different life cycle profiles of productivity. Health care increases survival probability. We adopt the classical approach of welfare economics by considering how a central planner with an egalitarian (ex-ante) perspective would allocate resources. We show that, under the efficient allocation, health care spending increases with labor productivity, but only during the working years. Post retirement, everyone would get the same health care. Quantitatively, we find that the amount of inequality across the income distribution in the data is larger that what would be justified solely on the basis of production efficiency, but not drastically so. As a rough summary, in U.S. data top to bottom spending ratios are about 1.5 for most of the life cycle. Efficiency implies a decline from about 2 (at age 25) to 1 at retirement. We find larger inefficiencies in the lower part of the income distribution and in post retirement ages. ER - TY - JOUR AU - Doyle,Joseph J., Jr. AU - Graves,John A. AU - Gruber,Jonathan AU - Kleiner,Samuel TI - Do High-Cost Hospitals Deliver Better Care? Evidence from Ambulance Referral Patterns JF - National Bureau of Economic Research Working Paper Series VL - No. 17936 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17936 L1 - http://www.nber.org/papers/w17936.pdf N1 - Author contact info: Joseph J. Doyle, Jr. MIT Sloan School of Management 100 Main Street, E62-515 Cambridge, MA 02142 Tel: 617/452-3761 Fax: 617/258-6855 E-Mail: jjdoyle@mit.edu John Graves 12 tufts st Cambridge, MA 02139 Tel: 6179352824 E-Mail: graveja0@gmail.com Jonathan Gruber MIT Department of Economics E52-355 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-8892 Fax: 617/253-1330 E-Mail: gruberj@mit.edu Samuel Kleiner Cornell University College of Human Ecology 108 Martha Van Rensselaer Hall Ithaca, NY 14853 Tel: 607/255-1027 Fax: 607/255-4071 E-Mail: skleiner@cornell.edu AB - Endogenous patient sorting across hospitals can confound performance comparisons. This paper provides a new lens to compare hospital performance for emergency patients: plausibly exogenous variation in ambulance-company assignment. Ambulances are effectively randomly assigned to patients in the same area based on rotational dispatch mechanisms. Using Medicare data from 2002-2008, we show that ambulance company assignment importantly affects hospital choice for patients in the same zip code. Using data for New York state from 2000-2006 that matches exact patient addresses to hospital discharge records, we show that patients who live very near each other but on either side of ambulance-dispatch boundaries go to different types of hospitals. Both strategies show that higher-cost hospitals have significantly lower one-year mortality rates compared to lower-cost hospitals. We find that common indicators of hospital quality, such as indicators for "appropriate care" for heart attacks, are generally not associated with better patient outcomes. On the other hand, we find that measures of "leading edge" hospitals, such as teaching hospitals and hospitals that quickly adopt the latest technologies, are associated with better outcomes, but have little impact on the estimated mortality-hospital cost relationship. We also find that hospital procedure intensity is a key determinant of the mortality-cost relationship, suggesting that treatment intensity, and not differences in quality reflected in prices, drives much of our findings. The evidence also suggests that there are diminishing returns to hospital spending and treatment intensity. ER - TY - JOUR AU - He,Zhiguo AU - Xiong,Wei TI - Debt Financing in Asset Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 17935 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17935 L1 - http://www.nber.org/papers/w17935.pdf N1 - Author contact info: Zhiguo He University of Chicago Booth School of Business 5807 S. Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-3769 E-Mail: zhiguo.he@chicagobooth.edu Wei Xiong Princeton University Department of Economics Bendheim Center for Finance Princeton, NJ 08450 Tel: 609/258-0282 Fax: 609/258-0771 E-Mail: wxiong@princeton.edu AB - We study rollover risk and collateral value in a dynamic asset pricing model with endogenous debt financing by extending the framework of Geanakoplos (2009) with a generic binomial tree and time-varying heterogeneous beliefs. Optimistic borrowers face rollover risk if the belief dispersion between the borrowers and the pessimistic lenders widens after interim bad news. We demonstrate the optimality of the maximum riskless short-term debt financing for optimistic borrowers even in the presence of the rollover risk. We also highlight the role of interim trading which, by allowing creditors to sell seized collateral to other optimists with saved cashes, boosts the asset’s collateral value and equilibrium price. ER - TY - JOUR AU - Kiyotaki,Nobuhiro AU - Moore,John TI - Liquidity, Business Cycles, and Monetary Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 17934 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17934 L1 - http://www.nber.org/papers/w17934.pdf N1 - Author contact info: Nobuhiro Kiyotaki Department of Economics Princeton University Fisher Hall Princeton, NJ 08544-1021 Tel: 609-258-4000 Fax: 609-258-6419 E-Mail: kiyotaki@princeton.edu John Moore William Robertson Building Edinburgh Scotland, EH8 9JY U.K. E-Mail: j.h.moore@ed.ac.uk AB - The paper presents a model of a monetary economy where there are differences in liquidity across assets. Money circulates because it is more liquid than other assets, not because it has any special function. There is a spectrum of returns on assets, reflecting their differences in liquidity. The model is used, first, to investigate how aggregate activity and asset prices fluctuate with shocks to productivity and liquidity; second, to examine what role government policy might have through open market operations that change the mix of assets held by the private sector. With its emphasis on liquidity rather than sticky prices, the model harks back to an earlier interpretation of Keynes (1936), following Tobin (1969). ER - TY - JOUR AU - Meghir,Costas AU - Palme,Mårten AU - Simeonova,Emilia TI - Education, Health and Mortality: Evidence from a Social Experiment JF - National Bureau of Economic Research Working Paper Series VL - No. 17932 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17932 L1 - http://www.nber.org/papers/w17932.pdf N1 - Author contact info: Costas Meghir Department of Economics Yale University 37 Hillhouse Avenue New Haven, CT 06511 Tel: 203/432-3558 E-Mail: c.meghir@yale.edu Mårten Palme Department of Economics Stockholm University SE-106 91 Stockholm SWEDEN E-Mail: Marten.Palme@ne.su.se Emilia Simeonova Department of Economics Princeton University 355 Wallace Hall Princeton, NJ 08540 Tel: 617/627-5948 E-Mail: emilia.simeonova@gmail.com AB - We study the effect of a compulsory education reform in Sweden on adult health and mortality. The reform was implemented by municipalities between 1949 and 1962 as a social experiment and implied an extension of compulsory schooling from 7 or 8 years depending on municipality to 9 years nationally. We use detailed individual data on education, hospitalizations, labor force participation and mortality for Swedes born between 1946 and 1957. Individual level data allow us to study the effect of the education reform on three main groups of outcomes: (i) mortality until age 60 for different causes of death; (ii) hospitalization by cause and (iii) exit from the labor force primarily through the disability insurance program. The results show reduced male mortality up to age fifty for those assigned to the reform, but these gains were erased by increased mortality later on. We find similar patterns in the probability of being hospitalized and the average costs of inpatient care. Men who acquired more education due to the reform are less likely to retire early. ER - TY - JOUR AU - Oster,Emily AU - Shoulson,Ira AU - Dorsey,E. Ray TI - Limited Life Expectancy, Human Capital and Health Investments: Evidence from Huntington Disease JF - National Bureau of Economic Research Working Paper Series VL - No. 17931 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17931 L1 - http://www.nber.org/papers/w17931.pdf N1 - Author contact info: Emily Oster University of Chicago Booth School of Business 5807 South Woodlawn Ave Chicago, IL 60637 Tel: 773/834-1552 Fax: 773-834-8172 E-Mail: eoster@uchicago.edu Ira Shoulson Georgetown University 2115 Wisconsin Ave NW Suite 603 Washington DC 20007 E-Mail: ira@irashoulson.org E. Ray Dorsey Johns Hopkins University Department of Neurology Meyer Bldg, Room 6-181 600 N. Wolfe Street Baltimore, MD 21287 E-Mail: Ray.Dorsey@jhmi.edu AB - One of the most basic predictions of human capital theory is that life expectancy should impact human capital investment. Limited exogenous variation in life expectancy makes this difficult to test, especially in the contexts most relevant to the macroeconomic applications. We estimate the relationship between life expectancy and human capital investments using genetic variation in life expectancy driven by Huntington disease (HD), an inherited degenerative neurological disorder with large impacts on mortality. We compare investment levels for individuals who have ex ante identical risks of HD but learn (through early symptom development or genetic testing) that they do or do not carry the genetic mutation which causes the disease. We find strong qualitative support: individuals with more limited life expectancy complete less education and less job training. We estimate the elasticity of demand for college completion with respect to years of life expectancy of 0.40. This figure implies that differences in life expectancy explain about 10% of cross-country differences in college enrollment. Finally, we use smoking and cancer screening data to test the corollary that health capital is responsive to life expectancy. ER - TY - JOUR AU - Klapper,Leora F. AU - Lusardi,Annamaria AU - Panos,Georgios A. TI - Financial Literacy and the Financial Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 17930 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17930 L1 - http://www.nber.org/papers/w17930.pdf N1 - Author contact info: Leora F. Klapper The World Bank 1818 H Street, NW Washington, DC 20433 Tel: 202/473-8738 E-Mail: lklapper@worldbank.org Annamaria Lusardi The George Washington University School of Business 2201 G Street, NW Duques Hall, Suite 450E Washington, DC 20052 Tel: 202-994-8410 E-Mail: alusardi@gwu.edu Georgios A. Panos University of Stirling Stirling Management School Room 3B79, Cottrell Building Economics Division Stirling, Scotland, FK9 4LA United Kingdom E-Mail: georgios.panos@stir.ac.uk AB - The ability of consumers to make informed financial decisions improves their ability to develop sound personal finance. This paper uses a panel dataset from Russia, an economy in which consumer loans grew at an astounding rate - from about US$10 billion in 2003 to over US$170 billion in 2008 - to examine the importance of financial literacy and its effects on behavior. The survey contains questions on financial literacy, consumer borrowing (formal and informal), saving and spending behavior. The paper studies both the financial consequences and the real consequences of financial illiteracy. Even though consumer borrowing increased very rapidly in Russia, the authors find that only 41% of respondents demonstrate understanding of the workings of interest compounding and only 46% can answer a simple question about inflation. Financial literacy is positively related to participation in financial markets and negatively related to the use of informal sources of borrowing. Moreover, individuals with higher financial literacy are significantly more likely to report having greater availability of unspent income and higher spending capacity. The relationship between financial literacy and availability of unspent income is higher during the financial crisis, suggesting that financial literacy may better equip individuals to deal with macroeconomic shocks. ER - TY - JOUR AU - Mullainathan,Sendhil AU - Noeth,Markus AU - Schoar,Antoinette TI - The Market for Financial Advice: An Audit Study JF - National Bureau of Economic Research Working Paper Series VL - No. 17929 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17929 L1 - http://www.nber.org/papers/w17929.pdf N1 - Author contact info: Sendhil Mullainathan Department of Economics Littauer M-18 Harvard University Cambridge, MA 02138 Tel: 617/496-2720 Fax: 617/495-7730 E-Mail: mullain@fas.harvard.edu Markus Noeth LS Banking & Behavioral Finance VMP 5 University of Hamburg 20146 Hamburg Germany Tel: +4940428383337 Fax: +4940428385512 E-Mail: markus.noeth@uni-hamburg.de Antoinette Schoar MIT Sloan School of Management 100 Main Street, E62-638 Cambridge, MA 02142 Tel: 617/253-3763 Fax: 617/258-6855 E-Mail: aschoar@mit.edu AB - Do financial advisers undo or reinforce the behavioral biases and misconceptions of their clients? We use an audit methodology where trained auditors meet with financial advisers and present different types of portfolios. These portfolios reflect either biases that are in line with the financial interests of the advisers (e.g., returns-chasing portfolio) or run counter to their interests (e.g., a portfolio with company stock or very low-fee index funds). We document that advisers fail to de-bias their clients and often reinforce biases that are in their interests. Advisers encourage returns-chasing behavior and push for actively managed funds that have higher fees, even if the client starts with a well-diversified, low-fee portfolio. ER - TY - JOUR AU - Goda,Gopi Shah AU - Manchester,Colleen Flaherty AU - Sojourner,Aaron TI - What Will My Account Really Be Worth? An Experiment on Exponential Growth Bias and Retirement Saving JF - National Bureau of Economic Research Working Paper Series VL - No. 17927 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17927 L1 - http://www.nber.org/papers/w17927.pdf N1 - Author contact info: Gopi Shah Goda Stanford University SIEPR 366 Galvez St. Stanford, CA 94305 Tel: 650/736-0480 Fax: 650/723-8611 E-Mail: gopi@stanford.edu Colleen Flaherty Manchester Work and Organizations University of Minnesota Room 3-300R 321 - 19th Avenue South Minneapolis, MN 55455 Tel: 612-625-9667 E-Mail: cmanch@umn.edu Aaron Sojourner University of Minnesota Carlson School of Management 321 19th Ave S, 3-300 Minneapolis, MN 55455 E-Mail: asojourn@umn.edu AB - Recent findings on limited financial literacy and exponential growth bias suggest saving decisions may not be optimal because such decisions require an accurate understanding of how current contributions can translate into income in retirement. This study uses a large-scale field experiment to measure how a low-cost, direct-mail intervention designed to inform subjects about this relationship affects their saving behavior. Using administrative data prior to and following the intervention, we measure its effect on participation and the level of contributions in retirement saving accounts. Those sent income projections along with enrollment information were more likely to change contribution levels and increase annual contributions relative to the control group. Among those who made a change in contribution, the increase in annual contributions was approximately $1,150. Results from a follow-up survey corroborate these findings and show heterogeneous effects of the intervention by rational and behavioral factors known to affect saving. Finally, we find evidence of behavioral influences on decision-making in that the assumptions used to generate the projections influence the saving response. ER - TY - JOUR AU - Battaglini,Marco AU - Nunnari,Salvatore AU - Palfrey,Thomas TI - The Free Rider Problem: a Dynamic Analysis JF - National Bureau of Economic Research Working Paper Series VL - No. 17926 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17926 L1 - http://www.nber.org/papers/w17926.pdf N1 - Author contact info: Marco Battaglini Department of Economics Fisher Hall Princeton University Princeton, NJ 08544 Tel: 609/258-4002 Fax: 609/258-6419 E-Mail: mbattagl@princeton.edu Salvatore Nunnari Division of the Humanities and Social Sciences Mail Code 228-77 California Institute of Technology Pasadena, CA, 91125 E-Mail: salvatore.nunnari@gmail.com Thomas Palfrey Division of the Humanities and Social Sciences Mail Code 228-77 California Institute of Technology Pasadena, CA 91125 E-Mail: trp@hss.caltech.edu AB - We present a dynamic model of free riding in which n infinitely lived agents choose between private consumption and contributions to a durable public good g. We characterize the set of continuous Markov equilibria in economies with reversibility, where investments can be positive or negative; and in economies with irreversibility, where investments are non negative and g can only be reduced by depreciation. With reversibility, there is a continuum of equilibrium steady states: the highest equilibrium steady state of g is increasing in n, and the lowest is decreasing. With irreversibility, the set of equilibrium steady states converges to a unique point as depreciation converges to zero: the highest steady state possible with reversibility. In both cases, the highest steady state converges to the efficient steady state as agents become increasingly patient. In economies with reversibility there are always non-monotonic equilibria in which g converges to the steady state with damped oscillations; and there can be equilibria with no stable steady state, but a unique persistent limit cycle. ER - TY - JOUR AU - Loecker,Jan De AU - Goldberg,Pinelopi K. AU - Khandelwal,Amit K. AU - Pavcnik,Nina TI - Prices, Markups and Trade Reform JF - National Bureau of Economic Research Working Paper Series VL - No. 17925 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17925 L1 - http://www.nber.org/papers/w17925.pdf N1 - Author contact info: Jan De Loecker Department of Economics 307 Fisher Hall Princeton University Princeton, NJ 08544-1021 Tel: 609/258-2149 E-Mail: jdeloeck@princeton.edu Pinelopi K. Goldberg Yale University Department of Economics 37 Hillhouse Ave. P.O. Box 208264 New Haven, CT 06520-8264 E-Mail: penny.goldberg@yale.edu Amit Khandelwal Graduate School of Business Columbia University Uris Hall 606, 3022 Broadway New York, NY 10027 Tel: 212/854-7506 Fax: 212/316-9219 E-Mail: ak2796@columbia.edu Nina Pavcnik Department of Economics 6106 Rockefeller Center Dartmouth College Hanover, NH 03755 Tel: 603/646-2537 Fax: 603/646-2122 E-Mail: nina.pavcnik@dartmouth.edu AB - This paper examines how prices, markups and marginal costs respond to trade liberalization. We develop a framework to estimate markups from production data with multi-product firms. This approach does not require assumptions on the market structure or demand curves faced by firms, nor assumptions on how firms allocate their inputs across products. We exploit quantity and price information to disentangle markups from quantity-based productivity, and then compute marginal costs by dividing observed prices by the estimated markups. We use India’s trade liberalization episode to examine how firms adjust these performance measures. Not surprisingly, we find that trade liberalization lowers factory-gate prices. However, the price declines are small relative to the declines in marginal costs, which fall predominantly because of the input tariff liberalization. The reason is that firms offset their reductions in marginal costs by raising markups. This limited pass-through of cost reductions attenuates the reform’s impact on prices. Our results demonstrate substantial heterogeneity and variability in markups across firms and time and suggest that producers benefited relative to consumers, at least immediately after the reforms. To the extent that higher firm profits lead to the new product introductions and growth, long-term gains to consumers may be substantially higher. ER - TY - JOUR AU - Bachmann,Rüdiger AU - Ma,Lin TI - Lumpy Investment, Lumpy Inventories JF - National Bureau of Economic Research Working Paper Series VL - No. 17924 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17924 L1 - http://www.nber.org/papers/w17924.pdf N1 - Author contact info: Ruediger Bachmann Department of Economics University of Michigan Lorch Hall 335 A Ann Arbor, MI 48109-1220 Tel: +1 (734) 764-0241 E-Mail: rudib@umich.edu Lin Ma Lorch Hall Ann Arbor E-Mail: limma@umich.edu AB - How do microeconomic frictions and microeconomic heterogeneity affect macroeconomic dynamics? We revisit the recent claim in the literature that nonconvex capital adjustment costs do not matter for aggregate dynamics. We argue that the neutrality of fixed adjustment frictions in general equilibrium hinges on the assumption of capital good homogeneity. With only one type of capital good to save and invest in, fixed capital investment dynamics are tightly linked to consumption dynamics, which are similar across lumpy and frictionless investment models. With capital goods heterogeneity, households optimally substitute between different ways of saving, which renders their consumption/saving decisions more sensitive to capital adjustment frictions. We quantify our arguments by introducing inventories into a two-sector lumpy investment model. We find that with inventories, frictionless fixed capital adjustment leads to an initial response of fixed capital investment to productivity shocks that is 50% higher than with capital adjustment frictions, calibrated to the fraction of plants undergoing lumpy investment episodes. We argue more generally that the details of how general equilibrium is introduced into the physical environment of a model matters for the aggregate relevance of microeconomic frictions and microeconomic heterogeneity. ER - TY - JOUR AU - Alvarez,Fernando E. AU - Lippi,Francesco TI - Price Setting with menu cost for Multi-product firms JF - National Bureau of Economic Research Working Paper Series VL - No. 17923 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17923 L1 - http://www.nber.org/papers/w17923.pdf N1 - Author contact info: Fernando E. Alvarez University of Chicago Department of Economics 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-4412 Fax: 773/702-8490 E-Mail: f-alvarez1@uchicago.edu Francesco Lippi University of Sassari Department of Economics and EIEF via Sallustiana, 62 00184 Rome - Italy E-Mail: flippi@uniss.it AB - We model the decisions of a multi-product firm that faces a fixed “menu” cost: once it is paid, the firm can adjust the price of all its products. We characterize analytically the steady state firm’s decisions in terms of the structural parameters: the variability of the flexible prices, the curvature of the profit function, the size of the menu cost, and the number of products sold. We provide expressions for the steady state frequency of adjustment, the hazard rate of price adjustments, and the size distribution of price changes, all in terms of the structural parameters. We study analytically the impulse response of aggregate prices and output to a monetary shock. The size of the output response and its duration increase with the number of products, they more than double as the number of products goes from 1 to ten, quickly converging to the ones of Taylor’s staggered price model. ER - TY - JOUR AU - Bailey,Martha J. AU - Hershbein,Brad AU - Miller,Amalia R. TI - The Opt-In Revolution? Contraception and the Gender Gap in Wages JF - National Bureau of Economic Research Working Paper Series VL - No. 17922 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17922 L1 - http://www.nber.org/papers/w17922.pdf N1 - Author contact info: Martha J. Bailey University of Michigan Department of Economics 611 Tappan Street 207 Lorch Hall Ann Arbor, MI 48109-1220 Tel: 734/647-6874 Fax: 734/764-2769 E-Mail: baileymj@umich.edu Brad Hershbein Department of Economics University of Michigan Ann Arbor, MI 48109-1220 E-Mail: bjhersh@umich.edu Amalia Miller Department of Economics, University of Virginia E-Mail: armiller@virginia.edu AB - Decades of research on the U.S. gender gap in wages describes its correlates, but little is known about why women changed their career paths in the 1960s and 1970s. This paper explores the role of “the Pill” in altering women’s human capital investments and its ultimate implications for life-cycle wages. Using state-by-birth-cohort variation in legal access to contraception, we show that younger access to the Pill conferred an 8-percent hourly wage premium by age fifty. Our estimates imply that the Pill can account for 10 percent of the convergence of the gender gap in the 1980s and 30 percent in the 1990s. ER - TY - JOUR AU - Cheng,Ing-Haw AU - Kirilenko,Andrei AU - Xiong,Wei TI - Convective Risk Flows in Commodity Futures Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 17921 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17921 L1 - http://www.nber.org/papers/w17921.pdf N1 - Author contact info: Ing-Haw Cheng 701 Tappan St Ross School of Business University of Michigan Ann Arbor, MI 48109 Tel: 6128503093 E-Mail: ingcheng@umich.edu Andrei Kirilenko Office of the Chief Economist 1155 21st Street, N.W. Washington, DC 20581 Tel: (202) 418-5587 Fax: (202) 418-5660 E-Mail: AKirilenko@CFTC.gov Wei Xiong Princeton University Department of Economics Bendheim Center for Finance Princeton, NJ 08450 Tel: 609/258-0282 Fax: 609/258-0771 E-Mail: wxiong@princeton.edu AB - This paper analyzes the joint responses of commodity futures prices and traders’ futures positions to changes in the VIX before and after the recent financial crisis. We find that while financial traders accommodate the needs of commercial hedgers in normal times, in times of distress, financial traders reduce their net long positions in response to an increase in the VIX causing the risk to flow to commercial hedgers. By exploiting a cross-section of traders, we provide micro-level evidence for a convective flow of risk from distressed financial traders to the ultimate producers of commodities in the real economy. ER - TY - JOUR AU - Kolstad,Jonathan T. AU - Kowalski,Amanda E. TI - Mandate-Based Health Reform and the Labor Market: Evidence from the Massachusetts Reform JF - National Bureau of Economic Research Working Paper Series VL - No. 17933 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17933 L1 - http://www.nber.org/papers/w17933.pdf N1 - Author contact info: Jonathan T. Kolstad The Wharton School University of Pennsylvania 306 Colonial Penn Center 3641 Locust Walk Philadelphia, PA 19104 Tel: 215/573-9075 E-Mail: jkolstad@wharton.upenn.edu Amanda E. Kowalski Department of Economics Yale University 37 Hillhouse Avenue Box 208264 New Haven, CT 06520 Tel: 203/432-3521 E-Mail: amanda.kowalski@yale.edu AB - We model the labor market impact of the three key provisions of the recent Massachusetts and national “mandate-based" health reforms: individual and employer mandates and expansions in publicly-subsidized coverage. Using our model, we characterize the compensating differential for employer-sponsored health insurance (ESHI) -- the causal change in wages associated with gaining ESHI. We also characterize the welfare impact of the labor market distortion induced by health reform. We show that the welfare impact depends on a small number of “sufficient statistics" that can be recovered from labor market outcomes. Relying on the reform implemented in Massachusetts in 2006, we estimate the empirical analog of our model. We find that jobs with ESHI pay wages that are lower by an average of $6,058 annually, indicating that the compensating differential for ESHI is only slightly smaller in magnitude than the average cost of ESHI to employers. Because the newly-insured in Massachusetts valued ESHI, they were willing to accept lower wages, and the deadweight loss of mandate-based health reform was less than 5% of what it would have been if the government had instead provided health insurance by levying a tax on wages. ER - TY - JOUR AU - Ichniowski,Casey AU - Preston,Anne E. TI - Does March Madness Lead to Irrational Exuberance in the NBA Draft? High-Value Employee Selection Decisions and Decision-Making Bias JF - National Bureau of Economic Research Working Paper Series VL - No. 17928 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17928 L1 - http://www.nber.org/papers/w17928.pdf N1 - Author contact info: Casey Ichniowski Graduate School of Business 3022 Broadway Street, 713 Uris Hall Columbia University New York, NY 10027 Tel: 212/854-4433 Fax: 212/316-9355 E-Mail: bei1@columbia.edu Anne E. Preston Department of Economics 203 Stokes Hall Haverford College Haverford, PA 19041 E-Mail: apreston@haverford.edu AB - Using a detailed personally-assembled data set on the performance of collegiate and professional basketball players over the 1997-2010 period, we conduct a very direct test of two questions. Does performance in the NCAA “March Madness” college basketball tournament affect NBA teams’ draft decisions? If so, is this effect the result of decision making biases which overweight player performance in these high-visibility college basketball games or rational judgments of how the players later perform in the NBA? The data provide very clear answers to these two questions. First, unexpected March Madness performance, in terms of unexpected team wins and unexpected player scoring, affects draft decisions. This result persists even when models control for a direct measure of the drafted players’ unobserved counterfactual – various mock draft rankings of where the players were likely to be drafted just prior to any participation in the March Madness tournament. Second, NBA personnel who are making these draft decisions are certainly not irrationally overweighting this MM information. If anything, the unexpected performance in the March Madness tournament deserves more weight than it gets in the draft decisions. Finally, there is no evidence that players who played in the March Madness tournament comprise a pool of players with a lower variance in future NBA performance and who are therefore less likely to become NBA superstars than are players who do not play in MM. Players with positive draft bumps due to unexpectedly good performance in the March Madness tournament are in fact more likely than those without bumps from March Madness participation to become one of the rare NBA superstars in the league. ER - TY - JOUR AU - He,Zhiguo AU - Matvos,Gregor TI - Debt and Creative Destruction: Why Could Subsidizing Corporate Debt be Optimal? JF - National Bureau of Economic Research Working Paper Series VL - No. 17920 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17920 L1 - http://www.nber.org/papers/w17920.pdf N1 - Author contact info: Zhiguo He University of Chicago Booth School of Business 5807 S. Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-3769 E-Mail: zhiguo.he@chicagobooth.edu Gregor Matvos Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773-834-3188 E-Mail: gmatvos@chicagobooth.edu AB - We illustrate the welfare benefit of tax subsidies to corporate debt financing. Two firms engage in a socially wasteful competition for survival in a declining industry. Firms differ on two dimensions: exogenous productivity and endogenously chosen amount of debt financing, resulting in a two dimensional war of attrition. Debt financing increases incentives to exit, which, while socially beneficial, is costly for the firm. Therefore the planner can increase welfare by subsidizing debt financing. The duration of industry distress determines the tradeoff between the welfare benefit illustrated in our model and the costs of subsidizing corporate debt from the existing literature. Our theory also sheds light on why the IRS considers "conflict of interest" as one of the key determinants in identifying securities that are qualified for tax-benefits. ER - TY - JOUR AU - Li,Chunding AU - Whalley,John TI - Indirect Tax Initiatives and Global Rebalancing JF - National Bureau of Economic Research Working Paper Series VL - No. 17919 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17919 L1 - http://www.nber.org/papers/w17919.pdf N1 - Author contact info: Chunding Li Institute of World Economics and Politics Chinese Academy of Social Sciences No.5 Jianguomenneidajie Beijing, PRC Postcode: 100732 E-Mail: cli428@uwo.ca John Whalley Department of Economics Social Science Centre University of Western Ontario London, ON N6A 5C2 CANADA Tel: 519/661-3509 Fax: 519/661-3666 E-Mail: jwhalley@uwo.ca AB - This paper discusses how joint cross country indirect tax initiatives can be used to achieve global rebalancing. This is potentially an important development for G20 discussions which thus far have centered on exchange rates as the instruments to achieve rebalancing. We suggest that if China and Germany (as major surplus countries) switch their present VAT systems from a destination principle to an origin principle, and the US (as the major deficit country) adopts a VAT on a destination principle VAT, jointly these actions can significantly reduce the three countries’ joint imbalances and so contribute to global rebalancing. We use a numerical general equilibrium model with a monetary structure incorporating inside money to capture endogeneity of trade imbalances, and to also investigate the potential impacts of such initiatives. These confirm that VAT structures are not only good for global rebalancing but also the changes we consider are beneficial for welfare and revenue collection. Our research is aimed to inject new ideas to the present global rebalancing debate. ER - TY - JOUR AU - Markowitz,Sara AU - Nesson,Erik AU - Poe-Yamagata,Eileen AU - Florence,Curtis AU - Deb,Partha AU - Andrews,Tracy AU - Barnett,Sarah Beth L. TI - Estimating the Relationship between Alcohol Policies and Criminal Violence and Victimization JF - National Bureau of Economic Research Working Paper Series VL - No. 17918 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17918 L1 - http://www.nber.org/papers/w17918.pdf N1 - Author contact info: Sara Markowitz Department of Economics Emory University 1602 Fishburne Dr. Atlanta, GA 30322 Tel: (404) 712-8167 E-Mail: sara.markowitz@emory.edu Erik Nesson Department of Economics Emory University 1602 Fishburne Dr. Atlanta, GA 30322 Tel: 608-358-1658 E-Mail: enesson@emory.edu Eileen Poe-Yamagata IMPAQ International, LLC 10420 Little Patuxent Parkway, Suite 300 Columbia, MD 21044 E-Mail: epyamagata@impaqint.com Curtis Florence National Center for Injury Prevention and Control Centers for Disease Control Atlanta, Georgia E-Mail: gul4@cdc.gov Partha Deb Hunter College Department of Economics 695 Park Avenue Room 1524 West New York, NY 10065 Tel: 212/772-5435 Fax: 212/772-5398 E-Mail: partha.deb@hunter.cuny.edu Tracy Andrews IMPAQ International, LLC 10420 Little Patuxent Parkway Suite 300 Columbia, MD 21044 E-Mail: troberts1975@gmail.com Sarah Beth L. Barnett National Center for Injury Prevention and Control Centers for Disease Control Atlanta, GA E-Mail: Hun8@cdc.gov AB - Violence is one of the leading social problems in the United States. The development of appropriate public policies to curtail violence is confounded by the relationship between alcohol and violence. In this paper, we estimate the propensity of alcohol control policies to reduce the perpetration and victimization of criminal violence. We measure violence with data on individual level victimizations from the U.S. National Crime Victimization Survey. We examine the effects of a number of different alcohol control policies in reducing violent crime. These policies include the retail price of beer, drunk driving laws and penalties, keg laws, and serving and selling laws. We find some evidence of a negative relationship between alcohol prices and the probability of alcohol or drug related assault victimizations. However, we find no strong evidence that other alcohol policies are effective in reducing violent crimes. These results provide policy makers with guidance on potential approaches for reducing violence through alcohol beverage control. ER - TY - JOUR AU - Evans,Richard W. AU - Kotlikoff,Laurence J. AU - Phillips,Kerk L. TI - Game Over: Simulating Unsustainable Fiscal Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 17917 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17917 L1 - http://www.nber.org/papers/w17917.pdf N1 - Author contact info: Richard W. Evans Brigham Young University Department of Economics 167 FOB Provo, Utah 84602 Tel: 801-422-8303 Fax: 801-422-0194 E-Mail: revans@byu.edu Laurence J. Kotlikoff Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-4002 Fax: 617/353-4001 E-Mail: kotlikoff@gmail.com Kerk Phillips Department of Economics Building 130 FOB Brigham Young University Provo, UT 84602 Tel: 801/378-5928 phone; 801/378-2844 fax E-Mail: kerk_phillips@byu.edu AB - Fiscal sustainability is one of the most pressing policy issues of our time. Yet it remains difficult to quantify. Official debt is plagued with a number of measurement difficulties since its measurement reflects the choice of words, not policies. And forming the fiscal gap–the imbalance in the government's intertemporal budget–requires strong discount rate assumptions. An alternative approach, taken here, is specifying a stochastic general equilibrium model and determining via simulation how long it takes for the economy to reach game over–the point where current policy can no longer be maintained. Our simulations, based on an OLG model calibrated to the U.S. economy, produce an average duration to game over of roughly one century, with a 35 percent chance of reaching the fiscal limit in roughly 30 years. The prospect of man-made economic collapse produces large equity premia, like those observed in the data. Our simulations show that both the fiscal gap and the equity premium rise as the economy gets closer to hitting its fiscal limit, suggesting that the fiscal gap and the equity premium may be good indicators of unsustainable policy. ER - TY - JOUR AU - Feenstra,Robert C. AU - Jensen,J. Bradford TI - Evaluating Estimates of Materials Offshoring from U.S. Manufacturing JF - National Bureau of Economic Research Working Paper Series VL - No. 17916 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17916 L1 - http://www.nber.org/papers/w17916.pdf N1 - Author contact info: Robert C. Feenstra Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/752-7022 Fax: 530/752-9382 E-Mail: rcfeenstra@ucdavis.edu J. Bradford Jensen McDonough School of Business Georgetown University Washington, DC 20057 Tel: 202/687-3767 E-Mail: jbj24@georgetown.edu AB - When materials offshoring is measured by estimating imported intermediate inputs, a common assumption used is that an industry’s imports of each input, relative to its total demand, is the same as the economy-wide imports relative to total demand: this is the so-called “import comparability” or “proportionality” assumption. A report to the National Research Council identified this assumption as being a significant limitation of current data collection and analysis. In this note we move beyond this assumption to obtain a direct measure of imported materials by industry for the United States in 1997. At the 3-digit I-O industry level, there is a correlation of 0.68 between the offshoring shares made with and without the proportionality assumption, and a higher correlation of 0.87 when the shares are value weighted. While most value-weighted industry have differences below 50 percentage points in the two estimates, there is significant number of cases that differ by 10 percentage points or more. ER - TY - JOUR AU - Garthwaite,Craig L. TI - You Get a Book! Demand Spillovers, Combative Advertising, and Celebrity Endorsements JF - National Bureau of Economic Research Working Paper Series VL - No. 17915 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17915 L1 - http://www.nber.org/papers/w17915.pdf N1 - Author contact info: Craig Garthwaite Department of Management and Strategy Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-2509 Fax: 847/467-1777 E-Mail: c-garthwaite@kellogg.northwestern.edu AB - This paper studies the economic effects of endorsements. In the publishing sector, endorsements from the Oprah Winfrey Book Club are found to be a business stealing form of advertising that raises title level sales without increasing the market size. The endorsements decrease aggregate adult fiction sales; likely as a result of the endorsed books being more difficult than those that otherwise would have been purchased. Economically meaningful sales increases are also found for non-endorsed titles by endorsed authors. These spillover demand estimates demonstrate a broad range of benefits from advertising for firms operating in a multiproduct brand setting. ER - TY - JOUR AU - Glaeser,Edward L. AU - Gottlieb,Joshua D. AU - Tobio,Kristina TI - Housing Booms and City Centers JF - National Bureau of Economic Research Working Paper Series VL - No. 17914 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17914 L1 - http://www.nber.org/papers/w17914.pdf N1 - Author contact info: Edward L. Glaeser Department of Economics 315A Littauer Center Harvard University Cambridge, MA 02138 Tel: 617/495-0575 Fax: 617/495-7730 E-Mail: eglaeser@harvard.edu Joshua D. Gottlieb Department of Economics Littauer Center 200 Harvard University Cambridge, MA 02138 Tel: (617) 588-1477 E-Mail: gottlieb@post.harvard.edu Kristina Tobio Kennedy School of Government 79 JFK St- T347 Cambridge, MA 02138 E-Mail: kristina_tobio@ksg.harvard.edu AB - Popular discussions often treat the great housing boom of the 1996-2006 period as if it were a national phenomenon with similar impacts across locales, but across metropolitan areas, price growth was dramatically higher in warmer, less educated cities with less initial density and higher initial housing values. Within metropolitan areas, price growth was faster in neighborhoods closer to the city center. The centralization of price growth during the boom was particularly dramatic in those metropolitan areas where income is higher away from the city center. We consider four different explanations for why city centers grew more quickly when wealth was more suburbanized: (1) gentrification, which brings rapid price growth, is more common in areas with centralized poverty; (2) areas with centralized poverty had more employment concentration which led to faster centralized price growth; (3) areas with centralized poverty had the weakest supply response to the boom in prices in the city center; and (4) poverty is centralized in cities with assets, like public transit, at the city center that became more valuable over the boom. We find some support for several of these hypotheses, but taken together they explain less than half of the overall connection between centralized poverty and centralized price growth. ER - TY - JOUR AU - Mooij,Ruud de AU - Keen,Michael TI - 'Fiscal Devaluation' and Fiscal Consolidation: The VAT in Troubled Times JF - National Bureau of Economic Research Working Paper Series VL - No. 17913 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17913 L1 - http://www.nber.org/papers/w17913.pdf N1 - Author contact info: Ruud de Mooij IMF 1900 Pennsylvania Avenue, NW Washington, DC 20431 Tel: 202-623-8012 E-Mail: RDeMooij@imf.org Michael Keen Fiscal Affairs Department International Monetary Fund 700 19th Street, NW Washington, DC 20431 Tel: 202/623-7000 E-Mail: mkeen@imf.org M1 - published as Ruud de Mooij, Michael Keen. "'Fiscal Devaluation' and Fiscal Consolidation: The VAT in Troubled Times," in Alberto Alesina and Francesco Giavazzi, editors, "Fiscal Policy after the Financial Crisis" University of Chicago Press (2012) M3 - presented at "Fiscal Policy after the Financial Crisis", December 12-13, 2011 AB - This paper focuses on two core tax design issues that arise in addressing current fiscal challenges It first explores the idea, prominent in troubled Eurozone countries, of a ‘fiscal devaluation:’ shifting from social contributions to the VAT as a way to mimic a nominal devaluation. Empirical evidence is presented which suggests that in Eurozone countries this may indeed improve the trade balance quite sizably in the short-run, though, as theory predicts, the effects eventually disappear. The paper then assesses the wider scope for VAT reform in meeting fiscal consolidation needs, developing and beginning to apply a methodology for finding additional VAT revenue in ways less distortionary and fairer than further raising the standard rate. ER - TY - JOUR AU - Banerjee,Abhijit AU - Chattopadhyay,Raghabendra AU - Duflo,Esther AU - Keniston,Daniel AU - Singh,Nina TI - Can Institutions be Reformed from Within? Evidence from a Randomized Experiment with the Rajasthan Police JF - National Bureau of Economic Research Working Paper Series VL - No. 17912 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17912 L1 - http://www.nber.org/papers/w17912.pdf N1 - Author contact info: Abhijit Banerjee MIT Department of Economics E52-252d 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-8855 Fax: 617/253-1330 E-Mail: banerjee@mit.edu Raghabendra Chattopadhyay Indian Institute of Management Calcutta Diamond Harbour Road Joka, Kolkata 700104 West Bengal INDIA E-Mail: rc@iimcal.ac.in Esther Duflo Department of Economics MIT, E52-252G 50 Memorial Drive Cambridge, MA 02142 Tel: 617/258-7013 Fax: 617/253-6915 E-Mail: eduflo@mit.edu Daniel Keniston Department of Economics Yale University Box 208269 New Haven, CT 06520-8269 E-Mail: daniel.keniston@yale.edu Nina Singh IPS Inspector General of Police Headquarters, Rajasthan Police Jaipur India E-Mail: ninasingh89@gmail.com AB - Institutions in developing countries, particularly those inherited from the colonial period, are often thought to be subject to strong inertia. This study presents the results of a unique randomized trial testing whether these institutions can be reformed through incremental administrative change. The police department of the state of Rajasthan, India collaborated with researchers at US and Indian universities to design and implement four interventions to improve police performance and the public’s perception of the police in 162 police stations (covering over one-fifth of the State’s police stations and personnel): (1) placing community observers in police stations; (2) a freeze on transfers of police staff; (3) in‐service training to update skills; and (4) weekly duty rotation with a guaranteed day off per week. These reforms were evaluated using data collected through two rounds of surveys including police interviews, decoy visits to police stations, and a large-scale public opinion and crime victimization survey—the first of its kind in India. The results illustrate that two of the reform interventions, the freeze on transfers and the training, improved police effectiveness and public and crime victims’ satisfaction. The decoy visits also led to an improvement in police performance. The other reforms showed no robust effects. This may be due to constraints on local implementation: The three successful interventions did not require the sustained cooperation of the communities or the local authorities (the station heads) and they were robustly implemented throughout the project. In contrast, the two unsuccessful interventions, which required local implementation, were not systematically implemented. ER - TY - JOUR AU - Mitchell,Olivia S. AU - Utkus,Stephen TI - Target-Date Funds in 401(k) Retirement Plans JF - National Bureau of Economic Research Working Paper Series VL - No. 17911 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17911 L1 - http://www.nber.org/papers/w17911.pdf N1 - Author contact info: Olivia S. Mitchell University of Pennsylvania Wharton School 3620 Locust Walk, St 3000 SH-DH Philadelphia, PA 19104-6302 Tel: 215-898-0424 Fax: 215/898-0310 E-Mail: mitchelo@wharton.upenn.edu Stephen Utkus Vanguard Center for Retirement Research 100 Vanguard Boulevard, M38 Malvern, PA 19355 E-Mail: steve_utkus@vanguard.com AB - Individual responsibility for portfolio construction is a central theme for defined contribution pensions, yet the rise of target-date funds is shifting investment decisions from workers back to employers. A complex choice architecture including automatic enrollment, reenrollment, and fund mapping, is increasing the number of participants defaulting into employer-selected target-date funds. At the same time, portfolios of non-defaulted participants undergo sizeable changes, with equity share ratios widening by over 40 percent points between younger/older participants. Among active decision-makers, these funds act as a form of implicit employer-provided lifecycle investment advice. More broadly, our findings highlight malleable preferences among retirement investors and a demand for default-based guidance or simplified advice for households facing complex choices. ER - TY - JOUR AU - Lazear,Edward P. AU - Spletzer,James R. TI - Hiring, Churn and the Business Cycle JF - National Bureau of Economic Research Working Paper Series VL - No. 17910 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17910 L1 - http://www.nber.org/papers/w17910.pdf N1 - Author contact info: Edward P. Lazear Graduate School of Business Stanford University Stanford, CA 94305 Tel: 650/723-9136 Fax: 650/723-0498 E-Mail: lazear@stanford.edu James Spletzer U.S. Census Bureau E-Mail: James.R.Spletzer@census.gov AB - Churn, defined as replacing departing workers with new ones as workers move to more productive uses, is an important feature of labor dynamics. The majority of hiring and separation reflects churn rather than hiring for expansion or separation for contraction. Using the JOLTS data, we show that churn decreased significantly during the most recent recession with almost four-fifths of the decline in hiring reflecting decreases in churn. Reductions in churn have costs because they reflect a reduction in labor movement to higher valued uses. We estimate the cost of reduced churn to be $208 billion. On an annual basis, this amounts to about .4% of GDP for a period of 3 1/2 years. ER - TY - JOUR AU - Goodhart,Charles A.E. AU - Kashyap,Anil K AU - Tsomocos,Dimitrios P. AU - Vardoulakis,Alexandros P. TI - Financial Regulation in General Equilibrium JF - National Bureau of Economic Research Working Paper Series VL - No. 17909 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17909 L1 - http://www.nber.org/papers/w17909.pdf N1 - Author contact info: Charles Goodhart London School of Economics E-Mail: caegoodhart@aol.com Anil Kashyap Booth School of Business University of Chicago 5807 S. Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-7260 Fax: 773/702-0458 E-Mail: anil.kashyap@chicagobooth.edu Dimitrios P. Tsomocos Said Business School and St. Edmund Hall University of Oxford E-Mail: Dimitrios.Tsomocos@sbs.ox.ac.uk Alexandros P. Vardoulakis Banque de France E-Mail: alexandros.vardoulakis@banque-france.fr AB - This paper explores how different types of financial regulation could combat many of the phenomena that were observed in the financial crisis of 2007 to 2009. The primary contribution is the introduction of a model that includes both a banking system and a “shadow banking system” that each help households finance their expenditures. Households sometimes choose to default on their loans, and when they do this triggers forced selling by the shadow banks. Because the forced selling comes when net worth of potential buyers is low, the ensuing price dynamics can be described as a fire sale. The proposed framework can assess five different policy options that officials have advocated for combating defaults, credit crunches and fire sales, namely: limits on loan to value ratios, capital requirements for banks, liquidity coverage ratios for banks, dynamic loan loss provisioning for banks, and margin requirements on repurchase agreements used by shadow banks. The paper aims to develop some general intuition about the interactions between the tools and to determine whether they act as complements and substitutes. ER - TY - JOUR AU - Cooper,Russell TI - Exit from a Monetary Union through Euroization: Discipline without Chaos JF - National Bureau of Economic Research Working Paper Series VL - No. 17908 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17908 L1 - http://www.nber.org/papers/w17908.pdf N1 - Author contact info: Russell Cooper Department of Economics European University Institute via della Piazzola, 43 Firenze, 50133 ITALY E-Mail: russellcoop@gmail.com AB - This paper studies the role of exit from a monetary union during a debt crisis. A monetary union, such as the European Monetary Union, needs to establish a procedure for exit as a tool to cope with debt default. The paper studies various forms of exit and argues that “Euroization” is both a credible and effective means of punishment for countries in default. ER - TY - JOUR AU - Bergin,Paul R. AU - Pyun,Ju Hyun TI - Multilateral Resistance to International Portfolio Diversification JF - National Bureau of Economic Research Working Paper Series VL - No. 17907 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17907 L1 - http://www.nber.org/papers/w17907.pdf N1 - Author contact info: Paul Bergin Department of Economics University of California, Davis One Shields Ave. Davis, CA 95616 Tel: 530/752-8398 Fax: 530/752-9382 E-Mail: prbergin@ucdavis.edu Ju Hyun Pyun Department of Economics University of California, Davis One Shields Ave. Davis, CA 95616 E-Mail: jpyun@ucdavis.edu AB - Not only are investors biased toward home assets, but when they do invest abroad, they appear to favor countries with returns more correlated with home assets, reducing diversification yet further. This paper argues that understanding this correlation puzzle requires a multi-county theoretical perspective, and we construct an N-country DSGE model that allows for heterogeneous stock return correlations. It shows that bilateral asset holdings depend not only upon the stock return correlation with the destination country, but also on the correlation with all other countries. This effect is analogous to ‘multilateral resistance’ in the trade literature. An empirical study controlling for this multilateral resistance in correlations overturns the result of preceding literature, finding that higher stock return correlation lowers bilateral equity asset holdings as theory predicts, reducing the losses of home bias. ER - TY - JOUR AU - Faust,Jon AU - Gupta,Abhishek TI - Posterior Predictive Analysis for Evaluating DSGE Models JF - National Bureau of Economic Research Working Paper Series VL - No. 17906 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17906 L1 - http://www.nber.org/papers/w17906.pdf N1 - Author contact info: Jon Faust Johns Hopkins University Department of Economics Mergenthaler Hall 456 3400 N. Charles Street Baltimore, MD 21218 Tel: 410/516-7614 Fax: 410/516-7600 E-Mail: faustj@jhu.edu Abhishek Gupta National Institute of Public Finance and Policy 18/2, Satsang Vihar Marg Special Institutional Area New Delhi-110067 India Tel: +91-98111-31767 Fax: +91-11-26852548 E-Mail: agupta28@gmail.com AB - While dynamic stochastic general equilibrium (DSGE) models for monetary policy analysis have come a long way, there is considerable difference of opinion over the role these models should play in the policy process. The paper develops three main points about assessing the value of these models. First, we document that DSGE models continue to have aspects of crude approximation and omission. This motivates the need for tools to reveal the strengths and weaknesses of the models--both to direct development efforts and to inform how best to use the current flawed models. Second, posterior predictive analysis provides a useful and economical tool for finding and communicating strengths and weaknesses. In particular, we adapt a form of discrepancy analysis as proposed by Gelman, et al. (1996). Third, we provide a nonstandard defense of posterior predictive analysis in the DSGE context against long-standing objections. We use the iconic Smets-Wouters model for illustrative purposes, showing a number of heretofore unrecognized properties that may be important from a policymaking perspective. ER - TY - JOUR AU - Buera,Francisco J. AU - Kaboski,Joseph P. AU - Shin,Yongseok TI - The Macroeconomics of Microfinance JF - National Bureau of Economic Research Working Paper Series VL - No. 17905 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17905 L1 - http://www.nber.org/papers/w17905.pdf N1 - Author contact info: Francisco J. Buera Department of Economics University of California, Los Angeles 8283 Bunche Hall Office 8357 Mail Stop: 147703 Los Angeles, CA 90095 Tel: 310/825-8018 Fax: 310/825-9528 E-Mail: fjbuera@econ.ucla.edu Joseph P. Kaboski Department of Economics and Econometrics University of Notre Dame 434 Flanner Hall Notre Dame, IN 46556 Tel: 574/631-9906 E-Mail: jkaboski@nd.edu Yongseok Shin Department of Economics Washington University in St. Louis One Brookings Drive St. Louis, MO 63130 Tel: 314/935-7138 Fax: 314/935-4156 E-Mail: yshin@wustl.edu AB - We provide a quantitative evaluation of the aggregate and distributional impact of microfinance or credit programs targeted toward small businesses. We find that the redistributive impact of microfinance is stronger in general equilibrium than in partial equilibrium, but the impact on aggregate output and capital is smaller in general equilibrium. Aggregate total factor productivity (TFP) increases with microfinance in general equilibrium but decreases in partial equilibrium. When general equilibrium effects are accounted for, scaling up the microfinance program will have only a small impact on per-capita income, because the increase in TFP is counterbalanced by lower capital accumulation resulting from the redistribution of income from high-savers to low-savers. Nevertheless, the vast majority of the population will be positively affected by microfinance through the increase in equilibrium wages. ER - TY - JOUR AU - Roussanov,Nikolai AU - Savor,Pavel G. TI - Status, Marriage, and Managers' Attitudes To Risk JF - National Bureau of Economic Research Working Paper Series VL - No. 17904 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17904 L1 - http://www.nber.org/papers/w17904.pdf N1 - Author contact info: Nikolai Roussanov University of Pennsylvania Wharton School, Finance Department 2400 Steinberg-Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104-6367 Tel: 215/746-0004 Fax: 215/898-6200 E-Mail: nroussan@wharton.upenn.edu Pavel G. Savor Finance Department, Wharton School University of Pennsylvania 3620 Locust Walk Philadelphia, PA 19104 Tel: 215-898-7543 E-Mail: psavor@wharton.upenn.edu AB - Relative wealth concerns can affect risk-taking behavior, as the payoff to a marginal dollar of wealth depends on the wealth of others. We develop a model where status concerns arise endogenously due to competition in the marriage market and lead to greater risk-taking for unmarried individuals. We evaluate empirically the importance of this effect in a high-stakes setting by studying corporate CEOs. We find that single CEOs, who are more likely to exhibit status concerns, are associated with firms that exhibit higher stock return volatility and pursue more aggressive investment policies. This effect is weaker for older CEOs. Our results hold both when we estimate the impact of marital status directly and when we use variation in divorce laws across U.S. states to instrument for CEO marital status. ER - TY - JOUR AU - Leeper,Eric M. AU - Walker,Todd B. TI - Perceptions and Misperceptions of Fiscal Inflation JF - National Bureau of Economic Research Working Paper Series VL - No. 17903 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17903 L1 - http://www.nber.org/papers/w17903.pdf N1 - Author contact info: Eric M. Leeper Department of Economics 304 Wylie Hall Indiana University Bloomington, IN 47405 Tel: 812/855-9157 Fax: NA E-Mail: eleeper@indiana.edu Todd B. Walker Department of Economics 105 Wylie Hall Indiana University Bloomington, IN 47405 E-Mail: walkertb@indiana.edu M1 - published as Eric M. Leeper, Todd B. Walker. "Perceptions and Misperceptions of Fiscal Inflation," in Alberto Alesina and Francesco Giavazzi, editors, "Fiscal Policy after the Financial Crisis" University of Chicago Press (2012) M3 - presented at "Fiscal Policy after the Financial Crisis", December 12-13, 2011 AB - The Great Recession and worldwide financial crisis have exploded fiscal imbalances and brought fiscal policy and inflation to the forefront of policy concerns. Those concerns will only grow as aging populations increase demands on government expenditures in coming decades. It is widely perceived that fiscal policy is inflationary if and only if it leads the central bank to print new currency to monetize deficits. Monetization can be inflationary. But it is a misperception that this is the only channel for fiscal inflations. Nominal bonds, the predominant form of government debt in advanced economies, derive their value from expected future nominal primary surpluses and money creation; changes in the price level can align the market value of debt to its expected real backing. This introduces a fresh channel, not requiring explicit monetization, through which fiscal deficits directly affect inflation. The paper describes various ways in which fiscal policy can directly affect inflation and explains why these fiscal effects are difficult to detect in time series data. ER - TY - JOUR AU - Comin,Diego A. TI - An Exploration of Luxury Hotels in Tanzania JF - National Bureau of Economic Research Working Paper Series VL - No. 17902 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17902 L1 - http://www.nber.org/papers/w17902.pdf N1 - Author contact info: Diego A. Comin Harvard Business School Soldiers Field Boston, MA 02163 Tel: 617/495-5011 E-Mail: dcomin@hbs.edu M3 - presented at "African Development Successes", August 3-5, 2011 AB - Tourism is a tradable service activity that could allow some African countries to generate significant growth. Tanzania, given its unique natural assets, is an ideal candidate. However, despite being so richly endowed in touristic resources, Tanzania receives very few tourists and revenues from tourism. To explore the determinants of this performance, I conduct an international survey for upscale hotel managers to measure supply-side constraints on the operation of hotels. The survey reveals that hotels in the safari area in Tanzania are more expensive than comparable hotels, and that this difference in price cannot be accounted for by differences in supply constraints. Further, using cross-country panel data, I show that upscale hotel prices account for a significant fraction of cross-country differences in tourists. ER - TY - JOUR AU - Cullen,Mark R. AU - Cummins,Clint AU - Fuchs,Victor R. TI - Geographic and Racial Variation in Premature Mortality in the US: Analyzing the Disparities JF - National Bureau of Economic Research Working Paper Series VL - No. 17901 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17901 L1 - http://www.nber.org/papers/w17901.pdf N1 - Author contact info: Mark R. Cullen Stanford University School of Medicine 1265 Welch Rd X338 Stanford, CA 94305 Tel: 650.721.6209 Fax: 650.723.8596 E-Mail: mrcullen@stanford.edu Clint Cummins Stanford University Department of Health Research and Policy HRP Redwood Building Stanford, California 94305-5405 E-Mail: clint@leland.stanford.edu Victor R. Fuchs 796 Cedro Way Stanford, CA 94305 Tel: 650/326-7639 Fax: 650/328-4163 E-Mail: vfuchs@stanford.edu AB - Life expectancy at birth, estimated from United States period life tables, has been shown to vary systematically and widely by region and race. We use the same tables to estimate the probability of survival from birth to age 70 (S70), a measure of mortality more sensitive to disparities and more reliably calculated for small populations, to describe the variation and identify its sources in greater detail to assess the patterns of this variation. Examination of the unadjusted probability of S70 for each US county with a sufficient population of whites and blacks reveals large geographic differences for each race-sex group. For example, white males born in the ten percent healthiest counties have a 77 percent probability of survival to age 70, but only a 61 percent chance if born in the ten percent least healthy counties. Similar geographical disparities face white women and blacks of each sex. Moreover, within each county, large differences in S70 prevail between blacks and whites, on average 17 percentage points for men and 12 percentage points for women. In linear regressions for each race-sex group, nearly all of the geographic variation is accounted for by a common set of 22 socio-economic and environmental variables, selected for previously suspected impact on mortality; R2 ranges from 0.86 for white males to 0.72 for black females. Analysis of black-white survival chances within each county reveals that the same variables account for most of the race gap in S70 as well. When actual white male values for each explanatory variable are substituted for black in the black male prediction equation to assess the role explanatory variables play in the black-white survival difference, residual black-white differences at the county level shrink markedly to a mean of -2.4% (+/-2.4); for women the mean difference is -3.7 % (+/-2.3). ER - TY - JOUR AU - Ilut,Cosmin AU - Schneider,Martin TI - Ambiguous Business Cycles JF - National Bureau of Economic Research Working Paper Series VL - No. 17900 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17900 L1 - http://www.nber.org/papers/w17900.pdf N1 - Author contact info: Cosmin Ilut Department of Economics Duke University 213 Social Sciences Bldg., Box 90097 Durham, NC, 27708 E-Mail: cosmin.ilut@duke.edu Martin Schneider Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 Tel: (650) 721 6320 E-Mail: schneidr@stanford.edu AB - This paper considers business cycle models with agents who dislike both risk and ambiguity (Knightian uncertainty). Ambiguity aversion is described by recursive multiple priors preferences that capture agents' lack of confidence in probability assessments. While modeling changes in risk typically requires higher-order approximations, changes in ambiguity in our models work like changes in conditional means. Our models thus allow for uncertainty shocks but can still be solved and estimated using first-order approximations. In our estimated medium-scale DSGE model, a loss of confidence about productivity works like 'unrealized' bad news. Time-varying confidence emerges as a major source of business cycle fluctuations. ER - TY - JOUR AU - Fang,Hanming AU - Kung,Edward TI - Why Do Life Insurance Policyholders Lapse? The Roles of Income, Health and Bequest Motive Shocks JF - National Bureau of Economic Research Working Paper Series VL - No. 17899 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17899 L1 - http://www.nber.org/papers/w17899.pdf N1 - Author contact info: Hanming Fang Department of Economics University of Pennsylvania 3718 Locust Walk Philadelphia, PA 19104 Tel: 215-898-7767 Fax: 215-573-2057 E-Mail: hanming.fang@econ.upenn.edu Edward Kung Department of Economics Duke University 213 Social Sciences Building P.O. Box 90097 Durham, NC 27708-0097 E-Mail: edward.kung@duke.edu AB - Previous research has shown that the reasons for lapsation have important implications regarding the effects of the emerging life settlement market on consumer welfare. We present and empirically implement a dynamic discrete choice model of life insurance decisions to assess the importance of various factors in explaining life insurance lapsations. In order to explain some key features in the data, our model incorporates serially correlated unobservable state variables which we deal with using posterior distributions of the unobservables simulated from Sequential Monte Carlo (SMC) method. We estimate the model using the life insurance holding information from the Health and Retirement Study (HRS) data. Counterfactual simulations using the estimates of our model suggest that a large fraction of life insurance lapsations are driven by i.i.d choice specific shocks, particularly when policyholders are relatively young. But as the remaining policyholders get older, the role of such i.i.d. shocks gets smaller, and more of their lapsations are driven either by income, health or bequest motive shocks. Income and health shocks are relatively more important than bequest motive shocks in explaining lapsations when policyholders are young, but as they age, the bequest motive shocks play a more important role. We also suggest the implications of these findings regarding the effects of the emerging life settlement market on consumer welfare. ER - TY - JOUR AU - Atkeson,Andrew AU - Hellwig,Christian AU - Ordonez,Guillermo TI - Optimal Regulation in the Presence of Reputation Concerns JF - National Bureau of Economic Research Working Paper Series VL - No. 17898 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17898 L1 - http://www.nber.org/papers/w17898.pdf N1 - Author contact info: Andrew Atkeson Bunche Hall 9381 Department of Economics UCLA Box 951477 Los Angeles, CA 90095-1477 Tel: 866/312-9770 Fax: 310/825-9528 E-Mail: andy@atkeson.net Christian Hellwig Toulouse School of Economics Manufacture de Tabacs, 21 Allées de Brienne, 31000 Toulouse Tel: +33 5 61 12 85 93 Fax: +33 5 61 12 86 37 E-Mail: christian.hellwig@tse-fr.eu Guillermo Ordonez Yale University Department of Economics 28 Hillhouse Avenue New Haven, CT 06511 Tel: 203/432-8320 Fax: 203/436-2626 E-Mail: guillermo.ordonez@yale.edu AB - We study a market with free entry and exit of firms who can produce high-quality output by making a costly but efficient initial unobservable investment. If no learning about this investment occurs, an extreme "lemons problem" develops, no firm invests, and the market shuts down. Learning introduces reputation incentives such that a fraction of entrants do invest. If the market operates with spot prices, simple regulation can enhance the role of reputation to induce investment, thus mitigating the "lemons problem" and improving welfare. ER - TY - JOUR AU - Qian,Yi TI - Brand Management and Strategies Against Counterfeits JF - National Bureau of Economic Research Working Paper Series VL - No. 17849 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17849 L1 - http://www.nber.org/papers/w17849.pdf N1 - Author contact info: Yi Qian Department of Marketing Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-7113 Fax: 847/491-2498 E-Mail: yiqian@kellogg.northwestern.edu AB - In this paper, I provide a theory for the brand-protection strategies to counterfeiting under weak intellectual property rights. My theoretical framework has general implications for endogenous sunk cost investments as a means of deterring counterfeiters. My model incorporates two layers of asymmetric information that counterfeits can incur: counterfeiters fooling consumers, and buyers of counterfeits fooling other consumers. Brands have a number of different tools at their disposal to maintain a separating equilibrium in the face of counterfeits. One of the theoretical predictions of this study is that counterfeit entry would induce incumbent brand to introduce new products. This helps to explain the innovation strategies that authentic firms employ in response to entry by their counterfeiters in the real world. Authentic prices rise if and only if the counterfeit quality is lower than a threshold level. In addition, the model demonstrates how authentic producers could invest in self-enforcement to increase counterfeiters' incentives to separate themselves. Better channel management through company stores and other costly devices are forms of non-price signals and complement a company's own enforcements against counterfeits. These predictions are validated using a unique panel data collected from Chinese shoe companies covering the years 1993-2004. Data further reveal that companies with worse relationships with the government invest more in various self-enforcement strategies, which are effective in reducing counterfeit sales, and that the set of strategies are complements rather than substitutes. ER - TY - JOUR AU - Courtemanche,Charles J. AU - Zapata,Daniela TI - Does Universal Coverage Improve Health? The Massachusetts Experience JF - National Bureau of Economic Research Working Paper Series VL - No. 17893 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17893 L1 - http://www.nber.org/papers/w17893.pdf N1 - Author contact info: Charles J. Courtemanche University of Louisville College of Business Department of Economics Louisville, KY 40292 Tel: 502-852-4854 Fax: 502-852-7672 E-Mail: cjcour02@louisville.edu Daniela Zapata University of North Carolina at Greensboro Department of Economics P.O. Box 26170 Greensboro, NC 27402 E-Mail: d_zapata@uncg.edu AB - In 2006, Massachusetts passed health care reform legislation designed to achieve nearly universal coverage through a combination of insurance market reforms, mandates, and subsidies that later served as the model for national health care reform. Using individual-level data from the Behavioral Risk Factor Surveillance System, we provide evidence that health care reform in Massachusetts led to better overall self-assessed health. An assortment of robustness checks and placebo tests support a causal interpretation of the results. We also document improvements in several determinants of overall health, including physical health, mental health, functional limitations, joint disorders, body mass index, and moderate physical activity. The health effects were strongest among women, minorities, near-elderly adults, and those with incomes low enough to qualify for the law’s subsidies. Finally, we use the reform to instrument for health insurance and estimate a sizeable impact of coverage on health. The effects on coverage were strongest for men, non-black minorities, young adults, and those who qualified for the subsidies, while the effects of coverage were strongest for women, blacks, the near-elderly, and middle-to-upper income individuals. ER - TY - JOUR AU - Banerjee,Abhijit AU - Duflo,Esther AU - Qian,Nancy TI - On the Road: Access to Transportation Infrastructure and Economic Growth in China JF - National Bureau of Economic Research Working Paper Series VL - No. 17897 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17897 L1 - http://www.nber.org/papers/w17897.pdf N1 - Author contact info: Abhijit Banerjee MIT Department of Economics E52-252d 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-8855 Fax: 617/253-1330 E-Mail: banerjee@mit.edu Esther Duflo Department of Economics MIT, E52-252G 50 Memorial Drive Cambridge, MA 02142 Tel: 617/258-7013 Fax: 617/253-6915 E-Mail: eduflo@mit.edu Nancy Qian Department of Economics Yale University 27 Hillhouse Avenue New Haven, CT 06520-8269 E-Mail: nancy.qian@yale.edu AB - This paper estimates the effect of access to transportation networks on regional economic outcomes in China over a twenty-period of rapid income growth. It addresses the problem of the endogenous placement of networks by exploiting the fact that these networks tend to connect historical cities. Our results show that proximity to transportation networks have a moderate positive causal effect on per capita GDP levels across sectors, but no effect on per capita GDP growth. We provide a simple theoretical framework with empirically testable predictions to interpret our results. We argue that our results are consistent with factor mobility playing an important role in determining the economic benefits of infrastructure development. ER - TY - JOUR AU - Bordo,Michael D. AU - Meissner,Christopher M. TI - Does Inequality Lead to a Financial Crisis? JF - National Bureau of Economic Research Working Paper Series VL - No. 17896 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17896 L1 - http://www.nber.org/papers/w17896.pdf N1 - Author contact info: Michael D. Bordo Department of Economics Rutgers University New Jersey Hall 75 Hamilton Street New Brunswick, NJ 08901 Tel: 732/822-7152 Fax: 732/932-7416 E-Mail: bordo@econ.rutgers.edu Christopher M. Meissner Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: +1 (530) 752-3108 Fax: +1 (530) 752-9382 E-Mail: cmmeissner@ucdavis.edu AB - The recent global crisis has sparked interest in the relationship between income inequality, credit booms, and financial crises. Rajan (2010) and Kumhof and Rancière (2011) propose that rising inequality led to a credit boom and eventually to a financial crisis in the US in the first decade of the 21st century as it did in the 1920s. Data from 14 advanced countries between 1920 and 2000 suggest these are not general relationships. Credit booms heighten the probability of a banking crisis, but we find no evidence that a rise in top income shares leads to credit booms. Instead, low interest rates and economic expansions are the only two robust determinants of credit booms in our data set. Anecdotal evidence from US experience in the 1920s and in the years up to 2007 and from other countries does not support the inequality, credit, crisis nexus. Rather, it points back to a familiar boom-bust pattern of declines in interest rates, strong growth, rising credit, asset price booms and crises. ER - TY - JOUR AU - Carlin,Bruce Ian AU - Ederer,Florian TI - Search Fatigue JF - National Bureau of Economic Research Working Paper Series VL - No. 17895 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17895 L1 - http://www.nber.org/papers/w17895.pdf N1 - Author contact info: Bruce I. Carlin Anderson Graduate School of Management UCLA 110 Westwood Plaza, Suite C413 Los Angeles, CA 90095-1481 Tel: 310/825-7246 E-Mail: bruce.carlin@anderson.ucla.edu Florian Ederer University of California at Los Angeles (UCLA) Anderson School of Management 110 Westwood Plaza Cornell Hall, Suite D515 Los Angeles, CA 90095-1481 Tel: 310 825 7348 Fax: 310 825 1581 E-Mail: florian.ederer@anderson.ucla.edu AB - Consumer search is not only costly but also tiring. We characterize the intertemporal effects that search fatigue has on oligopoly prices, product proliferation, and the provision of consumer assistance (i.e., advice). These effects vary based on whether search is all-or-nothing or sequential in nature, whether learning takes place, and whether consumers exhibit brand loyalty. We perform welfare analysis and highlight the novel empirical implications that our analysis generates. ER - TY - JOUR AU - Aizenman,Joshua AU - Inoue,Kenta TI - Central Banks and Gold Puzzles JF - National Bureau of Economic Research Working Paper Series VL - No. 17894 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17894 L1 - http://www.nber.org/papers/w17894.pdf N1 - Author contact info: Joshua Aizenman Department of Economics; E2 1156 High St. University of California, Santa Cruz Santa Cruz, CA 95064 Tel: 831/459-4791 Fax: 831/459-5077 E-Mail: jaizen@ucsc.edu Kenta Inoue Economics E2, UCSC 1156 High St., Santa Cruz CA 95064 E-Mail: kinoue@ucsc.edu AB - We study the curious patterns of gold holding and trading by central banks during 1979-2010. With the exception of several discrete step adjustments, central banks keep maintaining passive stocks of gold, independently of the patterns of the real price of gold. We also observe the synchronization of gold sales by central banks, as most reduced their positions in tandem, and their tendency to report international reserves valuation excluding gold positions. Our analysis suggests that the intensity of holding gold is correlated with ‘global power’ – by the history of being a past empire, or by the sheer size of a country, especially by countries that are or were the suppliers of key currencies. These results are consistent with the view that central bank’s gold position signals economic might, and that gold retains the stature of a ‘safe haven’ asset at times of global turbulence. The under-reporting of gold positions in the international reserve/GDP statistics is consistent with loss aversion, wishing to maintain a sizeable gold position, while minimizing the criticism that may occur at a time when the price of gold declines. ER - TY - JOUR AU - Olken,Benjamin A. AU - Onishi,Junko AU - Wong,Susan TI - Should Aid Reward Performance? Evidence from a Field Experiment on Health and Education in Indonesia JF - National Bureau of Economic Research Working Paper Series VL - No. 17892 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17892 L1 - http://www.nber.org/papers/w17892.pdf N1 - Author contact info: Benjamin A. Olken Department of Economics MIT 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/588-1437 Fax: 617/868-2742 E-Mail: bolken@mit.edu Junko Onishi World Bank 1818 H Street, NW Washington, DC 20433 E-Mail: jonishi@worldbank.org Susan Wong World Bank 1818 H St, NW Washington, DC 20433 E-Mail: swong1@worldbank.org AB - This paper reports an experiment in over 3,000 Indonesian villages designed to test the role of performance incentives in improving the efficacy of aid programs. Villages in a randomly-chosen one-third of subdistricts received a block grant to improve 12 maternal and child health and education indicators, with the size of the subsequent year’s block grant depending on performance relative to other villages in the subdistrict. Villages in remaining subdistricts were randomly assigned to either an otherwise identical block grant program with no financial link to performance, or to a pure control group. We find that the incentivized villages performed better on health than the non-incentivized villages, particularly in less developed areas, but found no impact of incentives on education. We find no evidence of negative spillovers from the incentives to untargeted outcomes, and no evidence that villagers manipulated scores. The relative performance design was crucial in ensuring that incentives did not result in a net transfer of funds toward richer areas. Incentives led to what appear to be more efficient spending of block grants, and led to an increase in labor from health providers, who are partially paid fee-for-service, but not teachers. On net, between 50-75% of the total impact of the block grant program on health indicators can be attributed to the performance incentives. ER - TY - JOUR AU - Li,Shanjun AU - Linn,Joshua AU - Muehlegger,Erich TI - Gasoline Taxes and Consumer Behavior JF - National Bureau of Economic Research Working Paper Series VL - No. 17891 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17891 L1 - http://www.nber.org/papers/w17891.pdf N1 - Author contact info: Shanjun Li Cornell University 424 Warren Hall Ithaca, NY 14853 E-Mail: sl2448@cornell.edu Joshua Linn Resources for the Future 1616 P St NW Washington, DC 20036 Tel: 202-328-5047 E-Mail: linn@rff.org Erich Muehlegger Harvard Kennedy School 79 JFK Street Cambridge, MA 02138 Tel: 617/495-7735 E-Mail: erich_muehlegger@hks.harvard.edu AB - Gasoline taxes can be employed to correct externalities associated with automobile use, to reduce dependency on foreign oil, and to raise government revenue. Our understanding of the optimal gasoline tax and the efficacy of existing taxes is largely based on empirical analysis of consumer responses to gasoline price changes. In this paper, we directly examine how gasoline taxes affect consumer behavior as distinct from tax-exclusive gasoline prices. Our analysis shows that a 5-cent tax increase reduces gasoline consumption by 1.3 percent in the short-run, much larger than that from a 5-cent increase in the tax-exclusive gasoline price. This difference suggests that traditional analysis could significantly underestimate policy impacts of tax changes. We further investigate the differential effect from gasoline taxes and tax-exclusive gasoline prices on both the intensive and extensive margins of gasoline consumption. We discuss implications of our findings for the estimation of the implicit discount rate for vehicle purchases and for the fiscal benefits of raising taxes. ER - TY - JOUR AU - Arcidiacono,Peter AU - Bayer,Patrick AU - Bugni,Federico A. AU - James,Jonathan TI - Approximating High-Dimensional Dynamic Models: Sieve Value Function Iteration JF - National Bureau of Economic Research Working Paper Series VL - No. 17890 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17890 L1 - http://www.nber.org/papers/w17890.pdf N1 - Author contact info: Peter Arcidiacono Department of Economics 201A Social Sciences Building Duke University Durham, NC 27708 Tel: 919/660-1816 Fax: 919/684-8974 E-Mail: psarcidi@econ.duke.edu Patrick Bayer Department of Economics Duke University 213 Social Sciences Durham, NC 27708 Tel: 919/660-1832 E-Mail: patrick.bayer@duke.edu Federico Bugni Department of Economics Duke University Box 90097 Durham, NC 27708 E-Mail: federico.bugni@duke.edu Jonathan James Department of Economics, Duke University Box 90097 Durham, NC 27708 E-Mail: jwj8@duke.edu AB - Many dynamic problems in economics are characterized by large state spaces which make both computing and estimating the model infeasible. We introduce a method for approximating the value function of high-dimensional dynamic models based on sieves and establish results for the: (a) consistency, (b) rates of convergence, and (c) bounds on the error of approximation. We embed this method for approximating the solution to the dynamic problem within an estimation routine and prove that it provides consistent estimates of the model's parameters. We provide Monte Carlo evidence that our method can successfully be used to approximate models that would otherwise be infeasible to compute, suggesting that these techniques may substantially broaden the class of models that can be solved and estimated. ER - TY - JOUR AU - Bresnahan,Timothy F. AU - Levin,Jonathan D. TI - Vertical Integration and Market Structure JF - National Bureau of Economic Research Working Paper Series VL - No. 17889 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17889 L1 - http://www.nber.org/papers/w17889.pdf N1 - Author contact info: Timothy F. Bresnahan Stanford University Department of Economics, Room 325 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/723-3712 Fax: 650/725-5702 E-Mail: tbres@stanford.edu Jonathan D. Levin Stanford University Department of Economics 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/723-5962 E-Mail: jdlevin@stanford.edu AB - Contractual theories of vertical integration derive firm boundaries as an efficient response to market transaction costs. These theories predict a relationship between underlying features of transactions and observed integration decisions. There has been some progress in testing these predictions, but less progress in quantifying their importance. One difficulty is that empirical applications often must consider firm structure together with industry structure. Research in industrial organization frequently has adopted this perspective, emphasizing how scale and scope economies, and strategic considerations, influence patterns of industry integration. But this research has paid less attention to contractual or organizational details, so that these two major lines of research on vertical integration have proceeded in parallel with only rare intersection. We discuss the value of combining different viewpoints from organizational economics and industrial organization. ER - TY - JOUR AU - Hunt,Jennifer AU - Garant,Jean-Philippe AU - Herman,Hannah AU - Munroe,David J. TI - Why Don't Women Patent? JF - National Bureau of Economic Research Working Paper Series VL - No. 17888 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17888 L1 - http://www.nber.org/papers/w17888.pdf N1 - Author contact info: Jennifer Hunt Department of Economics Rutgers University New Jersey Hall 75 Hamilton Street New Brunswick NJ, 08901-1248 Tel: (732) 932-7363 E-Mail: jennifer.hunt@rutgers.edu Jean-Philippe Garant Department of Economics, McGill University 855 Sherbrooke Street West, Leacock 443 Montreal, QC H3A2T7 E-Mail: jean-philippe.garant@mail.mcgill.ca Hannah Herman Department of Economics, McGill University 855 Sherbrooke Street West, Leacock 443 Montreal, QC H3A2T7 E-Mail: hannah.herman@mail.mcgill.ca David J. Munroe Columbia University, Department of Economics 420 West 118th Street New York, NY 10027 E-Mail: djm2166@columbia.edu AB - We investigate women's underrepresentation among holders of commercialized patents: only 5.5% of holders of such patents are female. Using the National Survey of College Graduates 2003, we find only 7% of the gap is accounted for by women's lower probability of holding any science or engineering degree, because women with such a degree are scarcely more likely to patent than women without. Differences among those without a science or engineering degree account for 15%, while 78% is accounted for by differences among those with a science or engineering degree. For the latter group, we find that women's underrepresentation in engineering and in jobs involving development and design explain much of the gap; closing it would increase U.S. GDP per capita by 2.7%. ER - TY - JOUR AU - Anwar,Shamena AU - Bayer,Patrick AU - Hjalmarsson,Randi TI - A Fair and Impartial Jury? The Role of Age in Jury Selection and Trial Outcomes JF - National Bureau of Economic Research Working Paper Series VL - No. 17887 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17887 L1 - http://www.nber.org/papers/w17887.pdf N1 - Author contact info: Shamena Anwar Carnegie Mellon University 5000 Forbes Ave Heinz College, Hamburg Hall Room 2116D Pittsburgh, PA 15213 Tel: 714-913-5172 E-Mail: shamena@andrew.cmu.edu Patrick Bayer Department of Economics Duke University 213 Social Sciences Durham, NC 27708 Tel: 919/660-1832 E-Mail: patrick.bayer@duke.edu Randi Hjalmarsson Queen Mary University of London School of Economics and Finance Mile End Road London E1 4NS, UK E-Mail: r.hjalmarsson@qmul.ac.uk AB - This paper uses data from over 700 felony trials in Sarasota and Lake Counties in Florida from 2000-2010 to examine the role of age in jury selection and trial outcomes. The results of the analysis imply that prosecutors are more likely to use their peremptory challenges to exclude younger members of the jury pool, while defense attorneys exclude older potential jurors. Having established that age has an important role in jury selection, the paper employs a research design that isolates the effect of the random variation in the age composition of the pool of eligible jurors called for jury duty to examine the causal impact of age on trial outcomes. Consistent with the jury selection patterns, the empirical evidence implies that older jurors are indeed more likely to convict. These results are robust to the inclusion of a broad set of controls for the racial and gender composition of the jury and a series of county, time, and judge fixed effects; almost identical effects are estimated separately for each county. These findings have implications for the role that the institution of peremptory challenges has on a defendant’s right to a fair trial and to an eligible citizen’s rights to serve on a jury. ER - TY - JOUR AU - Balduzzi,Pierluigi AU - Reuter,Jonathan TI - Heterogeneity in Target-Date Funds and the Pension Protection Act of 2006 JF - National Bureau of Economic Research Working Paper Series VL - No. 17886 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17886 L1 - http://www.nber.org/papers/w17886.pdf N1 - Author contact info: Pierluigi Balduzzi Carroll School of Management Boston College 330B Fulton Hall 140 Commonwealth Avenue Chestnut Hill, MA 02467 Tel: 617/552-3976 Fax: 617/552-3985 E-Mail: pierluigi.balduzzi@bc.edu Jonathan Reuter Carroll School of Management Boston College 224B Fulton Hall 140 Commonwealth Avenue Chestnut Hill, MA 02467 Tel: 617/552-2863 Fax: 617/552-0431 E-Mail: reuterj@bc.edu AB - This paper studies the evolution of the market for target-date funds (TDFs) between 1994 and 2009. We document pronounced heterogeneity in the TDF universe: TDFs with the same target date have delivered very different returns because of differences in systematic risk in the stock allocations, and because of differences in the stock versus bond allocations. This heterogeneity has increased over time, especially after the passage of the Pension Protection Plan of 2006. Indeed, we can attribute the increased heterogeneity in TDFs to the entry of new fund families in the TDF market between 2007 and 2009. These developments in the TDF market are consistent with new entries in the market adopting a product-differentiation strategy. Our findings suggest that the widespread adoption of TDFs will not result in returns that are similar across investors enrolled in different 401(k) plans, and that the current proposals for further disclosure in TDF offerings may have little impact on the incentive for fund families to offer similar risk profiles. ER - TY - JOUR AU - Belongia,Michael T. AU - Ireland,Peter N. TI - The Barnett Critique After Three Decades: A New Keynesian Analysis JF - National Bureau of Economic Research Working Paper Series VL - No. 17885 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17885 L1 - http://www.nber.org/papers/w17885.pdf N1 - Author contact info: Michael T. Belongia University of Mississippi Department of Economics Box 1848 University, MS 38677 E-Mail: mtbelong@olemiss.edu Peter N. Ireland Boston College Department of Economics 140 Commonwealth Ave. Chestnut Hill, MA 02467-3859 Tel: 617/552-3687 Fax: 617/552-2308 E-Mail: irelandp@bc.edu AB - This paper extends a New Keynesian model to include roles for currency and deposits as competing sources of liquidity services demanded by households. It shows that, both qualitatively and quantitatively, the Barnett critique applies: While a Divisia aggregate of monetary services tracks the true monetary aggregate almost perfectly, a simple-sum measure often behaves quite differently. The model also shows that movements in both quantity and price indices for monetary services correlate strongly with movements in output following a variety of shocks. Finally, the analysis characterizes the optimal monetary policy response to disturbances that originate in the financial sector. ER - TY - JOUR AU - Wyplosz,Charles TI - Fiscal Rules: Theoretical Issues and Historical Experiences JF - National Bureau of Economic Research Working Paper Series VL - No. 17884 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17884 L1 - http://www.nber.org/papers/w17884.pdf N1 - Author contact info: Charles Wyplosz Graduate Institute of International Studies Avenue de la Paix 11a 1202 Geneva Switzerland Tel: 41 22 908 5946 Fax: 41 22 733 3049 E-Mail: charles.wyplosz@graduateinstitute.ch M1 - published as Charles Wyplosz. "Fiscal Rules: Theoretical Issues and Historical Experiences," in Alberto Alesina and Francesco Giavazzi, editors, "Fiscal Policy after the Financial Crisis" University of Chicago Press (2012) M3 - presented at "Fiscal Policy after the Financial Crisis", December 12-13, 2011 AB - Fiscal indiscipline is a feature of many developed countries. It is generally accepted that the source of the phenomenon lies in the common pool problem, the fact that recipients of public spending to fail to fully internalize the costs that taxpayers must assume. As a result, democratically elected governments are led to postpone tax collection, or to cut spending. Solving the fiscal discipline problem requires internalizing this externality. This calls for adequate institutions or for rules, or both. This paper reviews the various types of solutions that have been discussed in the literature and surveys a number of experiments. With the European debt crisis in mind, the paper pays particular attention to the common pool problem that emerges in federal states. The main conclusions are the following. First, rules are unlikely to exist unless they come with supporting institutions. Second, fiscal institutions are neither necessary nor sufficient to achieve fiscal discipline, but they help. Third, because institutions must bind the policymakers without violating the democratic requirement that elected officials have the power to decide on budgets, effective arrangements are those that give institutions the authority to apply legal rules or to act as official watchdogs. ER - TY - JOUR AU - Bryan,Gharad T. AU - Karlan,Dean AU - Zinman,Jonathan TI - You Can Pick Your Friends, But You Need to Watch Them: Loan Screening and Enforcement in a Referrals Field Experiment JF - National Bureau of Economic Research Working Paper Series VL - No. 17883 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17883 L1 - http://www.nber.org/papers/w17883.pdf N1 - Author contact info: Gharad T. Bryan London School of Economics Houghton Street London WC2A 2AE United Kingdom E-Mail: g.t.bryan@lse.ac.uk Dean Karlan Department of Economics Yale University P.O. Box 208269 New Haven, CT 06520-8629 Tel: 203/432-4479 Fax: 203/432-5591 E-Mail: dean.karlan@yale.edu Jonathan Zinman Department of Economics Dartmouth College 314 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-0075 Fax: 603/646-2122 E-Mail: jzinman@dartmouth.edu AB - We examine a randomized trial that allows separate identification of peer screening and enforcement of credit contracts. A South African microlender offered half its clients a bonus for referring a friend who repaid a loan. For the remaining clients, the bonus was conditional on loan approval. After approval, the repayment incentive was removed from half the referrers in the first group and added for half those in the second. We find large enforcement effects, a $12 (100 Rand) incentive reduced default by 10 percentage points from a base of 20%. In contrast, we find no evidence of screening. ER - TY - JOUR AU - Korteweg,Arthur AU - Sorensen,Morten TI - Estimating Loan-to-Value and Foreclosure Behavior JF - National Bureau of Economic Research Working Paper Series VL - No. 17882 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17882 L1 - http://www.nber.org/papers/w17882.pdf N1 - Author contact info: Arthur Korteweg Graduate School of Business Stanford University 518 Memorial Way Stanford, CA 94305-5015 Tel: 650/498-6993 Fax: 650/725-7979 E-Mail: korteweg@stanford.edu Morten Sorensen Columbia University Columbia Business School Uris Hall 802 3022 Broadway New York, NY 10027 Tel: 212/851-2446 E-Mail: ms3814@columbia.edu AB - We develop and estimate a unified model of house prices, loan-to-value ratios (LTVs), and trade and foreclosure behavior. House prices are only observed for traded properties, and trades are endogenous, creating sample-selection problems for traditional estimators. We develop a Bayesian filtering procedure to recover the price path for each individual property and produce selection-corrected estimates of historical LTVs and foreclosure behavior, both showing large unprecedented changes since 2007. Our model reduces the index revision problem by nearly half, and has applications in economics and finance (e.g., pricing mortgage-backed securities). ER - TY - JOUR AU - Cahuc,Pïerre AU - Carcillo,Stephane TI - Can Public Sector Wage Bills Be Reduced? JF - National Bureau of Economic Research Working Paper Series VL - No. 17881 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17881 L1 - http://www.nber.org/papers/w17881.pdf N1 - Author contact info: Pïerre Cahuc CREST, Ecole Polytechnique 15 boulevard Gabriel Peri 92245 Malakoff Cedex, France Tel: (33)1 41 17 37 17 E-Mail: cahuc@ensae.fr Stephane Carcillo OECD 2, rue André Pascal 75775 Paris Cedex 16, France E-Mail: stephane.carcillo@oecd.org M1 - published as Pierre Cahuc, Stephane Carcillo. "Can Public Sector Wage Bills Be Reduced?," in Alberto Alesina and Francesco Giavazzi, editors, "Fiscal Policy after the Financial Crisis" University of Chicago Press (2012) M3 - presented at "Fiscal Policy after the Financial Crisis", December 12-13, 2011 AB - This paper analyzes the relation between public wage bills and public deficits in the OECD countries from 1995 to 2009. The paper shows that fiscal drift episodes, characterized by simultaneous increases in the GDP shares of public wage bills and budget deficits, are more frequent during booms and election years, but not during recessions, except for the 2009 exceptionally strong recession. The emergence of fiscal drift episodes during booms and election years is less frequent in countries with more transparent government, more freedom of the press, as well as in countries with presidential regimes and less union coverage. Inversely, fiscal tightening episodes, characterized by simultaneous decreases in the GDP shares of public wage bills and budget deficits, occur less often during booms than during recessions. The emergence of fiscal tightening episodes during recessions and election years is less frequent in countries with more union coverage. ER - TY - JOUR AU - Dyrda,Sebastian AU - Kaplan,Greg AU - Ríos-Rull,José-Víctor TI - Business Cycles and Household Formation: The Micro vs the Macro Labor Elasticity JF - National Bureau of Economic Research Working Paper Series VL - No. 17880 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17880 L1 - http://www.nber.org/papers/w17880.pdf N1 - Author contact info: Sebastian Dyrda University of Minnesota Department of Economics 4-101 Hanson Hall 1925 Fourth Street South Minneapolis, MN 55455 E-Mail: dyrda020@umn.edu Greg Kaplan Department of Economics University of Pennsylvania 160 McNeil Building 3718 Locust Walk Philadelphia, PA 19104 Tel: 215/898-1875 E-Mail: gkaplan@sas.upenn.edu Jose-Victor Rios-Rull University of Minnesota Department of Economics 4-101 Hanson Hall (off 4-179) 1925 Fourth Street South Minneapolis, MN 55455 Tel: (612) 625-0941 Fax: (612) 624-0209 E-Mail: vr0j@umn.edu AB - We provide new evidence on the the cyclical behavior of household size in the United States from 1979 to 2010. During economic downturns, people live in larger households. This is mostly, but not entirely, driven by young people moving into or delaying departure from the parental home. We assess the importance of these cyclical movements for aggregate labor supply by building a model of endogenous household formation within a real business cycle structure. We use the model to measure how much more volatile are hours due to two mechanisms: (i) the presence of a large group of mostly young individuals with non-traditional living arrangements; and (ii) the possibility for these individuals to change their living situation in response to aggregate conditions. Our exercise assumes that older people living in stable households have a Frisch elasticity that is consistent with the micro evidence that is based on such people. The inclusion of people living in unstable households yields an implied aggregate, or macro, Frisch elasticity that is around 45% larger than the assumed micro elasticity. ER - TY - JOUR AU - Steckel,Richard H. AU - White,William J. TI - Engines of Growth: Farm Tractors and Twentieth-Century U.S. Economic Welfare JF - National Bureau of Economic Research Working Paper Series VL - No. 17879 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17879 L1 - http://www.nber.org/papers/w17879.pdf N1 - Author contact info: Richard H. Steckel Department of Economics Ohio State University 410 Arps Hall, 1945 North High Street Columbus, OH 43210-1172 Tel: 614/292-5008 Fax: 614/292-3906 E-Mail: steckel.1@osu.edu William J. White Pope & Associates, Inc. 11800 Conrey Road, Suite 240 Cincinnati, Ohio 45249 E-Mail: wjw630@yahoo.com AB - The role of twentieth-century agricultural mechanization in changing the productivity, employment opportunities, and appearance of rural America has long been appreciated. Less attention has been paid to the impact made by farm tractors, combines, and associated equipment on the standard of living of the U.S. population as a whole. This paper demonstrates, through use of a detailed counterfactual analysis, that mechanization in the production of farm products increased GDP by more than 8.0 percent, using 1954 as a base year. This result suggests that studying individual innovations can significantly increase our understanding of the nature of economic growth. ER - TY - JOUR AU - Fell,Harrison AU - MacKenzie,Ian A. AU - Pizer,William A. TI - Prices versus Quantities versus Bankable Quantities JF - National Bureau of Economic Research Working Paper Series VL - No. 17878 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17878 L1 - http://www.nber.org/papers/w17878.pdf N1 - Author contact info: Harrison Fell Colorado School of Mines E-Mail: Fell@rff.org Ian A. MacKenzie Center of Economic Research ETH Zurich Zürichbergstrasse 18 ZUE F 10 8092 Zürich SWITZERLAND E-Mail: imackenzie@ethz.ch William A. Pizer Sanford School of Public Policy Duke University Box 90312 Durham, NC 27708 Tel: 919/613-9286 Fax: 877/240-9880 E-Mail: billy.pizer@duke.edu AB - Quantity-based regulation with banking allows regulated firms to shift obligations across time in response to periods of unexpectedly high or low marginal costs. Despite its wide prevalence in existing and proposed emission trading programs, banking has received limited attention in past welfare analyses of policy choice under uncertainty. We address this gap with a model of banking behavior that captures two key constraints: uncertainty about the future from the firm’s perspective and a limit on negative bank values (e.g., borrowing). We show conditions where banking provisions reduce price volatility and lower expected costs compared to quantity policies without banking. For plausible parameter values related to U.S. climate change policy, we find that bankable quantities produce behavior quite similar to price policies for about two decades and, during this period, improve welfare by about a $1 billion per year over fixed quantities. ER - TY - JOUR AU - Obstfeld,Maurice TI - Does the Current Account Still Matter? JF - National Bureau of Economic Research Working Paper Series VL - No. 17877 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17877 L1 - http://www.nber.org/papers/w17877.pdf N1 - Author contact info: Maurice Obstfeld Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-9646 Fax: 510/642-6615 E-Mail: obstfeld@econ.berkeley.edu AB - Do global current account imbalances still matter in a world of deep international financial markets where gross two-way financial flows often dwarf the net flows measured in the current account? Contrary to a complete markets or “consenting adults” view of the world, large current account imbalances, while very possibly warranted by fundamentals and welcome, can also signal elevated macroeconomic and financial stresses, as was arguably the case in the mid-2000s. Furthermore, the increasingly big valuation changes in countries’ net international investment positions, while potentially important in risk allocation, cannot be relied upon systematically to offset the changes in national wealth implied by the current account. The same factors that dictate careful attention to global imbalances also imply, however, that data on gross international financial flows and positions are central to any assessment of financial stability risks. The balance sheet mismatches of leveraged entities provide the most direct indicators of potential instability, much more so than do global imbalances, though the imbalances may well be a symptom that deeper financial threats are gathering. ER - TY - JOUR AU - Guerrieri,Veronica AU - Shimer,Robert TI - Dynamic Adverse Selection: A Theory of Illiquidity, Fire Sales, and Flight to Quality JF - National Bureau of Economic Research Working Paper Series VL - No. 17876 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17876 L1 - http://www.nber.org/papers/w17876.pdf N1 - Author contact info: Veronica Guerrieri University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-7834 Fax: 773/702-0458 E-Mail: vguerrie@chicagobooth.edu Robert Shimer Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-9015 E-Mail: shimer@uchicago.edu AB - We develop a dynamic equilibrium model of asset markets affected by adverse selection. There exists a unique equilibrium where better assets trade at higher prices but in less liquid markets. Sellers of high-quality assets can separate because they are more willing to accept a lower trading probability. As a result, the emergence of adverse selection generates a drop in liquidity. It may also lead to a decline in the price-dividend ratio—a fire sale—and a flight to quality. Subsidies to purchasing assets may be Pareto improving and can reverse the fire sale and flight to quality. ER - TY - JOUR AU - Cheung,Yin-Wong AU - Chinn,Menzie D. AU - Qian,XingWang TI - Are Chinese Trade Flows Different? JF - National Bureau of Economic Research Working Paper Series VL - No. 17875 PY - 2012 Y2 - March 2012 UR - http://www.nber.org/papers/w17875 L1 - http://www.nber.org/papers/w17875.pdf N1 - Author contact info: Yin-Wong Cheung Department of Economics University of California Santa Cruz, CA 95064 E-Mail: cheung@ucsc.edu Menzie D. Chinn Department of Economics University of Wisconsin 1180 Observatory Drive Madison, WI 53706 Tel: 608/262-7397 Fax: 608/262-2033 E-Mail: mchinn@lafollette.wisc.edu Xingwang Qian Economics and Finance Department SUNY Buffalo State 1300 Elmwood Ave Buffalo, NY 14222 E-Mail: qianx@buffalostate.edu AB - We find that Chinese trade flows respond to economic activity and relative prices – as represented by a trade weighted exchange rate – but the relationships are not always precisely or robustly estimated. Chinese exports are generally well-behaved, rising with foreign GDP and decreasing as the Chinese renminbi (RMB) appreciates. However, the estimated income elasticity is sensitive to the treatment of time trends. Estimates of aggregate imports are more problematic. In many cases, Chinese aggregate imports actually rise in response to a RMB depreciation and decline with Chinese GDP. This is true even after accounting for the fact a substantial share of imports are subsequently incorporated into Chinese exports. We find that some of these counter-intuitive results are mitigated when we disaggregate the trade flows by customs type, commodity type, and the type of firm undertaking the transactions. However, for imports, we only obtain more reasonable estimates of elasticities when we allow for different import intensities for different components of aggregate demand (specifically, consumption versus investment), or when we include a relative productivity variable. ER - TY - JOUR AU - Harris,Robert S. AU - Jenkinson,Tim AU - Kaplan,Steven N. TI - Private Equity Performance: What Do We Know? JF - National Bureau of Economic Research Working Paper Series VL - No. 17874 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17874 L1 - http://www.nber.org/papers/w17874.pdf N1 - Author contact info: Robert S. Harris University of Virginia Darden School of Business 100 Darden Boulevard Charlottesville, VA 22903 USA E-Mail: HarrisR@darden.virginia.edu Tim Jenkinson University of Oxford Said Business School Park End Street Oxford OX1 1HP UK E-Mail: tim.jenkinson@sbs.ox.ac.uk Steven N. Kaplan Booth School of Business The University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-4513 Fax: 773/702-0458 E-Mail: steven.kaplan@chicagobooth.edu AB - We present evidence on the performance of nearly 1400 U.S. private equity (buyout and venture capital) funds using a new research-quality dataset from Burgiss, sourced from over 200 institutional investors. Using detailed cash-flow data, we compare buyout and venture capital returns to the returns produced by public markets. We also compare the evidence from Burgiss to that derived from other commercial datasets – Venture Economics, Preqin and Cambridge Associates – as well as recent research. We find better buyout fund performance than has previously been documented. This in part reflects recently discovered problems with data provided by Venture Economics, upon which several previous studies had relied. Average U.S. buyout fund performance has exceeded that of public markets for most vintages for a long period of time. The outperformance versus the S&P 500 averages 20% to 27% over the life of the fund and more than 3% per year. Average U.S. venture capital funds, on the other hand, outperformed public equities in the 1990s, but have underperformed public equities in the 2000s. Using individual fund data, we explore the relationship between absolute measures of performance – internal rates of return (IRRs) and multiples of invested capital – and performance relative to public markets. Within a given vintage year, performance relative to public markets can be predicted well by a fund’s multiple of invested capital and IRR, so we are able to estimate the performance relative to public markets that would have been derived from the other commercial datasets, had the required cash-flow data been available. Private equity performance in the other commercial sources – other than Venture Economics – is qualitatively similar to that we find using the Burgiss data. ER - TY - JOUR AU - Cetorelli,Nicola AU - Goldberg,Linda S. TI - Follow the Money: Quantifying Domestic Effects of Foreign Bank Shocks in the Great Recession JF - National Bureau of Economic Research Working Paper Series VL - No. 17873 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17873 L1 - http://www.nber.org/papers/w17873.pdf N1 - Author contact info: Nicola Cetorelli Federal Reserve Bank of New York 33 Liberty Street New York, NY 10045 Tel: 212 720 5071 Fax: 212 720 8363 E-Mail: nicola.cetorelli@ny.frb.org Linda S. Goldberg Federal Reserve Bank-New York 33 Liberty Street New York, NY 10045 Tel: 212/720-2836 Fax: 212/720-6831 E-Mail: linda.goldberg@ny.frb.org AB - Foreign banks pulled significant funding from their U.S. branches during the Great Recession. We estimate that the average-sized branch experienced a 12 percent net internal fund “withdrawal,” with the fund transfer disproportionately bigger for larger branches. This internal shock to the balance sheets of U.S. branches of foreign banks had sizable effects on their lending. On average, for each dollar of funds transferred internally to the parent, branches decreased lending supply by about 40 to 50 cents. However, the extent of the lending effects was very different across branches, depending on their pre-crisis modes of operation in the United States. ER - TY - JOUR AU - Lewis,Karen K. AU - Liu,Edith X. TI - International Consumption Risk Is Shared After All: An Asset Return View JF - National Bureau of Economic Research Working Paper Series VL - No. 17872 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17872 L1 - http://www.nber.org/papers/w17872.pdf N1 - Author contact info: Karen K. Lewis Department of Finance, Wharton School 2300 SHDH University of Pennsylvania Philadelphia, PA 19104-6367 Tel: 215/898-7637 Fax: 215/898-6200 E-Mail: lewisk@wharton.upenn.edu Edith Liu Department of Applied Economics and Management 105 Warren Hall Cornell University Ithaca, NY 14853 E-Mail: edith.liu@cornell.edu AB - International consumption risk sharing studies have largely ignored their models' counterfactual implications for asset returns although these returns incorporate direct market measures of risk. In this paper, we modify a canonical risk-sharing model to generate more plausible asset return behavior and then consider the effects on welfare gains. Matching the mean and variance of equity returns and the risk-free rate requires persistent consumption risk, leading to three main findings: (1) risk-sharing gains decrease as the ability to diversify persistent consumption risk decreases; (2) the international correlation of equity returns is high relative to the correlation of consumption and dividends, implying low diversification potential for persistent consumption risk; and (3) increasing persistent consumption risk reduces the gains. Taken together, our findings suggest that asset returns imply more international risk sharing than previously thought. ER - TY - JOUR AU - Bromhead,Alan de AU - Eichengreen,Barry AU - O'Rourke,Kevin H. TI - Right-Wing Political Extremism in the Great Depression JF - National Bureau of Economic Research Working Paper Series VL - No. 17871 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17871 L1 - http://www.nber.org/papers/w17871.pdf N1 - Author contact info: Alan de Bromhead Mansfield College University of Oxford Oxford OX1 3TF United Kingdom E-Mail: alan.debromhead@mansfield.ox.ac.uk Barry Eichengreen Department of Economics University of California, Berkeley 549 Evans Hall 3880 Berkeley, CA 94720-3880 Tel: 510/642-2772 Fax: 510/643-0926 E-Mail: eichengr@econ.Berkeley.edu Kevin H. O'Rourke All Souls College Oxford University Oxford OX1 4AL, UK Tel: + 44 (0)1865 279 348 Fax: 353-1-6772503 E-Mail: kevin.orourke@all-souls.ox.ac.uk AB - We examine the impact of the Great Depression on the share of votes for right-wing anti-system parties in elections in the 1920s and 1930s. We confirm the existence of a link between political extremism and economic hard times as captured by growth or contraction of the economy. What mattered was not simply growth at the time of the election but cumulative growth performance. But the effect of the Depression on support for right-wing anti-system parties was not equally powerful under all economic, political and social circumstances. It was greatest in countries with relatively short histories of democracy, with existing extremist parties, and with electoral systems that created low hurdles to parliamentary representation. Above all, it was greatest where depressed economic conditions were allowed to persist. ER - TY - JOUR AU - Huckfeldt,Peter J. AU - Sood,Neeraj AU - Escarce,José J AU - Grabowski,David C. AU - Newhouse,Joseph P. TI - Effects of Medicare Payment Reform: Evidence from the Home Health Interim and Prospective Payment Systems JF - National Bureau of Economic Research Working Paper Series VL - No. 17870 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17870 L1 - http://www.nber.org/papers/w17870.pdf N1 - Author contact info: Peter J. Huckfeldt RAND Corporation Santa Monica, California E-Mail: Peter_Huckfeldt@rand.org Neeraj Sood Department of Clinical Pharmacy USC School of Pharmacy 1985 Zonal Avenue Los Angeles, CA 90033 Tel: 310/393-0411 Fax: 310/260-8156 E-Mail: nsood@usc.edu Jose Escarce UCLA Med-GIM-HSR 911 Broxton Avenue Box 951736 Los Angeles, CA 90024 Tel: 310/794-3842 Fax: 310/794-0732 E-Mail: jescarce@mednet.ucla.edu David Grabowski Harvard University Department of Health Care Policy Harvard Medical School 180 Longwood Avenue Boston, MA 02115 E-Mail: grabowski@med.harvard.edu Joseph P. Newhouse Division of Health Policy Research and Education Harvard University 180 Longwood Avenue Boston, MA 02115-5899 Tel: 617/432-1325 Fax: 617/432-3503 E-Mail: newhouse@hcp.med.harvard.edu AB - Medicare continues to implement payment reforms that shift reimbursement from fee-for-service towards episode-based payment, affecting average and marginal reimbursement. We contrast the effects of two reforms for home health agencies. The Home Health Interim Payment System in 1997 lowered both types of reimbursement; our conceptual model predicts a decline in the likelihood of use and costs, both of which we find. The Home Health Prospective Payment System in 2000 raised average but lowered marginal reimbursement with theoretically ambiguous effects; we find a modest increase in use and costs. We find little substantive effect of either policy on readmissions or mortality. ER - TY - JOUR AU - Nunn,Nathan TI - Culture and the Historical Process JF - National Bureau of Economic Research Working Paper Series VL - No. 17869 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17869 L1 - http://www.nber.org/papers/w17869.pdf N1 - Author contact info: Nathan Nunn Department of Economics Harvard University 1805 Cambridge St Cambridge, Ma 02138 Tel: 617/496-4958 Fax: 617/495-8570 E-Mail: nnunn@fas.harvard.edu AB - This article discusses the importance of accounting for cultural values and beliefs when studying the process of historical economic development. A notion of culture as heuristics or rules-of-thumb that aid in decision making is described. Because cultural traits evolve based upon relative fitness, historical shocks can have persistent impacts if they alter the costs and benefits of different traits. A number of empirical studies confirm that culture is an important mechanism that helps explain why historical shocks can have persistent impacts; these are reviewed here. As an example, I discuss the colonial origins hypothesis (Acemoglu, Johnson and Robinson, 2001), and show that our understanding of the transplantation of European legal and political institutions during the colonial period remains incomplete unless the values and beliefs brought by European settlers are taken into account. It is these cultural beliefs that formed the foundation of the initial institutions that in turn were key for long-term economic development. ER - TY - JOUR AU - Calomiris,Charles W. AU - Nissim,Doron TI - Crisis-Related Shifts in the Market Valuation of Banking Activities JF - National Bureau of Economic Research Working Paper Series VL - No. 17868 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17868 L1 - http://www.nber.org/papers/w17868.pdf N1 - Author contact info: Charles W. Calomiris Graduate School of Business Columbia University 3022 Broadway Street, Uris Hall New York, NY 10027 Tel: 212/854-8748 Fax: 212/316-9219 E-Mail: cc374@columbia.edu Doron Nissim Graduate School of Business Columbia University 3022 Broadway New York, NY 10027 E-Mail: dn75@columbia.edu AB - We examine changes in the market valuation of banking activities over the last decade, focusing on the effects of the financial crisis. Our valuation model recognizes that banks create value through the types of assets and liabilities that they create and the various types of risk they undertake (including their leverage, their lending risk, and their interest rate risk). The model also allows for heterogeneous bank income streams, dividend signaling effects, and changes in capitalization rates for income streams over time depending on changing market conditions. This approach explains substantial cross-sectional variation in observed market-to-book values, allowing us to identify the market pricing of various banking activities and changes in market pricing over time. We find that the declines in bank stock values since 2007 reflect declining values of various categories of banking activity and changes in market conditions. Dividend payments matter for market values increasingly over time. “Carry-trade” effects from taking on interest rate risk are also apparent. The effects of leverage on bank valuation changed sign during the crisis; while the market rewarded high leverage with higher market values prior to the crisis, leverage become associated with lower values during and after the crisis. Contrary to the view that the declines in market-to-book values for U.S. banks from 2006-2011 mainly reflect unrecognized losses, we find that other factors explain most of the decline in market-to-book ratios. Although model parameters do change over time, more than three-quarters of the change in market-to-book values that occurred from 2006 to the end of 2008 were predictable based on changes in fundamental determinants of value using the model coefficients estimated in 2006. ER - TY - JOUR AU - Erel,Isil AU - Jang,Yeejin AU - Weisbach,Michael S. TI - Financing-Motivated Acquisitions JF - National Bureau of Economic Research Working Paper Series VL - No. 17867 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17867 L1 - http://www.nber.org/papers/w17867.pdf N1 - Author contact info: Isil Erel Department of Finance Ohio State University 832 Fisher Hall 2100 Neil Avenue Columbus, OH 43210 Tel: 614-292-5174 E-Mail: erel@fisher.osu.edu YeeJin Jang Ohio State University Fisher College of Business 810 Fisher Hall 2100 Neil Avenue Columbus, OH 43210 E-Mail: Jang_122@fisher.osu.edu Michael Weisbach Department of Finance Fisher College of Business Ohio State University 2100 Neil Ave. Columbus, OH 43210 Tel: 614/292-3264 E-Mail: weisbach.2@osu.edu AB - Managers often claim that an important source of value in acquisitions is the acquiring firm’s ability to finance investments for the target firm. This claim implies that targets are financially constrained prior to being acquired and that these constraints are eased following the acquisition. We evaluate the extent to which acquisitions lower financial constraints on a sample of 5,187 European acquisitions occurring between 2001 and 2008. Each of these targets remains a subsidiary of its new parent, so we can observe the target’s financial policies following the acquisition. We examine whether these post-acquisition financial policies reflect improved access to capital. We find that the level of cash target firms hold, the sensitivity of cash to cash flow, and the sensitivity of investment to cash flow all decline significantly, while investment significantly increases following the acquisition. These effects are stronger in deals more likely associated with financing improvements. These findings are consistent with the view that easing financial frictions is a source of value that motivates acquisitions. ER - TY - JOUR AU - Shoven,John B. AU - Slavov,Sita Nataraj TI - The Decision to Delay Social Security Benefits: Theory and Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 17866 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17866 L1 - http://www.nber.org/papers/w17866.pdf N1 - Author contact info: John B. Shoven Department of Economics 579 Serra Mall at Galvez Street Stanford, CA 94305-6015 Tel: 650/723-3273 Fax: 650/723-8611 E-Mail: shoven@stanford.edu Sita Slavov Department of Economics Occidental College 1600 Campus Road Los Angeles, CA 90041 Tel: 323/259-1461 E-Mail: sslavov@oxy.edu AB - Social Security benefits may be commenced at any time between age 62 and age 70. As individuals who claim later can, on average, expect to receive benefits for a shorter period, an actuarial adjustment is made to the monthly benefit amount to reflect the age at which benefits are claimed. We investigate the actuarial fairness of this adjustment. Our simulations suggest that delaying is actuarially advantageous for a large subset of people, particularly for real interest rates of 3.5 percent or below. The gains from delaying are greater at lower interest rates, for married couples relative to singles, for single women relative to single men, and for two-earner couples relative to one-earner couples. In a two-earner couple, the gains from deferring the primary earner’s benefit are greater than the gains from deferring the secondary earner’s benefit. We then use panel data from the Health and Retirement Study to investigate whether individuals’ actual claiming behavior appears to be influenced by the degree of actuarial advantage to delaying. We find no evidence of a consistent relationship between claiming behavior and factors that influence the actuarial advantage of delay, including gender and marital status, interest rates, subjective discount rates, or subjective assessments of life expectancy. ER - TY - JOUR AU - Walque,Damien de AU - Dow,William H. AU - Medlin,Carol AU - Nathan,Rose TI - Stimulating Demand for AIDS Prevention: Lessons from the RESPECT Trial JF - National Bureau of Economic Research Working Paper Series VL - No. 17865 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17865 L1 - http://www.nber.org/papers/w17865.pdf N1 - Author contact info: Damien de Walque The World Bank Development Research Group 1818 H Street, NW Washington, DC 20433 Tel: (202) 473-2517 E-Mail: ddewalque@worldbank.org William H. Dow University of California, Berkeley School of Public Health 239 University Hall, #7360 Berkeley, CA 94720-7360 Tel: 510/643-5439 Fax: 510/643-6981 E-Mail: wdow@berkeley.edu Carol Medlin Bill & Melinda Gates Foundation Seattle, WA 98102 E-Mail: Carol.Medlin@gatesfoundation.org Rose Nathan Ifakara Health Institute Dar es Salaam Tanzania E-Mail: rnathan@ihi.or.tz M3 - presented at "African Development Successes", August 3-5, 2011 AB - HIV-prevention strategies have yielded only limited success so far in slowing down the AIDS epidemic. This paper examines novel intervention strategies that use incentives to discourage risky sexual behaviors. Widely-adopted conditional cash transfer programs that offer payments conditioning on easily monitored behaviors, such as well-child health care visits have shown positive impact on health outcomes. Similarly, contingency management approaches have successfully used outcome-based rewards to encourage behaviors that aren’t easily monitored, such as stopping drug abuse. These strategies have not been used in the sexual domain, so we assess how incentives can be used to reduce risky sexual behavior. After discussing theoretical pathways, we discuss the use of sexual-behavior incentives in the Tanzanian RESPECT trial. There, participants who tested negative for sexually transmitted infections are eligible for outcome-based cash rewards. The trial was well-received in the communities, with high enrollment rates and over 90% of participants viewing the incentives favorably. After one year, 57% of enrollees in the “low-value” reward arm stated that the cash rewards “very much” motivated sexual behavioral change, rising to 79% in the “high-value” reward arm. Despite its controversial nature, we argue for further testing of such incentive-based approaches to encouraging reductions in risky sexual behavior. ER - TY - JOUR AU - Eaton,Jonathan AU - Kortum,Samuel S. AU - Sotelo,Sebastian TI - International Trade: Linking Micro and Macro JF - National Bureau of Economic Research Working Paper Series VL - No. 17864 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17864 L1 - http://www.nber.org/papers/w17864.pdf N1 - Author contact info: Jonathan Eaton Department of Economics Penn State University 608 Kern Graduate Building University Park, PA 16802-3306 Tel: (814) 865 - 8871 Fax: (814) 863 - 4775 E-Mail: jxe22@psu.edu Samuel S. Kortum Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-8251 Fax: 773/702-8490 E-Mail: kortum@uchicago.edu Sebastian Sotelo Sebastian Sotelo Department of Economics University of Chicago 1126 East 59th St. Chicago, IL 60637 E-Mail: sotelo@uchicago.edu AB - A recent literature has introduced heterogeneous firms into models of international trade. This literature has adopted the convention of treating individual firms as points on a continuum. While the continuum offers many advantages this convenience comes at some cost: (1) Shocks to individual firms can never have an aggregate effect. (2) It is hard to reconcile the small (sometimes zero) number of firms engaged in selling from one country to another with a continuum. (3) For such models to deliver finite solutions for aggregates, such as the price index, requires restrictions on parameter values that may not hold in the data. We show how a standard heterogeneous-firm trade model can be amended to allow for only an integer number of firms. The model overcomes the deficiencies of the continuum model enumerated above. Taking the model to aggregate data on bilateral trade in manufactures among 92 countries and to firm-level export data for a much narrower sample shows that it accounts for both the large share of a small number of firms in sales around the world and for zeros in bilateral trade data while maintaining the good fit of the standard gravity equation among country pairs with thick trade volumes. Randomness at the firm level adds substantially to aggregate variability. ER - TY - JOUR AU - Lusardi,Annamaria AU - Mitchell,Olivia S. AU - Curto,Vilsa TI - Financial Sophistication in the Older Population JF - National Bureau of Economic Research Working Paper Series VL - No. 17863 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17863 L1 - http://www.nber.org/papers/w17863.pdf N1 - Author contact info: Annamaria Lusardi The George Washington University School of Business 2201 G Street, NW Duques Hall, Suite 450E Washington, DC 20052 Tel: 202-994-8410 E-Mail: alusardi@gwu.edu Olivia S. Mitchell University of Pennsylvania Wharton School 3620 Locust Walk, St 3000 SH-DH Philadelphia, PA 19104-6302 Tel: 215-898-0424 Fax: 215/898-0310 E-Mail: mitchelo@wharton.upenn.edu Vilsa Curto Stanford University Department of Economics 579 Serra Mall Stanford, CA 94305 E-Mail: vcurto@stanford.edu AB - This paper examines data on financial sophistication among the U.S. older population, using a special-purpose module implemented in the Health and Retirement Study. We show that financial sophistication is deficient for older respondents (aged 55+). Specifically, many in this group lack a basic grasp of asset pricing, risk diversification, portfolio choice, and investment fees. Subpopulations with particular deficits include women, the least educated, persons over the age of 75, and non-Whites. In view of the fact that people are increasingly being asked to take on responsibility for their own retirement security, such lack of knowledge can have serious implications. ER - TY - JOUR AU - Trabandt,Mathias AU - Uhlig,Harald TI - How Do Laffer Curves Differ Across Countries? JF - National Bureau of Economic Research Working Paper Series VL - No. 17862 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17862 L1 - http://www.nber.org/papers/w17862.pdf N1 - Author contact info: Mathias Trabandt Board of Governors of the Federal Reserve System Division of International Finance Trade and Financial Studies Section 20th Street and Constitution Avenue N.W. Washington, D.C. 20551 Tel: +1-202-492-6999 E-Mail: mathias.trabandt@gmail.com Harald Uhlig Dept. of Economics University of Chicago 1126 E 59th Street Chicago, IL 60637 Tel: 773/702-3702 Fax: 773/702-8490 E-Mail: huhlig@uchicago.edu M1 - published as Mathias Trabandt, Harald Uhlig. "How Do Laffer Curves Differ Across Countries?," in Alberto Alesina and Francesco Giavazzi, editors, "Fiscal Policy after the Financial Crisis" University of Chicago Press (2012) M3 - presented at "Fiscal Policy after the Financial Crisis", December 12-13, 2011 AB - We seek to understand how Laffer curves differ across countries in the US and the EU-14, thereby providing insights into fiscal limits for government spending and the service of sovereign debt. As an application, we analyze the consequences for the permanent sustainability of current debt levels, when interest rates are permanently increased e.g. due to default fears. We build on the analysis in Trabandt and Uhlig (2011) and extend it in several ways. To obtain a better fit to the data, we allow for monopolistic competition as well as partial taxation of pure profit income. We update the sample to 2010, thereby including recent increases in government spending and their fiscal consequences. We provide new tax rate data. We conduct an analysis for the pessimistic case that the recent fiscal shifts are permanent. We include a cross-country analysis on consumption taxes as well as a more detailed investigation of the inclusion of human capital considerations for labor taxation. ER - TY - JOUR AU - Meer,Jonathan AU - Rosen,Harvey S. TI - Does Generosity Beget Generosity? Alumni Giving and Undergraduate Financial Aid JF - National Bureau of Economic Research Working Paper Series VL - No. 17861 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17861 L1 - http://www.nber.org/papers/w17861.pdf N1 - Author contact info: Jonathan Meer Department of Economics Texas A&M University College Station, TX 77843 E-Mail: jmeer@econmail.tamu.edu Harvey S. Rosen Department of Economics Fisher Hall Princeton University Princeton, NJ 08544-1021 Tel: 609/258-4022 Fax: 609/258-6419 E-Mail: HSR@princeton.edu AB - We investigate how undergraduates’ financial aid packages affect their subsequent donative behavior as alumni. The empirical work is based upon micro data on alumni giving at an anonymous research university. We focus on three types of financial aid, scholarships, loans, and campus jobs. A novel aspect of our modeling strategy is that, consistent with the view of some professional fundraisers, we allow the receipt of a given form of aid per se to affect alumni giving. At the same time, our model allows the amount of the support to affect giving behavior nonlinearly. Our main findings are: 1) Individuals who took out student loans are less likely to make a gift, other things being the same. We conjecture that this phenomenon is caused by an “annoyance effect” — alumni resent the fact that they are burdened with loans. 2) Scholarship aid reduces the size of a gift, but has little effect on the probability of donating. The negative effect of receiving a scholarship on donations decreases in absolute value with the size of the scholarship. We do not find any evidence that scholarship recipients give less because they have relatively low incomes post graduation. 3) Aid in the form of campus jobs does not have a strong effect on donative behavior. ER - TY - JOUR AU - Romer,Christina D. AU - Romer,David H. TI - The Incentive Effects of Marginal Tax Rates: Evidence from the Interwar Era JF - National Bureau of Economic Research Working Paper Series VL - No. 17860 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17860 L1 - http://www.nber.org/papers/w17860.pdf N1 - Author contact info: Christina D. Romer Department of Economics University of California, Berkeley Berkeley, CA 94720 Tel: 510/642-4317 Fax: 510/642-6615 E-Mail: cromer@econ.berkeley.edu David H. Romer Department of Economics University of California, Berkeley Berkeley, CA 94720-3880 E-Mail: dromer@econ.berkeley.edu AB - This paper uses the interwar period in the United States as a laboratory for investigating the incentive effects of changes in marginal income tax rates. Marginal rates changed frequently and drastically in the 1920s and 1930s, and the changes varied greatly across income groups at the top of the income distribution. We examine the effect of these changes on taxable income using time-series/cross-section analysis of data on income and taxes by small slices of the income distribution. We find that the elasticity of taxable income to changes in the log after-tax share (one minus the marginal rate) is positive but small (approximately 0.2) and precisely estimated (a t-statistic over 6). The estimate is highly robust. We also examine the time-series response of available indicators of investment and entrepreneurial activity to changes in marginal rates. We find suggestive evidence of an impact on business formation, but no evidence of an important impact on other indicators. ER - TY - JOUR AU - Jackson,C. Kirabo TI - Do College-Prep Programs Improve Long-Term Outcomes? JF - National Bureau of Economic Research Working Paper Series VL - No. 17859 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17859 L1 - http://www.nber.org/papers/w17859.pdf N1 - Author contact info: C. Kirabo Jackson Northwestern University School of Education and Social Policy 2040 Sheridan Road Evanston, IL 60208 Tel: 847/467-1803 E-Mail: kirabo-jackson@northwestern.edu AB - I analyze the longer-run effects of a college-preparatory program implemented in inner-city schools that included payments to eleventh- and twelfth- grade students and their teachers for passing scores on Advanced Placement exams. Affected students attended college in greater numbers, were more likely to remain in college beyond their first year, more likely to earn a college degree, more likely to be employed, and earned higher wages. This is the first credible evidence that implementing college-preparatory programs in existing urban schools can improve both the long-run educational and labor market outcomes of disadvantaged students. ER - TY - JOUR AU - Assunção,Juliano J. AU - Benmelech,Efraim AU - Silva,Fernando S. S. TI - Repossession and the Democratization of Credit JF - National Bureau of Economic Research Working Paper Series VL - No. 17858 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17858 L1 - http://www.nber.org/papers/w17858.pdf N1 - Author contact info: Juliano Assuncao Catholic University of Rio de Janeiro (PUC-Rio) Rua Marquês de São Vicente, 225 22451-900 Rio de Janeiro, RJ Brazil E-Mail: juliano@econ.puc-rio.br Efraim Benmelech Harvard University Department of Economics Littauer 233 Cambridge, MA 02138 Tel: 617/496-4787 Fax: 617/495-8570 E-Mail: effi_benmelech@harvard.edu Fernando S. Silva Catholic University of Rio de Janeiro (PUC-Rio) Rua Marquês de São Vicente, 225 22451-900 Rio de Janeiro, RJ Brazil E-Mail: fernandosssilva@yahoo.com.br AB - We exploit a 2004 credit reform in Brazil that simplified the sale of repossessed cars used as collateral for auto loans. We show that the change has led to larger loans with lower spreads and longer maturities. The reform expanded credit to riskier, low-income borrowers for newer, more expensive cars. Although the credit reform improved riskier borrowers’ access to credit, it also led to increased incidences of delinquency and default. Our results shed light on the consequences of a credit reform, highlighting the crucial role that collateral and repossession play in the liberalization and democratization of credit. ER - TY - JOUR AU - McKnight,Robin AU - Reuter,Jonathan AU - Zitzewitz,Eric TI - Insurance as Delegated Purchasing: Theory and Evidence from Health Care JF - National Bureau of Economic Research Working Paper Series VL - No. 17857 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17857 L1 - http://www.nber.org/papers/w17857.pdf N1 - Author contact info: Robin McKnight Department of Economics Wellesley College 106 Central Street Wellesley, MA 02481 Tel: 781/283-2153 E-Mail: rmcknigh@wellesley.edu Jonathan Reuter Carroll School of Management Boston College 224B Fulton Hall 140 Commonwealth Avenue Chestnut Hill, MA 02467 Tel: 617/552-2863 Fax: 617/552-0431 E-Mail: reuterj@bc.edu Eric Zitzewitz Department of Economics Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-2891 Fax: 603/646-2122 E-Mail: eric.zitzewitz@dartmouth.edu AB - Household demand for actuarially unfair insurance against small risks has long puzzled economists. One way to potentially rationalize this demand is to recognize that (non-life) insurance is an incentive-compatible means of engaging an expert buyer. To quantify the benefits of expert buying, we compare prices paid by the insured and uninsured for health care. In categories of health care where uncompensated care is more difficult to obtain (drugs, doctor office visits, and hospital outpatient visits), we find that insurers pay 10-20% less than the uninsured. For forms of care where payment by the uninsured is more likely to be negotiated after services are rendered (hospitalizations and emergency room visits) the uninsured pay about 30% less on average, due largely to the nontrivial share of uninsured who pay 5% or less of their billed charges. At least in settings where free services are difficult to obtain, expert buying is an important benefit of insurance. We discuss the implications of the delegated-purchasing view of insurance for con-sumer-driven health insurance and for self-insurance by employers. ER - TY - JOUR AU - Lim,Jongha AU - Minton,Bernadette A. AU - Weisbach,Michael S. TI - Equity-Holding Institutional Lenders: Do they Receive Better Terms? JF - National Bureau of Economic Research Working Paper Series VL - No. 17856 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17856 L1 - http://www.nber.org/papers/w17856.pdf N1 - Author contact info: Jongha Lim Department of Finance Trulaske College of Business School University of Missouri Columbia, MO 65211 E-Mail: limjong@missouri.edu Bernadette Minton Finance Department Fisher College of Business 700 Fisher Hall 2100 Neil Avenue Columbus, OH 43210-1144 Tel: 614/292-5026 Fax: 614/292-2418 E-Mail: minton_15@fisher.osu.edu Michael Weisbach Department of Finance Fisher College of Business Ohio State University 2100 Neil Ave. Columbus, OH 43210 Tel: 614/292-3264 E-Mail: weisbach.2@osu.edu AB - The past decade has seen significant changes in the structure of the corporate lending market, with non-commercial bank institutional investors playing larger roles than they historically have played. In addition, non-commercial bank institutional lenders are often equity holders in their borrowing firms. In our sample of 11,137 tranches of institutional “leveraged” loans, 2,008 (18%) have a non-commercial bank institution that also owns at least 0.1% of the firm’s equity. Such “dual holder” loan tranches have higher spreads than otherwise similar loan tranches without equity holder participation. The dual holder premium is present for both revolver and term loans, and exists within all non-investment grade credit rating classes. Contrary to risk-based explanations of this finding, dual holder tranches are priced with premiums relative to other tranches of the same loan package. Dual holding premiums are higher when the equity-holder’s stake is larger, when the dual-holder’s share in the loan is larger, and when the equity holder is a hedge fund or a private equity fund. These premiums likely represent additional compensation to dual holders for providing capital to firms when the firms are having difficulty raising capital otherwise. ER - TY - JOUR AU - Gneezy,Uri AU - List,John AU - Price,Michael K. TI - Toward an Understanding of Why People Discriminate: Evidence from a Series of Natural Field Experiments JF - National Bureau of Economic Research Working Paper Series VL - No. 17855 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17855 L1 - http://www.nber.org/papers/w17855.pdf N1 - Author contact info: Uri Gneezy Rady School of Management University of California - San Diego Otterson Hall, Room 4S136 9500 Gilman Drive #0553 La Jolla, CA 92093-0553 Tel: (858) 534-4312 Fax: (858) 534-0745 E-Mail: ugneezy@ucsd.edu John List Department of Economics University of Chicago 1126 East 59th Chicago, IL 60637 Tel: 301/405-1288 Fax: 301/314-9091 E-Mail: jlist@uchicago.edu Michael Price Department of Economics University of Tennessee 515 Stokely Management Center Knoxville, TN 27996 Tel: 865/974-5672 Fax: 865/974-4601 E-Mail: mprice21@utk.edu AB - Social scientists have presented evidence that suggests discrimination is ubiquitous: women, nonwhites, and the elderly have been found to be the target of discriminatory behavior across several labor and product markets. Scholars have been less successful at pinpointing the underlying motives for such discriminatory patterns. We employ a series of field experiments across several market and agent types to examine the nature and extent of discrimination. Our exploration includes examining discrimination based on gender, age, sexual orientation, race, and disability. Using data from more than 3000 individual transactions, we find evidence of discrimination in each market. Interestingly, we find that when the discriminator believes the object of discrimination is controllable, any observed discrimination is motivated by animus. When the object of discrimination is not due to choice, the evidence suggests that statistical discrimination is the underlying reason for the disparate behavior. ER - TY - JOUR AU - Giesecke,Kay AU - Longstaff,Francis A. AU - Schaefer,Stephen AU - Strebulaev,Ilya TI - Macroeconomic Effects of Corporate Default Crises: A Long-Term Perspective JF - National Bureau of Economic Research Working Paper Series VL - No. 17854 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17854 L1 - http://www.nber.org/papers/w17854.pdf N1 - Author contact info: Kay Giesecke Stanford University E-Mail: giesecke@stanford.edu Francis Longstaff UCLA Anderson Graduate School of Management 110 Westwood Plaza, Box 951481 Los Angeles, CA 90095-1481 Tel: 310/825-2218 Fax: 310/206-5455 E-Mail: francis.longstaff@anderson.ucla.edu Stephen Schaefer London Business School Regents Park London, NW14SA United Kingdom E-Mail: sschaefer@london.edu Ilya A. Strebulaev Graduate School of Business Stanford University 655 Knight Way Stanford, CA 94305 Tel: 650/725-8239 Fax: 650/725-7979 E-Mail: istrebulaev@stanford.edu AB - Using an extensive new data set on corporate bond defaults in the U.S. from 1866 to 2010, we study the macroeconomic effects of bond market crises and contrast them with those resulting from banking crises. During the past 150 years, the U.S. has experienced many severe corporate default crises in which 20 to 50 percent of all corporate bonds defaulted. Although the total par amount of corporate bonds has often rivaled the amount of bank loans outstanding, we find that corporate default crises have far fewer real effects than do banking crises. These results provide empirical support for current theories that emphasize the unique role that banks and the credit and collateral channels play in amplifying macroeconomic shocks. ER - TY - JOUR AU - Foster,Lucia AU - Haltiwanger,John C. AU - Syverson,Chad TI - The Slow Growth of New Plants: Learning about Demand? JF - National Bureau of Economic Research Working Paper Series VL - No. 17853 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17853 L1 - http://www.nber.org/papers/w17853.pdf N1 - Author contact info: Lucia Foster Center for Economic Studies Census Bureau Room 211/WP11 Washington, DC 20233-6300 Tel: 301-763-6444 Fax: Senior Economist E-Mail: lucia.s.foster@census.gov John C. Haltiwanger Department of Economics University of Maryland College Park, MD 20742 Tel: 301/405-3504 Fax: 301/405-3542 E-Mail: haltiwan@econ.umd.edu Chad Syverson University of Chicago Booth School of Business 5807 S. Woodlawn Ave. Chicago, IL 60637 Tel: 773/702-7815 Fax: 773/702-8490 E-Mail: chad.syverson@chicagobooth.edu AB - It is well known that new businesses are typically much smaller than their established industry competitors, and that this size gap closes slowly. We show that even in commodity-like product markets, these patterns do not reflect productivity gaps, but rather differences in demand-side fundamentals. We document and explore patterns in plants’ idiosyncratic demand levels by estimating a dynamic model of plant expansion in the presence of a demand accumulation process (e.g., building a customer base). We find active accumulation driven by plants’ past production decisions quantitatively dominates passive demand accumulation, and that within-firm spillovers affect demand levels but not growth. ER - TY - JOUR AU - Chaudhary,Latika AU - Musacchio,Aldo AU - Nafziger,Steven AU - Yan,Se TI - Big BRICs, Weak Foundations: The Beginning of Public Elementary Education in Brazil, Russia, India, and China JF - National Bureau of Economic Research Working Paper Series VL - No. 17852 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17852 L1 - http://www.nber.org/papers/w17852.pdf N1 - Author contact info: Latika Chaudhary 1030 Columbia Avenue, #4072 Claremont, CA 91711 Tel: 909-607-0078 E-Mail: latika.chaudhary@scrippscollege.edu Aldo Musacchio Harvard Business School Morgan Hall 279 Soldiers Field Boston, MA 02163 Tel: 617/496-0995 E-Mail: amusacchio@hbs.edu Steven Nafziger Department of Economics, Williams College Shapiro Hall, 24 Hopkins Hall Dr. Williamstown, MA 01267 E-Mail: steven.nafziger@williams.edu Se Yan Department of Applied Economics Guanghua School of Management Peking University Beijing 100871, China E-Mail: seyan@gsm.pku.edu.cn AB - Our paper provides a comparative perspective on the development of public primary education in four of the largest developing economies circa 1910: Brazil, Russia, India and China (BRIC). These four countries encompassed more than 50 percent of the world’s population in 1910, but remarkably few of their citizens attended any school by the early 20th century. We present new, comparable data on school inputs and outputs for BRIC drawn from contemporary surveys and government documents. Recent studies emphasize the importance of political decentralization, and relatively broad political voice for the early spread of public primary education in developed economies. We identify the former and the lack of the latter to be important in the context of BRIC, but we also outline how other factors such as factor endowments, colonialism, serfdom, and, especially, the characteristics of the political and economic elite help explain the low achievement levels of these four countries and the incredible amount of heterogeneity within each of them. ER - TY - JOUR AU - Dupas,Pascaline AU - Green,Sarah AU - Keats,Anthony AU - Robinson,Jonathan TI - Challenges in Banking the Rural Poor: Evidence from Kenya's Western Province JF - National Bureau of Economic Research Working Paper Series VL - No. 17851 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17851 L1 - http://www.nber.org/papers/w17851.pdf N1 - Author contact info: Pascaline Dupas Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 E-Mail: pdupas@stanford.edu Sarah Green Innovations for Poverty Action 101 Whitney Ave New Haven, CT 06510 E-Mail: sgreen@poverty-action.org Anthony Keats Department of Economics University of California, Los Angeles 8283 Bunche Hall Los Angeles, CA 90095 E-Mail: akeats@ucla.edu Jonathan Robinson Department of Economics University of California, Santa Cruz 457 Engineering 2 Santa Cruz, CA 95064 E-Mail: jmrtwo@ucsc.edu M3 - presented at "African Development Successes", August 3-5, 2011 AB - Most people in rural Africa do not have bank accounts. In this paper, we combine experimental and survey evidence from Western Kenya to document some of the supply and demand factors behind such low levels of financial inclusion. Our experiment had two parts. In the first part, we waived the fixed cost of opening a basic savings account at a local bank for a random subset of individuals who were initially unbanked. While 63% of people opened an account, only 18% actively used it. Survey evidence suggests that the main reasons people did not begin saving in their bank accounts are that: (1) they do not trust the bank, (2) service is unreliable, and (3) withdrawal fees are prohibitively expensive. In the second part of the experiment, we provided information on local credit options and lowered the eligibility requirements for an initial small loan. Within the following 6 months, only 3% of people initiated the loan application process. Survey evidence suggests that people do not borrow because they do not want to risk losing their collateral. These results suggest that, while simply expanding access to banking services (for instance by lowering account opening fees) will benefit a minority, broader success may be unobtainable unless the quality of services is simultaneously improved. There are also challenges on the demand side, however. More work needs to be done to understand what savings and credit products are best suited for the majority of rural households. ER - TY - JOUR AU - Bloom,Nicholas AU - Genakos,Christos AU - Sadun,Raffaella AU - Reenen,John Van TI - Management Practices Across Firms and Countries JF - National Bureau of Economic Research Working Paper Series VL - No. 17850 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17850 L1 - http://www.nber.org/papers/w17850.pdf N1 - Author contact info: Nicholas Bloom Stanford University Department of Economics 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/725-3266 Fax: 650/725-5702 E-Mail: nbloom@stanford.edu Christos Genakos Department of Economics Athens University of Economics and Business 76 Patission Str. Athens, 10434 GREECE Tel: (+30) 210 8203 353 E-Mail: cgenakos@aueb.gr Raffaella Sadun Harvard Business School Morgan Hall 219 Soldiers Field Boston, MA 02163 Tel: 617/495-6190 Fax: 617/495-0355 E-Mail: rsadun@hbs.edu John Van Reenen Department of Economics London School of Economics Centre for Economic Performance Houghton Street London WC2A 2AE UNITED KINGDOM Tel: 00 44 207/955-6976 Fax: 00 44 207/955-6848 E-Mail: j.vanreenen@lse.ac.uk AB - For the last decade we have been using double-blind survey techniques and randomized sampling to construct management data on over 10,000 organizations across twenty countries. On average, we find that in manufacturing American, Japanese, and German firms are the best managed. Firms in developing countries, such as Brazil, China and India tend to be poorly managed. American retail firms and hospitals are also well managed by international standards, although American schools are worse managed than those in several other developed countries. We also find substantial variation in management practices across organizations in every country and every sector, mirroring the heterogeneity in the spread of performance in these sectors. One factor linked to this variation is ownership. Government, family, and founder owned firms are usually poorly managed, while multinational, dispersed shareholder and private-equity owned firms are typically well managed. Stronger product market competition and higher worker skills are associated with better management practices. Less regulated labor markets are associated with improvements in incentive management practices such as performance based promotion. ER - TY - JOUR AU - Ferson,Wayne E. AU - Nallareddy,Suresh K. AU - Xie,Biqin TI - The "Out of Sample" Performance of Long-run Risk Models JF - National Bureau of Economic Research Working Paper Series VL - No. 17848 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17848 L1 - http://www.nber.org/papers/w17848.pdf N1 - Author contact info: Wayne E. Ferson Department of Finance and Business Economics University of Southern California 3670 Trousdale Parkway Suite 308 Los Angeles, CA 90089-0804 Tel: 213/740-5615 Fax: 213/740-6650 E-Mail: ferson@marshall.usc.edu Suresh K. Nallareddy School of Accounting University of Southern California 3670 Trousdale Parkway Suite 308 Los Angeles, CA 90089-0804TER E-Mail: suresh.nallareddy.2011@marshall.usc.edu Biqin Xie Leventhal School of Accounting University of Southern California 3670 Trousdale Avenue, Los Angeles CA 90089 E-Mail: biqinxie@usc.edu AB - This paper studies the ability of long-run risk models to explain out-of-sample asset returns during 1931-2009. The long-run risk models perform relatively well on the momentum effect. A cointegrated version of the model outperforms the classical, stationary version. Both the long-run and the short run consumption shocks in the models are empirically important for the models’ performance. The models’ average pricing errors are especially small in the decades from the 1950s to the 1990s. When we restrict the risk premiums to identify structural parameters, this results in larger average pricing errors but often smaller error variances. The mean squared errors are not substantially better than those of the classical CAPM, except for Momentum. ER - TY - JOUR AU - Casella,Alessandra AU - Palfrey,Thomas AU - Turban,Sébastien TI - Vote Trading With and Without Party Leaders JF - National Bureau of Economic Research Working Paper Series VL - No. 17847 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17847 L1 - http://www.nber.org/papers/w17847.pdf N1 - Author contact info: Alessandra Casella Department of Economics Columbia University 420 West 118 Street New York, NY 10027 Tel: 212/854-2459 Fax: 212/854-8059 E-Mail: ac186@columbia.edu Thomas Palfrey Division of the Humanities and Social Sciences Mail Code 228-77 California Institute of Technology Pasadena, CA 91125 E-Mail: trp@hss.caltech.edu Sebastien Turban Department of Economics Columbia University 420 West 118 Street New York NY 10027 E-Mail: st2511@columbia.edu AB - Two groups of voters of known sizes disagree over a single binary decision to be taken by simple majority. Individuals have different, privately observed intensities of preferences and before voting can buy or sell votes among themselves for money. We study the implication of such trading for outcomes and welfare when trades are coordinated by the two group leaders and when they take place anonymously in a competitive market. The theory has strong predictions. In both cases, trading falls short of full efficiency, but for opposite reasons: with group leaders, the minority wins too rarely; with market trades, the minority wins too often. As a result, with group leaders, vote trading improves over no-trade; with market trades, vote trading can be welfare reducing. All predictions are strongly supported by experimental results. ER - TY - JOUR AU - Guadalupe,Maria AU - Li,Hongyi AU - Wulf,Julie TI - Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management JF - National Bureau of Economic Research Working Paper Series VL - No. 17846 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17846 L1 - http://www.nber.org/papers/w17846.pdf N1 - Author contact info: Maria Guadalupe Graduate School of Business Columbia University 3022 Broadway, Uris Hall 624 New York, NY 10027 Tel: 212/854-6176 E-Mail: mg2341@columbia.edu Hongyi Li MIT Sloan School of Management 100 Main Street, E62-513 Cambridge, MA 02142 E-Mail: hongyili@mit.edu Julie Wulf Harvard Business School Soldiers Field Boston, MA 02163 Tel: 617/495-8542 Fax: 617/496-5859 E-Mail: jwulf@hbs.edu AB - This paper shows that top management structures in large US firms radically changed since the mid-1980s. While the number of managers reporting directly to the CEO doubled, the growth was driven primarily by functional managers rather than general managers. Using panel data on senior management positions, we explore the relationship between changes in executive team composition, firm diversification, and IT investments—which arguably alter returns to exploiting synergies through corporate-wide coordination by functional managers in headquarters. We find that the number of functional managers closer to the product (“product” functions i.e., marketing, R&D) increase as firms focus their businesses, while the number of functional managers farther from the product (“administrative” functions i.e., finance, law, HR) increase with IT investments. Finally, we show that general manager pay decreases as functional managers join the executive team suggesting a shift in activities from general to functional managers—a phenomenon we term “functional centralization.” ER - TY - JOUR AU - Chan,Gabriel AU - Stavins,Robert AU - Stowe,Robert AU - Sweeney,Richard TI - The SO2 Allowance Trading System and the Clean Air Act Amendments of 1990: Reflections on Twenty Years of Policy Innovation JF - National Bureau of Economic Research Working Paper Series VL - No. 17845 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17845 L1 - http://www.nber.org/papers/w17845.pdf N1 - Author contact info: Gabriel Chan Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617-496-0739 Fax: 617-496-8753 E-Mail: gabe_chan@hksphd.harvard.edu Robert Stavins JFK School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/495-1820 Fax: 617/496-3783 E-Mail: robert_stavins@harvard.edu Robert Stowe Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617-496-4265 E-Mail: robert_stowe@harvard.edu Richard Sweeney Harvard Kennedy School E-Mail: rich_sweeney@hksphd.harvard.edu AB - The introduction of the U.S. SO2 allowance-trading program to address the threat of acid rain as part of the Clean Air Act Amendments of 1990 is a landmark event in the history of environmental regulation. The program was a great success by almost all measures. This paper, which draws upon a research workshop and a policy roundtable held at Harvard in May 2011, investigates critically the design, enactment, implementation, performance, and implications of this path-breaking application of economic thinking to environmental regulation. Ironically, cap and trade seems especially well suited to addressing the problem of climate change, in that emitted greenhouse gases are evenly distributed throughout the world’s atmosphere. Recent hostility toward cap and trade in debates about U.S. climate legislation may reflect the broader political environment of the climate debate more than the substantive merits of market-based regulation. ER - TY - JOUR AU - Bi,Huixin AU - Leeper,Eric M. AU - Leith,Campbell B. TI - Uncertain Fiscal Consolidations JF - National Bureau of Economic Research Working Paper Series VL - No. 17844 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17844 L1 - http://www.nber.org/papers/w17844.pdf N1 - Author contact info: Huixin Bi Bank of Canada 234 Wellington Street Ottawa Ontario K1A0G9 Canada E-Mail: bihu@bankofcanada.ca Eric M. Leeper Department of Economics 304 Wylie Hall Indiana University Bloomington, IN 47405 Tel: 812/855-9157 Fax: NA E-Mail: eleeper@indiana.edu Campbell B. Leith Department of Economics University of Glasgow Glasgow, G12 8QQ, Scotland E-Mail: campbell.leith@glasgow.ac.uk AB - The paper explores the macroeconomic consequences of fiscal consolidations whose timing and composition are uncertain. Drawing on the evidence in Alesina and Ardagna (2010), we emphasize whether or not the fiscal consolidation is driven by tax rises or expenditure cuts. We find that the composition of the fiscal consolidation, its duration, the monetary policy stance, the level of government debt and expectations over the likelihood and composition of fiscal consolidations all matter in determining the extent to which a given consolidation is expansionary and/or successful in stabilizing government debt. ER - TY - JOUR AU - Choi,James J. AU - Haisley,Emily AU - Kurkoski,Jennifer AU - Massey,Cade TI - Small Cues Change Savings Choices JF - National Bureau of Economic Research Working Paper Series VL - No. 17843 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17843 L1 - http://www.nber.org/papers/w17843.pdf N1 - Author contact info: James J. Choi Yale School of Management 135 Prospect Street P.O. Box 208200 New Haven, CT 06520-8200 E-Mail: james.choi@yale.edu Emily Haisley Barclays Bank PLC 1 Churchill Place London, E14 5HP United Kingdom E-Mail: Emily.Haisley@barclayswealth.com Jennifer Kurkoski Google, Inc. 76 Ninth Avenue 4th Floor New York, NY 10011 E-Mail: kurkoski@google.com Cade Massey Yale School of Management 135 Prospect Street Box 208200 New Haven, CT 06520-8200 E-Mail: cade.massey@yale.edu AB - In randomized field experiments, we embedded one- to two-sentence anchoring, goal-setting, or savings threshold cues in emails to employees about their 401(k) savings plan. We find that anchors increase or decrease 401(k) contribution rates by up to 1.4% of income. A high savings goal example raises contribution rates by up to 2.2% of income. Highlighting a higher savings threshold in the match incentive structure raises contributions by up to 1.5% of income relative to highlighting the lower threshold. Highlighting the maximum possible contribution rate raises contribution rates by up to 2.9% of income among low savers. ER - TY - JOUR AU - Criscuolo,Chiara AU - Martin,Ralf AU - Overman,Henry AU - Reenen,John Van TI - The Causal Effects of an Industrial Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 17842 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17842 L1 - http://www.nber.org/papers/w17842.pdf N1 - Author contact info: Chiara Criscuolo Centre for Economic Performance London School of Economics Houghton Street London WC2A 2AE United Kingdom Tel: 004420 7955 6973 E-Mail: chiara.criscuolo@oecd.org Ralf Martin Imperial College Business School London SW7 2AZ, UK E-Mail: R.Martin@lse.ac.uk Henry Overman London School of Economics Houghton Street London WC2A 2AE UK E-Mail: h.g.overman@lse.ac.uk John Van Reenen Department of Economics London School of Economics Centre for Economic Performance Houghton Street London WC2A 2AE UNITED KINGDOM Tel: 00 44 207/955-6976 Fax: 00 44 207/955-6848 E-Mail: j.vanreenen@lse.ac.uk AB - Business support policies designed to raise productivity and employment are common worldwide, but rigorous micro-econometric evaluation of their causal effects is rare. We exploit multiple changes in the area-specific eligibility criteria for a major program to support manufacturing jobs (“Regional Selective Assistance”). Area eligibility is governed by pan-European state aid rules which change every seven years and we use these rule changes to construct instrumental variables for program participation. We match two decades of UK panel data on the population of firms to all program participants. IV estimates find positive program treatment effect on employment, investment and net entry but not on TFP. OLS underestimates program effects because the policy targets underperforming plants and areas. The treatment effect is confined to smaller firms with no effect for larger firms (e.g. over 150 employees). We also find the policy raises area level manufacturing employment mainly through significantly reducing unemployment. The positive program effect is not due to substitution between plants in the same area or between eligible and ineligible areas nearby. We estimate that “cost per job” of the program was only $6,300 suggesting that in some respects investment subsidies can be cost effective. ER - TY - JOUR AU - Hallegatte,Stéphane AU - Heal,Geoffrey AU - Fay,Marianne AU - Treguer,David TI - From Growth to Green Growth - a Framework JF - National Bureau of Economic Research Working Paper Series VL - No. 17841 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17841 L1 - http://www.nber.org/papers/w17841.pdf N1 - Author contact info: Stephane Hallegatte CIRED 45 bis, Avenue de la Belle Gabrielle 94736 Nogent-sur-Marne FRANCE E-Mail: hallegatte@centre-cired.fr Geoffrey Heal Graduate School of Business 616 Uris Hall Columbia University New York, NY 10027-6902 Tel: 212/854-6459 Fax: 212/316-9219 E-Mail: gmh1@columbia.edu Marianne Fay Chief Economist, Sustainable Development Program The World Bank 1818 H St NW Washington DC 20433 E-Mail: mfay@worldbank.org David Treguer Sustainable Development Network The World Bank 1818 H St NW Washington DC 20433 E-Mail: dtreguer@worldbank.org AB - Green growth is about making growth resource-efficient, cleaner and more resilient without slowing it. This paper aims at clarifying this in an analytical framework and proposing foundations for green growth. This framework identifies channels through which green policies can potentially contribute to economic growth. Finally, the paper discusses the policies that can be implemented to capture co-benefits and environmental benefits. Since green growth policies pursue a variety of goals, they are best served by a combination of instruments: price-based policies are important but are only one component in a policy tool-box that can also include norms and regulation, public production and direct investment, information creation and dissemination, education and moral suasion, or industrial and innovation policies. ER - TY - JOUR AU - Krishna,Pravin TI - Preferential Trade Agreements and the World Trade System: A Multilateralist View JF - National Bureau of Economic Research Working Paper Series VL - No. 17840 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17840 L1 - http://www.nber.org/papers/w17840.pdf N1 - Author contact info: Pravin Krishna Johns Hopkins University 1740 Massachusetts Avenue, NW Washington, DC 20036 Tel: 202/663 5733 Fax: 202/663 7718 E-Mail: Pravin_Krishna@jhu.edu M3 - presented at "Globalization in an Age of Crisis", September 14-16, 2011 AB - This paper reviews recent developments in international trade to evaluate several arguments concerning the merits of preferential trade agreements (PTAs) and their place in the world trade system. Taking a multilateralist perspective, it makes several points: First, despite the proliferation of PTAs in recent years, the actual amount of liberalization that has been achieved through PTAs is actually quite limited. Second, at least a few studies point to significant trade diversion in the context of particular PTAs and thus serve as a cautionary note against casual dismissals of trade diversion as a merely theoretical concern. Equally, adverse effects on the terms-of-trade of non-member countries have also been found in the literature. Third, while the literature has found mixed results on the question of whether tariff preferences help or hurt multilateral liberalization, the picture is different with the more elastic tools of trade policy, such as antidumping duties (ADs); the use of ADs against non-members appears to have dramatically increased while the use of ADs against partner countries within PTAs has fallen. Fourth, despite the rapid expansion of preferences in trade, intra-PTA trade shares are relatively small for most PTAs; multilateral remain relevant to most member countries of the WTO. ER - TY - JOUR AU - Ammer,John AU - Holland,Sara B. AU - Smith,David C. AU - Warnock,Francis E. TI - U.S. International Equity Investment JF - National Bureau of Economic Research Working Paper Series VL - No. 17839 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17839 L1 - http://www.nber.org/papers/w17839.pdf N1 - Author contact info: John Ammer International Finance Division Board of Governors of the Federal Reserve System Washington DC 20551 E-Mail: john.ammer@frb.gov Sara Holland University of Georgia Terry College of Business E-Mail: sbh@uga.edu David C. Smith McIntire School of Commerce University of Virginia Charlottesville, VA 22903 Tel: 434/243-2272 E-Mail: dcs8f@comm.virginia.edu Francis E. Warnock Darden Business School University of Virginia Charlottesville, VA 22906-6550 Tel: 434/924-6076 Fax: 434/243-8945 E-Mail: warnockf@darden.virginia.edu AB - U.S. investors are the largest group of international equity investors in the world, but to date conclusive evidence on which types of foreign firms are able to attract U.S. investment is not available. Using a comprehensive dataset of all U.S. investment in foreign equities, we find that the single most important determinant of the amount of U.S. investment a foreign firm receives is whether the firm cross-lists on a U.S. exchange. Correcting for selection biases, cross-listing leads to a doubling (or more) in U.S. investment, an impact greater than all other factors combined. We also show that our firm-level analysis has implications for country-level studies, suggesting that research investigating equity investment patterns at the country-level should include cross-listing as an endogenous control variable. We describe easy-to-implement methods for including the importance of cross-listing at the country level. ER - TY - JOUR AU - Acharya,Viral V. AU - Mora,Nada TI - Are Banks Passive Liquidity Backstops? Deposit Rates and Flows during the 2007-2009 Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 17838 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17838 L1 - http://www.nber.org/papers/w17838.pdf N1 - Author contact info: Viral V. Acharya Stern School of Business New York University 44 West 4th Street, Suite 9-84 New York, NY 10012 Tel: 212/998-0354 Fax: 212 995 4233 E-Mail: vacharya@stern.nyu.edu Nada Mora Federal Reserve Bank of Kansas City E-Mail: nada.mora@kc.frb.org AB - Can banks maintain their advantage as liquidity providers when they are heavily exposed to a financial crisis? The standard argument - that banks can - hinges on deposit inflows that are seeking a safe haven and provide banks with a natural hedge to fund drawn credit lines and other commitments. We shed new light on this issue by studying the behavior of bank deposit rates and inflows during the 2007-09 crisis. Our results indicate that the role of the banking system as a stabilizing liquidity insurer is not one of the passive recipient, but of an active seeker, of deposits. We find that banks facing a funding squeeze sought to attract deposits by offering higher rates. Banks offering higher rates were also those most exposed to liquidity demand shocks (as measured by their unused commitments, wholesale funding dependence, and limited liquid assets), as well as with fundamentally weak balance-sheets (as measured by their non-performing loans or by subsequent failure). Such rate increases have a competitive effect in that they lead other banks to offer higher rates as well. Overall, the results present a nuanced view of deposit rates and flows to banks in a crisis, one that reflects banks not just as safety havens but also as stressed entities scrambling for deposits. ER - TY - JOUR AU - Giavazzi,Francesco AU - McMahon,Michael TI - The Households Effects of Government Consumption JF - National Bureau of Economic Research Working Paper Series VL - No. 17837 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17837 L1 - http://www.nber.org/papers/w17837.pdf N1 - Author contact info: Francesco Giavazzi Universita' Bocconi and IGIER Via Guglielmo Rontgen, 1 Milan 20136 ITALY Tel: 0039-02-5836-3304 Fax: 0039-02-5836-3302 E-Mail: francesco.giavazzi@unibocconi.it Michael McMahon Department of Economics University of Warwick Coventry CV4 7AL UK E-Mail: m.mcmahon@warwick.ac.uk M3 - presented at "Fiscal Policy after the Financial Crisis", December 12-13, 2011 AB - This paper provides new evidence on the effects of fiscal policy by studying, using household-level data, how households respond to shifts in government spending. Our identification strategy allows us to control for time-specific aggregate effects, such as the stance of monetary policy or the U.S.-wide business cycle. However, it potentially prevents us from estimating the wealth effects associated with a shift in spending. We find significant heterogeneity in households' response to a spending shock; the effects appear vary over time depending, among other factors, on the state of business cycle and, at a lower frequency, on the composition of employment (such as the share of workers in part-time jobs). Shifts in spending could also have important distributional effects that are lost when estimating an aggregate multiplier. Heads of households working relatively few (weekly) hours, for instance, suffer from a spending shock of the type we analyzed: their consumption falls, their hours increase and their real wages fall. ER - TY - JOUR AU - Ball,Laurence M. TI - Ben Bernanke and the Zero Bound JF - National Bureau of Economic Research Working Paper Series VL - No. 17836 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17836 L1 - http://www.nber.org/papers/w17836.pdf N1 - Author contact info: Laurence M. Ball Department of Economics Johns Hopkins University Baltimore, MD 21218 Tel: 410/516-7605 Fax: 410/516-7600 E-Mail: lball@jhu.edu AB - From 2000 to 2003, when Ben Bernanke was a professor and then a Fed Governor, he wrote extensively about monetary policy at the zero bound on interest rates. He advocated aggressive stimulus policies, such as a money-financed tax cut and an inflation target of 3-4%. Yet, since U.S. interest rates hit zero in 2008, the Fed under Chairman Bernanke has taken more cautious actions. This paper asks when and why Bernanke changed his mind about zero-bound policy. The answer, at one level, is that he was influenced by analysis from the Fed staff that was presented at the FOMC meeting of June 2003. This answer raises another question: why did the staff's views influence Bernanke so strongly? I seek answers to this question in the social psychology literature on group decision-making. ER - TY - JOUR AU - Anderson,James E. AU - Yotov,Yoto V. TI - Gold Standard Gravity JF - National Bureau of Economic Research Working Paper Series VL - No. 17835 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17835 L1 - http://www.nber.org/papers/w17835.pdf N1 - Author contact info: James E. Anderson Department of Economics Boston College Chestnut Hill, MA 02467 Tel: 617/552-3691 Fax: 617/552-2308 E-Mail: james.anderson.1@bc.edu Yoto V. Yotov Drexel University LeBow College of Business Department of Economics and International Business Matheson Hall, Suite 503-C Philadelphia, PA 19104 E-Mail: yotov@drexel.edu AB - This paper provides striking confirmation of the restrictions of the structural gravity model of trade. Structural forces predicted by theory explain 95% of the variation of the fixed effects used to control for them in the recent gravity literature, fixed effects that in principle could reflect other forces. This validation opens avenues to inferring unobserved sectoral activity and multilateral resistance variables by equating fixed effects with structural gravity counterparts. Our findings also provide important validation of a host of general equilibrium comparative static exercises based on the structural gravity model. ER - TY - JOUR AU - Dynarski,Susan AU - Wiederspan,Mark TI - Student Aid Simplification: Looking Back and Looking Ahead JF - National Bureau of Economic Research Working Paper Series VL - No. 17834 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17834 L1 - http://www.nber.org/papers/w17834.pdf N1 - Author contact info: Susan Dynarski University of Michigan Weill Hall 735 South State Street Ann Arbor, MI 48109-3091 Tel: 734 615 5113 Fax: NA E-Mail: dynarski@umich.edu Mark Wiederspan University of Michigan School of Education 610 East University Avenue Ann Arbor, Michigan 48109-1259 E-Mail: mwieders@umich.edu AB - Each year, fourteen million households seeking federal aid for college complete a detailed questionnaire about their finances, the Free Application for Federal Student Aid (FAFSA). At 116 questions, the FAFSA is almost as long as IRS Form 1040 and substantially longer than Forms 1040EZ and 1040A. Aid for college is intended to increase college attendance by reducing its price and loosening liquidity constraints. Economic theory, empirical evidence and common sense suggest that complexity in aid could undermine its ability to affect schooling decisions. In 2006, Dynarski and Scott-Clayton published an analysis of complexity in the aid system that generated considerable discussion in academic and policy circles. Over the next few years, complexity in the aid system drew the attention of the media, advocacy groups, presidential candidates, the National Economic Council and the Council of Economic Advisers. A flurry of legislative and agency activity followed. In this article, we provide a five-year retrospective of what has changed in the aid application process, what has not, and the possibilities for future reform. ER - TY - JOUR AU - Caselli,Francesco AU - Cunningham,Thomas E. AU - Morelli,Massimo AU - Barreda,Inés Moreno de TI - Signalling, Incumbency Advantage, and Optimal Reelection Thresholds JF - National Bureau of Economic Research Working Paper Series VL - No. 17833 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17833 L1 - http://www.nber.org/papers/w17833.pdf N1 - Author contact info: Francesco Caselli Department of Economics London School of Economics Houghton Street London WC2A 2AE UNITED KINGDOM Tel: (44) (0) 2079557498 E-Mail: f.caselli@lse.ac.uk Thomas E. Cunningham Harvard University E-Mail: t.e.cunningham@lse.ac.uk Massimo Morelli Columbia University E-Mail: mm3331@columbia.edu Ines Moreno de Barreda Oxford University E-Mail: ines.morenodebarreda@economics.ox.ac.uk AB - Much literature on political behavior treats politicians as motivated by reelection, choosing actions to signal their types to voters. We identify two novel implications of models in which signalling incentives are important. First, because incumbents only care about clearing a reelection hurdle, signals will tend to cluster just above the threshold needed for reelection. This generates a skew distribution of signals leading to an incumbency advantage in the probability of election. Second, voters can exploit the signalling behavior of politicians by precommitting to a higher threshold for signals received. Raising the threshold discourages signalling effort by low quality politicians but encourages effort by high quality politicians, thus increasing the separation of signals and improving the selection function of an election. This precommitment has a simple institutional interpretation as a supermajority rule, requiring that incumbents exceed some fraction of votes greater than 50% to be reelected. ER - TY - JOUR AU - Adelino,Manuel AU - Schoar,Antoinette AU - Severino,Felipe TI - Credit Supply and House Prices: Evidence from Mortgage Market Segmentation JF - National Bureau of Economic Research Working Paper Series VL - No. 17832 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17832 L1 - http://www.nber.org/papers/w17832.pdf N1 - Author contact info: Manuel Adelino Tuck School of Business at Dartmouth 100 Tuck Hall Hanover, NH 03755 Tel: 857-383-1027 E-Mail: manuel.adelino@tuck.dartmouth.edu Antoinette Schoar MIT Sloan School of Management 100 Main Street, E62-638 Cambridge, MA 02142 Tel: 617/253-3763 Fax: 617/258-6855 E-Mail: aschoar@mit.edu Felipe Severino MIT Sloan School of Management 100 Main Street, E62-678 Cambridge, MA 02142 E-Mail: fseverin@mit.edu AB - We show that easier access to credit significantly increases house prices by using exogenous changes in the conforming loan limit as an instrument for lower cost of financing and higher supply. Houses that become eligible for financing with a conforming loan show an increase in house values of 1.1 dollars per square foot (for an average price per square foot of 224 dollars) and higher overall house prices controlling for a rich set of house characteristics. These coefficients are consistent with a local elasticity of house prices to interest rates below 10. In addition, loan to value ratios around the conforming loan limit deviate significantly from the common 80 percent norm, which confirms that it is an important factor in the financing choices of home buyers. In line with our interpretation, the results are stronger in the first half of our sample (1998-2001) when the conforming loan limit was more important, given that other forms of financing were less common and substantially more expensive. ER - TY - JOUR AU - Mian,Atif R. AU - Sufi,Amir AU - Trebbi,Francesco TI - Resolving Debt Overhang: Political Constraints in the Aftermath of Financial Crises JF - National Bureau of Economic Research Working Paper Series VL - No. 17831 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17831 L1 - http://www.nber.org/papers/w17831.pdf N1 - Author contact info: Atif R. Mian University of California, Berkeley Haas School of Business 545 Student Services Berkeley, CA 94720 Tel: 510/643-1425 Fax: 510/643-1425 E-Mail: atif@haas.berkeley.edu Amir Sufi University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-6148 Fax: 773/702-0458 E-Mail: amir.sufi@chicagobooth.edu Francesco Trebbi University of British Columbia 1873 East Mall Vancouver, BC, V6T1Z1 Canada Tel: 604.218.5900 Fax: 604.822.5915 E-Mail: ftrebbi@mail.ubc.ca AB - Debtors bear the brunt of a decline in asset prices associated with financial crises and policies aimed at partial debt relief may be warranted to boost growth in the midst of crises. Drawing on the US experience during the Great Recession of 2008-09 and historical evidence in a large panel of countries, we explore why the political system may fail to deliver such policies. We find that during the Great Recession creditors were able to use the political system more effectively to protect their interests through bailouts. More generally we show that politically countries become more polarized and fractionalized following financial crises. This results in legislative stalemate, making it less likely that crises lead to meaningful macroeconomic reforms. ER - TY - JOUR AU - Mian,Atif R. AU - Sufi,Amir TI - What explains high unemployment? The aggregate demand channel JF - National Bureau of Economic Research Working Paper Series VL - No. 17830 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17830 L1 - http://www.nber.org/papers/w17830.pdf N1 - Author contact info: Atif R. Mian University of California, Berkeley Haas School of Business 545 Student Services Berkeley, CA 94720 Tel: 510/643-1425 Fax: 510/643-1425 E-Mail: atif@haas.berkeley.edu Amir Sufi University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-6148 Fax: 773/702-0458 E-Mail: amir.sufi@chicagobooth.edu AB - A drop in aggregate demand driven by shocks to household balance sheets is responsible for a large fraction of the decline in U.S. employment from 2007 to 2009. The aggregate demand channel for unemployment predicts that employment losses in the non-tradable sector are higher in high leverage U.S. counties that were most severely impacted by the balance sheet shock, while losses in the tradable sector are distributed uniformly across all counties. We find exactly this pattern from 2007 to 2009. Alternative hypotheses for job losses based on uncertainty shocks or structural unemployment related to construction do not explain our results. Using the relation between non-tradable sector job losses and demand shocks and assuming Cobb-Douglas preferences over tradable and non-tradable goods, we quantify the effect of aggregate demand channel on total employment. Our estimates suggest that the decline in aggregate demand driven by household balance sheet shocks accounts for almost 4 million of the lost jobs from 2007 to 2009, or 65% of the lost jobs in our data. ER - TY - JOUR AU - Zinman,Jonathan AU - Zitzewitz,Eric TI - Wintertime for Deceptive Advertising? JF - National Bureau of Economic Research Working Paper Series VL - No. 17829 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17829 L1 - http://www.nber.org/papers/w17829.pdf N1 - Author contact info: Jonathan Zinman Department of Economics Dartmouth College 314 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-0075 Fax: 603/646-2122 E-Mail: jzinman@dartmouth.edu Eric Zitzewitz Department of Economics Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-2891 Fax: 603/646-2122 E-Mail: eric.zitzewitz@dartmouth.edu AB - Casual empiricism suggests that deceptive advertising about product quality is prevalent, and several classes of theories explore its causes and consequences. We provide some unusually sharp empirical evidence on the extent, mechanics, and dynamics of deceptive advertising. Ski resorts self-report substantially more natural snowfall on weekends. Resorts that plausibly reap greater benefits from exaggerating do it more. Data on website visits suggests that consumers are appropriately skeptical of weekend reports. We find little evidence that competition restrains or encourages exaggeration. Near the end of our sample period, a new iPhone application feature makes it easier for skiers share information on ski conditions in real time. Exaggeration falls sharply, especially at resorts with better iPhone reception. ER - TY - JOUR AU - Allen,Franklin AU - Qian,Jun “QJ” AU - Zhang,Chenying AU - Zhao,Mengxin TI - China’s Financial System: Opportunities and Challenges JF - National Bureau of Economic Research Working Paper Series VL - No. 17828 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17828 L1 - http://www.nber.org/papers/w17828.pdf N1 - Author contact info: Franklin Allen Wharton Finance Dept. University of Pennsylvania 3620 Locust Walk Philadelphia, PA 19104 Tel: 215/898-3629 Fax: 215/573-2207 E-Mail: allenf@wharton.upenn.edu Jun Qian Boston College 140 Commonwealth Ave Chestnut Hill, MA 02467 E-Mail: qianju@bc.edu Chenying Zhang University of Pennsylvania E-Mail: chezhang@wharton.upenn.edu Mengxin Zhao University of Alberta Tel: 7802481318 E-Mail: mengxin.zhao@ualberta.ca M3 - presented at "Capitalizing China Conference", December 15-16, 2009 AB - We provide a comprehensive review of China’s financial system, and explore directions of future development. First, the financial system has been dominated by a large banking sector. In recent years banks have made considerable progress in reducing the amount of non-performing loans and improving their efficiency. Second, the role of the stock market in allocating resources in the economy has been limited and ineffective. We discuss issues related to the further development of China’s stock market and other financial markets. Third, the most successful part of the financial system, in terms of supporting the growth of the overall economy, is a non-standard sector that consists of alternative financing channels, governance mechanisms, and institutions. The co-existence of this sector with banks and markets can continue to support the growth of the Hybrid Sector (non-state, non-listed firms). Finally, among the policies that will help to sustain stable economic growth in China are those that reduce the likelihood of damaging financial crises, including a banking sector crisis, a real estate or stock market crash, and a “twin crisis” in the currency market and banking sector. ER - TY - JOUR AU - Cellini,Stephanie Riegg AU - Goldin,Claudia TI - Does Federal Student Aid Raise Tuition? New Evidence on For-Profit Colleges JF - National Bureau of Economic Research Working Paper Series VL - No. 17827 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17827 L1 - http://www.nber.org/papers/w17827.pdf N1 - Author contact info: Stephanie Cellini Trachtenberg School of Public Policy and Public Ad George Washington University 805 21st Street NW Room 601M Washington, DC 20052 Tel: 202/994-0019 E-Mail: scellini@gwu.edu Claudia Goldin National Bureau of Economic Research 1050 Massachusetts Ave. Cambridge, MA 02138 Tel: 617/613-1200 Fax: 617/613-1245 E-Mail: cgoldin@harvard.edu AB - We use administrative data from five states to provide the first comprehensive estimates of the size of the for-profit higher education sector in the U.S. Our estimates include schools that are not currently eligible to participate in federal student aid programs under Title IV of the Higher Education Act and are therefore missed in official counts. We find that the number of for-profit institutions is double the official count and the number of students is between one-quarter and one-third greater. Many for-profit institutions that are not Title IV eligible offer programs and certificates that are similar, if not identical, to those given by institutions that are part of Title IV. We find that the Title IV institutions charge tuition that is about 75 percent higher than that charged by comparable institutions whose students cannot apply for federal financial aid. The dollar value of the premium is about equal to the amount of financial aid received by students in eligible institutions, lending credence to the “Bennett hypothesis” that aid-eligible institutions raise tuition to maximize aid. ER - TY - JOUR AU - Li,Chunding AU - Whalley,John TI - China's Potential Future Growth and Gains from Trade Policy Bargaining: Some Numerical Simulation Results JF - National Bureau of Economic Research Working Paper Series VL - No. 17826 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17826 L1 - http://www.nber.org/papers/w17826.pdf N1 - Author contact info: Chunding Li Institute of World Economics and Politics Chinese Academy of Social Sciences No.5 Jianguomenneidajie Beijing, PRC Postcode: 100732 E-Mail: cli428@uwo.ca John Whalley Department of Economics Social Science Centre University of Western Ontario London, ON N6A 5C2 CANADA Tel: 519/661-3509 Fax: 519/661-3666 E-Mail: jwhalley@uwo.ca AB - Numerical simulation analysis of bargaining solutions is little developed in existing literature. Here we use a multi country, single period numerical general equilibrium model which captures China and her major trading partners and examine the outcomes of trade policy bargaining solutions (bargaining over tariffs and financial transfers) over time as China grows more rapidly than her trade partners. We compute gains relative to non-cooperative Nash equilibria for a range of model parameterizations. This yields a measure of both absolute and relative gain to China from bargaining. We calibrate our model to base case data for 2008 and use a model formulation where there are heterogeneous goods across countries. The gains from trade bargaining accrue more heavily to other countries when we use 2008 data rather than later year data. We then consider the impacts out into the future of different country growth rates which sharply increases China’s relative size. Our objective is to assess how China’s gains from bargaining change over time; whether they grow at a faster rate than GDP growth and for which parameterizations. Our simulation results indicate that China’s welfare gain from trade bargaining will increase over time if countries keep their present GDP growth rates for several decades, but there are major difference when using different bargaining solution concepts. These differences have not been noted in existing literature but have an intuitive explanation. Our results also indicate that if China jointly bargains along with India, Brazil and other developing countries with the OECD, China’s gain will further increase. Bargaining gains are also sensitive to country size. When we use PPP to adjust China’s relative GDP size; China’s trade bargaining welfare gain increases by about 37%. ER - TY - JOUR AU - Basker,Emek TI - Raising the Barcode Scanner: Technology and Productivity in the Retail Sector JF - National Bureau of Economic Research Working Paper Series VL - No. 17825 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17825 L1 - http://www.nber.org/papers/w17825.pdf N1 - Author contact info: Emek Basker Department of Economics 118 Professional Building University of Missouri Columbia, MO 65211 E-Mail: emek@missouri.edu M3 - presented at "Patents, Standards and Innovation Conference", January 20-21, 2012 AB - Barcodes and barcode scanners transformed the grocery industry in the 1970s. I use store-level data from the 1972, 1977, and 1982 Census of Retail Trade, matched to data on store scanner installations, to estimate scanners' effect on labor productivity. I find that early scanners increased a store's labor productivity, on average, by approximately 4.5 percent in the first few years. The effect was larger in stores carrying more packaged products, consistent with the presence of network externalities. Short-run gains were small relative to fixed costs, suggesting that the impediment to widespread adoption of the new technology was profitability, not coordination problems. ER - TY - JOUR AU - Poterba,James M. AU - Venti,Steven F. AU - Wise,David A. TI - Were They Prepared for Retirement? Financial Status at Advanced Ages in the HRS and AHEAD Cohorts JF - National Bureau of Economic Research Working Paper Series VL - No. 17824 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17824 L1 - http://www.nber.org/papers/w17824.pdf N1 - Author contact info: James M. Poterba Department of Economics MIT, E52-350 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-6673 Fax: 617/258-7804 E-Mail: poterba@nber.org Steven F. Venti Department of Economics 6106 Rockefeller Center Dartmouth College Hanover, NH 03755 Tel: 603/646-2526 Fax: 603/646-2122 E-Mail: steven.f.venti@dartmouth.edu David A. Wise Harvard Kennedy School 79 John F. Kennedy Cambridge, MA 02138 E-Mail: dwise@nber.org M3 - presented at "Aging Conference", May 6-7, 2011 AB - Many analysts have considered whether households approaching retirement age have accumulated enough assets to be well prepared for retirement. In this paper, we shift from studying household finances at the start of the retirement period, an ex ante measure of retirement preparation, to studying the asset holdings of households in their last years of life. The analysis is based on Health and Retirement Study with special attention to Asset and Health Dynamics Among the Oldest Old (AHEAD) cohort that was first surveyed in 1993. We consider the level of assets that households hold in the last survey wave preceding their death. We study how assets at the end of life depend on three family status pathways prior to death— (1) original one-person households in 1993, (2) persons in two-person household in 1993 with a deceased spouse in the last year observed, and (3) persons in two-person households in 1993 with the spouse alive when last observed. We find that a substantial fraction of persons die with virtually no financial assets—46.1 percent with less than $10,000—and many of these households also have no housing wealth and rely almost entirely on Social Security benefits for support. In addition this group is disproportionately in poor health. Based on a replacement rate comparison, many of these households may be deemed to have been well-prepared for retirement, in the sense that their income in their final years was not substantially lower than their income in their late 50s or early 60s. Yet with such low asset levels, they would have little capacity to pay for unanticipated needs such as health expenses or other financial shocks or to pay for entertainment, travel, or other activities. This raises a question of whether the replacement ratio is a sufficient statistic for the “adequacy” of retirement preparation. ER - TY - JOUR AU - Svensson,Lars E.O. TI - Practical Monetary Policy: Examples from Sweden and the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 17823 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17823 L1 - http://www.nber.org/papers/w17823.pdf N1 - Author contact info: Lars E.O. Svensson Sveriges Riksbank SE-103 37 Stockholm SWEDEN Tel: +46 8 787 0107 Fax: +46 8 21 0531 E-Mail: lars.svensson@iies.su.se AB - In the summer of 2010, the Federal Reserve’s and the Swedish Riksbank’s inflation forecasts were below the former’s mandate-consistent rate and the latter’s target, respectively, and their unemployment forecasts were above sustainable rates. Given the mandates of the Federal Reserve and the Riksbank, conditions in both countries clearly called for policy easing. The Federal Reserve maintained a minimum policy rate, soon started to communicate possible future easing, and in the fall launched QE2. In contrast, the Riksbank started a period of rapid tightening. I examine the arguments that were raised in opposition to the Federal Reserve's easing, and those for the Riksbank's tightening. Although the Swedish economy subsequently performed better than expected, probably an important reason was that the market implemented much easier financial conditions than were consistent with the Riksbank’s policy rate path. Without the policy tightening, performance would have been even better. The U.S. economy meanwhile performed worse than expected because of factors other than monetary policy. Without the policy easing, performance would have been even worse. Thus, the Federal Reserve appears to have followed its mandate in the summer of 2010, and subsequent adverse economic shocks contributed to weak performance of the U.S. economy. In contrast, the Riksbank appears to have deviated from its mandate, but favorable circumstances contributed to an economic outcome with better performance than might have been expected based on policy choices. ER - TY - JOUR AU - Aiyar,Shekhar AU - Calomiris,Charles W. AU - Wieladek,Tomasz TI - Does Macro-Pru Leak? Evidence from a UK Policy Experiment JF - National Bureau of Economic Research Working Paper Series VL - No. 17822 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17822 L1 - http://www.nber.org/papers/w17822.pdf N1 - Author contact info: Shekhar Aiyar International Monetary Fund 700 19th Street, N.W. Washington DC 20431 E-Mail: SAiyar@imf.org Charles W. Calomiris Graduate School of Business Columbia University 3022 Broadway Street, Uris Hall New York, NY 10027 Tel: 212/854-8748 Fax: 212/316-9219 E-Mail: cc374@columbia.edu Tomasz Wieladek Economics Department London Business School Sussex Place London NW1 4SA England E-Mail: twieladek@london.edu AB - The regulation of bank capital as a means of smoothing the credit cycle is a central element of forthcoming macro-prudential regimes internationally. For such regulation to be effective in controlling the aggregate supply of credit it must be the case that: (i) changes in capital requirements affect loan supply by regulated banks, and (ii) unregulated substitute sources of credit are unable to offset changes in credit supply by affected banks. This paper examines micro evidence—lacking to date—on both questions, using a unique dataset. In the UK, regulators have imposed time-varying, bank-specific minimum capital requirements since Basel I. It is found that regulated banks (UK-owned banks and resident foreign subsidiaries) reduce lending in response to tighter capital requirements. But unregulated banks (resident foreign branches) increase lending in response to tighter capital requirements on a relevant reference group of regulated banks. This “leakage” is substantial, amounting to about one-third of the initial impulse from the regulatory change. ER - TY - JOUR AU - Lusardi,Annamaria TI - Numeracy, financial literacy, and financial decision-making JF - National Bureau of Economic Research Working Paper Series VL - No. 17821 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17821 L1 - http://www.nber.org/papers/w17821.pdf N1 - Author contact info: Annamaria Lusardi The George Washington University School of Business 2201 G Street, NW Duques Hall, Suite 450E Washington, DC 20052 Tel: 202-994-8410 E-Mail: alusardi@gwu.edu AB - Financial decisions, be they related to asset building or debt management, require the capacity to do calculations, including some complex ones. But how numerate are individuals, in particular when it comes to calculations related to financial decisions? Studies and surveys implemented in both the United States and in other countries that are described in this paper show the level of numeracy among the population to be very low. Moreover, lack of numeracy is not only widespread but is particularly severe among some demographic groups, such as women, the elderly, and those with low educational attainment. This has potential consequences for individuals and for society as a whole because numeracy is found to be linked to many financial decisions. Now more than ever, numeracy and financial literacy are lifetime skills necessary to succeed in today’s complex economic environment. ER - TY - JOUR AU - Acemoglu,Daron AU - Autor,David TI - What Does Human Capital Do? A Review of Goldin and Katz's The Race between Education and Technology JF - National Bureau of Economic Research Working Paper Series VL - No. 17820 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17820 L1 - http://www.nber.org/papers/w17820.pdf N1 - Author contact info: Daron Acemoglu Department of Economics MIT, E52-380B 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-1927 Fax: 617/253-1330 E-Mail: daron@mit.edu David Autor Department of Economics MIT, E52-371 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/258-7698 Fax: 617/253-1330 E-Mail: dautor@mit.edu AB - Goldin and Katz’s The Race between Education and Technology is a monumental achievement that supplies a unified framework for interpreting how the demand and supply of human capital have shaped the distribution of earnings in the U.S. labor market over the 20th century. This essay reviews the theoretical and conceptual underpinnings of this work and documents the success of Goldin and Katz’s framework in accounting for numerous broad labor market trends. The essay also considers areas where the framework falls short in explaining several key labor market puzzles of recent decades and argues that these shortcomings can potentially be overcome by relaxing the implicit equivalence drawn between workers’ skills and their job tasks in the conceptual framework on which Goldin and Katz build. The essay argues that allowing for a richer set of interactions between skills and technologies in accomplishing job tasks both augments and refines the predictions of Goldin and Katz’s approach and suggests an even more important role for human capital in economic growth than indicated by their analysis. ER - TY - JOUR AU - Antràs,Pol AU - Chor,Davin AU - Fally,Thibault AU - Hillberry,Russell TI - Measuring the Upstreamness of Production and Trade Flows JF - National Bureau of Economic Research Working Paper Series VL - No. 17819 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17819 L1 - http://www.nber.org/papers/w17819.pdf N1 - Author contact info: Pol Antràs Department of Economics Harvard University 1805 Cambridge Street Littauer Center 207 Cambridge, MA 02138 Tel: 617/495-1236 Fax: 617/495-8570 E-Mail: pantras@fas.harvard.edu Davin Chor Singapore Management University School of Economics 90 Stamford Rd Singapore 178903 Singapore Tel: 1-617-495-1045 E-Mail: davinchor@smu.edu.sg Thibault Fally Department of Economics University of Colorado at Boulder 256 UCB Boulder, Colorado 80309-0256 USA Tel: 303-492-6652 E-Mail: Thibault.Fally@colorado.edu Russell Hillberry Department of Economics University of Melbourne 3010, VIC, Australia Phone: +61 3 8344 5354 E-Mail: rhhi@unimelb.edu.au AB - We propose two distinct approaches to the measurement of industry upstreamness (or average distance from final use) and show that they yield an equivalent measure. Furthermore, we provide two additional interpretations of this measure, one of them related to the concept of forward linkages in Input-Output analysis. On the empirical side, we construct this measure for 426 industries using the 2002 US Input-Output Tables. We also verify the stability of upstreamness across countries in the OECD STAN database, albeit with a more aggregated industry classification. Finally, we present an application that explores the determinants of the average upstreamness of exports at the country level using trade flows for 2002. ER - TY - JOUR AU - Lindo,Jason M. AU - Stoecker,Charles F. TI - Drawn into Violence: Evidence on 'What Makes a Criminal' from the Vietnam Draft Lotteries JF - National Bureau of Economic Research Working Paper Series VL - No. 17818 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17818 L1 - http://www.nber.org/papers/w17818.pdf N1 - Author contact info: Jason M. Lindo Department of Economics University of Oregon Eugene, OR 97403-1285 Tel: 541/346-4664 E-Mail: jlindo@uoregon.edu Charles F. Stoecker Department of Economics One Shields Ave Davis, CA 95616 E-Mail: cfstoecker@ucdavis.edu AB - Draft lottery number assignment during the Vietnam Era provides a natural experiment to examine the effects of military service on crime. Using exact dates of birth for inmates in state and federal prisons in 1979, 1986, and 1991, we find that draft eligibility increases incarceration for violent crimes but decreases incarceration for non-violent crimes among whites. This is particularly evident in 1979, where two-sample instrumental variable estimates indicate that military service increases the probability of incarceration for a violent crime by 0.34 percentage points and decreases the probability of incarceration for a nonviolent crime by 0.30 percentage points. We conduct two falsification tests, one that applies each of the three binding lotteries to unaffected cohorts and another that considers the effects of lotteries that were not used to draft servicemen. ER - TY - JOUR AU - Scheuer,Florian TI - Optimal Asset Taxes in Financial Markets with Aggregate Uncertainty JF - National Bureau of Economic Research Working Paper Series VL - No. 17817 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17817 L1 - http://www.nber.org/papers/w17817.pdf N1 - Author contact info: Florian Scheuer Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305 Tel: 650/725-3987 E-Mail: scheuer@stanford.edu AB - This paper studies Pareto-optimal risk-sharing arrangements in a private information economy with aggregate uncertainty and ex ante heterogeneous agents. I show how to implement Pareto-optima as equilibria when agents can trade claims to consumption contingent on aggregate shocks in financial markets. The first result is that if aggregate and idiosyncratic shocks are independent, the implementation of optimal allocations does not require any interventions in financial markets. This result can be extended to dynamic settings in the sense that, in this case, only savings need to be distorted, but not trades in financial markets. Second, I characterize optimal trading distortions in financial markets when aggregate and idiosyncratic shocks are not independent. In this case, optimal asset taxes must be higher for those securities that pay out in aggregate states in which consumption is more volatile. For instance, this can provide an efficiency justification for the frequently observed differential tax treatment of different asset classes, such as debt and equity claims. ER - TY - JOUR AU - White,T. Kirk AU - Reiter,Jerome P. AU - Petrin,Amil TI - Plant-level Productivity and Imputation of Missing Data in U.S. Census Manufacturing Data JF - National Bureau of Economic Research Working Paper Series VL - No. 17816 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17816 L1 - http://www.nber.org/papers/w17816.pdf N1 - Author contact info: Kirk White Economic Research Service, USDA 1400 Independence Ave., SW Mail Stop 1800 Washington, DC 20250-1800 Tel: 919-451-9357 Fax: 919-684-8974 E-Mail: tkirkwhite@gmail.com Jerome P. Reiter Duke University E-Mail: jerry@stat.duke.edu Amil Petrin Department of Economics University of Minnesota 4-101 Hanson Hall Minneapolis, MN 55455 Tel: 612/625-0145 Fax: 612/624-0209 E-Mail: petrin@umn.edu AB - Within-industry differences in measured plant-level productivity are large. A large literature has been devoted to explaining these differences. In the U.S. Census Bureau's manufacturing data, the Bureau imputes for missing values using methods known to result in underestimation of variability and potential bias in multivariate inferences. We present an alternative strategy for handling the missing data based on multiple imputation via sequences of classification and regression trees. We use our imputations and the Bureau's imputations to estimate within-industry productivity dispersions. The results suggest that there may be more within-industry productivity dispersion than previous research has indicated. ER - TY - JOUR AU - Crucini,Mario J. AU - Shintani,Mototsugu AU - Tsuruga,Takayuki TI - Noisy Information, Distance and Law of One Price Dynamics Across US Cities JF - National Bureau of Economic Research Working Paper Series VL - No. 17815 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17815 L1 - http://www.nber.org/papers/w17815.pdf N1 - Author contact info: Mario J. Crucini Department of Economics Vanderbilt University Box 1819 Station B Nashville, TN 37235-1819 Tel: 615/322-7357 Fax: 615/343-8459 E-Mail: mario.j.crucini@vanderbilt.edu Mototsugu Shintani Department of Economics Vanderbilt University Box 1819 Station B Nashville, TN 37235-1819 E-Mail: mototsugu.shintani@vanderbilt.edu Takayuki Tsuruga Graduate School of Economics, Kyoto University Yoshida Honmachi Sakyo-ku, Kyoto 606-8501 JAPAN E-Mail: tsuruga@econ.kyoto-u.ac.jp AB - Using micro price data across US cities, we provide evidence that both the volatility and persistence of deviations from the law of one price (LOP) are positively correlated with the distance between cities. A standard, two-city, equilibrium model with time-varying technology under homogeneous information can predict the relationship between the volatility and distance but not between the persistence and distance. To account for the latter fact, we augment the standard model with noisy signals about the state of nominal aggregate demand that are asymmetric across cities. We further establish that the interaction of imperfect information and sticky prices improves the fit of the model. ER - TY - JOUR AU - Schmieder,Johannes F. AU - Wachter,Till M. von AU - Bender,Stefan TI - The Long-Term Effects of Unemployment Insurance Extensions on Employment JF - National Bureau of Economic Research Working Paper Series VL - No. 17814 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17814 L1 - http://www.nber.org/papers/w17814.pdf N1 - Author contact info: Johannes F. Schmieder Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/299-9841 Fax: 617/353-4449 E-Mail: johannes@bu.edu Till M. von Wachter Department of Economics Columbia University 601 West 115th Str. Apt. 101 New York, NY 10025 Tel: 212/854-5712 Fax: 212/854-8059 E-Mail: vw2112@columbia.edu Stefan Bender Institute for Employment Research (IAB) Regensburger Str. 104 90478 Nuremberg Germany E-Mail: stefan.bender@iab.de AB - The majority of papers analyzing the employment effects of unemployment insurance (UI) benefit durations focuses on the duration of the first unemployment spell. In this paper, we make two contributions. First, we use a regression discontinuity design to analyze the long-term effects of extensions in UI durations. These estimates differ from standard estimates that they incorporate differences in UI benefit receipt and employment due to recurrent unemployment spells. Second, we derive a welfare formula of UI extensions that incorporates recurrent nonemployment spells. We find that accounting for nonemployment beyond the initial spell leads to a significant reduction in estimates of the nonemployment effect of UI extensions by about 25 percent. We show this effect is only partly explained by a mechanical effect due to finite follow-up durations, and mainly arises from a lower probability of days in nonemployment in months after end of the initial nonemployment spell. ER - TY - JOUR AU - Schmieder,Johannes F. AU - Wachter,Till M. von AU - Bender,Stefan TI - The Effects of Extended Unemployment Insurance over the Business Cycle: Evidence from Regression Discontinuity Estimates Over Twenty Years JF - National Bureau of Economic Research Working Paper Series VL - No. 17813 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17813 L1 - http://www.nber.org/papers/w17813.pdf N1 - Author contact info: Johannes F. Schmieder Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/299-9841 Fax: 617/353-4449 E-Mail: johannes@bu.edu Till M. von Wachter Department of Economics Columbia University 601 West 115th Str. Apt. 101 New York, NY 10025 Tel: 212/854-5712 Fax: 212/854-8059 E-Mail: vw2112@columbia.edu Stefan Bender Institute for Employment Research (IAB) Regensburger Str. 104 90478 Nuremberg Germany E-Mail: stefan.bender@iab.de AB - One goal of extending the duration of unemployment insurance (UI) in recessions is to increase UI coverage in the face of longer unemployment spells. Although it is a common concern that such extensions may themselves raise nonemployment durations, it is not known how recessions would affect the magnitude of this moral hazard. To obtain causal estimates of the differential effects of UI in booms and recessions, this paper exploits the fact that, in Germany, potential UI benefit duration is a function of exact age which is itself invariant over the business cycle. We implement a regression discontinuity design separately for twenty years and correlate our estimates with measures of the business cycle. We find that the nonemployment effects of a month of additional UI benefits are, at best, somewhat declining in recessions. Yet, the UI exhaustion rate, and therefore the additional coverage provided by UI extensions, rises substantially during a downturn. The ratio of these two effects represents the nonemployment response of workers weighted by the probability of being affected by UI extensions. Hence, our results imply that the effective moral hazard effect of UI extensions is significantly lower in recessions than in booms. Using a model of job search with liquidity constraints, we also find that, in the absence of market-wide effects, the net social benefits from UI extensions can be expressed either directly in terms of the exhaustion rate and the nonemployment effect of UI durations, or as a declining function of our measure of effective moral hazard. ER - TY - JOUR AU - Crucini,Mario J. AU - Landry,Anthony TI - Accounting for Real Exchange Rates Using Micro-data JF - National Bureau of Economic Research Working Paper Series VL - No. 17812 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17812 L1 - http://www.nber.org/papers/w17812.pdf N1 - Author contact info: Mario J. Crucini Department of Economics Vanderbilt University Box 1819 Station B Nashville, TN 37235-1819 Tel: 615/322-7357 Fax: 615/343-8459 E-Mail: mario.j.crucini@vanderbilt.edu Anthony Landry Federal Reserve Bank of Dallas 2200 North Pearl Street Dallas, TX 75204 Tel: (214) 922-5831 Fax: (214) 922-5194 E-Mail: anthony.landry@dal.frb.org AB - The classical dichotomy predicts that all of the time series variance in the aggregate real exchange rate is accounted for by non-traded goods in the CPI basket because traded goods obey the Law of One Price. In stark contrast, Engel (1999) found that traded goods had comparable volatility to the aggregate real exchange rate. Our work reconciles these two views by successfully applying the classical dichotomy at the level of intermediate inputs into the production of final goods using highly disaggregated retail price data. Since the typical good found in the CPI basket is about equal parts traded and non-traded inputs, we conclude that the classical dichotomy applied to intermediate inputs restores its conceptual value. ER - TY - JOUR AU - Scott-Clayton,Judith TI - Information Constraints and Financial Aid Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 17811 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17811 L1 - http://www.nber.org/papers/w17811.pdf N1 - Author contact info: Judith Scott-Clayton Teachers College Columbia University 525 W.120th Street, Box 174 New York, NY 10027 Tel: 212/678-3478 Fax: 212/678-3699 E-Mail: scott-clayton@tc.columbia.edu AB - One justification for public support of higher education is that prospective students, particularly those from underprivileged groups, lack complete information about the costs and benefits of a college degree. Beyond financial considerations, students may also lack information about what they need to do academically to prepare for and successfully complete college. Yet until recently, college aid programs have typically paid little attention to students' information constraints, and the complexity of some programs can exacerbate the problem. This chapter describes the information problems facing prospective students as well as their consequences, drawing upon economic theory and empirical evidence. ER - TY - JOUR AU - Celik,Levent AU - Karabay,Bilgehan AU - McLaren,John TI - When is it Optimal to Delegate: The Theory of Fast-track Authority JF - National Bureau of Economic Research Working Paper Series VL - No. 17810 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17810 L1 - http://www.nber.org/papers/w17810.pdf N1 - Author contact info: Levent Celik CERGE-EI Politickych veznu 7, 111 21 Prague 1 Czech Republic E-Mail: celik@cerge-ei.cz Bilgehan Karabay Department of Economics University of Auckland Owen G. Glenn Building 12 Grafton Road Auckland 1010 New Zealand Tel: +64-9-9237193 Fax: +64-9-3737427 E-Mail: bilgehan.karabay@gmail.com John McLaren Department of Economics University of Virginia P.O. Box 400182 Charlottesville, VA 22904-4182 Tel: 434/924-3994 Fax: 434/982-2904 E-Mail: jmclaren@virginia.edu AB - With fast-track authority (FTA), the US Congress delegates trade-policy authority to the President by committing not to amend a trade agreement. We suggest an interpretation in which Congress uses FTA to forestall destructive competition between its members for protectionist rents. We show that FTA is never granted if an industry is operating in the majority of districts. Second, the more equally distributed are the industries across districts and the more similar are the industries' sizes, the more likely it is that FTA is granted. This is true since competition over rents is most punishing when bargaining power is symmetrically distributed, and in that case the ex ante expected welfare of each district is lower without FTA. Third, if existing levels of protection are very different across industries, even if FTA is granted, it may not lead to free trade because a majority of industries may prefer the status quo to free trade. ER - TY - JOUR AU - Banzhaf,H. Spencer AU - Farooque,Omar TI - Interjurisdictional Housing Prices and Spatial Amenities: Which Measures of Housing Prices Reflect Local Public Goods? JF - National Bureau of Economic Research Working Paper Series VL - No. 17809 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17809 L1 - http://www.nber.org/papers/w17809.pdf N1 - Author contact info: H. Spencer Banzhaf Department of Economics Andrew Young School of Policy Studies Georgia State University P.O. Box 3992 Atlanta, GA 30302 Tel: 404/413-0252 Fax: 404/413-0248 E-Mail: hsbanzhaf@gsu.edu Omar Farooque Department of Economics 302 Arthur Andersen Hall 2001 Sheridan Road, Evanston, IL 60208-2600 E-Mail: omarfarooque2015@u.northwestern.edu AB - Understanding the spatial variation in housing prices plays a crucial role in topics ranging from the cost of living to quality-of-life indices to studies of public goods and household mobility. Yet analysts have not reached a consensus on the best source of such data, variously using self-reported values from the census, transactions values, tax assessments, and rental values. Additionally, while most studies use micro-level data, some have used summary statistics such as the median housing value. Assessing neighborhood price indices in Los Angeles, we find that indices based on transactions prices are highly correlated with indices based on self-reported values, but the former are better correlated with public goods. Moreover, rental values have a higher correlation with public goods and income levels than either asset-value measure. Finally, indices based on median values are poorly correlated with the other indices, public goods, and income. ER - TY - JOUR AU - Bodenhorn,Howard TI - Voting Rights, Share Concentration, and Leverage at Nineteenth-Century US Banks JF - National Bureau of Economic Research Working Paper Series VL - No. 17808 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17808 L1 - http://www.nber.org/papers/w17808.pdf N1 - Author contact info: Howard Bodenhorn John E. Walker Department of Economics College of Business and Behavioral Science 201-B Sirrine Hall Clemson University Clemson, SC 29634 Tel: 864/656-4335 E-Mail: bodenhorn@gmail.com AB - Studies of corporate governance are concerned with two features of modern shareholding: diffuse ownership and the resulting separation of ownership and control, which potentially leads to managerial self-dealing; and, majority shareholding, which potentially mitigates some managerial self-dealing but opens the door for the expropriation of minority shareholders. This paper provides a study of the second issue for nineteenth-century US corporations. It investigates two related questions. First, did voting rules that limited the control rights of large shareholders encourage diffuse ownership? It did. Second, did diffuse ownership systematically alter bank risk taking? It did. Banks with less concentrated ownership followed policies that reduced liquidity and bankruptcy risk. ER - TY - JOUR AU - Gross,Tal AU - Notowidigdo,Matthew J. AU - Wang,Jialan TI - Liquidity Constraints and Consumer Bankruptcy: Evidence from Tax Rebates JF - National Bureau of Economic Research Working Paper Series VL - No. 17807 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17807 L1 - http://www.nber.org/papers/w17807.pdf N1 - Author contact info: Tal Gross Department of Health Policy and Management Mailman School of Public Health Columbia University 600 West 168th Street, Sixth Floor New York, NY 10032 Tel: (212) 342-4521 E-Mail: tg2370@columbia.edu Matthew J. Notowidigdo University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-9758 E-Mail: noto@chicagobooth.edu Jialan Wang Olin Business School Washington University in St. Louis 208 Simon Hall 1 Olympian Way St. Louis, MO, 63130 E-Mail: jialan.wang@wustl.edu AB - This paper estimates the extent to which legal fees prevent liquidity-constrained households from declaring bankruptcy. To do so, it studies how the 2001 and 2008 tax rebates affected consumer bankruptcy filings. We exploit the randomized timing of the rebate checks and estimate that the rebates caused a significant, short-run increase in consumer bankruptcies in both years, with larger effects in 2008 when the rebates were more generous and more widely distributed. Using hand-collected data from individual bankruptcy petitions, we document that the rebates caused an increase in the average liabilities and the liabilities-to-income ratios of filers. ER - TY - JOUR AU - Aizenman,Joshua AU - Ito,Hiro TI - Trilemma Policy Convergence Patterns and Output Volatility JF - National Bureau of Economic Research Working Paper Series VL - No. 17806 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17806 L1 - http://www.nber.org/papers/w17806.pdf N1 - Author contact info: Joshua Aizenman Department of Economics; E2 1156 High St. University of California, Santa Cruz Santa Cruz, CA 95064 Tel: 831/459-4791 Fax: 831/459-5077 E-Mail: jaizen@ucsc.edu Hiro Ito Portland State University 1721 SW Broadway, Suite 241 Portland, Oregon 97201 E-Mail: ito@pdx.edu AB - We examine the open macroeconomic policy choices of developing economies from the perspective of the economic “trilemma” hypothesis. We construct an index of divergence of the three trilemma policy choices, and evaluate its patterns in recent decades. We find that the three dimensions of the trilemma configurations are converging towards a “middle ground” among emerging market economies -- managed exchange rate flexibility underpinned by sizable holdings of international reserves, intermediate levels of monetary independence, and controlled financial integration. Emerging market economies with more converged policy choices tend to experience smaller output volatility in the last two decades. Emerging markets with relatively low international reserves/GDP could experience higher levels of output volatility when they choose a policy combination with a greater degree of policy divergence. Yet this heightened output volatility effect does not apply to economies with relatively high international reserves/GDP holding. ER - TY - JOUR AU - Campello,Murillo AU - Hackbarth,Dirk TI - The Firm-Level Credit Multiplier JF - National Bureau of Economic Research Working Paper Series VL - No. 17805 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17805 L1 - http://www.nber.org/papers/w17805.pdf N1 - Author contact info: Murillo Campello Johnson Graduate School of Management Cornell University 114 East Avenue 369 Sage Hall Ithaca, NY 148531-6201 Tel: 607-255-1282 E-Mail: campello@cornell.edu Dirk Hackbarth University of Illinois at Urbana-Champaign 515 East Gregory Drive, 4035 BIF Champaign, IL, 61820 Tel: (217) 333-7343 Fax: (217) 244-3102 E-Mail: dhackbar@uiuc.edu AB - We study the effect of asset tangibility on corporate financing and investment decisions. Financially constrained firms benefit the most from investing in tangible assets because those assets help relax constraints, allowing for further investment. Using a dynamic model, we characterize this effect – which we call firm-level credit multiplier – and show how asset tangibility increases the sensitivity of investment to Tobin’s Q for financially constrained firms. Examining a large sample of manufacturers over the 1971-2005 period as well as simulated data, we find support for our theory’s tangibility–investment channel. We further verify that our findings are driven by firms’ debt issuance activities. Consistent with our empirical identification strategy, the firm-level credit multiplier is absent from samples of financially unconstrained firms and samples of financially constrained firms with low spare debt capacity. ER - TY - JOUR AU - Fairlie,Robert W. AU - Karlan,Dean AU - Zinman,Jonathan TI - Behind the GATE Experiment: Evidence on Effects of and Rationales for Subsidized Entrepreneurship Training JF - National Bureau of Economic Research Working Paper Series VL - No. 17804 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17804 L1 - http://www.nber.org/papers/w17804.pdf N1 - Author contact info: Robert Fairlie Department of Economics University of California, Santa Cruz Santa Cruz, CA 95064 E-Mail: rfairlie@ucsc.edu Dean Karlan Department of Economics Yale University P.O. Box 208269 New Haven, CT 06520-8629 Tel: 203/432-4479 Fax: 203/432-5591 E-Mail: dean.karlan@yale.edu Jonathan Zinman Department of Economics Dartmouth College 314 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-0075 Fax: 603/646-2122 E-Mail: jzinman@dartmouth.edu AB - We use randomized program offers and multiple follow-up survey waves to examine the effects of entrepreneurship training on a broad set of outcomes. Training increases short run business ownership and employment, but there is no evidence of broader or longer run effects. We also test whether training mitigates market frictions by estimating heterogeneous treatment effects. Training does not have strong effects (in either relative or absolute terms) on those most likely to face credit or human capital constraints, or labor market discrimination. Training does have a relatively strong short-run effect on business ownership for those unemployed at baseline, but not at other horizons or for other outcomes. ER - TY - JOUR AU - Branch,Gregory F. AU - Hanushek,Eric A. AU - Rivkin,Steven G. TI - Estimating the Effect of Leaders on Public Sector Productivity: The Case of School Principals JF - National Bureau of Economic Research Working Paper Series VL - No. 17803 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17803 L1 - http://www.nber.org/papers/w17803.pdf N1 - Author contact info: Gregory F. Branch Texas Schools Project University of Texas at Dallas Richardson, TX 75080 E-Mail: gregory.branch@utdallas.edu Eric A. Hanushek Hoover Institution Stanford University Stanford, CA 94305-6010 Tel: 650/736-0942 Fax: 650/723-1687 E-Mail: hanushek@stanford.edu Steven G. Rivkin Department of Economics University of Illinois at Chicago 601 South Morgan UH725 M/C144 Chicago, IL 60607 Tel: 312.413.2368 E-Mail: sgrivkin@uic.edu AB - Although much has been written about the importance of leadership in the determination of organizational success, there is little quantitative evidence due to the difficulty of separating the impact of leaders from other organizational components – particularly in the public sector. Schools provide an especially rich environment for studying the impact of public sector management, not only because of the hypothesized importance of leadership but also because of the plentiful achievement data that provide information on institutional outcomes. Outcome-based estimates of principal value-added to student achievement reveal significant variation in principal quality that appears to be larger for high-poverty schools. Alternate lower-bound estimates based on direct estimation of the variance yield smaller estimates of the variation in principal productivity but ones that are still important, particularly for high poverty schools. Patterns of teacher exits by principal quality validate the notion that a primary channel for principal influence is the management of the teacher force. Finally, looking at principal transitions by quality reveals little systematic evidence that more effective leaders have a higher probability of exiting high poverty schools. ER - TY - JOUR AU - Aron-Dine,Aviva AU - Einav,Liran AU - Finkelstein,Amy AU - Cullen,Mark R. TI - Moral Hazard in Health Insurance: How Important Is Forward Looking Behavior? JF - National Bureau of Economic Research Working Paper Series VL - No. 17802 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17802 L1 - http://www.nber.org/papers/w17802.pdf N1 - Author contact info: Aviva Aron-Dine Department of Economics MIT E52-369D 50 Memorial Drive Cambridge, MA 02142 E-Mail: arondine@mit.edu Liran Einav Stanford University Department of Economics 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/723-3704 Fax: 650/725-5702 E-Mail: leinav@stanford.edu Amy Finkelstein Department of Economics MIT E52-274C 50 Memorial Drive Cambridge, MA 02142 Tel: 617/253-4149 Fax: 617/868-2742 E-Mail: afink@mit.edu Mark R. Cullen Stanford University School of Medicine 1265 Welch Rd X338 Stanford, CA 94305 Tel: 650.721.6209 Fax: 650.723.8596 E-Mail: mrcullen@stanford.edu AB - We investigate whether individuals exhibit forward looking behavior in their response to the non-linear pricing common in health insurance contracts. Our empirical strategy exploits the fact that employees who join an employer-provided health insurance plan later in the calendar year face the same initial ("spot") price of medical care but a higher expected end-of-year ("future") price than employees who join the same plan earlier in the year. Our results reject the null of completely myopic behavior; medical utilization appears to respond to the future price, with a statistically significant elasticity of medical utilization with respect to the future price of -0.4 to -0.6. To try to quantify the extent of forward looking behavior, we develop a stylized dynamic model of individual behavior and calibrate it using our estimated behavioral response and additional data from the RAND Health Insurance Experiment. Our calibration suggests that the elasticity estimate may be substantially smaller than the one implied by fully forward-looking behavior, yet it is sufficiently high to have an economically significant effect on the response of annual medical utilization to a non-linear health insurance contract. Overall, our results point to the empirical importance of accounting for dynamic incentives in analyses of the impact of health insurance on medical utilization. ER - TY - JOUR AU - Foltz,Jeremy D. AU - Aldana,Ursula T. AU - Laris,Paul TI - The Sahel's Silent Maize Revolution: Analyzing Maize Productivity in Mali at the Farm-level JF - National Bureau of Economic Research Working Paper Series VL - No. 17801 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17801 L1 - http://www.nber.org/papers/w17801.pdf N1 - Author contact info: Jeremy D. Foltz Dept. of Ag. & Applied Economics University of Wisconsin, Madison 427 Lorch St. Madison, WI 53706 Tel: (608) 262-6871 E-Mail: jdfoltz@wisc.edu Ursula T. Aldana Instituto de Estudios Peruanos Lima, Peru E-Mail: utaldana@gmail.com Paul Laris Department of Geography California State University 1250 Bellflower Blvd. Long Beach, CA 90840 Tel: (562) 985-1862 E-Mail: plaris@csulb.edu M3 - presented at "African Development Successes", August 3-5, 2011 AB - Since independence a quiet revolution has taken place in maize production in the Sahel with Mali increasing production more than ten-fold and yields going up ~2% a year. This research work uses farm level panel data from southern Mali's maize growing regions to demonstrate this success in agricultural production and technological change. We analyze the determinants of production to unpack increases in input use from technological change. The estimations show that farmer adoption of increased fertilizer use has driven much of the productivity growth rather than the adoption of improvements in seeds and management. Additionally, we find strong evidence of observed and unobserved heterogeneity, which affects both the choice of fertilizer amounts and the marginal returns to fertilizer use. The results demonstrate the key changes behind this silent maize revolution and point to the importance of taking into account farmer heterogeneity in estimating productivity and returns to fertilizer. ER - TY - JOUR AU - Borjas,George J. AU - Doran,Kirk B. TI - The Collapse of the Soviet Union and the Productivity of American Mathematicians JF - National Bureau of Economic Research Working Paper Series VL - No. 17800 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17800 L1 - http://www.nber.org/papers/w17800.pdf N1 - Author contact info: George J. Borjas Harvard Kennedy School 79 JFK Street Cambridge, MA 02138 Tel: 617/495-1393 Fax: 617/495-9532 E-Mail: gborjas@harvard.edu Kirk B. Doran 438 Flanner Hall University of Notre Dame Notre Dame, IN 46556 E-Mail: kdoran@nd.edu AB - It has been difficult to open up the black box of knowledge production. We use unique international data on the publications, citations, and affiliations of mathematicians to examine the impact of a large post-1992 influx of Soviet mathematicians on the productivity of their American counterparts. We find a negative productivity effect on those mathematicians whose research overlapped with that of the Soviets. We also document an increased mobility rate (to lower-quality institutions and out of active publishing) and a reduced likelihood of producing “home run” papers. Although the total product of the pre-existing American mathematicians shrank, the Soviet contribution to American mathematics filled in the gap. However, there is no evidence that the Soviets greatly increased the size of the “mathematics pie.” Finally, we find that there are significant international differences in the productivity effects of the collapse of the Soviet Union, and that these international differences can be explained by both differences in the size of the émigré flow into the various countries and in how connected each country is to the global market for mathematical publications. ER - TY - JOUR AU - Inman,Robert P. AU - Rubinfeld,Daniel L. TI - Understanding the Democratic Transition in South Africa JF - National Bureau of Economic Research Working Paper Series VL - No. 17799 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17799 L1 - http://www.nber.org/papers/w17799.pdf N1 - Author contact info: Robert P. Inman Department of Finance Wharton School University of Pennsylvania Philadelphia, PA 19104-6367 Tel: 215/898-8299 Fax: 215/898-6200 E-Mail: inman@wharton.upenn.edu Daniel L. Rubinfeld Robert L. Bridges Professor of Law and Professor of Economics Emeritus 788 Simon Tower, Boalt Hall University of California, Berkeley Berkeley, CA 94720 Tel: 510/642-1959 Fax: 510/642-3767 E-Mail: drubinfeld@law.berkeley.edu AB - South Africa’s transition from apartheid to democracy stands as one of the past century’s most important political events. The transition has been successful to this point because the new constitution adopted a form of federal governance that has been able to provide protection for the economic elite from maximal redistributive taxation. Appropriately structured, federal governance creates a “hostage game” in which the majority central government controls the tax rate but elite run province(s) control the provision of important redistributive services to a significant fraction of lower income households. At least to today, the political economy of South Africa has found a stable equilibrium with less than maximal redistributive taxation. Moreover, the move to a democratic federalist system has improved the economic welfare of both the white minority and the black majority. Whether the federal structure can continue to check maximal taxation depends crucially upon the rate of time preference of the majority and their demands for redistributive public services. A new, impatient and more radical majority (ANC) party threatens the current equilibrium. ER - TY - JOUR AU - Ang,Andrew AU - Brière,Marie AU - Signori,Ombretta TI - Inflation and Individual Equities JF - National Bureau of Economic Research Working Paper Series VL - No. 17798 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17798 L1 - http://www.nber.org/papers/w17798.pdf N1 - Author contact info: Andrew Ang Columbia Business School 3022 Broadway 413 Uris New York, NY 10027 Tel: 212/854-9154 Fax: 212/662-8474 E-Mail: aa610@columbia.edu Marie Briere Amundi 90 bd Pasteur, 75015 Paris, France E-Mail: marie.briere@amundi.com Ombretta Signori AXA Investment Managers Coeur Défense Tour B - La Défense 4 100 Esplanade du Général de Gaulle 92932 Paris La Défense Cedex France E-Mail: ombretta.signori@axa-im.com AB - We study the inflation hedging ability of individual stocks. While the poor inflation hedging ability of the aggregate stock market has long been documented, there is considerable heterogeneity in how individual stock returns covary with inflation. Stocks with good inflation-hedging abilities since 1990 have had higher returns, on average, than stocks with low inflation betas and tend to be drawn from the Oil and Gas and Technology sectors. However, we show that there is substantial time variation of stock inflation betas. This makes it difficult to construct portfolios of stocks that are good inflation hedges out of sample. This is true for portfolios constructed on past inflation betas, sector portfolios, and portfolios constructed from high-paying dividend stocks. ER - TY - JOUR AU - Becker,Bo AU - Bergstresser,Daniel AU - Subramanian,Guhan TI - Does Shareholder Proxy Access Improve Firm Value? Evidence from the Business Roundtable Challenge JF - National Bureau of Economic Research Working Paper Series VL - No. 17797 PY - 2012 Y2 - February 2012 UR - http://www.nber.org/papers/w17797 L1 - http://www.nber.org/papers/w17797.pdf N1 - Author contact info: Bo Becker Harvard Business School Baker Library 349 Soldiers Field Boston, MA 02163 Tel: 617/496-5335 Fax: 617/495-7659 E-Mail: bbecker@hbs.edu Daniel Bergstresser Brandeis University International Business School 415 South St Waltham, MA 02453 E-Mail: dberg@brandeis.edu Guhan Subramanian Harvard University E-Mail: subraman@law.harvard.edu AB - We use the Business Roundtable’s challenge to the SEC’s 2010 proxy access rule as a natural experiment to measure the value of shareholder proxy access. We find that firms that would have been most vulnerable to proxy access, as measured by institutional ownership and activist institutional ownership in particular, lost value on October 4, 2010, when the SEC unexpectedly announced that it would delay implementation of the Rule in response to the Business Roundtable challenge. We also examine intra-day returns and find that the value loss occurred just after the SEC’s announcement on October 4. We find similar results on July 22, 2011, when the D.C. Circuit ruled in favor of the Business Roundtable. These findings are consistent with the view that financial markets placed a positive value on shareholder access, as implemented in the SEC’s 2010 Rule. ER - TY - JOUR AU - Devereux,Michael B. AU - Senay,Ozge AU - Sutherland,Alan TI - Nominal Stability and Financial Globalization JF - National Bureau of Economic Research Working Paper Series VL - No. 17796 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17796 L1 - http://www.nber.org/papers/w17796.pdf N1 - Author contact info: Michael B. Devereux Department of Economics University of British Columbia 997-1873 East Mall Vancouver, BC V6T 1Z1 CANADA Tel: 604/822-2542 Fax: 604/822-5915 E-Mail: mbdevereux@gmail.com Ozge Senay Department of Economics University of St. Andrews St. Andrews, Fife KY16 9AL UK E-Mail: os12@st-andrews.ac.uk Alan Sutherland Department of Economics University of St. Andrews St. Andrews, Fife KY16 9AL UK E-Mail: ajs10@st-and.ac.uk AB - Over the one and a half decades prior to the global financial crisis, advanced economies experienced a large growth in gross external portfolio positions. This phenomenon has been described as Financial Globalization. Over roughly the same time frame, most of these countries also saw a substantial fall in the level and variability of inflation. Many economists have conjectured that financial globalization contributed to the improved performance in the level and predictability of inflation. In this paper, we explore the causal link running in the opposite direction. We show that a monetary policy rule which reduces inflation variability leads to an increase in the size of gross external positions, both in equity and bond portfolios. This is a highly robust prediction of open economy macro models with endogenous portfolio choice. It holds across many different modeling specifications and parameterizations. We also present preliminary empirical evidence which shows a negative relationship between inflation volatility and the size of gross external positions. ER - TY - JOUR AU - Kogan,Leonid AU - Papanikolaou,Dimitris TI - Growth Opportunities, Technology Shocks, and Asset Prices JF - National Bureau of Economic Research Working Paper Series VL - No. 17795 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17795 L1 - http://www.nber.org/papers/w17795.pdf N1 - Author contact info: Leonid Kogan MIT Sloan School of Management 100 Main Street, E62-636 Cambridge, MA 02142 Tel: 617/504-9728 Fax: 617/258-6855 E-Mail: lkogan@mit.edu Dimitris Papanikolaou Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-7704 E-Mail: d-papanikolaou@kellogg.northwestern.edu AB - We explore the impact of investment-specific technology (IST) shocks on the crosssection of stock returns. IST shocks reflect technological advances embodied in new capital goods. Using a structural model, we show that IST shocks have a differential effect on the two fundamental components of firm value, the value of assets in place and the value of growth opportunities. This differential sensitivity to IST shocks has two main implications. First, risk premia on firms with abundant growth opportunities are different from those on firms with limited growth opportunities. Second, firms with similar levels of growth opportunities comove with each other, giving rise to the value factor in stock returns. Our model replicates the failure of the conditional CAPM to capture the value premium. Our empirical tests confirm the model's predictions for asset returns and investment rates. ER - TY - JOUR AU - Nunn,Nathan AU - Qian,Nancy TI - Aiding Conflict: The Impact of U.S. Food Aid on Civil War JF - National Bureau of Economic Research Working Paper Series VL - No. 17794 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17794 L1 - http://www.nber.org/papers/w17794.pdf N1 - Author contact info: Nathan Nunn Department of Economics Harvard University 1805 Cambridge St Cambridge, Ma 02138 Tel: 617/496-4958 Fax: 617/495-8570 E-Mail: nnunn@fas.harvard.edu Nancy Qian Department of Economics Yale University 27 Hillhouse Avenue New Haven, CT 06520-8269 E-Mail: nancy.qian@yale.edu AB - This paper examines the effect of U.S. food aid on conflict in recipient countries. To establish a causal relationship, we exploit time variation in food aid caused by fluctuations in U.S. wheat production together with cross-sectional variation in a country's tendency to receive any food aid from the United States. Our estimates show that an increase in U.S. food aid increases the incidence, onset and duration of civil conflicts in recipient countries. Our results suggest that the effects are larger for smaller scale civil conflicts. No effect is found on interstate warfare. ER - TY - JOUR AU - Agrawal,Ajay K. AU - Cockburn,Iain M. AU - Galasso,Alberto AU - Oettl,Alexander TI - Why are Some Regions More Innovative than Others? The Role of Firm Size Diversity JF - National Bureau of Economic Research Working Paper Series VL - No. 17793 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17793 L1 - http://www.nber.org/papers/w17793.pdf N1 - Author contact info: Ajay K. Agrawal Rotman School of Management University of Toronto 105 St. George Street Toronto, ON M5S 3E6 CANADA Tel: 416/946-0203 Fax: 416/978-5433 E-Mail: ajay.agrawal@rotman.utoronto.ca Iain M. Cockburn School of Management Boston University 595 Commonwealth Ave Boston, MA 02215 Tel: 617/588-1486 Fax: 815/550-2353 E-Mail: cockburn@bu.edu Alberto Galasso Rotman School of Management University of Toronto 105 St. George Street Toronto, ON CANADA M5S 3E6 Fax: 905-569-4397 E-Mail: Alberto.Galasso@Rotman.Utoronto.Ca Alexander Oettl College of Management Georgia Institute of Technology 800 West Peachtree Street, NW Atlanta, GA 30308 Tel: 404.385.4570 E-Mail: alexander.oettl@mgt.gatech.edu AB - Large labs may spawn spin-outs caused by innovations deemed unrelated to the firm's overall business. Small labs generate demand for specialized services that lower entry costs for others. We develop a theoretical framework to study the interplay of these two localized externalities and their impact on regional innovation. We examine MSA-level patent data during the period 1975-2000 and find that innovation output is higher where large and small labs coexist. The finding is robust to across-region as well as within-region analysis, IV analysis, and the effect is stronger in certain subsamples consistent with our explanation but not the plausible alternatives. ER - TY - JOUR AU - Popp,David AU - Santen,Nidhi AU - Fisher-Vanden,Karen AU - Webster,Mort TI - Technology Variation vs. R&D Uncertainty: What Matters Most for Energy Patent Success? JF - National Bureau of Economic Research Working Paper Series VL - No. 17792 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17792 L1 - http://www.nber.org/papers/w17792.pdf N1 - Author contact info: David Popp Associate Professor of Public Administration Syracuse University The Maxwell School 426 Eggers Hall Syracuse, NY 13244-1020 Tel: 315/443-2482 Fax: 315/443-1081 E-Mail: dcpopp@maxwell.syr.edu Nidhi Santen Engineering Systems Division Massachusetts Institute of Technology E19-411-ST20 77 Massachusetts Avenue Cambridge, MA 02139 E-Mail: nrsanten@mit.edu Karen Fisher-Vanden Department of Agric. Economics and Rural Soc. 112-E Armsby Building Pennsylvania State University University Park, PA 16802 E-Mail: fishervanden@psu.edu Mort Webster Engineering Systems Division Massachusetts Institute of Technology E40-235 77 Massachusetts Avenue Cambridge, MA 02139 E-Mail: mort@mit.edu AB - R&D is an uncertain activity with highly skewed outcomes. Nonetheless, most recent empirical studies and modeling estimates of the potential of technological change focus on the average returns to research and development (R&D) for a composite technology and contain little or no information about the distribution of returns to R&D—which could be important for capturing the range of costs associated with climate change mitigation policies—by individual technologies. Through an empirical study of patent citation data, this paper adds to the literature on returns to energy R&D by focusing on the behavior of the most successful innovations for six energy technologies, allowing us to determine whether uncertainty or differences in technologies matter most for success. We highlight two key results. First, we compare the results from an aggregate analysis of six energy technologies to technology-by-technology results. Our results show that existing work that assumes diminishing returns but assumes one generic technology is too simplistic and misses important differences between more successful and less successful technologies. Second, we use quantile regression techniques to learn more about patents that have a high positive error term in our regressions – that is, patents that receive many more citations than predicted based on observable characteristics. We find that differences across technologies, rather than differences across quantiles within technologies, are more important. The value of successful technologies persists longer than those of less successful technologies, providing evidence that success is the culmination of several advances building upon one another, rather than resulting from one single breakthrough. Diminishing returns to research efforts appear most problematic during rapid increases of research investment, such as experienced by solar energy in the 1970s. ER - TY - JOUR AU - Waggoner,Daniel F. AU - Zha,Tao TI - Confronting Model Misspecification in Macroeconomics JF - National Bureau of Economic Research Working Paper Series VL - No. 17791 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17791 L1 - http://www.nber.org/papers/w17791.pdf N1 - Author contact info: Daniel F. Waggoner Federal Reserve Bank of Atlanta 1000 Peachtree Street N.E. Atlanta, Georgia 30309-4470 E-Mail: dwaggoner@frbatlanta.org Tao Zha Emory University 1602 Fishburne Drive Atlanta, GA 30322-2240 Tel: 404/723-3254 Fax: 404/727-4639 E-Mail: tzha@emory.edu AB - We estimate a Markov-switching mixture of two familiar macroeconomic models: a richly parameterized DSGE model and a corresponding BVAR model. We show that the Markov-switching mixture model dominates both individual models and improves the fit considerably. Our estimation indicates that the DSGE model plays an important role only in the late 1970s and the early 1980s. We show how to use the mixture model as a data filter for estimation of the DSGE model when the BVAR model is not identified. Moreover, we show how to compute the impulse responses to the same type of shock shared by the DSGE and BVAR models when the shock is identified in the BVAR model. Our exercises demonstrate the importance of integrating model uncertainty and parameter uncertainty to address potential model misspecification in macroeconomics. ER - TY - JOUR AU - Handley,Kyle AU - Limão,Nuno TI - Trade and Investment under Policy Uncertainty: Theory and Firm Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 17790 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17790 L1 - http://www.nber.org/papers/w17790.pdf N1 - Author contact info: Kyle Handley Stanford University E-Mail: handleyk@gmail.com Nuno Limao Department of Economics University of Maryland 3105 Tydings Hall College Park, MD 20742 Tel: 301/405-7842 Fax: 301/405-3542 E-Mail: limao@econ.umd.edu AB - We provide theoretical and empirical evidence that policy uncertainty can significantly affect firm level investment and entry decisions in the context of international trade. When market entry costs are sunk, policy uncertainty can create a real option value of waiting to enter foreign markets until conditions improve or uncertainty is resolved. Using a dynamic, heterogeneous firms model we show that: (i) investment and entry into export markets is reduced when trade policy is uncertain, and (ii) preferential trade agreements (PTAs) are valuable to exporters even if applied trade barriers are currently low or zero. We derive a structural equation that predicts how firm entry responds to changes in applied tariffs and a theory-based measure of policy uncertainty. Our novel approach using observable trade policies allows us to estimate the impact of policy uncertainty and quantify its aggregate implications. We apply this method to Portugal's accession to the European Community in 1986 using new firm-level trade data. We find that (i) the trade policy reform accounted for a large fraction of the observed Portuguese exporting firms' entry and sales upon accession (ii) the accession removed uncertainty about future preferences and (iii) this uncertainty channel accounted for a large fraction of the predicted growth. These results have broader implications for other PTAs and our approach can be applied to analyze other sources of policy uncertainty. ER - TY - JOUR AU - Bolin,Kristian AU - Lindgren,Bjorn TI - The Double Facetted Nature of Health Investments - Implications for Equilibrium and Stability in a Demand-for-Health Framework JF - National Bureau of Economic Research Working Paper Series VL - No. 17789 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17789 L1 - http://www.nber.org/papers/w17789.pdf N1 - Author contact info: Kristian Bolin Department of Economics Lund University P.O.Box 7082 SE-22007 Lund SWEDEN E-Mail: Kristian.Bolin@nek.lu.se Bjorn Lindgren Department of Economics University of Gothenburg P.O.Box 640 SE-40530 Gothenburg SWEDEN E-Mail: Bjorn.Lindgren@economics.gu.se AB - A number of behaviours influence health in a non-monotonic way. Physical activity and alcohol consumption, for instance, may be beneficial to one’s health in moderate but detrimental in large quantities. We develop a demand-for-health framework that incorporates the feature of a physiologically optimal level. An individual may still choose a physiologically non-optimal level, because of the trade-off in his or her preferences for health versus other utility-affecting commodities. However, any deviation from the physiologically optimal level will be punished with respect to health. A set of steady-state comparative statics is derived regarding the effects on the demand for health and health-related behaviour, indicating that individuals react differently to exogenous changes, depending on the amount of the health-related behaviour they demand. We also show (a) that a steady-state equilibrium is a saddle-point and (b) that the physiologically optimal level may be a steady-state equilibrium for the individual. Our analysis suggests that general public-health policies may, to some extent, be counterproductive due to the responses induced in part of the population. ER - TY - JOUR AU - Cheung,Yin-Wong AU - Dooley,Michael P. AU - Sushko,Vladyslav TI - Investment and Growth in Rich and Poor Countries JF - National Bureau of Economic Research Working Paper Series VL - No. 17788 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17788 L1 - http://www.nber.org/papers/w17788.pdf N1 - Author contact info: Yin-Wong Cheung Department of Economics University of California Santa Cruz, CA 95064 E-Mail: cheung@ucsc.edu Michael P. Dooley Department of Economics Engineering II University of California, Santa Cruz Santa Cruz, CA 95064 Tel: 831/459 3662 Fax: 831/459-5077 E-Mail: MPD@UCSC.EDU Vladyslav Sushko Bank for International Settlements Centralbahnplatz 2 4002 Basel Switzerland E-Mail: vlad.sushko@bis.org AB - This paper revisits the association between investment and growth. The empirical findings highlight substantial heterogeneity for the effect of investment on growth and suggest a possible negative association. Results based on a battery of cross-sectional and time-series regressions show that the link between investment and growth has weakened over time and that investment in high-income countries is more likely to have a negative effect on growth. The adverse effect for high-income countries appears to have increased over time. An implication is that uphill capital flows could be associated with negative or zero returns. The result is robust to the presence of control variables that are commonly included in growth studies. ER - TY - JOUR AU - Ramey,Valerie A. TI - Government Spending and Private Activity JF - National Bureau of Economic Research Working Paper Series VL - No. 17787 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17787 L1 - http://www.nber.org/papers/w17787.pdf N1 - Author contact info: Valerie A. Ramey Department of Economics, 0508 University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 Tel: 858/534-2388 Fax: 858/534-7040 E-Mail: VRAMEY@UCSD.EDU M1 - published as Valerie A. Ramey. "Government Spending and Private Activity," in Alberto Alesina and Francesco Giavazzi, editors, "Fiscal Policy after the Financial Crisis" University of Chicago Press (2012) M3 - presented at "Fiscal Policy after the Financial Crisis", December 12-13, 2011 AB - This paper asks whether increases in government spending stimulate private activity. The first part of the paper studies private spending. Using a variety of identification methods and samples, I find that in most cases private spending falls significantly in response to an increase in government spending. These results imply that the average GDP multiplier lies below unity. In order to determine whether concurrent increases in tax rates dampen the spending multiplier, I use two different methods to adjust for tax effects. Neither method suggests significant effects of current tax rate changes on the spending multiplier. In the second part of the paper, I explore the effects of government spending on labor markets. I find that increases in government spending lower unemployment. Most specifications and samples imply, however, that virtually all of the effect is through an increase in government employment, not private employment. I thus conclude that on balance government spending does not appear to stimulate private activity. ER - TY - JOUR AU - Waldman,Michael AU - Nicholson,Sean AU - Adilov,Nodir TI - Positive and Negative Mental Health Consequences of Early Childhood Television Watching JF - National Bureau of Economic Research Working Paper Series VL - No. 17786 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17786 L1 - http://www.nber.org/papers/w17786.pdf N1 - Author contact info: Michael Waldman Johnson Graduate School of Management 323 Sage Hall Cornell University Ithaca, NY 14853-6201 Tel: (607) 255-8631 Fax: (607) 254-4590 E-Mail: mw46@cornell.edu Sean Nicholson Professor Department of Policy Analysis and Management Cornell University 102 Martha Van Rensselaer Hall Ithaca, NY 14853 Tel: 607/254-6498 Fax: 607/255-4071 E-Mail: sn243@cornell.edu Nodir Adilov Indiana University - Purdue University Neff Hall Fort Wayne, IN 46805 E-Mail: adilovn@ipfw.edu AB - An extensive literature in medicine investigates the health consequences of early childhood television watching. However, this literature does not address the issue of reverse causation, i.e., does early childhood television watching cause specific health outcomes or do children more likely to have these health outcomes watch more television? This paper uses a natural experiment to investigate the health consequences of early childhood television watching and so is not subject to questions concerning reverse causation. Specifically, we use repeated cross-sectional data from 1972 through 1992 on county-level mental retardation rates, county-level autism rates, and county-level children’s cable-television subscription rates to investigate how early childhood television watching affects the prevalence of mental retardation and autism. We find a strong negative correlation between average county-level cable subscription rates when a birth cohort is below three and subsequent mental retardation diagnosis rates, but a strong positive correlation between the same cable subscription rates and subsequent autism diagnosis rates. Our results thus suggest that early childhood television watching has important positive and negative health consequences. ER - TY - JOUR AU - Akresh,Richard AU - Walque,Damien de AU - Kazianga,Harounan TI - Alternative Cash Transfer Delivery Mechanisms: Impacts on Routine Preventative Health Clinic Visits in Burkina Faso JF - National Bureau of Economic Research Working Paper Series VL - No. 17785 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17785 L1 - http://www.nber.org/papers/w17785.pdf N1 - Author contact info: Richard Akresh University of Illinois at Urbana-Champaign Department of Economics 1407 West Gregory Drive David Kinley Hall, Room 214 Urbana, IL 61801 Tel: 217-333-3467 Fax: 217-244-6678 E-Mail: akresh@illinois.edu Damien de Walque The World Bank Development Research Group 1818 H Street, NW Washington, DC 20433 Tel: (202) 473-2517 E-Mail: ddewalque@worldbank.org Harounan Kazianga Department of Economics Oklahoma State University Business 324 Stillwater, OK 74078 Tel: (405) 744-5110 E-Mail: harounan.kazianga@okstate.edu M3 - presented at "African Development Successes", August 3-5, 2011 AB - We conducted a unique randomized experiment to estimate the impact of alternative cash transfer delivery mechanisms on household demand for routine preventative health services in rural Burkina Faso. The two-year pilot program randomly distributed cash transfers that were either conditional or unconditional and were given to either mothers or fathers. Families under the conditional cash transfer schemes were required to obtain quarterly child growth monitoring at local health clinics for all children under 60 months old. There were no such requirements under the unconditional programs. Compared with control group households, we find that conditional cash transfers significantly increase the number of preventative health care visits during the previous year, while unconditional cash transfers do not have such an impact. For the conditional cash transfers, transfers given to mothers or fathers showed similar magnitude beneficial impacts on increasing routine visits. ER - TY - JOUR AU - Lockwood,Benjamin B. AU - Weinzierl,Matthew C. TI - De Gustibus non est Taxandum: Theory and Evidence on Preference Heterogeneity and Redistribution JF - National Bureau of Economic Research Working Paper Series VL - No. 17784 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17784 L1 - http://www.nber.org/papers/w17784.pdf N1 - Author contact info: Benjamin B. Lockwood Littauer Center, Room 200 Harvard University Cambridge, MA 02138 E-Mail: lockwood@fas.harvard.edu Matthew C. Weinzierl Harvard Business School 277 Morgan Soldiers Field Boston, MA 02163 Tel: 617/495-6697 Fax: 617/496-5994 E-Mail: mweinzierl@hbs.edu AB - Preferences over consumption and leisure play no role in the standard optimal tax model, which attributes all variation in earnings to differences in income-earning ability. We show how to incorporate these preferences, which like ability are publicly unobservable, into the standard model in a tractable way. In this more general model, the policy designer must guess at the relative importance of ability and preferences in explaining variation in earnings. We show that such preferences could, in principle, increase or decrease optimal redistribution. In the most plausible specifications of the model, however, the result is clear: greater variation in preferences lowers the optimal extent of redistribution. To generate more redistribution than in standard results, one must assume that the desire for income is inversely related to income earned. This result holds even when the conventional model accurately describes the average individual, and it suggests one potential resolution to the puzzle of why observed redistribution is in some cases weaker than conventional theory would suggest. We then establish a new empirical finding that confirms this model's central policy prediction across developed countries and U.S. states. In countries and states with more heterogeneous tastes for consumption relative to leisure, redistribution is statistically significantly lower. ER - TY - JOUR AU - Gabaix,Xavier TI - Boundedly Rational Dynamic Programming: Some Preliminary Results JF - National Bureau of Economic Research Working Paper Series VL - No. 17783 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17783 L1 - http://www.nber.org/papers/w17783.pdf N1 - Author contact info: Xavier Gabaix New York University Finance Department Stern School of Business 44 West 4th Street, 9th floor New York, NY 10012 Tel: 212-998-0257 Fax: 212-995-4233 E-Mail: xgabaix@stern.nyu.edu AB - A key open question in economics is the practical, portable modeling of bounded rationality. In this short note, I report ongoing progress that is more fully developed elsewhere. I present some results from a new model in which the decision-maker builds a simplified representation of the world. The model allows to model boundedly rational dynamic programming in a parsimonious and quite tractable way. I illustrate the approach via a boundedly rational version of the consumption-saving life cycle problem. The consumer can pay attention to the variables such as the interest rate and his income, or replace them, in his mental model, by their average values. Endogenously, the consumer pays little attention to interest rate but pays keen attention to his income. One consequence of this is that Euler equations will be biased, and the intertemporal elasticity of substitution will be biased toward 0, in a manner that is quantitatively important. ER - TY - JOUR AU - Davis,Steven J. AU - Faberman,R. Jason AU - Haltiwanger,John C. TI - Recruiting Intensity during and after the Great Recession: National and Industry Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 17782 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17782 L1 - http://www.nber.org/papers/w17782.pdf N1 - Author contact info: Steven J. Davis Booth School of Business The University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-7312 Fax: 773/834-0733 E-Mail: Steven.Davis@ChicagoBooth.edu Jason Faberman Economic Research Department Federal Reserve Bank of Chicago 230 S. LaSalle St. Chicago, IL 60604 Tel: (312) 322-5274 Fax: (312) 322-2357 E-Mail: jfaberman@frbchi.org John C. Haltiwanger Department of Economics University of Maryland College Park, MD 20742 Tel: 301/405-3504 Fax: 301/405-3542 E-Mail: haltiwan@econ.umd.edu AB - We measure job-filling rates and recruiting intensity per vacancy at the national and industry levels from January 2001 to September 2011 using data from the Job Openings and Labor Turnover Survey. Construction makes up less than 5 percent of employment but accounts for more than 40 percent of the large swings in the job-filling rate during and after the Great Recession. Leisure & Hospitality accounts for nearly a quarter of the large drop in recruiting intensity during the Great Recession. We show that industry-level movements in job-filling rates and recruiting intensity are at odds with the implications of the standard matching function in labor search theory but consistent with a generalized function that incorporates an important role for recruiting intensity per vacancy. ER - TY - JOUR AU - Barcellos,Silvia H. AU - Carvalho,Leandro AU - Lleras-Muney,Adriana TI - Child Gender And Parental Investments In India: Are Boys And Girls Treated Differently? JF - National Bureau of Economic Research Working Paper Series VL - No. 17781 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17781 L1 - http://www.nber.org/papers/w17781.pdf N1 - Author contact info: Silvia H. Barcellos Rand Corporation 1776 Main Street Santa Monica, CA 90401 E-Mail: silvia@rand.org Leandro Carvalho Rand Corporation 1776 Main Street Santa Monica, CA 90401 E-Mail: carvalho@rand.org Adriana Lleras-Muney Department of Economics 9373 Bunche Hall UCLA Los Angeles, CA 90095 Tel: 310/825-3925 Fax: NA E-Mail: alleras@ECON.UCLA.EDU AB - Although previous research has not always found that boys and girls are treated differently in rural India, son-biased stopping rules imply that estimates of the effect of gender on parental investments are likely to be biased because girls systematically end up in larger families. We propose a novel identification strategy for overcoming this bias. We document that boys receive significantly more childcare time than girls. In addition boys are more likely to be breastfed longer, and to be given vaccinations and vitamin supplementation. We then present suggestive evidence that the differential treatment of boys is neither due to their greater needs nor to the effect of anticipated family size. ER - TY - JOUR AU - Hahm,Joon-Ho AU - Mishkin,Frederic S. AU - Shin,Hyun Song AU - Shin,Kwanho TI - Macroprudential Policies in Open Emerging Economies JF - National Bureau of Economic Research Working Paper Series VL - No. 17780 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17780 L1 - http://www.nber.org/papers/w17780.pdf N1 - Author contact info: Joon-Ho Hahm Yonsei University Seoul, Korea E-Mail: jhahm@yonsei.ac.kr Frederic S. Mishkin Columbia University Graduate School of Business Uris Hall 817 3022 Broadway New York, NY 10027 Tel: 212-854-3488 Fax: 212/662-8474 E-Mail: fsm3@columbia.edu Hyun Song Shin Department of Economics Princeton University Princeton, NJ 08544 Tel: 609/258-4467 Fax: 609/258-0771 E-Mail: hsshin@princeton.edu Kwanho Shin Korea University Department of Economics Seoul 136-701 Korea Tel: 02-3290-2220 Fax: 02-3290-2719 E-Mail: khshin@korea.ac.kr AB - This paper examines macroprudential policies in open emerging economies. It discusses how the recent financial crisis has provided a rationale for macroprudential policies to help manage the economy and the need for policymakers to monitor the financial cycle and systemic risks. It also discusses one particularly promising measure of the state of the financial cycle, the growth of non-core liabilities of the financial sector, and evaluates macroprudential policy frameworks. The paper uses Korea as an example and conducts an empirical evaluation of non-core liabilities of Korean banks as a measure of the financial cycle. ER - TY - JOUR AU - Krusell,Per AU - Mukoyama,Toshihiko AU - Rogerson,Richard AU - Şahin,Ayşegül TI - Is Labor Supply Important for Business Cycles? JF - National Bureau of Economic Research Working Paper Series VL - No. 17779 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17779 L1 - http://www.nber.org/papers/w17779.pdf N1 - Author contact info: Per Krusell Institute for International Economic Studies Stockholm University 106 91 STOCKHOLM SWEDEN E-Mail: per.krusell@iies.su.se Toshihiko Mukoyama Department of Economics University of Virginia P.O. Box 400182 Charlottesville VA 22904 E-Mail: tm5hs@virginia.edu Richard Rogerson Woodrow Wilson School of Public and International Affairs 323 Bendheim Hall Princeton University Princeton, NJ 08544 Tel: 609-258-4839 Fax: 609-258-5349 E-Mail: rdr@princeton.edu Aysegul Sahin Federal Reserve Bank of New York Research & Statistics Group 33 Liberty Street New York, NY 10045 Tel: 212-720-5145 E-Mail: Aysegul.Sahin@ny.frb.org AB - We build a general equilibrium model that features uninsurable idiosyncratic shocks, search frictions and an operative labor supply choice along the extensive margin. The model is calibrated to match the average levels of gross flows across the three labor market states: employment, unemployment, and non-participation. We use it to study the implications of two kinds of aggregate shocks for the cyclical behavior of labor market aggregates and flows: shocks to search frictions (the rates of job finding and job loss) and shocks to the return on the market activity (any factors affecting aggregate productivity). We find that both kinds of shocks are needed to explain the labor market data, and that an active labor supply channel is key. A model with friction shocks only, calibrated to match unemployment fluctuations, accounts for only a small fraction of employment fluctuations and has counterfactual cyclical predictions for participation. ER - TY - JOUR AU - Buera,Francisco J. AU - Moll,Benjamin TI - Aggregate Implications of a Credit Crunch JF - National Bureau of Economic Research Working Paper Series VL - No. 17775 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17775 L1 - http://www.nber.org/papers/w17775.pdf N1 - Author contact info: Francisco J. Buera Department of Economics University of California, Los Angeles 8283 Bunche Hall Office 8357 Mail Stop: 147703 Los Angeles, CA 90095 Tel: 310/825-8018 Fax: 310/825-9528 E-Mail: fjbuera@econ.ucla.edu Benjamin Moll 106 Fisher Hall Department of Economics Princeton University Princeton, NJ 08544 E-Mail: moll@princeton.edu AB - We take an off-the-shelf model with financial frictions and heterogeneity, and study the mapping from a credit crunch, modeled as a shock to collateral constraints, to simple aggregate wedges. We study three variants of this model that only differ in the form of underlying heterogeneity. We find that in all three model variants a credit crunch shows up as a different wedge: efficiency, investment, and labor wedges. Furthermore, all three model variants have an undistorted Euler equation for the aggregate of firm owners. These results highlight the limitations of using representative agent models to identify sources of business cycle fluctuations. ER - TY - JOUR AU - Burstein,Ariel AU - Cravino,Javier TI - Measured Aggregate Gains from International Trade JF - National Bureau of Economic Research Working Paper Series VL - No. 17767 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17767 L1 - http://www.nber.org/papers/w17767.pdf N1 - Author contact info: Ariel Burstein Department of Economics Bunche Hall 8365 Box 951477 UCLA Los Angeles, CA 90095-1477 Tel: 310/206-6732 Fax: 310/825-9528 E-Mail: arielb@econ.ucla.edu Javier Cravino Department of Economics UCLA Bunche Hall 8365 Los Angeles, CA 90095-1477 E-Mail: jcravino@ucla.edu AB - Do theoretical welfare gains from trade translate into aggregate measures of economic activity? We calculate the changes in real GDP and real consumption that result from changes in trade costs in a range of workhorse trade models, following the procedures outlined by statistical agencies in the United States. Our main findings are as follows: First, real GDP and measured aggregate productivity rise in response to reductions in variable trade costs if GDP deflators capture the decline in trade costs. Second, with balanced trade in each country, changes in world real consumption and changes in world real GDP (i.e.: weighting the change in each country by its nominal GDP) in response to changes in variable trade costs coincide, up to a first-order approximation, with changes in world theoretical (welfare-based) consumption. The equivalence between measured consumption and theoretical consumption holds country-by-country under stronger conditions. Third, for given trade shares and changes in variable trade costs, changes in real GDP and changes in world real consumption are approximately equal in magnitude across the models we consider. ER - TY - JOUR AU - Kim,Yun Jung AU - Tesar,Linda AU - Zhang,Jing TI - The Impact of Foreign Liabilities on Small Firms: Firm-Level Evidence from the Korean Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 17756 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17756 L1 - http://www.nber.org/papers/w17756.pdf N1 - Author contact info: Yun Jung Kim University of Michigan Department of Economics 611 Tappan Street Ann Arbor, MI 48109-1220 E-Mail: yunjungk@umich.edu Linda Tesar Department of Economics University of Michigan Ann Arbor, MI 48109-1220 Tel: 734/763 6015 Fax: 734/764-2769 E-Mail: ltesar@umich.edu Jing Zhang University of Michigan Department of Economics 611 Tappan Street Ann Arbor, MI 48109-1220 E-Mail: jzhang@umich.edu AB - Using Korean firm-level data on publicly-listed and privately-held firms together with firm exit data, we find strong evidence of the balance-sheet effect for small firms at both the intensive and extensive margins. During the crisis, small firms with more short-term foreign debt are more likely to go bankrupt, and experience larger sales declines conditional on survival. The extensive margin accounts for a large fraction of small firms’ adjustment during the crisis. Consistent with many studies in the literature, large firms with larger exposure to foreign debt paradoxically have better performance during the crisis at both the intensive and extensive margin. ER - TY - JOUR AU - Gorton,Gary B. AU - Metrick,Andrew TI - Getting up to Speed on the Financial Crisis: A One-Weekend-Reader's Guide JF - National Bureau of Economic Research Working Paper Series VL - No. 17778 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17778 L1 - http://www.nber.org/papers/w17778.pdf N1 - Author contact info: Gary B. Gorton Yale School of Management 135 Prospect Street P.O. Box 208200 New Haven, CT 06520-8200 Fax: 203/432-8931 E-Mail: Gary.Gorton@yale.edu Andrew Metrick Yale School of Management 135 Prospect Street P.O. Box 208200 New Haven, CT 06520 Tel: 203/432-3069 E-Mail: metrick@yale.edu AB - All economists should be conversant with “what happened?” during the financial crisis of 2007-2009. We select and summarize 16 documents, including academic papers and reports from regulatory and international agencies. This reading list covers the key facts and mechanisms in the build-up of risk, the panics in short-term-debt markets, the policy reactions, and the real effects of the financial crisis. ER - TY - JOUR AU - Gorton,Gary B. AU - Lewellen,Stefan AU - Metrick,Andrew TI - The Safe-Asset Share JF - National Bureau of Economic Research Working Paper Series VL - No. 17777 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17777 L1 - http://www.nber.org/papers/w17777.pdf N1 - Author contact info: Gary B. Gorton Yale School of Management 135 Prospect Street P.O. Box 208200 New Haven, CT 06520-8200 Fax: 203/432-8931 E-Mail: Gary.Gorton@yale.edu Stefan Lewellen Yale School of Management 135 Prospect Street New Haven, CT 06520 E-Mail: stefan.lewellen@yale.edu Andrew Metrick Yale School of Management 135 Prospect Street P.O. Box 208200 New Haven, CT 06520 Tel: 203/432-3069 E-Mail: metrick@yale.edu AB - We document that the percentage of all U.S. assets that are “safe” has remained stable at about 33 percent since 1952. This stable ratio is a rare example of calm in a rapidly changing financial world. Over the same time period, the ratio of U.S. assets to GDP has increased by a factor of 2.5, and the main supplier of safe financial debt has shifted from commercial banks to the “shadow banking system.” We analyze this pattern of stylized facts and offer some tentative conclusions about the composition of the safe-asset share and its role within the overall economy. ER - TY - JOUR AU - Cascio,Elizabeth U. AU - Washington,Ebonya L. TI - Valuing the Vote: The Redistribution of Voting Rights and State Funds Following the Voting Rights Act of 1965 JF - National Bureau of Economic Research Working Paper Series VL - No. 17776 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17776 L1 - http://www.nber.org/papers/w17776.pdf N1 - Author contact info: Elizabeth U. Cascio Department of Economics Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755 Tel: (603) 646-4096 Fax: (603) 646-2122 E-Mail: elizabeth.u.cascio@dartmouth.edu Ebonya L. Washington Yale University Box 8264 37 Hillhouse, Room 36 New Haven, CT 06520 Tel: 203/432-9901 Fax: 203/432-6323 E-Mail: ebonya.washington@yale.edu AB - The Voting Rights Act of 1965 (VRA) has been called one of the most effective pieces of civil rights legislation in US history, having generated dramatic increases in black voter registration and black voter turnout across the South. We show that the expansion of black voting rights in some southern states brought about by one requirement of the VRA – the elimination of literacy tests at voter registration – was accompanied by a shift in the distribution of state aid toward localities with higher proportions of black residents, who held newfound power to affect the reelection of state officials, a finding that is consistent with models of distributive politics. Our estimates imply an elasticity of state transfers to counties with respect to turnout in presidential elections – the closest available measure of enfranchisement – of roughly one. ER - TY - JOUR AU - Herbst,Chris M. AU - Tekin,Erdal TI - Child Care Subsidies, Maternal Well-Being, and Child-Parent Interactions: Evidence from Three Nationally Representative Datasets JF - National Bureau of Economic Research Working Paper Series VL - No. 17774 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17774 L1 - http://www.nber.org/papers/w17774.pdf N1 - Author contact info: Chris M. Herbst School of Public Affairs, ASU, Mail Code 3720 411 N. Central Ave., Ste. 450 Phoenix, AZ 85004-0687 E-Mail: chris.herbst@asu.edu Erdal Tekin Department of Economics Andrew Young School of Policy Studies Georgia State University P.O. Box 3992 Atlanta, GA 30302-3992 Tel: 404/413-0163 Fax: 404/413-0145 E-Mail: tekin@gsu.edu AB - A complete account of the U.S. child care subsidy system requires an understanding of its implications for both parental and child well-being. Although the effects of child care subsidies on maternal employment and child development have been recently studied, many other dimensions of family well-being have received little attention. This paper attempts to fill this gap by examining the impact of child care subsidy receipt on maternal health and the quality of child-parent interactions. The empirical analyses use data from three nationally representative surveys, providing access to numerous measures of family well-being. In addition, we attempt to handle the possibility of non-random selection into subsidy receipt by using several identification strategies both within and across the surveys. Our results consistently indicate that child care subsidies are associated with worse maternal health and poorer interactions between parents and their children. In particular, subsidized mothers report lower levels of overall health and are more likely to show symptoms consistent with anxiety, depression, and parenting stress. Such mothers also reveal more psychological and physical aggression toward their children and are more likely to utilize spanking as a disciplinary tool. Together, these findings suggest that work-based public policies aimed at economically disadvantaged mothers may ultimately undermine family well-being. ER - TY - JOUR AU - Hall,Bronwyn H. AU - Harhoff,Dietmar TI - Recent Research on the Economics of Patents JF - National Bureau of Economic Research Working Paper Series VL - No. 17773 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17773 L1 - http://www.nber.org/papers/w17773.pdf N1 - Author contact info: Bronwyn H. Hall Dept. of Economics 549 Evans Hall UC Berkeley Berkeley, CA 94720-3880 Tel: 510/642-3878 Fax: 510/548-5561 E-Mail: bhhall@nber.org Dietmar Harhoff Institute for Innovation Research Munich School of Management University of Munich Kaulbachstrasse 45 D-80539 Munich, Germany E-Mail: harhoff@bwl.uni-muenchen.de AB - Recent research on the economics of patents is surveyed. The topics covered include theoretical and empirical evidence on patents as an incentive for innovation, the effectiveness of patents for invention disclosure, patent valuation, and what we know about the design of patent systems. We also look at what is known about some current policy areas, including software and business method patents, university patenting, and the growth in patent litigation. ER - TY - JOUR AU - Hamilton,James D. AU - Wu,Jing Cynthia TI - Identification and Estimation of Gaussian Affine Term Structure Models JF - National Bureau of Economic Research Working Paper Series VL - No. 17772 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17772 L1 - http://www.nber.org/papers/w17772.pdf N1 - Author contact info: James D. Hamilton Department of Economics, 0508 University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 Tel: 858/534-5986 Fax: 858/534-7040 E-Mail: jhamilton@ucsd.edu Jing Cynthia Wu Booth School of Business University of Chicago 5807 S Woodlawn Ave Chicago, IL 60637-1610 E-Mail: Cynthia.Wu@chicagobooth.edu AB - This paper develops new results for identification and estimation of Gaussian affine term structure models. We establish that three popular canonical representations are unidentified, and demonstrate how unidentified regions can complicate numerical optimization. A separate contribution of the paper is the proposal of minimum-chi-square estimation as an alternative to MLE. We show that, although it is asymptotically equivalent to MLE, it can be much easier to compute. In some cases, MCSE allows researchers to recognize with certainty whether a given estimate represents a global maximum of the likelihood function and makes feasible the computation of small-sample standard errors. ER - TY - JOUR AU - Gorton,Gary B. AU - Ordonez,Guillermo TI - Collateral Crises JF - National Bureau of Economic Research Working Paper Series VL - No. 17771 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17771 L1 - http://www.nber.org/papers/w17771.pdf N1 - Author contact info: Gary B. Gorton Yale School of Management 135 Prospect Street P.O. Box 208200 New Haven, CT 06520-8200 Fax: 203/432-8931 E-Mail: Gary.Gorton@yale.edu Guillermo Ordonez Yale University Department of Economics 28 Hillhouse Avenue New Haven, CT 06511 Tel: 203/432-8320 Fax: 203/436-2626 E-Mail: guillermo.ordonez@yale.edu AB - Short-term collateralized debt, such as demand deposits and money market instruments - private money, is efficient if agents are willing to lend without producing costly information about the collateral backing the debt. When the economy relies on such informationally-insensitive debt, firms with low quality collateral can borrow, generating a credit boom and an increase in output and consumption. Financial fragility builds up over time as information about counterparties decays. A crisis occurs when a small shock then causes a large change in the information environment. Agents suddenly have incentives to produce information, asymmetric information becomes a threat and there is a decline in output and consumption. A social planner would produce more information than private agents, but would not always want to eliminate fragility. ER - TY - JOUR AU - DeBacker,Jason M. AU - Heim,Bradley T. AU - Tran,Anh TI - Importing Corruption Culture from Overseas: Evidence from Corporate Tax Evasion in the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 17770 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17770 L1 - http://www.nber.org/papers/w17770.pdf N1 - Author contact info: Jason M. DeBacker Department of the Treasury Fax: Financial Economics E-Mail: jason.debacker@gmail.com Bradley Heim School of Public and Environmental Affairs Indiana University 1315 E 10th St Bloomington, IN 47405 Tel: 812-855-9783 E-Mail: heimb@indiana.edu Anh Tran 1315 E. 10th St SPEA Room 410J Bloomington, IN 47405 E-Mail: trananh@indiana.edu M3 - presented at "Causes and Consequences of Corporate Culture", December 8-9, 2011 AB - This paper studies how cultural norms and enforcement policies influence illicit corporate activities. Using confidential IRS audit data, we show that corporations with owners from countries with higher corruption norms engage in higher amounts of tax evasion in the U.S. This effect is strong for small corporations and decreases as the size of the corporation increases. In the mid-2000s, the United States implemented several enforcement measures which significantly increased tax compliance. However, we find that these enforcement efforts were less effective in reducing tax evasion by corporations whose owners are from countries with higher corruption norms. This suggests that cultural norms can be a challenge to legal enforcement. ER - TY - JOUR AU - Kogan,Leonid AU - Papanikolaou,Dimitris AU - Seru,Amit AU - Stoffman,Noah TI - Technological Innovation, Resource Allocation, and Growth JF - National Bureau of Economic Research Working Paper Series VL - No. 17769 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17769 L1 - http://www.nber.org/papers/w17769.pdf N1 - Author contact info: Leonid Kogan MIT Sloan School of Management 100 Main Street, E62-636 Cambridge, MA 02142 Tel: 617/504-9728 Fax: 617/258-6855 E-Mail: lkogan@mit.edu Dimitris Papanikolaou Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-7704 E-Mail: d-papanikolaou@kellogg.northwestern.edu Amit Seru Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-2767 E-Mail: amit.seru@chicagobooth.edu Noah Stoffman Kelley School of Business, Indiana University 1309 E 10th Street Bloomington, IN 47405 Tel: (812) 856-5664 E-Mail: nstoffma@indiana.edu AB - We explore the role of technological innovation as a source of economic growth by constructing direct measures of innovation at the firm level. We combine patent data for US firms from 1926 to 2010 with the stock market response to news about patents to assess the economic importance of each innovation. Our innovation measure predicts productivity and output at the firm, industry and aggregate level. Furthermore, capital and labor flow away from non-innovating firms towards innovating firms within an industry. There exists a similar, though weaker, pattern across industries. Cross-industry differences in technological innovation are strongly related to subsequent differences in industry output growth. ER - TY - JOUR AU - Krishnamurthy,Arvind AU - Nagel,Stefan AU - Orlov,Dmitry TI - Sizing Up Repo JF - National Bureau of Economic Research Working Paper Series VL - No. 17768 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17768 L1 - http://www.nber.org/papers/w17768.pdf N1 - Author contact info: Arvind Krishnamurthy Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-2671 Fax: 847/491-5719 E-Mail: a-krishnamurthy@northwestern.edu Stefan Nagel Stanford University Graduate School of Business 655 Knight Way Stanford, CA 94305 Tel: 650/724-9762 Fax: 650/725-7979 E-Mail: nagel_stefan@gsb.stanford.edu Dmitry Orlov Stanford University Graduate School of Business 655 Knight Way Stanford, CA 94305 E-Mail: dorlov@stanford.edu AB - We measure the repo funding extended by money market funds (MMF) and securities lenders to the shadow banking system, including quantities, haircuts, and repo rates by type of underlying collateral. We find that repo played only a small role in funding private sector assets prior to the crisis, as most repos are backed by Treasury and Agency collateral. Repo with private sector collateral contracts during the crisis, but the magnitude is relatively insignificant compared with the contraction in asset-backed commercial paper (ABCP). While relatively small in aggregate, the contraction in repo particularly affected key dealer banks with large exposures to private sector securities, which then had knock-on effects on security markets, and led these dealer banks to resort to the Fed's emergency lending programs. We also find that haircuts in MMF-to-dealer repo rise less than the dealer-to-dealer or dealer-to-hedge fund repo haircuts reported in earlier papers. This finding suggests that the contraction in repo led dealers to take defensive actions, given their own capital and liquidity problems, raising credit terms to their borrowers. The picture that emerges from these findings looks less like a traditional bank run of depositors and more like a credit crunch among dealer banks. ER - TY - JOUR AU - Allcott,Hunt AU - Greenstone,Michael TI - Is There an Energy Efficiency Gap? JF - National Bureau of Economic Research Working Paper Series VL - No. 17766 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17766 L1 - http://www.nber.org/papers/w17766.pdf N1 - Author contact info: Hunt Allcott Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10012 E-Mail: hunt.allcott@nyu.edu Michael Greenstone MIT Department of Economics 50 Memorial Drive, E52-359 Cambridge, MA 02142-1347 Tel: 617/452-4127 Fax: 617/253-1330 E-Mail: mgreenst@mit.edu AB - Many analysts have argued that energy efficiency investments offer an enormous “win-win” opportunity to both reduce negative externalities and save money. This overview paper presents a simple model of investment in energy-using capital stock with two types of market failures: first, uninternalized externalities from energy consumption, and second, forces such as imperfect information that cause consumers and firms not to exploit privately-profitable energy efficiency investments. The model clarifies that only if the second type of market failure cannot be addressed directly through mechanisms such as information provision, energy efficiency subsidies and standards may be merited. We therefore review the empirical work on the magnitude of profitable unexploited energy efficiency investments, a literature which frequently does not meet modern standards for credibly estimating the net present value of energy cost savings and often leaves other benefits and costs unmeasured. These problems notwithstanding, recent empirical work in a variety of contexts implies that on average the magnitude of profitable unexploited investment opportunities is much smaller than engineering-accounting studies suggest. Finally, there is tremendous opportunity and need for policy-relevant research that utilizes randomized controlled trials and quasi-experimental techniques to estimate the returns to energy efficiency investments and the welfare effects of energy efficiency programs. ER - TY - JOUR AU - Kaplow,Louis TI - On the Optimal Burden of Proof JF - National Bureau of Economic Research Working Paper Series VL - No. 17765 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17765 L1 - http://www.nber.org/papers/w17765.pdf N1 - Author contact info: Louis Kaplow Harvard University Hauser 322 Cambridge, MA 02138 Tel: 617/495-4101 Fax: 617/496-4880 E-Mail: meskridge@law.harvard.edu AB - The burden of proof is a central feature of adjudication, and analogues exist in many other settings. It constitutes an important but largely unappreciated policy instrument that interacts with the level of enforcement effort and magnitude of sanctions in controlling harmful activity. Models are examined in which the prospect of sanctions affects not only harmful acts but also benign ones, on account of the prospect of mistaken application of sanctions. Accordingly, determination of the optimal strength of the burden of proof, as well as optimal enforcement effort and sanctions, involves trading off deterrence and the chilling of desirable behavior, the latter being absent in previous work. The character of the optimum differs markedly from prior results and from conventional understandings of proof burdens, which can be understood as involving Bayesian posterior probabilities. Additionally, there are important divergences across models in which enforcement involves monitoring (posting officials to be on the lookout for harmful acts), investigation (inquiry triggered by the costless observation of particular harmful acts), and auditing (scrutiny of a random selection of acts). A number of extensions are analyzed, in one instance nullifying key results in prior work. ER - TY - JOUR AU - Edwards,Sebastian TI - Is Tanzania a Success Story? A Long Term Analysis JF - National Bureau of Economic Research Working Paper Series VL - No. 17764 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17764 L1 - http://www.nber.org/papers/w17764.pdf N1 - Author contact info: Sebastian Edwards UCLA Anderson Graduate School of Business 110 Westwood Plaza, Suite C508 Box 951481 Los Angeles, CA 90095-1481 Tel: 310/206-6797 Fax: 310/206-5825 E-Mail: sebastian.edwards@anderson.ucla.edu M3 - presented at "African Development Successes", August 3-5, 2011 AB - The purpose of this paper is to provide a historical perspective on the reform process initiated in Tanzania in 1986, and deepened in 1996. In order to do this I concentrate mostly on the period spanning from 1967, when the Arusha Declaration was adopted by the official political party the TANU, and 1996, when a new approach towards foreign aid was implemented. I am particularly interested in investigating how external aid affected Tanzania during the early years, and how it contributed to the demise of the economy in the 1970s and 1980s. I also analyze the role played by foreign aid in the subsequent (after 1996) recovery of the country. I emphasize both technical as well as political economy issues related to imbalances, disequilibria, devaluation, black markets, adjustment, and reform. Because of the emphasis on foreign aid and macroeconomics, I pay special attention to three important episodes in Tanzania’s economic history: (a) the exchange rate crisis of the late 1970’s and early 1980s; (b) the IMF Stand-by Program and the maxi-devaluation of 1986; and (c) The serious impasse between donors and the Tanzanian authorities in the mid 1990s. At the end of the analysis I ask whether Tanzania is, as officials from the multilateral institutions have claimed repeatedly, a “success story.” ER - TY - JOUR AU - Gozzi,Juan Carlos AU - Levine,Ross AU - Peria,Maria Soledad Martinez AU - Schmukler,Sergio L. TI - How Firms Use Domestic and International Corporate Bond Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 17763 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17763 L1 - http://www.nber.org/papers/w17763.pdf N1 - Author contact info: Juan Carlos Gozzi International Finance Division Board of Governors of the Federal Reserve System Washington, DC E-Mail: Juan.C.GozziValdez@frb.gov Ross Levine Department of Economics Brown University 64 Waterman Street Providence, RI 02912 Tel: 401/863-2170 E-Mail: ross_levine@brown.edu Maria Soledad Martinez Peria The World Bank E-Mail: mmartinezperia@worldbank.org Sergio Schmukler The World Bank MSN MC3-301 1818 H Street, N.W. Washington, DC 20433 Tel: 202-458-4167 Fax: 202-522-3518 E-Mail: Sschmukler@worldbank.org AB - This paper provides the first comprehensive documentation of the main features of corporate bond issues in domestic and international markets and analyzes how firms use these markets after they internationalize. We find that debt issues in domestic and international bond markets have different characteristics, not explained by differences across firms or their country of origin. International issues tend to be larger, of shorter maturity, denominated in foreign currency, and include a higher fraction of fixed rate contracts. Moreover, a large proportion of firms remain active in domestic bond markets after accessing international markets, and many of these firms use both markets for different types of issues. This evidence suggests that domestic and international bond markets provide different financial services and are not substitutes, but rather complements. ER - TY - JOUR AU - Bernheim,B. Douglas AU - Meer,Jonathan AU - Novarro,Neva K. TI - Do Consumers Exploit Precommitment Opportunities? Evidence from Natural Experiments Involving Liquor Consumption JF - National Bureau of Economic Research Working Paper Series VL - No. 17762 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17762 L1 - http://www.nber.org/papers/w17762.pdf N1 - Author contact info: B. Douglas Bernheim Department of Economics Stanford University Stanford, CA 94305-6072 Tel: 650/725-8732 Fax: 650/725-5702 E-Mail: bernheim@stanford.edu Jonathan Meer Department of Economics Texas A&M University College Station, TX 77843 E-Mail: jmeer@econmail.tamu.edu Neva K. Novarro Department of Economics 425 N College Ave. Claremont, CA 91711 E-Mail: nnovarro@gmail.com AB - The object of this paper is to provide evidence concerning the extent to which consumers of liquor exhibit a demand for precommitment devices. One of the most frequently mentioned strategies for exercising self-control is to limit the availability of a problematic good by not maintaining an easily accessed supply. In a policy regime with shorter sales hours (either for on-premise or off-premise consumption), this strategy should be more effective; hence, if the strategy is widely used, alcohol consumption should be lower. In contrast, without time inconsistency, one would expect liquor consumption to decline with shorter on-premise sales, but not necessarily with shorter off-premise sales hours (because liquor is storable at low cost and the experience is repeated with high frequency). We examine a collection of natural experiments in which states expanded allowable Sunday sales hours for liquor. Our results indicate that consumers increase their liquor consumption in response to extended Sunday on-premise sales hours, but not in response to extended off-premise sales hours. Thus we find no indication that precommitment strategies affecting availability play meaningful roles in aggregate liquor consumption. Instead, the observed pattern coincides with predictions for time-consistent consumers who have rational expectations and low costs of carrying inventories. ER - TY - JOUR AU - Bordalo,Pedro AU - Gennaioli,Nicola AU - Shleifer,Andrei TI - Salience in Experimental Tests of the Endowment Effect JF - National Bureau of Economic Research Working Paper Series VL - No. 17761 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17761 L1 - http://www.nber.org/papers/w17761.pdf N1 - Author contact info: Pedro Bordalo Department of Economics Royal Holloway University of London Egham Hill, Egham, TW20 0EX United Kingdom E-Mail: pedro.bordalo@rhul.ac.uk Nicola Gennaioli CREI Universitat Pompeu Fabra Ramon Trias Fargas 25-27 08005 Barcelona (Spain) E-Mail: ngennaioli@crei.cat Andrei Shleifer Department of Economics Harvard University Littauer Center M-9 Cambridge, MA 02138 Tel: 617/495-5046 Fax: 617/496-1708 E-Mail: ashleifer@harvard.edu AB - We provide a novel account of experimental evidence for the endowment effect using the salience mechanism (Bordalo, Gennaioli, and Shleifer, 2011). The two-stage procedure implemented in experiments implies that the endowed good and other goods are evaluated in different contexts. We describe conditions under which the standard effect occurs, but also account for recent evidence such as a reverse endowment effect for bads and a role for reference prices in modulating the WTA-WTP gap. ER - TY - JOUR AU - Rajan,Raghuram TI - The Corporation in Finance JF - National Bureau of Economic Research Working Paper Series VL - No. 17760 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17760 L1 - http://www.nber.org/papers/w17760.pdf N1 - Author contact info: Raghuram Rajan Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-4437 Fax: 773/702-0458 E-Mail: raghuram.rajan@ChicagoBooth.edu AB - The nature of the firm and its financing are closely interlinked. To produce significant net present value, an entrepreneur has to transform her enterprise into one that is differentiated from the ordinary. To achieve the control that will allow her to execute this strategy, she needs to have substantial ownership, and thus financing. But it is hard to raise finance against differentiated assets. So an entrepreneur has to commit to undertake a second transformation, standardization, that will make the human capital in the firm, including her own, replaceable, so that outside financiers obtain control rights that will allow them to be repaid. I argue that the availability of a vibrant stock market helps the entrepreneur commit to these two transformations in a way that a debt market would not. This helps explain why the nature of firms and the extent of innovation differ so much in different financing environments. ER - TY - JOUR AU - Hamilton,James D. TI - Oil Prices, Exhaustible Resources, and Economic Growth JF - National Bureau of Economic Research Working Paper Series VL - No. 17759 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17759 L1 - http://www.nber.org/papers/w17759.pdf N1 - Author contact info: James D. Hamilton Department of Economics, 0508 University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 Tel: 858/534-5986 Fax: 858/534-7040 E-Mail: jhamilton@ucsd.edu AB - This paper explores details behind the phenomenal increase in global crude oil production over the last century and a half and the implications if that trend should be reversed. I document that a key feature of the growth in production has been exploitation of new geographic areas rather than application of better technology to existing sources, and suggest that the end of that era could come soon. The economic dislocations that historically followed temporary oil supply disruptions are reviewed, and the possible implications of that experience for what the transition era could look like are explored. ER - TY - JOUR AU - Hummels,David AU - Schaur,Georg TI - Time as a Trade Barrier JF - National Bureau of Economic Research Working Paper Series VL - No. 17758 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17758 L1 - http://www.nber.org/papers/w17758.pdf N1 - Author contact info: David Hummels Krannert School of Management 403 West State Street Purdue University West Lafayette, IN 47907-1310 Tel: 765/494-4495 Fax: 765/494-9658 E-Mail: hummelsd@purdue.edu Georg Schaur University of Tennessee Department of Economics 519 Stokely Management Center Knoxville TN 37996 E-Mail: gschaur@utk.edu AB - A large and growing share of international trade is carried on airplanes. Air cargo is many times more expensive than maritime transport but arrives in destination markets much faster. We model firms’ choice between exporting goods using fast but expensive air cargo and slow but cheap ocean cargo. This choice depends on the price elasticity of demand and the value that consumers attach to fast delivery and is revealed in the relative market shares of firms who air and ocean ship. We use US imports data that provide rich variation in the premium paid for air shipping and in time lags for ocean transit to identify these parameters and extract consumer’s valuation of time. By exploiting variation across US entry coasts we are able to control for selection and for unobserved shocks to product quality and variety that affect market shares. We estimate that each day in transit is equivalent to an ad-valorem tariff of 0.6 to 2.3 percent and that the most time-sensitive trade flows are those involving parts and components trade. These results suggest a link between sharp declines in the price of air shipping and rapid growth in trade as well as growth in world-wide fragmentation of production. Our estimates are also useful for assessing the economic impact of policies that raise or lower time to trade such as security screening of cargo, port infrastructure investment, or streamlined customs procedures. ER - TY - JOUR AU - Hassler,John AU - Krusell,Per TI - Economics and Climate Change: Integrated Assessment in a Multi-Region World JF - National Bureau of Economic Research Working Paper Series VL - No. 17757 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17757 L1 - http://www.nber.org/papers/w17757.pdf N1 - Author contact info: John Hassler Institute for International Economic Studies Stockholm University E-Mail: John.Hassler@iies.su.se Per Krusell Institute for International Economic Studies Stockholm University 106 91 STOCKHOLM SWEDEN E-Mail: per.krusell@iies.su.se AB - This paper develops a model that integrates the climate and the global economy---an integrated assessment model---with which different policy scenarios can be analyzed and compared. The model is a dynamic stochastic general-equilibrium setup with a continuum of regions. Thus, it is a full stochastic general-equilibrium version of RICE, Nordhaus's pioneering multi-region integrated assessment model. Like RICE, our model features traded fossil fuel but otherwise has no markets across regions---there is no insurance nor any intertemporal trade across them. The extreme form of market incompleteness is not fully realistic but arguably not a decent approximation of reality. Its major advantage is that, along with a set of reasonable assumptions on preferences, technology, and nature, it allows a closed-form model solution. We use the model to assess the welfare consequences of carbon taxes that differ across as well as within oil-consuming and -producing regions. We show that, surprisingly, only taxes on oil producers can improve the climate: taxes on oil consumers have no effect at all. The calibrated model suggests large differences in views on climate policy across regions. ER - TY - JOUR AU - Manski,Charles F. TI - Identification of Preferences and Evaluation of Income Tax Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 17755 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17755 L1 - http://www.nber.org/papers/w17755.pdf N1 - Author contact info: Charles F. Manski Department of Economics Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-8223 Fax: 847/491-7001 E-Mail: cfmanski@northwestern.edu AB - The merits of alternative income tax policies depend on the population distribution of preferences for income, leisure, and public goods. Standard theory, which supposes that persons want more income and more leisure, does not predict how they resolve the tension between these desires. Empirical studies of labor supply have been numerous but have not shed much light on the matter. A persistent problem is that empirical researchers have imposed strong preference assumptions that lack foundation. This paper examines anew the problem of inference on preferences and considers the implications for comparison of tax policies. I first perform a basic revealed-preference analysis that imposes no assumptions on the preference distribution beyond the presumption that persons prefer more income and leisure. This shows that observation of a person’s labor supply under a status quo tax policy may bound his labor supply under a proposed policy or may have no implications, depending on the shapes of the two tax schedules and the location of status quo labor supply. I next explore the identifying power of two assumptions restricting the population distribution of income-leisure preferences. One assumes that groups of persons who face different choice sets have the same distribution of preferences, while the other adds restrictions on the shape of this distribution. I then address utilitarian policy comparison with partial knowledge of preferences. Partial knowledge of preferences implies partial knowledge of the welfare function. Hence, it may not be possible to rank policies. ER - TY - JOUR AU - Sojourner,Aaron J. AU - Town,Robert J. AU - Grabowski,David C. AU - Chen,Michelle M. TI - Impacts of Unionization on Employment, Product Quality and Productivity: Regression Discontinuity Evidence From Nursing Homes JF - National Bureau of Economic Research Working Paper Series VL - No. 17733 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17733 L1 - http://www.nber.org/papers/w17733.pdf N1 - Author contact info: Aaron Sojourner University of Minnesota Carlson School of Management 321 19th Ave S, 3-300 Minneapolis, MN 55455 E-Mail: asojourn@umn.edu Robert Town Health Care Management Department The Wharton School University of Pennsylvania 3641 Locust Walk Philadelphia, PA 19104 E-Mail: rtown@wharton.upenn.edu David Grabowski Harvard University Department of Health Care Policy Harvard Medical School 180 Longwood Avenue Boston, MA 02115 E-Mail: grabowski@med.harvard.edu Min Chen Department of Finance and Real Estate The College of Business Administration Florida International University 11200 S.W. 8th Street Miami, Florida 33199 Tel: (305) 348-4201 E-Mail: min.chen2@fiu.edu AB - This paper studies the effects of unions in private-sector nursing homes on a broad range of labor, firm, and consumer outcomes. We link national data on nursing home characteristics from the Centers for Medicare and Medicaid Services to records on establishment-level unionization from federal labor agencies, and employ a regression discontinuity design to identify union effects by contrasting outcomes in nursing homes where unions closely won representation elections to outcomes in facilities where unions closely lost such elections. After showing that these two sets of homes are similar leading up to the election, we estimate union effects on staffing levels, care quality, and other outcomes. We find negative effects of unions on staffing levels and no decline in care quality, suggesting positive productivity effects. Consistent with these results, supplementary analysis shows significant increases in wages for some classes of nursing labor. Some evidence suggests that nursing homes in local product markets that were less competitive and had lower union density at the time of election experienced stronger union employment effects. We find no impact of unionization on facility survival. By combining credible identification of union effects, a comprehensive set of outcomes over time with measures of market-level characteristics, this study generates some of the best evidence available on many controversial questions in the economics of unions. Furthermore, it generates evidence from the service sector, which has grown in importance and where evidence on these questions has been thin. ER - TY - JOUR AU - Keller,Wolfgang AU - Li,Ben AU - Shiue,Carol H. TI - Shanghai’s Trade, China’s Growth: Continuity, Recovery, and Change since the Opium War JF - National Bureau of Economic Research Working Paper Series VL - No. 17754 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17754 L1 - http://www.nber.org/papers/w17754.pdf N1 - Author contact info: Wolfgang Keller Department of Economics University of Colorado-Boulder Boulder, CO 80309-0256 Tel: 303/735 5507 Fax: 303/492 8960 E-Mail: Wolfgang.Keller@colorado.edu Ben Li Department of Economics Boston College 140 Commonwealth Avenue Chestnut Hill MA 02467-3806 USA Tel: 1-617-552-4517 E-Mail: benli36@gmail.com Carol H. Shiue Department of Economics University of Colorado-Boulder Boulder, CO 80309-0256 E-Mail: carol.shiue@colorado.edu AB - In this paper, we provide aggregate trends in China’s trade performance from the 1840s to the present. Based on historical benchmarks, we argue that China’s recent gains are not exclusively due to the reforms since 1978. Rather, foreign economic activity can be understood by developments that were set in motion in the 19th century. We turn our focus to Shanghai, currently the world’s largest port. Shanghai began direct trade relations with western nations starting in 1843. By 1853, Shanghai already accounted for more than half of China’s foreign trade. In tracking the levels and growth rates of the city’s net and gross imports and exports, foreign direct investment, and foreign residents over more than a century, we find that Shanghai’s level of bilateral trade today with the United States, the United Kingdom, or Japan, for example, are by no means high given Shanghai’s 19th century experience. This paper argues that a regional approach that embeds national trading destinations within an international trading system provides a meaningful approach to understanding the history of China’s trade. ER - TY - JOUR AU - Vegh,Carlos A. AU - Vuletin,Guillermo TI - How is Tax Policy Conducted over the Business Cycle? JF - National Bureau of Economic Research Working Paper Series VL - No. 17753 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17753 L1 - http://www.nber.org/papers/w17753.pdf N1 - Author contact info: Carlos A. Vegh Department of Economics Tydings Hall, Office 4118G University of Maryland College Park, MD 20742-7211 Tel: 301-405-3546 Fax: 301-405-3542 E-Mail: vegh@econ.bsos.umd.edu Guillermo Vuletin Colby College Department of Economics Diamond, 3rd floor 5230 Mayflower Hill Waterville, ME 04901-8852 Tel: 207-859-5235 Fax: 207-859-5248 E-Mail: gvuletin@colby.edu AB - It is well known by now that government spending has typically been procyclical in emerging economies but acyclical or countercyclical in industrial countries. Little, if any, is known, however, about the cyclical behavior of tax rates (as opposed to tax revenues, which are endogenous to the business cycle and hence cannot shed light on the cyclicality of tax policy). We build a novel dataset on tax rates for 62 countries for the period 1960-2009 that comprises corporate income, personal income, and value-added tax rates. We find that, by and large, tax policy is acyclical in industrial countries but procyclical in developing countries. We show that the evidence is consistent with a model of optimal fiscal policy under uncertainty. ER - TY - JOUR AU - Fryer,Roland G., Jr TI - Aligning Student, Parent, and Teacher Incentives: Evidence from Houston Public Schools JF - National Bureau of Economic Research Working Paper Series VL - No. 17752 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17752 L1 - http://www.nber.org/papers/w17752.pdf N1 - Author contact info: Roland G. Fryer, Jr Department of Economics Harvard University Littauer Center 208 Cambridge, MA 02138 Tel: 617/495-9592 Fax: 617/495-8570 E-Mail: rfryer@fas.harvard.edu AB - This paper describes an experiment designed to investigate the impact of aligning student, parent, and teacher incentives on student achievement. On outcomes for which incentives were provided, there were large treatment effects. Students in treatment schools mastered more than one standard deviation more math objectives than control students, and their parents attended almost twice as many parent-teacher conferences. In contrast, on related outcomes that were not incentivized (e.g. standardized test scores, parental engagement), we observe both positive and negative effects. We argue that these facts are consistent with a moral hazard model with multiple tasks, though other explanations are possible. ER - TY - JOUR AU - Favilukis,Jack AU - Kohn,David AU - Ludvigson,Sydney C. AU - Nieuwerburgh,Stijn Van TI - International Capital Flows and House Prices: Theory and Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 17751 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17751 L1 - http://www.nber.org/papers/w17751.pdf N1 - Author contact info: Jack Favilukis London School of Economics Department of Finance Houghton Street, London WC2A 2AE United Kingdom E-Mail: jack.favilukis@gmail.com David Kohn Department of Economics New York University 19 W. 4th Street 6th Floor New York, NY 10012 E-Mail: dk1310@nyu.edu Sydney C. Ludvigson Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10002 Tel: 212/998-8927 Fax: 212/995-4186 E-Mail: sydney.ludvigson@nyu.edu Stijn Van Nieuwerburgh Stern School of Business New York University 44 W 4th Street, Suite 9-120 New York, NY 10012 Tel: 646/284-4141 Fax: 646/284-4141 E-Mail: svnieuwe@stern.nyu.edu M1 - published as Jack Favilukis, David Kohn, Sydney C. Ludvigson, Stijn Van Nieuwerburgh. "International Capital Flows and House Prices: Theory and Evidence," in Edward Glaeser and Todd Sinai, editors, "Housing and the Financial Crisis" University of Chicago Press (2012) AB - The last fifteen years have been marked by a dramatic boom-bust cycle in real estate prices, accompanied by economically large fluctuations in international capital flows. We argue that changes in international capital flows played, at most, a small role in driving house price movements in this episode and that, instead, the key causal factor was a financial market liberalization and its subsequent reversal. Using observations on credit standards, capital flows, and interest rates, we find that a bank survey measure of credit supply, by itself, explains 53 percent of the quarterly variation in house price growth in the U.S. over the period 1992-2010, while it explains 66 percent over the period since 2000. By contrast, once we control for credit supply, various measures of capital flows, real interest rates, and aggregate activity—collectively—add less than 5% to the fraction of variation explained for these same movements in home values. Credit supply retains its strong marginal explanatory power for house price movements over the period 2002-2010 in a panel of international data, while capital flows have no explanatory power. ER - TY - JOUR AU - Lichtenberg,Frank R. TI - The Effect of Pharmaceutical Innovation on the Functional Limitations of Elderly Americans Evidence from the 2004 National Nursing Home Survey JF - National Bureau of Economic Research Working Paper Series VL - No. 17750 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17750 L1 - http://www.nber.org/papers/w17750.pdf N1 - Author contact info: Frank R. Lichtenberg Columbia University 504 Uris Hall 3022 Broadway New York, NY 10027 Tel: 212/854-4408 Fax: (212) 854-9895 E-Mail: frl1@columbia.edu AB - I examine the effect of pharmaceutical innovation on the functional status of nursing home residents using cross-sectional, patient-level data from the 2004 National Nursing Home Survey. This was the first public-use survey of nursing homes that contains detailed information about medication use, and it contains better data on functional status than previous surveys. Residents using newer medications and a higher proportion of priority-review medications were more able to perform all five activities of daily living (ADLs), controlling for age, sex, race, marital status, veteran status, where the resident lived prior to admission, primary diagnosis at the time of admission, up to 16 diagnoses at the time of the interview, sources of payment, and facility fixed effects. The ability of nursing home residents to perform activities of daily living is positively related to the number of “new” (post-1990) medications they consume, but unrelated to the number of old medications they consume. If 2004 nursing home residents had used only old medications, the fraction of residents with all five ADL dependencies would have been 58%, instead of 50%. During the period 1990-2004, pharmaceutical innovation reduced the functional limitations of nursing home residents by between 1.2% and 2.1% per year. ER - TY - JOUR AU - Irwin,Douglas A. TI - The Nixon Shock after Forty Years: The Import Surcharge Revisited JF - National Bureau of Economic Research Working Paper Series VL - No. 17749 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17749 L1 - http://www.nber.org/papers/w17749.pdf N1 - Author contact info: Douglas A. Irwin Department of Economics Dartmouth College Hanover, NH 03755 Tel: 603/646-2942 Fax: 603/646-2122 E-Mail: douglas.irwin@dartmouth.edu AB - On August 15, 1971, President Richard Nixon closed the gold window and imposed a 10 percent surcharge on all dutiable imports in an effort to force other countries to revalue their currencies against the dollar. The import surcharge was lifted four months later after the Smithsonian agreement led to new exchange rate parities. This paper examines the political, economic, and legal issues surrounding the import surcharge. This historical episode may shed light on the possible use of trade sanctions as part of the effort to get China to allow the renminbi to appreciate more rapidly. ER - TY - JOUR AU - Hackmann,Martin B. AU - Kolstad,Jonathan T. AU - Kowalski,Amanda E. TI - Health Reform, Health Insurance, and Selection: Estimating Selection into Health Insurance Using the Massachusetts Health Reform JF - National Bureau of Economic Research Working Paper Series VL - No. 17748 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17748 L1 - http://www.nber.org/papers/w17748.pdf N1 - Author contact info: Martin Hackmann Department of Economics Yale University 37 Hillhouse Avenue Box 208264 New Haven, CT 06520 E-Mail: martin.hackmann@yale.edu Jonathan T. Kolstad The Wharton School University of Pennsylvania 306 Colonial Penn Center 3641 Locust Walk Philadelphia, PA 19104 Tel: 215/573-9075 E-Mail: jkolstad@wharton.upenn.edu Amanda E. Kowalski Department of Economics Yale University 37 Hillhouse Avenue Box 208264 New Haven, CT 06520 Tel: 203/432-3521 E-Mail: amanda.kowalski@yale.edu AB - We implement an empirical test for selection into health insurance using changes in coverage induced by the introduction of mandated health insurance in Massachusetts. Our test examines changes in the cost of the newly insured relative to those who were insured prior to the reform. We find that counties with larger increases in insurance coverage over the reform period face the smallest increase in average hospital costs for the insured population, consistent with adverse selection into insurance before the reform. Additional results, incorporating cross-state variation and data on health measures, provide further evidence for adverse selection. ER - TY - JOUR AU - Wolfram,Catherine AU - Shelef,Orie AU - Gertler,Paul J. TI - How Will Energy Demand Develop in the Developing World? JF - National Bureau of Economic Research Working Paper Series VL - No. 17747 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17747 L1 - http://www.nber.org/papers/w17747.pdf N1 - Author contact info: Catherine Wolfram Haas School of Business University of California, Berkeley Berkeley, CA 94720-1900 Tel: 510/642-2588 Fax: 510/643-1420 E-Mail: wolfram@haas.berkeley.edu Orie Shelef University of California at Berkeley E-Mail: orie_shelef@haas.berkeley.edu Paul J. Gertler Haas School of Business 545 Student Services Building University of California, Berkeley Berkeley, CA 94720-1900 Tel: 510/642-1418 Fax: 510/642-4700 E-Mail: gertler@haas.berkeley.edu AB - Most of the medium-run growth in energy demand is forecast to come from the developing world, which consumed more total units of energy than the developed world in 2007. We argue that the main driver of the growth is likely to be increased incomes among the poor and near-poor. We document that as households come out of poverty and join the middle class, they acquire appliances, such as refrigerators, and vehicles for the first time. These new goods require energy to use and energy to manufacture. The current forecasts for energy demand in the developing world may be understated because they do not accurately capture the dramatic increase in demand associated with poverty reduction. ER - TY - JOUR AU - Menzio,Guido AU - Telyukova,Irina A. AU - Visschers,Ludo TI - Directed Search over the Life Cycle JF - National Bureau of Economic Research Working Paper Series VL - No. 17746 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17746 L1 - http://www.nber.org/papers/w17746.pdf N1 - Author contact info: Guido Menzio Department of Economics University of Pennsylvania 467 McNeil Building 3718 Locust Walk Philadelphia, PA 19104 Tel: 773/865-6337 Fax: 215/573-2057 E-Mail: gmenzio@econ.upenn.edu Irina Telyukova UCSD Department of Economics 9500 Gilman Drive, MC 0508 La Jolla, CA 92093-0508 Tel: 858-822-2097 Fax: 858-534-7040 E-Mail: itelyukova@ucsd.edu Ludo Visschers Department of Economics Universidad Carlos III, Madrid Calle Madrid 126, Getafe 28903 Spain E-Mail: lvissche@eco.uc3m.es AB - We develop a life-cycle model of the labor market in which different worker-firm matches have different quality and the assignment of the right workers to the right firms is time consuming because of search and learning frictions. The rate at which workers move between unemployment, employment and across different firms is endogenous because search is directed and, hence, workers can choose whether to seek low-wage jobs that are easy to find or high-wage jobs that are hard to find. We calibrate our theory using data on labor market transitions aggregated across workers of different ages. We validate our theory by showing that it correctly predicts the pattern of labor market transitions for workers of different ages. Finally, we use our theory to decompose the age profiles of transition rates, wages and productivity into the effects of age variation in work-life expectancy, human capital and match quality. ER - TY - JOUR AU - Kruse,Douglas L. AU - Blasi,Joseph R. AU - Freeman,Richard B. TI - Does Linking Worker Pay to Firm Performance Help the Best Firms Do Even Better? JF - National Bureau of Economic Research Working Paper Series VL - No. 17745 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17745 L1 - http://www.nber.org/papers/w17745.pdf N1 - Author contact info: Douglas L. Kruse School of Management and Labor Relations Rutgers University 94 Rockafeller Road Piscataway, NJ 08854 Tel: 732/445-5991 Fax: 732/445-2830 E-Mail: kruse@smlr.rutgers.edu Joseph R. Blasi Rutgers University School of Management and Labor Relations 200 B Levin Building Rockefeller Road New Brunswick, NJ 08903 Tel: 732/445-5444 Fax: 732/445-2830 E-Mail: blasi@smlr.rutgers.edu Richard B. Freeman NBER 1050 Massachusetts Avenue Cambridge, MA 02138 Tel: 617/868-3900 Fax: 617/868-2742 E-Mail: freeman@nber.org AB - This paper analyzes the linkages among group incentive methods of compensation, labor practices, worker assessments of workplace culture, turnover, and firm performance in a non-representative sample of companies: firms that applied to the “100 Best Companies to Work For in America” competition from 2005 to 2007. Although employers with good labor practices self- select into the 100 Best Companies firms sample, which should bias the analysis against finding strong associations among modes of compensation, labor policies, and outcomes, we find that in the firms that make more extensive use of group incentive pay employees participate more in decisions, have greater information sharing, trust supervisors more, and report a more positive workplace culture than in other companies. The combination of group incentive pay with policies that empower employees and create a positive workplace culture reduces voluntary turnover and increases employee intent to stay and raises return on equity. Finding these effects in the non-representative “100 Best Companies” sample strengthens the likelihood that the policies have a causal impact on employee well-being and firm performance. ER - TY - JOUR AU - Scott-Clayton,Judith TI - What Explains Trends in Labor Supply Among U.S. Undergraduates, 1970-2009? JF - National Bureau of Economic Research Working Paper Series VL - No. 17744 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17744 L1 - http://www.nber.org/papers/w17744.pdf N1 - Author contact info: Judith Scott-Clayton Teachers College Columbia University 525 W.120th Street, Box 174 New York, NY 10027 Tel: 212/678-3478 Fax: 212/678-3699 E-Mail: scott-clayton@tc.columbia.edu AB - Recent cohorts of college enrollees are more likely to work, and work substantially more, than those of the past. October CPS data reveal that average labor supply among 18 to 22-year-old full-time undergraduates nearly doubled between 1970 and 2000, rising from 6 hours to 11 hours per week. In 2000 over half of these “traditional” college students were working for pay in the reference week, and the average working student worked 22 hours per week. After 2000, labor supply leveled off and then fell abruptly in the wake of the Great Recession to an average of 8 hours per week in 2009. This paper considers several explanations for the long-term trend of rising employment—including compositional change and rising tuition costs—and considers whether the upward trend is likely to resume when economic conditions improve. ER - TY - JOUR AU - Banerjee,Abhijit AU - Chandrasekhar,Arun G. AU - Duflo,Esther AU - Jackson,Matthew O. TI - The Diffusion of Microfinance JF - National Bureau of Economic Research Working Paper Series VL - No. 17743 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17743 L1 - http://www.nber.org/papers/w17743.pdf N1 - Author contact info: Abhijit Banerjee MIT Department of Economics E52-252d 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-8855 Fax: 617/253-1330 E-Mail: banerjee@mit.edu Arun G. Chandrasekhar MIT Department of Economics 50 Memorial Drive, E52 Cambridge, MA 02142 E-Mail: agc2104@gmail.com Esther Duflo Department of Economics MIT, E52-252G 50 Memorial Drive Cambridge, MA 02142 Tel: 617/258-7013 Fax: 617/253-6915 E-Mail: eduflo@mit.edu Matthew Jackson Department of Economics Stanford University Stanford, CA 94305-6072 Tel: 650 723 3544 E-Mail: jacksonm@stanford.edu AB - We examine how participation in a microfinance program diffuses through social networks. We collected detailed demographic and social network data in 43 villages in South India before microfinance was introduced in those villages and then tracked eventual participation. We exploit exogenous variation in the importance (in a network sense) of the people who were first informed about the program, "the injection points". Microfinance participation is higher when the injection points have higher eigenvector centrality. We estimate structural models of diffusion that allow us to (i) determine the relative roles of basic information transmission versus other forms of peer influence, and (ii) distinguish information passing by participants and non-participants. We find that participants are significantly more likely to pass information on to friends and acquaintances than informed non-participants, but that information passing by non-participants is still substantial and significant, accounting for roughly a third of informedness and participation. We also find that, conditioned on being informed, an individual's decision is not significantly affected by the participation of her acquaintances. ER - TY - JOUR AU - Kuehn,Lars-Alexander AU - Petrosky-Nadeau,Nicolas AU - Zhang,Lu TI - An Equilibrium Asset Pricing Model with Labor Market Search JF - National Bureau of Economic Research Working Paper Series VL - No. 17742 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17742 L1 - http://www.nber.org/papers/w17742.pdf N1 - Author contact info: Lars-Alexander Kuehn Carnegie Mellon University Tepper School of Business 5000 Forbes Avenue Pittsburgh, PA 15206 E-Mail: kuehn@cmu.edu Nicolas Petrosky-Nadeau Carnegie Mellon University Tepper School of Business 5000 Forbes Avenue Pittsburgh, PA 15206 E-Mail: npn@andrew.cmu.edu Lu Zhang Fisher College of Business The Ohio State University 2100 Neil Avenue Columbus, OH 43210 Tel: 585-267-6250 E-Mail: zhanglu@fisher.osu.edu AB - Search frictions in the labor market help explain the equity premium in the financial market. We embed the Diamond-Mortensen-Pissarides search framework into a dynamic stochastic general equilibrium model with recursive preferences. The model produces a sizeable equity premium of 4.54% per annum with a low interest rate volatility of 1.34%. The equity premium is strongly countercyclical, and forecastable with labor market tightness, a pattern we confirm in the data. Intriguingly, search frictions, combined with a small labor surplus and large job destruction flows, give rise endogenously to rare disaster risks a la Rietz (1988) and Barro (2006). ER - TY - JOUR AU - Fisher-Vanden,Karen AU - Mansur,Erin T. AU - Wang,Qiong (Juliana) TI - Costly Blackouts? Measuring Productivity and Environmental Effects of Electricity Shortages JF - National Bureau of Economic Research Working Paper Series VL - No. 17741 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17741 L1 - http://www.nber.org/papers/w17741.pdf N1 - Author contact info: Karen Fisher-Vanden Department of Agric. Economics and Rural Soc. 112-E Armsby Building Pennsylvania State University University Park, PA 16802 E-Mail: fishervanden@psu.edu Erin T. Mansur Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755 Tel: (603) 646-2531 Fax: (603) 646-2122 E-Mail: erin.mansur@dartmouth.edu Qiong Wang Environmental Studies Program 3502 Trousdale Parkway, SOS B15, MC0036 Los Angeles, CA 90089 E-Mail: juliana.wang@usc.edu AB - In many countries, unreliable inputs, particularly those lacking storage, can significantly limit a firm's productivity. In the case of an increasing frequency of blackouts, a firm may change factor shares in a number of ways. It may decide to self generate electricity, to purchase intermediate goods that it used to produce directly, or to improve its technical efficiency. We examine how industrial firms responded to China's severe power shortages in the early 2000s. Fast-growing demand coupled with regulated electricity prices led to blackouts that varied in degree over location and time. Our data consist of annual observations from 1999 to 2004 for approximately 32,000 energy-intensive, enterprises from all industries. We estimate the losses in productivity due to factor-neutral and factor-biased effects of electricity scarcity. Our results suggest that enterprises re-optimize among factors in response to electricity scarcity by shifting from energy (both electric and non-electric sources) into materials---a shift from "make" to "buy." These effects are strongest for firms in textiles, timber, chemicals, and metals. Contrary to the literature, we do not find evidence of an increase in self generation. Finally, we find that these productivity changes, while costly to firms, led to small reductions in carbon emissions. ER - TY - JOUR AU - Calomiris,Charles W. AU - Longhofer,Stanley D. AU - Miles,William TI - The Housing Wealth Effect: The Crucial Roles of Demographics, Wealth Distribution and Wealth Shares JF - National Bureau of Economic Research Working Paper Series VL - No. 17740 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17740 L1 - http://www.nber.org/papers/w17740.pdf N1 - Author contact info: Charles W. Calomiris Graduate School of Business Columbia University 3022 Broadway Street, Uris Hall New York, NY 10027 Tel: 212/854-8748 Fax: 212/316-9219 E-Mail: cc374@columbia.edu Stanley D. Longhofer Director, Center for Real Estate Barton School of Business Wichita State University Wichita, KS 67260-0077 E-Mail: stan.longhofer@wichita.edu William Miles Department of Economics Wichita State University Wichita, KS 67260-0077 E-Mail: mil122000@yahoo.com AB - Current estimates of housing wealth effects vary widely. We consider the role of omitted variables suggested by economic theory that have been absent in a number of prior studies. Our estimates take into account age composition and wealth distribution (using poverty rates as a proxy), as well as wealth shares (how much of total wealth is comprised of housing vs. stock wealth). We exploit cross-state variation in housing, stock wealth and other variables in a newly assembled panel data set and find that the impact of housing on consumer spending depends crucially on age composition, poverty rates, and the housing wealth share. In particular, young people who are more likely to be credit-constrained, and older homeowners, likely to be “trading down” on their housing stock, experience the largest housing wealth effects, as suggested by theory. Also, as suggested by theory, housing wealth effects are higher in state-years with higher housing wealth shares, and in state-years with higher poverty rates (likely reflecting the greater importance of credit constraints for those observations). Taking these various factors into account implies huge variation over time and across states in the size of housing wealth effects. ER - TY - JOUR AU - Gruber,Jonathan AU - Hendren,Nathaniel AU - Townsend,Robert TI - Demand and Reimbursement Effects of Healthcare Reform: Health Care Utilization and Infant Mortality in Thailand JF - National Bureau of Economic Research Working Paper Series VL - No. 17739 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17739 L1 - http://www.nber.org/papers/w17739.pdf N1 - Author contact info: Jonathan Gruber MIT Department of Economics E52-355 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-8892 Fax: 617/253-1330 E-Mail: gruberj@mit.edu Nathaniel Hendren Massachusetts Institute of Technology 1534 Cambridge St #1 Cambridge, MA 02139 Tel: 773-344-8990 E-Mail: nhendren@gmail.com Robert Townsend Department of Economics MIT 50 Memorial Drive, E52-252c Cambridge, MA 02142 Tel: 617/452-3722 Fax: 617/253-1330 E-Mail: rtownsen@mit.edu AB - The Thai 30 Baht program was one of the largest health system reforms ever undertaken by a low-middle income country. In addition to lowering the cost of care for the previously uninsured in public facilities, it also entailed a fourfold increase in funding provided to hospitals to care for the poorest 30% of the population (who were already publicly insured). For the previously uninsured, we find that the 30 Baht program led to increased health care utilization, as well as a shift from private to public sources of care. But, we find a larger increase for the poor who were previously publicly insured, especially amongst infants and women of childbearing age. Using vital statistics records, we find that the increased access to healthcare by the publicly insured poor led to a reduction in their infant mortality of at least 6.5 per 1,000 births. This suggests significant improvements in infant mortality rates can be achieved through increased access to healthcare services for the poor and marginalized groups. ER - TY - JOUR AU - Cutler,David M. AU - Lleras-Muney,Adriana TI - Education and Health: Insights from International Comparisons JF - National Bureau of Economic Research Working Paper Series VL - No. 17738 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17738 L1 - http://www.nber.org/papers/w17738.pdf N1 - Author contact info: David M. Cutler Department of Economics Harvard University 1875 Cambridge Street Cambridge, MA 02138 Tel: 617/496-5216 Fax: 617/496-8951 E-Mail: dcutler@harvard.edu Adriana Lleras-Muney Department of Economics 9373 Bunche Hall UCLA Los Angeles, CA 90095 Tel: 310/825-3925 Fax: NA E-Mail: alleras@ECON.UCLA.EDU AB - In this review we synthesize what is known about the relationship between education and health. A large number of studies from both rich and poor countries show that education is associated with better health. While previous work has thought of the effect of education separately for rich and poor countries, we argue that there are insights to be gained by integrating the two. For example, education is associated with lower malnutrition in most countries, but in richer countries the educated have lower BMIs whereas in poor countries the educated have higher BMIs. This suggests that the behaviors associated with better health differ depending on the level of development. We illustrate this approach by comparing the effects of education on various health and health behaviors around the world, to generate hypotheses about why education is so often (but not always) predictive of health. Finally, we review the empirical evidence on the relationship between education and health, paying particular attention to causal evidence and evidence on mechanisms linking education to better health. ER - TY - JOUR AU - Karlan,Dean AU - McConnell,Margaret A. TI - Hey Look at Me: The Effect of Giving Circles on Giving JF - National Bureau of Economic Research Working Paper Series VL - No. 17737 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17737 L1 - http://www.nber.org/papers/w17737.pdf N1 - Author contact info: Dean Karlan Department of Economics Yale University P.O. Box 208269 New Haven, CT 06520-8629 Tel: 203/432-4479 Fax: 203/432-5591 E-Mail: dean.karlan@yale.edu Margaret McConnell Harvard University 9 Bow St Cambridge, MA 02138 E-Mail: mmcconnell@gmail.com AB - Theories abound for why individuals give to charity. We conduct a field experiment with donors to a Yale University service club to test the impact of a promise of public recognition on giving. Some may claim that they respond to an offer of public recognition not to improve their social standing, but rather to motivate others to give. To tease apart these two theories, we conduct a laboratory experiment with undergraduates, and find no evidence to support the alternative, altruistic motivation. We conclude that charitable gifts increase in response to the promise of public recognition primarily because of individuals' desire to improve their social image. ER - TY - JOUR AU - Agarwal,Sumit AU - Lucca,David AU - Seru,Amit AU - Trebbi,Francesco TI - Inconsistent Regulators: Evidence From Banking JF - National Bureau of Economic Research Working Paper Series VL - No. 17736 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17736 L1 - http://www.nber.org/papers/w17736.pdf N1 - Author contact info: Sumit Agarwal Federal Reserve Bank of Chicago 230 South LaSalle Street Chicago, IL 60604 Tel: 312/322-5973 E-Mail: ushakri@yahoo.com David Lucca Federal Reserve Bank of New York 33 Liberty Street New York, NY 10045 E-Mail: david.lucca@ny.frb.org Amit Seru Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-2767 E-Mail: amit.seru@chicagobooth.edu Francesco Trebbi University of British Columbia 1873 East Mall Vancouver, BC, V6T1Z1 Canada Tel: 604.218.5900 Fax: 604.822.5915 E-Mail: ftrebbi@mail.ubc.ca AB - US state chartered commercial banks are supervised alternately by state and federal regulators. Each regulator supervises a given bank for a fixed time period according to a predetermined rotation schedule. We use unique data to examine differences between federal and state regulators for these banks. Federal regulators are significantly less lenient, downgrading supervisory ratings about twice as frequently as state supervisors. Under federal regulators, banks report higher nonperforming loans, more delinquent loans, higher regulatory capital ratios, and lower ROA. There is a higher frequency of bank failures and problem-bank rates in states with more lenient supervision relative to the federal benchmark. Some states are more lenient than others. Regulatory capture by industry constituents and supervisory staff characteristics can explain some of these differences. These findings suggest that inconsistent oversight can hamper the effectiveness of regulation by delaying corrective actions and by inducing costly variability in operations of regulated entities. ER - TY - JOUR AU - Greenwood,Jeremy AU - Guner,Nezih AU - Kocharkov,Georgi AU - Santos,Cezar TI - Technology and the Changing Family: A Unified Model of Marriage, Divorce, Educational Attainment and Married Female Labor-Force Participation JF - National Bureau of Economic Research Working Paper Series VL - No. 17735 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17735 L1 - http://www.nber.org/papers/w17735.pdf N1 - Author contact info: Jeremy Greenwood Department of Economics University of Pennsylvania 3718 Locust Walk McNeil Building, Rm 160 Philadelphia, PA 19104-6297 Tel: 215/898-1505 Fax: 215/746-2947 E-Mail: do-not-use@jeremygreenwood.net Nezih Guner MOVE Facultat d’Economia Edifici B – Campus de Bellaterra 08193 Bellaterra Cerdanyola del Vallès Spain E-Mail: nezih.guner@movebarcelona.eu Georgi Kocharkov Department of Economics Universidad Carlos III Calle Madrid 126 28903 Getafe, Spain E-Mail: gkochark@eco.uc3m.es Cezar Santos Department of Economics University of Pennsylvania 3718 Locust Walk, McNeil Building, Rm 160 Philadelphia, PA 19104-6297 E-Mail: santosca@econ.upenn.edu AB - Marriage has declined since 1960, with the drop being bigger for non-college educated individuals versus college educated ones. Divorce has increased, more so for the non-college educated vis-à-vis the college educated. Additionally, assortative mating has risen; i.e., people are more likely to marry someone of the same educational level today than in the past. A unified model of marriage, divorce, educational attainment and married female labor-force participation is developed and estimated to fit the postwar U.S. data. The role of technological progress in the household sector and shifts in the wage structure for explaining these facts is gauged. ER - TY - JOUR AU - Feng,Shuaizhang AU - Oppenheimer,Michael AU - Schlenker,Wolfram TI - Climate Change, Crop Yields, and Internal Migration in the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 17734 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17734 L1 - http://www.nber.org/papers/w17734.pdf N1 - Author contact info: Shuaizhang Feng Department of Economics Shanghai University of Finance and Economics Shanghai China E-Mail: shuaizhang.feng@gmail.com Michael Oppenheimer Department of Geosciences Woodrow Wilson School Princeton University 448 Robertson Hall Princeton, NJ 08544-1013 E-Mail: omichael@princeton.edu Wolfram Schlenker Department of Economics School of International and Public Affairs Columbia University 420 West 118th Street, MC 3323 New York, NY 10027 Tel: 212/854-1806 Fax: 212/854-5765 E-Mail: wolfram.schlenker@columbia.edu AB - We investigate the link between agricultural productivity and net migration in the United States using a county-level panel for the most recent period of 1970-2009. In rural counties of the Corn Belt, we find a statistically significant relationship between changes in net outmigration and climate-driven changes in crop yields, with an estimated semi-elasticity of about -0.17, i.e., a 1% decrease in yields leads to a 0.17% net reduction of the population through migration. This effect is primarily driven by young adults. We do not detect a response for senior citizens, nor for the general population in eastern counties outside the Corn Belt. Applying this semi-elasticity to predicted yield changes under the B2 scenario of the Hadley III model, we project that, holding other factors constant, climate change would on average induce 3.7% of the adult population (ages 15-59) to leave rural counties of the Corn Belt in the medium term (2020-2049) compared to the 1960-1989 baseline, with the possibility of a much larger migration response in the long term (2077-2099). Since there is uncertainty about future warming, we also present projections for a range of uniform climate change scenarios in temperature or precipitation. ER - TY - JOUR AU - Zitzewitz,Eric TI - Does Transparency Reduce Favoritism and Corruption? Evidence from the Reform of Figure Skating Judging JF - National Bureau of Economic Research Working Paper Series VL - No. 17732 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17732 L1 - http://www.nber.org/papers/w17732.pdf N1 - Author contact info: Eric Zitzewitz Department of Economics Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-2891 Fax: 603/646-2122 E-Mail: eric.zitzewitz@dartmouth.edu AB - Transparency is usually thought to reduce favoritism and corruption by facilitating monitoring by outsiders, but there is concern it can have the perverse effect of facilitating collusion by insiders. In response to vote trading scandals in the 1998 and 2002 Olympics, the International Skating Union (ISU) introduced a number of changes to its judging system, including obscuring which judge issued which mark. The stated intent was to disrupt collusion by groups of judges, but this change also frustrates most attempts by outsiders to monitor judge behavior. I find that the "compatriot-judge effect", which aggregates favoritism (nationalistic bias from own-country judges) and corruption (vote trading), actually increased slightly after the reforms. ER - TY - JOUR AU - Braguinsky,Serguey AU - Mityakov,Sergey V. TI - Foreign Corporations and the Culture of Transparency: Evidence from Russian Administrative Data JF - National Bureau of Economic Research Working Paper Series VL - No. 17731 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17731 L1 - http://www.nber.org/papers/w17731.pdf N1 - Author contact info: Serguey Braguinsky Department of Social and Decision Sciences and Heinz College, School of Public Policy and Management Carnegie Mellon University Pittsburgh, PA 15213 E-Mail: sbrag@andrew.cmu.edu Sergey V. Mityakov John E. Walker Department of Economics Clemson University 222 Sirrine Hall Clemson SC 29634 E-Mail: smityak@clemson.edu M3 - presented at "Causes and Consequences of Corporate Culture", December 8-9, 2011 AB - Foreign-owned firms from advanced countries carry the culture of transparency in business transactions that is orthogonal to the culture of hiding and insider dealing in many developing economies and economies in transition. In this paper, we document this using administrative data on reported earnings and market values of cars owned by workers employed in foreign-owned and domestic firms in Moscow, Russia. We examine whether closer ties to foreign corporations result in the diffusion of transparency to private Russian firms. We find that Russian firms initially founded in partnerships with foreign corporations are twice as transparent in reported earnings of their workers as other Russian firms, but they are still less than half as transparent as foreign firms themselves. We also find that increased links to foreign corporations, such as hiring more workers from them, raise the transparency of domestic firms. An important channel for this transmission appears to be the need to keep official wages and salaries of incumbent workers close to wages domestic firms have to pay to their newly hired workers with experience in multinationals. ER - TY - JOUR AU - Hanushek,Eric A. AU - Yilmaz,Kuzey TI - Land Use Controls and the Provision of Education JF - National Bureau of Economic Research Working Paper Series VL - No. 17730 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17730 L1 - http://www.nber.org/papers/w17730.pdf N1 - Author contact info: Eric A. Hanushek Hoover Institution Stanford University Stanford, CA 94305-6010 Tel: 650/736-0942 Fax: 650/723-1687 E-Mail: hanushek@stanford.edu Kuzey Yilmaz University of Rochester Rochester, NY 14627 E-Mail: kuyilmaz@hotmail.com AB - Considerable prior analysis has gone into the study of zoning restrictions on locational choice and on fiscal burdens. The prior work on zoning - particularly fiscal or exclusionary zoning - has provided both inconclusive theoretical results and quite inconsistent empirical support of the theory. More importantly, none of this work addresses important questions about the level and distribution of public goods that are provided under fiscal zoning. Since fiscal issues and Tiebout demands are central to much of the motivation for exclusionary zoning, we expand the theoretical analysis to encompass the interplay between land use restrictions and public good provision. In this, we focus on schooling outcomes, since the provision of education is one of the primary activities of local jurisdictions. We develop a general equilibrium model of location and the provision of education. Some households create a fiscal burden, motivating the use by local governments of exclusionary land-use controls. Then, the paper analyzes what the market effects of land-use controls are and how successful they are. The policies considered (minimum lot size zoning, local public finance with a head tax, and fringe zoning) demonstrate how household behavior directly affects the equilibrium outcomes and the provision of the local public good. ER - TY - JOUR AU - Feenstra,Robert C. AU - Ma,Hong AU - Neary,J. Peter AU - Rao,D.S. Prasada TI - Who Shrunk China? Puzzles in the Measurement of Real GDP JF - National Bureau of Economic Research Working Paper Series VL - No. 17729 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17729 L1 - http://www.nber.org/papers/w17729.pdf N1 - Author contact info: Robert C. Feenstra Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/752-7022 Fax: 530/752-9382 E-Mail: rcfeenstra@ucdavis.edu Hong Ma Tsinghua University Department of Economics Beijing, China E-Mail: mahong@sem.tsinghua.edu.cn Peter Neary Department of Economics University of Oxford Manor Road Building Oxford OX1 3UQ United Kingdom Tel: +44 (0) 1865 271085 E-Mail: peter.neary@economics.ox.ac.uk Prasada Rao D.S. School of Economics University of Queensland Brisbane Australia Qld 4072 E-Mail: d.rao@uq.edu.au AB - The latest World Bank estimates of real GDP per capita for China are significantly lower than previous ones. We review possible sources of this puzzle and conclude that it reflects a combination of factors, including substitution bias in consumption, reliance on urban prices which we estimate are higher than rural ones, and the use of an expenditure-weighted rather than an output-weighted measure of GDP. Taking all these together, we estimate that real per-capita GDP in China was 50% higher relative to the U.S. in 2005 than the World Bank estimates. ER - TY - JOUR AU - Feenstra,Robert C. AU - Hong,Chang AU - Ma,Hong AU - Spencer,Barbara J. TI - Contractual Versus Non-Contractual Trade: The Role of Institutions in China JF - National Bureau of Economic Research Working Paper Series VL - No. 17728 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17728 L1 - http://www.nber.org/papers/w17728.pdf N1 - Author contact info: Robert C. Feenstra Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/752-7022 Fax: 530/752-9382 E-Mail: rcfeenstra@ucdavis.edu Chang Hong Department of Economics Clark University Worcester, MA 01610 E-Mail: CHong@clarku.edu Hong Ma Tsinghua University Department of Economics Beijing, China E-Mail: mahong@sem.tsinghua.edu.cn Barbara J. Spencer University of British Columbia Sauder School of Business 2053 Main Mall Vancouver, BC V6T 1Z2 CANADA Tel: 604/822-8479 Fax: 604/822-8477 E-Mail: barbara.spencer@sauder.ubc.ca AB - Recent research has demonstrated the importance of institutional quality at the country level for both the volume of trade and the ability to trade in differentiated goods that rely on contract enforcement. This paper takes advantage of cross-provincial variation in institutional quality in China, and export data that distinguishes between foreign and domestic exporters and processing versus ordinary trade, to show that institutional quality is a significant factor in determining Chinese provincial export patterns. Institutions matter more for processing trade, and more for foreign firms, just as we would expect from a greater reliance on contracts in these cases. ER - TY - JOUR AU - Robles,Verónica C. Frisancho AU - Krishna,Kala TI - Affirmative Action in Higher Education in India: Targeting, Catch Up, and Mismatch JF - National Bureau of Economic Research Working Paper Series VL - No. 17727 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17727 L1 - http://www.nber.org/papers/w17727.pdf N1 - Author contact info: Verónica C. Frisancho Robles Department of Economics 306 Kern Building The Pennsylvania State University University Park, PA 16802 E-Mail: vfrisancho@psu.edu Kala Krishna Department of Economics 523 Kern Graduate Building The Pennsylvania State University University Park, PA 16802 Tel: 814/865-1106 Fax: 814/863-4775 E-Mail: kmk4@psu.edu AB - Affirmative action policies in higher education are used in many countries to try to socially advance historically disadvantaged minorities. Although the underlying social objectives of these policies are rarely criticized, there is intense debate over the actual impact of such preferences in higher education on educational performance and labor outcomes. Most of the work uses U.S. data where clean performance indicators are hard to find. Using a remarkably detailed dataset on the 2008 graduating class from an elite engineering institution (EEI) in India we evaluate the impact of affirmative action policies in higher education on minority students focusing on three central issues in the current debate: targeting, catch up, and mismatch. In addition, we present preliminary evidence on labor market discrimination. We find that admission preferences effectively target minority students who are poorer than the average displaced non-minority student. Moreover, by analyzing the college performance of minority and non-minority students as they progress through college, we find that scheduled caste and scheduled tribe students, especially those in more selective majors, fall behind their same-major peers which is the opposite of catching up. We also identify evidence in favor of the mismatch hypothesis: once we control for selection into majors, minority students who enrol in more selective majors as a consequence of admission preferences end up earning less than if they would have had if they had chosen a less selective major. Finally, although there is no evidence of discrimination against minority students in terms of wages, we find that scheduled caste and scheduled tribe students are more likely to get worse jobs, even after controlling for selection. ER - TY - JOUR AU - Fisman,Raymond AU - Harmon,Nikolaj A. AU - Kamenica,Emir AU - Munk,Inger TI - Labor Supply of Politicians JF - National Bureau of Economic Research Working Paper Series VL - No. 17726 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17726 L1 - http://www.nber.org/papers/w17726.pdf N1 - Author contact info: Raymond Fisman School of Business Columbia University 622 Uris Hall 3022 Broadway New York, NY 10027 Tel: 212/854-9157 Fax: 212-316-9219 E-Mail: rf250@columbia.edu Nikolaj A. Harmon Department of Economics Princeton University, Fisher Hall Princeton, NJ E-Mail: nharmon@princeton.edu Emir Kamenica University of Chicago Booth School of Business 5807 S. Woodlawn Ave. Chicago, IL 60637 Tel: 773.834.8690 E-Mail: emir.kamenica@chicagobooth.edu Inger Munk Renewables - DONG Energy Nesa Allé 1 2820 Gentofte Denmark E-Mail: ingmu@dongenergy.dk AB - We examine the labor supply of politicians using data on Members of the European Parliament (MEPs). We exploit the introduction of a law that equalized MEPs' salaries, which had previously differed by as much as a factor of ten. Doubling an MEP's salary increases the probability of running for reelection by 23 percentage points and increases the logarithm of the number of parties that field a candidate by 29 percent of a standard deviation. A salary increase has no discernible impact on absenteeism or shirking from legislative sessions; in contrast, non-pecuniary motives, proxied by home-country corruption, substantially impact the intensive margin of labor supply. Finally, an increase in salary lowers the quality of elected MEPs, measured by the selectivity of their undergraduate institutions. ER - TY - JOUR AU - Roberts,Mark J. AU - Xu,Daniel Yi AU - Fan,Xiaoyan AU - Zhang,Shengxing TI - A Structural Model of Demand, Cost, and Export Market Selection for Chinese Footwear Producers JF - National Bureau of Economic Research Working Paper Series VL - No. 17725 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17725 L1 - http://www.nber.org/papers/w17725.pdf N1 - Author contact info: Mark J. Roberts Department of Economics 513 Kern Graduate Building Pennsylvania State University University Park, PA 16802 Tel: 814/863-1535 Fax: 814/863-4775 E-Mail: mroberts@psu.edu Daniel Xu Department of Economics Duke University 213 Social Science Bldg 419 Chapel Drive Box 90097 Durham, NC 27708-0097 Tel: 919-660-1824 E-Mail: daniel.xu@duke.edu XiaoYan Fan Department of Economics Fudan University E-Mail: ecofan0613@vip.163.com Shengxing Zhang Department of Economics New York University E-Mail: oo7zsx@gmail.com AB - In this paper we use micro data on both trade and production for a sample of large Chinese manufacturing firms in the footwear industry from 2002-2006 to estimate an empirical model of export demand, pricing, and market participation by destination market. We use the model to construct indexes of firm-level demand, cost, and export market profitability. The empirical results indicate substantial firm heterogeneity in both the demand and cost dimensions with demand being more dispersed. The firm-specific demand and cost components are very useful in explaining differences in the extensive margin of trade, the length of time a firm exports to a destination, and the number and mix of destinations, as well as the export prices, while cost is more important in explaining the quantity of firm exports on the intensive margin. We use the estimates to analyze the reallocation resulting from removal of the quota on Chinese footwear exports to the EU and find that it led to a rapid restructuring of export supply sources in favor of firms with high demand and low cost indexes. ER - TY - JOUR AU - Knittel,Christopher R. TI - Reducing Petroleum Consumption from Transportation JF - National Bureau of Economic Research Working Paper Series VL - No. 17724 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17724 L1 - http://www.nber.org/papers/w17724.pdf N1 - Author contact info: Christopher R. Knittel MIT Sloan School of Management 100 Main Street, E62-513 Cambridge, MA 02142 E-Mail: knittel@mit.edu AB - The United States consumed more petroleum-based liquid fuel per capita than any other OECD-high-income country – 30 percent more than the second-highest country (Canada) and 40 percent more than the third-highest (Luxemburg). This paper examines the main channels through which reductions in U.S. oil consumption might take place: (a) increased fuel economy of existing vehicles, (b) increased use of non-petroleum-based low-carbon fuels, (c) alternatives to the internal combustion engine, and (d) reduced vehicles miles travelled. I then discuss how the policies for reducing petroleum consumption used in the US compare with the standard economics prescription for using a Pigouvian tax to deal with externalities. Taking into account that energy taxes are a political hot button in the United States, and also considering some evidence that consumers may not correctly value fuel economy, I offer some thoughts about the margins on which policy aimed at reducing petroleum consumption would have the largest impact on economic efficiency. ER - TY - JOUR AU - Landvoigt,Tim AU - Piazzesi,Monika AU - Schneider,Martin TI - The Housing Market(s) of San Diego JF - National Bureau of Economic Research Working Paper Series VL - No. 17723 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17723 L1 - http://www.nber.org/papers/w17723.pdf N1 - Author contact info: Tim Landvoigt Department of Economics Stanford University 579 Serra Mall Stanford CA 94305-6072 E-Mail: timlandvoigt@googlemail.com Monika Piazzesi Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 Tel: (650) 723-9289 E-Mail: piazzesi@stanford.edu Martin Schneider Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 Tel: (650) 721 6320 E-Mail: schneidr@stanford.edu AB - This paper uses an assignment model to understand the cross section of house prices within a metro area. Movers' demand for housing is derived from a lifecycle problem with credit market frictions. Equilibrium house prices adjust to assign houses that differ by quality to movers who differ by age, income and wealth. To quantify the model, we measure distributions of house prices, house qualities and mover characteristics from micro data on San Diego County during the 2000s boom. The main result is that cheaper credit for poor households was a major driver of prices, especially at the low end of the market. ER - TY - JOUR AU - Jackson,C. Kirabo TI - Do High-School Teachers Really Matter? JF - National Bureau of Economic Research Working Paper Series VL - No. 17722 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17722 L1 - http://www.nber.org/papers/w17722.pdf N1 - Author contact info: C. Kirabo Jackson Northwestern University School of Education and Social Policy 2040 Sheridan Road Evanston, IL 60208 Tel: 847/467-1803 E-Mail: kirabo-jackson@northwestern.edu AB - Unlike in elementary-schools, high-school teacher effects may be confounded with track-level treatments that are correlated with individual teachers. I document bias due to track-specific treatments, and show that traditional tests for the existence of teacher effects suffer from finite sample bias. Using new methods to account for these biases, I find modest algebra teacher effects and little evidence of English teacher effects. Unlike in elementary-school, value-added estimates of high-school teachers are weak predictors of teacher's future performance. The results indicate that teachers might not influence test-scores as much as previously thought. ER - TY - JOUR AU - Chi,Wei AU - Freeman,Richard B. AU - Li,Hongbin TI - Adjusting to Really Big Changes: The Labor Market in China, 1989-2009 JF - National Bureau of Economic Research Working Paper Series VL - No. 17721 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17721 L1 - http://www.nber.org/papers/w17721.pdf N1 - Author contact info: Wei Chi School of Economics and Management Tsinghua University Beijing, China, 100084 E-Mail: chiw@sem.tsinghua.edu.cn Richard B. Freeman NBER 1050 Massachusetts Avenue Cambridge, MA 02138 Tel: 617/868-3900 Fax: 617/868-2742 E-Mail: freeman@nber.org Hongbin Li School of Economics and Management Tsinghua University Beijing 100084, China E-Mail: lihongbin@sem.tsinghua.edu.cn AB - China’s emerging labor market was buffeted by changes in demand and supply and institutional changes in the last two decades. Using the Chinese Urban Household Survey data from 1989 to 2009, our study shows that the market responded with substantial changes in the structure of wages and in employment and types of jobs that workers obtained that mirrors the adjustments found in labor markets in advanced economies. However, the one place where the Chinese labor market appears to diverge from the labor markets in advanced countries is the rapid convergence in earnings and occupational positions of cohorts who entered the job market under more or less favorable conditions. On this dimension, China’s labor market seems more flexible than those in other countries. Three related factors may explain this pattern: (1) the rapid growth of China’s economy; (2) the high rate of employee turnover; (3) the relative weakness of internal labor markets in China. Bottom line, the Chinese labor market has responded about as well as one could expect to the changes in the demand and supply factors and institutional shocks in this critical period in Chinese economic history. ER - TY - JOUR AU - Imberman,Scott A. AU - Kugler,Adriana D. TI - The Effect of Providing Breakfast on Student Performance: Evidence from an In-Class Breakfast Program JF - National Bureau of Economic Research Working Paper Series VL - No. 17720 PY - 2012 Y2 - January 2012 UR - http://www.nber.org/papers/w17720 L1 - http://www.nber.org/papers/w17720.pdf N1 - Author contact info: Scott A. Imberman Department of Economics University of Houston 204 McElhinney Hall Houston, TX 77204 Tel: 713/743-3839 Fax: 713/743-3798 E-Mail: simberman@uh.edu Adriana D. Kugler Georgetown University Georgetown Public Policy Institute 37th and O Streets NW, Suite 311 Washington, DC 20057 Tel: 202/687-5716 Fax: 202/687-5544 E-Mail: ak659@georgetown.edu AB - In response to low take-up, many public schools have experimented with moving breakfast from the cafeteria to the classroom. We examine whether such a program increases performance as measured by standardized test scores, grades and attendance rates. We exploit quasi-random timing of program implementation that allows for a difference-in-differences identification strategy. Our main identification assumption is that schools where the program was introduced earlier would have evolved similarly to those where the program was introduced later. We find that in-class breakfast increases both math and reading achievement by about one-tenth of a standard deviation relative to providing breakfast in the cafeteria. Moreover, we find that these effects are most pronounced for low performing, free-lunch eligible, Hispanic, and low BMI students. We also find some improvements in attendance for high achieving students but no impact on grades. ER - TY - JOUR AU - Bond,Philip AU - Edmans,Alex AU - Goldstein,Itay TI - The Real Effects of Financial Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 17719 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17719 L1 - http://www.nber.org/papers/w17719.pdf N1 - Author contact info: Philip Bond Department of Finance Carlson School of Management University of Minnesota 321 19th Ave S Minneapolis MN 55410 E-Mail: apbond@umn.edu Alex Edmans The Wharton School University of Pennsylvania 2318 Steinberg Hall - Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104 Tel: 215/746-0498 Fax: 215/898-6200 E-Mail: aedmans@wharton.upenn.edu Itay Goldstein Wharton School University of Pennsylvania Philadelphia, PA 19104 E-Mail: itayg@wharton.upenn.edu AB - A large amount of activity in the financial sector occurs in secondary financial markets, where securities are traded among investors without capital flowing to firms. The stock market is the archetypal example, which in most developed economies captures a lot of attention and resources. Is the stock market just a side show or does it affect real economic activity? In this article, we discuss the potential real effects of financial markets that stem from the informational role of market prices. We review the theoretical literature and show that accounting for the feedback effect from market prices to the real economy significantly changes our understanding of the price formation process, the informativeness of the price, and speculators’ trading behavior. We make two main points. First, we argue that a new definition of price efficiency is needed to account for the extent to which prices reflect information useful for the efficiency of real decisions (rather than the extent to which they forecast future cash flows). Second, incorporating the feedback effect into models of financial markets can explain various market phenomena that otherwise seem puzzling. Finally, we review empirical evidence on the real effects of secondary financial markets. ER - TY - JOUR AU - McMillan,Margaret S. AU - Masters,William A. AU - Kazianga,Harounan TI - Rural Demography, Public Services and Land Rights in Africa: A Village-Level Analysis in Burkina Faso JF - National Bureau of Economic Research Working Paper Series VL - No. 17718 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17718 L1 - http://www.nber.org/papers/w17718.pdf N1 - Author contact info: Margaret S. McMillan Tufts University Department of Economics 114a Braker Hall Medford, MA 02155 Tel: 617/627-3137 Fax: 617/627-3197 E-Mail: margaret.mcmillan@tufts.edu William Masters Tufts University E-Mail: william.masters@tufts.edu Harounan Kazianga Department of Economics Oklahoma State University Business 324 Stillwater, OK 74078 Tel: (405) 744-5110 E-Mail: harounan.kazianga@okstate.edu AB - This paper uses historical census data from Burkina Faso to characterize local demographic pressures associated with internal migration into river valleys after Onchocerciasis eradication, combined with a new survey of village elders to document change over time and differences across villages in local public goods provision, market institutions and land use rights. We hypothesize that higher local population densities are associated with more public goods and a transition from open-access to regulated land use. Controlling for province or village fixed effects, we find that villages’ variance in population associated with proximity to rivers is closely correlated with higher levels of infrastructure, markets and individual land rights, as opposed to familial or communal rights. Responding to population growth with both improved public services and private property rights is consistent with both scale effects in public good provision, and changes in the scarcity of land. ER - TY - JOUR AU - Matvos,Gregor AU - Seru,Amit TI - Resource Allocation within Firms and Financial Market Dislocation: Evidence from Diversified Conglomerates JF - National Bureau of Economic Research Working Paper Series VL - No. 17717 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17717 L1 - http://www.nber.org/papers/w17717.pdf N1 - Author contact info: Gregor Matvos Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773-834-3188 E-Mail: gmatvos@chicagobooth.edu Amit Seru Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-2767 E-Mail: amit.seru@chicagobooth.edu AB - When external capital markets are stressed they may not reallocate resources between firms. We show that resource allocation within firms' internal capital markets provides an important force countervailing financial market dislocation. Using data on US conglomerates we empirically verify that firms shift resources between industries in response to shocks to the financial sector. We estimate a structural model of internal capital market to separately identify and quantify the forces driving the reallocation decision and how these forces interact with external capital market stress. The frictions in internal capital markets drive a large wedge between productivity and investment: the weaker (stronger) division obtains too much (little) capital, as though it is 12 (9) percent more (less) productive than it really is. The cost of accessing external capital funds quadruple during extreme financial market dislocations, making resource allocation within firms significantly cheaper. The estimated model allows us to simulate the propagation of the 2007/2008 financial market dislocation. The counterfactual out of sample simulated data is remarkably consistent with the actual data and shows that improved resource allocation in internal capital markets offset financial market stress during the recent financial crisis by 16% to 30% relative to firms with no internal capital markets. ER - TY - JOUR AU - Baldwin,Richard TI - Trade And Industrialisation After Globalisation’s 2nd Unbundling: How Building And Joining A Supply Chain Are Different And Why It Matters JF - National Bureau of Economic Research Working Paper Series VL - No. 17716 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17716 L1 - http://www.nber.org/papers/w17716.pdf N1 - Author contact info: Richard Baldwin Cigale 2 1010 Lausanne SWITZERLAND Tel: 41-22-908-5900 E-Mail: rbaldwin@cepr.org M3 - presented at "Globalization in an Age of Crisis", September 14-16, 2011 AB - Revolutionary transformations of industry and trade occurred from 1985 to the late-1990s – the regionalisation of supply chains. Before 1985, successful industrialisation meant building a domestic supply chain. Today, industrialisers join supply chains and grow rapidly because offshored production brings elements that took Korea and Taiwan decades to develop domestically. These changes have not been fully reflected in “high development theory” – a lacuna that may lead to misinterpretation of data and inattention to important policy questions. ER - TY - JOUR AU - Rossin-Slater,Maya AU - Ruhm,Christopher J. AU - Waldfogel,Jane TI - The Effects of California’s Paid Family Leave Program on Mothers’ Leave-Taking and Subsequent Labor Market Outcomes JF - National Bureau of Economic Research Working Paper Series VL - No. 17715 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17715 L1 - http://www.nber.org/papers/w17715.pdf N1 - Author contact info: Maya Rossin-Slater Columbia University, Department of Economics 1022 International Affairs Building 420 West 118th Street New York City, NY 10027 E-Mail: mr2856@columbia.edu Christopher J. Ruhm Frank Batten School of Leadership and Public Policy University of Virginia 235 McCormick Rd. P.O. Box 400893 Charlottesville, VA 22904-40893 Tel: 434-243-3729 E-Mail: ruhm@virginia.edu Jane Waldfogel Columbia University School of Social Work 1255 Amsterdam Avenue New York, NY 10027 E-Mail: jw205@columbia.edu AB - This analysis uses March Current Population Survey data from 1999-2010 and a differences-in-differences approach to examine how California’s first in the nation paid family leave (PFL) program affected leave-taking by mothers following childbirth, as well as subsequent labor market outcomes. We obtain robust evidence that the California program more than doubled the overall use of maternity leave, increasing it from around three to six or seven weeks for the typical new mother – with particularly large growth for less advantaged groups. We also provide suggestive evidence that PFL increased the usual weekly work hours of employed mothers of one-to-three year-old children by 6 to 9% and that their wage incomes may have risen by a similar amount. ER - TY - JOUR AU - Krebs,Tom AU - Kuhn,Moritz AU - Wright,Mark L. J. TI - Human Capital Risk, Contract Enforcement, and the Macroeconomy JF - National Bureau of Economic Research Working Paper Series VL - No. 17714 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17714 L1 - http://www.nber.org/papers/w17714.pdf N1 - Author contact info: Tom Krebs Department of Economics University of Mannheim 68131 Mannheim Germany E-Mail: tkrebs@econ.uni-mannheim.de Moritz Kuhn Department of Economics University of Bonn Adenauer Alle 24-42 53113 Bonn Germany E-Mail: mokuhn@uni-bonn.de Mark L. J. Wright Federal Reserve Bank of Chicago 230 South LaSalle St. Chicago, IL 60604 E-Mail: mlwright@econ.ucla.edu AB - We develop a macroeconomic model with physical and human capital, human capital risk, and limited contract enforcement. We show analytically that young (high-return) households are the most exposed to human capital risk and are also the least insured. We document this risk-insurance pattern in data on life-insurance drawn from the Survey of Consumer Finance. A calibrated version of the model can quantitatively account for the life-cycle variation of insurance observed in the US data and implies welfare costs of under-insurance for young households that are equivalent to a 4 percent reduction in lifetime consumption. A policy reform that makes consumer bankruptcy more costly leads to a substantial increase in the volume of credit and insurance. ER - TY - JOUR AU - Almond,Douglas AU - Mazumder,Bhashkar AU - Ewijk,Reyn van TI - Fasting During Pregnancy and Children's Academic Performance JF - National Bureau of Economic Research Working Paper Series VL - No. 17713 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17713 L1 - http://www.nber.org/papers/w17713.pdf N1 - Author contact info: Douglas Almond Department of Economics Columbia University International Affairs Building, MC 3308 420 West 118th Street New York, NY 10027 Tel: 212/854-7248 Fax: 212/854-3239 E-Mail: da2152@columbia.edu Bhashkar Mazumder Federal Reserve Bank of Chicago 230 S. LaSalle Street Chicago, IL 60604 Tel: 312-322-8166 E-Mail: bmazumder@frbchi.org Reyn van Ewijk IMBEI University of Mainz Langenbeckstr. 1 55101 Mainz Germany E-Mail: vanewijk@imbei.uni-mainz.de AB - We consider the effects of daytime fasting by pregnant women during the lunar month of Ramadan on their children's test scores at age seven. Using English register data, we find that scores are .05 to .08 standard deviations lower for Pakistani and Bangladeshi students exposed to Ramadan in early pregnancy. These estimates are downward biased to the extent that Ramadan is not universally observed. We conclude that the effects of prenatal investments on test scores are comparable to many conventional educational interventions but are likely to be more cost effective and less subject to "fade out". ER - TY - JOUR AU - Bussière,Matthieu AU - Callegari,Giovanni AU - Ghironi,Fabio AU - Sestieri,Giulia AU - Yamano,Norihiko TI - Estimating Trade Elasticities: Demand Composition and the Trade Collapse of 2008-09 JF - National Bureau of Economic Research Working Paper Series VL - No. 17712 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17712 L1 - http://www.nber.org/papers/w17712.pdf N1 - Author contact info: Matthieu Bussiere Banque de France 31 rue Croix des Petits Champs 75001 Paris France E-Mail: Matthieu.Bussiere@banque-france.fr Giovanni Callegari European Central Bank Kaiserstrasse 29 60311 Frankfurt am Main Germany E-Mail: Giovanni.Callegari@ecb.int Fabio Ghironi Boston College Department of Economics 140 Commonwealth Avenue Chestnut Hill, MA 02467-3859 Tel: 617/552-3686 Fax: 617/552-2308 E-Mail: fabio.ghironi@bc.edu Giulia Sestieri Banque de France 31 rue Croix des Petits Champs 75001 Paris France E-Mail: Giulia.Sestieri@banque-france.fr Norihiko Yamano OECD 2 rue Andre Pascal 75775 Paris Cedex 16, Paris France E-Mail: Norihiko.Yamano@oecd.org AB - This paper introduces a new methodology for the estimation of demand trade elasticities based on an import intensity-adjusted measure of aggregate demand, with the foundation of a stylized theoretical model. We compute the import intensity of demand components by using the OECD Input-Output tables. We argue that the composition of demand plays a key role in trade dynamics because of the large movements in the most import-intensive categories of expenditure (especially investment, but also exports). We provide evidence in favor of these mechanisms for a panel of 18 OECD countries, paying particular attention to the 2008-09 Great Trade Collapse. ER - TY - JOUR AU - Bernard,Andrew B. AU - Grazzi,Marco AU - Tomasi,Chiara TI - Intermediaries in International Trade: Direct versus indirect modes of export JF - National Bureau of Economic Research Working Paper Series VL - No. 17711 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17711 L1 - http://www.nber.org/papers/w17711.pdf N1 - Author contact info: Andrew B. Bernard Tuck School of Business at Dartmouth 100 Tuck Hall Hanover, NH 03755 Tel: 603/646-0302 Fax: 603/646-0995 E-Mail: Andrew.B.Bernard@dartmouth.edu marco grazzi LEM Scuola Superiore Sant'Anna Piazza Martiri della Liberta', 33 56127 Pisa, Italy E-Mail: m.grazzi@sssup.it Chiara Tomasi University of Trento Via Inama, 5 38122 Trento, Italy E-Mail: chiara.tomasi@unitn.it AB - This paper examines the factors that give rise to intermediaries in exporting and explores the implications for trade volumes. Export intermediaries such as wholesalers serve different markets and export different products than manufacturing exporters. In particular, high market-specific fixed costs of exporting, the (lack of) quality of the general contracting environment and product-specific factors play important roles in explaining the existence of export intermediaries. These underlying differences between direct and intermediary exporters have important consequences for trade flows. The ability of export intermediaries to overcome country and product fixed costs means that they can more easily respond along the extensive margin to external shocks. Intermediaries and direct exporters respond differently to exchange rate fluctuations both in terms of the total value of shipments and the number of products exported as well as in terms of prices and quantities. Aggregate exports to destinations with high shares of indirect exports are much less responsive to changes in the real exchange rate than are exports to countries served primarily by direct exporters. ER - TY - JOUR AU - Deming,David J. AU - Goldin,Claudia AU - Katz,Lawrence F. TI - The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators? JF - National Bureau of Economic Research Working Paper Series VL - No. 17710 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17710 L1 - http://www.nber.org/papers/w17710.pdf N1 - Author contact info: David Deming Harvard Graduate School of Education Gutman 411 Appian Way Cambridge, MA 02139 Tel: 617/495-0583 E-Mail: david_deming@gse.harvard.edu Claudia Goldin National Bureau of Economic Research 1050 Massachusetts Ave. Cambridge, MA 02138 Tel: 617/613-1200 Fax: 617/613-1245 E-Mail: cgoldin@harvard.edu Lawrence F. Katz Department of Economics Harvard University Cambridge, MA 02138 Tel: 617/495-5148 Fax: 617/613-1245 E-Mail: lkatz@harvard.edu AB - Private for-profit institutions have been the fastest growing part of the U.S. higher education sector. For-profit enrollment increased from 0.2 percent to 9.1 percent of total enrollment in degree-granting schools from 1970 to 2009, and for-profit institutions account for the majority of enrollments in non-degree granting postsecondary schools. We describe the schools, students, and programs in the for-profit higher education sector, its phenomenal recent growth, and its relationship to the federal and state governments. Using the 2004 to 2009 Beginning Postsecondary Students (BPS) longitudinal survey we assess outcomes of a recent cohort of first-time undergraduates who attended for-profits relative to comparable students who attended community colleges or other public or private non-profit institutions. We find that relative to these other institutions, for-profits educate a larger fraction of minority, disadvantaged, and older students, and they have greater success at retaining students in their first year and getting them to complete short programs at the certificate and associate degree levels. But we also find that for-profit students end up with higher unemployment and “idleness” rates and lower earnings six years after entering programs than do comparable students from other schools, and that they have far greater student debt burdens and default rates on their student loans. ER - TY - JOUR AU - Cook,Philip J. AU - Durrance,Christine Piette TI - The Virtuous Tax: Lifesaving and Crime-Prevention Effects of the 1991 Federal Alcohol-Tax Increase JF - National Bureau of Economic Research Working Paper Series VL - No. 17709 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17709 L1 - http://www.nber.org/papers/w17709.pdf N1 - Author contact info: Philip J. Cook Sanford School of Public Policy Duke University 215 Sanford Building Durham, NC 27708-0245 Tel: 919 613 7360 Fax: 919/681-8288 E-Mail: pcook@duke.edu Christine Durrance UNC E-Mail: Christine.Durrance@unc.edu AB - On January 1, 1991, the federal excise tax on beer doubled, and the tax rates on wine and liquor increased as well. These changes are larger than the typical state-level changes that have been used to study the effect of price on alcohol abuse and its consequences. In this paper, we develop a method to estimate some important effects of those large 1991 changes, exploiting the interstate differences in alcohol consumption. We demonstrate that the relative importance of drinking in traffic fatalities is closely tied to per capita alcohol consumption across states. As a result, we expect that the proportional effects of the federal tax increase on traffic fatalities would be positively correlated with per capita consumption. We demonstrate that this is indeed the case, and infer estimates of the price elasticity and lives saved in each state. We repeat this exercise for other injury-fatality rates, and for nine categories of crime. For each outcome, the estimated effect of the tax increase is negatively related to average consumption, and that relationship is highly significant for the overall injury death rate, the violent crime rate, and the property crime rate. A conservative estimate is that the federal tax reduced injury deaths by 4.7%, or almost 7,000, in 1991. ER - TY - JOUR AU - Corsetti,Giancarlo AU - Müller,Gernot J. TI - Multilateral Economic Cooperation and the International Transmission of Fiscal Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 17708 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17708 L1 - http://www.nber.org/papers/w17708.pdf N1 - Author contact info: Giancarlo Corsetti Faculty of Economics Cambridge University Sidgwick Avenue CB3 9DD Cambridge, Cambs United Kingdom Tel: +44(0)1223335235 E-Mail: giancarlo.corsetti@gmail.com Gernot Müller University of Bonn Kaiserstraße 1, 53113 Bonn, Germany E-Mail: gernot.mueller@uni-bonn.de M3 - presented at "Globalization in an Age of Crisis", September 14-16, 2011 AB - During the global financial crisis 2007–2009 fiscal policy was widely used as a stabilization tool. Policymakers allowed a large build-up of public debt resulting from both automatic and discretionary expansionary measures. At the same time, calls for policy coordination stressed that international spillovers of fiscal policy might be sizeable. We reconsider the case for fiscal coordination by providing new evidence on the cross-border effects of discretionary fiscal measures. We rely on a vector autoregression model as well as on a quantitative business cycle model. We find that i) large spillover effects cannot be ruled out and, in contrast to conventional wisdom, ii) financial factors rather than trade flows lie at the heart of the international transmission mechanism. We discuss the implications of these results for policy coordination when markets price sovereign default risk, and put pressure on governments for implementing budget consolidation measures. ER - TY - JOUR AU - Henderson,J. Vernon AU - Lee,Yong Suk TI - Organization of Disaster Aid Delivery: Spending Your Donations JF - National Bureau of Economic Research Working Paper Series VL - No. 17707 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17707 L1 - http://www.nber.org/papers/w17707.pdf N1 - Author contact info: J. Vernon Henderson Department of Economics Box B Brown University Providence, RI 02912 Tel: 401/863-2886 Fax: 401/863-1970 E-Mail: j_henderson@brown.edu Yong Suk Lee Dept. of Economics Brown University Providence RI 0291 E-Mail: yong_suk_lee@brown.edu AB - This paper analyzes how different organizational structures between funding and implementing agencies affect the quality of aid delivered and social agendas pursued across neighboring villages in a set disaster context. We model the implied objective functions and trade-offs concerning aid quality, aid quantity, and social agendas of different types of agencies. We analyze three waves of survey data on fishermen and fishing villages in Aceh, Indonesia from 2005-2009, following the tsunami. Different organizational structures result in significantly different qualities of hard aid, differential willingness to share aid delivery with other NGOs in a village, and differential promotion of public good objectives and maintenance of village religious and occupational traditions. This is the first time these aspects have been modeled and quantified in the literature. Some well known international NGOs delivered housing with relatively low rates of reported faults such as leaky roofs and cracked walls; others had relatively high rates. For boats, some had very high rates of boat “failure”, boats that sank upon launch, were not seaworthy, or fell apart within a month or two. We also document how a social agenda of particular agencies to promote greater equality can be thwarted and distorted by village leaders, potentially increasing inequality. ER - TY - JOUR AU - Harrigan,James AU - Ma,Xiangjun AU - Shlychkov,Victor TI - Export Prices of U.S. Firms JF - National Bureau of Economic Research Working Paper Series VL - No. 17706 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17706 L1 - http://www.nber.org/papers/w17706.pdf N1 - Author contact info: James Harrigan Department of Economics University of Virginia P.O. Box 400182 Charlottesville, VA 22904-4182 Tel: 434-243-8354 Fax: 434-982-2904 E-Mail: harrigan@nber.org Ma Xiangjun Department of Economics University of Virginia P.O. Box 400182 Charlottesville, VA 22904-4182 E-Mail: xm2e@virginia.edu Victor Shlychkov Columbia University E-Mail: vs2109@columbia.edu AB - Using confidential firm-level data from the United States in 2002, we show that exporting firms charge prices for narrowly defined goods that differ substantially with the characteristics of firms and export markets. We control for selection into export markets using a three-stage estimator. We have three main results. First, we find that that highly productive and skill-intensive firms charge higher prices, while capital-intensive firms charge lower prices. Second, the very large correlation between distance and export prices found by Baldwin and Harrigan (2011) is largely due to a composition effect. Third, U.S. firms charge slightly higher prices to larger and richer markets, and substantially higher prices to markets other than Canada and Mexico. ER - TY - JOUR AU - Aldy,Joseph E. AU - Pizer,William A. TI - The Competitiveness Impacts of Climate Change Mitigation Policies JF - National Bureau of Economic Research Working Paper Series VL - No. 17705 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17705 L1 - http://www.nber.org/papers/w17705.pdf N1 - Author contact info: Joseph E. Aldy Harvard Kennedy School Taubman 382, Mailbox 58 79 JFK Street Cambridge, MA 02138 Tel: 617/496-7213 E-Mail: joseph_aldy@hks.harvard.edu William A. Pizer Sanford School of Public Policy Duke University Box 90312 Durham, NC 27708 Tel: 919/613-9286 Fax: 877/240-9880 E-Mail: billy.pizer@duke.edu AB - In order to clarify ongoing debates over the competitiveness impacts of climate change regulation, we develop a precise definition that can be estimated with available domestic production, trade, and energy price data. We use this definition and a 20+ year panel of 400+ U.S. manufacturing industries to estimate and predict the effects a U.S.-only $15 per ton CO2 price. We find competitiveness effects on the order of a 1.0 to 1.3 percent decline in production among energy-intensive manufacturing industries, representing about one-third of the policy’s impacts on these firms’ output. ER - TY - JOUR AU - Gelber,Alexander M. AU - Isen,Adam TI - Children’s Schooling and Parents’ Investment in Children: Evidence from the Head Start Impact Study JF - National Bureau of Economic Research Working Paper Series VL - No. 17704 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17704 L1 - http://www.nber.org/papers/w17704.pdf N1 - Author contact info: Alexander M. Gelber The Wharton School University of Pennsylvania 1403 Steinberg-Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104 Tel: 857/998-0055 E-Mail: agelber@nber.org Adam Isen University of Pennsylvania Steinberg-Dietrich Hall #1400 3620 Locust Walk Philadelphia, PA 19104-6372 E-Mail: isen@wharton.upenn.edu AB - Parents may have important effects on their children, but little work in economics explores whether children's schooling opportunities crowd out or encourage parents' investment in children. We analyze data from the Head Start Impact Study, which granted randomly-chosen preschool-aged children the opportunity to attend Head Start. We find that Head Start causes a substantial increase in parents' involvement with their children—such as time spent reading to children, math activities, or days spent with children by fathers who do not live with their children—both during and after the period when their children are potentially enrolled in Head Start. We discuss a variety of mechanisms that are consistent with our findings, including a simple model we present in which Head Start impacts parent involvement in part because parents perceive their involvement to be complementary with child schooling in the production of child qualities. ER - TY - JOUR AU - Nyce,Steven AU - Schieber,Sylvester AU - Shoven,John B. AU - Slavov,Sita AU - Wise,David A. TI - Does Retiree Health Insurance Encourage Early Retirement? JF - National Bureau of Economic Research Working Paper Series VL - No. 17703 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17703 L1 - http://www.nber.org/papers/w17703.pdf N1 - Author contact info: Steven Nyce Towers Watson 901 North Glebe Road Arlington, VA 22203 E-Mail: steven.nyce@towerswatson.com Sylvester Schieber Towers Watson 901 North Glebe Road Arlington, VA 22203 Tel: 703/258-8000 Fax: 703/258-8585 E-Mail: Syl.Schieber@towerswatson.com John B. Shoven Department of Economics 579 Serra Mall at Galvez Street Stanford, CA 94305-6015 Tel: 650/723-3273 Fax: 650/723-8611 E-Mail: shoven@stanford.edu Sita Slavov Department of Economics Occidental College 1600 Campus Road Los Angeles, CA 90041 Tel: 323/259-1461 E-Mail: sslavov@oxy.edu David A. Wise Harvard Kennedy School 79 John F. Kennedy Cambridge, MA 02138 E-Mail: dwise@nber.org AB - The strong link between health insurance and employment in the United States may cause workers to delay retirement until they become eligible for Medicare at age 65. However, some employers extend health insurance benefits to their retirees, and individuals who are eligible for such retiree health benefits need not wait until age 65 to retire with group health coverage. We investigate the impact of retiree health insurance on early retirement using employee-level data from 64 diverse firms that are clients of Towers Watson, a leading benefits consulting firm. We find that retiree health coverage has its strongest effects at ages 62 and 63, resulting in a 3.7 percentage point (21.2 percent) increase in the probability of turnover at age 62 and a 5.1 percentage point (32.2 percent) increase in the probability of turnover at age 63; it has a more modest effects for individuals under the age of 62. A more generous employer contribution of 50 percent or more raises turnover by 1-3 percentage points at ages 56-61, by 5.9 percentage points (33.7 percent) at age 62, and by 6.9 percentage points (43.7 percent) at age 63. Overall, an employer contribution of 50 percent or more reduces the total number of person-years worked between ages 56 and 64 by 9.6 percent relative to no coverage. ER - TY - JOUR AU - Duflo,Esther TI - Women’s Empowerment and Economic Development JF - National Bureau of Economic Research Working Paper Series VL - No. 17702 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17702 L1 - http://www.nber.org/papers/w17702.pdf N1 - Author contact info: Esther Duflo Department of Economics MIT, E52-252G 50 Memorial Drive Cambridge, MA 02142 Tel: 617/258-7013 Fax: 617/253-6915 E-Mail: eduflo@mit.edu AB - Women’s empowerment and economic development are closely related: in one direction, development alone can play a major role in driving down inequality between men and women; in the other direction, empowering women may benefit development. Does this imply that pushing just one of these two levers would set a virtuous circle in motion? This paper reviews the literature on both sides of the empowerment-development nexus, and argues that the inter-relationships are probably too weak to be self-sustaining, and that continuous policy commitment to equality for its own sake may be needed to bring about equality between men and women. ER - TY - JOUR AU - Kerr,William R. TI - Income Inequality and Social Preferences for Redistribution and Compensation Differentials JF - National Bureau of Economic Research Working Paper Series VL - No. 17701 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17701 L1 - http://www.nber.org/papers/w17701.pdf N1 - Author contact info: William R. Kerr Harvard Business School Rock Center 212 Soldiers Field Boston, MA 02163 Tel: 617/496-7021 E-Mail: wkerr@hbs.edu AB - In cross-sectional studies, countries with greater income inequality typically exhibit less support for government-led redistribution and greater acceptance of wage inequality (e.g., United States versus Western Europe). If individual nations evolve along this pattern, a vicious cycle could form with reduced social concern amplifying primal increases in inequality due to forces like skill-biased technical change. Exploring movements around these long-term levels, however, this study finds mixed evidence regarding the vicious cycle hypothesis. On one hand, larger compensation differentials are accepted as inequality grows. This growth in differentials is of a smaller magnitude than the actual increase in inequality, but it is nonetheless positive and substantial in size. Weighing against this, growth in inequality is met with greater support for government-led redistribution to the poor. These patterns suggest that short-run inequality shocks can be reinforced in the labor market but do not result in weaker political preferences for redistribution. ER - TY - JOUR AU - Kehoe,Timothy J. AU - Meza,Felipe TI - Catch-up Growth Followed by Stagnation: Mexico, 1950–2010 JF - National Bureau of Economic Research Working Paper Series VL - No. 17700 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17700 L1 - http://www.nber.org/papers/w17700.pdf N1 - Author contact info: Timothy J. Kehoe University of Minnesota Department of Economics 1925 Fourth Street South Minneapolis, MN 55455-0462 Tel: 612/625-1589 Fax: 612/204-5515 E-Mail: tkehoe@umn.edu Felipe Meza Centro de Investigación Económica Instituto Tecnólogico Autónomo de México Camino a Santa Teresa 930 Mexico, D.F. 10700 Mexico E-Mail: felipe.meza@itam.mx AB - In 1950 Mexico entered an economic takeoff and grew rapidly for more than 30 years. Growth stopped during the crises of 1982–1995, despite major reforms, including liberalization of foreign trade and investment. Since then growth has been modest. We analyze the economic history of Mexico 1877–2010. We conclude that the growth 1950–1981 was driven by urbanization, industrialization, and education and that Mexico would have grown even more rapidly if trade and investment had been liberalized sooner. If Mexico is to resume rapid growth — so that it can approach U.S. levels of income — it needs further reforms. ER - TY - JOUR AU - Chetty,Raj AU - Friedman,John N. AU - Rockoff,Jonah E. TI - The Long-Term Impacts of Teachers: Teacher Value-Added and Student Outcomes in Adulthood JF - National Bureau of Economic Research Working Paper Series VL - No. 17699 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17699 L1 - http://www.nber.org/papers/w17699.pdf N1 - Author contact info: Raj Chetty Department of Economics Harvard University 1805 Cambridge St. Cambridge, MA 02138 Tel: 617-744-9492 E-Mail: chetty@fas.harvard.edu John N. Friedman Harvard Kennedy School Taubman 356 79 JFK St. Cambridge, MA 02138 Tel: 617/233-6965 Fax: 617/496-1722 E-Mail: john_friedman@harvard.edu Jonah E. Rockoff Columbia University Graduate School of Business 3022 Broadway #603 New York, NY 10027-6903 Tel: 212/854-9799 Fax: 212/316-9219 E-Mail: jonah.rockoff@columbia.edu AB - Are teachers’ impacts on students’ test scores (“value-added”) a good measure of their quality? This question has sparked debate largely because of disagreement about (1) whether value-added (VA) provides unbiased estimates of teachers’ impacts on student achievement and (2) whether high-VA teachers improve students’ long-term outcomes. We address these two issues by analyzing school district data from grades 3-8 for 2.5 million children linked to tax records on parent characteristics and adult outcomes. We find no evidence of bias in VA estimates using previously unobserved parent characteristics and a quasi-experimental research design based on changes in teaching staff. Students assigned to high-VA teachers are more likely to attend college, attend higher- ranked colleges, earn higher salaries, live in higher SES neighborhoods, and save more for retirement. They are also less likely to have children as teenagers. Teachers have large impacts in all grades from 4 to 8. On average, a one standard deviation improvement in teacher VA in a single grade raises earnings by about 1% at age 28. Replacing a teacher whose VA is in the bottom 5% with an average teacher would increase the present value of students’ lifetime income by more than $250,000 for the average class- room in our sample. We conclude that good teachers create substantial economic value and that test score impacts are helpful in identifying such teachers. ER - TY - JOUR AU - Hausman,Jerry A. AU - Palmer,Christopher J. TI - Heteroskedasticity-Robust Inference in Finite Samples JF - National Bureau of Economic Research Working Paper Series VL - No. 17698 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17698 L1 - http://www.nber.org/papers/w17698.pdf N1 - Author contact info: Jerry A. Hausman Department of Economics MIT, Room E52-271A 50 Memorial Drive Cambridge, MA 02139 Tel: 617/253-3644 Fax: 617/253-1330 E-Mail: jhausman@mit.edu Christopher Palmer Economcis Department MIT, Room E52-391 50 Memorial Drive Cambridge, MA 02142 Tel: 617-299-6511 E-Mail: cjpalmer@mit.edu AB - Since the advent of heteroskedasticity-robust standard errors, several papers have proposed adjustments to the original White formulation. We replicate earlier findings that each of these adjusted estimators performs quite poorly in finite samples. We propose a class of alternative heteroskedasticity-robust tests of linear hypotheses based on an Edgeworth expansions of the test statistic distribution. Our preferred test outperforms existing methods in both size and power for low, moderate, and severe levels of heteroskedasticity. ER - TY - JOUR AU - Autor,David H. TI - The Unsustainable Rise of the Disability Rolls in the United States: Causes, Consequences, and Policy Options JF - National Bureau of Economic Research Working Paper Series VL - No. 17697 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17697 L1 - http://www.nber.org/papers/w17697.pdf N1 - Author contact info: David Autor Department of Economics MIT, E52-371 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/258-7698 Fax: 617/253-1330 E-Mail: dautor@mit.edu AB - Two ailments limit the effectiveness and threaten the long-term viability of the U.S. Social Security Disability Insurance program (SSDI). First, the program is ineffective in assisting the vast majority of workers with less severe disabilities to reach their employment potential or earn their own way. Second, the program’s expenditures on cash transfers and medical benefits— exceeding $1,500 per U.S. household—are extremely high and growing unsustainably. There is no compelling evidence, however, that the incidence of disabling conditions among the U.S. working age population is rising. This paper discusses the challenges facing the SSDI program, explains how its design has led to rapid and unsustainable growth, considers why past efforts to slow program growth have met with minimal and fleeting success, and outlines three recent proposals that would modify the program to slow growth while potentially improving the employment prospects of workers with disabilities. Because these proposals depart substantially from a program design that has seen little change in half a century, their efficacy is unproven. Additionally, even well-meaning efforts to place the SSDI program on a sustainable trajectory run the risk of creating additional hurdles for claimants who are truly unable to work. Nevertheless, the imminent exhaustion of the SSDI Trust Fund provides an impetus and an opportunity to explore innovative solutions to the longstanding policy challenges posed by the SSDI program. ER - TY - JOUR AU - Acharya,Viral V. AU - Lambrecht,Bart M. TI - A Theory of Income Smoothing When Insiders Know More Than Outsiders JF - National Bureau of Economic Research Working Paper Series VL - No. 17696 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17696 L1 - http://www.nber.org/papers/w17696.pdf N1 - Author contact info: Viral V. Acharya Stern School of Business New York University 44 West 4th Street, Suite 9-84 New York, NY 10012 Tel: 212/998-0354 Fax: 212 995 4233 E-Mail: vacharya@stern.nyu.edu Bart Lambrecht Lancaster University Management School Room C-42 Bailrigg Lancaster LA1 4YX, UK Tel: 44 0 1524 592711 Fax: 44 0 1524 847321 E-Mail: b.lambrecht@lancaster.ac.uk AB - We consider a setting in which insiders have information about income that outside shareholders do not, but property rights ensure that outside shareholders can enforce a fair payout. To avoid intervention, insiders report income consistent with outsiders' expectations based on publicly available information rather than true income, resulting in an observed income and payout process that adjust partially and over time towards a target. Insiders under-invest in production and effort so as not to unduly raise outsiders' expectations about future income, a problem that is more severe the smaller is the inside ownership and results in an "outside equity Laffer curve". A disclosure environment with adequate quality of independent auditing mitigates the problem, implying that accounting quality can enhance investments, size of public stock markets and economic growth. ER - TY - JOUR AU - Borenstein,Severin TI - The Private and Public Economics of Renewable Electricity Generation JF - National Bureau of Economic Research Working Paper Series VL - No. 17695 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17695 L1 - http://www.nber.org/papers/w17695.pdf N1 - Author contact info: Severin Borenstein Haas School of Business University of California, Berkeley Berkeley, CA 94720-1900 Tel: 510/642-3689 E-Mail: borenste@haas.berkeley.edu AB - Generating electricity from renewable sources is more expensive than conventional approaches, but reduces pollution externalities. Analyzing the tradeoff is much more challenging than often presumed, because the value of electricity is extremely dependent on the time and location at which it is produced, which is not very controllable with some renewables, such as wind and solar. Likewise, the pollution benefits from renewable generation depend on what type of generation it displaces, which also depends on time and location. Without incorporating these factors, cost-benefit analyses of alternatives are likely to be misleading. However, other common arguments for subsidizing renewable power – green jobs, energy security and driving down fossil energy prices – are unlikely to substantially alter the analysis. The role of intellectual property spillovers is a strong argument for subsidizing energy science research, but less persuasive as an enhancement to the value of installing current renewable energy technologies. ER - TY - JOUR AU - Card,David AU - Cardoso,Ana Rute TI - Can Compulsory Military Service Increase Civilian Wages? Evidence from the Peacetime Draft in Portugal JF - National Bureau of Economic Research Working Paper Series VL - No. 17694 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17694 L1 - http://www.nber.org/papers/w17694.pdf N1 - Author contact info: David Card Department of Economics 549 Evans Hall, #3880 University of California, Berkeley Berkeley, CA 94720-3880 Tel: 510/642-5222 Fax: 510/643-7042 E-Mail: card@econ.berkeley.edu Ana Rute Cardoso IAE (CSIC) and Barcelona GSE 08193 Bellaterra Barcelona Spain Tel: 34(9)35806612 Fax: 34(9)35801452 E-Mail: anarute.cardoso@iae.csic.es AB - Although military conscription was widespread during most of the past century, credible evidence on the effects of mandatory service is limited. We provide new evidence on the long-term effects of peacetime conscription, using longitudinal data for Portuguese men born in 1967. These men were inducted at a relatively late age (21), allowing us to use pre-conscription wages to control for ability differences between conscripts and non-conscripts. We find that the average impact of military service for men who were working prior to age 21 is close to zero throughout the period from 2 to 20 years after their service. These small average effects arise from a significant 4-5 percentage point impact for men with only primary education, coupled with a zero-effect for men with higher education. The positive impacts for less-educated men suggest that mandatory service can be a valuable experience for those who might otherwise spend their careers in low-level jobs. ER - TY - JOUR AU - Dougherty,Sean AU - Robles,Verónica C. Frisancho AU - Krishna,Kala TI - Employment Protection Legislation and Plant-Level Productivity in India JF - National Bureau of Economic Research Working Paper Series VL - No. 17693 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17693 L1 - http://www.nber.org/papers/w17693.pdf N1 - Author contact info: Sean Dougherty OECD Economics Department 2, rue Andre Pascal 75775 Paris Cedex 16 France E-Mail: sean.dougherty@oecd.org Verónica C. Frisancho Robles Department of Economics 306 Kern Building The Pennsylvania State University University Park, PA 16802 E-Mail: vfrisancho@psu.edu Kala Krishna Department of Economics 523 Kern Graduate Building The Pennsylvania State University University Park, PA 16802 Tel: 814/865-1106 Fax: 814/863-4775 E-Mail: kmk4@psu.edu AB - Using plant-level data from the Annual Survey of Industries (ASI) for the fiscal years from 1998-99 through 2007-08, this study provides plant-level cross-state/time-series evidence of the impact of employment protection legislation (EPL) on total factor productivity (TFP) and labor productivity in India. Identification of the effect of EPL follows from a difference-in-differences estimator inspired by Rajan and Zingales (1998) that takes advantage of the state-level variation in labor regulation and heterogeneous industry characteristics. The fundamental identification assumption is that EPL is more likely to restrict firms operating in industries with higher labor intensity and/or higher sales volatility. Our results show that firms in labor intensive or more volatile industries benefited the most from labor reforms in their states. Our point estimates indicate that, on average, firms in labor intensive industries and in flexible labor markets have TFP residuals 14% higher than those registered for their counterparts in states with more stringent labor laws. However, no important differences are identified among plants in industries with low labor intensity when comparing states with high and low levels of EPL reform. Similarly, the TFP of plants in volatile industries and in states that experienced more pro-employer reforms is 11% higher than that of firms in volatile industries and in more restrictive states; however, the TFP residuals of plants in industries with low labor intensity are 11% lower in high EPL reform states than in states with lower levels of EPL reform. In sum, the evidence presented here suggests that the high labor costs and rigidities imposed through Indian federal labor laws are lessened by labor market reforms at the state level. ER - TY - JOUR AU - Aizenman,Joshua AU - Edwards,Sebastian AU - Riera-Crichton,Daniel TI - Adjustment patterns to commodity terms of trade shocks: the role of exchange rate and international reserves policies JF - National Bureau of Economic Research Working Paper Series VL - No. 17692 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17692 L1 - http://www.nber.org/papers/w17692.pdf N1 - Author contact info: Joshua Aizenman Department of Economics; E2 1156 High St. University of California, Santa Cruz Santa Cruz, CA 95064 Tel: 831/459-4791 Fax: 831/459-5077 E-Mail: jaizen@ucsc.edu Sebastian Edwards UCLA Anderson Graduate School of Business 110 Westwood Plaza, Suite C508 Box 951481 Los Angeles, CA 90095-1481 Tel: 310/206-6797 Fax: 310/206-5825 E-Mail: sebastian.edwards@anderson.ucla.edu Daniel Riera-Crichton Department of Economics, Bates College Andrews Road 2 Office 237 Pettingill Hall Lewiston, ME 04240 E-Mail: drieracr@bates.edu AB - We analyze the way in which Latin American countries have adjusted to commodity terms of trade (CTOT) shocks in the 1970-2007 period. Specifically, we investigate the degree to which the active management of international reserves and exchange rates impacted the transmission of international price shocks to real exchange rates. We find that active reserve management not only lowers the short-run impact of CTOT shocks significantly, but also affects the long-run adjustment of REER, effectively lowering its volatility. We also show that relatively small increases in the average holdings of reserves by Latin American economies (to levels still well below other emerging regions current averages) would provide a policy tool as effective as a fixed exchange rate regime in insulating the economy from CTOT shocks. Reserve management could be an effective alternative to fiscal or currency policies for relatively trade closed countries and economies with relatively poor institutions or high government debt. Finally, we analyze the effects of active use of reserve accumulation aimed at smoothing REERs. The result support the view that “leaning against the wind” is potent, but more effective when intervening to support weak currencies rather than intervening to slow down the pace of real appreciation. The active reserve management reduces substantially REER volatility. ER - TY - JOUR AU - Coeurdacier,Nicolas AU - Rey,Hélène TI - Home Bias in Open Economy Financial Macroeconomics JF - National Bureau of Economic Research Working Paper Series VL - No. 17691 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17691 L1 - http://www.nber.org/papers/w17691.pdf N1 - Author contact info: Nicolas Coeurdacier SciencesPo Department of Economics 28 rue des Saint Pères 75006 Paris, France E-Mail: ncoeurdacier@london.edu Helene Rey London Business School Regents Park London NW1 4SA UNITED KINGDOM Tel: 44 2070008412 E-Mail: hrey@london.edu AB - Home bias is a perennial feature of international capital markets. We review various explanations of this puzzling phenomenon highlighting recent developments in macroeconomic modelling that incorporate international portfolio choices in standard two-country general equilibrium models. We refer to this new literature as Open Economy Financial Macroeconomics. We focus on three broad classes of explanations: (i) hedging motives in frictionless financial markets (real exchange rate and non-tradable income risk), (ii) asset trade costs in international financial markets (such as transaction costs or differences in tax treatments between national and foreign assets), (iii) informational frictions and behavioural biases. Recent theories call for new portfolio facts beyond equity home bias. We present new evidence on crossborder asset holdings across different types of assets: equities, bonds and bank lending and new micro data on institutional holdings of equity at the fund level. These data should inform macroeconomic modelling of the open economy and a growing literature of models of delegated investment. ER - TY - JOUR AU - Amarante,Verónica AU - Manacorda,Marco AU - Miguel,Edward AU - Vigorito,Andrea TI - Do Cash Transfers Improve Birth Outcomes? Evidence from Matched Vital Statistics, Social Security and Program Data JF - National Bureau of Economic Research Working Paper Series VL - No. 17690 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17690 L1 - http://www.nber.org/papers/w17690.pdf N1 - Author contact info: Veronica Amarante Universidad de la Republica Joaquin Requena 1375 Montevideo 11200 Uruguay E-Mail: vero@iecon.ccee.edu.uy Marco Manacorda Department of Economics Queen Mary University of London CEP - London School of Economics Houghton Street London WC2A 2AE UK E-Mail: m.manacorda@lse.ac.uk Edward Miguel Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720 Tel: 510/642-7162 Fax: 510/642-6615 E-Mail: emiguel@econ.berkeley.edu Andrea Vigorito Instituto de Economia Facultad de Ciencias Economicas Universidad de la Republica Joaquin Requena 1375 Montevideo 11200 Uruguay E-Mail: andrea@iecon.ccee.edu.uy AB - There is limited empirical evidence on whether unrestricted cash social assistance to poor pregnant women improves children’s birth outcomes. Using program administrative micro-data matched to longitudinal vital statistics on the universe of births in Uruguay, we estimate that participation in a generous cash transfer program led to a sizeable 15% reduction in the incidence of low birthweight. Improvements in mother nutrition and a fall in labor supply, out-of-wedlock births and mother’s smoking all appear to contribute to the effect. We conclude that, by improving child health, unrestricted unconditional cash transfers may help break the cycle of intergenerational poverty. ER - TY - JOUR AU - Nardi,Mariacristina De AU - French,Eric AU - Jones,John Bailey AU - Gooptu,Angshuman TI - Medicaid and the Elderly JF - National Bureau of Economic Research Working Paper Series VL - No. 17689 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17689 L1 - http://www.nber.org/papers/w17689.pdf N1 - Author contact info: Mariacristina De Nardi Federal Reserve Bank of Chicago 230 South LaSalle St. Chicago, IL 60604 Tel: 312/322-5769 Fax: 312/322-2357 E-Mail: denardim@nber.org Eric French Research Department Federal Reserve Bank of Chicago 230 South LaSalle Street Chicago, IL 60604 E-Mail: efrench@frbchi.org John Bailey Jones Department of Economics BA-113B University at Albany State University of New York Albany, NY 12222 Tel: 518/442-4926 E-Mail: jbjones@albany.edu Angshuman Gooptu Harris School 1155 East 60th Street Chicago, IL 60637 E-Mail: agoopt1@gmail.com AB - We describe the Medicaid eligibility rules for the elderly. Medicaid is administered jointly by the Federal and state governments, and each state has significant flexibility on the details of the implementation. We document the features common to all states, but we also highlight the most salient state-level differences. There are two main pathways to Medicaid eligibility for people over age 65: either having low assets and income, or being impoverished due to large medical expenses. The first group of recipients (the categorically needy) mostly includes life-long poor individuals, while the second group (the medically needy) includes people who might have earned substantial amounts of money during their lifetime but have become impoverished by large medical expenses. The categorically needy program thus only affects the savings decision of people who have been poor throughout most of their lives. In contrast, the medically needy program provides some insurance even to people who have higher income and assets. Thus, this second pathway is to some extent going to affect the savings of the relatively higher income and assets people. ER - TY - JOUR AU - Nardi,Mariacristina De AU - French,Eric AU - Benson,David TI - Consumption and the Great Recession JF - National Bureau of Economic Research Working Paper Series VL - No. 17688 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17688 L1 - http://www.nber.org/papers/w17688.pdf N1 - Author contact info: Mariacristina De Nardi Federal Reserve Bank of Chicago 230 South LaSalle St. Chicago, IL 60604 Tel: 312/322-5769 Fax: 312/322-2357 E-Mail: denardim@nber.org Eric French Research Department Federal Reserve Bank of Chicago 230 South LaSalle Street Chicago, IL 60604 E-Mail: efrench@frbchi.org David Benson 230 S. La Salle St. Chicago, IL 60604 E-Mail: dbenson@frbchi.org AB - We document some key facts about aggregate consumption and its subcomponents over time. We then document the behavior of some important determinants of consumption, such as consumers’ expectations about their future income, and changes in the consumers’ wealth positions. Finally, we use a simple permanent income model to show that the observed drop in consumption during the Great Recession can be explained by the observed drops in wealth and income expectations. ER - TY - JOUR AU - Fan,Joseph AU - Morck,Randall AU - Yeung,Bernard TI - Capitalizing China JF - National Bureau of Economic Research Working Paper Series VL - No. 17687 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17687 L1 - http://www.nber.org/papers/w17687.pdf N1 - Author contact info: Joseph Fan School of Accountancy Chinese University of Hong Kong Shatin, N.T. Hong Kong SAR Tel: (852) 2609 7839 Fax: (852) 2603 5114 E-Mail: pjfan@cuhk.edu.hk Randall Morck Faculty of Business University of Alberta Edmonton, AB T6G 2R6 CANADA Tel: 780/492-5683 Fax: 780/492-3325 E-Mail: randall.morck@ualberta.ca Bernard Yeung National University of Singapore Mochtar Riady Building 15 Kent Ridge Drive BIZ 1, Level 6, #6-19 Singapore 119245 Tel: +65 6516 3075 Fax: +65 6779 1365 E-Mail: bizdean@nus.edu.sg M3 - presented at "Capitalizing China Conference", December 15-16, 2009 AB - Despite a vast accumulation of private capital, China is not embracing capitalism. Deceptively familiar capitalist features disguise the profoundly unfamiliar foundations of “market socialism with Chinese characteristics.” The Chinese Communist Party (CCP), by controlling the career advancement of all senior personnel in all regulatory agencies, all state-owned enterprises (SOEs), and virtually all major financial institutions state-owned enterprises (SOEs), and senior Party positions in all but the smallest non-SOE enterprises, retains sole possession of Lenin’s Commanding Heights. This manuscript introduces the chapters comprising the NBER volume Capitalizing China (Fan and Morck, eds. 2012), which examine China’s high savings rate, banking system, financial markets, financial regulations, corporate governance, and public finances; and consider policy alternatives the CCP might consider if its goal is China’s elevation into the ranks of high income countries. ER - TY - JOUR AU - Wincoop,Eric van TI - International Contagion Through Leveraged Financial Institutions JF - National Bureau of Economic Research Working Paper Series VL - No. 17686 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17686 L1 - http://www.nber.org/papers/w17686.pdf N1 - Author contact info: Eric van Wincoop Department of Economics University of Virginia P.O. Box 400182 Charlottesville, VA 22904-4182 Tel: 434/924-3997 Fax: 434/982-2904 E-Mail: vanwincoop@virginia.edu AB - The 2008-2009 financial crises, while originating in the United States, witnessed a drop in asset prices and output that was at least as large in the rest of the world as in the United States. A widely held view is that this was the result of global transmission through leveraged financial institutions. We investigate this in the context of a simple two-country model. The paper highlights what the various transmission mechanisms associated with balance sheet losses are, how they operate, what their magnitudes are and what the role is of different types of borrowing constraints faced by leveraged institutions. For realistic parameters we find that the model cannot account for the global nature of the crisis, both in terms of the size of the impact and the extent of transmission. ER - TY - JOUR AU - Jaffee,Dwight AU - Quigley,John M. TI - The Future of the Government Sponsored Enterprises: The Role for Government in the U.S. Mortgage Market JF - National Bureau of Economic Research Working Paper Series VL - No. 17685 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17685 L1 - http://www.nber.org/papers/w17685.pdf N1 - Author contact info: Dwight Jaffee Haas School of Business University of California Berkeley, CA 94720-1900 Tel: 510/642-1273 Fax: 510/643-7441 E-Mail: jaffee@haas.berkeley.edu John M. Quigley Department of Economics Evans Hall #3880 University of California Berkeley, CA 94720-3880 Tel: 510-643-7411 Fax: 510-643-9657 E-Mail: quigley@econ.berkeley.edu M1 - published as Dwight Jaffee, John M. Quigley. "The Future of the Government Sponsored Enterprises: The Role for Government in the U.S. Mortgage Market," in Edward Glaeser and Todd Sinai, editors, "Housing and the Financial Crisis" University of Chicago Press (2012) M3 - presented at "Housing and the Financial Crisis", November 17-18, 2011 AB - This paper analyzes options for reforming the U.S. housing finance system in view of the failure of Fannie Mae and Freddie Mac as government sponsored enterprises (GSEs). The options considered include GSE reform, a range of possible new governmental mortgage guarantee plans, and greater reliance on private mortgage markets. The analysis also considers the likely consequences of adopting alternative roles for government in the U.S. housing and mortgage markets. We start by reviewing the history of the GSEs and their contributions to the operation of U.S. housing and mortgage markets, including the actions that led to their failure in conjunction with the recent mortgage market crisis. The reform options we consider include those proposed in a 2011 U.S. Treasury White Paper, plans for new government mortgage guarantees from various researchers and organizations, and the evidence from Western European countries for the efficacy of private mortgages markets. ER - TY - JOUR AU - Schlenker,Wolfram AU - Walker,W. Reed TI - Airports, Air Pollution, and Contemporaneous Health JF - National Bureau of Economic Research Working Paper Series VL - No. 17684 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17684 L1 - http://www.nber.org/papers/w17684.pdf N1 - Author contact info: Wolfram Schlenker Department of Economics School of International and Public Affairs Columbia University 420 West 118th Street, MC 3323 New York, NY 10027 Tel: 212/854-1806 Fax: 212/854-5765 E-Mail: wolfram.schlenker@columbia.edu Reed Walker Graduate School of Arts and Sciences Department of Economics Columbia University 1022 International Affairs Building New York, NY 10027 Tel: 315-382-4986 E-Mail: rw2157@columbia.edu AB - Airports are some of the largest sources of air pollution in the United States. We demonstrate that daily airport runway congestion contributes significantly to local pollution levels and contemporaneous health of residents living nearby and downwind from airports. Our research design exploits the fact that network delays originating from large airports on the East Coast increase runway congestion in California, which in turn increases daily pollution levels around California airports. Using the component of California air pollution driven by airport congestion, we find that carbon monoxide (CO) leads to significant increases in hospitalization rates for asthma, respiratory, and heart related emergency room admissions that are an order of magnitude larger than conventional estimates: A one standard deviation increase in daily pollution levels leads to an additional $1 million in hospitalization costs for respiratory and heart related admissions for the 6 million individuals living within 10km (6.2 miles) of the 12 largest airports in California. While infants and the elderly are more sensitive to air pollution, we also find significant relationships for the adult population. The health impacts are driven by CO, not NO2 or O3, and occur at levels far below existing EPA mandates. Our results suggest there may be sizable morbidity benefits from lowering the existing CO standard. ER - TY - JOUR AU - Ciccone,Antonio AU - Peri,Giovanni TI - Schooling Supply and the Structure of Production: Evidence from US States 1950-1990 JF - National Bureau of Economic Research Working Paper Series VL - No. 17683 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17683 L1 - http://www.nber.org/papers/w17683.pdf N1 - Author contact info: Antonio Ciccone Universitat Pompeu Fabra E-Mail: antonio.ciccone@upf.edu Giovanni Peri Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/752-3033 E-Mail: gperi@ucdavis.edu AB - We find that over the period 1950-1990, US states absorbed increases in the supply of schooling due to tighter compulsory schooling and child labor laws mostly through within-industry increases in the schooling intensity of production. Shifts in the industry composition towards more schooling-intensive industries played a less important role. To try and understand this finding theoretically, we consider a free trade model with two goods/industries, two skill types, and many regions that produce a fixed range of differentiated varieties of the same goods. We find that a calibrated version of the model can account for shifts in schooling supply being mostly absorbed through within-industry increases in the schooling intensity of production even if the elasticity of substitution between varieties is substantially higher than estimates in the literature. ER - TY - JOUR AU - Goodhart,Charles TI - Global Macroeconomic and Financial Supervision: Where Next? JF - National Bureau of Economic Research Working Paper Series VL - No. 17682 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17682 L1 - http://www.nber.org/papers/w17682.pdf N1 - Author contact info: Charles Goodhart London School of Economics E-Mail: caegoodhart@aol.com M3 - presented at "Globalization in an Age of Crisis", September 14-16, 2011 AB - The overriding practical problem now is the tension between the global financial and market system and the national political and power structures. The main analytical short-coming lies in the failure to incorporate financial frictions, especially default, into our macro-economic models. Neither a move to a global sovereign authority, nor a reversion towards narrower economic nationalism, seems likely to take place in the near future. Meanwhile, the adjustment to economic imbalances remains asymmetric, with almost all the pressure on deficit countries. Almost by definition surplus countries are “virtuous”. But current account surpluses have to be matched by net capital outflows. Such capital flows to weaker deficit countries have often had unattractive returns. A program to give earlier and greater warnings of the risks of investing in deficit countries could lead to earlier policy reaction, and reduce the risk of crisis. ER - TY - JOUR AU - Wang,Jing AU - Medianu,Dana AU - Whalley,John TI - The Contribution of China, India and Brazil to Narrowing North-South Differences in GDP/capita, World Trade Shares, and Market Capitalization JF - National Bureau of Economic Research Working Paper Series VL - No. 17681 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17681 L1 - http://www.nber.org/papers/w17681.pdf N1 - Author contact info: Jing Wang Institute of Quantitative & Technical Economics Chinese Academy of Social Sciences (CASS). Beijing China E-Mail: wj@cass.org.cn Dana Medianu Department of Economics Social Science Centre University of Western Ontario London, ON N6A 5C2 Canada E-Mail: dmedianu@uwo.ca John Whalley Department of Economics Social Science Centre University of Western Ontario London, ON N6A 5C2 CANADA Tel: 519/661-3509 Fax: 519/661-3666 E-Mail: jwhalley@uwo.ca AB - This paper focuses on the contribution to recent narrowing of the gap between Northern and Southern economies in GDP/capita, shares in world trade and market capitalization attributable both jointly and single to China, India, and Brazil (the three currently largest rapidly growing Southern economies). We report North‐South differences in GDP/capita which (depending slightly on definition of North and South, as well as price deflators used) fall from 22 to 15.9 in constant USD between 1990 and 2009, changing Northern and Southern shares in world trade which fall for the North from 82.3% to 64.4% and rise for the South from 17.7% to 35.6%, and a changing North‐South gap in stock market capitalizations from 27.6 to 3.3 over the same time. In contrast the North‐China gap falls from 57.2 to 13.1 between 1990 and 2009, and India from 70.4 to 38.1 using market exchange rates and from 23.4 to 5.5 for China and from 20.7 to 11.4 for India using PPP rates. We calculate the portions of North‐South gap change after 1990 which is accounted for by growth individually and jointly of China, India, and Brazil. Our calculations show that the majority of the change occurs from growth in these three economies, and the most from China. We suggest that the conventional view of a North‐South bipolar world may need recasting into a tripolar world of the North, the Large South, and the rest of the South. In this, world manufacturing activity, trade, and even more rapidly, market capitalization are gravitating towards the Large Three, with a narrowing South‐Large Three gap as well as a shrinking North‐Large Three gap. ER - TY - JOUR AU - Costinot,Arnaud AU - Lorenzoni,Guido AU - Werning,Iván TI - A Theory of Capital Controls as Dynamic Terms-of-Trade Manipulation JF - National Bureau of Economic Research Working Paper Series VL - No. 17680 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17680 L1 - http://www.nber.org/papers/w17680.pdf N1 - Author contact info: Arnaud Costinot Department of Economics MIT, E52-243B 50 Memorial Drive Cambridge MA 02142-1347 Tel: 617/324-1712 Fax: 617/253-1330 E-Mail: costinot@mit.edu Guido Lorenzoni MIT Department of Economics E52-251C 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-4836 Fax: 617/253-1330 E-Mail: glorenzo@mit.edu Ivan Werning Department of Economics MIT 50 Memorial Drive, E51-251a Cambridge, MA 02142-1347 Tel: 617/452-3662 Fax: 617/253-1330 E-Mail: iwerning@mit.edu AB - This paper develops a simple theory of capital controls as dynamic terms-of-trade manipulation. We study an infinite horizon endowment economy with two countries. One country chooses taxes on international capital flows in order to maximize the welfare of its representative agent, while the other country is passive. We show that capital controls are not guided by the absolute desire to alter the intertemporal price of the goods produced in any given period, but rather by the relative strength of this desire between two consecutive periods. Specifically, it is optimal for the strategic country to tax capital inflows (or subsidize capital outflows) if it grows faster than the rest of the world and to tax capital outflows (or subsidize capital inflows) if it grows more slowly. In the long-run, if relative endowments converge to a steady state, taxes on international capital flows converge to zero. Although our theory emphasizes interest rate manipulation, the country's net financial position per se is irrelevant. ER - TY - JOUR AU - Chong,Alberto AU - O,Ana L. De La AU - Karlan,Dean AU - Wantchekon,Leonard TI - Looking Beyond the Incumbent: The Effects of Exposing Corruption on Electoral Outcomes JF - National Bureau of Economic Research Working Paper Series VL - No. 17679 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17679 L1 - http://www.nber.org/papers/w17679.pdf N1 - Author contact info: Alberto Chong Inter-American Development Bank E-Mail: ALBERTOCH@iadb.org Ana L. De La O Yale University 177 Prospect Street New Haven, CT 06520 E-Mail: ana.delao@yale.edu Dean Karlan Department of Economics Yale University P.O. Box 208269 New Haven, CT 06520-8629 Tel: 203/432-4479 Fax: 203/432-5591 E-Mail: dean.karlan@yale.edu Leonard Wantchekon Princeton University E-Mail: lwantche@princeton.edu AB - Does information about rampant political corruption increase electoral participation and the support for challenger parties? Democratic theory assumes that offering more information to voters will enhance electoral accountability. However, if there is consistent evidence suggesting that voters punish corrupt incumbents, it is unclear whether this translates into increased support for challengers and higher political participation. We provide experimental evidence that information about copious corruption not only decreases incumbent support in local elections in Mexico, but also decreases voter turnout, challengers' votes, and erodes voters' identification with the party of the corrupt incumbent. Our results suggest that while flows of information are necessary, they may be insufficient to improve political accountability, since voters may respond to information by withdrawing from the political process. We conclude with a discussion of the institutional contexts that could allow increased access to information to promote government accountability. ER - TY - JOUR AU - Compton,Janice AU - Pollak,Robert A. TI - Family Proximity, Childcare, and Women's Labor Force Attachment JF - National Bureau of Economic Research Working Paper Series VL - No. 17678 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17678 L1 - http://www.nber.org/papers/w17678.pdf N1 - Author contact info: Janice Compton Department of Economics University of Manitoba Winnipeg, MB, R3R 5V5 CANADA E-Mail: comptonj@cc.umanitoba.ca Robert Pollak Washington University in St. Louis Arts and Sciences and the Olin Business School Campus Box 1133 1 Brookings Drive St. Louis, MO 63130-4899 Tel: 314/935-4918 Fax: 314/935-6359 E-Mail: pollak@wustl.edu AB - We show that close geographical proximity to mothers or mothers-in-law has a substantial positive effect on the labor supply of married women with young children. We argue that the mechanism through which proximity increases labor supply is the availability of childcare. We interpret availability broadly enough to include not only regular scheduled childcare during work hours but also an insurance aspect of proximity (e.g., a mother or mother-in-law who can provide irregular or unanticipated childcare). Using two large datasets, the National Survey of Families and Households and the public use files of the U.S. Census, we find that the predicted probability of employment and labor force participation is 4-10 percentage points higher for married women with young children living in close proximity to their mothers or their mothers-in-law compared with those living further away. ER - TY - JOUR AU - Lindo,Jason M. AU - Swensen,Isaac D. AU - Waddell,Glen R. TI - Are Big-Time Sports a Threat to Student Achievement? JF - National Bureau of Economic Research Working Paper Series VL - No. 17677 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17677 L1 - http://www.nber.org/papers/w17677.pdf N1 - Author contact info: Jason M. Lindo Department of Economics University of Oregon Eugene, OR 97403-1285 Tel: 541/346-4664 E-Mail: jlindo@uoregon.edu Isaac Swensen Department of Economics University of Oregon Eugene, OR 97403-1285 E-Mail: isaac@uoregon.edu Glen Waddell Department of Economics University of Oregon Eugene, OR 97403-1285 Tel: 541 346 1259 E-Mail: waddell@uoregon.edu AB - We consider the relationship between collegiate-football success and non-athlete student performance. We find that the team's success significantly reduces male grades relative to female grades. This phenomenon is only present in fall quarters, which coincides with the football season. Using survey data, we find that males are more likely than females to increase alcohol consumption, decrease studying, and increase partying in response to the success of the team. Yet, females also report that their behavior is affected by athletic success, suggesting that their performance is likely impaired but that this effect is masked by the practice of grade curving. ER - TY - JOUR AU - Almond,Douglas AU - Currie,Janet AU - Herrmann,Mariesa TI - From Infant to Mother: Early Disease Environment and Future Maternal Health JF - National Bureau of Economic Research Working Paper Series VL - No. 17676 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17676 L1 - http://www.nber.org/papers/w17676.pdf N1 - Author contact info: Douglas Almond Department of Economics Columbia University International Affairs Building, MC 3308 420 West 118th Street New York, NY 10027 Tel: 212/854-7248 Fax: 212/854-3239 E-Mail: da2152@columbia.edu Janet Currie Princeton University 316 Wallace Hall Princeton, NJ 08544 Tel: 609-258-7393 Fax: 609-258-5974 E-Mail: jcurrie@princeton.edu Mariesa Herrmann International Affairs Building Department of Economics Columbia University 420 W 118th Street New York, NY 10027 E-Mail: mariesah@gmail.com AB - This paper examines the links between the disease environment around the time of a woman's birth, and her health at the time she delivers her own infant. Our results suggest that exposure to disease in early childhood significantly increases the incidence of diabetes in the population of future mothers. The exposed mothers are less likely to be married, have fewer years of education, are more likely to gain over 60 pounds while pregnant, and are more likely to smoke while pregnant. Not surprisingly then, exposure increases the probability of low birth weight in the next generation, at least among whites. Among whites, this effect remains when we control for maternal behaviors as well as disease exposure. Among blacks, we find that maternal exposure reduces the incidence of low birth weight. The difference between whites and blacks may reflect a “scarring” vs. selection story; whites who go on to have children are negatively impacted, while blacks who go on to have children are positively selected having survived a higher early childhood mortality rate. ER - TY - JOUR AU - Levchenko,Andrei A. TI - International Trade and Institutional Change JF - National Bureau of Economic Research Working Paper Series VL - No. 17675 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17675 L1 - http://www.nber.org/papers/w17675.pdf N1 - Author contact info: Andrei Levchenko Department of Economics University of Michigan 611 Tappan Street Ann Arbor, MI 48109 Tel: 734/764-3296 E-Mail: alev@umich.edu AB - This paper analyzes the impact of international trade on the quality of institutions, such as contract enforcement, property rights, or investor protection. It presents a model in which imperfect institutions create rents for some parties within the economy, and are a source of comparative advantage in trade. Institutional quality is determined as an equilibrium of a political economy game. When countries share the same technology, there is a "race to the top'' in institutional quality: irrespective of country characteristics, both trade partners are forced to improve institutions after opening. On the other hand, domestic institutions will not improve in either country when one of the countries has a strong enough technological comparative advantage in the institutionally intensive good. We provide empirical evidence for a related cross-sectional prediction of the model. Countries whose exogenous geographical characteristics predispose them to exporting in institutionally intensive sectors exhibit significantly higher institutional quality. ER - TY - JOUR AU - Davis,Lucas W. TI - Prospects for Nuclear Power JF - National Bureau of Economic Research Working Paper Series VL - No. 17674 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17674 L1 - http://www.nber.org/papers/w17674.pdf N1 - Author contact info: Lucas W. Davis Haas School of Business University of California Berkeley, CA 94720-1900 E-Mail: ldavis@haas.berkeley.edu AB - The prospects for a revival of nuclear power were dim even before the partial reactor meltdowns at the Fukushima nuclear plant. Nuclear power has long been controversial because of concerns about nuclear accidents, proliferation risk, and the storage of spent fuel. These concerns are real and important. In addition, however, a key challenge for nuclear power has been the high cost of construction for nuclear plants. Construction costs are high enough that it becomes difficult to make an economic argument for nuclear, even before incorporating these external costs. This is particularly true in countries like the United States where recent technological advances have dramatically increased the availability of natural gas. ER - TY - JOUR AU - Gerber,Alan S. AU - Huber,Gregory A. AU - Doherty,David AU - Dowling,Conor M. AU - Hill,Seth J. TI - Do Perceptions of Ballot Secrecy Influence Turnout? Results from a Field Experiment JF - National Bureau of Economic Research Working Paper Series VL - No. 17673 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17673 L1 - http://www.nber.org/papers/w17673.pdf N1 - Author contact info: Alan S. Gerber Yale University Institution for Social and Policy Studies 77 Prospect Street New Haven, CT 06520 Tel: 203/432-5232 E-Mail: alan.gerber@yale.edu Gregory A. Huber Yale University Institution for Social and Policy Studies 77 Prospect Street New Haven, CT 06520 E-Mail: gregory.huber@yale.edu David Doherty Loyola University Chicago Political Science Department 1032 W. Sheridan Road Coffey Hall, 3rd Floor Chicago, IL 60660 E-Mail: ddoherty@luc.edu Conor M. Dowling Yale University Institution for Social and Policy Studies 77 Prospect St. New Haven, CT 06520 E-Mail: conor.dowling@yale.edu Seth J. Hill Institution for Social and Policy Studies 77 Prospect Street New Haven, CT 06520 E-Mail: seth.hill@yale.edu AB - Although the secret ballot has long been secured as a legal matter in the United States, formal secrecy protections are not equivalent to convincing citizens that they may vote privately and without fear of reprisal. We present survey evidence that those who have not previously voted are particularly likely to voice doubts about the secrecy of the voting process. We then report results from a field experiment where we provided registered voters with information about ballot secrecy protections prior to the 2010 general election. We find that these letters increased turnout for registered citizens without records of previous turnout, but did not appear to influence the behavior of citizens who had previously voted. These results suggest that although the secret ballot is a long-standing institution in the United States, providing basic information about ballot secrecy can affect the decision to participate to an important degree. ER - TY - JOUR AU - Doepke,Matthias AU - Tertilt,Michèle AU - Voena,Alessandra TI - The Economics and Politics of Women's Rights JF - National Bureau of Economic Research Working Paper Series VL - No. 17672 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17672 L1 - http://www.nber.org/papers/w17672.pdf N1 - Author contact info: Matthias Doepke Northwestern University Department of Economics 2001 Sheridan Road Evanston, IL 60208 Tel: 847-491-8207 E-Mail: doepke@northwestern.edu Michèle Tertilt Department of Economics University of Mannheim L7, 3-5 68131 Mannheim Germany Tel: +49-621-181-1902 E-Mail: tertilt@uni-mannheim.de Alessandra Voena Harvard Kennedy School 79 John F Kennedy Street, Mailbox 34 Cambridge, MA 02138 E-Mail: ale.voena@gmail.com AB - Women's rights and economic development are highly correlated. Today, the discrepancy between the legal rights of women and men is much larger in developing compared to developed countries. Historically, even in countries that are now rich women had few rights before economic development took off. Is development the cause of expanding women's rights, or conversely, do women's rights facilitate development? We argue that there is truth to both hypotheses. The literature on the economic consequences of women's rights documents that more rights for women lead to more spending on health and children, which should benefit development. The political-economy literature on the evolution of women's rights finds that technological change increased the costs of patriarchy for men, and thus contributed to expanding women's rights. Combining these perspectives, we discuss the theory of Doepke and Tertilt (2009), where an increase in the return to human capital induces men to vote for women's rights, which in turn promotes growth in human capital and income per capita. ER - TY - JOUR AU - Ferreira,Fernando AU - Gyourko,Joseph TI - Does Gender Matter for Political Leadership? The Case of U.S. Mayors JF - National Bureau of Economic Research Working Paper Series VL - No. 17671 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17671 L1 - http://www.nber.org/papers/w17671.pdf N1 - Author contact info: Fernando Ferreira The Wharton School University of Pennsylvania 1461 Steinberg - Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104-6302 Tel: 215/898-7181 Fax: 215/573-2220 E-Mail: fferreir@wharton.upenn.edu Joseph Gyourko University of Pennsylvania Wharton School of Business 3620 Locust Walk 1480 Steinberg-Dietrich Hall Philadelphia, PA 19104-6302 Tel: 215/898-3003 Fax: 215/573-2220 E-Mail: gyourko@wharton.upenn.edu AB - What are the consequences of electing a female leader for policy and political outcomes? We answer this question in the context of U.S. cities, where women’s participation in mayoral elections increased from negligible numbers in 1970 to about one-third of the elections in the 2000’s. We use a novel data set of U.S. mayoral elections from 1950 to 2005, and apply a regression discontinuity design to deal with the endogeneity of female candidacy to city characteristics. In contrast to most research on the influence of female leadership, we find no effect of gender of the mayor on policy outcomes related to the size of local government, the composition of municipal spending and employment, or crime rates. While female mayors do not implement different policies, they do appear to have higher unobserved political skills, as they have a 6-7 percentage point higher incumbent effect than a comparable male. But we find no evidence of political spillovers: exogenously electing a female mayor does not change the long run political success of other female mayoral candidates in the same city or of female candidates in local congressional elections. ER - TY - JOUR AU - Magud,Nicolas E. AU - Reinhart,Carmen M. AU - Vesperoni,Esteban R. TI - Capital Inflows, Exchange Rate Flexibility, and Credit Booms JF - National Bureau of Economic Research Working Paper Series VL - No. 17670 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17670 L1 - http://www.nber.org/papers/w17670.pdf N1 - Author contact info: Nicolas Magud International Monetary Fund 700 19 Street NW Washington DC 20431 Tel: (202) 623-8497 Fax: (202) 589-8497 E-Mail: nmagud@imf.org Carmen M. Reinhart Peterson Institute for International Economics 1750 Massachusetts Avenue, NW Washington, DC 20036-1903 Tel: 202-454-1325 Fax: 202-659-3225 E-Mail: creinhart@piie.com Esteban R. Vesperoni International Monetary Fund 700 19 Street NW Washington DC 20431 E-Mail: evesperoni@imf.org AB - The prospects of expansionary monetary policies in the advanced countries for the foreseeable future have renewed the debate over policy options to cope with large capital inflows that are, at least partly, driven by low interest rates in the financial centers. Historically, capital flow bonanzas have often fueled sharp credit expansions in advanced and emerging market economies alike. Focusing primarily on emerging markets, we analyze the impact of exchange rate flexibility on credit markets during periods of large capital inflows. We show that credit grows more rapidly and its composition tilts to foreign currency in economies with less flexible exchange rate regimes, and that these results are not explained entirely by the fact that the latter attract more capital inflows than economies with more flexible regimes. Our findings thus suggest countries with less flexible exchange rate regimes may stand to benefit the most from regulatory policies that reduce banks’ incentives to tap external markets and to lend/borrow in foreign currency; these policies include marginal reserve requirements on foreign lending, currency-dependent liquidity requirements, and higher capital requirement and/or dynamic provisioning on foreign exchange loans. ER - TY - JOUR AU - Bosetti,Valentina AU - Frankel,Jeffrey A. TI - Sustainable Cooperation in Global Climate Policy: Specific Formulas and Emission Targets to Build on Copenhagen and Cancun JF - National Bureau of Economic Research Working Paper Series VL - No. 17669 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17669 L1 - http://www.nber.org/papers/w17669.pdf N1 - Author contact info: Valentina Bosetti Fondazione Eni Enrico Mattei E-Mail: valentina.bosetti@feem.it Jeffrey A. Frankel Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/496-3834 Fax: 617/496-5747 E-Mail: jeffrey_frankel@harvard.edu M3 - presented at "SI 2011 Environmental & Energy Economics", July 29-30, 2011 AB - We explore a framework that could be used to assign quantitative allocations of emissions of greenhouse gases (GHGs), across countries, one budget period at a time. Under the two-part plan: (i) China, India, and other developing countries accept targets at Business as Usual (BAU) in the coming budget period, the same period in which the US first agrees to cuts below BAU; and (ii) all countries are asked in the future to make further cuts in accordance with a common numerical formula to all. The formula is expressed as the sum of a Progressive Reductions Factor, a Latecomer Catch-up Factor, and a Gradual Equalization Factor. This paper builds on our previous work in many ways. First we update targets to reflect pledges made by governments after the Copenhagen Accord of December 2010 and confirmed at the Cancun meeting of December 2011. Second, the WITCH model, which we use to project economic and environmental effects of any given set of emission targets, has been refined and updated to reflect economic and technological developments. We include the possibility of emissions reduction from bio energy (BE), carbon capture and storage (CCS), and avoided deforestation and forest degradation (REDD+) which is an important component of pledges in several developing countries. Third, we use a Nash criterion for evaluating whether a country’s costs are too high to sustain cooperation. ER - TY - JOUR AU - Bitler,Marianne P. AU - Schmidt,Lucie TI - Utilization of Infertility Treatments: The Effects of Insurance Mandates JF - National Bureau of Economic Research Working Paper Series VL - No. 17668 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17668 L1 - http://www.nber.org/papers/w17668.pdf N1 - Author contact info: Marianne Bitler Department of Economics University of California, Irvine 3151 Social Science Plaza Irvine, CA 96297 Tel: 949/824-5606 Fax: 949/824-2182 E-Mail: mbitler@uci.edu Lucie Schmidt Dept. of Economics Schapiro Hall Williams College Williamstown, MA 02167 E-Mail: lschmidt@williams.edu AB - Over the last several decades, both delay of childbearing and fertility problems have become increasingly common among women in developed countries. At the same time, technological changes have made many more options available to individuals experiencing fertility problems. However, these technologies are expensive, and only 25% of health insurance plans in the United States cover infertility treatment. As a result of these high costs, legislation has been passed in 15 states that mandates insurance coverage of infertility treatment in private insurance plans. In this paper, we examine whether mandated insurance coverage for infertility treatment affects utilization. We allow utilization effects to differ by age and education, since previous research suggests that older, more educated women should be more likely to be directly affected by the mandates than younger women and less educated women, both because they are at higher risk of fertility problems and because they are more likely to have private health insurance which is subject to the mandate. We find robust evidence that the mandates do have a significant effect on utilization for older, more educated women that is larger than the effects found for other groups. These effects are largest for the use of ovulation-inducing drugs and artificial insemination. ER - TY - JOUR AU - Bitler,Marianne AU - Hoynes,Hilary W. TI - Immigrants, Welfare Reform, and the U.S. Safety Net JF - National Bureau of Economic Research Working Paper Series VL - No. 17667 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17667 L1 - http://www.nber.org/papers/w17667.pdf N1 - Author contact info: Marianne Bitler Department of Economics University of California, Irvine 3151 Social Science Plaza Irvine, CA 96297 Tel: 949/824-5606 Fax: 949/824-2182 E-Mail: mbitler@uci.edu Hilary W. Hoynes Department of Economics University of California, Davis One Shields Ave. Davis, CA 95616-8578 Tel: 530/564-0505 Fax: 530/752-9382 E-Mail: hwhoynes@ucdavis.edu AB - Beginning with the 1996 federal welfare reform law many of the central safety net programs in the U.S. eliminated eligibility for legal immigrants, who had been previously eligible on the same terms as citizens. These dramatic cutbacks affected eligibility not only for cash welfare assistance for families with children, but also for food stamps, Medicaid, SCHIP, and SSI. In this paper, we comprehensively examine the status of the U.S. safety net for immigrants and their family members. We document the policy changes that affected immigrant eligibility for these programs and use the CPS for 1995-2010 to analyze trends in program participation, income, and poverty among immigrants (and natives). We pay particular attention to the recent period and examine how immigrants and their children are faring in the “Great Recession” with an eye toward revealing how these policy changes have affected the success of the safety net in protecting this population. ER - TY - JOUR AU - Gerardi,Kristopher AU - Lambie-Hanson,Lauren AU - Willen,Paul S. TI - Do Borrower Rights Improve Borrower Outcomes? Evidence from the Foreclosure Process JF - National Bureau of Economic Research Working Paper Series VL - No. 17666 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17666 L1 - http://www.nber.org/papers/w17666.pdf N1 - Author contact info: Kristopher Gerardi Federal Reserve Bank of Atlanta 1000 Peachtree St. NE Atlanta, GA 30309 E-Mail: kristopher.gerardi@atl.frb.org Lauren Lambie-Hanson Department of Urban Studies and Planning Massachusetts Institute of Technology 77 Massachusetts Ave Room 7-346 Cambridge, MA 02139 E-Mail: lslh@mit.edu Paul S. Willen Federal Reserve Bank of Boston 600 Atlantic Avenue Boston, MA 02210-2204 Tel: 617/973-3149 Fax: 617/973-2123 E-Mail: willen968@gmail.com AB - We evaluate laws designed to protect borrowers from foreclosure. We find that these laws delay but do not prevent foreclosures. We first compare states that require lenders to seek judicial permission to foreclose with states that do not. Borrowers in judicial states are no more likely to cure and no more likely to renegotiate their loans, but the delays lead to a build-up in these states of persistently delinquent borrowers, the vast majority of whom eventually lose their homes. We next analyze a “right-to-cure” law instituted in Massachusetts on May 1, 2008. Using a difference-in-differences approach to evaluate the effect of the policy, we compare Massachusetts with neighboring states that did not adopt similar laws. We find that the right-to-cure law lengthens the foreclosure timeline but does not lead to better outcomes for borrowers. ER - TY - JOUR AU - Eichengreen,Barry TI - International Policy Coordination: The Long View JF - National Bureau of Economic Research Working Paper Series VL - No. 17665 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17665 L1 - http://www.nber.org/papers/w17665.pdf N1 - Author contact info: Barry Eichengreen Department of Economics University of California, Berkeley 549 Evans Hall 3880 Berkeley, CA 94720-3880 Tel: 510/642-2772 Fax: 510/643-0926 E-Mail: eichengr@econ.Berkeley.edu M3 - presented at "Globalization in an Age of Crisis", September 14-16, 2011 AB - This paper places current efforts at international economic policy coordination in historical perspective. It argues that successful cooperation is most likely in four sets of circumstances. First, when it centers on technical issues. Second, when cooperation is institutionalized – when procedures and precedents create presumptions about the appropriate conduct of policy and reduce the transactions costs of reaching an agreement. Third, when it is concerned with preserving an existing set of policies and behaviors (when it is concerned with preserving a policy regime). Fourth, when it occurs in the context of broad comity among nations. These points are elaborated through a review of 150 years of historical experience and then used to assess the scope for cooperative responses to the current economic crisis. ER - TY - JOUR AU - Landier,Augustin AU - Thesmar,David TI - Regulating Systemic Risk through Transparency: Tradeoffs in Making Data Public JF - National Bureau of Economic Research Working Paper Series VL - No. 17664 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17664 L1 - http://www.nber.org/papers/w17664.pdf N1 - Author contact info: Augustin Landier the Toulouse School of Economics 21 Allée de Brienne 31000 Toulouse, FRANCE E-Mail: augustin.landier@tse-fr.eu David Thesmar HEC Paris 1 rue de la libération 78351 Jouy-en-Josas cedex France Tel: 33139679412 E-Mail: thesmar@hec.fr M1 - published as Augustin Landier, David Thesmar. "Regulating Systemic Risk through Transparency: Tradeoffs in Making Data Public," in Markus K. Brunnermeier and Arvind Krishnamurthy, editors, "Systemic Risk and Macro Modeling" University of Chicago Press (2012) M3 - presented at "Systemic Risk and Macro Modeling", April 28, 2011 AB - Public or partial disclosure of financial data is a key element in the design of a new regulatory environment. We study the costs and benefits of higher public access to financial data and analyze qualitatively how frequency, disclosure lag and granularity of such open data can be chosen to maximize welfare, depending on the relative magnitude of economic frictions. We lay out a simple framework to choose optimal transparency of financial data. ER - TY - JOUR AU - Jenter,Dirk AU - Lewellen,Katharina TI - CEO Preferences and Acquisitions JF - National Bureau of Economic Research Working Paper Series VL - No. 17663 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17663 L1 - http://www.nber.org/papers/w17663.pdf N1 - Author contact info: Dirk Jenter Stanford University Graduate School of Business 655 Knight Way Stanford, CA 94305-5015 Tel: 650/498-4411 E-Mail: djenter@stanford.edu Katharina Lewellen Tuck School at Dartmouth 100 Tuck Hall Hanover, NH 03755 E-Mail: katharina.lewellen@tuck.dartmouth.edu AB - This paper explores the impact of target CEOs’ retirement preferences on the incidence, the pricing, and the outcomes of takeover bids. Mergers frequently force target CEOs to retire early, and CEOs’ private merger costs are the forgone benefits of staying employed until the planned retirement date. Using retirement age as an instrument for CEOs’ private merger costs, we find strong evidence that target CEO preferences affect merger patterns. The likelihood of receiving a takeover bid increases sharply when target CEOs reach age 65. The probability of a bid is close to 4% per year for target CEOs below age 65 but increases to 6% for the retirement-age group, a 50% increase in the odds of receiving a bid. This increase in takeover activity appears discretely at the age-65 threshold, with no gradual increase as CEOs approach retirement age. Moreover, observed takeover premiums and target announcement returns are significantly lower when target CEOs are older than 65, reinforcing the conclusion that retirement-age CEOs are more willing to accept takeover offers. These results suggest that the preferences of target CEOs have first-order effects on both bidder and target behavior. ER - TY - JOUR AU - Farhi,Emmanuel AU - Gopinath,Gita AU - Itskhoki,Oleg TI - Fiscal Devaluations JF - National Bureau of Economic Research Working Paper Series VL - No. 17662 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17662 L1 - http://www.nber.org/papers/w17662.pdf N1 - Author contact info: Emmanuel Farhi Harvard University Department of Economics Littauer Center Cambridge, MA 02138 Tel: 617/496-1835 Fax: 617/495-8570 E-Mail: efarhi@harvard.edu Gita Gopinath Department of Economics Harvard University 1875 Cambridge Street Littauer 206 Cambridge, MA 02138 Tel: 617/495-8161 Fax: 617/495-7730 E-Mail: gopinath@harvard.edu Oleg Itskhoki Department of Economics Princeton University Fisher Hall 306 Princeton, NJ 08544-1021 Tel: 609/258-5493 Fax: 609/258-6419 E-Mail: itskhoki@princeton.edu AB - We show that even when the exchange rate cannot be devalued, a small set of conventional fiscal instruments can robustly replicate the real allocations attained under a nominal exchange rate devaluation in a dynamic New Keynesian open economy environment. We perform the analysis under alternative pricing assumptions— producer or local currency pricing, along with nominal wage stickiness; under arbitrary degrees of asset market completeness and for general stochastic sequences of devaluations. There are two types of fiscal policies equivalent to an exchange rate devaluation—one, a uniform increase in import tariff and export subsidy, and two, a value-added tax increase and a uniform payroll tax reduction. When the devaluations are anticipated, these policies need to be supplemented with a consumption tax reduction and an income tax increase. These policies are revenue neutral. In certain cases equivalence requires, in addition, a partial default on foreign bond holders. We discuss the issues of implementation of these policies, in particular, under the circumstances of a currency union. ER - TY - JOUR AU - Becker,Bo AU - Strömberg,Per TI - Fiduciary Duties and Equity-Debtholder Conflicts JF - National Bureau of Economic Research Working Paper Series VL - No. 17661 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17661 L1 - http://www.nber.org/papers/w17661.pdf N1 - Author contact info: Bo Becker Harvard Business School Baker Library 349 Soldiers Field Boston, MA 02163 Tel: 617/496-5335 Fax: 617/495-7659 E-Mail: bbecker@hbs.edu Per Stromberg Institute for Financial Research (SIFR) Drottninggatan 89 SE-113 60 Stockholm Sweden Tel: +46 8 728-5128 Fax: +46 8 728 5130 E-Mail: per.stromberg@sifr.org AB - We use an important legal event as a natural experiment to examine the effect of management fiduciary duties on equity-debt conflicts. A 1991 Delaware bankruptcy ruling changed the nature of corporate directors’ fiduciary duties in firms incorporated in that state. This change limited managers’ incentives to take actions favoring equity over debt for firms in the vicinity of financial distress. We show that this ruling increased the likelihood of equity issues, increased investment, and reduced firm risk, consistent with a decrease in debt-equity conflicts of interest. The changes are isolated to firms relatively closer to default. The ruling was also followed by an increase in average leverage and a reduction in covenant use. Finally, we estimate the welfare implications of this change and find that firm values increased when the rules were introduced. We conclude that managerial fiduciary duties affect equity-bond holder conflicts in a way that is economically important, has impact on ex ante capital structure choices, and affects welfare. ER - TY - JOUR AU - Goetz,Martin AU - Laeven,Luc AU - Levine,Ross TI - The Valuation Effects of Geographic Diversification: Evidence from U.S. Banks JF - National Bureau of Economic Research Working Paper Series VL - No. 17660 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17660 L1 - http://www.nber.org/papers/w17660.pdf N1 - Author contact info: Martin Goetz Financial Economist Federal Reserve Bank of Boston 600 Atlantic Avenue Boston, MA 02210 E-Mail: Martin.Goetz@bos.frb.org Luc Laeven Deputy Division Chief International Monetary Fund 700 19th Avenue, NW Washington, DC 20431 Tel: 202/623-9020 Fax: 202/623-4740 E-Mail: Llaeven@imf.org Ross Levine Department of Economics Brown University 64 Waterman Street Providence, RI 02912 Tel: 401/863-2170 E-Mail: ross_levine@brown.edu AB - This paper assesses the impact of the geographic diversification of bank holding company (BHC) assets across the United States on their market valuations. Using two novel identification strategies based on the dynamic process of interstate bank deregulation, we find that exogenous increases in geographic diversity reduce BHC valuations. These findings are consistent with the view that geographic diversity makes it more difficult for shareholders and creditors to monitor firm executives, allowing corporate insiders to extract larger private benefits from firms. ER - TY - JOUR AU - Castro,Rui AU - Clementi,Gian Luca AU - Lee,Yoonsoo TI - Cross-Sectoral Variation in The Volatility of Plant-Level Idiosyncratic Shocks JF - National Bureau of Economic Research Working Paper Series VL - No. 17659 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17659 L1 - http://www.nber.org/papers/w17659.pdf N1 - Author contact info: Rui Castro Department of Economics University of Montreal Montreal H3C3J7 CANADA E-Mail: rui.castro@umontreal.ca Gian Luca Clementi Department of Economics Stern School of Business New York University 44 West Fourth Street New York, NY 10012 Tel: 212/998-0268 Fax: 212/995-4218 E-Mail: clem@nyu.edu Yoonsoo Lee Department of Economics Sogang University Seoul, 121-742, Korea E-Mail: ylee@sogang.ac.kr AB - We estimate plant--level idiosyncratic risk in the U.S. manufacturing sector. Our proxy for risk is the volatility of the portion of TFP growth which is not explained by either industry- or economy-wide factors, or by establishments' characteristics systematically associated with growth itself. Consistent with previous studies, we find that idiosyncratic shocks are much larger than aggregate random disturbances, accounting for about 90% of the overall uncertainty faced by plants. The extent of cross-sectoral variation in idiosyncratic risk is remarkable. Plants in the most volatile sector are subject to at least three times as much uncertainty as plants in the least volatile. Our evidence indicates that idiosyncratic risk is higher in industries where the extent of creative destruction is likely to be greater. ER - TY - JOUR AU - Gresenz,Carole Roan AU - Edgington,Sarah E. AU - Laugesen,Miriam J. AU - Escarce,José J. TI - Take-Up of Public Insurance and Crowd-out of Private Insurance Under Recent CHIP Expansions to Higher Income Children JF - National Bureau of Economic Research Working Paper Series VL - No. 17658 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17658 L1 - http://www.nber.org/papers/w17658.pdf N1 - Author contact info: Carole Gresenz RAND Corporation 1200 South Hayes Street Arlington, Virginia 22202-5050 E-Mail: gresenz@rand.org Sarah E. Edgington UCLA Division of General Internal Medicine and Heath Services Research 911 Broxton Plaza Los Angeles, CA 90095 E-Mail: sarah@demography-la.com Miriam J. Laugesen Department of Health Policy and Management Mailman School of Public Health Columbia University 722 West 168th Street New York, NY 10032 E-Mail: ml3111@columbia.edu Jose Escarce UCLA Med-GIM-HSR 911 Broxton Avenue Box 951736 Los Angeles, CA 90024 Tel: 310/794-3842 Fax: 310/794-0732 E-Mail: jescarce@mednet.ucla.edu AB - We analyze the effects of states’ expansions of CHIP eligibility to children in higher income families during 2002-2009 on take-up of public coverage, crowd-out of private coverage, and rates of uninsurance. Our results indicate these expansions were associated with limited uptake of public coverage and only a two percentage point reduction in the uninsurance rate among these children. Because not all of the take-up of public insurance among eligible children is accounted for by children who transfer from being uninsured to having public insurance, our results suggest that there may be some crowd-out of private insurance coverage; the upper bound crowd-out rate we calculate is 46 percent. ER - TY - JOUR AU - Stevens,Ann Huff AU - Miller,Douglas L. AU - Page,Marianne E. AU - Filipski,Mateusz TI - The Best of Times, the Worst of Times: Understanding Pro-cyclical Mortality JF - National Bureau of Economic Research Working Paper Series VL - No. 17657 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17657 L1 - http://www.nber.org/papers/w17657.pdf N1 - Author contact info: Ann Huff Stevens Department of Economics One Shields Avenue University of California, Davis Davis, CA 95616 Tel: 530/752-3034 E-Mail: annstevens@ucdavis.edu Douglas L. Miller University of California, Davis Department of Economics One Shields Avenue Davis, CA 95616-8578 Tel: 530/752-8490 E-Mail: dlmiller@ucdavis.edu Marianne E. Page Department of Economics University of California, Davis Davis, CA 95616-8578 Tel: 530-554-4940 Fax: NA E-Mail: mepage@ucdavis.edu Mateusz Filipski Department of Agricultural Economics One Shields Ave. Davis, CA 95616 E-Mail: mjfilipski@ucdavis.edu AB - A growing literature documents cyclical movements in mortality and health. We examine this pattern more closely and attempt to identify the mechanisms behind it. Specifically, we distinguish between mechanisms that rely on fluctuations in own employment or time use and those involving factors that are external to the individual. Our investigation suggests that changes in individuals’ own behavior contribute very little to pro-cyclical mortality. Looking across broad age and gender groups, we find that own-group employment rates are not systematically related to own-group mortality. In addition, we find that most of the additional deaths that occur during times of economic growth are among the elderly, particularly elderly women, who have limited labor force attachment. Focusing on mortality among the elderly, we show that cyclicality is especially strong for deaths occurring in nursing homes, and is stronger in states where a higher fraction of the elderly reside in nursing homes. We also demonstrate that staffing in skilled nursing facilities moves counter-cyclically. Taken together, these findings suggest that cyclical fluctuations in the mortality rate may be largely driven by fluctuations in the quality of health care. ER - TY - JOUR AU - Caselli,Francesco AU - Ciccone,Antonio TI - A Note on Schooling in Development Accounting JF - National Bureau of Economic Research Working Paper Series VL - No. 17656 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17656 L1 - http://www.nber.org/papers/w17656.pdf N1 - Author contact info: Francesco Caselli Department of Economics London School of Economics Houghton Street London WC2A 2AE UNITED KINGDOM Tel: (44) (0) 2079557498 E-Mail: f.caselli@lse.ac.uk Antonio Ciccone Universitat Pompeu Fabra E-Mail: antonio.ciccone@upf.edu AB - How much would output increase if underdeveloped economies were to increase their levels of schooling? We contribute to the development accounting literature by describing a non-parametric upper bound on the increase in output that can be generated by more schooling. The advantage of our approach is that the upper bound is valid for any number of schooling levels with arbitrary patterns of substitution/complementarity. We also quantify the upper bound for all economies with the necessary data, compare our results with the standard development accounting approach, and provide an update on the results using the standard approach for a large sample of countries. ER - TY - JOUR AU - Papay,John P. AU - West,Martin R. AU - Fullerton,Jon B. AU - Kane,Thomas J. TI - Does Practice-Based Teacher Preparation Increase Student Achievement? Early Evidence from the Boston Teacher Residency JF - National Bureau of Economic Research Working Paper Series VL - No. 17646 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17646 L1 - http://www.nber.org/papers/w17646.pdf N1 - Author contact info: John Papay Brown University Education Department Providence, RI 02912 Tel: 617-493-3942 E-Mail: john_papay@mail.harvard.edu Martin West Harvard Graduate School of Education 6 Appian Way, Gutman 454 Cambridge, MA 02138 Tel: 617-496-4803 E-Mail: martin_west@gse.harvard.edu Jon Fullerton Harvard Graduate School of Education Center for Education Policy Research 50 Church Street, 4th Floor Cambridge, MA 02138 E-Mail: jon_fullerton@gse.harvard.edu Thomas J. Kane Harvard Graduate School of Education Center for Education Policy Research 50 Church St., 4th Floor Cambridge, MA 02138 Tel: 617/496-4359 E-Mail: kaneto@gse.harvard.edu AB - The Boston Teacher Residency is an innovative practice-based preparation program in which candidates work alongside a mentor teacher for a year before becoming a teacher of record in Boston Public Schools. We find that BTR graduates are more racially diverse than other BPS novices, more likely to teach math and science, and more likely to remain teaching in the district through year five. Initially, BTR graduates for whom value-added performance data are available are no more effective at raising student test scores than other novice teachers in English language arts and less effective in math. The effectiveness of BTR graduates in math improves rapidly over time, however, such that by their fourth and fifth years they out-perform veteran teachers. Simulations of the program’s overall impact through retention and effectiveness suggest that it is likely to improve student achievement in the district only modestly over the long run. ER - TY - JOUR AU - Alesina,Alberto F. AU - Carloni,Dorian AU - Lecce,Giampaolo TI - The Electoral Consequences of Large Fiscal Adjustments JF - National Bureau of Economic Research Working Paper Series VL - No. 17655 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17655 L1 - http://www.nber.org/papers/w17655.pdf N1 - Author contact info: Alberto F. Alesina Department of Economics Harvard University Littauer Center 210 Cambridge, MA 02138 Tel: 617/495-8388 Fax: 617/495-7730 E-Mail: aalesina@harvard.edu Dorian Carloni University of California, Berkeley E-Mail: dcarloni@econ.berkeley.edu Giampaolo Lecce Bocconi University E-Mail: gl834@nyu.edu M1 - published as Alberto Alesina, Dorian Carloni, Giampaolo Lecce. "The Electoral Consequences of Large Fiscal Adjustments," in Alberto Alesina and Francesco Giavazzi, editors, "Fiscal Policy after the Financial Crisis" University of Chicago Press (2012) AB - The conventional wisdom regarding the political consequences of large reductions of budget deficits is that they are very costly for the governments which implement them: they are punished by voters at the following elections. In the present paper, instead, we find no evidence that governments which quickly reduce budget deficits are systematically voted out of office in a sample of 19 OECD countries from 1975 to 2008. We also take into consideration issues of reverse causality, namely the possibility that only "strong and popular" governments can implement fiscal adjustments and thus they are not voted out of office "despite" having reduced the deficits. In the end we conclude that many governments can reduce deficits avoiding an electoral defeat. ER - TY - JOUR AU - Mulligan,Casey B. TI - The Expanding Social Safety Net JF - National Bureau of Economic Research Working Paper Series VL - No. 17654 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17654 L1 - http://www.nber.org/papers/w17654.pdf N1 - Author contact info: Casey B. Mulligan University of Chicago Department of Economics 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-9017 Fax: 773/702-8490 E-Mail: c-mulligan@uchicago.edu AB - Inflation-adjusted spending on means-tested subsidies have increased sharply since 2007, and most of this growth was due to changes in eligibility rules, and increases in subsidies per eligible person, rather than increases in the number of people who would have been eligible under pre-recession subsidy rules. The non-elderly parts of the safety net have increased from about $10,000 per year of non- or under-employment by non-elderly household heads and spouses in 2007 to almost $15,000 per year in 2010, adjusted for inflation. From 2007 to 2010, inflation-adjusted safety net spending increased $35,000 for every added year of non-employment or under-employment. As a result, the average private returns to employment are substantially less than they were in 2007. ER - TY - JOUR AU - Nagel,Stefan TI - Evaporating Liquidity JF - National Bureau of Economic Research Working Paper Series VL - No. 17653 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17653 L1 - http://www.nber.org/papers/w17653.pdf N1 - Author contact info: Stefan Nagel Stanford University Graduate School of Business 655 Knight Way Stanford, CA 94305 Tel: 650/724-9762 Fax: 650/725-7979 E-Mail: nagel_stefan@gsb.stanford.edu AB - The returns of short-term reversal strategies in equity markets can be interpreted as a proxy for the returns from liquidity provision. Analysis of reversal strategies shows that the expected return from liquidity provision is strongly time-varying and highly predictable with the VIX index. Expected returns and conditional Sharpe Ratios increase enormously along with the VIX during times of financial market turmoil, such as the financial crisis 2007-09. Even reversal strategies formed from industry portfolios (which do not yield high returns unconditionally) produce high rates of return and high Sharpe Ratios during times of high VIX. The results point to withdrawal of liquidity supply, and an associated increase in the expected returns from liquidity provision, as a main driver behind the evaporation of liquidity during times of financial market turmoil, consistent with theories of liquidity provision by financially constrained intermediaries. ER - TY - JOUR AU - Pagnotta,Emiliano AU - Philippon,Thomas TI - Competing on Speed JF - National Bureau of Economic Research Working Paper Series VL - No. 17652 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17652 L1 - http://www.nber.org/papers/w17652.pdf N1 - Author contact info: Emiliano Pagnotta New York University Stern School of Business 44 West 4th Street, Suite 9-81 New York, NY 10012 E-Mail: emiliano.pagnotta@stern.nyu.edu Thomas Philippon New York University Stern School of Business 44 West 4th Street, Suite 9-190 New York, NY 10012-1126 Tel: 212/998-0490 Fax: 212/995-4233 E-Mail: tphilipp@stern.nyu.edu AB - Two forces have reshaped global securities markets in the last decade: Exchanges operate at much faster speeds and the trading landscape has become more fragmented. In order to analyze the positive and normative implications of these evolutions, we study a framework that captures (i) exchanges' incentives to invest in faster trading technologies and (ii) investors' trading and participation decisions. Our model predicts that regulation that protect prices will lead to fragmentation and faster trading speed. Asset prices decrease when there is intermediation competition and are further depressed by price protection. Endogenizing speed can also change the slope of asset demand curves. On normative side, we find that for a given number of exchanges, faster trading is in general socially desirable. Similarly, for a given trading speed, competition among exchange increases participation and welfare. However, when speed is endogenous, competition between exchanges is not necessarily desirable. In particular, speed can be inefficiently high. Our model sheds light on important features of the experience of European and U.S. markets since the implementation of Reg. NMS, and provides some guidance for optimal regulations. ER - TY - JOUR AU - Beaudry,Paul AU - Nam,Deokwoo AU - Wang,Jian TI - Do Mood Swings Drive Business Cycles and is it Rational? JF - National Bureau of Economic Research Working Paper Series VL - No. 17651 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17651 L1 - http://www.nber.org/papers/w17651.pdf N1 - Author contact info: Paul Beaudry Department of Economics University of British Columbia Vancouver, Canada Tel: 604/822-8624 Fax: 604/822-5915 E-Mail: paulbe@interchange.ubc.ca Deokwoo Nam Department of Economics City University of Hong Kong 83 Tat Chee Avenue, Kowloon, Hong Kong E-Mail: deokwnam@cityu.edu.hk Jian Wang Research Department, Federal Reserve Bank of Dalla 2200 N. Pearl St. Dallas, TX 75201 E-Mail: Jian.Wang@dal.frb.org AB - This paper provides new evidence in support of the idea that bouts of optimism and pessimism drive much of US business cycles. In particular, we begin by using sign-restriction based identification schemes to isolate innovations in optimism or pessimism and we document the extent to which such episodes explain macroeconomic fluctuations. We then examine the link between these identified mood shocks and subsequent developments in fundamentals using alternative identification schemes (i.e., variants of the maximum forecast error variance approach). We find that there is a very close link between the two, suggesting that agents' feelings of optimism and pessimism are at least partially rational as total factor productivity (TFP) is observed to rise 8-10 quarters after an initial bout of optimism. While this later finding is consistent with some previous findings in the news shock literature, we cannot rule out that such episodes reflect self-fulfilling beliefs. Overall, we argue that mood swings account for over 50% of business cycle fluctuations in hours and output. ER - TY - JOUR AU - Bagwell,Kyle AU - Staiger,Robert W. TI - Can the Doha Round be a Development Round? Setting a Place at the Table JF - National Bureau of Economic Research Working Paper Series VL - No. 17650 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17650 L1 - http://www.nber.org/papers/w17650.pdf N1 - Author contact info: Kyle Bagwell Department of Economics Stanford University Landau Economics Building 579 Serra Mall Stanford, CA 94305-6072 Tel: (650) 723-3251 E-Mail: kbagwell@stanford.edu Robert W. Staiger Department of Economics Stanford University Landau Economics Building 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/723-0533 Fax: 650/725-5702 E-Mail: rstaiger@stanford.edu M3 - presented at "Globalization in an Age of Crisis", September 14-16, 2011 AB - A fundamental objective of the Doha Round of WTO negotiations is to improve the trading prospects of developing countries. The 2001 declaration from the WTO Ministerial Conference in Doha, Qatar, commits the member governments to negotiations aimed at substantial improvements in market access with a view to phasing out export subsidies, while embracing “special and differential treatment” for developing countries as an integral part of all elements of the negotiations. The main message of this paper comes in three parts. First, these stated aims are incompatible from the perspective of our economic analysis; thus, if these aims are pursued as stated, then we conclude that they are unlikely to deliver the meaningful trade gains for developing countries that the WTO membership seeks. Second, in attempting to integrate its developing country membership into the world trading system, the WTO may face a “latecomers” problem that, while occurring also in earlier rounds, is unprecedented in its scale in the Doha Round, and which could potentially account for the current impasse. And third, we argue that if the Round maintains its stated aims but moves away from the non-reciprocal special-and-differential treatment norm as the cornerstone of the approach to meeting developing country needs in the WTO, and if developing countries prepare, in markets where they are large, to come to the bargaining table and to negotiate reciprocally with each other and with developing nations, then it might be possible to break the impasse at Doha, to address the latecomers problem, and to deliver trade gains for developing countries. ER - TY - JOUR AU - Lee,Jungmin AU - Kawaguchi,Daiji AU - Hamermesh,Daniel S. TI - Aggregate Impacts of a Gift of Time JF - National Bureau of Economic Research Working Paper Series VL - No. 17649 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17649 L1 - http://www.nber.org/papers/w17649.pdf N1 - Author contact info: Jungmin Lee Sogang University Seoul, Korea E-Mail: junglee@sogang.ac.kr Daiji Kawaguchi Hitotsubashi University E-Mail: kawaguch@econ.hit-u.ac.jp Daniel S. Hamermesh Department of Economics University of Texas Austin, TX 78712-1173 Tel: 512/475-8526 Fax: 512/471-3510 E-Mail: hamermes@eco.utexas.edu AB - How would people spend additional time if confronted by permanent declines in market work? We examine the impacts of cuts in legislated standard hours that raised employers’ overtime costs in Japan around 1990 and Korea in the early 2000s. Using time-diaries from before and after these shocks, we show that these shocks were effective—per-capita hours of market work declined discretely. The economy-wide drops in market work were reallocated solely to leisure and personal maintenance. In the absence of changing household technology a permanent time gift leads to no increase in time spent in household production by the average individual. ER - TY - JOUR AU - Andreoni,James AU - Rao,Justin M. AU - Trachtman,Hannah TI - Avoiding The Ask: A Field Experiment on Altruism, Empathy, and Charitable Giving JF - National Bureau of Economic Research Working Paper Series VL - No. 17648 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17648 L1 - http://www.nber.org/papers/w17648.pdf N1 - Author contact info: James Andreoni Department of Economics University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 Tel: 858/534-3832 Fax: 858/534-7040 E-Mail: andreoni@ucsd.edu Justin Rao Yahoo! Research Labs 4401 Great America Pkwy Santa Clara, CA 95054 E-Mail: justinmrao@yahoo.com Hannah Trachtman Innovations for Poverty Action 1731 Connecticut Ave Washington, DC 20009 E-Mail: htrachtm@gmail.com AB - What triggers giving? We explore this in a randomized natural field experiment during the Salvation Army's annual campaign. Solicitors were at one or both of two main entrances to a supermarket, making the solicitation either easy or difficult to avoid. Additionally, solicitors were either silent, or asked "please give" to passersby. We observed over 17,000 passings over four days, and found dramatic avoidance of the solicitors, but only during a direct ask. Furthermore, asking increased donations 75%. Across all conditions, seeking the solicitor was exceedingly rare. The results do not support static views of altruism, such as inequity aversion, and instead highlight the importance of social cues and psychological features of the giver-receiver interaction. We argue that avoidance could evidence a lack of altruism or self-control strategy to deal with empathic reflexes to give. ER - TY - JOUR AU - Lewis,Gregory AU - Bajari,Patrick TI - Incentives and Adaptation: Evidence from Highway Procurement in Minnesota JF - National Bureau of Economic Research Working Paper Series VL - No. 17647 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17647 L1 - http://www.nber.org/papers/w17647.pdf N1 - Author contact info: Gregory Lewis Department of Economics Harvard University 125 Littauer Center 1805 Cambridge Street Cambridge, MA 02138 Tel: 617/496-1526 Fax: 617/495-8570 E-Mail: glewis@fas.harvard.edu Patrick Bajari Amazon.com 701 5th Avenue, Suite 1500 Seattle, WA 98104 Tel: 612/625-8369 Fax: 612/624-0209 E-Mail: bajari@umn.edu AB - Procurement projects often encounter unanticipated problems. Deadlines and penalties are one important instrument used to incentivize contractors to adapt their plans. We develop a theory of highway procurement in which contractors must modify their construction rate following a productivity shock. We model how time incentives affect the work rate and time taken, characterizing the efficient contract design. Using new micro-level data from Minnesota that includes day-by-day information on work plans, actual outcomes and delays, we find strong evidence supporting the theory. As an application, we build an econometric model that endogenizes adaptation, and simulate how different incentive structures affect outcomes and the variance of contractor payments. Accounting for the traffic delays caused by construction, switching to a more efficient design would substantially increase welfare without substantially increasing risk. ER - TY - JOUR AU - Whalley,John AU - Agarwal,Manmohan AU - Wang,Jing AU - Walsh,Sean AU - Yan,Chen TI - Linking External Sector Imbalances and Changing Financial Instability before the 2008 Financial Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 17645 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17645 L1 - http://www.nber.org/papers/w17645.pdf N1 - Author contact info: John Whalley Department of Economics Social Science Centre University of Western Ontario London, ON N6A 5C2 CANADA Tel: 519/661-3509 Fax: 519/661-3666 E-Mail: jwhalley@uwo.ca Manmohan Agarwal Center for International Governance Innovation (CI 57 Erb St. West Waterloo, ON Canada N2L 6C2 E-Mail: magarwal@cigionline.org Jing Wang Institute of Quantitative & Technical Economics Chinese Academy of Social Sciences (CASS). Beijing China E-Mail: wj@cass.org.cn Sean Walsh Centre for International Governance Innovation 57 Erb Street West Waterloo, Ontario N2L 6C2 Canada E-Mail: swalsh@cigionline.org Chen Yan School of Economics Xiamen University Fujian Province China, 361005 E-Mail: chenyan@xmu.edu.cn AB - The G20 Framework for Strong, Sustainable and Balanced Growth builds on the claim that growing imbalances before the 2008 Financial Crisis were a major cause of the crisis, and the further claim that reducing imbalances post crisis must be a central part of any effort to prevent a further occurrence. Analytical literature in economics seemingly does not provide satisfactory measures of financial instability, either in individual national economies or in the combined global economy; nor ways of linking imbalance change to either worsening or improving financial (or real) instability and the onset of financial crises. Here we focus on the external sector component of financial instability and link changes in country imbalances to individual economy growth rates in ways when summed across countries produce indices of expected worsening or improving financial instability at different points in time. We compute a variety of such indices for the years immediately before the 2008 Financial Crisis. We use the sum of the absolute value of external sector imbalances across countries (the trade imbalance, or the current account imbalance) as a proportion of the combined GDP of countries and link them in various ways to country growth rates. An increasing measure under an index is an indication of future widening excess demands and supplies over all countries as a group relative to gross world product. This, in turn, is an indication of increasing severity of adjustment problems ahead, and hence expected worsening financial instability. We compute such indices for all G20 countries, and various subsets of countries (G2, G8, G8+5) and examine their behavior over the period 2004-2007. Our results suggest that depending upon the index used and the base date chosen for comparative purposes in determining changes, different implications emerge for the linkage between external sector imbalances, perceived future instability and hence the onset of a financial crisis. The implication we drawn is that the links between imbalances and both the onset and best policy response to the 2008 Financial Crisis asserted by the G20 may be more tenuous than claimed. Indeed no such links were suggested earlier for the 1930s, the Asian Financial Crisis or any other crisis. In turn economies have functioned with larger imbalances relative to GDP than in 2008 for considerable periods of time and with no financial implosion (UK in the pre World War I period; Germany and Australia in the 1990s). ER - TY - JOUR AU - Gumpert,Anna AU - Hines,James R., Jr. AU - Schnitzer,Monika TI - The Use of Tax Havens in Exemption Regimes JF - National Bureau of Economic Research Working Paper Series VL - No. 17644 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17644 L1 - http://www.nber.org/papers/w17644.pdf N1 - Author contact info: Anna Gumpert Department of Economics University of Munich Akademiestr. 1/III D-80799 Munich, Germany E-Mail: anna.gumpert@lrz.uni-muenchen.de James R. Hines Department of Economics University of Michigan 343 Lorch Hall 611 Tappan Street Ann Arbor, MI 48109-1220 Tel: 734/764-2320 Fax: 734/764-2769 E-Mail: jrhines@umich.edu Monika Schnitzer Department of Economics, University of Munich, Akademiestr. 1/III, 80799 Munich, Germany E-Mail: schnitzer@lrz.uni-muenchen.de AB - This paper analyzes the tax haven investment behavior of multinational firms from a country that exempts foreign income from taxation. High foreign tax rates generally encourage firms to invest in tax havens, though significant costs of reallocating taxable income dampen these incentives. The behavior of German manufacturing firms from 2002-2008 is consistent with this prediction: at the mean, one percentage point higher foreign tax rates are associated with three percentage point greater likelihoods of owning tax haven affiliates. This contrasts with earlier evidence for U.S. firms subject to home country taxation, which are more likely to invest in tax havens if they face lower foreign tax rates. Foreign tax rates appear to be unrelated to tax haven investments of German firms in service industries, possibly reflecting the difficulty they face in reallocating taxable income. ER - TY - JOUR AU - Bajari,Patrick AU - Hong,Han AU - Park,Minjung AU - Town,Robert TI - Regression Discontinuity Designs with an Endogenous Forcing Variable and an Application to Contracting in Health Care JF - National Bureau of Economic Research Working Paper Series VL - No. 17643 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17643 L1 - http://www.nber.org/papers/w17643.pdf N1 - Author contact info: Patrick Bajari Amazon.com 701 5th Avenue, Suite 1500 Seattle, WA 98104 Tel: 612/625-8369 Fax: 612/624-0209 E-Mail: bajari@umn.edu Han Hong Landau Economics Building 579 Serra Mall Stanford, CA 94305 E-Mail: doubleh@stanford.edu Minjung Park Haas School of Business UC Berkeley 545 Student Services Building #1900 Berkeley CA 94720-1900 Tel: 510-506-6780 E-Mail: minjungp@gmail.com Robert Town Health Care Management Department The Wharton School University of Pennsylvania 3641 Locust Walk Philadelphia, PA 19104 E-Mail: rtown@wharton.upenn.edu AB - Regression discontinuity designs (RDDs) are a popular method to estimate treatment effects. However, RDDs may fail to yield consistent estimates if the forcing variable can be manipulated by the agent. In this paper, we examine one interesting set of economic models with such a feature. Specifically, we examine the case where there is a structural relationship between the forcing variable and the outcome variable because they are determined simultaneously. We propose a modi…ed RDD estimator for such models and derive the conditions under which it is consistent. As an application of our method, we study contracts between a large managed care organization and leading hospitals for the provision of organ and tissue transplants. Exploiting "donut holes" in the reimbursement contracts we estimate how the total claims filed by the hospitals depend on the generosity of the reimbursement structure. Our results show that hospitals submit significantly larger bills when the reimbursement rate is higher, indicating informational asymmetries between the payer and hospitals in this market. ER - TY - JOUR AU - Golosov,Mikhail AU - Troshkin,Maxim AU - Tsyvinski,Aleh TI - Optimal Dynamic Taxes JF - National Bureau of Economic Research Working Paper Series VL - No. 17642 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17642 L1 - http://www.nber.org/papers/w17642.pdf N1 - Author contact info: Mikhail Golosov Department of Economics Princeton University 111 Fisher Hall Princeton, NJ 08544 Tel: 609/258-4003 Fax: 609/258-6419 E-Mail: golosov@princeton.edu Maxim Troshkin Cowles Foundation Yale University 28 Hillhouse Avenue B9 New Haven, CT 06511 E-Mail: maxim.troshkin@yale.edu Aleh Tsyvinski Department of Economics Yale University Box 208268 New Haven, CT 06520-8268 E-Mail: a.tsyvinski@yale.edu AB - We study optimal labor and savings distortions in a lifecycle model with idiosyncratic shocks. We show a tight connection between its recursive formulation and a static Mirrlees model with two goods, which allows us to derive elasticity-based expressions for the dynamic optimal distortions. We derive a generalization of a savings distortion for non-separable preferences and show that, under certain conditions, the labor wedge tends to zero for sufficiently high skills. We estimate skill distributions using individual data on the U.S. taxes and labor incomes. Computed optimal distortions decrease for sufficiently high incomes and increase with age. ER - TY - JOUR AU - Obstfeld,Maurice TI - The International Monetary System: Living with Asymmetry JF - National Bureau of Economic Research Working Paper Series VL - No. 17641 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17641 L1 - http://www.nber.org/papers/w17641.pdf N1 - Author contact info: Maurice Obstfeld Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-9646 Fax: 510/642-6615 E-Mail: obstfeld@econ.berkeley.edu M3 - presented at "Globalization in an Age of Crisis", September 14-16, 2011 AB - This paper analyzes current stresses in the two key areas that concerned the architects of the original Bretton Woods system: international liquidity and exchange rate management. Despite radical changes since World War II in the market context for liquidity and exchange rate concerns, they remain central to discussions of international macroeconomic policy coordination. To take two prominent examples of specific (and related) coordination problems, liquidity issues are paramount in strategies of national self-insurance through foreign reserve accumulation, while recent attempts by emerging market economies (EMEs) to limit real currency appreciation have relied heavily on nominal exchange rate management. A central message is that a diverse set of potential asymmetries among sovereign member states provides fertile ground for a variety of coordination failures. The paper goes on to discuss institutions and policies that might mitigate some of these inefficiencies. ER - TY - JOUR AU - Ashraf,Quamrul AU - Galor,Oded TI - Cultural Diversity, Geographical Isolation, and the Origin of the Wealth of Nations JF - National Bureau of Economic Research Working Paper Series VL - No. 17640 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17640 L1 - http://www.nber.org/papers/w17640.pdf N1 - Author contact info: Quamrul Ashraf Williams College Department of Economics 24 Hopkins Hall Drive Williamstown, MA 01267 Tel: (413) 597-3051 Fax: (413) 597-4045 E-Mail: Quamrul.H.Ashraf@williams.edu Oded Galor Department of Economics Brown University Box B Providence, RI 02912 Tel: 401/863-2117 Fax: 401/863-1970 E-Mail: oded_galor@brown.edu AB - This research argues that variations in the interplay between cultural assimilation and cultural diffusion have played a significant role in giving rise to differential patterns of economic development across the globe. Societies that were geographically less vulnerable to cultural diffusion benefited from enhanced assimilation, lower cultural diversity, and more intense accumulation of society-specific human capital. Thus, they operated more efficiently with respect to their production-possibility frontiers and flourished in the technological paradigm that characterized the agricultural stage of development. The lack of cultural diffusion and its manifestation in cultural rigidity, however, diminished the ability of these societies to adapt to a new technological paradigm, which delayed their industrialization and, hence, their take-off to a state of sustained economic growth. The theory thus contributes to the understanding of the advent of divergence and overtaking in the process of development. Consistently with the theory, the empirical analysis establishes that (i) geographical isolation prevalent in pre-industrial times (i.e., prior to the advent of airborne transportation technology) has had a persistent negative impact on the extent of contemporary cultural diversity; (ii) pre-industrial geographical isolation had a positive impact on economic development in the agricultural stage but has had a negative impact on income per capita in the course of industrialization; and (iii) cultural diversity, as determined exogenously by pre-industrial geographical isolation, has had a positive impact on economic development in the process of industrialization. ER - TY - JOUR AU - Brown,Jennifer AU - Minor,Dylan B. TI - Selecting the Best? Spillover and Shadows in Elimination Tournaments JF - National Bureau of Economic Research Working Paper Series VL - No. 17639 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17639 L1 - http://www.nber.org/papers/w17639.pdf N1 - Author contact info: Jennifer Brown Department of Management and Strategy Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-2592 Fax: 847/467-1777 E-Mail: jen-brown@kellogg.northwestern.edu Dylan B. Minor Kellogg School of Management (MEDS) Northwestern University 2001 Sheridan Road Evanston, Il 60208 Tel: 1 847 491 2978 E-Mail: d-minor@kellogg.northwestern.edu AB - We consider how an elimination tournament's ability to select the most skilled competitor as the winner is shaped by past, current, and future competition. We present a two-stage model that yields the following main results: (1) a shadow effect — the weaker the expected future competitor, the greater the probability that the stronger player wins in the current stage and (2) an effort spillover effect — previous effort reduces the probability that the stronger player wins in the current stage. We test our theory predictions using data from high-stakes tournaments and betting markets. Empirical results suggest that shadow and spillover effects influence match outcomes. ER - TY - JOUR AU - Davis,Steven J. AU - Wachter,Till M. von TI - Recessions and the Cost of Job Loss JF - National Bureau of Economic Research Working Paper Series VL - No. 17638 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17638 L1 - http://www.nber.org/papers/w17638.pdf N1 - Author contact info: Steven J. Davis Booth School of Business The University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-7312 Fax: 773/834-0733 E-Mail: Steven.Davis@ChicagoBooth.edu Till M. von Wachter Department of Economics Columbia University 601 West 115th Str. Apt. 101 New York, NY 10025 Tel: 212/854-5712 Fax: 212/854-8059 E-Mail: vw2112@columbia.edu AB - We develop new evidence on the cumulative earnings losses associated with job displacement, drawing on longitudinal Social Security records for U.S. workers from 1974 to 2008. In present value terms, men lose an average of 1.4 years of pre-displacement earnings if displaced in mass-layoff events that occur when the national unemployment rate is below 6 percent. They lose a staggering 2.8 years of pre-displacement earnings if displaced when the unemployment rate exceeds 8 percent. These results reflect discounting at a 5% annual rate over 20 years after displacement. We also document large cyclical movements in the incidence of job loss and job displacement and present evidence on how worker anxieties about job loss, wage cuts and job opportunities respond to contemporaneous economic conditions. Finally, we confront leading models of unemployment fluctuations with evidence on the present value earnings losses associated with job displacement. The model of Mortensen and Pissarides (1994) extended to include search on the job generates present value losses only one-fourth as large as observed losses. Moreover, present value losses in the model vary little with aggregate conditions at the time of displacement, unlike the pattern in the data. ER - TY - JOUR AU - Lindo,Jason M. AU - Swensen,Isaac D. AU - Waddell,Glen R. TI - Alcohol and Student Performance: Estimating the Effect of Legal Access JF - National Bureau of Economic Research Working Paper Series VL - No. 17637 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17637 L1 - http://www.nber.org/papers/w17637.pdf N1 - Author contact info: Jason M. Lindo Department of Economics University of Oregon Eugene, OR 97403-1285 Tel: 541/346-4664 E-Mail: jlindo@uoregon.edu Isaac Swensen Department of Economics University of Oregon Eugene, OR 97403-1285 E-Mail: isaac@uoregon.edu Glen Waddell Department of Economics University of Oregon Eugene, OR 97403-1285 Tel: 541 346 1259 E-Mail: waddell@uoregon.edu AB - We consider the effect of legal access to alcohol on student achievement. We first estimate the effect using an RD design but argue that this approach is not well suited to the research question in our setting. Our preferred approach instead exploits the longitudinal nature of the data, identifying the effect by measuring the extent to which a student’s performance changes after he gains legal access to alcohol, controlling flexibly for the expected evolution of grades as students make progress towards their degrees. We find that students’ grades fall below their expected levels upon being able to drink legally, but by less than previously documented. We also show that there are effects on women and that the effects are persistent. ER - TY - JOUR AU - Lacetera,Nicola AU - Macis,Mario AU - Slonim,Robert TI - Rewarding Altruism? A Natural Field Experiment JF - National Bureau of Economic Research Working Paper Series VL - No. 17636 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17636 L1 - http://www.nber.org/papers/w17636.pdf N1 - Author contact info: Nicola Lacetera University of Toronto 105 St. George Street Toronto, ON M5S 2E9 Canada Tel: 416/946-0287 E-Mail: nicola.lacetera@utoronto.ca Mario Macis Johns Hopkins University Carey Business School 100 International Dr. Baltimore, MD 21202 Tel: 7738175801 E-Mail: mmacis@jhu.edu Robert Slonim The University of Sydney Faculty of Arts and Social Sciences H04 - Merewether NSW 2006 Australia E-Mail: robert.slonim@sydney.edu.au AB - We present evidence from a natural field experiment involving nearly 100,000 individuals on the effects of offering economic incentives for blood donations. Subjects who were offered economic rewards to donate blood were more likely to donate, and more so the higher the value of the rewards. They were also more likely to attract others to donate, spatially alter the location of their donations towards the drives offering rewards, and modify their temporal donation schedule leading to a short-term reduction in donations immediately after the reward offer was removed. Although offering economic incentives, combining all of these effects, positively and significantly increased donations, ignoring individuals who took additional actions beyond donating to get others to donate would have led to an under-estimate of the total effect, whereas ignoring the spatial effect would have led to an over-estimate of the total effect. We also find that individuals who received a reward by surprise were less likely to donate after the intervention than subjects who received no reward, suggesting that for some individuals a surprise reward adversely affected their intrinsic motivations. We discuss the implications of these findings for understanding pro-social behavior. ER - TY - JOUR AU - Andreoni,James AU - Payne,A. Abigail TI - Crowding-Out Charitable Contributions in Canada: New Knowledge from the North JF - National Bureau of Economic Research Working Paper Series VL - No. 17635 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17635 L1 - http://www.nber.org/papers/w17635.pdf N1 - Author contact info: James Andreoni Department of Economics University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 Tel: 858/534-3832 Fax: 858/534-7040 E-Mail: andreoni@ucsd.edu Abigail Payne Department of Economics McMaster University KTH 426, 1280 Main Street West Hamilton, Ontario, Canada L8S 4M4 Tel: 905/5259140 ext 23814 Fax: 905/521-8232 E-Mail: paynea@mcmaster.ca AB - Using data from charitable organizations in the US, authors have established that government grants to charities largely crowd out giving from other sources, but that this reduction is due mostly to reduced fundraising activities of the charity itself. We use much more detailed data from over 6000 charities in Canada, measured for up to 15 years, to provide valuable new insights into this phenomenon. In particular, dollars received from individuals is largely unchanged by government grants. Instead, the crowding out is attributable to two other sources of donations not differentiated in US data: giving from other charities and charitable foundations, and donations gained from special fundraising activities, like galas or sponsorships. Only the latter-which is about half of the measured crowding out-represents a potential loss of dollars to the charitable sector as a result of government grants. ER - TY - JOUR AU - Querubin,Pablo AU - Snyder,James M., Jr. TI - The Control of Politicians in Normal Times and Times of Crisis: Wealth Accumulation by U.S. Congressmen, 1850-1880 JF - National Bureau of Economic Research Working Paper Series VL - No. 17634 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17634 L1 - http://www.nber.org/papers/w17634.pdf N1 - Author contact info: Pablo Querubin Harvard Academy 1727 Cambridge Street, Room E106 Cambridge, MA 02138 https://sites.google.com/site/pabloquerubin Tel: 6173727322 E-Mail: pablo.querubin@gmail.com James M. Snyder, Jr. Harvard University 1737 Cambridge Street, CGIS Knafel Building Room 413 Cambridge, MA 02138 Tel: 617/496-1089 E-Mail: jsnyder@gov.harvard.edu AB - We employ a regression discontinuity design based on close elections to estimate the rents from a seat in the U.S. congress between 1850-1880. Using census data, we compare wealth accumulation among those who won or lost their first race by a small margin. We find evidence of significant returns for the first half of the 1860s, during the Civil War, but not for other periods. We hypothesize that increased opportunities from the sudden spike in government spending during the war and the decrease in control by the media and other monitors might have made it easier for incumbent congressmen to collect rents. ER - TY - JOUR AU - Bailey,Martha J. AU - Dynarski,Susan M. TI - Gains and Gaps: Changing Inequality in U.S. College Entry and Completion JF - National Bureau of Economic Research Working Paper Series VL - No. 17633 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17633 L1 - http://www.nber.org/papers/w17633.pdf N1 - Author contact info: Martha J. Bailey University of Michigan Department of Economics 611 Tappan Street 207 Lorch Hall Ann Arbor, MI 48109-1220 Tel: 734/647-6874 Fax: 734/764-2769 E-Mail: baileymj@umich.edu Susan Dynarski University of Michigan Weill Hall 735 South State Street Ann Arbor, MI 48109-3091 Tel: 734 615 5113 Fax: NA E-Mail: dynarski@umich.edu AB - We describe changes over time in inequality in postsecondary education using nearly seventy years of data from the U.S. Census and the 1979 and 1997 National Longitudinal Surveys of Youth. We find growing gaps between children from high- and low-income families in college entry, persistence, and graduation. Rates of college completion increased by only four percentage points for low-income cohorts born around 1980 relative to cohorts born in the early 1960s, but by 18 percentage points for corresponding cohorts who grew up in high-income families. Among men, inequality in educational attainment has increased slightly since the early 1980s. But among women, inequality in educational attainment has risen sharply, driven by increases in the education of the daughters of high-income parents. Sex differences in educational attainment, which were small or nonexistent thirty years ago, are now substantial, with women outpacing men in every demographic group. The female advantage in educational attainment is largest in the top quartile of the income distribution. These sex differences present a formidable challenge to standard explanations for rising inequality in educational attainment. ER - TY - JOUR AU - Dobbie,Will AU - Fryer,Roland G., Jr TI - Getting Beneath the Veil of Effective Schools: Evidence from New York City JF - National Bureau of Economic Research Working Paper Series VL - No. 17632 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17632 L1 - http://www.nber.org/papers/w17632.pdf N1 - Author contact info: Will Dobbie Education Innovation Laboratory Harvard University 44 Brattle Street, 5th Floor Cambridge, MA 02138 E-Mail: dobbie@fas.harvard.edu Roland G. Fryer, Jr Department of Economics Harvard University Littauer Center 208 Cambridge, MA 02138 Tel: 617/495-9592 Fax: 617/495-8570 E-Mail: rfryer@fas.harvard.edu AB - Charter schools were developed, in part, to serve as an R&D engine for traditional public schools, resulting in a wide variety of school strategies and outcomes. In this paper, we collect unparalleled data on the inner-workings of 35 charter schools and correlate these data with credible estimates of each school's effectiveness. We find that traditionally collected input measures -- class size, per pupil expenditure, the fraction of teachers with no certification, and the fraction of teachers with an advanced degree -- are not correlated with school effectiveness. In stark contrast, we show that an index of five policies suggested by over forty years of qualitative research -- frequent teacher feedback, the use of data to guide instruction, high-dosage tutoring, increased instructional time, and high expectations -- explains approximately 50 percent of the variation in school effectiveness. Our results are robust to controls for three alternative theories of schooling: a model emphasizing the provision of wrap-around services, a model focused on teacher selection and retention, and the "No Excuses'' model of education. We conclude by showing that our index provides similar results in a separate sample of charter schools. ER - TY - JOUR AU - Tong,Hui AU - Wei,Shang-Jin TI - Does Trade Globalization Induce or Inhibit Corporate Transparency? Unbundling the Growth Potential and Product Market Competition Channels JF - National Bureau of Economic Research Working Paper Series VL - No. 17631 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17631 L1 - http://www.nber.org/papers/w17631.pdf N1 - Author contact info: Hui Tong Research Department IMF Washington DC 700 19th Street N.W. Washington, DC 20431 E-Mail: htong@imf.org Shang-Jin Wei Graduate School of Business Columbia University Uris Hall 619 3022 Broadway New York, NY 10027-6902 Tel: 212/854-9139 E-Mail: shangjin.wei@columbia.edu AB - How does increasing globalization affect corporate transparency? Freer trade represents different facets and in theory has ambiguous effects on corporate transparency. On the one hand, by exposing firms to more product market competition, it could discourage discretionary disclosure. On the other hand, by opening up foreign markets and enhancing firms’ growth opportunities, it may promote more transparency. Rather than simply estimating a net effect, this paper pursues an approach that allows separate estimation of the two potentially opposing channels. We employ three different measures of corporate transparency and track their evolutions for 4061 firms in 49 countries during 1992-2005. By using detailed product-level tariff schedules for these countries, we construct a measure of growth opportunities enabled by foreign tariff liberalizations at the sector-country-year level, and a second measure of globalization-induced product market competition based on a country’s own tariff liberalization (again at the sector–country-year level). We find strong evidence that higher growth opportunities engendered by globalization promotes corporate transparency, especially in industries that depend heavily on external financing. At the same time, we find somewhat weaker evidence that greater product market competition engendered by globalization discourages corporate transparency. The results demonstrate the importance of disentangling the multiple and potentially conflicting effects of globalization. ER - TY - JOUR AU - Anderson,James E. AU - Milot,Catherine A. AU - Yotov,Yoto V. TI - The Incidence of Geography on Canada's Services Trade JF - National Bureau of Economic Research Working Paper Series VL - No. 17630 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17630 L1 - http://www.nber.org/papers/w17630.pdf N1 - Author contact info: James E. Anderson Department of Economics Boston College Chestnut Hill, MA 02467 Tel: 617/552-3691 Fax: 617/552-2308 E-Mail: james.anderson.1@bc.edu Catherine A. Milot Department of Foreign Affairs and International Trade, Canada 111 Sussex Drive Ottawa, Canada K1N 1J1 E-Mail: catherine.milot@international.gc.ca Yoto V. Yotov Drexel University LeBow College of Business Department of Economics and International Business Matheson Hall, Suite 503-C Philadelphia, PA 19104 E-Mail: yotov@drexel.edu AB - We estimate geographic barriers to export trade in nine service categories for Canada's provinces from 1997 to 2007 using the structural gravity model. Constructed Home, Domestic and Foreign Bias indexes (the last two new) capture the direct plus indirect effect of services trade costs on intra-provincial, inter-provincial and international trade relative to their frictionless benchmarks. Barriers to services international trade are huge relative to inter-provincial trade and large relative to goods international trade. A novel test confirms the fit of structural gravity with services trade data. ER - TY - JOUR AU - Oster,Emily AU - Shoulson,Ira AU - Dorsey,E. Ray TI - Optimal Expectations and Limited Medical Testing: Evidence from Huntington Disease JF - National Bureau of Economic Research Working Paper Series VL - No. 17629 PY - 2011 Y2 - December 2011 UR - http://www.nber.org/papers/w17629 L1 - http://www.nber.org/papers/w17629.pdf N1 - Author contact info: Emily Oster University of Chicago Booth School of Business 5807 South Woodlawn Ave Chicago, IL 60637 Tel: 773/834-1552 Fax: 773-834-8172 E-Mail: eoster@uchicago.edu Ira Shoulson Georgetown University 2115 Wisconsin Ave NW Suite 603 Washington DC 20007 E-Mail: ira@irashoulson.org E. Ray Dorsey Johns Hopkins University Department of Neurology Meyer Bldg, Room 6-181 600 N. Wolfe Street Baltimore, MD 21287 E-Mail: Ray.Dorsey@jhmi.edu AB - We use novel data to study the decision to undergo genetic testing by individuals at risk for Huntington disease (HD), a hereditary neurological disorder that reduces healthy life expectancy to about age 50. Although genetic testing is perfectly predictive and carries little financial or time cost, less than 10 percent of at-risk individuals are tested prior to the onset of symptoms. Testing rates are higher for individuals with higher ex ante risk of carrying the genetic expansion for HD. Untested individuals express optimistic beliefs about their probability of having HD and make fertility, savings, labor supply, and other decisions as if they do not have HD, even though individuals with confirmed HD behave quite differently. We show that these facts are qualitatively consistent with a model of optimal expectations (Brunnermeier and Parker, 2005) and can be reconciled quantitatively in this model with reasonable parameter values. This model nests the neoclassical framework and, we argue, provides strong evidence rejecting the assumptions of that framework. Finally, we briefly develop policy implications. ER - TY - JOUR AU - Kotchen,Matthew AU - Potoski,Matthew TI - Conflicts of Interest Distort Public Evaluations: Evidence from the Top 25 Ballots of NCAA Football Coaches JF - National Bureau of Economic Research Working Paper Series VL - No. 17628 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17628 L1 - http://www.nber.org/papers/w17628.pdf N1 - Author contact info: Matthew Kotchen School of Forestry & Environmental Studies, School of Management, and Department of Economics Yale University 195 Prospect Street New Haven, CT 06511 Tel: 203/432-9533 Fax: 203/436-9150 E-Mail: matthew.kotchen@yale.edu Matthew Potoski University of California, Santa Barbara 2400 Bren Hall Santa Barbara, CA 93106 E-Mail: mpotoski@bren.ucsb.edu AB - This paper provides a study on conflicts of interest among college football coaches participating in the USA Today Coaches Poll of top 25 teams. The Poll provides a unique empirical setting that overcomes many of the challenges inherent in conflict of interest studies, because many agents are evaluating the same thing, private incentives to distort evaluations are clearly defined and measurable, and there exists an alternative source of computer rankings that is bias free. Using individual coach ballots between 2005 and 2010, we find that coaches distort their rankings to reflect their own team's reputation and financial interests. On average, coaches rank teams from their own athletic conference nearly a full position more favorably and boost their own team's ranking more than two full positions. Coaches also rank teams they defeated more favorably, thereby making their own team look better. When it comes to ranking teams contending for one of the high-profile Bowl Championship Series (BCS) games, coaches favor those teams that generate higher financial payoffs for their own team. Reflecting the structure of payoff disbursements, coaches from non-BCS conferences band together, while those from BCS conferences more narrowly favor teams in their own conference. Among all coaches an additional payoff between $3.3 and $5 million induces a more favorable ranking of one position. Moreover, for each increase in a contending team's payoff equal to 10 percent of a coach's football budget, coaches respond with more favorable rankings of half a position, and this effect is more than twice as large when coaches rank teams outside the top 10. ER - TY - JOUR AU - Bernard,Andrew B. AU - Jensen,J. Bradford AU - Redding,Stephen J. AU - Schott,Peter K. TI - The Empirics of Firm Heterogeneity and International Trade JF - National Bureau of Economic Research Working Paper Series VL - No. 17627 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17627 L1 - http://www.nber.org/papers/w17627.pdf N1 - Author contact info: Andrew B. Bernard Tuck School of Business at Dartmouth 100 Tuck Hall Hanover, NH 03755 Tel: 603/646-0302 Fax: 603/646-0995 E-Mail: Andrew.B.Bernard@dartmouth.edu J. Bradford Jensen McDonough School of Business Georgetown University Washington, DC 20057 Tel: 202/687-3767 E-Mail: jbj24@georgetown.edu Stephen J. Redding Department of Economics and Woodrow Wilson School Princeton University Fisher Hall Princeton, NJ 08544 Tel: 609/258-4016 Fax: 609/258-6419 E-Mail: reddings@princeton.edu Peter K. Schott Yale School of Management 135 Prospect Street New Haven, CT 06520-8200 Tel: 203/436-4260 Fax: 203/432-6974 E-Mail: peter.schott@yale.edu AB - This paper reviews the empirical evidence on firm heterogeneity in international trade. A first wave of empirical findings from micro data on plants and firms proposed challenges for existing models of international trade and inspired the development of new theories emphasizing firm heterogeneity. Subsequent empirical research has examined additional predictions of these theories and explored other dimensions of the data not originally captured by them. These other dimensions include multi-product firms, offshoring, intra-firm trade and firm export market dynamics. ER - TY - JOUR AU - Sinn,Hans-Werner AU - Wollmershaeuser,Timo TI - Target Loans, Current Account Balances and Capital Flows: The ECB’s Rescue Facility JF - National Bureau of Economic Research Working Paper Series VL - No. 17626 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17626 L1 - http://www.nber.org/papers/w17626.pdf N1 - Author contact info: Hans-Werner Sinn Ifo Institute - Leibniz Institute for Economic Research at University of Munich Poschingerstr. 5 81679 Munich GERMANY Tel: 49-89-21802748 Fax: 49-89-397303;49-89-8506434 (home) E-Mail: sinn@ifo.de Timo Wollmershaeuser Ifo Institute -­ Leibniz Institute for Economic Research at University of Munich Poschingerstrasse 5 81679 Munich Germany E-Mail: wollmershaeuser@ifo.de AB - The European Monetary Union is stuck in a severe balance-of-payments imbalance of a nature similar to the one that destroyed the Bretton Woods System. Greece, Ireland, Portugal, Spain and Italy have suffered from balance-of-payments deficits whose accumulated value, as measured by the Target balances in the national central banks’ balance sheets, was 404 billion euros in August 2011. The national central banks of these countries covered the deficits by creating and lending out additional central bank money that flowed to the euro core countries, Germany in particular, and crowded out the central bank money resulting from local refinancing operations. Thus the ECB forced a public capital export from the core countries that partly compensated for the now reluctant private capital flows to, and the capital flight from, the periphery countries. ER - TY - JOUR AU - Hornbeck,Richard AU - Keskin,Pinar TI - The Evolving Impact of the Ogallala Aquifer: Agricultural Adaptation to Groundwater and Climate JF - National Bureau of Economic Research Working Paper Series VL - No. 17625 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17625 L1 - http://www.nber.org/papers/w17625.pdf N1 - Author contact info: Richard Hornbeck Department of Economics Harvard University 232 Littauer Center Cambridge, MA 02138 Tel: 202/494-0722 E-Mail: hornbeck@fas.harvard.edu Pinar Keskin Department of Economics Wellesley College 106 Central Street Wellesley, MA 02481 pkeskin@wellesley.edu E-Mail: pkeskin@wellesley.edu AB - Agriculture on the American Great Plains has been constrained by historical water scarcity. After World War II, technological improvements made groundwater from the Ogallala aquifer available for irrigation. Comparing counties over the Ogallala with nearby similar counties, groundwater access increased irrigation intensity and initially reduced the impact of droughts. Over time, land-use adjusted toward water-intensive crops and drought-sensitivity increased; conversely, farmers in water-scarce counties maintained drought-resistant practices that fully mitigated higher drought-sensitivity. Land values capitalized the Ogallala's value at $26 billion in 1974; as extraction remained high and water levels declined, the Ogallala's value fell to $9 billion in 2002. ER - TY - JOUR AU - Roberts,James W. AU - Sweeting,Andrew TI - When Should Sellers Use Auctions? JF - National Bureau of Economic Research Working Paper Series VL - No. 17624 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17624 L1 - http://www.nber.org/papers/w17624.pdf N1 - Author contact info: James W. Roberts Duke University Department of Economics 213 Social Sciences Building Durham, NC 27708 Tel: 919/660-1822 E-Mail: j.roberts@duke.edu Andrew Sweeting Department of Economics 213 Social Sciences Box 90097 Duke University Durham, NC 27708 Tel: 919 660 1883 E-Mail: atsweet@duke.edu AB - A bidding process can be organized so that offers are submitted simultaneously or sequentially. In the latter case, potential buyers can condition their behavior on previous entrants' decisions. The relative performance of these mechanisms is investigated when entry is costly and selective, meaning that potential buyers with higher values are more likely to participate. A simple sequential mechanism can give both buyers and sellers significantly higher payoffs than the commonly used simultaneous bid auction. The findings are illustrated with parameters estimated from simultaneous entry USFS timber auctions where our estimates predict that the sequential mechanism would increase revenue and efficiency. ER - TY - JOUR AU - Bose,Gautam AU - Lang,Kevin TI - A Theory of Monitoring and Internal Labor Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 17623 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17623 L1 - http://www.nber.org/papers/w17623.pdf N1 - Author contact info: Gautam Bose School of Economics University of New South Wales Sydney NSW 2052 Australia E-Mail: g.bose@unsw.edu.au Kevin Lang Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-5694 Fax: 617/353-4001 E-Mail: lang@bu.edu AB - We analyze a firm's job-assignment and worker-monitoring decisions when workers face occasional crises. Firms prefer to assign good workers to a difficult task and to not employ bad workers. Firms observe failures but only observe successfully resolved crises if they monitor the worker. If monitoring costs are positive but sufficiently small, for a range of probabilities that the worker is good, the firm assigns the worker to a low task (less sensitive to crises) and monitors her. At probabilities below this range and not too much above it, she is assigned to the low task and not monitored. At high probabilities of being good, she is assigned to the difficult task. We analyze the implications for internal labor markets of the case where a worker has the same ex ante probability of being good at all firms and learning is about ability at this particular firm. ER - TY - JOUR AU - Guvenen,Fatih TI - Macroeconomics With Heterogeneity: A Practical Guide JF - National Bureau of Economic Research Working Paper Series VL - No. 17622 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17622 L1 - http://www.nber.org/papers/w17622.pdf N1 - Author contact info: Fatih Guvenen Department of Economics University of Minnesota 4-151 Hanson Hall 1925 Fourth Street South Minneapolis, MN, 55455 Tel: 612-6250767 E-Mail: guvenen@umn.edu AB - This article reviews macroeconomic models with heterogeneous households. A key question for the relevance of these models concerns the degree to which markets are complete. This is because the existence of complete markets imposes restrictions on (i) how much heterogeneity matters for aggregate phenomena and (ii) the types of cross-sectional distributions that can be obtained. The degree of market incompleteness, in turn, depends on two factors: (i) the richness of insurance opportunities provided by the economic environment and (ii) the nature and magnitude of idiosyncratic risks to be insured. First, I review a broad collection of empirical evidence—from econometric tests of “full insurance,” to quantitative and empirical analyses of the permanent income (“self-insurance”) model that examine how it fits the facts about life cycle allocations, to studies that try to directly measure where economies place between these two benchmarks (“partial insurance”). The empirical evidence I survey reveals significant uncertainty in the profession regarding the magnitudes of idiosyncratic risks as well as whether or not these risks have increased since the 1970s. An important difficulty stems from the fact that inequality often arises from a mixture of idiosyncratic risk and fixed (or predictable) heterogeneity, making the two challenging to disentangle. I also discuss applications of incomplete markets models to trends in wealth, consumption, and earnings inequality both over the life cycle and over time, where this challenge is evident. Third, I discuss “approximate” aggregation—the finding that some incomplete markets models generate aggregate implications very similar to representative-agent models. What approximate aggregation does and does not imply is illustrated through several examples. Finally, I discuss some computational issues relevant for solving and calibrating such models and I provide a simple yet fully parallelizable global optimization algorithm that can be used to calibrate heterogeneous agent models. ER - TY - JOUR AU - Jordà,Òscar AU - Schularick,Moritz HP. AU - Taylor,Alan M. TI - When Credit Bites Back: Leverage, Business Cycles, and Crises JF - National Bureau of Economic Research Working Paper Series VL - No. 17621 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17621 L1 - http://www.nber.org/papers/w17621.pdf N1 - Author contact info: Òscar Jordà Economic Research, MS 1130 Federal Reserve Bank of San Francisco 101 Market St. San Francisco, CA 94105 E-Mail: oscar.jorda@sf.frb.org Moritz HP. Schularick John-F.-Kennedy-Institute, Free University of Berlin, Berlin, Germany E-Mail: moritz.schularick@fu-berlin.de Alan M. Taylor Department of Economics University of Virginia Monroe Hall Charlottesville, VA 22903 Fax: (434) 982-2904 E-Mail: alan.m.taylor@virginia.edu AB - This paper studies the role of leverage in the business cycle. Based on a study of nearly 200 recession episodes in 14 advanced countries between 1870 and 2008, we document a new stylized fact of the modern business cycle: more credit-intensive booms tend to be followed by deeper recessions and slower recoveries. We find a close relationship between the rate of credit growth relative to GDP in the expansion phase and the severity of the subsequent recession. We use local projection methods to study how leverage impacts the behavior of key macroeconomic variables such as investment, lending, interest rates, and inflation. The effects of leverage are particularly pronounced in recessions that coincide with financial crises, but are also distinctly present in normal cycles. The stylized facts we uncover lend support to the idea that financial factors play an important role in the modern business cycle. ER - TY - JOUR AU - Michalopoulos,Stelios AU - Papaioannou,Elias TI - The Long-Run Effects of the Scramble for Africa JF - National Bureau of Economic Research Working Paper Series VL - No. 17620 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17620 L1 - http://www.nber.org/papers/w17620.pdf N1 - Author contact info: Stelios Michalopoulos Brown University Department of Economics 64 Waterman Street Providence, RI 02912 Tel: 401/863-2506 Fax: 401/863-1970 E-Mail: smichalo@brown.edu Elias Papaioannou Department of Economics Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-8169 E-Mail: papaioannou.elias@gmail.com AB - We examine the long-run consequences of the scramble for Africa among European powers in the late 19th century and uncover the following empirical regularities. First, using information on the spatial distribution of African ethnicities before colonization, we show that borders were arbitrarily drawn. Apart from the land mass and water area of an ethnicity's historical homeland, no other geographic, ecological, historical, and ethnic-specific traits predict which ethnic groups have been partitioned by the national border. Second, using data on the location of civil conflicts after independence, we show that partitioned ethnic groups have suffered significantly more warfare; moreover, partitioned ethnicities have experienced more prolonged and more devastating civil wars. Third, we identify sizeable spillovers; civil conflict spreads from the homeland of partitioned ethnicities to nearby ethnic regions. These results are robust to a rich set of controls at a fine level and the inclusion of country fixed effects and ethnic-family fixed effects. The uncovered evidence thus identifies a sizable causal impact of the scramble for Africa on warfare. ER - TY - JOUR AU - Frankel,Jeffrey A. AU - Végh,Carlos A. AU - Vuletin,Guillermo TI - On Graduation from Fiscal Procyclicality JF - National Bureau of Economic Research Working Paper Series VL - No. 17619 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17619 L1 - http://www.nber.org/papers/w17619.pdf N1 - Author contact info: Jeffrey A. Frankel Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/496-3834 Fax: 617/496-5747 E-Mail: jeffrey_frankel@harvard.edu Carlos A. Vegh Department of Economics Tydings Hall, Office 4118G University of Maryland College Park, MD 20742-7211 Tel: 301-405-3546 Fax: 301-405-3542 E-Mail: vegh@econ.bsos.umd.edu Guillermo Vuletin Colby College Department of Economics Diamond, 3rd floor 5230 Mayflower Hill Waterville, ME 04901-8852 Tel: 207-859-5235 Fax: 207-859-5248 E-Mail: gvuletin@colby.edu AB - In the past, industrial countries have tended to pursue countercyclical or, at worst, acyclical fiscal policy. In sharp contrast, emerging and developing countries have followed procyclical fiscal policy, thus exacerbating the underlying business cycle. We show that, over the last decade, about a third of the developing world has been able to escape the procyclicality trap and actually become countercyclical. We trace this critical shift in fiscal policy to the quality of institutions. We provide a formal analysis, which controls for the endogeneity of institutions and other determinants of fiscal procyclicality, that strongly suggests that there is a causal link running from stronger institutions to less procyclical or countercyclical fiscal policy. ER - TY - JOUR AU - Andreoni,James AU - Payne,Abigail AU - Smith,Justin D. AU - Karp,David TI - Diversity and Donations: The Effect of Religious and Ethnic Diversity on Charitable Giving JF - National Bureau of Economic Research Working Paper Series VL - No. 17618 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17618 L1 - http://www.nber.org/papers/w17618.pdf N1 - Author contact info: James Andreoni Department of Economics University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 Tel: 858/534-3832 Fax: 858/534-7040 E-Mail: andreoni@ucsd.edu Abigail Payne Department of Economics McMaster University KTH 426, 1280 Main Street West Hamilton, Ontario, Canada L8S 4M4 Tel: 905/5259140 ext 23814 Fax: 905/521-8232 E-Mail: paynea@mcmaster.ca Justin D. Smith Department of Economics Wilfrid Laurier University P3090, 75 University Ave. W. Waterloo, Ontario, Canada N2L 3C5 E-Mail: jusmith@wlu.ca David Karp McMaster University E-Mail: david@davidkarp.ca AB - We explore the effects of local ethnic and religious diversity on individual donations to private charities. Using 10-year neighborhood-level panels derived from personal tax records in Canada, we find that diversity has a detrimental effect on charitable donations. A 10 percentage point increase in ethnic diversity reduces donations by 14%, and a 10 percentage point increase in religious diversity reduces donations by 10%. The ethnic diversity effect is driven by a within-group disposition among non-minorities, and is most evident in high income, but low education areas. The religious diversity effect is driven by a within-group disposition among Catholics, and is concentrated in high income and high education areas. Despite these large effects on amount donated, we find no evidence that increasing diversity affects the fraction of households that donate. Over the period studied, ethnic diversity rises by 6 percentage points and religious diversity rises by 4 percentage points; our results suggest that charities receive about 12% less in total donations. As areas like North America continue to grow more diverse over time, our results imply that these demographic changes may have significant implications for the charitable sector. ER - TY - JOUR AU - Feldstein,Martin S. TI - The Euro and European Economic Conditions JF - National Bureau of Economic Research Working Paper Series VL - No. 17617 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17617 L1 - http://www.nber.org/papers/w17617.pdf N1 - Author contact info: Martin S. Feldstein President Emeritus NBER 1050 Massachusetts Avenue Cambridge, MA 02138-5398 Tel: 617/868-3905 Fax: 617/868-7194 E-Mail: msfeldst@nber.org AB - The creation of the euro should now be recognized as an experiment that has led to the sovereign debt crisis in several countries, the fragile condition of major European banks, the high levels of unemployment, and the large trade deficits that now exist in most Eurozone countries. Although the European Central Bank managed the euro in a way that achieved a low rate of inflation, other countries both in Europe and elsewhere have also had a decade of low inflation without incurring the costs of a monetary union. The emergence of these problems just a dozen years after the start of the euro in 1999 was not an accident or the result of bureaucratic mismanagement but the inevitable consequence of imposing a single currency on a very heterogeneous group of countries, a heterogeneity that includes not only economic structures but also fiscal traditions and social attitudes. This paper reviews (1) the reasons for these economic problems, (2) the political origins of the European Monetary Union, (3) the current attempts to solve the sovereign debt problem, (4) the long-term problem of inter-country differences of productivity growth and competitiveness, (5) the special problems of Greece and Italy, (6) and the pros and cons of a Greek departure from the Eurozone. ER - TY - JOUR AU - Piketty,Thomas AU - Saez,Emmanuel AU - Stantcheva,Stefanie TI - Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities JF - National Bureau of Economic Research Working Paper Series VL - No. 17616 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17616 L1 - http://www.nber.org/papers/w17616.pdf N1 - Author contact info: Thomas Piketty Paris School of Economics 48 Boulevard Jourdan 75014 Paris, France E-Mail: piketty@ens.fr Emmanuel Saez Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720 Tel: 510/642-4631 Fax: 510/642-6615 E-Mail: saez@econ.berkeley.edu Stefanie Stantcheva MIT Department of Economics 50 Memorial Drive Building E52 Cambridge, MA 02142-1347 E-Mail: stefanie@mit.edu AB - This paper analyzes the problem of optimal taxation of top labor incomes. We develop a model where top incomes respond to marginal tax rates through three channels: (1) the standard supply-side channel through reduced economic activity, (2) the tax avoidance channel, (3) the compensation bargaining channel through efforts in influencing own pay setting. We derive the optimal top tax rate formula as a function of the three elasticities corresponding to those three channels of responses. The first elasticity (supply side) is the sole real factor limiting optimal top tax rates. The optimal tax system should be designed to minimize the second elasticity (avoidance) through tax enforcement and tax neutrality across income forms, in which case the second elasticity becomes irrelevant. The optimal top tax rate increases with the third elasticity (bargaining) as bargaining efforts are zero-sum in aggregate. We then analyze top income and top tax rate data in 18 OECD countries. There is a strong correlation between cuts in top tax rates and increases in top 1% income shares since 1975, implyingthat the overall elasticity is large. But top income share increases have not translated into higher economic growth, consistent with the zero-sum bargaining model. This suggests that the first elasticity is modest in size and that the overall effect comes mostly from the third elasticity. Consequently, socially optimal top tax rates might possibly be much higher than what is commonly assumed. ER - TY - JOUR AU - Kacperczyk,Marcin AU - Nieuwerburgh,Stijn Van AU - Veldkamp,Laura TI - Time-Varying Fund Manager Skill JF - National Bureau of Economic Research Working Paper Series VL - No. 17615 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17615 L1 - http://www.nber.org/papers/w17615.pdf N1 - Author contact info: Marcin Kacperczyk Stern School of Business New York University 44 West 4th Street KMC 9-190 New York, NY 10012 Tel: 212/998-0924 E-Mail: mkacperc@stern.nyu.edu Stijn Van Nieuwerburgh Stern School of Business New York University 44 W 4th Street, Suite 9-120 New York, NY 10012 Tel: 646/284-4141 Fax: 646/284-4141 E-Mail: svnieuwe@stern.nyu.edu Laura Veldkamp Stern School of Business New York University 44 W Fourth Street,Suite 7-77 New York, NY 10012 Tel: 212/998-0527 Fax: 212/995-4218 E-Mail: lveldkam@stern.nyu.edu AB - Mutual fund managers can outperform the market by picking stocks or timing the market successfully. Previous work has estimated picking and timing skill, assuming that each manager is endowed with a fixed amount of each and found some evidence of picking skills and little evidence of timing skills among successful managers. This paper estimates skill separately in booms and recessions and finds that the extent to which managers focus on stock picking or market timing fluctuates with the state of the economy. Stock picking is more prevalent in booms, while market timing dominates in recessions. We use this finding to develop a new methodology for detecting managerial skill. The results suggest that some but not all managers have skill. We describe the characteristics of the skilled managers and show that skilled managers significantly outperform the market. ER - TY - JOUR AU - Kézdi,Gábor AU - Willis,Robert J. TI - Household Stock Market Beliefs and Learning JF - National Bureau of Economic Research Working Paper Series VL - No. 17614 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17614 L1 - http://www.nber.org/papers/w17614.pdf N1 - Author contact info: Gabor Kezdi Department of Economics Central European University 9 Nador St, Budapest, Hungary E-Mail: kezdig@ceu.hu Robert J. Willis 3254 ISR University of Michigan P. O. Box 1248 426 Thompson Street Ann Arbor, MI 48106 Tel: 734/936-0314 E-Mail: rjwillis@isr.umich.edu AB - This paper characterizes heterogeneity of the beliefs of American households about future stock market returns, provides an explanation for that heterogeneity and establishes its relationship to stock holding behavior. We find substantial belief heterogeneity that is puzzling since households can observe the same publicly available information about the stock market. We propose a simple learning model where agents can invest in the acquisition of financial knowledge. Differential incentives to learn about the returns process can explain heterogeneity in beliefs. We check this explanation by using data on beliefs elicited as subjective probabilities and a rich set of other variables from the Health and Retirement Study. Both descriptive statistics and estimated relevant heterogeneity of the structural parameters provide support for our explanation. People with higher lifetime earnings, higher education, higher cognitive abilities, defined contribution as opposed to defined benefit pension plans, for example, possess beliefs that are considerably closer to what historical time series would imply. Our results also suggest that a substantial part of the reduced form relationship between stock holding and household characteristics is due to differences in beliefs. Our methodological contribution is estimating relevant heterogeneity of structural belief parameters from noisy survey answers to probability questions. ER - TY - JOUR AU - Novy-Marx,Robert TI - Logical Implications of GASB’s Methodology for Valuing Pension Liabilities JF - National Bureau of Economic Research Working Paper Series VL - No. 17613 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17613 L1 - http://www.nber.org/papers/w17613.pdf N1 - Author contact info: Robert Novy-Marx Simon Graduate School of Business University of Rochester 305 Schlegel Hall Rochester, NY 14627 Tel: 773/834-7123 E-Mail: Robert.Novy-Marx@Simon.Rochester.edu AB - It is well known that the funding status of state and local government defined benefit pension plans, as measured by the accounting methodology prescribed by the Governmental Accounting Standards Board (GASB), improves when the plans take on more investment risk. This paper documents several lesser known logical implications of the GASB methodology. In particular, I show that GASB accounting is susceptible to the “Yogi Berra fallacy,” under which a pizza is less filling when sliced into fewer pieces: GASB gives different “valuations” for the exact same assets and liabilities when they are partitioned differently among plans. Moreover, the marginal valuation of assets can be negative under GASB. In such cases a plan can improve its GASB funding status literally by burning money. Finally, I show that GASB’s methodology is exactly equivalent to fairly valuing plan liabilities, but accounting for stocks at more than twice their traded prices, and further crediting a plan an additional dollar for each dollar of stock that it intends to buy in the future. ER - TY - JOUR AU - Balli,Faruk AU - Kalemli-Ozcan,Sebnem AU - Sorensen,Bent TI - Risk Sharing through Capital Gains JF - National Bureau of Economic Research Working Paper Series VL - No. 17612 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17612 L1 - http://www.nber.org/papers/w17612.pdf N1 - Author contact info: Faruk Balli Massey University School of Economics and Finance Palmerston North New Zealand Tel: +6463505799 ext2330 E-Mail: f.balli@massey.ac.nz Sebnem Kalemli-Ozcan John F. Kennedy School of Government Harvard University 79 JFK Street, Mailbox 28 Cambridge, MA 02138 E-Mail: sebnem.kalemli-ozcan@mail.uh.edu Bent Sorensen Department of Economics University of Houston 204 McElhinney Hall Houston, TX 77204 Tel: 713-743-3841 Fax: 713-743-3798 E-Mail: bent.sorensen@mail.uh.edu AB - We estimate channels of international risk sharing between European Monetary Union (EMU), European Union, and other OECD countries 1992-2007. We focus on risk sharing through savings, factor income flows, and capital gains. Risk sharing through factor income and capital gains was close to zero before 1999 but has increased since then. Risk sharing from capital gains, at about 6 percent, is higher than risk sharing from factor income flows for European Union countries and OECD countries. Risk sharing from factor income flows is higher for Euro zone countries, at 14 percent, reflecting increased international asset and liability holdings in the Euro area. ER - TY - JOUR AU - Bishop,Kelly C. AU - Timmins,Christopher TI - Hedonic Prices and Implicit Markets: Estimating Marginal Willingness to Pay for Differentiated Products Without Instrumental Variables JF - National Bureau of Economic Research Working Paper Series VL - No. 17611 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17611 L1 - http://www.nber.org/papers/w17611.pdf N1 - Author contact info: Kelly Bishop Olin Business School Washington University in St. Louis Box 1133, 1 Brookings Drive St. Louis, MO 63130 E-Mail: kbishop@wustl.edu Christopher Timmins Department of Economics Duke University 209 Social Sciences Building P.O. Box 90097 Durham, NC 27708-0097 Tel: 919/660-1809 Fax: 919/684-8974 E-Mail: christopher.timmins@duke.edu AB - The hedonic model of Rosen (1974) has become a workhorse for valuing the characteristics of differentiated products despite a number of well-documented econometric problems. For example, Bartik (1987) and Epple (1987) each describe a source of endogeneity in the second stage of Rosen's procedure that has proven difficult to overcome. In this paper, we propose a new approach for recovering the marginal willingness-to-pay function that altogether avoids these endogeneity problems. Applying this estimator to data on large changes in violent crime rates, we find that marginal willingness-to-pay increases by ten cents with each additional violent crime per 100,000 residents. ER - TY - JOUR AU - Rothstein,Jesse AU - Wozny,Nathan TI - Permanent Income and the Black-White Test Score Gap JF - National Bureau of Economic Research Working Paper Series VL - No. 17610 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17610 L1 - http://www.nber.org/papers/w17610.pdf N1 - Author contact info: Jesse Rothstein Goldman School of Public Policy University of California, Berkeley 2607 Hearst Avenue Berkeley, CA 94720-7320 Tel: 510/643-8561 Fax: 510/643-9657 E-Mail: rothstein@berkeley.edu Nathan Wozny Mathematica Policy Research P.O. Box 2393 Princeton, NJ 08543-2393 Tel: 609-936-2795 Fax: 609-799-0005 E-Mail: nwozny@mathematica-mpr.com AB - Analysts often examine the black-white test score gap conditional on family income. Typically only a current income measure is available. We argue that the gap conditional on permanent income is of greater interest, and we describe a method for identifying this gap using an auxiliary data set to estimate the relationship between current and permanent income. Current income explains only about half as much of the black-white test score gap as does permanent income, and the remaining gap in math achievement among families with the same permanent income is only 0.2 to 0.3 standard deviations in two commonly used data sets. When we add permanent income to the controls used by Fryer and Levitt (2006), the unexplained gap in 3rd grade shrinks below 0.15 standard deviations, less than half of what is found with their controls. ER - TY - JOUR AU - Lewis,Ethan G. TI - Immigrant-Native Substitutability: The Role of Language Ability JF - National Bureau of Economic Research Working Paper Series VL - No. 17609 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17609 L1 - http://www.nber.org/papers/w17609.pdf N1 - Author contact info: Ethan G. Lewis Department of Economics Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-2943 Fax: 603/646-2122 E-Mail: ethan.g.lewis@dartmouth.edu AB - Wage evidence suggests that immigrant workers are imperfectly substitutable for native-born workers with similar education and experience. Using U.S. Censuses and recent American Community Survey data, I ask to what extent differences in language skills drive this. I find they are important. I estimate that the response of immigrants’ relative wages to immigration is concentrated among immigrants with poor English skills. Similarly, immigrants who arrive at young ages, as adults, both have stronger English skills and exhibit greater substitutability for native-born workers than immigrants who arrive older. In U.S. markets where Spanish speakers are concentrated, I find a “Spanish-speaking” labor market emerges: in such markets, the return to speaking English is low, and the wages of Spanish and non-Spanish speakers respond most strongly to skill ratios in their own language group. Finally, in Puerto Rico, where almost all workers speak Spanish, I find immigrants and natives are perfect substitutes. The implications for immigrant poverty and regional settlement patterns are analyzed. ER - TY - JOUR AU - Gaynor,Martin AU - Laudicella,Mauro AU - Propper,Carol TI - Can Governments Do It Better? Merger Mania and Hospital Outcomes in the English NHS JF - National Bureau of Economic Research Working Paper Series VL - No. 17608 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17608 L1 - http://www.nber.org/papers/w17608.pdf N1 - Author contact info: Martin Gaynor Heinz College Carnegie Mellon University 4800 Forbes Avenue, Room 3008 Pittsburgh, PA 15213-3890 Tel: 412/268-7933 Fax: 412/268-5338 E-Mail: mgaynor@cmu.edu Mauro Laudicella Imperial College Business School South Kensington Campus London SW7 2AZ, United Kingdom E-Mail: m.laudicella@imperial.ac.uk Carol Propper Imperial College Business School South Kensington Campus London SW7 2AZ, United Kingdom E-Mail: carol.propper@bristol.ac.uk AB - The literature on mergers between private hospitals suggests that such mergers often produce little benefit. Despite this, the UK government has pursued an active policy of hospital merger. These mergers are initiated by a regulator, acting on behalf of the public, and justified on the grounds that merger will improve outcomes. We examine whether this promise is met. We exploit the fact that between 1997 and 2006 in England around half the short term general hospitals were involved in a merger, but that politics means that selection for a merger may be random with respect to future performance. We examine the impact of mergers on a large set of outcomes including financial performance, productivity, waiting times and clinical quality and find little evidence that mergers achieved gains other than a reduction in activity. In addition, mergers reduce the scope for competition between hospitals. ER - TY - JOUR AU - Ashenfelter,Orley C. TI - Economic History or History of Economics? A Review Essay on Sylvia Nasar’s Grand Pursuit: the Story of Economic Genius JF - National Bureau of Economic Research Working Paper Series VL - No. 17607 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17607 L1 - http://www.nber.org/papers/w17607.pdf N1 - Author contact info: Orley C. Ashenfelter Industrial Relations Section Firestone Library Princeton University Princeton, NJ 08544 Tel: 609/258-4040 Fax: 609/258-2907 E-Mail: c6789@princeton.edu AB - In this essay I review Sylvia Nasar’s long awaited new history of economics, Grand Pursuit. I describe how the book is really an economic history of the period from 1850-1950, with distinguished economists’ stories inserted in appropriate places. Nasar’s goal is to show how economists work, but also to show that they are people too--with more than enough warts and foibles to show they are human! I contrast the general view of the role of economics in Grand Pursuit with Robert Heilbroner’s remarkably different conception in The Worldly Philosophers. I also discuss more generally the question of why economists might be interested in their history at all. ER - TY - JOUR AU - Edmans,Alex AU - Goldstein,Itay AU - Zhu,John Y. TI - Contracting With Synergies JF - National Bureau of Economic Research Working Paper Series VL - No. 17606 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17606 L1 - http://www.nber.org/papers/w17606.pdf N1 - Author contact info: Alex Edmans The Wharton School University of Pennsylvania 2318 Steinberg Hall - Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104 Tel: 215/746-0498 Fax: 215/898-6200 E-Mail: aedmans@wharton.upenn.edu Itay Goldstein Wharton School University of Pennsylvania Philadelphia, PA 19104 E-Mail: itayg@wharton.upenn.edu John Y. Zhu Wharton School University of Pennsylvania Philadelphia, PA 19104 E-Mail: zhuyiran@wharton.upenn.edu AB - This paper studies optimal contracting under synergies. We define influence as the extent to which effort by one agent reduces a colleague's marginal cost of effort, and synergy to be the sum of the (unidimensional) influence parameters across a pair of agents. In a two-agent model, effort levels are equal even if influence is asymmetric. The optimal effort level depends only on total synergy and not individual influence parameters. An increase in synergy raises total effort and total pay, consistent with strong equity incentives in small firms, including among low-level employees. The influence parameters matter only for individual pay. Pay is asymmetric, with the more influential agent being paid more, even though the level and productivity of effort are both symmetric. With three agents, effort levels differ and are higher for more synergistic agents. An increase in the synergy between two agents can lead to the third agent being excluded from the team, even if his productivity is unchanged. This has implications for optimal team composition and firm boundaries. Agents that influence a greater number of colleagues receive higher wages, consistent with the salary differential between CEOs and divisional managers. ER - TY - JOUR AU - Mocan,Naci H. AU - Unel,Bulent TI - Skill-biased Technological Change, Earnings of Unskilled Workers, and Crime JF - National Bureau of Economic Research Working Paper Series VL - No. 17605 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17605 L1 - http://www.nber.org/papers/w17605.pdf N1 - Author contact info: Naci H. Mocan Department of Economics Louisiana State University 2119 Patrick F. Taylor Hall Baton Rouge, LA 70803-6306 Tel: 225/578-4570 E-Mail: mocan@lsu.edu Bulent Unel Department of Economics 2134 Taylor Hall Baton Rouge, LA 70803-6306 E-Mail: bunel@lsu.edu AB - This paper investigates the impact of unskilled workers' earnings on crime. Following the literature on wage inequality and skill-biased technological change, we employ CPS data to create state-year as well as state-year-and (broad) industry specific measures of skill-biased technological change, which are then used as instruments for unskilled workers' earnings in crime regressions. Regressions that employ state panels reveal that technology-induced variations in unskilled workers' earnings impact property crime with an elasticity of -1, but that wages have no impact on violent crime. The paper also estimates, for the first time in this literature, structural crime equations using micro panel data from NLSY97 and instrumenting real wages of young workers. Using state-year-industry specific technology shocks as instruments yields elasticities that are in the neighborhood of -2 for most types of crime, which is markedly larger than previous estimates. In both data sets there is evidence for asymmetric impact of unskilled workers' earnings on crime. A decline in earnings has a larger effect on crime in comparison to an increase in earnings by the same absolute value. ER - TY - JOUR AU - Harrigan,James AU - Reshef,Ariell TI - Skill Biased Heterogeneous Firms, Trade Liberalization, and the Skill Premium JF - National Bureau of Economic Research Working Paper Series VL - No. 17604 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17604 L1 - http://www.nber.org/papers/w17604.pdf N1 - Author contact info: James Harrigan Department of Economics University of Virginia P.O. Box 400182 Charlottesville, VA 22904-4182 Tel: 434-243-8354 Fax: 434-982-2904 E-Mail: harrigan@nber.org Ariell Reshef University of Virginia Department of Economics P.O. Box 400182 Charlottesville, VA 22904-4182 Tel: 434-243-4977 Fax: 434-982-2904 E-Mail: ariellr@virginia.edu AB - We propose a theory that rising globalization and rising wage inequality are related because trade liberalization raises the demand for highly competitive skill-intensive firms. In our model, only the lowest-cost firms participate in the global economy exactly along the lines of Melitz (2003). In addition to differing in their productivity, firms in our model differ in their skill intensity. We model skill-biased technology as a correlation between skill intensity and technological acumen, and we estimate this correlation to be large using firm-level data from Chile in 1995. A fall in trade costs leads to both greater trade volumes and an increase in the relative demand for skill, as the lowest-cost/most-skilled firms expand to serve the export market while less skill-intensive non-exporters retrench in the face of increased import competition. This mechanism works regardless of factor endowment differences, so we provide an explanation for why globalization and wage inequality move together in both skill-abundant and skill-scarce countries. In our model countries are net exporters of the services of their abundant factor, but there are no Stolper-Samuelson effects because import competition affects all domestic firms equally. ER - TY - JOUR AU - Limao,Nuno AU - Saggi,Kamal TI - Size Inequality, Coordination Externalities and International Trade Agreements JF - National Bureau of Economic Research Working Paper Series VL - No. 17603 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17603 L1 - http://www.nber.org/papers/w17603.pdf N1 - Author contact info: Nuno Limao Department of Economics University of Maryland 3105 Tydings Hall College Park, MD 20742 Tel: 301/405-7842 Fax: 301/405-3542 E-Mail: limao@econ.umd.edu Kamal Saggi Vanderbilt University Department of Economics VU Station B# 351828 2301 Vanderbilt Place Nashville, TN 37235-1828 Tel: (615)322 3237 Fax: 615-343-2391 E-Mail: k.saggi@vanderbilt.edu AB - Developing countries now account for a significant fraction of both world trade and two thirds of the membership of the World Trade Organization (WTO). However, many are still individually small and thus have a limited ability to bilaterally extract and enforce trade concessions from larger developed economies even though as a group they would be able to do so. We show that this coordination externality generates asymmetric outcomes under agreements that rely on bilateral threats of trade retaliation. such as the WTO. but not under agreements extended to include certain financial instruments. In particular, we find that an extended agreement generates improvements in global efficiency and equity if it Includes the exchange of bonds prior to trading but not if it relies solely on ex-post fines. Moreover, a combination of bonds and fines generates similar improvements even if small countries are subject to financial constraints that prevent them from posting bonds. ER - TY - JOUR AU - Akcigit,Ufuk AU - Liu,Qingmin TI - The Role of Information in Competitive Experimentation JF - National Bureau of Economic Research Working Paper Series VL - No. 17602 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17602 L1 - http://www.nber.org/papers/w17602.pdf N1 - Author contact info: Ufuk Akcigit Department of Economics University of Pennsylvania 3718 Locust Walk, #445 Philadelphia, PA 19104 Tel: 215/898-7711 Fax: 215/573-2057 E-Mail: uakcigit@econ.upenn.edu Qingmin Liu Columbia University 1022 International Affairs Building Mail Code 3308 420 West 118th Street New York, NY 10027 E-Mail: qingmin@econ.upenn.edu AB - Technological progress is typically a result of trial-and-error research by competing firms. While some research paths lead to the innovation sought, others result in dead ends. Because firms benefit from their competitors working in the wrong direction, they do not reveal their dead-end findings. Time and resources are wasted on projects that other firms have already found to be dead ends. Consequently, technological progress is slowed down, and the society benefits from innovations with delay, if ever. To study this prevalent problem, we build a tractable two-arm bandit model with two competing firms. The risky arm could potentially lead to a dead end and the safe arm introduces further competition to make firms keep their dead-end findings private. We characterize the equilibrium in this decentralized environment and show that the equilibrium necessarily entails significant efficiency losses due to wasteful dead-end replication and a flight to safety – an early abandonment of the risky project. Finally, we design a dynamic mechanism where firms are incentivized to disclose their actions and share their private information in a timely manner. This mechanism restores efficiency and suggests a direction for welfare improvement. ER - TY - JOUR AU - Caselli,Francesco AU - Tesei,Andrea TI - Resource Windfalls, Political Regimes, and Political Stability JF - National Bureau of Economic Research Working Paper Series VL - No. 17601 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17601 L1 - http://www.nber.org/papers/w17601.pdf N1 - Author contact info: Francesco Caselli Department of Economics London School of Economics Houghton Street London WC2A 2AE UNITED KINGDOM Tel: (44) (0) 2079557498 E-Mail: f.caselli@lse.ac.uk Andrea Tesei Universitat Pompeu Fabra Carrer Ramon Trias Fargas 25-27 Barcelona Spain E-Mail: andrea.tesei@upf.edu AB - We study theoretically and empirically whether natural resource windfalls affect political regimes. We document the following regularities. Natural resource windfalls have no effect on the political system when they occur in democracies. However, windfalls have significant political consequences in autocracies. In particular, when an autocratic country receives a positive shock to its flow of resource rents it responds by becoming even more autocratic. Furthermore, there is heterogeneity in the response of autocracies. In deeply entrenched autocracies the effect of windfalls on politics is virtually nil, while in moderately entrenched autocracies windfalls significantly exacerbate the autocratic nature of the political system. To frame the empirical work we present a simple model in which political incumbents choose the degree of political contestability by deciding how much to spend on vote-buying, bullying, or outright repression. Potential challengers decide whether or not to try to unseat the incumbent and replace him. The model uncovers a reason for the asymmetric impact of resource windfalls on democracies and autocracies, as well as the differential impact within autocratic regimes. ER - TY - JOUR AU - Cawley,John AU - Moriya,Asako S. AU - Simon,Kosali I. TI - The Impact of the Macroeconomy on Health Insurance Coverage: Evidence from the Great Recession JF - National Bureau of Economic Research Working Paper Series VL - No. 17600 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17600 L1 - http://www.nber.org/papers/w17600.pdf N1 - Author contact info: John Cawley 3M24 MVR Hall Department of Policy Analysis and Management and Department of Economics Cornell University Ithaca, NY 14853 Tel: 607/255-0952 Fax: 607/255-4071 E-Mail: jhc38@cornell.edu Asako S. Moriya Carnegie Mellon University E-Mail: asako.moriya@gmail.com Kosali I. Simon School of Public and Environmental Affairs Indiana University Rm 359 1315 East Tenth Street Bloomington, IN 47405-1701 Tel: (812) 856-3850 E-Mail: simonkos@indiana.edu AB - This paper investigates the impact of the macroeconomy on the health insurance coverage of Americans. We examine panel data from the Survey of Income and Program Participation (SIPP) for 2004-2010, a period that includes the Great Recession of 2007-09. We find that a one percentage point increase in the state unemployment rate is associated with a 1.67 percentage point (2.12%) reduction in the probability that men have health insurance; this effect is strongest among college-educated, white, and older (50-64 year old) men. For women and children, the unemployment rate was not significantly correlated with the probability of health insurance coverage through any source. When one examines the source of coverage, it becomes apparent that a one percentage point increase in the unemployment rate is associated with a 1.37 percentage point (4.69%) higher probability that a child is covered by public health insurance. Based on the point estimates in this paper, we estimate that 9.3 million adult Americans, the vast majority of whom were men, lost health insurance due to a higher unemployment rate alone during the 2007-09 recession. This is roughly nine times more than lost health insurance during the previous (2001) recession. We conclude with a discussion of how components of recent health care reform may influence these relationships in the future. ER - TY - JOUR AU - Bolton,Patrick AU - Oehmke,Martin TI - Should Derivatives be Privileged in Bankruptcy? JF - National Bureau of Economic Research Working Paper Series VL - No. 17599 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17599 L1 - http://www.nber.org/papers/w17599.pdf N1 - Author contact info: Patrick Bolton Columbia Business School 804 Uris Hall New York, NY 10027 Tel: 212/854-9245 Fax: 212/854-8059 E-Mail: pb2208@columbia.edu Martin Oehmke Finance and Economics Division Columbia Business School 3022 Broadway, Uris Hall 420 New York, NY 10027 Tel: 212/851-1804 Fax: 212/316-9180 E-Mail: moehmke@columbia.edu AB - Derivative contracts, swaps, and repos enjoy "super-senior" status in bankruptcy: they are exempt from the automatic stay on debt and collateral collection that applies to virtually all other claims. We propose a simple corporate finance model to assess the effect of this exemption on firms' cost of borrowing and incentives to engage in swaps and derivatives transactions. Our model shows that while derivatives are value-enhancing risk management tools, super-seniority for derivatives can lead to inefficiencies: collateralization and effective seniority of derivatives shifts credit risk to the firm's creditors, even though this risk could be borne more efficiently by derivative counterparties. In addition, because super-senior derivatives dilute existing creditors, they may lead firms to take on derivative positions that are too large from a social perspective. Hence, derivatives markets may grow inefficiently large in equilibrium. ER - TY - JOUR AU - Irwin,Douglas A. AU - O'Rourke,Kevin H. TI - Coping with Shocks and Shifts: The Multilateral Trading System in Historical Perspective JF - National Bureau of Economic Research Working Paper Series VL - No. 17598 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17598 L1 - http://www.nber.org/papers/w17598.pdf N1 - Author contact info: Douglas A. Irwin Department of Economics Dartmouth College Hanover, NH 03755 Tel: 603/646-2942 Fax: 603/646-2122 E-Mail: douglas.irwin@dartmouth.edu Kevin H. O'Rourke All Souls College Oxford University Oxford OX1 4AL, UK Tel: + 44 (0)1865 279 348 Fax: 353-1-6772503 E-Mail: kevin.orourke@all-souls.ox.ac.uk M3 - presented at "Globalization in an Age of Crisis", September 14-16, 2011 AB - This paper provides a historical look at how the multilateral trading system has coped with the challenge of shocks and shifts. By shocks we mean sudden jolts to the world economy in the form of financial crises and deep recessions, or wars and political conflicts. By shifts we mean slow-moving, long-term changes in comparative advantage or shifts in the geopolitical equilibrium that force economies to undergo disruptive and potentially painful adjustments. We conclude that most shocks (financial crises and regional wars) have had relatively little effect on trade policy, but that shifts pose a greater challenge to the system of open, multilateral trade. ER - TY - JOUR AU - Irwin,Douglas A. TI - Anticipating the Great Depression? Gustav Cassel’s Analysis of the Interwar Gold Standard JF - National Bureau of Economic Research Working Paper Series VL - No. 17597 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17597 L1 - http://www.nber.org/papers/w17597.pdf N1 - Author contact info: Douglas A. Irwin Department of Economics Dartmouth College Hanover, NH 03755 Tel: 603/646-2942 Fax: 603/646-2122 E-Mail: douglas.irwin@dartmouth.edu AB - The intellectual response to the Great Depression is often portrayed as a battle between the ideas of Friedrich Hayek and John Maynard Keynes. Yet both the Austrian and the Keynesian interpretations of the Depression were incomplete. Austrians could explain how a country might get into a depression (bust following an investment boom) but not how to get out of one (liquidation). Keynesians could explain how a country might get out of a depression (government spending on public works) but not how it got into one (animal spirits). By contrast, the monetary approach of economists such as Gustav Cassel has been ignored. As early as 1920, Cassel warned that mismanagement of the gold standard could lead to a severe depression. Cassel not only explained how this could occur, but his explanation anticipates the way that scholars today describe how the Great Depression actually occurred. Unlike Keynes or Hayek, Cassel explained both how a country could get into a depression (deflation due to tight monetary policies) and how it could get out of one (monetary expansion). ER - TY - JOUR AU - Eichengreen,Barry AU - Tong,Hui TI - The External Impact of China's Exchange Rate Policy: Evidence from Firm Level Data JF - National Bureau of Economic Research Working Paper Series VL - No. 17593 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17593 L1 - http://www.nber.org/papers/w17593.pdf N1 - Author contact info: Barry Eichengreen Department of Economics University of California, Berkeley 549 Evans Hall 3880 Berkeley, CA 94720-3880 Tel: 510/642-2772 Fax: 510/643-0926 E-Mail: eichengr@econ.Berkeley.edu Hui Tong Research Department IMF Washington DC 700 19th Street N.W. Washington, DC 20431 E-Mail: htong@imf.org AB - We examine the impact of renminbi revaluation on firm valuations, considering two surprise announcements of changes in China’s exchange rate policy in 2005 and 2010 and data on 6,050 firms in 44 countries. Renminbi appreciation has a positive effect on firms exporting to China but little positive or even a negative impact on those providing inputs for China’s processing exports. Stock prices rise for firms competing with China in their home market while falling for firms importing Chinese products with large imported-input content. Renminbi appreciation also reduces the valuation of financially-constrained firms, particularly in more financially integrated countries. ER - TY - JOUR AU - Ghani,Ejaz AU - Kerr,William R. AU - O'Connell,Stephen D. TI - Local Industrial Structures and Female Entrepreneurship in India JF - National Bureau of Economic Research Working Paper Series VL - No. 17596 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17596 L1 - http://www.nber.org/papers/w17596.pdf N1 - Author contact info: Ejaz Ghani South Asia PREM The World Bank Washington D.C. E-Mail: Eghani@worldbank.org William R. Kerr Harvard Business School Rock Center 212 Soldiers Field Boston, MA 02163 Tel: 617/496-7021 E-Mail: wkerr@hbs.edu Stephen D. O'Connell City University of New York Department of Economics The Graduate Center 365 Fifth Ave New York, NY 10016-4309 E-Mail: soconnell@gc.cuny.edu AB - We analyze the spatial determinants of female entrepreneurship in India in the manufacturing and services sectors. We focus on the presence of incumbent female-owned businesses and their role in promoting higher subsequent female entrepreneurship relative to male entrepreneurship. We find evidence of agglomeration economies in both sectors, where higher female ownership among incumbent businesses within a district-industry predicts a greater share of subsequent entrepreneurs will be female. Moreover, higher female ownership of local businesses in related industries (e.g., those sharing similar labor needs, industries related via input-output markets) predict greater relative female entry rates even after controlling for the focal district-industry’s conditions. The core patterns hold when using local industrial conditions in 1994 to instrument for incumbent conditions in 2000-2005. The results highlight that the traits of business owners in incumbent industrial structures influence the types of entrepreneurs supported. ER - TY - JOUR AU - Irwin,Douglas A. TI - Gold Sterilization and the Recession of 1937-38 JF - National Bureau of Economic Research Working Paper Series VL - No. 17595 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17595 L1 - http://www.nber.org/papers/w17595.pdf N1 - Author contact info: Douglas A. Irwin Department of Economics Dartmouth College Hanover, NH 03755 Tel: 603/646-2942 Fax: 603/646-2122 E-Mail: douglas.irwin@dartmouth.edu AB - The Recession of 1937-38 is often cited as illustrating the dangers of withdrawing fiscal and monetary stimulus too early in a weak recovery. Yet our understanding of this severe downturn is incomplete: existing studies find that changes in fiscal policy were small in comparison to the magnitude of the downturn and that higher reserve requirements were not binding on banks. This paper focuses on a neglected change in monetary policy, the sterilization of gold inflows during 1937, and finds that it exerted a powerful contractionary force during this period. The transmission of this monetary shock to the real economy appears to have worked through lower asset (equity) prices and higher interest rates. ER - TY - JOUR AU - Gopinath,Gita AU - Itskhoki,Oleg AU - Neiman,Brent TI - Trade Prices and the Global Trade Collapse of 2008-2009 JF - National Bureau of Economic Research Working Paper Series VL - No. 17594 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17594 L1 - http://www.nber.org/papers/w17594.pdf N1 - Author contact info: Gita Gopinath Department of Economics Harvard University 1875 Cambridge Street Littauer 206 Cambridge, MA 02138 Tel: 617/495-8161 Fax: 617/495-7730 E-Mail: gopinath@harvard.edu Oleg Itskhoki Department of Economics Princeton University Fisher Hall 306 Princeton, NJ 08544-1021 Tel: 609/258-5493 Fax: 609/258-6419 E-Mail: itskhoki@princeton.edu Brent Neiman University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-3199 Fax: 773/753-8266 E-Mail: brent.neiman@chicagobooth.edu AB - We document the behavior of trade prices during the Great Trade Collapse of 2008-2009 using transaction-level data from the U.S. Bureau of Labor Statistics. First, we find that differentiated manufactures exhibited marked stability in their trade prices during the large decline in their trade volumes. Prices of non-differentiated manufactures, by contrast, declined sharply. Second, while the trade collapse was much steeper among differentiated durable manufacturers than among non-durables, prices in both categories barely changed. Third, despite this lack of movement in average price levels, the frequency and magnitude of price adjustments at the product level noticeably changed with the onset of the crisis. ER - TY - JOUR AU - Ait-Sahalia,Yacine AU - Fan,Jianqing AU - Li,Yingying TI - The Leverage Effect Puzzle: Disentangling Sources of Bias at High Frequency JF - National Bureau of Economic Research Working Paper Series VL - No. 17592 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17592 L1 - http://www.nber.org/papers/w17592.pdf N1 - Author contact info: Yacine Ait-Sahalia Department of Economics Fisher Hall Princeton University Princeton, NJ 08544-1021 Tel: 609/258-4015 Fax: 609/258-0719 E-Mail: yacine@princeton.edu Jianqing Fan Bendheim Center for Finance 26 Prospect Ave Princeton NJ 08540 E-Mail: jqfan@princeton.edu Yingying Li Department of Information Systems, Business Statis Hong Kong University of Science and Technology E-Mail: yyli@ust.hk AB - The leverage effect refers to the generally negative correlation between an asset return and its changes of volatility. A natural estimate consists in using the empirical correlation between the daily returns and the changes of daily volatility estimated from high-frequency data. The puzzle lies in the fact that such an intuitively natural estimate yields nearly zero correlation for most assets tested, despite the many economic reasons for expecting the estimated correlation to be negative. To better understand the sources of the puzzle, we analyze the different asymptotic biases that are involved in high frequency estimation of the leverage effect, including biases due to discretization errors, to smoothing errors in estimating spot volatilities, to estimation error, and to market microstructure noise. This decomposition enables us to propose novel bias correction methods for estimating the leverage effect. ER - TY - JOUR AU - Hanushek,Eric A. AU - Link,Susanne AU - Woessmann,Ludger TI - Does School Autonomy Make Sense Everywhere? Panel Estimates from PISA JF - National Bureau of Economic Research Working Paper Series VL - No. 17591 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17591 L1 - http://www.nber.org/papers/w17591.pdf N1 - Author contact info: Eric A. Hanushek Hoover Institution Stanford University Stanford, CA 94305-6010 Tel: 650/736-0942 Fax: 650/723-1687 E-Mail: hanushek@stanford.edu Susanne Link ifo Institute Poschingerstr. 5 81679 Munich GERMANY E-Mail: link@ifo.de Ludger Woessmann University of Munich Ifo Institute for Economic Research and CESifo Poschingerstr. 5 81679 Munich, Germany E-Mail: woessmann@ifo.de AB - Decentralization of decision-making is among the most intriguing recent school reforms, in part because countries went in opposite directions over the past decade and because prior evidence is inconclusive. We suggest that autonomy may be conducive to student achievement in well-developed systems but detrimental in low-performing systems. We construct a panel dataset from the four waves of international PISA tests spanning 2000-2009, comprising over one million students in 42 countries. Relying on panel estimation with country fixed effects, we identify the effect of school autonomy from within-country changes in the average share of schools with autonomy over key elements of school operations. Our results show that autonomy affects student achievement negatively in developing and low-performing countries, but positively in developed and high-performing countries. These results are unaffected by a wide variety of robustness and specification tests, providing confidence in the need for nuanced application of reform ideas. ER - TY - JOUR AU - Schoar,Antoinette AU - Zuo,Luo TI - Shaped by Booms and Busts: How the Economy Impacts CEO Careers and Management Styles JF - National Bureau of Economic Research Working Paper Series VL - No. 17590 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17590 L1 - http://www.nber.org/papers/w17590.pdf N1 - Author contact info: Antoinette Schoar MIT Sloan School of Management 100 Main Street, E62-638 Cambridge, MA 02142 Tel: 617/253-3763 Fax: 617/258-6855 E-Mail: aschoar@mit.edu Luo Zuo MIT Sloan School of Management 100 Main Street, E62-661 Cambridge, MA 02142 E-Mail: luozuo@mit.edu AB - This paper examines how early career experiences affect the career path and promotion of managers as well as the managerial styles that they develop when becoming CEOs. We identify the impact of an exogenous shock to a manager’s career, in particular the business cycle at the career starting date. Economic conditions at the beginning of a manager’s career have lasting effects on the career path and the ultimate outcome as a CEO. Those CEOs who begin their careers during recessions take less time to become CEOs, but end up heading smaller firms, receiving lower compensation, and being more likely to rise through the ranks within a given firm rather than to move across firms and industries. Moreover, managers who start in recessions have more conservative management styles once they become CEOs. Firms led by these managers spend less in capital expenditures and R&D, have lower leverage, are more diversified across segments, show more concern about cost effectiveness, and have lower stock return volatility. While looking at the role of early job choices on CEO careers is more endogenous, the results support the idea that certain types of starting positions are feeders for successful long-run management careers: Starting in a firm that ranks within the top ten firms from which CEOs come is associated with favorable outcomes for a manager – these CEOs end up heading larger companies and receiving higher compensation. ER - TY - JOUR AU - Hungerman,Daniel M. TI - Substitution and Stigma: Evidence on Religious Competition from the Catholic Sex-Abuse Scandal JF - National Bureau of Economic Research Working Paper Series VL - No. 17589 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17589 L1 - http://www.nber.org/papers/w17589.pdf N1 - Author contact info: Daniel M. Hungerman Department of Economics University of Notre Dame 439 Flanner Hall Notre Dame, IN 46556-5602 Tel: 574/631-4495 Fax: 574/631-4783 E-Mail: dhungerm@nd.edu AB - This paper considers substituting one charitable activity for another in the context of religious practice. I examine the impact of the Catholic Church sex-abuse scandal on both Catholic and non-Catholic religiosity. I find that the scandal led to a 2-million-member fall in the Catholic population that was compensated by an increase in non-Catholic participation and by an increase in non-affiliation. Back-of-the-envelope calculations suggest the scandal generated over 3 billion dollars in donations to non-Catholic faiths. Those substituting out of Catholicism frequently chose highly dissimilar alternatives; for example, Baptist churches gained significantly from the scandal while the Episcopal Church did not. These results challenge several theories of religious participation and suggest that regulatory policies or other shocks specific to one religious group could have important spillover effects on other religious groups. ER - TY - JOUR AU - Mullahy,John TI - Marginal Effects in Multivariate Probit and Kindred Discrete and Count Outcome Models, with Applications in Health Economics JF - National Bureau of Economic Research Working Paper Series VL - No. 17588 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17588 L1 - http://www.nber.org/papers/w17588.pdf N1 - Author contact info: John Mullahy University of Wisconsin-Madison Dept. of Population Health Sciences 787 WARF, 610 N. Walnut Street Madison, WI 53726 Tel: 608/265-5410 Fax: 608/263-2820 E-Mail: jmullahy@facstaff.wisc.edu AB - Estimation of marginal or partial effects of covariates x on various conditional parameters or functionals is often the main target of applied microeconometric analysis. In the specific context of probit models such estimation is straightforward in univariate models, and Greene, 1996, 1998, has extended these results to cover the case of quadrant probability marginal effects in bivariate probit models. The purpose of this paper is to extend these results to the general multivariate probit context for arbitrary orthant probabilities and to demonstrate the applicability of such extensions in contexts of interest in health economics applications. The baseline results are extended to models that condition on subvectors of y, to count data structures that derive from the probability structure of y, to multivariate ordered probit data structures, and to multinomial probit models whose marginal effects turn out to be a special case of those of the multivariate probit model. Simulations reveal that analytical formulae versus fully numerical derivatives result in a reduction in computational time as well as an increase in accuracy. ER - TY - JOUR AU - Bernheim,B. Douglas AU - Fradkin,Andrey AU - Popov,Igor TI - The Welfare Economics of Default Options: A Theoretical and Empirical Analysis of 401(k) Plans JF - National Bureau of Economic Research Working Paper Series VL - No. 17587 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17587 L1 - http://www.nber.org/papers/w17587.pdf N1 - Author contact info: B. Douglas Bernheim Department of Economics Stanford University Stanford, CA 94305-6072 Tel: 650/725-8732 Fax: 650/725-5702 E-Mail: bernheim@stanford.edu Andrey Fradkin Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 E-Mail: afrad@stanford.edu Igor Popov Department of Economics Stanford University Stanford, CA 94305-6072 E-Mail: iapopov@stanford.edu AB - According to previous research, changing the default contribution rate for a 401(k) pension plan has a powerful effect on the distribution of contributions among relatively new employees. Potential explanations include the following: (1) opting out may entail significant effort and inconvenience; (2) the default rate may serve as a psychological anchor, influencing choices because of its salience or imprimatur; (3) workers may procrastinate, putting off the opt-out decision; (4) workers may be inattentive. We examine the welfare implications of defaults under each of these theories. Because three of them involve non-standard behavioral hypotheses, we adopt and implement the framework for behavioral welfare economics proposed by Bernheim and Rangel (2009). In each case we begin by developing theoretical principles, and then confront the theory with data to reach concrete quantitative conclusions. ER - TY - JOUR AU - Palladini,Giorgia AU - Portes,Richard TI - Sovereign CDS and Bond Pricing Dynamics in the Euro-area JF - National Bureau of Economic Research Working Paper Series VL - No. 17586 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17586 L1 - http://www.nber.org/papers/w17586.pdf N1 - Author contact info: Giorgia Palladini London Business School Regents Park London NW1 4SA UK E-Mail: gpalladini@london.edu Richard Portes London Business School Regent's Park London NW1 4SA UNITED KINGDOM Tel: 44 (0) 20 7000 8424 Fax: 44 (0) 20 7000 8401 E-Mail: rportes@london.edu AB - This analysis tests the price discovery relationship between sovereign CDS premia and bond yield spreads on the same reference entity. The theoretical no-arbitrage relationship between the two credit spreads is confronted with daily data from six Euro-area countries over the period 2004-2011. As a first step, the supposed non stationarity of the two series is verified. Then, we examine whether the non-stationary CDS and bond spreads series are bound by a cointegration relationship. Overall the cointegration analysis confirms that the two prices should be equal to each other in equilibrium, as theory predicts. Nonetheless the theoretical value [1, -1] for the cointegrating vector is rejected, meaning that in the short run the cash and synthetic market's valuation of credit risk differ to various degrees. The VECM analysis suggests that the CDS market moves ahead of the bond market in terms of price discovery. These findings are further supported by the Granger Causality Test: for most sovereigns in the sample, past values of CDS spreads help to forecast bond yield spreads. Short-run deviations from the equilibrium persist longer than it would take for participants in one market to observe the price in the other. That is consistent with the hypothesis of imperfections in the arbitrage relationship between the two markets. ER - TY - JOUR AU - Rotemberg,Julio J. TI - Charitable Giving When Altruism and Similarity are Linked JF - National Bureau of Economic Research Working Paper Series VL - No. 17585 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17585 L1 - http://www.nber.org/papers/w17585.pdf N1 - Author contact info: Julio J. Rotemberg Graduate School of Business Harvard University, Morgan Hall Soldiers Field Boston, MA 02163 Tel: 617/495-1015 Fax: 617/496-5994 E-Mail: jrotemberg@hbs.edu AB - This paper presents a model in which anonymous charitable donations are rationalized by two human tendencies drawn from the psychology literature. The first is people's disproportionate disposition to help those they agree with while the second is the dependence of peoples' self-esteem on the extent to which they perceive that others agree with them. Government spending crowds out the charity that ensues from these forces only modestly. Moreover, people's donations tend to rise when others donate. In some equilibria of the model, poor people give little because they expect donations to come mainly from richer individuals. In others, donations by poor individuals constitute a large fraction of donations and this raises the incentive for poor people to donate. The model predicts that, under some circumstances, charities with identical objectives can differ by obtaining funds from distinct donor groups. The model then provides an interpretation for situations in which the number of charities rises while total donations are stagnant. ER - TY - JOUR AU - Mulligan,Casey B. TI - Rising Labor Productivity during the 2008-9 Recession JF - National Bureau of Economic Research Working Paper Series VL - No. 17584 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17584 L1 - http://www.nber.org/papers/w17584.pdf N1 - Author contact info: Casey B. Mulligan University of Chicago Department of Economics 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-9017 Fax: 773/702-8490 E-Mail: c-mulligan@uchicago.edu AB - During the recession of 2008-9, labor hours fell sharply, while wages and output per hour rose. Some, but not all, of the productivity and wage increase can be attributed to changing quality of the workforce. The rest of the increase appears to be due to increases in production inputs other than labor hours. All of these findings, plus the drop in consumer expenditure, are consistent with the hypothesis that labor market “distortions” were increasing during the recession and have remained in place during the slow “recovery.” Producers appear to be trying to continue production with less labor, rather than cutting labor hours as a means of cutting output. ER - TY - JOUR AU - Guerrieri,Veronica AU - Lorenzoni,Guido TI - Credit Crises, Precautionary Savings, and the Liquidity Trap JF - National Bureau of Economic Research Working Paper Series VL - No. 17583 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17583 L1 - http://www.nber.org/papers/w17583.pdf N1 - Author contact info: Veronica Guerrieri University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-7834 Fax: 773/702-0458 E-Mail: vguerrie@chicagobooth.edu Guido Lorenzoni MIT Department of Economics E52-251C 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-4836 Fax: 617/253-1330 E-Mail: glorenzo@mit.edu AB - We study the effects of a credit crunch on consumer spending in a heterogeneous-agent incomplete-market model. After an unexpected permanent tightening in consumers’ borrowing capacity, some consumers are forced to deleverage and others increase their precautionary savings. This depresses interest rates, especially in the short run, and generates an output drop, even with flexible prices. The output drop is larger with nominal rigidities, if the zero lower bound prevents the interest rate from adjusting downwards. Adding durable goods to the model, households take larger debt positions and the output response may be larger. ER - TY - JOUR AU - Edmans,Alex AU - Goldstein,Itay AU - Jiang,Wei TI - Feedback Effects and the Limits to Arbitrage JF - National Bureau of Economic Research Working Paper Series VL - No. 17582 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17582 L1 - http://www.nber.org/papers/w17582.pdf N1 - Author contact info: Alex Edmans The Wharton School University of Pennsylvania 2318 Steinberg Hall - Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104 Tel: 215/746-0498 Fax: 215/898-6200 E-Mail: aedmans@wharton.upenn.edu Itay Goldstein Wharton School University of Pennsylvania Philadelphia, PA 19104 E-Mail: itayg@wharton.upenn.edu Wei Jiang Graduate School of Business Columbia University 411 Uris Hall New York, NY 10027 Tel: 212/854-9679 E-Mail: wj2006@columbia.edu AB - This paper identifies a limit to arbitrage that arises from the fact that a firm's fundamental value is endogenous to the act of exploiting the arbitrage. Trading on private information reveals this information to managers and helps them improve their real decisions, in turn enhancing fundamental value. While this increases the profitability of a long position, it reduces the profitability of a short position -- selling on negative information reveals that firm prospects are poor, causing the manager to cancel investment. Optimal abandonment increases firm value and may cause the speculator to realize a loss on her initial sale. Thus, investors may strategically refrain from trading on negative information, and so bad news is incorporated more slowly into prices than good news. The effect has potentially important real consequences -- if negative information is not incorporated into stock prices, negative-NPV projects may not be abandoned, leading to overinvestment. ER - TY - JOUR AU - Horioka,Charles Yuji AU - Terada-Hagiwara,Akiko TI - The Determinants and Long-term Projections of Saving Rates in Developing Asia JF - National Bureau of Economic Research Working Paper Series VL - No. 17581 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17581 L1 - http://www.nber.org/papers/w17581.pdf N1 - Author contact info: Charles Y. Horioka Institute of Social and Economic Research Osaka University 6-1 Mihogaoka, Ibaraki-shi Osaka-fu 567-0047 JAPAN Tel: 81-6-6879-8586 Fax: 81-6-6878-2766 E-Mail: horioka@iser.osaka-u.ac.jp Akiko Terada-Hagiwara Asian Development Bank Manila, Philippines E-Mail: ahagiwara@adb.org AB - In this paper, we present data on trends over time in domestic saving rates in twelve economies in developing Asia during the 1966-2007 period and analyze the determinants of these trends. We find that domestic saving rates in developing Asia have, in general, been high and rising but that there have been substantial differences from economy to economy and that the main determinants of these trends appear to have been the age structure of the population (especially the aged dependency ratio), income levels, and the level of financial sector development. We then project future trends in domestic saving rates in developing Asia for the 2011-2030 period based on our estimation results and find that the domestic saving rate in developing Asia as a whole will remain roughly constant during the next two decades despite rapid population aging in some economies in developing Asia because population aging will occur much later in other economies and because the negative impact of population aging on the domestic saving rate will be largely offset by the positive impact of higher income levels. ER - TY - JOUR AU - Angeletos,George-Marios AU - La'O,Jennifer TI - Optimal Monetary Policy with Informational Frictions JF - National Bureau of Economic Research Working Paper Series VL - No. 17525 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17525 L1 - http://www.nber.org/papers/w17525.pdf N1 - Author contact info: George-Marios Angeletos Department of Economics MIT E52-251 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/452-3859 Fax: 617/253-1330 E-Mail: angelet@mit.edu Jennifer La'O University of Chicago Booth School of Business 5807 S. Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-9768 E-Mail: jenlao@chicagobooth.edu AB - We study optimal monetary policy in an environment in which firms’ pricing and production decisions are subject to informational frictions. Our framework accommodates multiple formalizations of these frictions, including dispersed private information, sticky information, and certain forms of inattention. An appropriate notion of constrained efficiency is analyzed alongside the Ramsey policy problem. Similarly to the New-Keynesian paradigm, efficiency obtains with a subsidy that removes the monopoly distortion and a monetary policy that replicates flexible-price allocations. Nevertheless, “divine coincidence” breaks down and full price stability is no more optimal. Rather, the optimal policy is to “lean against the wind”, that is, to target a negative correlation between the price level and real economic activity. ER - TY - JOUR AU - Guindon,G. Emmanuel AU - Nandi,Arindam AU - Chaloupka,Frank J., IV AU - Jha,Prabhat TI - Socioeconomic Differences in the Impact of Smoking Tobacco and Alcohol Prices on Smoking in India JF - National Bureau of Economic Research Working Paper Series VL - No. 17580 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17580 L1 - http://www.nber.org/papers/w17580.pdf N1 - Author contact info: G. Emmanuel Guindon University of Waterloo Propel Centre for Population Health Impact Lyle S. Hallman Institute 200 University Ave. West Waterloo, ON, N2L 3G1, Canada E-Mail: egguindon@uwaterloo.ca Arindam Nandi The Center for Disease Dynamics, Economics & Policy 1616 P St NW, Ste 600 Washington DC 20036 E-Mail: nandi@cddep.org Frank J. Chaloupka, IV University of Illinois at Chicago Department of Economics (m/c 144) College of Liberal Arts and Sciences 601 S. Morgan Street, Room 713 Chicago, IL 60607-7121 Tel: 312/413-2287 Fax: 312/996-3344;630/801-8870 E-Mail: fjc@uic.edu Prabhat Jha University of Toronto Centre for Global Health Research LKSKI/KRC, St. Michael's Hospital 30 Bond Street, Toronto, ON, M5B 1W8, Canada E-Mail: jhap@smh.ca AB - The threat posed by smoking to health in India is severe. Already 1 in 5 of all adult male deaths and 1 in 20 of all adult female deaths at ages 30-69 are due to smoking and India will soon have 1 million smoking deaths a year. Increasing tobacco prices has been found to be the single most effective method to reduce smoking. Yet, bidis, the most common form of smoked tobacco in India, are largely untaxed, while cigarettes are taxed at about 40% of retail price, well below the 65–80% rate noted by the World Bank in countries with effective tobacco control policies. Moreover, low and stagnant tax rates have occurred in a period in which all tobacco products have become more affordable with income growth. First, we use data from the most recent three consecutive quinquennial National Sample Survey (NSS) rounds (NSS 50, 55 and 61 conducted in 1993/94, 1999/00 and 200/05) and a two-equation system of budget shares and unit values that attempts to correct for quality and measurement error. Second, we pool data from the most recent nine rounds of NSS (NSS 55-57, 59-64, conducted between 1999/00 to 2007/08). Our analyses of single and repeated cross-sections yield own-price elasticity for bidis that are roughly in keeping with existing evidence. We find that a 10% increase in bidi prices would reduce the demand for bidis by about 6 to 9.5%. We find, however, that own-price elasticity for cigarettes in India is substantially larger than previously thought. Our estimates suggest that cigarette users are at least as responsive as bidi users to price changes. On the whole, our analyses suggest that low SES households are likely more responsive to price changes than high SES households. Our analyses also uncovers important and policy-relevant cross-prices effects. Findings from this study provide additional evidence of the effectiveness of tobacco prices at reducing tobacco use. ER - TY - JOUR AU - Benabou,Roland AU - Tirole,Jean TI - Laws and Norms JF - National Bureau of Economic Research Working Paper Series VL - No. 17579 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17579 L1 - http://www.nber.org/papers/w17579.pdf N1 - Author contact info: Roland Benabou Department of Economics and Woodrow Wilson School Princeton University Princeton, NJ 08544 Tel: 609/258-3672 Fax: 609/258-5533 E-Mail: rbenabou@princeton.edu Jean Tirole Institut d'Economie Industrielle Bureau MF529 - Bat. F 21 allees de Brienne 31000 Toulouse FRANCE Tel: 33-561-128642 E-Mail: tirole@cict.fr AB - This paper analyzes how private decisions and public policies are shaped by personal and societal preferences ("values"), material or other explicit incentives ("laws") and social sanctions or rewards ("norms"). It first examines how honor, stigma and social norms arise from individuals' behaviors and inferences, and how they interact with material incentives. It then characterizes optimal incentive-setting in the presence of norms, deriving in particular appropriately modified versions of Pigou and Ramsey taxation. Incorporating agents' imperfect knowledge of the distribution of preferences opens up to analysis several new questions. The first is social psychologists' practice of "norms-based interventions", namely campaigns and messages that seek to alter people’s perceptions of what constitutes "normal" behavior or values among their peers. The model makes clear how such interventions operate but also how their effectiveness is limited by a credibility problem, particularly when the descriptive and prescriptive norms conflict. The next main question is the expressive role of law. The choices of legislators and other principals naturally reflect their knowledge of societal preferences, and these same "community standards" are also what shapes social judgments and moral sentiments. Setting law thus means both imposing material incentives and sending a message about society's values, and hence about the norms that different behaviors are likely to encounter. The analysis, combining an informed principal with individually signaling agents, makes precise the notion of expressive law, determining in particular when a weakening or a strengthening of incentives is called for. Pushing further this logic, the paper also sheds light on why societies are often resistant to the message of economists, as well as on why they renounce certain policies, such as "cruel and unusual" punishments, irrespective of effectiveness considerations, in order to express their being "civilized". ER - TY - JOUR AU - Ruhm,Christopher J. AU - Jones,Alison Snow AU - Kerr,William C. AU - Greenfield,Thomas K. AU - Terza,Joseph V. AU - Pandian,Ravi S. AU - McGeary,Kerry Anne TI - What U.S. Data Should be Used to Measure the Price Elasticity of Demand for Alcohol? JF - National Bureau of Economic Research Working Paper Series VL - No. 17578 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17578 L1 - http://www.nber.org/papers/w17578.pdf N1 - Author contact info: Christopher J. Ruhm Frank Batten School of Leadership and Public Policy University of Virginia 235 McCormick Rd. P.O. Box 400893 Charlottesville, VA 22904-40893 Tel: 434-243-3729 E-Mail: ruhm@virginia.edu Alison Snow Jones E-Mail: N/A user is deceased William C. Kerr Alcohol Research Group Public Health Institute 6475 Christie Avenue, Suite 400 Emeryville, CA 94608-1010 E-Mail: wkerr@arg.org Thomas K. Greenfield Alcohol Research Group Public Health Institute 6475 Christie Avenue, Suite 400 Emeryville, CA 94608-1010 E-Mail: tgreenfield@arg.org Joseph V. Terza Department of Economics University of North Carolina at Greensboro Greensboro, NC 27402-6165 E-Mail: jvterza@uncg.edu Ravi S. Pandian Department of Health Management and Policy Drexel University Philadelphia, PA 19102 E-Mail: rsp46@drexel.edu Kerry Anne McGeary Department of Economics Miller College of Business Whitinger Business Building, RM 129 Ball State University Muncie, IN 47306 Tel: 765-285-5378 Fax: 765-285-4313 E-Mail: kmcgeary@bsu.edu AB - This paper examines how estimates of the price elasticity of demand for beer vary with the choice of alcohol price series used. Our most important finding is that the commonly used ACCRA price data are unlikely to reliably indicate alcohol demand elasticities. Instead, the estimates obtained using ACCRA prices vary drastically and unpredictably. As an alternative, researchers often use beer taxes to proxy for alcohol prices. However, since beer taxes are actually likely to poorly indicate prices, it is not surprising that the estimated beer tax elasticities are close to zero. We believe that our most useful estimates are obtained using annual Uniform Product Code (UPC) or “barcode” scanner data on grocery store alcohol prices. These estimates suggest a relatively low price elasticity of demand for beer, probably around -0.3, with evidence that the elasticities are considerably overstated in models that control for beer but not wine or spirits prices. ER - TY - JOUR AU - Kerr,William R. AU - Lincoln,William F. AU - Mishra,Prachi TI - The Dynamics of Firm Lobbying JF - National Bureau of Economic Research Working Paper Series VL - No. 17577 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17577 L1 - http://www.nber.org/papers/w17577.pdf N1 - Author contact info: William R. Kerr Harvard Business School Rock Center 212 Soldiers Field Boston, MA 02163 Tel: 617/496-7021 E-Mail: wkerr@hbs.edu William Lincoln University of Michigan Economics Department 107 Lorch Hall 611 Tappan St. Ann Arbor, MI 48109-1220 Tel: 781-710-5709 E-Mail: wlincoln@umich.edu Prachi Mishra International Monetary Fund Research Department, HQ1-9-718 700, 19th Street NW Washington DC 20431 Tel: 202-623-9409 Fax: 202-589-9409 E-Mail: pmishra@imf.org AB - We study the determinants of the dynamics of firm lobbying behavior using a panel data set covering 1998-2006. Our data exhibit three striking facts: (i) few firms lobby, (ii) lobbying status is strongly associated with firm size, and (iii) lobbying status is highly persistent over time. Estimating a model of a firm's decision to engage in lobbying, we find significant evidence that up-front costs associated with entering the political process help explain all three facts. We then exploit a natural experiment in the expiration in legislation surrounding the H-1B visa cap for high-skilled immigrant workers to study how these costs affect firms' responses to policy changes. We find that companies primarily adjusted on the intensive margin: the firms that began to lobby for immigration were those who were sensitive to H-1B policy changes and who were already advocating for other issues, rather than firms that became involved in lobbying anew. For a firm already lobbying, the response is determined by the importance of the issue to the firm's business rather than the scale of the firm's prior lobbying efforts. These results support the existence of significant barriers to entry in the lobbying process. ER - TY - JOUR AU - Devereux,Michael P. AU - Loretz,Simon TI - How Would EU Corporate Tax Reform Affect US Investment in Europe? JF - National Bureau of Economic Research Working Paper Series VL - No. 17576 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17576 L1 - http://www.nber.org/papers/w17576.pdf N1 - Author contact info: Michael P. Devereux Centre for Business Taxation Saïd Business School Oxford University Park End Street Oxford OX1 1HP United Kingdom E-Mail: Michael.Devereux@sbs.ox.ac.uk Simon Loretz University of Bayreuth Universitätsstr. 30 95447 Bayreuth Germany E-Mail: simon.loretz@uni-bayreuth.de M3 - presented at "Tax Policy and the Economy", October 6, 2011 AB - This paper examines the likely impact of a proposed formula apportionment system for corporation tax in the EU on the inbound investment of US multinational companies. We pay attention to tax planning strategies that may be employed by US multinationals and investigate whether effective tax rates in Europe of US companies differ from those of European companies. The proposal is for an optional system: we estimate the extent to which both European and US companies would be likely to choose it taking into account their existing structures and future investment incentives. The relative position of US and European companies depends crucially on the taxation of foreign passive income. ER - TY - JOUR AU - Bansal,Ravi AU - Ochoa,Marcelo TI - Temperature, Aggregate Risk, and Expected Returns JF - National Bureau of Economic Research Working Paper Series VL - No. 17575 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17575 L1 - http://www.nber.org/papers/w17575.pdf N1 - Author contact info: Ravi Bansal Fuqua School of Business Duke University 1 Towerview Drive Durham, NC 27708 Tel: 919/660-7758 Fax: 919/660-8038 E-Mail: ravi.bansal@duke.edu Marcelo Ochoa Department of Economics Duke University Social Sciences Building Durham, NC 27708-0097 E-Mail: jmo6@duke.edu AB - In this paper we show that temperature is an aggregate risk factor that adversely affects economic growth. Our argument is based on evidence from global capital markets which shows that the covariance between country equity returns and temperature (i.e., temperature betas) contains sharp information about the cross-country risk premium; countries closer to the Equator carry a positive temperature risk premium which decreases as one moves farther away from the Equator. The differences in temperature betas mirror exposures to aggregate growth rate risk, which we show is negatively impacted by temperature shocks. That is, portfolios with larger exposure to risk from aggregate growth also have larger temperature betas; hence, a larger risk premium. We further show that increases in global temperature have a negative impact on economic growth in countries closer to the Equator, while its impact is negligible in countries at high latitudes. Consistent with this evidence, we show that there is a parallel between a country's distance to the Equator and the economy's dependence on climate sensitive sectors; in countries closer to the Equator industries with a high exposure to temperature are more prevalent. We provide a Long-Run Risks based model that quantitatively accounts for cross-sectional differences in temperature betas, its link to expected returns, and the connection between aggregate growth and temperature risks. ER - TY - JOUR AU - Bansal,Ravi AU - Ochoa,Marcelo TI - Welfare Costs of Long-Run Temperature Shifts JF - National Bureau of Economic Research Working Paper Series VL - No. 17574 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17574 L1 - http://www.nber.org/papers/w17574.pdf N1 - Author contact info: Ravi Bansal Fuqua School of Business Duke University 1 Towerview Drive Durham, NC 27708 Tel: 919/660-7758 Fax: 919/660-8038 E-Mail: ravi.bansal@duke.edu Marcelo Ochoa Department of Economics Duke University Social Sciences Building Durham, NC 27708-0097 E-Mail: jmo6@duke.edu AB - This article makes a contribution towards understanding the impact of temperature fluctuations on the economy and financial markets. We present a long-run risks model with temperature related natural disasters. The model simultaneously matches observed temperature and consumption growth dynamics, and key features of financial markets data. We use this model to evaluate the role of temperature in determining asset prices, and to compute utility-based welfare costs as well as dollar costs of insuring against temperature fluctuations. We find that the temperature related utility-costs are about 0.78% of consumption, and the total dollar costs of completely insuring against temperature variation are 2.46% of world GDP. If we allow for temperature-triggered natural disasters to impact growth, insuring against temperature variation raise to 5.47% of world GDP. We show that the same features, long-run risks and recursive-preferences, that account for the risk-free rate and the equity premium puzzles also imply that temperature-related economic costs are important. Our model implies that a rise in global temperature lowers equity valuations and raises risk premiums. ER - TY - JOUR AU - Lampe,Ryan L. AU - Moser,Petra TI - Patent Pools and the Direction of Innovation - Evidence from the 19th-century Sewing Machine Industry JF - National Bureau of Economic Research Working Paper Series VL - No. 17573 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17573 L1 - http://www.nber.org/papers/w17573.pdf N1 - Author contact info: Ryan L. Lampe DePaul University 1 East Jackson Blvd Suite 6200 Chicago, IL 60604 E-Mail: rlampe@depaul.edu Petra Moser Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 Tel: 650-723-9303 Fax: (650) 725-5702 E-Mail: pmoser@stanford.edu AB - Patent pools allow a group of firms to combine their patents as if they were a single firm. Theoretical models predict that pools encourage innovation in pool technologies, albeit at the cost of innovation in substitutes. Empirical evidence is scarce because modern pools are too recent to allow empirical analyses. This article examines data on patents and innovations by new firms for a historical pool in the sewing machine industry (1856-1877) to examine effects on innovation. Contrary to theoretical predictions, this analysis suggests that pools may discourage innovation in pool technologies and shift R&D towards technologically inferior substitutes. ER - TY - JOUR AU - Durante,Ruben AU - Labartino,Giovanna AU - Perotti,Roberto TI - Academic Dynasties: Decentralization and Familism in the Italian Academia JF - National Bureau of Economic Research Working Paper Series VL - No. 17572 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17572 L1 - http://www.nber.org/papers/w17572.pdf N1 - Author contact info: Ruben Durante Department of Economics, Sciences Po 28, rue des Saints Pères 75007 Paris France E-Mail: Ruben.Durante@sciences-po.org Giovanna Labartino Department of Economics - University of Padova Via del Santo 33 35123 Padova Italy E-Mail: giovanna.labartino@gmail.com Roberto Perotti IGIER Universita' Bocconi Via Roentgen 1 20136 Milano ITALY Tel: 39 02 58363073 Fax: 39 02 58363302 E-Mail: roberto.perotti@unibocconi.it AB - Decentralization can lead to "good" or "bad" outcomes depending on the socio-cultural norms of the targeted communities. We investigate this issue by looking at the evolution of familism and nepotism in the Italian academia before and after the 1998 reform, which decentralized the recruitment of professors from the national to the university level. To capture familism we use a novel dataset on Italian university professors between 1988 and 2008 focusing on the informative content of last names. We construct two indices of “homonymy” which capture the concentration of last names in a given academic department relative to that in the underlying general population. Our results suggest that increased autonomy by local university officials resulted in a significant increase in the incidence of familism in areas characterized by low civic capital but not in areas with higher civic capital. ER - TY - JOUR AU - Perotti,Roberto TI - The "Austerity Myth": Gain Without Pain? JF - National Bureau of Economic Research Working Paper Series VL - No. 17571 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17571 L1 - http://www.nber.org/papers/w17571.pdf N1 - Author contact info: Roberto Perotti IGIER Universita' Bocconi Via Roentgen 1 20136 Milano ITALY Tel: 39 02 58363073 Fax: 39 02 58363302 E-Mail: roberto.perotti@unibocconi.it M1 - published as Roberto Perotti. "The "Austerity Myth": Gain Without Pain?," in Alberto Alesina and Francesco Giavazzi, editors, "Fiscal Policy after the Financial Crisis" University of Chicago Press (2012) AB - As governments around the world contemplate slashing budget deficits, the “expansionary fiscal consolidation hypothesis” is back in vogue. I argue that, as a statement about the short run, it should be taken with caution. I present four detailed case studies, two – Denmark and Ireland – undertaken under fixed exchange rates (the most relevant case for many Eurozone countries today) and two – Finland and Sweden - after floating the currency. All four episodes were associated with an expansion; but only in Denmark the driver of growth was internal demand. However, after three years a long slump set in as the economy lost competitiveness. In all the others for a long time the main driver of growth was exports. In Ireland this occurred because the sterling coincidentally appreciated. In Finland and Sweden the currency experienced an extremely large depreciation after floating. In all consolidations interest rate fell fast, and wage moderation played a key role in generating a gain competitiveness and a decline in interest rates. These results cast doubt on at least some versions of the “expansionary fiscal consolidations” hypothesis. ER - TY - JOUR AU - Peri,Giovanni TI - The Impact of Immigration on Native Poverty through Labor Market Competition JF - National Bureau of Economic Research Working Paper Series VL - No. 17570 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17570 L1 - http://www.nber.org/papers/w17570.pdf N1 - Author contact info: Giovanni Peri Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/752-3033 E-Mail: gperi@ucdavis.edu AB - In this paper I first analyze the wage effects of immigrants on native workers in the US economy and its top immigrant-receiving states and metropolitan areas. Then I quantify the consequences of these wage effects on the poverty rates of native families. The goal is to establish whether the labor market effects of immigrants have significantly affected the percentage of "poor" families among U.S.-born individuals. I consider the decade 2000-2009 during which poverty rates increased significantly in the U.S. As a reference, I also analyze the decade 1990-2000. To calculate the wage impact of immigrants I adopt a simple general equilibrium model of productive interactions, regulated by the elasticity of substitution across schooling groups, age groups and between US and foreign-born workers. Considering the inflow of immigrants by age, schooling and location I evaluate their impact in local markets (cities and states) assuming no mobility of natives and on the US market as a whole allowing for native internal mobility. Our findings show that for all plausible parameter values there is essentially no effect of immigration on native poverty at the national level. At the local level, only considering the most extreme estimates and only in some localities, we find non-trivial effects of immigration on poverty. In general, however, even the local effects of immigration bear very little correlation with the observed changes in poverty rates and they explain a negligible fraction of them. ER - TY - JOUR AU - Aldy,Joseph E. AU - Stavins,Robert TI - The Promise and Problems of Pricing Carbon: Theory and Experience JF - National Bureau of Economic Research Working Paper Series VL - No. 17569 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17569 L1 - http://www.nber.org/papers/w17569.pdf N1 - Author contact info: Joseph E. Aldy Harvard Kennedy School Taubman 382, Mailbox 58 79 JFK Street Cambridge, MA 02138 Tel: 617/496-7213 E-Mail: joseph_aldy@hks.harvard.edu Robert Stavins JFK School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/495-1820 Fax: 617/496-3783 E-Mail: robert_stavins@harvard.edu AB - Because of the global commons nature of climate change, international cooperation among nations will likely be necessary for meaningful action at the global level. At the same time, it will inevitably be up to the actions of sovereign nations to put in place policies that bring about meaningful reductions in the emissions of greenhouse gases. Due to the ubiquity and diversity of emissions of greenhouse gases in most economies, as well as the variation in abatement costs among individual sources, conventional environmental policy approaches, such as uniform technology and performance standards, are unlikely to be sufficient to the task. Therefore, attention has increasingly turned to market-based instruments in the form of carbon-pricing mechanisms. We examine the opportunities and challenges associated with the major options for carbon pricing: carbon taxes, cap-and-trade, emission reduction credits, clean energy standards, and fossil fuel subsidy reductions. ER - TY - JOUR AU - Choi,Wonho Wilson AU - Metrick,Andrew AU - Yasuda,Ayako TI - A Model of Private Equity Fund Compensation JF - National Bureau of Economic Research Working Paper Series VL - No. 17568 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17568 L1 - http://www.nber.org/papers/w17568.pdf N1 - Author contact info: Wilson W. Choi KAIST Business School, S228 Seoul, South Korea E-Mail: wonhochoi@business.kaist.ac.kr Andrew Metrick Yale School of Management 135 Prospect Street P.O. Box 208200 New Haven, CT 06520 Tel: 203/432-3069 E-Mail: metrick@yale.edu Ayako Yasuda Graduate School of Management UC Davis 3206 Gallagher Hall One Shields Ave. Davis, CA 95616-8609 Tel: 530-752-0775 Fax: 530-752-2924 E-Mail: asyasuda@ucdavis.edu AB - This paper analyzes the economics of the private equity fund compensation. We build a novel model to estimate the expected revenue to fund managers as a function of their investor contracts. In particular, we evaluate the present value of the fair-value test (FVT) carried interest scheme, which is one of the most common profit-sharing arrangements observed in practice. We extend the simulation model developed in Metrick and Yasuda (2010a) and compare the relative values of the FVT carry scheme to other benchmark carry schemes. We find that the FVT carry scheme is substantially more valuable to the fund managers than other commonly observed (and more conservative) carry schemes, largely due to the early timing of carry compensation that frequently occurs under the FVT scheme. Interestingly, conditional on having an FVT carry scheme, fund managers’ incremental gains from inflating the reported values of the funds’ un- exited portfolio companies would be negligible. ER - TY - JOUR AU - Edmans,Alex AU - Fang,Vivian W. AU - Zur,Emanuel TI - The Effect of Liquidity on Governance JF - National Bureau of Economic Research Working Paper Series VL - No. 17567 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17567 L1 - http://www.nber.org/papers/w17567.pdf N1 - Author contact info: Alex Edmans The Wharton School University of Pennsylvania 2318 Steinberg Hall - Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104 Tel: 215/746-0498 Fax: 215/898-6200 E-Mail: aedmans@wharton.upenn.edu Vivian W.. Fang Rutgers Business School Rutgers University Newark, NJ 07102 E-Mail: fang@business.rutgers.edu Emanuel Zur Zicklin School of Business, Baruch College City University of New York New York, NY 10010 E-Mail: emanuel.zur@baruch.cuny.edu AB - This paper studies the effect of stock liquidity on blockholders’ choice of governance mechanisms. We focus on hedge funds as they are unconstrained by legal restrictions and business ties, and thus have all governance channels at their disposal. Since the threat of governance, not just actual governance, can discipline managers, we use Section 13 filings to measure governance intent rather than only studying instances of actual governance. We find that liquidity increases the likelihood that a hedge fund acquires a block in a firm. Conditional upon acquiring a stake, liquidity reduces the likelihood that a blockholder governs through voice (intervention) – as evidenced by the greater propensity to file Schedule 13Gs (passive investment) rather than 13Ds (active investment). Liquidity is more likely to lead to a 13G filing if the manager’s wealth is sensitive to the stock price, consistent with governance through exit (trading). A 13G filing leads to positive announcement returns, especially in liquid firms. These two results suggest that liquidity does not dissuade blockholders from governing altogether, but instead encourages them to govern through exit rather than voice. We use decimalization as an exogenous shock to liquidity to identify causal effects. ER - TY - JOUR AU - Alvarez,Fernando E. AU - Lippi,Francesco TI - Persistent Liquidity Effects and Long Run Money Demand JF - National Bureau of Economic Research Working Paper Series VL - No. 17566 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17566 L1 - http://www.nber.org/papers/w17566.pdf N1 - Author contact info: Fernando E. Alvarez University of Chicago Department of Economics 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-4412 Fax: 773/702-8490 E-Mail: f-alvarez1@uchicago.edu Francesco Lippi University of Sassari Department of Economics and EIEF via Sallustiana, 62 00184 Rome - Italy E-Mail: flippi@uniss.it AB - We present a monetary model in the presence of segmented asset markets that implies a persistent fall in interest rates after a once and for all increase in liquidity. The gradual propagation mechanism produced by our model is novel in the literature. We provide an analytical characterization of this mechanism, showing that the magnitude of the liquidity effect on impact, and its persistence, depend on the ratio of two parameters: the long-run interest rate elasticity of money demand and the intertemporal substitution elasticity. At the same time, the model has completely classical long-run predictions, featuring quantity theoretic and Fisherian properties. The model simultaneously explains the short-run “instability” of money demand estimates as-well-as the stability of long-run interest-elastic money demand. ER - TY - JOUR AU - Mao,Risheng AU - Whalley,John TI - Ownership Characteristics, Real Exchange Rate Movements and Labor Market Adjustment in China JF - National Bureau of Economic Research Working Paper Series VL - No. 17565 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17565 L1 - http://www.nber.org/papers/w17565.pdf N1 - Author contact info: Risheng Mao Institute of World Economics & Politics Chinese Academy of Social Sciences No.5 JianGuoMenNeiDajie Beijing, China 100732 E-Mail: rmao3@uwo.ca John Whalley Department of Economics Social Science Centre University of Western Ontario London, ON N6A 5C2 CANADA Tel: 519/661-3509 Fax: 519/661-3666 E-Mail: jwhalley@uwo.ca AB - This paper uses a firm level multi-industry data set covering 456 Chinese manufacturing sectors to assess the implications of Renminbi (RMB) real exchange rate appreciation for adjustments in employment and wage rates. We stress differences in both industry and firm characteristics within sectors. Our empirical results show that modest (and also larger) RMB real exchange rate appreciation would likely have pronounced effects on both net employment and wage rates. A 10% RMB appreciation would likely cause a net employment decline in Chinese manufacturing industries of between 4.1% and 5.3%, and a wage rate drop of 4% after controlling for other factors. Real exchange rate change effects by industry on net employment and wage rates vary significantly with the ownership characteristics of firms within industries. Employment and wage rates for private enterprises are less responsive to RMB real exchange rate fluctuations than is true for state owned enterprises (SOEs) and foreign invested enterprises (FIEs). This finding is opposite to the widely held belief that the labor market behavior of Chinese SOEs shows stronger labor market rigidities than for private firms. Impacts of exchange rate movements emerge as systematically related to export openness, overall import penetration and profit margins of individual manufacturing industries. ER - TY - JOUR AU - Martin,Ian TI - The Forward Premium Puzzle in a Two-Country World JF - National Bureau of Economic Research Working Paper Series VL - No. 17564 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17564 L1 - http://www.nber.org/papers/w17564.pdf N1 - Author contact info: Ian Martin Graduate School of Business Stanford University Stanford, CA 94305 Tel: 650/721-1297 E-Mail: ian.martin@gsb.stanford.edu AB - I explore the behavior of asset prices and the exchange rate in a two-country world. When the large country has bad news, the relative price of the small country’s output declines. As a result, the small country’s bonds are risky, and uncovered interest parity fails, with positive excess returns available to investors who borrow at the large country’s interest rate and lend at the small country’s interest rate. I use a diagrammatic approach to derive these and other results in a calibration-free way. ER - TY - JOUR AU - Martin,Ian TI - The Lucas Orchard JF - National Bureau of Economic Research Working Paper Series VL - No. 17563 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17563 L1 - http://www.nber.org/papers/w17563.pdf N1 - Author contact info: Ian Martin Graduate School of Business Stanford University Stanford, CA 94305 Tel: 650/721-1297 E-Mail: ian.martin@gsb.stanford.edu AB - This paper investigates the behavior of asset prices in an endowment economy in which a representative agent with power utility consumes the dividends of multiple assets. The assets are Lucas trees; a collection of Lucas trees is a Lucas orchard. The model generates return correlations that vary endogenously, spiking at times of disaster. Since disasters spread across assets, the model generates large risk premia even for assets with stable fundamentals. Very small assets may comove endogenously and hence earn positive risk premia even if their fundamentals are independent of the rest of the economy. I provide conditions under which the variation in a small asset’s price-dividend ratio can be attributed almost entirely to variation in its risk premium. ER - TY - JOUR AU - Battaglini,Marco AU - Coate,Stephen TI - Fiscal Policy and Unemployment JF - National Bureau of Economic Research Working Paper Series VL - No. 17562 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17562 L1 - http://www.nber.org/papers/w17562.pdf N1 - Author contact info: Marco Battaglini Department of Economics Fisher Hall Princeton University Princeton, NJ 08544 Tel: 609/258-4002 Fax: 609/258-6419 E-Mail: mbattagl@princeton.edu Stephen Coate Department of Economics Cornell University Uris Hall Ithaca, NY 14853-7601 Tel: 607/255-1912 Fax: 215/573-2057 E-Mail: sc163@cornell.edu AB - This paper explores the interaction between fiscal policy and unemployment. It develops a dynamic economic model in which unemployment can arise but can be mitigated by tax cuts and public spending increases. Such policies are fiscally costly, but can be financed by issuing government debt. In the context of this model, the paper analyzes the simultaneous determination of fiscal policy and unemployment in long run equilibrium. Outcomes with both a benevolent government and political decision-making are studied. With political decision-making, the model yields a simple positive theory of fiscal policy and unemployment. ER - TY - JOUR AU - Ang,Andrew AU - Kristensen,Dennis TI - Testing Conditional Factor Models JF - National Bureau of Economic Research Working Paper Series VL - No. 17561 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17561 L1 - http://www.nber.org/papers/w17561.pdf N1 - Author contact info: Andrew Ang Columbia Business School 3022 Broadway 413 Uris New York, NY 10027 Tel: 212/854-9154 Fax: 212/662-8474 E-Mail: aa610@columbia.edu Dennis Kristensen Columbia University, Economics Department 1018 International Affairs Building, MC 3308 420 West 118th Street New York, NY 10027 Tel: 212-854-5489 E-Mail: dk2313@columbia.edu AB - Using nonparametric techniques, we develop a methodology for estimating conditional alphas and betas and long-run alphas and betas, which are the averages of conditional alphas and betas, respectively, across time. The tests can be performed for a single asset or jointly across portfolios. The traditional Gibbons, Ross, and Shanken (1989) test arises as a special case of no time variation in the alphas and factor loadings and homoskedasticity. As applications of the methodology, we estimate conditional CAPM and multifactor models on book-to-market and momentum decile portfolios. We reject the null that long-run alphas are equal to zero even though there is substantial variation in the conditional factor loadings of these portfolios. ER - TY - JOUR AU - Coeurdacier,Nicolas AU - Gourinchas,Pierre-Olivier TI - When Bonds Matter: Home Bias in Goods and Assets JF - National Bureau of Economic Research Working Paper Series VL - No. 17560 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17560 L1 - http://www.nber.org/papers/w17560.pdf N1 - Author contact info: Nicolas Coeurdacier SciencesPo Department of Economics 28 rue des Saint Pères 75006 Paris, France E-Mail: ncoeurdacier@london.edu Pierre-Olivier Gourinchas Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-0720 Fax: 510/642-6615 E-Mail: pog@econ.berkeley.edu AB - This paper presents a model of international portfolios with real exchange rate and non financial risks that accounts for observed levels of equity home bias. A key feature is that investors can trade equities as well as domestic and foreign real bonds. Bonds matter: in equilibrium, investors structure their bond portfolio to hedge real exchange rate risk since relative bond returns are strongly correlated with real exchange rate movements. Equity home bias does not arise from the co-movements between relative stock returns and real exchange rates, but from the hedging properties of stock returns against other sources of risk, conditionally on bond returns. We estimate the optimal equity and bond portfolios implied by the model for G-7 countries and find strong empirical support for the theory. We are able to account for a significant share of the equity home bias and obtain a currency exposure of bond portfolios comparable to the data. ER - TY - JOUR AU - Liu,Runjuan AU - Trefler,Daniel TI - A Sorted Tale of Globalization: White Collar Jobs and the Rise of Service Offshoring JF - National Bureau of Economic Research Working Paper Series VL - No. 17559 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17559 L1 - http://www.nber.org/papers/w17559.pdf N1 - Author contact info: Runjuan Liu Alberta School of Business University of Alberta Edmonton AB T6G 2R6 Canada Tel: 7804920334 Fax: 7804923325 E-Mail: runjuan.liu@ualberta.ca Daniel Trefler Rotman School of Management University of Toronto 105 St. George Street Toronto, ON M5S 3E6 CANADA Tel: 416/946-7945 Fax: 416/978-5433 E-Mail: dtrefler@rotman.utoronto.ca AB - We study how the rise of trade in services with China and India has impacted U.S. labour markets. The topic has two understudied aspects: it deals with service trade (most studies deal with manufacturing trade) and it examines the historical first of U.S. workers competing with educated but low-wage foreign workers. Our empirical agenda is made complicated by the endogeneity of service imports and the endogenous sorting of workers across occupations. To develop an estimation framework that deals with these, we imbed a partial equilibrium model of ‘trade in tasks’ within a general equilibrium model of occupational choice. The model highlights the need to estimate labour market outcomes using changes in the outcomes of individual workers and, in particular, to distinguish workers who switch ‘up’ from those who switch ‘down’. (Switching ‘down’ means switching to an occupation that pays less on average than the current occupation). We apply these insights to matched CPS data for 1996-2007. The cumulative 10-year impact of rising service imports from China and India has been as follows. (1) Downward and upward occupational switching increased by 17% and 4%, respectively. (2) Transitions to unemployment increased by a large 0.9 percentage points. (3) The earnings of occupational ‘stayers’ fell by a tiny 2.3%. (4) The earnings impact for occupational switchers is not identified without an assumption about worker sorting. Under the assumption of no worker sorting, downward (upward) switching was associated with an earning change of -13.9% (+12.1%). Under the assumption of worker sorting, there is no statistically significant impact on earnings. ER - TY - JOUR AU - Acharya,Viral V. TI - A Transparency Standard for Derivatives JF - National Bureau of Economic Research Working Paper Series VL - No. 17558 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17558 L1 - http://www.nber.org/papers/w17558.pdf N1 - Author contact info: Viral V. Acharya Stern School of Business New York University 44 West 4th Street, Suite 9-84 New York, NY 10012 Tel: 212/998-0354 Fax: 212 995 4233 E-Mail: vacharya@stern.nyu.edu M1 - published as Viral V. Acharya. "A Transparency Standard for Derivatives," in Markus K. Brunnermeier and Arvind Krishnamurthy, editors, "Systemic Risk and Macro Modeling" University of Chicago Press (2012) AB - Derivatives exposures across large financial institutions often contribute to – if not necessarily create – systemic risk. Current reporting standards for derivatives exposures are nevertheless inadequate for assessing these systemic risk contributions. In this paper, I explain how a transparency standard, in contrast to the current standard, would facilitate such risk analysis. I also demonstrate that such a standard is implementable by providing examples of existing disclosures from large dealer firms in their quarterly filings. These disclosures often contain useful firm-level data on derivatives, but due to a lack of standardization, they cannot be aggregated to assess the risk to the system. I highlight the important contribution that reporting the “margin coverage ratio” (MCR), namely the ratio of a derivatives dealer’s cash (or liquidity, more broadly) to its contingent collateral or margin calls in case of a significant downgrade of its credit quality, could make toward assessing systemic risk contributions. ER - TY - JOUR AU - Fox,Jeremy T. AU - Gandhi,Amit TI - Identifying Demand with Multidimensional Unobservables: A Random Functions Approach JF - National Bureau of Economic Research Working Paper Series VL - No. 17557 PY - 2011 Y2 - November 2011 UR - http://www.nber.org/papers/w17557 L1 - http://www.nber.org/papers/w17557.pdf N1 - Author contact info: Jeremy T. Fox Economics Department University of Michigan 238 Lorch Hall 611 Tappan Ave Ann Arbor, MI 48104 Tel: 734-330-2854 Fax: 734-274-2331 E-Mail: jeremyfox@gmail.com Amit Gandhi University of Wisconsin 1180 Observatory Drive Madison, WI 53706-1393 E-Mail: agandhi@ssc.wisc.edu AB - We explore the identification of nonseparable models without relying on the property that the model can be inverted in the econometric unobservables. In particular, we allow for infinite dimensional unobservables. In the context of a demand system, this allows each product to have multiple unobservables. We identify the distribution of demand both unconditional and conditional on market observables, which allows us to identify several quantities of economic interest such as the (conditional and unconditional) distributions of elasticities and the distribution of price effects following a merger. Our approach is based on a significant generalization of the linear in random coefficients model that only restricts the random functions to be analytic in the endogenous variables, which is satisfied by several standard demand models used in practice. We assume an (unknown) countable support for the the distribution of the infinite dimensional unobservables. ER - TY - JOUR AU - Krishnamurthy,Arvind AU - Vissing-Jorgensen,Annette TI - The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 17555 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17555 L1 - http://www.nber.org/papers/w17555.pdf N1 - Author contact info: Arvind Krishnamurthy Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-2671 Fax: 847/491-5719 E-Mail: a-krishnamurthy@northwestern.edu Annette Vissing-Jorgensen Finance Department Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208-2001 Tel: 847/467-6171 Fax: 847/491-5719 E-Mail: a-vissing@northwestern.edu AB - We evaluate the effect of the Federal Reserve’s purchase of long-term Treasuries and other long-term bonds ("QE1" in 2008-2009 and "QE2" in 2010-2011) on interest rates. Using an event-study methodology we reach two main conclusions. First, it is inappropriate to focus only on Treasury rates as a policy target because QE works through several channels that affect particular assets differently. We find evidence for a signaling channel, a unique demand for long-term safe assets, and an inflation channel for both QE1 and QE2, and an MBS pre-payment channel and a corporate bond default risk channel for QE1. Second, effects on particular assets depend critically on which assets are purchased. The event-study suggests that (a) mortgage-backed securities purchases in QE1 were crucial for lowering mortgage-backed security yields as well as corporate credit risk and thus corporate yields for QE1, and (b) Treasuries-only purchases in QE2 had a disproportionate effect on Treasuries and Agencies relative to mortgage-backed securities and corporates, with yields on the latter falling primarily through the market’s anticipation of lower future federal funds rates. ER - TY - JOUR AU - Arimura,Toshi H. AU - Li,Shanjun AU - Newell,Richard G. AU - Palmer,Karen TI - Cost-Effectiveness of Electricity Energy Efficiency Programs JF - National Bureau of Economic Research Working Paper Series VL - No. 17556 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17556 L1 - http://www.nber.org/papers/w17556.pdf N1 - Author contact info: Toshi H. Arimura Sophia University E-Mail: t-arimu@sophia.ac.jp Shanjun Li Cornell University 424 Warren Hall Ithaca, NY 14853 E-Mail: sl2448@cornell.edu Richard G. Newell Nicholas School of the Environment Duke University Box 90227 Durham, NC 27708 Tel: 919/681-8663 Fax: 919/684-5833 E-Mail: richard.newell@duke.edu Karen Palmer Resources for the Future 1616 P Street, NW Washington, DC 20036 E-Mail: palmer@rff.org AB - We analyze the cost-effectiveness of electric utility ratepayer–funded programs to promote demand-side management (DSM) and energy efficiency (EE) investments. We specify a model that relates electricity demand to previous EE DSM spending, energy prices, income, weather, and other demand factors. In contrast to previous studies, we allow EE DSM spending to have a potential long-term demand effect and explicitly address possible endogeneity in spending. We find that current period EE DSM expenditures reduce electricity demand and that this effect persists for a number of years. Our findings suggest that ratepayer funded DSM expenditures between 1992 and 2006 produced a central estimate of 0.9 percent savings in electricity consumption over that time period and a 1.8 percent savings over all years. These energy savings came at an expected average cost to utilities of roughly 5 cents per kWh saved when future savings are discounted at a 5 percent rate. ER - TY - JOUR AU - Glewwe,Paul W. AU - Hanushek,Eric A. AU - Humpage,Sarah D. AU - Ravina,Renato TI - School Resources and Educational Outcomes in Developing Countries: A Review of the Literature from 1990 to 2010 JF - National Bureau of Economic Research Working Paper Series VL - No. 17554 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17554 L1 - http://www.nber.org/papers/w17554.pdf N1 - Author contact info: Paul W. Glewwe Dept of Applied Economics, U of MN 1994 Buford Ave. St. Paul MN 55108 E-Mail: pglewwe@umn.edu Eric A. Hanushek Hoover Institution Stanford University Stanford, CA 94305-6010 Tel: 650/736-0942 Fax: 650/723-1687 E-Mail: hanushek@stanford.edu Sarah D. Humpage University of Minnesota St. Paul MN 55108 E-Mail: sarah.humpage@gmail.com Renato Ravina University of Minnesota St. Paul MN 55108 E-Mail: rravina@gmail.com AB - Developing countries spend hundreds of billions of dollars each year on schools, educational materials and teachers, but relatively little is known about how effective these expenditures are at increasing students’ years of completed schooling and, more importantly, the skills that they learn while in school. This paper examines studies published between 1990 and 2010, in both the education literature and the economics literature, to investigate which specific school and teacher characteristics, if any, appear to have strong positive impacts on learning and time in school. Starting with over 9,000 studies, 79 are selected as being of sufficient quality. Then an even higher bar is set in terms of econometric methods used, leaving 43 “high quality” studies. Finally, results are also shown separately for 13 randomized trials. The estimated impacts on time in school and learning of most school and teacher characteristics are statistically insignificant, especially when the evidence is limited to the “high quality” studies. The few variables that do have significant effects – e.g. availability of desks, teacher knowledge of the subjects they teach, and teacher absence – are not particularly surprising and thus provide little guidance for future policies and programs. ER - TY - JOUR AU - Arkolakis,Costas TI - A Unified Theory of Firm Selection and Growth JF - National Bureau of Economic Research Working Paper Series VL - No. 17553 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17553 L1 - http://www.nber.org/papers/w17553.pdf N1 - Author contact info: Costas Arkolakis Department of Economics Yale University, 28 Hillhouse Avenue P.O. Box 208268 New Haven, CT 06520-8268 Tel: 203/432-3527 Fax: 203/432-6323 E-Mail: costas.arkolakis@yale.edu AB - This paper studies the effects of marketing choice to firm growth. I assume that firm-level growth is the result of idiosyncratic productivity improvements with continuous arrival of new potential producers. A firm enters a market if it is profitable to incur the marginal cost to reach the first consumer and pays an increasing marketing cost to reach additional consumers. The model is calibrated using data on the cross-section of firms and their sales across markets as well as the rate of incumbent firm-exit. The calibrated model quantitatively predicts firm exit, growth, and the resulting firm size distribution in the US manufacturing data. It also predicts a distribution of firm growth rates that deviates from Gibrat's law –i.e. independence of firm size and growth– in a manner consistent with the data. ER - TY - JOUR AU - Sandleris,Guido AU - Wright,Mark L.J. TI - The Costs of Financial Crises: Resource Misallocation, Productivity and Welfare in the 2001 Argentine Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 17552 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17552 L1 - http://www.nber.org/papers/w17552.pdf N1 - Author contact info: Guido Sandleris Universidad Torcuato Di Tella Buenos Aires, Argentina E-Mail: gsandleris@utdt.edu Mark L. J. Wright Federal Reserve Bank of Chicago 230 South LaSalle St. Chicago, IL 60604 E-Mail: mlwright@econ.ucla.edu AB - Financial crises in emerging market countries appear to be very costly: both output and a host of partial welfare indicators decline dramatically. The magnitude of these costs is puzzling both from an accounting perspective -- factor usage does not decline as much as output, resulting in large falls in measured productivity -- and from a theoretical perspective. Towards a resolution of this puzzle, we present a framework that allows us to (i) account for changes in a country's measured productivity during a financial crises as the result of changes in the underlying technology of the economy, the efficiency with which resources are allocated across sectors, and the efficiency of the resource allocation within sectors driven both by reallocation amongst existing plants and by entry and exit; and (ii) measure the change in the country's welfare resulting from changes in productivity, government spending, the terms of trade, and a country's international investment position. We apply this framework to the Argentine crisis of 2001 using a unique establishment level data-set and find that more than half of the roughly 10% decline in measured total factor productivity can be accounted for by deterioration in the allocation of resources both across and within sectors. We measure the decline in welfare to be on the order of one-quarter of one years GDP. ER - TY - JOUR AU - Dias,Daniel A. AU - Richmond,Christine J. AU - Wright,Mark L.J. TI - The Stock of External Sovereign Debt: Can We Take the Data At ‘Face Value’? JF - National Bureau of Economic Research Working Paper Series VL - No. 17551 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17551 L1 - http://www.nber.org/papers/w17551.pdf N1 - Author contact info: Daniel A. Dias University of Illinois at Urbana Champaign and CEMAPRE 109 David Kinley Hall 1407 W. Gregory Dr. - MC707 Urbana, IL, 61801 E-Mail: ddias@illinois.edu Christine J. Richmond International Monetary Fund 700 19th Street NW Washington, DC 20431 E-Mail: CRichmond@imf.org Mark L. J. Wright Federal Reserve Bank of Chicago 230 South LaSalle St. Chicago, IL 60604 E-Mail: mlwright@econ.ucla.edu AB - The stock of sovereign debt is typically measured at face value. This is a misleading indicator when debts are issued with different contractual forms. In this paper we construct a new measure of the stock of external sovereign debt for 100 developing countries from 1979 to 2006 that is invariant to contractual form, and illustrate five problems with debt stocks measured at face value. First, we show that correcting for differences in the contractual form of debt paints a very different quantitative, and in some cases also qualitative, picture of the stock of developing country external sovereign debt. Second, rankings of indebtedness across countries, which were historically used to define eligibility for debt forgiveness, are sometimes inverted once we correct for differences in contractual form. Third, the empirical performance of the benchmark quantitative model of sovereign debt deteriorates by between 40 to 70 percent once model-consistent measures of debt are used. Fourth, we show how the spread of aggregation clauses in debt contracts which award creditors voting power in proportion to the contractual face value may introduce inefficiencies into the process of restructuring sovereign debts. Fifth, we show how the use of contractual face values gives issuing countries the ability to manipulate their debt stock data, and illustrate the use of these techniques in practice. ER - TY - JOUR AU - Fajgelbaum,Pablo D. AU - Grossman,Gene M. AU - Helpman,Elhanan TI - A Linder Hypothesis for Foreign Direct Investment JF - National Bureau of Economic Research Working Paper Series VL - No. 17550 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17550 L1 - http://www.nber.org/papers/w17550.pdf N1 - Author contact info: Pablo Fajgelbaum UCLA E-Mail: PFajgelbaum@econ.ucla.edu Gene M. Grossman International Economics Section Department of Economics Princeton University Princeton, NJ 08544 Tel: 609/258-4823 Fax: 609/258-1374 E-Mail: grossman@princeton.edu Elhanan Helpman Department of Economics Harvard University 1875 Cambridge Street Cambridge, MA 02138 Tel: 617-495-4690 Fax: 617-495-7730 E-Mail: ehelpman@harvard.edu AB - We study patterns of FDI in a multi-country world economy. First, we present evidence for a broad sample of countries that firms direct FDI disproportionately to markets with income levels similar to their home market. Then we develop a model featuring non-homothetic preferences for quality and monopolistic competition in which specialization is purely demand-driven and the decision to serve foreign countries via exports or FDI depends on a proximity-concentration trade-off. We characterize the joint patterns of trade and FDI when countries differ in income distribution and size and show that FDI is more likely to occur between countries with similar per capita income levels. The model predicts a Linder Hypothesis for FDI, consistent with the patterns found in the data. ER - TY - JOUR AU - Ju,Jiandong AU - Shi,Kang AU - Wei,Shang-Jin TI - On the Connection between Intertemporal and Intra-temporal Trades JF - National Bureau of Economic Research Working Paper Series VL - No. 17549 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17549 L1 - http://www.nber.org/papers/w17549.pdf N1 - Author contact info: Jiandong Ju Department of Economics University of Oklahoma Norman, OK 73019 E-Mail: jdju@ou.edu Kang Shi Department of Economics Chinese University of Hong Kong Shatin, New Territories Hong Kong E-Mail: kangshi@cuhk.edu.hk Shang-Jin Wei Graduate School of Business Columbia University Uris Hall 619 3022 Broadway New York, NY 10027-6902 Tel: 212/854-9139 E-Mail: shangjin.wei@columbia.edu AB - Sticky (or slow-adjusting) current accounts are observed in many countries. This paper explores the role of domestic factor market flexibility in understanding the phenomenon. To do so, we consider multiple tradable sectors with different factor intensities and allow substitution between intertemporal trade (current account adjustment) and intra-temporal trade (goods trade) in a dynamic general equilibrium model. An economy’s response to a shock generally involves a combination of a change in the composition of goods trade and a change in the current account. Flexible factor markets reduce the need for the current account to adjust. On the other hand, the more rigid the factor markets, the larger the size of current account adjustment relative to the volume of goods trade, and the slower the speed of adjustment of the current account towards its long-run equilibrium. We present empirical evidence in support of the theory. ER - TY - JOUR AU - Albagli,Elias AU - Hellwig,Christian AU - Tsyvinski,Aleh TI - A Theory of Asset Pricing Based on Heterogeneous Information JF - National Bureau of Economic Research Working Paper Series VL - No. 17548 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17548 L1 - http://www.nber.org/papers/w17548.pdf N1 - Author contact info: Elias Albagli University of Southern California Marshall School of Business E-Mail: albagli@marshall.usc.edu Christian Hellwig Toulouse School of Economics Manufacture de Tabacs, 21 Allées de Brienne, 31000 Toulouse Tel: +33 5 61 12 85 93 Fax: +33 5 61 12 86 37 E-Mail: christian.hellwig@tse-fr.eu Aleh Tsyvinski Department of Economics Yale University Box 208268 New Haven, CT 06520-8268 E-Mail: a.tsyvinski@yale.edu AB - We propose a theory of asset prices that emphasizes heterogeneous information as the main element determining prices of different securities. Our main analytical innovation is in formulating a model of noisy information aggregation through asset prices, which is parsimonious and tractable, yet flexible in the specification of cash flow risks. We show that the noisy aggregation of heterogeneous investor beliefs drives a systematic wedge between the impact of fundamentals on an asset price, and the corresponding impact on cash flow expectations. The key intuition behind the wedge is that the identity of the marginal trader has to shift for different realization of the underlying shocks to satisfy the market-clearing condition. This identity shift amplifies the impact of price on the marginal trader's expectations. We derive tight characterization for both the conditional and the unconditional expected wedges. Our first main theorem shows how the sign of the expected wedge (that is, the difference between the expected price and the dividends) depends on the shape of the dividend payoff function and on the degree of informational frictions. Our second main theorem provides conditions under which the variability of prices exceeds the variability for realized dividends. We conclude with two applications of our theory. First, we highlight how heterogeneous information can lead to systematic departures from the Modigliani-Miller theorem. Second, in a dynamic extension of our model we provide conditions under which bubbles arise. ER - TY - JOUR AU - Gustman,Alan L. AU - Steinmeier,Thomas L. AU - Tabatabai,Nahid TI - How Did the Recession of 2007-2009 Affect the Wealth and Retirement of the Near Retirement Age Population in the Health and Retirement Study? JF - National Bureau of Economic Research Working Paper Series VL - No. 17547 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17547 L1 - http://www.nber.org/papers/w17547.pdf N1 - Author contact info: Alan L. Gustman Department of Economics Dartmouth College Hanover, NH 03755-3514 Tel: 603/646-2641 Fax: 603/646-2122 E-Mail: ALAN.L.GUSTMAN@DARTMOUTH.EDU Thomas Steinmeier Department of Economics Texas Tech University Lubbock, TX 79409 E-Mail: thomas.steinmeier@ttu.edu Nahid Tabatabai Department of Economics Dartmouth College Hanover, N.H. 03755 E-Mail: Nahid.Tabatabai@dartmouth.edu AB - This paper uses asset and labor market data from the Health and Retirement Study (HRS) to investigate how the recent "Great Recession" has affected the wealth and retirement of those in the population who were just approaching retirement age at the beginning of the recession, a potentially vulnerable segment of the working age population. The retirement wealth held by those ages 53 to 58 before the onset of the recession in 2006 declined by a relatively modest 2.8 percentage points by 2010. In more normal times, their wealth would have increased over these four years. Members of older cohorts accumulated an additional 5 percent of wealth over the same age span. To be sure, a part of their accumulation was the result of the upside of the housing bubble. The wealth holdings of poorer households were least affected by the recession. Relative losses are greatest for those who initially had the highest wealth when the recession began. The adverse labor market effects of the Great Recession are more modest. Although there is an increase in unemployment, that increase is not mirrored in the rate of flow out of full-time work or partial retirement. All told, the retirement behavior of the Early Boomer cohort looks similar, at least so far, to the behavior observed for members of older cohorts at comparable ages. Very few in the population nearing retirement age have experienced multiple adverse events. Although most of the loss in wealth is due to a fall in the net value of housing, because very few in this cohort have found their housing wealth under water, and housing is the one asset this cohort is not likely to cash in for another decade or two, there is time for their losses in housing wealth to recover. ER - TY - JOUR AU - Rodrik,Dani TI - Unconditional Convergence JF - National Bureau of Economic Research Working Paper Series VL - No. 17546 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17546 L1 - http://www.nber.org/papers/w17546.pdf N1 - Author contact info: Dani Rodrik John F. Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/495-9454 Fax: 617/496-5747 E-Mail: dani_rodrik@harvard.edu AB - Unlike economies as a whole, manufacturing industries exhibit unconditional convergence in labor productivity. The paper documents this finding for 4-digit manufacturing sectors for a large group of developed and developing countries over the period since 1990. The coefficient of unconditional convergence is estimated quite precisely and is large, at 3.0-5.6 percent per year depending on the estimation horizon. The result is robust to a large number of specification tests, and statistically highly significant. Because of data coverage, these findings should be as viewed as applying to the organized, formal parts of manufacturing. ER - TY - JOUR AU - Fehr,Ernst AU - Hart,Oliver D. AU - Zehnder,Christian TI - How Do Informal Agreements and Renegotiation Shape Contractual Reference Points? JF - National Bureau of Economic Research Working Paper Series VL - No. 17545 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17545 L1 - http://www.nber.org/papers/w17545.pdf N1 - Author contact info: Ernst Fehr Institute for Empirical Economics Research University of Zurich Blumlisalpstrasse 10 8006 Zurich SWITZERLAND E-Mail: efehr@iew.unizh.ch Oliver D. Hart Department of Economics Littauer Center 220 Harvard University Cambridge, MA 02138 Tel: 617/496-3461 Fax: 617-495-7730 E-Mail: ohart@harvard.edu Christian Zehnder Faculty of Business and Economics University of Lausanne Quartier UNIL-Dorigny Internef 612 CH-1015 Lausanne Switzerland E-Mail: christian.zehnder@unil.ch AB - Previous experimental work provides encouraging support for some of the central assumptions underlying Hart and Moore (2008)’s theory of contractual reference points. However, existing studies ignore realistic aspects of trading relationships such as informal agreements and ex post renegotiation. We investigate the relevance of these features experimentally. Our evidence indicates that the central behavioral mechanism underlying the concept of contractual reference points is robust to the presence of informal agreements and ex post renegotiation. However, our data also reveal new behavioral features that suggest refinements of the theory. In particular, we find that the availability of informal agreements and ex post renegotiation changes how trading parties evaluate ex post outcomes. Interestingly, the availability of these additional options affects ex post evaluations even in situations in which the parties do not use them. ER - TY - JOUR AU - Weisbrod,Aaron AU - Whalley,John TI - The Contribution of Chinese FDI to Africa’s Pre Crisis Growth Surge JF - National Bureau of Economic Research Working Paper Series VL - No. 17544 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17544 L1 - http://www.nber.org/papers/w17544.pdf N1 - Author contact info: Aaron Weisbrod Department of Economics The University of Western Ontario London, Ontario N6A 5C2 CANADA E-Mail: A.Weisbrod@lse.ac.uk John Whalley Department of Economics Social Science Centre University of Western Ontario London, ON N6A 5C2 CANADA Tel: 519/661-3509 Fax: 519/661-3666 E-Mail: jwhalley@uwo.ca AB - In the 3 years before the 2008 Financial Crisis, GDP growth in sub Saharan Africa (averaged over individual economies) was around 6%, or 2 percentage points above mean growth rates for the preceding 10 years. This period also coincided with significant Chinese FDI flows into these countries, accounting for up to 10% of total inward FDI flows for certain countries in these years. We use growth accounting methods to assess what portion of this elevated growth can be attributed to Chinese inward FDI. We follow Solow (1957), Dennison (1962), and others and use data for individual economies between 1990 and 2008 to calculate Solow residuals for these years for individual economies. We use capital stock data, workforce, and factor share data by country. Capital stock data is unavailable directly, and so we use perpetual inventory methods to construct the data. Factor shares come from UN National Accounts data. We then run counterfactual growth accounting experiments for thirteen Sub-Saharan African countries excluding Chinese FDI inflows for 2005-2007 and also 2003-2009. Our individual results vary by year and country, but there are several year/country combinations where Chinese FDI contributed to an additional one half of a percentage point or above to GDP growth. These results suggest that a significant, even if in some cases small, portion of the elevated growth in sub Saharan Africa in the three years before the Financial Crisis and also in the two years afterwards (2008-2009) can be attributed to Chinese inward investment. ER - TY - JOUR AU - Fernández-Villaverde,Jesús AU - Guerrón-Quintana,Pablo A. AU - Rubio-Ramírez,Juan TI - Supply-Side Policies and the Zero Lower Bound JF - National Bureau of Economic Research Working Paper Series VL - No. 17543 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17543 L1 - http://www.nber.org/papers/w17543.pdf N1 - Author contact info: Jesus Fernandez-Villaverde University of Pennsylvania 160 McNeil Building 3718 Locust Walk Philadelphia, PA 19104 Tel: 267/307-1068 E-Mail: jesusfv@econ.upenn.edu Pablo A. Guerrón-Quintana Federal Reserve Bank of Philadelphia Tel: 9195132869 E-Mail: pablo.guerron@phil.frb.org Juan Rubio-Ramírez Duke University P.O. Box 90097 Durham, NC 27708 Tel: 9196601865 E-Mail: juan.rubio-ramirez@duke.edu AB - This paper examines how supply-side policies may play a role in fighting a low aggregate demand that traps an economy at the zero lower bound (ZLB) of nominal interest rates. Future increases in productivity or reductions in mark-ups triggered by supply-side policies generate a wealth effect that pulls current consumption and output up. Since the economy is at the ZLB, increases in the interest rates do not undo this wealth effect, as we will have in the case outside the ZLB. We illustrate this mechanism with a simple two-period New Keynesian model. We discuss possible objections to this set of policies and the relation of supply-side policies with more conventional monetary and fiscal policies. ER - TY - JOUR AU - Acharya,Viral V. AU - Rajan,Raghuram G. TI - Sovereign Debt, Government Myopia, and the Financial Sector JF - National Bureau of Economic Research Working Paper Series VL - No. 17542 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17542 L1 - http://www.nber.org/papers/w17542.pdf N1 - Author contact info: Viral V. Acharya Stern School of Business New York University 44 West 4th Street, Suite 9-84 New York, NY 10012 Tel: 212/998-0354 Fax: 212 995 4233 E-Mail: vacharya@stern.nyu.edu Raghuram Rajan Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-4437 Fax: 773/702-0458 E-Mail: raghuram.rajan@ChicagoBooth.edu AB - What determines the sustainability of sovereign debt? In this paper, we develop a model where myopic governments seek electoral popularity but can nevertheless commit credibly to service external debt. They do not default when they are poor because they would lose access to debt markets and be forced to reduce spending; they do not default when they become rich because of the adverse consequences to the domestic financial sector. Interestingly, the more myopic a government, the greater the advantage it sees in borrowing, and therefore the less likely it will be to default (in contrast to models where sovereigns repay because they are concerned about their long term reputation). More myopic governments are also likely to tax in a more distortionary way, and create more dependencies between the domestic financial sector and government debt that raise the costs of default. We use the model to explain recent experiences in sovereign debt markets. ER - TY - JOUR AU - Bertrand,Marianne AU - Pan,Jessica TI - The Trouble with Boys: Social Influences and the Gender Gap in Disruptive Behavior JF - National Bureau of Economic Research Working Paper Series VL - No. 17541 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17541 L1 - http://www.nber.org/papers/w17541.pdf N1 - Author contact info: Marianne Bertrand Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-5943 Fax: 773/702-0458 E-Mail: marianne.bertrand@chicagobooth.edu Jessica Pan Department of Economics National University of Singapore 1 Arts Link Singapore 117570 E-Mail: jesspan@nus.edu.sg AB - This paper explores the importance of the home and school environments in explaining the gender gap in disruptive behavior. We document large differences in the gender gap across key features of the home environment – boys do especially poorly in broken families. In contrast, we find little impact of the early school environment on non-cognitive gaps. Differences in endowments explain a small part of boys’ non-cognitive deficit in single-mother families. More importantly, non-cognitive returns to parental inputs differ markedly by gender. Broken families are associated with worse parental inputs and boys’ non-cognitive development, unlike girls’, appears extremely responsive to such inputs. ER - TY - JOUR AU - Nordhaus,William D. TI - Estimates of the Social Cost of Carbon: Background and Results from the RICE-2011 Model JF - National Bureau of Economic Research Working Paper Series VL - No. 17540 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17540 L1 - http://www.nber.org/papers/w17540.pdf N1 - Author contact info: William D. Nordhaus Yale University, Department of Economics 28 Hillhouse Avenue Box 208264 New Haven, CT 06520-8264 Tel: 203/432-3598 Fax: 203/432-5779 E-Mail: william.nordhaus@yale.edu AB - A new and important concept in global warming economics and policy is the social cost of carbon or SCC. This concept represents the economic cost caused by an additional ton of carbon-dioxide emissions or its equivalent. The present study describes the development of the concept as well as its analytical background. We estimate the SCC using an updated version of the RICE-2011 model. Additional concerns are uncertainty about different aspects of global warming as well as the treatment of different countries or generations. The most important results are: First, the estimated social cost of carbon for the current time (2015) including uncertainty, equity weighting, and risk aversion is $44 per ton of carbon (or $12 per ton CO2) in 2005 US$ and international prices). Second, including uncertainty increases the expected value of the SCC by approximately 8 percent. Third, equity weighting generally tends to reduce the SCC. Finally, the major open issue concerning the SCC continues to be the appropriate discount rate. ER - TY - JOUR AU - Kotchen,Matthew J. AU - Boyle,Kevin J. AU - Leiserowitz,Anthony A. TI - Policy-Instrument Choice and Benefit Estimates for Climate-Change Policy in the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 17539 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17539 L1 - http://www.nber.org/papers/w17539.pdf N1 - Author contact info: Matthew Kotchen School of Forestry & Environmental Studies, School of Management, and Department of Economics Yale University 195 Prospect Street New Haven, CT 06511 Tel: 203/432-9533 Fax: 203/436-9150 E-Mail: matthew.kotchen@yale.edu Kevin J. Boyle Virginia Tech University Blacksburg, VA 24061 E-Mail: kjboyle@vt.edu Anthony A. Leiserowitz Yale University New Haven, CT 06511 E-Mail: anthony.leiserowitz@yale.edu AB - This paper provides the first willingness-to-pay (WTP) estimates in support of a national climate-change policy that are comparable with the costs of actual legislative efforts in the U.S. Congress. Based on a survey of 2,034 American adults, we find that households are, on average, willing to pay between $79 and $89 per year in support of reducing domestic greenhouse-gas (GHG) emissions 17 percent by 2020. Even very conservative estimates yield an average WTP at or above $60 per year. Taking advantage of randomized treatments within the survey valuation question, we find that mean WTP does not vary substantially among the policy instruments of a cap-and-trade program, a carbon tax, or a GHG regulation. But there are differences in the sociodemographic characteristics of those willing to pay across policy instruments. Greater education always increases WTP. Older individuals have a lower WTP for a carbon tax and a GHG regulation, while greater household income increases WTP for these same two policy instruments. Republicans, along with those indicating no political party affiliation, have a significantly lower WTP regardless of the policy instrument. But many of these differences are no longer evident after controlling for respondent opinions about whether global warming is actually happening. ER - TY - JOUR AU - Whelan,Kenneth T. AU - Ehrenberg,Ronald G. AU - Hallock,Kevin F. AU - Seeber,Ronald L. TI - Adverse Selection and Incentives in an Early Retirement Program JF - National Bureau of Economic Research Working Paper Series VL - No. 17538 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17538 L1 - http://www.nber.org/papers/w17538.pdf N1 - Author contact info: Kenneth Whelan Cornell Higher Education Research Institute 273 Ives Hall Ithaca, NY 14853-3901 E-Mail: ktw29@cornell.edu Ronald G. Ehrenberg Cornell Higher Education Research Institute 271 Ives Hall East Ithaca, NY 14853-3901 Tel: 607/255-3026 Fax: 607 255 4496 E-Mail: rge2@cornell.edu Kevin F. Hallock ILR School Cornell University 391 Ives Hall (East) Ithaca, NY 14853 Tel: 607/255-3193 E-Mail: kfh7@cornell.edu Ronald Seeber ILR- Cornell University Ithaca, NY 14853-3901 E-Mail: rs60@cornell.edu AB - We evaluate potential determinants of enrollment in an early retirement incentive program for non-tenure-track employees of a large university. Using administrative record on the eligible population of employees not covered by collective bargaining agreements, historical employee count and layoff data by budget units, and public information on unit budgets, we find dips in per-employee finance in a budget unit during the application year and higher recent per employee layoffs were associated with increased probabiliites of eligible employee program enrollment. Our results also suggest, on average, that employees whose salaries are lower than we would predict given their personal characteristics and job titles were more likely to enroll in the early retirement program. To the extent that employees' compensation reflects their productivity, as it should under a pay system in which annual salary increases are based on merit, this finidng suggests that adverse selection was not a problem with the program. That is, we find no evidence that on average the "most productive" employees took the incentive. ER - TY - JOUR AU - Jeske,Karsten AU - Krueger,Dirk AU - Mitman,Kurt TI - Housing and the Macroeconomy: The Role of Bailout Guarantees for Government Sponsored Enterprises JF - National Bureau of Economic Research Working Paper Series VL - No. 17537 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17537 L1 - http://www.nber.org/papers/w17537.pdf N1 - Author contact info: Karsten Jeske Mellon Capital Management Corporation E-Mail: Karstenj@mcm.com Dirk Krueger Department of Economics University of Pennsylvania 3718 Locust Walk Philadelphia, PA 19104 Tel: 215/898-6691 Fax: 215/573-2057 E-Mail: dkrueger@econ.upenn.edu Kurt Mitman Department of Economics, McNeil 160 3718 Locust Walk Philadelphia, PA 19104 E-Mail: mitmanke@econ.upenn.edu AB - This paper evaluates the macroeconomic and distributional effects of government bailout guarantees for Government Sponsored Enterprises (such as Fannie Mae and Freddy Mac) in the mortgage market. In order to do so we construct a model with heterogeneous, infinitely lived households and competitive housing and mortgage markets. Households have the option to default on their mortgages, with the consequence of having their homes foreclosed. We model the bailout guarantee as a government provided and tax-financed mortgage interest rate subsidy. We find that eliminating this subsidy leads to substantially lower equilibrium mortgage origination and increases aggregate welfare, but has little effect on foreclosure rates and housing investment. The interest rate subsidy is a regressive policy: eliminating it benefits low-income and low-asset households who did not own homes or had small mortgages, while lowering the welfare of high-income, high-asset households. ER - TY - JOUR AU - Poterba,James M. AU - Venti,Steven F. AU - Wise,David A. TI - The Composition and Draw-down of Wealth in Retirement JF - National Bureau of Economic Research Working Paper Series VL - No. 17536 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17536 L1 - http://www.nber.org/papers/w17536.pdf N1 - Author contact info: James M. Poterba Department of Economics MIT, E52-350 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-6673 Fax: 617/258-7804 E-Mail: poterba@nber.org Steven F. Venti Department of Economics 6106 Rockefeller Center Dartmouth College Hanover, NH 03755 Tel: 603/646-2526 Fax: 603/646-2122 E-Mail: steven.f.venti@dartmouth.edu David A. Wise Harvard Kennedy School 79 John F. Kennedy Cambridge, MA 02138 E-Mail: dwise@nber.org AB - This paper presents evidence on the resources available to households as they enter retirement. It draws heavily on data collected by the Health and Retirement Study and calculates the "potential additional annuity income" that households could purchase, given their holdings of non-annuitized financial assets at the start of retirement. Even if households used all of their financial assets inside and outside personal retirement accounts to purchase a life annuity, only 47 percent of households between the ages of 65 and 69 in 2008 could increase their life-contingent income by more than $5,000 per year. At the upper end of the wealth distribution, however, a substantial number of households could make large annuity purchases. The paper also considers the role of housing equity in the portfolios of retirement-age households, and explores the extent to which households draw down housing equity and financial assets as they age. Many households appear to treat housing equity and non-annuitized financial assets as “precautionary savings,” tending to draw them down only when they experience a shock such as the death of a spouse or a period of substantial medical outlays. Because home equity is often conserved until very late in life, for many households it may provide some insurance against the risk of living longer than expected. ER - TY - JOUR AU - Rebitzer,James B. AU - Votruba,Mark E. TI - Organizational Economics and Physician Practices JF - National Bureau of Economic Research Working Paper Series VL - No. 17535 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17535 L1 - http://www.nber.org/papers/w17535.pdf N1 - Author contact info: James B. Rebitzer Professor of Management, Economics, Public Policy Markets, Public Policy and Law Department Boston University School of Management 595 Commonwealth Ave. Boston, MA 02215 Tel: 617-383-7356 Fax: NA E-Mail: rebitzer@bu.edu Mark Votruba Weatherhead School of Management Case Western Reserve University 11119 Bellflower Road Cleveland, OH 44106 Tel: 216-368-4296 Fax: 216-368-5039 E-Mail: mark.votruba@case.edu AB - Economists seeking to improve the efficiency of health care delivery frequently emphasize two issues: the fragmented structure of physician practices and poorly designed physician incentives. This paper analyzes these issues from the perspective of organizational economics. We begin with a brief overview of the structure of physician practices and observe that the long anticipated triumph of integrated care delivery has largely gone unrealized. We then analyze the special problems that fragmentation poses for the design of physician incentives. Organizational economics suggests some promising incentive strategies for this setting, but implementing these strategies is complicated by norms of autonomy in the medical profession and by other factors that inhibit effective integration between hospitals and physicians. Compounding these problems are patterns of medical specialization that complicate coordination among physicians. We conclude by considering the policy implications of our analysis - paying particular attention to proposed Accountable Care Organizations. ER - TY - JOUR AU - Rothstein,Jesse TI - Unemployment Insurance and Job Search in the Great Recession JF - National Bureau of Economic Research Working Paper Series VL - No. 17534 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17534 L1 - http://www.nber.org/papers/w17534.pdf N1 - Author contact info: Jesse Rothstein Goldman School of Public Policy University of California, Berkeley 2607 Hearst Avenue Berkeley, CA 94720-7320 Tel: 510/643-8561 Fax: 510/643-9657 E-Mail: rothstein@berkeley.edu AB - Nearly two years after the official end of the "Great Recession," the labor market remains historically weak. One candidate explanation is supply-side effects driven by dramatic expansions of Unemployment Insurance (UI) benefit durations, to as many as 99 weeks. This paper investigates the effect of these UI extensions on job search and reemployment. I use the longitudinal structure of the Current Population Survey to construct unemployment exit hazards that vary across states, over time, and between individuals with differing unemployment durations. I then use these hazards to explore a variety of comparisons intended to distinguish the effects of UI extensions from other determinants of employment outcomes. The various specifications yield quite similar results. UI extensions had significant but small negative effects on the probability that the eligible unemployed would exit unemployment, concentrated among the long-term unemployed. The estimates imply that UI benefit extensions raised the unemployment rate in early 2011 by only about 0.1-0.5 percentage points, much less than is implied by previous analyses, with at least half of this effect attributable to reduced labor force exit among the unemployed rather than to the changes in reemployment rates that are of greater policy concern. ER - TY - JOUR AU - Dynarski,Susan AU - Hyman,Joshua M. AU - Schanzenbach,Diane Whitmore TI - Experimental Evidence on the Effect of Childhood Investments on Postsecondary Attainment and Degree Completion JF - National Bureau of Economic Research Working Paper Series VL - No. 17533 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17533 L1 - http://www.nber.org/papers/w17533.pdf N1 - Author contact info: Susan Dynarski University of Michigan Weill Hall 735 South State Street Ann Arbor, MI 48109-3091 Tel: 734 615 5113 Fax: NA E-Mail: dynarski@umich.edu Joshua M. Hyman University of Michigan Weill Hall 735 South State Street Ann Arbor, MI 48109-3091 http://www-personal.umich.edu/~jmhyman/ E-Mail: jmhyman@umich.edu Diane Whitmore Schanzenbach School of Education and Social Policy Northwestern University Annenberg Hall, Room 205 2120 Campus Drive Evanston, IL 60208 Tel: 847/491-3884 E-Mail: dws@northwestern.edu AB - This paper examines the effect of early childhood investments on college enrollment and degree completion. We use the random assignment in the Project STAR experiment to estimate the effect of smaller classes in primary school on college entry, college choice, and degree completion. We improve on existing work in this area with unusually detailed data on college enrollment spells and the previously unexplored outcome of college degree completion. We find that assignment to a small class increases the probability of attending college by 2.7 percentage points, with effects more than twice as large among blacks. Among those with the lowest ex ante probability of attending college, the effect is 11 percentage points. Smaller classes increase the likelihood of earning a college degree by 1.6 percentage points and shift students towards high-earning fields such as STEM (science, technology, engineering and medicine), business and economics. We confirm the standard finding that test score effects fade out by middle school, but show that test score effects at the time of the experiment are an excellent predictor of long-term improvements in postsecondary outcomes. We compare the costs and impacts of this intervention with other tools for increasing postsecondary attainment, such as Head Start and financial aid, and conclude that early investments are no more cost effective than later investments in boosting adult educational attainment. ER - TY - JOUR AU - Cai,Jing AU - Harrison,Ann TI - The Value-Added Tax Reform Puzzle JF - National Bureau of Economic Research Working Paper Series VL - No. 17532 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17532 L1 - http://www.nber.org/papers/w17532.pdf N1 - Author contact info: Jing Cai Department of Agricultural and Resource Economics University of California, Berkeley 317 Giannini Hall Berkeley, CA 94704 Tel: 510-846-8676 E-Mail: caijing516@berkeley.edu Ann Harrison The Wharton School University of Pennsylvania 2016 Steinberg Hall-Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104-6370 Tel: 215 746 3132 E-Mail: annh@wharton.upenn.edu AB - We explore the impact of a tax reform in some provinces of China which eliminated the value-added tax on some investment goods. While the goal of the experiment was to encourage upgrading of technology, our results suggest that there was no evident increase overall in fixed investment, and employment fell significantly in the treated provinces and sectors. The reform reduced the total number of employees for all types of firms. For domestic firms, it reduced employment by almost 8%. Our results are robust to a variety of approaches, and suggest that the primary impact of the policy has been to induce labor-saving growth. This experiment has since been extended to the rest of China. ER - TY - JOUR AU - Feldstein,Martin S. TI - The Tax Reform Act of 1986: Comment on the 25th Anniversary JF - National Bureau of Economic Research Working Paper Series VL - No. 17531 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17531 L1 - http://www.nber.org/papers/w17531.pdf N1 - Author contact info: Martin S. Feldstein President Emeritus NBER 1050 Massachusetts Avenue Cambridge, MA 02138-5398 Tel: 617/868-3905 Fax: 617/868-7194 E-Mail: msfeldst@nber.org AB - The Tax Reform Act of 1986 was a powerful pro-growth force for the American economy. Equally important, as we look back on it after 25 years, we also see that it taught us two important lessons. First, it showed that politicians with very different political philosophies on the right and on the left could agree on a major program of tax rate reduction and tax reform. Second, it showed that the amount of taxable income is very sensitive to marginal tax rates. More specifically, the evidence based on the 1986 tax rate reductions shows that the response of taxpayers to reductions in marginal tax rates offsets a substantial portion of the revenue that would otherwise be lost. This implies that combining a broadening of the tax base that raises revenue equal to 10 percent of existing personal income tax revenue with a 10 percent across the board cut in all marginal tax rates would raise revenue equal to about four percent of existing tax revenue. With personal income tax revenue in 2011 of about $1 trillion, that four percent increase in net revenue would be $40 billion at the current level of taxable income or more than $500 billion over the next ten years. ER - TY - JOUR AU - Aizenman,Joshua AU - Pinto,Brian AU - Sushko,Vladyslav TI - Financial Sector Ups and Downs and the Real Sector: Big Hindrance, Little Help JF - National Bureau of Economic Research Working Paper Series VL - No. 17530 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17530 L1 - http://www.nber.org/papers/w17530.pdf N1 - Author contact info: Joshua Aizenman Department of Economics; E2 1156 High St. University of California, Santa Cruz Santa Cruz, CA 95064 Tel: 831/459-4791 Fax: 831/459-5077 E-Mail: jaizen@ucsc.edu Brian Pinto MSN MC4-406 The World Bank, 1818 H Street NW Washington DC 20433 E-Mail: bpinto2@worldbank.org Vladyslav Sushko Bank for International Settlements Centralbahnplatz 2 4002 Basel Switzerland E-Mail: vlad.sushko@bis.org AB - We examine how financial expansion and contraction cycles affect the broader economy through their impact on 8 real economic sectors in a panel of 28 countries over 1960-2005, paying particular attention to large, or sharp, contractions and magnifying and mitigating factors. Overall, the construction sector is the most responsive to financial sector growth, with a number of others such as government, public utilities, and transportation also exhibiting significant sensitivity to lagged financial sector growth. Sharp fluctuations in the financial sector have asymmetric effects, with the majority of real sectors adversely affected by contractions but not helped by expansions. The adverse effects of financial contractions are transmitted almost exclusively by the financial openness channel with foreign reserves mitigating these effects with a sizeable (10 to 15 times greater) impact during sharp financial contractions. Both effects are magnified during particularly large financial contractions (with coefficients on interaction terms 2 to 3 times greater than when all contractions are considered). Consequent upon a financial contraction, the most severe real sector contractions occur in countries with high financial openness, relative predominance of construction, manufacturing, and wholesale and retail sectors, and low international reserves. Finally, we find that abrupt financial contractions are more likely to follow periods of accelerated growth, indicative of “up by the stairs, down by the elevator dynamics.” ER - TY - JOUR AU - Pollak,Robert A. TI - Allocating Time: Individuals' Technologies, Household Technology, Perfect Substitutes, and Specialization JF - National Bureau of Economic Research Working Paper Series VL - No. 17529 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17529 L1 - http://www.nber.org/papers/w17529.pdf N1 - Author contact info: Robert Pollak Washington University in St. Louis Arts and Sciences and the Olin Business School Campus Box 1133 1 Brookings Drive St. Louis, MO 63130-4899 Tel: 314/935-4918 Fax: 314/935-6359 E-Mail: pollak@wustl.edu AB - In an efficient household if the spouses' time inputs are perfect substitutes, then spouses will “specialize" regardless of their preferences and the governance structure. That is, both spouses will not allocate time to both household production and the market sector. The perfect substitutes assumption implies that spouses' "unilateral" production functions (i.e., the household production function when only one spouse allocates time to home production) are closely related, satisfying a highly restrictive condition that I call "compatibility." I introduce the “correspondence assumption,” which postulates that the unilateral production functions in a newly formed household coincide with individuals’ production functions before they enter marriage. The correspondence assumption provides a plausible account of the genesis of household technology and simplifies its estimation. I introduce the "additivity assumption” which postulates that the household production function is the sum of the spouses' unilateral production functions and argue that additivity is implicit in much of the new home economics. Together, the correspondence and additivity assumptions imply that individuals’ technologies reveal the entire household technology. I show that perfect substitutes, additivity and concavity imply that the household production function is of the same form as the unilateral production functions, exhibits constant returns to scale, and depends on the spouses' total time inputs, measured in efficiency units. ER - TY - JOUR AU - Conti,Rena M. AU - Huskamp,Haiden A. AU - Berndt,Ernst R. TI - The Effect of FDA Advisories on Branded Pharmaceutical Firms' Valuations and Promotion Efforts JF - National Bureau of Economic Research Working Paper Series VL - No. 17528 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17528 L1 - http://www.nber.org/papers/w17528.pdf N1 - Author contact info: Rena M. Conti University of Chiccago Department of Pediatrics Section of Heamtology/Oncology 5812 S. Ellis Street Chicago, IL 60637 E-Mail: rconti@uchicago.edu Haiden A. Huskamp Harvard Medical School Dept. of Health Care Policy 180 Longwood Avenue Boston, MA 02115 E-Mail: huskamp@hcp.med.harvard.edu Ernst R. Berndt MIT Sloan School of Management 100 Main Street, E62-518 Cambridge, MA 02142 Tel: 617/253-2665 Fax: 617-227-0880 E-Mail: eberndt@mit.edu AB - The US Food and Drug Administration (FDA) expends considerable efforts in regulating medications approved for use. Yet the impact of medication labeling changes on brand pharmaceutical products, and whether and what firms do to respond to increased information regarding the safety and efficacy of a drug, have not be characterized. We propose a behavioral framework for examining the effects of FDA advisories on branded pharmaceutical firms and their products. We empirically assess the impact of recent FDA advisories on the stock market valuations of a sample of branded pharmaceutical manufacturing firms using event study methods. We examine whether and how branded pharmaceutical manufacturers respond to an advisory by assessing changes in promotion compared to non-affected firms. We find firms targeted by an advisory have average stock price declines of 3% in three days and 11% in five days following the advisory release, and in turn appear to decrease total physician-directed promotion spending, journals ads and detailing visits significantly six months following the advisory release; the provision of free samples is unaffected. We find no changes among therapeutic substitutes unaffected by the advisory. Results of sensitivity analyses suggest firms with market dominant positions experience similar decreases in stock market valuations and physician-directed promotion compared to pooled results. The results are also robust to alternative definitions of the timing of advisory release dates and the severity of advisories’ wording. Theory and empirical results suggest the public release of FDA advisories negatively impacts firm’s short-term market valuations. The results suggest an additional rationale for previously documented declines in prescribing after FDA advisory releases – significant declines in physician-directed promotion following FDA advisory releases; the combined (and likely correlated) effects of the release of the advisory and declines in physician-directed promotion on prescribing behavior are likely larger than the sum of the independent effects. ER - TY - JOUR AU - Algan,Yann AU - Cahuc,Pierre AU - Shleifer,Andrei TI - Teaching Practices and Social Capital JF - National Bureau of Economic Research Working Paper Series VL - No. 17527 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17527 L1 - http://www.nber.org/papers/w17527.pdf N1 - Author contact info: Yann Algan Department of Economics Sciences Po 75007 Paris, France 28 rue des Saints-Pères 75007 Paris France E-Mail: yann.algan@sciences-po.org Pïerre Cahuc CREST, Ecole Polytechnique 15 boulevard Gabriel Peri 92245 Malakoff Cedex, France Tel: (33)1 41 17 37 17 E-Mail: cahuc@ensae.fr Andrei Shleifer Department of Economics Harvard University Littauer Center M-9 Cambridge, MA 02138 Tel: 617/495-5046 Fax: 617/496-1708 E-Mail: ashleifer@harvard.edu AB - We use several data sets to consider the effect of teaching practices on student beliefs, as well as on organization of firms and institutions. In cross-country data, we show that teaching practices (such as copying from the board versus working on projects together) are strongly related to various dimensions of social capital, from beliefs in cooperation to institutional outcomes. We then use micro-data to investigate the influence of teaching practices on student beliefs about cooperation both with each other and with teachers, and students’ involvement in civic life. A two-stage least square strategy provides evidence that teaching practices have an independent sizeable effect on student social capital. The relationship between teaching practices and student test performance is nonlinear. The evidence supports the idea that progressive education promotes social capital. ER - TY - JOUR AU - Barreca,Alan AU - Fishback,Price V. AU - Kantor,Shawn TI - Agricultural Policy, Migration, and Malaria in the 1930s United States JF - National Bureau of Economic Research Working Paper Series VL - No. 17526 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17526 L1 - http://www.nber.org/papers/w17526.pdf N1 - Author contact info: Alan Barreca 206 Tilton Hall Tulane University New Orleans, LA 70118 Tel: 504-252-0258 E-Mail: abarreca@tulane.edu Price V. Fishback Department of Economics University of Arizona Tucson, AZ 85721 Tel: 520/621-4421 Fax: 520/621-8450 E-Mail: pfishback@eller.arizona.edu Shawn E. Kantor School of Social Sciences, Humanities and Arts University of California, Merced 5200 N. Lake Road Merced, CA 95343 Tel: 209-228-2956 Fax: 209-228-4007 E-Mail: skantor@ucmerced.edu AB - The Agricultural Adjustment Act (AAA) caused a population shift in the United States in the 1930s. Evaluating the effects of the AAA on the incidence of malaria can therefore offer important lessons regarding the broader consequences of demographic changes. Using a quasi-first difference model and a robust set of controls, we find a negative association between AAA expenditures and malaria death rates at the county level. Further, we find the AAA caused relatively low-income groups to migrate from counties with high-risk malaria ecologies. These results suggest that the AAA-induced migration played an important role in the reduction of malaria. ER - TY - JOUR AU - Khandelwal,Amit K. AU - Schott,Peter K. AU - Wei,Shang-Jin TI - Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters JF - National Bureau of Economic Research Working Paper Series VL - No. 17524 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17524 L1 - http://www.nber.org/papers/w17524.pdf N1 - Author contact info: Amit Khandelwal Graduate School of Business Columbia University Uris Hall 606, 3022 Broadway New York, NY 10027 Tel: 212/854-7506 Fax: 212/316-9219 E-Mail: ak2796@columbia.edu Peter K. Schott Yale School of Management 135 Prospect Street New Haven, CT 06520-8200 Tel: 203/436-4260 Fax: 203/432-6974 E-Mail: peter.schott@yale.edu Shang-Jin Wei Graduate School of Business Columbia University Uris Hall 619 3022 Broadway New York, NY 10027-6902 Tel: 212/854-9139 E-Mail: shangjin.wei@columbia.edu AB - If trade barriers are managed by inefficient institutions, trade liberalization can lead to greater-than-expected gains. We examine Chinese textile and clothing exports before and after the elimination of externally imposed export quotas. We find that the surge in export value and decline in export prices following quota removal is driven by net entry, and show that this dominance is inconsistent with use of a productivity-based allocation of quota licenses by the Chinese government. Our counterfactual implies that elimination of misallocated quotas raised the overall productivity gain of quota removal by 28 percent. ER - TY - JOUR AU - Rin,Marco Da AU - Hellmann,Thomas F. AU - Puri,Manju TI - A survey of venture capital research JF - National Bureau of Economic Research Working Paper Series VL - No. 17523 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17523 L1 - http://www.nber.org/papers/w17523.pdf N1 - Author contact info: Marco Da Rin Department of Finance-Office K 936 Tilburg University Warandelaan 2 P.O. Box 90153 5000 LE Tilburg The Netherlands Tel: 31 13 466 2054 Fax: 31 13 466 2875 E-Mail: marco.darin@uvt.nl Thomas F. Hellmann Sauder School of Business University of British Columbia 2053 Main Mall Vancouver, BC V6T 1Z2 CANADA Tel: 604/822-8476 Fax: 604/822-8477 E-Mail: hellmann@sauder.ubc.ca Manju Puri Fuqua School of Business Duke University 1 Towerview Drive, Box 90120 Durham, NC 27708-0120 Tel: 919/660-7657 Fax: 919/681-6246 E-Mail: mpuri@duke.edu AB - This survey reviews the growing body of academic work on venture capital. It lays out the major data sources used. It examines the work on venture capital investments in companies, looking at issues of selection, contracting, post-investment services and exits. The survey considers recent work on organizational structures of venture capital firms, and the relationship between general and limited partners. It discusses the work on the returns to venture capital investments. It also examines public policies, and the role of venture capital in the economy at large. ER - TY - JOUR AU - Rydqvist,Kristian AU - Spizman,Joshua AU - Strebulaev,Ilya A. TI - Government Policy and Ownership of Financial Assets JF - National Bureau of Economic Research Working Paper Series VL - No. 17522 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17522 L1 - http://www.nber.org/papers/w17522.pdf N1 - Author contact info: Kristian Rydqvist Binghamton University State University of New York PO BOX 6000 Binghamton, NY 13902-6000 E-Mail: rydqvist@binghamton.edu Joshua Spizman Loyola Marymount University Hilton Center for Business 1 LMU Drive, MS 8385 Los Angeles, CA 90045-2659 E-Mail: joshua.spizman@lmu.edu Ilya A. Strebulaev Graduate School of Business Stanford University 655 Knight Way Stanford, CA 94305 Tel: 650/725-8239 Fax: 650/725-7979 E-Mail: istrebulaev@stanford.edu AB - Since World War II, direct stock ownership by households across the globe has largely been replaced by indirect stock ownership by financial institutions. We argue that tax policy is the driving force. Using long time-series from eight countries, we show that the fraction of household ownership decreases with measures of the tax benefits of holding stocks inside tax-deferred plans. This finding is important for policy considerations on effective taxation and for financial economics research on the long-term effects of taxation on corporate finance and asset prices. ER - TY - JOUR AU - Demidova,Svetlana AU - Rodriguez-Clare,Andres TI - The Simple Analytics of the Melitz Model in a Small Open Economy JF - National Bureau of Economic Research Working Paper Series VL - No. 17521 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17521 L1 - http://www.nber.org/papers/w17521.pdf N1 - Author contact info: Svetlana Demidova Department of Economics McMaster University Canada E-Mail: demidov@mcmaster.ca Andres Rodriguez-Clare University of California at Berkeley Department of Economics Berkeley, CA 94720-3880 E-Mail: andres1000@gmail.com AB - In this paper we present a version of the Melitz (2003) model for the case of a small economy and summarize its key relationships with the aid of a simple figure. We then use this figure to provide an intuitive analysis of the implications of asymmetric changes in trade barriers and show that a decline in import costs always benefits the liberalizing country. This stands in contrast to variants of the Melitz model with a freely traded (outside) sector, such as Demidova (2008) and Melitz and Ottaviano (2008), where the country that reduces importing trade costs experiences a decline in welfare. ER - TY - JOUR AU - Head,Allen AU - Liu,Lucy Qian AU - Menzio,Guido AU - Wright,Randall TI - Sticky Prices: A New Monetarist Approach JF - National Bureau of Economic Research Working Paper Series VL - No. 17520 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17520 L1 - http://www.nber.org/papers/w17520.pdf N1 - Author contact info: Allen Head Dept. of Economics Queen's University Kingston ON K7L 3N6 CANADA E-Mail: heada@qed.econ.queensu.ca Lucy Qian Liu International Monetary Fund Washington, DC E-Mail: qliu3@imf.org Guido Menzio Department of Economics University of Pennsylvania 467 McNeil Building 3718 Locust Walk Philadelphia, PA 19104 Tel: 773/865-6337 Fax: 215/573-2057 E-Mail: gmenzio@econ.upenn.edu Randall Wright Department of Finance and Department of Economics University of Wisconsin - Madison Grainger Hall 975 University Ave Madison, WI 53706 E-Mail: rwright@bus.wisc.edu AB - Why do some sellers set nominal prices that apparently do not respond to changes in the aggregate price level? In many models, prices are sticky by assumption; here it is a result. We use search theory, with two consequences: prices are set in dollars, since money is the medium of exchange; and equilibrium implies a nondegenerate price distribution. When the money supply increases, some sellers may keep prices constant, earning less per unit but making it up on volume, so profit stays constant. The calibrated model matches price-change data well. But, in contrast with other sticky-price models, money is neutral. ER - TY - JOUR AU - Kolesár,Michal AU - Chetty,Raj AU - Friedman,John N. AU - Glaeser,Edward L. AU - Imbens,Guido W. TI - Identification and Inference with Many Invalid Instruments JF - National Bureau of Economic Research Working Paper Series VL - No. 17519 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17519 L1 - http://www.nber.org/papers/w17519.pdf N1 - Author contact info: Michal Kolesar Department of Economics Harvard University 1805 Cambridge St. Cambridge, MA 02138 E-Mail: kolesarmi@gmail.com Raj Chetty Department of Economics Harvard University 1805 Cambridge St. Cambridge, MA 02138 Tel: 617-744-9492 E-Mail: chetty@fas.harvard.edu John N. Friedman Harvard Kennedy School Taubman 356 79 JFK St. Cambridge, MA 02138 Tel: 617/233-6965 Fax: 617/496-1722 E-Mail: john_friedman@harvard.edu Edward L. Glaeser Department of Economics 315A Littauer Center Harvard University Cambridge, MA 02138 Tel: 617/495-0575 Fax: 617/495-7730 E-Mail: eglaeser@harvard.edu Guido Imbens Department of Economics Littauer Center Harvard University 1805 Cambridge Street Cambridge, MA 02138 Tel: 617/384-7485 Fax: 617/495-7730 E-Mail: imbens@fas.harvard.edu AB - We analyze linear models with a single endogenous regressor in the presence of many instrumental variables. We weaken a key assumption typically made in this literature by allowing all the instruments to have direct effects on the outcome. We consider restrictions on these direct effects that allow for point identification of the effect of interest. The setup leads to new insights concerning the properties of conventional estimators, novel identification strategies, and new estimators to exploit those strategies. A key assumption underlying the main identification strategy is that the product of the direct effects of the instruments on the outcome and the effects of the instruments on the endogenous regressor has expectation zero. We argue in the context of two specific examples with a group structure that this assumption has substantive content. ER - TY - JOUR AU - Gormley,Todd A. AU - Johnson,Simon AU - Rhee,Changyong TI - Ending "Too Big To Fail": Government Promises vs. Investor Perceptions JF - National Bureau of Economic Research Working Paper Series VL - No. 17518 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17518 L1 - http://www.nber.org/papers/w17518.pdf N1 - Author contact info: Todd Gormley The Wharton School University of Pennsylvania 3620 Locust Walk, Suite 2400 Philadelphia, PA 19104 Tel: 215-746-0496 E-Mail: tgormley@wharton.upenn.edu Simon Johnson MIT Sloan School of Management 100 Main Street, E52-562 Cambridge, MA 02142 Tel: 617/290-9618 Fax: 617/253-2660 E-Mail: sjohnson@mit.edu Changyong Rhee Economics and Research Department Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Philippines E-Mail: crhee@adb.org AB - Can a government credibly promise not to bailout firms whose failure would have major negative systemic consequences? Our analysis of Korea's 1997-99 crisis, suggests an answer: No. Despite a general "no bailout" policy during the crisis, the largest Korean corporate groups (chaebol) – facing severe financial and governance problems – could still borrow heavily from households through issuing bonds at prices implying very low expected default risk. The evidence suggests "too big to fail" beliefs were not eliminated by government promises, presumably because investors believed that this policy was not time consistent. Subsequent government handling of potential and actual defaults by Daewoo and Hyundai confirmed the market view that creditors would be protected. ER - TY - JOUR AU - Brav,Alon AU - Jiang,Wei AU - Kim,Hyunseob TI - The Real Effects of Hedge Fund Activism: Productivity, Risk, and Product Market Competition JF - National Bureau of Economic Research Working Paper Series VL - No. 17517 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17517 L1 - http://www.nber.org/papers/w17517.pdf N1 - Author contact info: Alon Brav Fuqua School of Business Duke University One Towerview Drive Durham, NC 27708 Tel: 919/660-2908 Fax: 919/684-2818 E-Mail: brav@duke.edu Wei Jiang Graduate School of Business Columbia University 411 Uris Hall New York, NY 10027 Tel: 212/854-9679 E-Mail: wj2006@columbia.edu Hyunseob Kim Duke University Fuqua School of Business 100 Fuqua Drive Durham, NC 27708-0120 E-Mail: hyunseob.kim@duke.edu AB - This paper studies the long-term effect of hedge fund activism on the productivity of target firms using plant-level information from the U.S. Census Bureau. A typical target firm improves its production efficiency within two years after activism, and this improvement is concentrated in industries with a high degree of product market competition. By following plants that were sold post-intervention we also find that efficient capital redeployment is an important channel via which activists create value. Furthermore, our analyses demonstrate that measuring performance using the Compustat data is likely to lead to a downward bias because target firms experiencing greater improvement post-intervention are also more likely to disappear from the Compustat database. Finally, consistent with recent work in asset-pricing linking firm investment decisions and expected returns, we show how changes to target firms’ productivity are associated with a decline in systemic risk, particularly in competitive industries. ER - TY - JOUR AU - Campbell,John Y. AU - Cocco,João F. TI - A Model of Mortgage Default JF - National Bureau of Economic Research Working Paper Series VL - No. 17516 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17516 L1 - http://www.nber.org/papers/w17516.pdf N1 - Author contact info: John Y. Campbell Morton L. and Carole S. Olshan Professor of Economics Department of Economics Harvard University Littauer Center 213 Cambridge, MA 02138 Tel: 617/496-6448 Fax: 617/495-7730 E-Mail: john_campbell@harvard.edu Joao Cocco London Business School Regent's Park London NW1 4SA, UK E-Mail: jcocco@london.edu AB - This paper solves a dynamic model of a household's decision to default on its mortgage, taking into account labor income, house price, inflation, and interest rate risk. Mortgage default is triggered by negative home equity, which results from declining house prices in a low inflation environment with large mortgage balances outstanding. Not all households with negative home equity default, however. The level of negative home equity that triggers default depends on the extent to which households are borrowing constrained. High loan-to-value ratios at mortgage origination increase the probability of negative home equity. High loan-to-income ratios also increase the probability of default by tightening borrowing constraints. Comparing mortgage types, adjustable-rate mortgage defaults occur when nominal interest rates increase and are substantially affected by idiosyncratic shocks to labor income. Fixed-rate mortgages default when interest rates and inflation are low, and create a higher probability of a default wave with a large number of defaults. Interest-only mortgages trade off an increased probability of negative home equity against a relaxation of borrowing constraints, but overall have the highest probability of a default wave. ER - TY - JOUR AU - Razin,Assaf AU - Wahba,Jackline TI - Welfare Magnet Hypothesis, Fiscal Burden and Immigration Skill Selectivity JF - National Bureau of Economic Research Working Paper Series VL - No. 17515 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17515 L1 - http://www.nber.org/papers/w17515.pdf N1 - Author contact info: Assaf Razin Department of Economics Cornell University Uris 422 Ithaca, NY 14853 Tel: 607/255-9625 Fax: 607/255-2818 E-Mail: ar256@cornell.edu Jackline Wahba Economics Division School of Social Sciences University of Southampton Southampton, SO17 1BJ United Kingdom E-Mail: J.Wahba@soton.ac.uk AB - This paper revisits the magnet hypothesis and investigates the impact of the welfare generosity on the difference between skilled and unskilled migration rates. The main purpose of the paper is to assess the role of mobility restriction on shaping the effect of the welfare state genrosity. In a free migration regime, the impact is expected to be negative on the skill composition of migrants while in a restricted mobility regime, the impact will be the opposite, as voters will prefer selective migration policies, favoring skilled migrants who tend to be net contributors to the fiscal system. We utilize the free labor movement within EUR (the EU, Norway and Switzerland) and the restricted movement from outside of the EUR to compare the free migration. ER - TY - JOUR AU - Ghani,Ejaz AU - Kerr,William R. AU - O'Connell,Stephen D. TI - Spatial Determinants of Entrepreneurship in India JF - National Bureau of Economic Research Working Paper Series VL - No. 17514 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17514 L1 - http://www.nber.org/papers/w17514.pdf N1 - Author contact info: Ejaz Ghani South Asia PREM The World Bank Washington D.C. E-Mail: Eghani@worldbank.org William R. Kerr Harvard Business School Rock Center 212 Soldiers Field Boston, MA 02163 Tel: 617/496-7021 E-Mail: wkerr@hbs.edu Stephen D. O'Connell City University of New York Department of Economics The Graduate Center 365 Fifth Ave New York, NY 10016-4309 E-Mail: soconnell@gc.cuny.edu AB - We analyze the spatial determinants of entrepreneurship in India in the manufacturing and services sectors. Among general district traits, quality of physical infrastructure and workforce education are the strongest predictors of entry, with labor laws and household banking quality also playing important roles. Looking at the district-industry level, we find extensive evidence of agglomeration economies among manufacturing industries. In particular, supportive incumbent industrial structures for input and output markets are strongly linked to higher establishment entry rates. We also find substantial evidence for the Chinitz effect where small local incumbent suppliers encourage entry. The importance of agglomeration economies for entry hold when considering changes in India’s incumbent industry structures from 1989, determined before large-scale deregulation began, to 2005. ER - TY - JOUR AU - Chinn,Menzie D. AU - Eichengreen,Barry AU - Ito,Hiro TI - A Forensic Analysis of Global Imbalances JF - National Bureau of Economic Research Working Paper Series VL - No. 17513 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17513 L1 - http://www.nber.org/papers/w17513.pdf N1 - Author contact info: Menzie D. Chinn Department of Economics University of Wisconsin 1180 Observatory Drive Madison, WI 53706 Tel: 608/262-7397 Fax: 608/262-2033 E-Mail: mchinn@lafollette.wisc.edu Barry Eichengreen Department of Economics University of California, Berkeley 549 Evans Hall 3880 Berkeley, CA 94720-3880 Tel: 510/642-2772 Fax: 510/643-0926 E-Mail: eichengr@econ.Berkeley.edu Hiro Ito Portland State University 1721 SW Broadway, Suite 241 Portland, Oregon 97201 E-Mail: ito@pdx.edu AB - We examine whether the behavior of current account balances changed in the years preceding the global crisis of 2008-09, and assess the prospects for global imbalances in the post-crisis period. Changes in the budget balance are an important factor affecting current account balances for deficit countries such as the U.S. and the U.K. The effect of the “saving glut variables” on current account balances has been relatively stable for emerging market countries, suggesting that those factors cannot explain the bulk of their recent current account movements. We also find the 2006-08 period to constitute a structural break for emerging market countries, and to a lesser extent, for industrialized countries. We attribute the anomalous behavior of pre-crisis current account balances to stock market performance and real housing appreciation; fiscal procyclicality and the stance of monetary policy do not matter as much. Household leverage also appears to explain some of the standard model’s prediction errors. Looking forward, U.S., fiscal consolidation alone cannot induce significant deficit reduction. For China, financial development might help shrink its current account surplus, but only when it is coupled with financial liberalization. These findings suggest that unless countries implement substantially more policy change, global imbalances are unlikely to disappear. ER - TY - JOUR AU - Chiu,Jonathan AU - Meh,Cesaire AU - Wright,Randall TI - Innovation and Growth with Financial, and other, Frictions JF - National Bureau of Economic Research Working Paper Series VL - No. 17512 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17512 L1 - http://www.nber.org/papers/w17512.pdf N1 - Author contact info: Jonathan Chiu Bank of Canada 234 Wellington, Ottawa, ON K1A 0G9 Canada E-Mail: jchiu@bank-banque-canada.ca Cesaire Meh Bank of Canada 234 Wellington, Ottawa, ON K1A 0G9 Canada E-Mail: CMeh@bank-banque-canada.ca Randall Wright Department of Finance and Department of Economics University of Wisconsin - Madison Grainger Hall 975 University Ave Madison, WI 53706 E-Mail: rwright@bus.wisc.edu AB - The generation and implementation of ideas, or knowledge, is crucial for economic performance. We study this process in a model of endogenous growth with frictions. Productivity increases with knowledge, which advances via innovation, and with the exchange of ideas from those who generate them to those best able to implement them (technology transfer). But frictions in this market, including search, bargaining, and commitment problems, impede exchange and thus slow growth. We characterize optimal policies to subsidize research and trade in ideas, given both knowledge and search externalities. We discuss the roles of liquidity and financial institutions, and show two ways in which intermediation can enhance efficiency and innovation. First, intermediation allows us to finance more transactions with fewer assets. Second, it ameliorates certain bargaining problems, by allowing entrepreneurs to undo otherwise sunk investments in liquidity. We also discuss some evidence, suggesting that technology transfer is a significant source of innovation and showing how it is affected by credit considerations. ER - TY - JOUR AU - Wong,Yuet-Yee AU - Wright,Randall TI - Buyers, Sellers and Middlemen: Variations on Search-Theoretic Themes JF - National Bureau of Economic Research Working Paper Series VL - No. 17511 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17511 L1 - http://www.nber.org/papers/w17511.pdf N1 - Author contact info: Yuet-Yee Wong Binghamton University Department of Economics POB 6000 Binghamton, NY 13902 E-Mail: yywong01@gmail.com Randall Wright Department of Finance and Department of Economics University of Wisconsin - Madison Grainger Hall 975 University Ave Madison, WI 53706 E-Mail: rwright@bus.wisc.edu AB - We study bilateral exchange, both direct trade and indirect trade that happens through chains of intermediaries or middlemen. We develop a model of this activity and present applications. This illustrates how, and how many, intermediaries get involved, and how the terms of trade are determined. We show how bargaining with one intermediary depends on upcoming negotiations with downstream intermediaries, leading to holdup problems. We discuss the roles of buyers and sellers in bilateral exchanges, and how to interpret prices. We develop a particular bargaining solution and relate it to other solutions. In addition to contrasting our framework with other models of middlemen, we discuss the connection to different branches of search theory. We also illustrate how bubbles can emerge in intermediation. ER - TY - JOUR AU - Gu,Chao AU - Wright,Randall TI - Endogenous Credit Cycles JF - National Bureau of Economic Research Working Paper Series VL - No. 17510 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17510 L1 - http://www.nber.org/papers/w17510.pdf N1 - Author contact info: Chao Gu University of Missouri E-Mail: guc@missouri.edu Randall Wright Department of Finance and Department of Economics University of Wisconsin - Madison Grainger Hall 975 University Ave Madison, WI 53706 E-Mail: rwright@bus.wisc.edu AB - We study models of credit with limited commitment, which implies endogenous borrowing constraints. We show that there are multiple stationary equilibria, as well as nonstationary equilibria, including some that display deterministic cyclic and chaotic dynamics. There are also stochastic (sunspot) equilibria, in which credit conditions change randomly over time, even though fundamentals are deterministic and stationary. We show this can occur when the terms of trade are determined by Walrasian pricing or by Nash bargaining. The results illustrate how it is possible to generate equilibria with credit cycles (crunches, freezes, crises) in theory, and as recently observed in actual economies. ER - TY - JOUR AU - Schwartz-Ziv,Miriam AU - Weisbach,Michael TI - What do Boards Really Do? Evidence from Minutes of Board Meetings JF - National Bureau of Economic Research Working Paper Series VL - No. 17509 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17509 L1 - http://www.nber.org/papers/w17509.pdf N1 - Author contact info: Miriam Schwartz-Ziv Program on Corporate Governance Harvard Law School 1557 Massachusetts Avenue Cambridge, MA 02138 E-Mail: miriam.schwartz@mail.huji.ac.il Michael Weisbach Department of Finance Fisher College of Business Ohio State University 2100 Neil Ave. Columbus, OH 43210 Tel: 614/292-3264 E-Mail: weisbach.2@osu.edu AB - We analyze a unique database from a sample of real-world boardrooms – minutes of board meetings and board-committee meetings of eleven business companies for which the Israeli government holds a substantial equity interest. We use these data to evaluate the underlying assumptions and predictions of models of boards of directors. These models generally fall into two categories: “managerial models” assume boards play a direct role in managing the firm, and “supervisory models” assume that boards’ monitor top management but do not make business decisions themselves. Consistent with the supervisory models, our minutes-based data suggest that boards spend most of their time monitoring management: 67% of the issues they discussed were of a supervisory nature, they were presented with only a single option in 99% of the issues discussed, and they disagreed with the CEO only 3.3% of the time. In addition, managerial models describe boards at times as well: Boards requested to receive further information or an update for 8% of the issues discussed, and they took an initiative with respect to 8.1% of them. In 63% of the meetings, boards took at least one of these actions or did not vote in line with the CEO. ER - TY - JOUR AU - Fernández,Raquel AU - Wong,Joyce Cheng TI - The Disappearing Gender Gap: The Impact of Divorce, Wages, and Preferences on Education Choices and Women's Work JF - National Bureau of Economic Research Working Paper Series VL - No. 17508 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17508 L1 - http://www.nber.org/papers/w17508.pdf N1 - Author contact info: Raquel Fernández Department of Economics New York University 19 West 4th Street, 6th Floor New York, NY 10012 Tel: 212/998-8908 Fax: 212/995-4186 E-Mail: raquel.fernandez@nyu.edu Joyce C. Wong Department of Economics New York University 19 West 4th Street, 6th Floor New York, NY 10012 E-Mail: cwong@nyu.edu AB - Women born in 1935 went to college significantly less than their male counterparts and married women’s labor force participation (LFP) averaged 40% between the ages of thirty and forty. The cohort born twenty years later behaved very differently. The education gender gap was eliminated and married women’s LFP averaged 70% over the same ages. In order to evaluate the quantitative contributions of the many significant changes in the economic environment, family structure, and social norms that occurred over this period, this paper develops a dynamic life-cycle model calibrated to data relevant to the 1935 cohort. We find that the higher probability of divorce and the changes in wage structure faced by the 1955 cohort are each able to explain, in isolation, a large proportion (about 60%) of the observed changes in female LFP. After combining all economic and family structure changes, we find that a simple change in preferences towards work can account for the remaining change in LFP. To eliminate the education gender gap requires, on the other hand, for the psychic cost of obtaining higher education to change asymmetrically for women versus men. ER - TY - JOUR AU - Cobb-Clark,Deborah A. AU - Tekin,Erdal TI - Fathers and Youth's Delinquent Behavior JF - National Bureau of Economic Research Working Paper Series VL - No. 17507 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17507 L1 - http://www.nber.org/papers/w17507.pdf N1 - Author contact info: Deborah A. Cobb-Clark Melbourne Institute of Applied Economics and Social Research Faculty of Business and Economics The University of Melbourne Parkville VIC, 3010 Australia Tel: +61 3 9035 4219 Fax: +61 3 8344 2111 E-Mail: d.cobb-clark@unimelb.edu.au Erdal Tekin Department of Economics Andrew Young School of Policy Studies Georgia State University P.O. Box 3992 Atlanta, GA 30302-3992 Tel: 404/413-0163 Fax: 404/413-0145 E-Mail: tekin@gsu.edu AB - This paper analyzes the relationship between having one or more father figures and the likelihood that young people engage in delinquent criminal behavior. We pay particular attention to distinguishing the roles of residential and non-residential, biological fathers as well as stepfathers. Using data from the National Longitudinal Study of Adolescent Health, we find that adolescent boys engage in more delinquent behavior if there is no father figure in their lives. However, adolescent girls' behavior is largely independent of the presence (or absence) of their fathers. The strong effect of family structure is not explained by the lack of paternal involvement that generally comes with fathers’ absence, even though adolescents, especially boys, who spend time doing things with their fathers usually have better outcomes. There is also a link between adult delinquent behavior and adolescent family structure that cannot be explained by fathers' involvement with their adolescent sons and is only partially explained by fathers' involvement with their adolescent daughters. Finally, the strong link between adolescent family structure and delinquent behavior is not accounted for by the income differentials associated with fathers' absence. Our results suggest that the presence of a father figure during adolescence is likely to have protective effects, particularly for males, in both adolescence and young adulthood. ER - TY - JOUR AU - Simsek,Alp TI - Speculation and Risk Sharing with New Financial Assets JF - National Bureau of Economic Research Working Paper Series VL - No. 17506 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17506 L1 - http://www.nber.org/papers/w17506.pdf N1 - Author contact info: Alp Simsek Department of Economics Harvard University Littauer Center 319 Cambridge, Ma. 02138 Tel: 617/496-3374 Fax: 617/495-7730 E-Mail: asimsek@fas.harvard.edu AB - While the traditional view of financial innovation emphasizes the risk sharing role of new financial assets, belief disagreements about these assets naturally lead to speculation, which represents a powerful economic force in the opposite direction. This paper investigates the effect of financial innovation on portfolio risks in an economy when both the risk sharing and the speculation forces are present. I consider this question in a standard mean-variance framework. Financial assets provide hedging services but they are also subject to speculation because traders do not necessarily agree about their payoffs. I define the average variance of traders' net worths as a measure of portfolio risks for this economy, and I decompose it into two components: the uninsurable variance, defined as the average variance that would obtain if there were no belief disagreements, and the speculative variance, defined as the residual variance that results from speculative trades based on belief disagreements. Financial innovation always decreases the uninsurable variance because new assets increase the possibilities for risk sharing. My main result shows that financial innovation also always increases the speculative variance. This is true even if traders completely agree about the payoffs of new assets. The intuition behind this result is the hedge-more/bet-more effect: Traders use new assets to hedge their bets on existing assets, which in turn enables them to place larger bets and take on greater risks. The net effect of financial innovation on portfolio risks depends on the quantitative strength of its effects on the uninsurable and the speculative variances. I consider a calibration of the model for new assets linked to national incomes of G7 countries, which were recommended by Athanasoulis and Shiller (2001) to facilitate risk sharing. For reasonable levels of belief disagreements, these assets would actually increase the average consumption risks of individuals in G7 countries. In addition, a profit seeking market maker would introduce a different subset of these assets than the ones proposed by Athanasoulis and Shiller (2001). The endogenous set of new assets would be directed towards increasing the opportunities for speculation rather than risk sharing. ER - TY - JOUR AU - Kartashov,Vasily AU - Maurer,Raimond AU - Mitchell,Olivia S. AU - Rogalla,Ralph TI - Lifecycle Portfolio Choice with Systematic Longevity Risk and Variable Investment-Linked Deferred Annuities JF - National Bureau of Economic Research Working Paper Series VL - No. 17505 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17505 L1 - http://www.nber.org/papers/w17505.pdf N1 - Author contact info: Vasily Kartashov Finance Department Goethe University Grueneburgplatz 1 (Uni-PF. H 23) Frankfurt am Main Germany E-Mail: kartashov@finance.uni-frankfurt.de Raimond Maurer Finance Department Goethe University Grüneburgplatz 1 (Uni-PF. H 23) Frankfurt am Main Germany E-Mail: rmaurer@wiwi.uni-frankfurt.de Olivia S. Mitchell University of Pennsylvania Wharton School 3620 Locust Walk, St 3000 SH-DH Philadelphia, PA 19104-6302 Tel: 215-898-0424 Fax: 215/898-0310 E-Mail: mitchelo@wharton.upenn.edu Ralph Rogalla Finance Department Goethe University Grüneburgplatz 1 (Uni-PF. H 23) Frankfurt am Main Germany E-Mail: rogalla@wiwi.uni-frankfurt.de AB - This paper assesses the impact of variable investment-linked deferred annuities (VILDAs) on lifecycle consumption, saving, and portfolio allocation patterns given stochastic and systematic mortality. Insurers have taken two approaches to manage systematic mortality risks, namely self-insurance and risk transfer to purchasers of the annuity products. We demonstrate that self-insurance leads to high loadings, so that households offered a choice would favor the risk transfer scheme. Reservation loadings on the actuarially fair VILDA price for non-participation are 0.5-8%; if insurers cannot hedge within this range, they will transfer systematic longevity risks to the annuitants. Our findings have implications for new payout products that may be attractive to older households seeking to protect against retirement shortfalls. ER - TY - JOUR AU - Hanushek,Eric A. AU - Woessmann,Ludger AU - Zhang,Lei TI - General Education, Vocational Education, and Labor-Market Outcomes over the Life-Cycle JF - National Bureau of Economic Research Working Paper Series VL - No. 17504 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17504 L1 - http://www.nber.org/papers/w17504.pdf N1 - Author contact info: Eric A. Hanushek Hoover Institution Stanford University Stanford, CA 94305-6010 Tel: 650/736-0942 Fax: 650/723-1687 E-Mail: hanushek@stanford.edu Ludger Woessmann University of Munich Ifo Institute for Economic Research and CESifo Poschingerstr. 5 81679 Munich, Germany E-Mail: woessmann@ifo.de Lei Zhang Institute for Fiscal Studies Tsinghua University Beijing 100084, China E-Mail: zlei89@gmail.com AB - Policy debates about the balance of vocational and general education programs focus on the school-to-work transition. But with rapid technological change, gains in youth employment from vocational education may be offset by less adaptability and thus diminished employment later in life. To test our main hypothesis that any relative labor-market advantage of vocational education decreases with age, we employ a difference-in-differences approach that compares employment rates across different ages for people with general and vocational education. Using micro data for 18 countries from the International Adult Literacy Survey, we find strong support for the existence of such a trade-off, which is most pronounced in countries emphasizing apprenticeship programs. Results are robust to accounting for ability patterns and to propensity-score matching. ER - TY - JOUR AU - Waldfogel,Joel TI - Copyright Protection, Technological Change, and the Quality of New Products: Evidence from Recorded Music since Napster JF - National Bureau of Economic Research Working Paper Series VL - No. 17503 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17503 L1 - http://www.nber.org/papers/w17503.pdf N1 - Author contact info: Joel Waldfogel Frederick R. Kappel Chair in Applied Economics 3-177 Carlson School of Management University of Minnesota 321 19th Avenue South Minneapolis, MN 55455 Tel: 612/626-7128 E-Mail: jwaldfog@umn.edu AB - Recent technological changes may have altered the balance between technology and copyright law for digital products. While file-sharing has reduced revenue, other technological changes have reduced the costs of bringing creative works to market. As a result, we don’t know whether the effective copyright protection currently available provides adequate incentives to bring forth a steady stream of valuable new products. This paper assesses the quality of new recorded music since Napster, using three independent approaches. The first is an index of the quantity of high-quality music based on critics’ retrospective lists. The second and third approaches rely directly on music sales and airplay data, respectively, using of the idea that if one vintage’s music is better than another’s, its superior quality should generate higher sales or greater airplay through time, after accounting for depreciation. The three resulting indices of vintage quality for the past half-century are both consistent with each other and with other historical accounts of recorded music quality. There is no evidence of a reduction in the quality of music released since Napster, and the two usage-based indices suggest an increase since 1999. Hence, researchers and policymakers thinking about the strength of copyright protection should supplement their attention to producer surplus with concern for consumer surplus as well. ER - TY - JOUR AU - Aizenman,Joshua AU - Jinjarak,Yothin AU - Park,Donghyun TI - Capital Flows and Economic Growth in the Era of Financial Integration and Crisis, 1990-2010 JF - National Bureau of Economic Research Working Paper Series VL - No. 17502 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17502 L1 - http://www.nber.org/papers/w17502.pdf N1 - Author contact info: Joshua Aizenman Department of Economics; E2 1156 High St. University of California, Santa Cruz Santa Cruz, CA 95064 Tel: 831/459-4791 Fax: 831/459-5077 E-Mail: jaizen@ucsc.edu Yothin Jinjarak University of London College Buildings, 534 London UK, WC1H 0XG E-Mail: yothin.jinjarak@gmail.com Donghyun Park Economics and Research Department Asian Development Bank Manila, Philippines Tel: (632) 632-5825/6385 Fax: (632) 636-2342 E-Mail: dpark@adb.org AB - We investigate the relationship between economic growth and lagged international capital flows, disaggregated into FDI, portfolio investment, equity investment, and short-term debt. We follow about 100 countries during 1990-2010 when emerging markets became more integrated into the international financial system. We look at the relationship both before and after the global crisis. Our study reveals a complex and mixed picture. The relationship between growth and lagged capital flows depends on the type of flows, economic structure, and global growth patterns. We find a large and robust relationship between FDI – both inflows and outflows – and growth. The relationship between growth and equity flows is smaller and less stable. Finally, the relationship between growth and short-term debt is nil before the crisis, and negative during the crisis. ER - TY - JOUR AU - Corsetti,Giancarlo AU - Dedola,Luca AU - Viani,Francesca TI - Traded and Nontraded Goods Prices, and International Risk Sharing: an Empirical Investigation. JF - National Bureau of Economic Research Working Paper Series VL - No. 17501 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17501 L1 - http://www.nber.org/papers/w17501.pdf N1 - Author contact info: Giancarlo Corsetti Faculty of Economics Cambridge University Sidgwick Avenue CB3 9DD Cambridge, Cambs United Kingdom Tel: +44(0)1223335235 E-Mail: giancarlo.corsetti@gmail.com Luca Dedola Monetary Policy Research Div. European Central Bank Postfach 16 03 19 D- 60066 Frankfurt am Manin GERMANY E-Mail: luca.dedola@ecb.int Francesca Viani Bank of Spain C/ Alcalá, 48 Madrid SPAIN E-Mail: francesca.viani@bde.es M3 - presented at "ISOM", June 17-18, 2011 AB - Accounting for the pervasive evidence of limited international risk sharing is an important hurdle for open-economy models, especially when these are adopted in the analysis of policy trade-offs likely to be affected by imperfections in financial markets. Key to the literature is the evidence, at odds with efficiency, that consumption is relatively high in countries where its international relative price (the real exchange rate) is also high. We reconsider the relation between cross-country consumption differentials and real exchange rates, by decomposing it into two components, reflecting the prices of tradable and nontradable goods, respectively. We document that, as a common pattern among OECD countries, both components tend to contribute to the overall lack of risk sharing, with the tradable price component playing the dominant role in accounting for efficiency deviations. We relate these findings to two mechanisms proposed by the literature to reconcile open economy models with the data. One features strong Balassa-Samuelson effects on nontradable prices due to productivity gains in the tradable sector, with a muted offsetting response of tradable prices. The other, endogenous income effects causing nontradable but especially tradable prices to appreciate with a rise in domestic consumption demand. ER - TY - JOUR AU - Li,Yiting AU - Rocheteau,Guillaume AU - Weill,Pierre-Olivier TI - Liquidity and the Threat of Fraudulent Assets JF - National Bureau of Economic Research Working Paper Series VL - No. 17500 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17500 L1 - http://www.nber.org/papers/w17500.pdf N1 - Author contact info: Yiting Li Department of Economics National Taiwan University 21 Hsu-Chow Rd. 100 Taipei, Taiwan E-Mail: yitingli@ntu.edu.tw Guillaume Rocheteau Department of Economics University of California at Irvine 3151 Social Science Plaza Irvine, California 9269 E-Mail: grochete@uci.edu Pierre-Olivier Weill Department of Economics University of California, Los Angeles Bunche Hall 8283 Los Angeles, CA 90095 Tel: 310/794-6495 Fax: 310/825-9528 E-Mail: poweill@econ.ucla.edu AB - We study an over-the-counter (OTC) market with bilateral meetings and bargaining where the usefulness of assets, as means of payment or collateral, is limited by the threat of fraudulent practices. We assume that agents can produce fraudulent assets at a positive cost, which generates endogenous upper bounds on the quantity of each asset that can be sold, or posted as collateral in the OTC market. Each endogenous, asset-specific, resalability constraint depends on the vulnerability of the asset to fraud, on the frequency of trade, and on the current and future prices of the asset. In equilibrium, the set of assets can be partitioned into three liquidity tiers, which differ in their resalability, their prices, their sensitivity to shocks, and their responses to policy interventions. The dependence of an asset's resalability on its price creates a pecuniary externality, which leads to the result that some policies commonly thought to improve liquidity can be welfare reducing. ER - TY - JOUR AU - Fullerton,Don AU - Wolfram,Catherine TI - The Design and Implementation of U.S. Climate Policy: An Introduction JF - National Bureau of Economic Research Working Paper Series VL - No. 17499 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17499 L1 - http://www.nber.org/papers/w17499.pdf N1 - Author contact info: Don Fullerton Department of Finance University of Illinois BIF Box#30 (MC520) 515 East Gregory Drive Champaign, IL 61820 Tel: 217/244-3621 Fax: 217/244-3102 E-Mail: dfullert@illinois.edu Catherine Wolfram Haas School of Business University of California, Berkeley Berkeley, CA 94720-1900 Tel: 510/642-2588 Fax: 510/643-1420 E-Mail: wolfram@haas.berkeley.edu M3 - presented at "The Design & Implementation of US Climate Policy", May 13-14, 2010 AB - While economic models have already proven useful to analyze big picture questions about climate policy such as the choice between a carbon tax or cap-and-trade permit system, the 19 chapters in this book show how economic models also are useful to address the many remaining smaller questions that arise as policy is implemented. For example, chapters consider: the tradeoffs policymakers confront in deciding whether to implement the policy upstream on energy producers or downstream on energy users; how to monitor and enforce climate policy; how Federal actions might interact with climate policies at other levels of government or with other non-climate policies; the distributional effects of different policy variations; policies that might impact particular sectors, including residential energy use, agriculture and transportation; and specific questions regarding offsets, trade, innovation, and adaptation. ER - TY - JOUR AU - Whalley,John TI - What Role for Trade in a Post 2012 Global Climate Policy Regime JF - National Bureau of Economic Research Working Paper Series VL - No. 17498 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17498 L1 - http://www.nber.org/papers/w17498.pdf N1 - Author contact info: John Whalley Department of Economics Social Science Centre University of Western Ontario London, ON N6A 5C2 CANADA Tel: 519/661-3509 Fax: 519/661-3666 E-Mail: jwhalley@uwo.ca AB - This paper discusses the role that trade can potentially play in both negotiating and operating a post Kyoto/post 2012 global climate policy regime. As an addition to the bargaining set for a global climate negotiation, trade in principle widens the range of jointly beneficial potential outcomes and can in this sense be a potential facilitator of an agreed global climate regime. The reverse is also true, that in a linked climate-trade-finance global policy coordination structure that goes well beyond what was envisioned at Bretton Woods, climate now added to the global policy bargaining set also offers the prospect of potentially stronger trade disciplines (and even beyond WTO disciplines being negotiated). Trade policy can as well be an instrument for the implementation of a global climate regime, since trade provides a mechanism for achieving an internalization outcome for the global externality that climate change represents, and that provides a potentially more efficient outcome and also helps meet distributional objectives. In short, trade added to the emerging post 2012 climate regime can both expand the bargaining set for both (effectively linked) negotiations, and additionally provide an instrument for the implementation of an agreed outcome. ER - TY - JOUR AU - Prasad,Eswar S. TI - Role Reversal in Global Finance JF - National Bureau of Economic Research Working Paper Series VL - No. 17497 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17497 L1 - http://www.nber.org/papers/w17497.pdf N1 - Author contact info: Eswar S. Prasad Dyson School of Applied Economics and Management Cornell University 440 Warren Hall Ithaca, NY 14853 Tel: 607/255-5687 Fax: 607/255-9984 E-Mail: eswar.prasad@cornell.edu AB - I document that emerging markets have cast off their “original sin”--their external liabilities are no longer dominated by foreign-currency debt and have instead shifted sharply towards direct investment and portfolio equity. Their external assets are increasingly concentrated in foreign exchange reserves held in advanced economy government bonds. Given the enormous and rising public debt burdens of reserve currency economies, this means that the long-term risk on emerging markets’ external balance sheets is shifting to the asset side. However, emerging markets continue to look for more insurance against balance of payments crises, even as self-insurance through reserve accumulation itself becomes riskier. I discuss a possible mechanism for global liquidity insurance that would meet emerging markets’ demand for insurance with fewer domestic policy distortions while facilitating a quicker adjustment of global imbalances. I also argue that emerging markets have become less dependent on foreign finance and more resilient to capital flow volatility. The main risk that increasing financial openness poses for these economies is that capital flows exacerbate vulnerabilities arising from weak domestic policies and institutions. ER - TY - JOUR AU - Hummels,David AU - Jørgensen,Rasmus AU - Munch,Jakob R. AU - Xiang,Chong TI - The Wage Effects of Offshoring: Evidence from Danish Matched Worker-Firm Data JF - National Bureau of Economic Research Working Paper Series VL - No. 17496 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17496 L1 - http://www.nber.org/papers/w17496.pdf N1 - Author contact info: David Hummels Krannert School of Management 403 West State Street Purdue University West Lafayette, IN 47907-1310 Tel: 765/494-4495 Fax: 765/494-9658 E-Mail: hummelsd@purdue.edu Rasmus Jorgensen Department of Economics University of Copenhagen Øster Farimagsgade 5 Building 26 DK-1353 Copenhagen K E-Mail: rasmus.jorgensen@econ.ku.dk Jakob Munch Department of Economics University of Copenhagen Øster Farimagsgade 5 Building 26 DK-1353 Copenhagen K E-Mail: Jakob.Roland.Munch@econ.ku.dk Chong Xiang Department of Economics Purdue University 403 West State Street West Lafayette, IN 47907-2506 Tel: 765/494-4499 Fax: 765/496-1778 E-Mail: cxiang@purdue.edu AB - We estimate how offshoring and exporting affect wages by skill type. Our data match the population of Danish workers to the universe of private-sector Danish firms, whose trade flows are broken down by product and origin and destination countries. Our data reveal new stylized facts about offshoring activities at the firm level, and allow us to both condition our identification on within-job-spell changes and construct instruments for offshoring and exporting that are time varying and uncorrelated with the wage setting of the firm. We find that within job spells, (1) offshoring tends to increase the high-skilled wage and decrease the low-skilled wage; (2) exporting tends to increase the wages of all skill types; (3) the net wage effect of trade varies substantially across workers of the same skill type; and (4) conditional on skill, the wage effect of offshoring exhibits additional variation depending on task characteristics. We then track the outcomes for workers after a job spell and find that those displaced from offshoring firms suffer greater earnings losses than other displaced workers, and that low-skilled workers suffer greater and more persistent earnings losses than high-skilled workers. ER - TY - JOUR AU - Lucas,Robert E., Jr. AU - Moll,Benjamin TI - Knowledge Growth and the Allocation of Time JF - National Bureau of Economic Research Working Paper Series VL - No. 17495 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17495 L1 - http://www.nber.org/papers/w17495.pdf N1 - Author contact info: Robert E. Lucas, Jr. Department of Economics The University of Chicago 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-8179 Fax: 773/702-8490 E-Mail: relucas@midway.uchicago.edu Benjamin Moll 106 Fisher Hall Department of Economics Princeton University Princeton, NJ 08544 E-Mail: moll@princeton.edu AB - We analyze a model economy with many agents, each with a different productivity level. Agents divide their time between two activities: producing goods with the production-related knowledge they already have, and interacting with others in search of new, productivity-increasing ideas. These choices jointly determine the economy’s current production level and its rate of learning and real growth. Individuals’ time allocation decisions depend on the knowledge distribution because the productivity levels of others determine their own chances of improving their productivities through search. The time allocations of everyone in the economy in turn determine the evolution of its knowledge distribution. We construct the balanced growth path for this economy, thereby obtaining a theory of endogenous growth that captures in a tractable way the social nature of knowledge creation. We also study the allocation chosen by an idealized planner who takes into account and internalizes the external benefits of search, and tax structures that implement an optimal solution. Finally, we provide two examples of alternative learning technologies, as concrete illustrations of other directions that might be pursued. ER - TY - JOUR AU - Fryer,Roland G., Jr TI - Injecting Successful Charter School Strategies into Traditional Public Schools: Early Results from an Experiment in Houston JF - National Bureau of Economic Research Working Paper Series VL - No. 17494 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17494 L1 - http://www.nber.org/papers/w17494.pdf N1 - Author contact info: Roland G. Fryer, Jr Department of Economics Harvard University Littauer Center 208 Cambridge, MA 02138 Tel: 617/495-9592 Fax: 617/495-8570 E-Mail: rfryer@fas.harvard.edu AB - In the 2010-2011 school year, we implemented five strategies gleaned from practices in successful charter schools – increased instructional time, a more rigorous approach to building human capital, high-dosage tutoring, frequent use of data to inform instruction, and a culture of high expectations – in nine of the lowest performing schools in Houston, Texas. We show that the average impact of these changes on student achievement is 0.277 standard deviations in math and 0.062 standard deviations in reading, which is strikingly similar to reported impacts of attending the Harlem Children’s Zone and Knowledge is Power Program schools – two widely lauded charter organizations. ER - TY - JOUR AU - Atkeson,Andrew AU - Burstein,Ariel T. TI - Aggregate Implications of Innovation Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 17493 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17493 L1 - http://www.nber.org/papers/w17493.pdf N1 - Author contact info: Andrew Atkeson Bunche Hall 9381 Department of Economics UCLA Box 951477 Los Angeles, CA 90095-1477 Tel: 866/312-9770 Fax: 310/825-9528 E-Mail: andy@atkeson.net Ariel Burstein Department of Economics Bunche Hall 8365 Box 951477 UCLA Los Angeles, CA 90095-1477 Tel: 310/206-6732 Fax: 310/825-9528 E-Mail: arielb@econ.ucla.edu AB - We present a tractable model of innovating firms and the aggregate economy that we use to assess the link between the responses of firms to changes in innovation policy and the impact of those policy changes on aggregate output and welfare. We argue that the key theoretical determinant of the relative long-run aggregate impact of alternative policies is their impact on the expected profitability of entering firms. We show that, to a first-order approximation, a wide range of policy changes have a long-run aggregate impact in direct proportion to the fiscal expenditures on those policies, and that to evaluate the aggregate impact of such policy changes, there is no need to calculate changes in firms' decisions in response to these policy changes. We use these results to compare the relative magnitudes of the impact on aggregates in the long run of three innovation policies in the United States: the Research and Experimentation Tax Credit, federal expenditure on R&D, and the corporate profits tax. We argue that the corporate profits tax is a relatively important policy through its negative effects on innovation and physical capital accumulation that may well undo the benefits of federal support for R&D. We also use a calibrated version of our model to examine the absolute magnitude of the impact of these policies on aggregates. We show that, depending on the magnitude of spillovers, it is possible for changes in innovation policies to have a very large impact on aggregates in the long run. However, over a 15-year horizon, the impact of changes in innovation policies on aggregate output is not very sensitive to the magnitude of spillovers. On the basis of these results we conclude that, while it is possible to make comparisons about the relative importance of different policies and sharp predictions about their aggregate impact in the medium term, it is very difficult to shed much light on the implications of innovation policies for long-run aggregate outcomes and welfare without accurate estimates as to the magnitude of innovation spillovers. ER - TY - JOUR AU - Bordo,Michael D. AU - James,Harold TI - Reserves and Baskets JF - National Bureau of Economic Research Working Paper Series VL - No. 17492 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17492 L1 - http://www.nber.org/papers/w17492.pdf N1 - Author contact info: Michael D. Bordo Department of Economics Rutgers University New Jersey Hall 75 Hamilton Street New Brunswick, NJ 08901 Tel: 732/822-7152 Fax: 732/932-7416 E-Mail: bordo@econ.rutgers.edu Harold James History Department and Woodrow Wilson School Princeton University Princeton NJ 08544 E-Mail: hjames@princeton.edu AB - We discuss three well known plans that were offered in the twentieth century to provide an artificial replacement for gold and key currencies as international reserves: Keynes’ Bancor, the SDR and the Ecu( predecessor to the euro).The latter two of these reserve substitutes were institutionalized but neither replaced the dollar as the principal medium of international reserve. ER - TY - JOUR AU - Guercio,Diane Del AU - Reuter,Jonathan TI - Mutual Fund Performance and the Incentive to Invest in Active Management JF - National Bureau of Economic Research Working Paper Series VL - No. 17491 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17491 L1 - http://www.nber.org/papers/w17491.pdf N1 - Author contact info: Diane Del Guercio Lundquist College of Business 1208 University of Oregon Eugene, OR 97403-1208 E-Mail: dianedg@lcbmail.uoregon.edu Jonathan Reuter Carroll School of Management Boston College 224B Fulton Hall 140 Commonwealth Avenue Chestnut Hill, MA 02467 Tel: 617/552-2863 Fax: 617/552-0431 E-Mail: reuterj@bc.edu AB - It is well known that within U.S. domestic equity mutual funds, actively managed funds significantly underperform index funds. However, this comparison ignores the fact that mutual funds targeted at different types of investors charge different fees, and use these fees to provide different bundles of services. To control for these differences, we compare the performance of actively managed funds and index funds within each of three broad market segments: retail funds sold directly to investors, retail funds sold through brokers, and institutional funds. We find that underperformance is strongest in the broker-sold segment and weakest in the direct-sold segment. In fact, we find that within the direct-sold segment, the risk-adjusted, after-fee returns of actively managed funds are statistically indistinguishable from those of index funds, consistent with the equilibrium condition in Grossman and Stiglitz (1980). To rationalize differences in performance, we test for differences in the flow-performance relation across the three segments. We find that fund flows respond most strongly to risk-adjusted returns in the direct-sold segment. We find a wide variety of evidence that direct-sold funds respond to investor preferences for risk-adjusted performance by investing more in active management. Our findings suggest that the underperformance of the average actively managed fund reflects its weaker incentives to generate alpha rather than an inability to generate alpha. We argue that our findings also help to explain the continued demand for actively managed funds. ER - TY - JOUR AU - Diebold,Francis X. AU - Yilmaz,Kamil TI - On the Network Topology of Variance Decompositions: Measuring the Connectedness of Financial Firms JF - National Bureau of Economic Research Working Paper Series VL - No. 17490 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17490 L1 - http://www.nber.org/papers/w17490.pdf N1 - Author contact info: Francis X. Diebold Department of Economics University of Pennsylvania 3718 Locust Walk Philadelphia, PA 19104-6297 Tel: 215/898-1507 Fax: 212/573-4217 E-Mail: fdiebold@sas.upenn.edu Kamil Yilmaz Koc University Rumelifeneri Yolu, Sariyer Istanbul 34450 TURKEY Tel: 90-212-338-1458 Fax: 90-212-338-1653 E-Mail: kyilmaz@ku.edu.tr AB - We propose several connectedness measures built from pieces of variance decompositions, and we argue that they provide natural and insightful measures of connectedness among financial asset returns and volatilities. We also show that variance decompositions define weighted, directed networks, so that our connectedness measures are intimately-related to key measures of connectedness used in the network literature. Building on these insights, we track both average and daily time-varying connectedness of major U.S. financial institutions' stock return volatilities in recent years, including during the financial crisis of 2007-2008. ER - TY - JOUR AU - Bilbiie,Florin O. AU - Fujiwara,Ippei AU - Ghironi,Fabio TI - Optimal Monetary Policy with Endogenous Entry and Product Variety JF - National Bureau of Economic Research Working Paper Series VL - No. 17489 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17489 L1 - http://www.nber.org/papers/w17489.pdf N1 - Author contact info: Florin O. Bilbiie Université Paris 1 Panthéon-Sorbonne Centre d’Economie de la Sorbonne 106/112 Boulevard de l'Hôpital 75647 Paris Cedex 13 France E-Mail: florin.bilbiie@univ-paris1.fr Ippei Fujiwara Australian National University Crawford School of Economics and Government Lennox Crossing, Building #132 Canberra ACT 0200, Australia Tel: +61 2 6125 4705 Fax: +61 2 6125 5448 E-Mail: ippei.fujiwara@anu.edu.au Fabio Ghironi Boston College Department of Economics 140 Commonwealth Avenue Chestnut Hill, MA 02467-3859 Tel: 617/552-3686 Fax: 617/552-2308 E-Mail: fabio.ghironi@bc.edu AB - We show that deviations from long-run stability of product prices are optimal in the presence of endogenous producer entry and product variety in a sticky-price model with monopolistic competition in which price stability would be optimal in the absence of entry. Specifically, a long-run positive (negative) rate of inflation is optimal when the benefit of variety to consumers falls short of (exceeds) the market incentives for creating that variety under flexible prices, governed by the desired markup. Plausible preference specifications and parameter values justify a long-run inflation rate of two percent or higher. Price indexation implies even larger deviations from long-run price stability. However, price stability (around this non-zero trend) is close to optimal in the short run, even in the presence of time-varying flexible-price markups that distort the allocation of resources across time and states. The central bank uses its leverage over real activity in the long run, but not in the short run. Our results point to the need for continued empirical research on the determinants of markups and investigation of the benefit of product variety to consumers. ER - TY - JOUR AU - Aldy,Joseph E. AU - Stavins,Robert N. TI - Using the Market to Address Climate Change: Insights from Theory and Experience JF - National Bureau of Economic Research Working Paper Series VL - No. 17488 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17488 L1 - http://www.nber.org/papers/w17488.pdf N1 - Author contact info: Joseph E. Aldy Harvard Kennedy School Taubman 382, Mailbox 58 79 JFK Street Cambridge, MA 02138 Tel: 617/496-7213 E-Mail: joseph_aldy@hks.harvard.edu Robert Stavins JFK School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/495-1820 Fax: 617/496-3783 E-Mail: robert_stavins@harvard.edu AB - Emissions of greenhouse gases linked with global climate change are affected by diverse aspects of economic activity, including individual consumption, business investment, and government spending. An effective climate policy will have to modify the decision calculus for these activities in the direction of more efficient generation and use of energy, lower carbon intensity of energy, and – more broadly – a more carbon-lean economy. The only approach to doing this on a meaningful scale that would be technically feasible and cost-effective is carbon pricing, that is, market-based climate policies that place a shadow-price on carbon dioxide emissions. We examine alternative designs of three such instruments – carbon taxes, cap-and-trade, and clean energy standards. We note that the U.S. political response to possible market-based approaches to climate policy has been and will continue to be largely a function of issues and structural factors that transcend the scope of environmental and climate policy. ER - TY - JOUR AU - Jones,Benjamin F. TI - The Human Capital Stock: A Generalized Approach JF - National Bureau of Economic Research Working Paper Series VL - No. 17487 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17487 L1 - http://www.nber.org/papers/w17487.pdf N1 - Author contact info: Benjamin Jones Northwestern University Kellogg School of Management Department of Management and Strategy 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-3177 Fax: 847/467-1777 E-Mail: bjones@kellogg.northwestern.edu AB - This paper presents a new framework for human capital measurement. The generalized framework can (i) substantially amplify the role of human capital in accounting for cross-country income differences and (ii) reconcile the existing conflict between regression and accounting evidence in assessing the wealth and poverty of nations. One natural interpretation emphasizes differences across economies in the acquisition of advanced knowledge by skilled workers. ER - TY - JOUR AU - Tyler,John H. TI - If You Build It Will They Come? Teacher Use of Student Performance Data on a Web-Based Tool JF - National Bureau of Economic Research Working Paper Series VL - No. 17486 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17486 L1 - http://www.nber.org/papers/w17486.pdf N1 - Author contact info: John H. Tyler Box 1938 340 Brook Street Brown University Providence, RI 02912 Tel: 401/863-1036 Fax: 401/863-1276 E-Mail: john_tyler@brown.edu AB - The past decade has seen increased testing of students and the concomitant proliferation of computer-based systems to store, manage, analyze, and report the data that comes from these tests. The research to date on teacher use of these data has mostly been qualitative and has mostly focused on the conditions that are necessary (but not necessarily sufficient) for effective use of data by teachers. Absent from the research base in this area is objective information on how much and in what ways teachers actually use student test data, even when supposed precursors of teacher data use are in place. This paper addresses this knowledge gap by analyzing usage data generated when teachers in one mid-size urban district log onto the web-based, district-provided data deliver and analytic tool. Based on information contained in the universe of web logs from the 2008-2009 and 2009-2010 school years, I find relatively low levels of teacher interaction with pages on the web tool that contain student test information that could potentially inform practice. I also find no evidence that teacher usage of web-based student data is related student achievement, but there is reason to believe these estimates are downwardly biased. ER - TY - JOUR AU - Dettling,Lisa J. AU - Kearney,Melissa Schettini TI - House Prices and Birth Rates: The Impact of the Real Estate Market on the Decision to Have a Baby JF - National Bureau of Economic Research Working Paper Series VL - No. 17485 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17485 L1 - http://www.nber.org/papers/w17485.pdf N1 - Author contact info: Lisa J. Dettling Department of Economics University of Maryland 3105 Tydings Hall College Park, MD 20742 E-Mail: dettling@econ.umd.edu Melissa Schettini Kearney Department of Economics University of Maryland 3105 Tydings Hall College Park, MD 20742 Tel: 301/405-6202 E-Mail: kearney@econ.umd.edu AB - This project investigates how changes in Metropolitan Statistical Area (MSA)- level housing prices affect household fertility decisions. Recognizing that housing is a major cost associated with child rearing, and assuming that children are normal goods, we hypothesize that an increase in real estate prices will have a negative price effect on current period fertility. This applies to both potential first-time homeowners and current homeowners who might upgrade to a bigger house with the addition of a child. On the other hand, for current homeowners, an increase in MSA-level house prices will increase home equity, leading to a positive effect on birth rates. Controlling for MSA fixed effects, trends, and time-varying conditions, our analysis finds that indeed, short-term increases in house prices lead to a decline in births among non-owners and a net increase among owners. Our estimates suggest that a $10,000 increase in house prices leads to a 2.1 percent increase in births among home owners, and a 0.4 percent decrease among non-owners. At the mean U.S. home ownership rate, our estimates imply that the net effect of a $10,000 increase in house prices is a 0.8 percent increase in births. Given underlying differences in home ownership rates, the predicted net effect of house price changes varies across demographic groups. Our paper provides evidence that homeowners use some of their increased housing wealth, coming from increases in local area house prices, to fund their childbearing goals. In addition, we find that changes in house prices exert a larger effect on current period birth rates than do changes in unemployment rates. ER - TY - JOUR AU - Jagannathan,Ravi AU - Marakani,Srikant TI - Long Run Risks & Price/Dividend Ratio Factors JF - National Bureau of Economic Research Working Paper Series VL - No. 17484 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17484 L1 - http://www.nber.org/papers/w17484.pdf N1 - Author contact info: Ravi Jagannathan Kellogg Graduate School of Management Northwestern University 2001 Sheridan Road Leverone/Anderson Complex Evanston, IL 60208-2001 Tel: 847/491-8338 Fax: 847/491-5719 E-Mail: rjaganna@northwestern.edu Srikant Marakani Department of Economics and Finance, College of Bu City University of Hong Kong, P7422, Academic 1 Tat Chee Avenue, Kowloon, Hong Kong E-Mail: smarakan@cityu.edu.hk AB - We show that long run consumption risk models imply that the covariance matrix of the logarithm of price to dividend (P/D) ratios of stocks has a strict factor structure. Factor analysis of the P/D ratios of 25 portfolios formed by sorting stocks based on their size and book to market ratio during the 1943 to 2008 reveals two significant factors. Consistent with theory, these factors predict growth in US aggregate consumption & dividends and consumption growth volatility, and explain the cross section of average excess returns on portfolios based on size, book/market, long term reversal, short term reversal, and earnings to price ratios. ER - TY - JOUR AU - Courtemanche,Charles J. AU - Heutel,Garth AU - McAlvanah,Patrick TI - Impatience, Incentives, and Obesity JF - National Bureau of Economic Research Working Paper Series VL - No. 17483 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17483 L1 - http://www.nber.org/papers/w17483.pdf N1 - Author contact info: Charles J. Courtemanche University of Louisville College of Business Department of Economics Louisville, KY 40292 Tel: 502-852-4854 Fax: 502-852-7672 E-Mail: cjcour02@louisville.edu Garth Heutel Bryan 466, Department of Economics University of North Carolina at Greensboro P. O. Box 26170 Greensboro, NC 27402 Tel: 336/334-4872 Fax: 336/334-5580 E-Mail: gaheutel@uncg.edu Patrick McAlvanah Federal Trade Commission 600 Pennsylvania Avenue NW Mail Drop NJ 4136 Washington, DC 20580 E-Mail: pmcalvanah@ftc.gov AB - This paper explores the relationship between time preferences, economic incentives, and body mass index (BMI). Using data from the 2006 National Longitudinal Survey of Youth, we first show that greater impatience increases BMI and the likelihood of obesity even after controlling for demographic, human capital, occupational, and financial characteristics as well as risk preference. Next, we provide evidence of an interaction effect between time preference and food prices, with cheaper food leading to the largest weight gains among those exhibiting the most impatience. The interaction of changing economic incentives with heterogeneous discounting may help explain why increases in BMI have been concentrated amongst the right tail of the distribution, where the health consequences are especially severe. Lastly, we model time-inconsistent preferences by computing individuals' quasi-hyperbolic discounting parameters (beta and delta). Both long-run patience (delta) and present-bias (beta) predict BMI, suggesting obesity is partly attributable to rational intertemporal tradeoffs but also partly to time inconsistency. ER - TY - JOUR AU - Bridges,John AU - Buttorff,Christine AU - Groothuis-Oudshoorn,Karin TI - Estimating Patients' Preferences for Medical Devices: Does the Number of Profile in Choice Experiments Matter? JF - National Bureau of Economic Research Working Paper Series VL - No. 17482 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17482 L1 - http://www.nber.org/papers/w17482.pdf N1 - Author contact info: John F. P. Bridges Department of Health Policy & Management Johns Hopkins Bloomberg School of Public Health 624 N. Broadway, Rm 689 Baltimore, MD 21205 Tel: 410/614-9851 Fax: 410/614-9152 E-Mail: jbridges@jhsph.edu Christine Buttorff Johns Hopkins Bloomberg School of Public Health 624 N. Broadway Rm. 691 Baltimore, MD 21205 E-Mail: cbuttorf@jhsph.edu Karin Groothuis-Oudshoorn Department of Health Technology and Services Resea University of Twente 7500 AE Enschede, Netherlands E-Mail: c.g.m.oudshoorn@utwente.nl AB - Background: Most applications of choice-based conjoint analysis in health use choice tasks with only two profiles, while those in marketing routinely use three or more. This study reports on a randomized trial comparing paired with triplet profile choice formats focused on measuring patient preference for hearing aids. Methods: Respondents with hearing loss were drawn from a nationally representative cohort, completed identical surveys incorporating a conjoint analysis, but were randomized to choice tasks with two or three profiles. Baseline differences between the two groups were explored using ANOVA and chi-square tests. The primary outcomes of differences in estimated preferences were explored using t-tests, likelihood ratio tests, and analysis of individual-level models estimated with ordinary least squares. Results: 500 respondents were recruited. 127 had no hearing loss, 28 had profound loss and 22 declined to participate and were not analyzed. Of the remaining 323 participants, 146 individuals were randomized to the pairs and 177 to triplets. The only significant difference between the groups was time to complete the survey (11.5 and 21 minutes respectively). Pairs and triplets produced identical rankings of attribute importance but homogeneity was rejected (P<0.0001). Pairs led to more variation, and were systematically biased toward the null because a third (32.2%) of respondents focused on only one attribute. This is in contrast to respondents in the triplet design who traded across all attributes. Discussion: The number of profiles in choice tasks affects the results of conjoint analysis studies. Here triplets are preferred to pairs as they avoid non-trading and allow for more accurate estimation of preferences models. ER - TY - JOUR AU - Becker,Bo AU - Jacob,Marcus AU - Jacob,Martin TI - Payout Taxes and the Allocation of Investment JF - National Bureau of Economic Research Working Paper Series VL - No. 17481 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17481 L1 - http://www.nber.org/papers/w17481.pdf N1 - Author contact info: Bo Becker Harvard Business School Baker Library 349 Soldiers Field Boston, MA 02163 Tel: 617/496-5335 Fax: 617/495-7659 E-Mail: bbecker@hbs.edu Marcus Jacob EBS European Business School Oestrich-Winkel Germany E-Mail: marcus.jacob@ebs.edu Martin Jacob WHU - Otto Beisheim School of Management Burgplatz 2 56179 Vallendar Germany E-Mail: martin.jacob@whu.edu AB - When corporate payout is taxed, internal equity (retained earnings) is cheaper than external equity (share issues). High taxes will favor firms who can finance internally. If there are no perfect substitutes for equity finance, payout taxes may thus change the investment behavior of firms. Using an international panel with many changes in payout taxes, we show that this prediction holds well. Payout taxes have a large impact on the dynamics of corporate investment and growth. Investment is “locked in” in profitable firms when payout is heavily taxed. Thus, apart from any aggregate effects, payout taxes change the allocation of capital. ER - TY - JOUR AU - Blonigen,Bruce A. AU - Oldenski,Lindsay AU - Sly,Nicholas TI - Separating the Opposing Effects of Bilateral Tax Treaties JF - National Bureau of Economic Research Working Paper Series VL - No. 17480 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17480 L1 - http://www.nber.org/papers/w17480.pdf N1 - Author contact info: Bruce Blonigen Department of Economics 1285 University of Oregon Eugene, OR 97403-1285 Tel: 541/346-4680 Fax: 541/346-1243 E-Mail: bruceb@uoregon.edu Lindsay Oldenski Georgetown University 37th and O Streets, NW Washington DC, 20057 E-Mail: lo36@georgetown.edu Nicholas Sly Department of Economics 1285 University of Oregon Eugene, OR 97403-1285 E-Mail: sly@uoregon.edu AB - Bilateral tax treaties (BTT) are intended to promote foreign direct investment and foreign affiliate activity through double taxation relief. However, BTTs also typically contain provisions that facilitate sharing of tax information between countries intended to curtail tax avoidance by multinational firms. These provisions should disproportionately affect firms that intensively use inputs for which an arms-length price is easily observed, since strategic transfer practices that manipulate tax liabilities are no longer effective with information sharing between countries. Using BEA firm-level data we are able to separately estimate the impacts of double-taxation relief and sharing of tax information on investment behavior of US multinational firms. We find a significant positive effect of new tax treaties on foreign affiliate activity between member nations that is offset (and even reversed) the more a firm relies on inputs traded on an organized exchange (i.e., inputs for which the arms-length price is easily observed). We find these opposing BTT effects for both the intensive margin (sales of existing affiliates) and the extensive margin (entry of new affiliates). ER - TY - JOUR AU - Farmer,Roger E.A. TI - The Stock Market Crash of 2008 Caused the Great Recession: Theory and Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 17479 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17479 L1 - http://www.nber.org/papers/w17479.pdf N1 - Author contact info: Roger Farmer UCLA Department of Economics Box 951477 Los Angeles, CA 90095-1477 Tel: 310/825-6547 Fax: 310/825-9528 E-Mail: rfarmer@econ.ucla.edu AB - This paper argues that the stock market crash of 2008, triggered by a collapse in house prices, caused the Great Recession. The paper has three parts. First, it provides evidence of a high correlation between the value of the stock market and the unemployment rate in U.S. data since 1929. Second, it compares a new model of the economy developed in recent papers and books by Farmer, with a classical model and with a textbook Keynesian approach. Third, it provides evidence that fiscal stimulus will not permanently restore full employment. In Farmer’s model, as in the Keynesian model, employment is demand determined. But aggregate demand depends on wealth, not on income. ER - TY - JOUR AU - Cuffe,Harold E. AU - Harbaugh,William T. AU - Lindo,Jason M. AU - Musto,Giancarlo AU - Waddell,Glen R. TI - Evidence on the Efficacy of School-Based Incentives for Healthy Living JF - National Bureau of Economic Research Working Paper Series VL - No. 17478 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17478 L1 - http://www.nber.org/papers/w17478.pdf N1 - Author contact info: Harold E. Cuffe Department of Economics University of Oregon Eugene, OR 97403-1285 E-Mail: cuffe@uoregon.edu William T. Harbaugh Department of Economics University of Oregon Eugene, OR 97403-1285 Tel: 541/346-1244 Fax: 541/346-1243 E-Mail: harbaugh@uoregon.edu Jason M. Lindo Department of Economics University of Oregon Eugene, OR 97403-1285 Tel: 541/346-4664 E-Mail: jlindo@uoregon.edu Giancarlo Musto Université de Lyon 93 Chemin des mouilles 69130 Ecully E-Mail: musto@gate.cnrs.fr Glen Waddell Department of Economics University of Oregon Eugene, OR 97403-1285 Tel: 541 346 1259 E-Mail: waddell@uoregon.edu AB - We analyze the effects of a school-based incentive program on children's exercise habits. The program offers children an opportunity to win prizes if they walk or bike to school during prize periods. We use daily child-level data and individual fixed effects models to measure the impact of the prizes by comparing behavior during prize periods with behavior during non-prize periods. Variation in the timing of prize periods across different schools allows us to estimate models with calendar-date fixed effects to control for day-specific attributes, such as weather and proximity to holidays. On average, we find that being in a prize period increases riding behavior by sixteen percent, a large impact given that the prize value is just six cents per participating student. We also find that winning a prize lottery has a positive impact on ridership over subsequent weeks; consider heterogeneity across prize type, gender, age, and calendar month; and explore differential effects on the intensive versus extensive margins. ER - TY - JOUR AU - Lefgren,Lars AU - Platt,Brennan AU - Price,Joseph TI - Sticking with What (Barely) Worked JF - National Bureau of Economic Research Working Paper Series VL - No. 17477 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17477 L1 - http://www.nber.org/papers/w17477.pdf N1 - Author contact info: Lars Lefgren Department of Economics Brigham Young University 130 Faculty Office Bulding Provo, UT 84602-2363 Tel: (801) 422-5169 E-Mail: l-lefgren@byu.edu Brennan Platt Department of Economics Brigham Young University 130 Faculty Office Building Provo, UT 84602-2363 E-Mail: brennan_platt@byu.edu Joseph Price Department of Economics Brigham Young University 162 FOB Provo, UT 84602 Tel: 801/422-5296 Fax: 801/422-0194 E-Mail: joseph_price@byu.edu AB - Outcome bias occurs when an evaluator considers ex-post outcomes when judging whether a choice was correct, ex-ante. We formalize this cognitive bias in a simple model of distorted Bayesian updating. We then examine strategy changes made by professional football coaches. We find they are more likely to revise their strategy after a loss than a win — even for narrow losses, which are uninformative about future success. This increased revision following a loss occurs even when a loss was expected, and the offensive strategy is revised even when failure is attributable to the defense. These results are consistent with our model’s predictions. ER - TY - JOUR AU - Ashenfelter,Orley C. AU - Hosken,Daniel S. AU - Weinberg,Matthew C. TI - The Price Effects of a Large Merger of Manufacturers: A Case Study of Maytag-Whirlpool JF - National Bureau of Economic Research Working Paper Series VL - No. 17476 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17476 L1 - http://www.nber.org/papers/w17476.pdf N1 - Author contact info: Orley C. Ashenfelter Industrial Relations Section Firestone Library Princeton University Princeton, NJ 08544 Tel: 609/258-4040 Fax: 609/258-2907 E-Mail: c6789@princeton.edu Daniel Hosken Federal Trade Commission 600 Pennsylvania Avenue, NW Washington, DC 20580 E-Mail: dhosken@ftc.gov Matthew C. Weinberg Dalton Hall Bryn Mawr College Bryn Mawr, PA 19010 L ADDRESS HERE E-Mail: mweinberg@brynmawr.edu AB - Many experts speculate that U.S. antitrust policy towards horizontal mergers has been too lenient. We estimate the price effects of Whirlpool’s acquisition of Maytag to provide new evidence on this debate. We compare price changes in appliance markets most affected by the merger to markets where concentration changed much less or not at all. We estimate price increases for dishwashers and relatively large price increases for clothes dryers, but no price effects for refrigerators or clothes washers. The combined firm’s market share fell across all four affected categories and the number of distinct appliance products fell. ER - TY - JOUR AU - Karlan,Dean AU - Zinman,Jonathan TI - List Randomization for Sensitive Behavior: An Application for Measuring Use of Loan Proceeds JF - National Bureau of Economic Research Working Paper Series VL - No. 17475 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17475 L1 - http://www.nber.org/papers/w17475.pdf N1 - Author contact info: Dean Karlan Department of Economics Yale University P.O. Box 208269 New Haven, CT 06520-8629 Tel: 203/432-4479 Fax: 203/432-5591 E-Mail: dean.karlan@yale.edu Jonathan Zinman Department of Economics Dartmouth College 314 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-0075 Fax: 603/646-2122 E-Mail: jzinman@dartmouth.edu AB - Policymakers and microfinance institutions (MFIs) often claim to target poor entrepreneurs who then invest loan proceeds in their businesses. Typically in nonresearch settings these claims are assessed using readily available but unverified self-reports from client loan applications. Alternatively, independent surveyors could directly elicit how borrowers spent their loan proceeds. That too, however, could suffer from deliberate misreporting. We use data from the Peru and the Philippines in which independent surveyors elicited loan use both directly (i.e., by asking how individuals spent their loan proceeds) and indirectly (i.e., through a list-randomization technique that allows individuals to hide their answer from the surveyor). We find that direct elicitation under-reports the non-enterprise uses of loan proceeds. ER - TY - JOUR AU - Adrian,Tobias AU - Brunnermeier,Markus K. TI - CoVaR JF - National Bureau of Economic Research Working Paper Series VL - No. 17454 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17454 L1 - http://www.nber.org/papers/w17454.pdf N1 - Author contact info: Tobias Adrian Federal Reserve Bank of New York Capital Market Research 33 Liberty Street New York, NY 10045 Tel: 212-720-1717 Fax: 212-720-1582 E-Mail: tobias.adrian@ny.frb.org Markus K. Brunnermeier Princeton University Department of Economics Bendheim Center for Finance Princeton, NJ 08540 Tel: 609/258-4050 Fax: 609/258-0771 E-Mail: markus@princeton.edu AB - We propose a measure for systemic risk: CoVaR, the value at risk (VaR) of the financial system conditional on institutions being under distress. We define an institution's contribution to systemic risk as the difference between CoVaR conditional on the institution being under distress and the CoVaR in the median state of the institution. From our estimates of CoVaR for the universe of publicly traded financial institutions, we quantify the extent to which characteristics such as leverage, size, and maturity mismatch predict systemic risk contribution. We also provide out of sample forecasts of a countercyclical, forward looking measure of systemic risk and show that the 2006Q4 value of this measure would have predicted more than half of realized covariances during the financial crisis. ER - TY - JOUR AU - Eichengreen,Barry AU - Razo-Garcia,Raul TI - How Reliable are De Facto Exchange Rate Regime Classifications? JF - National Bureau of Economic Research Working Paper Series VL - No. 17318 PY - 2011 Y2 - October 2011 UR - http://www.nber.org/papers/w17318 L1 - http://www.nber.org/papers/w17318.pdf N1 - Author contact info: Barry Eichengreen Department of Economics University of California, Berkeley 549 Evans Hall 3880 Berkeley, CA 94720-3880 Tel: 510/642-2772 Fax: 510/643-0926 E-Mail: eichengr@econ.Berkeley.edu Raul Razo-Garcia Department of Economics Carleton University Ottawa K1S 5B6 Canada E-Mail: rrazogar@connect.carleton.ca AB - We analyze disagreements over de facto exchange-rate-regime classifications using three popular de facto regime data series. While there is a moderate degree of concurrence across classifications, disagreements are not uncommon, and they are not random. They are most prevalent in middle-income countries (emerging markets) and low-income (developing) countries as opposed to advanced economies. They are most prevalent for countries with well-developed financial markets, low reserves and open capital accounts. This suggests caution when attempting to relate the exchange rate regime to financial development, the openness of the financial account, and reserve management and accumulation decisions. ER - TY - JOUR AU - Bartel,Ann P. AU - Phibbs,Ciaran S. AU - Beaulieu,Nancy AU - Stone,Patricia TI - Human Capital and Organizational Performance: Evidence from the Healthcare Sector JF - National Bureau of Economic Research Working Paper Series VL - No. 17474 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17474 L1 - http://www.nber.org/papers/w17474.pdf N1 - Author contact info: Ann P. Bartel Graduate School of Business Columbia University 3022 Broadway, 623 Uris Hall New York, NY 10027 Tel: 212/854-4419 Fax: (212) 316-9219 E-Mail: apb2@columbia.edu Ciaran Phibbs Health Economics Resource Center (152) VA Medical Center, 795 Willow Road Menlo Park, CA 94025 E-Mail: cphibbs@stanford.edu Nancy Beaulieu 22A Chandler Road Boxford, MA 01921 Tel: 978-352-8048 E-Mail: nancydeanbeaulieu@yahoo.com Patricia Stone Columbia University School of Nursing E-Mail: ps2024@columbia.edu AB - This paper contributes to the literature on the relationship between human capital and organizational performance. We use detailed longitudinal monthly data on nursing units in the Veterans Administration hospital system to identify how the human capital (general, hospital-specific and unit or team-specific) of the nursing team on the unit affects patients' outcomes. Since we use monthly, not annual, data, we are able to avoid the omitted variable bias and endogeneity bias that could result when annual data are used. Nurse staffing levels, general human capital, and unit-specific human capital have positive and significant effects on patient outcomes while the use of contract nurses, who have less specific capital than regular staff nurses, negatively impacts patient outcomes. Policies that would increase the specific human capital of the nursing staff are found to be cost-effective. ER - TY - JOUR AU - Landry,Craig E. AU - Lange,Andreas AU - List,John A. AU - Price,Michael K. AU - Rupp,Nicholas G. TI - The Hidden Benefits of Control: Evidence from a Natural Field Experiment JF - National Bureau of Economic Research Working Paper Series VL - No. 17473 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17473 L1 - http://www.nber.org/papers/w17473.pdf N1 - Author contact info: Craig Landry East Carolina University E-Mail: landryc@ecu.edu Andreas Lange University of Hamburg Department of Economics Von Melle Park 5 20146 Hamburg Germany Tel: +49-40-42838-4035 Fax: +49-40-42838-3243 E-Mail: andreas.lange@wiso.uni-hamburg.de John List Department of Economics University of Chicago 1126 East 59th Chicago, IL 60637 Tel: 301/405-1288 Fax: 301/314-9091 E-Mail: jlist@uchicago.edu Michael Price Department of Economics University of Tennessee 515 Stokely Management Center Knoxville, TN 27996 Tel: 865/974-5672 Fax: 865/974-4601 E-Mail: mprice21@utk.edu Nicholas G. Rupp East Carolina University E-Mail: ruppn@ecu.edu AB - An important dialogue between theorists and experimentalists over the past few decades has raised the study of the interaction of psychological and economic incentives from academic curiosity to a bona fide academic field. One recent area of study within this genre that has sparked interest and debate revolves around the “hidden costs” of conditional incentives. This study overlays randomization on a naturally-occurring environment in a series of temporally-linked field experiments to advance our understanding of the economics of charity and test if such “costs” exist in the field. This approach permits us to examine why people initially give to charities, and what factors keep them committed to the cause. Several key findings emerge. First, there are hidden benefits of conditional incentives that would have gone undetected had we maintained a static theory and an experimental design that focused on short run substitution effects rather than dynamic interactions. Second, we can reject the pure altruism model of giving. Third, we find that public good provision is maximized in both the short and long run by using conditional, rather than unconditional, incentives. ER - TY - JOUR AU - Landry,Craig E. AU - Lange,Andreas AU - List,John A. AU - Price,Michael K. AU - Rupp,Nicholas G. TI - Is There a 'Hidden Cost of Control' in Naturally-Occurring Markets? Evidence from a Natural Field Experiment JF - National Bureau of Economic Research Working Paper Series VL - No. 17472 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17472 L1 - http://www.nber.org/papers/w17472.pdf N1 - Author contact info: Craig Landry East Carolina University E-Mail: landryc@ecu.edu Andreas Lange University of Hamburg Department of Economics Von Melle Park 5 20146 Hamburg Germany Tel: +49-40-42838-4035 Fax: +49-40-42838-3243 E-Mail: andreas.lange@wiso.uni-hamburg.de John List Department of Economics University of Chicago 1126 East 59th Chicago, IL 60637 Tel: 301/405-1288 Fax: 301/314-9091 E-Mail: jlist@uchicago.edu Michael Price Department of Economics University of Tennessee 515 Stokely Management Center Knoxville, TN 27996 Tel: 865/974-5672 Fax: 865/974-4601 E-Mail: mprice21@utk.edu Nicholas G. Rupp East Carolina University E-Mail: ruppn@ecu.edu AB - Several recent laboratory experiments have shown that the use of explicit incentives—such as conditional rewards and punishment—entail considerable “hidden” costs. The costs are hidden in the sense that they escape our attention if our reasoning is based on the assumption that people are exclusively self-interested. This study represents a first attempt to explore whether, and to what extent, such considerations affect equilibrium outcomes in the field. Using data gathered from nearly 3000 households, we find little support for the negative consequences of control in naturally-occurring labor markets. In fact, even though we find evidence that workers are reciprocal, we find that worker effort is maximized when we use conditional—not unconditional—rewards to incent workers. ER - TY - JOUR AU - Herbst,Chris M. AU - Tekin,Erdal TI - The Geographic Accessibility of Child Care Subsidies and Evidence on the Impact of Subsidy Receipt on Childhood Obesity JF - National Bureau of Economic Research Working Paper Series VL - No. 17471 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17471 L1 - http://www.nber.org/papers/w17471.pdf N1 - Author contact info: Chris M. Herbst School of Public Affairs, ASU, Mail Code 3720 411 N. Central Ave., Ste. 450 Phoenix, AZ 85004-0687 E-Mail: chris.herbst@asu.edu Erdal Tekin Department of Economics Andrew Young School of Policy Studies Georgia State University P.O. Box 3992 Atlanta, GA 30302-3992 Tel: 404/413-0163 Fax: 404/413-0145 E-Mail: tekin@gsu.edu AB - This paper examines the impact of the spatial accessibility of public human services agencies on the likelihood of receiving a child care subsidy among disadvantaged mothers with young children. In particular, we collect data on the location of virtually every human services agency in the U.S. and use this information to calculate the approximate distance that families must travel from home in order to reach the nearest office that administers the subsidy application process. Using data from the Kindergarten cohort of the Early Childhood Longitudinal Study (ECLS-K), our results indicate that an increase in the distance to a public human services agency reduces the likelihood that a family receives a child care subsidy. Specifically, we estimate an elasticity of subsidy receipt with respect to distance of -0.13. The final section of the paper provides an empirical application in which we use variation in families’ travel distance to identify the causal effect of child care subsidies on children’s weight outcomes. Our instrumental variables estimates suggest that subsidized child care leads to sizeable increases in the prevalence of overweight and obesity among low-income children. ER - TY - JOUR AU - Antràs,Pol TI - Grossman-Hart (1986) Goes Global: Incomplete Contracts, Property Rights, and the International Organization of Production JF - National Bureau of Economic Research Working Paper Series VL - No. 17470 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17470 L1 - http://www.nber.org/papers/w17470.pdf N1 - Author contact info: Pol Antràs Department of Economics Harvard University 1805 Cambridge Street Littauer Center 207 Cambridge, MA 02138 Tel: 617/495-1236 Fax: 617/495-8570 E-Mail: pantras@fas.harvard.edu AB - I survey the influence of Grossman and Hart's (1986) seminal paper in the field of International Trade. I discuss the implementation of the theory in open-economy environments and its implications for the international organization of production and the structure of international trade flows. I also review empirical work suggestive of the empirical relevance of the property-rights theory. Along the way, I develop novel theoretical results and also outline some of the key limitations of existing contributions. ER - TY - JOUR AU - Knight,Brian G. TI - State Gun Policy and Cross-State Externalities: Evidence from Crime Gun Tracing JF - National Bureau of Economic Research Working Paper Series VL - No. 17469 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17469 L1 - http://www.nber.org/papers/w17469.pdf N1 - Author contact info: Brian G. Knight Brown University Department of Economics, Box B 64 Waterman Street Providence, RI 02912 Tel: 401/863-1584 Fax: 401/863-1970 E-Mail: Brian_Knight@brown.edu AB - This paper provides a theoretical and empirical analysis of cross-state externalities associated with gun regulations in the context of the gun trafficking market. Using gun tracing data, which identify the source state for crime guns recovered in destination states, we find that firearms in this market tend to flow from states with weak gun laws to states with strict gun laws, satisfying a necessary condition for the existence of cross-state externalities in the theoretical model. We also find an important role for transportation costs in this market, with gun flows more significant between nearby states; this finding suggests that externalities are spatial in nature. Finally, we present evidence that criminal possession of guns is higher in states exposed to weak gun laws in nearby states. ER - TY - JOUR AU - Benmelech,Efraim AU - Dvir,Eyal TI - Does Short-Term Debt Increase Vulnerability to Crisis? Evidence from the East Asian Financial Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 17468 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17468 L1 - http://www.nber.org/papers/w17468.pdf N1 - Author contact info: Efraim Benmelech Harvard University Department of Economics Littauer 233 Cambridge, MA 02138 Tel: 617/496-4787 Fax: 617/495-8570 E-Mail: effi_benmelech@harvard.edu Eyal Dvir Department of Economics Boston College 140 Commonwealth Ave Chestnut Hill, MA 02467 E-Mail: dvire@bc.edu AB - Does short-term debt increase vulnerability to financial crisis, or does short-term debt reflect -- rather than cause -- the incipient crisis? We study the role that short-term debt played in the collapse of the East Asian financial sector in 1997-1998. We alleviate concerns about the endogeneity of short-term debt by using long-term debt obligations that matured during the crisis. We find that debt obligations issued at least three years before the crisis had a negative, albeit sometimes insignificant, effect on the probability of failure. Our results are consistent with the view that short-term debt reflects, rather than causes, distress in financial institutions. ER - TY - JOUR AU - Neumark,David AU - Song,Joanne TI - Do Stronger Age Discrimination Laws Make Social Security Reforms More Effective? JF - National Bureau of Economic Research Working Paper Series VL - No. 17467 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17467 L1 - http://www.nber.org/papers/w17467.pdf N1 - Author contact info: David Neumark Department of Economics University of California at Irvine 3151 Social Science Plaza Irvine, CA 92697 Tel: 949-824-8496 Fax: 949/824-2182 E-Mail: dneumark@uci.edu Joanne Song Department of Economics University of California at Irvine 3151 Social Science Plaza Irvine, CA 92697 E-Mail: jihs@uci.edu AB - Supply-side Social Security reforms to increase employment and delay benefit claiming among older individuals may be frustrated by age discrimination. We test for policy complementarities between supply-side Social Security reforms and demand-side efforts to deter age discrimination, specifically studying whether stronger state-level age discrimination protections enhanced the impact of the increases in the Social Security Full Retirement Age (FRA) that occurred in the past decade. The evidence indicates that, for older individuals who were “caught” by the increase in the FRA, benefit claiming reductions and employment increases were sharper in states with stronger age discrimination protections. ER - TY - JOUR AU - Felix,R. Alison AU - Hines,James R., Jr. TI - Who Offers Tax-Based Business Development Incentives? JF - National Bureau of Economic Research Working Paper Series VL - No. 17466 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17466 L1 - http://www.nber.org/papers/w17466.pdf N1 - Author contact info: R. Alison Felix Federal Reserve Bank of Kansas City 1 Memorial Drive Kansas City, MO 64198-0001 E-Mail: alison.felix@kc.frb.org James R. Hines Department of Economics University of Michigan 343 Lorch Hall 611 Tappan Street Ann Arbor, MI 48109-1220 Tel: 734/764-2320 Fax: 734/764-2769 E-Mail: jrhines@umich.edu AB - Many American communities seek to attract or retain businesses with tax abatements, tax credits, or tax increment financing of infrastructure projects (TIFs). The evidence for 1999 indicates that communities are most likely to offer one or more of these business development incentives if their residents have low incomes, if they are located close to state borders, and if their states have troubled political cultures. Ten percent greater median household income is associated with a 3.2 percent lower probability of offering incentives; ten percent greater distance from a state border is associated with a 1.0 percent lower probability of offering incentives; and a 10 percent higher rate at which government officials are convicted of federal corruption crimes is associated with a 1.2 percent greater probability of offering business incentives. TIFs are the preferred incentive of communities whose residents have household incomes between $25,000 and $75,000; whereas TIFs are much less commonly offered by communities whose residents have household incomes below $25,000. The need to finance TIFs out of incremental tax revenues may make it infeasible for many of the poorest of communities to use TIFs for local business development. ER - TY - JOUR AU - Gottlieb,Daniel AU - Smetters,Kent TI - Grade Non-Disclosure JF - National Bureau of Economic Research Working Paper Series VL - No. 17465 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17465 L1 - http://www.nber.org/papers/w17465.pdf N1 - Author contact info: Daniel Gottlieb University of Pennsylvania SH-DH 3303 3620 Locust Walk Philadelphia, PA 19104 E-Mail: dgott@wharton.upenn.edu Kent Smetters University of Pennsylvania SH-DH 3303 3620 Locust Walk Philadelphia, PA 19104 Tel: 215/898-9811 Fax: 215/898-0310 E-Mail: smetters@wharton.upenn.edu AB - This paper documents and explains the existence of grade non-disclosure policies in Masters in Business Administration programs, why these policies are concentrated in highly-ranked programs, and why these policies are not prevalent in most other professional degree programs. Related policies, including honors and minimum grade requirements, are also consistent with our model. ER - TY - JOUR AU - Pastor,Lubos AU - Veronesi,Pietro TI - Political Uncertainty and Risk Premia JF - National Bureau of Economic Research Working Paper Series VL - No. 17464 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17464 L1 - http://www.nber.org/papers/w17464.pdf N1 - Author contact info: Lubos Pastor University of Chicago Booth School of Business 5807 South Woodlawn Ave Chicago, IL 60637 Tel: 773/834-4080 Fax: NA E-Mail: lubos.pastor@chicagobooth.edu Pietro Veronesi University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-6348 Fax: 773/702-0458 E-Mail: pietro.veronesi@chicagobooth.edu AB - We study the pricing of political uncertainty in a general equilibrium model of government policy choice. The model implies that political uncertainty commands a risk premium whose magnitude is larger in weaker economic conditions. Political uncertainty reduces the value of the implicit put protection that the government provides to the market. It also makes stocks more volatile and more correlated, especially when the economy is weak. We find empirical evidence consistent with these predictions. We also show that government policies cannot be judged by the stock market response to their announcement. ER - TY - JOUR AU - Arikan,Asli M. AU - Stulz,René M. TI - Corporate Acquisitions, Diversification, and the Firm’s Lifecycle JF - National Bureau of Economic Research Working Paper Series VL - No. 17463 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17463 L1 - http://www.nber.org/papers/w17463.pdf N1 - Author contact info: Asli Arikan The Ohio State University Fisher College of Business 307 Fisher Hall 2100 Neil Avenue Columbus, Ohio 43210-1144 E-Mail: arikan_1@fisher.osu.edu Rene M. Stulz The Ohio State University Fisher College of Business 806A Fisher Hall Columbus, OH 43210-1144 Tel: 614/292-1970 Fax: 614/292-2359 E-Mail: stulz_1@cob.osu.edu AB - Lifecycle theories of mergers and diversification predict that firms make acquisitions and diversify when their internal growth opportunities become exhausted. Free cash flow theories make similar predictions. In contrast to these theories, we find that the acquisition rate of firms (defined as the number of acquisitions in an IPO cohort-year divided by the number of firms in that cohort-year) follows a u-shape through their lifecycle as public firms, with young and mature firms being equally acquisitive but more so than middle-aged firms. Firms that go public during the merger/IPO wave of the 1990s are significantly more acquisitive early in their public life than firms that go public at other times. Young public firms have a lower acquisition rate of public firms than mature firms, but the opposite is true for acquisitions of private firms and subsidiaries. Strikingly, firms diversify early in their life and there is a 41% chance that a firm’s first acquisition is a diversifying acquisition. The stock market reacts more favorably to acquisitions by young firms than to acquisitions by mature firms except for acquisitions of public firms paid for with stock. There is no evidence that the market reacts more adversely to diversifying acquisitions by young firms than to other acquisitions. ER - TY - JOUR AU - Fryer,Roland G., Jr AU - Pager,Devah AU - Spenkuch,Jörg L. TI - Racial Disparities in Job Finding and Offered Wages JF - National Bureau of Economic Research Working Paper Series VL - No. 17462 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17462 L1 - http://www.nber.org/papers/w17462.pdf N1 - Author contact info: Roland G. Fryer, Jr Department of Economics Harvard University Littauer Center 208 Cambridge, MA 02138 Tel: 617/495-9592 Fax: 617/495-8570 E-Mail: rfryer@fas.harvard.edu Devah Pager Department of Sociology Princeton University 157 Wallace Hall Princeton, NJ 08544 E-Mail: pager@princeton.edu Jorg L. Spenkuch Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 E-Mail: jspenkuch@uchicago.edu AB - The extent to which discrimination can explain racial wage gaps is one of the most divisive subjects in the social sciences. Using a newly available dataset, this paper develops a simple empirical test which, under plausible conditions, provides a lower bound on the extent of discrimination in the labor market. Taken at face value, our estimates imply that differential treatment accounts for at least one third of the black-white wage gap. We argue that the patterns in our data are consistent with a search-matching model in which employers statistically discriminate on the basis of race when hiring unemployed workers, but learn about their marginal product over time. However, we cannot rule out other forms of discrimination. ER - TY - JOUR AU - Borjas,George J. AU - Grogger,Jeffrey AU - Hanson,Gordon H. TI - Substitution Between Immigrants, Natives, and Skill Groups JF - National Bureau of Economic Research Working Paper Series VL - No. 17461 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17461 L1 - http://www.nber.org/papers/w17461.pdf N1 - Author contact info: George J. Borjas Harvard Kennedy School 79 JFK Street Cambridge, MA 02138 Tel: 617/495-1393 Fax: 617/495-9532 E-Mail: gborjas@harvard.edu Jeffrey Grogger Irving B. Harris Professor of Urban Policy Harris School of Public Policy University of Chicago 1155 E. 60th Street Chicago, IL 60637 Tel: 773/542-3533 Fax: 773/702-0926 E-Mail: jgrogger@uchicago.edu Gordon H. Hanson IR/PS 0519 University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0519 Tel: 858/822-5087 Fax: 858/534-3939 E-Mail: gohanson@ucsd.edu AB - The wage impact of immigration depends crucially on the elasticity of substitution between similarly skilled immigrants and natives and the elasticity of substitution between high school dropouts and graduates. This paper revisits the estimation of these elasticities. The U.S. data indicate that equally skilled immigrants and natives are perfect substitutes. The value of the second elasticity depends on how one controls for changes in demand that have differentially affected high school dropouts and graduates. The groups are imperfect substitutes under standard trend assumptions, but even slight deviations from these assumptions can lead to an outright rejection of the CES framework. ER - TY - JOUR AU - Burstein,Ariel AU - Cravino,Javier AU - Vogel,Jonathan TI - Importing Skill-Biased Technology JF - National Bureau of Economic Research Working Paper Series VL - No. 17460 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17460 L1 - http://www.nber.org/papers/w17460.pdf N1 - Author contact info: Ariel Burstein Department of Economics Bunche Hall 8365 Box 951477 UCLA Los Angeles, CA 90095-1477 Tel: 310/206-6732 Fax: 310/825-9528 E-Mail: arielb@econ.ucla.edu Javier Cravino Department of Economics UCLA Bunche Hall 8365 Los Angeles, CA 90095-1477 E-Mail: jcravino@ucla.edu Jonathan Vogel Department of Economics Columbia University 420 West 118th Street New York, NY 10027 Tel: 212/854-9925 Fax: 212/854-8059 E-Mail: jvogel@columbia.edu AB - Capital equipment – such as computers and industrial machinery – embodies skill-biased technology, in the sense that it is complementary to skilled labor. Most countries import a large share of their capital equipment, and by doing so import skill-biased technology. In this paper we develop a tractable quantitative model of international trade in capital goods to quantify the extent to which trade, through capital-skill complementarity, raises the relative demand for skill and hence increases the skill premium. In one counterfactual, we find that moving from the trade levels observed in the year 2000 to autarky would decrease the skill premium by 16% in the median country in our sample, by 5% in the US, and by a much larger magnitude in countries that heavily rely on imported capital equipment. ER - TY - JOUR AU - Handel,Benjamin R. TI - Adverse Selection and Switching Costs in Health Insurance Markets: When Nudging Hurts JF - National Bureau of Economic Research Working Paper Series VL - No. 17459 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17459 L1 - http://www.nber.org/papers/w17459.pdf N1 - Author contact info: Benjamin R. Handel Department of Economics University of California, Berkeley 508-1 Evans Hall #3880 Berkeley, CA 94720 Tel: 609/240-5199 Fax: 510/642-6615 E-Mail: handel@berkeley.edu AB - This paper investigates consumer switching costs in the context of health insurance markets, where adverse selection is a potential concern. Though previous work has studied these phenomena in isolation, they interact in a way that directly impacts market outcomes and consumer welfare. Our identification strategy leverages a unique natural experiment that occurred at a large firm where we also observe individual-level panel data on health insurance choices and medical claims. We present descriptive results to show that (i) switching costs are large and (ii) adverse selection is present. To formalize this analysis we develop and estimate a choice model that jointly quantifies switching costs, risk preferences, and ex ante health risk. We use these estimates to study the welfare impact of an information provision policy that nudges consumers toward better decisions by reducing switching costs. This policy increases welfare in a naive setting where insurance plan prices are held fixed. However, when insurance prices change endogenously to reflect updated enrollee risk pools, the same policy substantially exacerbates adverse selection and reduces consumer welfare, doubling the existing welfare loss from adverse selection. ER - TY - JOUR AU - Collins,William J. AU - Shester,Katharine L. TI - Slum Clearance and Urban Renewal in the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 17458 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17458 L1 - http://www.nber.org/papers/w17458.pdf N1 - Author contact info: William J. Collins Department of Economics Vanderbilt University VU Station B #351819 2301 Vanderbilt Place Nashville, TN 37235-1819 Tel: 615/322-3428 Fax: NA E-Mail: william.collins@vanderbilt.edu Katharine Shester Washington and Lee University Holekamp Hall Lexington, Virginia 24450 E-Mail: shesterk@wlu.edu AB - We study the local effects of the Housing Act of 1949, which established a federally subsidized program that helped cities clear areas for redevelopment, rehabilitate deteriorating structures, complete comprehensive city plans, and enforce building codes. We use an instrumental variable strategy to estimate the program’s effects on city-level measures of median income, property values, employment and poverty rates, and population. The estimates are generally positive and economically significant, and they are not driven by differential changes in cities’ demographic composition. The results are consistent with a model of spatial equilibrium in which local productivity is enhanced. ER - TY - JOUR AU - Aguiar,Mark A. AU - Amador,Manuel TI - Fiscal Policy in Debt Constrained Economies JF - National Bureau of Economic Research Working Paper Series VL - No. 17457 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17457 L1 - http://www.nber.org/papers/w17457.pdf N1 - Author contact info: Mark A. Aguiar Department of Economics Princeton University Fisher Hall Princeton, NJ 08544-1021 E-Mail: mark@markaguiar.com Manuel Amador Stanford University Department of Economics Landau Economics Building 579 Serra Mall, Room 330 Stanford , CA 94305-6072 Tel: 650/725-5257 E-Mail: amador@stanford.edu AB - We study optimal fiscal policy in a small open economy (SOE) with sovereign and private default risk. The SOE's government uses linear taxation to fund exogenous expenditures and uses public debt to inter-temporally allocate tax distortions. We characterize a class of environments in which the tax on labor goes to zero in the long run, while the tax on capital income may be non-zero, reversing the standard prediction of the Ramsey tax literature. The zero labor tax is an optimal long run outcome if the private agents are impatient relative to the international interest rate and the economy is subject to sovereign debt constraints. The front loading of labor taxes allows the economy to build a large (aggregate) debt position in the presence of limited commitment. We show that a similar result holds in a closed economy with imperfect inter-generational altruism. ER - TY - JOUR AU - Cunha,Jesse M. AU - Giorgi,Giacomo De AU - Jayachandran,Seema TI - The Price Effects of Cash Versus In-Kind Transfers JF - National Bureau of Economic Research Working Paper Series VL - No. 17456 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17456 L1 - http://www.nber.org/papers/w17456.pdf N1 - Author contact info: Jesse Cunha Naval Postgraduate School Graduate School of Business and Public Policy 555 Dyer Rd Monterey, CA 93943 Tel: 650.492.0381 E-Mail: jcunha@nps.edu Giacomo De Giorgi Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305 Tel: 650/723-3982 E-Mail: degiorgi@stanford.edu Seema Jayachandran Department of Economics Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: (847) 491-4757 Fax: (847) 491-7001 E-Mail: seema@northwestern.edu AB - This paper compares how cash and in-kind transfers affect local prices. Both types of transfers increase the demand for normal goods, but only in-kind transfers also increase supply. Hence, in-kind transfers should lead to lower prices than cash transfers, which helps consumers at the expense of local producers. We test and confirm this prediction using a program in Mexico that randomly assigned villages to receive boxes of food (trucked into the village), equivalently-valued cash transfers, or no transfers. The pecuniary benefit to consumers of in-kind transfers, relative to cash transfers, equals 11% of the direct transfer. ER - TY - JOUR AU - Manski,Charles F. AU - Pepper,John V. TI - Deterrence and the Death Penalty: Partial Identification Analysis Using Repeated Cross Sections JF - National Bureau of Economic Research Working Paper Series VL - No. 17455 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17455 L1 - http://www.nber.org/papers/w17455.pdf N1 - Author contact info: Charles F. Manski Department of Economics Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-8223 Fax: 847/491-7001 E-Mail: cfmanski@northwestern.edu John Pepper Department of Economics University of Virginia P.O. Box 400182 Charlottesville, VA 22904-4182 E-Mail: jvp3m@virginia.edu AB - Researchers have long used repeated cross sectional observations of homicide rates and sanctions to examine the deterrent effect of the adoption and implementation of death penalty statutes. The empirical literature, however, has failed to achieve consensus. A fundamental problem is that the outcomes of counterfactual policies are not observable. Hence, the data alone cannot identify the deterrent effect of capital punishment. How then should research proceed? It is tempting to impose assumptions strong enough to yield a definitive finding, but strong assumptions may be inaccurate and yield flawed conclusions. Instead, we study the identifying power of relatively weak assumptions restricting variation in treatment response across places and time. The results are findings of partial identification that bound the deterrent effect of capital punishment. By successively adding stronger identifying assumptions, we seek to make transparent how assumptions shape inference. We perform empirical analysis using state-level data in the United States in 1975 and 1977. Under the weakest restrictions, there is substantial ambiguity: we cannot rule out the possibility that having a death penalty statute substantially increases or decreases homicide. This ambiguity is reduced when we impose stronger assumptions, but inferences are sensitive to the maintained restrictions. Combining the data with some assumptions implies that the death penalty increases homicide, but other assumptions imply that the death penalty deters it. ER - TY - JOUR AU - Kuhn,Peter J. AU - Shen,Kailing TI - Gender Discrimination in Job Ads: Theory and Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 17453 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17453 L1 - http://www.nber.org/papers/w17453.pdf N1 - Author contact info: Peter J. Kuhn Department of Economics University of California, Santa Barbara 2127 North Hall Santa Barbara, CA 93106 Tel: 805/893-3666 Fax: 805/893-8830 E-Mail: pjkuhn@econ.ucsb.edu Kailing Shen Wang Yanan Institute for Studies in Economics (WISE) Xiamen University China 361005 E-Mail: kailing.shen@gmail.com AB - We study firms' advertised gender preferences in a population of ads on a Chinese internet job board, and interpret these patterns using a simple employer search model. The model allows us to distinguish firms' underlying gender preferences from firms' propensities to restrict their search to their preferred gender. The model also predicts that higher job skill requirements should reduce the tendency to gender-target a job ad; this is strongly confirmed in our data, and suggests that rising skill demands may be a potent deterrent to explicit discrimination of the type we document here. We also find that firms' underlying gender preferences are highly job-specific, with many firms requesting men for some jobs and women for others, and with one third of the variation in gender preferences within firm*occupation cells. ER - TY - JOUR AU - Gibbs,Chloe AU - Ludwig,Jens AU - Miller,Douglas L. TI - Does Head Start Do Any Lasting Good? JF - National Bureau of Economic Research Working Paper Series VL - No. 17452 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17452 L1 - http://www.nber.org/papers/w17452.pdf N1 - Author contact info: Chloe Gibbs University of Chicago 1155 East 60th Street Chicago, IL60637 E-Mail: chloeh@uchicago.edu Jens Ludwig University of Chicago 1155 East 60th Street Chicago, IL 60637 Tel: 773/834-0811 Fax: 773/834-1582 E-Mail: jludwig@uchicago.edu Douglas L. Miller University of California, Davis Department of Economics One Shields Avenue Davis, CA 95616-8578 Tel: 530/752-8490 E-Mail: dlmiller@ucdavis.edu AB - Head Start is a federal early childhood intervention designed to reduce disparities in preschool outcomes. The first randomized experimental study of Head Start, the National Head Start Impact Study (NHSIS), found impacts on academic outcomes of .15 to .3 standard deviations measured at the end of the program year, although the estimated impacts were no longer significant when measured at the end of kindergarten or first grade. Assessments that Head Start is ineffective based on the NHSIS results are in our view premature, given our currently limited understanding of how and why early childhood education improves long-term life chances. Many of the specific changes to Head Start that have been proposed could potentially wind up doing more harm than good. ER - TY - JOUR AU - Brown,Jeffrey AU - Finkelstein,Amy TI - Insuring Long Term Care In the US JF - National Bureau of Economic Research Working Paper Series VL - No. 17451 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17451 L1 - http://www.nber.org/papers/w17451.pdf N1 - Author contact info: Jeffrey Brown Department of Finance University of Illinois at Urbana-Champaign 515 East Gregory Drive Champaign, IL 61820 Tel: 217/333-3322 E-Mail: brownjr@illinois.edu Amy Finkelstein Department of Economics MIT E52-274C 50 Memorial Drive Cambridge, MA 02142 Tel: 617/253-4149 Fax: 617/868-2742 E-Mail: afink@mit.edu AB - Long-term care expenditures constitute one of the largest uninsured financial risks facing the elderly in the United States. This paper provides an overview of the economic and policy issues surrounding insuring long-term care expenditure risk. Through this lens we also discuss the likely impact of recent long-term care public policy initiatives at both the state and federal level. ER - TY - JOUR AU - Lang,Kevin AU - Lehmann,Jee-Yeon K. TI - Racial Discrimination in the Labor Market: Theory and Empirics JF - National Bureau of Economic Research Working Paper Series VL - No. 17450 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17450 L1 - http://www.nber.org/papers/w17450.pdf N1 - Author contact info: Kevin Lang Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-5694 Fax: 617/353-4001 E-Mail: lang@bu.edu Jee-Yeon K. Lehmann Department of Economics University of Houston 211B McElhinney Hall Houston, TX 77204 Tel: 713-743-3378 Fax: 713-743-3798 E-Mail: jlehmann@uh.edu AB - We review theories of race discrimination in the labor market. Taste-based models can generate wage and unemployment duration differentials when combined with either random or directed search even when strong prejudice is not widespread, but no existing model explains the unemployment rate differential. Models of statistical discrimination based on differential observability of productivity across races can explain the pattern and magnitudes of wage differentials but do not address employment and unemployment. At their current state of development, models of statistical discrimination based on rational stereotypes have little empirical content. It is plausible that models combining elements of the search models with statistical discrimination could fit the data. We suggest possible avenues to be pursued and comment briefly on the implication of existing theory for public policy. ER - TY - JOUR AU - Giné,Xavier AU - Goldberg,Jessica AU - Yang,Dean TI - Credit Market Consequences of Improved Personal Identification: Field Experimental Evidence from Malawi JF - National Bureau of Economic Research Working Paper Series VL - No. 17449 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17449 L1 - http://www.nber.org/papers/w17449.pdf N1 - Author contact info: Xavier Gine The World Bank 1818 H Street N.W. Mail Stop MC 3-307 Washington, D.C. 20433 Tel: (202) 473-0451 Fax: (202) 522-1155 E-Mail: xgine@worldbank.org Jessica Goldberg University of Maryland Department of Economics 3115G Tydings Hall College Park, MD 20742 Tel: (301) 405-3559 E-Mail: goldberg@econ.umd.edu Dean Yang University of Michigan Gerald R. Ford School of Public Policy and Department of Economics 735 S. State Street, Room 3316 Ann Arbor, MI 48109 Tel: 734/764-6158 Fax: 734/763-9181 E-Mail: deanyang@umich.edu AB - We report the results of a randomized field experiment that examines the credit market impacts of improvements in a lender's ability to determine borrowers’ identities. Improved personal identification enhances the credibility of a lender’s dynamic repayment incentives by allowing it to withhold future loans from past defaulters and expand credit for good borrowers. The experimental context, rural Malawi, is characterized by an imperfect identification system. Consistent with a simple model of borrower heterogeneity and information asymmetries, fingerprinting led to substantially higher repayment rates for borrowers with the highest ex ante default risk, but had no effect for the rest of the borrowers. The change in repayment rates is driven by reductions in adverse selection (smaller loan sizes) and lower moral hazard (for example, less diversion of loan-financed fertilizer from its intended use on the cash crop). ER - TY - JOUR AU - Livshits,Igor AU - MacGee,James AU - Tertilt,Michèle TI - Costly Contracts and Consumer Credit JF - National Bureau of Economic Research Working Paper Series VL - No. 17448 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17448 L1 - http://www.nber.org/papers/w17448.pdf N1 - Author contact info: Igor Livshits Department of Economics University of Western Ontario Social Science Centre London, Ontario N6A5C2 Tel: 519/661-2111 X85539 Fax: 519/661-3666 E-Mail: livshits@uwo.ca James MacGee Department of Economics University of Western Ontario London, Ontario Canada NCA 5C2 Tel: 519/661-2111 Ext 85207 Fax: 519/661-3666 E-Mail: jmacgee@uwo.ca Michèle Tertilt Department of Economics University of Mannheim L7, 3-5 68131 Mannheim Germany Tel: +49-621-181-1902 E-Mail: tertilt@uni-mannheim.de AB - Financial innovations are a common explanation of the rise in consumer credit and bankruptcies. To evaluate this story, we develop a simple model that incorporates two key frictions: asymmetric information about borrowers’ risk of default and a fixed cost to create each contract offered by lenders. Innovations which reduce the fixed cost or ameliorate asymmetric information have large extensive margin effects via the entry of new lending contracts targeted at riskier borrowers. This results in more defaults and borrowing, as well as increased dispersion of interest rates. Using the Survey of Consumer Finance and interest rate data collected by the Board of Governors, we find evidence supporting these predictions, as the dispersion of credit card interest rates nearly tripled, and the share of credit card debt of lower income households nearly doubled. ER - TY - JOUR AU - Auerbach,Alan J. AU - Gorodnichenko,Yuriy TI - Fiscal Multipliers in Recession and Expansion JF - National Bureau of Economic Research Working Paper Series VL - No. 17447 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17447 L1 - http://www.nber.org/papers/w17447.pdf N1 - Author contact info: Alan J. Auerbach Department of Economics 530 Evans Hall, #3880 University of California, Berkeley Berkeley, CA 94720-3880 Tel: 510/643-0711 Fax: 510/643-0413 E-Mail: auerbach@econ.berkeley.edu Yuriy Gorodnichenko Department of Economics 508-1 Evans Hall #3880 University of California, Berkeley Berkeley, CA 94720-3880 Tel: 510/643-0720 Fax: 510/642-6615 E-Mail: ygorodni@econ.berkeley.edu M1 - published as Alan Auerbach, Yuriy Gorodnichenko. "Fiscal Multipliers in Recession and Expansion," in Alberto Alesina and Francesco Giavazzi, editors, "Fiscal Policy after the Financial Crisis" University of Chicago Press (2012) AB - In this paper, we estimate government purchase multipliers for a large number of OECD countries, allowing these multipliers to vary smoothly according to the state of the economy and using real-time forecast data to purge policy innovations of their predictable components. We adapt our previous methodology (Auerbach and Gorodnichenko, 2011) to use direct projections rather than the SVAR approach to estimate multipliers, to economize on degrees of freedom and to relax the assumptions on impulse response functions imposed by the SVAR method. Our findings confirm those of our earlier paper. In particular, GDP multipliers of government purchases are larger in recession, and controlling for real-time predictions of government purchases tends to increase the estimated multipliers of government purchases in recession. We also consider the responses of other key macroeconomic variables and find that these responses generally vary over the cycle as well, in a pattern consistent with the varying impact on GDP. ER - TY - JOUR AU - Martin,Ralf AU - Preux,Laure B. de AU - Wagner,Ulrich J. TI - The Impacts of the Climate Change Levy on Manufacturing: Evidence from Microdata JF - National Bureau of Economic Research Working Paper Series VL - No. 17446 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17446 L1 - http://www.nber.org/papers/w17446.pdf N1 - Author contact info: Ralf Martin Imperial College Business School London SW7 2AZ, UK E-Mail: R.Martin@lse.ac.uk Laure B. de Preux Centre for Health Economics University of York Heslington York YO10 5DD, UK E-Mail: L.B.dePreux@lse.ac.uk Ulrich Wagner Universidad Carlos III de Madrid Department of Economics Calle de Madrid, 126 28903 Getafe (Madrid) Spain Tel: +34916248488 Fax: +34916249329 E-Mail: uwagner@eco.uc3m.es M3 - presented at "SI 2010 Environmental and Energy Economics", July 29-30, 2010 AB - We estimate the impacts of the Climate Change Levy (CCL) on manufacturing plants using panel data from the UK production census. Our identification strategy builds on the comparison of outcomes between plants subject to the CCL and plants that were granted an 80% discount on the levy after joining a Climate Change Agreement (CCA). Exploiting exogenous variation in eligibility for CCA participation, we find that the CCL had a strong negative impact on energy intensity and electricity use. We cannot reject the hypothesis that the tax had no detrimental effects on economic performance and on plant exit. ER - TY - JOUR AU - Mulligan,Casey B. TI - Means-Tested Subsidies and Economic Performance Since 2007 JF - National Bureau of Economic Research Working Paper Series VL - No. 17445 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17445 L1 - http://www.nber.org/papers/w17445.pdf N1 - Author contact info: Casey B. Mulligan University of Chicago Department of Economics 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-9017 Fax: 773/702-8490 E-Mail: c-mulligan@uchicago.edu AB - The aggregate neoclassical growth model – with means-tested subsidies whose replacement rates began rising at the end of 2007 as its only impulse – produces time series for aggregate labor usage, consumption, investment, and real GDP that closely resemble actual U.S. time series. Despite having no explicit financial market, the model has investment fall steeply during the recession not because of any distortions with the supply of capital, but merely because labor is falling and labor is complementary with capital in the production function. Through the lens of the model, the fact that real consumption fell significantly below trend during 2008 suggests that labor usage per capita is expected to remain well below pre-recession levels for several years. ER - TY - JOUR AU - Leeper,Eric M. AU - Traum,Nora AU - Walker,Todd B. TI - Clearing Up the Fiscal Multiplier Morass JF - National Bureau of Economic Research Working Paper Series VL - No. 17444 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17444 L1 - http://www.nber.org/papers/w17444.pdf N1 - Author contact info: Eric M. Leeper Department of Economics 304 Wylie Hall Indiana University Bloomington, IN 47405 Tel: 812/855-9157 Fax: NA E-Mail: eleeper@indiana.edu Nora Traum Department of Economics Nelson Hall Campus Box 8110 North Carolina State University Raleigh, NC 27695 E-Mail: nora_traum@ncsu.edu Todd B. Walker Department of Economics 105 Wylie Hall Indiana University Bloomington, IN 47405 E-Mail: walkertb@indiana.edu AB - Bayesian prior predictive analysis of five nested DSGE models suggests that model specifications and prior distributions tightly circumscribe the range of possible government spending multipliers. Multipliers are decomposed into wealth and substitution effects, yielding uniform comparisons across models. By constraining the multiplier to tight ranges, model and prior selections bias results, revealing less about fiscal effects in data than about the lenses through which researchers choose to interpret data. When monetary policy actively targets inflation, output multipliers can exceed one, but investment multipliers are likely to be negative. Passive monetary policy produces consistently strong multipliers for output, consumption, and investment. ER - TY - JOUR AU - Komai,Alejandro AU - Richardson,Gary TI - A Brief History of Regulations Regarding Financial Markets in the United States: 1789 to 2009 JF - National Bureau of Economic Research Working Paper Series VL - No. 17443 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17443 L1 - http://www.nber.org/papers/w17443.pdf N1 - Author contact info: Alejandro Komai 8283 Bunche Hall Mail Stop 147703 Los Angeles, CA 90095 E-Mail: atkomai@ucla.edu Gary Richardson Department of Economics University of California, Irvine 3155 Social Sciences Plaza Irvine, CA 92697-5100 Tel: 949/824-3189 Fax: 949/824-2182 E-Mail: garyr@uci.edu AB - In the United States today, the system of financial regulation is complex and fragmented. Responsibility to regulate the financial services industry is split between about a dozen federal agencies, hundreds of state agencies, and numerous industry-sponsored self-governing associations. Regulatory jurisdictions often overlap, so that most financial firms report to multiple regulators; but gaps exist in the supervisory structure, so that some firms report to few, and at times, no regulator. The overlapping jumble of standards; laws; and federal, state, and private jurisdictions can confuse even the most sophisticated student of the system. This article explains how that confusion arose. The story begins with the Constitutional Convention and the foundation of our nation. Our founding fathers fragmented authority over financial markets between federal and state governments. That legacy survives today, complicating efforts to create a financial system that can function effectively during the twenty-first century. ER - TY - JOUR AU - Abadie,Alberto AU - Imbens,Guido W. AU - Zheng,Fanyin TI - Robust Inference for Misspecified Models Conditional on Covariates JF - National Bureau of Economic Research Working Paper Series VL - No. 17442 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17442 L1 - http://www.nber.org/papers/w17442.pdf N1 - Author contact info: Alberto Abadie John F. Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/496-4547 Fax: 617/496-5960 E-Mail: alberto_abadie@harvard.edu Guido Imbens Department of Economics Littauer Center Harvard University 1805 Cambridge Street Cambridge, MA 02138 Tel: 617/384-7485 Fax: 617/495-7730 E-Mail: imbens@fas.harvard.edu Fanyin Zheng Harvard University E-Mail: fzheng@fas.harvard.edu AB - Following the work by White (1980ab; 1982) it is common in empirical work in economics to report standard errors that are robust against general misspecification. In a regression setting these standard errors are valid for the parameter that in the population minimizes the squared difference between the conditional expectation and the linear approximation, averaged over the population distribution of the covariates. In nonlinear settings a similar interpretation applies. In this note we discuss an alternative parameter that corresponds to the approximation to the conditional expectation based on minimization of the squared difference averaged over the sample, rather than the population, distribution of a subset of the variables. We argue that in some cases this may be a more interesting parameter. We derive the asymptotic variance for this parameter, generally smaller than the White robust variance, and we propose a consistent estimator for the asymptotic variance. ER - TY - JOUR AU - Link,Albert N. AU - Ruhm,Christopher J. TI - Creativity and the Family Tree: Human Capital Endowments and the Propensity of Entrepreneurs to Patent JF - National Bureau of Economic Research Working Paper Series VL - No. 17441 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17441 L1 - http://www.nber.org/papers/w17441.pdf N1 - Author contact info: Albert Link Department of Economics Bryan School, UNCG P.O. Box 26165 Greensboro, NC 27402-6165 E-Mail: al_link@uncg.edu Christopher J. Ruhm Frank Batten School of Leadership and Public Policy University of Virginia 235 McCormick Rd. P.O. Box 400893 Charlottesville, VA 22904-40893 Tel: 434-243-3729 E-Mail: ruhm@virginia.edu AB - In this paper we show that the patenting behavior of creative entrepreneurs is correlated with the patenting behavior of their fathers, which we refer to as a source of the entrepreneurs’ human capital endowments. Our argument for this relationship follows from established theories of developmental creativity, and our empirical analysis is based on survey data collected from MIT’s Technology Review winners. ER - TY - JOUR AU - Goda,Gopi Shah AU - Shoven,John B. AU - Slavov,Sita Nataraj TI - Does Widowhood Explain Gender Differences in Out-of-Pocket Medical Spending Among the Elderly? JF - National Bureau of Economic Research Working Paper Series VL - No. 17440 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17440 L1 - http://www.nber.org/papers/w17440.pdf N1 - Author contact info: Gopi Shah Goda Stanford University SIEPR 366 Galvez St. Stanford, CA 94305 Tel: 650/736-0480 Fax: 650/723-8611 E-Mail: gopi@stanford.edu John B. Shoven Department of Economics 579 Serra Mall at Galvez Street Stanford, CA 94305-6015 Tel: 650/723-3273 Fax: 650/723-8611 E-Mail: shoven@stanford.edu Sita Slavov Department of Economics Occidental College 1600 Campus Road Los Angeles, CA 90041 Tel: 323/259-1461 E-Mail: sslavov@oxy.edu AB - Despite the presence of Medicare, out-of-pocket medical spending is a large expenditure risk facing the elderly. While women live longer than men, elderly women incur higher out-of-pocket medical spending than men at each age. In this paper, we examine whether differences in marital status and living arrangements can explain this difference. We find that out-of-pocket medical spending is approximately 29 percent higher when an individual becomes widowed, a large portion of which is spending on nursing homes. Our results suggest a substantial role of living arrangements in out-of-pocket medical spending; however, our estimates combined with differences in rates of widowhood across gender suggest that marital status can explain only one third of the gender difference in total out-of-pocket medical spending, leaving a large portion unexplained. On the other hand, gender differences in widowhood more than explain the observed gender difference in out-of-pocket spending on nursing homes. ER - TY - JOUR AU - Gustman,Alan L. AU - Steinmeier,Thomas L. AU - Tabatabai,Nahid TI - The Effects of Changes in Women's Labor Market Attachment on Redistribution Under the Social Security Benefit Formula JF - National Bureau of Economic Research Working Paper Series VL - No. 17439 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17439 L1 - http://www.nber.org/papers/w17439.pdf N1 - Author contact info: Alan L. Gustman Department of Economics Dartmouth College Hanover, NH 03755-3514 Tel: 603/646-2641 Fax: 603/646-2122 E-Mail: ALAN.L.GUSTMAN@DARTMOUTH.EDU Thomas Steinmeier Department of Economics Texas Tech University Lubbock, TX 79409 E-Mail: thomas.steinmeier@ttu.edu Nahid Tabatabai Department of Economics Dartmouth College Hanover, N.H. 03755 E-Mail: Nahid.Tabatabai@dartmouth.edu AB - Studies using data from the early 1990s suggested that while the progressive Social Security benefit formula succeeded in redistributing benefits from individuals with high earnings to individuals with low earnings, it was much less successful in redistributing benefits from households with high earnings to households with low earnings. Wives often earned much less than their husbands. As a result, much of the redistribution at the individual level was effectively from high earning husbands to their own lower earning wives. In addition, spouse and survivor benefits accrue disproportionately to women from high income households. Both factors mitigate redistribution at the household level. This paper compares outcomes for the earlier cohort with those of a cohort born twelve years later. The aim of the study is to see whether, after the recent growth in two earner households, and the growth in women's labor market activity and earnings, the Social Security system now fosters somewhat more redistribution from high to low earning households. The analysis is based on data from the Health and Retirement Study and includes members of households with at least one person age 51 to 56 in either 1992 or in 2004. As expected, women enjoyed a more rapid growth of labor force participation, hours of work and covered earnings than men. This increased the redistribution of Social Security benefits among households. Nevertheless, a considerable gap remains between the labor market activities and earnings of women versus men. As a result, the Social Security system remains much less successful in redistributing benefits from households with high covered earnings to those with lower covered earnings than in redistributing benefits from individuals with high covered earnings to those with lower covered earnings. ER - TY - JOUR AU - Deming,David J. AU - Hastings,Justine S. AU - Kane,Thomas J. AU - Staiger,Douglas O. TI - School Choice, School Quality and Postsecondary Attainment JF - National Bureau of Economic Research Working Paper Series VL - No. 17438 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17438 L1 - http://www.nber.org/papers/w17438.pdf N1 - Author contact info: David Deming Harvard Graduate School of Education Gutman 411 Appian Way Cambridge, MA 02139 Tel: 617/495-0583 E-Mail: david_deming@gse.harvard.edu Justine S. Hastings Brown University Department of Economics 64 Waterman Street Providence, RI 02912 Tel: 203/432-3714 Fax: 203/432-6323 E-Mail: justine_hastings@brown.edu Thomas J. Kane Harvard Graduate School of Education Center for Education Policy Research 50 Church St., 4th Floor Cambridge, MA 02138 Tel: 617/496-4359 E-Mail: kaneto@gse.harvard.edu Douglas O. Staiger Dartmouth College Department of Economics HB6106, 301 Rockefeller Hall Hanover, NH 03755-3514 Tel: 603/646-2979 Fax: 603/646-2122 E-Mail: douglas.staiger@dartmouth.edu AB - We study the impact of a public school choice lottery in Charlotte-Mecklenburg (CMS) on postsecondary attainment. We match CMS administrative records to the National Student Clearinghouse (NSC), a nationwide database of college enrollment. Among applicants with low-quality neighborhood schools, lottery winners are more likely than lottery losers to graduate from high school, attend a four-year college, and earn a bachelor’s degree. They are twice as likely to earn a degree from an elite university. The results suggest that school choice can improve students’ longer-term life chances when they gain access to schools that are better on observed dimensions of quality. ER - TY - JOUR AU - Richardson,Gary AU - Horn,Patrick Van TI - When the Music Stopped: Transatlantic Contagion During the Financial Crisis of 1931 JF - National Bureau of Economic Research Working Paper Series VL - No. 17437 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17437 L1 - http://www.nber.org/papers/w17437.pdf N1 - Author contact info: Gary Richardson Department of Economics University of California, Irvine 3155 Social Sciences Plaza Irvine, CA 92697-5100 Tel: 949/824-3189 Fax: 949/824-2182 E-Mail: garyr@uci.edu Patrick Van Horn New College of Florida Division of Social Sciences 5800 Bay Shore Road Sarasota, FL 34243 E-Mail: pvanhorn@ncf.edu AB - In 1931, a financial crisis began in Austria, struck numerous European nations, forced Britain to abandon the gold standard, and spread across the Atlantic. This article describes how banks in New York City, the central money market of the United States, reacted to events in Europe. An array of data sources – including memos detailing private conversations between leading bankers the governors of the New York Federal Reserve, articles written by prominent commentators, and financial data drawn from the balance sheets of commercial banks – tell a consistent tale. Banks in New York anticipated events in Europe, prepared for them by accumulating substantial reserves, and during the crisis, continued business as usual. Leading international bankers deliberately and collectively decided on the business-as-usual policy in order to minimize the impact of the panic in the United States and Europe. ER - TY - JOUR AU - Gentzkow,Matthew AU - Kamenica,Emir TI - Competition in Persuasion JF - National Bureau of Economic Research Working Paper Series VL - No. 17436 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17436 L1 - http://www.nber.org/papers/w17436.pdf N1 - Author contact info: Matthew Gentzkow University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-2177 Fax: 773/702-0458 E-Mail: gentzkow@chicagobooth.edu Emir Kamenica University of Chicago Booth School of Business 5807 S. Woodlawn Ave. Chicago, IL 60637 Tel: 773.834.8690 E-Mail: emir.kamenica@chicagobooth.edu AB - Does competition among persuaders increase the extent of information revealed? We study ex ante symmetric information games where a number of senders choose what information to gather and communicate to a receiver, who takes a non-contractible action that affects the welfare of all players. We characterize the information revealed in pure-strategy equilibria. We consider three ways of increasing competition among senders: (i) moving from collusive to non-cooperative play, (ii) introducing additional senders, and (iii) decreasing the alignment of senders' preferences. For each of these notions, we establish that increasing competition cannot decrease the amount of information revealed, and will in a certain sense tend to increase it. ER - TY - JOUR AU - Lochner,Lance AU - Monge-Naranjo,Alexander TI - Credit Constraints in Education JF - National Bureau of Economic Research Working Paper Series VL - No. 17435 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17435 L1 - http://www.nber.org/papers/w17435.pdf N1 - Author contact info: Lance Lochner Department of Economics, Faculty of Social Science University of Western Ontario 1151 Richmond Street, North London, ON N6A 5C2 CANADA Tel: 519/661-2111 ext. 85281 Fax: 519/661-3666 E-Mail: llochner@uwo.ca Alexander Monge-Naranjo Department of Economics Pennsylvania State University 502 Kern Graduate Building University Park, PA 16802-3306 E-Mail: aum26@psu.edu AB - We review studies of the impact of credit constraints on the accumulation of human capital. Evidence suggests that credit constraints are increasingly important for schooling and other aspects of households' behavior. We highlight the importance of early childhood investments, since their response largely determines the impact of credit constraints on the overall lifetime acquisition of human capital. We also review the intergenerational literature and examine the macroeconomic impacts of credit constraints on social mobility and the income distribution. A common limitation across all areas of the human capital literature is the imposition of ad hoc constraints on credit. We propose a more careful treatment of the structure of government student loan programs as well as the incentive problems underlying private credit. We show that endogenizing constraints on credit for human capital helps explain observed borrowing, schooling, and default patterns and offers new insights about the design of government policy. ER - TY - JOUR AU - Sanders,Nicholas J. AU - Stoecker,Charles F. TI - Where Have All the Young Men Gone? Using Gender Ratios to Measure Fetal Death Rates JF - National Bureau of Economic Research Working Paper Series VL - No. 17434 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17434 L1 - http://www.nber.org/papers/w17434.pdf N1 - Author contact info: Nicholas J. Sanders Stanford University 366 Galvez Street, Room 228 Stanford, CA 94305-6015 E-Mail: sandersn@stanford.edu Charles F. Stoecker Department of Economics One Shields Ave Davis, CA 95616 E-Mail: cfstoecker@ucdavis.edu M3 - presented at "SI 2011 Environmental & Energy Economics", July 29-30, 2011 AB - Fetal health is an important consideration in the formation of health-based policy. However, a complete census of true fetal deaths is impossible to obtain. We present the gender ratio of live births as an under-exploited metric of fetal health and apply it to examine the effects of air quality on fetal health. Males are more vulnerable to side effects of maternal stress in utero, and thus are more likely to suffer fetal death due to pollution exposure. We demonstrate this metric in the context of the Clean Air Act Amendments of 1970 (CAAA) which provide a source of exogenous variation in county-level ambient total suspended particulate matter (TSPs). We find that a standard deviation increase in annual average TSPs (approximately 35 μg/m3) decreases the percentage of live births that are male by 3.1 percentage points. We then explore the use of observed differences in neonatal and one-year mortality rates across genders in response to pollution exposure as a metric to estimate total fetal losses in utero. These calculations suggest the pollution reductions from the CAAA prevented approximately 21,000-134,000 fetal deaths in 1972. ER - TY - JOUR AU - Ottaviano,Gianmarco I.P. TI - Firm Heterogeneity, Endogenous Entry, and the Business Cycle JF - National Bureau of Economic Research Working Paper Series VL - No. 17433 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17433 L1 - http://www.nber.org/papers/w17433.pdf N1 - Author contact info: Gianmarco Ottaviano Department of Economics Bocconi University Via Roentgen 1 20136 Milan Italy E-Mail: gianmarco.ottaviano@unibocconi.it M3 - presented at "ISOM", June 17-18, 2011 AB - This paper investigates the role that the entry and exit of heterogeneous firms plays in shaping aggregate fluctuations in economic activity. In so doing, it develops a dynamic stochastic general equilibrium model in which procyclical entry and countercyclical exit along a real business cycle lead to endogenous cyclical movements in average firm productivity. These movements stem from a composition effect due to the reallocation of market shares among firms with different levels of efficiency and affect the propagation of exogenous technological shocks. Numerical analysis suggests that existing models with representative firms may overstate the actual role of procyclical entry and exit in imperfectly competitive markets as a propagation mechanism of exogenous technology shocks. The reason is that procyclical entry and countercyclical exit disproportionately involve less efficiency firms whose impact on aggregate economic activity is hampered by their smaller size. ER - TY - JOUR AU - Murtin,Fabrice AU - Wacziarg,Romain TI - The Democratic Transition JF - National Bureau of Economic Research Working Paper Series VL - No. 17432 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17432 L1 - http://www.nber.org/papers/w17432.pdf N1 - Author contact info: Fabrice Murtin Organisation for Economic Co-operation and Development 2 rue Andre Pascal 75016 Paris, France E-Mail: fabrice.murtin@oecd.org Romain Wacziarg Anderson School of Management at UCLA C-510 Entrepreneurs Hall 110 Westwood Plaza Los Angeles, CA 90095-1481 Tel: 310 825 4507 E-Mail: wacziarg@ucla.edu AB - Over the last two centuries, many countries experienced regime transitions toward democracy. We document this democratic transition over a long time horizon. We use historical time series of income, education and democracy levels from 1870 to 2000 to explore the economic factors associated with rising levels of democracy. We find that primary schooling, and to a weaker extent per capita income levels, are strong determinants of the quality of political institutions. We find little evidence of causality running the other way, from democracy to income or education. ER - TY - JOUR AU - Paul,Gilles St. TI - Toward a Political Economy of Macroeconomic Thinking JF - National Bureau of Economic Research Working Paper Series VL - No. 17431 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17431 L1 - http://www.nber.org/papers/w17431.pdf N1 - Author contact info: Gilles St. Paul IDEI Universite de Toulouse 1 21, Allee de Brienne 31000 Toulouse France Tel: 00 33 5 61 12 85 44 E-Mail: gilles.saint-paul@tse-fr.eu M3 - presented at "ISOM", June 17-18, 2011 AB - This paper investigates, in a simplified macro context, the joint determination of the (incorrect) perceived model and the equilibrium. I assume that the model is designed by a self-interested economist who knows the true structural model, but reports a distorted one so as to influence outcomes. This model influences both the people and the government; the latter tries to stabilize an unobserved demand shock and will make different inferences about that shock depending on the model it uses. The model's choice is constrained by a set of autocoherence conditions that state that, in equilibrium, if everybody uses the model then it must correctly predict the moments of the observables. I then study, in particular, how the models devised by the economists vary depending on whether they are "progressive" vs. "conservative". The predictions depend greatly on the specifics of the economy being considered. But in many cases, they are plausible. For example, conservative economists will tend to report a lower keynesian multiplier, and a greater long-term inflationary impact of output expansions. On the other hand, the economists' margin of manoeuver is constrained by the autocoherence conditions. Here, a "progressive" economist who promotes a Keynesian multiplier larger than it really is, must, to remain consistent, also claim that demand shocks are more volatile than they really are. Otherwise, people will be disappointed by the stabilization performance of fiscal policy and reject the hypothesized value of the multiplier. In some cases, autocoherence induces the experts to make, loosely speaking, ideological concessions on some parameter values. The analysis is illustrated by empirical evidence from the Survey of Professional Forecasters. ER - TY - JOUR AU - Keane,Michael P. AU - Rogerson,Richard TI - Reconciling Micro and Macro Labor Supply Elasticities: A Structural Perspective JF - National Bureau of Economic Research Working Paper Series VL - No. 17430 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17430 L1 - http://www.nber.org/papers/w17430.pdf N1 - Author contact info: Michael P. Keane School of Economics University of New South Wales Sydney NSW 2052 Australia E-Mail: Michael.Keane@uts.edu.au Richard Rogerson Woodrow Wilson School of Public and International Affairs 323 Bendheim Hall Princeton University Princeton, NJ 08544 Tel: 609-258-4839 Fax: 609-258-5349 E-Mail: rdr@princeton.edu AB - The response of aggregate labor supply to various changes in the economic environment is central to many economic issues, especially the optimal design of tax policies. This paper surveys recent work that uses structural models and micro data to evaluate the size of this response. Whereas the earlier literature on this issue often concluded that aggregate labor supply elasticities were small, recent work has identified three key reasons that the aggregate elasticity may be quite large. First, earlier estimates abstracted from several key features, including human capital accumulation, leading to estimates that are dramatically negatively biased. Second, failure to understand that aggregate labor supply adjustments can occur along both the hours per worker and employment margins has led economists to misinterpret the implications of previous estimates for aggregate labor supply. Third, structural estimation of responses along the extensive (i.e., employment) margin are typically quite large. ER - TY - JOUR AU - Justiniano,Alejandro AU - Michelacci,Claudio TI - The Cyclical Behavior of Equilibrium Unemployment and Vacancies in the US and Europe JF - National Bureau of Economic Research Working Paper Series VL - No. 17429 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17429 L1 - http://www.nber.org/papers/w17429.pdf N1 - Author contact info: Alejandro Justiniano Economic Research Department Federal Reserve Bank of Chicago 230 S. LaSalle Street Chicago, IL 60604 Tel: 312/322-5900 E-Mail: ajustiniano@frbchi.org Claudio Michelacci CEMFI, Calle Casado del Alisal 5 Madrid, SPAIN Tel: 0034-91-4290-551 Fax: 0034-91-4291-056 E-Mail: c.michelacci@cemfi.es M3 - presented at "ISOM", June 17-18, 2011 AB - We set-up a real business cycle model with search and matching frictions driven by several shocks, which nests full Nash Bargaining and wage rigidity as special cases and includes other transmission mechanisms suggested by the literature for the propagation and amplification of disturbances. The model is estimated using full information methods for two Anglo-Saxon countries (the US and the UK), two Continental European countries (France and Germany) and two Scandinavian countries (Norway and Sweden). We conduct inference with mixed frequency data, combining quarterly series for unemployment, vacancies, GDP, consumption, and investment, with annual data on unemployment flows. Parameters and shocks are estimated separately for each country, which can then vary in terms of search and hiring costs, workers' bargaining power, unemployment benefits levels, wage rigidity and the stochastic properties of disturbances. Overall, the structural model accounts reasonably well for differences in labor market dynamics observed between the two sides of the Atlantic and within Europe. Our estimates indicate that there is considerable cross-country variation in the contribution of technology shocks to the cyclical fluctuations of the labor market. Technology shocks alone replicate remarkably well the volatility in vacancies, unemployment and finding probabilities observed in US, with mixed success in Europe. In contrast, matching shocks and job destruction shocks play a larger role in most European countries relative to the US. ER - TY - JOUR AU - Robinson,David T. AU - Sensoy,Berk A. TI - Cyclicality, Performance Measurement, and Cash Flow Liquidity in Private Equity JF - National Bureau of Economic Research Working Paper Series VL - No. 17428 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17428 L1 - http://www.nber.org/papers/w17428.pdf N1 - Author contact info: David T. Robinson Fuqua School of Business Duke University 100 Fuqua Drive Durham, NC 27708 Tel: 919/660-8023 Fax: 919/684-2818 E-Mail: davidr@duke.edu Berk Sensoy Ohio State University 2100 Neil Ave. Columbus, OH 43210 E-Mail: sensoy_4@fisher.osu.edu AB - Public and private equity waves move together. Using quarterly cash-flow data for a large sample of venture capital and buyout funds from 1984-2010, we investigate the implications of this co-cyclicality for understanding private equity cash flows and performance. In the cross-section, varying the beta used to assess relative performance has a large effect on inference near a beta of zero, but only a modest effect for more reasonable beta estimates. A similar message comes through in the time series. Though funds raised in hot markets underperform in absolute terms, this underperformance is sharply reduced by a comparison to the S&P 500, and disappears entirely at the levels of beta recently estimated in the literature. These findings imply that high private equity fundraising forecasts both low private equity cash flows and low market returns, suggesting a positive correlation between private equity net cash flows and public equity valuations. Examining cash flows directly, we find that this is indeed the case. While both capital calls and distributions rise with public equity valuations, distributions are more sensitive than calls. Net cash flows are therefore procyclical and private equity funds are liquidity providers (sinks) when market valuations are high (low). Venture cash flows and performance are considerably more procyclical than buyout. Debt market conditions also have a significant impact on private equity cash flows. At the same time, most cash-flow variation is idiosyncratic across funds, and most predictable variation is explained by the age of the fund. ER - TY - JOUR AU - Aizenman,Joshua AU - Jinjarak,Yothin TI - The Fiscal Stimulus of 2009-10: Trade Openness, Fiscal Space and Exchange Rate Adjustment JF - National Bureau of Economic Research Working Paper Series VL - No. 17427 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17427 L1 - http://www.nber.org/papers/w17427.pdf N1 - Author contact info: Joshua Aizenman Department of Economics; E2 1156 High St. University of California, Santa Cruz Santa Cruz, CA 95064 Tel: 831/459-4791 Fax: 831/459-5077 E-Mail: jaizen@ucsc.edu Yothin Jinjarak University of London College Buildings, 534 London UK, WC1H 0XG E-Mail: yothin.jinjarak@gmail.com M3 - presented at "ISOM", June 17-18, 2011 AB - This paper studies the cross-country variation of the fiscal stimulus and the exchange rate adjustment propagated by the global crisis of 2008-9, identifying the role of economic structure in accounting for the heterogeneity of response. We find that greater de facto fiscal space prior to the global crisis and lower trade openness were associated with a higher fiscal stimulus/GDP during 2009-2010 (where the de facto fiscal space is the inverse of the average tax-years it would take to repay the public debt). Lowering the 2006 public debt/average tax base from the level of low-income countries (5.94) down to the average level of the Euro minus the Euro-area peripheral countries (1.97), was associated with a larger crisis stimulus in 2009-11 of 2.78 GDP percentage points. Joint estimation of fiscal stimuli and exchange rate depreciations indicates that higher trade openness was associated with a smaller fiscal stimulus and a higher depreciation rate during the crisis. Overall, the results are in line with the predictions of the neo-Keynesian open-economy model. ER - TY - JOUR AU - Busch,Susan AU - Golberstein,Ezra AU - Meara,Ellen TI - The FDA and ABCs: The Unintended Consequences of Antidepressant Warnings on Human Capital JF - National Bureau of Economic Research Working Paper Series VL - No. 17426 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17426 L1 - http://www.nber.org/papers/w17426.pdf N1 - Author contact info: Susan Busch School of Publc Health Yale University P.O. Box 208034 New Haven, CT 06520-8034 E-Mail: susan.busch@yale.edu Ezra Golberstein Division of Health Policy and Management University of Minnesota School of Public Health 420 Delaware St. SE, MMC 729 Minneapolis, MN 55455 E-Mail: egolber@umn.edu Ellen Meara Dartmouth Institute for Health Policy and Clinical Practice 35 Centerra Parkway Lebanon, NH 03755 Tel: 603/653-0899 E-Mail: ellen.r.meara@dartmouth.edu AB - Using annual cross-sectional data on over 100,000 adolescents aged 12-17, we studied academic and behavioral outcomes among those who were and were not likely affected by FDA warnings regarding the safety of antidepressants. Just before the FDA warnings, adolescents with probable depression had grade point averages 0.14 points higher than adolescents with depression just after the warnings. The FDA warnings also coincided with increased delinquency, use of tobacco and illicit drugs. Together, our results stress the importance of mental health and its treatment as an input into cognitive and non-cognitive aspects of human capital. ER - TY - JOUR AU - Bordo,Michael D. AU - Humpage,Owen F. AU - Schwartz,Anna J. TI - The Federal Reserve as an Informed Foreign Exchange Trader: 1973 – 1995 JF - National Bureau of Economic Research Working Paper Series VL - No. 17425 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17425 L1 - http://www.nber.org/papers/w17425.pdf N1 - Author contact info: Michael D. Bordo Department of Economics Rutgers University New Jersey Hall 75 Hamilton Street New Brunswick, NJ 08901 Tel: 732/822-7152 Fax: 732/932-7416 E-Mail: bordo@econ.rutgers.edu Owen Humpage Federal Reserve Bank of Cleveland P.O. Box 6387 Cleveland, OH 44101-1387 Tel: 216 579 2019 Fax: 216 579 3050 E-Mail: owen.f.humpage@clev.frb.org Anna J. Schwartz NBER 365 Fifth Ave, 5th Floor New York, NY 10016 Tel: 212/817-7957 Fax: 212/817-1597 E-Mail: aschwartz@gc.cuny.edu AB - If official interventions convey private information useful for price discovery in foreign-exchange markets, then they should have value as a forecast of near-term exchange-rate movements. Using a set of standard criteria, we show that approximately 60 percent of all U.S. foreign-exchange interventions between 1973 and 1995 were successful in this sense. This percentage, however, is no better than random. U.S. intervention sales and purchases of foreign exchange were incapable of forecasting dollar appreciations or depreciations. U.S. interventions, however, were associated with more moderate dollar movements in a manner consistent with leaning against the wind, but only about 22 percent of all U.S. interventions conformed to this pattern. We also found that the larger the size of an intervention, the greater was its probability of success, although some interventions were inefficiently large. Other potential characteristics of intervention, notably coordination and secrecy, did not seem to influence our success rates. ER - TY - JOUR AU - Gorodnichenko,Yuriy AU - Mikusheva,Anna AU - Ng,Serena TI - Estimators for Persistent and Possibly Non-Stationary Data with Classical Properties JF - National Bureau of Economic Research Working Paper Series VL - No. 17424 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17424 L1 - http://www.nber.org/papers/w17424.pdf N1 - Author contact info: Yuriy Gorodnichenko Department of Economics 508-1 Evans Hall #3880 University of California, Berkeley Berkeley, CA 94720-3880 Tel: 510/643-0720 Fax: 510/642-6615 E-Mail: ygorodni@econ.berkeley.edu Anna Mikusheva MIT E-Mail: amikushe@mit.edu Serena Ng Department of Economics Columbia University 440 W. 118 St. International Affairs Building, MC 3308 New York NY 10027 Tel: 212-854-5488 E-Mail: serena.ng@columbia.edu AB - This paper considers a moments based non-linear estimator that is root-T consistent and uniformly asymptotically normal irrespective of the degree of persistence of the forcing process. These properties hold for linear autoregressive models, linear predictive regressions, as well as certain non-linear dynamic models. Asymptotic normality is obtained because the moments are chosen so that the objective function is uniformly bounded in probability and that a central limit theorem can be applied. Critical values from the normal distribution can be used irrespective of the treatment of the deterministic terms. Simulations show that the estimates are precise, and the t-test has good size in the parameter region where the least squares estimates usually yield distorted inference. ER - TY - JOUR AU - Baum,Charles L. AU - Chou,Shin-Yi TI - The Socio-Economic Causes of Obesity JF - National Bureau of Economic Research Working Paper Series VL - No. 17423 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17423 L1 - http://www.nber.org/papers/w17423.pdf N1 - Author contact info: Charles Baum Economics and Finance Department P. O. Box 27 Middle Tennessee State University Murfreesboro, TN 37132 E-Mail: cbaum@mtsu.edu Shin-Yi Chou Department of Economics College of Business and Economics Lehigh University 621 Taylor Street Bethlehem, PA 18015-3117 Tel: 610/758-3444 Fax: NA E-Mail: syc2@lehigh.edu AB - An increasing number of Americans are obese, with a body mass index of 30 or more. In fact, the latest estimates indicate that about 30% of Americans are currently obese, which is roughly a 100% increase from 25 years ago. It is well accepted that weight gain is caused by caloric imbalance, where more calories are consumed than expended. Nevertheless, it is not clear why the prevalence of obesity has increased so dramatically over the last 30 years. We simultaneously estimate the effects of the various socio-economic factors on weight status, considering in our analysis many of the socio-economic factors that have been identified by other researchers as important influences on caloric imbalance: employment, physical activity at work, food prices, the prevalence of restaurants, cigarette smoking, cigarette prices and taxes, food stamp receipt, and urbanization. We use 1979- and 1997-cohort National Longitudinal Survey of Youth (NLSY) data, which allows us to compare the prevalence of obesity between cohorts surveyed roughly 25 years apart. Using the traditional Blinder-Oaxaca decomposition technique, we find that cigarette smoking has the largest effect: the decline in cigarette smoking explains about 2% of the increase in the weight measures. The other significant factors explain less. ER - TY - JOUR AU - Jurek,Jakub W. AU - Stafford,Erik TI - Crashes and Collateralized Lending JF - National Bureau of Economic Research Working Paper Series VL - No. 17422 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17422 L1 - http://www.nber.org/papers/w17422.pdf N1 - Author contact info: Jakub W. Jurek Princeton University Bendheim Center for Finance 211 26 Prospect Avenue Princeton, NJ 08540 Tel: 609/258-4037 Fax: 609/258-0771 E-Mail: jjurek@princeton.edu Erik Stafford Graduate School of Business Harvard University Baker 371 Boston, MA 02163 Tel: 617/495-8064 E-Mail: estafford@hbs.edu AB - This paper develops a parsimonious static model for characterizing financing terms in collateralized lending markets. We characterize the systematic risk exposures for a variety of securities and develop a simple indifference-pricing framework to value the systematic crash risk exposure of the collateral. We then apply Modigliani and Miller's (1958) Proposition Two (MM) to split the cost of bearing this risk between the borrower and lender, resulting in a schedule of haircuts and financing rates. The model produces comparative statics and time-series dynamics that are consistent with the empirical features of repo market data, including the dramatic change in financing terms for structured products during the credit crisis of 2007-2008. ER - TY - JOUR AU - Aruoba,S. Boragan AU - Diebold,Francis X. AU - Nalewaik,Jeremy AU - Schorfheide,Frank AU - Song,Dongho TI - Improving GDP Measurement: A Forecast Combination Perspective JF - National Bureau of Economic Research Working Paper Series VL - No. 17421 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17421 L1 - http://www.nber.org/papers/w17421.pdf N1 - Author contact info: S. Boragan Aruoba Department of Economics University of Maryland 3105 Tydings Hall College Park, MD 20742-7211 Tel: 301/405-3523 E-Mail: aruoba@econ.umd.edu Francis X. Diebold Department of Economics University of Pennsylvania 3718 Locust Walk Philadelphia, PA 19104-6297 Tel: 215/898-1507 Fax: 212/573-4217 E-Mail: fdiebold@sas.upenn.edu Jeremy Nalewaik Federal Reserve Board 20th and C, NW Washington, DC 20551 E-Mail: jeremy.j.nalewaik@frb.gov Frank Schorfheide University of Pennsylvania Department of Economics 3718 Locust Walk McNeil 525 Philadelphia, PA 19104-6297 Tel: 215/898-8486 Fax: 215/573-2057 E-Mail: schorf@ssc.upenn.edu Dongho Song University of Pennsylvania Department of Economics 3718 Locust Walk Philadelphia, PA 19104 E-Mail: donghos@sas.upenn.edu AB - Two often-divergent U.S. GDP estimates are available, a widely-used expenditure side version, GDPE, and a much less widely-used income-side version GDPI . We propose and explore a "forecast combination" approach to combining them. We then put the theory to work, producing a superior combined estimate of GDP growth for the U.S., GDPC. We compare GDPC to GDPE and GDPI , with particular attention to behavior over the business cycle. We discuss several variations and extensions. ER - TY - JOUR AU - Ohanian,Lee E. AU - Raffo,Andrea TI - Aggregate Hours Worked in OECD Countries: New Measurement and Implications for Business Cycles JF - National Bureau of Economic Research Working Paper Series VL - No. 17420 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17420 L1 - http://www.nber.org/papers/w17420.pdf N1 - Author contact info: Lee E. Ohanian 8283 Bunche Hall UCLA, Department of Economics Box 951477 Los Angeles, CA 90095 Tel: 310/825-0979 Fax: 310/825-9528 E-Mail: ohanian@econ.ucla.edu Andrea Raffo Economist Board of Governors of the Federal Reserve System 20th & C St, NW Washington DC 20551 E-Mail: andrea.raffo@frb.gov AB - We build a new quarterly dataset of aggregate hours worked consistent with standard NIPA constructs for 14 OECD countries over the last fifty years. We find that cyclical features of labor markets across countries differ markedly from the accepted empirical facts reported in the literature based on either just U.S. hours data, or based on cross-country employment data. We document that total hours worked in many OECD countries are about as volatile as output, that a relatively large fraction of labor market adjustment takes place along the intensive margin outside the United States, and that the volatility of total hours relative to output volatility has increased over time in almost all countries. We use these data to re-assess productivity and labor wedges during the Great Recession and during prior recessions. We find that the Great Recession in many OECD countries is a significant puzzle in that labor wedges are quite small, while those in the U.S. Great Recession - and those in previous European recessions - are much larger. These new data indicate that understanding cyclical labor fluctuations in OECD countries requires understanding why hours fluctuate so much more than previously considered, how and why labor markets changed so much in the last few years, why cyclical adjustment of hours per worker in countries with large firing costs is not even larger than observed, and why the Great Recession differs so much across countries. ER - TY - JOUR AU - David,Guy AU - Rawley,Evan AU - Polsky,Daniel TI - Integration and Task Allocation: Evidence from Patient Care JF - National Bureau of Economic Research Working Paper Series VL - No. 17419 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17419 L1 - http://www.nber.org/papers/w17419.pdf N1 - Author contact info: Guy David The Wharton School University of Pennsylvania 202 Colonial Penn Center 3641 Locust Walk Philadelphia, PA 19104-6218 Tel: 215/573-5780 Fax: 215/573-2157 E-Mail: gdavid2@wharton.upenn.edu Evan Rawley The Wharton School University of Pennsylvania 2000 Steinberg Hall-Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104-6370 Tel: 215-746-2047 E-Mail: rawley@wharton.upenn.edu Daniel Polsky University of Pennsylvania School of Medicine Division of General Internal Medicine 423 Guardian Drive, Blockley Hall, Rm 1212 Philadelphia, PA 19104 E-Mail: polsky@mail.med.upenn.edu AB - We develop a formal model to show how integration solves task allocation problems between organizations and test the predictions of the model, using a large and rich patient-level dataset on hospital discharges to nursing homes and home health care. As predicted by the theory, we find that vertical integration allows hospitals to shift patient recovery tasks downstream to lower cost delivery systems by discharging patients earlier and in poorer health, and integration leads to greater post-hospitalization service intensity. While integration facilitates a shift in the allocation of tasks, health outcomes are no worse when patients receive care from an integrated provider. The evidence suggests that by improving the allocation of tasks, integration solves coordination problems that arise in market exchange. ER - TY - JOUR AU - Judd,Kenneth L. AU - Maliar,Lilia AU - Maliar,Serguei TI - How to Solve Dynamic Stochastic Models Computing Expectations Just Once JF - National Bureau of Economic Research Working Paper Series VL - No. 17418 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17418 L1 - http://www.nber.org/papers/w17418.pdf N1 - Author contact info: Kenneth L. Judd Hoover Institution Stanford University Stanford, CA 94305-6010 Tel: 650/723-5866 Fax: 650/723-1687 E-Mail: kennethjudd@mac.com Lilia Maliar Office T-24 Hoover Institution Stanford University CA 94305-6010, USA Tel: 6507253416 Fax: 6507231687 E-Mail: maliarl@stanford.edu Serguei Maliar Office T-24 Hoover Institution Stanford University CA 94305-6010, USA Tel: 6507253416 Fax: 6507231687 E-Mail: maliars@stanford.edu AB - We introduce a technique called "precomputation of integrals" that makes it possible to compute conditional expectations in dynamic stochastic models in the initial stage of the solution procedure. This technique can be applied to any set of equations that contains conditional expectations, in particular, to the Bellman and Euler equations. After the integrals are precomputed, we can solve stochastic models as if they were deterministic. We illustrate the benefits of precomputation of integrals using one- and multi-agent numerical examples. ER - TY - JOUR AU - Burgess,Robin AU - Hansen,Matthew AU - Olken,Benjamin A. AU - Potapov,Peter AU - Sieber,Stefanie TI - The Political Economy of Deforestation in the Tropics JF - National Bureau of Economic Research Working Paper Series VL - No. 17417 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17417 L1 - http://www.nber.org/papers/w17417.pdf N1 - Author contact info: Robin Burgess R524, Department of Economics and STICERD LSE Research Laboratory London School of Economics Houghton Street London WC2A 2AE UNITED KINGDOM Tel: 020-7955-6676 Fax: 020-79556951 E-Mail: r.burgess@lse.ac.uk Matthew Hansen Department of Geography 2181 LeFrak Hall University of Maryland College Park, MD 20742 E-Mail: mhansen@umd.edu Benjamin A. Olken Department of Economics MIT 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/588-1437 Fax: 617/868-2742 E-Mail: bolken@mit.edu Peter Potapov Department of Geography 2181 LeFrak Hall University of Maryland College Park, MD 20742 E-Mail: peter.potapov@hermes.geog.umd.edu Stefanie Sieber The World Bank 1818 H Street, NW Washington, DC 20433 E-Mail: ssieber@worldbank.org AB - Tropical deforestation accounts for almost one-fifth of greenhouse gas emissions worldwide and threatens the world's most diverse ecosystems. The prevalence of illegal forest extraction in the tropics suggests that understanding the incentives of local bureaucrats and politicians who enforce forest policy may be critical to understanding tropical deforestation. We find support for this thesis using a novel satellite-based dataset that tracks annual changes in forest cover across eight years of institutional change in post-Soeharto Indonesia. Increases in the numbers of political jurisdictions are associated with increased deforestation and with lower prices in local wood markets, consistent with a model of Cournot competition between jurisdictions. Illegal logging increases dramatically in the years leading up to local elections, suggesting the presence of "political logging cycles". And, illegal logging and rents from unevenly distributed oil and gas revenues are short run substitutes, but this effect dissapears over time as political turnover occurs. The results illustrate how incentives faced by local government officials affect deforestation, and provide an example of how standard economic theories can explain illegal behavior. ER - TY - JOUR AU - Binsbergen,Jules H. van AU - Hueskes,Wouter AU - Koijen,Ralph AU - Vrugt,Evert B. TI - Equity Yields JF - National Bureau of Economic Research Working Paper Series VL - No. 17416 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17416 L1 - http://www.nber.org/papers/w17416.pdf N1 - Author contact info: Jules H. van Binsbergen Kellogg Graduate School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60201 Tel: 847/491-3562 Fax: 847/491-5719 E-Mail: j-vanbinsbergen@kellogg.northwestern.edu Wouter Hueskes Gustav Mahlerplein 3 1082 MS Amsterdam The Netherlands E-Mail: wouter.hueskes@apg-am.nl Ralph Koijen University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-4199 E-Mail: ralph.koijen@chicagobooth.edu Evert B. Vrugt De Boelelaan 1105 1081 HV Amsterdam The Netherlands E-Mail: evrugt@xs4all.nl AB - We study a new data set of prices of traded dividends with maturities up to 10 years across three world regions: the US, Europe, and Japan. We use these asset prices to construct equity yields, analogous to bond yields. We decompose these yields to obtain a term structure of expected dividend growth rates and a term structure of risk premia, which allows us to decompose the equity risk premium by maturity. We find that both expected dividend growth rates and risk premia exhibit substantial variation over time, particularly for short maturities. In addition to predicting dividend growth, equity yields help predict other measures of economic growth such as consumption growth. We relate the dynamics of growth expectations to recent events such as the financial crisis and the earthquake in Japan. ER - TY - JOUR AU - Moser,Christoph AU - Rose,Andrew K. TI - Who Benefits from Regional Trade Agreements? The View from the Stock Market JF - National Bureau of Economic Research Working Paper Series VL - No. 17415 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17415 L1 - http://www.nber.org/papers/w17415.pdf N1 - Author contact info: Christoph Moser ETH Zurich KOF Swiss Economic Institute 8092 Zurich, Switzerland E-Mail: moser@kof.ethz.ch Andrew K. Rose Haas School of Business Administration University of California, Berkeley Berkeley, CA 94720-1900 Tel: 510/642-6609 Fax: 510/642-4700 E-Mail: arose@haas.berkeley.edu AB - The effects of Regional Trade Agreements (RTAs) are disputed. In this paper, we assess these effects using capital market data and an event-study approach, using a daily data set covering a thousand announcements spanning over eighty economies and a hundred RTAs over twenty recent years. We measure the effects of news concerning RTAs on the returns of national stock markets, adjusted for international stock market movements. We then link these excess returns to features of the RTA members and the agreements themselves. We find evidence of the natural trading partner hypothesis; stock markets rise more when RTAs are signed between countries that already engage in high volumes of trade. Stock markets also rise more when poorer countries sign RTAs. ER - TY - JOUR AU - Lichtenberg,Frank R. TI - The Impact of Therapeutic Procedure Innovation on Hospital Patient Longevity: Evidence from Western Australia, 2000-2007 JF - National Bureau of Economic Research Working Paper Series VL - No. 17414 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17414 L1 - http://www.nber.org/papers/w17414.pdf N1 - Author contact info: Frank R. Lichtenberg Columbia University 504 Uris Hall 3022 Broadway New York, NY 10027 Tel: 212/854-4408 Fax: (212) 854-9895 E-Mail: frl1@columbia.edu AB - We investigate the effect of therapeutic procedure innovation in general on the longevity of all hospital patients, i.e. patients with a variety of medical conditions. The analysis is based on data on over one million discharges from public and private hospitals in Western Australia (WA) during the period 2000-2007. We can measure survival for a period as long as 8 years after admission, and we know the date each procedure was added to the Medicare Benefits Schedule. Estimates based on patient-level data indicate that therapeutic procedure innovation increased the life expectancy of WA hospital patients by almost 3 months between 2000 and 2007, controlling for the patient’s age, sex, Diagnosis Related Group (DRG, over 600 categories), Aboriginal status, marital status, insurance coverage (whether or not the patient had private insurance), postcode (over 400 postcodes), year of hospital admission, and number of procedures performed.. Estimates based on longitudinal DRG-level data also indicate that therapeutic procedure innovation increased the life expectancy of WA hospital patients, but the implied increase may be smaller—about 2 months. In either case, therapeutic procedure innovation in WA hospitals appears to have been remarkably cost-effective, because it increased the cost of medical procedures by a negligible amount. ER - TY - JOUR AU - Saffer,Henry AU - Dave,Dhaval M. AU - Grossman,Michael TI - Racial, Ethnic and Gender Differences in Physical Activity JF - National Bureau of Economic Research Working Paper Series VL - No. 17413 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17413 L1 - http://www.nber.org/papers/w17413.pdf N1 - Author contact info: Henry Saffer NBER 365 Fifth Avenue, 5th Floor New York, NY 10016-4309 Tel: 212/817-7956 Fax: 212/817-1597 E-Mail: hsaffer@gc.cuny.edu Dhaval M. Dave Bentley University Department of Economics 175 Forest Street, AAC 195 Waltham, MA 02452-4705 Tel: 212/817-7955 Fax: 212/817-1597 E-Mail: ddave@bentley.edu Michael Grossman Ph.D. Program in Economics City University of New York Graduate Center 365 Fifth Avenue, 5th Floor New York, NY 10016-4309 Tel: 212/817-7959 Fax: 212/817-1597 E-Mail: mgrossman@gc.cuny.edu AB - This study examines racial, ethnic and gender differentials in physical activity. Individuals engage in physical activity during leisure-time and also during in many other activities such as walking to work, home maintenance, shopping and child care. Physical activity also occurs on the job is this is referred to as work physical activity. Prior studies have shown that non-work physical activity has a positive impact on health while work physical activity has a negative impact on health. Many prior studies have relied primarily on leisure-time physical activity, which typically constitutes only about 10% of non-work physical activity and does not capture specific information on the intensity or duration of the activity. This study addresses these limitations by constructing measures of physical activity from the American Time Use Surveys, which are all-inclusive and capture the duration of each activity combined with its intensity based on the Metabolic Equivalent of Task (MET). Non-work physical activity tends to be significantly lower for Blacks, Hispanics, other racial groups than for Whites and lower for males than for females. These adjusted differentials are consistent with racial, ethnic and gender differentials in health. About 25-46% of the differentials in non-work physical activity can be attributed to differences in education, socio-economic status, proxies for time constraints, and locational attributes. ER - TY - JOUR AU - Nurnberg,Peter AU - Schapiro,Morton AU - Zimmerman,David TI - Educational “Goodwill”: Measuring the Intangible Assets at Highly Selective Private Colleges and Universities JF - National Bureau of Economic Research Working Paper Series VL - No. 17412 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17412 L1 - http://www.nber.org/papers/w17412.pdf N1 - Author contact info: Peter Nurnberg Williams Project on the Economics of Higher Education Mears West, Williams College Williamstown, MA 01267 E-Mail: peter.s.nurnberg@gmail.com Morton Schapiro Office of the President Northwestern University 633 Clark Street Evanston, IL 60208 E-Mail: nu-president@northwestern.edu David Zimmerman Department of Economics Williams College South Academic Building 24 Hopkins Hall Drive Williamstown, MA 01267 Tel: 413/597-2192 Fax: 413/597-4045 E-Mail: David.J.Zimmerman@williams.edu AB - In this paper we utilize data on the head-to-head loss rate for students accepted at Williams College, but who opt to enroll elsewhere. For example, we employ data that measure the fraction of students admitted to Williams and to Amherst (or Harvard or Yale, etc.) but who opt to attend Amherst (or Harvard or Yale, etc.) instead of Williams. We then model this head-to-head loss rate using data from a variety of sources. A better understanding of the head-to-head loss rate can assist an institution in the competition for high quality students. Importantly, it can also shed light on the degree to which some part of the loss rate might be due to “intangible” differences between the schools being compared. These intangibles (positive or negative) might grant a school greater success (or failure) in the market for students than an objective accounting of its characteristics might suggest. Such an advantage (or disadvantage) is closely aligned with the business concept of “goodwill.” We present preliminary evidence on how a quantitative measure of educational goodwill can be computed. ER - TY - JOUR AU - Finan,Frederico AU - Schechter,Laura A. TI - Vote-Buying and Reciprocity JF - National Bureau of Economic Research Working Paper Series VL - No. 17411 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17411 L1 - http://www.nber.org/papers/w17411.pdf N1 - Author contact info: Frederico Finan Department of Economics University of California 508-1 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 310/794-5958 Fax: 310/825-9528 E-Mail: ffinan@econ.berkeley.edu Laura A. Schechter Department of Agricultural and Applied Economics University of Wisconsin, Madison 427 Lorch St. 334 Taylor Hall Madison, WI 53706 E-Mail: lschechter@wisc.edu AB - While vote-buying is common, little is known about how politicians determine who to target. We argue that vote-buying can be sustained by an internalized norm of reciprocity. Receiving money engenders feelings of obligation. Combining survey data on vote-buying with an experiment-based measure of reciprocity, we show that politicians target reciprocal individuals. Overall, our findings highlight the importance of social preferences in determining political behavior. ER - TY - JOUR AU - Kling,Jeffrey R. AU - Mullainathan,Sendhil AU - Shafir,Eldar AU - Vermeulen,Lee AU - Wrobel,Marian TI - Comparison Friction: Experimental Evidence from Medicare Drug Plans JF - National Bureau of Economic Research Working Paper Series VL - No. 17410 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17410 L1 - http://www.nber.org/papers/w17410.pdf N1 - Author contact info: Jeffrey R. Kling Congressional Budget Office 3403 Ordway St NW Washington, DC 20016 E-Mail: jeffrey.r.kling@gmail.com Sendhil Mullainathan Department of Economics Littauer M-18 Harvard University Cambridge, MA 02138 Tel: 617/496-2720 Fax: 617/495-7730 E-Mail: mullain@fas.harvard.edu Eldar Shafir Dept. of Psychology Princeton University Green Hall Princeton, NJ 08544 E-Mail: shafir@princeton.edu Lee Vermeulen University of Wisconsin - Madison E-Mail: lc.vermeulen@hosp.wisc.edu Marian Wrobel Mathematica Policy Research, Inc. 955 Massachusetts Avenue, Suite 801 Cambridge, MA 02139 Tel: 617/491-7900 Fax: 617/491-8044 E-Mail: marian.wrobel@gmail.com AB - Consumers need information to compare alternatives for markets to function efficiently. Recognizing this, public policies often pair competition with easy access to comparative information. The implicit assumption is that comparison friction—the wedge between the availability of comparative information and consumers’ use of it—is inconsequential because information is readily available and consumers will access this information and make effective choices. We examine the extent of comparison friction in the market for Medicare Part D prescription drug plans in the United States. In a randomized field experiment, an intervention group received a letter with personalized cost information. That information was readily available for free and widely advertised. However, this additional step—providing the information rather than having consumers actively access it—had an impact. Plan switching was 28 percent in the intervention group, versus 17 percent in the comparison group, and the intervention caused an average decline in predicted consumer cost of about $100 per year among letter recipients—roughly 5 percent of the cost in the comparison group. Our results suggest that comparison friction can be large even when the cost of acquiring information is small, and may be relevant for a wide range of public policies that incorporate consumer choice. ER - TY - JOUR AU - Harstad,Bård TI - The Market for Conservation and Other Hostages JF - National Bureau of Economic Research Working Paper Series VL - No. 17409 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17409 L1 - http://www.nber.org/papers/w17409.pdf N1 - Author contact info: Bård Harstad Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-5166 Fax: 847/467-1220 E-Mail: harstad@kellogg.northwestern.edu AB - A conservation good, such as the rainforest, is a hostage: it is possessed by S who may prefer to consume it, but B receives a larger value from continued conservation. A range of prices would make trade mutually beneficial. So, why doesn't B purchase conservation, or the forest, from S? If this were an equilibrium, S would never consume, anticipating a higher price at the next stage. Anticipating this, B prefers to deviate and not pay. The Markov-perfect equilibria are in mixed strategies, implying that the good is consumed (or the forest is cut) at a positive rate. If conservation is more valuable, it is less likely to occur. If there are several interested buyers, cutting increases. If S sets the price and players are patient, the forest disappears with probability one. A rental market has similar properties. By comparison, a rental market dominates a sale market if the value of conservation is low, the consumption value high, and if remote protection is costly. Thus, the theory can explain why optimal conservation does not always occur and why conservation abroad is rented, while domestic conservation is bought. ER - TY - JOUR AU - Barreca,Alan I. AU - Lindo,Jason M. AU - Waddell,Glen R. TI - Heaping-Induced Bias in Regression-Discontinuity Designs JF - National Bureau of Economic Research Working Paper Series VL - No. 17408 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17408 L1 - http://www.nber.org/papers/w17408.pdf N1 - Author contact info: Alan Barreca 206 Tilton Hall Tulane University New Orleans, LA 70118 Tel: 504-252-0258 E-Mail: abarreca@tulane.edu Jason M. Lindo Department of Economics University of Oregon Eugene, OR 97403-1285 Tel: 541/346-4664 E-Mail: jlindo@uoregon.edu Glen Waddell Department of Economics University of Oregon Eugene, OR 97403-1285 Tel: 541 346 1259 E-Mail: waddell@uoregon.edu AB - This study uses Monte Carlo simulations to demonstrate that regression-discontinuity designs arrive at biased estimates when attributes related to outcomes predict heaping in the running variable. After showing that our usual diagnostics are poorly suited to identifying this type of problem, we provide alternatives. We also demonstrate how the magnitude and direction of the bias varies with bandwidth choice and the location of the data heaps relative to the treatment threshold. Finally, we discuss approaches to correcting for this type of problem before considering these issues in several non-simulated environments. ER - TY - JOUR AU - Aizenman,Joshua AU - Hutchison,Michael M. AU - Jinjarak,Yothin TI - What is the Risk of European Sovereign Debt Defaults? Fiscal Space, CDS Spreads and Market Pricing of Risk JF - National Bureau of Economic Research Working Paper Series VL - No. 17407 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17407 L1 - http://www.nber.org/papers/w17407.pdf N1 - Author contact info: Joshua Aizenman Department of Economics; E2 1156 High St. University of California, Santa Cruz Santa Cruz, CA 95064 Tel: 831/459-4791 Fax: 831/459-5077 E-Mail: jaizen@ucsc.edu Michael M. Hutchison Department of Economics E2 University of California Santa Cruz, CA 95064 Tel: 831-459-2600; hutch@.ucsc.edu E-Mail: hutch@ucsc.edu Yothin Jinjarak University of London College Buildings, 534 London UK, WC1H 0XG E-Mail: yothin.jinjarak@gmail.com AB - We estimate the pricing of sovereign risk for sixty countries based on fiscal space (debt/tax; deficits/tax) and other economic fundamentals over 2005-10. We measure how accurately the model predicts sovereign credit default swap (CDS) spreads, focusing in particular on the five countries in the South-West Eurozone Periphery (Greece, Ireland, Italy, Portugal, and Spain). Dynamic panel estimates of the model suggest that fiscal space and other macroeconomic factors are statistically significant and economically important determinants of market-based sovereign risk. Although the explanatory power of fiscal space measures drop during the crisis, the TED spread, trade openness, external debt and inflation play a larger role. As expectations of market volatility jumped during the crisis, the weakly concavity of creditors’ payoff probably accounts for the emergence of TED spread as a key pricing factor. However, risk-pricing of the South-West Eurozone Periphery countries is not predicted accurately by the model either in-sample or out-of-sample: unpredicted high spreads are evident during global crisis period, especially in 2010 when the sovereign debt crisis swept over the periphery area. We “match” the periphery group with five middle income countries outside Europe that were closest in terms of fiscal space during the European fiscal crisis. We find that Eurozone periphery default risk is priced much higher than the “matched” countries in 2010, even allowing for differences in fundamentals. One interpretation is that the market has mispriced risk in the Eurozone periphery. An alternative interpretation is that the market is pricing not on current fundamentals but future fundamentals, expecting the periphery fiscal space to deteriorate markedly and posing a high risk of debt restructuring. Adjustment challenges of the Eurozone periphery may be perceived as economically and politically more difficult than the matched group of middle income countries because of exchange rate and monetary constraints. ER - TY - JOUR AU - Colman,Gregory J. AU - Dave,Dhaval M. TI - Exercise, Physical Activity, and Exertion over the Business Cycle JF - National Bureau of Economic Research Working Paper Series VL - No. 17406 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17406 L1 - http://www.nber.org/papers/w17406.pdf N1 - Author contact info: Gregory J. Colman Pace University Department of Economics 41 Park Row, 11th Floor New York, NY 10038 Tel: 212/346-1102 E-Mail: gcolman@pace.edu Dhaval M. Dave Bentley University Department of Economics 175 Forest Street, AAC 195 Waltham, MA 02452-4705 Tel: 212/817-7955 Fax: 212/817-1597 E-Mail: ddave@bentley.edu AB - As economic recessions reduce employment and wages, associated shifts in time and income constraints would be expected to also impact individuals’ health behaviors. Prior work has focused exclusively on recreational exercise, which typically represents only about 4% of total daily physical exertion. The general presumption in these studies is that, because exercise improves health, if unemployment increases exercise it must also improve health. Yet a person may be laid off from a physically demanding job, exercise more, and still be less physically active than when employed. Thus the relevant question is whether unemployment leads persons to become more physically active. We study this question with the American Time Use Survey (2003-2010), exploring the impact of the business cycle (and specifically the Great Recession) on individuals’ exercise, other uses of time, and physical activity during the day. We also utilize more precise measures of exercise (and all other physical activities), which reflect information on the duration as well as intensity of each component activity, than has been employed in past studies. Using within-state variation in employment and unemployment, we find that recreational exercise tends to increase as employment decreases. In addition, we also find that individuals substitute into television watching, sleeping, childcare, and housework. However, this increase in exercise as well as other activities does not compensate for the decrease in work-related exertion due to job-loss. Thus total physical exertion, which prior studies have not analyzed, declines. These behavioral effects are strongest among low-educated males, which is validating given that the Great Recession led to some of the largest layoffs within the manufacturing, mining, and construction sectors. Due to the concentration of low-educated workers in boom-and-bust industries, the drop in total physical activity during recessions is especially problematic for vulnerable populations and may play a role in exacerbating the SES-health gradient during recessions. We also find some evidence of intra-household spillover effects, wherein individuals respond to shifts in spousal employment conditional on their own labor supply. ER - TY - JOUR AU - Ferreira,Fernando AU - Gyourko,Joseph AU - Tracy,Joseph TI - Housing Busts and Household Mobility: An Update JF - National Bureau of Economic Research Working Paper Series VL - No. 17405 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17405 L1 - http://www.nber.org/papers/w17405.pdf N1 - Author contact info: Fernando Ferreira The Wharton School University of Pennsylvania 1461 Steinberg - Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104-6302 Tel: 215/898-7181 Fax: 215/573-2220 E-Mail: fferreir@wharton.upenn.edu Joseph Gyourko University of Pennsylvania Wharton School of Business 3620 Locust Walk 1480 Steinberg-Dietrich Hall Philadelphia, PA 19104-6302 Tel: 215/898-3003 Fax: 215/573-2220 E-Mail: gyourko@wharton.upenn.edu Joseph Tracy Executive Vice President Federal Reserve Bank of New York 33 Liberty Street New York, NY 10045 Tel: 212/720-6344 E-Mail: joseph.tracy@ny.frb.org AB - This paper provides updated estimates of the impact of three financial frictions – negative equity, mortgage lock-in, and property tax lock-in – on household mobility. We add the 2009 wave of the American Housing Survey (AHS) to our sample and also create an improved measure of permanent moves in response to Schulhofer-Wohl’s (2011) critique of our earlier work (Ferreira, Gyourko and Tracy (2010)). Our updated estimates corroborate our previous results: negative equity reduces household mobility by 30 percent, and $1,000 of additional mortgage or property tax costs reduces household mobility by 10%-16%. Schulhofer-Wohl’s finding of a slight positive correlation between mobility and negative equity appears due to a large fraction of false positives, as his coding methodology has the propensity to misclassify almost half of the additional moves it identifies relative to our measure of permanent moves. This also makes his mobility measure dynamically inconsistent, as many transitions originally classified as a move are reclassified as a non-move when additional AHS panels become available. We conclude with directions for future research, including potential improvements to measures of household mobility. ER - TY - JOUR AU - Zucker,Lynne G. AU - Darby,Michael R. AU - Fong,Jason TI - Communitywide Database Designs for Tracking Innovation Impact: COMETS, STARS and Nanobank JF - National Bureau of Economic Research Working Paper Series VL - No. 17404 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17404 L1 - http://www.nber.org/papers/w17404.pdf N1 - Author contact info: Lynne G. Zucker Departments of Sociology & Public Policy UCLA Box 951551 Los Angeles, CA 90095-1551 Tel: 310/825-9155 Fax: 310/454-2748 E-Mail: zucker@ucla.edu Michael R. Darby John E. Anderson Graduate School of Management University of California, Los Angeles 110 Westwood Plaza, Box 951481 Los Angeles, CA 90095-1481 Tel: 310/825-4180 Fax: 310/454-2748 E-Mail: michael.r.darby@anderson.ucla.edu Jason Fong Ctr for Intl. Science Technology & Cultural Policy UCLA Luskin School of Public Affairs Los Angeles, CA 90095-1656 E-Mail: jfong@ucla.edu AB - Data availability is arguably the greatest impediment to advancing the science of science and innovation policy and practice (SciSIPP). This paper describes the contents, methodology and use of the public online COMETS (Connecting Outcome Measures in Entrepreneurship Technology and Science) database spanning all sciences, technologies, and high-tech industries; its sibling COMETSandSTARS database which adds more data at organization and individual scientist-inventor-entrepreneur level restricted by vendor licenses to onsite use at NBER and/or UCLA; and their prototype Nanobank covering only nano-scale sciences and technologies. Some or all of these databases include or will include: US patents (granted and applications); NIH, NSF, SBIR, STTR Grants; Thomson Reuters Web of Knowledge; ISI Highly Cited; US doctoral dissertations; IPEDS/HEGIS universities; all firms and other organizations which ever publish in ISI listed journals beginning in 1981, are assigned US patents (from 1975), or are listed on a covered grant; additional nanotechnology firms based on web search. Ticker/CUSIP codes enable linking public firms to the major databases covering them. A major matching/disambiguation effort assigns unique identifiers for an organization or individual so that their appearances are linked within and across the constituent legacy databases. Extensive geographic coding enables analysis at country, region, state, county, or city levels as well as computation of distances between any two addresses. The databases provide very flexible sources of data for serious research on many issues in the science of science and technology. ER - TY - JOUR AU - Michel-Kerjan,Erwann AU - Raschky,Paul AU - Kunreuther,Howard TI - Corporate Demand for Insurance: An Empirical Analysis of the U.S. Market for Catastrophe and Non-Catastrophe Risks JF - National Bureau of Economic Research Working Paper Series VL - No. 17403 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17403 L1 - http://www.nber.org/papers/w17403.pdf N1 - Author contact info: Erwann Michel-Kerjan The Wharton School University of Pennsylvania Center for Risk Management 3730 Walnut Street, 556 JMHH Philadelphia, PA 19104-6340 Tel: 215-573-0515 Fax: 215-573-2130 E-Mail: erwannmk@wharton.upenn.edu Paul Raschky University of Innsbruck E-Mail: paul.raschky@buseco.monash.edu.au Howard Kunreuther Operations and Information Management The Wharton School University of Pennsylvania 3730 Walnut Street, 500 JMHH Philadelphia, PA 19104-6366 Tel: 215/898-4589 Fax: 215/573-2130 E-Mail: kunreuther@wharton.upenn.edu AB - Using a unique dataset of insurance decisions by over 1,800 large U.S. corporations, this study provides the first empirical analysis of firm behavior that compares corporate demand for property and catastrophe insurance (here, terrorism). We combine demand and supply data and apply a simultaneous-equation approach to address the problem of endogenous premium decisions. The main finding is that demand for property and catastrophe insurance are not very different and that the demand for catastrophe coverage is actually more price inelastic. We also show that a corporation’s ability to self-insure affects the demand for catastrophe insurance but not for property insurance. ER - TY - JOUR AU - Dobbie,Will AU - Fryer,Roland G., Jr TI - The Impact of Youth Service on Future Outcomes: Evidence from Teach For America JF - National Bureau of Economic Research Working Paper Series VL - No. 17402 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17402 L1 - http://www.nber.org/papers/w17402.pdf N1 - Author contact info: Will Dobbie Education Innovation Laboratory Harvard University 44 Brattle Street, 5th Floor Cambridge, MA 02138 E-Mail: dobbie@fas.harvard.edu Roland G. Fryer, Jr Department of Economics Harvard University Littauer Center 208 Cambridge, MA 02138 Tel: 617/495-9592 Fax: 617/495-8570 E-Mail: rfryer@fas.harvard.edu AB - Nearly one million American youth have participated in service programs such as Peace Corps and Teach For America. This paper provides the first causal estimate of the impact of service programs on those who serve, using data from a web-based survey of former Teach For America applicants. We estimate the effect of voluntary youth service using a sharp discontinuity in the Teach For America application process. Participating in Teach For America increases racial tolerance, makes individuals more optimistic about the life chances of poor children, and makes them more likely to work in education. We argue that these facts are broadly consistent with the “Contact Hypothesis,” which states that, under appropriate conditions, interpersonal contact can reduce prejudice. ER - TY - JOUR AU - Eichengreen,Barry AU - Dincer,Nergiz TI - Who Should Supervise? The Structure of Bank Supervision and the Performance of the Financial System JF - National Bureau of Economic Research Working Paper Series VL - No. 17401 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17401 L1 - http://www.nber.org/papers/w17401.pdf N1 - Author contact info: Barry Eichengreen Department of Economics University of California, Berkeley 549 Evans Hall 3880 Berkeley, CA 94720-3880 Tel: 510/642-2772 Fax: 510/643-0926 E-Mail: eichengr@econ.Berkeley.edu Nergiz Dincer T.R. Prime Ministry State Planning Organization Necatibey cad. No:108, Yucetepe 06100, Ankara, TURKEY E-Mail: nergiz.dincer@gmail.com AB - We assemble data on the structure of bank supervision, distinguishing supervision by the central bank from supervision by a nonbank governmental agency and independent from dependent governmental supervisors. Using observations for 140 countries from 1998 through 2010, we find that supervisory responsibility tends to be assigned to the central bank in low-income countries where that institution is one of few public-sector agencies with the requisite administrative capacity. It is more likely to be undertaken by a non-independent agency of the government in countries ranked high in terms of government efficiency and regulatory quality. We show that the choice of institutional arrangement makes a difference for outcomes. Countries with independent supervisors other than the central bank have fewer nonperforming loans as a share of GDP even after controlling for inflation, per capita income, and country and/or year fixed effects. Their banks are required to hold less capital against assets, presumably because they have less need to protect against loan losses. Savers in such countries enjoy higher deposit rates. There is some evidence, albeit more tentative, that countries with these arrangements are less prone to systemic banking crises. ER - TY - JOUR AU - Rodrik,Dani TI - The Future of Economic Convergence JF - National Bureau of Economic Research Working Paper Series VL - No. 17400 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17400 L1 - http://www.nber.org/papers/w17400.pdf N1 - Author contact info: Dani Rodrik John F. Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/495-9454 Fax: 617/496-5747 E-Mail: dani_rodrik@harvard.edu AB - The question addressed in this paper is whether the gap in performance between the developed and developing worlds can continue, and in particular, whether developing nations can sustain the rapid growth they have experienced of late. The good news is that growth in the developing world should depend not on growth in the advanced economies themselves, but on the difference in the productivity levels of the two groups of countries – on the “convergence gap” – which remains quite large. Yet much of this convergence potential is likely to go to waste. Convergence is anything but automatic, and depends on sustaining rapid structural change in the direction of tradables such as manufacturing and modern services. The policies that successful countries have used to achieve this are hard to emulate. Moreover, these policies – such as currency undervaluation and industrial policies – will meet greater resistance on the part of industrial countries struggling with stagnant economies and high unemployment. ER - TY - JOUR AU - Davis,Steven J. AU - Haltiwanger,John C. AU - Jarmin,Ron S. AU - Lerner,Josh AU - Miranda,Javier TI - Private Equity and Employment JF - National Bureau of Economic Research Working Paper Series VL - No. 17399 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17399 L1 - http://www.nber.org/papers/w17399.pdf N1 - Author contact info: Steven J. Davis Booth School of Business The University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-7312 Fax: 773/834-0733 E-Mail: Steven.Davis@ChicagoBooth.edu John C. Haltiwanger Department of Economics University of Maryland College Park, MD 20742 Tel: 301/405-3504 Fax: 301/405-3542 E-Mail: haltiwan@econ.umd.edu Ron S. Jarmin Center for Economic Studies U.S. Census Bureau 4600 Silver Hill Road Washington, DC 20233 Tel: 301.763.1858 Fax: 301.763.5935 E-Mail: ron.s.jarmin@census.gov Josh Lerner Harvard Business School Rock Center 214 Boston, MA 02163 Tel: 617/495-6065 Fax: 617/496-7357 E-Mail: jlerner@hbs.edu Javier Miranda U.S. Bureau of the Census Center for Economic Studies 4600 Silver Hill Road Washington, DC 20233 Tel: 301-763-6466 E-Mail: javier.miranda@census.gov AB - Private equity critics claim that leveraged buyouts bring huge job losses. To investigate this claim, we construct and analyze a new dataset that covers U.S. private equity transactions from 1980 to 2005. We track 3,200 target firms and their 150,000 establishments before and after acquisition, comparing outcomes to controls similar in terms of industry, size, age, and prior growth. Relative to controls, employment at target establishments declines 3 percent over two years post buyout and 6 percent over five years. The job losses are concentrated among public-to-private buyouts, and transactions involving firms in the service and retail sectors. But target firms also create more new jobs at new establishments, and they acquire and divest establishments more rapidly. When we consider these additional adjustment margins, net relative job losses at target firms are less than 1 percent of initial employment. In contrast, the sum of gross job creation and destruction at target firms exceeds that of controls by 13 percent of employment over two years. In short, private equity buyouts catalyze the creative destruction process in the labor market, with only a modest net impact on employment. The creative destruction response mainly involves a more rapid reallocation of jobs across establishments within target firms. ER - TY - JOUR AU - Olken,Benjamin A. AU - Pande,Rohini TI - Corruption in Developing Countries JF - National Bureau of Economic Research Working Paper Series VL - No. 17398 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17398 L1 - http://www.nber.org/papers/w17398.pdf N1 - Author contact info: Benjamin A. Olken Department of Economics MIT 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/588-1437 Fax: 617/868-2742 E-Mail: bolken@mit.edu Rohini Pande Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617-384-5267 Fax: 617-496-8753 E-Mail: rohini_pande@harvard.edu AB - Recent years have seen a remarkable expansion in economists’ ability to measure corruption. This, in turn, has led to a new generation of well-identified, microeconomic studies. We review the evidence on corruption in developing countries in light of these recent advances, focusing on three questions: how much corruption is there, what are the efficiency consequences of corruption, and what determines the level of corruption. We find robust evidence that corruption responds to standard economic incentive theory, but also that effects of anti-corruption policies often attenuate as officials find alternate strategies to pursue rents. ER - TY - JOUR AU - Faravelli,Marco AU - Walsh,Randall TI - Smooth Politicians and Paternalistic Voters: A Theory of Large Elections JF - National Bureau of Economic Research Working Paper Series VL - No. 17397 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17397 L1 - http://www.nber.org/papers/w17397.pdf N1 - Author contact info: Marco Faravelli University of Queensland Level 5, Colin Clark Building (39) St Lucia, Brisbane, QLD 4072 Australia E-Mail: m.faravelli@uq.edu.au Randall Walsh Department of Economics University of Pittsburgh 4901 WW Posvar Hall 230 S. Bouquet St. Pittsburgh, PA 15260 Tel: 412/648-1737 Fax: 412/648-3011 E-Mail: walshr@pitt.edu AB - We propose a new game theoretic approach to modeling large elections that overcomes the “paradox of voting” in a costly voting framework, without reliance on the assumption of ad hoc preferences for voting. The key innovation that we propose is the adoption of a “smooth” policy rule under which the degree to which parties favor their own interests is increasing in their margin of victory. In other words, mandates matter. We argue that this approach is an improvement over the existing literature as it is consistent with the empirical evidence. Incorporating this policy rule into a costly voting model with paternalistic voters yields a parsimonious model with attractive properties. Specifically, the model predicts that when the size of the electorate grows without bound, limiting turnout is strictly positive both in terms of numbers and proportions. Further, the model preserves the typical comparative statics predictions that have been identified in the extant costly voting models such as the underdog effect and the competition effect. Finally, under the case of selfish agents, we are able to extend Palfrey and Rosenthal’s (1985) zero turnout result to a general class of smooth policy rules. Thus, this new approach reconciles the predictions of standard costly voting, both in terms of positive turnout and comparative statics predictions with the assumption of a large electorate environment. ER - TY - JOUR AU - Alfaro,Laura AU - Kalemli-Ozcan,Sebnem AU - Volosovych,Vadym TI - Sovereigns, Upstream Capital Flows and Global Imbalances JF - National Bureau of Economic Research Working Paper Series VL - No. 17396 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17396 L1 - http://www.nber.org/papers/w17396.pdf N1 - Author contact info: Laura Alfaro Harvard Business School Morgan Hall 263 Soldiers Field Boston, MA 02163 Tel: 617/495-7981 Fax: 617/496-5985 E-Mail: lalfaro@hbs.edu Sebnem Kalemli-Ozcan John F. Kennedy School of Government Harvard University 79 JFK Street, Mailbox 28 Cambridge, MA 02138 E-Mail: sebnem.kalemli-ozcan@mail.uh.edu Vadym Volosovych Finance Group, Department of Business Economics Erasmus University Rotterdam Room H14-30 P.O. Box 1738 3000 DR Rotterdam, The Netherlands Tel: +31 10 408-1326 Fax: +31 10 408-9165 E-Mail: volosovych@ese.eur.nl AB - We decompose capital flows – both debt and equity – into public and private components and study their relationship with productivity growth. This exercise reveals that international capital flows are mainly shaped by government decisions and sovereign to sovereign transactions. Specifically, we show: (i) international capital flows net of government debt are positively correlated with growth and allocated according to the neoclassical predictions; (ii) international capital flows net of official aid flows, which are mostly accounted as debt, are also positively correlated with productivity growth consistent with the predictions of the neoclassical model; (iii) public debt flows are negatively correlated with growth only if government debt is financed by another sovereign and not by private lenders. Our results show that the failure to consider official flows as the main driver of uphill flows and global imbalances is an important shortcoming of the recent literature. ER - TY - JOUR AU - Edmond,Chris TI - Information Manipulation, Coordination, and Regime Change JF - National Bureau of Economic Research Working Paper Series VL - No. 17395 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17395 L1 - http://www.nber.org/papers/w17395.pdf N1 - Author contact info: Chris Edmond Department of Economics University of Melbourne Parkville VIC 3010 AUSTRALIA Tel: +61-3-8344-9733 Fax: +61-3-8344-6899 E-Mail: chris.edmond@gmail.com AB - This paper presents a model of information and political regime change. If enough citizens act against a regime, it is overthrown. Citizens are imperfectly informed about how hard this will be and the regime can, at a cost, engage in propaganda so that at face-value it seems hard. This coordination game with endogenous information manipulation has a unique equilibrium and the paper gives a complete analytic characterization of its comparative statics. If the quantity of information available to citizens is sufficiently high, then the regime has a better chance of surviving. However, an increase in the reliability of information can reduce the regime's chances. These two effects are always in tension: a regime benefits from an increase in information quantity if and only if an increase in information reliability reduces its chances. The model allows for two kinds of information revolutions. In the first, associated with radio and mass newspapers under the totalitarian regimes of the early twentieth century, an increase in information quantity coincides with a shift towards media institutions more accommodative of the regime and, in this sense, a decrease in information reliability. In this case, both effects help the regime. In the second kind, associated with diffuse technologies like modern social media, an increase in information quantity coincides with a shift towards sources of information less accommodative of the regime and an increase in information reliability. This makes the quantity and reliability effects work against each other. The model predicts that a given percentage increase in information reliability has exactly twice as large an effect on the regime's chances as the same percentage increase in information quantity, so, overall, an information revolution that leads to roughly equal-sized percentage increases in both these characteristics will reduce a regime's chances of surviving. ER - TY - JOUR AU - Asker,John AU - Farre-Mensa,Joan AU - Ljungqvist,Alexander TI - Comparing the Investment Behavior of Public and Private Firms JF - National Bureau of Economic Research Working Paper Series VL - No. 17394 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17394 L1 - http://www.nber.org/papers/w17394.pdf N1 - Author contact info: John Asker Stern School of Business Department of Economics, Suite 7-79 New York University 44 West 4th Street New York, NY 10012 Tel: 212/998-0062 Fax: 212/995-4218 E-Mail: jasker@stern.nyu.edu Joan Farre-Mensa Harvard Business School Rock Center 218 Boston, MA 02163 E-Mail: jfarremensa@hbs.edu Alexander Ljungqvist Stern School of Business New York University 44 West Fourth Street, #9-160 New York, NY 10012 Tel: 212/998-0304 Fax: 212/995-4220 E-Mail: aljungqv@stern.nyu.edu AB - We evaluate differences in investment behavior between stock market listed and privately held firms in the U.S. using a rich new data source on private firms. Listed firms invest less and are less responsive to changes in investment opportunities compared to observably similar, matched private firms, especially in industries in which stock prices are particularly sensitive to current earnings. These differences do not appear to be due to unobserved differences between public and private firms, how we measure investment opportunities, lifecycle differences, or our matching criteria. We suggest that the patterns we document are most consistent with theoretical models emphasizing the role of managerial myopia. ER - TY - JOUR AU - Becker,Bo AU - Cronqvist,Henrik AU - Fahlenbrach,Rüdiger TI - Estimating the Effects of Large Shareholders Using a Geographic Instrument JF - National Bureau of Economic Research Working Paper Series VL - No. 17393 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17393 L1 - http://www.nber.org/papers/w17393.pdf N1 - Author contact info: Bo Becker Harvard Business School Baker Library 349 Soldiers Field Boston, MA 02163 Tel: 617/496-5335 Fax: 617/495-7659 E-Mail: bbecker@hbs.edu Henrik Cronqvist Claremont McKenna College Robert Day School of Economics and Finance Bauer Center 500 E. 9th Street Claremont, CA 91711 Tel: (909) 607-1732 E-Mail: henrik.cronqvist@claremontmckenna.edu Rüdiger Fahlenbrach Ecole Polytechnique Fédérale de Lausanne (EPFL) Quartier UNIL-Dorigny Bâtiment Extranef, # 211 1015 Lausanne Switzerland E-Mail: ruediger.fahlenbrach@epfl.ch AB - Large shareholders may play an important role for firm performance and policies, but identifying this empirically presents a challenge due to the endogeneity of ownership structures. We develop and test an empirical framework which allows us to separate selection from treatment effects of large shareholders. Individual blockholders tend to hold blocks in public firms located close to where they reside. Using this empirical observation, we develop an instrument – the density of wealthy individuals near a firm’s headquarters – for the presence of a large, non-managerial individual shareholder in a firm. These shareholders have a large impact on firms, controlling for selection effects. ER - TY - JOUR AU - Becker,Bo AU - Ivashina,Victoria TI - Cyclicality of Credit Supply: Firm Level Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 17392 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17392 L1 - http://www.nber.org/papers/w17392.pdf N1 - Author contact info: Bo Becker Harvard Business School Baker Library 349 Soldiers Field Boston, MA 02163 Tel: 617/496-5335 Fax: 617/495-7659 E-Mail: bbecker@hbs.edu Victoria Ivashina Harvard Business School Baker Library 233 Soldiers Field Boston, MA 02163 Tel: 617/495-8018 Fax: 617/495-6198 E-Mail: vivashina@hbs.edu AB - Theory predicts that there is a close link between bank credit supply and the evolution of the business cycle. Yet fluctuations in bank-loan supply have been hard to quantify in the time-series. While loan issuance falls in recessions, it is not clear if this is due to demand or supply. We address this question by studying firms’ substitution between bank debt and non-bank debt (public bonds) using firm-level data. Any firm that raises new debt must have a positive demand for external funds. Conditional on issuance of new debt, we interpret firm’s switching from loans to bonds as a contraction in bank credit supply. We find strong evidence of substitution from loans to bonds at times characterized by tight lending standards, high levels of non-performing loans and loan allowances, low bank share prices and tight monetary policy. The bank-to-bond substitution can only be measured for firms with access to bond markets. However, we show that this substitution behavior has strong predictive power for bank borrowing and investments by small, out-of-sample firms. We consider and reject several alternative explanations of our findings. ER - TY - JOUR AU - Nakamura,Emi AU - Steinsson,Jón TI - Fiscal Stimulus in a Monetary Union: Evidence from U.S. Regions JF - National Bureau of Economic Research Working Paper Series VL - No. 17391 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17391 L1 - http://www.nber.org/papers/w17391.pdf N1 - Author contact info: Emi Nakamura Columbia Business School 3022 Broadway, Uris Hall 820 New York, NY 10027 Tel: 212/854-8162 E-Mail: enakamura@columbia.edu Jón Steinsson Department of Economics Columbia University 1026 International Affairs Building 420 West 118th Street New York, NY 10027 Tel: 212/854-3690 Fax: 212/854-8059 E-Mail: jsteinsson@columbia.edu AB - We use rich historical data on military procurement spending across U.S. regions to estimate the effects of government spending in a monetary union. Aggregate military build-ups and draw-downs have differential effects across regions. We use this variation to estimate an "open economy relative multiplier'' of approximately 1.5. We develop a framework for interpreting this estimate and relating it to estimates of the standard closed economy aggregate multiplier. The closed economy aggregate multiplier is highly sensitive to how strongly aggregate monetary and tax policy "leans against the wind.'' In contrast, our estimate "differences out'' these effects because different regions in the union share a common monetary and tax policy. Our estimate provides evidence in favor of models in which demand shocks can have large effects on output. ER - TY - JOUR AU - Knittel,Christopher R. AU - Sandler,Ryan TI - Cleaning the Bathwater with the Baby: The Health Co-Benefits of Carbon Pricing in Transportation JF - National Bureau of Economic Research Working Paper Series VL - No. 17390 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17390 L1 - http://www.nber.org/papers/w17390.pdf N1 - Author contact info: Christopher R. Knittel MIT Sloan School of Management 100 Main Street, E62-513 Cambridge, MA 02142 E-Mail: knittel@mit.edu Ryan Sandler University of California, Davis Department of Economics One Shields Ave Davis CA 95616 E-Mail: rsandler@ucdavis.edu AB - Efforts to reduce greenhouse gas emissions in the US have relied on Corporate Average Fuel Economy (CAFE) Standards and Renewable Fuel Standards (RFS). Economists often argue that these policies are inefficient relative to carbon pricing because they ignore existing vehicles and do not adequately reduce the incentive to drive. This paper presents evidence that the net social costs of carbon pricing are significantly less than previous thought. The bias arises from the fact that the demand elasticity for miles travelled varies systematically with vehicle emissions; dirtier vehicles are more responsive to changes in gasoline prices. This is true for all four emissions for which we have data—nitrogen oxides, carbon monoxide, hydrocarbon, and greenhouse gases—as well as weight. This reduces the net social costs associated with carbon pricing through increasing the co-benefits. Accounting for this heterogeneity implies that the welfare losses from $1.00 gas tax, or a $110 per ton of CO2 tax, are negative over the period of 1998 to 2008 even when we ignore the climate change benefits from the tax. Co-benefits increase by over 60 percent relative to ignoring the heterogeneity that we document. In addition, accounting for this heterogeneity raises the optimal gas tax associated with local pollution, as calculated by Parry and Small (2005), by as much as 57 percent. While our empirical setting is California, we present evidence that the effects may be larger for the rest of the US. ER - TY - JOUR AU - Monacelli,Tommaso AU - Quadrini,Vincenzo AU - Trigari,Antonella TI - Financial Markets and Unemployment JF - National Bureau of Economic Research Working Paper Series VL - No. 17389 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17389 L1 - http://www.nber.org/papers/w17389.pdf N1 - Author contact info: Tommaso Monacelli IGIER Universita' Bocconi and CEPR Via Roentgen 1 20136 Milano Italy E-Mail: tommaso.monacelli@unibocconi.it Vincenzo Quadrini Department of Finance and Business Economics Marshall School of Business University of Southern California 701 Exposition Boulevard Los Angeles, CA 90089 Tel: 213/740-6521 Fax: 213/740-6650 E-Mail: quadrini@usc.edu Antonella Trigari IGIER Università Bocconi Via Roentgen 1 20136 Milano Italy Tel: +39 02 58363040 Fax: +39 02 58363302 E-Mail: antonella.trigari@unibocconi.it AB - We study the importance of financial markets for (un)employment fluctuations in a model with searching and matching frictions where firms issue debt under limited enforcement. Higher debt allows employers to bargain lower wages which in turn increases the incentive to create jobs. The transmission mechanism of 'credit shocks' is fundamentally different from the typical credit channel and the model can explain why firms cut hiring after a credit contraction even if they have not shortage of funds for hiring workers. The theoretical predictions are consistent with the estimation of a structural VAR whose identifying restrictions are derived from the theoretical model. ER - TY - JOUR AU - Graham,John R. AU - Hazarika,Sonali AU - Narasimhan,Krishnamoorthy TI - Financial Distress in the Great Depression JF - National Bureau of Economic Research Working Paper Series VL - No. 17388 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17388 L1 - http://www.nber.org/papers/w17388.pdf N1 - Author contact info: John Graham Duke University Fuqua School of Business 100 Fuqua Drive Durham, NC 27708-0120 Tel: 919/660-7857 Fax: 919/660-8038 E-Mail: john.graham@duke.edu Sonali Hazarika Baruch College/CUNY Zicklin School Of Business One Bernard Baruch Way 55 Lexington Avenue at East 24th New York, NY 10010 E-Mail: sonali.hazarika@baruch.cuny.edu Krishnamoorthy Narasimhan PIMCO 840 Newport Center Drive Newport Beach, CA E-Mail: Krishna.Narasimhan@pimco.com AB - We use firm-level data to study corporate performance during the Great Depression era for all industrial firms on the NYSE. Our goal is to identify the factors that contribute to business insolvency and valuation changes during the period 1928 to 1938. We find that firms with more debt and lower bond ratings in 1928 became financially distressed more frequently during the Depression, consistent with the trade-off theory of leverage and the information production role of credit rating agencies. We also document for the first time that firms responded to tax incentives to use debt during the Depression era, but that the extra debt used in response to this tax-driven “debt bias” did not contribute significantly to the occurrence of distress. Finally, we conduct an out of sample test during the recent 2008-2009 Recession and find that higher leverage and lower bond ratings also increased the occurrence of financial distress during this period. ER - TY - JOUR AU - Graham,John R. AU - Hazarika,Sonali AU - Narasimhan,Krishnamoorthy TI - Corporate Governance, Debt, and Investment Policy during the Great Depression JF - National Bureau of Economic Research Working Paper Series VL - No. 17387 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17387 L1 - http://www.nber.org/papers/w17387.pdf N1 - Author contact info: John Graham Duke University Fuqua School of Business 100 Fuqua Drive Durham, NC 27708-0120 Tel: 919/660-7857 Fax: 919/660-8038 E-Mail: john.graham@duke.edu Sonali Hazarika Baruch College/CUNY Zicklin School Of Business One Bernard Baruch Way 55 Lexington Avenue at East 24th New York, NY 10010 E-Mail: sonali.hazarika@baruch.cuny.edu Krishnamoorthy Narasimhan PIMCO 840 Newport Center Drive Newport Beach, CA E-Mail: Krishna.Narasimhan@pimco.com AB - We study a period of severe disequilibrium to investigate whether board characteristics are related to corporate investment, debt usage, and firm value. During the 1930-1938 Depression era, when the corporate sector was shocked by an unprecedented downturn, we document a relation between board characteristics and firm performance that varies in economically sensible ways: Complex firms (that would benefit more from board advice) exhibit a positive relation between board size and firm value, and simple firms exhibit a negative relation between board size and firm value. Moreover, simple firms with large boards do not downsize adequately in response to the severe economic contraction: they invest more (or shrink less) and use more debt during the 1930s. We document similar effects for the number of outside directors on the board. Finally, we also find that companies with properly aligned governance structures are more likely to replace the company president following poor performance. ER - TY - JOUR AU - Holland,Stephen P. AU - Hughes,Jonathan E. AU - Knittel,Christopher R. AU - Parker,Nathan C. TI - Some Inconvenient Truths About Climate Change Policy: The Distributional Impacts of Transportation Policies JF - National Bureau of Economic Research Working Paper Series VL - No. 17386 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17386 L1 - http://www.nber.org/papers/w17386.pdf N1 - Author contact info: Stephen P. Holland Bryan School of Business and Economics University of North Carolina, Greensboro P.O. Box 26165 Greensboro, NC 27402-6165 Tel: 336/334-4925 Fax: 336/334-4089 E-Mail: sphollan@uncg.edu Jonathan E. Hughes Department of Economics University of Colorado at Boulder 0256 UCB Boulder, CO 80309 Tel: 303-735-0220 E-Mail: jonathan.e.hughes@colorado.edu Christopher R. Knittel MIT Sloan School of Management 100 Main Street, E62-513 Cambridge, MA 02142 E-Mail: knittel@mit.edu Nathan C. Parker Institute of Transportation Studies University of California, Davis E-Mail: ncparker@ucdavis.edu AB - Instead of efficiently pricing greenhouse gases, policy makers have favored measures that implicitly or explicitly subsidize low carbon fuels. We simulate a transportation-sector cap & trade program (CAT) and three policies currently in use: ethanol subsidies, a renewable fuel standard (RFS), and a low carbon fuel standard (LCFS). Our simulations confirm that the alternatives to CAT are quite costly–2.5 to 4 times more expensive. We provide evidence that the persistence of these alternatives in spite of their higher costs lies in the political economy of carbon policy. The alternatives to CAT exhibit a feature that make them amenable to adoption–a right skewed distribution of gains and losses where many counties have small losses, but a smaller share of counties gain considerably–as much as $6,800 per capita, per year. We correlate our estimates of gains from CAT and the RFS with Congressional voting on the Waxman-Markey cap & trade bill, H.R. 2454. Because Waxman-Markey (WM) would weaken the RFS, House members likely viewed the two policies as competitors. Conditional on a district's CAT gains, increases in a district's RFS gains are associated with decreases in the likelihood of voting for WM. Furthermore, we show that campaign contributions are correlated with a district's gains under each policy and that these contributions are correlated with a Member's vote on WM. ER - TY - JOUR AU - Einav,Liran AU - Kuchler,Theresa AU - Levin,Jonathan D. AU - Sundaresan,Neel TI - Learning from Seller Experiments in Online Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 17385 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17385 L1 - http://www.nber.org/papers/w17385.pdf N1 - Author contact info: Liran Einav Stanford University Department of Economics 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/723-3704 Fax: 650/725-5702 E-Mail: leinav@stanford.edu Theresa Kuchler Stanford University Department of Economics 579 Serra Mall Stanford, CA 94305-6072 E-Mail: tkuchler@stanford.edu Jonathan D. Levin Stanford University Department of Economics 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/723-5962 E-Mail: jdlevin@stanford.edu Neel Sundaresan eBay Research Labs 2065 Hamilton Avenue San Jose, CA 95125 E-Mail: nsundaresan@ebay.com AB - The internet has dramatically reduced the cost of varying prices, displays and information provided to consumers, facilitating both active and passive experimentation. We document the prevalence of targeted pricing and auction design variation on eBay, and identify hundreds of thousands of experiments conducted by sellers across a wide array of retail products. We show how this type of data can be used to address questions about consumer behavior and market outcomes, and provide illustrative results on price dispersion, the frequency of over-bidding, the choice of reserve prices, "buy now" options and other auction design parameters, and on consumer sensitivity to shipping fees. We argue that leveraging the experiments of market participants takes advantage of the scale and heterogeneity of online markets and can be a powerful approach for testing and measurement. ER - TY - JOUR AU - Fang,Hanming AU - Shapiro,Dmitry A. AU - Zillante,Arthur TI - An Experimental Study of Alternative Campaign Finance Systems: Donations, Elections and Policy Choices JF - National Bureau of Economic Research Working Paper Series VL - No. 17384 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17384 L1 - http://www.nber.org/papers/w17384.pdf N1 - Author contact info: Hanming Fang Department of Economics University of Pennsylvania 3718 Locust Walk Philadelphia, PA 19104 Tel: 215-898-7767 Fax: 215-573-2057 E-Mail: hanming.fang@econ.upenn.edu Dmitry A. Shapiro Belk College of Business University of North Carolina at Charlotte 9201 University City Boulevard Charlotte, NC 28223-0001 E-Mail: dashapir@email.uncc.edu Arthur Zillante Belk College of Business University of Carolina at Charlotte 9201 University City Boulevard Charlotte, NC 28223-0001 E-Mail: azillant@uncc.edu AB - We experimentally study the effect of alternative campaign finance systems – as characterized by different information structure about donors – on donations, election outcomes, political candidates' policy choices, and welfare. Three alternative campaign finance systems are considered: a full anonymity (FA) system in which neither the politicians nor the voters are informed about the donors' ideal policies or levels of donations; a partial anonymity (PA) system in which only the politicians, but not the voters, are informed about the donors' ideal policies and donations; and finally a no anonymity (NA) system in which both the politicians and the voters are informed about the donors' ideal policies and donations. We find that donors contribute less in the FA system than in the PA and NA system, and candidates are less likely to deviate from their ideal policies under FA than under the PA and NA systems. The effect of donations on the candidate's policy deviations differs in FA from that in PA and NA. Specifically, in the FA system larger donations lead to smaller deviations from the candidate's ideal policy; but in the NA and PA systems, larger donations lead to larger deviations. As a result we observe that the donations lead to a centrist bias in the candidate's policy choices, i.e., donations are more likely to make extreme candidate move to the center than to make centrist candidate move to the right. This centrist bias is present more robustly in FA treatments. Finally, we find that donors greatly benefit from the possibility of donations regardless of the finance system. Voter welfare remains virtually unchanged under the PA and NA systems, especially when there is competition among the donors. Our findings provide the first experimental evidence supportive of Ayres and Ackerman's (2002) campaign finance reform proposal. ER - TY - JOUR AU - Cropper,Maureen L. AU - Limonov,Alexander AU - Malik,Kabir AU - Singh,Anoop TI - Estimating the Impact of Restructuring on Electricity Generation Efficiency: The Case of the Indian Thermal Power Sector JF - National Bureau of Economic Research Working Paper Series VL - No. 17383 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17383 L1 - http://www.nber.org/papers/w17383.pdf N1 - Author contact info: Maureen L. Cropper Department of Economics University of Maryland College Park, MD 20742 Tel: 301/405-3483 Fax: 301/405-3542 E-Mail: cropper@econ.umd.edu Alexander Limonov Resources for the Future 1616 P Street NW Washington, DC 20036 E-Mail: limonov@rff.org Kabir Malik Department of Agricultural and Resource Economics University of Maryland College Park, MD 20742 E-Mail: kmalik@arec.umd.edu Anoop Singh Department of Industrial Management and Engineering Indian Institute of Technology Kanpur Kanpur-208 016 India E-Mail: anoops@iitk.ac.in AB - This paper examines the impact of unbundling of generation from transmission and distribution on the operating efficiency of state-owned thermal power plantsin India. Using information collected by India’s Central Electricity Authority we construct a panel dataset for thermal power plants for the years 1994-2008. We take advantage of variation across states in the timing of reforms to examine the impact of restructuring on plant performance and thermal efficiency. We estimate difference-in-differences models that control for state-level time trends, and plant and year fixed effects. The models suggest that unbundling significantly improved average annual plant availability by about 4.6 percentage points and reduced forced outages by about 2.9 percentage points in states that unbundled before 2003. Restructuring has not, however, improved thermal efficiency. This may reflect the fact that unbundling has not yet attracted independent power producers into the market to the same extent as has occurred in the US. ER - TY - JOUR AU - Costa,Dora TI - Leaders: Privilege, Sacrifice, Opportunity and Personnel Economics in the American Civil War JF - National Bureau of Economic Research Working Paper Series VL - No. 17382 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17382 L1 - http://www.nber.org/papers/w17382.pdf N1 - Author contact info: Dora Costa Bunche Hall 9272 Department of Economics UCLA Box 951477 Los Angeles, CA 90095-1477 Tel: (310) 825-4249 Fax: (310) 825-9528 E-Mail: costa@econ.ucla.edu AB - The US Civil War provides researchers a unique opportunity to identify wartime leaders and thus to test theories of leadership. By observing both leaders and followers during the war and forty years after it, I establish that the most able became wartime leaders, that leading by example from the front was an effective strategy in reducing desertion rates, and that leaders later migrated to the larger cities because this is where their superior skills would have had the highest pay-offs. I find that US cities were magnets for the most able and provided training opportunities for both leaders and followers: men might start in a low social status occupation in a city but then move to a higher status occupation. ER - TY - JOUR AU - Fairlie,Robert AU - Hoffmann,Florian AU - Oreopoulos,Philip TI - A Community College Instructor Like Me: Race and Ethnicity Interactions in the Classroom JF - National Bureau of Economic Research Working Paper Series VL - No. 17381 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17381 L1 - http://www.nber.org/papers/w17381.pdf N1 - Author contact info: Robert Fairlie Department of Economics University of California, Santa Cruz Santa Cruz, CA 95064 E-Mail: rfairlie@ucsc.edu Florian Hoffmann Department of Economics University of British Columbia E-Mail: florian.hoffmann@ubc.ca Philip Oreopoulos Department of Economics University of Toronto 150 St. George Street Toronto, ON M5S 3G7 Canada E-Mail: philip.oreopoulos@utoronto.ca AB - Detailed administrative data from a large and diverse community college are used to examine whether academic performance depends on whether students are the same race or ethnicity as their instructors. To address the concern of endogenous sorting, we focus on students with restricted course enrollment options due to low registration priorities, courses with no within-term or within-year racial variation in instructors, and models that include both student and classroom fixed effects. Given the computational complexity of the 2-way fixed effects model we rely on numerical algorithms that exploit the particular structure of the model’s normal equations. We find that the performance gap in terms of class dropout and pass rates between white and underrepresented minority students falls by roughly half when taught by an underrepresented minority instructor. The racial performance gap in grades is also lower with minority instructors. Results from detailed racial interactions indicate that African-American students perform particularly better when taught by African-American instructors. ER - TY - JOUR AU - Bordo,Michael D. AU - Markiewicz,Agnieszka AU - Jonung,Lars TI - A Fiscal Union for the Euro: Some Lessons from History JF - National Bureau of Economic Research Working Paper Series VL - No. 17380 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17380 L1 - http://www.nber.org/papers/w17380.pdf N1 - Author contact info: Michael D. Bordo Department of Economics Rutgers University New Jersey Hall 75 Hamilton Street New Brunswick, NJ 08901 Tel: 732/822-7152 Fax: 732/932-7416 E-Mail: bordo@econ.rutgers.edu Agnieszka Markiewicz Erasmus University, Rotterdam E-Mail: markiewicz@ese.eur.nl Lars Jonung Knut Wicksell Centre of Financial Studies School of Economics and Management Lund university Box 7080 220 07 Lund Sweden Tel: +46-70-2740273 E-Mail: Lars.Jonung@ehl.lu.se AB - The recent financial crisis 2007-2009 was the longest and the deepest recession since the Great Depression of 1930. The crisis that originated in subprime mortgage markets was spread and amplified through globalised financial markets and resulted in severe debt crises in several European countries in 2010 and 2011. Events revealed that the European Union had insufficient means to halt the spiral of European debt crisis. In particular, no pan-European fiscal mechanism to face a global crisis is available at present. The aim of this study is to identify the characteristics of a robust common fiscal policy framework that could have alleviated the consequences of the recent crisis. This is done by using the political and fiscal history of five federal states; Argentina, Brazil, Canada, Germany and the United States. ER - TY - JOUR AU - Obstfeld,Maurice TI - International Liquidity: The Fiscal Dimension JF - National Bureau of Economic Research Working Paper Series VL - No. 17379 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17379 L1 - http://www.nber.org/papers/w17379.pdf N1 - Author contact info: Maurice Obstfeld Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-9646 Fax: 510/642-6615 E-Mail: obstfeld@econ.berkeley.edu AB - This paper argues that if policymakers seek to enhance global liquidity, then the international community must provide a higher and better coordinated level of fiscal support than it has in the past. Loans to troubled sovereigns or financial institutions imply a credit risk that ultimately must be lodged somewhere. Expanded international lending facilities, including an expanded IMF, cannot remain unconditionally solvent absent an expanded level of fiscal backup. The same point obviously applies to the European framework for managing internal sovereign debt problems, including proposals for a jointly guaranteed eurozone sovereign bond. Even attainment of a significant role for the Special Drawing Right depends upon enhanced fiscal resources and burden sharing at the international level. ER - TY - JOUR AU - Heckman,James J. TI - Integrating Personality Psychology into Economics JF - National Bureau of Economic Research Working Paper Series VL - No. 17378 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17378 L1 - http://www.nber.org/papers/w17378.pdf N1 - Author contact info: James J. Heckman Department of Economics The University of Chicago 1126 E. 59th Street Chicago, IL 60637 Tel: 773/702-0634 Fax: 773/702-8490 E-Mail: jjh@uchicago.edu AB - This paper reviews the problems and potential benefits of integrating personality psychology into economics. Economists have much to learn from and contribute to personality psychology. ER - TY - JOUR AU - Ashraf,Quamrul H. AU - Weil,David N. AU - Wilde,Joshua TI - The Effect of Interventions to Reduce Fertility on Economic Growth JF - National Bureau of Economic Research Working Paper Series VL - No. 17377 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17377 L1 - http://www.nber.org/papers/w17377.pdf N1 - Author contact info: Quamrul Ashraf Williams College Department of Economics 24 Hopkins Hall Drive Williamstown, MA 01267 Tel: (413) 597-3051 Fax: (413) 597-4045 E-Mail: Quamrul.H.Ashraf@williams.edu David N. Weil Department of Economics Box B Brown University Providence, RI 02912 Tel: 401/863-1754 Fax: 401/863-1970 E-Mail: david_weil@brown.edu Joshua Wilde University of South Florida Department of Economics 4202 E. Fowler Avenue, BSN3403 Tampa, FL 33620 E-Mail: jkwilde@usf.edu AB - We assess quantitatively the effect of exogenous reductions in fertility on output per capita. Our simulation model allows for effects that run through schooling, the size and age structure of the population, capital accumulation, parental time input into child-rearing, and crowding of fixed natural resources. The model is parameterized using a combination of microeconomic estimates, data on demographics and natural resource income in developing countries, and standard components of quantitative macroeconomic theory. We apply the model to examine the effect of an intervention that immediately reduces TFR by 1.0, using current Nigerian vital rates as a baseline. For a base case set of parameters, we find that an immediate decline in the TFR of 1.0 will raise output per capita by approximately 13.2 percent at a horizon of 20 years, and by 25.4 percent at a horizon of 50 years. ER - TY - JOUR AU - Böhringer,Christoph AU - Carbone,Jared C. AU - Rutherford,Thomas F. TI - Embodied Carbon Tariffs JF - National Bureau of Economic Research Working Paper Series VL - No. 17376 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17376 L1 - http://www.nber.org/papers/w17376.pdf N1 - Author contact info: Christoph Böhringer University of Oldenburg Department of Economics D-26111 Oldenburg Germany E-Mail: christoph.boehringer@uni-oldenburg.de Jared Carbone University of Calgary Department of Economics, SS 454 2500 University Drive NW Calgary, AB T2N 1N4, Canada Tel: 403.220.4094 Fax: 403.282.5262 E-Mail: jccarbon@ucalgary.ca Thomas F. Rutherford ETH Zurich Zurichbergstrasse 18 8032 Zurich Switzerland E-Mail: trutherford@ethz.ch M3 - presented at "SI 2011 Environmental & Energy Economics", July 29-30, 2011 AB - In a world where the prospects of a global agreement to control greenhouse gas emissions are bleak, the idea of using trade policy as an implicit regulation of foreign emission sources has gained many supporters in countries contemplating unilateral climate policies. Embodied carbon tariffs tax the direct and indirect carbon emissions embodied in imported goods. The appeal seems obvious: as OECD countries are, on average, large net importers of embodied emissions from non-OECD countries, carbon tariffs could substantially extend the reach of OECD climate policies. We investigate this claim by simulating the effects of embodied carbon tariffs with a computable general equilibrium model of global trade and energy use. We find that embodied carbon tariffs do effectively reduce carbon leakage. However, the scope for improvements in the global cost-effectiveness of unilateral climate policy is limited. The main welfare effect of the tariffs is to shift the burden of OECD climate policy to the developing world. ER - TY - JOUR AU - Hungerman,Daniel M. TI - Do Religious Proscriptions Matter? Evidence from a Theory-Based Test JF - National Bureau of Economic Research Working Paper Series VL - No. 17375 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17375 L1 - http://www.nber.org/papers/w17375.pdf N1 - Author contact info: Daniel M. Hungerman Department of Economics University of Notre Dame 439 Flanner Hall Notre Dame, IN 46556-5602 Tel: 574/631-4495 Fax: 574/631-4783 E-Mail: dhungerm@nd.edu AB - A large literature shows that religious participation is associated with a wide range of behaviors and outcomes, but what drives this association is unclear. On the one hand, this association may stem from correlations in preferences, where those with tastes for religion coincidentally have particular tastes for other behaviors as well. Alternately, religious participation may directly affect behavior; for example many religious organizations impose rules and proscriptions on their members and these rules may affect members’ decisions. Using the canonical economic model of religiosity, I develop an empirical test to investigate the importance of religious proscriptions on behavior. Several empirical applications of this test are conducted; the results indicate a strong role for religious proscriptions in determining behavior. The test developed here does not require an instrumental variable for religion and could be applied to the study of criminal gangs, terrorist organizations, fraternities, communes, political groups, and other “social clubs.” ER - TY - JOUR AU - Ferreira,Fernando AU - Gyourko,Joseph TI - Anatomy of the Beginning of the Housing Boom: U.S. Neighborhoods and Metropolitan Areas, 1993-2009 JF - National Bureau of Economic Research Working Paper Series VL - No. 17374 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17374 L1 - http://www.nber.org/papers/w17374.pdf N1 - Author contact info: Fernando Ferreira The Wharton School University of Pennsylvania 1461 Steinberg - Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104-6302 Tel: 215/898-7181 Fax: 215/573-2220 E-Mail: fferreir@wharton.upenn.edu Joseph Gyourko University of Pennsylvania Wharton School of Business 3620 Locust Walk 1480 Steinberg-Dietrich Hall Philadelphia, PA 19104-6302 Tel: 215/898-3003 Fax: 215/573-2220 E-Mail: gyourko@wharton.upenn.edu AB - We provide novel estimates of the timing, magnitudes, and potential determinants of the start of the last housing boom across American neighborhoods and metropolitan areas (MSAs) using a rich new micro data set containing 23 million housing transactions in 94 metropolitan areas between 1993 and 2009. We also match transactions data with loan information, enabling us to observe household income and other demographics for each neighborhood. Five major findings are reported. First, the start of the boom was not a single, national event. Booms, which are defined by the global breakpoint in an area’s price appreciation series, begin at different times over a decade-long period from 1995-2006. Second, the magnitude of the initial jump in house price appreciation at the start of the boom is economically, not just statistically, significant. On average, log house prices are over four points higher during the first year of the boom relative to the previous twelve month period for both MSAs and neighborhoods. There is no evidence that price growth was trending up prior to the start of the boom. Third, local income is the only potential demand shifter found that also had an economically and statistically significant change around the time that local housing booms began. Contemporaneous local income growth is large enough to account for half or more of the initial jump in house price appreciation. While these estimates indicate that the beginning of the boom was fundamentally justified on average, they do not imply that what followed was rational. Fourth, there is important heterogeneity in that result. Income growth is large and jumps at the same time as house price appreciation in areas that boomed early and have inelastic supplies of housing, but not in late booming areas and those with elastic supply sides. Fifth and finally, none of the demand-shifters analyzed show positive pre-trends, but some such as the share of subprime lending, do lag the beginning of the boom. This suggests that key players in the lending market more responded to the boom, rather than caused it to start. ER - TY - JOUR AU - Petrin,Amil AU - Sivadasan,Jagadeesh TI - Estimating Lost Output from Allocative Inefficiency, with an Application to Chile and Firing Costs JF - National Bureau of Economic Research Working Paper Series VL - No. 17373 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17373 L1 - http://www.nber.org/papers/w17373.pdf N1 - Author contact info: Amil Petrin Department of Economics University of Minnesota 4-101 Hanson Hall Minneapolis, MN 55455 Tel: 612/625-0145 Fax: 612/624-0209 E-Mail: petrin@umn.edu Jagadeesh Sivadasan University of Michigan Ross School of Business 701 Tappan, Room R4310 Ann Arbor, MI 48103 Tel: 7348468165 Fax: 7347642557 E-Mail: jagadees@umich.edu AB - We propose a new measure of allocative efficiency based on unrealized increases in aggregate productivity growth. We show that the difference in the value of the marginal product of an input and its marginal cost at any plant - the plant-input "gap" - is exactly equal to the change in aggregate output that would occur if that plant changed that input's use by one unit. The mean absolute gap across plants for any input can then be interpreted as an approximation to the gain to society that would occur if every plant had a one-unit change in that input in the efficient direction, holding everything else constant. We show how to estimate this average gap using plant-level data for 1982-1994 from Chilean manufacturing, a sector largely viewed as being one of South America's least distorted. We find the gaps for blue and white collar labor are quite large in absolute value and imply that a one-unit move in the correct direction for blue collar would increase aggregate value added by almost 0.5%. We also find that the gaps for blue and white collar workers are increasing over time while the gaps for materials and electricity are not. The timing of the two separate increases in firing costs and the sharpest increases in the labor gaps is suggestive that the increases in average within-firm labor gaps may be related to the increases in severance pay. ER - TY - JOUR AU - Menezes-Filho,Naércio Aquino AU - Muendler,Marc-Andreas TI - Labor Reallocation in Response to Trade Reform JF - National Bureau of Economic Research Working Paper Series VL - No. 17372 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17372 L1 - http://www.nber.org/papers/w17372.pdf N1 - Author contact info: Náercio Aquino Menezes-Filho Insper Institute of Education and Research Rua Quatá, 300 São Paulo, SP 04546-042 Brazil E-Mail: naercioamf@isp.edu.br Marc-Andreas Muendler Department of Economics, 0508 University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 Tel: 858/534-4799 Fax: 858/534-7040 E-Mail: muendler@ucsd.edu AB - Tracking individual workers across jobs after Brazil’s trade liberalization in the 1990s shows that tariff cuts trigger worker displacements, but neither exporters nor comparative-advantage sectors absorb trade-displaced labor. On the contrary, exporters separate from significantly more and hire fewer workers than the average employer. Trade liberalization increases transitions to services, unemployment, and out of the labor force. Results are consistent with faster labor productivity growth than sales expansions so that output shifts to more productive firms while labor does not. Higher rates of failed reallocations and longer durations of complete reallocations result, associated with a costly incidence of idle resources. ER - TY - JOUR AU - Howard,David H. AU - Shen,Yu-Chu TI - Comparative Effectiveness Research, COURAGE, and Technological Abandonment JF - National Bureau of Economic Research Working Paper Series VL - No. 17371 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17371 L1 - http://www.nber.org/papers/w17371.pdf N1 - Author contact info: David Howard Department of Health Policy and Management Emory University 1518 Clifton Road NE Atlanta, GA 30322 Tel: 404-727-3907 Fax: 404-727-9198 E-Mail: dhhowar@emory.edu Yu-Chu Shen Graduate School of Business and Public Policy Naval Postgraduate School 555 Dyer Road Monterey, CA 93943 Tel: 831/656-2951 E-Mail: yshen@nps.edu AB - When a major study finds that a widely used medical treatment is no better than a less expensive alternative, do physicians stop using it? Policymakers hope that comparative effectiveness research will identify less expensive substitutes for widely-used treatments, but physicians may be reluctant to abandon profitable therapies. We examine the impact of the COURAGE trial, which found that medical therapy is as effective as percutaneous coronary intervention (PCI) for patients with stable angina, on practice patterns. Using hospital discharge data from US community, Veterans Administration, and English hospitals, we detect a moderate decline in PCI volume post-COURAGE. However, many patients with stable angina continue to receive PCI. We do not find differences in PCI volume trends by reimbursement scheme or hospitals’ teaching status, ownership, or degree of vertical integration. ER - TY - JOUR AU - Graham,John R. AU - Harvey,Campbell R. AU - Puri,Manju TI - Capital Allocation and Delegation of Decision-Making Authority within Firms JF - National Bureau of Economic Research Working Paper Series VL - No. 17370 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17370 L1 - http://www.nber.org/papers/w17370.pdf N1 - Author contact info: John Graham Duke University Fuqua School of Business 100 Fuqua Drive Durham, NC 27708-0120 Tel: 919/660-7857 Fax: 919/660-8038 E-Mail: john.graham@duke.edu Campbell R. Harvey Duke University Fuqua School of Business Durham, NC 27708-0120 Tel: 919/660-7768 Fax: 919/660-8030 E-Mail: cam.harvey@duke.edu Manju Puri Fuqua School of Business Duke University 1 Towerview Drive, Box 90120 Durham, NC 27708-0120 Tel: 919/660-7657 Fax: 919/681-6246 E-Mail: mpuri@duke.edu AB - We survey more than 1,000 CEOs and CFOs to understand how capital is allocated, and decision-making authority is delegated, within firms. We find that CEOs are least likely to share or delegate decision-making authority in mergers and acquisitions, relative to delegation of capital structure, payout, investment, and capital allocation decisions. We also find that CEOs are more likely to delegate decision authority when the firm is large or complex. Delegation is less likely when the CEO is particularly knowledgeable about a project, when the CEO has an MBA degree or long tenure, and when the CEO's pay is tilted towards incentive compensation. We study capital allocation in detail and learn that most companies allocate funds across divisions using the net present value rule, the reputation of the divisional manager, the timing of a project‟s cash flows, and senior management's "gut feel." Corporate politics and corporate socialism are more important allocation criteria in foreign countries than in the U.S. ER - TY - JOUR AU - Jacob,Brian A. AU - Ludwig,Jens AU - Miller,Douglas L. TI - The Effects of Housing and Neighborhood Conditions on Child Mortality JF - National Bureau of Economic Research Working Paper Series VL - No. 17369 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17369 L1 - http://www.nber.org/papers/w17369.pdf N1 - Author contact info: Brian Jacob Gerald R. Ford School of Public Policy University of Michigan 735 South State Street Ann Arbor, MI 48109 Tel: 734-615-6994 Fax: NA E-Mail: bajacob@umich.edu Jens Ludwig University of Chicago 1155 East 60th Street Chicago, IL 60637 Tel: 773/834-0811 Fax: 773/834-1582 E-Mail: jludwig@uchicago.edu Douglas L. Miller University of California, Davis Department of Economics One Shields Avenue Davis, CA 95616-8578 Tel: 530/752-8490 E-Mail: dlmiller@ucdavis.edu AB - In this paper we estimate the causal effects on child mortality from moving into less distressed neighborhood environments. We match mortality data to information on every child in public housing that applied for a housing voucher in Chicago in 1997 (N=11,848). Families were randomly assigned to the voucher wait list, and only some families were offered vouchers. The odds ratio for the effects of being offered a housing voucher on overall mortality rates is equal to 1.11 for all children (95% CI 0.54 to 2.10), 1.50 for boys (95% CI 0.72 to 2.89) and 0.00 for girls – that is, the voucher offer is perfectly protective for mortality for girls (95% CI 0 to 0.79). Our paper also addresses a methodological issue that may arise in studies of low-probability outcomes – perfect prediction by key explanatory variables. ER - TY - JOUR AU - Graham,John R. AU - Li,Si AU - Qiu,Jiaping TI - Managerial Attributes and Executive Compensation JF - National Bureau of Economic Research Working Paper Series VL - No. 17368 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17368 L1 - http://www.nber.org/papers/w17368.pdf N1 - Author contact info: John Graham Duke University Fuqua School of Business 100 Fuqua Drive Durham, NC 27708-0120 Tel: 919/660-7857 Fax: 919/660-8038 E-Mail: john.graham@duke.edu Si Li School of Business and Economics Wilfrid Laurier University Waterloo, ON N2L 3C5, Canada E-Mail: sli@wlu.ca Jiaping Qiu DeGroote School of Business McMaster University Hamilton, ON L8S 4M4, Canada E-Mail: qiu@mcmaster.ca AB - We study the role of firm- and manager-specific heterogeneities in executive compensation. We decompose the variation in executive compensation and find that time invariant firm and especially manager fixed effects explain a majority of the variation in executive pay. We then show that in many settings, it is important to include fixed effects to mitigate potential omitted variable bias. Furthermore, we find that compensation fixed effects are significantly correlated with management styles (i.e., manager fixed effects in corporate policies). Finally, the method used in the paper has a number of potential applications in financial economics. ER - TY - JOUR AU - Galasso,Alberto AU - Schankerman,Mark AU - Serrano,Carlos J. TI - Trading and Enforcing Patent Rights JF - National Bureau of Economic Research Working Paper Series VL - No. 17367 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17367 L1 - http://www.nber.org/papers/w17367.pdf N1 - Author contact info: Alberto Galasso Rotman School of Management University of Toronto 105 St. George Street Toronto, ON CANADA M5S 3E6 Fax: 905-569-4397 E-Mail: Alberto.Galasso@Rotman.Utoronto.Ca Mark Schankerman Department of Economics, R.516 London School of Economics Houghton Street London WC2A 2AE UK Tel: 442079557518 E-Mail: M.Schankerman@lse.ac.uk Carlos J. Serrano Department of Economics University of Toronto 150 St. George Street Toronto, ON M5S 3G7 CANADA Tel: 416/946-3404 E-Mail: carlos.serrano@utoronto.ca AB - We study how the market for innovation affects enforcement of patent rights. Conventional wisdom associates the gains from trade with comparative advantage in manufacturing or marketing. We show that these gains imply that patent transactions should increase litigation risk. We identify a new source of gains from trade, comparative advantage in patent enforcement, and show that transactions driven by this motive should reduce litigation. Using data on trade and litigation of individually-owned patents in the U.S., we exploit variation in capital gains tax rates as an instrument to identify the causal effect of trade on litigation. We find that taxes strongly effect patent transactions, and that reallocation of patent rights reduces litigation risk, on average. The impact of trade on litigation is heterogeneous, however. Patents with larger potential gains from trade are more likely to change ownership, suggesting that the market for innovation is efficient. We also show that the impact of trade on litigation depends on characteristics of the transactions. ER - TY - JOUR AU - Dong,Yan AU - Whalley,John TI - Gains and Losses from Potential Bilateral US-China Trade Retaliation JF - National Bureau of Economic Research Working Paper Series VL - No. 17366 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17366 L1 - http://www.nber.org/papers/w17366.pdf N1 - Author contact info: Yan Dong Institute of World Economics and Politics Chinese Academy of Social Sciences 15th Floor of CASS Building No.5 Jianguomen Nei Avenue Beijing, China, 100732 E-Mail: dongyan@cass.org.cn John Whalley Department of Economics Social Science Centre University of Western Ontario London, ON N6A 5C2 CANADA Tel: 519/661-3509 Fax: 519/661-3666 E-Mail: jwhalley@uwo.ca AB - Two closely related numerical general equilibrium models of world trade are used to analyze the potential consequences of US-China bilateral retaliation on trade flows and welfare. One is a conventional Armington trade model with five regions, the US, China, EU, Japan and Rest of the World, and calibrated to a global 2009 micro consistent data set. The other is a modified version of this model with monetary non neutrals and including China’s trade surplus as an endogenous variable. Who may gain or loss from global trade conflicts spawned by adjustment pressures in the post crisis world is much debated. In a US-China trade conflict, Europe and Japan would seem gainers from preferential access to US and Chinese markets. The loss of markets would hurt the US, but moving closer to an optimal tariff could be the source of terms of trade gains. And the ease of substitution across trading partners practices would determine costs for China. Results from the conventional model suggest that retaliation between the two countries can be welfare improving for US as it substitutes expenditures into own goods and improve its terms of trade with non retaliatory regions, while China and non retaliatory regions maybe adversely affected. Results in the endogenous trade surplus model from the central case model specification ,however, suggest that both the US and the EU (the deficit regions) have welfare losses in most cases, while the surplus region, China, and the ROW have welfare gains. In both models, when the bilateral tariff rates are very high, gains accrue to the EU and Japan from trade diversion if the substitutions elasticities of imports are high. Costs will are borne by the US and China in lost exports, lowered terms of trade and adjustment costs at home. ER - TY - JOUR AU - Chen,Hejing AU - Whalley,John TI - The WTO Government Procurement Agreement and Its Impacts on Trade JF - National Bureau of Economic Research Working Paper Series VL - No. 17365 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17365 L1 - http://www.nber.org/papers/w17365.pdf N1 - Author contact info: Hejing Chen Department of International Economics and Business School of Economics Xiamen University 361005 Fujian Province P.R.China E-Mail: hjchen.xmu@gmail.com John Whalley Department of Economics Social Science Centre University of Western Ontario London, ON N6A 5C2 CANADA Tel: 519/661-3509 Fax: 519/661-3666 E-Mail: jwhalley@uwo.ca AB - This paper assesses the impacts of the WTO Government Procurement Agreement (GPA) on trade in both goods and services among members using a gravity model applied to a panel dataset covering 20 OECD countries over the period 1996-2008 for trade in goods and 1999-2008 for trade in services. The agreement dates from 1996 and covers 41 (mainly OECD) countries (/areas). China is now negotiating possible membership. Little has been written on the GPA which is a plurilateral agreement covering both goods and services. It mutually extends commitments only to signatories, but has commitments going beyond those in the earlier GATT procurement code. Government service markets are large, and trade in these also has spillover effects on trade in services and goods. Results suggest that GPA membership has a positive impact on trade in both goods and services between parties as well as on outward foreign affiliate service sales. The number of GPA parties has a small marginal negative effect on trade in goods. Service exports also increase slightly with more parties participating in the GPA. The growth of government procurement contracts above the threshold under the GPA also fosters service imports, exports and outward foreign affiliate sales. ER - TY - JOUR AU - Bayer,Patrick AU - McMillan,Robert TI - Tiebout Sorting and Neighborhood Stratification JF - National Bureau of Economic Research Working Paper Series VL - No. 17364 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17364 L1 - http://www.nber.org/papers/w17364.pdf N1 - Author contact info: Patrick Bayer Department of Economics Duke University 213 Social Sciences Durham, NC 27708 Tel: 919/660-1832 E-Mail: patrick.bayer@duke.edu Robert McMillan University of Toronto Department of Economics 150 St. George Street Toronto, ON M5S 3G7 CANADA Tel: 416/978-4190 Fax: 416/978-6713 E-Mail: mcmillan@chass.utoronto.ca AB - Tiebout’s classic 1956 paper has strong implications regarding stratification across and within jurisdictions, predicting in the simplest instance a hierarchy of internally homogeneous communities ordered by income. Typically, urban areas are less than fully stratified, and the question arises how much departures from standard Tiebout assumptions contribute to observed within-neighborhood mixing. This paper quantifies the separate effects on neighborhood stratification of employment geography (via costly commuting) and preferences for housing attributes. It does so using an equilibrium sorting model, estimated with rich Census micro-data. Simulations based on the model using credible preference estimates show that counterfactual reductions in commuting costs lead to marked increases in racial and education segregation and, to a lesser degree, increases in income segregation, given that households now find it easier to locate in neighborhoods with like households. While turning off preferences for housing characteristics increases racial segregation, especially for blacks, doing so reduces income segregation, indicating that heterogeneity in the housing stock serves to stratify households based on ability-to-pay. Further, we show that differences in housing also help accentuate differences in the consumption of local amenities. ER - TY - JOUR AU - Qureshi,Mahvash S. AU - Ostry,Jonathan D. AU - Ghosh,Atish R. AU - Chamon,Marcos TI - Managing Capital Inflows: The Role of Capital Controls and Prudential Policies JF - National Bureau of Economic Research Working Paper Series VL - No. 17363 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17363 L1 - http://www.nber.org/papers/w17363.pdf N1 - Author contact info: Mahvash S. Qureshi Research Department International Monetary Fund HQ1-09-612 700 19th Street, N.W. Washington DC, 20431 E-Mail: mqureshi@imf.org Jonathan D. Ostry Research Department International Monetary Fund HQ1-10-700 700 19th Street, N.W. Washington DC, 20431 E-Mail: jostry@imf.org Atish R. Ghosh Research Department International Monetary Fund HQ1-09-612 700 19th Street, N.W. Washington DC, 20431 E-Mail: aghosh@imf.org Marcos Chamon Research Department International Monetary Fund HQ1-09-612 700 19th Street, N.W. Washington DC, 20431 E-Mail: MCHAMON@imf.org M3 - presented at "Global Financial Crisis Conference", June 3-4, 2011 AB - We examine whether macroprudential policies and capital controls can contribute to enhancing financial stability in the face of large capital inflows. We construct new indices of foreign currency (FX)-related prudential measures, domestic prudential measures, and financial-sector capital controls for 51 emerging market economies over the period 1995–2008. Our results indicate that both capital controls and FX-related prudential measures are associated with a lower proportion of FX lending in total domestic bank credit and a lower proportion of portfolio debt in total external liabilities. Other prudential policies appear to help restrain the intensity of aggregate credit booms. Experience from the global financial crisis suggests that prudential and capital control policies in place during the boom seem to have enhanced economic resilience during the bust. ER - TY - JOUR AU - Dominguez,Kathryn M.E. AU - Hashimoto,Yuko AU - Ito,Takatoshi TI - International Reserves and the Global Financial Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 17362 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17362 L1 - http://www.nber.org/papers/w17362.pdf N1 - Author contact info: Kathryn M.E. Dominguez University of Michigan Department of Economics and Ford School Weill Hall 735 South State Street Ann Arbor, MI 48109 Tel: 734-764-9498 Fax: 734-763-9181 E-Mail: kathrynd@umich.edu Yuko Hashimoto Statistics Department International Monetary Fund 700 19th Street, NW Washington D.C., 20431 E-Mail: yhashimoto@imf.org Takatoshi Ito Graduate School of Economics University of Tokyo 7-3-1 Hongo, Bunkyo-ku Tokyo 113-0033 JAPAN Tel: 81-3-5841-5608 Fax: 81-3-5841-5521 E-Mail: tito@e.u-tokyo.ac.jp M3 - presented at "Global Financial Crisis Conference", June 3-4, 2011 AB - This study examines whether pre-crisis international reserve accumulations, as well as exchange rate and reserve policy decisions made during the global financial crisis, can help to explain cross-country differences in post-crisis economic performance. Our approach focuses not only on the total stock of official reserves held by countries, but also on the decisions by governments to purchase or sell reserve assets during the crisis period. We introduce new data made available through the IMF Special Data Dissemination Standard (SDDS) Reserve Template, which allow us to distinguish interest income and valuation changes in the stock of official reserves from the actively managed component of reserves. We use this novel data to gauge how (and whether) reserve accumulation policies influenced the economic and financial performance of countries during and after the global crisis. Our findings support the view that higher reserve accumulations prior to the crisis are associated with higher post-crisis GDP growth. ER - TY - JOUR AU - Barkbu,Bergljot AU - Eichengreen,Barry AU - Mody,Ashoka TI - International Financial Crises and the Multilateral Response: What the Historical Record Shows JF - National Bureau of Economic Research Working Paper Series VL - No. 17361 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17361 L1 - http://www.nber.org/papers/w17361.pdf N1 - Author contact info: Bergljot Barkbu European Department International Monetary Fund 700 19th Street, NW Washington DC 20431 E-Mail: bbarkbu@imf.org Barry Eichengreen Department of Economics University of California, Berkeley 549 Evans Hall 3880 Berkeley, CA 94720-3880 Tel: 510/642-2772 Fax: 510/643-0926 E-Mail: eichengr@econ.Berkeley.edu Ashoka Mody Research Department International Monetary Fund 700 19th Street, NW Washington DC 20431 E-Mail: amody@imf.org AB - We review the modern history of financial crises, providing a context for analyses of the world’s recent bout of financial instability. Along with indicators of economic performance in the subject countries, we present a comprehensive description of multilateral rescue efforts spanning the last 30 years. We show that while emergency lending has grown, reliance on debt restructuring has declined. This leads us to ask what can be done to rebalance the management of debt problems toward a better mix of emergency lending and private sector burden sharing. Building on the literature on collective action clauses, we explore the idea of sovereign cocos, contingent debt securities that automatically reduce payment obligations in the event of debt-sustainability problems. ER - TY - JOUR AU - Claessens,Stijn AU - Tong,Hui AU - Wei,Shang-Jin TI - From the Financial Crisis to the Real Economy: Using Firm-level Data to Identify Transmission Channels JF - National Bureau of Economic Research Working Paper Series VL - No. 17360 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17360 L1 - http://www.nber.org/papers/w17360.pdf N1 - Author contact info: Stijn Claessens Research Department IMF Washington DC 700 19th Street N.W. Washington, DC 20431 E-Mail: SClaessens@imf.org Hui Tong Research Department IMF Washington DC 700 19th Street N.W. Washington, DC 20431 E-Mail: htong@imf.org Shang-Jin Wei Graduate School of Business Columbia University Uris Hall 619 3022 Broadway New York, NY 10027-6902 Tel: 212/854-9139 E-Mail: shangjin.wei@columbia.edu AB - Using accounting data for 7722 non-financial firms in 42 countries, we examine how the 2007-2009 crisis affected firm performance and how various linkages propagated shocks across borders. We isolate and compare effects from changes in external financing conditions, domestic demand, and international trade on firms’ profits, sales and investment using both sectoral benchmarks and firm-specific sensitivities estimated prior to the crisis. We find that the crisis had a bigger negative impact on firms with greater sensitivity to demand and trade, particularly in countries more open to trade. Interestingly, financial openness appears to have made limited difference. ER - TY - JOUR AU - Rose,Andrew K. AU - Spiegel,Mark M. TI - Dollar Illiquidity and Central Bank Swap Arrangements During the Global Financial Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 17359 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17359 L1 - http://www.nber.org/papers/w17359.pdf N1 - Author contact info: Andrew K. Rose Haas School of Business Administration University of California, Berkeley Berkeley, CA 94720-1900 Tel: 510/642-6609 Fax: 510/642-4700 E-Mail: arose@haas.berkeley.edu Mark M. Spiegel Federal Reserve Bank of San Francisco 101 Market Street San Francisco, CA 94105 E-Mail: mark.spiegel@sf.frb.org M3 - presented at "Global Financial Crisis Conference", June 3-4, 2011 AB - While the global financial crisis was centered in the United States, it led to a surprising appreciation in the dollar, suggesting global dollar illiquidity. In response, the Federal Reserve partnered with other central banks to inject dollars into the international financial system. Empirical studies of the success of these efforts have yielded mixed results, in part because their timing is likely to be endogenous. In this paper, we examine the cross-sectional impact of these interventions. Theory consistent with dollar appreciation in the crisis suggests that their impact should be greater for countries that have greater exposure to the United States through trade and financial channels, less transparent holdings of dollar assets, and greater illiquidity difficulties. We examine these predictions for observed cross-sectional changes in CDS spreads, using a new proxy for innovations in perceived changes in sovereign risk based upon Google-search data. We find robust evidence that auctions of dollar assets by foreign central banks disproportionately benefited countries that were more exposed to the United States through either trade linkages or asset exposure. We obtain weaker results for differences in asset transparency or illiquidity. However, several of the important announcements concerning the international swap programs disproportionately benefited countries exhibiting greater asset opaqueness. ER - TY - JOUR AU - Raddatz,Claudio AU - Schmukler,Sergio L. TI - On the International Transmission of Shocks: Micro-Evidence from Mutual Fund Portfolios JF - National Bureau of Economic Research Working Paper Series VL - No. 17358 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17358 L1 - http://www.nber.org/papers/w17358.pdf N1 - Author contact info: Claudio Raddatz Research Economist World Bank, MSN3-301 1818 H Street, N.W. Washington, DC 20433 Tel: 202/458-2145 E-Mail: craddatz@bcentral.cl Sergio Schmukler The World Bank MSN MC3-301 1818 H Street, N.W. Washington, DC 20433 Tel: 202-458-4167 Fax: 202-522-3518 E-Mail: Sschmukler@worldbank.org M3 - presented at "Global Financial Crisis Conference", June 3-4, 2011 AB - This paper uses micro-level data on mutual funds from different financial centers investing in equity and bonds to study how investors and managers behave and transmit shocks across countries. The paper finds that the volatility of mutual fund investments is driven quantitatively by both the underlying investors and fund managers through (i) injections/redemptions into each fund and (ii) managerial changes in country weights and cash. Both investors and managers respond to country returns and crises and adjust their investments substantially, for example, generating large reallocations during the global crisis. Their behavior tends to be pro-cyclical, reducing their exposure to countries during bad times and increasing it when conditions improve. Managers actively change country weights over time, although there is significant short-run pass-through from returns to these weights. Consequently, capital flows from mutual funds do not seem to have a stabilizing role and expose countries in their portfolios to foreign shocks. ER - TY - JOUR AU - Fratzscher,Marcel TI - Capital Flows, Push versus Pull Factors and the Global Financial Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 17357 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17357 L1 - http://www.nber.org/papers/w17357.pdf N1 - Author contact info: Marcel Fratzscher European Central Bank Kaiserstrasse 29 D-60311 Frankfurt/Main GERMANY Tel: +49 - 69 1344 6871 E-Mail: marcel.fratzscher@ecb.int M3 - presented at "Global Financial Crisis Conference", June 3-4, 2011 AB - The causes of the 2008 collapse and subsequent surge in global capital flows remain an open and highly controversial issue. Employing a factor model coupled with a dataset of high-frequency portfolio capital flows to 50 economies, the paper finds that common shocks – key crisis events as well as changes to global liquidity and risk – have exerted a large effect on capital flows both in the crisis and in the recovery. However, these effects have been highly heterogeneous across countries, with a large part of this heterogeneity being explained by differences in the quality of domestic institutions, country risk and the strength of domestic macroeconomic fundamentals. Comparing and quantifying these effects shows that common factors (“push” factors) were overall the main drivers of capital flows during the crisis, while country-specific determinants (“pull” factors) have been dominant in accounting for the dynamics of global capital flows in 2009 and 2010, in particular for emerging markets. ER - TY - JOUR AU - Hale,Galina TI - Bank Relationships, Business Cycles, and Financial Crises JF - National Bureau of Economic Research Working Paper Series VL - No. 17356 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17356 L1 - http://www.nber.org/papers/w17356.pdf N1 - Author contact info: Galina Hale Economic Research Federal Reserve Bank of San Francisco 101 Market St., MS 1130 San Francisco, CA 94105 Tel: 415-974-3131 Fax: 415-974-2168 E-Mail: Galina.B.Hale@sf.frb.org M3 - presented at "Global Financial Crisis Conference", June 3-4, 2011 AB - The importance of information asymmetries in the capital markets is commonly accepted as one of the main reasons for home bias in investment. We posit that effects of such asymmetries may be reduced through relationships between banks established through bank-to-bank lending and provide evidence to support this claim. To analyze dynamics of formation of such relationships during 1980-2009 time period, we construct a global banking network of 7938 banking institutions from 141 countries. We find that recessions and banking crises tend to have negative effects on the formation of new connections and that these effects are not the same for all countries or all banks. We also find that the global financial crisis of 2008-09 had a large negative impact on the formation of new relationships in the global banking network, especially by large banks that have been previously immune to effects of banking crises and recessions. ER - TY - JOUR AU - Cetorelli,Nicola AU - Goldberg,Linda S. TI - Liquidity management of U.S. global banks: Internal capital markets in the great recession JF - National Bureau of Economic Research Working Paper Series VL - No. 17355 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17355 L1 - http://www.nber.org/papers/w17355.pdf N1 - Author contact info: Nicola Cetorelli Federal Reserve Bank of New York 33 Liberty Street New York, NY 10045 Tel: 212 720 5071 Fax: 212 720 8363 E-Mail: nicola.cetorelli@ny.frb.org Linda S. Goldberg Federal Reserve Bank-New York 33 Liberty Street New York, NY 10045 Tel: 212/720-2836 Fax: 212/720-6831 E-Mail: linda.goldberg@ny.frb.org AB - The recent crisis highlighted the importance of globally active banks in linking markets. One channel for this linkage is through how these banks manage liquidity across their entire banking organization. We document that funds regularly flow between parent banks and their affiliates in diverse foreign markets. We use the Great Recession as an opportunity to identify the balance sheet shocks to parent banks in the United States, and then explore which foreign affiliate features are associated with those businesses being protected, for example their status as important locations in sourcing funding or as destinations for foreign investment activity. We show that distance from the parent organization lays a significant role in this allocation, where distance is bank-affiliate specific and depends on the ex ante relative importance of such locations as local funding pools and in their overall foreign investment strategies. These flows are a form of global interdependence previously unexplored in the literature on international shock transmission. ER - TY - JOUR AU - Kalemli-Ozcan,Sebnem AU - Sorensen,Bent AU - Yesiltas,Sevcan TI - Leverage Across Firms, Banks, and Countries JF - National Bureau of Economic Research Working Paper Series VL - No. 17354 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17354 L1 - http://www.nber.org/papers/w17354.pdf N1 - Author contact info: Sebnem Kalemli-Ozcan John F. Kennedy School of Government Harvard University 79 JFK Street, Mailbox 28 Cambridge, MA 02138 E-Mail: sebnem.kalemli-ozcan@mail.uh.edu Bent Sorensen Department of Economics University of Houston 204 McElhinney Hall Houston, TX 77204 Tel: 713-743-3841 Fax: 713-743-3798 E-Mail: bent.sorensen@mail.uh.edu Sevcan Yesiltas Johns Hopkins University Department of Economics 3400 N. Charles Street 440 Mergenthaler Hall Baltimore, MD 21218 Tel: 410-516-7601 Fax: 410-516-7600 E-Mail: syesilt1@jhu.edu M3 - presented at "Global Financial Crisis Conference", June 3-4, 2011 AB - We present new stylized facts on bank and firm leverage for 2000-2009 using extensive internationally comparable micro level data from several countries. The main result is that there was very little buildup in leverage for the average non-financial firm and commercial bank before the crisis, but the picture was quite different for large commercial banks in the United States and for investment banks worldwide. We document the following patterns: a) there was an increase in leverage ratios of investment banks and financial firms during the early 2000s; b) there was no visible increase for commercial banks and non-financial firms; c) off balance-sheet items constitute a big fraction of assets, especially for large commercial banks in the United States; d) the leverage ratio is procyclical for investment banks and for large commercial banks in the United States; e) banks in emerging markets with tighter bank regulation and stronger investor protection experienced significantly less deleveraging during the crisis. These results show that excessive risk taking before the crisis was not easily detectable because the risk involved the quality rather than the amount of assets. ER - TY - JOUR AU - Gourinchas,Pierre-Olivier AU - Rey,Hélène AU - Truempler,Kai TI - The Financial Crisis and The Geography of Wealth Transfers JF - National Bureau of Economic Research Working Paper Series VL - No. 17353 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17353 L1 - http://www.nber.org/papers/w17353.pdf N1 - Author contact info: Pierre-Olivier Gourinchas Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-0720 Fax: 510/642-6615 E-Mail: pog@econ.berkeley.edu Helene Rey London Business School Regents Park London NW1 4SA UNITED KINGDOM Tel: 44 2070008412 E-Mail: hrey@london.edu Kai Truempler Kai Alexander Truempler Economics Department London Business School Regent's Park London NW1 4SA United Kingdom Tel: +44 75 15149509 E-Mail: ktruempler.phd2007@london.edu AB - This paper studies the geography of wealth transfers during the 2008 global financial crisis. We construct valuation changes on bilateral external positions in equity, direct investment and portfolio debt at the height of the crisis to map who benefited and who lost on their external exposure. We find a very diverse set of fortunes governed by the structure of countries' external portfolios. In particular, we are able to relate the gains and losses on debt portfolios to the country's exposure to ABCP conduits and the extent of dollar shortage. ER - TY - JOUR AU - Lane,Philip R. AU - Ferretti,Gian Maria Milesi TI - External Adjustment and the Global Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 17352 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17352 L1 - http://www.nber.org/papers/w17352.pdf N1 - Author contact info: Philip Lane The Sutherland Centre Arts Block Trinity College Dublin Dublin 2 IRELAND E-Mail: plane@tcd.ie Gian Maria Milesi Ferretti International Monetary Fund Western Hemisphere Department, HQ1-10-120 700 19th Street, N.W. Washington, DC 20431 Tel: 202 623-7441 Fax: 202 589-7441 E-Mail: gmilesiferretti@imf.org M3 - presented at "Global Financial Crisis Conference", June 3-4, 2011 AB - The period preceding the global financial crisis was characterized by a substantial widening of current account imbalances across the world. Since the onset of the crisis, these imbalances have contracted to a significant extent. In this paper, we analyze the ongoing process of external adjustment in advanced economies and emerging markets. We find that countries whose pre-crisis current account balances were in excess of what could be explained by standard economic fundamentals have experienced the largest contractions in their external balance. We subsequently examine the contributions of real exchange rates, domestic demand and domestic output to the adjustment process (allowing for differences across exchange rate regimes) and find that external adjustment in deficit countries was achieved primarily through demand compression, rather than expenditure switching. Finally, we show that changes in other investment flows were the main channel of financial account adjustment, with official external assistance and ECB liquidity cushioning the exit of private capital flows for some countries. ER - TY - JOUR AU - Forbes,Kristin J. AU - Warnock,Francis E. TI - Capital Flow Waves: Surges, Stops, Flight, and Retrenchment JF - National Bureau of Economic Research Working Paper Series VL - No. 17351 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17351 L1 - http://www.nber.org/papers/w17351.pdf N1 - Author contact info: Kristin Forbes MIT Sloan School of Management 100 Main Street, E62-416 Cambridge, MA 02142 Tel: 617/253-8996 Fax: 617/258-6855 E-Mail: kjforbes@mit.edu Francis E. Warnock Darden Business School University of Virginia Charlottesville, VA 22906-6550 Tel: 434/924-6076 Fax: 434/243-8945 E-Mail: warnockf@darden.virginia.edu M3 - presented at "Global Financial Crisis Conference", June 3-4, 2011 AB - This paper analyzes waves in international capital flows. We develop a new methodology for identifying episodes of extreme capital flow movements using data that differentiates activity by foreigners and domestics. We identify episodes of “surges” and “stops” (sharp increases and decreases, respectively, of gross inflows) and “flight” and “retrenchment” (sharp increases and decreases, respectively, of gross outflows). Our approach yields fundamentally different results than the previous literature that used measures of net flows. Global factors, especially global risk, are significantly associated with extreme capital flow episodes. Contagion, whether through trade, banking, or geography, is also associated with stop and retrenchment episodes. Domestic macroeconomic characteristics are generally less important, and we find little association between capital controls and the probability of having surges or stops driven by foreign capital flows. The results provide insights for different theoretical approaches explaining crises and capital flow volatility. ER - TY - JOUR AU - Bertaut,Carol AU - DeMarco,Laurie Pounder AU - Kamin,Steven B. AU - Tryon,Ralph W. TI - ABS Inflows to the United States and the Global Financial Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 17350 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17350 L1 - http://www.nber.org/papers/w17350.pdf N1 - Author contact info: Carol Bertaut Board of Governors 20th Street and Constitution Avenue, NW Washington, DC 20551 E-Mail: bertautc@frb.gov Laurie Pounder DeMarco Board of Governors 20th Street and Constitution Avenue, NW Washington, DC 20551 E-Mail: laurie.p.demarco@frb.gov Steven B. Kamin Board of Governors 20th Street and Constitution Avenue, NW Washington, DC 20551 Tel: 202/452-3339 E-Mail: steven.kamin@frb.gov Ralph W. Tryon Board of Governors 20th Street and Constitution Avenue, NW Washington, DC 20551 E-Mail: ralph.tryon@frb.gov M3 - presented at "Global Financial Crisis Conference", June 3-4, 2011 AB - The “global saving glut” (GSG) hypothesis argues that the surge in capital inflows from emerging market economies to the United States led to significant declines in long-term interest rates in the United States and other industrial economies. In turn, these lower interest rates, when combined with both innovations and deficiencies of the U.S. credit market, are believed to have contributed to the U.S. housing bubble and to the buildup in financial vulnerabilities that led to the financial crisis. Because the GSG countries for the most part restricted their U.S. purchases to Treasuries and Agency debt, their provision of savings to ultimately risky subprime mortgage borrowers was necessarily indirect, pushing down yields on safe assets and increasing the appetite for alternative investments on the part of other investors. We present a more complete picture of how capital flows contributed to the crisis, drawing attention to the sizable inflows from European investors into U.S. private-label asset-backed securities (ABS), including mortgage-backed securities and other structured investment products. By adding to domestic demand for private-label ABS, substantial foreign acquisitions of these securities contributed to the decline in their spreads over Treasury yields. Through a combination of empirical estimation and model simulation, we verify that both GSG inflows into Treasuries and Agencies, as well as European acquisitions of ABS, played a role in contributing to downward pressures on U.S. interest rates. ER - TY - JOUR AU - Olivetti,Claudia AU - Petrongolo,Barbara TI - Gender Gaps across Countries and Skills: Supply, Demand and the Industry Structure JF - National Bureau of Economic Research Working Paper Series VL - No. 17349 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17349 L1 - http://www.nber.org/papers/w17349.pdf N1 - Author contact info: Claudia Olivetti Boston University Department of Economics 270 Bay State Road Boston, MA 02215 Tel: 617/613-1228 Fax: 617/353-4449 E-Mail: olivetti@bu.edu Barbara Petrongolo Centre for Economic Performance London School of Economics Houghton Street London WC2A 2AE E-Mail: B.Petrongolo@lse.ac.uk AB - The gender wage gap varies widely across countries and across skill groups within countries. Interestingly, there is a positive cross-country correlation between the unskilled-to-skilled gender wage gap and the corresponding gap in hours worked. Based on a canonical supply and demand framework, this positive correlation would reveal the presence of net demand forces shaping gender differences in labor market outcomes across skills and countries. We use a simple multi-sector framework to illustrate how differences in labor demand for different inputs can be driven by both within-industry and between-industry factors. The main idea is that, if the service sector is more developed in the US than in continental Europe, and unskilled women tend to be over-represented in this sector, we expect unskilled women to suffer a relatively large wage and/or employment penalty in the latter than in the former. We find that, overall, the between-industry component of labor demand explains more than half of the total variation in labor demand between the US and the majority of countries in our sample, as well as one-third of the correlation between wage and hours gaps. The between-industry component is relatively more important in countries where the relative demand for unskilled females is lowest. ER - TY - JOUR AU - Golosov,Mikhail AU - Hassler,John AU - Krusell,Per AU - Tsyvinski,Aleh TI - Optimal Taxes on Fossil Fuel in General Equilibrium JF - National Bureau of Economic Research Working Paper Series VL - No. 17348 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17348 L1 - http://www.nber.org/papers/w17348.pdf N1 - Author contact info: Mikhail Golosov Department of Economics Princeton University 111 Fisher Hall Princeton, NJ 08544 Tel: 609/258-4003 Fax: 609/258-6419 E-Mail: golosov@princeton.edu John Hassler Institute for International Economic Studies Stockholm University E-Mail: John.Hassler@iies.su.se Per Krusell Institute for International Economic Studies Stockholm University 106 91 STOCKHOLM SWEDEN E-Mail: per.krusell@iies.su.se Aleh Tsyvinski Department of Economics Yale University Box 208268 New Haven, CT 06520-8268 E-Mail: a.tsyvinski@yale.edu AB - We analyze a dynamic stochastic general-equilibrium (DSGE) model with an externality through climate change from using fossil energy. A central result of our paper is an analytical derivation of a simple formula for the marginal externality damage of emissions. This formula, which holds under quite plausible assumptions, reveals that the damage is proportional to current GDP, with the proportion depending only on three factors: (i) discounting, (ii) the expected damage elasticity (how many percent of the output flow is lost from an extra unit of carbon in the atmosphere), and (iii) the structure of carbon depreciation in the atmosphere. Very importantly, future values of output, consumption, and the atmospheric CO2 concentration, as well as the paths of technology and population, and so on, all disappear from the formula. The optimal tax, using a standard Pigou argument, is then equal to this marginal externality. The simplicity of the formula allows the optimal tax to be easily parameterized and computed. Based on parameter estimates that rely on updated natural-science studies, we find that the optimal tax should be a bit higher than the median, or most well-known, estimates in the literature. We also show how the optimal taxes depend on the expectations and the possible resolution of the uncertainty regarding future damages. Finally, we compute the optimal and market paths for the use of energy and the corresponding climate change. ER - TY - JOUR AU - Ossa,Ralph TI - Trade Wars and Trade Talks with Data JF - National Bureau of Economic Research Working Paper Series VL - No. 17347 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17347 L1 - http://www.nber.org/papers/w17347.pdf N1 - Author contact info: Ralph Ossa University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-8907 E-Mail: ralph.ossa@chicagobooth.edu AB - What are the optimal tariffs of the US? What tariffs would prevail in a worldwide trade war? How costly would be a breakdown of international trade policy cooperation? And what is the scope for future multilateral trade negotiations? I address these and other questions using a unified framework which nests traditional, new trade, and political economy motives for protection. I find that US optimal tariffs average 60 percent, world trade war tariffs average 58 percent, the welfare losses from a breakdown of international trade policy cooperation average 3.5 percent, and the possible welfare gains from future multi- lateral trade negotiations average 0.3 percent. Optimal tariffs are tariffs which maximize a political economy augmented measure of real income. ER - TY - JOUR AU - Sher,Itai AU - Fox,Jeremy T. AU - Kim,Kyoo il AU - Bajari,Patrick TI - Partial Identification of Heterogeneity in Preference Orderings Over Discrete Choices JF - National Bureau of Economic Research Working Paper Series VL - No. 17346 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17346 L1 - http://www.nber.org/papers/w17346.pdf N1 - Author contact info: Itai Sher Department of Economics University of Minnesota 4-145 Hanson Hall 1925 Fourth Street South Minneapolis, MN 55455 E-Mail: isher@umn.edu Jeremy T. Fox Economics Department University of Michigan 238 Lorch Hall 611 Tappan Ave Ann Arbor, MI 48104 Tel: 734-330-2854 Fax: 734-274-2331 E-Mail: jeremyfox@gmail.com Kyoo il Kim Department of Economics University of Minnesota 4-129 Hanson Hall 1925 4th Street South Minneapolis, MN 55455 Tel: 612-625-6793 E-Mail: kyookim@umn.edu Patrick Bajari Amazon.com 701 5th Avenue, Suite 1500 Seattle, WA 98104 Tel: 612/625-8369 Fax: 612/624-0209 E-Mail: bajari@umn.edu AB - We study a variant of a random utility model that takes a probability distribution over preference relations as its primitive. We do not model products using a space of observed characteristics. The distribution of preferences is only partially identified using cross-sectional data on varying budget sets. Imposing monotonicity in product characteristics does not restore full identification. Using a linear programming approach to partial identification, we show how to obtain bounds on probabilities of any ordering relation. We also do constructively point identify the proportion of consumers who prefer one budget set over one or two others. This result is useful for welfare. Panel data and special regressors are two ways to gain full point identification. ER - TY - JOUR AU - Beshears,John AU - Choi,James J. AU - Laibson,David AU - Madrian,Brigitte C. AU - Milkman,Katherine L. TI - The Effect of Providing Peer Information on Retirement Savings Decisions JF - National Bureau of Economic Research Working Paper Series VL - No. 17345 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17345 L1 - http://www.nber.org/papers/w17345.pdf N1 - Author contact info: John Beshears Stanford Graduate School of Business 655 Knight Way Stanford, CA 94305-7298 Tel: 650/723-6792 E-Mail: beshears@stanford.edu James J. Choi Yale School of Management 135 Prospect Street P.O. Box 208200 New Haven, CT 06520-8200 E-Mail: james.choi@yale.edu David Laibson Department of Economics Littauer M-12 Harvard University Cambridge, MA 02138 Tel: 617/496-3402 Fax: 617/495-8570 E-Mail: dlaibson@gmail.com Brigitte C. Madrian John F. Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617-495-8917 Fax: 617-496-5960 E-Mail: Brigitte_Madrian@Harvard.edu Katherine L. Milkman University of Pennsylvania 3730 Walnut Street 561 Jon M. Huntsman Hall Philadelphia, PA19104 E-Mail: kmilkman@wharton.upenn.edu AB - We measure how receiving information about coworkers’ savings behavior affects recipients’ savings choices. Low-saving employees were sent a simplified 401(k) plan enrollment or contribution increase form. A randomized subset of forms included information on the (high) fraction of coworkers either participating in or contributing at least 6% of pay to the plan. We find no significant evidence that this peer information altered the savings decisions of recipients who had previously opted out of an automatic 401(k) enrollment program. Peer information decreased the savings of (unionized) recipients who were not eligible for automatic enrollment. Our results highlight the limitations of peer information interventions. ER - TY - JOUR AU - Werning,Ivan TI - Managing a Liquidity Trap: Monetary and Fiscal Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 17344 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17344 L1 - http://www.nber.org/papers/w17344.pdf N1 - Author contact info: Ivan Werning Department of Economics MIT 50 Memorial Drive, E51-251a Cambridge, MA 02142-1347 Tel: 617/452-3662 Fax: 617/253-1330 E-Mail: iwerning@mit.edu AB - I study monetary and fiscal policy in liquidity trap scenarios, where the zero bound on the nominal interest rate is binding. I work with a continuous-time version of the standard New Keynesian model. Without commitment, the economy suffers from deflation and depressed output. I show that, surprisingly, both are exacerbated with greater price flexibility. I examine monetary and fiscal policies that maximize utility for the agent in the model and refer to these as optimal throughout the paper. I find that the optimal interest rate is set to zero past the liquidity trap and jumps discretely up upon exit. Inflation may be positive throughout, so the absence of deflation is not evidence against a liquidity trap. Output, on the other hand, always starts below its efficient level and rises above it. I then study fiscal policy and show that, regardless of parameters that govern the value of "fiscal multipliers" during normal or liquidity trap times, at the start of a liquidity trap optimal spending is above its natural level. However, it declines over time and goes below its natural level. I propose a decomposition of spending according to "opportunistic" and "stimulus" motives. The former is defined as the level of government purchases that is optimal from a static, cost-benefit standpoint, taking into account that, due to slack resources, shadow costs may be lower during a slump; the latter measures deviations from the former. I show that stimulus spending may be zero throughout, or switch signs, depending on parameters. Finally, I consider the hybrid where monetary policy is discretionary, but fiscal policy has commitment. In this case, stimulus spending is typically positive and increasing throughout the trap. ER - TY - JOUR AU - Bailey,Martha J. TI - Reexamining the Impact of Family Planning Programs on U.S. Fertility: Evidence from the War on Poverty and the Early Years of Title X JF - National Bureau of Economic Research Working Paper Series VL - No. 17343 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17343 L1 - http://www.nber.org/papers/w17343.pdf N1 - Author contact info: Martha J. Bailey University of Michigan Department of Economics 611 Tappan Street 207 Lorch Hall Ann Arbor, MI 48109-1220 Tel: 734/647-6874 Fax: 734/764-2769 E-Mail: baileymj@umich.edu AB - Almost 50 years after domestic U.S. family planning programs began, their effects on childbearing remain controversial. Using the county-level roll-out of these programs from 1964 to 1973, this paper reevaluates their shorter- and longer-term effects on U.S. fertility rates. I find that the introduction of family planning is associated with significant and persistent reductions in fertility driven both by falling completed childbearing and childbearing delay. Although federally-funded family planning accounted for a small portion of the post-baby boom U.S. fertility decline, the estimates imply that they reduced childbearing among poor women by 21 to 29 percent. ER - TY - JOUR AU - Andreoni,James AU - Sprenger,Charles TI - Uncertainty Equivalents: Testing the Limits of the Independence Axiom JF - National Bureau of Economic Research Working Paper Series VL - No. 17342 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17342 L1 - http://www.nber.org/papers/w17342.pdf N1 - Author contact info: James Andreoni Department of Economics University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 Tel: 858/534-3832 Fax: 858/534-7040 E-Mail: andreoni@ucsd.edu Charles Sprenger Department of Economics Stanford University Stanford, CA 94305 E-Mail: c.sprenger@gmail.com AB - There is convincing experimental evidence that Expected Utility fails, but when does it fail, how severely, and for what fraction of subjects? We explore these questions using a novel measure we call the uncertainty equivalent. We find Expected Utility performs well away from certainty, but fails near certainty for about 40% of subjects. Comparing non-Expected Utility theories, we strongly reject Prospect Theory probability weighting, we support disappointment aversion if amended to allow violations of stochastic dominance, but find the u-v model of a direct preference for certainty the most parsimonious approach. ER - TY - JOUR AU - Davis,Lucas W. AU - Wolfram,Catherine TI - Deregulation, Consolidation, and Efficiency: Evidence from U.S. Nuclear Power JF - National Bureau of Economic Research Working Paper Series VL - No. 17341 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17341 L1 - http://www.nber.org/papers/w17341.pdf N1 - Author contact info: Lucas W. Davis Haas School of Business University of California Berkeley, CA 94720-1900 E-Mail: ldavis@haas.berkeley.edu Catherine Wolfram Haas School of Business University of California, Berkeley Berkeley, CA 94720-1900 Tel: 510/642-2588 Fax: 510/643-1420 E-Mail: wolfram@haas.berkeley.edu AB - For the first four decades of its existence the U.S. nuclear power industry was run by regulated utilities, with most companies owning only one or two reactors. Beginning in the late 1990s electricity markets in many states were deregulated and almost half of the nation’s 103 reactors were sold to independent power producers selling power in competitive wholesale markets. Deregulation has been accompanied by substantial market consolidation and today the three largest companies control more than one-third of all U.S. nuclear capacity. We find that deregulation and consolidation are associated with a 10 percent increase in operating efficiency, achieved primarily by reducing the frequency and duration of reactor outages. At average wholesale prices the value of this increased efficiency is approximately $2.5 billion annually and implies an annual decrease of almost 40 million metric tons of carbon dioxide emissions. ER - TY - JOUR AU - Lee,Soohyung AU - Niederle,Muriel AU - Kim,Hye-Rim AU - Kim,Woo-Keum TI - Propose with a Rose? Signaling in Internet Dating Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 17340 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17340 L1 - http://www.nber.org/papers/w17340.pdf N1 - Author contact info: Soohyung Lee Department of Economics University of Maryland, College Park E-Mail: lees@econ.umd.edu Muriel Niederle Department of Economics 579 Serra Mall Stanford University Stanford, CA 94305-6072 Tel: 650/723-7359 Fax: 650/725-5702 E-Mail: niederle@stanford.edu Hye-Rim Kim Korea Marriage Culture Institute E-Mail: soohlee@gmail.com Woo-Keum Kim Korea Marriage Culture Institute E-Mail: muriel.niederle@gmail.com AB - The large literature on costly signaling and the somewhat scant literature on preference signaling had varying success in showing the effectiveness of signals. We use a field experiment to show that even when everyone can send a signal, signals are free and the only costs are opportunity costs, sending a signal increases the chances of success. In an online dating experiment, participants can attach “virtual roses” to a proposal to signal special interest in another participant. We find that attaching a rose to an offer substantially increases the chance of acceptance. This effect is driven by an increase in the acceptance rate when the offer is made to a participant who is less desirable than the proposer. Furthermore, participants endowed with more roses have more of their offers accepted than their counterparts. ER - TY - JOUR AU - Rooij,Maarten van AU - Lusardi,Annamaria AU - Alessie,Rob J. TI - Financial Literacy, Retirement Planning, and Household Wealth JF - National Bureau of Economic Research Working Paper Series VL - No. 17339 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17339 L1 - http://www.nber.org/papers/w17339.pdf N1 - Author contact info: Maarten van Rooij Dutch Central Bank P. O. Box 98 1000 AB Amsterdam The Netherlands E-Mail: M.C.J.van.Rooij@DNB.NL Annamaria Lusardi The George Washington University School of Business 2201 G Street, NW Duques Hall, Suite 450E Washington, DC 20052 Tel: 202-994-8410 E-Mail: alusardi@gwu.edu Rob J. Alessie University of Groningen Department of Economics P.O. Box 800 9700 AV Groningen Tel: +31-50-3637240 E-Mail: r.j.m.alessie@rug.nl AB - There is ample empirical evidence documenting widespread financial illiteracy and limited pension knowledge. At the same time, the distribution of wealth is widely dispersed and many workers arrive on the verge of retirement with few or no personal assets. In this paper, we investigate the relationship between financial literacy and household net worth, relying on comprehensive measures of financial knowledge designed for a special module of the Dutch Central Bank Household Survey (DHS). Our findings provide evidence of a strong positive association between financial literacy and net worth, even after controlling for many determinants of wealth. Moreover, we discuss two channels through which financial literacy might facilitate wealth accumulation. First, financial knowledge increases the likelihood of investing in the stock market, allowing individuals to benefit from the equity premium. Second, financial literacy is positively related to retirement planning, and the development of a savings plan has been shown to boost wealth. Overall, financial literacy, both directly and indirectly, is found to have a strong link to household wealth. ER - TY - JOUR AU - Kaplan,Greg AU - Violante,Giovanni L. TI - A Model of the Consumption Response to Fiscal Stimulus Payments JF - National Bureau of Economic Research Working Paper Series VL - No. 17338 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17338 L1 - http://www.nber.org/papers/w17338.pdf N1 - Author contact info: Greg Kaplan Department of Economics University of Pennsylvania 160 McNeil Building 3718 Locust Walk Philadelphia, PA 19104 Tel: 215/898-1875 E-Mail: gkaplan@sas.upenn.edu Giovanni L. Violante Department of Economics New York University 19 W. 4th Street New York, NY 10012-1119 Tel: 212/992-9771 Fax: 212/995-3932 E-Mail: glv2@nyu.edu AB - A wide body of empirical evidence, based on randomized experiments, finds that 20-40 percent of fiscal stimulus payments (e.g. tax rebates) are spent on nondurable household consumption in the quarter that they are received. We develop a structural economic model to interpret this evidence. Our model integrates the classical Baumol-Tobin model of money demand into the workhorse incomplete-markets life-cycle economy. In this framework, households can hold two assets: a low-return liquid asset (e.g., cash, checking account) and a high-return illiquid asset (e.g., housing, retirement account) that carries a transaction cost. The optimal life-cycle pattern of wealth accumulation implies that many households are "wealthy hand-to-mouth" : they hold little or no liquid wealth despite owning sizeable quantities of illiquid assets. They therefore display large propensities to consume out of additional income. We document the existence of such households in data from the Survey of Consumer Finances. A version of the model parameterized to the 2001 tax rebate episode is able to generate consumption responses to fiscal stimulus payments that are in line with the data. ER - TY - JOUR AU - Gentile,Elisabetta AU - Imberman,Scott A. TI - Dressed for Success? The Effect of School Uniforms on Student Achievement and Behavior JF - National Bureau of Economic Research Working Paper Series VL - No. 17337 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17337 L1 - http://www.nber.org/papers/w17337.pdf N1 - Author contact info: Elisabetta Gentile 204 McElhinney Hall Houston, TX 77204-5019 E-Mail: egentile@mail.uh.edu Scott A. Imberman Department of Economics University of Houston 204 McElhinney Hall Houston, TX 77204 Tel: 713/743-3839 Fax: 713/743-3798 E-Mail: simberman@uh.edu AB - Uniform use in public schools is rising, but we know little about how they affect students. Using a unique dataset from a large urban school district in the southwest United States, we assess how uniforms affect behavior, achievement and other outcomes. Each school in the district determines adoption independently, providing variation over schools and time. By including student and school fixed-effects we find evidence that uniform adoption improves attendance in secondary grades, while in elementary schools they generate large increases in teacher retention. ER - TY - JOUR AU - Foley,C. Fritz AU - Kerr,William R. TI - Ethnic Innovation and U.S. Multinational Firm Activity JF - National Bureau of Economic Research Working Paper Series VL - No. 17336 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17336 L1 - http://www.nber.org/papers/w17336.pdf N1 - Author contact info: C. Fritz Foley Graduate School of Business Administration Harvard University Soldiers Field Boston, MA 02163 Tel: 617/495-6375 Fax: 617/496-8443 E-Mail: ffoley@hbs.edu William R. Kerr Harvard Business School Rock Center 212 Soldiers Field Boston, MA 02163 Tel: 617/496-7021 E-Mail: wkerr@hbs.edu AB - This paper studies the impact that immigrant innovators have on the global activities of U.S. firms by analyzing detailed data on patent applications and on the operations of the foreign affiliates of U.S. multinational firms. The results indicate that increases in the share of a firm's innovation performed by inventors of a particular ethnicity are associated with increases in the share of that firm's affiliate activity in their native countries. Ethnic innovators also appear to facilitate the disintegration of innovative activity across borders and to allow U.S. multinationals to form new affiliates abroad without the support of local joint venture partners. Thus, this paper points out that immigration can enhance the competitiveness of multinational firms. ER - TY - JOUR AU - Giovanni,Julian di AU - Levchenko,Andrei A. TI - Country Size, International Trade, and Aggregate Fluctuations in Granular Economies JF - National Bureau of Economic Research Working Paper Series VL - No. 17335 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17335 L1 - http://www.nber.org/papers/w17335.pdf N1 - Author contact info: Julian di Giovanni Research Department International Monetary Fund 700 19th Street NW Washington, DC 20431 Tel: 202/623-7558 Fax: 202/589-7558 E-Mail: julian.digiovanni@utoronto.ca Andrei Levchenko Department of Economics University of Michigan 611 Tappan Street Ann Arbor, MI 48109 Tel: 734/764-3296 E-Mail: alev@umich.edu AB - This paper proposes a new mechanism by which country size and international trade affect macroeconomic volatility. We study a multi-country, multi-sector model with heterogeneous firms that are subject to idiosyncratic firm-specific shocks. When the distribution of firm sizes follows a power law with an exponent close to -1, the idiosyncratic shocks to large firms have an impact on aggregate output volatility. We explore the quantitative properties of the model calibrated to data for the 50 largest economies in the world. Smaller countries have fewer firms, and thus higher volatility. The model performs well in matching this pattern both qualitatively and quantitatively: the rate at which macroeconomic volatility decreases in country size in the model is very close to what is found in the data. Opening to trade increases the importance of large firms to the economy, thus raising macroeconomic volatility. Our simulation exercise shows that the contribution of trade to aggregate fluctuations depends strongly on country size: in the largest economies in the world, such as the U.S. or Japan, international trade increases volatility by only 1.5-3.5%. By contrast, trade increases aggregate volatility by some 15-20% in a small open economy, such as Denmark or Romania. ER - TY - JOUR AU - Wachter,Jessica A. AU - Warusawitharana,Missaka TI - What is the Chance that the Equity Premium Varies over Time? Evidence from Predictive Regressions JF - National Bureau of Economic Research Working Paper Series VL - No. 17334 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17334 L1 - http://www.nber.org/papers/w17334.pdf N1 - Author contact info: Jessica Wachter Department of Finance 2300 SH-DH The Wharton School University of Pennsylvania 3620 Locust Walk Philadelphia, PA 19104 Tel: 215/898-7634 Fax: 215/898-6200 E-Mail: jwachter@wharton.upenn.edu Missaka Warusawitharana Department of Research and Statistics Board of Governors of the Federal Reserve Mail Stop 97 20th and Constitution Ave Washington D.C., 20551 E-Mail: Missaka.N.Warusawitharana@frb.gov AB - We examine the evidence on excess stock return predictability in a Bayesian setting in which the investor faces uncertainty about both the existence and strength of predictability. When we apply our methods to the dividend-price ratio, we find that even investors who are quite skeptical about the existence of predictability sharply modify their views in favor of predictability when confronted by the historical time series of returns and predictor variables. Correctly taking into account the stochastic properties of the regressor has a dramatic impact on inference, particularly over the 2000-2005 period. ER - TY - JOUR AU - Baker,Malcolm AU - Wurgler,Jeffrey TI - Behavioral Corporate Finance: An Updated Survey JF - National Bureau of Economic Research Working Paper Series VL - No. 17333 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17333 L1 - http://www.nber.org/papers/w17333.pdf N1 - Author contact info: Malcolm Baker Baker Library 261 Harvard Business School Soldiers Field Boston, MA 02163 Tel: 617/495-6566 Fax: 617/496-5271 E-Mail: mbaker@hbs.edu Jeffrey Wurgler Stern School of Business, Suite 9-190 New York University 44 West 4th Street New York, NY 10012 Tel: 212/998-0367 Fax: 212/995-4233 E-Mail: jwurgler@stern.nyu.edu AB - We survey the theory and evidence of behavioral corporate finance, which generally takes one of two approaches. The market timing and catering approach views managerial financing and investment decisions as rational managerial responses to securities mispricing. The managerial biases approach studies the direct effects of managers’ biases and nonstandard preferences on their decisions. We review relevant psychology, economic theory and predictions, empirical challenges, empirical evidence, new directions such as behavioral signaling, and open questions. ER - TY - JOUR AU - Angrist,Joshua D. AU - Pathak,Parag A. AU - Walters,Christopher R. TI - Explaining Charter School Effectiveness JF - National Bureau of Economic Research Working Paper Series VL - No. 17332 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17332 L1 - http://www.nber.org/papers/w17332.pdf N1 - Author contact info: Joshua Angrist Department of Economics MIT, E52-353 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-8909 Fax: 617/253-1330 E-Mail: angrist@mit.edu Parag Pathak MIT Department of Economics 50 Memorial Drive E52-391C Cambridge, MA 02142 Tel: 617/253-7458 E-Mail: ppathak@mit.edu Christopher R. Walters MIT Economics 50 Memorial Drive Cambridge, MA 02142 E-Mail: crwalt@mit.edu AB - Estimates using admissions lotteries suggest that urban charter schools boost student achievement, while charter schools in other settings do not. We explore student-level and school-level explanations for these differences using a large sample of Massachusetts charter schools. Our results show that urban charter schools boost achievement well beyond ambient non-charter levels (that is, the average achievement level for urban non-charter students), and beyond non-urban achievement in math. Student demographics explain some of these gains since urban charters are most effective for non-whites and low-baseline achievers. At the same time, non-urban charter schools are uniformly ineffective. Our estimates also reveal important school-level heterogeneity in the urban charter sample. A non-lottery analysis suggests that urban schools with binding, well-documented admissions lotteries generate larger score gains than under-subscribed urban charter schools with poor lottery records. We link the magnitude of charter impacts to distinctive pedagogical features of urban charters such as the length of the school day and school philosophy. The relative effectiveness of urban lottery-sample charters is accounted for by over-subscribed urban schools' embrace of the No Excuses approach to education. ER - TY - JOUR AU - Geromichalos,Athanasios AU - Simonovska,Ina TI - Asset Liquidity and International Portfolio Choice JF - National Bureau of Economic Research Working Paper Series VL - No. 17331 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17331 L1 - http://www.nber.org/papers/w17331.pdf N1 - Author contact info: Athanasios Geromichalos Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 E-Mail: ageromich@ucdavis.edu Ina Simonovska Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 612/703-2265 Fax: 530/752-9382 E-Mail: inasimonovska@ucdavis.edu AB - We study optimal portfolio choice in a two-country model where assets represent claims on future consumption and facilitate trade in markets with imperfect credit. Assuming that foreign assets trade at a cost, agents hold relatively more domestic assets. Consequently, agents have larger claims to domestic over foreign consumption. Moreover, foreign assets turn over faster than domestic assets because the former have desirable liquidity properties, but represent inferior saving tools. Our mechanism offers an answer to a long-standing puzzle in international finance: a positive relationship between consumption and asset home bias coupled with higher turnover rates of foreign over domestic assets. ER - TY - JOUR AU - Albagli,Elias AU - Hellwig,Christian AU - Tsyvinski,Aleh TI - Information Aggregation, Investment, and Managerial Incentives JF - National Bureau of Economic Research Working Paper Series VL - No. 17330 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17330 L1 - http://www.nber.org/papers/w17330.pdf N1 - Author contact info: Elias Albagli University of Southern California Marshall School of Business E-Mail: albagli@marshall.usc.edu Christian Hellwig Toulouse School of Economics Manufacture de Tabacs, 21 Allées de Brienne, 31000 Toulouse Tel: +33 5 61 12 85 93 Fax: +33 5 61 12 86 37 E-Mail: christian.hellwig@tse-fr.eu Aleh Tsyvinski Department of Economics Yale University Box 208268 New Haven, CT 06520-8268 E-Mail: a.tsyvinski@yale.edu AB - We study the interplay of share prices and firm decisions when share prices aggregate and convey noisy information about fundamentals to investors and managers. First, we show that the informational feedback between the firm's share price and its investment decisions leads to a systematic premium in the firm's share price relative to expected dividends. Noisy information aggregation leads to excess price volatility, over-valuation of shares in response to good news, and undervaluation in response to bad news. By optimally increasing its exposure to fundamental risks when the market price conveys good news, the firm shifts its dividend risk to the upside, which amplifies the overvaluation and explains the premium. Second, we argue that explicitly linking managerial compensation to share prices gives managers an incentive to manipulate the firm's decisions to their own benefit. The managers take advantage of shareholders by taking excessive investment risks when the market is optimistic, and investing too little when the market is pessimistic. The amplified upside exposure is rewarded by the market through a higher share price, but is inefficient from the perspective of dividend value. ER - TY - JOUR AU - Mocan,Naci H. AU - Altindag,Duha Tore TI - Is Leisure a Normal Good? Evidence from the European Parliament JF - National Bureau of Economic Research Working Paper Series VL - No. 17329 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17329 L1 - http://www.nber.org/papers/w17329.pdf N1 - Author contact info: Naci H. Mocan Department of Economics Louisiana State University 2119 Patrick F. Taylor Hall Baton Rouge, LA 70803-6306 Tel: 225/578-4570 E-Mail: mocan@lsu.edu Duha Tore Altindag Auburn University Department of Economics 0334 Haley Center Auburn AL, 36849 Tel: 334-844-2929 E-Mail: altindag@auburn.edu AB - Prior to July 2009, salaries of the members of the European Parliament were paid by their home country and there were substantial salary differences between parliamentarians representing different EU countries. Starting in July 2009, the salary of each member of the Parliament is pegged to 38.5% of a European Court judge’s salary, paid by the EU. This created an exogenous change in salaries, the magnitude and direction of which varied substantially between parliamentarians. Parliamentarians receive per diem compensation for each plenary session they attend, but salaries constitute unearned income as they are independent of attendance to the Parliament. Using detailed information on each parliamentarian of the European Parliament between 2004 and 2011 we show that an increase in salaries reduces attendance to plenary sessions and an increase in per diem compensation increases it. We also show that corruption in home country has a negative effect on attendance for seasoned members of the Parliament. ER - TY - JOUR AU - Barro,Robert J. AU - Ursua,José F. TI - Rare Macroeconomic Disasters JF - National Bureau of Economic Research Working Paper Series VL - No. 17328 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17328 L1 - http://www.nber.org/papers/w17328.pdf N1 - Author contact info: Robert J. Barro Department of Economics Littauer Center 218 Harvard University Cambridge, MA 02138 Tel: 617/495-3203 Fax: 617/496-8629 E-Mail: rbarro@harvard.edu Jose Ursua Department of Economics Littauer Center G32 Harvard University Cambridge, MA 02138 E-Mail: ursuaj@gmail.com AB - The potential for rare macroeconomic disasters may explain an array of asset-pricing puzzles. Our empirical studies of these extreme events rely on long-term data now covering 28 countries for consumption and 40 for GDP. A baseline model calibrated with observed peak-to-trough disaster sizes accords with the average equity premium with a reasonable coefficient of relative risk aversion. High stock-price volatility can be explained by incorporating time-varying long-run growth rates and disaster probabilities. Business-cycle models with shocks to disaster probability have implications for the cyclical behavior of asset returns and corporate leverage, and international versions may explain the uncovered-interest-parity puzzle. Richer models of disaster dynamics allow for transitions between normalcy and disaster, bring in post-crisis recoveries, and use the full time series on consumption. Potential future research includes applications to long-term economic growth and environmental economics and the use of stock-price options and other variables to gauge time-varying disaster probabilities. ER - TY - JOUR AU - Hamermesh,Daniel S. AU - Abrevaya,Jason TI - "Beauty Is the Promise of Happiness"? JF - National Bureau of Economic Research Working Paper Series VL - No. 17327 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17327 L1 - http://www.nber.org/papers/w17327.pdf N1 - Author contact info: Daniel S. Hamermesh Department of Economics University of Texas Austin, TX 78712-1173 Tel: 512/475-8526 Fax: 512/471-3510 E-Mail: hamermes@eco.utexas.edu Jason Abrevaya Department of Economics University of Texas Speedway Avenue Austin, TX 78712-1173 USA E-Mail: abrevaya@eco.utexas.edu AB - We measure the impact of individuals’ looks on life satisfaction/happiness. Using five data sets, from the U.S., Canada, the U.K., and Germany, we construct beauty measures in different ways that allow placing lower bounds on the effects of beauty. Beauty raises happiness: A one standard-deviation change in beauty generates about 0.10 standard deviations of additional satisfaction/happiness among men, 0.12 among women. Accounting for a wide variety of covariates, particularly effects in the labor and marriage markets, including those that might be affected by differences in beauty, the impact among men is more than halved, among women slightly less than halved. ER - TY - JOUR AU - Biddle,Jeff AU - Hamermesh,Daniel S. TI - Cycles of Wage Discrimination JF - National Bureau of Economic Research Working Paper Series VL - No. 17326 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17326 L1 - http://www.nber.org/papers/w17326.pdf N1 - Author contact info: Jeff Biddle Department of Economics Michigan State University East Lansing, MI 48824-1038 E-Mail: biddle@msu.edu Daniel S. Hamermesh Department of Economics University of Texas Austin, TX 78712-1173 Tel: 512/475-8526 Fax: 512/471-3510 E-Mail: hamermes@eco.utexas.edu AB - Using CPS data from 1979-2009 we examine how cyclical downturns and industry-specific demand shocks affect wage differentials between white non-Hispanic males and women, Hispanics and African-Americans. Women’s and Hispanics’ relative earnings are harmed by negative shocks, while the earnings disadvantage of African-Americans may drop with negative shocks. Negative shocks also appear to increase the earnings disadvantage of bad-looking workers. A theory of job search suggests two opposite-signed mechanisms that affect these wage differentials. It suggests greater absolute effects among job-movers, which is verified using the longitudinal component of the CPS. ER - TY - JOUR AU - Koijen,Ralph AU - Nieuwerburgh,Stijn Van AU - Yogo,Motohiro TI - Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice JF - National Bureau of Economic Research Working Paper Series VL - No. 17325 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17325 L1 - http://www.nber.org/papers/w17325.pdf N1 - Author contact info: Ralph Koijen University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-4199 E-Mail: ralph.koijen@chicagobooth.edu Stijn Van Nieuwerburgh Stern School of Business New York University 44 W 4th Street, Suite 9-120 New York, NY 10012 Tel: 646/284-4141 Fax: 646/284-4141 E-Mail: svnieuwe@stern.nyu.edu Motohiro Yogo Federal Reserve Bank of Minneapolis Research Department 90 Hennepin Avenue Minneapolis, MN 55401-1804 Tel: 612/204-6476 E-Mail: yogo@minneapolisfed.org AB - We develop a pair of risk measures for the universe of health and longevity products that includes life insurance, annuities, and supplementary health insurance. Health delta measures the differential payoff that a policy delivers in poor health, while mortality delta measures the differential payoff that a policy delivers at death. Optimal portfolio choice simplifies to the problem of choosing a combination of health and longevity products that replicates the optimal exposure to health and mortality delta. For each household in the Health and Retirement Study, we calculate the health and mortality delta implied by its ownership of life insurance, annuities including private pensions, supplementary health insurance, and long-term care insurance. For the median household aged 51 to 58, the lifetime welfare cost of market incompleteness and suboptimal portfolio choice is 28 percent of total wealth. ER - TY - JOUR AU - Kessler,Judd B. AU - Roth,Alvin E. TI - Organ Allocation Policy and the Decision to Donate JF - National Bureau of Economic Research Working Paper Series VL - No. 17324 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17324 L1 - http://www.nber.org/papers/w17324.pdf N1 - Author contact info: Judd Kessler Department of Business and Public Policy The Wharton School University of Pennsylvania 3620 Locust Walk Philadelphia, PA 19104 Tel: (215) 898-7696 Fax: (215) 898-7635 E-Mail: judd.kessler@wharton.upenn.edu Alvin E. Roth Harvard University Department of Economics Littauer 308 Cambridge, MA 02138-3001 Tel: 617/496-6009 (econ) Fax: 617/495-6537 E-Mail: aroth@hbs.edu AB - Organ donations from deceased donors provide the majority of transplanted organs in the United States, and one deceased donor can save numerous lives by providing multiple organs. Nevertheless, most Americans are not registered organ donors despite the relative ease of becoming one. We study in the laboratory an experimental game modeled on the decision to register as an organ donor, and investigate how changes in the management of organ waiting lists might impact donations. We find that an organ allocation policy giving priority on waiting lists to those who previously registered as donors has a significant positive impact on registration. ER - TY - JOUR AU - Ross,Stephen A. TI - The Recovery Theorem JF - National Bureau of Economic Research Working Paper Series VL - No. 17323 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17323 L1 - http://www.nber.org/papers/w17323.pdf N1 - Author contact info: Stephen A. Ross MIT Sloan School of Management 100 Main Street, E62-616 Cambridge, MA 02142 Tel: 617/258-8371 Fax: 203/772-1365 E-Mail: sross@mit.edu AB - We can only estimate the distribution of stock returns but we observe the distribution of risk neutral state prices. Risk neutral state prices are the product of risk aversion – the pricing kernel – and the natural probability distribution. The Recovery Theorem enables us to separate these and to determine the market’s forecast of returns and the market’s risk aversion from state prices alone. Among other things, this allows us to determine the pricing kernel, the market risk premium, the probability of a catastrophe, and to construct model free tests of the efficient market hypothesis. ER - TY - JOUR AU - Fogel,Robert W. AU - Cain,Louis AU - Burton,Joseph AU - Bettenhausen,Brian TI - Was What Ail'd Ya' What Kill'd Ya'? JF - National Bureau of Economic Research Working Paper Series VL - No. 17322 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17322 L1 - http://www.nber.org/papers/w17322.pdf N1 - Author contact info: Robert W. Fogel Director, Center for Population Economics University of Chicago, Booth School of Business 5807 S. Woodlawn Avenue, Suite 367 Chicago, IL 60637 Tel: 773/702-7709 Fax: 773/702-2901 E-Mail: rwf@cpe.uchicago.edu Louis Cain Loyola University Chicago E-Mail: lcain@luc.edu Joseph Burton Center for Population Economics University of Chicago - GSB 1101 E. 58th Street Chicago, IL 60637 E-Mail: jburton@cpe.uchicago.edu Brian Bettenhausen CPE University of Chicago E-Mail: bbett@cpe.uchicago.edu AB - Making use of those Union Army veterans for whom death certificates are available, we compare the conditions with which they were diagnosed by Civil War pension surgeons to the causes of death on the certificates. We divide the data between those veterans who entered the pension system early because of war injuries and those who entered the pension system after the 1890 reform that made it available to many more veterans. We examine the correlation between specific conditions and death causes to gauge support for the hypothesis that death is attributable to something specific. We also examine the correlation between the accumulation of rated conditions to time until death to gauge support for the “insult hypothesis.” In general, we find support for both hypotheses. Examining the hazard ratios for dying of a specific condition, there is support for the idea that what ail’d ya’ is what kill’d ya’. ER - TY - JOUR AU - Kacperczyk,Marcin AU - Schnabl,Philipp TI - Implicit Guarantees and Risk Taking: Evidence from Money Market Funds JF - National Bureau of Economic Research Working Paper Series VL - No. 17321 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17321 L1 - http://www.nber.org/papers/w17321.pdf N1 - Author contact info: Marcin Kacperczyk Stern School of Business New York University 44 West 4th Street KMC 9-190 New York, NY 10012 Tel: 212/998-0924 E-Mail: mkacperc@stern.nyu.edu Philipp Schnabl Stern School of Business New York University 44 West Fourth Street New York, NY 10012 Tel: 212/998-0356 E-Mail: schnabl@stern.nyu.edu AB - A firm's termination generates bankruptcy costs. This may create incentives for a firm's owner to bail out a firm in bankruptcy and to curb the firm's risk taking outside bankruptcy. We analyze the role of such implicit guarantees in the context of financial institutions that sponsor money market mutual funds. Our identification strategy exploits a large, exogenous expansion in risk-taking opportunities of money market funds during the period of August 2007 to August 2008. We find that a fund's response to the expansion depends on its sponsor's ability to provide implicit guarantees: Funds sponsored by financial institutions with higher equity take on less risk than those sponsored by financial institutions with lower equity. Moreover, fund sponsors with higher equity are more likely to provide financial support to their funds during a market-wide run in September 2008. The difference in risk taking disappears once implicit guarantees by fund sponsors are replaced with an explicit government guarantee. Overall, our findings suggest that implicit guarantees may reduce, rather than increase, risk taking. ER - TY - JOUR AU - Manoli,Dayanand S. AU - Weber,Andrea TI - Nonparametric Evidence on the Effects of Financial Incentives on Retirement Decisions JF - National Bureau of Economic Research Working Paper Series VL - No. 17320 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17320 L1 - http://www.nber.org/papers/w17320.pdf N1 - Author contact info: Dayanand S. Manoli Department of Economics University of California, Los Angeles 8283 Bunche Hall Box 951477 Los Angeles, CA 90095-1477 Tel: 310/794-6617 E-Mail: dsmanoli@econ.ucla.edu Andrea Weber University of Mannheim Economics Department L7, 3-4 68131 Mannheim Germany Tel: +49 621 1811928 E-Mail: a.weber@uni-mannheim.de AB - This paper presents new empirical evidence on the effects of retirement benefits on labor force participation decisions. We use administrative data on the census of private sector employees in Austria and variation from mandated discontinuous changes in retirement benefits from the Austrian pension system. We present graphical evidence documenting labor supply responses to the policy discontinuities. Next, we develop nonparametric procedures to estimate labor supply elasticities based on the graphical evidence and mandated financial incentives. We estimate elasticities of 0.12 for men and 0.38 for women. These relatively low elasticities highlight that many retirement decisions are likely to be affected by factors beyond only financial incentives from retirement benefits. ER - TY - JOUR AU - Chugh,Sanjay K. AU - Ghironi,Fabio TI - Optimal Fiscal Policy with Endogenous Product Variety JF - National Bureau of Economic Research Working Paper Series VL - No. 17319 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17319 L1 - http://www.nber.org/papers/w17319.pdf N1 - Author contact info: Sanjay K. Chugh Boston College Department of Economics Chestnut Hill, MA 02167 Tel: 215-668-8930 E-Mail: sanjay.chugh@bc.edu Fabio Ghironi Boston College Department of Economics 140 Commonwealth Avenue Chestnut Hill, MA 02467-3859 Tel: 617/552-3686 Fax: 617/552-2308 E-Mail: fabio.ghironi@bc.edu AB - We study Ramsey-optimal fiscal policy in an economy in which product varieties are the result of forward-looking investment decisions by firms. There are two main results. First, depending on the particular form of variety aggregation in preferences, firms' dividend payments may be either subsidized or taxed in the long run. This policy balances monopoly incentives for product creation with consumers' welfare benefit of product variety. In the most empirically relevant form of variety aggregation, socially efficient outcomes entail a substantial tax on dividend income, removing the incentive for over-accumulation of capital, which takes the form of variety. Second, optimal policy induces dramatically smaller, but efficient, fluctuations of both capital and labor markets than in a calibrated exogenous policy. Decentralization requires zero intertemporal distortions and constant static distortions over the cycle. The results relate to Ramsey theory, which we show by developing welfare-relevant concepts of efficiency that take into account product creation. ER - TY - JOUR AU - Fernández-Villaverde,Jesús AU - Guerrón-Quintana,Pablo A. AU - Kuester,Keith AU - Rubio-Ramírez,Juan TI - Fiscal Volatility Shocks and Economic Activity JF - National Bureau of Economic Research Working Paper Series VL - No. 17317 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17317 L1 - http://www.nber.org/papers/w17317.pdf N1 - Author contact info: Jesus Fernandez-Villaverde University of Pennsylvania 160 McNeil Building 3718 Locust Walk Philadelphia, PA 19104 Tel: 267/307-1068 E-Mail: jesusfv@econ.upenn.edu Pablo A. Guerrón-Quintana Federal Reserve Bank of Philadelphia Tel: 9195132869 E-Mail: pablo.guerron@phil.frb.org Keith Kuester Federal Reserve Bank of Philadelphia E-Mail: Keith.Kuester@phil.frb.org Juan Rubio-Ramírez Duke University P.O. Box 90097 Durham, NC 27708 Tel: 9196601865 E-Mail: juan.rubio-ramirez@duke.edu AB - We study the effects of changes in uncertainty about future fiscal policy on aggregate economic activity. Fiscal deficits and public debt have risen sharply in the wake of the financial crisis. While these developments make fiscal consolidation inevitable, there is considerable uncertainty about the policy mix and timing of such budgetary adjustment. To evaluate the consequences of this increased uncertainty, we first estimate tax and spending processes for the U.S. that allow for time-varying volatility. We then feed these processes into an otherwise standard New Keynesian business cycle model calibrated to the U.S. economy. We find that fiscal volatility shocks have an adverse effect on economic activity that is comparable to the effects of a 25-basis-point innovation in the federal funds rate. ER - TY - JOUR AU - Afendulis,Christopher AU - Kessler,Daniel TI - Vertical Integration and Optimal Reimbursement Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 17316 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17316 L1 - http://www.nber.org/papers/w17316.pdf N1 - Author contact info: Christopher Afendulis Department of Health Care Policy Harvard Medical School 180 Longwood Avenue Boston, MA 02115 E-Mail: afendulis@hcp.med.harvard.edu Daniel Kessler Hoover Institution Stanford University 434 Galvez Mall Stanford, CA 94305 Tel: 650/723-0596 E-Mail: fkessler@stanford.edu AB - Health care providers may vertically integrate not only to facilitate coordination of care, but also for strategic reasons that may not be in patients' best interests. Optimal Medicare reimbursement policy depends upon the extent to which each of these explanations is correct. To investigate, we compare the consequences of the 1997 adoption of prospective payment for skilled nursing facilities (SNF PPS) in geographic areas with high versus low levels of hospital/SNF integration. We find that SNF PPS decreased spending more in high integration areas, with no measurable consequences for patient health outcomes. Our findings suggest that subjecting integrated providers to higher-powered reimbursement incentives, i.e., less cost-sharing, may enhance medical productivity. More generally, we conclude that it may be efficient for purchasers of health services (and other services subject to agency problems) to consider the organizational form of their suppliers when choosing a reimbursement mechanism. ER - TY - JOUR AU - Amromin,Gene AU - Huang,Jennifer AU - Sialm,Clemens AU - Zhong,Edward TI - Complex Mortgages JF - National Bureau of Economic Research Working Paper Series VL - No. 17315 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17315 L1 - http://www.nber.org/papers/w17315.pdf N1 - Author contact info: Gene Amromin Federal Reserve Bank of Chicago 230 South LaSalle Street Chicago, IL 60604-1413 Fax: Financial Economist E-Mail: gamromin@frbchi.org Jennifer Huang University of Texas at Austin McCombs School of Business 1 University Station; B6600 Austin, TX 78712 Tel: 512-232-9375 E-Mail: Jennifer.Huang@mccombs.utexas.edu Clemens Sialm University of Texas at Austin McCombs School of Business 1 University Station; B6600 Austin, TX 78712 Tel: 512-232-6835 E-Mail: clemens.sialm@mccombs.utexas.edu Edward Zhong University of Wisconsin, Madison 1180 Observatory Drive Madison, WI 53706 E-Mail: edzhong@gmail.com AB - We investigate the characteristics and the default behavior of households who take out complex mortgages. Unlike traditional fixed rate or adjustable rate mortgages, complex mortgages are not fully amortizing and enable households to postpone loan repayment. We find that complex mortgages are used by sophisticated households with high income levels and prime credit scores, in contrast to the low income population targeted by subprime mortgages. Complex mortgage borrowers have significantly higher delinquency rates than traditional mortgage borrowers even after controlling for leverage, payment resets, and other household and loan characteristics. The difference in the delinquency rates between complex and traditional borrowers increases with measures of financial sophistication and leverage, suggesting that complex borrowers are more strategic in their default decisions than traditional borrowers. ER - TY - JOUR AU - Voigtländer,Nico AU - Voth,Hans-Joachim TI - How the West 'Invented' Fertility Restriction JF - National Bureau of Economic Research Working Paper Series VL - No. 17314 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17314 L1 - http://www.nber.org/papers/w17314.pdf N1 - Author contact info: Nico Voigtlaender UCLA Anderson School of Management 110 Westwood Plaza C513 Entrepreneurs Hall Los Angeles, CA 90095 Tel: 310/794-6382 E-Mail: nico.v@anderson.ucla.edu Hans-Joachim Voth Economics Department UPF & CREI Ramon Trias Fargas 25-27 E-08005 Barcelona E-Mail: jvoth@crei.cat AB - Europeans restricted their fertility long before the 'Demographic Transition.' By raising the marriage age of women and ensuring that a substantial proportion remained celibate, the "European Marriage Pattern" (EMP) reduced childbirths by up to 40% between the 14th and 18th century. In a Malthusian environment, this translated into lower population pressure, raising average wages significantly, which in turn laid the foundation for industrialization. We analyze the rise of this first socio-economic institution in history that limited fertility through delayed marriage. Our model emphasizes changes in agricultural production following the Black Death in 1348-50. The land-intensive production of meat, wool, and dairy (pastoral products) increased, while labor-intensive grain production declined. Women had a comparative advantage producing pastoral goods. They often worked as servants in husbandry, where they remained unmarried long after they had left the parental household. The emergence of EMP enabled Europe to shift from a high-fertility, low income to a low-fertility, high income Malthusian steady state. We demonstrate the importance of this effect in a calibration of our model and show why the same shock to population did not have similar consequences in China. ER - TY - JOUR AU - Herkenhoff,Kyle F. AU - Ohanian,Lee E. TI - Labor Market Dysfunction During the Great Recession JF - National Bureau of Economic Research Working Paper Series VL - No. 17313 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17313 L1 - http://www.nber.org/papers/w17313.pdf N1 - Author contact info: Kyle F. Herkenhoff Department of Economics UCLA 405 Hilgard Ave. LA, CA 90095 E-Mail: kfh@ucla.edu Lee E. Ohanian 8283 Bunche Hall UCLA, Department of Economics Box 951477 Los Angeles, CA 90095 Tel: 310/825-0979 Fax: 310/825-9528 E-Mail: ohanian@econ.ucla.edu AB - This paper documents the abnormally slow recovery in the labor market during the Great Recession, and analyzes how mortgage modification policies contributed to delayed recovery. By making modifications means-tested by reducing mortgage payments based on a borrower's current income, these programs change the incentive for households to relocate from a relatively poor labor market to a better labor market. We find that modifications raise the unemployment rate by about 0.5 percentage points, and reduce output by about 1 percent, reflecting both lower employment and lower productivity, which is the result of individuals losing skills as unemployment duration is longer. ER - TY - JOUR AU - Bordo,Michael D. AU - Redish,Angela AU - Rockoff,Hugh TI - Why didn’t Canada have a banking crisis in 2008
(or in 1930, or 1907, or ...)? JF - National Bureau of Economic Research Working Paper Series VL - No. 17312 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17312 L1 - http://www.nber.org/papers/w17312.pdf N1 - Author contact info: Michael D. Bordo Department of Economics Rutgers University New Jersey Hall 75 Hamilton Street New Brunswick, NJ 08901 Tel: 732/822-7152 Fax: 732/932-7416 E-Mail: bordo@econ.rutgers.edu Angela Redish Dept. of Economics University of British Columbia #997 1873 East Mall Vancouver BC V6T 1Z1 CANADA E-Mail: anji@econ.ubc.ca Hugh Rockoff Department of Economics 75 Hamilton Street Rutgers University College Avenue Campus New Brunswick, NJ 08901-1248 Tel: 609/897-0117 Fax: 732/932-7416 E-Mail: rockoff@fas-econ.rutgers.edu AB - The financial crisis of 2008 engulfed the banking system of the United States and many large European countries. Canada was a notable exception. In this paper we argue that the structure of financial systems is path dependent. The relative stability of the Canadian banks in the recent crisis compared to the United States in our view reflected the original institutional foundations laid in place in the early 19th century in the two countries. The Canadian concentrated banking system that had evolved by the end of the twentieth century had absorbed the key sources of systemic risk -- the mortgage market and investment banking -- and was tightly regulated by one overarching regulator. In contrast the relatively weak, fragmented, and crisis prone U.S. banking system that had evolved since the early nineteenth century, led to the rise of securities markets, investment banks and money market mutual funds (the shadow banking system) combined with multiple competing regulatory authorities. The consequence was that the systemic risk that led to the crisis of 2007-2008 was not contained. ER - TY - JOUR AU - Khan,Aubhik AU - Thomas,Julia K. TI - Credit Shocks and Aggregate Fluctuations in an Economy with Production Heterogeneity JF - National Bureau of Economic Research Working Paper Series VL - No. 17311 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17311 L1 - http://www.nber.org/papers/w17311.pdf N1 - Author contact info: Aubhik Khan Department of Economics Ohio State University 410 Arps Hall 1945 N. High Street Columbus, OH 43210 Tel: 614 247 0097 E-Mail: mail@aubhik-khan.net Julia Thomas Department of Economics The Ohio State University 410 Arps Hall 1945 N High Street Columbus, OH 43210 E-Mail: mail@juliathomas.net AB - We study the cyclical implications of credit market imperfections in a calibrated dynamic, stochastic general equilibrium model wherein firms face persistent shocks to aggregate and individual productivity. In our model economy, optimal capital reallocation is distorted by two frictions: collateralized borrowing and partial capital irreversibility yielding (S,s) firm-level investment policies. In the presence of persistent heterogeneity in capital, debt and total factor productivity, the effects of a financial shock are amplified and propagated through large and long-lived disruptions to the distribution of capital that, in turn, imply large and persistent reductions in aggregate total factor productivity. We find that an unanticipated tightening in borrowing conditions can, on its own, generate a large recession far more persistent than the financial shock itself. This recession, and the subsequent recovery, is distinguished both quantitatively and qualitatively from that driven by exogenous shocks to total factor productivity. ER - TY - JOUR AU - Currie,Janet AU - Tekin,Erdal TI - Is the Foreclosure Crisis Making Us Sick? JF - National Bureau of Economic Research Working Paper Series VL - No. 17310 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17310 L1 - http://www.nber.org/papers/w17310.pdf N1 - Author contact info: Janet Currie Princeton University 316 Wallace Hall Princeton, NJ 08544 Tel: 609-258-7393 Fax: 609-258-5974 E-Mail: jcurrie@princeton.edu Erdal Tekin Department of Economics Andrew Young School of Policy Studies Georgia State University P.O. Box 3992 Atlanta, GA 30302-3992 Tel: 404/413-0163 Fax: 404/413-0145 E-Mail: tekin@gsu.edu AB - We investigate the relationship between foreclosure activity and the health of residents using zip code level longitudinal data. We focus on Arizona, California, Florida, and New Jersey, four states that have been among the hardest hit by the foreclosure crisis. We combine foreclosure data for 2005 to 2009 from RealtyTrac with data on emergency room visits and hospital discharges. Our zip code level quarterly data allow us to control for many potential confounding factors through the inclusion of fixed effects for each zip code as well as for each combination of county, quarter, and year. We find that an increase in the number of foreclosures is associated with increases in medical visits for mental health (anxiety and suicide attempts), for preventable conditions (such as hypertension), and for a broad array of physical complaints that are plausibly stress-related. They are not related to visits for cancer morbidity, which arguably should not respond as rapidly to stress. Foreclosures also have a zero or negative effect on elective procedures, as one might expect. Age specific results suggest that the foreclosure crisis is having its most harmful effects on individuals 20 to 49. We also find that larger effects for African-Americans and Hispanics than for whites, consistent with the perception that minorities have been particularly hard hit. ER - TY - JOUR AU - Tella,Rafael Di AU - Dubra,Juan TI - Free to Punish? The American Dream and the Harsh Treatment of Criminals JF - National Bureau of Economic Research Working Paper Series VL - No. 17309 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17309 L1 - http://www.nber.org/papers/w17309.pdf N1 - Author contact info: Rafael Di Tella Harvard Business School Soldiers Field Rd Boston, MA 02163 Tel: 617/495-6000 E-Mail: rditella@hbs.edu Juan Dubra Universidad de Montevideo Montevideo, Uruguay E-Mail: dubraj@um.edu.uy AB - We describe the evolution of selective aspects of punishment in the US over the period 1980-2004. We note that imprisonment increased around 1980, a period that coincides with the “Reagan revolution” in economic matters. We build an economic model where beliefs about economic opportunities and beliefs about punishment are correlated. We present three pieces of evidence (across countries, within the US and an experimental exercise) that are consistent with the model. ER - TY - JOUR AU - Caliendo,Lorenzo AU - Rossi-Hansberg,Esteban TI - The Impact of Trade on Organization and Productivity JF - National Bureau of Economic Research Working Paper Series VL - No. 17308 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17308 L1 - http://www.nber.org/papers/w17308.pdf N1 - Author contact info: Lorenzo Caliendo Yale School of Management 135 Prospect Street New Haven, CT 06520 Tel: 203/432-4069 E-Mail: lorenzo.caliendo@yale.edu Esteban Rossi-Hansberg Princeton University Department of Economics Fisher Hall Princeton, NJ 08544-1021 Tel: 609/2584024 Fax: 650/725-5702 E-Mail: erossi@princeton.edu AB - A firm's productivity depends on how production is organized given the level of demand for its product. To capture this mechanism, we develop a theory of an economy where firms with heterogeneous demands use labor and knowledge to produce. Entrepreneurs decide the number of layers of management and the knowledge and span of control of each agent. As a result, in the theory, heterogeneity in demand leads to heterogeneity in productivity and other firms' outcomes. We use the theory to analyze the impact of international trade on organization and calibrate the model to the U.S. economy. Our results indicate that, as a result of a bilateral trade liberalization, firms that export will increase the number of layers of management and will decentralize decisions. The new organization of the average exporter results in higher productivity, although the responses of productivity are heterogeneous across these firms. In contrast, non-exporters reduce their number of layers, decentralization, and, on average, their productivity. The marginal exporter increases its productivity by about 1% and its revenue productivity by about 1.8%. ER - TY - JOUR AU - Molloy,Raven AU - Smith,Christopher L. AU - Wozniak,Abigail K. TI - Internal Migration in the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 17307 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17307 L1 - http://www.nber.org/papers/w17307.pdf N1 - Author contact info: Raven Molloy Federal Reserve Board of Governors 20th and C Streets NW Washington, DC 20551 E-Mail: raven.s.molloy@frb.gov Christopher Smith Federal Reserve Board Research Division Stop # 80 20th & C Sts., NW Washington, DC 20551-0001 E-Mail: Christopher.L.Smith@frb.gov Abigail K. Wozniak Department of Economics University of Notre Dame 441 Flanner Hall South Bend, IN 46556 Tel: 574/631-6208 E-Mail: a_wozniak@nd.edu AB - We review patterns in migration within the US over the past thirty years. Internal migration has fallen noticeably since the 1980s, reversing increases from earlier in the century. The decline in migration has been widespread across demographic and socioeconomic groups, as well as for moves of all distances. Although a convincing explanation for the secular decline in migration remains elusive and requires further research, we find only limited roles for the housing market contraction and the economic recession in reducing migration recently. Despite its downward trend, migration within the US remains higher than that within most other developed countries. ER - TY - JOUR AU - Acemoglu,Daron AU - Egorov,Georgy AU - Sonin,Konstantin TI - A Political Theory of Populism JF - National Bureau of Economic Research Working Paper Series VL - No. 17306 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17306 L1 - http://www.nber.org/papers/w17306.pdf N1 - Author contact info: Daron Acemoglu Department of Economics MIT, E52-380B 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-1927 Fax: 617/253-1330 E-Mail: daron@mit.edu Georgy Egorov Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/467-2154 Fax: 847/467-1220 E-Mail: g-egorov@kellogg.northwestern.edu Konstantin Sonin New Economic School 47 Nakhimovsky prosp. Moscow, 117418 RUSSIA E-Mail: ksonin@nes.ru AB - When voters fear that politicians may have a right-wing bias or that they may be influenced or corrupted by the rich elite, signals of true left-wing conviction are valuable. As a consequence, even a moderate politician seeking reelection chooses “populist’ policies - i.e., policies to the left of the median voter - as a way of signaling that he is not from the right. Truly right-wing politicians respond by choosing more moderate, or even left-of-center policies. This populist bias of policy is greater when the value of remaining in office is higher for the politician; when there is greater polarization between the policy preferences of the median voter and right-wing politicians; when politicians are indeed more likely to have a hidden right-wing agenda; when there is an intermediate amount of noise in the information that voters receive; when politicians are more forward-looking; and when there is greater uncertainty about the type of the incumbent. We show that similar results apply when some politicians can be corrupted or influenced through other non-electoral means by the rich elite. We also show that ‘soft term limits’ may exacerbate, rather than reduce, the populist bias of policies. ER - TY - JOUR AU - Doi,Takero AU - Hoshi,Takeo AU - Okimoto,Tatsuyoshi TI - Japanese Government Debt and Sustainability of Fiscal Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 17305 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17305 L1 - http://www.nber.org/papers/w17305.pdf N1 - Author contact info: Takero Doi Faculty of Economics Keio University Mita 2-15-45, Minato-ku Tokyo 108-8345 JAPAN Tel: +81-3-3453-4511 Fax: +81-3-5427-1578 E-Mail: tdoi@econ.keio.ac.jp Takeo Hoshi School of International Relations and Pacific Stud University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0519 Tel: 858/534-5018 Fax: 858/534-3939 E-Mail: thoshi@ucsd.edu Tatsuyoshi Okimoto Graduate School of International Corporate Strateg Hitotsubashi University 2-1-2 Hitotsubashi, Chiyoda-ku, Tokyo 101-8439, JA E-Mail: tatsuyoshi.okimoto@gmail.com AB - We construct quarterly series of the revenues, expenditures, and debt outstanding for Japan from 1980 to 2010, and analyze the sustainability of the fiscal policy. We pursue three approaches to examine the sustainability. First, we calculate the minimum tax rate that stabilizes the debt to GDP ratio given the future government expenditures. Using 2010 as the base year, we find that the government revenue to GDP ratio must rise permanently to 40%-47% (from the current 33%) to stabilize the debt to GDP ratio. Second, we estimate the response of the primary surplus when the debt to GDP ratio increases. We allow the relationship to fluctuate between two “regimes” using a Markov switching model. In both regimes, the primary surplus to GDP ratio fails to respond positively to debt, which suggests the process is explosive. Finally, we estimate a fiscal policy function and a monetary policy function with Markov switching. We find that the fiscal policy is “active” (the tax revenues do not rise when the debt increases) and the monetary policy is “passive” (the interest rate does not react to the inflation rate sufficiently) in both regimes. These results suggest that the current fiscal situation for the Japanese government is not sustainable. ER - TY - JOUR AU - Serrano,Carlos J. TI - Estimating the Gains from Trade in the Market for Innovation: Evidence from the Transfer of Patents JF - National Bureau of Economic Research Working Paper Series VL - No. 17304 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17304 L1 - http://www.nber.org/papers/w17304.pdf N1 - Author contact info: Carlos J. Serrano Department of Economics University of Toronto 150 St. George Street Toronto, ON M5S 3G7 CANADA Tel: 416/946-3404 E-Mail: carlos.serrano@utoronto.ca AB - The "market for innovation" — the sale and licensing of patents — is an often discussed source of incentives to invest in R&D. This article presents and estimates a model of the transfer and renewal of patents that, under some assumptions, allows us to quantify the gains resulting from the transfer of patents in the market for innovation. The gains from trade measure the benefits of reallocating the ownership of a patent from the original inventor to a new owner for whom the patent has a higher value. In addition, we study the effect that lowering the costs of technology transfer has on the proportion of patents traded and the gains from trade. ER - TY - JOUR AU - Frydman,Carola AU - Molloy,Raven TI - Pay Cuts for the Boss: Executive Compensation in the 1940s JF - National Bureau of Economic Research Working Paper Series VL - No. 17303 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17303 L1 - http://www.nber.org/papers/w17303.pdf N1 - Author contact info: Carola Frydman Department of Economics Boston University 270 Bay State Road Boston, MA 02215 E-Mail: cfrydman@bu.edu Raven Molloy Federal Reserve Board of Governors 20th and C Streets NW Washington, DC 20551 E-Mail: raven.s.molloy@frb.gov AB - Executive pay fell during the 1940s, marking the last notable decrease in the past 70 years. We study this decline using a new panel dataset on the remuneration of top executives in 246 firms. We find that government regulation—including explicit salary restrictions and taxation—had, at best, a modest effect on executive pay. By contrast, a decline in the returns to firm size and an increase in the power of labor unions contributed greatly to the reduction in executive compensation relative to other workers’ earnings from 1940 to 1946. The continued decrease in relative executive pay remains largely unexplained. ER - TY - JOUR AU - Hanna,Rema AU - Oliva,Paulina TI - The Effect of Pollution on Labor Supply: Evidence from a Natural Experiment in Mexico City JF - National Bureau of Economic Research Working Paper Series VL - No. 17302 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17302 L1 - http://www.nber.org/papers/w17302.pdf N1 - Author contact info: Rema Hanna Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/496-1140 Fax: 617/496-5747 E-Mail: Rema_Hanna@hks.harvard.edu Paulina Oliva Department of Economics 2127 North Hall University of California Santa Barbara, CA 93106 Tel: 805/893-5572 E-Mail: oliva@econ.ucsb.edu AB - Moderate effects of pollution on health may exert an important influence on labor market decisions. We exploit exogenous variation in pollution due to the closure of a large refinery in Mexico City to understand how pollution impacts labor supply. The closure led to an 8 percent decline in pollution in the surrounding neighborhoods. We find that a one percent increase in sulfur dioxide results in a 0.61 percent decrease in the hours worked. The effects do not appear to be driven by labor demand shocks nor differential migration as a result of the closure in the areas located near the refinery. ER - TY - JOUR AU - Fuster,Andreas AU - Hebert,Benjamin AU - Laibson,David TI - Natural Expectations, Macroeconomic Dynamics, and Asset Pricing JF - National Bureau of Economic Research Working Paper Series VL - No. 17301 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17301 L1 - http://www.nber.org/papers/w17301.pdf N1 - Author contact info: Andreas Fuster Federal Reserve Bank of New York Research Group 33 Liberty St New York, NY 10045 Tel: 212-720-5995 E-Mail: andreas.fuster@ny.frb.org Benjamin Hebert Department of Economics Harvard University Littauer Center 1805 Cambridge St. Cambridge, MA 02138 E-Mail: benmhebert@gmail.com David Laibson Department of Economics Littauer M-12 Harvard University Cambridge, MA 02138 Tel: 617/496-3402 Fax: 617/495-8570 E-Mail: dlaibson@gmail.com M3 - presented at "26th Annual Conference on Macroeconomics", April 8-9, 2011 AB - How does an economy behave if (1) fundamentals are truly hump-shaped, exhibiting momentum in the short run and partial mean reversion in the long run, and (2) agents do not know that fundamentals are hump-shaped and base their beliefs on parsimonious models that they fit to the available data? A class of parsimonious models leads to qualitatively similar biases and generates empirically observed patterns in asset prices and macroeconomic dynamics. First, parsimonious models will robustly pick up the short-term momentum in fundamentals but will generally fail to fully capture the long-run mean reversion. Beliefs will therefore be characterized by endogenous extrapolation bias and pro-cyclical excess optimism. Second, asset prices will be highly volatile and exhibit partial mean reversion—i.e., overreaction. Excess returns will be negatively predicted by lagged excess returns, P/E ratios, and consumption growth. Third, real economic activity will have amplified cycles. For example, consumption growth will be negatively auto-correlated in the medium run. Fourth, the equity premium will be large. Agents will perceive that equities are very risky when in fact long-run equity returns will co-vary only weakly with long-run consumption growth. If agents had rational expectations, the equity premium would be close to zero. Fifth, sophisticated agents—i.e., those who are assumed to know the true model—will hold far more equity than investors who use parsimonious models. Moreover, sophisticated agents will follow a counter-cyclical asset allocation policy. These predicted effects are qualitatively confirmed in U.S. data. ER - TY - JOUR AU - David,Guy AU - Lindrooth,Richard AU - Helmchen,Lorens A. AU - Burns,Lawton R. TI - Do Hospitals Cross Subsidize? JF - National Bureau of Economic Research Working Paper Series VL - No. 17300 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17300 L1 - http://www.nber.org/papers/w17300.pdf N1 - Author contact info: Guy David The Wharton School University of Pennsylvania 202 Colonial Penn Center 3641 Locust Walk Philadelphia, PA 19104-6218 Tel: 215/573-5780 Fax: 215/573-2157 E-Mail: gdavid2@wharton.upenn.edu Richard Lindrooth University of Colorado Denver Room E3313, Third Floor Building 500 13001 E. 17th Place Aurora, CO 80045 E-Mail: richard.lindrooth@ucdenver.edu Lorens Helmchen Department of Health Administration and Policy George Mason University 4400 University Drive - MS 1J3 Northeast Module I, 121 Fairfax, VA 22030 Tel: (703) 993-9734 Fax: (703) 993-1953 E-Mail: lhelmche@gmu.edu Lawton Burns Health Care Systems Department The Wharton School University of Pennsylvania 203 Colonial Penn Center 641 Locust Walk Philadelphia, PA 19104-6218 E-Mail: burnsl@wharton.upenn.edu AB - Cross-subsidies are often considered the principal mechanism through which hospitals provide unprofitable care. Yet, hospitals’ reliance on and extent of cross-subsidization are difficult to establish. We exploit entry by cardiac specialty hospitals as an exogenous shock to incumbent hospitals’ profitability and in turn to their ability to cross-subsidize unprofitable services. Using patient-level data from general short-term hospitals in Arizona and Colorado before and after entry, we find that the hospitals most exposed to entry reduced their provision of services considered to be unprofitable (psychiatric, substance- abuse, and trauma care) and expanded their admissions for neurosurgery, a highly profitable service. ER - TY - JOUR AU - Hart,Oliver D. AU - Zingales,Luigi TI - Inefficient Provision of Liquidity JF - National Bureau of Economic Research Working Paper Series VL - No. 17299 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17299 L1 - http://www.nber.org/papers/w17299.pdf N1 - Author contact info: Oliver D. Hart Department of Economics Littauer Center 220 Harvard University Cambridge, MA 02138 Tel: 617/496-3461 Fax: 617-495-7730 E-Mail: ohart@harvard.edu Luigi Zingales Booth School of Business The University of Chicago 5807 S. Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-3196 Fax: 773/834-2081 E-Mail: luigi.zingales@ChicagoBooth.edu AB - We study an economy where the lack of a simultaneous double coincidence of wants creates the need for a relatively safe asset (money). We show that, even in the absence of asymmetric information or an agency problem, the private provision of liquidity is inefficient. The reason is that liquidity affects prices and the welfare of others, and creators do not internalize this. This distortion is present even if we introduce lending and government money. To eliminate the inefficiency the government must restrict the creation of liquidity by the private sector. ER - TY - JOUR AU - Avery,Christopher AU - Chevalier,Judith A. AU - Zeckhauser,Richard J. TI - The "CAPS" Prediction System and Stock Market Returns JF - National Bureau of Economic Research Working Paper Series VL - No. 17298 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17298 L1 - http://www.nber.org/papers/w17298.pdf N1 - Author contact info: Christopher Avery Harvard Kennedy School of Government 79 JFK Street Cambridge, MA 02138 Tel: 617/496-4063 Fax: 617/496-5960 E-Mail: christopher_avery@hks.harvard.edu Judith A. Chevalier Yale School of Management 135 Prospect Street New Haven, CT 06520 Tel: 203/432-3122 Fax: NA E-Mail: judith.chevalier@yale.edu Richard J. Zeckhauser John F. Kennedy School of Government Harvard University 79 John F. Kennedy Street Cambridge, MA 02138 Tel: 617/495-1174 Fax: 617/384-9340 E-Mail: richard_zeckhauser@harvard.edu AB - We study the predictive power of approximately 2.5 million stock picks submitted by individual users to the "CAPS" website run by the Motley Fool company (www.caps.fool.com). These picks prove to be surprisingly informative about future stock prices. Indeed, a strategy of shorting stocks with a disproportionate number of negative picks on the site and buying stocks with a disproportionate number of positive picks produces a return of over nine percent per annum over the sample period. These results are mostly driven by the fact that negative picks on the site strongly predict future stock price declines; positive picks on the site produce returns that are statistically indistinguishable from the market. A Fama French decomposition suggests that these results are largely due to stock-picking rather than style factors or market timing. ER - TY - JOUR AU - Iyengar,Radha AU - Monten,Jonathan AU - Hanson,Matthew TI - Building Peace: The Impact of Aid on the Labor Market for Insurgents JF - National Bureau of Economic Research Working Paper Series VL - No. 17297 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17297 L1 - http://www.nber.org/papers/w17297.pdf N1 - Author contact info: Radha Iyengar London School of Economics Department of Economics Houghton St London WC2A 2AE UNITED KINGDOM Tel: 44 (0) 20 7852 3563 Fax: 44 (0) 20 7955 7595 E-Mail: R.Iyengar1@lse.ac.uk Jonathan Monten Department of Government London School of Economics Houghton St London WC2A 2AE United Kingdom Tel: (202) 669-5378 E-Mail: jmonten@gmail.com Matthew Hanson NBER 1050 Massachusetts Ave Cambridge, MA 02138 Tel: (703) 599-7785 E-Mail: hansonm@nber.org AB - Employment growth could reduce violence during civil conflicts. To determine if increased employment affects violence we analyzed varying employment in development programs run by different US military divisions in Iraqi districts. Employment levels vary with funding periods and the military division in charge. Controlling for variability between districts, we find that a 10% increase in labor-related spending generates a 15-20% decline in labor-intensive insurgent violence. Overall the 10% spending increase is associated with a nearly 10% violence reduction, due to reduction in attacks which kill civilians, but increased attacks against the military. These findings indicate that labor-intensive development programs can reduce violence during insurgencies. ER - TY - JOUR AU - Duffie,Darrell AU - Strulovici,Bruno TI - Capital Mobility and Asset Pricing JF - National Bureau of Economic Research Working Paper Series VL - No. 17296 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17296 L1 - http://www.nber.org/papers/w17296.pdf N1 - Author contact info: Darrell Duffie Graduate School of Business Stanford University Stanford, CA 94305-5015 Tel: 650/723-1976 Fax: 650/725-7979 E-Mail: duffie@stanford.edu Bruno Strulovici Economics Department Northwestern University Evanston IL 60201 E-Mail: b-strulovici@northwestern.edu AB - We present a model for the equilibrium movement of capital between asset markets that are distinguished only by the levels of capital invested in each. Investment in that market with the greatest amount of capital earns the lowest risk premium. Intermediaries optimally trade off the costs of intermediation against fees that depend on the gain they can offer to investors for moving their capital to the market with the higher mean return. Those fees also depend on the bargaining power of the investor, in light of potential alternative intermediaries. In equilibrium, the speeds of adjustment of mean returns and of capital between the two markets are increasing in the degree to which capital is imbalanced between the two markets. ER - TY - JOUR AU - Duffie,Darrell AU - Malamud,Semyon AU - Manso,Gustavo TI - Information Percolation in Segmented Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 17295 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17295 L1 - http://www.nber.org/papers/w17295.pdf N1 - Author contact info: Darrell Duffie Graduate School of Business Stanford University Stanford, CA 94305-5015 Tel: 650/723-1976 Fax: 650/725-7979 E-Mail: duffie@stanford.edu Semyon Malamud Swiss Finance Institute @ EPFL Quartier UNIL-Dorigny, Extranef 213 CH - 1015 Lausanne, Switzerland E-Mail: semyon.malamud@epfl.ch Gustavo Manso University of California at Berkeley E-Mail: manso@mit.edu AB - We calculate equilibria of dynamic double-auction markets in which agents are distinguished by their preferences and information. Over time, agents are privately informed by bids and offers. Investors are segmented into groups that differ with respect to characteristics determining information quality, including initial information precision as well as market “connectivity,” the expected frequency of their trading opportunities. Investors with superior information sources attain strictly higher expected profits, provided their counterparties are unable to observe the quality of those sources. If, however, the quality of bidders’ information sources are commonly observable, then, under conditions, investors with superior information sources have strictly lower expected profits. ER - TY - JOUR AU - Davis,Steven J. AU - Faberman,Jason AU - Haltiwanger,John C. TI - Labor Market Flows in the Cross Section and Over Time JF - National Bureau of Economic Research Working Paper Series VL - No. 17294 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17294 L1 - http://www.nber.org/papers/w17294.pdf N1 - Author contact info: Steven J. Davis Booth School of Business The University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-7312 Fax: 773/834-0733 E-Mail: Steven.Davis@ChicagoBooth.edu Jason Faberman Economic Research Department Federal Reserve Bank of Chicago 230 S. LaSalle St. Chicago, IL 60604 Tel: (312) 322-5274 Fax: (312) 322-2357 E-Mail: jfaberman@frbchi.org John C. Haltiwanger Department of Economics University of Maryland College Park, MD 20742 Tel: 301/405-3504 Fax: 301/405-3542 E-Mail: haltiwan@econ.umd.edu AB - Many theoretical models of labor market search imply a tight link between worker flows (hires and separations) and job gains and losses at the employer level. Partly motivated by these theories, we exploit establishment-level data from U.S. sources to study the relationship between worker flows and job flows in the cross section and over time. We document strong, highly nonlinear relationships of hiring, quit and layoff rates to employer growth in the cross section. Simple statistical models that capture these cross-sectional relationships greatly improve our ability to account for fluctuations in aggregate worker flows. We also evaluate how well various theoretical models and views fit the patterns in the data. Aggregate fluctuations in layoffs are well captured by micro specifications that impose a tight cross-sectional link between worker flows and job flows. Aggregate fluctuations in quits are not. Instead, quit rates rise and fall with booms and recessions across the distribution of establishment growth rates, but more so at shrinking employers. Finally, we use our preferred statistical models – in combination with data on the cross-sectional distribution of establishment growth rates – to construct synthetic JOLTS-type measures of hires, separations, quits and layoffs back to 1990. ER - TY - JOUR AU - Acemoglu,Daron AU - Robinson,James A. AU - Torvik,Ragnar TI - Why Do Voters Dismantle Checks and Balances? JF - National Bureau of Economic Research Working Paper Series VL - No. 17293 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17293 L1 - http://www.nber.org/papers/w17293.pdf N1 - Author contact info: Daron Acemoglu Department of Economics MIT, E52-380B 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-1927 Fax: 617/253-1330 E-Mail: daron@mit.edu James A. Robinson Harvard University Department of Government N309, 1737 Cambridge Street Cambridge, MA 02138 Tel: 617/496-2839 Fax: 617/495-0438 E-Mail: jrobinson@gov.harvard.edu Ragnar Torvik Norwegian University of Science and Technology Department of Economics N-7491 Trondheim Norway E-Mail: ragnar.torvik@svt.ntnu.no AB - Voters often dismantle constitutional checks and balances on the executive. If such checks and balances limit presidential abuses of power and rents, why do voters support their removal? We argue that by reducing politician rents, checks and balances also make it cheaper to bribe or influence politicians through non-electoral means. In weakly-institutionalized polities where such non-electoral influences, particularly by the better organized elite, are a major concern, voters may prefer a political system without checks and balances as a way of insulating politicians from these influences. When they do so, they are effectively accepting a certain amount of politician (presidential) rents in return for redistribution. We show that checks and balances are less likely to emerge when (equilibrium) politician rents are low; when the elite are better organized and are more likely to be able to influence or bribe politicians; and when inequality and potential taxes are high (which makes redistribution more valuable to the majority). We show that the main intuition, that checks and balances, by making politicians “cheaper to bribe,” are potentially costly to the majority, is valid under different ways of modeling the form of checks and balances. ER - TY - JOUR AU - Sialm,Clemens AU - Tham,T. Mandy TI - Spillover Effects in Mutual Fund Companies JF - National Bureau of Economic Research Working Paper Series VL - No. 17292 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17292 L1 - http://www.nber.org/papers/w17292.pdf N1 - Author contact info: Clemens Sialm University of Texas at Austin McCombs School of Business 1 University Station; B6600 Austin, TX 78712 Tel: 512-232-6835 E-Mail: clemens.sialm@mccombs.utexas.edu Mandy Tham Nanyang Technological University 50 Nanyang Avenue S3-B1a-34 Singapore 639798 E-Mail: atmtham@ntu.edu.sg AB - Our paper investigates spillover effects across different business segments of publicly traded mutual fund management companies. We find that the prior stock price performance of the management company has a significant impact on the money flows and the management turnover of the affiliated mutual funds. Mutual funds managed by poorly performing firms experience unexpectedly low flows of new money and exhibit a significantly higher attrition of fund managers even if the mutual funds themselves performed well. Our results remain strong for companies where mutual funds account for only a small fraction of the overall revenues and hold for both equity and bond mutual funds. These results indicate that the financial health of a diversified firm has a significant impact on the prospects of the various business segments. ER - TY - JOUR AU - Beaudry,Paul AU - Portier,Franck TI - A Gains from Trade Perspective on Macroeconomic Fluctuations JF - National Bureau of Economic Research Working Paper Series VL - No. 17291 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17291 L1 - http://www.nber.org/papers/w17291.pdf N1 - Author contact info: Paul Beaudry Department of Economics University of British Columbia Vancouver, Canada Tel: 604/822-8624 Fax: 604/822-5915 E-Mail: paulbe@interchange.ubc.ca Franck Portier GREMAQ-IDEI University of Toulouse Manufacture des Tabacs 21 Allee de Brienne 31000 Toulouse, FRANCE Tel: fax 05-61-12-8637; fportier@cict.fr E-Mail: fportier@cict.fr AB - Business cycles reflect changes over time in the amount of trade between individuals. In this paper we show that incorporating explicitly intra-temporal gains from trade between individuals into a macroeconomic model can provide new insight into the potential mechanisms driving economic fluctuations as well as modify key policy implications. We first show how a "gains from trade" approach can easily explain why changes in perceptions about the future (including "news" about the future) can cause booms and bust. We then turn to fiscal policy, and discuss under what conditions fiscal multipliers can be observed. While much of our analysis is conducted in a flexible price environment, we also present implications of our model for a sticky price environments, as it allows to understand stable-inflation boom-bust cycles. The source of the explicit gains from trade in our setup derives from simply assuming that in the short run workers are not perfect mobile across all sectors of the economy. We provide evidence from the PSID in support of this modeling assumption. ER - TY - JOUR AU - Hovakimian,Armen AU - Kayhan,Ayla AU - Titman,Sheridan TI - Are Corporate Default Probabilities Consistent with the Static Tradeoff Theory? JF - National Bureau of Economic Research Working Paper Series VL - No. 17290 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17290 L1 - http://www.nber.org/papers/w17290.pdf N1 - Author contact info: Armen Hovakimian Department of Economics and Finance Baruch College Zicklin School of Business 1 Bernard Baruch Way New York, NY 10010 Tel: 646-312-3490 Fax: 646-312-3451 E-Mail: Armen_Hovakimian@baruch.cuny.edu Ayla Kayhan Department of Finance E.J. Ourso School of Business Louisiana State University Baton Rouge, LA 70803 Tel: 512/785-4995 E-Mail: akayhan@lsu.edu Sheridan Titman Finance Department McCombs School of Business University of Texas at Austin Austin, TX 78712-1179 Tel: 512/232-2787 Fax: 512/471-5073 E-Mail: titman@mail.utexas.edu AB - Default probability plays a central role in the static tradeoff theory of capital structure. We directly test this theory by regressing the probability of default on proxies for costs and benefits of debt. Contrary to predictions of the theory, firms with higher bankruptcy costs, i.e., smaller firms and firms with lower asset tangibility, choose capital structures with higher bankruptcy risk. Further analysis suggests that the capital structures of smaller firms with lower asset tangibility, which tend to have less access to capital markets, are more sensitive to negative profitability and equity value shocks, making them more susceptible to bankruptcy risk. ER - TY - JOUR AU - Devereux,Michael B. AU - Hnatkovska,Viktoria TI - The Extensive Margin, Sectoral Shares and International Business Cycles JF - National Bureau of Economic Research Working Paper Series VL - No. 17289 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17289 L1 - http://www.nber.org/papers/w17289.pdf N1 - Author contact info: Michael B. Devereux Department of Economics University of British Columbia 997-1873 East Mall Vancouver, BC V6T 1Z1 CANADA Tel: 604/822-2542 Fax: 604/822-5915 E-Mail: mbdevereux@gmail.com Viktoria Hnatkovska Department of Economics University of British Columbia Vancouver, BC V6T 1Z1 E-Mail: hnatkovs@interchange.ubc.ca AB - This paper documents some previously neglected features of sectoral shares at business cycle frequencies in OECD economies. In particular, we find that the nontraded sector share of output is as volatile as aggregate GDP, and that for most countries, the nontraded sector is distinctly countercyclical. While the standard international real business cycle model has difficulty in accounting for these properties of the data, an extended model which allows for sectoral adjustment along both the intensive and extensive margins does a much better job in replicating the volatilities and co-movements in the data. In addition, the model provides a closer match between theory and data with respect to the correlation between relative consumption growth and real exchange rate changes, a key measure of international risk-sharing. ER - TY - JOUR AU - Devereux,Michael B. AU - Hnatkovska,Viktoria TI - Consumption Risk-Sharing and the Real Exchange Rate: Why does the Nominal Exchange Rate Make Such a Difference? JF - National Bureau of Economic Research Working Paper Series VL - No. 17288 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17288 L1 - http://www.nber.org/papers/w17288.pdf N1 - Author contact info: Michael B. Devereux Department of Economics University of British Columbia 997-1873 East Mall Vancouver, BC V6T 1Z1 CANADA Tel: 604/822-2542 Fax: 604/822-5915 E-Mail: mbdevereux@gmail.com Viktoria Hnatkovska Department of Economics University of British Columbia Vancouver, BC V6T 1Z1 E-Mail: hnatkovs@interchange.ubc.ca AB - A basic prediction of effcient risk-sharing is that relative consumption growth rates across countries or regions should be positively related to real exchange rate growth rates across the same areas. We investigate this hypothesis, employing a newly constructed multi-country and multi-regional data set. Within countries, we find signifcant evidence for risk sharing: episodes of high relative regional consumption growth are associated with regional real exchange rate depreciation. Across countries however, the association is reversed: relative consumption and real exchange rates are negatively correlated. We identify this failure of risk sharing as a border effect. We find that the border effect is substantially (but not fully) accounted for by nominal exchange rate variability. We then ask whether standard open economy macro models can explain these features of the data. We argue that they cannot. To explain the role of the nominal exchange rate in deviations from cross country consumption risk sharing, it is necessary to combine multiple sources of shocks, ex-ante price setting, and incomplete financial markets. ER - TY - JOUR AU - Liebman,Jeffrey B. AU - Luttmer,Erzo F.P. TI - Would People Behave Differently If They Better Understood Social Security? Evidence From a Field Experiment JF - National Bureau of Economic Research Working Paper Series VL - No. 17287 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17287 L1 - http://www.nber.org/papers/w17287.pdf N1 - Author contact info: Jeffrey B. Liebman John F. Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/495-8518 Fax: 617/496-9053 E-Mail: jeffrey_liebman@harvard.edu Erzo F.P. Luttmer 6106 Rockefeller Center, Room 305 Department of Economics Dartmouth College Hanover, NH 03755 Tel: 603/646-6479 E-Mail: Erzo.FP.Luttmer@Dartmouth.Edu AB - This paper presents the results of a field experiment in which a sample of older workers was randomized between a treatment group that was given information about key Social Security provisions and a control group that was not. The experiment was designed to examine whether it is possible to affect individual behavior using a relatively inexpensive informational intervention about the provisions of a public program and to explore the mechanisms underlying the behavior change. We find that our relatively mild intervention (sending an informational brochure and an invitation to a web-tutorial) increased labor force participation one year later by 4 percentage points relative to the control group mean of 74 percent and that this effect is driven by a 7.2 percentage point increase among female subjects. In addition to affecting actual labor supply behavior, the information intervention increased survey measures of the perceived returns to working longer, especially among female respondents. ER - TY - JOUR AU - Dobbie,Will AU - Fryer,Roland G., Jr. TI - Exam High Schools and Academic Achievement: Evidence from New York City JF - National Bureau of Economic Research Working Paper Series VL - No. 17286 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17286 L1 - http://www.nber.org/papers/w17286.pdf N1 - Author contact info: Will Dobbie Education Innovation Laboratory Harvard University 44 Brattle Street, 5th Floor Cambridge, MA 02138 E-Mail: dobbie@fas.harvard.edu Roland G. Fryer, Jr Department of Economics Harvard University Littauer Center 208 Cambridge, MA 02138 Tel: 617/495-9592 Fax: 617/495-8570 E-Mail: rfryer@fas.harvard.edu AB - Publicly funded exam schools educate many of the world's most talented students. These schools typically contain higher achieving peers, more rigorous instruction, and additional resources compared to regular public schools. This paper uses a sharp discontinuity in the admissions process at three prominent exam schools in New York City to provide the first causal estimate of the impact of attending an exam school in the United States on longer term academic outcomes. Attending an exam school increases the rigor of high school courses taken and the probability that a student graduates with an advanced high school degree. Surprisingly, however, attending an exam school has little impact on Scholastic Aptitude Test scores, college enrollment, or college graduation -- casting doubt on their ultimate long term impact. ER - TY - JOUR AU - Lin,Xiaoji AU - Zhang,Lu TI - Covariances versus Characteristics in General Equilibrium JF - National Bureau of Economic Research Working Paper Series VL - No. 17285 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17285 L1 - http://www.nber.org/papers/w17285.pdf N1 - Author contact info: Xiaoji Lin Department of Finance Ohio State University 2100 Neil Ave, Columbus, OH, 43210 Tel: 614-292-4318 Fax: 614-292-7062 Tel: 44-020-7852-3717 Fax: 44-020-7955-7420 E-Mail: lin_1376@fisher.osu.edu Lu Zhang Fisher College of Business The Ohio State University 2100 Neil Avenue Columbus, OH 43210 Tel: 585-267-6250 E-Mail: zhanglu@fisher.osu.edu AB - We question a deep-ingrained doctrine in asset pricing: If an empirical characteristic-return relation is consistent with investor "rationality," the relation must be "explained" by a risk factor model. The investment approach changes the big picture of asset pricing. Factors formed on characteristics are not necessarily risk factors: Characteristics-based factor models are linear approximations of firm-level investment returns. The evidence that characteristics dominate covariances in horse races does not necessarily mean mispricing: Measurement errors in covariances are more likely to blame. Most important, the investment approach completes the consumption approach in general equilibrium, especially for cross-sectional asset pricing. ER - TY - JOUR AU - Coles,Melvyn G. AU - Mortensen,Dale T. TI - Equilibrium Wage and Employment Dynamics in a Model of Wage Posting without Commitment JF - National Bureau of Economic Research Working Paper Series VL - No. 17284 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17284 L1 - http://www.nber.org/papers/w17284.pdf N1 - Author contact info: Melvyn Coles Department of Economics University of Essex Colchester CO435Q ENGLAND E-Mail: mcole@essex.ac.uk Dale T. Mortensen Department of Economics Northwestern University 2003 Sheridan Road Evanston, IL 60208-2600 Tel: 847/491-8230 Fax: 847/491-7001 E-Mail: d-mortensen@northwestern.edu AB - A rich but tractable variant of the Burdett-Mortensen model of wage setting behavior is formulated and a dynamic market equilibrium solution to the model is defined and characterized. In the model, firms cannot commit to wage contracts. Instead, the Markov perfect equilibrium to the wage setting game, characterized by Coles (2001), is assumed. In addition, firm recruiting decisions, firm entry and exit, and transitory firm productivity shocks are incorporated into the model. Given that the cost of recruiting workers is proportional to firm employment, we establish the existence of an equilibrium solution to the model in which wages are not contingent on firm size but more productive employers always pay higher wages. Although the state space, the distribution of workers over firms, is large in the general case, it reduces to a scalar that can be interpreted as the unemployment rate in the special case of homogenous firms. Furthermore, the equilibrium is unique. As the dimension of the state space is equal to the number of firms types in general, an (approximate) equilibrium is computable. ER - TY - JOUR AU - Fox,Jeremy T. AU - Kim,Kyoo il TI - A Simple Nonparametric Approach to Estimating the Distribution of Random Coefficients in Structural Models JF - National Bureau of Economic Research Working Paper Series VL - No. 17283 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17283 L1 - http://www.nber.org/papers/w17283.pdf N1 - Author contact info: Jeremy T. Fox Economics Department University of Michigan 238 Lorch Hall 611 Tappan Ave Ann Arbor, MI 48104 Tel: 734-330-2854 Fax: 734-274-2331 E-Mail: jeremyfox@gmail.com Kyoo il Kim Department of Economics University of Minnesota 4-129 Hanson Hall 1925 4th Street South Minneapolis, MN 55455 Tel: 612-625-6793 E-Mail: kyookim@umn.edu AB - We explore a nonparametric mixtures estimator for recovering the joint distribution of random coefficients in economic models. The estimator is based on linear regression subject to linear inequality constraints and is computationally attractive compared to alternative, nonparametric estimators. We provide conditions under which the estimated distribution function converges to the true distribution in the weak topology on the space of distributions. We verify the consistency conditions for discrete choice, continuous outcome and selection models. ER - TY - JOUR AU - Blonigen,Bruce AU - O'Fallon,Cheyney TI - Foreign Firms and Local Communities JF - National Bureau of Economic Research Working Paper Series VL - No. 17282 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17282 L1 - http://www.nber.org/papers/w17282.pdf N1 - Author contact info: Bruce Blonigen Department of Economics 1285 University of Oregon Eugene, OR 97403-1285 Tel: 541/346-4680 Fax: 541/346-1243 E-Mail: bruceb@uoregon.edu Cheyney O'Fallon U.C. Santa Cruz, Economics Department 401 Engineering 2 Building, 1156 High Street Santa Cruz, CA 95064 E-Mail: cofallon@ucsc.edu AB - The literature on the effects of foreign direct investment (FDI) and activities of multinational enterprises (MNEs) on host-countries has been almost exclusively focused on issues of productivity, growth and wages. We argue that this leaves quite a bit of important unexplored areas of inquiry, particularly those connected with the interactions of local communities and governments with MNEs. As an example, we provide a novel analysis of local corporate philanthropy, which shows significant differences between local- and foreign-owned corporations. We find that foreign-owned enterprises are less likely to give, but that when they do give, it is substantially more in magnitude than domestic firms, everything else equal. This evidence is consistent with the hypothesis that foreign-owned firms would prefer to use corporate social responsibility (CSR) activities on a more international scale, but will strategically use CSR activities for public relation motives when the MNE faces greater local scrutiny and/or bias. ER - TY - JOUR AU - Duffie,Darrell TI - Systemic Risk Exposures: A 10-by-10-by-10 Approach JF - National Bureau of Economic Research Working Paper Series VL - No. 17281 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17281 L1 - http://www.nber.org/papers/w17281.pdf N1 - Author contact info: Darrell Duffie Graduate School of Business Stanford University Stanford, CA 94305-5015 Tel: 650/723-1976 Fax: 650/725-7979 E-Mail: duffie@stanford.edu M1 - published as Darrell Duffie. "Systemic Risk Exposures: A 10-by-10-by-10 Approach," in Markus K. Brunnermeier and Arvind Krishnamurthy, editors, "Systemic Risk and Macro Modeling" University of Chicago Press (2012) AB - Here, I present and discuss a “10-by-10-by-10” network-based approach to monitoring systemic financial risk. Under this approach, a regulator would analyze the exposures of a core group of systemically important financial firms to a list of stressful scenarios, say 10 in number. For each scenario, about 10 such designated firms would report their gains or losses. Each reporting firm would also provide the identities of the 10, say, counterparties with whom the gain or loss for that scenario is the greatest in magnitude relative to all counterparties. The gains or losses with each of those 10 counterparties would also be reported, scenario by scenario. Gains and losses would be measured in terms of market value and also in terms of cash flow, allowing regulators to assess risk magnitudes in terms of stresses to both economic values and also liquidity. Exposures would be measured before and after collateralization. One of the scenarios would be the failure of a counterparty. The “top ten” counterparties for this scenario would therefore be those whose defaults cause the greatest losses to the reporting firm. In eventual practice, the number of reporting firms, the number of stress scenarios, and the number of major counterparties could all exceed 10, but it is reasonable to start with a small reporting system until the approach is better understood and agreed upon internationally. ER - TY - JOUR AU - Duffie,Darrell AU - Sun,Yeneng TI - The Exact Law of Large Numbers for Independent Random Matching JF - National Bureau of Economic Research Working Paper Series VL - No. 17280 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17280 L1 - http://www.nber.org/papers/w17280.pdf N1 - Author contact info: Darrell Duffie Graduate School of Business Stanford University Stanford, CA 94305-5015 Tel: 650/723-1976 Fax: 650/725-7979 E-Mail: duffie@stanford.edu Yeneng Sun National University of Singapore Department of Economics 1 Arts Link Singapore 117570 Republic of Singapore E-Mail: ynsun@nus.edu.sg AB - This paper provides a mathematical foundation for independent random matching of a large population, as widely used in the economics literature. We consider both static and dynamic systems with random mutation, partial matching arising from search, and type changes induced by matching. Under independence assumptions at each randomization step, we show that there is an almost-sure constant cross-sectional distribution of types in a large population, and moreover that the multi-period cross-sectional distribution of types is deterministic and evolves according to the transition matrices of the type process of a given agent. We also show the existence of a joint agent-probability space, and randomized mutation, partial matching and match-induced type-changing functions that satisfy appropriate independence conditions, where the agent space is an extension of the classical Lebesgue unit interval. ER - TY - JOUR AU - Burkhauser,Richard V. AU - Lyons,Sean AU - Simon,Kosali I. TI - The Importance of the Meaning and Measurement of “Affordable” in the Affordable Care Act JF - National Bureau of Economic Research Working Paper Series VL - No. 17279 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17279 L1 - http://www.nber.org/papers/w17279.pdf N1 - Author contact info: Richard V. Burkhauser Cornell University Department of Policy Analysis & Management 259 MVR Hall Ithaca, NY 14853-4401 Tel: 607/255-2097 Fax: 607/255-4071 E-Mail: rvb1@cornell.edu Sean Lyons PhD candidate Dept. of PAM Cornell University, Ithaca NY E-Mail: sml55@cornell.edu Kosali I. Simon School of Public and Environmental Affairs Indiana University Rm 359 1315 East Tenth Street Bloomington, IN 47405-1701 Tel: (812) 856-3850 E-Mail: simonkos@indiana.edu AB - This paper focuses on the practical importance of a critical but under-explored interpretation of a provision in the Affordable Care Act (ACA): whether “affordable” refers to the cost of single coverage alone, or to family or single coverage as applicable to the worker, in determining the employer’s mandated coverage requirement and workers’ (and their dependents’) access to subsidized exchange coverage. Since the average annual total premium for family coverage is substantially higher than that for single coverage (on average $12,298 vs. $4,386 in 2008) this is a non-trivial distinction. Using data on workers from the Current Population Survey merged with estimates of employer and exchange policy premiums, we investigate the impact of the affordability decision on the fraction of workers who could then access exchange coverage subsidies and on the correspondingly lower employer sponsored insurance (ESI) coverage rates. We do via a series of calculations for each worker that first shows the financial incentives at stake in deciding between ESI and subsidized exchange coverage. We then show how many of those who stand to gain from exchange coverage could do so under the two different affordability rules and different levels of employee contributions. Finally, we show the extent to which a single affordability rule would cause low-income workers with families to fall into a “no-man’s land” with no source of affordable family coverage. We estimate that choosing a family affordability rule could initially lead to as many as 1.3 million more workers accessing exchange subsidies for themselves and their families than under a single affordability rule. If employees pay 50 percent of the premiums in the future, this number increases to 6 million. Increased use of exchange subsidies would be accompanied by reductions in ESI coverage and increased costs to taxpayers. Alternatively, choosing a single affordability rule would initially result in close to 4 million dependents of workers with affordable single coverage not having affordable health insurance. This would grow to close to 13 million if employees pay 50 percent of the premium. ER - TY - JOUR AU - Burnside,Craig TI - Carry Trades and Risk JF - National Bureau of Economic Research Working Paper Series VL - No. 17278 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17278 L1 - http://www.nber.org/papers/w17278.pdf N1 - Author contact info: Craig Burnside Department of Economics Duke University 213 Social Sciences Building Durham, NC 27708-0097 Tel: 919/660-1808 Fax: 919/684-8974 E-Mail: craig.burnside@duke.edu AB - Carry trades, in which an investor borrows a low interest rate currency and lends a high interest rate currency, have been profitable historically. The risk exposure of carry traders might explain their high returns, but conventional models of risk do not work because traditional risk factors, used to price the stock market, do not price currency returns. Less traditional factors that are more successful in explaining currency returns, are, however, unsuccessful in explaining the returns to the stock market. More exotic models of "crisis risk" are another possibility, but I show that any time-variation in the exposure of the carry trade to market risk has been insufficient, in sample, to explain the average returns earned by carry traders. Instead, peso events remain a candidate explanation of the returns to the carry trade. ER - TY - JOUR AU - Gourio,François AU - Siemer,Michael AU - Verdelhan,Adrien TI - International Risk Cycles JF - National Bureau of Economic Research Working Paper Series VL - No. 17277 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17277 L1 - http://www.nber.org/papers/w17277.pdf N1 - Author contact info: Francois Gourio Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-4534 Fax: 617/353-4449 E-Mail: fgourio@bu.edu Michael Siemer Department of Economics Boston University 270 Bay State Road Boston, MA 02215 E-Mail: msiemer@bu.edu Adrien Verdelhan MIT Sloan School of Management 100 Main Street, E62-621 Cambridge, MA 02142 Tel: 617/253-5123 E-Mail: adrienv@mit.edu AB - Recent work in international finance suggests that the forward premium puzzle can be accounted for if (1) aggregate uncertainty is time-varying, and (2) countries have heterogeneous exposures to a world aggregate shock. We embed these features in a standard two-country real business cycle framework, and calibrate the model to match the differences between low and high interest rates countries. Unlike traditional real business cycle models, our model generates volatile exchange rates, a large currency forward premium, "excess comovement'' of asset prices relative to quantities, and an imperfect correlation between relative consumption growth and exchange rates. Our model implies, however, that high interest rate countries have smoother quantities, equity returns and interest rates than low interest rate countries, contrary to the data. ER - TY - JOUR AU - Grubb,Farley TI - The Continental Dollar: Initial Design, Ideal Performance, and the Credibility of Congressional Commitment JF - National Bureau of Economic Research Working Paper Series VL - No. 17276 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17276 L1 - http://www.nber.org/papers/w17276.pdf N1 - Author contact info: Farley Grubb University of Delaware Economics Department Newark, DE 19716 Tel: 302/831-1905 Fax: 302/831-6968 E-Mail: grubbf@udel.edu AB - An alternative history of the Continental Dollar is constructed from the original resolutions passed by Congress. The Continental Dollar was a zero-interest bearer bond, not a fiat currency. The public could redeem it at face value in specie at fixed future dates. Being a zero-interest bearer bond, discounting must be separated from depreciation. Before 1779 there was no depreciation, only discounting. In 1779 and again in 1780 Congress passed ex post facto laws which altered the redemption dates of past Continental Dollars in ways that were not fiscally credible. These laws were the turning point. Depreciation and collapse followed. ER - TY - JOUR AU - Blau,Francine D. AU - Kahn,Lawrence M. TI - Substitution Between Individual and Cultural Capital: Pre-Migration Labor Supply, Culture and US Labor Market Outcomes Among Immigrant Women JF - National Bureau of Economic Research Working Paper Series VL - No. 17275 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17275 L1 - http://www.nber.org/papers/w17275.pdf N1 - Author contact info: Francine D. Blau ILR School Cornell University 268 Ives Hall Ithaca, New York 14853-3901 Tel: 607/255-4381 Fax: 607/255-4496 E-Mail: fdb4@cornell.edu Lawrence Kahn ILR School Cornell University 258 Ives Hall Ithaca, NY 14853 Tel: 607-255-0510 Fax: 607-255-4496 E-Mail: lmk12@cornell.edu AB - In this paper we use New Immigrant Survey data to investigate the impact of immigrant women’s own labor supply prior to migrating and female labor supply in their source country to provide evidence on the role of human capital and culture in affecting their labor supply and wages in the United States. We find, as expected, that women who migrate from countries with relatively high levels of female labor supply work more in the United States. Moreover, most of this effect remains when we further control for each woman’s own labor supply prior to migrating, which itself also strongly affects labor supply in the United States. Importantly, we find a significantly negative interaction between pre-migration labor supply and source country female labor supply. We obtain broadly similar effects analyzing the determinants of hourly earnings among the employed in the United States, although the results are not always significant. These results suggest an important role for culture and norms in affecting immigrant women’s labor supply, since the effect of source country female labor supply on immigrant women’s US work hours is still strong even controlling for the immigrant’s own pre-migration labor supply. The negative interaction effects between previous work experience and source country female labor supply on women’s US work hours and wages suggest that cultural capital and individual job-related human capital act as substitutes in affecting preparedness for work in the US. ER - TY - JOUR AU - Ball,Laurence M. AU - Roux,Nicolás De AU - Hofstetter,Marc TI - Unemployment in Latin America and the Caribbean JF - National Bureau of Economic Research Working Paper Series VL - No. 17274 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17274 L1 - http://www.nber.org/papers/w17274.pdf N1 - Author contact info: Laurence M. Ball Department of Economics Johns Hopkins University Baltimore, MD 21218 Tel: 410/516-7605 Fax: 410/516-7600 E-Mail: lball@jhu.edu Nicolas De Roux Department of Economics Columbia University 420 West 118th Street New York, NY 10027 E-Mail: nd2282@columbia.edu Marc Hofstetter Faculdad de Economia Universidad de los Andes Carrera 1 No 18A-70 Bogota, Colombia E-Mail: mahofste@uniandes.edu.co AB - This study constructs a new data set on unemployment rates in Latin America and the Caribbean and then explores the determinants of unemployment. We compare different countries, finding that unemployment is influenced by the size of the rural population and that the effects of government regulations are generally weak. We also examine large, persistent increases in unemployment over time, finding that they are caused by contractions in aggregate demand. These demand contractions result from either disinflationary monetary policy or the defense of an exchange-rate peg in the face of capital flight. Our evidence supports hysteresis theories in which short-run changes in unemployment influence the natural rate. ER - TY - JOUR AU - Stowasser,Till AU - Heiss,Florian AU - McFadden,Daniel AU - Winter,Joachim TI - "Healthy, Wealthy and Wise?" Revisited: An Analysis of the Causal Pathways from Socio-economic Status to Health JF - National Bureau of Economic Research Working Paper Series VL - No. 17273 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17273 L1 - http://www.nber.org/papers/w17273.pdf N1 - Author contact info: Till Stowasser University of Munich Department of Economics Ludwigstr. 28 D-80539 Munich Germany E-Mail: till.stowasser@lrz.uni-muenchen.de Florian Heiss Department of Statistics and Econometrics Johannes Gutenberg-Universität Mainz Haus Recht und Wirtschaft II D-55099 Mainz Germany Tel: +49 (0) 6131/39 22551 Fax: +49 (0) 6131/39 23717 E-Mail: heiss@uni-mainz.de Daniel L. McFadden University of California, Berkeley Department of Economics 549 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-8428 Fax: 510/642-0638 E-Mail: mcfadden@econ.berkeley.edu Joachim Winter Department of Economics LMU Ludwigstr. 28 (RG) D-80539 Munich Germany E-Mail: winter@lmu.de M3 - presented at "Aging Conference", May 6-7, 2011 AB - Much has been said about the stylized fact that the economically successful are not only wealthier but also healthier than the less affluent. There is little doubt about the existence of this socio-economic gradient in health, but there remains a vivid debate about its source. In this paper, we review the methodological challenges involved in testing the causal relationships between socio-economic status and health. We describe the approach of testing for the absence of causal channels developed by Adams et al. (2003) that seeks identification without the need to isolate exogenous variation in economic variables, and we repeat their analysis using the full range of data that have become available in the Health and Retirement Study since, both in terms of observations years and age ranges covered. This analysis shows that causal inference critically depends on which time periods are used for estimation. Using the information of longer panels has the greatest effect on results. We find that SES causality cannot be ruled out for a larger number of health conditions than in the original study. An approach based on a reduced-form interpretation of causality thus is not very informative, at least as long as the confounding influence of hidden common factors is not fully controlled. ER - TY - JOUR AU - Favero,Carlo AU - Giavazzi,Francesco AU - Perego,Jacopo TI - Country Heterogeneity and the International Evidence on the Effects of Fiscal Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 17272 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17272 L1 - http://www.nber.org/papers/w17272.pdf N1 - Author contact info: Carlo Favero Department of Finance Bocconi University and IGIER Via Röntgen, 1 20136 Milano, ITALY E-Mail: carlo.favero@unibocconi.it Francesco Giavazzi Universita' Bocconi and IGIER Via Guglielmo Rontgen, 1 Milan 20136 ITALY Tel: 0039-02-5836-3304 Fax: 0039-02-5836-3302 E-Mail: francesco.giavazzi@unibocconi.it Jacopo Perego IGIER Universita' Bocconi 1 via Roentgen 20136 Milano Italy E-Mail: jacopo.perego@unibocconi.it AB - This paper shows how the richer frequency and variety of fiscal policy shocks available in an international sample can be analyzed recognizing the heterogeneity that exists across different countries. The main conclusion of our empirical analysis is that the question "what is the fiscal policy multiplier" is an ill-posed one. There is no unconditional fiscal policy multiplier. The effect of fiscal policy on output is different depending on the different debt dynamics, the different degree of openness and the different fiscal reaction functions across different countries. There are many fiscal multipliers and an average fiscal multiplier is of very little use to describe the effect of exogenous shifts in fiscal policy on output. ER - TY - JOUR AU - Spolaore,Enrico AU - Wacziarg,Romain TI - Long-Term Barriers to the International Diffusion of Innovations JF - National Bureau of Economic Research Working Paper Series VL - No. 17271 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17271 L1 - http://www.nber.org/papers/w17271.pdf N1 - Author contact info: Enrico Spolaore Department of Economics Tufts University Braker Hall 315 8 Upper Campus Road Medford, MA 02155 Tel: 617/627-4068 Fax: 617/627-3917 E-Mail: enrico.spolaore@tufts.edu Romain Wacziarg Anderson School of Management at UCLA C-510 Entrepreneurs Hall 110 Westwood Plaza Los Angeles, CA 90095-1481 Tel: 310 825 4507 E-Mail: wacziarg@ucla.edu M3 - presented at "ISOM", June 17-18, 2011 AB - We document an empirical relationship between the cross-country adoption of technologies and the degree of long-term historical relatedness between human populations. Historical relatedness is measured using genetic distance, a measure of the time since two populations’ last common ancestors. We find that the measure of human relatedness that is relevant to explain international technology diffusion is genetic distance relative to the world technological frontier (“relative frontier distance”). This evidence is consistent with long-term historical relatedness acting as a barrier to technology adoption: societies that are more distant from the technological frontier tend to face higher imitation costs. The results can help explain current differences in total factor productivity and income per capita across countries. ER - TY - JOUR AU - Charles,Kerwin Kofi AU - Stephens,Melvin,Jr. TI - Employment, Wages and Voter Turnout JF - National Bureau of Economic Research Working Paper Series VL - No. 17270 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17270 L1 - http://www.nber.org/papers/w17270.pdf N1 - Author contact info: Kerwin Kofi Charles Harris School of Public Policy University of Chicago 1155 East 60th Street Chicago, IL 60637 Tel: 773.834.8922 Fax: NA E-Mail: kcharles@uchicago.edu Melvin Stephens, Jr. University of Michigan Department of Economics 341 Lorch Hall 611 Tappan St. Ann Arbor, MI 48109-1220 Tel: 734/647-5606 E-Mail: mstep@umich.edu AB - This paper argues that, since activities that provide political information are complementary with leisure, increased labor market activity should lower turnout, but should do so least in prominent elections where information is ubiquitous. Using official county-level voting data and a variety of OLS and TSLS models, we find that increases in wages and employment: reduce voter turnout in gubernatorial elections by a significant amount; have no effect on Presidential turnout; and raise the share of persons voting in a Presidential election who do not vote on a House of Representative election on the same ballot. We argue that this pattern (which contradicts some previous findings in the literature) can be fully accounted for by an information argument, and is either inconsistent with or not fully explicable by arguments based on citizens’ psychological motivations to vote in good or bad times; changes in logistical voting costs; or transitory migration. Using individual-level panel data methods and multiple years’ data from the American National Election Study (ANES) we confirm that increases in employment lead to less use of the media and reduced political knowledge, and present associational individual evidence that corroborates our main argument. ER - TY - JOUR AU - Erel,Isil AU - Nadauld,Taylor D. AU - Stulz,René M. TI - Why Did U.S. Banks Invest in Highly-Rated Securitization Tranches? JF - National Bureau of Economic Research Working Paper Series VL - No. 17269 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17269 L1 - http://www.nber.org/papers/w17269.pdf N1 - Author contact info: Isil Erel Department of Finance Ohio State University 832 Fisher Hall 2100 Neil Avenue Columbus, OH 43210 Tel: 614-292-5174 E-Mail: erel@fisher.osu.edu Taylor D. Nadauld Department of Finance Brigham Young University Provo, Utah 84602 E-Mail: taylor.nadauld@byu.edu Rene M. Stulz The Ohio State University Fisher College of Business 806A Fisher Hall Columbus, OH 43210-1144 Tel: 614/292-1970 Fax: 614/292-2359 E-Mail: stulz_1@cob.osu.edu AB - We estimate holdings of highly-rated tranches of mortgage securitizations of American deposit-taking banks ahead of the credit crisis and evaluate hypotheses that have been advanced to explain these holdings. We find that holdings of highly-rated tranches were economically trivial for the typical bank, but banks with greater holdings performed more poorly during the crisis. Though univariate comparisons show that banks with large trading books had greater holdings, the holdings of highly-rated tranches are not higher for banks with large trading books in regressions that control for bank size. The ratio of highly-rated tranches holdings to assets increases with bank assets, but not for banks with more than $50 billion of assets. This evidence is inconsistent with explanations for holdings of highly-rated tranches that emphasize the incentives of banks deemed “too-big-to-fail”. Further, the evidence does not provide support for “bad incentives” theories of holdings of highly-rated tranches. We find, however, that banks active in securitization held more highly-rated tranches. Such a result can be consistent with regulatory arbitrage as well as with securitizing banks holding highly-rated tranches to convince investors of the quality of these securities. Our evidence supports the latter hypothesis. ER - TY - JOUR AU - Burman,Leonard E. AU - Phaup,Marvin TI - Tax Expenditures, the Size and Efficiency of Government, and Implications for Budget Reform JF - National Bureau of Economic Research Working Paper Series VL - No. 17268 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17268 L1 - http://www.nber.org/papers/w17268.pdf N1 - Author contact info: Leonard E. Burman Center for Policy Research 426 Eggers Hall Syracuse, NY 13244 Tel: 315/443-2692 Fax: 315/443-1081 E-Mail: leburman@maxwell.syr.edu Marvin Phaup Trachtenberg School of Public Policy and Public Ad The George Washington University 601K Media and Public Affairs Washington, D.C. 20052 E-Mail: MPhaup@gwu.edu M1 - published as Leonard E. Burman, Marvin Phaup. "Tax Expenditures, the Size and Efficiency of Government, and Implications for Budget Reform," in Jeffrey Brown, editor, "Tax Policy and the Economy, Volume 26" University of Chicago Press (2012) AB - One possible explanation for the difficulty in controlling the budget is that a major component of spending —tax expenditures—receives privileged status. It is treated as tax cuts rather than spending. This paper explores the implications of that classification and illustrates how it can lead to higher taxes, larger government, and an inefficient mix of spending (too many tax expenditures). The paper then analyzes alternative budgeting approaches that would explicitly incorporate and measure tax expenditures. It concludes by analyzing ways to control tax expenditures (and other spending) and the special challenges presented by tax expenditures. ER - TY - JOUR AU - Bordo,Michael D. AU - Rockoff,Hugh TI - The Influence of Irving Fisher on Milton Friedman’s Monetary Economics JF - National Bureau of Economic Research Working Paper Series VL - No. 17267 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17267 L1 - http://www.nber.org/papers/w17267.pdf N1 - Author contact info: Michael D. Bordo Department of Economics Rutgers University New Jersey Hall 75 Hamilton Street New Brunswick, NJ 08901 Tel: 732/822-7152 Fax: 732/932-7416 E-Mail: bordo@econ.rutgers.edu Hugh Rockoff Department of Economics 75 Hamilton Street Rutgers University College Avenue Campus New Brunswick, NJ 08901-1248 Tel: 609/897-0117 Fax: 732/932-7416 E-Mail: rockoff@fas-econ.rutgers.edu AB - This paper examines the influence of Irving Fisher’s writings on Milton Friedman’s work in monetary economics. We focus first on Fisher’s influences in monetary theory (the quantity theory of money, the Fisher effect, Gibson’s Paradox, the monetary theory of business cycles, and the Phillips Curve, and empirics, e.g. distributed lags.). Then we discuss Fisher and Friedman's views on monetary policy and various schemes for monetary reform (the k% rule, freezing the monetary base, the compensated dollar, a mandate for price stability, 100% reserve money, and stamped money.) Assessing the influence of an earlier economist's writings on that of later scholars is a challenge. As a science progresses the views of its earlier pioneers are absorbed in the weltanschauung. Fisher's Purchasing Power of Money as well as the work of Pigou and Marshall were the basic building blocks for later students of monetary economics. Thus, the Chicago School of the 1930s absorbed Fisher's approach, and Friedman learned from them. However, in some salient aspects of Friedman's work we can clearly detect a major direct influence of Fisher's writings on Friedman's. Thus, for example with the buildup of inflation in the 1960s Friedman adopted the Fisher effect and Fisher's empirical approach to inflationary expectations into his analysis. Thus, Fisher's influence on Friedman was both indirect through the Chicago School and direct. Regardless of the weight attached to the two influences, Fisher' impact on Friedman was profound. ER - TY - JOUR AU - Rajan,Raghuram G. AU - Ramcharan,Rodney TI - Constituencies and Legislation: The Fight over the McFadden Act of 1927 JF - National Bureau of Economic Research Working Paper Series VL - No. 17266 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17266 L1 - http://www.nber.org/papers/w17266.pdf N1 - Author contact info: Raghuram Rajan Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-4437 Fax: 773/702-0458 E-Mail: raghuram.rajan@ChicagoBooth.edu Rodney Ramcharan Federal Reserve Board Washington DC Tel: 202-912-7851 Fax: 202-452-5295 E-Mail: rodney.ramcharan@frb.gov AB - The McFadden Act of 1927 was one of the most hotly contested pieces of legislation in U.S. banking history, and its influence was still felt over half a century later. The act was intended to force states to accord the same branching rights to national banks as they accorded to state banks. By uniting the interests of large state and national banks, it also had the potential to expand the number of states that allowed branching. Congressional votes for the act therefore could reflect the strength of various interests in the district for expanded banking competition. Unlike previous work, we find strong evidence of elite influence. We find congressmen in districts in which landholdings were concentrated (suggesting a landed elite), and where the cost of bank credit was high and its availability limited (suggesting limited banking competition and high potential rents), were significantly more likely to oppose the act. The evidence suggests that while the law and the overall regulatory structure can shape the financial system far into the future, they themselves are likely to be shaped by well organized elites, even in countries with benign political institutions. ER - TY - JOUR AU - Braguinsky,Serguey AU - Branstetter,Lee G. AU - Regateiro,Andre TI - The Incredible Shrinking Portuguese Firm JF - National Bureau of Economic Research Working Paper Series VL - No. 17265 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17265 L1 - http://www.nber.org/papers/w17265.pdf N1 - Author contact info: Serguey Braguinsky Department of Social and Decision Sciences and Heinz College, School of Public Policy and Management Carnegie Mellon University Pittsburgh, PA 15213 E-Mail: sbrag@andrew.cmu.edu Lee G. Branstetter Heinz College School of Public Policy and Management Department of Social and Decision Sciences Carnegie Mellon University Pittsburgh, PA 15213 Tel: 412/268-4649 E-Mail: branstet@andrew.cmu.edu Andre Regateiro Heinz College School of Public Policy and Management Carnegie Mellon University Pittsburgh, PA 15213 E-Mail: AndreRegateiro@ist.utl.pt AB - Using Portugal's extensive matched employer-employee data set, this paper documents an unusual feature of the Portuguese economy. For decades, the entire Portuguese firm size distribution has been shifting to the left. We argue in this paper that Portugal's shrinking firms are linked to the country's anemic growth and low productivity. We show that the shift in the Portuguese firm size distribution is not reflected in other advanced industrial economies for which we have been able to obtain comparable data. Careful attempts to account for expanding data coverage, a structural shift from manufacturing to services, and aggressive efforts to "demonopolize" the Portuguese economy leave about half of this shift unexplained by these factors. So, what does explain the shift? We argue that Portugal's uniquely strong protections for regular workers have played an important role. Drawing upon an emerging literature that that attributes much of the productivity gap between advanced nations and developing nations to the misallocation of resources across firms in developing countries, we develop a theoretical model that shows how Portugal's labor market institutions could prevent more productive firms from reaching their optimal size, thereby constraining GDP per capita. Calibration exercises based on this model quantify the degree of labor market distortion consistent with recent shifts in the Portuguese firm size distribution. These calibration exercises suggest quite substantial growth effects could arise if the distortions were lessened or abolished altogether. ER - TY - JOUR AU - Abdulkadiroglu,Atila AU - Angrist,Joshua D. AU - Pathak,Parag A. TI - The Elite Illusion: Achievement Effects at Boston and New York Exam Schools JF - National Bureau of Economic Research Working Paper Series VL - No. 17264 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17264 L1 - http://www.nber.org/papers/w17264.pdf N1 - Author contact info: Atila Abdulkadiroğlu Duke University Department of Economics Durham, NC 27708 E-Mail: atila.abdulkadiroglu@duke.edu Joshua Angrist Department of Economics MIT, E52-353 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-8909 Fax: 617/253-1330 E-Mail: angrist@mit.edu Parag Pathak MIT Department of Economics 50 Memorial Drive E52-391C Cambridge, MA 02142 Tel: 617/253-7458 E-Mail: ppathak@mit.edu AB - Talented students compete fiercely for seats at Boston and New York exam schools. These schools are characterized by high levels of peer achievement and a demanding curriculum tailored to each district's highest achievers. While exam school students do very well in school, the question of whether an exam school education adds value relative to a regular public education remains open. We estimate the causal effect of exam school attendance using a regression-discontinuity design, reporting both parametric and non- parametric estimates. The outcomes studied here include scores on state standardized achievement tests, PSAT and SAT participation and scores, and AP scores. Our estimates show little effect of exam school offers on most students' achievement. We use two-stage least squares to convert reduced form estimates of the effects of exam school offers into estimates of peer and tracking effects, arguing that these appear to be unimportant in this context. Finally, we explore the external validity of RD estimates, arguing that as best we can tell, there is little effect of an exam school education on achievement even for the highest-ability marginal applicants and for applicants to the right of admissions cutoffs. On the other hand, a Boston exam school education seems to have a modest effect on high school English scores for minority applicants. A small group of 9th grade applicants also appears to do better on SAT Reasoning. These localized gains notwithstanding, the intense competition for exam school seats does not appear to be justified by improved learning for a broad set of students. ER - TY - JOUR AU - Puglisi,Riccardo AU - Snyder,James M., Jr. TI - The Balanced U.S. Press JF - National Bureau of Economic Research Working Paper Series VL - No. 17263 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17263 L1 - http://www.nber.org/papers/w17263.pdf N1 - Author contact info: Riccardo Puglisi Department of Economics, Statistics and Law University of Pavia Corso Strada Nuova 65 27100 Pavia Italy E-Mail: riccardo.puglisi@unipv.it James M. Snyder, Jr. Harvard University 1737 Cambridge Street, CGIS Knafel Building Room 413 Cambridge, MA 02138 Tel: 617/496-1089 E-Mail: jsnyder@gov.harvard.edu AB - We propose a new method for measuring the relative ideological positions of newspapers, voters, interest groups, and political parties. The method uses data on ballot propositions. We exploit the fact that newspapers, parties, and interest groups take positions on these propositions, and the fact that citizens ultimately vote on them. We find that, on average, newspapers in the U.S. are located almost exactly at the median voter in their states. Newspapers also tend to be centrist relative to interest groups. ER - TY - JOUR AU - Celik,Levent AU - Karabay,Bilgehan AU - McLaren,John TI - Trade Policy Making in a Model of Legislative Bargaining JF - National Bureau of Economic Research Working Paper Series VL - No. 17262 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17262 L1 - http://www.nber.org/papers/w17262.pdf N1 - Author contact info: Levent Celik CERGE-EI Politickych veznu 7, 111 21 Prague 1 Czech Republic E-Mail: celik@cerge-ei.cz Bilgehan Karabay Department of Economics University of Auckland Owen G. Glenn Building 12 Grafton Road Auckland 1010 New Zealand Tel: +64-9-9237193 Fax: +64-9-3737427 E-Mail: bilgehan.karabay@gmail.com John McLaren Department of Economics University of Virginia P.O. Box 400182 Charlottesville, VA 22904-4182 Tel: 434/924-3994 Fax: 434/982-2904 E-Mail: jmclaren@virginia.edu AB - In democracies, trade policy is the result of interactions among many agents with different agendas. In accordance with this observation, we construct a dynamic model of legislative trade policy-making in the realm of distributive politics. An economy consists of different sectors, each of which is concentrated in one or more electoral districts. Each district is represented by a legislator in the Congress. Legislative process is modeled as a multilateral sequential bargaining game a la Baron and Ferejohn (1989). Some surprising results emerge: bargaining can be welfare-worsening for all participants; legislators may vote for bills that make their constituents worse off; identical industries will receive very different levels of tariff. The results pose a challenge to empirical work, since equilibrium trade policy is a function not only of economic fundamentals but also of political variables at the time of congressional negotiations – some of them random realizations of mixed bargaining strategies. ER - TY - JOUR AU - Lewis,Karen K. TI - Global Asset Pricing JF - National Bureau of Economic Research Working Paper Series VL - No. 17261 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17261 L1 - http://www.nber.org/papers/w17261.pdf N1 - Author contact info: Karen K. Lewis Department of Finance, Wharton School 2300 SHDH University of Pennsylvania Philadelphia, PA 19104-6367 Tel: 215/898-7637 Fax: 215/898-6200 E-Mail: lewisk@wharton.upenn.edu AB - Financial markets have become increasingly global in recent decades, yet the pricing of internationally traded assets continues to depend strongly upon local risk factors, leading to several observations that are difficult to explain with standard frameworks. Equity returns depend upon both domestic and global risk factors. Further, local investors tend to overweight their asset portfolios in local equity. The stock prices of firms that begin to trade across borders increase in response to this information. Foreign exchange markets also display anomalous relationships. The forward rate predicts the wrong sign of future movements in the exchange rate, implying that traders can make profits by borrowing in lower interest rate currencies and investing in higher interest rate currencies. Furthermore, the sign of the foreign exchange premium changes over time, a fact difficult to reconcile with consumption variability. In this review, I describe the implications of the current body of research for addressing these and other global asset pricing challenges. ER - TY - JOUR AU - Feldstein,Martin S. TI - What's Next for the Dollar? JF - National Bureau of Economic Research Working Paper Series VL - No. 17260 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17260 L1 - http://www.nber.org/papers/w17260.pdf N1 - Author contact info: Martin S. Feldstein President Emeritus NBER 1050 Massachusetts Avenue Cambridge, MA 02138-5398 Tel: 617/868-3905 Fax: 617/868-7194 E-Mail: msfeldst@nber.org AB - The real trade weighted value of the dollar fell 11 percent against the Federal Reserve Bank’s index of major currencies during the 12 months through May 2011 and 31 percent during the past ten years. Four strong market forces are likely to cause further declines over the next several years: a portfolio rebalancing by major international investors who regard their portfolios as overweight dollars, the large US current account deficit, a Chinese policy to raise consumption, and interest rate differences that make dollar investments less attractive. A declining dollar could have a powerful positive effect on the short-run performance of the American economy by raising exports (now more than $1.3 trillion) and inducing American consumers to shift from imports to American made products and services. Without a boost to demand from an increase in net exports, the U.S. recovery is likely to remain weak and could run out of steam. There are of course also negative effects of a falling dollar: reducing the real value of any given level of personal incomes by raising the cost to households of the imported products that they consume and creating inflationary pressures as import prices rise. ER - TY - JOUR AU - Aguiar,Mark A. AU - Hurst,Erik AU - Karabarbounis,Loukas TI - Time Use During Recessions JF - National Bureau of Economic Research Working Paper Series VL - No. 17259 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17259 L1 - http://www.nber.org/papers/w17259.pdf N1 - Author contact info: Mark A. Aguiar Department of Economics Princeton University Fisher Hall Princeton, NJ 08544-1021 E-Mail: mark@markaguiar.com Erik Hurst Booth School of Business University of Chicago Harper Center Chicago, IL 60637 Tel: 773/834-4073 Fax: 773/702-0458 E-Mail: erik.hurst@chicagobooth.edu Loukas Karabarbounis University of Chicago Booth School of Business 5807 S. Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-8327 E-Mail: loukas.karabarbounis@chicagobooth.edu AB - We use data from the American Time Use Survey (ATUS), covering both the recent recession and the pre-recessionary period, to explore how foregone market work hours are allocated to other activities over the business cycle. Given the short time series, it is hard to distinguish business cycle effects from low frequency trends by simply comparing time spent on a given category prior to the recession with time spent on that category during the recession. Instead, we identify the business cycle effects on time use using cross state variation with respect to the severity of the recessions. We find that roughly 30% to 40% of the foregone market work hours are allocated to increased home production. Additionally, 30% of the foregone hours are allocated to increased sleep time and increased television watching. Other leisure activities absorb 20% of the foregone market work hours. We use our evidence from the ATUS to calibrate and test the predictions of workhorse macroeconomic models with home production. We show that the quantitative implications of these models regarding the allocation of time over the business cycle matches reasonably well the actual behavior of households. ER - TY - JOUR AU - Aizenman,Joshua AU - Sushko,Vladyslav TI - Capital flows: Catalyst or Hindrance to economic takeoffs? JF - National Bureau of Economic Research Working Paper Series VL - No. 17258 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17258 L1 - http://www.nber.org/papers/w17258.pdf N1 - Author contact info: Joshua Aizenman Department of Economics; E2 1156 High St. University of California, Santa Cruz Santa Cruz, CA 95064 Tel: 831/459-4791 Fax: 831/459-5077 E-Mail: jaizen@ucsc.edu Vladyslav Sushko Bank for International Settlements Centralbahnplatz 2 4002 Basel Switzerland E-Mail: vlad.sushko@bis.org AB - This paper applies a probit estimation to assess the relationship between economic takeoffs during 1950-2000 and inflows of portfolio debt, portfolio equity, and FDI, controlling for country’s stock of short-term external debt and commodity terms of trade. Average level of FDI inflows is associated with a 23 percent higher takeoff probability relative to a zero FDI inflow benchmark, and this effect is highest for the Latin America subsample, with a 65 rise in takeoff probability. Higher stock of short term external debt has been associated with a substantial negative effect on the probability of a takeoff, and the effect of the short terms debt overhang is largest for Latin American countries. Yet, virtually all the takeoffs were associated with a rise in portfolio debt inflows. At the sample mean, inflow of portfolio debt is associated with approximately 25 percent higher probability of a takeoff. In contrast, a one standard deviation increase in equity outflows (inflows) is associated with a 47 percent (17 percent) decline in the probability of a takeoff. A one standard deviation improvement in commodity terms of trade is associated with 28 percent higher takeoff probability. ER - TY - JOUR AU - Krishna,Pravin AU - Sethupathy,Guru TI - Trade and Inequality in India JF - National Bureau of Economic Research Working Paper Series VL - No. 17257 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17257 L1 - http://www.nber.org/papers/w17257.pdf N1 - Author contact info: Pravin Krishna Johns Hopkins University 1740 Massachusetts Avenue, NW Washington, DC 20036 Tel: 202/663 5733 Fax: 202/663 7718 E-Mail: Pravin_Krishna@jhu.edu Guru Sethupathy The Paul H. Nitze School of Advanced International Studies (SAIS) Johns Hopkins University 1740 Massachusetts Avenue, N.W. Washington D.C., 20036 E-Mail: gsethupathy@jhu.edu AB - To study the effects of the dramatic economic reforms undertaken in India in the early 1990s on inequality, this paper examines Theil inequality as well as other inequality measures constructed using Indian household expenditure survey data from 1988-2005. Overall inequality shows some variation over the period, falling between 1988 and 1994, rising between 1994 and 2000, but falling again by 2005. The evolution of inequality in the post reform period is thus non-monotonic. A similar inequality trend is seen within most Indian states over this time period. Finally, the change in inequality across households within states is found to be uncorrelated with the change in state-level measures of tariff and non-tariff protection. ER - TY - JOUR AU - Krishna,Pravin AU - Poole,Jennifer P. AU - Senses,Mine Zeynep TI - Wage Effects of Trade Reform with Endogenous Worker Mobility JF - National Bureau of Economic Research Working Paper Series VL - No. 17256 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17256 L1 - http://www.nber.org/papers/w17256.pdf N1 - Author contact info: Pravin Krishna Johns Hopkins University 1740 Massachusetts Avenue, NW Washington, DC 20036 Tel: 202/663 5733 Fax: 202/663 7718 E-Mail: Pravin_Krishna@jhu.edu Jennifer Poole UC, Santa Cruz 1156 High Street Santa Cruz, CA 95064 E-Mail: jpoole@ucsc.edu Mine Zeynep Senses Johns Hopkins University 1740 Massachusetts Avenue, NW Washington, DC 20036 E-Mail: msenses@jhu.edu AB - In this paper, we use a linked employer-employee database from Brazil to examine the impact of trade reform on the wages of workers employed at heterogeneous firms. Our analysis of data at the firm level confirms earlier findings of a differential positive effect of trade liberalization on average wages at exporting firms relative to non-exporting firms. However, the analysis of average firm-level wages is incomplete along several dimensions. First, it cannot fully account for the impact of a change in trade barriers on workforce composition, especially in terms of unobservable (time-invariant) worker characteristics (innate ability) and any additional productivity that results from employment in a specific firm (match-specific ability). Furthermore, the firm-level analysis is undertaken under the assumption that the assignment of workers to firms is random. This ignores the sorting of workers into firms and leads to a bias in estimates of the differential impact of trade on average wages at exporting firms relative to non-exporting firms. Using detailed information on worker and firm characteristics to control for compositional effects and allowing for the endogenous assignment of workers to firms due to time-invariant firm-worker match-specific productivity effects, we find an insignificant differential effect of trade openness on wages at exporting firms relative to domestic firms. We also show that workforce composition post-liberalization improves systematically in exporting firms in terms of the combination of innate worker ability and the quality of the worker-firm matches. Our findings confirm the importance of labor market matching mechanisms in determining the effects of trade policy changes on wages. ER - TY - JOUR AU - Dupas,Pascaline AU - Robinson,Jonathan TI - Why Don't the Poor Save More? Evidence from Health Savings Experiments JF - National Bureau of Economic Research Working Paper Series VL - No. 17255 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17255 L1 - http://www.nber.org/papers/w17255.pdf N1 - Author contact info: Pascaline Dupas Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 E-Mail: pdupas@stanford.edu Jonathan Robinson Department of Economics University of California, Santa Cruz 457 Engineering 2 Santa Cruz, CA 95064 E-Mail: jmrtwo@ucsc.edu AB - Using data from a field experiment in Kenya, we document that providing individuals with simple informal savings technologies can substantially increase investment in preventative health and reduce vulnerability to health shocks. Simply providing a safe place to keep money was sufficient to increase health savings, through a mental accounting effect. Adding an earmarking feature was only helpful when funds were put towards emergencies; earmarking for preventative health reduced savings on average, because the liquidity cost of tying up money was too great. Providing social pressure and credit through a ROSCA-based savings scheme had very large effects. ER - TY - JOUR AU - Kotchen,Matthew J. AU - Moon,Jon Jungbien TI - Corporate Social Responsibility for Irresponsibility JF - National Bureau of Economic Research Working Paper Series VL - No. 17254 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17254 L1 - http://www.nber.org/papers/w17254.pdf N1 - Author contact info: Matthew Kotchen School of Forestry & Environmental Studies, School of Management, and Department of Economics Yale University 195 Prospect Street New Haven, CT 06511 Tel: 203/432-9533 Fax: 203/436-9150 E-Mail: matthew.kotchen@yale.edu Jon Jungbien Moon Business School, Korea University Anam-dong, Seongbuk-gu Seoul, 136-701, Korea E-Mail: jonjmoon@korea.ac.kr AB - This paper provides an empirical investigation of the hypothesis that companies engage in corporate social responsibility (CSR) in order to offset corporate social irresponsibility (CSI). We find general support for the causal relationship: when companies do more “harm,” they also do more “good.” The empirical analysis is based on an extensive 15-year panel dataset that covers nearly 3,000 publicly traded companies. In addition to the overall finding that more CSI results in more CSR, we find evidence of heterogeneity among industries, where the effect is stronger in industries where CSI tends to be the subject of greater public scrutiny. We also investigate the degree of substitutability between different categories of CSR and CSI. Within the categories of community relations, environment, and human rights—arguably among those dimensions of social responsibility that are most salient—there is a strong within-category relationship. In contrast, the within-category relationship for corporate governance is weak, but CSI related to corporate governance appears to increase CSR in most other categories. Thus, when CSI concerns arise about corporate governance, companies seemingly choose to offset with CSR in other dimensions, rather than reform governance itself. ER - TY - JOUR AU - Ryan,Stephen P. AU - Tucker,Catherine TI - Heterogeneity and the Dynamics of Technology Adoption JF - National Bureau of Economic Research Working Paper Series VL - No. 17253 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17253 L1 - http://www.nber.org/papers/w17253.pdf N1 - Author contact info: Stephen P. Ryan MIT Department of Economics E52-262C 50 Memorial Drive Cambridge, MA 02142 Tel: 617/253-6082 Fax: 617/253-1330 E-Mail: sryan@mit.edu Catherine Tucker MIT Sloan School of Management 100 Main Street, E62-533 Cambridge, MA 02142 Tel: 617/252-1499 Fax: 617/258-7597 E-Mail: cetucker@mit.edu AB - We estimate the demand for a videocalling technology in the presence of both network effects and heterogeneity. Using a unique dataset from a large multinational firm, we pose and estimate a fully dynamic model of technology adoption. We propose a novel identification strategy based on post-adoption technology usage to disentangle equilibrium beliefs concerning the evolution of the network from observed and unobserved heterogeneity in technology adoption costs and use benefits. We find that employees have significant heterogeneity in both adoption costs and network benefits, and have preferences for diverse networks. Using our estimates, we evaluate a number of counterfactual adoption policies, and find that a policy of strategically targeting the right subtype for initial adoption can lead to a faster-growing and larger network than a policy of uncoordinated or diffuse adoption. ER - TY - JOUR AU - Gourinchas,Pierre-Olivier AU - Obstfeld,Maurice TI - Stories of the Twentieth Century for the Twenty-First JF - National Bureau of Economic Research Working Paper Series VL - No. 17252 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17252 L1 - http://www.nber.org/papers/w17252.pdf N1 - Author contact info: Pierre-Olivier Gourinchas Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-0720 Fax: 510/642-6615 E-Mail: pog@econ.berkeley.edu Maurice Obstfeld Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-9646 Fax: 510/642-6615 E-Mail: obstfeld@econ.berkeley.edu AB - A key precursor of twentieth-century financial crises in emerging and advanced economies alike was the rapid buildup of leverage. Those emerging economies that avoided leverage booms during the 2000s also were most likely to avoid the worst effects of the twenty-first century's first global crisis. A discrete-choice panel analysis using 1973-2010 data suggests that domestic credit expansion and real currency appreciation have been the most robust and significant predictors of financial crises, regardless of whether a country is emerging or advanced. For emerging economies, however, higher foreign exchange reserves predict a sharply reduced probability of a subsequent crisis. ER - TY - JOUR AU - Calabrese,Stephen AU - Epple,Dennis N. AU - Romano,Richard TI - Inefficiencies from Metropolitan Political and Fiscal Decentralization: Failures of Tiebout Competition JF - National Bureau of Economic Research Working Paper Series VL - No. 17251 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17251 L1 - http://www.nber.org/papers/w17251.pdf N1 - Author contact info: Stephen Calabrese Tepper School of Business Carnegie Mellon University Posner Hall, Room 243 Pittsburgh, PA 15213 Tel: 813-974-0656 Fax: 813-974-0832 E-Mail: sc45@qatar.cmu.edu Dennis N. Epple Tepper School of Business Carnegie Mellon University Posner Hall, Room 257B Pittsburgh, PA 15213 Tel: 412/268-1536 Fax: 412/268-7357 E-Mail: epple@cmu.edu Richard Romano University of Florida E-Mail: richard.romano@cba.ufl.edu AB - We examine the welfare effects of provision of local public goods in an empirically relevant setting using a multi-community model with mobile and heterogeneous households, and with flexible housing supplies. We characterize the first-best allocation and show efficiency can be implemented with decentralization using head taxes. We calibrate the model and compare welfare in property-tax equilibria, both decentralized and centralized, to the efficient allocation. Inefficiencies with decentralization and property taxation are large, dissipating most if not all the potential welfare gains that efficient decentralization could achieve. In property tax equilibrium centralization is frequently more efficient! An externality in community choice underlies the failure to achieve efficiency with decentralization and property taxes: Poorer households crowd richer communities and free ride by consuming relatively little housing thereby avoiding taxes. ER - TY - JOUR AU - Bayer,Patrick AU - McMillan,Robert AU - Murphy,Alvin AU - Timmins,Christopher TI - A Dynamic Model of Demand for Houses and Neighborhoods JF - National Bureau of Economic Research Working Paper Series VL - No. 17250 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17250 L1 - http://www.nber.org/papers/w17250.pdf N1 - Author contact info: Patrick Bayer Department of Economics Duke University 213 Social Sciences Durham, NC 27708 Tel: 919/660-1832 E-Mail: patrick.bayer@duke.edu Robert McMillan University of Toronto Department of Economics 150 St. George Street Toronto, ON M5S 3G7 CANADA Tel: 416/978-4190 Fax: 416/978-6713 E-Mail: mcmillan@chass.utoronto.ca Alvin Murphy Olin Business School Washington University in St. Louis Box 1133, 1 Brookings Drive St. Louis, MO 63130 Tel: 314-935-6306 E-Mail: murphya@wustl.edu Christopher Timmins Department of Economics Duke University 209 Social Sciences Building P.O. Box 90097 Durham, NC 27708-0097 Tel: 919/660-1809 Fax: 919/684-8974 E-Mail: christopher.timmins@duke.edu AB - We develop a tractable model of neighborhood choice in a dynamic setting along with a computationally straightforward estimation approach. This approach uses information about neighborhood choices and the timing of moves to recover moving costs and preferences for dynamically-evolving housing and neighborhood attributes. The model and estimator are potentially applicable to the study of a wide range of dynamic phenomena in housing markets and cities. We focus here on estimating the marginal willingness to pay for non-marketed amenities – neighborhood racial composition, air pollution, and violent crime – using rich dynamic data. Consistent with the time-series properties of each amenity, we find that a static demand model understates willingness to pay to avoid pollution and crime but overstates willingness to pay to live near neighbors of one’s own race. These findings have important implications for the class of static housing demand models typically used to value urban amenities. ER - TY - JOUR AU - Hafner,Tamara AU - Popp,David TI - China and India as Suppliers of Affordable Medicines to Developing Countries JF - National Bureau of Economic Research Working Paper Series VL - No. 17249 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17249 L1 - http://www.nber.org/papers/w17249.pdf N1 - Author contact info: Tamara Hafner Assistant Professor Department of Public Administration and Policy School of Public Affairs, American University 4400 Massachusetts Ave. NW Ward Circle Building, Room 345 Washington, DC 20016 E-Mail: hafner@american.edu David Popp Associate Professor of Public Administration Syracuse University The Maxwell School 426 Eggers Hall Syracuse, NY 13244-1020 Tel: 315/443-2482 Fax: 315/443-1081 E-Mail: dcpopp@maxwell.syr.edu AB - As countries reform their patent laws to be in compliance with the Trade Related Intellectual Property Rights Agreement, an important question is how increased patent protection will affect drug prices in low-income countries. Using pharmaceutical trade data from 1996 to 2005, we examine the role of China and India as suppliers of medicines to other middle- and low-income countries and evaluate the competitive effect of medicine imports from these countries on the price of medicines from high- income countries. We find that imports of antibiotics and unspecified medicaments from India and China significantly depress the average price of these commodities imported from high-income trading partners, suggesting that India and China are not only important sources of inexpensive medicines but also have an indirect effect by lowering prices through competition. As India is the leading supplier of medicines in Sub-Saharan Africa, this region will likely be affected most adversely. ER - TY - JOUR AU - Levinsohn,James A. AU - Pugatch,Todd TI - Prospective Analysis of a Wage Subsidy for Cape Town Youth JF - National Bureau of Economic Research Working Paper Series VL - No. 17248 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17248 L1 - http://www.nber.org/papers/w17248.pdf N1 - Author contact info: James A. Levinsohn Yale School of Management PO Box 208200 New Haven, CT 06520 Tel: 734/763-2319 Fax: 734/764-2769 E-Mail: James.Levinsohn@yale.edu Todd Pugatch Department of Economics University of Michigan Ann Arbor, MI 48109 E-Mail: tpugatch@umich.edu AB - Recognizing that a credible estimate of a wage subsidy's impact requires a model of the labor market that itself generates high unemployment in equilibrium, we estimate a structural search model that incorporates both observed heterogeneity and measurement error in wages. Using the model to examine the impact of a wage subsidy, we find that a R1000/month wage subsidy paid to employers leads to an increase of R660 in mean accepted wages and a decrease of 15 percentage points in the share of youth experiencing long-term unemployment. ER - TY - JOUR AU - LaLumia,Sara AU - Sallee,James M. TI - The Value of Honesty: Empirical Estimates from the Case of the Missing Children JF - National Bureau of Economic Research Working Paper Series VL - No. 17247 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17247 L1 - http://www.nber.org/papers/w17247.pdf N1 - Author contact info: Sara LaLumia Department of Economics Williams College 24 Hopkins Hall Drive Williamstown, MA 01267 E-Mail: sl2@williams.edu James M. Sallee Harris School of Public Policy Studies University of Chicago 1155 East 60th Street Chicago, IL 60637 Tel: 773/316-3480 Fax: 773/702-2286 E-Mail: sallee@uchicago.edu AB - How much are people willing to forego to be honest, to follow the rules? When people do break the rules, what can standard data sources tell us about their behavior? Standard economic models of crime typically assume that individuals are indifferent to dishonesty, so that they will cheat or lie as long as the expected pecuniary benefits exceed the expected costs of being caught and punished. We investigate this presumption by studying the response to a change in tax reporting rules that made it much more difficult for taxpayers to evade taxes by inappropriately claiming additional dependents. The policy reform induced a substantial reduction in the number of dependents claimed, which indicates that many filers had been cheating before the reform. Yet, the number of filers who availed themselves of this evasion opportunity is dwarfed by the number of filers who passed up substantial tax savings by not claiming extra dependents. By declining the opportunity to cheat, these taxpayers reveal information about their willingness to pay to be honest. We present a novel method for inferring the characteristics of taxpayers in the absence of audit data. Our analysis suggests both that this willingness to pay to be honest is large on average and that it varies significantly across the population of taxpayers. ER - TY - JOUR AU - Tucker,Catherine TI - Network Stability, Network Externalities and Technology Adoption JF - National Bureau of Economic Research Working Paper Series VL - No. 17246 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17246 L1 - http://www.nber.org/papers/w17246.pdf N1 - Author contact info: Catherine Tucker MIT Sloan School of Management 100 Main Street, E62-533 Cambridge, MA 02142 Tel: 617/252-1499 Fax: 617/258-7597 E-Mail: cetucker@mit.edu AB - This paper investigates how the destabilizing of a social network may increase the scope of network externalities, using data on sales of a video-calling system made to an investment bank's employees and subsequent usage by these customers. The terrorist attacks of 2001 led potential customers in New York to start communicating with a new and less predictable set of people when their work teams were reorganized as a result of the physical displacement that resulted from the attacks. This did not happen in other comparable cities. These destabilized communication patterns were associated with potential adopters in New York being more likely to take into account a wider spectrum of the user base when deciding whether to adopt relative to those in other cities. Empirical analysis suggests that the aggregate effect of network externalities on adoption was doubled by this instability. ER - TY - JOUR AU - Ebenstein,Avraham AU - Zhang,Jian AU - McMillan,Margaret S. AU - Chen,Kevin TI - Chemical Fertilizer and Migration in China JF - National Bureau of Economic Research Working Paper Series VL - No. 17245 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17245 L1 - http://www.nber.org/papers/w17245.pdf N1 - Author contact info: Avraham Ebenstein Department of Economics Hebrew University of Jerusalem Mount Scopus Campus, #4208 Jerusalem, Israel 91905 E-Mail: ebenstein@mscc.huji.ac.il Jian Zhang Central University of Finance and Economics 39 South College Road Beijing, China 100081 E-Mail: jian32@gmail.com Margaret S. McMillan Tufts University Department of Economics 114a Braker Hall Medford, MA 02155 Tel: 617/627-3137 Fax: 617/627-3197 E-Mail: margaret.mcmillan@tufts.edu Kevin Chen International Food Policy Research Institute Institute of Agricultural Economics Chinese Academy of Agricultural Sciences (CAAS) No. 176 mail box No. 12, Zhongguancun Nandajie Beijing, 10081, China E-Mail: k.chen@cgiar.org AB - This paper examines a possible connection between China’s massive rural to urban migration and high chemical fertilizer use rates during the late 1980s and 1990s. Using panel data on villages in rural China (1987-2002), we find that labor out-migration and fertilizer use per hectare are positively correlated. Using 2SLS, employing the opening of a Special Economic Zone in a nearby city as an instrument, we find that village fertilizer use is linked to contemporaneous short-term out-migration of farm workers. We also examine the long-term environmental consequences of chemical fertilizer use during this period. Using OLS, we find that fertilizer use intensity is correlated with future fertilizer use rates and diminished effectiveness of fertilizer, demonstrating persistency in use patterns, and suggesting that in areas with high use of fertilizer, the land is becoming less responsive. We also demonstrate that fertilizer use within a river basin is correlated with organic forms of water pollution, suggesting that industrialization has induced pollution in China both directly and through its impact on rural labor supply. ER - TY - JOUR AU - Exterkate,Anneke AU - Lumsdaine,Robin L. TI - How Survey Design Affects Inference Regarding Health Perceptions and Outcomes JF - National Bureau of Economic Research Working Paper Series VL - No. 17244 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17244 L1 - http://www.nber.org/papers/w17244.pdf N1 - Author contact info: Anneke Exterkate Erasmus University Burgemeester Oudlaan 50 3062 PA Rotterdam, Netherlands E-Mail: a.exterkate@gmail.com Robin L. Lumsdaine Kogod School of Business American University 4400 Massachusetts Avenue NW Washington, DC 20016 Tel: 202/885-1964 E-Mail: robin.lumsdaine@american.edu AB - This paper considers the role of survey design and question phrasing in evaluating the subjective health assessment responses using the Survey of Health, Ageing and Retirement in Europe (SHARE) dataset. A unique feature of this dataset is that respondents were twice asked during the survey to evaluate their health on a five-point scale, using two different sets of descriptors to define the five points, with the ordering of which set was first given determined randomly. We find no evidence to refute the assertion that the order was determined by random assignment. Yet we document differences in the response distributions between the two questions, as well as differences in inference in comparing the two populations (those that were asked one question first versus those that were asked the other). We then consider determinants of the degree of concordance between the two questions, as well as the determinants of individuals that provide conflicting responses. There appears to be evidence to suggest that individuals’ assessments of their health in response to the second question may be influenced by the battery of health questions that were asked following the first assessment. We find that information in self-assessed health responses is useful in examining health outcomes. Our results suggest that adjusting such responses to take into account framing and sequencing of questions may improve inference. In addition, we show that accounting for survey design may be important in models for predicting outcomes of interest, such as the probability of a major health event. ER - TY - JOUR AU - Béteille,Tara AU - Kalogrides,Demetra AU - Loeb,Susanna TI - Stepping Stones: Principal Career Paths and School Outcomes JF - National Bureau of Economic Research Working Paper Series VL - No. 17243 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17243 L1 - http://www.nber.org/papers/w17243.pdf N1 - Author contact info: Tara Beteille The World Bank MSN M9A-007 1900 Pennsylvania Avenue, NW Washington, DC 20431 E-Mail: tara.beteille@gmail.com Demetra Kalogrides Stanford University 520 Galvez Mall Drive Stanford CA, 94305 E-Mail: dkalo@stanford.edu Susanna Loeb 524 CERAS, 520 Galvez Mall Stanford University Stanford, CA 94305 Tel: 650/725-4262 E-Mail: sloeb@stanford.edu AB - More than one out of every five principals leaves their school each year. In some cases, these career changes are driven by the choices of district leadership. In other cases, principals initiate the move, often demonstrating preferences to work in schools with higher achieving students from more advantaged socioeconomic backgrounds. Principals often use schools with many poor or low-achieving students as stepping stones to what they view as more desirable assignments. We use longitudinal data from one large urban school district to study the relationship between principal turnover and school outcomes. We find that principal turnover is, on average, detrimental to school performance. Frequent turnover of school leadership results in lower teacher retention and lower student achievement gains. Leadership changes are particularly harmful for high poverty schools, low-achieving schools, and schools with many inexperienced teachers. These schools not only suffer from high rates of principal turnover but are also unable to attract experienced successors. The negative effect of leadership changes can be mitigated when vacancies are filled by individuals with prior experience leading other schools. However, the majority of new principals in high poverty and low-performing schools lack prior leadership experience and leave when more attractive positions become available in other schools. ER - TY - JOUR AU - Jacks,David S. TI - Defying Gravity: The 1932 Imperial Economic Conference and the Reorientation of Canadian Trade JF - National Bureau of Economic Research Working Paper Series VL - No. 17242 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17242 L1 - http://www.nber.org/papers/w17242.pdf N1 - Author contact info: David S. Jacks Department of Economics Simon Fraser University 8888 University Drive Burnaby, BC V5A 1S6 CANADA Tel: 778/782-5392 Fax: 778/782-5944 E-Mail: dsjacks@gmail.com AB - In the wake of the Great Depression, the Canadian government embarked on a stunning reversal in its commercial policy. A key element of its response was the promotion of intra-imperial trade at the Imperial Economic Conference of 1932. This paper addresses whether or not Canadian trade was able to defy gravity and divert trade flows towards other signatories at Ottawa. The results strongly suggest that the conference was a failure from the Canadian perspective. Potential sources of this failure include unreasonable expectations about the likely reductions in trade costs and a neglect of key considerations related to certainty and credibility. ER - TY - JOUR AU - Blau,Francine D. AU - Kahn,Lawrence M. TI - The Feasibility and Importance of Adding Measures of Actual Experience to Cross-Sectional Data Collection JF - National Bureau of Economic Research Working Paper Series VL - No. 17241 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17241 L1 - http://www.nber.org/papers/w17241.pdf N1 - Author contact info: Francine D. Blau ILR School Cornell University 268 Ives Hall Ithaca, New York 14853-3901 Tel: 607/255-4381 Fax: 607/255-4496 E-Mail: fdb4@cornell.edu Lawrence Kahn ILR School Cornell University 258 Ives Hall Ithaca, NY 14853 Tel: 607-255-0510 Fax: 607-255-4496 E-Mail: lmk12@cornell.edu AB - We use Michigan Panel Study of Income Dynamics data and data from a 2008 telephone survey of adults conducted by Westat for the Princeton Data Improvement Initiative (PDII) to explore the importance and feasibility of adding retrospective questions about actual work experience to cross-sectional data sets. We demonstrate that having such actual experience data is important for analyzing women’s post-school human capital accumulation, residual wage inequality, and the gender pay gap. Further, our PDII survey results show that it is feasible to collect actual experience data in cross-sectional telephone surveys like the March Current Population Survey annual supplement. ER - TY - JOUR AU - Parker,Jonathan A. TI - On Measuring the Effects of Fiscal Policy in Recessions JF - National Bureau of Economic Research Working Paper Series VL - No. 17240 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17240 L1 - http://www.nber.org/papers/w17240.pdf N1 - Author contact info: Jonathan Parker Finance Department Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208-2001 Tel: 847/491-4113 Fax: 847/491-5719 E-Mail: Jonathan-Parker@Kellogg.Northwestern.edu AB - We do not have a good measure of the effects of fiscal policy in a recession because the methods that we use to estimate the effects of fiscal policy — both those using the observed outcomes following different policies in aggregate data and those studying counterfactuals in fitted model economies -- almost entirely ignore the state of the economy and estimate 'the' government multiplier, which is presumably a weighted average of the one we care about — the multiplier in a recession — and one we care less about — the multiplier in an expansion. Notable exceptions to this general claim suggest this difference is potentially large. Our lack of knowledge stems significantly from the focus on linear dynamics: VARs and linearized (or close-to-linear) DSGEs. Our lack of knowledge also reflects a lack of data: deep recessions are few and nonlinearities hard to measure. The lack of statistical power in the estimation of nonlinear models using aggregate data can be addressed by exploiting estimates of partial-equilibrium responses in dissaggregated data. Microeconomic estimates of the partial-equilibrium causal effects of a policy can discipline the causal channels inherent in any DSGE model of the general equilibrium effects of policy. Microeconomic studies can also provide measures of the dependence of the effects of a policy on the states of different agents which is a key component of the dependence of the general-equilibrium effects of fiscal policy on the state of the economy. ER - TY - JOUR AU - Frankel,Jeffrey A. TI - Over-optimism in Forecasts by Official Budget Agencies and Its Implications JF - National Bureau of Economic Research Working Paper Series VL - No. 17239 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17239 L1 - http://www.nber.org/papers/w17239.pdf N1 - Author contact info: Jeffrey A. Frankel Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/496-3834 Fax: 617/496-5747 E-Mail: jeffrey_frankel@harvard.edu AB - The paper studies forecasts of real growth rates and budget balances made by official government agencies among 33 countries. In general, the forecasts are found: (i) to have a positive average bias, (ii) to be more biased in booms, (iii) to be even more biased at the 3-year horizon than at shorter horizons. This over-optimism in official forecasts can help explain excessive budget deficits, especially the failure to run surpluses during periods of high output: if a boom is forecasted to last indefinitely, retrenchment is treated as unnecessary. Many believe that better fiscal policy can be obtained by means of rules such as ceilings for the deficit or, better yet, the structural deficit. But we also find: (iv) countries subject to a budget rule, in the form of euroland’s Stability and Growth Path, make official forecasts of growth and budget deficits that are even more biased and more correlated with booms than do other countries. This effect may help explain frequent violations of the SGP. One country, Chile, has managed to overcome governments’ tendency to satisfy fiscal targets by wishful thinking rather than by action. As a result of budget institutions created in 2000, Chile’s official forecasts of growth and the budget have not been overly optimistic, even in booms. Unlike many countries in the North, Chile took advantage of the 2002-07 expansion to run budget surpluses, and so was able to ease in the 2008-09 recession. ER - TY - JOUR AU - He,Jie (Jack) AU - Qian,Jun 'QJ' AU - Strahan,Philip E. TI - Are All Ratings Created Equal? The Impact of Issuer Size on the Pricing of Mortgage-backed Securities JF - National Bureau of Economic Research Working Paper Series VL - No. 17238 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17238 L1 - http://www.nber.org/papers/w17238.pdf N1 - Author contact info: Jie He University of Georgia Terry College of Business Department of Banking and Finance 424 Brooks Hall Athens, GA 30602 E-Mail: jiehe@uga.edu Jun Qian Boston College 140 Commonwealth Ave Chestnut Hill, MA 02467 E-Mail: qianju@bc.edu Philip Strahan Carroll School of Management 324B Fulton Hall Boston College Chestnut Hill, MA 02467 Tel: 617/552-6430 E-Mail: philip.strahan@bc.edu AB - We examine whether rating agencies (Moody’s, S&P, and Fitch) reward large issuers of mortgage-backed securities, who bring substantial business, by granting them unduly favorable ratings. The initial yield on both AAA-rated and non-AAA rated tranches sold by large issuers is higher than that on similar tranches sold by small issuers during the market boom years of 2004-2006. Moreover, the prices of MBS sold by large issuers drop more than those sold by small issuers, and the differences are concentrated among tranches issued during 2004-2006. We conclude that large issuers receive more favorable ratings and that the market prices the risk of inflated ratings, especially during booming periods. ER - TY - JOUR AU - White,Michelle J. TI - Corporate and Personal Bankruptcy Law JF - National Bureau of Economic Research Working Paper Series VL - No. 17237 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17237 L1 - http://www.nber.org/papers/w17237.pdf N1 - Author contact info: Michelle J. White Department of Economics University of California, San Diego La Jolla, CA 92093-0508 Tel: 858/534-2783 Fax: 858/534-7040 E-Mail: miwhite@ucsd.edu AB - Bankruptcy is the legal process by which the debts of firms, individuals, and occasionally governments in financial distress are resolved. Bankruptcy law always includes three components. First, it provides a collective framework for simultaneously resolving all debts of the bankrupt entity, regardless of when they are due. Second, it provides rules for determining how the assets and earnings used to repay are divided among creditors. Third, bankruptcy law specifies punishments intended to discourage debtors from defaulting on their debts and filing for bankruptcy. This review discusses and evaluates bankruptcy law by examining whether and when the law encourages debtors and creditors to behave in economically efficient ways. It also considers how bankruptcy law might be changed to improve economic efficiency. The review shows that there are multiple economic objectives of bankruptcy law, because the law affects has very diverse effects. Some of these objectives differ for individuals versus corporations in bankruptcy. ER - TY - JOUR AU - Duggan,Mark AU - Hayford,Tamara TI - Has the Shift to Managed Care Reduced Medicaid Expenditures? Evidence from State and Local-Level Mandates JF - National Bureau of Economic Research Working Paper Series VL - No. 17236 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17236 L1 - http://www.nber.org/papers/w17236.pdf N1 - Author contact info: Mark Duggan The Wharton School University of Pennsylvania 1452 Steinberg Hall-Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104 Tel: 215-898-0928 Fax: 215-898-7635 E-Mail: mduggan@wharton.upenn.edu Tamara Hayford Congressional Budget Office Second and D Streets, SW Washington, DC 20515-6925 E-Mail: tamara.hayford@cbo.gov AB - From 1991 to 2003, the fraction of Medicaid recipients enrolled in HMOs and other forms of Medicaid managed care (MMC) increased from 11 percent to 58 percent. This increase was largely driven by state and local mandates that required most Medicaid recipients to enroll in an MMC plan. Theoretically, it is ambiguous whether the shift from fee-for-service into managed care would lead to an increase or a reduction in Medicaid spending. This paper investigates this effect using a data set on state and local level MMC mandates and detailed data from CMS on state Medicaid expenditures. The findings suggest that shifting Medicaid recipients from fee-for-service into MMC did not reduce Medicaid spending in the typical state. However, the effects of the shift varied significantly across states as a function of the generosity of the state’s baseline Medicaid provider reimbursement rates. These results are consistent with recent research on managed care among the privately insured, which finds that HMOs and other forms of managed care achieve their savings largely through reduced prices rather than lower quantities. ER - TY - JOUR AU - Kuziemko,Ilyana TI - Human Capital Spillovers in Families: Do Parents Learn from or Lean on their Children? JF - National Bureau of Economic Research Working Paper Series VL - No. 17235 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17235 L1 - http://www.nber.org/papers/w17235.pdf N1 - Author contact info: Ilyana Kuziemko 361 Wallace Hall Princeton University Princeton, NJ 08544 Tel: 609/258-6917 Fax: 609/258-5974 E-Mail: kuziemko@princeton.edu AB - I develop a model in which a child's acquisition of a given form of human capital incentivizes adults in his household to either learn from him (if children act as teachers then adults' cost of learning the skill falls) or lean on him (if children's human capital substitutes for that of adults in household production then adults' benefit of learning the skill falls). I exploit regional variation in two shocks to children's human capital and examine the effect on adults. The rapid introduction of primary education for black children in the South during Reconstruction not only increased literacy of children but also of adults living in the same household ("learning" outweighs "leaning"). Conversely, the 1998 introduction of English immersion in California public schools appears to have increased the English skills of children but discouraged adults living with them from acquiring the language ("leaning" outweighs "learning"). Whether family members learn from or lean on each other has implications for the externalities associated with education policies. ER - TY - JOUR AU - Kuziemko,Ilyana AU - Buell,Ryan W. AU - Reich,Taly AU - Norton,Michael I. TI - "Last-place Aversion": Evidence and Redistributive Implications JF - National Bureau of Economic Research Working Paper Series VL - No. 17234 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17234 L1 - http://www.nber.org/papers/w17234.pdf N1 - Author contact info: Ilyana Kuziemko 361 Wallace Hall Princeton University Princeton, NJ 08544 Tel: 609/258-6917 Fax: 609/258-5974 E-Mail: kuziemko@princeton.edu Ryan Buell Harvard Business School Boston, MA 02163 E-Mail: rbuell@hbs.edu Taly Reich Stanford Graduate School of Business 655 Knight Way Stanford, CA 94305-7298 E-Mail: treich@stanford.edu Michael I. Norton Marketing Unit Harvard Business School Boston, MA 02163 E-Mail: mnorton@hbs.edu AB - Why do low-income individuals often oppose redistribution? We hypothesize that an aversion to being in "last place" undercuts support for redistribution, with low-income individuals punishing those slightly below themselves to keep someone "beneath" them. In laboratory experiments, we find support for "last-place aversion" in the contexts of risk aversion and redistributive preferences. Participants choose gambles with the potential to move them out of last place that they reject when randomly placed in other parts of the distribution. Similarly, in money- transfer games, those randomly placed in second-to-last place are the least likely to costlessly give money to the player one rank below. Last-place aversion predicts that those earning just above the minimum wage will be most likely to oppose minimum-wage increases as they would no longer have a lower-wage group beneath them, a prediction we confirm using survey data. ER - TY - JOUR AU - Phillips,Gordon M. AU - Sertsios,Giorgo TI - How Do Firm Financial Conditions Affect Product Quality and Pricing? JF - National Bureau of Economic Research Working Paper Series VL - No. 17233 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17233 L1 - http://www.nber.org/papers/w17233.pdf N1 - Author contact info: Gordon M. Phillips Marshall School of Business University of Southern California Citigroup Center Los Angeles, CA 90089 Tel: 213/740-0038 E-Mail: Gordon.Phillips@marshall.usc.edu Giorgo Sertsios Bauer College of Business University of Houston Houston, TX E-Mail: Sertsios@econ.umd.edu AB - We analyze the interaction of firm product quality and pricing decisions with financial distress and bankruptcy in the airline industry. We consider an airline's choices of quality and price as dynamic decisions that trade off current cash flows for future revenue. We examine how airline mishandled baggage, on-time performance and pricing are related to financial distress and bankruptcy, controlling for the endogeneity of financial distress and bankruptcy. We find that an airline's quality decisions are differentially affected by financial distress and bankruptcy. Product quality decreases when airlines are in financial distress, consistent with financial distress reducing a firm's incentive to invest in quality. In contrast, in bankruptcy product quality increases relative to financial distress. In addition, we find that firms price more aggressively when in financial distress consistent with firms trying to increase short-term market share and revenues. ER - TY - JOUR AU - Abraham,Jean M. AU - Royalty,Anne Beeson AU - DeLeire,Thomas TI - Gauging the Generosity of Employer-Sponsored Insurance: Differences Between Households With and Without a Chronic Condition JF - National Bureau of Economic Research Working Paper Series VL - No. 17232 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17232 L1 - http://www.nber.org/papers/w17232.pdf N1 - Author contact info: Jean Abraham Department of Health Policy and Management University of Minnesota 20 Delaware St SE MMC 729 Minneapolis, MN 55455 E-Mail: abrah042@umn.edu Anne Beeson Royalty Department of Economics Indiana University - Purdue University at Indianapolis 425 University Blvd. Indianapolis, IN 46202-5140 E-Mail: royalty@iupui.edu Thomas DeLeire La Follette School of Public Affairs University of Wisconsin-Madison 1225 Observatory Drive Madison, WI 53706 Tel: 608-263-6998 Fax: 608/263-2820 E-Mail: deleire@wisc.edu AB - We develop an empirical method to assess the generosity of employer-sponsored insurance across groups within the U.S. population. A key feature of this method is its simplicity – it only requires data on out-of-pocket (OOP) health care spending and total health care spending and does not require detailed knowledge of health insurance benefit design. We apply our method to assess whether households with a chronically ill member have more or less generous insurance relative to households with no chronically ill members. We find that the chronically ill have less generous insurance coverage than the non-chronically ill. Additional analyses suggest that the reason for this less generous coverage is not that households with a chronically ill member are in different, less generous plans, on average. Rather, households with a chronically ill member have higher spending on certain types of medical services (e.g., pharmaceutical drugs) that are covered less generously by insurance. Given recent work on value-based insurance design and coinsurance as an obstacle to medication adherence, our findings suggest that the current design of health plans may put the health and financial well-being of the chronically ill at risk. ER - TY - JOUR AU - Bloom,Nicholas AU - Schweiger,Helena AU - Reenen,John Van TI - The Land that Lean Manufacturing Forgot? Management Practices in Transition Countries JF - National Bureau of Economic Research Working Paper Series VL - No. 17231 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17231 L1 - http://www.nber.org/papers/w17231.pdf N1 - Author contact info: Nicholas Bloom Stanford University Department of Economics 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/725-3266 Fax: 650/725-5702 E-Mail: nbloom@stanford.edu Helena Schweiger EBRD, Office of the Chief Economist One Exchange Square London EC2A 2JN United Kingdom E-Mail: helena.schweiger@gmail.com John Van Reenen Department of Economics London School of Economics Centre for Economic Performance Houghton Street London WC2A 2AE UNITED KINGDOM Tel: 00 44 207/955-6976 Fax: 00 44 207/955-6848 E-Mail: j.vanreenen@lse.ac.uk AB - We have conducted the first survey on management practices in transition countries. We found that Central Asian transition countries, such as Uzbekistan and Kazakhstan, have on average very poor management practices. Their average scores are below emerging countries such as Brazil, China and India. In contrast, the central European transition countries such as Poland and Lithuania operate with management practices that are only moderately worse than those of western European countries such as Germany. Since we find these practices are strongly linked to firm performance, this suggests poor management practices may be impeding the development of Central Asian transition countries. We find that competition, multinational ownership, private ownership and human capital are all strongly correlated with better management. This implies that the continued opening of markets to domestic and foreign competition, privatisation of state-owned firms and increased levels of workforce education should promote better management, and ultimately faster economic growth. ER - TY - JOUR AU - Bachmann,Ruediger AU - Bai,Jinhui TI - Public Consumption Over the Business Cycle JF - National Bureau of Economic Research Working Paper Series VL - No. 17230 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17230 L1 - http://www.nber.org/papers/w17230.pdf N1 - Author contact info: Ruediger Bachmann Department of Economics University of Michigan Lorch Hall 335 A Ann Arbor, MI 48109-1220 Tel: +1 (734) 764-0241 E-Mail: rudib@umich.edu Jinhui Bai Department of Economics Georgetown University Washington, DC 20057-1036 E-Mail: jb543@georgetown.edu AB - What fraction of the business cycle volatility of government purchases is accounted for as endogenous reactions to overall macroeconomic conditions? We answer this question in the framework of a neoclassical representative household model where the provision of a public consumption good is decided upon endogenously and in a time-consistent fashion. A simple frictionless version of such a model with aggregate productivity as the sole driving force can explain almost all the volatility of U.S. non-defense government consumption expenditures. However, such a model fails to match other important features of the business cycle dynamics of public consumption, which comes out as not persistent enough and too synchronized with the cycle. We add implementation lags and implementation costs in the budgeting process to the model, plus taste shocks for public consumption relative to private consumption, and achieve a substantially better match to the data. All these ingredients are essential to improve the fit. Depending on the precise specification of the flow utility function over private consumption, public consumption and leisure, 25-40 percent of the variance of public consumption is driven by aggregate productivity shocks. ER - TY - JOUR AU - Danzon,Patricia M. AU - Furukawa,Michael F. TI - Cross-National Evidence on Generic Pharmaceuticals: Pharmacy vs. Physician-Driven Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 17226 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17226 L1 - http://www.nber.org/papers/w17226.pdf N1 - Author contact info: Patricia M. Danzon Health Care Management Department The Wharton School University of Pennsylvania 3641 Locust Walk Philadelphia, PA 19104 Tel: 215/898-0694 Fax: 215/573-2157 E-Mail: danzon@wharton.upenn.edu Michael Furukawa Department of Information Systems W.P. Carey School of Business Arizona State University PO Box 874606 Tempe, AZ 85287-4606 E-Mail: Michael.Furukawa@asu.edu AB - This paper examines the role of regulation and competition in generic markets. Generics offer large potential savings to payers and consumers of pharmaceuticals. Whether the potential savings are realized depends on the extent of generic entry and uptake and the level of generic prices. In the U.S., the regulatory, legal and incentive structures encourage prompt entry, aggressive price competition and patient switching to generics. Key features are that pharmacists are authorized and incentivized to switch patients to cheap generics. By contrast, in many other high and middle income countries, generics traditionally competed on brand rather than price because physicians rather than pharmacies are the decision-makers. Physician-driven generic markets tend to have higher generic prices and may have lower generic uptake, depending on regulations and incentives. Using IMS data to analyze generic markets in the U.S., Canada, France, Germany, U.K., Italy, Spain, Japan, Australia, Mexico, Chile, Brazil over the period 1998-2009, we estimate a three-equation model for number of generic entrants, generic prices and generic volume shares. We find little effect of originator defense strategies, significant differences between unbranded and unbranded generics, variation across countries in volume response to prices. Policy changes adopted to stimulate generic uptake and reduce generic prices have been successful in some E.U. countries. ER - TY - JOUR AU - Adam,Klaus AU - Kuang,Pei AU - Marcet,Albert TI - House Price Booms and the Current Account JF - National Bureau of Economic Research Working Paper Series VL - No. 17224 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17224 L1 - http://www.nber.org/papers/w17224.pdf N1 - Author contact info: Klaus Adam University of Mannheim Dept. of Economics L7,3-5 68131 Mannheim Germany E-Mail: adam@mail.uni-mannheim.de Pei Kuang Goethe University of Frankfurt Departmnet of Economics Campus Westend - Grüneburgplatz 1, 60629 Frankfurt am Main Germany E-Mail: Kuang@finance.uni-frankfurt.de Albert Marcet Department of Economics London School of Economics Houghton Street London WC2A 2AE United Kingdom Tel: 00-44-207-955-7480 E-Mail: a.marcet@lse.ac.uk M3 - presented at "26th Annual Conference on Macroeconomics", April 8-9, 2011 AB - A simple open economy asset pricing model can account for the house price and current account dynamics in the G7 over the years 2001-2008. The model features rational households, but assumes that households entertain subjective beliefs about price behavior and update these using Bayes' rule. The resulting beliefs dynamics considerably propagate economic shocks and crucially contribute to replicating the empirical evidence. Belief dynamics can temporarily delink house prices from fundamentals, so that low interest rates can fuel a house price boom. House price booms, however, are not necessarily synchronized across countries and the model is consistent with the heterogeneous response of house prices across the G7 following the reduction in real interest rates at the beginning of the millennium. The response to interest rates depends sensitively on agents' beliefs at the time of the interest rate reduction, which in turn are a function of the country specific history prior to the year 2000. According to the model, the US house price boom could have been largely avoided, if real interest rates had decreased by less after the year 2000. ER - TY - JOUR AU - Angeletos,George-Marios AU - Iovino,Luigi AU - La'O,Jennifer TI - Cycles, Gaps, and the Social Value of Information JF - National Bureau of Economic Research Working Paper Series VL - No. 17229 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17229 L1 - http://www.nber.org/papers/w17229.pdf N1 - Author contact info: George-Marios Angeletos Department of Economics MIT E52-251 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/452-3859 Fax: 617/253-1330 E-Mail: angelet@mit.edu Luigi Iovino Department of Economics MIT E52-391 50 Memorial Drive Cambridge, MA 02142-1347 E-Mail: liovino@MIT.EDU Jennifer La'O University of Chicago Booth School of Business 5807 S. Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-9768 E-Mail: jenlao@chicagobooth.edu AB - What are the welfare effects of the information contained in macroeconomic statistics, central-bank communications, or news in the media? We address this question in a business-cycle framework that nests the neoclassical core of modern DSGE models. Earlier lessons that were based on “beauty contests” (Morris and Shin, 2002) are found to be inapplicable. Instead, the social value of information is shown to hinge on essentially the same conditions as the optimality of output stabilization policies. More precise information is unambiguously welfare-improving as long as the business cycle is driven primarily by technology and preference shocks—but can be detrimental when shocks to markups and wedges cause sufficient volatility in “output gaps.” A numerical exploration suggests that the first scenario is more plausible. ER - TY - JOUR AU - Aizenman,Joshua AU - Sushko,Vladyslav TI - Capital Flow Types, External Financing Needs, and Industrial Growth: 99 countries, 1991-2007 JF - National Bureau of Economic Research Working Paper Series VL - No. 17228 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17228 L1 - http://www.nber.org/papers/w17228.pdf N1 - Author contact info: Joshua Aizenman Department of Economics; E2 1156 High St. University of California, Santa Cruz Santa Cruz, CA 95064 Tel: 831/459-4791 Fax: 831/459-5077 E-Mail: jaizen@ucsc.edu Vladyslav Sushko Bank for International Settlements Centralbahnplatz 2 4002 Basel Switzerland E-Mail: vlad.sushko@bis.org AB - We examine the differential impact of portfolio debt, portfolio equity, and FDI inflows on 37 manufacturing industries, 99 countries, 1991-2007, extending Rajan-Zingales (1998). We utilize external finance dependence measures in a series of cross-sectional regressions of manufacturing industries’ growth rates covering 17 years. Net portfolio debt inflows are negatively associated with growth during the mid 1990s. The magnitudes of the negative effect of surges in portfolio debt inflows on growth are substantial in the late 1990s for a number of countries. The effect of debt inflows on growth in the 2000s is rather muted. Surges in portfolio equity inflows also exhibit a negative association with aggregate growth in the manufacturing sector. For instance, the inflow surge during the financial liberalization period, 1993-1994, is associated with a sharp decline in aggregate manufacturing sector growth, but a rise in the growth of relatively more financially constrained industries. Equity inflows exhibited economically significant positive impact on the growth of financially constrained industries, unlike their negative impact on the average manufacturing growth rate. FDI inflows exhibit a positive association with aggregate manufacturing growth during most of the sample period, both at the aggregate level and specifically for the industries in need of external financing. ER - TY - JOUR AU - Barwick,Panle Jia AU - Pathak,Parag A. TI - The Costs of Free Entry: An Empirical Study of Real Estate Agents in Greater Boston JF - National Bureau of Economic Research Working Paper Series VL - No. 17227 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17227 L1 - http://www.nber.org/papers/w17227.pdf N1 - Author contact info: Panle Jia Barwick MIT Department of Economics E52-243C 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-7229 Fax: 617/253-1330 E-Mail: pjia@mit.edu Parag Pathak MIT Department of Economics 50 Memorial Drive E52-391C Cambridge, MA 02142 Tel: 617/253-7458 E-Mail: ppathak@mit.edu AB - This paper studies the real estate brokerage industry in Greater Boston, an industry with low entry barriers and substantial turnover. Using a comprehensive dataset of agents and transactions from 1998-2007, we find that entry does not increase sales probabilities or reduce the time it takes for properties to sell, decreases the market share of experienced agents, and leads to a reduction in average service quality. These empirical patterns motivate an econometric model of the dynamic optimizing behavior of agents that serves as the foundation for simulating counterfactual market structures. A one-half reduction in the commission rate leads to a 73% increase in the number of houses each agent sells and benefits consumers by about $2 billion. House price appreciation in the first half of the 2000s accounts for 24% of overall entry and a 31% decline in the number of houses sold by each agent. Low cost programs that provide information about past agent performance have the potential to increase overall productivity and generate significant social savings. ER - TY - JOUR AU - Jackson,C. Kirabo TI - School Competition and Teacher Labor Markets: Evidence from Charter School Entry in North Carolina JF - National Bureau of Economic Research Working Paper Series VL - No. 17225 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17225 L1 - http://www.nber.org/papers/w17225.pdf N1 - Author contact info: C. Kirabo Jackson Northwestern University School of Education and Social Policy 2040 Sheridan Road Evanston, IL 60208 Tel: 847/467-1803 E-Mail: kirabo-jackson@northwestern.edu AB - I analyze changes in teacher turnover, hiring, effectiveness, and salaries at traditional public schools after the opening of a nearby charter school. While I find small effects on turnover overall, difficult to staff schools (low-income, high-minority share) hired fewer new teachers and experienced small declines in teacher quality. I also find evidence of a demand side response where schools increased teacher compensation to better retain quality teachers. The results are robust across a variety of alternate specifications to account for non-random charter entry. ER - TY - JOUR AU - Bradley,Cathy J. AU - Neumark,David AU - Motika,Meryl I. TI - The Effects of Health Shocks on Employment and Health Insurance: The Role of Employer-Provided Health Insurance JF - National Bureau of Economic Research Working Paper Series VL - No. 17223 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17223 L1 - http://www.nber.org/papers/w17223.pdf N1 - Author contact info: Cathy J. Bradley Department of Healthcare Policy and Research Virginia Commonwealth University 830 E. Main Street Richmond, VA 23219 E-Mail: cjbradley@vcu.edu David Neumark Department of Economics University of California at Irvine 3151 Social Science Plaza Irvine, CA 92697 Tel: 949-824-8496 Fax: 949/824-2182 E-Mail: dneumark@uci.edu Meryl I. Motika Department of Economics 3151 Social Science Plaza University of California-Irvine Irvine, CA 92697-5100 E-Mail: mmotika@uci.edu AB - We study how men’s dependence on their own employer for health insurance affects labor supply responses and loss of health insurance coverage when faced with a serious health shock. Men with employment-contingent health insurance (ECHI) are more likely to remain working following some kinds of adverse health shocks, and are more likely to lose insurance. With the passage of health care reform, the tendency of men with ECHI as opposed to other sources of insurance to remain employed following a health shock may be diminished, along with the likelihood of losing health insurance. ER - TY - JOUR AU - Knittel,Christopher R. AU - Miller,Douglas L. AU - Sanders,Nicholas J. TI - Caution, Drivers! Children Present: Traffic, Pollution, and Infant Health JF - National Bureau of Economic Research Working Paper Series VL - No. 17222 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17222 L1 - http://www.nber.org/papers/w17222.pdf N1 - Author contact info: Christopher R. Knittel MIT Sloan School of Management 100 Main Street, E62-513 Cambridge, MA 02142 E-Mail: knittel@mit.edu Douglas L. Miller University of California, Davis Department of Economics One Shields Avenue Davis, CA 95616-8578 Tel: 530/752-8490 E-Mail: dlmiller@ucdavis.edu Nicholas J. Sanders Stanford University 366 Galvez Street, Room 228 Stanford, CA 94305-6015 E-Mail: sandersn@stanford.edu AB - Since the Clean Air Act Amendments of 1990 (CAAA), atmospheric concentration of local pollutants has fallen drastically. A natural question is whether further reductions will yield additional health benefits. We further this research by addressing two related research questions: (1) what is the impact of automobile driving (and especially congestion) on ambient air pollution levels, and (2) what is the impact of modern air pollution levels on infant health? Our setting is California (with a focus on the Central Valley and Southern California) in the years 2002-2007. Using an instrumental variables approach that exploits the relationship between traffic, ambient weather conditions, and various pollutants, our findings suggest that ambient pollution levels, specifically particulate matter, still have large impacts on weekly infant mortality rates. Our results also illustrate the importance of weather controls in measuring pollution’s impact on infant mortality. ER - TY - JOUR AU - Hoberg,Gerard AU - Phillips,Gordon M. TI - Conglomerate Industry Choice and Product Di fferentiation JF - National Bureau of Economic Research Working Paper Series VL - No. 17221 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17221 L1 - http://www.nber.org/papers/w17221.pdf N1 - Author contact info: Gerard Hoberg Robert H. Smith School of Business University of Maryland 4423 Van Munching Hall College Park, MD 20742 Tel: 301/405-9685 Fax: 301/405-0359 E-Mail: ghoberg@rhsmith.umd.edu Gordon M. Phillips Marshall School of Business University of Southern California Citigroup Center Los Angeles, CA 90089 Tel: 213/740-0038 E-Mail: Gordon.Phillips@marshall.usc.edu AB - We use text-based computational analysis of business descriptions from 10-Ks to examine in which industries conglomerates are most likely to operate and to understand conglomerate valuations. We find that conglomerates are more likely to operate in industry pairs that are closer together in the product space and in industry pairs that have profitable opportunities "between" them. Conglomerate firms have lower stock market valuations than matched single-segment firms when their products are easier to replicate with single-segment firms. Conglomerate firms have stock market premiums when they have higher product differentiation and produce in more profitable industries. These findings are consistent with successful conglomerate firms having higher product differentiation and lower cost entry into profitable markets when operating in strategically chosen industry pairs. ER - TY - JOUR AU - Courtemanche,Charles J. AU - Carden,Art TI - Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices JF - National Bureau of Economic Research Working Paper Series VL - No. 17220 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17220 L1 - http://www.nber.org/papers/w17220.pdf N1 - Author contact info: Charles J. Courtemanche University of Louisville College of Business Department of Economics Louisville, KY 40292 Tel: 502-852-4854 Fax: 502-852-7672 E-Mail: cjcour02@louisville.edu Art Carden Department of Economics and Business Rhodes College 2000 N. Parkway Memphis TN 38112 Tel: 901-843-3829 Fax: 901-843-3736 E-Mail: cardena@rhodes.edu AB - Prior research shows grocery stores reduce prices to compete with Walmart Supercenters. This study finds evidence that the competitive effects of two other big box retailers – Costco and Walmart-owned Sam's Club – are quite different. Using city-level panel grocery price data matched with a unique data set on Walmart and warehouse club locations, we find that Costco entry is associated with higher grocery prices at incumbent retailers, and that the effect is strongest in cities with small populations and high grocery store densities. This is consistent with incumbents competing with Costco along non-price dimensions such as product quality or quality of the shopping experience. We find no evidence that Sam’s Club entry affects grocery stores’ prices, consistent with Sam’s Club’s focus on small businesses instead of consumers. ER - TY - JOUR AU - Backus,David AU - Chernov,Mikhail AU - Zin,Stanley E. TI - Sources of Entropy in Representative Agent Models JF - National Bureau of Economic Research Working Paper Series VL - No. 17219 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17219 L1 - http://www.nber.org/papers/w17219.pdf N1 - Author contact info: David Backus Stern School of Business NYU 44 West 4th Street New York, NY 10012-1126 Tel: 212/998-0873 Fax: 212/995-4221 E-Mail: dbackus@stern.nyu.edu Mikhail Chernov London School of Economics Houghton Street London, WC2A 2AE United Kingdom E-Mail: m.chernov@lse.ac.uk Stanley E. Zin Department of Economics Leonard N. Stern School of Business New York University 44 West 4th Street, Suite 7-91 New York, NY 10012-1126 Tel: 212/998-0121 E-Mail: stan.zin@nyu.edu AB - We propose two metrics for asset pricing models and apply them to representative agent models with recursive preferences, habits, and jumps. The metrics describe the pricing kernel’s dispersion (the entropy of the title) and dynamics (time dependence, a measure of how entropy varies over different time horizons). We show how each model generates entropy and time dependence and compare their magnitudes to estimates derived from asset returns. This exercise — and transparent loglinear approximations — clarifies the mechanisms underlying these models. It also reveals, in some cases, tension between entropy, which should be large enough to account for observed excess returns, and time dependence, which should be small enough to account for mean yield spreads. ER - TY - JOUR AU - Belley,Philippe AU - Frenette,Marc AU - Lochner,Lance TI - Post-Secondary Attendance by Parental Income in the U.S. and Canada: What Role for Financial Aid Policy? JF - National Bureau of Economic Research Working Paper Series VL - No. 17218 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17218 L1 - http://www.nber.org/papers/w17218.pdf N1 - Author contact info: Philippe Belley Kansas State University Economics 339A Waters Hall Manhattan, KS 66506-4001 U.S.A. Tel: 785-532-4574 Fax: 785-532-6919 E-Mail: pbelley@k-state.edu Marc Frenette Social Research & Demonstration Corporation 55 Murray Street Suite 400 Ottawa, Ontario Tel: 613/237-7668 Fax: 613/237-5045 E-Mail: mfrenette@srdc.org Lance Lochner Department of Economics, Faculty of Social Science University of Western Ontario 1151 Richmond Street, North London, ON N6A 5C2 CANADA Tel: 519/661-2111 ext. 85281 Fax: 519/661-3666 E-Mail: llochner@uwo.ca AB - This paper examines the implications of tuition and need-based financial aid policies for family income – post-secondary (PS) attendance relationships. We first conduct a parallel empirical analysis of the effects of parental income on PS attendance for recent high school cohorts in both the U.S. and Canada using data from the 1997 Cohort of the National Longitudinal Survey of Youth and Youth in Transition Survey. We estimate substantially smaller PS attendance gaps by parental income in Canada relative to the U.S., even after controlling for family background, adolescent cognitive achievement, and local residence fixed effects. We next document that U.S. public tuition and financial aid policies are actually more generous to low-income youth than are Canadian policies. By contrast, Canada offers more generous aid to middle-class youth than does the U.S. These findings suggest that the much stronger family income – PS attendance relationship in the U.S. is not driven by differences in the need-based nature of financial aid policies. Based on previous estimates of the effects of tuition and aid on PS attendance, we consider how much stronger income – attendance relationships would be in the absence of need-based aid and how much additional aid would need to be offered to lower income families to eliminate existing income – attendance gaps entirely. ER - TY - JOUR AU - Sawhney,Aparna AU - Kahn,Matthew E. TI - Understanding Cross-National Trends in High-Tech Renewable Power Equipment Exports to the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 17217 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17217 L1 - http://www.nber.org/papers/w17217.pdf N1 - Author contact info: Aparna Sawhney Centre for International Trade and Development Jawaharlal Nehru University New Delhi 110067 E-Mail: asawhney@mail.jnu.ac.in Matthew E. Kahn UCLA Institute of the Environment Department of Economics Department of Public Policy Box 951496 La Kretz Hall, Suite 300 Los Angeles, CA 90095-1496 Tel: 310/794-4904 Fax: 310/825-9663 E-Mail: mkahn@ioe.ucla.edu AB - We track US imports of advanced technology wind and solar power-generation equipment from a panel of countries during 1989-2010, and examine the determining factors including sector-specific US FDI outflow, country size, and domestic wind and solar power generation. Differentiating between the core high-tech and the balance of system equipment, we find US imports of the both categories have grown at significantly higher rate from the relatively poorer countries, particularly China and India. US FDI is found to play a significant positive role in the exports of high-tech equipment from both rich and poor countries, especially for the balance of system equipment. For the core wind and solar equipment, we find domestic renewable power generation played a significant positive role, and the effect is more pronounced for the rich countries as well as China compared to other poor countries. ER - TY - JOUR AU - Ashraf,Quamrul AU - Galor,Oded TI - The "Out of Africa" Hypothesis, Human Genetic Diversity, and Comparative Economic Development JF - National Bureau of Economic Research Working Paper Series VL - No. 17216 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17216 L1 - http://www.nber.org/papers/w17216.pdf N1 - Author contact info: Quamrul Ashraf Williams College Department of Economics 24 Hopkins Hall Drive Williamstown, MA 01267 Tel: (413) 597-3051 Fax: (413) 597-4045 E-Mail: Quamrul.H.Ashraf@williams.edu Oded Galor Department of Economics Brown University Box B Providence, RI 02912 Tel: 401/863-2117 Fax: 401/863-1970 E-Mail: oded_galor@brown.edu AB - This research argues that deep-rooted factors, determined tens of thousands of years ago, had a significant effect on the course of economic development from the dawn of human civilization to the contemporary era. It advances and empirically establishes the hypothesis that, in the course of the exodus of Homo sapiens out of Africa, variation in migratory distance from the cradle of humankind to various settlements across the globe affected genetic diversity and has had a long-lasting effect on the pattern of comparative economic development that is not captured by geographical, institutional, and cultural factors. In particular, the level of genetic diversity within a society is found to have a hump-shaped effect on development outcomes in both the pre-colonial and the modern era, reflecting the trade-off between the beneficial and the detrimental effects of diversity on productivity. While the intermediate level of genetic diversity prevalent among Asian and European populations has been conducive for development, the high degree of diversity among African populations and the low degree of diversity among Native American populations have been a detrimental force in the development of these regions. ER - TY - JOUR AU - Mancall,Peter C. AU - Rosenbloom,Joshua L. AU - Weiss,Thomas J. TI - Economic Growth in the Mid Atlantic Region: Conjectural Estimates for 1720 to 1800 JF - National Bureau of Economic Research Working Paper Series VL - No. 17215 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17215 L1 - http://www.nber.org/papers/w17215.pdf N1 - Author contact info: Peter Mancall Department of History University of Southern California Los Angeles, CA 90089 E-Mail: mancall@usc.edu Joshua Rosenbloom Department of Economics University of Kansas Snow Hall 436 1460 Jayhawk Blvd Lawrence, KS 66045-2113 Tel: 785/864-2839 Fax: 785/864-5270 E-Mail: jrosenbloom@ku.edu Thomas J. Weiss Department of Economics University of Kansas Lawrence, KS 66045 Tel: 785/840-6878 Fax: 785/864-5270 E-Mail: t-weiss@ku.edu AB - We employ the conjectural approach to estimate the growth of GDP per capita for the colonies and states of the mid-Atlantic region (Del., NJ, NY and Penn). In contrast to previous studies of the region’s growth that relied heavily on the performance of the export sector, the conjectural method enables us to take into account the impact of domestic sector, in particular the production of agricultural products for the domestic market. We find that the region experienced modest growth of real GDP per capita. Although the rate of growth was modest in comparison to what would materialize in the late nineteenth century, it was faster than that of the Lower South in the eighteenth century, and at times as fast as that for the U.S. in the first half of the nineteenth century. In its heyday of growth from 1740 to 1750—before the dislocations produced by the spread of the Seven Years’ War--real GDP per capita rose at 0.7 percent per year, driven by the growth of output per worker in both agriculture and nonagriculture, and by capital accumulation. ER - TY - JOUR AU - Kaplow,Louis TI - An Optimal Tax System JF - National Bureau of Economic Research Working Paper Series VL - No. 17214 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17214 L1 - http://www.nber.org/papers/w17214.pdf N1 - Author contact info: Louis Kaplow Harvard University Hauser 322 Cambridge, MA 02138 Tel: 617/495-4101 Fax: 617/496-4880 E-Mail: meskridge@law.harvard.edu AB - A notable feature and principal virtue of Tax by Design is its system-wide perspective on different elements of the tax system. This review essay builds on this trait and offers a more explicit foundation for the report’s general approach, drawing on a distribution-neutral methodology that is developed in other work. This technique is then employed to illuminate and extend Tax by Design’s analysis regarding the VAT, environmental taxation, wealth transfer taxation, and income transfers. ER - TY - JOUR AU - Neumark,David AU - Johnson,Hans P. AU - Mejia,Marisol Cuellar TI - Future Skill Shortages in the U.S. Economy? JF - National Bureau of Economic Research Working Paper Series VL - No. 17213 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17213 L1 - http://www.nber.org/papers/w17213.pdf N1 - Author contact info: David Neumark Department of Economics University of California at Irvine 3151 Social Science Plaza Irvine, CA 92697 Tel: 949-824-8496 Fax: 949/824-2182 E-Mail: dneumark@uci.edu Hans P. Johnson Public Policy Institute of California 500 Washington St., Suite 600 San Francisco, CA 94111 E-Mail: johnson@ppic.org Marisol Cuellar Mejia Public Policy Institute of California 500 Washington St., Suite 600 San Francisco, CA 94111 E-Mail: cuellar@ppic.org AB - The impending retirement of the baby boom cohort represents the first time in the history of the United States that such a large and well-educated group of workers will exit the labor force. This could imply skill shortages in the U.S. economy. We develop medium-term labor force projections of the educational demands on the workforce and the supply of workers by education to assess the potential for skill imbalances to emerge. Based on our formal projections, we see little likelihood of skill shortages emerging by the end of this decade. More tentatively, though, skill shortages are more likely as all of the baby boomers retire in later years, and skill shortages are more likely in the medium-term in states with large and growing immigrant populations. We discuss conflicting evidence on skill shortages based on alternative projections as well as criticisms of the definition of skill requirements, concluding that our projections are likely the most reasonable. ER - TY - JOUR AU - Chatterji,Pinka AU - Markowitz,Sara AU - Brooks-Gunn,Jeanne TI - Early Maternal Employment and Family Wellbeing JF - National Bureau of Economic Research Working Paper Series VL - No. 17212 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17212 L1 - http://www.nber.org/papers/w17212.pdf N1 - Author contact info: Pinka Chatterji State University of New York at Albany Economics Department 1400 Washington Avenue Albany, NY 12222 Tel: 518/442-4746 E-Mail: pchatterji@albany.edu Sara Markowitz Department of Economics Emory University 1602 Fishburne Dr. Atlanta, GA 30322 Tel: (404) 712-8167 E-Mail: sara.markowitz@emory.edu Jeanne Brooks-Gunn Columbia University National Center for Children and Families 525 West 120th Street, Box 39 New York, NY 10027 E-Mail: brooks-gunn@columbia.edu AB - This study uses longitudinal data from the NICHD Study on Early Child Care (SECC) to examine the effects of maternal employment on family well-being, measured by maternal mental and overall health, parenting stress, and parenting quality. First, we estimate the effects of maternal employment on these outcomes measured when children are 6 months old. Next, we use dynamic panel data models to examine the effects of maternal employment on family outcomes during the first 4.5 years of children’s lives. Among mothers of six month old infants, maternal work hours are positively associated with depressive symptoms and self-reported parenting stress, and negatively associated with self-rated overall health among mothers. Compared to mothers who are on leave 3 months after childbirth, mothers who are working full-time score 22 percent higher on the CES-D scale of depressive symptoms. However, maternal employment is not associated with the quality of parenting at 6 months, based on trained assessors’ observations of maternal sensitivity. Moreover, during the first 4.5 years of life as a whole, we find only weak evidence that maternal work hours are associated with maternal health, and no evidence that maternal employment is associated with parenting stress and quality. We find that unobserved heterogeneity is an important factor in modeling family outcomes. ER - TY - JOUR AU - Lindert,Peter H. AU - Williamson,Jeffrey G. TI - American Incomes before and after the Revolution JF - National Bureau of Economic Research Working Paper Series VL - No. 17211 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17211 L1 - http://www.nber.org/papers/w17211.pdf N1 - Author contact info: Peter H. Lindert Department of Economics University of California, Davis Davis, CA 95616 Tel: 530/752-1983 Fax: 530/752-5611 E-Mail: phlindert@ucdavis.edu Jeffrey G. Williamson 350 South Hamilton Street #1002 Madison, WI 53703 Tel: 608-441-0023 Fax: 608-204-0783 E-Mail: jwilliam@fas.harvard.edu AB - Building social tables in the tradition of Gregory King, we quantify the level and inequality of American incomes before and after the Revolutionary War. Our tentative estimates suggest that between 1774 and 1800 American incomes fell in real per capita terms. The colonial South was richer, and then suffered a greater Revolutionary decline, than suggested by previous estimates. Any rapid growth after 1790 seems to have just partially offset part of a very steep wartime decline. We also find that free American colonists had much more equal incomes than did households in England and Wales. Indeed, New England and the Middle Colonies appear to have been more egalitarian than anywhere else in the measurable world. The colonists also had greater purchasing power than their English counterparts over all of the income ranks except in the top few percent. ER - TY - JOUR AU - Greenstone,Michael AU - Hanna,Rema TI - Environmental Regulations, Air and Water Pollution, and Infant Mortality in India JF - National Bureau of Economic Research Working Paper Series VL - No. 17210 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17210 L1 - http://www.nber.org/papers/w17210.pdf N1 - Author contact info: Michael Greenstone MIT Department of Economics 50 Memorial Drive, E52-359 Cambridge, MA 02142-1347 Tel: 617/452-4127 Fax: 617/253-1330 E-Mail: mgreenst@mit.edu Rema Hanna Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/496-1140 Fax: 617/496-5747 E-Mail: Rema_Hanna@hks.harvard.edu AB - Using the most comprehensive data file ever compiled on air pollution, water pollution, environmental regulations, and infant mortality from a developing country, the paper examines the effectiveness of India’s environmental regulations. The air pollution regulations were effective at reducing ambient concentrations of particulate matter, sulfur dioxide, and nitrogen dioxide. The most successful air pollution regulation is associated with a modest and statistically insignificant decline in infant mortality. However, the water pollution regulations had no observable effect. Overall, these results contradict the conventional wisdom that environmental quality is a deterministic function of income and underscore the role of institutions and politics. ER - TY - JOUR AU - Grubb,Farley TI - State Redemption of the Continental Dollar, 1779-1790 JF - National Bureau of Economic Research Working Paper Series VL - No. 17209 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17209 L1 - http://www.nber.org/papers/w17209.pdf N1 - Author contact info: Farley Grubb University of Delaware Economics Department Newark, DE 19716 Tel: 302/831-1905 Fax: 302/831-6968 E-Mail: grubbf@udel.edu AB - Remittances of Continental Dollars to the national treasury from each state by year from 1779 through 1789 are used to determine state compliance with congressional resolutions regarding Continental-Dollar redemption. From 1781 through 1789, the states as a whole stayed well ahead of the remittance schedule set by Congress in 1779. Individual state compliance, however, varied considerably. By the time Congress changed redemption requirements with the Funding Act of 4 August 1790, a majority of the net new Continental Dollars ever emitted by Congress had already been redeemed by the states and remitted to the national treasury to be burned. ER - TY - JOUR AU - Gaynor,Martin AU - Town,Robert J. TI - Competition in Health Care Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 17208 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17208 L1 - http://www.nber.org/papers/w17208.pdf N1 - Author contact info: Martin Gaynor Heinz College Carnegie Mellon University 4800 Forbes Avenue, Room 3008 Pittsburgh, PA 15213-3890 Tel: 412/268-7933 Fax: 412/268-5338 E-Mail: mgaynor@cmu.edu Robert Town Health Care Management Department The Wharton School University of Pennsylvania 3641 Locust Walk Philadelphia, PA 19104 E-Mail: rtown@wharton.upenn.edu AB - This paper reviews the literature devoted to studying markets for health care services and health insurance. There has been tremendous growth and progress in this field. A tremendous amount of new research has been done in this area over the last 10 years. In addition, there has been increasing development and use of frontier industrial organization methods. We begin by examining research on the determinants of market structure, considering both static and dynamic models. We then model the strategic determination of prices between health insurers and providers where insurers market their products to consumers based, in part, on the quality and breadth of their provider network. We then review the large empirical literature on the strategic determination of hospital prices through the lens of this model. Variation in the quality of health care clearly can have large welfare consequences. We therefore also describe the theoretical and empirical literature on the impact of market structure on quality of health care. The paper then moves on to consider competition in health insurance markets and physician services markets. We conclude by considering vertical restraints and monopsony power. ER - TY - JOUR AU - Fafchamps,Marcel AU - McKenzie,David AU - Quinn,Simon R. AU - Woodruff,Christopher TI - When is capital enough to get female microenterprises growing? Evidence from a randomized experiment in Ghana JF - National Bureau of Economic Research Working Paper Series VL - No. 17207 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17207 L1 - http://www.nber.org/papers/w17207.pdf N1 - Author contact info: Marcel Fafchamps Oxford University E-Mail: marcel.fafchamps@economics.ox.ac.uk David McKenzie The World Bank, MSN MC3-307 1818 H Street N.W. Washington, DC 20433 Tel: 202-458-9332 E-Mail: dmckenzie@worldbank.org Simon R. Quinn Oxford University E-Mail: simon.quinn@economics.ox.ac.uk Christopher Woodruff Department of Economics University of Warwick Coventry CV4 7AL UK Tel: 44 787 258 2800 Fax: 44 024 7652 3032 E-Mail: c.woodruff@warwick.ac.uk AB - Standard models of investment predict that credit-constrained firms should grow rapidly when given additional capital, and that how this capital is provided should not affect decisions to invest in the business or consume the capital. We randomly gave cash and in-kind grants to male- and female-owned microenterprises in urban Ghana. Our findings cast doubt on the ability of capital alone to stimulate the growth of female microenterprises. First, while the average treatment effects of the in-kind grants are large and positive for both males and females, the gain in profits is almost zero for women with initial profits below the median, suggesting that capital alone is not enough to grow subsistence enterprises owned by women. Second, for women we strongly reject equality of the cash and in-kind grants; only in-kind grants lead to growth in business profits. The results for men also suggest a lower impact of cash, but differences between cash and in-kind grants are less robust. The difference in the effects of cash and in-kind grants is associated more with a lack of self-control than with external pressure. As a result, the manner in which funding is provided affects microenterprise growth. ER - TY - JOUR AU - Pincus,Steven C.A. AU - Robinson,James A. TI - What Really Happened During the Glorious Revolution? JF - National Bureau of Economic Research Working Paper Series VL - No. 17206 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17206 L1 - http://www.nber.org/papers/w17206.pdf N1 - Author contact info: Steven Pincus Yale University Department of History 320 York Street New Haven, CT 06511 E-Mail: steven.pincus@yale.edu James A. Robinson Harvard University Department of Government N309, 1737 Cambridge Street Cambridge, MA 02138 Tel: 617/496-2839 Fax: 617/495-0438 E-Mail: jrobinson@gov.harvard.edu AB - The English Glorious Revolution of 1688-89 is one of the most famous instances of ‘institutional’ change in world history which has fascinated scholars because of the role it may have played in creating an environment conducive to making England the first industrial nation. This claim was most forcefully advanced by North and Weingast yet the existing literature in history and economic history dismisses their arguments. In this paper we argue that North and Weingast were entirely correct in arguing that the Glorious Revolution represented a critical change in institutions. In addition, and contrary to the claims of many historians, most of the things they claimed happened, for example parliamentary sovereignty, did happen. However, we argue that they happened for reasons different from those put forward by North and Weingast. We show that rather than being an instance of a de jure ‘re-writing the rules’, as North and Weingast argued, the Glorious Revolution was actually an interlinked series of de facto institutional changes which came from a change in the balance of power and authority and was part of a broader reorientation in the political equilibrium of England. Moreover, it was significant for the economy not because it solved a problem of credible commitment, but for two other reasons. First, because the institutional changes it led to meant that party political ministries, rather than the king’s private advisors, now initiated policy. Second, because these ministries were dominated by Whigs with a specific program of economic modernization. ER - TY - JOUR AU - Danzon,Patricia M. AU - Pereira,Nuno S. TI - Vaccine Supply: Effects Of Regulation And Competition JF - National Bureau of Economic Research Working Paper Series VL - No. 17205 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17205 L1 - http://www.nber.org/papers/w17205.pdf N1 - Author contact info: Patricia M. Danzon Health Care Management Department The Wharton School University of Pennsylvania 3641 Locust Walk Philadelphia, PA 19104 Tel: 215/898-0694 Fax: 215/573-2157 E-Mail: danzon@wharton.upenn.edu Nuno S. Pereira Dean, Business School University of Porto Rua de Salazares 4200-464 Porto, Portugal E-Mail: nsp@egp-upbs.up.pt AB - In US vaccine markets, competing producers with high fixed, sunk costs face relatively concentrated demand. The resulting price and quality competition leads to the exit of all but one or very few producers per vaccine. Our empirical analysis of exits from US vaccine markets supports the hypothesis that high fixed costs and both price and quality competition contribute to vaccine exits. We find no evidence that government purchasing has significant effects, possibly because government purchase tends to increase volume but lower price, with offsetting effects. Evidence from the flu vaccine market confirms that government purchasing is not a necessary condition for exits and the existence of few suppliers per vaccine in the US. ER - TY - JOUR AU - Iacovone,Leonardo AU - Javorcik,Beata Smarzynska AU - Keller,Wolfgang AU - Tybout,James R. TI - Supplier Responses to Wal-Mart's Invasion of Mexico JF - National Bureau of Economic Research Working Paper Series VL - No. 17204 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17204 L1 - http://www.nber.org/papers/w17204.pdf N1 - Author contact info: Leonardo Iacovone 1818 H St, NW, Mail-stop J8-808 Private and Financial Sector Development Africa Region, The World Bank 1818 H St, NW, Mail-stop J8-808 Washington, DC 20433 Tel: 202 4738153 Fax: 202 522 1159 E-Mail: Liacovone@worldbank.org Beata Smarzynska Javorcik University of Oxford E-Mail: beata.javorcik@economics.ox.ac.uk Wolfgang Keller Department of Economics University of Colorado-Boulder Boulder, CO 80309-0256 Tel: 303/735 5507 Fax: 303/492 8960 E-Mail: Wolfgang.Keller@colorado.edu James R. Tybout Department of Economics Penn State University 517 Kern Graduate Building University Park, PA 16802 Tel: 814/865-4259 Fax: 814/863-4775 E-Mail: jtybout@psu.edu AB - This paper examines the effect of Wal-Mart's entry into Mexico on Mexican manufacturers of consumer goods. Guided by firm interviews that suggested substantial heterogeneity across firms in how they responded to Wal-Mart's entry, we develop a dynamic industry model in which firms decide whether to sell their products through Walmex (short for Wal-Mart de Mexico), or use traditional retailers. Walmex provides access to a larger market, but it puts continuous pressure on its suppliers to improve their product's appeal, and it forces them to accept relatively low prices relative to product appeal. Simulations of the model show that the arrival of Walmex separates potential suppliers into two groups. Those with relatively high-appeal products choose Walmex as their retailer, whereas those with lower appeal products do not. For the industry as a whole, the model predicts that the associated market share reallocations, adjustments in innovative effort, and exit patterns increase productivity and the rate of innovation. These predictions accord well with the results from our firm interviews. The model's predictions are also supported by establishment-level panel data that characterize Mexican producers' domestic sales, investments, and productivity gains in regions with differing levels of Walmex presence during the years 1994 to 2002. ER - TY - JOUR AU - Hurd,Michael D. AU - Rohwedder,Susann TI - Economic Preparation for Retirement JF - National Bureau of Economic Research Working Paper Series VL - No. 17203 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17203 L1 - http://www.nber.org/papers/w17203.pdf N1 - Author contact info: Michael D. Hurd RAND Corporation 1776 Main Street Santa Monica, CA 90407 Tel: 310/451-6945 Fax: 310/451-6923 E-Mail: mhurd@rand.org Susann Rohwedder RAND 1776 Main Street P.O. Box 2138 Santa Monica, CA 90407 Tel: 310-393 0411,ext. 7885 Fax: 310-451-6923 E-Mail: Susann_Rohwedder@rand.org M3 - presented at "Aging Conference", May 6-7, 2011 AB - We define and estimate measures of economic preparation for retirement based on a complete inventory of economic resources while taking into account the risk of living to advanced old age and the risk of high out-of-pocket spending for health care services. We ask whether, in a sample of 66–69 year-olds, observed economic resources could support with high probability a life-cycle consumption path anchored at the initial level of consumption until the end of life. We account for taxes, widowing, differential mortality and out-of-pocket health spending risk. We find that 71% of persons in our target age group are adequately prepared according to our definitions, but there is substantial variation by observable characteristics: 80% of married persons are adequately prepared compared with just 55% of single persons. We estimate that a reduction in Social Security benefits of 30 percent would reduce the fraction adequately prepared by 7.8 percentage points among married persons and by as much as 10.7 percentage points among single persons. ER - TY - JOUR AU - Desai,Mihir A. AU - Foley,C. Fritz AU - Hines,James R.,Jr. TI - Tax Policy and the Efficiency of U.S. Direct Investment Abroad JF - National Bureau of Economic Research Working Paper Series VL - No. 17202 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17202 L1 - http://www.nber.org/papers/w17202.pdf N1 - Author contact info: Mihir A. Desai Graduate School of Business Administration Harvard University Soldiers Field Boston, MA 02163 Tel: 617/495-6693 Fax: 617/496-6592 E-Mail: mdesai@hbs.edu C. Fritz Foley Graduate School of Business Administration Harvard University Soldiers Field Boston, MA 02163 Tel: 617/495-6375 Fax: 617/496-8443 E-Mail: ffoley@hbs.edu James R. Hines Department of Economics University of Michigan 343 Lorch Hall 611 Tappan Street Ann Arbor, MI 48109-1220 Tel: 734/764-2320 Fax: 734/764-2769 E-Mail: jrhines@umich.edu AB - Deferral of U.S. taxes on foreign source income is commonly characterized as a subsidy to foreign investment, as reflected in its inclusion among “tax expenditures” and occasional calls for its repeal. This paper analyzes the extent to which tax deferral and other policies inefficiently subsidize U.S. direct investment abroad. Investments are dynamically inefficient if they consistently generate fewer returns to investors than they absorb in new investment funds. From 1982–2010, repatriated earnings from foreign affiliates exceeded net capital investments by $1.1 trillion in 2010 dollars; and from 1950–2010, repatriated earnings and net interest from foreign affiliates exceeded net equity investments and loans by $2.1 trillion in 2010 dollars. By either measure, cash flows received from abroad exceeded 160 percent of net investments, implying that foreign investment over these periods was dynamically efficient. ER - TY - JOUR AU - Perri,Fabrizio AU - Quadrini,Vincenzo TI - International Recessions JF - National Bureau of Economic Research Working Paper Series VL - No. 17201 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17201 L1 - http://www.nber.org/papers/w17201.pdf N1 - Author contact info: Fabrizio Perri University of Minnesota Department of Economics 4-177 Hanson Hall Minneapolis, MN 55455 Tel: 612/625-7504 Fax: 612/624-0209 E-Mail: fperri@umn.edu Vincenzo Quadrini Department of Finance and Business Economics Marshall School of Business University of Southern California 701 Exposition Boulevard Los Angeles, CA 90089 Tel: 213/740-6521 Fax: 213/740-6650 E-Mail: quadrini@usc.edu AB - The 2008-2009 crisis was characterized by an unprecedented degree of international synchronization as all major industrialized countries experienced large macroeconomic contractions around the date of Lehman bankruptcy. At the same time countries also experienced large and synchronized tightening of credit conditions. We present a two-country model with financial market frictions where a credit tightening can emerge as a self-fulling equilibrium caused by pessimistic but fully rational expectations. As a result of the credit tightening, countries experience large and endogenously synchronized declines in asset prices and economic activity (international recessions). The model suggests that these recessions are more severe if they happen after a prolonged period of credit expansion. ER - TY - JOUR AU - Dastrup,Samuel AU - Zivin,Joshua S. Graff AU - Costa,Dora L. AU - Kahn,Matthew E. TI - Understanding the Solar Home Price Premium: Electricity Generation and “Green” Social Status JF - National Bureau of Economic Research Working Paper Series VL - No. 17200 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17200 L1 - http://www.nber.org/papers/w17200.pdf N1 - Author contact info: Samuel Dastrup University of California, San Diego Department of Economics 9500 Gilman Dr. La Jolla, CA 92093 E-Mail: sdastrup@ucsd.edu Joshua S. Graff Zivin University of California, San Diego 9500 Gilman Drive, MC 0519 La Jolla, CA 92093-0519 Tel: 858/822-6438 E-Mail: jgraffzivin@ucsd.edu Dora Costa Bunche Hall 9272 Department of Economics UCLA Box 951477 Los Angeles, CA 90095-1477 Tel: (310) 825-4249 Fax: (310) 825-9528 E-Mail: costa@econ.ucla.edu Matthew E. Kahn UCLA Institute of the Environment Department of Economics Department of Public Policy Box 951496 La Kretz Hall, Suite 300 Los Angeles, CA 90095-1496 Tel: 310/794-4904 Fax: 310/825-9663 E-Mail: mkahn@ioe.ucla.edu AB - This study uses a large sample of homes in the San Diego area and Sacramento, California area to provide some of the first capitalization estimates of the sales value of homes with solar panels relative to comparable homes without solar panels. Although the residential solar home market continues to grow, there is little direct evidence on the market capitalization effect. Using both hedonics and a repeat sales index approach we find that solar panels are capitalized at roughly a 3.5% premium. This premium is larger in communities with a greater share of college graduates and of registered Prius hybrid vehicles. ER - TY - JOUR AU - Tran,Ngoc-Khanh AU - Zeckhauser,Richard J. TI - The Behavior of Savings and Asset Prices When Preferences and Beliefs are Heterogeneous JF - National Bureau of Economic Research Working Paper Series VL - No. 17199 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17199 L1 - http://www.nber.org/papers/w17199.pdf N1 - Author contact info: Ngoc-Khanh Tran Massachusetts Institute of Technology 8 Sixth Street Apt. 2 Cambridge, MA 02141 E-Mail: khanh@MIT.EDU Richard J. Zeckhauser John F. Kennedy School of Government Harvard University 79 John F. Kennedy Street Cambridge, MA 02138 Tel: 617/495-1174 Fax: 617/384-9340 E-Mail: richard_zeckhauser@harvard.edu AB - Movements in asset prices are a major risk confronting individuals. This paper establishes new asset pricing results when agents differ in risk preference, time preference and/or expectations. It shows that risk tolerance is a critical concept driving savings decisions, consumption allocations, prices and return volatilities. Surprisingly, due to the equilibrium risk sharing, the precautionary savings motive in the aggregate can vastly exceed that of even the most prudent actual agent in the economy. Consequently, a low real interest rate, resulting from large aggregate savings, can prevail with reasonable risk aversions for all agents. One downside of a large aggregate savings motive is that savings rates become extremely sensitive to output fluctuation. Thus, the same mechanism that produces realistically low interest rates tends to make them unrealistically volatile. A powerful isomorphism allows differences in time preference and expectations to be swept away in the analysis, yielding an equivalent economy whose agents differ merely in risk aversion. These results hold great potential to simplify the analysis of heterogeneous-agent economies, as we demonstrate in quantifying how asset prices move and bounding their volatilities. All results are obtained in closed form for any number of agents possessing additively separable preferences in an endowment economy. ER - TY - JOUR AU - Colla,Carrie H. AU - Dow,William H. AU - Dube,Arindrajit TI - The Labor Market Impact of Employer Health Benefit Mandates: Evidence from San Francisco’s Health Care Security Ordinance JF - National Bureau of Economic Research Working Paper Series VL - No. 17198 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17198 L1 - http://www.nber.org/papers/w17198.pdf N1 - Author contact info: Carrie H. Colla The Dartmouth Institute for Health Policy and Clinical Practice Dartmouth Medical School 35 Centerra Parkway Lebanon, NH 03766 Tel: (603) 650-3521 Fax: (603) 653-0896 E-Mail: carrie.colla@dartmouth.edu William H. Dow University of California, Berkeley School of Public Health 239 University Hall, #7360 Berkeley, CA 94720-7360 Tel: 510/643-5439 Fax: 510/643-6981 E-Mail: wdow@berkeley.edu Arindrajit Dube Department of Economics 1030 Thompson Hall University of Massachusetts Amherst Amherst, MA 01003 E-Mail: adube@econs.umass.edu AB - A key issue surrounding employer benefit mandates is the incidence on workers through wages and employment. In this paper, we address this question using a pay-or-play policy implemented in San Francisco in 2008 that requires employers to either provide health benefits or contribute to a public option health plan. We estimate the impact on employment and earnings for the private sector overall, as well as for high impact sectors: retail and accommodation and food services. We develop a novel approach for individual case studies by combining both spatial discontinuity in policies and permutation-type inference using other MSAs. We find that, compared to control counties, employment and earnings patterns in San Francisco did not change appreciably following the policy. This was true for industries most affected by the mandate, as well as for overall private sector employment. The results are generally robust to inclusion of different control groups, county-specific time trends, and varying pre-periods. In contrast to the small effects on the labor market, we do find that about 25% of surveyed restaurants imposed customer surcharges, with the median surcharge being 4% of the bill. These results indicate that while little of the burden of the mandate fell on San Francisco workers, approximately half of the incidence of the mandate fell on consumers. ER - TY - JOUR AU - Greenwood,Robin AU - Hanson,Samuel G. TI - Issuer Quality and the Credit Cycle JF - National Bureau of Economic Research Working Paper Series VL - No. 17197 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17197 L1 - http://www.nber.org/papers/w17197.pdf N1 - Author contact info: Robin Greenwood Harvard Business School Baker Library 267 Soldiers Field Boston, MA 02163 Tel: 617/495-6979 Fax: 617/496-8443 E-Mail: rgreenwood@hbs.edu Samuel Hanson Harvard Business School Soldiers Field Road Boston, MA 02163 E-Mail: shanson@hbs.edu AB - We show that the credit quality of corporate debt issuers deteriorates during credit booms, and that this deterioration forecasts low excess returns to corporate bondholders. The key insight is that changes in the pricing of credit risk disproportionately affect the financing costs faced by low quality firms, so the debt issuance of low quality firms is particularly useful for forecasting bond returns. We show that a significant decline in issuer quality is a more reliable signal of credit market overheating than rapid aggregate credit growth. We use these findings to investigate the forces driving time-variation in expected corporate bond returns. ER - TY - JOUR AU - Bisin,Alberto AU - Moro,Andrea AU - Topa,Giorgio TI - The Empirical Content of Models with Multiple Equilibria in Economies with Social Interactions JF - National Bureau of Economic Research Working Paper Series VL - No. 17196 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17196 L1 - http://www.nber.org/papers/w17196.pdf N1 - Author contact info: Alberto Bisin Department of Economics New York University 19 West 4th Street, 5th Floor New York, NY 10012 Tel: 212/998-8916 Fax: 212/995-4186 E-Mail: alberto.bisin@nyu.edu Andrea Moro Department of Economics Vanderbilt University VU Station B #351819 Nashville, TN 37235 E-Mail: andrea.moro@vanderbilt.edu Giorgio Topa Federal Reserve Bank of New York Domestic Research Function 33 Liberty Street New York, NY 10045 Tel: 212-720-5497 Fax: 212-720-1844 E-Mail: giorgio.topa@ny.frb.org AB - We study a general class of models with social interactions that might display multiple equilibria. We propose an estimation procedure for these models and evaluate its efficiency and computational feasibility relative to different approaches taken to the curse of dimensionality implied by the multiplicity. Using data on smoking among teenagers, we implement the proposed estimation procedure to understand how group interactions affect health-related choices. We find that interaction effects are strong both at the school level and at the smaller friends-network level. Multiplicity of equilibria is pervasive at the estimated parameter values, and equilibrium selection accounts for about 15 percent of the observed smoking behavior. Counterfactuals show that student interactions, surprisingly, reduce smoking by approximately 70 percent with respect to the equilibrium smoking that would occur without interactions. ER - TY - JOUR AU - Bobashev,Georgiy AU - Cropper,Maureen L. AU - Epstein,Joshua M. AU - Goedecke,D. Michael AU - Hutton,Stephen AU - Over,Mead TI - Policy Response to Pandemic Influenza: The Value of Collective Action JF - National Bureau of Economic Research Working Paper Series VL - No. 17195 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17195 L1 - http://www.nber.org/papers/w17195.pdf N1 - Author contact info: Georgiy Bobashev RTI International 3040 E. Cornwallis Road Research Triangle Park, NC 27709-2194 E-Mail: bobashev@rti.org Maureen L. Cropper Department of Economics University of Maryland College Park, MD 20742 Tel: 301/405-3483 Fax: 301/405-3542 E-Mail: cropper@econ.umd.edu Joshua M. Epstein Johns Hopkins University School of Medicine 733 North Broadway Baltimore, MD 21205 E-Mail: jepste15@jhmi.edu D. Michael Goedecke RTI International 3040 E. Cornwallis Road Research Triangle Park, NC 27709-2194 E-Mail: mgoedecke@rti.org Stephen Hutton The World Bank 1818 H Street NW, MSC 9-001 Washington, DC 20433 E-Mail: shutton@worldbank.org Mead Over Center for Global Development E-Mail: mover@cgdev.org AB - This paper examines positive externalities and complementarities in the use of antiviral pharmaceuticals to mitigate pandemic influenza. The paper demonstrates the presence of treatment externalities in simple epidemiological SIR models, and then through simulations of a Global Epidemiological Model, in which the pandemic spreads between cities through the international airline network, and between cities and rural areas through ground transport. While most treatment benefits are private, spillovers may mean that it is in the self-interest of rich countries to pay for some AV treatment in poor countries. The most cost-effective policy is for rich countries to donate doses to the outbreak source country; however, donating doses to poor countries in proportion to their populations may also be cost-effective. These results depend on the transmissibility of the flu strain, the efficacy of antivirals in reducing transmissibility and on the proportion of infectious that can be identified and treated. ER - TY - JOUR AU - Barlevy,Gadi AU - Neal,Derek TI - Pay for Percentile JF - National Bureau of Economic Research Working Paper Series VL - No. 17194 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17194 L1 - http://www.nber.org/papers/w17194.pdf N1 - Author contact info: Gadi Barlevy Economic Research Department Federal Reserve Bank of Chicago 230 South LaSalle Chicago, IL 60604 Tel: 312/322-6379 Fax: 312/322-2357 E-Mail: gbarlevy@frbchi.org Derek Neal Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-8166 Fax: 773-702-8490 E-Mail: d-neal@uchicago.edu AB - We analyze an incentive pay scheme for educators that links educator compensation to the ranks of their students within appropriately defined comparison sets, and we show that under certain conditions this scheme induces teachers to allocate socially optimal levels of effort to all students. Moreover, because this scheme employs only ordinal information, it allows education authorities to employ completely new assessments at each testing date without ever having to equate various assessment forms. This approach removes incentives for teachers to teach to a particular assessment form and eliminates opportunities to influence reward pay by corrupting the equating process or the scales used to report assessment results. Education authorities can use the incentive scheme we describe while employing a separate no-stakes assessment system to track secular trends in scaled measures of student achievement. ER - TY - JOUR AU - Berry,Steven T. AU - Gandhi,Amit AU - Haile,Philip TI - Connected Substitutes and Invertibility of Demand JF - National Bureau of Economic Research Working Paper Series VL - No. 17193 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17193 L1 - http://www.nber.org/papers/w17193.pdf N1 - Author contact info: Steven T. Berry Yale University Department of Economics Box 208264 37 Hillhouse Avenue New Haven, CT 06520-8264 Tel: 203/432-3556 Fax: 203/432-6323 E-Mail: steven.berry@yale.edu Amit Gandhi University of Wisconsin 1180 Observatory Drive Madison, WI 53706-1393 E-Mail: agandhi@ssc.wisc.edu Philip Haile Department of Economics Yale University 37 Hillhouse Avenue P.O. Box 208264 New Haven, CT 06520 Tel: 203/432-3568 Fax: 203/432-6323 E-Mail: philip.haile@yale.edu AB - We consider the invertibility of a nonparametric nonseparable demand system. Invertibility of demand is important in several contexts, including identification of demand, estimation of demand, testing of revealed preference, and economic theory requiring uniqueness of market clearing prices. We introduce the notion of "connected substitutes" and show that this structure is sufficient for invertibility. The connected substitutes conditions require weak substitution between all goods and sufficient strict substitution to necessitate treating them in a single demand system. These conditions are satisfied in many standard models, have transparent economic interpretation, and allow us to show invertibility without functional form restrictions, smoothness assumptions, or strong domain restrictions. ER - TY - JOUR AU - Benmelech,Efraim AU - Bergman,Nittai K. AU - Enriquez,Ricardo TI - Negotiating with Labor Under Financial Distress JF - National Bureau of Economic Research Working Paper Series VL - No. 17192 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17192 L1 - http://www.nber.org/papers/w17192.pdf N1 - Author contact info: Efraim Benmelech Harvard University Department of Economics Littauer 233 Cambridge, MA 02138 Tel: 617/496-4787 Fax: 617/495-8570 E-Mail: effi_benmelech@harvard.edu Nittai Bergman MIT Sloan School of Management 100 Main Street, E62-632 Cambridge, MA 02142 Tel: 617/253-2933 Fax: 617/258-6855 E-Mail: nbergman@mit.edu Ricardo Enriquez Harvard University E-Mail: enriquez@fas.harvard.edu AB - We analyze how firms renegotiate labor contracts to extract concessions from labor. While anecdotal evidence suggests that firms tend to renegotiate down wages in times of financial distress, there is no empirical evidence that documents such renegotiation, its determinants, and its magnitude. This paper attempts to fill this gap. Using a unique data set of airlines that includes detailed information on wages and pension plans we document an empirical link between airline financial distress, pension underfunding, and wage concessions. ER - TY - JOUR AU - Gourio,Francois AU - Rudanko,Leena TI - Customer Capital JF - National Bureau of Economic Research Working Paper Series VL - No. 17191 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17191 L1 - http://www.nber.org/papers/w17191.pdf N1 - Author contact info: Francois Gourio Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-4534 Fax: 617/353-4449 E-Mail: fgourio@bu.edu Leena Rudanko Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-7082 E-Mail: rudanko@bu.edu AB - Firms spend substantial resources on marketing and selling. Interpreting this as evidence of frictions in product markets, which require firms to spend resources on customer acquisition, this paper develops a search theoretic model of firm dynamics in frictional product markets. Introducing search frictions generates long-term customer relationships, rendering the customer base a state variable for firms, which is sluggish to adjust. This affects: the level and volatility of firm investment, sales, profits, value and markups, the timing of firm responses to shocks, and the relationship between investment and Tobin’s q. We document support for these predictions in firm-level data from Compustat, using cross-industry variation in selling expenses to quantify differences in the degree of friction across markets. ER - TY - JOUR AU - Finkelstein,Amy AU - Taubman,Sarah AU - Wright,Bill AU - Bernstein,Mira AU - Gruber,Jonathan AU - Newhouse,Joseph P. AU - Allen,Heidi AU - Baicker,Katherine AU - Group,The Oregon Health Study TI - The Oregon Health Insurance Experiment: Evidence from the First Year JF - National Bureau of Economic Research Working Paper Series VL - No. 17190 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17190 L1 - http://www.nber.org/papers/w17190.pdf N1 - Author contact info: Amy Finkelstein Department of Economics MIT E52-274C 50 Memorial Drive Cambridge, MA 02142 Tel: 617/253-4149 Fax: 617/868-2742 E-Mail: afink@mit.edu Sarah Taubman National Bureau of Economic Research E-Mail: taubmans@nber.org Bill J. Wright Center for Outcomes Research and Education Providence Health & Services E-Mail: bill.wright@providence.org Mira Bernstein National Bureau of Economic Research E-Mail: mbernst@nber.org Jonathan Gruber MIT Department of Economics E52-355 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-8892 Fax: 617/253-1330 E-Mail: gruberj@mit.edu Joseph P. Newhouse Division of Health Policy Research and Education Harvard University 180 Longwood Avenue Boston, MA 02115-5899 Tel: 617/432-1325 Fax: 617/432-3503 E-Mail: newhouse@hcp.med.harvard.edu Heidi Allen Center for Outcomes Research and Education Providence Health & Services E-Mail: heidi.allen@providence.org . Katherine Baicker Professor of Health Economics Department of Health Policy and Management Harvard School of Public Health 677 Huntington Avenue Boston, MA 02115 E-Mail: kbaicker@hsph.harvard.edu The Oregon Health Study Group includes Matt Carlson (Portland State University), Tina Edlund (Deputy Director, Oregon Health Authority),Charles Gallia (Oregon DHS), Eric Schneider (RAND), and Jeanene Smith (Office for Oregon Health Policy and Research) in addition to the other authors of this paper AB - In 2008, a group of uninsured low-income adults in Oregon was selected by lottery to be given the chance to apply for Medicaid. This lottery provides a unique opportunity to gauge the effects of expanding access to public health insurance on the health care use, financial strain, and health of low-income adults using a randomized controlled design. In the year after random assignment, the treatment group selected by the lottery was about 25 percentage points more likely to have insurance than the control group that was not selected. We find that in this first year, the treatment group had substantively and statistically significantly higher health care utilization (including primary and preventive care as well as hospitalizations), lower out-of-pocket medical expenditures and medical debt (including fewer bills sent to collection), and better self-reported physical and mental health than the control group. ER - TY - JOUR AU - Ferraro,Paul J. AU - Price,Michael K. TI - Using Non-Pecuniary Strategies to Influence Behavior: Evidence from a Large Scale Field Experiment JF - National Bureau of Economic Research Working Paper Series VL - No. 17189 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17189 L1 - http://www.nber.org/papers/w17189.pdf N1 - Author contact info: Paul Ferraro Georgia State University E-Mail: prcpjf@langate.gsu.edu Michael Price Department of Economics University of Tennessee 515 Stokely Management Center Knoxville, TN 27996 Tel: 865/974-5672 Fax: 865/974-4601 E-Mail: mprice21@utk.edu AB - Policymakers are increasingly using norm-based messages to influence individual decision-making. We partner with a metropolitan water utility to implement a natural field experiment examining the effect of such messages on residential water demand. The data, drawn from more than 100,000 households, indicate that social comparison messages had a greater influence on behavior than simple pro-social messages or technical information alone. Moreover, our data suggest social comparison messages are most effective among households identified as the least price sensitive: high-users. Yet the effectiveness of such messages wanes over time. Our results thus highlight important complementarities between pecuniary and non-pecuniary strategies. ER - TY - JOUR AU - Helliwell,John F. AU - Wang,Shun TI - Weekends and Subjective Well-Being JF - National Bureau of Economic Research Working Paper Series VL - No. 17180 PY - 2011 Y2 - July 2011 UR - http://www.nber.org/papers/w17180 L1 - http://www.nber.org/papers/w17180.pdf N1 - Author contact info: John F. Helliwell Canadian Institute for Advanced Research and Department of Economics University of British Columbia 997-1873 East Mall Vancouver BC V6T 1Z1 CANADA Tel: 604/822-4953 Fax: 604/822-5915 E-Mail: john.helliwell@ubc.ca Shun Wang Department of Economics, University of British Columbia 997-1873 East Mall Vancouver B.C. V6T 1Z1 CANADA E-Mail: swangubc@hotmail.com AB - This paper exploits the richness and large sample size of the Gallup/Healthways US daily poll to illustrate significant differences in the dynamics of two key measures of subjective well-being: emotions and life evaluations. We find that there is no day-of-week effect for life evaluations, represented here by the Cantril Ladder, but significantly more happiness, enjoyment, and laughter, and significantly less worry, sadness, and anger on weekends (including public holidays) than on weekdays. We then find strong evidence of the importance of the social context, both at work and at home, in explaining the size and likely determinants of the weekend effects for emotions. Weekend effects are twice as large for full-time paid workers as for the rest of the population, and are much smaller for those whose work supervisor is considered a partner rather than a boss and who report trustable and open work environments. A large portion of the weekend effects is explained by differences in the amount of time spent with friends or family between weekends and weekdays (7.1 vs. 5.4 hours). The extra daily social time of 1.7 hours in weekends raises average happiness by about 2%. ER - TY - JOUR AU - Branstetter,Lee G. AU - Chatterjee,Chirantan AU - Higgins,Matthew TI - Regulation and Welfare: Evidence from Paragraph IV Generic Entry in the Pharmaceutical Industry JF - National Bureau of Economic Research Working Paper Series VL - No. 17188 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17188 L1 - http://www.nber.org/papers/w17188.pdf N1 - Author contact info: Lee G. Branstetter Heinz College School of Public Policy and Management Department of Social and Decision Sciences Carnegie Mellon University Pittsburgh, PA 15213 Tel: 412/268-4649 E-Mail: branstet@andrew.cmu.edu Chirantan Chatterjee Indian Institute of Management Bangalore E-Mail: chirantan.chatterjee@IIMB.ERNET.IN Matthew Higgins Georgia Institute of Technology College of Management 800 West Peachtree Street Atlanta, GA 30308 Tel: 404/894-4368 Fax: 404/894-6030 E-Mail: matt.higgins@mgt.gatech.edu AB - With increasing frequency, generic drug manufacturers in the United States are able to challenge the monopoly status of patent-protected drugs even before their patents expire. The legal foundation for these challenges is found in Paragraph IV of the Hatch-Waxman Act. If successful, these Paragraph IV challenges generally lead to large market share losses for incumbents and sharp declines in average market prices. This paper estimates, for the first time, the welfare effects of accelerated generic entry via these challenges. Using aggregate brand level sales data between 1997 and 2008 for hypertension drugs in the U.S. we estimate demand using a nested logit model in order to back out cumulated consumer surplus, which we find to be approximately $270 billion. We then undertake a counterfactual analysis, removing the stream of Paragraph IV facilitated generic products, finding a corresponding cumulated consumer surplus of $177 billion. This implies that gains flowing to consumers as a result of this regulatory mechanism amount to around $92 billion or about $133 per consumer in this market. These gains come at the expense to producers who lose, approximately, $14 billion. This suggests that net short-term social gains stands at around $78 billion. We also demonstrate significant cross-molecular substitution within the market and discuss the possible appropriation of consumer rents by the insurance industry. Policy and innovation implications are also discussed. ER - TY - JOUR AU - Burda,Michael C. AU - Hunt,Jennifer TI - What Explains the German Labor Market Miracle in the Great Recession? JF - National Bureau of Economic Research Working Paper Series VL - No. 17187 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17187 L1 - http://www.nber.org/papers/w17187.pdf N1 - Author contact info: Michael Burda Faculty of Business and Economics Humboldt University Berlin Spandauer Str. 1 D-10178 Berlin Germany E-Mail: burda@wiwi.hu-berlin.de Jennifer Hunt Department of Economics Rutgers University New Jersey Hall 75 Hamilton Street New Brunswick NJ, 08901-1248 Tel: (732) 932-7363 E-Mail: jennifer.hunt@rutgers.edu AB - Germany experienced an even deeper fall in GDP in the Great Recession than the United States, with little employment loss. Employers’ reticence to hire in the preceding expansion, associated in part with a lack of confidence it would last, contributed to an employment shortfall equivalent to 40 percent of the missing employment decline in the recession. Another 20 percent may be explained by wage moderation. A third important element was the widespread adoption of working time accounts, which permit employers to avoid overtime pay if hours per worker average to standard hours over a window of time. We find that this provided disincentives for employers to lay off workers in the downturn. Although the overall cuts in hours per worker were consistent with the severity of the Great Recession, reduction of working time account balances substituted for traditional government-sponsored short-time work. ER - TY - JOUR AU - Burchardi,Konrad B. AU - Hassan,Tarek Alexander TI - The Economic Impact of Social Ties: Evidence from German Reunification JF - National Bureau of Economic Research Working Paper Series VL - No. 17186 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17186 L1 - http://www.nber.org/papers/w17186.pdf N1 - Author contact info: Konrad Burch. Burchardi E-Mail: konrad.burchardi@iies.su.se Tarek Alexander Hassan Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-3291 Fax: 773/753-0851 E-Mail: tarek.hassan@chicagobooth.edu AB - We use the fall of the Berlin Wall in 1989 to show that personal relationships which individuals maintain for non-economic reasons can be an important determinant of regional economic growth. We show that West German households who have social ties to East Germany in 1989 experience a persistent rise in their personal incomes after the fall of the Berlin Wall. Moreover, the presence of these households significantly affects economic performance at the regional level: it increases the returns to entrepreneurial activity, the share of households who become entrepreneurs, and the likelihood that firms based within a given West German region invest in East Germany. As a result, West German regions which (for idiosyncratic reasons) have a high concentration of households with social ties to the East exhibit substantially higher growth in income per capita in the early 1990s. A one standard deviation rise in the share of households with social ties to East Germany in 1989 is associated with a 4.6 percentage point rise in income per capita over six years. We interpret our findings as evidence of a causal link between social ties and regional economic development. ER - TY - JOUR AU - Abeberese,Ama Baafra AU - Kumler,Todd J. AU - Linden,Leigh L. TI - Improving Reading Skills by Encouraging Children to Read: A Randomized Evaluation of the Sa Aklat Sisikat Reading Program in the Philippines JF - National Bureau of Economic Research Working Paper Series VL - No. 17185 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17185 L1 - http://www.nber.org/papers/w17185.pdf N1 - Author contact info: Ama B. Abeberese Department of Economics Columbia University 420 West 118th Street, MC3308 New York, NY 10027 E-Mail: aba2114@columbia.edu Todd J. Kumler Department of Economics Columbia University 420 West 118th Street, MC3308 New York, NY 10027 E-Mail: tjk2110@columbia.edu Leigh L. Linden Department of Economics The Univesrity of Texas at Austin 2225 Speedway BRB 1.116, C3100 Austin, Texas 78712 Tel: (512) 475-8556 E-Mail: leigh.linden@austin.utexas.edu AB - We evaluate a program that aims to improve children’s reading skills by providing classes with age-appropriate reading material and incentivizing children to read through a 31 day read-a-thon. During the read-a-thon, the program significantly increases the propensity of children to read, causing 20 percent more children to have read a book in the last week at school and increasing the number of books read by 2.3 in the last week and 7.2 in the last month. These increases extend both after the end of the program and outside of school, although at lower rates. The program also increased students’ scores on a reading assessment, causing students’ scores to improve by 0.13 standard deviations immediately after the program. The effect persisted even after the program ended with an effect of 0.06 standard deviations three months later. ER - TY - JOUR AU - Michalopoulos,Stelios AU - Papaioannou,Elias TI - Divide and Rule or the Rule of the Divided? Evidence from Africa JF - National Bureau of Economic Research Working Paper Series VL - No. 17184 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17184 L1 - http://www.nber.org/papers/w17184.pdf N1 - Author contact info: Stelios Michalopoulos Brown University Department of Economics 64 Waterman Street Providence, RI 02912 Tel: 401/863-2506 Fax: 401/863-1970 E-Mail: smichalo@brown.edu Elias Papaioannou Department of Economics Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-8169 E-Mail: papaioannou.elias@gmail.com AB - We investigate jointly the importance of contemporary country-level institutional structures and local ethnic-specific pre-colonial institutions in shaping comparative regional development in Africa. We utilize information on the spatial distribution of African ethnicities before colonization and regional variation in contemporary economic performance, as proxied by satellite light density at night. We exploit the fact that political boundaries across the African landscape partitioned ethnic groups in different countries subjecting identical cultures to different country-level institutions. Our regression discontinuity estimates reveal that differences in countrywide institutional arrangements across the border do not explain differences in economic performance within ethnic groups. In contrast, we document a strong association between pre-colonial ethnic institutional traits and contemporary regional development. While this correlation does not necessarily identify a causal relationship, this result obtains conditional on country fixed-effects, controlling for other ethnic traits and when we focus on pairs of contiguous ethnic homelands. ER - TY - JOUR AU - Milkman,Katherine L. AU - Beshears,John AU - Choi,James J. AU - Laibson,David AU - Madrian,Brigitte C. TI - Using Implementation Intentions Prompts to Enhance Influenza Vaccination Rates JF - National Bureau of Economic Research Working Paper Series VL - No. 17183 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17183 L1 - http://www.nber.org/papers/w17183.pdf N1 - Author contact info: Katherine L. Milkman University of Pennsylvania 3730 Walnut Street 561 Jon M. Huntsman Hall Philadelphia, PA19104 E-Mail: kmilkman@wharton.upenn.edu John Beshears Stanford Graduate School of Business 655 Knight Way Stanford, CA 94305-7298 Tel: 650/723-6792 E-Mail: beshears@stanford.edu James J. Choi Yale School of Management 135 Prospect Street P.O. Box 208200 New Haven, CT 06520-8200 E-Mail: james.choi@yale.edu David Laibson Department of Economics Littauer M-12 Harvard University Cambridge, MA 02138 Tel: 617/496-3402 Fax: 617/495-8570 E-Mail: dlaibson@gmail.com Brigitte C. Madrian John F. Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617-495-8917 Fax: 617-496-5960 E-Mail: Brigitte_Madrian@Harvard.edu AB - We evaluate the results of a field experiment designed to measure the effect of prompts to form implementation intentions on realized behavioral outcomes. The outcome of interest is influenza vaccination receipt at free on-site clinics offered by a large firm to its employees. All employees eligible for study participation received reminder mailings that listed the times and locations of the relevant vaccination clinics. Mailings to employees randomly assigned to the treatment conditions additionally included a prompt to write down either (1) the date the employee planned to be vaccinated or (2) the date and time the employee planned to be vaccinated. Vaccination rates increased when these implementation intentions prompts were included in the mailing. The vaccination rate among control condition employees was 33.1%. Employees who received the prompt to write down just a date had a vaccination rate 1.5 percentage points higher than the control group, a difference that is not statistically significant. Employees who received the more specific prompt to write down both a date and a time had a 4.2 percentage point higher vaccination rate, a difference that is both statistically significant and of meaningful magnitude. ER - TY - JOUR AU - Ang,Andrew AU - Timmermann,Allan TI - Regime Changes and Financial Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 17182 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17182 L1 - http://www.nber.org/papers/w17182.pdf N1 - Author contact info: Andrew Ang Columbia Business School 3022 Broadway 413 Uris New York, NY 10027 Tel: 212/854-9154 Fax: 212/662-8474 E-Mail: aa610@columbia.edu Allan Timmermann Department of Economics University of California La Jolla, CA 92093-0508 E-Mail: atimmerm@ucsd.edu AB - Regime switching models can match the tendency of financial markets to often change their behavior abruptly and the phenomenon that the new behavior of financial variables often persists for several periods after such a change. While the regimes captured by regime switching models are identified by an econometric procedure, they often correspond to different periods in regulation, policy, and other secular changes. In empirical estimates, the regime switching means, volatilities, autocorrelations, and cross-covariances of asset returns often differ across regimes, which allow regime switching models to capture the stylized behavior of many financial series including fat tails, heteroskedasticity, skewness, and time-varying correlations. In equilibrium models, regimes in fundamental processes, like consumption or dividend growth, strongly affect the dynamic properties of equilibrium asset prices and can induce non-linear risk-return trade-offs. Regime switches also lead to potentially large consequences for investors' optimal portfolio choice. ER - TY - JOUR AU - Åstebro,Thomas AU - Serrano,Carlos J. TI - Business Partners, Financing, and the Commercialization of Inventions JF - National Bureau of Economic Research Working Paper Series VL - No. 17181 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17181 L1 - http://www.nber.org/papers/w17181.pdf N1 - Author contact info: Thomas Astebro HEC Paris E-Mail: astebro@hec.fr Carlos J. Serrano Department of Economics University of Toronto 150 St. George Street Toronto, ON M5S 3G7 CANADA Tel: 416/946-3404 E-Mail: carlos.serrano@utoronto.ca AB - This paper studies the effect of business partners on the commercialization of nvention based ventures, and it assesses the relative importance of partners’ human and social capital on commercialization outcomes. Projects run by partnerships were five times more likely to reach commercialization, and they had mean revenues approximately ten times greater than projects run by solo-entrepreneurs. These gross differences may be due both to business partners’ value added and to selection. After controlling for selection effects and observed/unobserved heterogeneity, our smallest estimate of partner value added approximately doubles the probability of commercialization and increases expected revenues by 29% at the sample mean. ER - TY - JOUR AU - Hall,Robert E. TI - Clashing Theories of Unemployment JF - National Bureau of Economic Research Working Paper Series VL - No. 17179 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17179 L1 - http://www.nber.org/papers/w17179.pdf N1 - Author contact info: Robert E. Hall Hoover Institution Stanford University Stanford, CA 94305-6010 Tel: 650/723-2215 E-Mail: rehall@gmail.com AB - General-equilibrium models for studying monetary influences in general and the zero lower bound on the nominal interest rate in particular contain implicit theories of unemployment. In some cases, the theory is explicit. When the nominal rate is above the level that clears the current market for output, the excess supply shows up as diminished output, lower employment, and higher unemployment. Quite separately, the Diamond-Mortensen-Pissarides model is a widely accepted and well-developed account of turnover, wage determination, and unemployment. The DMP model is a clashing theory of unemployment, in the sense that its determinants of unemployment do not include any variables that signal an excess supply of current output. In consequence, a general-equilibrium monetary model with a DMP labor market generally has no equilibrium. After demonstrating the clash in a minimal but adequate setting, I consider modifications of the DMP model that permit the complete model to have an equilibrium. No fully satisfactory modification has yet appeared. ER - TY - JOUR AU - Hall,Bronwyn H. TI - Innovation and Productivity JF - National Bureau of Economic Research Working Paper Series VL - No. 17178 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17178 L1 - http://www.nber.org/papers/w17178.pdf N1 - Author contact info: Bronwyn H. Hall Dept. of Economics 549 Evans Hall UC Berkeley Berkeley, CA 94720-3880 Tel: 510/642-3878 Fax: 510/548-5561 E-Mail: bhhall@nber.org AB - What do we know about the relationship between innovation and productivity among firms? The workhorse model of this relationship is presented and the implications of analysis using this model and the usually available data on product and process innovation are derived. The recent empirical evidence on the relationship between innovation and productivity in firms is then surveyed. The conclusion is that there are substantial positive impacts of product innovation on revenue productivity, but that the impact of process innovation is more ambiguous, suggesting some market power on the part of the firms being analyzed. ER - TY - JOUR AU - Loeb,Susanna AU - Kalogrides,Demetra AU - Béteille,Tara TI - Effective Schools: Teacher Hiring, Assignment, Development, and Retention JF - National Bureau of Economic Research Working Paper Series VL - No. 17177 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17177 L1 - http://www.nber.org/papers/w17177.pdf N1 - Author contact info: Susanna Loeb 524 CERAS, 520 Galvez Mall Stanford University Stanford, CA 94305 Tel: 650/725-4262 E-Mail: sloeb@stanford.edu Demetra Kalogrides Stanford University 520 Galvez Mall Drive Stanford CA, 94305 E-Mail: dkalo@stanford.edu Tara Beteille The World Bank MSN M9A-007 1900 Pennsylvania Avenue, NW Washington, DC 20431 E-Mail: tara.beteille@gmail.com AB - The literature on effective schools emphasizes the importance of a quality teaching force in improving educational outcomes for students. In this paper, we use value-added methods to examine the relationship between a school’s effectiveness and the recruitment, assignment, development and retention of its teachers. We ask whether effective schools systematically recruit more effective teachers; whether they assign teachers to students more effectively; whether they do a better job of helping their teachers improve; whether they retain more effective teachers; or whether they do a combination of these processes. Our results reveal four key findings. First, we find that more effective schools are able to attract and hire more effective teachers from other schools when vacancies arise. Second, we find that more effective schools assign novice teachers to students in a more equitable fashion. Third, we find that teachers who work in schools that were more effective at raising achievement in a prior period improve more rapidly in a subsequent period than do those in less effective schools. Finally, we find that more effective schools are better able to retain higher-quality teachers, though they are not differentially able to remove ineffective teachers. The results point to the importance of personnel, and perhaps, school personnel practices, for improving student outcomes. ER - TY - JOUR AU - Ronfeldt,Matthew AU - Lankford,Hamilton AU - Loeb,Susanna AU - Wyckoff,James TI - How Teacher Turnover Harms Student Achievement JF - National Bureau of Economic Research Working Paper Series VL - No. 17176 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17176 L1 - http://www.nber.org/papers/w17176.pdf N1 - Author contact info: Matthew Ronfeldt University of Michigan School of Education E-Mail: ronfeldt@stanford.edu Hamilton Lankford School of Education, ED 317 University at Albany State University of New York Albany, NY 12222 E-Mail: hamp@albany.edu Susanna Loeb 524 CERAS, 520 Galvez Mall Stanford University Stanford, CA 94305 Tel: 650/725-4262 E-Mail: sloeb@stanford.edu James Wyckoff Curry School of Education University of Virginia P.O. Box 400277 Charlottesville, VA 22904-4277 E-Mail: wyckoff@virginia.edu AB - Researchers and policymakers often assume that teacher turnover harms student achievement, but recent evidence calls into question this assumption. Using a unique identification strategy that employs grade-level turnover and two classes of fixed-effects models, this study estimates the effects of teacher turnover on over 600,000 New York City 4th and 5th grade student observations over 5 years. The results indicate that students in grade-levels with higher turnover score lower in both ELA and math and that this effect is particularly strong in schools with more low-performing and black students. Moreover, the results suggest that there is a disruptive effect of turnover beyond changing the composition in teacher quality. ER - TY - JOUR AU - Collard-Wexler,Allan AU - Asker,John AU - Loecker,Jan De TI - Productivity Volatility and the Misallocation of Resources in Developing Economies JF - National Bureau of Economic Research Working Paper Series VL - No. 17175 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17175 L1 - http://www.nber.org/papers/w17175.pdf N1 - Author contact info: Allan Collard-Wexler Stern School of Business New York University 44 West Fourth Street KMC-7-80 New York, NY 10012 Tel: 212/998-0889 Fax: 212/995-4218 E-Mail: wexler@nyu.edu John Asker Stern School of Business Department of Economics, Suite 7-79 New York University 44 West 4th Street New York, NY 10012 Tel: 212/998-0062 Fax: 212/995-4218 E-Mail: jasker@stern.nyu.edu Jan De Loecker Department of Economics 307 Fisher Hall Princeton University Princeton, NJ 08544-1021 Tel: 609/258-2149 E-Mail: jdeloeck@princeton.edu AB - We investigate the role of dynamic production inputs and their associated adjustment costs in shaping the dispersion of total factor productivity (TFP) and static measures of capital misallocation within a country. Using data on 5,010 establishments in 33 developing countries from the World Bank’s Enterprise Research Data, we find that countries exhibiting greater time-series volatility of productivity are also characterized by greater cross-sectional dispersion in productivity. Volatility in TFP explains one quarter to one third of cross-country productivity dispersion. We document a similar relationship between productivity volatility and the dispersion of the marginal revenue product of capital (static capital misallocation). We then use a standard model of investment with adjustment costs, parameterized using numbers calibrated to U.S. data, to show that increasing the volatility of productivity to the level observed in these developing economies can quantitatively replicate the observed relationship between static misallocation and volatility observed in the data. We find that sixty-one percent of the static capital misallocation in the data is captured by the model’s prediction. Our findings suggest that the dynamic process governing productivity shocks is a first-order determinant of differences in misallocation and, hence, income across countries. ER - TY - JOUR AU - Danzon,Patricia M. AU - Mulcahy,Andrew W. AU - Towse,Adrian K. TI - Pharmaceutical Pricing in Emerging Markets: Effects of Income, Competition and Procurement JF - National Bureau of Economic Research Working Paper Series VL - No. 17174 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17174 L1 - http://www.nber.org/papers/w17174.pdf N1 - Author contact info: Patricia M. Danzon Health Care Management Department The Wharton School University of Pennsylvania 3641 Locust Walk Philadelphia, PA 19104 Tel: 215/898-0694 Fax: 215/573-2157 E-Mail: danzon@wharton.upenn.edu Andrew W. Mulcahy Health Care Management Department The Wharton School University of Pennsylvania 3641 Locust Walk Philadelphia, PA 19104 E-Mail: mulcahaw@wharton.upenn.edu Adrian K. Towse Office of Health Economics Southside, 7th Floor 105 Victoria St. London SW1E 6QT United Kingdom E-Mail: atowse@ohe.org AB - This paper analyzes determinants of ex-manufacturer prices for originator and generic drugs across a large sample of countries. We focus on drugs to treat HIV/AIDS, TB and malaria in middle and low income countries (MLICs), with robustness checks to other therapeutic categories and other countries. We examine effects of per capita income, income dispersion, number and type of therapeutic and generic competitors, and whether the drugs are sold to retail pharmacies vs. tendered procurement by NGOs. The cross-national income elasticity of prices is 0.4 across high and low income countries, but is only 0.15 between MLICs, implying that drugs are least affordable relative to income in the lowest income countries. Within-country income inequality contributes to relatively high prices in MLICs. Number of therapeutic and generic competitors only weakly affects prices to retail pharmacies, plausibly because uncertain quality leads to competition on brand rather than price. Tendered procurement attracts multi-national generic suppliers and significantly reduces prices for originators and generics, compared to prices to retail pharmacies. ER - TY - JOUR AU - Kroft,Kory AU - Notowidigdo,Matthew J. TI - Should Unemployment Insurance Vary With the Unemployment Rate? Theory and Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 17173 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17173 L1 - http://www.nber.org/papers/w17173.pdf N1 - Author contact info: Kory Kroft University of Toronto E-Mail: kory.kroft@utoronto.ca Matthew J. Notowidigdo University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-9758 E-Mail: noto@chicagobooth.edu AB - We study how the level of unemployment insurance (UI) benefits that trades off the consumption smoothing benefit with the moral hazard cost of distorting job search behavior varies over the business cycle. Empirically, we find that the moral hazard cost is procyclical, greater when the unemployment rate is relatively low. By contrast, our evidence suggests that the consumption smoothing benefit of UI is acyclical. Using these estimates to calibrate our model, we find that a one standard deviation increase in the unemployment rate leads to a roughly 14 to 27 percentage point increase in the welfare-maximizing wage replacement rate. ER - TY - JOUR AU - Genakos,Christos AU - Kühn,Kai-Uwe AU - Reenen,John Van TI - Leveraging Monopoly Power by Degrading Interoperability: Theory and Evidence from Computer Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 17172 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17172 L1 - http://www.nber.org/papers/w17172.pdf N1 - Author contact info: Christos Genakos Department of Economics Athens University of Economics and Business 76 Patission Str. Athens, 10434 GREECE Tel: (+30) 210 8203 353 E-Mail: cgenakos@aueb.gr Kai-Uwe Kuhn University of Michigan Department of Economics 611 Tappan Street 258 Lorch Hall Ann Arbor, MI 48109-1220 E-Mail: kukuhn@umich.edu John Van Reenen Department of Economics London School of Economics Centre for Economic Performance Houghton Street London WC2A 2AE UNITED KINGDOM Tel: 00 44 207/955-6976 Fax: 00 44 207/955-6848 E-Mail: j.vanreenen@lse.ac.uk AB - When will a monopolist have incentives to foreclose a complementary market by degrading compatibility/interoperability of his products with those of rivals? We develop a framework where leveraging extracts more rents from the monopoly market by “restoring” second degree price discrimination. In a random coefficient model with complements we derive a policy test for when incentives to reduce rival quality will hold. Our application is to Microsoft’s strategic incentives to leverage market power from personal computer to server operating systems. We estimate a structural random coefficients demand system which allows for complements (PCs and servers). Our estimates suggest that there were incentives to reduce interoperability which were particularly strong at the turn of the 21st Century. ER - TY - JOUR AU - Figueiredo,John M. de TI - Committee Jurisdiction, Congressional Behavior and Policy Outcomes JF - National Bureau of Economic Research Working Paper Series VL - No. 17171 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17171 L1 - http://www.nber.org/papers/w17171.pdf N1 - Author contact info: John M. de Figueiredo The Law School Duke University 210 Science Drive Durham, NC 27708 Tel: 919-613-8513 E-Mail: jdefig@law.duke.edu AB - The literature on congressional committees has largely overlooked the impact of jurisdictional fights on policy proposals and outcomes. This paper develops a theory of how legislators balance the benefits of expanded committee jurisdiction against preferred policy outcomes. It shows why a) senior members and young members in safe districts are most likely to challenge a committee’s jurisdiction; b) policy proposals may be initiated off the proposer’s ideal point in order to obtain jurisdiction; c) policy outcomes will generally be more moderate with jurisdictional fights than without these turf wars. We empirically investigate these results examining proposed Internet intellectual property protection legislation in the 106th Congress. ER - TY - JOUR AU - Anderson,Michael AU - Auffhammer,Maximilian TI - Pounds that Kill: The External Costs of Vehicle Weight JF - National Bureau of Economic Research Working Paper Series VL - No. 17170 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17170 L1 - http://www.nber.org/papers/w17170.pdf N1 - Author contact info: Michael L. Anderson Department of Agricultural and Resource Economics 207 Giannini Hall, MC 3310 University of California, Berkeley Berkeley, CA 94720 Tel: 510/642-7628 Fax: 510/643-8911 E-Mail: mlanderson@berkeley.edu Maximilian Auffhammer Agricultural and Resource Economics Department University of California, Berkeley 207 Giannini Hall Berkeley, CA 94720-3310 Tel: 510/643-5472 Fax: 510/643-8911 E-Mail: auffhammer@berkeley.edu AB - Heavier vehicles are safer for their own occupants but more hazardous for the occupants of other vehicles. In this paper we estimate the increased probability of fatalities from being hit by a heavier vehicle in a collision. We show that, controlling for own-vehicle weight, being hit by a vehicle that is 1,000 pounds heavier results in a 47% increase in the baseline fatality probability. Estimation results further suggest that the fatality risk is even higher if the striking vehicle is a light truck (SUV, pickup truck, or minivan). We calculate that the value of the external risk generated by the gain in fleet weight since 1989 is approximately 27 cents per gallon of gasoline. We further calculate that the total fatality externality is roughly equivalent to a gas tax of $1.08 per gallon. We consider two policy options for internalizing this external cost: a gas tax and an optimal weight varying mileage tax. Comparing these options, we find that the cost is similar for most vehicles. ER - TY - JOUR AU - Chen,Chongyang AU - Dai,Zhonglan AU - Shackelford,Douglas AU - Zhang,Harold TI - Does Financial Constraint Affect Shareholder Taxes and the Cost of Equity Capital? JF - National Bureau of Economic Research Working Paper Series VL - No. 17169 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17169 L1 - http://www.nber.org/papers/w17169.pdf N1 - Author contact info: Chongyang Chen School of Management, The University of Texas at Dallas Richardson, TX 75080-3021 E-Mail: cchen@utdallas.edu Zhonglan Dai School of Management The University of Texas at Dallas Richardson, TX 75080-3021 E-Mail: zdai@utdallas.edu Douglas Shackelford University of North Carolina at Chapel Hill Kenan-Flagler Business School Campus Box 3490, McColl Building Chapel Hill, NC 27599-3490 Tel: 919/962-3197 Fax: 919/962-4727 E-Mail: doug_shack@unc.edu Harold Zhang University of Texas at Dallas E-Mail: harold.zhang@utdallas.edu AB - We show that firms with the least elastic demand for equity capital should benefit the most from reductions in shareholder taxes. Consistent with this prediction, we find that, following 1997 and 2003 cuts in U.S. individual shareholder taxes, financially constrained firms, and particularly those with disproportionate ownership by U.S. individuals, enjoyed larger reductions in their cost of equity capital than did other firms. The results are consistent with the incidence of the tax reductions falling mostly on firms with the most pressing needs for capital. Furthermore, the findings provide an explanation for the heretofore puzzling finding that, following the unprecedented 2003 reduction in dividend tax rates, non-dividend-paying firms outperformed dividend-paying firms. Not surprisingly, we find that non-dividend-paying firms are more financial constrained than dividend-paying firms are. When a firm’s financial constraint and dividend choice are jointly considered, we find that the extent of financial constraint affects the change in the cost of equity capital, but whether a firm issues a dividend does not. In other words, it appears that the extant studies suffered from the omission of a correlated variation, the extent to which a firm is financially constrained. ER - TY - JOUR AU - Gruber,Jonathan TI - The Impacts of the Affordable Care Act: How Reasonable Are the Projections? JF - National Bureau of Economic Research Working Paper Series VL - No. 17168 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17168 L1 - http://www.nber.org/papers/w17168.pdf N1 - Author contact info: Jonathan Gruber MIT Department of Economics E52-355 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-8892 Fax: 617/253-1330 E-Mail: gruberj@mit.edu AB - The Patient Protection and Affordable Care Act (ACA) is the most comprehensive reform of the U.S. medical system in at least 45 years. The ACA transforms the non-group insurance market in the United States, mandates that most residents have health insurance, significantly expands public insurance and subsidizes private insurance coverage, raises revenues from a variety of new taxes, and reduces and reorganizes spending under the nation’s largest health insurance plan, Medicare. Projecting the impacts of such fundamental reform to the health care system is fraught with difficulty. But such projections were required for the legislative process, and were delivered by the Congressional Budget Office (CBO). This paper discusses the projected impact of the ACA in more detail, and describes the evidence that sheds light upon the accuracy of the projections. It begins by reviewing in broad details the structure of the ACA and then reviews evidence from a key case study that informs our understanding of the ACA’s impacts: a comparable health reform that was carried out in Massachusetts four years earlier. The paper discusses the key results from that earlier reform and what they might imply for the impacts of the ACA. The paper ends with a discussion of the projected impact of the ACA and offers some observations on those estimates. ER - TY - JOUR AU - Notowidigdo,Matthew J. TI - The Incidence of Local Labor Demand Shocks JF - National Bureau of Economic Research Working Paper Series VL - No. 17167 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17167 L1 - http://www.nber.org/papers/w17167.pdf N1 - Author contact info: Matthew J. Notowidigdo University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-9758 E-Mail: noto@chicagobooth.edu AB - Low-skill workers are comparatively immobile: when labor demand slumps in a city, low-skill workers are disproportionately likely to remain to face declining wages and employment. This paper estimates the extent to which (falling) housing prices and (rising) social transfers can account for this fact using a spatial equilibrium model. Nonlinear reduced form estimates of the model using U.S. Census data document that positive labor demand shocks increase population more than negative shocks reduce population, this asymmetry is larger for low-skill workers, and such an asymmetry is absent for wages, housing values, and rental prices. GMM estimates of the full model suggest that the comparative immobility of low-skill workers is not due to higher mobility costs per se, but rather a lower incidence of adverse labor demand shocks. ER - TY - JOUR AU - Fetter,Daniel K. TI - How Do Mortgage Subsidies Affect Home Ownership? Evidence from the Mid-century GI Bills JF - National Bureau of Economic Research Working Paper Series VL - No. 17166 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17166 L1 - http://www.nber.org/papers/w17166.pdf N1 - Author contact info: Daniel K. Fetter Department of Economics Wellesley College 106 Central Street Wellesley, MA 02481 Tel: 781/283-2979 E-Mail: dfetter@wellesley.edu AB - The sharpest increase in U.S. home ownership over the last century occurred between 1940 and 1960, associated primarily with a decrease in the age at first ownership. To shed light on the contribution of several coincident large-scale government interventions in housing finance, I examine veterans' home loan benefits provided under the postwar GI Bills. I use two breaks in the probability of military service by date of birth, for cohorts coming of age at the end of World War II and the Korean War, to estimate the impact of veteran status on home ownership. I find significant, positive effects of veteran status on home ownership in 1960. Consistent with a model in which the impact of easier loan terms declines with age, these effects are larger for younger veterans and diminish in 1970 and 1980 as the cohorts age. Complementary evidence suggests veterans' non-housing benefits and military service itself are unlikely to explain the observed differences in home ownership. Veterans' housing benefits appear to have increased aggregate home ownership rates primarily by shifting purchase earlier in life; they can explain approximately 7.4 percent of the increase in aggregate home ownership from 1940 to 1960, and 25 percent of the increase for the affected cohorts. ER - TY - JOUR AU - Akresh,Richard AU - Edmonds,Eric V. TI - Residential Rivalry and Constraints on the Availability of Child Labor JF - National Bureau of Economic Research Working Paper Series VL - No. 17165 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17165 L1 - http://www.nber.org/papers/w17165.pdf N1 - Author contact info: Richard Akresh University of Illinois at Urbana-Champaign Department of Economics 1407 West Gregory Drive David Kinley Hall, Room 214 Urbana, IL 61801 Tel: 217-333-3467 Fax: 217-244-6678 E-Mail: akresh@illinois.edu Eric V. Edmonds Department of Economics Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-2944 Fax: 603/646-2122 E-Mail: Eric.V.Edmonds@Dartmouth.edu AB - We consider the influence of household-based production on human capital investment. In data from rural Burkina Faso, we document a positive correlation between the presence of girls and enrollment that disappears in households that are able to send out or receive in children. We argue that the connection between education and the sex composition of co-resident children in households that are constrained in their ability to adjust child labor owes to residential rivalry, the idea that having a greater share of resident children with an advantage in household based production increases education by reducing the within-household equilibrium value of child time. ER - TY - JOUR AU - Burkhauser,Richard V. AU - Larrimore,Jeff AU - Simon,Kosali I. TI - A "Second Opinion" on the Economic Health of the American Middle Class JF - National Bureau of Economic Research Working Paper Series VL - No. 17164 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17164 L1 - http://www.nber.org/papers/w17164.pdf N1 - Author contact info: Richard V. Burkhauser Cornell University Department of Policy Analysis & Management 259 MVR Hall Ithaca, NY 14853-4401 Tel: 607/255-2097 Fax: 607/255-4071 E-Mail: rvb1@cornell.edu Jeff Larrimore Joint Committee on Taxation 1625 Longworth House Office Building Washington, D.C. 20515 E-Mail: jeff.larrimore@mail.house.gov Kosali I. Simon School of Public and Environmental Affairs Indiana University Rm 359 1315 East Tenth Street Bloomington, IN 47405-1701 Tel: (812) 856-3850 E-Mail: simonkos@indiana.edu AB - Researchers considering levels and trends in the resources available to the middle class traditionally measure the pre-tax cash income of either tax units or households. In this paper, we demonstrate that this choice carries significant implications for assessing income trends. Focusing on tax units rather than households greatly reduces measured growth in middle class income. Furthermore, excluding the effect of taxes and the value of in-kind benefits further reduces observed improvements in the resources of the middle class. Finally, we show how these distinctions change the observed distribution of benefits from the tax exclusion of employer provided health insurance. ER - TY - JOUR AU - Caplin,Andrew AU - Martin,Daniel TI - A Testable Theory of Imperfect Perception JF - National Bureau of Economic Research Working Paper Series VL - No. 17163 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17163 L1 - http://www.nber.org/papers/w17163.pdf N1 - Author contact info: Andrew Caplin Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10012 Tel: 212/998-8950 Fax: 212/995-3932 E-Mail: andrew.caplin@nyu.edu Daniel J. Martin Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10012 E-Mail: daniel.martin@nyu.edu AB - We introduce a rational choice theory that allows for many forms of imperfect perception, including failures of memory, selective attention, and adherence to simplifying rules of thumb. Despite its generality, the theory has strong, simple, and intuitive implications for standard choice data and for more enriched choice data. The central assumption is rational expectations: decision makers understand the relationship between their perceptions, however limited they may be, and the (stochastic) consequences of their available choices. Our theory separately identifies two distinct "framing" effects: standard effects involving the layout of the prizes (e.g. order in a list) and novel effects relating to the information content of the environment (e.g. how likely is the first in the list to be the best). Simple experimental tests both affirm the basic model and confirm the existence of information-based framing effects. ER - TY - JOUR AU - David,Guy AU - Markowitz,Sara TI - Side Effects of Competition: the Role of Advertising and Promotion in Pharmaceutical Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 17162 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17162 L1 - http://www.nber.org/papers/w17162.pdf N1 - Author contact info: Guy David The Wharton School University of Pennsylvania 202 Colonial Penn Center 3641 Locust Walk Philadelphia, PA 19104-6218 Tel: 215/573-5780 Fax: 215/573-2157 E-Mail: gdavid2@wharton.upenn.edu Sara Markowitz Department of Economics Emory University 1602 Fishburne Dr. Atlanta, GA 30322 Tel: (404) 712-8167 E-Mail: sara.markowitz@emory.edu AB - The extent of pharmaceutical advertising and promotion can be characterized by a balancing act between profitable demand expansions and potentially unfavorable subsequent regulatory actions. However, this balance also depends on the nature of competition (e.g. monopoly versus oligopoly). In this paper we model the firm’s behavior under different competitive scenarios and test the model’s predictions using a novel combination of sales, promotion, advertising, and adverse event reports data. We focus on the market for erectile dysfunction drugs as the basis for estimation. This market is ideal for analysis as it is characterized by an abrupt shift in structure, all drugs are branded, the drugs are associated with adverse health events, and have extensive advertising and promotion. We find that advertising and promotion expenditures increase own market share but also increase the share of adverse drug reactions. Competitors’ spending decreases market share, while also having an influence on adverse drug reactions. ER - TY - JOUR AU - Ferrie,Joseph P. AU - Rolf,Karen AU - Troesken,Werner TI - Cognitive Disparities, Lead Plumbing, and Water Chemistry: Intelligence Test Scores and Exposure to Water-Borne Lead Among World War Two U.S. Army Enlistees JF - National Bureau of Economic Research Working Paper Series VL - No. 17161 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17161 L1 - http://www.nber.org/papers/w17161.pdf N1 - Author contact info: Joseph P. Ferrie Department of Economics Northwestern University Evanston, IL 60208-2600 Tel: 847/491-8210 Fax: 847/491-7001 E-Mail: ferrie@northwestern.edu Karen Rolf Grace Abbott School of Social Work University of Nebraska-Omaha 6001 Dodge Street Omaha, NE 68182 E-Mail: krolf@unomaha.edu Werner Troesken Department of Economics University of Pittsburgh Pittsburgh, PA 15260 Tel: 412/648-2823 Fax: 412/648-9074 E-Mail: troesken@pitt.edu AB - Assessing the impact of lead exposure is difficult if individuals select on the basis of their characteristics into environments with different exposure levels. We address this issue with data from when the dangers of lead exposure were still largely unknown, using new evidence on intelligence test scores for male World War Two U.S. Army enlistees linked to the households where they resided in 1930. Higher exposure to water-borne lead (proxied by urban residence and low water pH levels) was associated with lower test scores: going from pH 6 to pH 5.5, scores fell 5 points (1/4 standard deviation). A longer time exposed led to a more severe effect. The ubiquity of lead in urban water systems at this time and uncertainty regarding its impact mean these effects are unlikely to have resulted from selection into locations with different levels of exposure. ER - TY - JOUR AU - Markowitz,Sara AU - Adams,E. Kathleen AU - Dietz,Patricia M. AU - Kannan,Viji AU - Tong,Van TI - Smoking Policies and Birth Outcomes: Estimates From a New Era JF - National Bureau of Economic Research Working Paper Series VL - No. 17160 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17160 L1 - http://www.nber.org/papers/w17160.pdf N1 - Author contact info: Sara Markowitz Department of Economics Emory University 1602 Fishburne Dr. Atlanta, GA 30322 Tel: (404) 712-8167 E-Mail: sara.markowitz@emory.edu E. Kathleen Adams Emory School of Public Health 1518 Clifton Road, NE Atlanta, GA 30322 E-Mail: eadam01@emory.edu Patricia M. Dietz Centers for Disease Control and Prevention Division of Reproductive Health 4770 Buford Hwy, NE Atlanta, GA 30341 E-Mail: pdietz@cdc.gov Viji Kannan University of Rochester Medical College Rochester, NY E-Mail: viji_kannan@urmc.rochester.edu Van Tong Centers for Disease Control and Prevention Division of Reproductive Health 4770 Buford Hwy, NE Atlanta, GA 30341 E-Mail: Vtong@cdc.gov AB - Smoking during pregnancy has been shown to have significant adverse health effects for new born babies. Smoking is the leading preventable cause of low birth weight of infants who in turn, need more resources at delivery and are more likely to have related health problems in infancy and beyond. Despite these outcomes, many women still smoke during pregnancy. The main question for policy makers is whether tobacco control policies can influence maternal smoking and reduce adverse birth outcomes. We examine this question using data from the Pregnancy Risk Assessment Monitoring System data from 2000 to 2005. This is a time period during which states significantly changed their tobacco control policies by raising excise taxes and imposing strong restrictions on indoor smoking. We estimate reduced form models of birth weight and gestational weeks, focusing on the effects of taxes and workplace restrictions on smoking as the policies of interest. We also estimate demand equations for the probability of smoking during the third trimester. Results show that the smoking policies are effective, but limited to babies born to mothers of certain age groups. For babies born to teenage mothers, higher cigarette taxes are associated with small increases in birth weight and gestational weeks. For babies born to mothers ages 25-34, restrictions on smoking in the workplace are associated with small increases in gestational weeks. ER - TY - JOUR AU - Dale,Stacy AU - Krueger,Alan B. TI - Estimating the Return to College Selectivity over the Career Using Administrative Earnings Data JF - National Bureau of Economic Research Working Paper Series VL - No. 17159 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17159 L1 - http://www.nber.org/papers/w17159.pdf N1 - Author contact info: Stacy Dale Mathematica Policy Research P.O. Box 2393 Princeton, NJ 08543-2393 E-Mail: sdale@mathematica-mpr.com Alan B. Krueger Industrial Relations Section Firestone Library Princeton University Princeton, NJ 08544 Tel: 609/258-4046 Fax: 609/258-2907 E-Mail: akrueger@princeton.edu AB - We estimate the monetary return to attending a highly selective college using the College and Beyond (C&B) Survey linked to Detailed Earnings Records from the Social Security Administration (SSA). This paper extends earlier work by Dale and Krueger (2002) that examined the relationship between the college that students attended in 1976 and the earnings they self-reported reported in 1995 on the C&B follow-up survey. In this analysis, we use administrative earnings data to estimate the return to various measures of college selectivity for a more recent cohort of students: those who entered college in 1989. We also estimate the return to college selectivity for the 1976 cohort of students, but over a longer time horizon (from 1983 through 2007) using administrative data. We find that the return to college selectivity is sizeable for both cohorts in regression models that control for variables commonly observed by researchers, such as student high school GPA and SAT scores. However, when we adjust for unobserved student ability by controlling for the average SAT score of the colleges that students applied to, our estimates of the return to college selectivity fall substantially and are generally indistinguishable from zero. There were notable exceptions for certain subgroups. For black and Hispanic students and for students who come from less-educated families (in terms of their parents’ education), the estimates of the return to college selectivity remain large, even in models that adjust for unobserved student characteristics. ER - TY - JOUR AU - Gennaioli,Nicola AU - Porta,Rafael La AU - Lopez-de-Silanes,Florencio AU - Shleifer,Andrei TI - Human Capital and Regional Development JF - National Bureau of Economic Research Working Paper Series VL - No. 17158 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17158 L1 - http://www.nber.org/papers/w17158.pdf N1 - Author contact info: Nicola Gennaioli CREI Universitat Pompeu Fabra Ramon Trias Fargas 25-27 08005 Barcelona (Spain) E-Mail: ngennaioli@crei.cat Rafael La Porta Dartmouth College Tuck School 210 Tuck Hall Hanover, NH 03755 Tel: 603/646-3739 E-Mail: rafael.laporta@dartmouth.edu Florencio Lopez-de-Silanes EDHEC Business School 393, Promenade des Anglais BP 3116 06202 Nice Cedex 3 FRANCE Tel: +33 (0) 4 93 18 78 07 Fax: +33 (0) 4 93 18 78 41 E-Mail: Florencio.lopezdesilanes@edhec.edu Andrei Shleifer Department of Economics Harvard University Littauer Center M-9 Cambridge, MA 02138 Tel: 617/495-5046 Fax: 617/496-1708 E-Mail: ashleifer@harvard.edu AB - We investigate the determinants of regional development using a newly constructed database of 1569 sub-national regions from 110 countries covering 74 percent of the world’s surface and 96 percent of its GDP. We combine the cross-regional analysis of geographic, institutional, cultural, and human capital determinants of regional development with an examination of productivity in several thousand establishments located in these regions. To organize the discussion, we present a new model of regional development that introduces into a standard migration framework elements of both the Lucas (1978) model of the allocation of talent between entrepreneurship and work, and the Lucas (1988) model of human capital externalities. The evidence points to the paramount importance of human capital in accounting for regional differences in development, but also suggests from model estimation and calibration that entrepreneurial inputs and human capital externalities are essential for understanding the data. ER - TY - JOUR AU - Kearney,Melissa Schettini AU - Levine,Phillip B. TI - Income Inequality and Early Non-Marital Childbearing: An Economic Exploration of the "Culture of Despair" JF - National Bureau of Economic Research Working Paper Series VL - No. 17157 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17157 L1 - http://www.nber.org/papers/w17157.pdf N1 - Author contact info: Melissa Schettini Kearney Department of Economics University of Maryland 3105 Tydings Hall College Park, MD 20742 Tel: 301/405-6202 E-Mail: kearney@econ.umd.edu Phillip B. Levine Department of Economics Wellesley College 106 Central Street Wellesley, MA 02481 Tel: 781/283-2162 Fax: 781/283-2177 E-Mail: plevine@wellesley.edu AB - Using individual-level data from the United States and a number of other developed countries, we empirically investigate the role of income inequality in determining rates of early, non-marital childbearing among low socioeconomic status (SES) women. We present robust evidence that low SES women are more likely to give birth at a young age and outside of marriage when they live in more unequal places, all else held constant. Our results suggest that inequality itself, as opposed to other correlated geographic factors, drives this relationship. We calculate that differences in the level of inequality are able to explain a sizeable share of the geographic variation in teen fertility rates both across U.S. states and across developed countries. We propose a model of economic “despair” that facilitates the interpretation of our results. It reinterprets the sociological and ethnographic literature that emphasizes the role of economic marginalization and hopelessness into a parsimonious framework that captures the concept of “despair” with an individual’s perception of economic success. Our empirical results are consistent with the idea that income inequality heightens a sense of economic despair among those at the bottom of the distribution. ER - TY - JOUR AU - Papay,John P. AU - Murnane,Richard J. AU - Willett,John B. TI - How Performance Information Affects Human-Capital Investment Decisions: The Impact of Test-Score Labels on Educational Outcomes JF - National Bureau of Economic Research Working Paper Series VL - No. 17120 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17120 L1 - http://www.nber.org/papers/w17120.pdf N1 - Author contact info: John Papay Brown University Education Department Providence, RI 02912 Tel: 617-493-3942 E-Mail: john_papay@mail.harvard.edu Richard Murnane Graduate School of Education Harvard University 6 Appian Way - Gutman 469 Cambridge, MA 02138 Tel: 617/496-4820 Fax: 617/496-3095 E-Mail: richard_murnane@harvard.edu John Willett Graduate School of Education Harvard University 6 Appian Way - Gutman 412 Cambridge, MA 02138 E-Mail: John_Willett@harvard.edu AB - Students receive abundant information about their educational performance, but how this information affects future educational-investment decisions is not well understood. Increasingly common sources of information are state-mandated standardized tests. On these tests, students receive a score and a label that summarizes their performance. Using a regression-discontinuity design, we find persistent effects of earning a more positive label on the college-going decisions of urban, low-income students. Consistent with a Bayesian-updating model, these effects are concentrated among students with weaker priors, specifically those who report before taking the test that they do not plan to attend a four-year college. ER - TY - JOUR AU - Charles,Kerwin Kofi AU - Guryan,Jonathan TI - Studying Discrimination: Fundamental Challenges and Recent Progress JF - National Bureau of Economic Research Working Paper Series VL - No. 17156 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17156 L1 - http://www.nber.org/papers/w17156.pdf N1 - Author contact info: Kerwin Kofi Charles Harris School of Public Policy University of Chicago 1155 East 60th Street Chicago, IL 60637 Tel: 773.834.8922 Fax: NA E-Mail: kcharles@uchicago.edu Jonathan Guryan Northwestern University Institute for Policy Research 2040 Sheridan Road Evanston, IL 60208 Tel: 847/467-7144 E-Mail: j-guryan@northwestern.edu AB - We discuss research on discrimination against blacks and other racial minorities in labor market outcomes, highlighting fundamental challenges faced by empirical work in this area. Specifically, for work devoted to measuring whether and how much discrimination exists, we discuss how the absence of relevant data, the potential noncomparability of blacks and whites, and various conceptual concerns peculiar to race may frustrate or render impossible the application of empirical methods used in other areas of study. For work seeking to arbitrate empirically between the two main alternative theoretical explanations for such discrimination as it exists, we distinguish between indirect analyses, which do not directly study the variation in prejudice or the variation in information, the mechanisms at the heart of the two types of models we review, and direct analyses, which are more recent and much less common. We highlight problems with both approaches. Throughout, we discuss recent work, which, the various challenges notwithstanding, permits tentative conclusions about discrimination. We conclude by pointing to areas that might be fruitful avenues for future investigation. ER - TY - JOUR AU - Cascio,Elizabeth U. AU - Gordon,Nora E. AU - Reber,Sarah J. TI - Federal Aid and Equality of Educational Opportunity: Evidence from the Introduction of Title I in the South JF - National Bureau of Economic Research Working Paper Series VL - No. 17155 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17155 L1 - http://www.nber.org/papers/w17155.pdf N1 - Author contact info: Elizabeth U. Cascio Department of Economics Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755 Tel: (603) 646-4096 Fax: (603) 646-2122 E-Mail: elizabeth.u.cascio@dartmouth.edu Nora E. Gordon Georgetown Public Policy Institute 306 Old North 37th and O Streets NW Washington, DC 20057 Tel: 202/687-6756 E-Mail: neg24@georgetown.edu Sarah J. Reber University of California, Los Angeles Department of Public Policy School of Public Affairs 3250 Public Policy Building Los Angeles, CA 90095 Tel: 310-694-8699 E-Mail: sreber@ucla.edu AB - Title I of the 1965 Elementary and Secondary Education Act substantially increased federal aid for education, with the goal of expanding educational opportunity. Combining the timing of the program’s introduction with variation in its intensity, we find that Title I increased school spending by 46 cents on the dollar in the average school district in the South and increased spending nearly dollar-for-dollar in Southern districts with little scope for local offset. Based on this differential fiscal response, we find that increases in school budgets from Title I decreased high school dropout rates for whites, but not blacks. ER - TY - JOUR AU - Wright,Jonathan H. TI - What does Monetary Policy do to Long-Term Interest Rates at the Zero Lower Bound? JF - National Bureau of Economic Research Working Paper Series VL - No. 17154 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17154 L1 - http://www.nber.org/papers/w17154.pdf N1 - Author contact info: Jonathan H. Wright Department of Economics Johns Hopkins University 3400 N. Charles Street Baltimore, MD 21218 Tel: 410/516-5728 Fax: 410/516-7600 E-Mail: wrightj@jhu.edu AB - The federal funds rate has been stuck at the zero bound for over two years and the Fed has turned to unconventional monetary policies, such as large scale asset purchases to provide stimulus to the economy. This paper uses a structural VAR with daily data to identify the effects of monetary policy shocks on various longer-term interest rates during this period. The VAR is identified using the assumption that monetary policy shocks are heteroskedastic: monetary policy shocks have especially high variance on days of FOMC meetings and certain speeches, while there is nothing unusual about these days from the perspective of any other shocks to the economy. A complementary high-frequency event-study approach is also used. I find that stimulative monetary policy shocks lower Treasury and corporate bond yields, but the effects die off fairly fast, with an estimated half-life of about two months. ER - TY - JOUR AU - Soest,Arthur van AU - Andreyeva,Tatiana AU - Kapteyn,Arie AU - Smith,James P. TI - Self Reported Disability and Reference Groups JF - National Bureau of Economic Research Working Paper Series VL - No. 17153 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17153 L1 - http://www.nber.org/papers/w17153.pdf N1 - Author contact info: Arthur van Soest Tilburg University P.O. Box 90153 5000 LE Tilburg The Netherlands E-Mail: avas@uvt.nl Tatiana Andreyeva Yale University Rudd Center for Food Policy and Obesity 309 Edwards Street New Haven, CT 06520 Tel: (203) 432-8432 Fax: (203) 432-9674 E-Mail: tatiana.andreyeva@yale.edu Arie Kapteyn RAND Corporation 1776 Main Street P.O. Box 2138 Santa Monica, CA 90407-2138 Tel: (310) 393-0411 x 7973 E-Mail: arie_kapteyn@rand.org James P. Smith RAND Corporation 1776 Main Street P.O. Box 2138 Santa Monica, CA 90407-2138 Tel: 310-451-6925 E-Mail: smith@rand.org M3 - presented at "Aging Conference", May 6-7, 2011 AB - Social networks and social interactions affect individual and social norms. We develop a direct test of this using Dutch survey data on how respondents evaluate work disability of hypothetical people with some work related health problem (vignettes). We analyze how the thresholds respondents use to decide what constitutes a (mild or more serious) work disability depend on the number of people receiving disability insurance benefits (DI) in their reference group. We find that reference group effects are significant and contribute substantially to an explanation of why self-reported work disability in the Netherlands is much higher than in, for example, the US. ER - TY - JOUR AU - Andersen,Torben G. AU - Dobrev,Dobrislav AU - Schaumburg,Ernst TI - A Functional Filtering and Neighborhood Truncation Approach to Integrated Quarticity Estimation JF - National Bureau of Economic Research Working Paper Series VL - No. 17152 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17152 L1 - http://www.nber.org/papers/w17152.pdf N1 - Author contact info: Torben G. Andersen Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/467-1285 Fax: 847/491-5719 E-Mail: t-andersen@kellogg.northwestern.edu Dobrislav Dobrev Federal Reserve Board of Governors 20th Street and Constitution Avenue NW Washington, DC 20551 E-Mail: Dobrislav.P.Dobrev@frb.gov Ernst Schaumburg Federal Reserve Bank of New York 33 Liberty Street New York, NY 10045 E-Mail: ernst.schaumburg@ny.frb.org AB - We provide a first in-depth look at robust estimation of integrated quarticity (IQ) based on high frequency data. IQ is the key ingredient enabling inference about volatility and the presence of jumps in financial time series and is thus of considerable interest in applications. We document the significant empirical challenges for IQ estimation posed by commonly encountered data imperfections and set forth three complementary approaches for improving IQ based inference. First, we show that many common deviations from the jump diffusive null can be dealt with by a novel filtering scheme that generalizes truncation of individual returns to truncation of arbitrary functionals on return blocks. Second, we propose a new family of efficient robust neighborhood truncation (RNT) estimators for integrated power variation based on order statistics of a set of unbiased local power variation estimators on a block of returns. Third, we find that ratio-based inference, originally proposed by Barndorff-Nielsen and Shephard, has desirable robustness properties and is well suited for our empirical applications. We confirm that the proposed filtering scheme and the RNT estimators perform well in our extensive simulation designs and in an application to the individual Dow Jones 30 stocks. ER - TY - JOUR AU - Mendoza,Enrique G. AU - Yue,Vivian Z. TI - A General Equilibrium Model of Sovereign Default and Business Cycles JF - National Bureau of Economic Research Working Paper Series VL - No. 17151 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17151 L1 - http://www.nber.org/papers/w17151.pdf N1 - Author contact info: Enrique G. Mendoza Department of Economics University of Maryland College Park, MD 20742 Tel: 301/405-3845 Fax: 301/405-7835 E-Mail: mendozae@econ.umd.edu Vivian Z. Yue Federal Reserve Board Mail stop 20 Washington DC 20551 E-Mail: vivianyue1@gmail.com AB - Emerging markets business cycle models treat default risk as part of an exogenous interest rate on working capital, while sovereign default models treat income fluctuations as an exogenous endowment process with ad-hoc default costs. We propose instead a general equilibrium model of both sovereign default and business cycles. In the model, some imported inputs require working capital financing; default triggers an efficiency loss as these inputs are replaced by imperfect substitutes; and default on public and private obligations occurs simultaneously. The model explains several features of cyclical dynamics around defaults, countercyclical spreads, high debt ratios, and key business cycle moments. ER - TY - JOUR AU - Jordà,Òscar AU - Taylor,Alan M. TI - Performance Evaluation of Zero Net-Investment Strategies JF - National Bureau of Economic Research Working Paper Series VL - No. 17150 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17150 L1 - http://www.nber.org/papers/w17150.pdf N1 - Author contact info: Òscar Jordà Economic Research, MS 1130 Federal Reserve Bank of San Francisco 101 Market St. San Francisco, CA 94105 E-Mail: oscar.jorda@sf.frb.org Alan M. Taylor Department of Economics University of Virginia Monroe Hall Charlottesville, VA 22903 Fax: (434) 982-2904 E-Mail: alan.m.taylor@virginia.edu AB - This paper introduces new nonparametric statistical methods to evaluate zero-cost investment strategies. We focus on directional trading strategies, risk-adjusted returns, and the investor’s decisions under uncertainty as the core of our analysis. By relying on classification tools with a long tradition in the sciences and biostatistics, we can provide a tighter connection between model-based risk characteristics and the no-arbitrage conditions for market efficiency. Moreover, we extend the methods to multicategorical settings, such as when the investor can sometimes take a neutral position. A variety of inferential procedures are provided, many of which are illustrated with applications to excess equity returns and to currency carry trades. ER - TY - JOUR AU - Kelly,Bryan T. AU - Lustig,Hanno AU - Nieuwerburgh,Stijn Van TI - Too-Systemic-To-Fail: What Option Markets Imply About Sector-wide Government Guarantees JF - National Bureau of Economic Research Working Paper Series VL - No. 17149 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17149 L1 - http://www.nber.org/papers/w17149.pdf N1 - Author contact info: Bryan T. Kelly University of Chicago Booth School of Business 5807 S. Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-8359 E-Mail: bryan.kelly@chicagobooth.edu Hanno Lustig UCLA Anderson School of Management 110 Westwood Plaza, Suite C413 Los Angeles, CA 90095-1481 Tel: 310/825-1011 Fax: 310/825-9528 E-Mail: hlustig@anderson.ucla.edu Stijn Van Nieuwerburgh Stern School of Business New York University 44 W 4th Street, Suite 9-120 New York, NY 10012 Tel: 646/284-4141 Fax: 646/284-4141 E-Mail: svnieuwe@stern.nyu.edu AB - Investors in option markets price in a substantial collective government bailout guarantee in the financial sector, which puts a floor on the equity value of the financial sector as a whole, but not on the value of the individual firms. The guarantee makes put options on the financial sector index cheap relative to put options on its member banks. The basket-index put spread rises fourfold from 0.8 cents per dollar insured before the financial crisis to 3.8 cents during the crisis for deep out-of-the-money options. The spread peaks at 12.5 cents per dollar, or 70% of the value of the index put. The rise in the put spread cannot be attributed to an increase in idiosyncratic risk because the correlation of stock returns increased during the crisis. The government’s collective guarantee partially absorbs financial sector-wide tail risk, which lowers index put prices but not individual put prices, and hence can explain the basket-index spread. A structural model with financial disasters quantitatively matches these facts and attributes as much as half of the value of the financial sector to the bailout guarantee during the crisis. The model solves the problem of how to measure systemic risk in a world where the government distorts market prices. ER - TY - JOUR AU - Cutler,David M. AU - Landrum,Mary Beth TI - Dimensions of Health in the Elderly Population JF - National Bureau of Economic Research Working Paper Series VL - No. 17148 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17148 L1 - http://www.nber.org/papers/w17148.pdf N1 - Author contact info: David M. Cutler Department of Economics Harvard University 1875 Cambridge Street Cambridge, MA 02138 Tel: 617/496-5216 Fax: 617/496-8951 E-Mail: dcutler@harvard.edu Mary Beth Landrum Harvard Medical School Department of Health Care Policy 180 Longwood Avenue Boston, MA 02115-5899 Tel: (617) 432-2460 Fax: (617) 432-2563 E-Mail: landrum@hcp.med.harvard.edu M3 - presented at "Aging Conference", May 6-7, 2011 AB - In this paper, we characterize the multi-faceted health of the elderly and understand how health along multiple dimensions has changed over time. Our data are from the Medicare Current Beneficiary Survey, 1991-2007. We show that 19 measures of health can be combined into three broad categories: a first dimension representing severe physical and social incapacity such as difficulty dressing or bathing; a second dimension representing less severe difficulty such as walking long distances or lifting heavy objects; and a third dimension representing vision and hearing impairment. These dimensions have changed at different rates over time. The first and third have declined rapidly over time, while the second has not. The improvement in health is not due to differential mortality of the sick or a new generation of more healthy people entering old age. Rather, the aging process itself is associated with less rapid deterioration in health. We speculate about the factors that may lead to this. ER - TY - JOUR AU - Hilt,Eric AU - Valentine,Jacqueline TI - Democratic Dividends: Stockholding, Wealth and Politics in New York, 1791-1826 JF - National Bureau of Economic Research Working Paper Series VL - No. 17147 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17147 L1 - http://www.nber.org/papers/w17147.pdf N1 - Author contact info: Eric Hilt Wellesley College Department of Economics 106 Central Street Wellesley, MA 02481 Tel: 781/283-2986 Fax: 781/283-2177 E-Mail: ehilt@wellesley.edu Jacqueline Valentine Wellesley College Department of Economics 106 Central Street Wellesley, MA 02482 E-Mail: valentine.jacqueline@gmail.com AB - This paper analyzes the early history of corporate shareholding, and its relationship with political change. In the late eighteenth century, corporations were extremely rare and were dominated by elites, but in the early nineteenth century, after American politics became significantly more democratic, corporations proliferated rapidly. Using newly collected data, this paper compares the wealth and status of New York City households who owned corporate stock to the general population there both in 1791, when there were only two corporations in the state, and in 1826, when there were hundreds. The results indicate that although corporate stock was held principally by the city’s elite merchants in both periods, share ownership became more widespread over time among less affluent households. In particular, the corporations created in the 1820s were owned and managed by investors who were less wealthy than the stockholders of corporations created in earlier, less democratic periods in the state’s history. ER - TY - JOUR AU - Klapper,Leora F. AU - Laeven,Luc AU - Rajan,Raghuram TI - Trade Credit Contracts JF - National Bureau of Economic Research Working Paper Series VL - No. 17146 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17146 L1 - http://www.nber.org/papers/w17146.pdf N1 - Author contact info: Leora F. Klapper The World Bank 1818 H Street, NW Washington, DC 20433 Tel: 202/473-8738 E-Mail: lklapper@worldbank.org Luc Laeven Deputy Division Chief International Monetary Fund 700 19th Avenue, NW Washington, DC 20431 Tel: 202/623-9020 Fax: 202/623-4740 E-Mail: Llaeven@imf.org Raghuram Rajan Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-4437 Fax: 773/702-0458 E-Mail: raghuram.rajan@ChicagoBooth.edu AB - We employ a novel dataset on almost 30,000 trade credit contracts to describe the broad characteristics of the parties that contract together, the key contractual terms such as the discount for early payment and the days by when payment is due. Whereas prior work has typically used information on only one side of the buyer-seller transaction, this paper utilizes information on both. We find that the largest and most creditworthy buyers receive contracts with the longest maturities from smaller suppliers, with the latter extending credit to the former perhaps as a way of certifying product quality. Discounts for early payment seem to be offered to riskier buyers to limit the potential nonpayment risk when credit is extended for these non-financial reasons. ER - TY - JOUR AU - Coate,Stephen TI - Property Taxation, Zoning, and Efficiency: A Dynamic Analysis JF - National Bureau of Economic Research Working Paper Series VL - No. 17145 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17145 L1 - http://www.nber.org/papers/w17145.pdf N1 - Author contact info: Stephen Coate Department of Economics Cornell University Uris Hall Ithaca, NY 14853-7601 Tel: 607/255-1912 Fax: 215/573-2057 E-Mail: sc163@cornell.edu AB - This paper revisits the classic argument that a system of local governments financing public service provision via property taxes will produce an efficient allocation of both housing and services if communities can implement zoning ordinances. The novel feature of the analysis is a dynamic model in which housing stocks and public policies are endogenously determined. In each period, citizens choose both the level of services for their communities and the zoning ordinances that govern future new construction. The main result of the paper is that there does not exist an equilibrium which has a steady state that is both efficient and satisfies a local stability property. The paper also develops examples in which equilibrium allocations converge to a steady state in which there is over-zoning and households are forced to over-consume housing. The findings of the paper challenge the well-known Benefit View of the property tax. ER - TY - JOUR AU - Benmelech,Efraim AU - Bergman,Nittai K. AU - Seru,Amit TI - Financing Labor JF - National Bureau of Economic Research Working Paper Series VL - No. 17144 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17144 L1 - http://www.nber.org/papers/w17144.pdf N1 - Author contact info: Efraim Benmelech Harvard University Department of Economics Littauer 233 Cambridge, MA 02138 Tel: 617/496-4787 Fax: 617/495-8570 E-Mail: effi_benmelech@harvard.edu Nittai Bergman MIT Sloan School of Management 100 Main Street, E62-632 Cambridge, MA 02142 Tel: 617/253-2933 Fax: 617/258-6855 E-Mail: nbergman@mit.edu Amit Seru Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-2767 E-Mail: amit.seru@chicagobooth.edu AB - Financial market imperfections can have significant impact on employment decisions of firms. We illustrate the economic importance of this channel by demonstrating that the responsiveness of employment decisions to firms’ financial health is quantitatively similar to the much-studied responsiveness of investment decisions to cash-flows. We use a collage of three ‘quasi-experiments’ used previously in the investment-cash flow and finance-growth literatures to trace the effects of finance on employment. Our results suggest that financial constraints and the availability of credit play an important role in firm-level employment decisions, as well as aggregate unemployment outcomes ER - TY - JOUR AU - McMillan,Margaret S. AU - Rodrik,Dani TI - Globalization, Structural Change and Productivity Growth JF - National Bureau of Economic Research Working Paper Series VL - No. 17143 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17143 L1 - http://www.nber.org/papers/w17143.pdf N1 - Author contact info: Margaret S. McMillan Tufts University Department of Economics 114a Braker Hall Medford, MA 02155 Tel: 617/627-3137 Fax: 617/627-3197 E-Mail: margaret.mcmillan@tufts.edu Dani Rodrik John F. Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/495-9454 Fax: 617/496-5747 E-Mail: dani_rodrik@harvard.edu AB - Large gaps in labor productivity between the traditional and modern parts of the economy are a fundamental reality of developing societies. In this paper, we document these gaps, and emphasize that labor flows from low-productivity activities to high-productivity activities are a key driver of development. Our results show that since 1990 structural change has been growth reducing in both Africa and Latin America, with the most striking changes taking place in Latin America. The bulk of the difference between these countries’ productivity performance and that of Asia is accounted for by differences in the pattern of structural change – with labor moving from low- to high-productivity sectors in Asia, but in the opposite direction in Latin America and Africa. In our empirical work, we identify three factors that help determine whether (and the extent to which) structural change contributes to overall productivity growth. In countries with a relatively large share of natural resources in exports, structural change has typically been growth reducing. Even though these “enclave” sectors usually operate at very high productivity, they cannot absorb the surplus labor from agriculture. By contrast, competitive or undervalued exchange rates and labor market flexibility have contributed to growth enhancing structural change. ER - TY - JOUR AU - Christiano,Lawrence AU - Ikeda,Daisuke TI - Government Policy, Credit Markets and Economic Activity JF - National Bureau of Economic Research Working Paper Series VL - No. 17142 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17142 L1 - http://www.nber.org/papers/w17142.pdf N1 - Author contact info: Lawrence Christiano Department of Economics Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-8231 Fax: 847/491-7001 E-Mail: l-christiano@northwestern.edu Daisuke Ikeda Bank of Japan 2-1-1 Nihonbashi Hongokucho Chuo-ku Tokyo 103-8660 JAPAN Tel: 81-3-3279-1111 Fax: 81-3-3510-1265 E-Mail: daisuke.ikeda@boj.or.jp AB - The US government has recently conducted large scale purchases of assets and implemented policies that reduced the cost of funds to financial institutions. Arguably these policies have helped to correct credit market dysfunctions, allowing interest rate spreads to shrink and output to begin a recovery. We study four models of financial frictions which explore different channels by which these effects might have occured. Recent events have sparked a renewed interest in leverage restrictions and the consequences of bailouts of the creditors of banks with under-performing assets. We use two of our models to consider the welfare and other effects of these policies. ER - TY - JOUR AU - Alfaro,Laura AU - Chen,Maggie TI - Surviving the Global Financial Crisis: Foreign Ownership and Establishment Performance JF - National Bureau of Economic Research Working Paper Series VL - No. 17141 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17141 L1 - http://www.nber.org/papers/w17141.pdf N1 - Author contact info: Laura Alfaro Harvard Business School Morgan Hall 263 Soldiers Field Boston, MA 02163 Tel: 617/495-7981 Fax: 617/496-5985 E-Mail: lalfaro@hbs.edu Maggie Chen Dept. of Economics George Washington University 2115 G ST, NW, #367 Washington, DC 20052 Tel: 202-994-0192 E-Mail: xchen@gwu.edu AB - We examine the differential response of establishments to the recent global financial crisis with particular emphasis on the role of foreign ownership. Using a worldwide establishment panel dataset, we investigate how multinational subsidiaries around the world responded to the crisis relative to local establishments. We find that, first, multinational subsidiaries fared on average better than local counterfactuals with similar economic characteristics. Second, among multinational subsidiaries, establishments sharing stronger vertical production and financial linkages with parents exhibited greater resilience. Finally, in contrast to the crisis period, the effect of foreign ownership and linkages on establishment performance was insignificant in non-crisis years. ER - TY - JOUR AU - Moon,Hyungsik Roger AU - Schorfheide,Frank AU - Granziera,Eleonora AU - Lee,Mihye TI - Inference for VARs Identified with Sign Restrictions JF - National Bureau of Economic Research Working Paper Series VL - No. 17140 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17140 L1 - http://www.nber.org/papers/w17140.pdf N1 - Author contact info: Hyungsik Moon University of Southern California Department of Economics KAP 300 University Park Campus Los Angeles, CA 90089 E-Mail: hyungsikmoon@gmail.com Frank Schorfheide University of Pennsylvania Department of Economics 3718 Locust Walk McNeil 525 Philadelphia, PA 19104-6297 Tel: 215/898-8486 Fax: 215/573-2057 E-Mail: schorf@ssc.upenn.edu Eleonora Granziera Bank of Canada 234 Rue Wellington Ottawa (Ontario) K1A 0G9 Canada E-Mail: egranziera@bankofcanada.ca Mihye Lee Department of Economics University of Southern California Los Angeles, CA 90089 E-Mail: mihyelee@usc.edu AB - There is a fast growing literature that partially identifies structural vector autoregressions (SVARs) by imposing sign restrictions on the responses of a subset of the endogenous variables to a particular structural shock (sign-restricted SVARs). To date, the methods that have been used are only justified from a Bayesian perspective. This paper develops methods of constructing error bands for impulse response functions of sign-restricted SVARs that are valid from a frequentist perspective. We also provide a comparison of frequentist and Bayesian error bands in the context of an empirical application - the former can be twice as wide as the latter. ER - TY - JOUR AU - D'Amuri,Francesco AU - Peri,Giovanni TI - Immigration, Jobs and Employment Protection: Evidence from Europe JF - National Bureau of Economic Research Working Paper Series VL - No. 17139 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17139 L1 - http://www.nber.org/papers/w17139.pdf N1 - Author contact info: Francesco D'Amuri Economic Research and International Relations Bank of Italy Via Nazionale 91 00184, Rome Italy E-Mail: francesco.damuri@bancaditalia.it. Giovanni Peri Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/752-3033 E-Mail: gperi@ucdavis.edu AB - In this paper we analyze the effect of immigrants on native jobs in fourteen Western European countries. We test whether the inflow of immigrants in the period 1996-2007 decreased employment rates and/or if it altered the occupational distribution of natives with similar education and age. We find no evidence of the first but significant evidence of the second: immigrants took "simple" (manual-routine) type of occupations and natives moved, in response, toward more "complex" (abstract-communication) jobs. The results are robust to the use of an IV strategy based on past settlement of different nationalities of immigrants across European countries. We also document the labor market flows through which such a positive reallocation took place: immigration stimulated job creation, and the complexity of jobs offered to new native hires was higher relative to the complexity of destructed native jobs. Finally, we find evidence that the occupation reallocation of natives was significantly larger in countries with more flexible labor laws. This tendency was particularly strong for less educated workers. ER - TY - JOUR AU - Bingley,Paul AU - Gupta,Nabanita Datta AU - Pedersen,Peder J. TI - Disability Programs, Health and Retirement in Denmark since 1960 JF - National Bureau of Economic Research Working Paper Series VL - No. 17138 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17138 L1 - http://www.nber.org/papers/w17138.pdf N1 - Author contact info: Paul Bingley Danish National Centre for Social Research Herluf Trollesgade 11 1052 Copenhagen DENMARK Tel: +4533480937 Fax: +4533480833 E-Mail: pab@sfi.dk Nabanita Datta Gupta E-Mail: ndg@asb.dk Peder Pedersen School of Economics and Management B 1322, Bartholins Alle 10 Arhus University- 8000 Arhus C DENMARK Tel: +4589421581 E-Mail: ppedersen@econ.au.dk M3 - presented at "International Social Security Conference", May 2, 2011 AB - This paper investigates the interaction between measures of health, disability pension take up and labor market performance in Denmark by charting their development over time and by examining how they are affected by key policy reforms in the area of early retirement. The main emphasis is on the long-run development of the Social Disability Pension (SDP) program, and whether it concurs with trends in population health based on mortality indicators (both overall and cause-specific) and with self-reported health. A strong relationship is found between labor force activity measures and non-health related programs for early retirement for those 60 and older. However, no clear relationship is evident between SDP take up and the health indicators. One reason for the lack of a correlation is most probably that SDP is “on its own track” due to program innovations and reforms creating competing risks or program substitution especially for the 50+ population. ER - TY - JOUR AU - Farmer,Roger TI - Animal Spirits, Financial Crises and Persistent Unemployment JF - National Bureau of Economic Research Working Paper Series VL - No. 17137 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17137 L1 - http://www.nber.org/papers/w17137.pdf N1 - Author contact info: Roger Farmer UCLA Department of Economics Box 951477 Los Angeles, CA 90095-1477 Tel: 310/825-6547 Fax: 310/825-9528 E-Mail: rfarmer@econ.ucla.edu AB - This paper develops a rational expectations model with multiple equilibrium unemployment rates and uses it to explain financial crises. In contrast to earlier work on this topic, the model has equilibria where asset prices are unbounded above. I argue that this is an important feature of any rational-agent explanation of a financial crisis, since for the expansion phase of the crisis to be rational, investors must credibly believe that asset prices could keep increasing forever with positive probability. I explain the sudden crash in asset prices that precipitates a financial crisis as a switch from a non-stationary equilibrium, to an alternative stationary equilibrium, with a high and inefficient unemployment rate. I also explain how variations in beliefs about future wealth cause movements in the stock market. These wealth movements are transmitted to the unemployment rate through variations in aggregate demand. ER - TY - JOUR AU - Acharya,Viral V. AU - Drechsler,Itamar AU - Schnabl,Philipp TI - A Pyrrhic Victory? - Bank Bailouts and Sovereign Credit Risk JF - National Bureau of Economic Research Working Paper Series VL - No. 17136 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17136 L1 - http://www.nber.org/papers/w17136.pdf N1 - Author contact info: Viral V. Acharya Stern School of Business New York University 44 West 4th Street, Suite 9-84 New York, NY 10012 Tel: 212/998-0354 Fax: 212 995 4233 E-Mail: vacharya@stern.nyu.edu Itamar Drechsler Stern School of Business New York University 44 West 4th Street, Suite 9-79 New York, NY 10012 E-Mail: Itamar.Drechsler@stern.nyu.edu Philipp Schnabl Stern School of Business New York University 44 West Fourth Street New York, NY 10012 Tel: 212/998-0356 E-Mail: schnabl@stern.nyu.edu AB - We show that financial sector bailouts and sovereign credit risk are intimately linked. A bailout benefits the economy by ameliorating the under-investment problem of the financial sector. However, increasing taxation of the non-financial sector to fund the bailout may be inefficient since it weakens its incentive to invest, decreasing growth. Instead, the sovereign may choose to fund the bailout by diluting existing government bondholders, resulting in a deterioration of the sovereign's creditworthiness. This deterioration feeds back onto the financial sector, reducing the value of its guarantees and existing bond holdings and increasing its sensitivity to future sovereign shocks. We provide empirical evidence for this two-way feedback between financial and sovereign credit risk using data on the credit default swaps (CDS) of the Eurozone countries for 2007-10. We show that the announcement of financial sector bailouts was associated with an immediate, unprecedented widening of sovereign CDS spreads and narrowing of bank CDS spreads; however, post-bailouts there emerged a significant co-movement between bank CDS and sovereign CDS, even after controlling for banks' equity performance, the latter being consistent with an effect of the quality of sovereign guarantees on bank credit risk. ER - TY - JOUR AU - Fox,Liana E. AU - Han,Wen-Jui AU - Ruhm,Christopher AU - Waldfogel,Jane TI - Time for Children: Trends in the Employment Patterns of Parents, 1967-2009 JF - National Bureau of Economic Research Working Paper Series VL - No. 17135 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17135 L1 - http://www.nber.org/papers/w17135.pdf N1 - Author contact info: Liana E. Fox Columbia University School of Social Work 1255 Amsterdam Avenue New York, NY 10027 E-Mail: lef2118@columbia.edu Wen-Jui Han Columbia University School of Social Work 1255 Amsterdam Avenue New York, NY 10027 E-Mail: wh41@columbia.edu Christopher J. Ruhm Frank Batten School of Leadership and Public Policy University of Virginia 235 McCormick Rd. P.O. Box 400893 Charlottesville, VA 22904-40893 Tel: 434-243-3729 E-Mail: ruhm@virginia.edu Jane Waldfogel Columbia University School of Social Work 1255 Amsterdam Avenue New York, NY 10027 E-Mail: jw205@columbia.edu AB - Utilizing data from the 1967-2009 years of the March Current Population Surveys, we examine two important resources for children’s well-being: time and money. We document trends in parental employment, from the perspective of children, and show what underlies these trends. We find that increases in family work hours mainly reflect movements into jobs by parents who, in prior decades, would have remained at home. This increase in market work has raised incomes for children in the typical two-parent family but not for those in lone-parent households. Time use data from 1975 and 2003-2008 reveal that working parents spend less time engaged in primary childcare than their counterparts without jobs but more than employed peers in previous cohorts. Analysis of 2004 work schedule data suggests that non-daytime work provides an alternative method of coordinating employment schedules for some dual-earner families. ER - TY - JOUR AU - Chai,Jingjing AU - Maurer,Raimond AU - Mitchell,Olivia S. AU - Rogalla,Ralph TI - Lifecycle Impacts of the Financial and Economic Crisis on Household Optimal Consumption, Portfolio Choice, and Labor Supply JF - National Bureau of Economic Research Working Paper Series VL - No. 17134 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17134 L1 - http://www.nber.org/papers/w17134.pdf N1 - Author contact info: Jingjing Chai Finance Department Goethe University Grüneburgplatz 1 (Uni-PF. H 23) Frankfurt am Main Germany E-Mail: chai@finance.uni-frankfurt.de Raimond Maurer Finance Department Goethe University Grüneburgplatz 1 (Uni-PF. H 23) Frankfurt am Main Germany E-Mail: rmaurer@wiwi.uni-frankfurt.de Olivia S. Mitchell University of Pennsylvania Wharton School 3620 Locust Walk, St 3000 SH-DH Philadelphia, PA 19104-6302 Tel: 215-898-0424 Fax: 215/898-0310 E-Mail: mitchelo@wharton.upenn.edu Ralph Rogalla Finance Department Goethe University Grüneburgplatz 1 (Uni-PF. H 23) Frankfurt am Main Germany E-Mail: rogalla@wiwi.uni-frankfurt.de AB - The direct financial impact of the financial crisis has been to deal a heavy blow to investment-based pensions; many workers lost a substantial portion of their retirement saving. The financial sector implosion produced an economic crisis for the rest of the economy via high unemployment and reduced labor earnings, which reduced household contributions to Social Security and some private pensions. Our research asks which types of individuals were most affected by these dual financial and economic shocks, and it also explores how people may react by changing their consumption, saving and investment, work and retirement, and annuitization decisions. We do so with a realistically calibrated lifecycle framework allowing for time-varying investment opportunities and countercyclical risky labor income dynamics. We show that households near retirement will reduce both short- and long-term consumption, boost work effort, and defer retirement. Younger cohorts will initially reduce their work hours, consumption, saving, and equity exposure; later in life, they will work more, retire later, consume less, invest more in stocks, save more, and reduce their demand for private annuities. ER - TY - JOUR AU - Benigno,Gianluca AU - Benigno,Pierpaolo AU - Nisticò,Salvatore TI - Risk, Monetary Policy and the Exchange Rate JF - National Bureau of Economic Research Working Paper Series VL - No. 17133 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17133 L1 - http://www.nber.org/papers/w17133.pdf N1 - Author contact info: Gianluca Benigno London School of Economics Department of Economics Houghton Street London WC2A 2AE ENGLAND E-Mail: G.Benigno@lse.ac.uk Pierpaolo Benigno Dipartimento di Economia e Finanza Luiss Guido Carli Viale Romania 32 00197 Rome ITALY Tel: 39-0685225-552 E-Mail: pbenigno@luiss.it Salvatore Nisticò Università di Roma "La Sapienza" Dipartimento di Analisi Economiche e Sociali viale Aldo Moro 5 00185 Rome Italy Tel: +39.06.8522.5637 Fax: +39.06.8522.5949 E-Mail: salvatore.nistico@uniroma1.it M3 - presented at "26th Annual Conference on Macroeconomics", April 8-9, 2011 AB - In this research, we provide new empirical evidence on the importance of time-varying uncertainty for the exchange rate and the excess return in currency markets. Following an increase in monetary policy uncertainty, the dollar exchange rate appreciates in the medium run, while an increase in the volatility of productivity leads to a dollar depreciation. We propose a general-equilibrium theory of exchange rate determination based on the interaction between monetary policy and time-varying uncertainty aimed at understanding these regularities. In the model, the behaviour of the exchange rate following nominal and real volatility shocks is consistent with the empirical evidence. Furthermore we show that risk factors and interest-rate smoothing are important in accounting for the negative coefficient in the UIP regression. ER - TY - JOUR AU - Treisman,Daniel TI - Income, Democracy, and the Cunning of Reason JF - National Bureau of Economic Research Working Paper Series VL - No. 17132 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17132 L1 - http://www.nber.org/papers/w17132.pdf N1 - Author contact info: Daniel Treisman Department of Political Science UCLA 4289 Bunche Hall Los Angeles, CA 90095-1472 Tel: 310/794-5875 Fax: 310/825-0778 E-Mail: treisman@polisci.ucla.edu AB - A long-standing debate pits those who think economic development leads to democratization against those who argue that both result from distant historical causes. Using the most comprehensive estimates of national income available, I show that development is associated with more democratic government—but in the medium run (10 to 20 years). The reason is that, for the most part, higher income only prompts a breakthrough to more democratic politics after the incumbent leader falls from power. And in the short run, faster economic growth increases the leader’s odds of survival. This logic—for which I provide evidence at the levels of individual countries and the world—helps explain why democracy advances in waves followed by periods of stasis and why dictators, concerned only to entrench themselves in power, end up preparing their countries to leap to a higher level of democracy when they are eventually overthrown. ER - TY - JOUR AU - Cook,David AU - Devereux,Michael B. TI - Sharing the Burden: Monetary and Fiscal Responses to a World Liquidity Trap JF - National Bureau of Economic Research Working Paper Series VL - No. 17131 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17131 L1 - http://www.nber.org/papers/w17131.pdf N1 - Author contact info: David Cook Hong Kong University of Science & Technology Department of Economics Clear Water Bay Kowloon, HONG KONG E-Mail: davcook@ust.hk Michael B. Devereux Department of Economics University of British Columbia 997-1873 East Mall Vancouver, BC V6T 1Z1 CANADA Tel: 604/822-2542 Fax: 604/822-5915 E-Mail: mbdevereux@gmail.com AB - With integrated trade and financial markets, a collapse in aggregate demand in a large country can cause ‘natural real interest rates’ to fall below zero in all countries, giving rise to a global ‘liquidity trap’. This paper explores the policy choices that maximize the joint welfare of all countries following such a shock, when governments cooperate on both fiscal and monetary policy. Adjusting to a large negative demand shock requires raising world aggregate demand, as well as redirecting demand towards the source (home) country. The key feature of demand shocks in a liquidity trap is that relative prices respond perversely. A negative shock causes an appreciation of the home terms of trade, exacerbating the slump in the home country. At the zero bound, the home country cannot counter this shock. Because of this, it may be optimal for the foreign policy-maker to raise interest rates. Strikingly, the foreign country may choose to have a positive policy interest rate, even though its ‘natural real interest rate’ is below zero. A combination of relatively tight monetary policy in the foreign country combined with substantial fiscal expansion in the home country achieves the level and composition of world expenditure that maximizes the joint welfare of the home and foreign country. Thus, in response to conditions generating a global liquidity trap, there is a critical mutual interaction between monetary and fiscal policy. ER - TY - JOUR AU - Chen,Xiaohong AU - Favilukis,Jack AU - Ludvigson,Sydney C. TI - An Estimation of Economic Models with Recursive Preferences JF - National Bureau of Economic Research Working Paper Series VL - No. 17130 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17130 L1 - http://www.nber.org/papers/w17130.pdf N1 - Author contact info: Xiaohong Chen Department of Economics Yale University Box 208281 New Haven, CT 06520-8281 E-Mail: xiaohong.chen@yale.edu Jack Favilukis London School of Economics Department of Finance Houghton Street, London WC2A 2AE United Kingdom E-Mail: jack.favilukis@gmail.com Sydney C. Ludvigson Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10002 Tel: 212/998-8927 Fax: 212/995-4186 E-Mail: sydney.ludvigson@nyu.edu AB - This paper presents estimates of key preference parameters of the Epstein and Zin (1989, 1991) and Weil (1989) (EZW) recursive utility model, evaluates the model's ability to fit asset return data relative to other asset pricing models, and investigates the implications of such estimates for the unobservable aggregate wealth return. Our empirical results indicate that the estimated relative risk aversion parameter ranges from 17-60, with higher values for aggregate consumption than for stockholder consumption, while the estimated elasticity of intertemporal substitution is above one. In addition, the estimated model-implied aggregate wealth return is found to be weakly correlated with the CRSP value-weighted stock market return, suggesting that the return to human wealth is negatively correlated with the aggregate stock market return. ER - TY - JOUR AU - Mbiti,Isaac AU - Weil,David N. TI - Mobile Banking: The Impact of M-Pesa in Kenya JF - National Bureau of Economic Research Working Paper Series VL - No. 17129 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17129 L1 - http://www.nber.org/papers/w17129.pdf N1 - Author contact info: Isaac Mbiti Department of Economics Southern Methodist University 3300 Dyer Street Dallas, TX 75275-0496 E-Mail: imbiti@smu.edu David N. Weil Department of Economics Box B Brown University Providence, RI 02912 Tel: 401/863-1754 Fax: 401/863-1970 E-Mail: david_weil@brown.edu M3 - presented at "African Development Successes Conference", July 18-20, 2010 AB - M-Pesa is a mobile phone based money transfer system in Kenya which grew at a blistering pace following its inception in 2007. We examine how M-Pesa is used as well as its economic impacts. Analyzing data from two waves of individual data on financial access in Kenya, we find that increased use of M-Pesa lowers the propensity of people to use informal savings mechanisms such as ROSCAS, but raises the probability of their being banked. Using aggregate data, we calculate the velocity of M-Pesa at between 11.0 and 14.6 person-to-person transfers per month. In addition, we find that M-Pesa causes decreases in the prices of competing money transfer services such as Western Union. While we find little evidence that people use their M-Pesa accounts as a place to store wealth, our results suggest that M-Pesa improves individual outcomes by promoting banking and increasing transfers. ER - TY - JOUR AU - Deaton,Angus S. TI - The Financial Crisis and the Well-Being of Americans JF - National Bureau of Economic Research Working Paper Series VL - No. 17128 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17128 L1 - http://www.nber.org/papers/w17128.pdf N1 - Author contact info: Angus S. Deaton 328 Wallace Hall Woodrow Wilson School Princeton University Princeton, NJ 08544-1013 Tel: 609/258-5967 Fax: 609/258-5974 E-Mail: deaton@princeton.edu M3 - presented at "Aging Conference", May 6-7, 2011 AB - The Great Recession was associated with large changes in income, wealth, and unemployment, changes that affected many lives. Since January 2008, the Gallup Organization has been collecting daily data on 1,000 Americans each day, with a range of self-reported well-being (SWB) questions. I use these data to examine how the recession affected the emotional and evaluative lives of the population, as well as of subgroups within it. In the fall of 2008, around the time of the collapse of Lehman Brothers, and lasting into the spring of 2009, at the bottom of the stock market, Americans reported sharp declines in their life evaluation, sharp increases in worry and stress, and declines in positive affect. By the end of 2010, in spite of continuing high unemployment, these measures had largely recovered, though worry remained higher and life evaluation lower than in January 2008. The SWB measures do a much better job of monitoring short-run levels of anxiety as the crisis unfolded than they do of reflecting the evolution of the economy over a year or two. Even large macroeconomic shocks to income and unemployment can be expected to produce only small and hard to detect effects on SWB measures. SWB, particularly evaluation of life as a whole, is sensitive to question order effects. Asking political questions before the life evaluation question reduces reported life evaluation by an amount that dwarfs the effects of even the worst of the crisis; these order effects persist deep into the interview, and condition the reporting of hedonic experience and of satisfaction with standard of living. Methods for controlling these effects need to be developed and tested if national measures are to be comparable over space and time. ER - TY - JOUR AU - Bebchuk,Lucian A. AU - Cohen,Alma AU - Wang,Charles C.Y. TI - Staggered Boards and the Wealth of Shareholders: Evidence from Two Natural Experiments JF - National Bureau of Economic Research Working Paper Series VL - No. 17127 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17127 L1 - http://www.nber.org/papers/w17127.pdf N1 - Author contact info: Lucian A. Bebchuk Harvard Law School 1545 Massachusetts Avenue Cambridge, MA 02138 Tel: 617/495-3138 Fax: 617/812-0554 E-Mail: bebchuk@law.harvard.edu Alma Cohen The Eitan Berglas School of Economics Tel Aviv University Ramat-Aviv, Tel-Aviv ISRAEL Tel: 011-972-3-640-993 E-Mail: almac@post.tau.ac.il Charles C.Y. Wang Stanford University 579 Serra Mall Stanford, CA 94309 E-Mail: charles.cy.wang@stanford.edu AB - While staggered boards have been documented to be negatively correlated with firm valuation, such association might be due to staggered boards either bringing about lower firm value or merely reflecting the tendency of low-value firms to have staggered boards. In this paper, we use two natural experiments to shed light on the causality question. In particular, we focus on two recent court rulings, separated by several weeks, that affected in opposite directions the antitakeover force of staggered boards: (i) a ruling by the Delaware Chancery Court approving the legality of shareholder-adopted bylaws that weaken the antitakeover force of a staggered board by moving the company’s annual meeting up from later parts of the calendar year to January, and (ii) the subsequent decision by the Delaware Supreme Court to overturn the Chancery Court ruling and invalidate such bylaws. We find evidence consistent with the hypothesis that the Chancery Court ruling increased the value of affected companies – namely, companies with a staggered board and an annual meeting in later parts of the calendar year – and that the Supreme Court ruling produced a reduction in the affected companies’ value. The identified effects were most pronounced for firms for which control contests are especially relevant due to relative underperformance, small firm size, high asset pledgibility, or high takeover intensity in their industry. Our findings have implications for the long-standing debate on staggered boards. The findings are consistent with the market’s viewing staggered boards as bringing about a reduction in firm value. Our findings are thus consistent with leading institutional investors’ policies in favor of board de-staggering, and with the view that the ongoing process of board de-staggering in public firms can be expected to enhance shareholder value. ER - TY - JOUR AU - Berka,Martin AU - Devereux,Michael B. AU - Rudolph,Thomas TI - Price Setting in a Leading Swiss Online Supermarket JF - National Bureau of Economic Research Working Paper Series VL - No. 17126 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17126 L1 - http://www.nber.org/papers/w17126.pdf N1 - Author contact info: Martin Berka Victoria University of Wellington School of Economics and Finance PO Box 600 Welliongton 6140 New Zealand Tel: 64-4-463-5893 Fax: 64-4-463-5014 E-Mail: martin.berka@vuw.ac.nz Michael B. Devereux Department of Economics University of British Columbia 997-1873 East Mall Vancouver, BC V6T 1Z1 CANADA Tel: 604/822-2542 Fax: 604/822-5915 E-Mail: mbdevereux@gmail.com Thomas Rudolph university of st. gallen switzerland E-Mail: trudolph888@gmail.com AB - We study a newly released data set of scanner prices for food products in a large Swiss online supermarket. We find that average prices change about every two months, but when we exclude temporary sales, prices are extremely sticky, changing on average once every three years. Non-sale price behavior is broadly consistent with menu cost models of sticky prices. When we focus specifically on the behavior of sale prices, however, we find that the characteristics of price adjustment seems to be substantially at odds with standard theory. ER - TY - JOUR AU - Sood,Neeraj AU - Huckfeldt,Peter J. AU - Grabowski,David C. AU - Newhouse,Joseph P. AU - Escarce,José J. TI - The Effect of Prospective Payment on Admission and Treatment Policy: Evidence from Inpatient Rehabilitation Facilities JF - National Bureau of Economic Research Working Paper Series VL - No. 17125 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17125 L1 - http://www.nber.org/papers/w17125.pdf N1 - Author contact info: Neeraj Sood Department of Clinical Pharmacy USC School of Pharmacy 1985 Zonal Avenue Los Angeles, CA 90033 Tel: 310/393-0411 Fax: 310/260-8156 E-Mail: nsood@usc.edu Peter J. Huckfeldt RAND Corporation Santa Monica, California E-Mail: Peter_Huckfeldt@rand.org David Grabowski Harvard University Department of Health Care Policy Harvard Medical School 180 Longwood Avenue Boston, MA 02115 E-Mail: grabowski@med.harvard.edu Joseph P. Newhouse Division of Health Policy Research and Education Harvard University 180 Longwood Avenue Boston, MA 02115-5899 Tel: 617/432-1325 Fax: 617/432-3503 E-Mail: newhouse@hcp.med.harvard.edu Jose Escarce UCLA Med-GIM-HSR 911 Broxton Avenue Box 951736 Los Angeles, CA 90024 Tel: 310/794-3842 Fax: 310/794-0732 E-Mail: jescarce@mednet.ucla.edu AB - We examine provider responses to the Medicare inpatient rehabilitation facility (IRF) prospective payment system (PPS), which simultaneously reduced marginal reimbursement and increased average reimbursement. IRFs could respond to the PPS by changing the total number of patients admitted, admitting different types of patients, or changing the intensity of care for admitted patients. We use Medicare claims data to separately estimate each type of provider response to the PPS. We also examine changes in patient outcomes and spillover effects on other post acute care providers. We find that costs of care initially fell following the PPS implementation, which we attribute to changes in treatment decisions rather than the types of patients admitted to IRFs. However, the probability of admission to IRFs increased after the PPS due to the expanded admission policies of providers. We find modest spillover effects on skilled nursing home costs and no substantive impact on patient health outcomes. ER - TY - JOUR AU - Goldfarb,Avi AU - Tucker,Catherine TI - Privacy and Innovation JF - National Bureau of Economic Research Working Paper Series VL - No. 17124 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17124 L1 - http://www.nber.org/papers/w17124.pdf N1 - Author contact info: Avi Goldfarb Rotman School of Management University of Toronto 105 St George St Toronto, ON M5S 3E6 E-Mail: agoldfarb@rotman.utoronto.ca Catherine Tucker MIT Sloan School of Management 100 Main Street, E62-533 Cambridge, MA 02142 Tel: 617/252-1499 Fax: 617/258-7597 E-Mail: cetucker@mit.edu AB - Information and communication technology now enables firms to collect detailed and potentially intrusive data about their customers both easily and cheaply. This means that privacy concerns are no longer limited to government surveillance and public figures' private lives. The empirical literature on privacy regulation shows that privacy regulation may affect the extent and direction of data-based innovation. We also show that the impact of privacy regulation can be extremely heterogeneous. Therefore, we argue that digitization means that privacy policy is now a part of innovation policy. ER - TY - JOUR AU - Burdekin,Richard C.K. AU - Mitchener,Kris James AU - Weidenmier,Marc D. TI - Irving Fisher and Price-Level Targeting in Austria: Was Silver the Answer? JF - National Bureau of Economic Research Working Paper Series VL - No. 17123 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17123 L1 - http://www.nber.org/papers/w17123.pdf N1 - Author contact info: Richard Burdekin Robert Day School of Economics and Finance Claremont McKenna College 500 East Ninth Street Claremont, CA 91711 E-Mail: richard.burdekin@claremontmckenna.edu Kris James Mitchener Department of Economics Leavey School of Business Santa Clara University Santa Clara, CA 95053 Tel: 408/554-4340 Fax: 408/554-2331 E-Mail: kmitchener@scu.edu Marc D. Weidenmier Robert Day School of Economics and Finance Claremont McKenna College 500 East Ninth Street Claremont, CA 91711 Tel: 909/607-8497 Fax: 909/621-8249 E-Mail: marc_weidenmier@claremontmckenna.edu AB - The question of price level versus inflation targeting remains controversial. Disagreement concerns, not so much the desirability of price stability, but rather the means of achieving it. Irving Fisher argued for a commodity dollar standard where the purchasing power of money was fixed by indexing it to a basket of commodities. We show that movements in the price of silver closely track the movements in overall prices during the classical gold standard era. The one-to-one relationship between paper and silver bonds suggests that a simple “silver rule" could have sufficed to fix the purchasing power of money. ER - TY - JOUR AU - Hochberg,Yael V. AU - Rauh,Joshua D. TI - Local Overweighting and Underperformance: Evidence from Limited Partner Private Equity Investments JF - National Bureau of Economic Research Working Paper Series VL - No. 17122 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17122 L1 - http://www.nber.org/papers/w17122.pdf N1 - Author contact info: Yael Hochberg Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/467-4574 Fax: 847/491-5719 E-Mail: y-hochberg@kellogg.northwestern.edu Joshua Rauh Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-4462 Fax: 847/491-5719 E-Mail: joshua-rauh@kellogg.northwestern.edu AB - Institutional investors of all types exhibit substantial home-state bias when investing in private equity (PE) funds. This effect is particularly pronounced for public pension funds, where the local overweighting amounts to 9.7% of the private equity portfolio on average, based on 5-year rolling average benchmarks. Public pension funds’ own-state investments perform significantly worse than their out-of-state investments, an average of 3-4 percentage points of net IRR per year, and those that that overweight their portfolios towards home-state investments also perform worse overall. These underperformance patterns are not evident for other types of institutional investors, such as endowments, foundations and corporate pension funds, and we do not observe similar overweighting or underperformance of investments in neighboring states. Overweighting in home state investments by public pension funds is greater in states with higher levels of corruption, although there is no positive correlation of underperformance with corruption for these investors. The overweighting and underperformance of local investments cost public pension funds between $0.9 and $1.2 billion per year, depending on the benchmark. ER - TY - JOUR AU - Bekaert,Geert AU - Ehrmann,Michael AU - Fratzscher,Marcel AU - Mehl,Arnaud J. TI - Global Crises and Equity Market Contagion JF - National Bureau of Economic Research Working Paper Series VL - No. 17121 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17121 L1 - http://www.nber.org/papers/w17121.pdf N1 - Author contact info: Geert Bekaert Graduate School of Business Columbia University 3022 Broadway, 411 Uris Hall New York, NY 10027 Tel: 212/854-9156 Fax: 212/662-8474 E-Mail: gb241@columbia.edu Michael Ehrmann European Central Bank Postfach 16 03 19 D-60066 Frankfurt am Main GERMANY E-Mail: michael.ehrmann@ecb.int Marcel Fratzscher European Central Bank Kaiserstrasse 29 D-60311 Frankfurt/Main GERMANY Tel: +49 - 69 1344 6871 E-Mail: marcel.fratzscher@ecb.int Arnaud J. Mehl European Central Bank Kaiserstrasse 29 60311 Frankfurt Germany E-Mail: Arnaud.Mehl@ecb.int AB - Using the 2007-2009 financial crisis as a laboratory, we analyze the transmission of crises to country-industry equity portfolios in 55 countries. We use an asset pricing framework with global and local factors to predict crisis returns, defining unexplained increases in factor loadings as indicative of contagion. We find evidence of systematic contagion from US markets and from the global financial sector, but the effects are very small. By contrast, there has been systematic and substantial contagion from domestic equity markets to individual domestic equity portfolios, with its severity inversely related to the quality of countries’ economic fundamentals and policies. Consequently, we reject the globalization hypothesis that links the transmission of the crisis to the extent of global exposure. Instead, we confirm the old “wake-up call” hypothesis, with markets and investors focusing substantially more on idiosyncratic, country-specific characteristics during the crisis. ER - TY - JOUR AU - Bettinger,Eric P. AU - Evans,Brent J. AU - Pope,Devin G. TI - Improving College Performance and Retention the Easy Way: Unpacking the ACT Exam JF - National Bureau of Economic Research Working Paper Series VL - No. 17119 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17119 L1 - http://www.nber.org/papers/w17119.pdf N1 - Author contact info: Eric Bettinger Stanford School of Education CERAS 522, 520 Galvez Mall Stanford, CA 94305 Tel: 650/736-7727 Fax: 650/723-9931 E-Mail: ebettinger@stanford.edu Brent J. Evans School of Education Stanford University E-Mail: bjevans@stanford.edu Devin G. Pope Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-2297 Fax: 773/702-0458 E-Mail: devin.pope@chicagobooth.edu AB - Colleges rely on the ACT exam in their admission decisions to increase their ability to differentiate between students likely to succeed and those that have a high risk of under-performing and dropping out. We show that two of the four sub tests of the ACT, English and Mathematics, are highly predictive of positive college outcomes while the other two subtests, Science and Reading, provide little or no additional predictive power. This result is robust across various samples, specifications, and outcome measures. We demonstrate that focusing solely on the English and Mathematics test scores greatly enhances the predictive validity of the ACT exam. ER - TY - JOUR AU - Beshears,John AU - Choi,James J. AU - Laibson,David AU - Madrian,Brigitte C. TI - The Availability and Utilization of 401(k) Loans JF - National Bureau of Economic Research Working Paper Series VL - No. 17118 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17118 L1 - http://www.nber.org/papers/w17118.pdf N1 - Author contact info: John Beshears Stanford Graduate School of Business 655 Knight Way Stanford, CA 94305-7298 Tel: 650/723-6792 E-Mail: beshears@stanford.edu James J. Choi Yale School of Management 135 Prospect Street P.O. Box 208200 New Haven, CT 06520-8200 E-Mail: james.choi@yale.edu David Laibson Department of Economics Littauer M-12 Harvard University Cambridge, MA 02138 Tel: 617/496-3402 Fax: 617/495-8570 E-Mail: dlaibson@gmail.com Brigitte C. Madrian John F. Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617-495-8917 Fax: 617-496-5960 E-Mail: Brigitte_Madrian@Harvard.edu M3 - presented at "Aging Conference", May 6-7, 2011 AB - We document the loan provisions in 401(k) savings plans and how participants use 401(k) loans. Although only about 22% of savings plan participants who are allowed to borrow from their 401(k) have such a loan at any given point in time, almost half had used a 401(k) loan over a longer, seven-year horizon. The probability of having a loan follows a hump-shaped pattern with respect to age, job tenure, account balance, and salary, but conditional on having a loan, loan size as a fraction of 401(k) balances declines with respect to these variables. Participants are less likely to use loans in plans that charge a higher interest rate, and loans are smaller when plans allow fewer simultaneously outstanding loans, impose a shorter maximum possible loan duration, or charge a lower interest rate. ER - TY - JOUR AU - Cristea,Anca D. AU - Hummels,David AU - Puzzello,Laura AU - Avetisyan,Misak G. TI - Trade and the Greenhouse Gas Emissions from International Freight Transport JF - National Bureau of Economic Research Working Paper Series VL - No. 17117 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17117 L1 - http://www.nber.org/papers/w17117.pdf N1 - Author contact info: Anca D. Cristea University of Oregon E-Mail: cristea@uoregon.edu David Hummels Krannert School of Management 403 West State Street Purdue University West Lafayette, IN 47907-1310 Tel: 765/494-4495 Fax: 765/494-9658 E-Mail: hummelsd@purdue.edu Laura Puzzello Monash University E-Mail: laura.puzzello@monash.edu Misak G. Avetisyan University of Southern California School of Policy, Planning and Development 3710 McClintock Avenue, RTH 322 Los Angeles, CA 90089-2902 Tel: (213) 7405747 E-Mail: mgavetis@sppd.usc.edu AB - We collect extensive data on worldwide trade by transportation mode and use this to provide detailed comparisons of the greenhouse gas emissions associated with output versus international transportation of traded goods. International transport is responsible for 33 percent of world-wide trade-related emissions, and over 75 percent of emissions for major manufacturing categories like machinery, electronics and transport equipment. US exports intensively make use of air cargo; as a result two-thirds of its export-related emissions are due to international transport, and US exports by themselves generate a third of transport emissions worldwide. Inclusion of transport dramatically changes the ranking of countries by emission intensity. US production emissions per dollar of exports are 16 percent below the world average, but once we include transport US emissions per dollar exported are 59 percent above the world average. We use our data to systematically investigate whether trade inclusive of transport can lower emissions. In one-quarter of cases, the difference in output emissions is more than enough to compensate for the emissions cost of transport. Finally, we examine how likely patterns of trade growth will affect modal use and emissions. Full liberalization of tariffs and GDP growth concentrated in China and India lead to transport emissions growing much faster than the value of trade, due to trade shifting toward distant trading partners. Emissions growth from growing GDP dwarfs any growth from tariff liberalization. ER - TY - JOUR AU - Engel,Charles TI - The Real Exchange Rate, Real Interest Rates, and the Risk Premium JF - National Bureau of Economic Research Working Paper Series VL - No. 17116 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17116 L1 - http://www.nber.org/papers/w17116.pdf N1 - Author contact info: Charles Engel Department of Economics University of Wisconsin 1180 Observatory Drive Madison, WI 53706-1393 Tel: 608/262-3697 Fax: 608/262-2033 E-Mail: cengel@ssc.wisc.edu AB - The well-known uncovered interest parity puzzle arises from the empirical regularity that, among developed country pairs, the high interest rate country tends to have high expected returns on its short term assets. At the same time, another strand of the literature has documented that high real interest rate countries tend to have currencies that are strong in real terms – indeed, stronger than can be accounted for by the path of expected real interest differentials under uncovered interest parity. These two strands – one concerning short-run expected changes and the other concerning the level of the real exchange rate – have apparently contradictory implications for the relationship of the foreign exchange risk premium and interest-rate differentials. This paper documents the puzzle, and shows that existing models appear unable to account for both empirical findings. The features of a model that might reconcile the findings are discussed. ER - TY - JOUR AU - Gennaioli,Nicola AU - Shleifer,Andrei AU - Vishny,Robert W. TI - A Model of Shadow Banking JF - National Bureau of Economic Research Working Paper Series VL - No. 17115 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17115 L1 - http://www.nber.org/papers/w17115.pdf N1 - Author contact info: Nicola Gennaioli CREI Universitat Pompeu Fabra Ramon Trias Fargas 25-27 08005 Barcelona (Spain) E-Mail: ngennaioli@crei.cat Andrei Shleifer Department of Economics Harvard University Littauer Center M-9 Cambridge, MA 02138 Tel: 617/495-5046 Fax: 617/496-1708 E-Mail: ashleifer@harvard.edu Robert W. Vishny Booth School of Business The University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-2522 Fax: 773/834-1920 E-Mail: Rvishny@gmail.com AB - We present a model of shadow banking in which financial intermediaries originate and trade loans, assemble these loans into diversified portfolios, and then finance these portfolios externally with riskless debt. In this model: i) outside investor wealth drives the demand for riskless debt and indirectly for securitization, ii) intermediary assets and leverage move together as in Adrian and Shin (2010), and iii) intermediaries increase their exposure to systematic risk as they reduce their idiosyncratic risk through diversification, as in Acharya, Schnabl, and Suarez (2010). Under rational expectations, the shadow banking system is stable and improves welfare. When investors and intermediaries neglect tail risks, however, the expansion of risky lending and the concentration of risks in the intermediaries create financial fragility and fluctuations in liquidity over time. ER - TY - JOUR AU - Jousten,Alain AU - Lefebvre,Mathieu AU - Perelman,Sergio TI - Disability in Belgium: There is More than Meets the Eye JF - National Bureau of Economic Research Working Paper Series VL - No. 17114 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17114 L1 - http://www.nber.org/papers/w17114.pdf N1 - Author contact info: Alain Jousten HEC Ecole de gestion de l'Université de Liège 7 Boulevard du Rectorat Bât. B31 Boîte 41 4000 Liege 1 BELGIUM Tel: +32 4 366 3198 E-Mail: ajousten@ulg.ac.be Mathieu Lefebvre CREPP - Universite de Liege Bvd du Rectorat 7 (B31) - B4000 Liège Tel: ++32 4 366 31 03 Fax: ++32 4 366 31 06 E-Mail: mathieu.lefebvre@ulg.ac.be Sergio Perelman CREPP - HEC Management School Universite de Liege Bd. du Rectorat 7 (B31) 4000 Liege BELGIUM E-Mail: sergio.perelman@ulg.ac.be M3 - presented at "International Social Security Conference", May 2, 2011 AB - The paper provides a perspective on the development of the Belgian disability insurance system. Using both survey and administrative data, it sketches a picture of the (changing) factors leading towards disability, as well as the outcomes in terms of program participation. The paper shows the key role of integrating other forms of early retirement programs into the analysis. The main findings are an unspectacular trend in the number of DI beneficiaries over time combined with a strong expansion of (early-) retirement schemes. ER - TY - JOUR AU - Voigtlaender,Nico AU - Voth,Hans-Joachim TI - Persecution Perpetuated: The Medieval Origins of Anti-Semitic Violence in Nazi Germany JF - National Bureau of Economic Research Working Paper Series VL - No. 17113 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17113 L1 - http://www.nber.org/papers/w17113.pdf N1 - Author contact info: Nico Voigtlaender UCLA Anderson School of Management 110 Westwood Plaza C513 Entrepreneurs Hall Los Angeles, CA 90095 Tel: 310/794-6382 E-Mail: nico.v@anderson.ucla.edu Hans-Joachim Voth Economics Department UPF & CREI Ramon Trias Fargas 25-27 E-08005 Barcelona E-Mail: jvoth@crei.cat AB - How persistent are cultural traits? This paper uses data on anti-Semitism in Germany and finds continuity at the local level over more than half a millennium. When the Black Death hit Europe in 1348-50, killing between one third and one half of the population, its cause was unknown. Many contemporaries blamed the Jews. Cities all over Germany witnessed mass killings of their Jewish population. At the same time, numerous Jewish communities were spared. We use plague pogroms as an indicator for medieval anti-Semitism. Pogroms during the Black Death are a strong and robust predictor of violence against Jews in the 1920s, and of votes for the Nazi Party. In addition, cities that saw medieval anti-Semitic violence also had higher deportation rates for Jews after 1933, were more likely to see synagogues damaged or destroyed in the 'Night of Broken Glass' in 1938, and their inhabitants wrote more anti-Jewish letters to the editor of the Nazi newspaper Der Stürmer. ER - TY - JOUR AU - Papay,John P. AU - Willett,John B. AU - Murnane,Richard J. TI - High-School Exit Examinations and the Schooling Decisions of Teenagers: A Multi-Dimensional Regression-Discontinuity Analysis JF - National Bureau of Economic Research Working Paper Series VL - No. 17112 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17112 L1 - http://www.nber.org/papers/w17112.pdf N1 - Author contact info: John Papay Brown University Education Department Providence, RI 02912 Tel: 617-493-3942 E-Mail: john_papay@mail.harvard.edu John Willett Graduate School of Education Harvard University 6 Appian Way - Gutman 412 Cambridge, MA 02138 E-Mail: John_Willett@harvard.edu Richard Murnane Graduate School of Education Harvard University 6 Appian Way - Gutman 469 Cambridge, MA 02138 Tel: 617/496-4820 Fax: 617/496-3095 E-Mail: richard_murnane@harvard.edu AB - We ask whether failing one or more of the state-mandated high-school exit examinations affects whether students graduate from high school. Using a new multi-dimensional regression-discontinuity approach, we examine simultaneously scores on mathematics and English language arts tests. Barely passing both examinations, as opposed to failing them, increases the probability that students graduate by 7.6 percentage points. The effects are greater for students scoring near each cutoff than for students further away from them. We explain how the multi-dimensional regression-discontinuity approach provides insights over conventional methods for making causal inferences when multiple variables assign individuals to a range of treatments. ER - TY - JOUR AU - Drautzburg,Thorsten AU - Uhlig,Harald TI - Fiscal Stimulus and Distortionary Taxation JF - National Bureau of Economic Research Working Paper Series VL - No. 17111 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17111 L1 - http://www.nber.org/papers/w17111.pdf N1 - Author contact info: Thorsten Drautzburg University of Chicago E-Mail: tdrautzburg@uchicago.edu Harald Uhlig Dept. of Economics University of Chicago 1126 E 59th Street Chicago, IL 60637 Tel: 773/702-3702 Fax: 773/702-8490 E-Mail: huhlig@uchicago.edu AB - We quantify the fiscal multipliers in response to the American Recovery and Reinvestment Act (ARRA) of 2009. We extend the benchmark Smets-Wouters (2007) New Keynesian model, allowing for credit-constrained households, the zero lower bound, government capital and distortionary taxation. The posterior yields modestly positive short-run multipliers around 0.52 and modestly negative long-run multipliers around -0.42. The multiplier is sensitive to the fraction of transfers given to credit-constrained households, the duration of the zero lower bound and the capital. The stimulus results in negative welfare effects for unconstrained agents. The constrained agents gain, if they discount the future substantially. ER - TY - JOUR AU - Bucher-Koenen,Tabea AU - Lusardi,Annamaria TI - Financial Literacy and Retirement Planning in Germany JF - National Bureau of Economic Research Working Paper Series VL - No. 17110 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17110 L1 - http://www.nber.org/papers/w17110.pdf N1 - Author contact info: Tabea Bucher-Koenen MEA University of Mannheim 68131 Mannheim, Germany E-Mail: bucher-koenen@mea.mpisoc.mpg.de Annamaria Lusardi The George Washington University School of Business 2201 G Street, NW Duques Hall, Suite 450E Washington, DC 20052 Tel: 202-994-8410 E-Mail: alusardi@gwu.edu AB - We examine financial literacy in Germany using data from the SAVE survey. We find that knowledge of basic financial concepts is lacking among women, the less educated, and those living in East Germany. In particular, those with low education and low income in East Germany have little financial literacy compared to their West German counterparts. Interestingly, there is no gender disparity in financial knowledge in the East. In order to investigate the nexus of causality between financial literacy and retirement planning, we develop an IV strategy by making use of regional variation in the financial knowledge of peers. We find a positive impact of financial knowledge on retirement planning. ER - TY - JOUR AU - Alessie,Rob J. AU - Rooij,Maarten van AU - Lusardi,Annamaria TI - Financial Literacy, Retirement Preparation and Pension Expectations in the Netherlands JF - National Bureau of Economic Research Working Paper Series VL - No. 17109 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17109 L1 - http://www.nber.org/papers/w17109.pdf N1 - Author contact info: Rob J. Alessie University of Groningen Department of Economics P.O. Box 800 9700 AV Groningen Tel: +31-50-3637240 E-Mail: r.j.m.alessie@rug.nl Maarten van Rooij Dutch Central Bank P. O. Box 98 1000 AB Amsterdam The Netherlands E-Mail: M.C.J.van.Rooij@DNB.NL Annamaria Lusardi The George Washington University School of Business 2201 G Street, NW Duques Hall, Suite 450E Washington, DC 20052 Tel: 202-994-8410 E-Mail: alusardi@gwu.edu AB - We present new evidence on financial literacy and retirement preparation in the Netherlands based on two surveys conducted before and after the onset of the financial crisis. We document that while financial knowledge did not increase from 2005 to 2010, significantly more individuals planned for their retirement in 2010. At the same time, employees’ expectations about the level of their pension income are high compared to what retirement plans may realistically provide. However, financially knowledgeable employees report lower expected replacement rates and acknowledge higher levels of uncertainty. Moreover using instrumental variables estimates for financial knowledge, we find a positive effect of financial literacy on retirement preparation. Employing the panel feature of our dataset, we show that financial knowledge has a causal impact on retirement planning. Our findings suggest that the formation of pension expectations might be an important mechanism contributing to the impact of financial literacy on planning. ER - TY - JOUR AU - Lusardi,Annamaria AU - Mitchell,Olivia S. TI - Financial Literacy and Retirement Planning in the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 17108 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17108 L1 - http://www.nber.org/papers/w17108.pdf N1 - Author contact info: Annamaria Lusardi The George Washington University School of Business 2201 G Street, NW Duques Hall, Suite 450E Washington, DC 20052 Tel: 202-994-8410 E-Mail: alusardi@gwu.edu Olivia S. Mitchell University of Pennsylvania Wharton School 3620 Locust Walk, St 3000 SH-DH Philadelphia, PA 19104-6302 Tel: 215-898-0424 Fax: 215/898-0310 E-Mail: mitchelo@wharton.upenn.edu AB - We examine financial literacy in the United States using the new National Financial Capability Study, wherein we demonstrate that financial literacy is particularly low among the young, women, and the less-educated. Moreover, Hispanics and African-Americans score the least well on financial literacy concepts. Interestingly, all groups rate themselves as rather well-informed about financial matters, notwithstanding their actual performance on the key literacy questions. Finally, we show that people who score higher on the financial literacy questions are also much more likely to plan for retirement, which is likely to leave them better positioned for old-age. Our results will inform those seeking to target financial literacy programs to those in most need. ER - TY - JOUR AU - Lusardi,Annamaria AU - Mitchell,Olivia S. TI - Financial Literacy around the World: An Overview JF - National Bureau of Economic Research Working Paper Series VL - No. 17107 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17107 L1 - http://www.nber.org/papers/w17107.pdf N1 - Author contact info: Annamaria Lusardi The George Washington University School of Business 2201 G Street, NW Duques Hall, Suite 450E Washington, DC 20052 Tel: 202-994-8410 E-Mail: alusardi@gwu.edu Olivia S. Mitchell University of Pennsylvania Wharton School 3620 Locust Walk, St 3000 SH-DH Philadelphia, PA 19104-6302 Tel: 215-898-0424 Fax: 215/898-0310 E-Mail: mitchelo@wharton.upenn.edu AB - In an increasingly risky and globalized marketplace, people must be able to make well-informed financial decisions. Yet new international research demonstrates that financial illiteracy is widespread when financial markets are well developed as in Germany, the Netherlands, Sweden, Japan, Italy, New Zealand, and the United States, or when they are changing rapidly as in Russia. Further, across these countries, we show that the older population believes itself well informed, even though it is actually less well informed than average. Other common patterns are also evident: women are less financially literate than men and are aware of this shortfall. More educated people are more informed, yet education is far from a perfect proxy for literacy. There are also ethnic/racial and regional differences: city-dwellers in Russia are better informed than their rural counterparts, while in the U.S., African Americans and Hispanics are relatively less financially literate than others. Moreover, the more financially knowledgeable are also those most likely to plan for retirement. In fact, answering one additional financial question correctly is associated with a 3-4 percentage point higher chance of planning for retirement in countries as diverse as Germany, the U.S., Japan, and Sweden; in the Netherlands, it boosts planning by 10 percentage points. Finally, using instrumental variables, we show that these estimates probably underestimate the effects of financial literacy on retirement planning. In sum, around the world, financial literacy is critical to retirement security. ER - TY - JOUR AU - Robinson,James A. AU - Torvik,Ragnar TI - Institutional Comparative Statics JF - National Bureau of Economic Research Working Paper Series VL - No. 17106 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17106 L1 - http://www.nber.org/papers/w17106.pdf N1 - Author contact info: James A. Robinson Harvard University Department of Government N309, 1737 Cambridge Street Cambridge, MA 02138 Tel: 617/496-2839 Fax: 617/495-0438 E-Mail: jrobinson@gov.harvard.edu Ragnar Torvik Norwegian University of Science and Technology Department of Economics N-7491 Trondheim Norway E-Mail: ragnar.torvik@svt.ntnu.no AB - Why was the Black Death followed by the decline of serfdom in Western Europe but its' intensification in Eastern Europe? What explains why involvement in Atlantic trade in the Early Modern period was positively correlated with economic growth in Britain but negatively correlated in Spain? Why did frontier expansion in the 19th Century Americas go along with economic growth in the United States and economic decline in Latin America? Why do natural resource booms seem to stimulate growth in some countries, but lead to a 'curse' in others, and why does foreign aid sometimes seem to encourage, other times impede economic growth? In this paper we argue that the response of economies to shocks or innovations in economic opportunities depends on the nature of institutions. When institutions are strong, new opportunities or windfalls can have positive effects. But when institutions are weak they can have negative effects. We present a simple model to illustrate how comparative statics are conditional on the nature of institutions and show how this perspective helps to unify a large number of historical episodes and empirical studies. ER - TY - JOUR AU - Baker,Michael AU - Milligan,Kevin S. TI - Maternity Leave and Children’s Cognitive and Behavioral Development JF - National Bureau of Economic Research Working Paper Series VL - No. 17105 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17105 L1 - http://www.nber.org/papers/w17105.pdf N1 - Author contact info: Michael Baker Department of Economics University of Toronto 150 St. George Street Toronto, ON M5S 3G7 CANADA Tel: 416/978-4138 Fax: 416/978-6713 E-Mail: baker@chass.utoronto.ca Kevin S. Milligan Department of Economics University of British Columbia #997-1873 East Mall Vancouver, BC V6T 1Z1 CANADA Tel: 604/822-6747 Fax: 604/822-5915 E-Mail: kevin.milligan@ubc.ca AB - We investigate the impact of maternity leave on the cognitive and behavioral development of children at ages 4 and 5. The impact is identified by legislated increases in the duration of maternity leave in Canada, which significantly increased the amount of maternal care children received in the second half of their first year. We carefully document how other observable inputs to child development vary across cohorts of children exposed to different maternity leave regimes. Our results indicate that maternity leave changes had no positive effect on indices of children’s cognitive and behavioral development. We uncover a small negative impact on PPVT and Who Am I? scores, which suggests the timing of the mother/child separation due to the mother’s return to work may be important. ER - TY - JOUR AU - Ananat,Elizabeth Oltmans AU - Gassman-Pines,Anna AU - Francis,Dania V. AU - Gibson-Davis,Christina M. TI - Children Left Behind: The Effects of Statewide Job Loss on Student Achievement JF - National Bureau of Economic Research Working Paper Series VL - No. 17104 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17104 L1 - http://www.nber.org/papers/w17104.pdf N1 - Author contact info: Elizabeth Ananat Sanford Institute of Public Policy Duke University Box 90245 Durham, NC 27708 Tel: 919/613-7302 Fax: 919/681-8288 E-Mail: eoananat@duke.edu Anna Gassman-Pines Sanford Building Duke University Box 90245 Durham, NC 27708 E-Mail: agassman.pines@duke.edu Dania V. Francis Sanford Building Duke University Box 90245 Durham, NC 27708 E-Mail: dania.frank@duke.edu Christina M. Gibson-Davis Sanford Building Duke University Box 90245 Durham, NC 27708 E-Mail: cgibson@duke.edu AB - Given the magnitude of the recent recession, and the high-stakes testing the U.S. has implemented under the No Child Left Behind Act (NCLB), it is important to understand the effects of large-scale job losses on student achievement. We examine the effects of state-level job losses on fourth- and eighth-grade test scores, using federal Mass Layoff Statistics and 1996-2009 National Assessment of Educational Progress data. Results indicate that job losses decrease scores. Effects are larger for eighth than fourth graders and for math than reading assessments, and are robust to specification checks. Job losses to 1% of a state’s working-age population lead to a .076 standard deviation decrease in the state’s eighth-grade math scores. This result is an order of magnitude larger than those found in previous studies that have compared students whose parents lose employment to otherwise similar students, suggesting that downturns affect all students, not just students who experience parental job loss. Our findings have important implications for accountability schemes: we calculate that a state experiencing one-year job losses to 2% of its workers (a magnitude observed in seven states) likely sees a 16% increase in the share of its schools failing to make Adequate Yearly Progress under NCLB. ER - TY - JOUR AU - Lusardi,Annamaria TI - Americans' Financial Capability JF - National Bureau of Economic Research Working Paper Series VL - No. 17103 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17103 L1 - http://www.nber.org/papers/w17103.pdf N1 - Author contact info: Annamaria Lusardi The George Washington University School of Business 2201 G Street, NW Duques Hall, Suite 450E Washington, DC 20052 Tel: 202-994-8410 E-Mail: alusardi@gwu.edu AB - This paper examines Americans’ financial capability, using data from a new survey. Financial capability is measured in terms of how well people make ends meet, plan ahead, choose and manage financial products, and possess the skills and knowledge to make financial decisions. The findings reported in this work paint a troubling picture of the state of financial capability in the United States. The majority of Americans do not plan for predictable events such as retirement or children’s college education. Most importantly, people do not make provisions for unexpected events and emergencies, leaving themselves and the economy exposed to shocks. To understand financial capability, it is important to look not only at assets but also at debt and debt management, as an increasingly large portion of the population carry debt. In managing debt, Americans engage in behaviors that can generate large expenses, such as sizable interest payments and fees. Moreover, more than one in five Americans has used alternative (and often costly) borrowing methods (payday loans, advances on tax refunds, pawn shops, etc.) in the past five years. The most worrisome finding is that many people do not seem well informed and knowledgeable about their terms of borrowing; a sizeable group does not know the terms of their mortgages or the interest rates they pay on their loans. Finally, the majority of Americans lack basic numeracy and knowledge of fundamental economic principles such as the workings of inflation, risk diversification, and the relationship between asset prices and interest rates. ER - TY - JOUR AU - Ashraf,Quamrul AU - Gershman,Boris AU - Howitt,Peter TI - Banks, Market Organization, and Macroeconomic Performance: An Agent-Based Computational Analysis JF - National Bureau of Economic Research Working Paper Series VL - No. 17102 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17102 L1 - http://www.nber.org/papers/w17102.pdf N1 - Author contact info: Quamrul Ashraf Williams College Department of Economics 24 Hopkins Hall Drive Williamstown, MA 01267 Tel: (413) 597-3051 Fax: (413) 597-4045 E-Mail: Quamrul.H.Ashraf@williams.edu Boris Gershman Brown University Department of Economics 64 Waterman St Providence, RI 02912 E-Mail: boris_gershman@brown.edu Peter Howitt Department of Economics Brown University, Box B Providence, RI 02912 Tel: 401/863-2145 Fax: 401/863-1970 E-Mail: peter_howitt@brown.edu AB - This paper is an exploratory analysis of the role that banks play in supporting the mechanism of exchange. It considers a model economy in which exchange activities are facilitated and coordinated by a self-organizing network of entrepreneurial trading firms. Collectively, these firms play the part of the Walrasian auctioneer, matching buyers with sellers and helping the economy to approximate equilibrium prices that no individual is able to calculate. Banks affect macroeconomic performance in this economy because their lending activities facilitate entry of trading firms and also influence their exit decisions. Both entry and exit have conflicting effects on performance, and we resort to computational analysis to understand how they are resolved. Our analysis sheds new light on the conflict between micro-prudential bank regulation and macroeconomic stability. Specifically, it draws an important distinction between "normal" performance of the economy and "worst-case" scenarios, and shows that micro prudence conflicts with macro stability only in bad times. The analysis also shows that banks provide a "financial stabilizer" that in some respects can more than counteract the more familiar financial accelerator. ER - TY - JOUR AU - Massetti,Emanuele AU - Mendelsohn,Robert TI - Estimating Ricardian Models With Panel Data JF - National Bureau of Economic Research Working Paper Series VL - No. 17101 PY - 2011 Y2 - June 2011 UR - http://www.nber.org/papers/w17101 L1 - http://www.nber.org/papers/w17101.pdf N1 - Author contact info: Emanuele Massetti Fondazione Eni Enrico Mattei C.so Magenta, 63 20123 Milano - Italy E-Mail: emanuele.massetti@yale.edu Robert Mendelsohn School of Forestry & Environmental Studies Yale University 195 Prospect St. New Haven, CT 06511 Tel: 203/432-5128 Fax: 203/432-3809 E-Mail: robert.mendelsohn@yale.edu M3 - presented at "SI 2010 Environmental and Energy Economics", July 29-30, 2010 AB - Many nonmarket valuation models, such as the Ricardian model, have been estimated using cross sectional methods with a single year of data. Although multiple years of data should increase the robustness of such methods, repeated cross sections suggest the results are not stable. We argue that repeated cross sections do not properly specify the model. Panel methods that correctly specify the Ricardian model are stable over time. The results suggest that many cross sectional methods including hedonic studies and travel cost studies could be enhanced using panel data. ER - TY - JOUR AU - Hovhannisyan,Nune AU - Keller,Wolfgang TI - International Business Travel: An Engine of Innovation? JF - National Bureau of Economic Research Working Paper Series VL - No. 17100 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17100 L1 - http://www.nber.org/papers/w17100.pdf N1 - Author contact info: Nune Hovhannisyan Department of Economics, Boulder, CO 80309 E-Mail: Nune.Hovhannisyan@colorado.edu Wolfgang Keller Department of Economics University of Colorado-Boulder Boulder, CO 80309-0256 Tel: 303/735 5507 Fax: 303/492 8960 E-Mail: Wolfgang.Keller@colorado.edu AB - While it is well known that managers prefer in-person meetings for negotiating deals and selling their products, face-to-face communication may be particularly important for the transfer of technology because technology is best explained and demonstrated in person. This paper studies the role of short-term cross-border labor movements for innovation by estimating the recent impact of U.S. business travel to foreign countries on their patenting rates. Business travel is shown to have a significant effect up and beyond technology transfer through the channels of international trade and foreign direct investment. On average, a 10% increase in business travel leads to an increase in patenting by about 0.3%. We show that the technological knowledge of each business traveler matters by estimating a higher impact for travelers that originate in U.S. states with substantial innovation, such as California. Moreover, the business traveler effect on innovation also varies across industries. This study provides initial evidence that international air travel may be an important channel through which cross-country income differences can be reduced. We also discuss a number of policy issues in the context of short-term cross-border labor movements. ER - TY - JOUR AU - Washington,Ebonya L. TI - Do Majority Black Districts Limit Blacks’ Representation? The Case of the 1990 Redistricting JF - National Bureau of Economic Research Working Paper Series VL - No. 17099 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17099 L1 - http://www.nber.org/papers/w17099.pdf N1 - Author contact info: Ebonya L. Washington Yale University Box 8264 37 Hillhouse, Room 36 New Haven, CT 06520 Tel: 203/432-9901 Fax: 203/432-6323 E-Mail: ebonya.washington@yale.edu AB - Conventional wisdom and empirical academic research conclude that majority Black districts decrease Black representation by increasing conservatism in Congress. However, this research generally suffers from three limitations: 1) too low a level of aggregation 2) lack of a counterfactual and 3) failure to account for the endogeneity of the creation of majority minority districts. I compare congressional delegations of states that during the 1990 redistricting were under greater pressure to create majority minority districts with those under lesser pressure in a difference-in-difference framework. I find no evidence that the creation of majority minority districts leads to more conservative House delegations. In fact point estimates indicate that states that increased their share of majority Black districts saw their delegations grow increasingly liberal. I find similar results for majority Latino districts in the southwest. Thus I find no evidence for the common view that majority minority districts decrease minority representation in Congress. ER - TY - JOUR AU - Alesina,Alberto F. AU - Giuliano,Paola AU - Nunn,Nathan TI - On the Origins of Gender Roles: Women and the Plough JF - National Bureau of Economic Research Working Paper Series VL - No. 17098 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17098 L1 - http://www.nber.org/papers/w17098.pdf N1 - Author contact info: Alberto F. Alesina Department of Economics Harvard University Littauer Center 210 Cambridge, MA 02138 Tel: 617/495-8388 Fax: 617/495-7730 E-Mail: aalesina@harvard.edu Paola Giuliano Anderson School of Management UCLA 110 Westwood Plaza C517 Entrepreneurs Hall Los Angeles, CA 90095-1481 Tel: 310/206-6890 Fax: 310/825-4011 E-Mail: paola.giuliano@anderson.ucla.edu Nathan Nunn Department of Economics Harvard University 1805 Cambridge St Cambridge, Ma 02138 Tel: 617/496-4958 Fax: 617/495-8570 E-Mail: nnunn@fas.harvard.edu AB - This paper seeks to better understand the historical origins of current differences in norms and beliefs about the appropriate role of women in society. We test the hypothesis that traditional agricultural practices influenced the historical gender division of labor and the evolution and persistence of gender norms. We find that, consistent with existing hypotheses, the descendants of societies that traditionally practiced plough agriculture, today have lower rates of female participation in the workplace, in politics, and in entrepreneurial activities, as well as a greater prevalence of attitudes favoring gender inequality. We identify the causal impact of traditional plough use by exploiting variation in the historical geo-climatic suitability of the environment for growing crops that differentially benefited from the adoption of the plough. Our IV estimates, based on this variation, support the findings from OLS. To isolate the importance of cultural transmission as a mechanism, we examine female labor force participation of second-generation immigrants living within the US. ER - TY - JOUR AU - Griffin,John D. AU - Nickerson,David AU - Wozniak,Abigail K. TI - Racial Differences in Inequality Aversion: Evidence from Real World Respondents in the Ultimatum Game JF - National Bureau of Economic Research Working Paper Series VL - No. 17097 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17097 L1 - http://www.nber.org/papers/w17097.pdf N1 - Author contact info: John D. Griffin Department of Political Science University of Notre Dame South Bend, IN 46556 E-Mail: John.Griffin@nd.edu David Nickerson Department of Economics University of Notre Dame 441 Flanner Hall Notre Dame, IN 46556 Abigail K. Wozniak Department of Economics University of Notre Dame 441 Flanner Hall South Bend, IN 46556 Tel: 574/631-6208 E-Mail: a_wozniak@nd.edu AB - The distinct historical and cultural experiences of American blacks and whites may influence whether members of those groups perceive a particular exchange as fair. We investigate racial differences in fairness standards using preferences for equal treatment in the ultimatum game, where responders choose to allow a proposed division of a monetary amount or to block it. Although previous research has studied group differences in the ultimatum game, no study has been able to examine these across races in America. We use a sample of over 1600 blacks and whites drawn from the universe of registered voters in three states and merged with information on neighborhood income and racial composition. We experimentally vary proposed divisions as well as the implied race of the ultimatum game proposer. We find no overall racial differences in acceptance rates or aversion to unequal divisions. However, we uncover racial differences in the response to pecuniary returns conditional on inequality of the division. This is driven by the lowest income group in our sample, which represents the 10th percentile of the black income distribution. The racial differences are robust across gender and age groups. We also find that blacks are more sensitive to unfair proposals from other blacks. ER - TY - JOUR AU - Banks,James AU - Oldfield,Zoe AU - Smith,James P. TI - Childhood Health and Differences in Late-Life Health Outcomes Between England and the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 17096 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17096 L1 - http://www.nber.org/papers/w17096.pdf N1 - Author contact info: James Banks University College London E-Mail: j.banks@ucl.ac.uk Zoe Oldfield Institute for Fiscal Studies 7 Ridgemount London, WC1 7AE U.K. E-Mail: zoe_o@ifs.org.uk James P. Smith RAND Corporation 1776 Main Street P.O. Box 2138 Santa Monica, CA 90407-2138 Tel: 310-451-6925 E-Mail: smith@rand.org M3 - presented at "Aging Conference", May 6-7, 2011 AB - In this paper we examine the link between retrospectively reported measures of childhood health and the prevalence of various major and minor diseases at older ages. Our analysis is based on comparable retrospective questionnaires placed in the Health and Retirement Study and the English Longitudinal Study of Ageing – nationally representative surveys of the age 50 plus population in America and England respectively. We show that the origins of poorer adult health among older Americans compared to the English trace right back into the childhood years – the American middle and old-age population report higher rates of specific childhood health conditions than their English counterparts. The transmission into poor health in mid life and older ages of these higher rates of childhood illnesses also appears to be higher in America compared to England. Both factors contribute to higher rates of adult illness in the United States compared to England although even in combination they do not explain the full extent of the country difference in late-life health outcomes. ER - TY - JOUR AU - Henderson,Daniel J. AU - List,John A. AU - Millimet,Daniel L. AU - Parmeter,Christopher F. AU - Price,Michael K. TI - Empirical Implementation of Nonparametric First-Price Auction Models JF - National Bureau of Economic Research Working Paper Series VL - No. 17095 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17095 L1 - http://www.nber.org/papers/w17095.pdf N1 - Author contact info: Daniel Henderson Dept. of Economics State University of New York at Binghamton Binghamton, NY 13902-6000 Tel: 607-777-4480 Fax: 607-777-2681 E-Mail: djhender@binghamton.edu John List Department of Economics University of Chicago 1126 East 59th Chicago, IL 60637 Tel: 301/405-1288 Fax: 301/314-9091 E-Mail: jlist@uchicago.edu Daniel Millimet Southern Methodist University Department of Economics Box 0496 Dallas, TX 75275-0496 Tel: 214-768-3269 Fax: 214-768-1821 E-Mail: millimet@mail.smu.edu Christopher F. Parmeter University of Miami E-Mail: cparmeter@bus.miami.edu Michael Price Department of Economics University of Tennessee 515 Stokely Management Center Knoxville, TN 27996 Tel: 865/974-5672 Fax: 865/974-4601 E-Mail: mprice21@utk.edu AB - Nonparametric estimators provide a flexible means of uncovering salient features of auction data. Although these estimators are popular in the literature, many key features necessary for proper implementation have yet to be uncovered. Here we provide several suggestions for nonparamteric estimation of first-price auction models. Specifically, we show how to impose monotonicity of the equilibrium bidding strategy; a key property of structural auction models not guaranteed in standard nonparametric estimation. We further develop methods for automatic bandwidth selection. Finally, we discuss how to impose monotonicity in auctions with differering number of bidders, reserve prices, and auction-specific characteristics. Finite sample performance is examined using simulated data as well as experimental auction data. ER - TY - JOUR AU - Jones,Charles I. TI - Life and Growth JF - National Bureau of Economic Research Working Paper Series VL - No. 17094 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17094 L1 - http://www.nber.org/papers/w17094.pdf N1 - Author contact info: Charles I. Jones Graduate School of Business Stanford University 655 Knight Way Stanford, CA 94305-4800 Tel: 510/288-8650 Fax: 650/725-0468 E-Mail: chad.jones@stanford.edu AB - Some technologies save lives — new vaccines, new surgical techniques, safer highways. Others threaten lives — pollution, nuclear accidents, global warming, the rapid global transmission of disease, and bioengineered viruses. How is growth theory altered when technologies involve life and death instead of just higher consumption? This paper shows that taking life into account has first-order consequences. Under standard preferences, the value of life may rise faster than consumption, leading society to value safety over consumption growth. As a result, the optimal rate of consumption growth may be substantially lower than what is feasible, in some cases falling all the way to zero. ER - TY - JOUR AU - Abramitzky,Ran AU - Lavy,Victor TI - How Responsive is Investment in Schooling to Changes in Redistribution Policies and in Returns JF - National Bureau of Economic Research Working Paper Series VL - No. 17093 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17093 L1 - http://www.nber.org/papers/w17093.pdf N1 - Author contact info: Ran Abramitzky Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305 Tel: 650/723-9276 Fax: 650/725-5702 E-Mail: ranabr@stanford.edu Victor Lavy Department of Economics Hebrew University of Jerusalem Mount Scopus Jerusalem 91905 ISRAEL Tel: 972-2-5883245 E-Mail: msvictor@mscc.huji.ac.il AB - This paper uses an unusual pay reform to test the responsiveness of investment in schooling to changes in redistribution schemes that increase the rate of return to education. We exploit an episode where different Israeli kibbutzim shifted from equal sharing to productivity-based wages in different years and find that students in kibbutzim that reformed earlier invested more in education. This effect is stronger for males and is mainly driven by students whose parents have lower levels of education. Our findings support the prediction that education is highly responsive to changes in the redistribution policy, especially for students from weaker backgrounds. ER - TY - JOUR AU - Burke,Marshall AU - Dykema,John AU - Lobell,David AU - Miguel,Edward AU - Satyanath,Shanker TI - Incorporating Climate Uncertainty into Estimates of Climate Change Impacts, with Applications to U.S. and African Agriculture JF - National Bureau of Economic Research Working Paper Series VL - No. 17092 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17092 L1 - http://www.nber.org/papers/w17092.pdf N1 - Author contact info: Marshall Burke Department of Agricultural and Resource Economics University of California Berkeley, CA 94720 E-Mail: marshall.burke@berkeley.edu John Dykema Harvard University School of Engineering and Applied Sciences 12 Oxford Street Cambridge, MA 02138 E-Mail: dykema@fas.harvard.edu David Lobell Stanford University Department of Environmental Earth System Science Y2E2 Bldg - MC4205, 473 Via Ortega, room 367 Stanford, CA 94305 E-Mail: dlobell@stanford.edu Edward Miguel Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720 Tel: 510/642-7162 Fax: 510/642-6615 E-Mail: emiguel@econ.berkeley.edu Shanker Satyanath Department of Politics New York University 19 West 4th Street New York, NY 10012 E-Mail: shanker.satyanath@nyu.edu AB - A growing body of economics research projects the effects of global climate change on economic outcomes. Climate scientists often criticize these articles because nearly all ignore the well-established uncertainty in future temperature and rainfall changes, and therefore appear likely to have downward biased standard errors and potentially misleading point estimates. This paper incorporates climate uncertainty into estimates of climate change impacts on U.S. agriculture. Accounting for climate uncertainty leads to a much wider range of projected impacts on agricultural profits, with the 95% confidence interval featuring drops of between 17% to 88%. An application to African agriculture yields similar results. ER - TY - JOUR AU - Antràs,Pol AU - Foley,C. Fritz TI - Poultry in Motion: A Study of International Trade Finance Practices JF - National Bureau of Economic Research Working Paper Series VL - No. 17091 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17091 L1 - http://www.nber.org/papers/w17091.pdf N1 - Author contact info: Pol Antràs Department of Economics Harvard University 1805 Cambridge Street Littauer Center 207 Cambridge, MA 02138 Tel: 617/495-1236 Fax: 617/495-8570 E-Mail: pantras@fas.harvard.edu C. Fritz Foley Graduate School of Business Administration Harvard University Soldiers Field Boston, MA 02163 Tel: 617/495-6375 Fax: 617/496-8443 E-Mail: ffoley@hbs.edu AB - This paper analyzes the financing terms that support international trade and sheds light on how and why these arrangements affect trade. Using detailed transaction level data from a U.S. based exporter of frozen and refrigerated food products, primarily poultry, it begins by describing broad patterns about the use of alternative financing terms. These patterns help discipline a model in which the trade finance mode is shaped by the risk that an importer defaults on an exporter and by the possibility that an exporter does not deliver goods as specified in the contract. The empirical results indicate that transactions are more likely to occur on cash in advance or letter of credit terms when the importer is located in a country with weak contractual enforcement and in a country that is further from the exporter. Letters of credit, however, are rarely used by the exporter. As an importer develops a relationship with the exporter, transactions are less likely to occur on terms that require prepayment. During the recent crisis, the exporter was more likely to demand cash in advance terms when transacting with new customers, and customers that traded on cash in advance terms prior to the crisis disproportionately reduced their purchases. These results can be rationalized by the model whenever (i) misbehavior on the part of the exporter is of little concern to importers, and (ii) local banks in importing countries are typically more effective than the exporter in pursuing financial claims against importers. ER - TY - JOUR AU - Baele,Lieven AU - Bekaert,Geert AU - Cho,Seonghoon AU - Inghelbrecht,Koen AU - Moreno,Antonio TI - Macroeconomic Regimes JF - National Bureau of Economic Research Working Paper Series VL - No. 17090 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17090 L1 - http://www.nber.org/papers/w17090.pdf N1 - Author contact info: Lieven Baele Tilburg University 5000 LE Tilburg The Netherlands E-Mail: Lieven.Baele@uvt.nl Geert Bekaert Graduate School of Business Columbia University 3022 Broadway, 411 Uris Hall New York, NY 10027 Tel: 212/854-9156 Fax: 212/662-8474 E-Mail: gb241@columbia.edu Seonghoon Cho School of Economics Yonsei University Seoul 120-749, Korea E-Mail: sc719@yonsei.ac.kr Koen Inghelbrecht Department Finance Faculty of Business Administration and Public Administration University College Ghent Voskenslaan 270 B-9000 Gent, Belgium E-Mail: Koen.Inghelbrecht@hogent.be Antonio Moreno Department of Economics University of Navarra E-Mail: antmoreno@unav.es AB - We estimate a New-Keynesian macro model accommodating regime-switching behavior in monetary policy and in macro shocks. Key to our estimation strategy is the use of survey-based expectations for inflation and output. We identify accommodating monetary policy before 1980, with activist monetary policy prevailing most but not 100% of the time thereafter. Systematic monetary policy switched to the activist regime in the 2000-2005 period through an aggressive lowering of interest rates. Discretionary policy spells became less frequent since 1985, but the Volcker period is identified as a discretionary period. Output shocks shift to the low volatility regime around 1985 whereas inflation shocks do so only around 1990, suggesting active monetary policy may have played role in anchoring inflation expectations. Shocks and policy regimes jointly drive the volatility of the macro variables. We provide new estimates of the onset and demise of the Great Moderation and the relative role played by macro-shocks and monetary policy. ER - TY - JOUR AU - Bui,Sa A. AU - Craig,Steven G. AU - Imberman,Scott A. TI - Is Gifted Education a Bright Idea? Assessing the Impact of Gifted and Talented Programs on Achievement JF - National Bureau of Economic Research Working Paper Series VL - No. 17089 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17089 L1 - http://www.nber.org/papers/w17089.pdf N1 - Author contact info: Sa Bui University of Houston 204 McElhinney Hall Houston, TX 77204-5019 E-Mail: sabui2@mail.uh.edu Steven G.. Craig University of Houston Department of Economics 204 McElhinney Hall Houston, TX 77204-5019 E-Mail: scraig@uh.edu Scott A. Imberman Department of Economics University of Houston 204 McElhinney Hall Houston, TX 77204 Tel: 713/743-3839 Fax: 713/743-3798 E-Mail: simberman@uh.edu AB - In this paper we determine how the receipt of gifted and talented (GT) services affects student outcomes. We identify the causal relationship by exploiting a discontinuity in eligibility requirements and find that for students on the margin there is no discernable impact on achievement even though peers improve substantially. We then use randomized lotteries to examine the impact of attending a GT magnet program relative to GT programs in other schools and find that, despite being exposed to higher quality teachers and peers that are one standard deviation higher achieving, only science achievement improves. We argue that these results are consistent with an invidious comparison model of peer effects offsetting other benefits. Evidence of large reductions in course grades and rank relative to peers in both regression discontinuity and lottery models are consistent with this explanation. ER - TY - JOUR AU - Card,David AU - Giuliano,Laura TI - Peer Effects and Multiple Equilibria in the Risky Behavior of Friends JF - National Bureau of Economic Research Working Paper Series VL - No. 17088 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17088 L1 - http://www.nber.org/papers/w17088.pdf N1 - Author contact info: David Card Department of Economics 549 Evans Hall, #3880 University of California, Berkeley Berkeley, CA 94720-3880 Tel: 510/642-5222 Fax: 510/643-7042 E-Mail: card@econ.berkeley.edu Laura Giuliano Department of Economics University of Miami P.O. Box 248126 Coral Gables, FL 33124-6550 Tel: 305-284-1628 E-Mail: l.giuliano@miami.edu AB - We study social interactions in the risky behavior of best-friend pairs in the National Longitudinal Study of Adolescent Health (Add Health). Focusing on friends who had not yet initiated a particular behavior (sex, smoking, marijuana use, truancy) by the first wave of the survey, we estimate bivariate discrete choice models for their subsequent decisions that include peer effects and unobserved heterogeneity. Social interactions can lead to multiple equilibria in friends’ choices: we consider simple equilibrium selection models as well as partial likelihood models that remain agnostic about the choice of equilibrium. Our identification strategy assumes that there is at least one individual characteristic (e.g., physical development) that does not directly affect a friend’s propensity to engage in a risky activity. Our estimates suggest that patterns of initiation of risky behavior by adolescent friends exhibit significant interaction effects. The likelihood that one friend initiates intercourse within a year of the baseline interview increases by 4 percentage points (on a base of 14%) if the other also initiates intercourse, holding constant family and individual factors. Similar effects are also present for smoking, marijuana use, and truancy. We find larger peer effects for females and for pairs that are more likely to remain best friends after a year. We also find important asymmetries in the strength of the peer effects in non-reciprocated friendships. ER - TY - JOUR AU - Rausch,Sebastian AU - Metcalf,Gilbert E. AU - Reilly,John M. TI - Distributional Impacts of Carbon Pricing: A General Equilibrium Approach with Micro-Data for Households JF - National Bureau of Economic Research Working Paper Series VL - No. 17087 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17087 L1 - http://www.nber.org/papers/w17087.pdf N1 - Author contact info: Sebastian Rausch Joint Program on the Science and Policy of Global Change Massachusetts Institute of Technology 1 Amherst St. (Bldg. E40) Cambridge, MA 02139 E-Mail: rausch@mit.edu Gilbert E. Metcalf Room 3221 Department of the Treasury Washington, DC 20220 1500 Pennsylvania Ave., NW Tel: 202-622-0173 E-Mail: gilbert.metcalf@tufts.edu John Reilly Joint Program on the Science and Policy of Global Change Massachusetts Institute of Technology 1 Amherst St. (Bldg. E40) Cambridge, MA 02139 E-Mail: jreilly@mit.edu AB - Many policies to limit greenhouse gas emissions have at their core efforts to put a price on carbon emissions. Carbon pricing impacts households both by raising the cost of carbon intensive products and by changing factor prices. A complete analysis requires taking both effects into account. The impact of carbon pricing is determined by heterogeneity in household spending patterns across income groups as well as heterogeneity in factor income patterns across income groups. It is also affected by precise formulation of the policy (how is the revenue from carbon pricing distributed) as well as the treatment of other government policies (e.g. the treatment of transfer payments). What is often neglected in analyses of policy is the heterogeneity of impacts across households even within income or regional groups. In this paper, we incorporate 15,588 households from the U.S. Consumer and Expenditure Survey data as individual agents in a comparative-static general equilibrium framework. These households are represented within the MIT USREP model, a detailed general equilibrium model of the U.S. economy. In particular, we categorize households by full household income (factor income as well as transfer income) and apply various measures of lifetime income to distinguish households that are temporarily low-income (e.g., retired households drawing down their financial assets) from permanently low-income households. We also provide detailed within-group distributional measures of burden impacts from various policy scenarios. ER - TY - JOUR AU - Gowrisankaran,Gautam AU - Reynolds,Stanley S. AU - Samano,Mario TI - Intermittency and the Value of Renewable Energy JF - National Bureau of Economic Research Working Paper Series VL - No. 17086 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17086 L1 - http://www.nber.org/papers/w17086.pdf N1 - Author contact info: Gautam Gowrisankaran Professor of Economics Department of Economics University of Arizona P.O. Box 210108 Tucson, AZ 85721-0108 Tel: 520/621-2529 Fax: 520/621-8450 E-Mail: gowrisankaran@eller.arizona.edu Stanley Reynolds Professor of Economics Department of Economics P.O. Box 210108 Tucson, AZ 85721 E-Mail: reynolds@eller.arizona.edu Mario Samano Department of Economics University of Arizona P.O. Box 210108 Tucson, AZ 85721 E-Mail: msamano@email.arizona.edu AB - This paper develops an empirical approach to estimate the equilibrium value of intermittent renewable energy. We model an electricity system operator who optimizes the amount of generation capacity, operating reserves, and demand curtailment potentially in the presence of large-scale solar facilities. We use generator characteristics, solar output, demand and weather forecast data to estimate parameters for southeastern Arizona. The deadweight loss of a 20% solar mandate is 79% of its $184/MWh average cost. Unforecastable intermittency accounts for $12.5/MWh. At a $21/ton social cost of CO2 this mandate is welfare neutral if solar capacity costs decrease from $5/W to $1.38/W. ER - TY - JOUR AU - DeCicca,Philip AU - Smith,Justin D. TI - The Long-Run Impacts of Early Childhood Education: Evidence From a Failed Policy Experiment JF - National Bureau of Economic Research Working Paper Series VL - No. 17085 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17085 L1 - http://www.nber.org/papers/w17085.pdf N1 - Author contact info: Philip DeCicca Department of Economics 422 Kenneth Taylor Hall McMaster University Hamilton, ON L8S 4M4 CANADA Tel: 905/525-9140 E-Mail: decicca@mcmaster.ca Justin D. Smith Department of Economics Wilfrid Laurier University P3090, 75 University Ave. W. Waterloo, Ontario, Canada N2L 3C5 E-Mail: jusmith@wlu.ca AB - We investigate short and long-term effects of early childhood education using variation created by a unique policy experiment in British Columbia, Canada. Our findings imply starting Kindergarten one year late substantially reduces the probability of repeating the third grade, and meaningfully increases in tenth grade math and reading scores. Effects are highest for low income students and males. Estimates suggest that entering kindergarten early may have a detrimental effect on future outcomes. ER - TY - JOUR AU - Galí,Jordi AU - Smets,Frank AU - Wouters,Rafael TI - Unemployment in an Estimated New Keynesian Model JF - National Bureau of Economic Research Working Paper Series VL - No. 17084 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17084 L1 - http://www.nber.org/papers/w17084.pdf N1 - Author contact info: Jordi Gali Centre de Recerca en Economia Internacional (CREI) Ramon Trias Fargas 25 08005 Barcelona SPAIN Tel: 011-34-93-5422754 Fax: 011-34-93-5421860 E-Mail: jgali@crei.cat Frank Smets European Central Bank Postfach 16 03 19 D-60311 Frankfurt GERMANY E-Mail: frank.smets@ecb.int Rafael Wouters National Bank of Belgium B-1000 Brussels BELGIUM E-Mail: rafael.wouters@nbb.be M3 - presented at "26th Annual Conference on Macroeconomics", April 8-9, 2011 AB - We reformulate the Smets-Wouters (2007) framework by embedding the theory of unemployment proposed in Galí (2011a,b). We estimate the resulting model using postwar U.S. data, while treating the unemployment rate as an additional observable variable. Our approach overcomes the lack of identification of wage markup and labor supply shocks highlighted by Chari, Kehoe and McGrattan (2008) in their criticism of New Keynesian models, and allows us to estimate a "correct" measure of the output gap. In addition, the estimated model can be used to analyze the sources of unemployment fluctuations. ER - TY - JOUR AU - Heutel,Garth TI - Optimal Policy Instruments for Externality-Producing Durable Goods Under Time Inconsistency JF - National Bureau of Economic Research Working Paper Series VL - No. 17083 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17083 L1 - http://www.nber.org/papers/w17083.pdf N1 - Author contact info: Garth Heutel Bryan 466, Department of Economics University of North Carolina at Greensboro P. O. Box 26170 Greensboro, NC 27402 Tel: 336/334-4872 Fax: 336/334-5580 E-Mail: gaheutel@uncg.edu AB - When consumers exhibit present bias and are time-inconsistent, the standard solution to market failures caused by externalities—Pigouvian pricing—is suboptimal. I investigate policies aimed at externalities for time-inconsistent consumers. Welfare-maximizing policy in this case includes an instrument to correct the externality and an instrument to correct the present bias. Either instrument can be an incentive-based policy or a command-and-control policy. Calibrated to the US automobile market, simulation results from a model with time-inconsistent consumers suggest that the second-best gasoline tax is 18%–30% higher than marginal external damages. These simulations also suggest that social welfare is maximized with a gasoline tax set about equal to marginal external damages and a fuel economy tax that increases the price of an average non-hybrid car by about $750–$2200 relative to the price of an average hybrid car. ER - TY - JOUR AU - Ponds,Eduard AU - Severinson,Clara AU - Yermo,Juan TI - Funding in Public Sector Pension Plans - International Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 17082 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17082 L1 - http://www.nber.org/papers/w17082.pdf N1 - Author contact info: Eduard Ponds Tilburg University Economics of Collective Pension Plans The Netherlands E-Mail: eduard.ponds@apg-am.nl Clara Severinson OECD Financial Affairs Division 2 Rue André Pascal 75016 Paris FRANCE E-Mail: Clara.SEVERINSON@oecd.org Juan Yermo OECD Directorate For Financial and Enterprise Affaires 2, rue André Pascal 75016 Paris E-Mail: Juan.YERMO@oecd.org M3 - presented at "State and Local Pensions Conference", August 19-20, 2010 AB - Most countries have separate pension plan for public sector employees. The future fiscal burden of these plans can be substantial as the government usually is the largest employer, pension promises in the public sector tend to be relatively generous, and future payments have to be paid out directly from government revenues (pay-as-you-go) or by funded plans (pension funds) which tend to be underfunded. The valuation and disclosure of these promises in some countries lacks transparency, which may be hiding potentially huge fiscal liabilities that are being passed on to future generations of workers. In order to arrive at a fair comparison between countries regarding the fiscal burden of their DB public sector pension plans, this paper gathers more evidence on public sector pension plans regarding the type of pension promise and quantifies the future tax burden related to these pension promises. The reported liabilities are recalculated using both a fair value approach (local market discount rates) and a common, fixed discount rate across all countries which reflects projected growth in national income. We also estimate for a number of plans from a sample of OECD countries the size of the net unfunded liabilities in fair value terms as of the end of 2008. This fiscal burden can also be interpreted as the implicit pension debt in fair value terms. ER - TY - JOUR AU - Cawley,John AU - Ruhm,Christopher TI - The Economics of Risky Health Behaviors JF - National Bureau of Economic Research Working Paper Series VL - No. 17081 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17081 L1 - http://www.nber.org/papers/w17081.pdf N1 - Author contact info: John Cawley 3M24 MVR Hall Department of Policy Analysis and Management and Department of Economics Cornell University Ithaca, NY 14853 Tel: 607/255-0952 Fax: 607/255-4071 E-Mail: jhc38@cornell.edu Christopher J. Ruhm Frank Batten School of Leadership and Public Policy University of Virginia 235 McCormick Rd. P.O. Box 400893 Charlottesville, VA 22904-40893 Tel: 434-243-3729 E-Mail: ruhm@virginia.edu AB - Risky health behaviors such as smoking, drinking alcohol, drug use, unprotected sex, and poor diets and sedentary lifestyles (leading to obesity) are a major source of preventable deaths. This chapter overviews the theoretical frameworks for, and empirical evidence on, the economics of risky health behaviors. It describes traditional economic approaches emphasizing utility maximization that, under certain assumptions, result in Pareto-optimal outcomes and a limited role for policy interventions. It also details nontraditional models (e.g. involving hyperbolic time discounting or bounded rationality) that even without market imperfections can result in suboptimal outcomes for which government intervention has greater potential to increase social welfare. The chapter summarizes the literature on the consequences of risky health behaviors for economic outcomes such as medical care costs, educational attainment, employment, wages, and crime. It also reviews the research on policies and strategies with the potential to modify risky health behaviors, such as taxes or subsidies, cash incentives, restrictions on purchase and use, providing information and restricting advertising. The chapter concludes with suggestions for future research. ER - TY - JOUR AU - Boersch-Supan,Axel H. AU - Juerges,Hendrik TI - Disability, Pension Reform and Early Retirement in Germany JF - National Bureau of Economic Research Working Paper Series VL - No. 17079 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17079 L1 - http://www.nber.org/papers/w17079.pdf N1 - Author contact info: Axel H. Boersch-Supan Munich Center for the Economics of Aging Max Planck Institute for Social Law and Social Policy Amalienstrasse 33 80779 Munich GERMANY Tel: +49 (89) 3860-2355 Fax: 49 (89) 3860-2390 E-Mail: axel@boersch-supan.de Hendrik Juerges Schumpeter School of Business and Economics University of Wuppertal Rainer-Gruenter-Str. 21 [FN.01] 42119 Wuppertal GERMANY Tel: +49-621-181-3519 Fax: +49-621-181-1863 E-Mail: juerges@uni-wuppertal.de M3 - presented at "International Social Security Conference", May 2, 2011 AB - The aim of this paper is to describe for (West) Germany the historical relationship between health and disability on the one hand and old-age labor force participation or early retirement on the other hand. We explore how both are linked with various pension reforms. To put the historical developments into context, the paper first describes the most salient features and reforms of the pension system since the 1960s. Then we show how mortality, health and labor force participation of the elderly have changed since the 1970. While mortality (as our main measure of health) has continuously decreased and population health improved, labor force participation has also decreased, which is counterintuitive. We then look at a number of specific pension reforms in the 1970s and 1980s and show that increasing or decreasing the generosity of the pension system has had the expected large effects on old-age labor force participation. Finally, we explore the possible link between early childhood environment and early retirement by analyzing the retirement behavior of cohorts born during World War I, a period of harsh living conditions among the civilian population in Germany. Our data show higher early retirement rates among those cohorts, presumably because those cohorts still suffer from worse health on average many decades after their birth. ER - TY - JOUR AU - Acemoglu,Daron AU - Jackson,Matthew O. TI - History, Expectations, and Leadership in the Evolution of Social Norms JF - National Bureau of Economic Research Working Paper Series VL - No. 17066 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17066 L1 - http://www.nber.org/papers/w17066.pdf N1 - Author contact info: Daron Acemoglu Department of Economics MIT, E52-380B 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-1927 Fax: 617/253-1330 E-Mail: daron@mit.edu Matthew Jackson Department of Economics Stanford University Stanford, CA 94305-6072 Tel: 650 723 3544 E-Mail: jacksonm@stanford.edu AB - We study the evolution of the social norm of “cooperation” in a dynamic environment. Each agent lives for two periods and interacts with agents from the previous and next generations via a coordination game. Social norms emerge as patterns of behavior that are stable in part due to agents’ interpretations of private information about the past, which are influenced by occasional past behaviors that are commonly observed. We first characterize the (extreme) cases under which history completely drives equilibrium play, leading to a social norm of high or low cooperation. In intermediate cases, the impact of history is potentially countered by occasional “prominent” agents, whose actions are visible by all future agents, and who can leverage their greater visibility to influence expectations of future agents and overturn social norms of low cooperation. We also show that in equilibria not completely driven by history, there is a pattern of “reversion” whereby play starting with high (low) cooperation reverts toward lower (higher) cooperation. ER - TY - JOUR AU - Orphanides,Athanasios AU - Williams,John TI - Monetary Policy Mistakes and the Evolution of Inflation Expectations JF - National Bureau of Economic Research Working Paper Series VL - No. 17080 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17080 L1 - http://www.nber.org/papers/w17080.pdf N1 - Author contact info: Athanasios Orphanides Central Bank of Cyprus 80 Kennedy Avenue 1076 Nicosia, Cyprus E-Mail: athanasios.orphanides@gmail.com John Williams Federal Reserve Bank of San Francisco Executive Offices 101 Market St. San Francisco, CA 94105 Tel: (415) 974-2121 E-Mail: john.c.williams@sf.frb.org M3 - presented at "The Great Inflation Conference", September 25-27, 2008 AB - What monetary policy framework, if adopted by the Federal Reserve, would have avoided the Great Inflation of the 1960s and 1970s? We use counterfactual simulations of an estimated model of the U.S. economy to evaluate alternative monetary policy strategies. We show that policies constructed using modern optimal control techniques aimed at stabilizing inflation, economic activity, and interest rates would have succeeded in achieving a high degree of economic stability as well as price stability only if the Federal Reserve had possessed excellent information regarding the structure of the economy or if it had acted as if it placed relatively low weight on stabilizing the real economy. Neither condition held true. We document that policymakers at the time both had an overly optimistic view of the natural rate of unemployment and put a high priority on achieving full employment. We show that in the presence of realistic informational imperfections and with an emphasis on stabilizing economic activity, an optimal control approach would have failed to keep inflation expectations well anchored, resulting in high and highly volatile inflation during the 1970s. Finally, we show that a strategy of following a robust first-difference policy rule would have been highly effective at stabilizing inflation and unemployment in the presence of informational imperfections. This robust monetary policy rule yields simulated outcomes that are close to those seen during the period of the Great Moderation starting in the mid-1980s. ER - TY - JOUR AU - Lusardi,Annamaria AU - Mitchell,Olivia S. TI - Financial Literacy and Planning: Implications for Retirement Wellbeing JF - National Bureau of Economic Research Working Paper Series VL - No. 17078 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17078 L1 - http://www.nber.org/papers/w17078.pdf N1 - Author contact info: Annamaria Lusardi The George Washington University School of Business 2201 G Street, NW Duques Hall, Suite 450E Washington, DC 20052 Tel: 202-994-8410 E-Mail: alusardi@gwu.edu Olivia S. Mitchell University of Pennsylvania Wharton School 3620 Locust Walk, St 3000 SH-DH Philadelphia, PA 19104-6302 Tel: 215-898-0424 Fax: 215/898-0310 E-Mail: mitchelo@wharton.upenn.edu AB - Relatively little is known about why people fail to plan for retirement and whether planning and information costs might affect retirement saving patterns. This paper reports on a purpose-built survey module on planning and financial literacy for the Health and Retirement Study which measures how people make financial plans, collect the information needed to make these plans, and implement the plans. We show that financial illiteracy is widespread among older Americans, particularly women, minorities, and the least educated. We also find that the financially savvy are more likely to plan and to succeed in their planning, and they rely on formal methods such as retirement calculators, retirement seminars, and financial experts, instead of family/relatives or co-workers. These results have implications for targeted financial education efforts. ER - TY - JOUR AU - Lusardi,Annamaria AU - Mitchell,Olivia S. TI - The Outlook for Financial Literacy JF - National Bureau of Economic Research Working Paper Series VL - No. 17077 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17077 L1 - http://www.nber.org/papers/w17077.pdf N1 - Author contact info: Annamaria Lusardi The George Washington University School of Business 2201 G Street, NW Duques Hall, Suite 450E Washington, DC 20052 Tel: 202-994-8410 E-Mail: alusardi@gwu.edu Olivia S. Mitchell University of Pennsylvania Wharton School 3620 Locust Walk, St 3000 SH-DH Philadelphia, PA 19104-6302 Tel: 215-898-0424 Fax: 215/898-0310 E-Mail: mitchelo@wharton.upenn.edu AB - As the world becomes more financially integrated and complex, average individuals and their families are increasingly faced with making highly sophisticated and all-too-often irreversible financial decisions. Nowhere is this more evident than with regard to retirement decision-making. Indeed, the global financial crisis suggests that poor financial decision-making can have substantial costs not only for individuals but also society at large. This paper focuses on key lessons for financial decision-making in the wake of that crisis, exploring how financial literacy can enhance peoples’ skills and abilities to make more informed economic choices. ER - TY - JOUR AU - Igan,Deniz AU - Mishra,Prachi AU - Tressel,Thierry TI - A Fistful of Dollars: Lobbying and the Financial Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 17076 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17076 L1 - http://www.nber.org/papers/w17076.pdf N1 - Author contact info: Deniz Igan International Monetary Fund Research Department, HQ1-9-700 700 19th St NW Washington, DC 20431 Tel: 202-623-4743 E-Mail: digan@imf.org Prachi Mishra International Monetary Fund Research Department, HQ1-9-718 700, 19th Street NW Washington DC 20431 Tel: 202-623-9409 Fax: 202-589-9409 E-Mail: pmishra@imf.org Thierry Tressel International Monetary Fund European Department, HQ1-9-302, 700, 19th Street NW Washington DC 20431 E-Mail: ttressel@imf.org M3 - presented at "26th Annual Conference on Macroeconomics", April 8-9, 2011 AB - Has lobbying by financial institutions contributed to the financial crisis? This paper uses detailed information on financial institutions’ lobbying and mortgage lending activities to answer this question. We find that lobbying was associated with more risk-taking during 2000-07 and with worse outcomes in 2008. In particular, lenders lobbying more intensively on issues related to mortgage lending and securitization (i) originated mortgages with higher loan-to-income ratios, (ii) securitized a faster growing proportion of their loans, and (iii) had faster growing originations of mortgages. Moreover, delinquency rates in 2008 were higher in areas where lobbying lenders’ mortgage lending grew faster. These lenders also experienced negative abnormal stock returns during the rescue of Bear Stearns and the collapse of Lehman Brothers, but positive abnormal returns when the bailout was announced. Finally, we find a higher bailout probability for lobbying lenders. These findings suggest that lending by politically active lenders played a role in accumulation of risks and thus contributed to the financial crisis. ER - TY - JOUR AU - Galor,Oded AU - Michalopoulos,Stelios TI - Evolution and the Growth Process: Natural Selection of Entrepreneurial Traits JF - National Bureau of Economic Research Working Paper Series VL - No. 17075 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17075 L1 - http://www.nber.org/papers/w17075.pdf N1 - Author contact info: Oded Galor Department of Economics Brown University Box B Providence, RI 02912 Tel: 401/863-2117 Fax: 401/863-1970 E-Mail: oded_galor@brown.edu Stelios Michalopoulos Brown University Department of Economics 64 Waterman Street Providence, RI 02912 Tel: 401/863-2506 Fax: 401/863-1970 E-Mail: smichalo@brown.edu AB - This research suggests that a Darwinian evolution of entrepreneurial spirit played a significant role in the process of economic development and the dynamics of inequality within and across societies. The study argues that entrepreneurial spirit evolved non-monotonically in the course of human history. In early stages of development, risk-tolerant, growth promoting traits generated an evolutionary advantage and their increased representation accelerated the pace of technological progress and the process of economic development. In mature stages of development, however, risk-averse traits gained an evolutionary advantage, diminishing the growth potential of advanced economies and contributing to convergence in economic growth across countries. ER - TY - JOUR AU - Edwards,Sebastian TI - Exchange Rates in Emerging Countries: Eleven Empirical Regularities from Latin America and East Asia JF - National Bureau of Economic Research Working Paper Series VL - No. 17074 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17074 L1 - http://www.nber.org/papers/w17074.pdf N1 - Author contact info: Sebastian Edwards UCLA Anderson Graduate School of Business 110 Westwood Plaza, Suite C508 Box 951481 Los Angeles, CA 90095-1481 Tel: 310/206-6797 Fax: 310/206-5825 E-Mail: sebastian.edwards@anderson.ucla.edu AB - In this paper I discuss some of the most important lessons on exchange rate policies in emerging markets during the last 35 years. The analysis is undertaken from the perspective of both the Latin American and East Asian nations. Some of the topics addressed include: the relationship between exchange rate regimes and growth, the costs of currency crises, the merits of “dollarization,” the relation between exchange rates and macroeconomic stability, monetary independence under alternative exchange rate arrangements, and the effects of the recent global “currency wars” on exchange rates in commodity exporters. ER - TY - JOUR AU - Rose,Andrew K. AU - Wieladek,Tomasz TI - Financial Protectionism: the First Tests JF - National Bureau of Economic Research Working Paper Series VL - No. 17073 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17073 L1 - http://www.nber.org/papers/w17073.pdf N1 - Author contact info: Andrew K. Rose Haas School of Business Administration University of California, Berkeley Berkeley, CA 94720-1900 Tel: 510/642-6609 Fax: 510/642-4700 E-Mail: arose@haas.berkeley.edu Tomasz Wieladek Economics Department London Business School Sussex Place London NW1 4SA England E-Mail: twieladek@london.edu AB - We provide the first empirical tests for financial protectionism, defined as a nationalistic change in banks’ lending behaviour, as the result of public intervention, which leads domestic banks either to lend less or at higher interest rates to foreigners. We use a bank-level panel data set spanning all British and foreign banks providing loans within the United Kingdom between 1997Q3 and 2010Q1. During this time, a number of banks were nationalised, privatised, given unusual access to loan or credit guarantees, or received capital injections. We use standard empirical panel-data techniques to study the “loan mix,” domestic (British) loans of a bank expressed as a fraction of its total loan activity. We also study effective short-term interest rates, though our data set here is much smaller. We examine the loan mix for both British and foreign banks, both before and after unusual public interventions such as nationalisations and public capital injections. We find strong evidence of financial protectionism. After nationalisations, foreign banks reduced the fraction of loans going to the UK by about eleven percentage points and increased their effective interest rates by about 70 basis points. By way of contrast, nationalised British banks did not significantly change either their loan mix or effective interest rates. Succinctly, foreign nationalised banks seem to have engaged in financial protectionism, while British nationalised banks have not. ER - TY - JOUR AU - Lusardi,Annamaria AU - Schneider,Daniel J. AU - Tufano,Peter TI - Financially Fragile Households: Evidence and Implications JF - National Bureau of Economic Research Working Paper Series VL - No. 17072 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17072 L1 - http://www.nber.org/papers/w17072.pdf N1 - Author contact info: Annamaria Lusardi The George Washington University School of Business 2201 G Street, NW Duques Hall, Suite 450E Washington, DC 20052 Tel: 202-994-8410 E-Mail: alusardi@gwu.edu Daniel J. Schneider Princeton University Department of Sociology Office of Population Research Princeton, NJ 08544 E-Mail: djschnei@princeton.edu Peter Tufano Peter Moores Dean University of Oxford Saïd Business School Park End Street Oxford OX1 1HP UK Tel: +1 44(0) 1865 288 812 E-Mail: peter.tufano@sbs.ox.ac.uk AB - This paper examines households’ financial fragility by looking at their capacity to come up with $2,000 in 30 days. Using data from the 2009 TNS Global Economic Crisis survey, we document widespread financial weakness in the United States: Approximately one quarter of Americans report that they would certainly not be able to come up with such funds, and an additional 19% would do so by relying at least in part on pawning or selling possessions or taking payday loans. If we consider the respondents who report being certain or probably not able to cope with an ordinary financial shock of this size, we find that nearly half of Americans are financially fragile. While financial fragility is more severe among those with low educational attainment and no financial education, families with children, those who suffered large wealth losses, and those who are unemployed, a sizable fraction of seemingly “middle class” Americans also judge themselves to be financially fragile. We examine the coping methods people use to deal with shocks. While savings is used most often, relying on family and friends, using formal and alternative credit, increasing work hours, and selling items are also used frequently to deal with emergencies, especially for some subgroups. Household finance researchers must look beyond precautionary savings to understand how families cope with risk. We also find evidence of a “pecking order” of coping methods in which savings appears to be first in the ordering. Finally, the paper compares the levels of financial fragility and methods of coping among eight industrialized countries. While there are differences in coping ability across countries, there is general evidence of a consistent ordering of coping methods ER - TY - JOUR AU - Justiniano,Alejandro AU - Primiceri,Giorgio E. AU - Tambalotti,Andrea TI - Is there a trade-off between inflation and output stabilization? JF - National Bureau of Economic Research Working Paper Series VL - No. 17071 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17071 L1 - http://www.nber.org/papers/w17071.pdf N1 - Author contact info: Alejandro Justiniano Economic Research Department Federal Reserve Bank of Chicago 230 S. LaSalle Street Chicago, IL 60604 Tel: 312/322-5900 E-Mail: ajustiniano@frbchi.org Giorgio Primiceri Department of Economics Northwestern University 318 Andersen Hall 2001 Sheridan Road Evanston, IL 60208-2600 Tel: 847/491-5395 Fax: 847/491-7001 E-Mail: g-primiceri@northwestern.edu Andrea Tambalotti Federal Reserve Bank of New York 33 Liberty Street, 3rd Floor New York, NY 10045 E-Mail: a.tambalotti@gmail.com AB - Not in an estimated DSGE model of the US economy, once we account for the fact that most of the high-frequency volatility in wages appears to be due to noise, rather than to variation in workers' preferences or market power. ER - TY - JOUR AU - Garthwaite,Craig L. TI - The Doctor Might See You Now: The Supply Side Effects of Public Health Insurance Expansions JF - National Bureau of Economic Research Working Paper Series VL - No. 17070 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17070 L1 - http://www.nber.org/papers/w17070.pdf N1 - Author contact info: Craig Garthwaite Department of Management and Strategy Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-2509 Fax: 847/467-1777 E-Mail: c-garthwaite@kellogg.northwestern.edu AB - In the United States, public health insurance programs cover over 90 million individuals. Changes in the scope of these programs, such as the Medicaid expansions under the recently passed Patient Protection and Affordable Care Act, may have large effects on physician behavior. This study finds that following the implementation of the State Children’s Health Insurance Program, physicians decreased the number of hours spent with patients, but increased their participation in the expanded program. Suggestive evidence is found that this decrease in hours was a result of shorter office visits. These findings are consistent with the predictions from a mixed-economy model of physician behavior with public and private payers and also provide evidence of crowd out resulting from the creation of SCHIP. ER - TY - JOUR AU - Cataife,Guido AU - Courtemanche,Charles J. TI - Is Universal Health Care in Brazil Really Universal? JF - National Bureau of Economic Research Working Paper Series VL - No. 17069 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17069 L1 - http://www.nber.org/papers/w17069.pdf N1 - Author contact info: Guido Cataife ICF International 3 Corporate Square NE Suite 370 Atlanta, GA 30329 E-Mail: gcataife@icfi.com Charles J. Courtemanche University of Louisville College of Business Department of Economics Louisville, KY 40292 Tel: 502-852-4854 Fax: 502-852-7672 E-Mail: cjcour02@louisville.edu AB - Since Brazil's adoption of a universal health care policy in 1988, the country's health care has been delivered by a mix of private providers and free public providers. We examine whether income-based disparities in medical care usage still exist after the development of the public network using a nationally representative sample of over 46,000 Brazilians from 2003. We find robust evidence of a positive association between income and doctor visits, private doctor visits, and private medical expenditures. Interestingly, we also find a pro-rich disparity in public doctor visits that disappears after including local area fixed effects to account for variation in availability and quality of medical services across localities. We then estimate the income elasticity of private medical expenditures to be well below one, suggesting that private care remains a necessity despite the availability of free public care. These results suggest that the public health care system in Brazil is not effectively reaching the segments of the population that need it most. ER - TY - JOUR AU - Dave,Dhaval M. AU - Tennant,Jennifer AU - Colman,Gregory J. TI - Isolating the Effect of Major Depression on Obesity: Role of Selection Bias JF - National Bureau of Economic Research Working Paper Series VL - No. 17068 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17068 L1 - http://www.nber.org/papers/w17068.pdf N1 - Author contact info: Dhaval M. Dave Bentley University Department of Economics 175 Forest Street, AAC 195 Waltham, MA 02452-4705 Tel: 212/817-7955 Fax: 212/817-1597 E-Mail: ddave@bentley.edu Jennifer Tennant Cornell University Department of Policy Analysis and Management 292 Martha Van Rensselaer Hall Ithaca, NY 14853 E-Mail: jrt229@cornell.edu Gregory J. Colman Pace University Department of Economics 41 Park Row, 11th Floor New York, NY 10038 Tel: 212/346-1102 E-Mail: gcolman@pace.edu AB - There is suggestive evidence that rates of major depression have risen markedly in the U.S. concurrent with the rise in obesity. The economic burden of depression, about $100 billion annually, is under-estimated if depression has a positive causal impact on obesity. If depression plays a causal role in increasing the prevalence of obesity, then policy interventions aimed at promoting mental health may also have the indirect benefits of promoting a healthy bodyweight. However, virtually the entire existing literature on the connection between the two conditions has examined merely whether they are significantly correlated, sometimes holding constant a limited set of demographic factors. This study utilizes multiple large-scale nationally-representative datasets to assess whether, and the extent to which, the positive association reflects a causal link from major depression to higher BMI and obesity. While contemporaneous effects are considered, the study primarily focuses on the effects of past and lifetime depression to bypass reverse causality and further assess the role of non-random selection on unobservable factors. There are expectedly no significant or substantial effects of current depression on BMI or overweight/obesity, given that BMI is a stock measure that changes relatively slowly over time. Results are also not supportive of a causal interpretation among males. However, among females, estimates indicate that past or lifetime diagnosis of major depression raises the probability of being overweight or obese by about seven percentage points. Results also suggest that this effect appears to plausibly operate through shifts in food consumption and physical activity. We estimate that this higher risk of overweight and obesity among females could potentially add about 10% (or $9.7 billion) to the estimated economic burden of depression. ER - TY - JOUR AU - Handbury,Jessie AU - Weinstein,David E. TI - Is New Economic Geography Right? Evidence from Price Data JF - National Bureau of Economic Research Working Paper Series VL - No. 17067 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17067 L1 - http://www.nber.org/papers/w17067.pdf N1 - Author contact info: Jessie Handbury Columbia University, Department of Economics 420 W. 118th Street MC 3308 New York, NY 10027 E-Mail: jhh2002@columbia.edu David Weinstein Columbia University, Department of Economics 420 W. 118th Street MC 3308 New York, NY 10027 Tel: 212/854-6880 Fax: 212/854-8059 E-Mail: dew35@columbia.edu AB - The agglomeration force behind the New Economic Geography literature initiated by Krugman is based on the notion that larger markets should have a lower variety adjusted price index. Despite his Nobel Prize, there have been no tests of this idea. This paper represents the first such test. Using a rich dataset covering 10-20 million purchases of grocery items, we find that after controlling for store and shopping effects: 1) Aggregate grocery prices are lower in larger cities; 2) Residents of larger cities have access to substantially more varieties than residents of smaller cities; and 3) These forces combine to substantially lower variety adjusted prices in large cities. In short, Krugman was right. ER - TY - JOUR AU - Mayer,Christopher J. AU - Morrison,Edward AU - Piskorski,Tomasz AU - Gupta,Arpit TI - Mortgage Modification and Strategic Behavior: Evidence from a Legal Settlement with Countrywide JF - National Bureau of Economic Research Working Paper Series VL - No. 17065 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17065 L1 - http://www.nber.org/papers/w17065.pdf N1 - Author contact info: Christopher J. Mayer Columbia Business School 3022 Broadway, Uris Hall #805 New York, NY 10027 Tel: 212/854-4221 Fax: 212-932-0545 E-Mail: cm310@columbia.edu Edward Morrison Columbia Law School Greene Hall, Room 819 435 W. 116th Street New York, NY 10027 E-Mail: emorri@law.columbia.edu Tomasz Piskorski Columbia Business School 3022 Broadway, Uris Hall 810 New York, NY 10027 Tel: 212-854-4655 E-Mail: tp2252@columbia.edu Arpit Gupta Columbia Law School Greene Hall 435 W. 116th Street New York, NY 10027 E-Mail: ag2968@columbia.edu AB - We investigate whether homeowners respond strategically to news of mortgage modification programs. We exploit plausibly exogenous variation in modification policy induced by U.S. state government lawsuits against Countrywide Financial Corporation, which agreed to offer modifications to seriously delinquent borrowers with subprime mortgages throughout the country. Using a difference-in-difference framework, we find that Countrywide’s relative delinquency rate increased thirteen percent per month immediately after the program’s announcement. The borrowers whose estimated default rates increased the most in response to the program were those who appear to have been the least likely to default otherwise, including those with substantial liquidity available through credit cards and relatively low combined loan-to-value ratios. These results suggest that strategic behavior should be an important consideration in designing mortgage modification programs. ER - TY - JOUR AU - Cole,Harold L. AU - Kubler,Felix TI - Recursive Contracts, Lotteries and Weakly Concave Pareto Sets JF - National Bureau of Economic Research Working Paper Series VL - No. 17064 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17064 L1 - http://www.nber.org/papers/w17064.pdf N1 - Author contact info: Harold L. Cole Economics Department University of Pennsylvania 3718 Locust Walk 160 McNeil Building Philadelphia, PA 19104 Tel: 215-898-7788 E-Mail: colehl@sas.upenn.edu Felix Kubler University of Zurich Plattenstrasse 32 CH-8032 Zurich Switzerland E-Mail: fkubler@gmail.com AB - Marcet and Marimon (1994, revised 1998, revised 2011) developed a recursive saddle point method which can be used to solve dynamic contracting problems that include participation, enforcement and incentive constraints. Their method uses a recursive multiplier to capture implicit prior promises to the agent(s) that were made in order to satisfy earlier instances of these constraints. As a result, their method relies on the invertibility of the derivative of the Pareto frontier and cannot be applied to problems for which this frontier is not strictly concave. In this paper we show how one can extend their method to a weakly concave Pareto frontier by expanding the state space to include the realizations of an end of period lottery over the extreme points of a flat region of the Pareto frontier. With this expansion the basic insight of Marcet and Marimon goes through – one can make the problem recursive in the Lagrangian multiplier which yields significant computational advantages over the conventional approach of using utility as the state variable. The case of a weakly concave Pareto frontier arises naturally in applications where the principal's choice set is not convex but where randomization is possible. ER - TY - JOUR AU - Bachmann,Rüdiger AU - Sims,Eric R. TI - Confidence and the Transmission of Government Spending Shocks JF - National Bureau of Economic Research Working Paper Series VL - No. 17063 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17063 L1 - http://www.nber.org/papers/w17063.pdf N1 - Author contact info: Ruediger Bachmann Department of Economics University of Michigan Lorch Hall 335 A Ann Arbor, MI 48109-1220 Tel: +1 (734) 764-0241 E-Mail: rudib@umich.edu Eric R. Sims Department of Economics University of Notre Dame 723 Flanner Hall South Bend, IN 46556 Tel: 574/631-6309 Fax: 574/631-4783 E-Mail: esims1@nd.edu AB - There seems to be a widespread belief among economists, policy-makers, and members of the media that the "confidence'" of households and businesses is a critical component in the transmission of fiscal policy shocks into economic activity. We take this proposition to the data using standard structural VARs with government spending and aggregate output augmented to include empirical measures of consumer or business confidence. We also estimate non-linear VAR specifications to allow for differential impacts of government spending in "normal'' times versus recessions. In normal times confidence does not react significantly to unexpected increases in government spending and spending multipliers are in the neighborhood of one; during recessions confidence rises and spending multipliers are significantly larger. We then quantify the importance of the systematic response of confidence to spending shocks for the spending multiplier and find that, in normal times, confidence is irrelevant for the transmission of government spending shocks to output, but during periods of economic slack it is important. We argue and present evidence that it is not confidence per se – in the sense of pure sentiment – that matters for the transmission of spending shocks during downturns, but rather that the composition of spending during a downtown is different. In particular, spending shocks during downturns predict future productivity improvements through a persistent increase in government investment relative to consumption, which is in turn reflected in higher measured confidence. ER - TY - JOUR AU - Ludwig,Jens AU - Kling,Jeffrey R. AU - Mullainathan,Sendhil TI - Mechanism Experiments and Policy Evaluations JF - National Bureau of Economic Research Working Paper Series VL - No. 17062 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17062 L1 - http://www.nber.org/papers/w17062.pdf N1 - Author contact info: Jens Ludwig University of Chicago 1155 East 60th Street Chicago, IL 60637 Tel: 773/834-0811 Fax: 773/834-1582 E-Mail: jludwig@uchicago.edu Jeffrey R. Kling Congressional Budget Office 3403 Ordway St NW Washington, DC 20016 E-Mail: jeffrey.r.kling@gmail.com Sendhil Mullainathan Department of Economics Littauer M-18 Harvard University Cambridge, MA 02138 Tel: 617/496-2720 Fax: 617/495-7730 E-Mail: mullain@fas.harvard.edu AB - Randomized controlled trials are increasingly used to evaluate policies. How can we make these experiments as useful as possible for policy purposes? We argue greater use should be made of experiments that identify behavioral mechanisms that are central to clearly specified policy questions, what we call “mechanism experiments.” These types of experiments can be of great policy value even if the intervention that is tested (or its setting) does not correspond exactly to any realistic policy option. ER - TY - JOUR AU - Schoar,Antoinette AU - Washington,Ebonya L. TI - Are the Seeds of Bad Governance Sown in Good Times? JF - National Bureau of Economic Research Working Paper Series VL - No. 17061 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17061 L1 - http://www.nber.org/papers/w17061.pdf N1 - Author contact info: Antoinette Schoar MIT Sloan School of Management 100 Main Street, E62-638 Cambridge, MA 02142 Tel: 617/253-3763 Fax: 617/258-6855 E-Mail: aschoar@mit.edu Ebonya L. Washington Yale University Box 8264 37 Hillhouse, Room 36 New Haven, CT 06520 Tel: 203/432-9901 Fax: 203/432-6323 E-Mail: ebonya.washington@yale.edu AB - This paper examines the extent to which the corporate governance structure of a firm arises endogenously in response to its performance. We demonstrate that following periods of abnormally good performance managers are more likely to call special meetings and to propose and pass governance measures that are contrary to shareholder interests (based on IRRC classification). These results are driven primarily by firms that are characterized as having poor governance according to either the GIM Index or the proportion of activist shareholders. Following these special meeting we find that next quarter performance of the firm is negative. Our results are consistent with an interpretation of shareholder inattention to governance following good firm performance or a desire to reward management for good past performance. Overall our evidence seems more consistent with the former interpretation. ER - TY - JOUR AU - Angeletos,George-Marios AU - La'O,Jennifer TI - Decentralization, Communication, and the Origins of Fluctuations JF - National Bureau of Economic Research Working Paper Series VL - No. 17060 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17060 L1 - http://www.nber.org/papers/w17060.pdf N1 - Author contact info: George-Marios Angeletos Department of Economics MIT E52-251 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/452-3859 Fax: 617/253-1330 E-Mail: angelet@mit.edu Jennifer La'O University of Chicago Booth School of Business 5807 S. Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-9768 E-Mail: jenlao@chicagobooth.edu AB - We consider a class of convex, competitive, neoclassical economies in which agents are rational; the equilibrium is unique; there is no room for randomization devices; and there are no shocks to preferences, technologies, endowments, or other fundamentals. In short, we rule out every known source of macroeconomic volatility. And yet, we show that these economies can be ridden with large and persistent fluctuations in equilibrium allocations and prices. These fluctuations emerge because decentralized trading impedes communication and, in so doing, opens the door to self-fulfilling beliefs despite the uniqueness of the equilibrium. In line with Keynesian thinking, these fluctuations may be attributed to “coordination failures” and “animal spirits”. They may also take the form of “fads”, or waves of optimism and pessimism that spread in the population like contagious diseases. Yet, these ostensibly pathological phenomena emerge at the heart of the neoclassical paradigm and require neither a deviation from rationality, nor multiple equilibria, nor even a divergence between private and social motives. ER - TY - JOUR AU - Harbaugh,William T. AU - Mocan,Naci H. AU - Visser,Michael S. TI - Theft and Deterrence JF - National Bureau of Economic Research Working Paper Series VL - No. 17059 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17059 L1 - http://www.nber.org/papers/w17059.pdf N1 - Author contact info: William T. Harbaugh Department of Economics University of Oregon Eugene, OR 97403-1285 Tel: 541/346-1244 Fax: 541/346-1243 E-Mail: harbaugh@uoregon.edu Naci H. Mocan Department of Economics Louisiana State University 2119 Patrick F. Taylor Hall Baton Rouge, LA 70803-6306 Tel: 225/578-4570 E-Mail: mocan@lsu.edu Michael S. Visser 1801 East Cotati Ave. Rohnert Park, CA 94928 E-Mail: visser@sonoma.edu AB - We report results from economic experiments of decisions that are best described as petty larceny, with high school and college students who can anonymously steal real money from each other. Our design allows exogenous variation in the rewards of crime, and the penalty and probability of detection. We find that the probability of stealing is increasing in the amount of money that can be stolen, and that it is decreasing in the probability of getting caught and in the penalty for getting caught. Furthermore, the impact of the certainty of getting caught is larger when the penalty is bigger, and the impact of the penalty is bigger when the probability of getting caught is larger. ER - TY - JOUR AU - Galor,Oded TI - Inequality, Human Capital Formation and the Process of Development JF - National Bureau of Economic Research Working Paper Series VL - No. 17058 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17058 L1 - http://www.nber.org/papers/w17058.pdf N1 - Author contact info: Oded Galor Department of Economics Brown University Box B Providence, RI 02912 Tel: 401/863-2117 Fax: 401/863-1970 E-Mail: oded_galor@brown.edu AB - Conventional wisdom about the relationship between income distribution and economic development has been subjected to dramatic transformations in the past century. While classical economists advanced the hypothesis that inequality is beneficial for growth, the neoclassical paradigm dismissed the classical hypothesis and suggested that income distribution has limited role in the growth process. A metamorphosis in these perspectives has taken place in the past two decades. Theory and subsequent empirical evidence have demonstrated that income distribution has a significant impact on human capital formation and the development process. In early stages of industrialization, as physical capital accumulation was a prime engine of growth, inequality enhanced the process of development by channeling resources towards individuals whose marginal propensity to save is higher. In later stages of development, however, as human capital has become a main engine of growth, equality, in the presence of credit constraints, has stimulated human capital formation and growth. Moreover, unequal distribution of land has been a hurdle for economic development. While industrialists have had an incentive to support education policies that foster human capital formation, landowners, whose interests lay in the reduction of the mobility of their labor force, have favored policies that deprived the masses of education. ER - TY - JOUR AU - Mankiw,N. Gregory AU - Weinzierl,Matthew C. TI - An Exploration of Optimal Stabilization Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 17029 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17029 L1 - http://www.nber.org/papers/w17029.pdf N1 - Author contact info: N. Gregory Mankiw Department of Economics Littauer 223 Harvard University Cambridge, MA 02138 Tel: 617/495-4301 Fax: 617/495-7730 E-Mail: ngmankiw@fas.harvard.edu Matthew C. Weinzierl Harvard Business School 277 Morgan Soldiers Field Boston, MA 02163 Tel: 617/495-6697 Fax: 617/496-5994 E-Mail: mweinzierl@hbs.edu AB - This paper examines the optimal response of monetary and fiscal policy to a decline in aggregate demand. The theoretical framework is a two-period general equilibrium model in which prices are sticky in the short run and flexible in the long run. Policy is evaluated by how well it raises the welfare of the representative household. While the model has Keynesian features, its policy prescriptions differ significantly from textbook Keynesian analysis. Moreover, the model suggests that the commonly used "bang for the buck" calculations are potentially misleading guides for the welfare effects of alternative fiscal policies. ER - TY - JOUR AU - Galor,Oded TI - The Demographic Transition: Causes and Consequences JF - National Bureau of Economic Research Working Paper Series VL - No. 17057 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17057 L1 - http://www.nber.org/papers/w17057.pdf N1 - Author contact info: Oded Galor Department of Economics Brown University Box B Providence, RI 02912 Tel: 401/863-2117 Fax: 401/863-1970 E-Mail: oded_galor@brown.edu AB - This paper develops the theoretical foundations and the testable implications of the various mechanisms that have been proposed as possible triggers for the demographic transition. Moreover, it examines the empirical validity of each of the theories and their significance for the understanding of the transition from stagnation to growth. The analysis suggests that the rise in the demand for human capital in the process of development was the main trigger for the decline in fertility and the transition to modern growth ER - TY - JOUR AU - Pischke,Jörn-Steffen TI - Money and Happiness: Evidence from the Industry Wage Structure JF - National Bureau of Economic Research Working Paper Series VL - No. 17056 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17056 L1 - http://www.nber.org/papers/w17056.pdf N1 - Author contact info: Jorn-Steffen Pischke CEP London School of Economics Houghton Street London WC2A 2AE UNITED KINGDOM Tel: 44-20-7955-6509 Fax: 44-20-7955-7595 E-Mail: s.pischke@lse.ac.uk AB - There is a well-established positive correlation between life-satisfaction measures and income in individual level cross-sectional data. This paper attempts to provide some evidence on whether this correlation reflects causality running from money to happiness. I use industry wage differentials as instruments for income. This is based on the idea that at least part of these differentials are due to rents, and part of the pattern of industry affiliations of individuals is random. To probe the validity of these assumptions, I compare estimates for life satisfaction with those for job satisfaction, present fixed effects estimates, and present estimates for married women using their husbands' industry as the instrument. All these specifications paint a fairly uniform picture across three different data sets. IV estimates are similar to the OLS estimates suggesting that most of the association of income and well-being is causal. ER - TY - JOUR AU - Behaghel,Luc AU - Blanchet,Didier AU - Debrand,Thierry AU - Roger,Muriel TI - Disability and Social Security Reforms: The French Case JF - National Bureau of Economic Research Working Paper Series VL - No. 17055 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17055 L1 - http://www.nber.org/papers/w17055.pdf N1 - Author contact info: Luc Behaghel Paris School of Economics - Inra 48 boulevard Jourdan 75014 PARIS FRANCE E-Mail: luc.behaghel@ens.fr Didier Blanchet INSEE 15 Blvd. Gabriel Péri BP 100 92244 Makakoff Cedex FRANCE E-Mail: didier.blanchet@insee.fr Thierry Debrand OFCE - IRDES 69, quai d'Orsay 75340 Paris Cedex 07 France E-Mail: thierryd2007@gmail.com Muriel Roger Paris School of Economics - Inra 48 Bd JOURDAN 75014 PARIS France Tel: 33 1 43 13 63 71 Fax: 33 1 43 13 63 62 E-Mail: muriel.roger@ens.fr M3 - presented at "International Social Security Conference", May 2, 2011 AB - The French pattern of early transitions out of employment is basically explained by the low age at “normal” retirement and by the importance of transitions through unemployment insurance and early-retirement schemes before access to normal retirement. These routes have exempted French workers from massively relying on disability motives for early exits, contrarily to the situation that prevails in some other countries where normal ages are high, unemployment benefits low and early-retirement schemes almost non-existent. Yet the role of disability remains interesting to examine in the French case, at least for prospective reasons in a context of decreasing generosity of other programs. The study of the past reforms of the pension system underlines that disability routes have often acted as a substitute to other retirement routes. Changes in the claiming of invalidity benefits seem to match changes in pension schemes or controls more than changes in such health indicators as the mortality rates. However, our results suggest that increases in average health levels over the past two decades have come along with increased disparities. In that context, less generous pensions may induce an increase in the claiming of invalidity benefits partly because of substitution effects, but also because the share of people with poor health increases. ER - TY - JOUR AU - Jönsson,Lisa AU - Palme,Mårten AU - Svensson,Ingemar TI - Disability Insurance, Population Health and Employment in Sweden JF - National Bureau of Economic Research Working Paper Series VL - No. 17054 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17054 L1 - http://www.nber.org/papers/w17054.pdf N1 - Author contact info: Lisa Jönsson Department of Economics Stockholm University SE-106 91 Stockholm SWEDEN E-Mail: lisa.jonsson@ne.su.se Mårten Palme Department of Economics Stockholm University SE-106 91 Stockholm SWEDEN E-Mail: Marten.Palme@ne.su.se Ingemar Svensson Swedish Pensions Agency Box 38190 100 64 Stockholm SWEDEN E-Mail: Ingemar.Svensson@pensionsmyndigheten.se M3 - presented at "International Social Security Conference", May 2, 2011 AB - This paper describes the development of population health and disability insurance utilization for older workers in Sweden and analyzes the relation between the two. We use three different measures of population health: (1) the mortality rate (measured between 1950 and 2009); (2) the prevalence of different types of health deficiencies obtained from Statistics Sweden’s Survey on Living Conditions (ULF, 1975-2005); (3) the utilization of health care from the inpatient register (1968–2008). We also study the development of the relative health between disability insurance recipients and non-recipients. Finally, we study the effect of the introduction of less strict eligibility criteria for older workers in 1970 and 1972 as well as the subsequent abolishment of these rules in 1991 and 1997, respectively. ER - TY - JOUR AU - Vos,Klaas de AU - Kapteyn,Arie AU - Kalwij,Adriaan TI - Disability Insurance and Labor Market Exit Routes of Older Workers in The Netherlands JF - National Bureau of Economic Research Working Paper Series VL - No. 17053 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17053 L1 - http://www.nber.org/papers/w17053.pdf N1 - Author contact info: Klaas de Vos CentERdata Tilburg University Warandelaan 2 5037 AB Tilburg THE NETHERLANDS E-Mail: K.deVos@uvt.nl Arie Kapteyn RAND Corporation 1776 Main Street P.O. Box 2138 Santa Monica, CA 90407-2138 Tel: (310) 393-0411 x 7973 E-Mail: arie_kapteyn@rand.org Adriaan Kalwij Utrecht University School of Economics Network for Studies on Pensions, Aging and Retirem E-Mail: a.s.kalwij@uu.nl M3 - presented at "International Social Security Conference", May 2, 2011 AB - This paper presents information on labor market participation of the elderly, mortality and health, pathways to retirement and rates of participation in various earnings replacing programs in the Netherlands. It presents an overview of reforms to Disability Insurance (DI) and other income maintenance and early retirement programs over the past few decades, and examines to what extent these reforms have affected labor market exit routes of older workers. The overall picture that emerges is that DI receipt appears unrelated to the general health of the population and that over the last two decades relatively fewer older workers exit the labor market through DI. This reduction may, arguably, in part be attributed to stricter DI eligibility rules. ER - TY - JOUR AU - Oshio,Takashi AU - Shimizutani,Satoshi TI - Disability Pension Program and Labor Force Participation in Japan: A Historical Perspective JF - National Bureau of Economic Research Working Paper Series VL - No. 17052 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17052 L1 - http://www.nber.org/papers/w17052.pdf N1 - Author contact info: Takashi Oshio Institute of Economic Research 2-1 Naka, Kunitachi Tokyo 186-8603 Japan E-Mail: oshio@ier.hit-u.ac.jp Satoshi Shimizutani Institute for International Policy Studies Toranomon 30 Mori Bldg., 6F 3-2-2 Toranomon Minato-ku Tokyo 105-0001 Japan E-Mail: sshimizutani@gmail.com M3 - presented at "International Social Security Conference", May 2, 2011 AB - This paper utilizes historical information to explore the relationship between labor force participation of middle aged and old people and the disability program in Japan. In particular, we explore the time series dimension to identify what has determined the trend in disability program participation over time and relate it with the labor supply. We find that mortality and health measures have been largely unrelated to the disability program participation rates. While major revisions to the disability program have slightly expanded the eligibility for DI programs, the program participation is still very low; thus, the effect on labor force participation is very limited in Japan, which is in contrast with some European countries that have high take up rates, inducing early retirement. ER - TY - JOUR AU - Naidu,Suresh AU - Yuchtman,Noam TI - Coercive Contract Enforcement: Law and the Labor Market in 19th Century Industrial Britain JF - National Bureau of Economic Research Working Paper Series VL - No. 17051 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17051 L1 - http://www.nber.org/papers/w17051.pdf N1 - Author contact info: Suresh Naidu Columbia University School of International and Public Affairs MC 3328 420 West 118th Street New York, NY 10027 Tel: 212/854-3213 E-Mail: sn2430@columbia.edu Noam Yuchtman Haas School of Business University of California, Berkeley Berkeley, CA 94720 Tel: 510/642-4632 E-Mail: yuchtman@haas.berkeley.edu AB - British Master and Servant law made employee contract breach a criminal offense until 1875. We develop a contracting model generating equilibrium contract breach and prosecutions, then exploit exogenous changes in output prices to examine the effects of labor demand shocks on prosecutions. Positive shocks in the textile, iron, and coal industries increased prosecutions. Following the abolition of criminal sanctions, wages differentially rose in counties that had experienced more prosecutions, and wages responded more to labor demand shocks. Coercive contract enforcement was applied in industrial Britain; restricted mobility allowed workers to commit to risk-sharing contracts with lower, but less volatile, wages. ER - TY - JOUR AU - Conti,Annamaria AU - Thursby,Marie C. AU - Rothaermel,Frank TI - Show Me the Right Stuff: Signals for High Tech Startups JF - National Bureau of Economic Research Working Paper Series VL - No. 17050 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17050 L1 - http://www.nber.org/papers/w17050.pdf N1 - Author contact info: Annamaria Conti Annamaria Conti 800 W. Peachtree St N.W. Atlanta, GA 30308 E-Mail: annamaria.conti@mgt.gatech.edu Marie C. Thursby College of Management Georgia Institute of Technology 800 West Peachtree Street, NW Atlanta, GA 30308-1149 Tel: 404/894-6249 Fax: 404/385-4894 E-Mail: marie.thursby@mgt.gatech.edu Frank Rothaermel Professor Frank Rothaermel 800 W. Peachtree St N.W. Atlanta, GA 30308 E-Mail: frank.rothaermel@mgt.gatech.edu AB - This paper revisits a central issue in entrepreneurial finance, namely the signals technology startups send to external investors to convey information about their quality. We examine the potential for technology startups to use patents and founders, friends and family money (FFF money) as signals to attract business angel and venture capital funds, patents reflect technology quality and FFF money reflects founder commitment. We find that if investors value technology quality more (less) than founder commitment, the optimal mix of signals is a relatively higher (lower) use of patents than FFF money. Regardless of investor preferences, high quality founders should invest more in both signals than in the absence of private information. This investment is inversely related to the opportunity cost of investing in the signals. We test our predictions empirically and find strong support for our theoretical view that FFF and patents are endogenously determined signals. Moreover, we find that startups who invest in both signals receive greater external funds. When we distinguish between venture capitalist and business angel investment, we find that patents serve as a signal for venture capitalists and FFF money is a signal for business angels (but not vice versa). ER - TY - JOUR AU - Banks,James AU - Blundell,Richard AU - Bozio,Antoine AU - Emmerson,Carl TI - Disability, Health and Retirement in the United Kingdom JF - National Bureau of Economic Research Working Paper Series VL - No. 17049 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17049 L1 - http://www.nber.org/papers/w17049.pdf N1 - Author contact info: James Banks University College London E-Mail: j.banks@ucl.ac.uk Richard Blundell University College London Department of Economics Gower Street London, ENGLAND E-Mail: r.blundell@ucl.ac.uk Antoine Bozio Institute for Fiscal Studies 7 Ridgemount Street London WC1E 7AE ENGLAND E-Mail: antoine_b@ifs.org.uk Carl Emmerson Institute for Fiscal Studies 7 Ridgemount Street London WC1E 7AE ENGLAND E-Mail: cemmerson@ifs.org.uk M3 - presented at "International Social Security Conference", May 2, 2011 AB - Over the last thirty years pathways to retirement have changed substantially in the UK. They have been dominated by spells of unemployment in the late 1970s, with then an increased importance of disability spells from the mid-1980s onwards. At the end of the period the direct route from work to retirement was increasingly more common. General economic conditions seem to have been important driving forces during the entire period. In contrast changes in health do not seem to provide convincing explanations for these trends: mortality has been falling over the period without any apparent link to the share of the population reporting ill health or disability or to the number claiming benefits. We also find evidence that recent reforms have had some impact. The halting of the previous growth in the rate of in-flow onto disability benefits in the mid-1990s coincided with the implementation of a major reform. Evidence from the pilots of the Pathways-to-Work programme in 2003-2005 suggests that those moving onto disability benefits moved off these benefits faster than they would otherwise have done as a direct result of the programme. ER - TY - JOUR AU - García-Gómez,Pilar AU - Jiménez-Martín,Sergi AU - Castelló,Judit Vall TI - Health, Disability and Pathways to Retirement in Spain JF - National Bureau of Economic Research Working Paper Series VL - No. 17048 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17048 L1 - http://www.nber.org/papers/w17048.pdf N1 - Author contact info: Pilar Garcia-Gomez Erasmus School of Economics P.O. Box 1738; 3000 DR Rotterdam The Netherlands E-Mail: garciagomez@ese.eur.nl Sergi Jimenez-Martin Universitat Pompeu Fabra Ramon Trias Fargas 25-27 08005 BARCELONA (SPAIN) E-Mail: sergi.jimenez@upf.edu judit vall castello Universitat Pompeu Fabra Ramon Trias Fargas 25-27 08005 BARCELONA (SPAIN) E-Mail: judit.vallcastello@governance.unimaas.nl M3 - presented at "International Social Security Conference", May 2, 2011 AB - In this paper we analyze the trends in labor force participation and transitions to benefit programs of older workers in relation to health trends as well as recent Social Security reforms. Our preliminary conclusions are pessimistic regarding the effect of health improvements on the labor market attachment of older workers since we show that despite the large improvements in the mortality rates among older individuals in Spain, the employment rates of individuals older than fifty-five remain lower than the ones observed in the late 1970s. Some caution should remain in our conclusions as the evidence on health trends is inconclusive. Regarding the effect of Social Security reforms, we find that both the 1997 and the 2002 reform decreased the stock into old-age benefits at the cost of an increased share of the participation into disability. Finally, we find that there was a significant increase in the outflow from employment into disability after the 2002 reform. ER - TY - JOUR AU - Card,David AU - DellaVigna,Stefano AU - Malmendier,Ulrike TI - The Role of Theory in Field Experiments JF - National Bureau of Economic Research Working Paper Series VL - No. 17047 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17047 L1 - http://www.nber.org/papers/w17047.pdf N1 - Author contact info: David Card Department of Economics 549 Evans Hall, #3880 University of California, Berkeley Berkeley, CA 94720-3880 Tel: 510/642-5222 Fax: 510/643-7042 E-Mail: card@econ.berkeley.edu Stefano DellaVigna University of California, Berkeley Department of Economics 549 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-0715 Fax: 510/642-6615 E-Mail: sdellavi@econ.berkeley.edu Ulrike Malmendier Department of Economics 549 Evans Hall # 3880 University of California, Berkeley Berkeley, CA 94720-3880 Tel: 510-642-5038 E-Mail: ulrike@econ.berkeley.edu AB - We propose a new classification of experiments that captures the extent to which the experimental design and analysis are linked to economic theory. We then use this system to classify all published field experiments in the five top economics journals from 1975 to 2010. We find that the vast majority of field experiments (68%) are Descriptive studies that lack any explicit model; 18% are Single Model studies that test a single model-based hypothesis; 6% are Competing Models studies that test competing model-based hypotheses; and 8% are Parameter Estimation studies that estimate structural parameters in a completely specified model. Using the same system to classify laboratory experiments published over the same period, we find that economic theory has played a more central role in the laboratory than in the field. Finally, we discuss in detail three sets of field experiments, on gift exchange, on charitable giving, and on negative income tax, that illustrate both the benefits and the potential costs of a tighter link between experimental design and theoretical underpinnings. ER - TY - JOUR AU - Huckfeldt,Peter J. AU - Knittel,Christopher R. TI - Pharmaceutical Use Following Generic Entry: Paying Less and Buying Less JF - National Bureau of Economic Research Working Paper Series VL - No. 17046 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17046 L1 - http://www.nber.org/papers/w17046.pdf N1 - Author contact info: Peter J. Huckfeldt RAND Corporation Santa Monica, California E-Mail: Peter_Huckfeldt@rand.org Christopher R. Knittel MIT Sloan School of Management 100 Main Street, E62-513 Cambridge, MA 02142 E-Mail: knittel@mit.edu AB - We study the effects of generic entry on prices and utilization using both event study models that exploit the differential timing of generic entry across drug molecules and cast studies. Our analysis examines drugs treating hypertension, high blood pressure, type 2 diabetes, and depression using price and utilization data from the Medical Expenditure Panel Survey. We find that utilization of drug molecules starts decreasing in the two years prior to generic entry and continues to decrease in the years following generic entry, despite decreases in prices offered by generic versions of a drug. This decrease coincides with the market entry and increased utilization of branded reformulations of a drug going off patent. We show case study evidence that utilization patterns coincide with changes in marketing by branded drug manufacturers. While the reformulations---often extended-release versions of the patent-expiring drug---offer potential health benefits, the FDA does not require evidence that the reformulations are improvements over the previous drug in order to grant a patent. Indeed, in a number of experiments comparing the efficacies of the patent-expiring and reformulated drugs do not find statistical differences in health outcomes calling into question the patent-extension policy. ER - TY - JOUR AU - Liu,Zheng AU - Wang,Pengfei AU - Zha,Tao TI - Land-price dynamics and macroeconomic fluctuations JF - National Bureau of Economic Research Working Paper Series VL - No. 17045 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17045 L1 - http://www.nber.org/papers/w17045.pdf N1 - Author contact info: Zheng Liu Federal Reserve Bank of San Francisco 101 Market Street, MS 1130 San Francisco, CA 94105 Tel: 415-974-3328 Fax: 415-974-2168 E-Mail: zheng.liu@sf.frb.org Pengfei Wang Department of Economics Business School Hong Kong University of Science & Technology E-Mail: pfwanghkust@gmail.com Tao Zha Emory University 1602 Fishburne Drive Atlanta, GA 30322-2240 Tel: 404/723-3254 Fax: 404/727-4639 E-Mail: tzha@emory.edu AB - We argue that positive co-movements between land prices and business investment are a driving force behind the broad impact of land-price dynamics on the macroeconomy. We develop an economic mechanism that captures the co-movements by incorporating two key features into a DSGE model: We introduce land as a collateral asset in firms' credit constraints and we identify a shock that drives most of the observed fluctuations in land prices. Our estimates imply that these two features combine to generate an empirically important mechanism that amplifies and propagates macroeconomic fluctuations through the joint dynamics of land prices and business investment. ER - TY - JOUR AU - Ball,Laurence M. AU - Mazumder,Sandeep TI - Inflation Dynamics and the Great Recession JF - National Bureau of Economic Research Working Paper Series VL - No. 17044 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17044 L1 - http://www.nber.org/papers/w17044.pdf N1 - Author contact info: Laurence M. Ball Department of Economics Johns Hopkins University Baltimore, MD 21218 Tel: 410/516-7605 Fax: 410/516-7600 E-Mail: lball@jhu.edu Sandeep Mazumder Department of Economics Wake Forest University Winston-Salem, NC 27109 E-Mail: mazumds@wfu.edu AB - This paper examines inflation dynamics in the United States since 1960, with a particular focus on the Great Recession. A puzzle emerges when Phillips curves estimated over 1960-2007 are used to predict inflation over 2008-2010: inflation should have fallen by more than it did. We resolve this puzzle with two modifications of the Phillips curve, both suggested by theories of costly price adjustment: we measure core inflation with the median CPI inflation rate, and we allow the slope of the Phillips curve to change with the level and variance of inflation. We then examine the hypothesis of anchored inflation expectations. We find that expectations have been fully "shock-anchored" since the 1980s, while "level anchoring" has been gradual and partial, but significant. It is not clear whether expectations are sufficiently anchored to prevent deflation over the next few years. Finally, we show that the Great Recession provides fresh evidence against the New Keynesian Phillips curve with rational expectations. ER - TY - JOUR AU - Conley,John P. AU - Crucini,Mario J. AU - Driskill,Robert A. AU - Onder,Ali Sina TI - Incentives and the Effects of Publication Lags on Life Cycle Research Productivity in Economics JF - National Bureau of Economic Research Working Paper Series VL - No. 17043 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17043 L1 - http://www.nber.org/papers/w17043.pdf N1 - Author contact info: John P. Conley Department of Economics Vanderbilt University 401 Calhoun Hall Nashville, TN 27235 E-Mail: j.p.conley@vanderbilt.edu Mario J. Crucini Department of Economics Vanderbilt University Box 1819 Station B Nashville, TN 37235-1819 Tel: 615/322-7357 Fax: 615/343-8459 E-Mail: mario.j.crucini@vanderbilt.edu Robert Driskill Vanderbilt University E-Mail: robert.a.driskill@vanderbilt.edu Ali Sina Onder Department of Economics and Uppsala Center for Fiscal Studies Uppsala University E-Mail: alisina.onder@nek.uu.se AB - We investigate how increases in publication delays have affected the life-cycle of publications of recent Ph.D. graduates in economics. We construct a panel dataset of 14,271 individuals who were awarded Ph.D.s between 1986 and 2000 in US and Canadian economics departments. For this population of scholars, we amass complete records of publications in peer reviewed journals listed in the JEL (a total of 368,672 observations). We find evidence of significantly diminished productivity in recent relative to earlier cohorts when productivity of an individual is measured by the number of AER equivalent publications. Diminished productivity is less evident when number of AER equivalent pages is used instead. Our findings are consistent with earlier empirical findings of increasing editorial delays, decreasing acceptance rates at journals, and a trend toward longer manuscripts. This decline in productivity is evident in both graduates of top thirty and non-top thirty ranked economics departments and may have important implications for what should constitute a tenurable record. We also find that the research rankings of the faculty do not line up with the research quality of their students in many cases. ER - TY - JOUR AU - Ben-Shalom,Yonatan AU - Moffitt,Robert A. AU - Scholz,John Karl TI - An Assessment of the Effectiveness of Anti-Poverty Programs in the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 17042 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17042 L1 - http://www.nber.org/papers/w17042.pdf N1 - Author contact info: Yonatan Ben-Shalom Mathematica Policy Research E-Mail: yben-shalom@mathematica-mpr.com Robert A. Moffitt Department of Economics Johns Hopkins University 3400 North Charles Street Baltimore, MD 21218 Tel: 410/516-7611 Fax: 410/516-7600 E-Mail: moffitt@jhu.edu John Karl Scholz University of Wisconsin - Madison Department of Economics 1180 Observatory Drive Madison, WI 53706 Tel: 608/262-5380 Fax: 608/263-3876 E-Mail: jkscholz@facstaff.wisc.edu AB - We assess the effectiveness of means-tested and social insurance programs in the United States. We show that per capita expenditures on these programs as a whole have grown over time but expenditures on some programs have declined. The benefit system in the U.S. has a major impact on poverty rates, reducing the percent poor in 2004 from 29 percent to 13.5 percent, estimates which are robust to different measures of the poverty line. We find that, while there are significant behavioral side effects of many programs, their aggregate impact is very small and does not affect the magnitude of the aggregate poverty impact of the system. The system reduces poverty the most for the disabled and the elderly and least for several groups among the non-elderly and non-disabled. Over time, we find that expenditures have shifted toward the disabled and the elderly, and away from those with the lowest incomes and toward those with higher incomes, with the consequence that post-transfer rates of deep poverty for some groups have increased. We conclude that the U.S. benefit system is paternalistic and tilted toward the support of the employed and toward groups with special needs and perceived deservingness. ER - TY - JOUR AU - Hurst,Erik AU - Pugsley,Benjamin Wild TI - What Do Small Businesses Do? JF - National Bureau of Economic Research Working Paper Series VL - No. 17041 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17041 L1 - http://www.nber.org/papers/w17041.pdf N1 - Author contact info: Erik Hurst Booth School of Business University of Chicago Harper Center Chicago, IL 60637 Tel: 773/834-4073 Fax: 773/702-0458 E-Mail: erik.hurst@chicagobooth.edu Benjamin Wild. Pugsley Department of Economics University of Chicago Chicago, IL 60637 E-Mail: bpugsley@uchicago.edu AB - In this paper, we show that most small business owners are very different from the entrepreneurs that economic models and policy makers often have in mind. Using new data that samples early stage entrepreneurs just prior to business start up, we show that few small businesses intend to bring a new idea to market. Instead, most intend to provide an existing service to an existing market. Further, we find that most small businesses have little desire to grow big or to innovate in any observable way. We show that such behavior is consistent with the industry characteristics of the majority of small businesses, which are concentrated among skilled craftsmen, lawyers, real estate agents, doctors, small shopkeepers, and restaurateurs. Lastly, we show non pecuniary benefits (being one’s own boss, having flexibility of hours, etc.) play a first-order role in the business formation decision. We then discuss how our findings suggest that the importance of entrepreneurial talent, entrepreneurial luck, and financial frictions in explaining the firm size distribution may be overstated. We conclude by discussing the potential policy implications of our findings. ER - TY - JOUR AU - Farber,Henry S. TI - Job Loss in the Great Recession: Historical Perspective from the Displaced Workers Survey, 1984-2010 JF - National Bureau of Economic Research Working Paper Series VL - No. 17040 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17040 L1 - http://www.nber.org/papers/w17040.pdf N1 - Author contact info: Henry S. Farber Industrial Relations Section Firestone Library Princeton University Princeton, NJ 08544-2098 Tel: 609/258-4044 Fax: 609/258-2907 E-Mail: farber@princeton.edu AB - The Great Recession from December 2007 to June 2009 is associated with a dramatic weakening of the labor market from which the labor market is now only slowly recovering. The unemployment rate remains stubbornly high and durations of unemployment are unprecedentedly long. I use data from the Displaced Workers Survey (DWS) from 1984-2010 to investigate the incidence and consequences of job loss from 1981-2009. In particular, the January 2010 DWS, which captures job loss during the 2007-2009 period, provides a window through which to examine the experience of job losers in the Great Recession and to compare their experience to that of earlier job losers. These data show a record high rate of job loss, with almost one in six workers reporting having lost a job in the 2007-2009 period. The consequences of job loss are also very serious during this period with very low rates of reemployment, difficulty finding full-time employment, and substantial earnings losses. ER - TY - JOUR AU - Lochner,Lance AU - Moretti,Enrico TI - Estimating and Testing Non-Linear Models Using Instrumental Variables JF - National Bureau of Economic Research Working Paper Series VL - No. 17039 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17039 L1 - http://www.nber.org/papers/w17039.pdf N1 - Author contact info: Lance Lochner Department of Economics, Faculty of Social Science University of Western Ontario 1151 Richmond Street, North London, ON N6A 5C2 CANADA Tel: 519/661-2111 ext. 85281 Fax: 519/661-3666 E-Mail: llochner@uwo.ca Enrico Moretti University of California, Berkeley Department of Economics 549 Evans Hall Berkeley, CA 94720-3880 Tel: 510/642 6649 Fax: 510/643 7042 E-Mail: moretti@econ.berkeley.edu AB - In many empirical studies, researchers seek to estimate causal relationships using instrumental variables. When only one valid instrumental variable is available, researchers are limited to estimating linear models, even when the true model may be non-linear. In this case, ordinary least squares and instrumental variable estimators will identify different weighted averages of the underlying marginal causal effects even in the absence of endogeneity. As such, the traditional Hausman test for endogeneity is uninformative. We build on this insight to develop a new test for endogeneity that is robust to any form of non-linearity. Notably, our test works well even when only a single valid instrument is available. This has important practical applications, since it implies that researchers can estimate a completely unrestricted non-linear model by OLS, and then use our test to establish whether those OLS estimates are consistent. We re-visit a few recent empirical examples to show how the test can be used to shed new light on the role of non-linearity. ER - TY - JOUR AU - Fahlenbrach,Rüdiger AU - Prilmeier,Robert AU - Stulz,René M. TI - This Time Is the Same: Using Bank Performance in 1998 to Explain Bank Performance During the Recent Financial Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 17038 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17038 L1 - http://www.nber.org/papers/w17038.pdf N1 - Author contact info: Rüdiger Fahlenbrach Ecole Polytechnique Fédérale de Lausanne (EPFL) Quartier UNIL-Dorigny Bâtiment Extranef, # 211 1015 Lausanne Switzerland E-Mail: ruediger.fahlenbrach@epfl.ch Robert Prilmeier The Ohio State University Fisher College of Business 810 Fisher Hall 2100 Neil Avenue Columbus, OH 43210-1144 E-Mail: prilmeier_1@fisher.osu.edu Rene M. Stulz The Ohio State University Fisher College of Business 806A Fisher Hall Columbus, OH 43210-1144 Tel: 614/292-1970 Fax: 614/292-2359 E-Mail: stulz_1@cob.osu.edu AB - We investigate whether a bank’s performance during the 1998 crisis, which was viewed at the time as the most dramatic crisis since the Great Depression, predicts its performance during the recent financial crisis. One hypothesis is that a bank that has an especially poor experience in a crisis learns and adapts, so that it performs better in the next crisis. Another hypothesis is that a bank’s poor experience in a crisis is tied to aspects of its business model that are persistent, so that its past performance during one crisis forecasts poor performance during another crisis. We show that banks that performed worse during the 1998 crisis did so as well during the recent financial crisis. This effect is economically important. In particular, it is economically as important as the leverage of banks before the start of the crisis. The result cannot be attributed to banks having the same chief executive in both crises. Banks that relied more on short-term funding, had more leverage, and grew more are more likely to be banks that performed poorly in both crises. ER - TY - JOUR AU - Ashraf,Quamrul AU - Galor,Oded TI - Dynamics and Stagnation in the Malthusian Epoch JF - National Bureau of Economic Research Working Paper Series VL - No. 17037 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17037 L1 - http://www.nber.org/papers/w17037.pdf N1 - Author contact info: Quamrul Ashraf Williams College Department of Economics 24 Hopkins Hall Drive Williamstown, MA 01267 Tel: (413) 597-3051 Fax: (413) 597-4045 E-Mail: Quamrul.H.Ashraf@williams.edu Oded Galor Department of Economics Brown University Box B Providence, RI 02912 Tel: 401/863-2117 Fax: 401/863-1970 E-Mail: oded_galor@brown.edu AB - This paper examines the central hypothesis of the influential Malthusian theory, according to which improvements in the technological environment during the pre-industrial era had generated only temporary gains in income per capita, eventually leading to a larger, but not significantly richer, population. Exploiting exogenous sources of cross-country variations in land productivity and the level of technological advancement the analysis demonstrates that, in accordance with the theory, technological superiority and higher land productivity had significant positive effects on population density but insignificant effects on the standard of living, during the time period 1-1500 CE. ER - TY - JOUR AU - Baker,Scott A. AU - Malani,Anup TI - Does Accuracy Improve the Information Value of Trials? JF - National Bureau of Economic Research Working Paper Series VL - No. 17036 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17036 L1 - http://www.nber.org/papers/w17036.pdf N1 - Author contact info: Scott A. Baker School of Law Washington University in St. Louis Tel: 919/962-8514 Fax: 919/962-1277 E-Mail: no email available Anup Malani University of Chicago Law School 1111 E. 60th Street Chicago, IL 60637 Tel: 773/702-9602 E-Mail: amalani@uchicago.edu AB - We develop a model where products liability trials provide information to consumers who are not parties to the litigation. Consumers use this information to take precautions against dangerous products. A critical assumption is that consumers cannot differentiate between firms that have never been sued and firms that have been sued but settled out of court. In this framework, we show that perfectly accurate courts do not maximize information to consumers and thus welfare, contrary to Kaplow and Shavell (1994). More accurate courts provide more information only if producers go to trial. Greater accuracy, however, encourages producers of dangerous products to settle and hide their type. When courts are perfectly accurate, all low quality producers settle. And given the lack of any information from trials about bad types, consumers (rationally) fail to take precautions. If consumer precautions are relatively more efficient than producer precautions, our conclusion stands even when firms can invest in improving the safety of their products. ER - TY - JOUR AU - DellaVigna,Stefano AU - Enikolopov,Ruben AU - Mironova,Vera AU - Petrova,Maria AU - Zhuravskaya,Ekaterina TI - Unintended Media Effects in a Conflict Environment: Serbian Radio and Croatian Nationalism JF - National Bureau of Economic Research Working Paper Series VL - No. 16989 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w16989 L1 - http://www.nber.org/papers/w16989.pdf N1 - Author contact info: Stefano DellaVigna University of California, Berkeley Department of Economics 549 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-0715 Fax: 510/642-6615 E-Mail: sdellavi@econ.berkeley.edu Ruben Enikolopov New Economic School E-Mail: renikolopov@gmail.com Vera Mironova Department of Political Science University of Maryland E-Mail: vera-ge0@mail.ru Maria Petrova New Economic School E-Mail: petrova.ma@gmail.com Ekaterina Zhuravskaya Paris School of Economics 48 Bd Jourdan 75014 Paris France E-Mail: zhuravsk@pse.ens.fr AB - Do media broadcasts matter when they reach audiences that are not their target? In a conflict, the media may have an unintended effect of increasing ethnic animosity. We consider radio signals travelling across country borders in the region that witnessed one of Europe’s deadliest conflicts since WWII: the Serbo-Croatian conflict in the Yugoslavian wars. Using survey data, we find that a large fraction of Croats listen to Serbian radio (intended for Serbian listeners across the border) whenever signal is available. Then, using official election results, we document that residents of Croatian villages with good-quality signal of Serbian public radio were more likely to vote for extreme nationalist parties, even after several years of peace time. Finally, ethnically-offensive graffiti are more likely to be exposed openly in the center of villages with Serbian radio reception. The effect is identified from the variation in the availability of the signal mostly due to topography and forestation. The results of a laboratory experiment confirm that Serbian radio exposure causes an increase in anti-Serbian sentiment among Croats. ER - TY - JOUR AU - Rothschild,Casey AU - Scheuer,Florian TI - Optimal Taxation with Rent-Seeking JF - National Bureau of Economic Research Working Paper Series VL - No. 17035 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17035 L1 - http://www.nber.org/papers/w17035.pdf N1 - Author contact info: Casey Rothschild Middlebury College Department of Economics Warner Hall 503 Middlebury, VT 05753 E-Mail: crothsch@wellesley.edu Florian Scheuer Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305 Tel: 650/725-3987 E-Mail: scheuer@stanford.edu AB - Recent policy proposals have suggested taxing top incomes at very high rates on the grounds that some or all of the highest wage earners are engaged in socially unproductive or counterproductive activities, such as externality imposing speculation in the financial sector. To address this, we provide a model in which agents can choose between working in a traditional sector, where private and social products coincide, and a crowdable rent-seeking sector, where some or all of earned income reflects the capture of pre-existing output rather than increased production. We characterize Pareto optimal linear and non-linear income tax systems under the assumption that the social planner cannot or does not observe whether any given individual is a traditional worker or a rent-seeker. We find that optimal marginal taxes on the highest wage earners can remain remarkably modest even if all high earners are socially unproductive rent-seekers and the government has a strong intrinsic desire for progressive redistribution. Intuitively, taxing their effort at a lower rate stimulates their rent-seeking efforts, thereby keeping private returns for other potential rent-seekers low and discouraging further entry. ER - TY - JOUR AU - Coibion,Olivier TI - Are the Effects of Monetary Policy Shocks Big or Small? JF - National Bureau of Economic Research Working Paper Series VL - No. 17034 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17034 L1 - http://www.nber.org/papers/w17034.pdf N1 - Author contact info: Olivier Coibion Department of Economics College of William and Mary 115 Morton Hall Williamsburg, VA 23188 Tel: 757/221-1389 E-Mail: ocoibion@gmail.com AB - This paper studies the small estimated effects of monetary policy shocks from standard VAR’s versus the large effects from the Romer and Romer (2004) approach. The differences are driven by three factors: the different contractionary impetus, the period of reserves targeting and lag length selection. Accounting for these factors, the real effects of policy shocks are consistent across approaches and most likely medium. Alternative monetary policy shock measures from estimated Taylor rules also yield medium-sized real effects and indicate that the historical contribution of monetary policy shocks to real fluctuations has been significant, particularly during the 1970s and early 1980s. ER - TY - JOUR AU - Andreoni,James AU - Gee,Laura K. TI - Gun For Hire: Does Delegated Enforcement Crowd out Peer Punishment in Giving to Public Goods? JF - National Bureau of Economic Research Working Paper Series VL - No. 17033 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17033 L1 - http://www.nber.org/papers/w17033.pdf N1 - Author contact info: James Andreoni Department of Economics University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 Tel: 858/534-3832 Fax: 858/534-7040 E-Mail: andreoni@ucsd.edu Laura K. Gee Department of Economics University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 E-Mail: l1gee@ucsd.edu AB - This paper compares two methods to encourage socially optimal provision of a public good. We compare the efficacy of vigilante justice, as represented by peer-to-peer punishment, to delegated policing, as represented by the “hired gun” mechanism, to deter free riding and improve group welfare. The “hired gun” mechanism (Andreoni and Gee, 2011) is an example of a low cost device that promotes complete compliances and minimal enforcement as the unique Nash equilibrium. We find that subjects are willing to pay to hire a delegated policing mechanism over 70% of the time, and that this mechanism increases welfare between 15% to 40%. Moreover, the lion’s share of the welfare gain comes because the hired gun crowds out vigilante peer-to-peer punishments. ER - TY - JOUR AU - Andreoni,James AU - Gee,Laura K. TI - The Hired Gun Mechanism JF - National Bureau of Economic Research Working Paper Series VL - No. 17032 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17032 L1 - http://www.nber.org/papers/w17032.pdf N1 - Author contact info: James Andreoni Department of Economics University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 Tel: 858/534-3832 Fax: 858/534-7040 E-Mail: andreoni@ucsd.edu Laura K. Gee Department of Economics University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 E-Mail: l1gee@ucsd.edu AB - We present and experimentally test a mechanism that provides a simple, natural, low cost, and realistic solution to the problem of compliance with socially determined efficient actions, such as contributing to a public good. We note that small self-governing organizations often place enforcement in the hands of an appointed leader–the department chair, the building superintendent, the team captain. This hired gun, we show, need only punish the least compliant group member, and then only punish this person enough so that the person would have rather been the second least compliant. We show experimentally this mechanism, despite having very small penalties out of equilibrium, reaches the full compliance equilibrium almost instantly. ER - TY - JOUR AU - Lacetera,Nicola AU - Zirulia,Lorenzo TI - Individual Preferences, Organization, and Competition in a Model of R&D Incentive Provision JF - National Bureau of Economic Research Working Paper Series VL - No. 17031 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17031 L1 - http://www.nber.org/papers/w17031.pdf N1 - Author contact info: Nicola Lacetera University of Toronto 105 St. George Street Toronto, ON M5S 2E9 Canada Tel: 416/946-0287 E-Mail: nicola.lacetera@utoronto.ca Lorenzo Zirulia University of Bologna Department of Economics Strada Maggiore, 45 Bologna, Italy E-Mail: lorenzo.zirulia@unibocconi.it AB - Understanding the organization of R&D activities requires the simultaneous consideration of scientific workers' talent and tastes, companies' organizational choices, and the characteristics of the relevant industry. We develop a model of the provision of incentives to corporate scientists, in an environment where (1) scientists engage in multiple activities when performing research; (2) knowledge is not perfectly appropriable; (3) scientists are responsive to both monetary and non-monetary incentives; and (4) firms compete on the product market. We show that both the degree of knowledge spillovers and of market competition affect the incentives given to scientists, and these effects interact. First, high knowledge spillovers lead firms to soften incentives when product market competition is high, and to strengthen incentives when competition is low. Second, the relationship between the intensity of competition and the power of incentives is U-shaped, with the exact shape depending on the degree of knowledge spillovers. We also show that the performance-contingent pay for both applied and basic research increases with the non-pecuniary benefits that scientists obtain from research. We relate our findings to the existing empirical research, and also discuss their implications for management and public policy. ER - TY - JOUR AU - Lacetera,Nicola AU - Pope,Devin G. AU - Sydnor,Justin R. TI - Heuristic Thinking and Limited Attention in the Car Market JF - National Bureau of Economic Research Working Paper Series VL - No. 17030 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17030 L1 - http://www.nber.org/papers/w17030.pdf N1 - Author contact info: Nicola Lacetera University of Toronto 105 St. George Street Toronto, ON M5S 2E9 Canada Tel: 416/946-0287 E-Mail: nicola.lacetera@utoronto.ca Devin G. Pope Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-2297 Fax: 773/702-0458 E-Mail: devin.pope@chicagobooth.edu Justin R. Sydnor University of Wisconsin - Madison 975 University Avenue Madison, WI 53706 E-Mail: jsydnor@bus.wisc.edu AB - Can heuristic information processing affect important product markets? We explore whether the tendency to focus on the left-most digit of a number affects how used car buyers incorporate odometer values in their purchase decisions. Analyzing over 22 million wholesale used-car transactions, we find substantial evidence of this left-digit bias; there are large and discontinuous drops in sale prices at 10,000-mile thresholds in odometer mileage, along with smaller drops at 1,000-mile thresholds. We obtain estimates for the inattention parameter in a simple model of this left-digit bias. We also investigate whether this heuristic behavior is primarily attributable to the final used-car customers or the used-car salesmen who buy cars in the wholesale market. The evidence is most consistent with partial inattention by final customers. We discuss the significance of these results for the literature on inattention and point to other market settings where this type of heuristic thinking may be important. Our results suggest that information-processing heuristics may be important even in markets with large stakes and where information is easy to observe. ER - TY - JOUR AU - Stango,Victor AU - Zinman,Jonathan TI - Limited and Varying Consumer Attention: Evidence from Shocks to the Salience of Bank Overdraft Fees JF - National Bureau of Economic Research Working Paper Series VL - No. 17028 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17028 L1 - http://www.nber.org/papers/w17028.pdf N1 - Author contact info: Victor Stango Graduate School of Management University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/752-3535 Fax: 530/752-2924 E-Mail: vstango@ucdavis.edu Jonathan Zinman Department of Economics Dartmouth College 314 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-0075 Fax: 603/646-2122 E-Mail: jzinman@dartmouth.edu AB - We explore dynamics of limited attention in the $35 billion market for checking overdrafts, using survey content as shocks to the salience of overdraft fees. Conditional on selection into surveys, individuals who face overdraft-related questions are less likely to incur a fee in the survey month. Taking multiple overdraft surveys builds a “stock” of attention that reduces overdrafts for up to two years. The effects are significant among consumers with lower education and financial literacy. Consumers avoid overdrafts not by increasing balances but by making fewer debit transactions and cancelling automatic recurring withdrawals. The results raise new questions about consumer financial protection policy. ER - TY - JOUR AU - Hassan,Tarek A. AU - Mertens,Thomas M. TI - The Social Cost of Near-Rational Investment JF - National Bureau of Economic Research Working Paper Series VL - No. 17027 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17027 L1 - http://www.nber.org/papers/w17027.pdf N1 - Author contact info: Tarek Alexander Hassan Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-3291 Fax: 773/753-0851 E-Mail: tarek.hassan@chicagobooth.edu Thomas Mertens New York University Stern School of Business 44 W Fourth Street New York, NY 10012 E-Mail: mertens@stern.nyu.edu AB - We show that the stock market may fail to aggregate information even if it appears to be efficient and that the resulting decrease in the information content of stock prices may drastically reduce welfare. We solve a macroeconomic model in which information about fundamentals is dispersed and households make small, correlated errors around their optimal investment policies. As information aggregates in the market, these errors amplify and crowd out the information content of stock prices. When stock prices reflect less information, the volatility of stock returns rises. The increase in volatility makes holding stocks unattractive, distorts the long-run level of capital accumulation, and causes costly (first-order) distortions in the long-run level of consumption. ER - TY - JOUR AU - Gourio,Francois TI - Credit Risk and Disaster Risk JF - National Bureau of Economic Research Working Paper Series VL - No. 17026 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17026 L1 - http://www.nber.org/papers/w17026.pdf N1 - Author contact info: Francois Gourio Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-4534 Fax: 617/353-4449 E-Mail: fgourio@bu.edu AB - Corporate credit spreads are large, volatile, countercyclical, and significantly larger than expected losses, but existing macroeconomic models with financial frictions fail to reproduce these patterns, because they imply small and constant aggregate risk premia. Building on the idea that corporate debt, while safe in normal times, is exposed to the risk of economic depression, this paper embeds a trade-off theory of capital structure into a real business cycle model with a small, time-varying risk of large economic disaster. This simple feature generates large, volatile and countercyclical credit spreads as well as novel business cycle implications. In particular, financial frictions substantially amplify the effect of shocks to the disaster probability. ER - TY - JOUR AU - Li,Jialun AU - Smetters,Kent TI - Optimal Portfolio Choice with Wage-Indexed Social Security JF - National Bureau of Economic Research Working Paper Series VL - No. 17025 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17025 L1 - http://www.nber.org/papers/w17025.pdf N1 - Author contact info: Jialun Li 3620 Locust Walk Philadelphia, PA 19104 E-Mail: jialunli@wharton.upenn.edu Kent Smetters University of Pennsylvania SH-DH 3303 3620 Locust Walk Philadelphia, PA 19104 Tel: 215/898-9811 Fax: 215/898-0310 E-Mail: smetters@wharton.upenn.edu AB - This paper re-examines the classic question of how a household should optimally allocate its portfolio between risky stocks and risk-free bonds over its lifecycle. We show that allowing for the wage indexation of social security benefits fundamentally alters the optimal decisions. Moreover, the optimal allocation is close to observed empirical behavior. Households, therefore, do not appear to be making large "mistakes," as sometimes believed. In fact, traditional financial planning advice, as embedded in "target date" funds – whose enormous recent growth has been encouraged by new government policy – often leads to even relatively larger "mistakes" and welfare losses. ER - TY - JOUR AU - Bordo,Michael D. AU - Rousseau,Peter L. TI - Historical Evidence on the Finance-Trade-Growth Nexus JF - National Bureau of Economic Research Working Paper Series VL - No. 17024 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17024 L1 - http://www.nber.org/papers/w17024.pdf N1 - Author contact info: Michael D. Bordo Department of Economics Rutgers University New Jersey Hall 75 Hamilton Street New Brunswick, NJ 08901 Tel: 732/822-7152 Fax: 732/932-7416 E-Mail: bordo@econ.rutgers.edu Peter L. Rousseau Department of Economics Vanderbilt University VU Station B #351819 2301 Vanderbilt Place Nashville, TN 37235-1819 Tel: 615/343-2466 E-Mail: peter.l.rousseau@vanderbilt.edu AB - We study linkages between financial development, international trade, and long-run growth using data since 1880 for seventeen now-developed “Atlantic” economies and a set of cross-country and dynamic panel data models. We find that finance and trade reinforced each other before 1930, but that these effects did not persist after the Second World War. Financial development has positive effects on growth throughout the sample period, while trade affects growth strongly and independently after 1945. We attribute the rising importance of trade in explaining growth to major post-World War II changes in tariffs and quantity restrictions associated with the GATT, the establishment of the European Common Market, and the gradual elimination of capital controls after 1973. The findings are robust to the use of ‘deep’ fundamentals such as legal origin and indicators of the political environment as instruments for financial development and trade. Financial development, however, is more closely linked to these fundamentals than trade. ER - TY - JOUR AU - Levitt,Steven D. AU - Miles,Thomas J. TI - The Role of Skill Versus Luck in Poker: Evidence from the World Series of Poker JF - National Bureau of Economic Research Working Paper Series VL - No. 17023 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17023 L1 - http://www.nber.org/papers/w17023.pdf N1 - Author contact info: Steven D. Levitt Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 Tel: 773/834-1862 Fax: 773/702-8490 E-Mail: slevitt@midway.uchicago.edu Thomas Miles University of Chicago E-Mail: tmiles@law.uchicago.edu AB - In determining the legality of online poker – a multibillion dollar industry – courts have relied heavily on the issue of whether or not poker is a game of skill. Using newly available data, we analyze that question by examining the performance in the 2010 World Series of Poker of a group of poker players identified as being highly skilled prior to the start of the events. Those players identified a priori as being highly skilled achieved an average return on investment of over 30 percent, compared to a -15 percent for all other players. This large gap in returns is strong evidence in support of the idea that poker is a game of skill. ER - TY - JOUR AU - Duffey,Romney B. TI - The Quantification of Systemic Risk and Stability: New Methods and Measures JF - National Bureau of Economic Research Working Paper Series VL - No. 17022 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17022 L1 - http://www.nber.org/papers/w17022.pdf N1 - Author contact info: Romney Duffey Atomic Energy of Canada Limited E-Mail: duffeyr@aecl.ca M1 - published as Romney B. Duffey. "The Quantification of Systemic Risk and Stability: New Methods and Measures," in Joseph G. Haubrich and Andrew W. Lo, editors, "Quantifying Systemic Risk" University of Chicago Press (2012) M3 - presented at "Research Conference on Quantifying Systemic Risk", November 6, 2009 AB - We address the question of the prediction of large failures, busts, or system collapse, and the necessary concepts related to risk quantification, minimization and management. Answering this question requires a new approach since predictions using standard financial techniques and statistical distributions fail to predict or anticipate crises. The key points are that financial markets, systems, trading and manoeuvres are not just about money, debt, stocks, instruments and assets but reflect the actions and motivations of humans, which includes the presence or absence of learning effects. Therefore we have the possibility of failures or rare or low frequency events due to human involvement. The rare or unknown event is directly due to human influence, and reflects both learning and risk taking, with the presence of the finite and persistent human error contribution while taking or exposed to risk. This presence of humans in the marketplace explains the failure of present purely statistical methods to correctly estimate, predict or determine the onset of financial crises, busts and collapses. In this essay, we unify the concepts for predicting financial systemic risk with the general theory for outcomes, trends and measures already derived for other technical and social systems with human involvement. We replace words and qualitative reasoning with measures and quantitative predictions. The paper is therefore written with an introductory section devoted to the measures relevant to risk prediction in other modern technological systems; and is then extended and applied specifically to risk prediction for financial and business systems. The resulting measures also provide useful guidance for risk governance. ER - TY - JOUR AU - Gilchrist,Simon AU - Zakrajšek,Egon TI - Credit Spreads and Business Cycle Fluctuations JF - National Bureau of Economic Research Working Paper Series VL - No. 17021 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17021 L1 - http://www.nber.org/papers/w17021.pdf N1 - Author contact info: Simon Gilchrist Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-6824 Fax: NA E-Mail: sgilchri@bu.edu Egon Zakrajsek Division of Monetary Affairs Federal Reserve Board 20th Street & Constitution Avenue, NW Washington, D.C. 20551 Tel: 202/728-5864 Fax: 202/452-2846 E-Mail: egon.zakrajsek@frb.gov AB - This paper examines the evidence on the relationship between credit spreads and economic activity. Using an extensive data set of prices of outstanding corporate bonds trading in the secondary market, we construct a credit spread index that is—compared with the standard default-risk indicators—a considerably more powerful predictor of economic activity. Using an empirical framework, we decompose our index into a predictable component that captures the available firm-specific information on expected defaults and a residual component—the excess bond premium. Our results indicate that the predictive content of credit spreads is due primarily to movements in the excess bond premium. Innovations in the excess bond premium that are orthogonal to the current state of the economy are shown to lead to significant declines in economic activity and equity prices. We also show that during the 2007–09 financial crisis, a deterioration in the creditworthiness of broker-dealers—key financial intermediaries in the corporate cash market—led to an increase in the excess bond premium. These find- ings support the notion that a rise in the excess bond premium represents a reduction in the effective risk-bearing capacity of the financial sector and, as a result, a contraction in the supply of credit with significant adverse consequences for the macroeconomy. ER - TY - JOUR AU - Cadena,Ximena AU - Schoar,Antoinette TI - Remembering to Pay? Reminders vs. Financial Incentives for Loan Payments JF - National Bureau of Economic Research Working Paper Series VL - No. 17020 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17020 L1 - http://www.nber.org/papers/w17020.pdf N1 - Author contact info: Ximena Cadena Harvard University 1737 Cambridge Street Room K 350 Cambridge, MA 02138 E-Mail: xcadena@iq.harvard.edu Antoinette Schoar MIT Sloan School of Management 100 Main Street, E62-638 Cambridge, MA 02142 Tel: 617/253-3763 Fax: 617/258-6855 E-Mail: aschoar@mit.edu AB - We report the results from a field experiment with a micro lender in Uganda to test the effectiveness of privately implemented incentives for loan repayment. Using a randomized control trial we measure the impact of three different treatments: Borrowers are either given a lump sum cash reward upon completion of the loan (equivalent to a 25% interest rate reduction on the current loan), a 25% reduction of the interest rate in the next loan the borrower takes from the bank, or a monthly text message reminder before the loan payment is due (SMS). We find that on average the size of the treatment effect is similar across all the treatment groups: borrowers in the treatment groups have a 7-9% increase in the probability of paying on time and the average days late drop by 2 days a month. The results suggest that simple text messages which help borrowers to better manage their repayment dates have similar effects as large changes in the cost of capital of 25% of interest. The impact of the cash back incentives are stronger for customers with smaller loans and less banking experience, the reduced future interest rate seemed to be most effective for customers with larger loans, while the SMS text messages were particularly effective for younger customers. ER - TY - JOUR AU - Grainger,Corbett A. AU - Costello,Christopher TI - The Value of Secure Property Rights: Evidence from Global Fisheries JF - National Bureau of Economic Research Working Paper Series VL - No. 17019 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17019 L1 - http://www.nber.org/papers/w17019.pdf N1 - Author contact info: Corbett A. Grainger Department of Agricultural and Applied Economics University of Wisconsin, Madison 429 Taylor Hall 427 Lorch St. Madison, WI 53706 http://www.aae.wisc.edu/cagrainger Tel: 608-262-3651 E-Mail: cagrainger@wisc.edu Christopher Costello Bren School of Environmental Science & Management University of California, Santa Barbara Santa Barbara, CA 93106 Tel: 805/893-5802 Fax: 805/893-7612 E-Mail: costello@bren.ucsb.edu AB - Property rights are commonly touted as a solution to common pool resource problems. But in practice the security of these property rights varies substantially owing to differences in design. In fisheries, the design of individual transferable quotas (ITQs) varies widely; the consequences of these design differences on economic outcomes has not been studied. To test whether the security of these property rights affects asset values, we compile a unique dataset to examine the relationship between the exclusivity of property rights and the dividend price ratios for ITQs. We find evidence that stronger property rights lead to higher asset values and lower dividend price ratios in ITQ fisheries. This pecuniary effect of property rights security informs the current policy debate on the design of property rights institutions for managing natural resources. ER - TY - JOUR AU - Brown,Jeffrey R. AU - Kapteyn,Arie AU - Mitchell,Olivia S. TI - Framing Effects and Expected Social Security Claiming Behavior JF - National Bureau of Economic Research Working Paper Series VL - No. 17018 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17018 L1 - http://www.nber.org/papers/w17018.pdf N1 - Author contact info: Jeffrey Brown Department of Finance University of Illinois at Urbana-Champaign 515 East Gregory Drive Champaign, IL 61820 Tel: 217/333-3322 E-Mail: brownjr@illinois.edu Arie Kapteyn RAND Corporation 1776 Main Street P.O. Box 2138 Santa Monica, CA 90407-2138 Tel: (310) 393-0411 x 7973 E-Mail: arie_kapteyn@rand.org Olivia S. Mitchell University of Pennsylvania Wharton School 3620 Locust Walk, St 3000 SH-DH Philadelphia, PA 19104-6302 Tel: 215-898-0424 Fax: 215/898-0310 E-Mail: mitchelo@wharton.upenn.edu AB - Eligible participants in the U.S. Social Security system may claim benefits anytime from age 62-70, with benefit levels actuarially adjusted based on the claiming age. This paper shows that individual intentions with regard to Social Security claiming ages are sensitive to how the early versus late claiming decision is framed. Using an experimental design, we find that the use of a “break-even analysis” has the very strong effect of encouraging individuals to claim early. We also show that individuals are more likely to report they will delay claiming when later claiming is framed as a gain, and when the information provides an anchoring point at older, rather than younger, ages. Moreover, females, individuals with credit card debt, and workers with lower expected benefits are more strongly influenced by framing. We conclude that some individuals may not make fully rational optimizing choices when it comes to choosing a claiming date. ER - TY - JOUR AU - Kolstad,Charles D. TI - Public Goods Agreements with Other-Regarding Preferences JF - National Bureau of Economic Research Working Paper Series VL - No. 17017 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17017 L1 - http://www.nber.org/papers/w17017.pdf N1 - Author contact info: Charles D. Kolstad Department of Economics University of California Santa Barbara, CA 93106 Tel: 805/893-2108 Fax: 805/893-8830 E-Mail: kolstad@econ.ucsb.edu AB - Why cooperation occurs when noncooperation appears to be individually rational has been an issue in economics for at least a half century. In the 1960’s and 1970’s the context was cooperation in the prisoner’s dilemma game; in the 1980’s concern shifted to voluntary provision of public goods; in the 1990’s, the literature on coalition formation for public goods provision emerged, in the context of coalitions to provide transboundary pollution abatement. The problem is that theory suggests fairly low (even zero) levels of contributions to the public good and high levels of free riding. Experiments and empirical evidence suggests higher levels of cooperation. This is a major reason for the emergence in the 1990’s and more recently of the literature on other-regarding preferences (also known as social preferences). Such preferences tend to involve higher levels of cooperation (though not always). This paper contributes to the literature on coalitions, public good provision and other-regarding preferences. For standard preferences, the marginal per capita return (MPCR) to investing in the public good must be greater than one for contributing to be individually rational. We find that Charness-Rabin preferences tend to reduce this threshold for individual contributions. We also find that Charness-Rabin preferences reduce the equilibrium size of a coalition of agents formed to provide the public good. In addition to theoretical results, some experimental implications of the theoretical model are provided. In contrast to much of the literature, we treat the wealth of agents as heterogeneous. ER - TY - JOUR AU - Ferrie,Joseph P. AU - Rolf,Karen TI - Socioeconomic Status in Childhood and Health After Age 70: A New Longitudinal Analysis for the U.S., 1895-2005 JF - National Bureau of Economic Research Working Paper Series VL - No. 17016 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17016 L1 - http://www.nber.org/papers/w17016.pdf N1 - Author contact info: Joseph P. Ferrie Department of Economics Northwestern University Evanston, IL 60208-2600 Tel: 847/491-8210 Fax: 847/491-7001 E-Mail: ferrie@northwestern.edu Karen Rolf Grace Abbott School of Social Work University of Nebraska-Omaha 6001 Dodge Street Omaha, NE 68182 E-Mail: krolf@unomaha.edu AB - The link between circumstances faced by individuals early in life (including those encountered in utero) and later life outcomes has been of increasing interest since the work of Barker in the 1970s on birth weight and adult disease. We provide such a life course perspective for the U.S. by following 45,000 U.S.-born males from the household where they resided before age 5 until their death and analyzing the link between the characteristics of their childhood environment – particularly, its socioeconomic status – and their longevity and specific cause of death. Individuals living before age 5 in lower SES households (measured by father’s occupation and family home ownership) die younger and are more likely to die from heart disease than those living in higher SES households. The pathways potentially generating these effects are discussed. ER - TY - JOUR AU - Smetters,Kent AU - Theseira,Walter E. TI - A Matter of Trust: Understanding Worldwide Public Pension Conversions JF - National Bureau of Economic Research Working Paper Series VL - No. 17015 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17015 L1 - http://www.nber.org/papers/w17015.pdf N1 - Author contact info: Kent Smetters University of Pennsylvania SH-DH 3303 3620 Locust Walk Philadelphia, PA 19104 Tel: 215/898-9811 Fax: 215/898-0310 E-Mail: smetters@wharton.upenn.edu Walter E. Theseira Nanyang Technological University HSS-04-49, 14 Nanyang Drive Singapore 637332 Republic of Singapore E-Mail: wetheseira@ntu.edu.sg AB - This paper seeks to explain the key two stylized facts of fundamental reforms to social security systems worldwide: Why have so many countries reformed when traditional systems seem, at first glance, to have a higher probability of delivering a secure retirement income? Why have these reforms been larger in developing countries facing less severe demographic problems? We show that an OLG voter model can answer both questions. Larger reforms are motivated by a fundamental breakdown in intergenerational trust while smaller reforms are caused by a lack of trust in the ability of the government to save. Empirical analysis seems to support the model. ER - TY - JOUR AU - Mobius,Markus M. AU - Niederle,Muriel AU - Niehaus,Paul AU - Rosenblat,Tanya S. TI - Managing Self-Confidence: Theory and Experimental Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 17014 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17014 L1 - http://www.nber.org/papers/w17014.pdf N1 - Author contact info: Markus Mobius Department of Economics Iowa State University 460A Heady Hall Ames, IA 50011 Tel: (515) 257-6233 Fax: (515) 294-0221 E-Mail: mobius@fas.harvard.edu Muriel Niederle Department of Economics 579 Serra Mall Stanford University Stanford, CA 94305-6072 Tel: 650/723-7359 Fax: 650/725-5702 E-Mail: niederle@stanford.edu Paul Niehaus University of California at San Diego, 9500 Gillma CA 92093-0508 E-Mail: pniehaus@ucsd.edu Tanya Rosenblat Department of Economics Iowa State University 460A Heady Hall Ames, IA 50011 E-Mail: tanyar@iastate.edu AB - Evidence from social psychology suggests that agents process information about their own ability in a biased manner. This evidence has motivated exciting research in behavioral economics, but has also garnered critics who point out that it is potentially consistent with standard Bayesian updating. We implement a direct experimental test. We study a large sample of 656 undergraduate students, tracking the evolution of their beliefs about their own relative performance on an IQ test as they receive noisy feedback from a known data-generating process. Our design lets us repeatedly measure the complete relevant belief distribution incentive-compatibly. We find that subjects (1) place approximately full weight on their priors, but (2) are asymmetric, over-weighting positive feedback relative to negative, and (3) conservative, updating too little in response to both positive and negative signals. These biases are substantially less pronounced in a placebo experiment where ego is not at stake. We also find that (4) a substantial portion of subjects are averse to receiving information about their ability, and that (5) less confident subjects are causally more likely to be averse. We unify these phenomena by showing that they all arise naturally in a simple model of optimally biased Bayesian information processing. ER - TY - JOUR AU - Arora,Ashish AU - Belenzon,Sharon AU - Rios,Luis A. TI - The Organization of R&D in American Corporations: The Determinants and Consequences of Decentralization JF - National Bureau of Economic Research Working Paper Series VL - No. 17013 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17013 L1 - http://www.nber.org/papers/w17013.pdf N1 - Author contact info: Ashish Arora Fuqua School of Business Duke University Box 90120 Durham, NC 27708-0120 Tel: 919 660 7746 Fax: 919 684-2818 E-Mail: ashish.arora@duke.edu Sharon Belenzon Duke University Fuqua School of Business 1 Towerview Drive, Durham, NC United States E-Mail: sharon.belenzon@duke.edu Luis Rios Duke University E-Mail: luis.rios@duke.edu AB - We study the relationship between decentralization of R&D, innovation and firm performance using a novel dataset on the organizational structure of 1,290 American publicly-listed corporations, 2,615 of their affiliate firms, as well as characteristics of 594,903 patents that they hold. We explore the tension between centralization and decentralization of R&D, which trades off between responsiveness to immediate and local business needs and the type of research that can benefit the firm as a whole. To do this, we develop two novel measures of decentralization. First, using intra-firm patent assignments, we distinguish between patents that are assigned to the inventing unit rather than to corporate headquarters. Second, we exploit the variation between firms which posses a central corporate R&D labs and those that do not. We find that centralized R&D tends be more scientific, broader in scope, and have more technical impact, while being more likely in firms that operate within a narrower range of businesses, in complex technologies, or that are less reliant upon acquisitions. Additionally, we find that firms with a more decentralized structure, on average, invest less in R&D, generate fewer patents per R&D, and exhibit greater sales growth and higher market value. We discuss several theories that can explain these relationships, as well as potential avenues for future research. ER - TY - JOUR AU - Casey,Katherine AU - Glennerster,Rachel AU - Miguel,Edward TI - Reshaping Institutions: Evidence on Aid Impacts Using a Pre-Analysis Plan JF - National Bureau of Economic Research Working Paper Series VL - No. 17012 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17012 L1 - http://www.nber.org/papers/w17012.pdf N1 - Author contact info: Katherine Casey Stanford GSB Memorial Way Stanford, CA 94305 E-Mail: kecasey@stanford.edu Rachel Glennerster Abdul Latif Jameel Poverty Action Lab MIT Department of Economics E60-275 Cambridge MA 02139 Tel: 617 324 0098 E-Mail: rglenner@mit.edu Edward Miguel Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720 Tel: 510/642-7162 Fax: 510/642-6615 E-Mail: emiguel@econ.berkeley.edu AB - Although institutions are believed to be key determinants of economic performance, there is limited evidence on how they can be successfully reformed. Evaluating the effects of specific reforms is complicated by the lack of exogenous variation in the presence of institutions; the difficulty of empirically measuring institutional performance; and the temptation to “cherry pick” a few novel treatment effect estimates from amongst the large number of indicators required to capture the complex and multi-faceted subject. We evaluate one attempt to make local institutions more egalitarian by imposing minority participation requirements in Sierra Leone and test for longer term learning-by-doing effects. In so doing, we address these three pervasive challenges by: exploiting the random assignment of a participatory local governance intervention, developing innovative real-world outcomes measures, and using a pre-analysis plan to bind our hands against data mining. The specific program under study is a “community driven development” (CDD) project, which has become a popular strategy amongst donors to improve local institutions in developing countries. We find positive short-run effects on local public goods provision and economic outcomes, but no sustained impacts on collective action, decision-making processes, or the involvement of marginalized groups (like women) in local affairs, indicating that the intervention was ineffective at durably reshaping local institutions. We further show that in the absence of a pre-analysis plan, we could have instead generated two highly divergent, equally erroneous interpretations of the impacts—one positive, one negative—of external aid on institutions. ER - TY - JOUR AU - Malani,Anup AU - Philipson,Tomas J. TI - Can Medical Progress be Sustained? Implications of the Link Between Development and Output Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 17011 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17011 L1 - http://www.nber.org/papers/w17011.pdf N1 - Author contact info: Anup Malani University of Chicago Law School 1111 E. 60th Street Chicago, IL 60637 Tel: 773/702-9602 E-Mail: amalani@uchicago.edu Tomas Philipson Irving B. Harris Graduate School of Public Policy Studies University of Chicago 1155 E. 60th Street Chicago, IL 60637 Tel: 773/502-7773 E-Mail: t-philipson@uchicago.edu AB - Improvements in health have been a major contributor to gains in overall economic welfare. In this paper, we argue that previous economic research on R&D has overlooked an important difference between medical R&D and R&D in other sectors. The health care sector exhibits a unique linkage between product development and output markets. Participants in clinical trials for new medical products are also potential consumers of existing approved medical products. This overlap between input supply and output demand has non-standard effects on innovative returns over time and across geography. First, medical R&D has a self-limiting effect. Contemporary innovation discourages trial participation and slows down development necessary for future innovation. Thus, medical R&D suffers increasing costs over time, driven by improvements in the standard of care. Second, policies that affect output markets, such as universal coverage and price controls, affect the returns to innovation, not only by altering the firm’s variable profits, but also by increasing the length and cost of development. Third, the amount of medical R&D in a location is driven, not only by the local relative R&D talent, but also by consumer demographics and output market policies in that location. We provide evidence of the input-output linkage for the break-through HIV therapies introduced in 1996. We document the substantial drop in trial recruitment induced by these new innovations and argue that this has slowed down development and lowered returns to subsequent HIV-related innovations. ER - TY - JOUR AU - Burkart,Mike AU - Gromb,Denis AU - Mueller,Holger M. AU - Panunzi,Fausto TI - Legal Investor Protection and Takeovers JF - National Bureau of Economic Research Working Paper Series VL - No. 17010 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17010 L1 - http://www.nber.org/papers/w17010.pdf N1 - Author contact info: Mike Burkart Department of Finance Stockholm School of Economics, Room 940 PO Box 6501 SE-113 83 Stockholm SWEDEN Tel: 4687369678 Fax: 468312327 E-Mail: Mike.Burkart@hhs.se Denis Gromb INSEAD Boulevard de Constance 77305 Fontanebleau France E-Mail: denis.gromb@insead.edu Holger Mueller Stern School of Business New York University 44 West Fourth Street Suite 9-190 New York, NY 10012-1126 Tel: 212/998-0341 Fax: 212/995-4233 E-Mail: hmueller@stern.nyu.edu Fausto Panunzi Dipartimento di Economia Universita Bocconi Via Roentgen 1 20136 Milano Tel: 39 02 5836 5327 E-Mail: fausto.panunzi@unibocconi.it AB - We study the role of legal investor protection for the efficiency of the market for corporate control. Stronger legal investor protection limits the ease with which an acquirer, once in control, can extract private benefits at the expense of non-controlling investors. This, in turn, increases the acquirer’s capacity to raise outside funds to finance the takeover. Absent effective competition for the target, the increased outside funding capacity does not make efficient takeovers more likely, however, because the bid price, and thus the acquirer’s need for funds, increase in lockstep with his pledgeable income. In contrast, under effective competition, the increased outside funding capacity makes it less likely that the takeover outcome is determined by the bidders’ financing constraints–and thus by their internal funds–and more likely that it is determined by their ability to create value. Accordingly, stronger legal investor protection can improve the efficiency of the takeover outcome. Taking into account the interaction between legal investor protection and financing constraints also provides new insights into the optimal allocation of voting rights, sales of controlling blocks, and the role of legal investor protection in cross-border M&A. ER - TY - JOUR AU - Dague,Laura AU - DeLeire,Thomas AU - Friedsam,Donna AU - Kuo,Daphne AU - Leininger,Lindsey AU - Meier,Sarah AU - Voskuil,Kristen TI - Estimates of Crowd-Out from a Public Health Insurance Expansion Using Administrative Data JF - National Bureau of Economic Research Working Paper Series VL - No. 17009 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17009 L1 - http://www.nber.org/papers/w17009.pdf N1 - Author contact info: Laura Dague Department of Economics University of Wisconsin-Madison 1180 Observatory Drive Madison, WI 53706-1393 E-Mail: dague@wisc.edu Thomas DeLeire La Follette School of Public Affairs University of Wisconsin-Madison 1225 Observatory Drive Madison, WI 53706 Tel: 608-263-6998 Fax: 608/263-2820 E-Mail: deleire@wisc.edu Donna Friedsam UW Population Health Institute University of Wisconsin-Madison 610 Walnut Street Madison, WI 53726 E-Mail: dafriedsam@wisc.edu Daphne Kuo UW Population Health Institute University of Wisconsin-Madison 610 Walnut Street Madison, WI 53726 E-Mail: dkuo@ssc.wisc.edu Lindsey Leininger Chapin Hall at the University of Chicago 1313 E. 60th Street Chicago, IL 60637 Tel: 773-256-5132 E-Mail: lleininger@chapinhall.org Sarah Meier University of Wisconsin-Madison Department of Population Health Sciences 610 Walnut Street Madison, WI 53726 E-Mail: skmeier@wisc.edu Kristen Voskuil University of Wisconsin-Madison UW Population Health Institute 610 Walnut Street Madison, WI 53726 E-Mail: krvoskuil@wisc.edu AB - We use a combination of administrative and survey data to estimate the fraction of individuals newly enrolled in public health coverage (Wisconsin’s combined Medicaid and CHIP program) that had access to private, employer-sponsored health insurance at the time of their enrollment and the fraction that dropped this coverage. We estimate that after expansion of eligibility for public coverage, approximately 20% of new enrollees had access to private health insurance at the time of enrollment and that only 8% dropped this coverage (with the remaining 12% having both private and public coverage). We also identify an “upper bound” estimate, which suggests that the percentage of new enrollees with private insurance coverage at the time of enrollment is, at most, 27%. These estimates of crowd-out are relatively low compared with estimates from the literature based on Medicaid and CHIP expansions, although based both on different data and on a different method. ER - TY - JOUR AU - Heal,Geoffrey TI - Sustainability and its Measurement JF - National Bureau of Economic Research Working Paper Series VL - No. 17008 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17008 L1 - http://www.nber.org/papers/w17008.pdf N1 - Author contact info: Geoffrey Heal Graduate School of Business 616 Uris Hall Columbia University New York, NY 10027-6902 Tel: 212/854-6459 Fax: 212/316-9219 E-Mail: gmh1@columbia.edu AB - I present a non-technical high-level review the concept of sustainability and the various approaches to quantifying it. ER - TY - JOUR AU - Shiller,Robert J. AU - Wojakowski,Rafal M. AU - Ebrahim,M. Shahid AU - Shackleton,Mark B. TI - Continuous Workout Mortgages JF - National Bureau of Economic Research Working Paper Series VL - No. 17007 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17007 L1 - http://www.nber.org/papers/w17007.pdf N1 - Author contact info: Robert J. Shiller Yale University, Cowles Foundation Box 208281 30 Hillhouse Avenue New Haven, CT 06520-8281 Tel: 203/432-3708 Fax: 203/432-6167 E-Mail: robert.shiller@yale.edu Rafal M. Wojakowski Lancaster University Management School, Department of Accounting and Finance Lancaster LA1 4YX United Kingdom E-Mail: r.wojakowski@lancaster.ac.uk M. Shahid Ebrahim Bangor Business School Hen Goleg, College Road Bangor LL57 2DG United Kingdom E-Mail: m.s.ebrahim@bangor.ac.uk Mark B. Shackleton Lancaster University Management School, Department of Accounting and Finance Lancaster LA1 4YX United Kingdom E-Mail: m.shackleton@lancaster.ac.uk AB - Continuous Workout Mortgage (CWM) balance and payments are indexed using market-observable house price index in an economic environment with prepayments. Our main results include: (a) explicit modelling of repayment and interest-only CWMs; (b) closed form formulas for mortgage payment and mortgage balance of a repayment CWM; (c) a closed form formula for the actuarially fair mortgage rate of an interest-only CWM. For repayment CWMs we extend our analysis to include two negotiable parameters: adjustable "workout proportion" and adjustable "workout threshold." These results are of importance as they not only help in the understanding of the mechanics of CWMs and estimating key contract parameters, but they also provide guidance on how to enhance the resilience of the financial architecture and mitigate systemic risk. ER - TY - JOUR AU - Nakamura,Leonard TI - Durable Financial Regulation: Monitoring Financial Instruments as a Counterpart to Regulating Financial Institutions JF - National Bureau of Economic Research Working Paper Series VL - No. 17006 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17006 L1 - http://www.nber.org/papers/w17006.pdf N1 - Author contact info: Leonard Nakamura Economic Research Federal Reserve Bank of Philadelphia 10 Independence Mall Philadelphia PA 19106-1574 USA Tel: 215-574-3804 Fax: 215-574-4364 E-Mail: leonard.nakamura@phil.frb.org M3 - presented at "Conference on Research in Income and Wealth", November 12-13, 2010 AB - This paper sets forth a discussion framework for the information requirements of systemic financial regulation. It specifically describes a potentially large macro-micro database for the U.S. based on an extended version of the Flow of Funds. I argue that such a database would have been of material value to U.S. regulators in ameliorating the recent financial crisis and could be of aid in understanding the potential vulnerabilities of an innovative financial system in the future. I also suggest that making these data available to the academic research community, under strict confidentiality restrictions, would enhance the detection and measurement of systemic risk. ER - TY - JOUR AU - McCallum,Bennett T. TI - Should Central Banks Raise their Inflation Targets? Some Relevant Issues JF - National Bureau of Economic Research Working Paper Series VL - No. 17005 PY - 2011 Y2 - May 2011 UR - http://www.nber.org/papers/w17005 L1 - http://www.nber.org/papers/w17005.pdf N1 - Author contact info: Bennett T. McCallum Tepper School of Business, Posner 256 Carnegie Mellon University Pittsburgh, PA 15213 Tel: 412/268-2347 Fax: 412/268-6830 E-Mail: bm05@andrew.cmu.edu AB - Should central banks, because of the zero-lower-bound problem, raise their inflation-rate targets? Several arguments are relevant. (1) In the absence of the ZLB, the optimal steady-state inflation rate, according to standard New Keynesian reasoning, lies between the Friedman-rule value of deflation at the steady-state real interest rate and the Calvo-model value of zero, with calibration indicating a larger weight on the latter. (2) An attractive modification of the Calvo pricing equation would, however, imply that the weight on the second of these values should be zero. (3) There may be some scope for activist monetary policy to be effective even when the one-period interest rate is at the ZLB; but there is professional disagreement on this matter. (4) Present institutional arrangements are not immutable. In particular, elimination of traditional currency is feasible (even arguably attractive) and would remove the ZLB constraint on policy. (5) Increasing target inflation for the purpose of avoiding occasional ZLB difficulties would tend to undermine the rationale for central bank independence and would constitute an additional movement away from policy recognition of the economic necessity for intertemporal discipline. ER - TY - JOUR AU - Zivin,Joshua S. Graff AU - Neidell,Matthew J. TI - The Impact of Pollution on Worker Productivity JF - National Bureau of Economic Research Working Paper Series VL - No. 17004 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w17004 L1 - http://www.nber.org/papers/w17004.pdf N1 - Author contact info: Joshua S. Graff Zivin University of California, San Diego 9500 Gilman Drive, MC 0519 La Jolla, CA 92093-0519 Tel: 858/822-6438 E-Mail: jgraffzivin@ucsd.edu Matthew J. Neidell Department of Health Policy and Management Columbia University 600 W 168th Street, 6th Floor New York, NY 10032 Tel: 212/342-4522 Fax: 212/305-3405 E-Mail: mn2191@columbia.edu AB - Environmental protection is typically cast as a tax on the labor market and the economy in general. Since a large body of evidence links pollution with poor health, and health is an important part of human capital, efforts to reduce pollution could plausibly be viewed as an investment in human capital and thus a tool for promoting economic growth. While a handful of studies have documented the impacts of pollution on labor supply, this paper is the first to rigorously assess the less visible but likely more pervasive impacts on worker productivity. In particular, we exploit a novel panel dataset of daily farm worker output as recorded under piece rate contracts merged with data on environmental conditions to relate the plausibly exogenous daily variations in ozone with worker productivity. We find robust evidence that ozone levels well below federal air quality standards have a significant impact on productivity: a 10 ppb decrease in ozone concentrations increases worker productivity by 4.2 percent. ER - TY - JOUR AU - Anderson,James E. AU - Yotov,Yoto V. TI - Terms of Trade and Global Efficiency Effects of Free Trade Agreements, 1990-2002 JF - National Bureau of Economic Research Working Paper Series VL - No. 17003 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w17003 L1 - http://www.nber.org/papers/w17003.pdf N1 - Author contact info: James E. Anderson Department of Economics Boston College Chestnut Hill, MA 02467 Tel: 617/552-3691 Fax: 617/552-2308 E-Mail: james.anderson.1@bc.edu Yoto V. Yotov Drexel University LeBow College of Business Department of Economics and International Business Matheson Hall, Suite 503-C Philadelphia, PA 19104 E-Mail: yotov@drexel.edu AB - This paper infers the terms of trade effects of Free Trade Agreements (FTA's) with the structural gravity model. Using panel data methods to resolve two way causality between trade and FTA's, we estimate direct FTA effects on bilateral trade volume in 2 digit manufacturing goods from 1990-2002. We deduce the terms of trade changes implied by these volume effects for 40 countries plus a rest-of-the-world aggregate. Some gain over 10%, some lose less than 0.2%. Overall, using a novel measure of the change in iceberg melting, global efficiency rises 0.62%. ER - TY - JOUR AU - Zheng,Siqi AU - Kahn,Matthew E. TI - Does Government Investment in Local Public Goods Spur Gentrification? Evidence from Beijing JF - National Bureau of Economic Research Working Paper Series VL - No. 17002 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w17002 L1 - http://www.nber.org/papers/w17002.pdf N1 - Author contact info: Siqi Zheng Institute of Real Estate Studies Department of Construction Management Tsinghua University Beijing 100084, P. R. China Tel: 8610-62772734 Fax: 8610-62788678 E-Mail: zhengsiqi@tsinghua.edu.cn Matthew E. Kahn UCLA Institute of the Environment Department of Economics Department of Public Policy Box 951496 La Kretz Hall, Suite 300 Los Angeles, CA 90095-1496 Tel: 310/794-4904 Fax: 310/825-9663 E-Mail: mkahn@ioe.ucla.edu AB - In Beijing, the metropolitan government has made enormous place based investments to increase green space and to improve public transit. We examine the gentrification consequences of such public investments. Using unique geocoded real estate and restaurant data, we document that the construction of the Olympic Village and two recent major subway systems have led to increased new housing supply in the vicinity of these areas, higher local prices and an increased quantity of nearby private chain restaurants. ER - TY - JOUR AU - Fullerton,Don AU - Karney,Daniel AU - Baylis,Kathy TI - Negative Leakage JF - National Bureau of Economic Research Working Paper Series VL - No. 17001 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w17001 L1 - http://www.nber.org/papers/w17001.pdf N1 - Author contact info: Don Fullerton Department of Finance University of Illinois BIF Box#30 (MC520) 515 East Gregory Drive Champaign, IL 61820 Tel: 217/244-3621 Fax: 217/244-3102 E-Mail: dfullert@illinois.edu Daniel Karney Department of Economics University of Illinois David Kinley Hall Champaign, IL 61820 E-Mail: dkarney2@illinois.edu Kathy Baylis Department of Agricultural and Consumer Economics University of Illinois Mumford Hall Urbana, IL 61801 E-Mail: baylis@illinois.edu AB - We build a simple analytical general equilibrium model and linearize it, to find a closed-from expression for the effect of a small change in carbon tax on leakage – the increase in emissions elsewhere. The model has two goods produced in two sectors or regions. Many identical consumers buy both goods using income from a fixed stock of capital that is mobile between sectors. An increase in one sector’s carbon tax raises the price of its output, so consumption shifts to the other good, causing positive carbon leakage. However, the taxed sector substitutes away from carbon into capital. It thus absorbs capital, which shrinks the other sector, causing negative leakage. This latter effect could swamp the former, reducing carbon emissions in both sectors. ER - TY - JOUR AU - Acharya,Viral V. AU - Bisin,Alberto TI - Counterparty Risk Externality: Centralized Versus Over-the-counter Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 17000 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w17000 L1 - http://www.nber.org/papers/w17000.pdf N1 - Author contact info: Viral V. Acharya Stern School of Business New York University 44 West 4th Street, Suite 9-84 New York, NY 10012 Tel: 212/998-0354 Fax: 212 995 4233 E-Mail: vacharya@stern.nyu.edu Alberto Bisin Department of Economics New York University 19 West 4th Street, 5th Floor New York, NY 10012 Tel: 212/998-8916 Fax: 212/995-4186 E-Mail: alberto.bisin@nyu.edu AB - We model the opacity of over-the-counter (OTC) markets in a setup where agents share risks, but have incentives to default and their financial positions are not mutually observable. We show that this setup results in excess "leverage" in that parties take on short OTC positions that lead to levels of default risk that are higher than Pareto-efficient ones. In particular, OTC markets feature a "counterparty risk externality" that we show can lead to ex-ante productive inefficiency. This externality is absent when trading is organized via a centralized clearing mechanism that provides transparency of trade positions, or a centralized counterparty (such as an exchange) that observes all trades and sets prices competitively. While collateral requirements and subordination of OTC positions in bankruptcy can ameliorate the counterparty risk externality, they are in general inadequate in addressing it fully. ER - TY - JOUR AU - Chakrabarti,Rajashri AU - Lee,Donghoon AU - Klaauw,Wilbert van der AU - Zafar,Basit TI - Household Debt and Saving During the 2007 Recession JF - National Bureau of Economic Research Working Paper Series VL - No. 16999 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16999 L1 - http://www.nber.org/papers/w16999.pdf N1 - Author contact info: Rajashri Chakrabarti Federal Reserve Bank of New York 33 Liberty Street New York, NY 10045 Tel: 212-720-6415 Fax: 212-720-1844 E-Mail: Rajashri.Chakrabarti@ny.frb.org Donghoon Lee Federal Reserve Bank of New York 33 Liberty Street New York, NY 10045 Tel: 2127208699 E-Mail: donghoon.lee@ny.frb.org Wilbert H. van der Klaauw 33 Liberty Street Research and Statistics, Federal Reserve Bank NY New York, NY 10045 E-Mail: Wilbert.vanderklaauw@ny.frb.org Basit Zafar Federal Reserve Bank of New York E-Mail: basit.zafar@ny.frb.org M3 - presented at "Conference on Research in Income and Wealth", November 12-13, 2010 AB - Using administrative credit report records and data collected through several special household surveys we analyze changes in household debt and savings during the 2007 recession. We find that while different segments of the population were affected in distinct ways, depending on whether they owned a home, whether they owned stocks and whether they had secure jobs, the crisis’ impact appears to have been widespread, affecting large shares of households across all age, income and education groups. In response to their deteriorated financial situation, households reduced their average spending and increased saving. The latter increase – at least in 2009 – did not materialize itself through an increase in contributions to retirement and savings accounts. If anything, such contributions actually declined on average during that year. Instead, the higher saving rate appears to reflect a considerable decline in household debt, with households paying down mortgage debt in particular. At the end of 2009 individuals expected to continue to increase saving and pay down debt, which is consistent with what we have observed so far in 2010. In contrast, consumers were pessimistic about the availability of credit, with credit expected to become harder to obtain during 2010. ER - TY - JOUR AU - Nicolò,Gianni De AU - Lucchetta,Marcella TI - Systemic Risks and the Macroeconomy JF - National Bureau of Economic Research Working Paper Series VL - No. 16998 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16998 L1 - http://www.nber.org/papers/w16998.pdf N1 - Author contact info: Gianni De Nicolo International Monetary Fund E-Mail: gdenicolo@imf.org Marcella Lucchetta University of Venice Ca' Foscari E-Mail: lucchett@unive.it M1 - published as Gianni De Nicolò, Marcella Lucchetta. "Systemic Risks and the Macroeconomy," in Joseph G. Haubrich and Andrew W. Lo, editors, "Quantifying Systemic Risk" University of Chicago Press (2012) M3 - presented at "Research Conference on Quantifying Systemic Risk", November 6, 2009 AB - This paper presents a modeling framework that delivers joint forecasts of indicators of systemic real risk and systemic financial risk, as well as stress-tests of these indicators as impulse responses to structural shocks identified by standard macroeconomic and banking theory. This framework is implemented using large sets of quarterly time series of indicators of financial and real activity for the G-7 economies for the 1980Q1-2009Q3 period. We obtain two main results. First, there is evidence of out-of sample forecasting power for tail risk realizations of real activity for several countries, suggesting the usefulness of the model as a risk monitoring tool. Second, in all countries aggregate demand shocks are the main drivers of the real cycle, and bank credit demand shocks are the main drivers of the bank lending cycle. These results challenge the common wisdom that constraints in the aggregate supply of credit have been a key driver of the sharp downturn in real activity experienced by the G-7 economies in 2008Q4-2009Q1. ER - TY - JOUR AU - Chernozhukov,Victor AU - Fernández-Val,Iván AU - Kowalski,Amanda E. TI - Quantile Regression with Censoring and Endogeneity JF - National Bureau of Economic Research Working Paper Series VL - No. 16997 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16997 L1 - http://www.nber.org/papers/w16997.pdf N1 - Author contact info: Victor Chernozhukov Department of Economics MIT Cambridge, MA 02142 E-Mail: vchern@mit.edu Iván Fernández-Val Department of Economics Boston University 270 Bay State Rd Boston, MA 02215 E-Mail: ivanf@bu.edu Amanda E. Kowalski Department of Economics Yale University 37 Hillhouse Avenue Box 208264 New Haven, CT 06520 Tel: 203/432-3521 E-Mail: amanda.kowalski@yale.edu AB - In this paper, we develop a new censored quantile instrumental variable (CQIV) estimator and describe its properties and computation. The CQIV estimator combines Powell (1986) censored quantile regression (CQR) to deal semiparametrically with censoring, with a control variable approach to incorporate endogenous regressors. The CQIV estimator is obtained in two stages that are nonadditive in the unobservables. The first stage estimates a nonadditive model with infinite dimensional parameters for the control variable, such as a quantile or distribution regression model. The second stage estimates a nonadditive censored quantile regression model for the response variable of interest, including the estimated control variable to deal with endogeneity. For computation, we extend the algorithm for CQR developed by Chernozhukov and Hong (2002) to incorporate the estimation of the control variable. We give generic regularity conditions for asymptotic normality of the CQIV estimator and for the validity of resampling methods to approximate its asymptotic distribution. We verify these conditions for quantile and distribution regression estimation of the control variable. We illustrate the computation and applicability of the CQIV estimator with numerical examples and an empirical application on estimation of Engel curves for alcohol. ER - TY - JOUR AU - Lettau,Martin AU - Ludvigson,Sydney C. TI - Shocks and Crashes JF - National Bureau of Economic Research Working Paper Series VL - No. 16996 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16996 L1 - http://www.nber.org/papers/w16996.pdf N1 - Author contact info: Martin Lettau Haas School of Business University of California, Berkeley 545 Student Services Bldg. #1900 Berkeley, CA 94720-1900 Tel: 510/642-6349 Fax: 510/643-1412 E-Mail: lettau@haas.berkeley.edu Sydney C. Ludvigson Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10002 Tel: 212/998-8927 Fax: 212/995-4186 E-Mail: sydney.ludvigson@nyu.edu AB - Three shocks, distinguished by whether their effects are permanent or transitory, are identified to characterize the post-war dynamics of aggregate consumer spending, labor earnings, and household wealth. The first shock accounts for virtually all of the variation in consumption and has effects akin to a permanent total factor productivity shock in canonical frictionless macroeconomic models. The second shock underlies the bulk of fluctuations in labor income, accounting for 76% of its variation. This shock permanently reallocates rewards between shareholders and workers but leaves consumption unaffected. Over the last 25 years, the cumulative effect of this shock has persistently boosted stock market wealth and persistently lowered labor earnings. The third shock is a persistent but transitory innovation that accounts for the vast majority of quarterly fluctuations in asset values but has a negligible impact on consumption and labor earnings at all horizons. We show that the 2000-02 asset market crash was the result of a negative transitory wealth shock, which predominantly affected stock market wealth. By contrast, the 2007-09 crash was accompanied by a string of large negative realizations in both the transitory shock and the permanent productivity shock, with the latter having especially important implications for housing wealth. ER - TY - JOUR AU - Acharya,Viral V. AU - Davydenko,Sergei A. AU - Strebulaev,Ilya A. TI - Cash Holdings and Credit Risk JF - National Bureau of Economic Research Working Paper Series VL - No. 16995 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16995 L1 - http://www.nber.org/papers/w16995.pdf N1 - Author contact info: Viral V. Acharya Stern School of Business New York University 44 West 4th Street, Suite 9-84 New York, NY 10012 Tel: 212/998-0354 Fax: 212 995 4233 E-Mail: vacharya@stern.nyu.edu Sergei Davydenko Assistant Professor of Finance Rotman School of Management University of Toronto 105 St George Street, Toronto Canada M5S 3E6 Tel: 44 207 262 5050 ext 3768 Fax: 44 207 724 3317 E-Mail: davydenko@rotman.utoronto.ca Ilya A. Strebulaev Graduate School of Business Stanford University 655 Knight Way Stanford, CA 94305 Tel: 650/725-8239 Fax: 650/725-7979 E-Mail: istrebulaev@stanford.edu AB - Intuition suggests that firms with higher cash holdings are safer and should have lower credit spreads. Yet empirically, the correlation between cash and spreads is robustly positive and higher for lower credit ratings. This puzzling finding can be explained by the precautionary motive for saving cash. In our model endogenously determined optimal cash reserves are positively related to credit risk, resulting in a positive correlation between cash and spreads. In contrast, spreads are negatively related to the "exogenous'' component of cash holdings that is independent of credit risk factors. Similarly, although firms with higher cash reserves are less likely to default over short horizons, endogenously determined liquidity may be related positively to the longer-term probability of default. Our empirical analysis confirms these predictions, suggesting that precautionary savings are central to understanding the effects of cash on credit risk. ER - TY - JOUR AU - Diamond,Douglas W. AU - Rajan,Raghuram TI - Illiquid Banks, Financial Stability, and Interest Rate Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 16994 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16994 L1 - http://www.nber.org/papers/w16994.pdf N1 - Author contact info: Douglas W. Diamond Booth School of Business University of Chicago 5807 S Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-7283 Fax: 773/834-9134 E-Mail: douglas.diamond@chicagobooth.edu Raghuram Rajan Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-4437 Fax: 773/702-0458 E-Mail: raghuram.rajan@ChicagoBooth.edu AB - Do low interest rates alleviate banking fragility? Banks finance illiquid assets with demandable deposits, which discipline bankers but expose them to damaging runs. Authorities may choose to bail out banks being run. Unconstrained bailouts undermine the disciplinary role of deposits. Moreover, competition forces banks to promise depositors more, increasing intervention and making the system worse off. By contrast, constrained intervention to lower rates maintains private discipline, while offsetting contractual rigidity. It may still lead banks to make excessive liquidity promises. Anticipating this, central banks can reduce financial fragility by raising rates in normal times to offset their propensity to reduce rates in adverse times. ER - TY - JOUR AU - Meisenzahl,Ralf AU - Mokyr,Joel TI - The Rate and Direction of Invention in the British Industrial Revolution: Incentives and Institutions JF - National Bureau of Economic Research Working Paper Series VL - No. 16993 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16993 L1 - http://www.nber.org/papers/w16993.pdf N1 - Author contact info: Ralf Meisenzahl Board of Governors of the Federal Reserve System 20th Street and Constitution Ave NW - MS 153 Washington, DC 20551 Tel: 202 912 7997 Fax: 202 452 5295 E-Mail: Ralf.R.Meisenzahl@frb.gov Joel Mokyr Department of Economics Northwestern University 2003 Sheridan Road Evanston, IL 60208 E-Mail: j-mokyr@northwestern.edu M3 - presented at "Rate & Direction of Inventive Activity Conference", September 30-October 2, 2010 AB - During the Industrial Revolution technological progress and innovation became the main drivers of economic growth. But why was Britain the technological leader? We argue that one hitherto little recognized British advantage was the supply of highly skilled, mechanically able craftsmen who were able to adapt, implement, improve, and tweak new technologies and who provided the micro inventions necessary to make macro inventions highly productive and remunerative. Using a sample of 759 of these mechanics and engineers, we study the incentives and institutions that facilitated the high rate of inventive activity during the Industrial Revolution. First, apprenticeship was the dominant form of skill formation. Formal education played only a minor role. Second, many skilled workmen relied on secrecy and first-mover advantages to reap the benefits of their innovations. Over 40 percent of the sample here never took out a patent. Third, skilled workmen in Britain often published their work and engaged in debates over contemporary technological and social questions. In short, they were affected by the Enlightenment culture. Finally, patterns differ for the textile sector; therefore, any inferences from textiles about the whole economy are likely to be misleading. ER - TY - JOUR AU - Zheng,Siqi AU - Cao,Jing AU - Kahn,Matthew E. TI - China's Rising Demand for "Green Cities": Evidence from Cross-City Real Estate Price Hedonics JF - National Bureau of Economic Research Working Paper Series VL - No. 16992 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16992 L1 - http://www.nber.org/papers/w16992.pdf N1 - Author contact info: Siqi Zheng Institute of Real Estate Studies Department of Construction Management Tsinghua University Beijing 100084, P. R. China Tel: 8610-62772734 Fax: 8610-62788678 E-Mail: zhengsiqi@tsinghua.edu.cn Jing Cao School of Economics and Management Tsinghua University Haidian District, Beijing, 100084, China E-Mail: caojing@sem.tsinghua.edu.cn Matthew E. Kahn UCLA Institute of the Environment Department of Economics Department of Public Policy Box 951496 La Kretz Hall, Suite 300 Los Angeles, CA 90095-1496 Tel: 310/794-4904 Fax: 310/825-9663 E-Mail: mkahn@ioe.ucla.edu AB - With the decline of the traditional hukou system, migrants in China have a broad set of cities to choose from. Within an open system of cities, compensating differentials theory predicts that local real estate prices will reflect the marginal valuation of non-market local public goods. More polluted cities will feature lower real estate prices. But, local pollution may be caused by booming local industries. To address such endogeneity concerns, we estimate hedonic regressions using an instrumental variable strategy based on “imports” of pollution from nearby sources. By documenting the importance of spatial emissions patterns, our study highlights how real estate prices in one city are affected by Pigouvian externalities originating in another location. On average, a 10% decrease in imported neighbor pollution is associated with a 1.8% increase in local home prices. ER - TY - JOUR AU - Wolff,Edward N. TI - Pensions in the 2000s: the Lost Decade? JF - National Bureau of Economic Research Working Paper Series VL - No. 16991 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16991 L1 - http://www.nber.org/papers/w16991.pdf N1 - Author contact info: Edward N. Wolff Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10012 Tel: 212/998-8917 Fax: 212/995-4186 E-Mail: edward.wolff@nyu.edu AB - One of the most dramatic changes in the retirement income system over the last three decades has been a decline in traditional defined benefit (DB) pension plans and a corresponding rise in defined contribution (DC) pensions. Have workers benefited from this change? Using data from the Survey of Consumer Finances, I find that after robust gains in the 1980s and 1990s, pension wealth experienced a marked slowdown in growth from 2001 to 2007. Projections to 2009 indicate no increase in pension wealth from 2001 to 2009. Retirement wealth is also found to offset the inequality in standard household net worth. However, I find that pensions had a weaker offsetting effect on wealth inequality in 2007 than in 1989. As a result, whereas standard net worth inequality showed little change from 1989 to 2007, the inequality of private augmented wealth (the sum of pension wealth and net worth) did increase over this period. These results hold up even when Social Security wealth and employer contributions to DC plans are included in the measure of wealth and when adjustments are made for future tax liabilities on retirement wealth. ER - TY - JOUR AU - Chandra,Amitabh AU - Jena,Anupam B. AU - Skinner,Jonathan S. TI - The Pragmatist’s Guide to Comparative Effectiveness Research JF - National Bureau of Economic Research Working Paper Series VL - No. 16990 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16990 L1 - http://www.nber.org/papers/w16990.pdf N1 - Author contact info: Amitabh Chandra John F. Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/496-7356 E-Mail: amitabh_chandra@harvard.edu Anupam Jena Department of Medicine Massachusetts General Hospital Wang Ambulatory Care Center 15 Parkman Street Boston, MA 02114 E-Mail: jena.anupam@mgh.harvard.edu Jonathan S. Skinner Department of Economics 6106 Rockefeller Hall Dartmouth College Hanover, NH 03755 Tel: 603/646-2535 Fax: 603/646-2122 E-Mail: jonathan.skinner@dartmouth.edu AB - All developed countries have been struggling with a trend toward health care absorbing an ever-larger fraction of government and private budgets. Adopting any treatment that improves health outcomes, no matter what the cost, can worsen allocative inefficiency by paying dearly for small health gains. One potential solution is to rely more heavily on studies of the costs and effectiveness of new technologies in an effort to ensure that new spending is justified by a commensurate gain in consumer benefits. But not everyone is a fan of such studies and we discuss the merits of comparative effectiveness studies and its cousin, cost-effectiveness analysis. We argue that effectiveness research can generate some moderating effects on cost growth in healthcare if such research can be used to nudge patients away from less-effective therapies, whether through improved decision making or by encouraging beefed-up copayments for cost-ineffective procedures. More promising still for reducing growth is the use of a cost-effectiveness framework to better understand where the real savings lie—and the real savings may well lie in figuring out the complex interaction and fragmentation of healthcare systems. ER - TY - JOUR AU - Hendel,Igal AU - Nevo,Aviv TI - Intertemporal Price Discrimination in Storable Goods Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 16988 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16988 L1 - http://www.nber.org/papers/w16988.pdf N1 - Author contact info: Igal Hendel Department of Economics Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-8226 Fax: 847/491-7001 E-Mail: igal@northwestern.edu Aviv Nevo Department of Economics Northwestern University 2001 Sheridan Road Evanston, IL 60208-2600 Tel: 847/491-8212 Fax: 847/491-7001 E-Mail: nevo@northwestern.edu AB - We study intertemporal price discrimination when consumers can store for future consumption needs. To make the problem tractable we offer a simple model of demand dynamics, which we estimate using market level data. Optimal pricing involves temporary price reductions that enable sellers to discriminate between price sensitive consumers, who anticipate future needs, and less price-sensitive consumers. We empirically quantify the impact of intertemporal price discrimination on profits and welfare. We find that sales: (1) capture 25-30% of the profit gap between non-discriminatory and third degree price discrimination profits, and (2) increase total welfare. ER - TY - JOUR AU - Chugh,Randy AU - Cropper,Maureen L. AU - Narain,Urvashi TI - The Cost of Fuel Economy in the Indian Passenger Vehicle Market JF - National Bureau of Economic Research Working Paper Series VL - No. 16987 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16987 L1 - http://www.nber.org/papers/w16987.pdf N1 - Author contact info: Randy Chugh Department of Economics University of Maryland College Park, MD 20742 E-Mail: chugh@econ.umd.edu Maureen L. Cropper Department of Economics University of Maryland College Park, MD 20742 Tel: 301/405-3483 Fax: 301/405-3542 E-Mail: cropper@econ.umd.edu Urvashi Narain Environment Department World Bank Washington, DC 20433 E-Mail: unarain@worldbank.org AB - To investigate how fuel economy is valued in the Indian car market, we compute the cost to Indian consumers of purchasing a more fuel-efficient vehicle and compare it to the benefit of lower fuel costs over the life of the vehicle. We use hedonic price functions for four market segments (petrol hatchbacks, diesel hatchbacks, petrol sedans, and diesel sedans) to compute 95 percent confidence intervals for the marginal cost to the consumer of an increase in fuel economy. We find that the associated present value of fuel savings falls within the 95 percent confidence interval for some specifications, in all market segments, for the years 2002 through 2006. Thus, we fail to consistently reject the hypothesis that consumers appropriately value fuel economy. When we reject the null hypothesis, the marginal cost of additional fuel economy exceeds the present value of fuel savings, suggesting that consumers may, in fact, be overvaluing fuel economy. ER - TY - JOUR AU - Hellerstein,Judith K. AU - Neumark,David TI - Employment in Black Urban Labor Markets: Problems and Solutions JF - National Bureau of Economic Research Working Paper Series VL - No. 16986 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16986 L1 - http://www.nber.org/papers/w16986.pdf N1 - Author contact info: Judith K. Hellerstein Department of Economics Tydings Hall University of Maryland College Park, MD 20742 Tel: 301/405-3545 Fax: 301/405-3542 E-Mail: hellerst@econ.umd.edu David Neumark Department of Economics University of California at Irvine 3151 Social Science Plaza Irvine, CA 92697 Tel: 949-824-8496 Fax: 949/824-2182 E-Mail: dneumark@uci.edu AB - Blacks in the United States are poorer than whites and have much lower employment rates. “Place-based” policies seek to improve the labor markets in which blacks – especially low-income urban blacks – tend to reside. We first review the literature on spatial mismatch, which provides much of the basis for place-based policies. New evidence demonstrates an important racial dimension to spatial mismatch, and this “racial mismatch” suggests that simply creating more jobs where blacks live, or moving blacks to where jobs are located, is unlikely to make a major dent in black employment problems. We also discuss new evidence of labor market networks that are to some extent stratified by race, which may help explain racial mismatch. We then turn to evidence on place-based policies. Many of these, such as enterprise zones and Moving to Opportunity (MTO), are largely ineffective in increasing employment, likely because spatial mismatch is not the core problem facing urban blacks, and because, in the case of MTO, the role of labor market networks was weakened. Finally, we discuss policies focused on place that also target incentives and other expenditures on the residents of the targeted locations, which may do more to take advantage of labor market networks. ER - TY - JOUR AU - Bricker,Jesse AU - Bucks,Brian K. AU - Kennickell,Arthur AU - Mach,Traci L. AU - Moore,Kevin TI - Drowning or Weathering the Storm? Changes in Family Finances from 2007 to 2009 JF - National Bureau of Economic Research Working Paper Series VL - No. 16985 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16985 L1 - http://www.nber.org/papers/w16985.pdf N1 - Author contact info: Jesse Bricker Board of Governors Federal Reserve Board Washington, DC 20551 E-Mail: jesse.bricker@frb.gov Brian K. Bucks Board of Governors Federal Reserve Board Washington, DC 20551 E-Mail: Brian.Bucks@cfpb.gov Arthur Kennickell Board of Governors Federal Reserve Board Washington, DC 20551 Tel: 202/452-2247 Fax: 202/452-5295 E-Mail: arthur.kennickell@frb.gov Traci L. Mach Board of Governors Federal Reserve Board Washington, DC 20551 E-Mail: traci.l.mach@frb.gov Kevin Moore Board of Governors Federal Reserve Board Washington, DC 20551 E-Mail: kevin.b.moore@frb.gov M3 - presented at "Conference on Research in Income and Wealth", November 12-13, 2010 AB - In 2009, the Federal Reserve Board implemented a survey of families that participated in the 2007 Survey of Consumer Finances (SCF) to gain detailed information on the effects of the recent recession on all types of households. Using data from the 2007–09 SCF panel, we highlight the variation in households’ financial experiences by examining the distribution of changes in families’ balance sheets. Further, we use information on changes in families’ saving, investing, and spending behavior to consider the potential longer-term consequences of the current recession on households’ finances and decisions. Most families experienced a decline in wealth between 2007 and 2009, but many families saw only small changes on net, and others saw substantial increases in their wealth. This pattern of gains and losses typically holds within demographic groups. Changes in families’ wealth over the period appear to reflect changes in asset values (particularly the value of homes, stocks, and businesses) rather than changes in the level of ownership of assets and debts or in the amount of debt held. On the whole, families appear more cautious in 2009 than in 2007, as most families reported greater desired buffer savings, and many expressed concern over future income and employment. ER - TY - JOUR AU - Acemoglu,Daron TI - Diversity and Technological Progress JF - National Bureau of Economic Research Working Paper Series VL - No. 16984 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16984 L1 - http://www.nber.org/papers/w16984.pdf N1 - Author contact info: Daron Acemoglu Department of Economics MIT, E52-380B 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-1927 Fax: 617/253-1330 E-Mail: daron@mit.edu AB - This paper proposes a tractable model to study the equilibrium diversity of technological progress and shows that equilibrium technological progress may exhibit too little diversity (too much conformity), in particular, foregoing socially beneficial investments in “alternative” technologies that will be used at some point in the future. The presence of future innovations that will replace current innovations imply that social benefits from innovation are not fully internalized. As a consequence, the market favors technologies that generate current gains relative to those that will bear fruit in the future; current innovations in research lines that will be profitable in the future are discouraged because current innovations are typically followed by further innovations before they can be profitably marketed. A social planner would choose a more diverse research portfolio and would induce a higher growth rate than the equilibrium allocation. The diversity of researchers is a partial (imperfect) remedy against the misallocation induced by the market. Researchers with different interests, competences or ideas may choose non-profit maximizing and thus more diverse research portfolios, indirectly contributing to economic growth. ER - TY - JOUR AU - Moser,Petra AU - Rhode,Paul W. TI - Did Plant Patents Create the American Rose? JF - National Bureau of Economic Research Working Paper Series VL - No. 16983 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16983 L1 - http://www.nber.org/papers/w16983.pdf N1 - Author contact info: Petra Moser Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 Tel: 650-723-9303 Fax: (650) 725-5702 E-Mail: pmoser@stanford.edu Paul Rhode Economics Department University of Michigan 205 Lorch Hall 611 Tappan St. Ann Arbor, MI 48109-1220 Tel: 734/647-5603 Fax: 734/764-2769 E-Mail: pwrhode@umich.edu M3 - presented at "Rate & Direction of Inventive Activity Conference", September 30-October 2, 2010 AB - The Plant Patent Act of 1930 was the first step towards creating property rights for biological innovation: it introduced patent rights for asexually-propagated plants. This paper uses data on plant patents and registrations of new varieties to examine whether the Act encouraged innovation. Nearly half of all plant patents between 1931 and 1970 were for roses. Large commercial nurseries, which began to build mass hybridization programs in the 1940s, accounted for most of these patents, suggesting that the new intellectual property rights may have helped to encourage the development of a commercial rose breeding industry. Data on registrations of newly-created roses, however, yield no evidence of an increase in innovation: less than 20 percent of new roses were patented, European breeders continued to create most new roses, and there was no increase in the number of new varieties per year after 1931. ER - TY - JOUR AU - Ang,Andrew AU - Longstaff,Francis A. TI - Systemic Sovereign Credit Risk: Lessons from the U.S. and Europe JF - National Bureau of Economic Research Working Paper Series VL - No. 16982 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16982 L1 - http://www.nber.org/papers/w16982.pdf N1 - Author contact info: Andrew Ang Columbia Business School 3022 Broadway 413 Uris New York, NY 10027 Tel: 212/854-9154 Fax: 212/662-8474 E-Mail: aa610@columbia.edu Francis Longstaff UCLA Anderson Graduate School of Management 110 Westwood Plaza, Box 951481 Los Angeles, CA 90095-1481 Tel: 310/825-2218 Fax: 310/206-5455 E-Mail: francis.longstaff@anderson.ucla.edu AB - We study the nature of systemic sovereign credit risk using CDS spreads for the U.S. Treasury, individual U.S. states, and major European countries. Using a multifactor affine framework that allows for both systemic and sovereign-specific credit shocks, we find that there is considerable heterogeneity across U.S. and European issuers in their sensitivity to systemic risk. U.S. and Euro systemic shocks are highly correlated, but there is much less systemic risk among U.S. sovereigns than among European sovereigns. We also find that U.S. and European systemic sovereign risk is strongly related to financial market variables. These results provide strong support for the view that systemic sovereign risk has its roots in financial markets rather than in macroeconomic fundamentals. ER - TY - JOUR AU - Alesina,Alberto F. AU - Ferrara,Eliana La TI - A Test of Racial Bias in Capital Sentencing JF - National Bureau of Economic Research Working Paper Series VL - No. 16981 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16981 L1 - http://www.nber.org/papers/w16981.pdf N1 - Author contact info: Alberto F. Alesina Department of Economics Harvard University Littauer Center 210 Cambridge, MA 02138 Tel: 617/495-8388 Fax: 617/495-7730 E-Mail: aalesina@harvard.edu Eliana La Ferrara Universita' Bocconi Dept of Economics via Roentgen 1 20136 Milano Italy Tel: 3902-58363328 E-Mail: eliana.laferrara@unibocconi.it AB - This paper proposes a test of racial bias in capital sentencing based upon patterns of judicial errors in lower courts. We model the behavior of the trial court as minimizing a weighted sum of the probability of sentencing an innocent and that of letting a guilty defendant free. We define racial bias as a situation where the relative weight on the two types of errors is a function of defendant and/or victim race. The key prediction of the model is that if the court is unbiased, ex post the error rate should be independent of the combination of defendant and victim race. We test this prediction using an original dataset that contains the race of the defendant and of the victim(s) for all capital appeals that became final between 1973 and 1995. We find robust evidence of bias against minority defendants who killed white victims: In Direct Appeal and Habeas Corpus the probability of error in these cases is 3 and 9 percentage points higher, respectively, than for minority defendants who killed minority victims. ER - TY - JOUR AU - Gans,Joshua AU - Murray,Fiona E. TI - Funding Scientific Knowledge: Selection, Disclosure and the Public-Private Portfolio JF - National Bureau of Economic Research Working Paper Series VL - No. 16980 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16980 L1 - http://www.nber.org/papers/w16980.pdf N1 - Author contact info: Joshua Gans Rotman School of Management University of Toronto 105 St. George Street Toronto ON M5S 3E6 Tel: 416/978-3243 E-Mail: joshua.gans@gmail.com Fiona E. Murray MIT Sloan School of Management 50 Memorial Drive, E52-568 Cambridge, MA 02142 Tel: 617/253-3681 Fax: 617/253-2660 E-Mail: fmurray@mit.edu M3 - presented at "Rate & Direction of Inventive Activity Conference", September 30-October 2, 2010 AB - This paper examines argues that while two distinct perspectives characterize the foundations of the public funding of research – filling a selection gap and solving a disclosure problem – in fact both the selection choices of public funders and their criteria for disclosure and commercialization shape the level and type of funding for research and the disclosures that arise as a consequence. In making our argument, we begin by reviewing project selection criteria and policies towards disclosure and commercialization (including patent rights) made by major funding organizations, noting the great variation between these institutions. We then provide a model of how selection criteria and funding conditions imposed by funders interact with the preferences of scientists to shape those projects that accept public funds and the overall level of openness in research. Our analysis reveals complex and unexpected relationships between public funding, private funding, and public disclosure of research. We show, for example, that funding choices made by public agencies can lead to unintended, paradoxical effects, providing short-term openness while stifling longer-term innovation. Implications for empirical evaluation and an agenda for future research are discussed. ER - TY - JOUR AU - Anderson,Soren T. AU - Kellogg,Ryan AU - Sallee,James M. TI - What Do Consumers Believe About Future Gasoline Prices? JF - National Bureau of Economic Research Working Paper Series VL - No. 16974 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16974 L1 - http://www.nber.org/papers/w16974.pdf N1 - Author contact info: Soren T. Anderson Department of Economics Marshall - Adams Hall, Office 18C Michigan State University East Lansing, MI 48824-1038 Tel: 517/355-0286 Fax: 517/432-1068 E-Mail: sta@msu.edu Ryan Kellogg University of Michigan Department of Economics 238 Lorch Hall 611 Tappan Street Ann Arbor, MI 48109-1220 Tel: 734/764-2371 Fax: 734/764-2769 E-Mail: kelloggr@umich.edu James M. Sallee Harris School of Public Policy Studies University of Chicago 1155 East 60th Street Chicago, IL 60637 Tel: 773/316-3480 Fax: 773/702-2286 E-Mail: sallee@uchicago.edu AB - Researchers estimating the demand for energy-using durable goods must specify consumers' beliefs about future energy prices. Policy-relevant inference hinges on this specification, yet there is little direct evidence on the nature of consumer beliefs. We provide such evidence by analyzing two decades of data on gasoline price expectations from the Michigan Survey of Consumers. We find that average consumer beliefs are indistinguishable from a no-change forecast. This finding has important implications for the literature on consumer valuation of energy efficiency, and it implies that researchers are likely justified in assuming a no-change forecast, as is common practice. ER - TY - JOUR AU - Fiore,Fiorella De AU - Uhlig,Harald TI - Bank Finance Versus Bond Finance JF - National Bureau of Economic Research Working Paper Series VL - No. 16979 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16979 L1 - http://www.nber.org/papers/w16979.pdf N1 - Author contact info: Fiorella de Fiore European Central Bank Postfach 160319 D-60066 Frankfurt am Main, GERMANY E-Mail: fiorella.De_fiore@ecb.int Harald Uhlig Dept. of Economics University of Chicago 1126 E 59th Street Chicago, IL 60637 Tel: 773/702-3702 Fax: 773/702-8490 E-Mail: huhlig@uchicago.edu AB - We present a dynamic general equilibrium model with agency costs where: i) firms are heterogeneous in the risk of default; ii) they can choose to raise finance through bank loans or corporate bonds; and iii) banks are more efficient than the market in resolving informational problems. The model is used to analyze some major long-run differences in corporate finance between the US and the euro area. We suggest an explanation of those differences based on information availability. Our model replicates the data when the euro area is characterized by limited availability of public information about corporate credit risk relative to the US, and when european firms value more than US firms the flexibility and information acquisition role provided by banks. ER - TY - JOUR AU - Krueger,Alan B. AU - Kuziemko,Ilyana TI - The Demand for Health Insurance Among Uninsured Americans: Results of a Survey Experiment and Implications for Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 16978 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16978 L1 - http://www.nber.org/papers/w16978.pdf N1 - Author contact info: Alan B. Krueger Industrial Relations Section Firestone Library Princeton University Princeton, NJ 08544 Tel: 609/258-4046 Fax: 609/258-2907 E-Mail: akrueger@princeton.edu Ilyana Kuziemko 361 Wallace Hall Princeton University Princeton, NJ 08544 Tel: 609/258-6917 Fax: 609/258-5974 E-Mail: kuziemko@princeton.edu AB - Most existing work on the price elasticity of demand for health insurance focuses on employees’ decisions to enroll in employer-provided plans. Yet any attempt to achieve universal coverage must focus on the uninsured, the vast majority of whom are not offered employer-sponsored insurance. In the summer of 2008, we conducted a survey experiment to assess the willingness to pay for a health plan among a large sample of uninsured Americans. The experiment yields price elasticities substantially greater than those found in most previous studies. We use these results to estimate coverage expansion under the Affordable Care Act, with and without an individual mandate. We estimate that 39 million uninsured individuals would gain coverage and find limited evidence of adverse selection. ER - TY - JOUR AU - Brown,Jason AU - Duggan,Mark AU - Kuziemko,Ilyana AU - Woolston,William TI - How does Risk Selection Respond to Risk Adjustment? Evidence from the Medicare Advantage Program JF - National Bureau of Economic Research Working Paper Series VL - No. 16977 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16977 L1 - http://www.nber.org/papers/w16977.pdf N1 - Author contact info: Jason Brown U.S. Department of the Treasury 1500 Pennsylvania Ave, NW Washington, D.C. 20220 E-Mail: Jason.Brown@do.treas.gov Mark Duggan The Wharton School University of Pennsylvania 1452 Steinberg Hall-Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104 Tel: 215-898-0928 Fax: 215-898-7635 E-Mail: mduggan@wharton.upenn.edu Ilyana Kuziemko 361 Wallace Hall Princeton University Princeton, NJ 08544 Tel: 609/258-6917 Fax: 609/258-5974 E-Mail: kuziemko@princeton.edu William Woolston Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305 E-Mail: william.woolston@stanford.edu AB - Governments often contract with private firms to provide public services such as health care and education. To decrease firms' incentives to selectively enroll low-cost individuals, governments frequently "risk-adjust" payments to firms based on enrollees' characteristics. We model how risk adjustment affects selection and differential payments---the government's payments to a firm for covering an individual minus the counterfactual cost had the government directly covered her. We show that firms reduce selection along dimensions included in the risk-adjustment formula, while increasing selection along excluded dimensions. These responses can actually increase differential payments relative to pre-risk-adjustment levels and thus risk adjustment can raise the total cost to the government of providing the public service. We confirm both selection predictions using individual-level data from Medicare, which in 2004 began risk-adjusting payments to private Medicare Advantage plans. We find that differential payments actually rise after risk adjustment and estimate that they totaled $30 billion in 2006, or nearly eight percent of total Medicare spending. ER - TY - JOUR AU - Schwert,G. William TI - Stock Volatility During the Recent Financial Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 16976 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16976 L1 - http://www.nber.org/papers/w16976.pdf N1 - Author contact info: G. William Schwert William E. Simon Graduate School of Business Admin University of Rochester Rochester, NY 14627 Tel: 585/275-2470 Fax: 585/461-5475 E-Mail: Schwert@schwert.ssb.rochester.edu AB - This paper uses monthly returns from 1802-2010, daily returns from 1885-2010, and intraday returns from 1982-2010 in the United States to show how stock volatility has changed over time. It also uses various measures of volatility implied by option prices to infer what the market was expecting to happen in the months following the financial crisis in late 2008. This episode was associated with historically high levels of stock market volatility, particularly among financial sector stocks, but the market did not expect volatility to remain high for long and it did not. This is in sharp contrast to the prolonged periods of high volatility during the Great Depression. Similar analysis of stock volatility in the United Kingdom and Japan reinforces the notion that the volatility seen in the 2008 crisis was relatively short-lived. While there is a link between stock volatility and real economic activity, such as unemployment rates, it can be misleading. ER - TY - JOUR AU - Paravisini,Daniel AU - Rappoport,Veronica AU - Schnabl,Philipp AU - Wolfenzon,Daniel TI - Dissecting the Effect of Credit Supply on Trade: Evidence from Matched Credit-Export Data JF - National Bureau of Economic Research Working Paper Series VL - No. 16975 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16975 L1 - http://www.nber.org/papers/w16975.pdf N1 - Author contact info: Daniel Paravisini Columbia University Graduate School of Business 3022 Broadway, Uris Hall 416 New York, NY 10027 Tel: 212/854-4489 Fax: 212/316-9180 E-Mail: dp2239@columbia.edu Veronica Rappoport Finance & Economics Division Columbia Business School 3022 Broadway, Uris Hall 821 New York, NY 10027 Tel: 212/854-0223 Fax: 212/662-8474 E-Mail: ver2102@columbia.edu Philipp Schnabl Stern School of Business New York University 44 West Fourth Street New York, NY 10012 Tel: 212/998-0356 E-Mail: schnabl@stern.nyu.edu Daniel Wolfenzon Graduate School of Business Columbia University Uris Hall, Room 808 3022 Broadway New York, NY 10027 Tel: 212/998-0309 Fax: 212/995-4233 E-Mail: dw2382@columbia.edu AB - We estimate the elasticity of exports to credit using matched customs and firm-level bank credit data from Peru. To account for non-credit determinants of exports, we compare changes in exports of the same product and to the same destination by firms borrowing from banks differentially affected by capital flow reversals during the 2008 financial crisis. We obtain elasticity estimates for the intensive and extensive margins of exports, size and frequency of shipments, and the method of freight and payment. Our results suggest that the credit shortage reduces exports through raising the cost of working capital for general production, rather than the cost of financing export-specific cash cycles or sunk entry investments. ER - TY - JOUR AU - Hungerman,Daniel M. TI - The Effect of Education on Religion: Evidence from Compulsory Schooling Laws JF - National Bureau of Economic Research Working Paper Series VL - No. 16973 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16973 L1 - http://www.nber.org/papers/w16973.pdf N1 - Author contact info: Daniel M. Hungerman Department of Economics University of Notre Dame 439 Flanner Hall Notre Dame, IN 46556-5602 Tel: 574/631-4495 Fax: 574/631-4783 E-Mail: dhungerm@nd.edu AB - For over a century, social scientists have debated how educational attainment impacts religious belief. In this paper, I use Canadian compulsory schooling laws to identify the relationship between completed schooling and later religiosity. I find that higher levels of education lead to lower levels of religious participation later in life. An additional year of education leads to a 4-percentage-point decline in the likelihood that an individual identifies with any religious tradition; the estimates suggest that increases in schooling can explain most of the large rise in non-affiliation in Canada in recent decades. ER - TY - JOUR AU - Cochrane,John H. TI - Discount Rates JF - National Bureau of Economic Research Working Paper Series VL - No. 16972 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16972 L1 - http://www.nber.org/papers/w16972.pdf N1 - Author contact info: John H. Cochrane Booth School of Business University of Chicago 5807 S. Woodlawn Chicago, IL 60637 Tel: 773/702-3059 Fax: 773/702-0458 E-Mail: john.cochrane@chicagobooth.edu AB - Discount rate variation is the central organizing question of current asset pricing research. I survey facts, theories and applications. We thought returns were uncorrelated over time, so variation in price-dividend ratios was due to variation in expected cashflows. Now it seems all price-dividend variation corresponds to discount-rate variation. We thought that the cross-section of expected returns came from the CAPM. Now we have a zoo of new factors. I categorize discount-rate theories based on central ingredients and data sources. Discount-rate variation continues to change finance applications, including portfolio theory, accounting, cost of capital, capital structure, compensation, and macroeconomics. ER - TY - JOUR AU - Cropper,Maureen L. AU - Hammitt,James K. AU - Robinson,Lisa A. TI - Valuing Mortality Risk Reductions: Progress and Challenges JF - National Bureau of Economic Research Working Paper Series VL - No. 16971 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16971 L1 - http://www.nber.org/papers/w16971.pdf N1 - Author contact info: Maureen L. Cropper Department of Economics University of Maryland College Park, MD 20742 Tel: 301/405-3483 Fax: 301/405-3542 E-Mail: cropper@econ.umd.edu James Hammitt Harvard University (Center for Risk Analysis) 718 Huntington Avenue Boston, MA 02115 E-Mail: jkh@harvard.edu Lisa A. Robinson 29 Caroline Park Waban, MA 02468 E-Mail: lisa.a.robinson@comcast.net AB - The value of mortality risk reduction is an important component of the benefits of environmental policies. In recent years, the number, scope, and quality of valuation studies have increased dramatically. Revealed-preference studies of wage compensation for occupational risks, on which analysts have primarily relied, have benefited from improved data and statistical methods. Stated-preference research has improved methodologically and expanded dramatically. Studies are now available for several health conditions associated with environmental causes and researchers have explored many issues concerning the validity of the estimates. With the growing numbers of both types of studies, several meta-analyses have become available that provide insight into the results of both methods. Challenges remain, including better understanding of the persistently smaller estimates from stated-preference than from wage-differential studies and of how valuation depends on the individual’s age, health status, and characteristics of the illnesses most frequently associated with environmental causes. ER - TY - JOUR AU - Bassetto,Marco AU - McGranahan,Leslie TI - On the Relationship Between Mobility, Population Growth, and Capital Spending in the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 16970 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16970 L1 - http://www.nber.org/papers/w16970.pdf N1 - Author contact info: Marco Bassetto Research Department Federal Reserve Bank of Chicago 230 S. LaSalle Street Chicago, IL 60604 Tel: 312/322-5909 Fax: 312/322-2357 E-Mail: mbassetto@frbchi.org Leslie McGranahan Federal Reserve Bank of Chicago E-Mail: leslie.mcgranahan@chi.frb.org AB - In this paper, we investigate the relationship between public capital spending and population dynamics at the state level. Empirically, we document two robust facts. First, states with faster population growth do not spend more (per capita) to accommodate the needs of their growing population. Second, states whose population is more likely to leave do tend to spend more per capita than states with low gross emigration rates. To interpret these facts, we introduce an explicit, quantitative political-economy model of government spending determination, where mobility and population growth generate departures from Ricardian equivalence by shifting some of the costs and benefits of public projects to future residents. The magnitude of the empirical response of capital spending to mobility is at the upper end of what can be explained by the theory with a plausible calibration. In the model, more mobile voters favor more spending because the maturity of states' debt is very long term and costs are shifted into the future more than benefits. ER - TY - JOUR AU - Einav,Liran AU - Finkelstein,Amy AU - Ryan,Stephen P. AU - Schrimpf,Paul AU - Cullen,Mark R. TI - Selection on Moral Hazard in Health Insurance JF - National Bureau of Economic Research Working Paper Series VL - No. 16969 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16969 L1 - http://www.nber.org/papers/w16969.pdf N1 - Author contact info: Liran Einav Stanford University Department of Economics 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/723-3704 Fax: 650/725-5702 E-Mail: leinav@stanford.edu Amy Finkelstein Department of Economics MIT E52-274C 50 Memorial Drive Cambridge, MA 02142 Tel: 617/253-4149 Fax: 617/868-2742 E-Mail: afink@mit.edu Stephen P. Ryan MIT Department of Economics E52-262C 50 Memorial Drive Cambridge, MA 02142 Tel: 617/253-6082 Fax: 617/253-1330 E-Mail: sryan@mit.edu Paul Schrimpf Department of Economics MIT 50 Memorial Drive Cambridge, MA 02142 E-Mail: paul_s@mit.edu Mark R. Cullen Stanford University School of Medicine 1265 Welch Rd X338 Stanford, CA 94305 Tel: 650.721.6209 Fax: 650.723.8596 E-Mail: mrcullen@stanford.edu AB - In this paper we explore the possibility that individuals may select insurance coverage in part based on their anticipated behavioral response to the insurance contract. Such "selection on moral hazard" can have important implications for attempts to combat either selection or moral hazard. We explore these issues using individual-level panel data from a single firm, which contain information about health insurance options, choices, and subsequent claims. To identify the behavioral response to health insurance coverage and the heterogeneity in it, we take advantage of a change in the health insurance options offered to some, but not all of the firm's employees. We begin with descriptive evidence that is suggestive of both heterogeneous moral hazard as well as selection on it, with individuals who select more coverage also appearing to exhibit greater behavioral response to that coverage. To formalize this analysis and explore its implications, we develop and estimate a model of plan choice and medical utilization. The results from the modeling exercise echo the descriptive evidence, and allow for further explorations of the interaction between selection and moral hazard. For example, one implication of our estimates is that abstracting from selection on moral hazard could lead one to substantially over-estimate the spending reduction associated with introducing a high deductible health insurance option. ER - TY - JOUR AU - Kolko,Jed AU - Neumark,David AU - Mejia,Marisol Cuellar TI - Public Policy, State Business Climates, and Economic Growth JF - National Bureau of Economic Research Working Paper Series VL - No. 16968 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16968 L1 - http://www.nber.org/papers/w16968.pdf N1 - Author contact info: Jed Kolko Trulia 116 New Montgomery St, 3rd floor San Francisco, CA 94105 E-Mail: jdkolko@yahoo.com David Neumark Department of Economics University of California at Irvine 3151 Social Science Plaza Irvine, CA 92697 Tel: 949-824-8496 Fax: 949/824-2182 E-Mail: dneumark@uci.edu Marisol Cuellar Mejia Public Policy Institute of California 500 Washington St., Suite 600 San Francisco, CA 94111 E-Mail: cuellar@ppic.org AB - State business climate indexes are a popular means of summarizing the “bundles” of state policies that might affect state economic growth. But the rankings of states’ business climates vary wildly, raising questions about what these business climate indexes measure, and hence about which policies they capture are more important determinants of state economic growth. Business climate rankings tend to focus on policies related either to productivity, or to taxes and other costs of doing business. States that rank poorly along one of these dimensions often rank quite highly on the other. Business climate indexes that focus on productivity-related variables have essentially no predictive power for economic growth. In contrast, business climate indexes focusing on taxes and costs predict growth of employment, wages, and Gross State Product. Looking at sub-indexes that disaggregate the policies captured by the taxes-and-cost related indexes, two types of policies are associated with faster economic growth: less spending on welfare and transfer payments; and a more uniform and simpler corporate tax structure. But factors beyond the control of policy, like a state’s industry mix, population density, and weather, have a stronger relationship with economic growth than even the tax-and-cost-focused business climate indexes. ER - TY - JOUR AU - Puri,Manju AU - Rocholl,Jörg AU - Steffen,Sascha TI - Global retail lending in the aftermath of the US financial crisis: Distinguishing between supply and demand effects JF - National Bureau of Economic Research Working Paper Series VL - No. 16967 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16967 L1 - http://www.nber.org/papers/w16967.pdf N1 - Author contact info: Manju Puri Fuqua School of Business Duke University 1 Towerview Drive, Box 90120 Durham, NC 27708-0120 Tel: 919/660-7657 Fax: 919/681-6246 E-Mail: mpuri@duke.edu Jorg Rocholl European School of Management and Technology Schlossplatz 1 D-10178 Berlin E-Mail: rocholl@esmt.org Sascha Steffen European School of Management and Technology Schlossplatz 1 10178 Berlin Germany E-Mail: steffen@esmt.org AB - This paper examines the broader effects of the US financial crisis on global lending to retail customers. In particular we examine retail bank lending in Germany using a unique data set of German savings banks during the period 2006 through 2008 for which we have the universe of loan applications and loans granted. Our experimental setting allows us to distinguish between savings banks affected by the US financial crisis through their holdings in Landesbanken with substantial subprime exposure and unaffected savings banks. The data enable us to distinguish between demand and supply side effects of bank lending and find that the US financial crisis induced a contraction in the supply of retail lending in Germany. While demand for loans goes down, it is not substantially different for the affected and nonaffected banks. More important, we find evidence of a significant supply side effect in that the affected banks reject substantially more loan applications than nonaffected banks. This result is particularly strong for smaller and more liquidity-constrained banks as well as for mortgage as compared with consumer loans. We also find that bank-depositor relationships help mitigate these supply side effects. ER - TY - JOUR AU - Acemoglu,Daron AU - Johnson,Simon AU - Robinson,James A. TI - Hither Thou Shalt Come, But No Further: Reply to "The Colonial Origins of Comparative Development: An Empirical Investigation: Comment" JF - National Bureau of Economic Research Working Paper Series VL - No. 16966 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16966 L1 - http://www.nber.org/papers/w16966.pdf N1 - Author contact info: Daron Acemoglu Department of Economics MIT, E52-380B 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-1927 Fax: 617/253-1330 E-Mail: daron@mit.edu Simon Johnson MIT Sloan School of Management 100 Main Street, E52-562 Cambridge, MA 02142 Tel: 617/290-9618 Fax: 617/253-2660 E-Mail: sjohnson@mit.edu James A. Robinson Harvard University Department of Government N309, 1737 Cambridge Street Cambridge, MA 02138 Tel: 617/496-2839 Fax: 617/495-0438 E-Mail: jrobinson@gov.harvard.edu AB - David Albouy expresses three main concerns about the results in Acemoglu, Johnson and Robinson (2001) on the relationship between potential settler mortality and institutions. First, there is a general concern that there are high mortality outliers, potentially affecting this relationship, with which we agree. However, limiting the effect of outliers has no impact on our substantive results and if anything significantly strengthens them, in fact making them robust to even extreme versions of his other critiques. His second argument that all the data from Latin America and much of the data from Africa, making up almost 60% of our sample, should be dropped is arbitrary - there is a great deal of well-documented comparable information on the mortality of Europeans in those places during the relevant period. His third argument that a "campaign" dummy should be included in the first stage is at odds with the historical record and is implemented inconsistently; even modest corrections undermine his claims. ER - TY - JOUR AU - Philippon,Thomas AU - Midrigan,Virgiliu TI - Household Leverage and the Recession JF - National Bureau of Economic Research Working Paper Series VL - No. 16965 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16965 L1 - http://www.nber.org/papers/w16965.pdf N1 - Author contact info: Thomas Philippon New York University Stern School of Business 44 West 4th Street, Suite 9-190 New York, NY 10012-1126 Tel: 212/998-0490 Fax: 212/995-4233 E-Mail: tphilipp@stern.nyu.edu Virgiliu Midrigan Department of Economics New York University 19 W. 4th St. New York, NY 10012 Tel: 212/992-8081 Fax: 212/995-4186 E-Mail: virgiliu.midrigan@nyu.edu AB - A salient feature of the recent U.S. recession is that output and employment have declined more in regions (states, counties) where household leverage had increased more during the credit boom. This pattern is difficult to explain with standard models of financing frictions. We propose a theory that can account for these cross-sectional facts. We study a cash-in-advance economy in which home equity borrowing, alongside public money, is used to conduct transactions. A decline in home equity borrowing tightens the cash-in-advance constraint, thus triggering a recession. We show that the evidence on house prices, leverage and employment across US regions identifies the key parameters of the model. Models estimated with cross-sectional evidence display high sensitivity of real activity to nominal credit shocks. Since home equity borrowing and public money are, in the model, perfect substitutes, our counter-factual experiments suggest that monetary policy actions have significantly reduced the severity of the recent recession. ER - TY - JOUR AU - Hanson,Gordon H. AU - Xiang,Chong TI - Exporting Christianity: Governance and Doctrine in the Globalization of US Denominations JF - National Bureau of Economic Research Working Paper Series VL - No. 16964 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16964 L1 - http://www.nber.org/papers/w16964.pdf N1 - Author contact info: Gordon H. Hanson IR/PS 0519 University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0519 Tel: 858/822-5087 Fax: 858/534-3939 E-Mail: gohanson@ucsd.edu Chong Xiang Department of Economics Purdue University 403 West State Street West Lafayette, IN 47907-2506 Tel: 765/494-4499 Fax: 765/496-1778 E-Mail: cxiang@purdue.edu AB - In this paper we build a model of market competition among religious denominations, using a framework that involves incomplete contracts and the production of club goods. We treat denominations akin to multinational enterprises, which decide which countries to enter based on local market conditions and their own “productivity.” The model yields predictions for how a denomination’s religious doctrine and governance structure affect its ability to attract adherents. We test these predictions using data on the foreign operations of US Protestant denominations in 2005 from the World Christian Database. Consistent with the model, we find that (1) denominations with stricter religious doctrine attract more adherents in countries in which the risk of natural disaster or disease outbreak is greater and in which government provision of health services is weaker, and (2) denominations with a decentralized governance structure attract more adherents in countries in which the productivity of pastor effort is higher. These findings shed light on factors determining the composition of religion within countries, helping account for the rise of new Protestant denominations in recent decades. ER - TY - JOUR AU - Mason,Charles AU - Plantinga,Andrew TI - Contracting for Impure Public Goods: Carbon Offsets and Additionality JF - National Bureau of Economic Research Working Paper Series VL - No. 16963 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16963 L1 - http://www.nber.org/papers/w16963.pdf N1 - Author contact info: Charles Mason Department of Economics and Finance University of Wyoming 1000 E. University Avenue Laramie, WY 82071-3985 E-Mail: bambuzlr@uwyo.edu Andrew Plantinga Department of Agricultural & Resource Economics Oregon State University Rm #212B Ballard Extension Hall Corvallis, OR 97331-4501 E-Mail: Plantinga@oregonstate.edu M3 - presented at "SI 2010 Environmental and Energy Economics", July 29-30, 2010 AB - Governments contracting with private agents for the provision of an impure public good must contend with agents who would potentially supply the good absent any payments. This additionality problem is centrally important to the use of carbon offsets to mitigate climate change. We analyze optimal contracts for forest carbon, an important offset category. A novel national-scale simulation of the contracts is conducted that uses econometric results derived from micro data. For a 50 million acre increase in forest area, annual government expenditures with optimal contracts are found to be about $4 billion lower compared to costs with a uniform subsidy. ER - TY - JOUR AU - Fukuda,Shin-ichi TI - Market-specific and Currency-specific Risk During the Global Financial Crisis: Evidence from the Interbank Markets in Tokyo and London JF - National Bureau of Economic Research Working Paper Series VL - No. 16962 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16962 L1 - http://www.nber.org/papers/w16962.pdf N1 - Author contact info: Shin-ichi Fukuda Faculty of Economics University of Tokyo 7-3-1 Hongo, Bunkyo-ku Tokyo 113-0033, JAPAN Fax: 81-3-5841-5521 E-Mail: sfukuda@e.u-tokyo.ac.jp M3 - presented at "East Asian Seminar on Economics", June 25-26, 2010 AB - This paper explores how international money markets reflected credit and liquidity risks during the global financial crisis. After matching the currency denomination, we investigate how the Tokyo Interbank Offered Rate (TIBOR) was synchronized with the London Interbank Offered Rate (LIBOR) denominated in the US dollar and the Japanese yen. Regardless of the currency denomination, TIBOR was highly synchronized with LIBOR in tranquil periods. However, the interbank rates showed substantial deviations in turbulent periods. We find remarkable asymmetric responses in reflecting market-specific and currency-specific risks during the crisis. The regression results suggest that counter-party credit risk increased the difference across the markets, while liquidity risk caused the difference across the currency denominations. They also support the view that a shortage of US dollar as liquidity distorted the international money markets during the crisis. We find that coordinated central bank liquidity provisions were useful in reducing liquidity risk in the US dollar transactions. But their effectiveness was asymmetric across the markets. ER - TY - JOUR AU - Bushway,Shawn D. AU - Owens,Emily G. AU - Piehl,Anne Morrison TI - Sentencing Guidelines and Judicial Discretion: Quasi-experimental Evidence from Human Calculation Errors JF - National Bureau of Economic Research Working Paper Series VL - No. 16961 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16961 L1 - http://www.nber.org/papers/w16961.pdf N1 - Author contact info: Shawn Bushway School of Criminal Justice University at Albany, SUNY 135 Western Avenue Albany, NY 12222 USA E-Mail: SBushway@uamail.albany.edu Emily G. Owens Cornell University Department of Policy Analysis and Management 137 MVR Hall Ithaca, NY 14853 E-Mail: ego5@cornell.edu Anne Piehl Department of Economics Rutgers, The State University of New Jersey New Jersey Hall 75 Hamilton Street New Brunswick, NJ 08901-1248 E-Mail: apiehl@economics.rutgers.edu AB - There is a debate about whether advisory non-binding sentencing guidelines affect the sentences outcomes of individuals convicted in jurisdictions with this sentencing framework. Identifying the impact of sentencing guidelines is a difficult empirical problem because court actors may have preferences for sentencing severity that are correlated with the preferences that are outlined in the guidelines. But, in Maryland, ten percent of the recommended sentences computed in the guideline worksheets contain calculation errors. We use this unique source of quasi-experimental variation to quantify the extent to which sentencing guidelines influence policy outcomes. Among drug offenses, we find that the direct impact of the guidelines is roughly ½ the size of the overall correlation between recommendations and outcomes. For violent offenses, we find the same ½ discount for sentence recommendations that are higher than they should have been, but more responsiveness to recommendations that are too low. We find no evidence that the guidelines themselves directly affect discretion for property offenders, perhaps because judges generally have substantial experience with property cases and therefore do not rely on the errant information. Sentences are more sensitive to both accurate and inaccurate recommendations for crimes that occur less frequently and have more complicated sentencing. This suggests that when the court has more experience, the recommendations have less influence. More tentative findings suggest that, further down the decision chain, parole boards counteract the remaining influence of the guidelines. ER - TY - JOUR AU - Burstein,Ariel AU - Melitz,Marc J. TI - Trade Liberalization and Firm Dynamics JF - National Bureau of Economic Research Working Paper Series VL - No. 16960 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16960 L1 - http://www.nber.org/papers/w16960.pdf N1 - Author contact info: Ariel Burstein Department of Economics Bunche Hall 8365 Box 951477 UCLA Los Angeles, CA 90095-1477 Tel: 310/206-6732 Fax: 310/825-9528 E-Mail: arielb@econ.ucla.edu Marc Melitz Department of Economics Harvard University 215 Littauer Center Cambridge, MA 02138 E-Mail: mmelitz@harvard.edu AB - In this paper, we analyze the transition dynamics associated with an economy's response to trade liberalization. We start by reviewing the recent literature that incorporates firm dynamics into models of international trade. We then build upon that literature to characterize the role of firm dynamics, export-market selection, firm-level innovation, sunk export costs, and firms’ expectations regarding the time path of liberalization in generating those transition dynamics following trade liberalization. These modeling ingredients generate substantial aggregate transition dynamics as they shift and shape the endogenous distribution of firms over time. Our results show how the responses of trade volumes, innovation, and aggregate output can vary greatly over time depending on those modeling ingredients. This has important consequences for many issues in international economics that rely on predictions for the effects of globalization over time on those key aggregate outcomes. ER - TY - JOUR AU - Mayer,Thierry AU - Melitz,Marc J. AU - Ottaviano,Gianmarco I.P. TI - Market Size, Competition, and the Product Mix of Exporters JF - National Bureau of Economic Research Working Paper Series VL - No. 16959 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16959 L1 - http://www.nber.org/papers/w16959.pdf N1 - Author contact info: Thierry Mayer Sciences-Po, Paris Department of Economics 28 rue des Saints-Peres 75007 Paris France E-Mail: thierry.mayer@sciences-po.fr Marc Melitz Department of Economics Harvard University 215 Littauer Center Cambridge, MA 02138 E-Mail: mmelitz@harvard.edu Gianmarco Ottaviano Department of Economics Bocconi University Via Roentgen 1 20136 Milan Italy E-Mail: gianmarco.ottaviano@unibocconi.it AB - We build a theoretical model of multi-product firms that highlights how market size and geography (the market sizes of and bilateral economic distances to trading partners) affect both a firm's exported product range and its exported product mix across market destinations (the distribution of sales across products for a given product range). We show how tougher competition in an export market induces a firm to skew its export sales towards its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Trade models based on exogenous markups cannot explain this strong significant link between destination market characteristics and the within-firm skewness of export sales (after controlling for bilateral trade costs). Theoretically, this within firm change in product mix driven by the trading environment has important repercussions on firm productivity and how it responds to changes in that trading environment. ER - TY - JOUR AU - Gopinath,Gita AU - Neiman,Brent TI - Trade Adjustment and Productivity in Large Crises JF - National Bureau of Economic Research Working Paper Series VL - No. 16958 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16958 L1 - http://www.nber.org/papers/w16958.pdf N1 - Author contact info: Gita Gopinath Department of Economics Harvard University 1875 Cambridge Street Littauer 206 Cambridge, MA 02138 Tel: 617/495-8161 Fax: 617/495-7730 E-Mail: gopinath@harvard.edu Brent Neiman University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-3199 Fax: 773/753-8266 E-Mail: brent.neiman@chicagobooth.edu AB - We empirically characterize the mechanics of trade adjustment during the Argentine crisis using detailed transaction-level customs data covering the universe of import transactions during 1996-2008. Though imports collapsed by nearly 70 percent from 2000-2002, the entry and exit of firms or products at the country level (the "extensive margin") played a small role in this adjustment. By contrast, the within-firm churning of inputs (the "sub-extensive margin") played a sizeable role, and we highlight significant heterogeneity in how firms adjusted their import mix. Motivated by these facts, we build a model of trade in intermediate inputs with heterogeneous firms, fixed import costs, and roundabout production to evaluate the channels through which a collapse in imports affects productivity and welfare. Import demand is non-homothetic and therefore the implications for productivity and welfare depend on the details of individual firm adjustments and cannot be summarized by the change in the aggregate import share. We simulate an imported input cost shock and show that these mechanisms can deliver quantitatively significant declines in productivity and welfare. ER - TY - JOUR AU - Bonaparte,Yosef AU - Cooper,Russell AU - Zhu,Guozhong TI - Consumption Smoothing and Portfolio Rebalancing: The Effects of Adjustment Costs JF - National Bureau of Economic Research Working Paper Series VL - No. 16957 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16957 L1 - http://www.nber.org/papers/w16957.pdf N1 - Author contact info: Yosef Bonaparte Claremont Graduate University Claremont, CA 91711 E-Mail: bonaparte20@gmail.com Russell Cooper Department of Economics European University Institute via della Piazzola, 43 Firenze, 50133 ITALY E-Mail: russellcoop@gmail.com Guozhong Zhu Guanghua School of Management Peking University Beijing, China E-Mail: aaronandrewzhu@gmail.com AB - This paper studies the dynamics of portfolio rebalancing and consumption smoothing in the presence of non-convex portfolio adjustment costs. The goal is to understand a household's response to income and return shocks. The model includes the choice of two assets: one riskless without adjustment costs and a second risky asset with adjustment costs. With these multiple assets, a household can buffer some income fluctuations through the asset without adjustment costs and engage in costly portfolio rebalancing less frequently. We estimate both preference parameters and portfolio adjustment costs. The estimates are used for evaluating consumption smoothing and portfolio adjustment in the face of income and return shocks. ER - TY - JOUR AU - Hamilton,James D. AU - Wu,Jing Cynthia TI - The Effectiveness of Alternative Monetary Policy Tools in a Zero Lower Bound Environment JF - National Bureau of Economic Research Working Paper Series VL - No. 16956 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16956 L1 - http://www.nber.org/papers/w16956.pdf N1 - Author contact info: James D. Hamilton Department of Economics, 0508 University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 Tel: 858/534-5986 Fax: 858/534-7040 E-Mail: jhamilton@ucsd.edu Jing Cynthia Wu Booth School of Business University of Chicago 5807 S Woodlawn Ave Chicago, IL 60637-1610 E-Mail: Cynthia.Wu@chicagobooth.edu AB - This paper reviews alternative options for monetary policy when the short-term interest rate is at the zero lower bound and develops new empirical estimates of the effects of the maturity structure of publicly held debt on the term structure of interest rates. We use a model of risk-averse arbitrageurs to develop measures of how the maturity structure of debt held by the public might affect the pricing of level, slope and curvature term-structure risk. We find these Treasury factors historically were quite helpful for predicting both yields and excess returns over 1990-2007. The historical correlations are consistent with the claim that if in December of 2006, the Fed were to have sold off all its Treasury holdings of less than one-year maturity (about $400 billion) and use the proceeds to retire Treasury debt from the long end, this might have resulted in a 14-basis-point drop in the 10-year rate and an 11-basis-point increase in the 6-month rate. We also develop a description of how the dynamic behavior of the term structure of interest rates changed after hitting the zero lower bound in 2009. Our estimates imply that at the zero lower bound, such a maturity swap would have the same effects as buying $400 billion in long-term maturities outright with newly created reserves, and could reduce the 10-year rate by 13 basis points without raising short-term yields. ER - TY - JOUR AU - Bennett,Daniel AU - Chiang,Chun-Fang AU - Malani,Anup TI - Learning During a Crisis: the SARS Epidemic in Taiwan JF - National Bureau of Economic Research Working Paper Series VL - No. 16955 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16955 L1 - http://www.nber.org/papers/w16955.pdf N1 - Author contact info: Daniel Bennett University of Chicago Harris School of Public Policy 1155 E. 60th Street Chicago, IL 60637 E-Mail: dmbennett@uchicago.edu Chun-Fang Chiang National Taiwan University E-Mail: chunfang@ntu.edu.tw Anup Malani University of Chicago Law School 1111 E. 60th Street Chicago, IL 60637 Tel: 773/702-9602 E-Mail: amalani@uchicago.edu AB - When SARS struck Taiwan in the spring of 2003, many people feared that the disease would spread through the healthcare system. As a result, outpatient medical visits fell by over 30 percent in the course of a few weeks. This paper examines how both public information (SARS incidence reports) and private information (the behavior and opinions of peers) contributed to this public reaction. We identify social learning through a difference-in-difference strategy that compares long time community residents to recent arrivals, who are less socially connected. We find that people learned from both public and private sources during SARS. In a dynamic simulation based on the regressions, social learning substantially magnifes the response to SARS. ER - TY - JOUR AU - Heal,Geoffrey AU - Kunreuther,Howard TI - Tipping Climate Negotiations JF - National Bureau of Economic Research Working Paper Series VL - No. 16954 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16954 L1 - http://www.nber.org/papers/w16954.pdf N1 - Author contact info: Geoffrey Heal Graduate School of Business 616 Uris Hall Columbia University New York, NY 10027-6902 Tel: 212/854-6459 Fax: 212/316-9219 E-Mail: gmh1@columbia.edu Howard Kunreuther Operations and Information Management The Wharton School University of Pennsylvania 3730 Walnut Street, 500 JMHH Philadelphia, PA 19104-6366 Tel: 215/898-4589 Fax: 215/573-2130 E-Mail: kunreuther@wharton.upenn.edu AB - Thinking about tipping provides a novel perspective on finding a way forward in climate negotiations and suggests an alternative to the current framework of negotiating a global agreement on reductions in greenhouse gas emissions. Recent work on non-cooperative games shows games with increasing differences have multiple equilibria and have a “tipping set,” a subset of agents who by changing from the inefficient to the efficient equilibrium can induce all others to do the same. We argue that international climate negotiations may form such a game and so have a tipping set. This set is a small group of countries who by adopting climate control measures can make in the interests of all others to do likewise. ER - TY - JOUR AU - Chandra,Amitabh AU - Skinner,Jonathan S. TI - Technology Growth and Expenditure Growth in Health Care JF - National Bureau of Economic Research Working Paper Series VL - No. 16953 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16953 L1 - http://www.nber.org/papers/w16953.pdf N1 - Author contact info: Amitabh Chandra John F. Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/496-7356 E-Mail: amitabh_chandra@harvard.edu Jonathan S. Skinner Department of Economics 6106 Rockefeller Hall Dartmouth College Hanover, NH 03755 Tel: 603/646-2535 Fax: 603/646-2122 E-Mail: jonathan.skinner@dartmouth.edu AB - In the United States, health care technology has contributed to rising survival rates, yet health care spending relative to GDP has also grown more rapidly than in any other country. We develop a model of patient demand and supplier behavior to explain these parallel trends in technology growth and cost growth. We show that health care productivity depends on the heterogeneity of treatment effects across patients, the shape of the health production function, and the cost structure of procedures such as MRIs with high fixed costs and low marginal costs. The model implies a typology of medical technology productivity: (I) highly cost-effective “home run” innovations with little chance of overuse, such as anti-retroviral therapy for HIV, (II) treatments highly effective for some but not for all (e.g. stents), and (III) “gray area” treatments with uncertain clinical value such as ICU days among chronically ill patients. Not surprisingly, countries adopting Category I and effective Category II treatments gain the greatest health improvements, while countries adopting ineffective Category II and Category III treatments experience the most rapid cost growth. Ultimately, economic and political resistance in the U.S. to ever-rising tax rates will likely slow cost growth, with uncertain effects on technology growth. ER - TY - JOUR AU - Dube,Arindrajit AU - Kaplan,Ethan AU - Naidu,Suresh TI - Coups, Corporations, and Classified Information JF - National Bureau of Economic Research Working Paper Series VL - No. 16952 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16952 L1 - http://www.nber.org/papers/w16952.pdf N1 - Author contact info: Arindrajit Dube Department of Economics 1030 Thompson Hall University of Massachusetts Amherst Amherst, MA 01003 E-Mail: adube@econs.umass.edu Ethan Kaplan Stockholm University IIES Stockholm, SWEDEN E-Mail: ekaplan@iies.su.se Suresh Naidu Columbia University School of International and Public Affairs MC 3328 420 West 118th Street New York, NY 10027 Tel: 212/854-3213 E-Mail: sn2430@columbia.edu AB - We estimate the impact of coups and top-secret coup authorizations on asset prices of partially nationalized multinational companies that stood to benefit from US-backed coups. Stock returns of highly exposed firms reacted to coup authorizations classified as top-secret. The average cumulative abnormal return to a coup authorization was 9% over 4 days for a fully nationalized company, rising to more than 13% over sixteen days. Pre-coup authorizations accounted for a larger share of stock price increases than the actual coup events themselves.There is no effect in the case of the widely publicized, poorly executed Cuban operations, consistent with abnormal returns to coup authorizations reflecting credible private information. We also introduce two new intuitive and easy to implement nonparametric tests that do not rely on asymptotic justifications. ER - TY - JOUR AU - Leeper,Eric M. AU - Walker,Todd B. AU - Yang,Shu-Chun Susan TI - Foresight and Information Flows JF - National Bureau of Economic Research Working Paper Series VL - No. 16951 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16951 L1 - http://www.nber.org/papers/w16951.pdf N1 - Author contact info: Eric M. Leeper Department of Economics 304 Wylie Hall Indiana University Bloomington, IN 47405 Tel: 812/855-9157 Fax: NA E-Mail: eleeper@indiana.edu Todd B. Walker Department of Economics 105 Wylie Hall Indiana University Bloomington, IN 47405 E-Mail: walkertb@indiana.edu Shu-Chun Susan Yang International Monetary Fund 700 19th Street, N.W. Washington, D.C. 20431 Tel: 202-226-2762 E-Mail: ssyang@econ.sinica.edu.tw AB - News--or foresight--about future economic fundamentals can create rational expectations equilibria with non-fundamental representations that pose substantial challenges to econometric efforts to recover the structural shocks to which economic agents react. Using tax policies as a leading example of foresight, simple theory makes transparent the economic behavior and information structures that generate non-fundamental equilibria. Econometric analyses that fail to model foresight will obtain biased estimates of output multipliers for taxes; biases are quantitatively important when two canonical theoretical models are taken as data generating processes. Both the nature of equilibria and the inferences about the effects of anticipated tax changes hinge critically on hypothesized tax information flows. Differential U.S. federal tax treatment of municipal and treasury bonds embeds news about future taxes in bond yield spreads. Including that measure of tax news in identified VARs produces substantially different inferences about the macroeconomic impacts of anticipated taxes. ER - TY - JOUR AU - Lynch,Anthony W. AU - Randall,Oliver TI - Why Surplus Consumption in the Habit Model May be Less Persistent than You Think JF - National Bureau of Economic Research Working Paper Series VL - No. 16950 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16950 L1 - http://www.nber.org/papers/w16950.pdf N1 - Author contact info: Anthony W. Lynch New York University 44 W. 4th Street, #9-190 New York, NY 10012 Tel: 212/998-0350 Fax: NA E-Mail: alynch@stern.nyu.edu Oliver Randall New York University 44 W. 4th Street, #9-190 New York, NY 10012 E-Mail: orandall@stern.nyu.edu AB - In U.S. data, value stocks have higher expected excess returns and higher CAPM alphas than growth stocks. We find the external-habit model of Campbell and Cochrane (1999) can generate a value premium in both CAPM alpha and expected excess return so long as the persistence of the log surplus-consumption ratio is not too high. In contrast, Lettau and Wachter (2007) find that when the log surplus-consumption ratio is assumed to be highly persistent as in Campbell and Cochrane, the external-habit model generates a growth premium in expected excess return. However, the micro evidence favors a less persistent log surplus-consumption ratio. We choose a value for this persistence which is sufficiently low that the most recent 2 years of log consumption contribute over 98% of all past consumption to log habit, which is a much more reasonable number than the 25% contribution generated by the Lettau-Wachter value. In our model, expected consumption is slowly mean-reverting, as in the long-run risk model of Bansal and Yaron (2004), which is why our model is able to generate a price-dividend ratio for aggregate equity that exhibits the high autocorrelation found in the data, despite the very low persistence of the price-of-risk state variable. Our results suggest that an external habit model in the spirit of Campbell and Cochrane can deliver an empirically sensible value premium once the persistence of the surplus consumption ratio is calibrated to the micro evidence rather than set to a value close to one. When we allow the conditional volatility of consumption growth to also be slowly mean reverting as in the long-run risk model of Bansal and Yaron, our model is also able to generate empirically sensible predictability of long-horizon returns using the price-dividend ratio, without eroding the value premium. Our results also suggest that models with fast-moving habit can deliver several empirical properties of aggregate dividend strips that have been recently documented. ER - TY - JOUR AU - Snowberg,Erik AU - Wolfers,Justin AU - Zitzewitz,Eric TI - How Prediction Markets Can Save Event Studies JF - National Bureau of Economic Research Working Paper Series VL - No. 16949 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16949 L1 - http://www.nber.org/papers/w16949.pdf N1 - Author contact info: Erik Snowberg Division of Humanities and Social Sciences MC 228-77 California Institute of Technology Pasadena, CA 91125 Tel: 626/395-4094 E-Mail: snowberg@caltech.edu Justin Wolfers Business and Public Policy Department Wharton School, University of Pennsylvania 3620 Locust Walk Room 1456 Steinberg-Deitrich Hall Philadelphia, PA 19104-6372 Tel: (215) 898-3013 Fax: (215) 898-7635 E-Mail: jwolfers@wharton.upenn.edu Eric Zitzewitz Department of Economics Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-2891 Fax: 603/646-2122 E-Mail: eric.zitzewitz@dartmouth.edu AB - This review paper articulates the relationship between prediction market data and event studies, with a special focus on applications in political economy. Event studies have been used to address a variety of political economy questions from the economic effects of party control of government to the importance of complex rules in congressional committees. However, the results of event studies are notoriously sensitive to both choices made by researchers and external events. Specifically, event studies will generally produce different results depending on three interrelated things: which event window is chosen, the prior probability assigned to an event at the beginning of the event window, and the presence or absence of other events during the event window. In this paper we show how each of these may bias the results of event studies, and how prediction markets can mitigate these biases. ER - TY - JOUR AU - Martinez-Bravo,Monica AU - Miquel,Gerard Padró i AU - Qian,Nancy AU - Yao,Yang TI - Do Local Elections in Non-Democracies Increase Accountability? Evidence from Rural China JF - National Bureau of Economic Research Working Paper Series VL - No. 16948 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16948 L1 - http://www.nber.org/papers/w16948.pdf N1 - Author contact info: Monica Martinez-Bravo Johns Hopkins University 1717 Massachusetts Ave, NW Washington D.C., 20036 E-Mail: mmb@jhu.edu Gerard Padro i Miquel STICERD London School of Economics Houghton Street London, WC2A 2AE UNITED KINGDOM Tel: (44) (0) 2078523554 E-Mail: g.padro@lse.ac.uk Nancy Qian Department of Economics Yale University 27 Hillhouse Avenue New Haven, CT 06520-8269 E-Mail: nancy.qian@yale.edu Yang Yao China Center for Economic Research Peking University Peking, China E-Mail: yyao@ccer.pku.edu.cn AB - We use unique survey data to study whether the introduction of local elections in China made local leaders more accountable towards local constituents. We develop a simple model to predict the effects on different policies of increasing local leader accountability, taking into account that there is an autocratic upper government. We exploit variation in the timing of the top-down introduction of elections across villages to estimate the causal effects of elections and find that elections affected policy outcomes in a way that is consistent with the predicted effects of increased local leader accountability. ER - TY - JOUR AU - Artopoulos,Alejandro AU - Friel,Daniel AU - Hallak,Juan Carlos TI - Lifting the Domestic Veil: The Challenges of Exporting Differentiated Goods Across the Development Divide JF - National Bureau of Economic Research Working Paper Series VL - No. 16947 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16947 L1 - http://www.nber.org/papers/w16947.pdf N1 - Author contact info: Alejandro Artopoulos Universidad de San Andrés Departamento de Administración Vito Dumas 284 (B1644BID) Victoria, Provincia de Buenos Aires ARGENTINA E-Mail: alepoulos@udesa.edu.ar Daniel Friel Universidad de San Andrés Departamento de Administración Vito Dumas 284 (B1644BID) Victoria, Provincia de Buenos Aires ARGENTINA E-Mail: dfriel@udesa.edu.ar Juan Carlos Hallak Universidad de San Andrés Departamento de Economía Vito Dumas 284 (B1644BID) Victoria, Provincia de Buenos Aires ARGENTINA Tel: (5411) 4725-7081 Fax: (5411) 4725-7010 E-Mail: jchallak@udesa.edu.ar AB - Several developing countries feature weak performances as exporters of differentiated goods to developed countries. This paper builds a conceptual framework to explain the obstacles that prevent producers of differentiated products from establishing a consistent presence in the developed world and the process through which those obstacles may be overcome. We build our framework based on case studies of export emergence in four Argentine industries: motorboats, television programs, wines, and wooden furniture. We find that exporting consistently to developed countries requires drastic changes in how business is conceived and conducted relative to the practices that prevail among domestically-oriented firms. Attempts by these firms to export often do not succeed because they approach foreign markets the same way that they approach the domestic one. Their failure to change the business approach stems from their inability to access critical (tacit) knowledge about differences in consumption patterns and business practices in developed countries. In three of the sectors we study, an export pioneer is the first to implement the necessary changes to established practices. His actions set a benchmark, unleashing a diffusion process that fosters export emergence in the sector. The most salient feature of export pioneers is their knowledge advantage about foreign markets stemming from their embeddedness in the business community of their industry in a developed country. ER - TY - JOUR AU - Bordo,Michael D. AU - Humpage,Owen F. AU - Schwartz,Anna J. TI - U.S. Intervention During the Bretton Woods Era: 1962-1973 JF - National Bureau of Economic Research Working Paper Series VL - No. 16946 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16946 L1 - http://www.nber.org/papers/w16946.pdf N1 - Author contact info: Michael D. Bordo Department of Economics Rutgers University New Jersey Hall 75 Hamilton Street New Brunswick, NJ 08901 Tel: 732/822-7152 Fax: 732/932-7416 E-Mail: bordo@econ.rutgers.edu Owen Humpage Federal Reserve Bank of Cleveland P.O. Box 6387 Cleveland, OH 44101-1387 Tel: 216 579 2019 Fax: 216 579 3050 E-Mail: owen.f.humpage@clev.frb.org Anna J. Schwartz NBER 365 Fifth Ave, 5th Floor New York, NY 10016 Tel: 212/817-7957 Fax: 212/817-1597 E-Mail: aschwartz@gc.cuny.edu AB - By the early 1960s, outstanding U.S. dollar liabilities began to exceed the U.S. gold stock, suggesting that the United States could not completely maintain its pledge to convert dollars into gold at the official price. This raised uncertainty about the Bretton Woods parity grid, and speculation seemed to grow. In response, the Federal Reserve instituted a series of swap lines to provide central banks with cover for unwanted, but temporary accumulations of dollars and to provide foreign central banks with dollar funds to finance their own interventions. The Treasury also began intervening in the market. The operations often forestalled gold losses, but in so doing, delayed the need to solve Bretton Woods’ fundamental underlying problems. In addition, the institutional arrangements forged between the Federal Reserve and the U.S. Treasury raised important questions bearing on Federal Reserve independence. ER - TY - JOUR AU - Frankel,Jeffrey A. TI - A Solution to Fiscal Procyclicality: The Structural Budget Institutions Pioneered by Chile JF - National Bureau of Economic Research Working Paper Series VL - No. 16945 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16945 L1 - http://www.nber.org/papers/w16945.pdf N1 - Author contact info: Jeffrey A. Frankel Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/496-3834 Fax: 617/496-5747 E-Mail: jeffrey_frankel@harvard.edu AB - Historically, many countries have suffered a pattern of procyclical fiscal policy: spending too much in booms and then forced to cut back in recessions. This problem has especially plagued Latin American commodity exporters. Since 2000, fiscal policy in Chile has been governed by a structural budget rule that has succeeded in implementing countercyclical fiscal policy. Official estimates of trend output and the 10-year price of copper – which are key to the decomposition of the budget into structural versus cyclical components – are made by expert panels and thus insulated from the political process. Chile’s fiscal institutions hold useful lessons everywhere, but especially in other commodity exporting countries. This paper finds statistical support for a series of hypotheses regarding forecasts by official agencies that have responsibility for formulating the budget. 1) Official forecasts of budgets and GDP in a 33-country sample are overly optimistic on average. 2) The bias is stronger at longer horizons 3) The bias is greater among European governments that are politically subject to the budget rules in the Stability and Growth Pact (SGP). 4) The bias is greater in booms. 5) In most countries, the real growth rate is the key macroeconomic input for budget forecasting. In Chile it is the price of copper. 6) Real copper prices mean-revert in the long run, but this is not readily perceived. 7) Chile has avoided the problem of overly optimistic official forecasts. The conclusion: official forecasts tend to be overly optimistic, if not insulated from politics, and the problem can be worse when the government is formally subject to budget rules. The key innovation that has allowed Chile to achieve countercyclical fiscal policy in general, and to run surpluses in booms in particular, is not just a structural budget rule in itself, but a regime that entrusts to independent expert panels responsibility for estimating long-run trends in copper prices and GDP. ER - TY - JOUR AU - Heckman,James J. AU - Pinto,Rodrigo AU - Shaikh,Azeem M. AU - Yavitz,Adam TI - Inference with Imperfect Randomization: The Case of the Perry Preschool Program JF - National Bureau of Economic Research Working Paper Series VL - No. 16935 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16935 L1 - http://www.nber.org/papers/w16935.pdf N1 - Author contact info: James J. Heckman Department of Economics The University of Chicago 1126 E. 59th Street Chicago, IL 60637 Tel: 773/702-0634 Fax: 773/702-8490 E-Mail: jjh@uchicago.edu Rodrigo Pinto Department of Economics The University of Chicago 1126 E. 59th Street Chicago, IL 60637 E-Mail: rodrig@uchicago.edu Azeem Shaikh Department of Economics University of Chicago 1126 E. 59th Street Chicago IL 60637 E-Mail: amshaikh@uchicago.edu Adam Yavitz Department of Economics University of Chicago 1126 E. 59th Street Chicago, IL 60637 E-Mail: adamy@uchicago.edu AB - This paper considers the problem of making inferences about the effects of a program on multiple outcomes when the assignment of treatment status is imperfectly randomized. By imperfect randomization we mean that treatment status is reassigned after an initial randomization on the basis of characteristics that may be observed or unobserved by the analyst. We develop a partial identification approach to this problem that makes use of information limiting the extent to which randomization is imperfect to show that it is still possible to make nontrivial inferences about the effects of the program in such settings. We consider a family of null hypotheses in which each null hypothesis specifies that the program has no effect on one of several outcomes of interest. Under weak assumptions, we construct a procedure for testing this family of null hypotheses in a way that controls the familywise error rate -- the probability of even one false rejection -- in finite samples. We develop our methodology in the context of a reanalysis of the HighScope Perry Preschool program. We find statistically significant effects of the program on a number of different outcomes of interest, including outcomes related to criminal activity for males and females, even after accounting for the imperfectness of the randomization and the multiplicity of null hypotheses. ER - TY - JOUR AU - Cadena,Ximena AU - Schoar,Antoinette AU - Cristea,Alexandra AU - Delgado-Medrano,Héber M. TI - Fighting Procrastination in the Workplace: An Experiment JF - National Bureau of Economic Research Working Paper Series VL - No. 16944 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16944 L1 - http://www.nber.org/papers/w16944.pdf N1 - Author contact info: Ximena Cadena Harvard University 1737 Cambridge Street Room K 350 Cambridge, MA 02138 E-Mail: xcadena@iq.harvard.edu Antoinette Schoar MIT Sloan School of Management 100 Main Street, E62-638 Cambridge, MA 02142 Tel: 617/253-3763 Fax: 617/258-6855 E-Mail: aschoar@mit.edu Alexandra Cristea ideas42 E-Mail: alexandra.cristea@gmail.com Heber M. Delgado-Medrano Princeton University 88 College Road West Princeton New Jersey, 08544 E-Mail: hdelgado@princeton.edu AB - In this paper we test whether procrastination and planning problems affect the performance, compensation and work satisfaction among employees. We conducted a randomized controlled experiment with a bank in Colombia to change the frequency and intensity with which employees received reminders about goal achievements. We also provided small in-kind prizes every week to remind employees of their goal achievement. Loan officers in the treatment group showed strong improvements in their goal achievements, better work load distribution, and higher monthly compensation (not including the value of the small prizes). The intervention also improved worker satisfaction and reduced stress levels, without affecting the quality of the loan officers’ portfolios. We show that including branch managers (the supervisors of the loan officers) in the intervention was central in achieving these results, since they played a key role in reinforcing the reminders and helping employees with planning problems. ER - TY - JOUR AU - Hellmann,Thomas F. AU - Perotti,Enrico C. TI - The Circulation of Ideas in Firms and Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 16943 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16943 L1 - http://www.nber.org/papers/w16943.pdf N1 - Author contact info: Thomas F. Hellmann Sauder School of Business University of British Columbia 2053 Main Mall Vancouver, BC V6T 1Z2 CANADA Tel: 604/822-8476 Fax: 604/822-8477 E-Mail: hellmann@sauder.ubc.ca Enrico C. Perotti Department of Finance University of Amsterdam Roeterstraat 11 1018 WB Amsterdam NETHERLANDS Tel: 31205254159 Fax: 31205255285 E-Mail: e.c.perotti@uva.nl AB - Novel early stage ideas face uncertainty on the expertise needed to elaborate them, which creates a need to circulate them widely to find a match. Yet as information is not excludable, shared ideas may be stolen, reducing incentives to innovate. Still, in idea-rich environments inventors may share them without contractual protection. Idea density is enhanced by firms ensuring rewards to inventors, while their legal boundaries limit idea leakage. As firms limit idea circulation, the innovative environment involves a symbiotic interaction: firms incubate ideas and allow employees leave if they cannot find an internal fit; markets allow for wide ideas circulation of ideas until matched and completed; under certain circumstances ideas may be even developed in both firms and markets. ER - TY - JOUR AU - Burnside,Craig AU - Eichenbaum,Martin S. AU - Rebelo,Sergio TI - Carry Trade and Momentum in Currency Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 16942 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16942 L1 - http://www.nber.org/papers/w16942.pdf N1 - Author contact info: Craig Burnside Department of Economics Duke University 213 Social Sciences Building Durham, NC 27708-0097 Tel: 919/660-1808 Fax: 919/684-8974 E-Mail: craig.burnside@duke.edu Martin S. Eichenbaum Department of Economics Northwestern University 2003 Sheridan Road Evanston, IL 60208 Tel: 847/491-8232 Fax: 847/491-7001 E-Mail: eich@northwestern.edu Sergio Rebelo Northwestern University Kellogg School of Management Department of Finance Leverone Hall Evanston, IL 60208-2001 Tel: 847/467-2329 Fax: 847/491-5719 E-Mail: s-rebelo@northwestern.edu AB - We examine the empirical properties of the payoffs to two popular currency speculation strategies: the carry trade and momentum. We review three possible explanations for the apparent profitability of these strategies. The first is that speculators are being compensated for bearing risk. The second is that these strategies are vulnerable to rare disasters or peso problems. The third is that there is price pressure in currency markets. ER - TY - JOUR AU - Erel,Isil AU - Julio,Brandon AU - Kim,Woojin AU - Weisbach,Michael S. TI - Macroeconomic Conditions and Capital Raising JF - National Bureau of Economic Research Working Paper Series VL - No. 16941 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16941 L1 - http://www.nber.org/papers/w16941.pdf N1 - Author contact info: Isil Erel Department of Finance Ohio State University 832 Fisher Hall 2100 Neil Avenue Columbus, OH 43210 Tel: 614-292-5174 E-Mail: erel@fisher.osu.edu Brandon Julio London Business School Regent's Park London NW1 4SA United Kingdom E-Mail: bjulio@london.edu Woojin Kim SNU Business School Seoul National University 1 Gwanak Ro Gwanak-gu Seoul, 151-916 Korea Tel: +82-2-880-5831 E-Mail: woojinkim@snu.ac.kr Michael Weisbach Department of Finance Fisher College of Business Ohio State University 2100 Neil Ave. Columbus, OH 43210 Tel: 614/292-3264 E-Mail: weisbach.2@osu.edu AB - Do macroeconomic conditions affect firms’ abilities to raise capital? If so, how do they affect the manner in which the capital is raised? We address these questions using a large sample of publicly-traded debt issues, seasoned equity offers, bank loans and private placements of equity and debt. Our results suggest that a borrower’s credit quality significantly affects its ability to raise capital during macroeconomic downturns. For noninvestment-grade borrowers, capital raising tends to be procyclical while for investment-grade borrowers, it is countercyclical. Moreover, proceeds raised by investment grade firms are more likely to be held in cash in recessions than in expansions. Poor market conditions also affect the structure of securities offered, shifting them towards shorter maturities and more security. Overall, our results suggest that macroeconomic conditions influence the securities that firms issue to raise capital, the way in which these securities are structured and indeed firms’ ability to raise capital at all. This influence likely occurs primarily through the effect of macroeconomic conditions on the supply of capital. ER - TY - JOUR AU - Feenstra,Robert C. AU - Li,Zhiyuan AU - Yu,Miaojie TI - Exports and Credit Constraints Under Incomplete Information: Theory and Evidence from China JF - National Bureau of Economic Research Working Paper Series VL - No. 16940 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16940 L1 - http://www.nber.org/papers/w16940.pdf N1 - Author contact info: Robert C. Feenstra Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/752-7022 Fax: 530/752-9382 E-Mail: rcfeenstra@ucdavis.edu Zhiyuan Li School of Economics Shanghai University of Finance & Economics 777 Guoding Road, Shanghai, P.R. China. 200433 Tel: +8618621053782 E-Mail: zhyli97@gmail.com Miaojie Yu China Center for Economic Research Peking University Beijing, China E-Mail: mjyu@ccer.edu.cn AB - This paper examines why credit constraints for domestic and exporting firms arise in a setting where banks do not observe firms' productivities. To maintain incentive-compatibility, banks lend below the amount needed for first-best production. The longer time needed for export shipments induces a tighter credit constraint on exporters than on purely domestic firms, even in the exporters' home market. Greater risk faced by exporters also affects the credit extended by banks. Extra fixed costs reduce exports on the extensive margin, but can be offset by collateral held by exporting firms. The empirical application to Chinese firms strongly supports these theoretical results, and we find a sizable impact of the financial crisis in reducing exports. ER - TY - JOUR AU - Friedman,Willa AU - Kremer,Michael AU - Miguel,Edward AU - Thornton,Rebecca TI - Education as Liberation? JF - National Bureau of Economic Research Working Paper Series VL - No. 16939 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16939 L1 - http://www.nber.org/papers/w16939.pdf N1 - Author contact info: Willa Friedman Department of Economics University of California at Berkeley 508-1 Evans Hall #3880 Berkeley, CA 94720-3880 E-Mail: willa@econ.berkeley.edu Michael Kremer Harvard University Department of Economics Littauer Center M20 Cambridge, MA 02138 Tel: 617/495-9145 Fax: 617/495-7730 E-Mail: mkremer@fas.harvard.edu Edward Miguel Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720 Tel: 510/642-7162 Fax: 510/642-6615 E-Mail: emiguel@econ.berkeley.edu Rebecca Thornton University of Michigan 611 Tappan St. Ann Arbor, MI 48109 Tel: 734-763-3720 E-Mail: rebeccal@umich.edu AB - Scholars have long speculated about education’s political impacts, variously arguing that it promotes modern or pro-democratic attitudes; that it instills acceptance of existing authority; and that it empowers the disadvantaged to challenge authority. To avoid endogeneity bias, if schooling requires some willingness to accept authority, we assess the political and social impacts of a randomized girls’ merit scholarship incentive program in Kenya that raised test scores and secondary schooling. We find little evidence for modernization theory. Consistent with the empowerment view, young women in program schools were less likely to accept domestic violence. Moreover, the program increased objective political knowledge, and reduced acceptance of political authority. However, this rejection of the status quo did not translate into greater perceived political efficacy, community participation, or voting intentions. Instead, the perceived legitimacy of political violence increased. Reverse causality may help account for the view that education instills greater acceptance of authority. ER - TY - JOUR AU - Fogel,Robert W. AU - Grotte,Nathaniel TI - An Overview of The Changing Body: Health, Nutrition, and Human Development in the Western World Since 1700 JF - National Bureau of Economic Research Working Paper Series VL - No. 16938 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16938 L1 - http://www.nber.org/papers/w16938.pdf N1 - Author contact info: Robert W. Fogel Director, Center for Population Economics University of Chicago, Booth School of Business 5807 S. Woodlawn Avenue, Suite 367 Chicago, IL 60637 Tel: 773/702-7709 Fax: 773/702-2901 E-Mail: rwf@cpe.uchicago.edu Nathaniel Grotte Center for Population Economics University of Chicago, Booth School of Business 5807 S. Woodlawn Avenue, Suite 367 Chicago, IL 60637 Tel: 773-834-5388 E-Mail: Nathaniel.Grotte@ChicagoBooth.edu AB - This summary of The Changing Body: Health, Nutrition, and Human Development in the Western World since 1700 (Cambridge) was prepared for presentation at the University of Alabama at Birmingham School of Public Health in March 2011. The book is built on the authors’ work with 300 years of height and nutrition data and discusses their findings in the context of technophysio evolution, a uniquely modern form of rapid physiological development, the result of humanity’s ability to control its environment and create technological innovations to adapt to it. ER - TY - JOUR AU - Clark,Jonathan R. AU - Huckman,Robert TI - Broadening Focus: Spillovers, Complementarities and Specialization in the Hospital Industry JF - National Bureau of Economic Research Working Paper Series VL - No. 16937 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16937 L1 - http://www.nber.org/papers/w16937.pdf N1 - Author contact info: Jonathan R. Clark 601A Donald H. Ford Building The Pennsylvania State University University Park PA 16802 E-Mail: jrc24@psu.edu Robert Huckman 435 Morgan Hall Harvard Business School Boston, MA 02163 Tel: 617/495-6649 E-Mail: rhuckman@hbs.edu AB - The long-standing argument that focused operations outperform others stands in contrast to claims about the benefits of broader operational scope. The performance benefits of focus are typically attributed to reduced complexity, lower uncertainty, and the development of specialized expertise, while the benefits of greater breadth are linked to the economies of scope achieved by sharing common resources, such as advertising or production capacity, across activities. Within the literature on corporate strategy, this tension between focus and breadth is reconciled by the concept of related diversification (i.e., a firm with multiple operating units, each specializing in distinct but related activities). We consider whether there are similar benefits to related diversification within an operating unit and examine the mechanism that generates these benefits. Using the empirical context of cardiovascular care within hospitals, we first examine the relationship between a hospital’s level of specialization in cardiovascular care and the quality of its clinical performance on cardiovascular patients. We find that, on average, focus has a positive effect on quality performance. We then distinguish between positive spillovers and complementarities to examine: (1) the extent to which a hospital’s specialization in areas related to cardiovascular care directly impacts performance on cardiovascular patients (positive spillovers) and (2) whether the marginal benefit of a hospital’s focus in cardiovascular care depends on the degree to which the hospital “co-specializes” in related areas (complementarities). In our setting, we find evidence of such complementarities in specialization. ER - TY - JOUR AU - Costinot,Arnaud AU - Vogel,Jonathan AU - Wang,Su TI - An Elementary Theory of Global Supply Chains JF - National Bureau of Economic Research Working Paper Series VL - No. 16936 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16936 L1 - http://www.nber.org/papers/w16936.pdf N1 - Author contact info: Arnaud Costinot Department of Economics MIT, E52-243B 50 Memorial Drive Cambridge MA 02142-1347 Tel: 617/324-1712 Fax: 617/253-1330 E-Mail: costinot@mit.edu Jonathan Vogel Department of Economics Columbia University 420 West 118th Street New York, NY 10027 Tel: 212/854-9925 Fax: 212/854-8059 E-Mail: jvogel@columbia.edu Su Wang MIT E-Mail: su_wang@mit.edu AB - This paper develops an elementary theory of global supply chains. We consider a world economy with an arbitrary number of countries, one factor of production, a continuum of intermediate goods, and one final good. Production of the final good is sequential and subject to mistakes. In the unique free trade equilibrium, countries with lower probabilities of making mistakes at all stages specialize in later stages of production. Because of the sequential nature of production, absolute productivity differences are a source of comparative advantage among nations. Using this simple theoretical framework, we offer a first look at how vertical specialization shapes the interdependence of nations. ER - TY - JOUR AU - Glaeser,Edward L. AU - Ponzetto,Giacomo A.M. AU - Tobio,Kristina TI - Cities, Skills, and Regional Change JF - National Bureau of Economic Research Working Paper Series VL - No. 16934 PY - 2011 Y2 - April 2011 UR - http://www.nber.org/papers/w16934 L1 - http://www.nber.org/papers/w16934.pdf N1 - Author contact info: Edward L. Glaeser Department of Economics 315A Littauer Center Harvard University Cambridge, MA 02138 Tel: 617/495-0575 Fax: 617/495-7730 E-Mail: eglaeser@harvard.edu Giacomo Ponzetto CREI and Universitat Pompeu Fabra C/ Ramon Trias Fargas, 25-27 08005 Barcelona Spain Tel: +34 93 542 2829 Fax: +34 93 542 2826 E-Mail: gponzetto@crei.cat Kristina Tobio Kennedy School of Government 79 JFK St- T347 Cambridge, MA 02138 E-Mail: kristina_tobio@ksg.harvard.edu AB - One approach to urban areas emphasizes the existence of certain immutable relationships, such as Zipf’s or Gibrat’s Law. An alternative view is that urban change reflects individual responses to changing tastes or technologies. This paper examines almost 200 years of regional change in the U.S. and finds that few, if any, growth relationships remain constant, including Gibrat’s Law. Education does a reasonable job of explaining urban resilience in recent decades, but does not seem to predict county growth a century ago. After reviewing this evidence, we present and estimate a simple model of regional change, where education increases the level of entrepreneurship. Human capital spillovers occur at the city level because skilled workers produce more product varieties and thereby increase labor demand. We find that skills are associated with growth in productivity or entrepreneurship, not with growth in quality of life, at least outside of the West. We also find that skills seem to have depressed housing supply growth in the West, but not in other regions, which supports the view that educated residents in that region have fought for tougher land-use controls. We also present evidence that skills have had a disproportionately large impact on unemployment during the current recession. ER - TY - JOUR AU - Devoto,Florencia AU - Duflo,Esther AU - Dupas,Pascaline AU - Pariente,William AU - Pons,Vincent TI - Happiness on Tap: Piped Water Adoption in Urban Moroc